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Edited Transcript of TRMR earnings conference call or presentation 6-Aug-19 12:00pm GMT

Q2 2019 Telaria Inc Earnings Call

New York Aug 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Telaria Inc earnings conference call or presentation Tuesday, August 6, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew Posen

Telaria, Inc. - VP & Head of IR

* John S. Rego

Telaria, Inc. - Senior VP & CFO

* Mark S. Zagorski

Telaria, Inc. - CEO & Director

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Conference Call Participants

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* Austin William Moldow

Canaccord Genuity Corp., Research Division - Associate

* Jason Michael Kreyer

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Lee T. Krowl

B. Riley FBR, Inc., Research Division - Associate Analyst

* Mark Nicholas Argento

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst, Founding Partner & Head of Institutional Equities

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Presentation

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Operator [1]

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Greetings, and welcome to the Telaria Second Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Posen, VP, Investor Relations. Please go ahead.

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Andrew Posen, Telaria, Inc. - VP & Head of IR [2]

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Good morning. Welcome to Telaria's Second Quarter 2019 Earnings Call. During the course of today's call, we may make forward-looking statements, including statements regarding Telaria's future financial and operating results, future market conditions and management's plans and objectives for future operations. These forward-looking statements are not historical facts, but rather are based on the company's current expectations and beliefs and are based on information currently available to us.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to, those factors contained in the Risk Factors section of the company's most recent annual report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 19, 2019, and in our future SEC filings and reports by the company, including its Form 10-Q for the period ended June 30, 2019.

All information provided in this conference call is as of today, August 6, 2019. Except as required by law, we undertake no obligation to update publicly any forward-looking statements made on this call to conform the statements to actual results or changes in our expectations. Our commentary today will include non-GAAP financial measures. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in understanding company performance, but note that these measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release issued today, a copy of which can be found on our website.

I'll now turn the call over to Mark Zagorski, Telaria's CEO.

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Mark S. Zagorski, Telaria, Inc. - CEO & Director [3]

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Thanks, Andrew. Good morning, and welcome to our Second Quarter 2019 Earnings call. This morning, we reported another strong quarter. Our revenue grew more than 47% year-over-year to $18.2 million, and we achieved adjusted positive EBITDA of $1.0 million compared to a loss of $1.1 million in the prior year. This made the quarter the first profitable second quarter in the company's history. As a result of this positive performance, we are increasing our revenue guidance for the full year.

Connected television, or CTV, was once again the biggest driver of our revenue growth, as we continued to expand our platform relationships with leading premium publishers as they seek to monetize more of their inventory programmatically. Our revenue growth reflects the continued successful execution of our business strategy, which is built upon 3 key pillars. The first is a deep focus on CTV, the fastest-growing sector in digital advertising. The second is a continued emphasis on premium partner relationships and transaction transparency, which inspires trust in programmatic buying and selling of video and helps make the transition from linear TV buying to CTV more seamless. The third pillar and the one which serves to support the first 2 is prudent investment in advancing our technology platform. This reinforces our competitive advantage in CTV, creating stickier, more valuable partner relationships in the ever-evolving programmatic video space.

I'd like to take a few minutes to dive a bit deeper into each of these key areas of our strategy. CTV remains at the core of our strategic focus, technology investments and market positioning. We continue to see impressive growth in this business, both in absolute dollars and as a percentage of our total revenue. For the second quarter of this year, CTV revenue increased 133% year-over-year to $7.1 million and comprised 39% of our total revenue. This is up from 24% of total revenue just a year ago, helping increase platform ECM -- eCPM to $15.41 compared to $11.60 in the prior year period.

The strategic decision to focus our business on CTV is being proven out by increasingly compelling market dynamics regarding CTV scale and penetration, the growth of ads for CTV content and a rapidly emerging programmatic opportunity in this space. The number of CTV viewers in the U.S. is now estimated to be 195 million people, a significant increase from 2016 and is expected to grow to more than 206 million by 2021, according to eMarketer. CTV reach will eclipse Pay TV reach this year as a greater percentage of U.S. households will have a connected TV than will have a Pay TV subscription. And as cord-cutting continues at an accelerated pace, the gap is expected to continue to widen over the coming years.

Due to cord-cutting, eMarketer research also estimates that more than 30% of U.S. households are no longer reachable through a traditional TV -- traditional wire TV connection. They expect that number to increase to 41% in 2022, making CTV an increasingly essential way for brands to reach video consumers in a brand-safe environment at scale. A growing amount of content that is being delivered via CTV channels is ad-supported. OTT services such as Disney's Hulu with 58 million ad-supported viewers, Viacom's PlutoTV with 16 million active users and independents like Tubi TV, which recently announced 20 million active users, continue to gain steam amongst consumers, driving incremental ad availability across the media. As inventory in CTV grows, the opportunity to monetize that inventory programmatically is beginning to strain traction as well.

Within other areas of digital advertising, programmatic quickly emerged as a standard way in which inventory is bought and sold. We believe the same will hold true for CTV. eMarketer estimates that 85% of display and 80% of mobile advertising will be transacted programmatically in 2019. This represents rapid growth from the 10% to 15% ad sales that were delivered programmatically less than a decade ago. Today, CTV advertising sits in a similar position as mobile and desktop did just a few years ago, and the industry is projecting a similar paradigm shift. Given the strength of our technology and our leading position in the ecosystem, we believe these trends provide us with a significant opportunity to play a key role in this transition.

Second pillar of our strategy is continued emphasis on premium partner relationships and a focus on transaction transparency, both with differentiators and a marketplace becoming increasingly wary of black-box technologies in closed systems. This quarter, we continued our track record of adding new and compelling video publishers to the roster of leading media companies using our platform. Notable new partners signed in the U.S. included MLB.tv, Fox News, ABC News and Sinclair’s NewsON, which includes 170 local TV stations covering 83% of the U.S. population.

Globally, we've had great traction as well, closing Brazil's Globosat; the largest Pay TV provider in Latin America, KLY; the leading media online group in Indonesia and ABS-CBN Corporation; the leading media and entertainment organizations in the Philippines. Additionally, we are happy to announce today that we've inked our first platform deal in Canada with Bell Canada; the country's largest communication company. This is another positive outcome of our SlimCut acquisition, which gave us a local footprint to expand our VMP solution into Canadian market. Working with the best brands in video is only part of our strategy to elevate our position as the premium leader in the space.

Last quarter, Telaria became the first video monetization platform to institute a comprehensive transparency initiative to help increase clarity and efficiencies throughout the advertising supply chain. By both delivering granular auction mechanics data to agencies and brands and by providing aggregated take rates across specific buyer campaigns, we're helping build more confidence in the video supply chain. The results of our transparency efforts speak for themselves as the initial partners who have engaged in this program have expanded their platform business through Telaria over 300% with more room to grow.

Transparency is rapidly becoming the mantra of buyers seeking to shift their ad spend from traditional TV where transactional clarity has always been at the forefront, to the emerging advertising opportunities in CTV. Our operating philosophy and technology investments focused on creating a more transparent marketplace have put us in an exceptional position to take advantage of this growing share-shift opportunity.

The third and final tool of our strategy is our relentless pursuit ensuring our platform technology to lead the industry in maximizing ad inventory yield. By optimizing our partners' ad revenue opportunities, we create a mutually beneficial, longer-lasting relationship. Staying ahead of technology curve requires a consistent and concerted effort to work with our partners to develop solutions that help optimize their video inventory. This successful effort is paid off, not only in new business wins cited previously, but also in global industry recognition. In June, Telaria won the award for Marketing Technology Company of The Year at the Mumbrella Awards in Sydney. The Telaria video management platform was awarded this honor based on its ability to solve the nuances of advanced TV among the changing ways audiences watch video while tackling workflow and ad-delivery challenges faced by publishers today.

This quarter, we also advanced our technology leadership by becoming both the first video platform to provide Nielsen verified audiences to programmatic CTV buyers and by launching our addressable audience targeting solution. Our Nielsen integration helps connect the linear and CTV buying criteria, making cross-platform advertising purchases more seamless. Our addressable audience targeting solution enables our platform partners to leverage their proprietary data to extract the highest value from their inventory. Both of these efforts are steps towards bridging the gap between traditional TV buying and the addressable opportunities of programmatic CTV.

Our technology development doesn't happen in a vacuum. In this quarter, we continued to enhance our platform in concert with our clients. For example, our product development relationship [improvement] continues to be very strong with several successful product releases throughout the quarter. Our work with them and other key partners ensures that our technology remains at the forefront of the industry.

In summary, Q2 was a great quarter that exceeded our expectations. We continue to successfully execute the 3 pillars of our strategy, which is helping to deliver solid financial results against our plan. Our focus on the large-screen world of CTV continues to drive our growth as more consumers cut the cord, more CTV content becomes ad-supported and more CTV publishers embrace programmatic technology. Our expanding roster of leading publishers [who have] drive to build the most transparent transactional platform in the marketplace has established us as a leader in the premium programmatic video. And our technology advancements are helping to deliver higher advertising yield, more addressable CTV opportunities for our publisher partners, and in turn, creating a stronger, stickier relationship with our platform.

All in all, we continue to believe that we are in a great position to grow our business and deliver value to our shareholders.

I will now turn the call over to John to walk you through the financials in more detail.

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John S. Rego, Telaria, Inc. - Senior VP & CFO [4]

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Thanks, Mark. This was another strong quarter with revenue of $18.2 million, up 47% from the same period last year, and for the first time, we reported EBITDA profitability in the second quarter of the year with adjusted EBITDA of $1 million, a significant improvement from last year when we reported an adjusted EBITDA loss of $1.1 million. Both revenue and adjusted EBITDA exceeded our expectations this quarter and built on the momentum we saw last quarter.

Our gross profit increased 31% to $14.7 million from Q2 last year, while our gross margin decreased year-over-year to 81%, which was in line with Q1. The decrease in our gross margin mostly reflects the positive contribution from our outstream business, which has helped return our desktop segment to grow -- to a growth trajectory but operates at a lower gross margin. Because this business is continuing to exceed our expectations, we now believe that our overall gross margins will stay around this level for the remainder of the year. CTV revenue increased 133% from the same period last year. And while CTV continues to be the biggest driver of our growth, our mobile and desktop businesses were also significant contributors this quarter. On a combined basis, they have increased more than 19% year-over-year, driven by the growth in both our outstream business as well as the monetization of OTT inventory that does not end up on a big screen.

Our quarterly core operating expenses, which exclude noncash items, increased 11% from the same period last year due mostly to headcount investment, principally due to our acquisition completed in the second quarter last year and the expansion of our technology team. However, as a percent of revenue, we continued to demonstrate significant operating leverage with core operating expenses for the quarter at 75% of revenue, down from 99% of revenue in Q2 of 2018. This was a significant reflection of our commitment to managing our cost base and driving our top line growth to our EBITDA.

Our balance sheet remains strong with working capital of $39.5 million, no debt and an unused credit line of $25 million.

I'd like to finish our call this morning with our expectations for the third quarter and a positive update on our outlook for 2019. For the third quarter, we expect revenue to be between $16 million and $17 million and adjusted EBITDA to be between a loss of $1 million and breakeven. This quarterly guide is reflective of the normalization of our desktop revenue as well as the growing impact of our CTV business, which experiences more TV-like seasonality where summer viewing is traditionally the lightest. For the full year, we're raising our revenue guidance to be between $68 million and $72 million and maintaining our adjusted EBITDA to be between $2 million and $5 million.

We'll now open up the line for some questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Jason Kreyer of Craig-Hallum Capital Group.

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Jason Michael Kreyer, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [2]

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Mark, just wanted to start out in CTV. Just maybe you can touch on the supply and demand environment that you're seeing there? It seems like you're seeing very rapid growth in that segment despite kind of a perceived supply constraint, at least, in the programmatic side. And then kind of dovetailing that, just if you're seeing any different trends as far as the total spend you see in CTV if there's more of a shift to kind of the addressable or programmatic side?

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Mark S. Zagorski, Telaria, Inc. - CEO & Director [3]

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Jason, thanks for the question. So the supply and demand environment in CTV is definitely one in which -- it's evolving over time. And I think there is a couple key factors to consider as we look at the opportunity there. The first is just the general subscriber growth that we're seeing across ad-supported properties. The Plutos and Tubis of the world are making a real play for viewers' eyeballs. Tubi, as a matter of fact, just launched a pretty wide ad campaign this week to take on Netflix. It's pretty cheeky, you should check it out.

But nonetheless, those guys are driving more viewers to ad-supported CTV, and that's creating -- opening up the gates a little bit with regards to the amount of inventory there. And then with that inventory increase that we're seeing, we're also seeing more of that move towards programmatic. And a lot of it has to do with the fact that the guys that are driving the inventory increases to Plutos, to Tubis of the world, the Hulus are guys that are digital-first entities.

They are not traditional broadcast entities that are moving to CTV. They are digital-first entities that have always been in that space. They're more comfortable with programmatic. They've grown up in that space. They've seen it become an important part of how they move inventory. So net-net, I think the inventory picture is only getting brighter for us as we move down the path with CTV, both from the changes in the core audience size, driven by more users going to that space as well as the comfort level with the guys who are driving that growth with programmatic.

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Jason Michael Kreyer, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [4]

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Got it. Okay. And then you talked a little bit about the reach that CTV has across the consumer base. Just wondering when you go into conversations with advertisers, how does that resonate? And how has that pitch changed over the last couple of months or quarters?

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Mark S. Zagorski, Telaria, Inc. - CEO & Director [5]

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Yes, it's a great question. So the -- I can tell you when we first started down this path 2 years ago in pursuing CTV as a core focus of the business, discussions with advertisers was very different. CTV was seen as a niche play for advertisers. It was seen as a supplement to their maybe desktop or mobile video plays. It was not seen as a substitute for television. Fast forward 2 years and the world has changed considerably. The profile of connected television and OTT services has been raised massively, and we can thank, in some part, the subscription-based services like Netflix for that.

But where the real dynamic is changes I've noted, has been in the ad-supported services penetration in household. And that has really driven the advertisers to take notice. But I have to say, with all that great positive momentum, the one thing that's really driven advertisers to think about shifting dollars has really been the cord-cutting that's been going on. They just can't reach a full national audience through traditional television, like they could just a few years ago. I mean you're looking at 30% of U.S. households not having some type of cable TV or Pay TV subscription, whether that's satellite or cable. And that number is increasing daily. So for a national brand advertiser to say that we truly can reach a significant number or basically all U.S. households, CTV needs to be part of that. And -- so it is truly being seen -- connected television is being seen as not just a supplement or complement to additional video strategy but as, in some cases, a replacement for linear TV strategy or at a minimum a big complement to that linear TV strategy.

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Jason Michael Kreyer, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [6]

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Thanks, guys, and congrats on the results.

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Operator [7]

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The next question is from Austin Moldow of Canaccord Genuity.

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Austin William Moldow, Canaccord Genuity Corp., Research Division - Associate [8]

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Congrats on the quarter. Since you brought up addressable, I wanted to ask about that. Can you talk more about your capabilities with and access to addressable TV inventory? And what your view is in kind of tapping into those budgets? Can your current technology be used to enable demand for addressable? And can you leverage your virtual MVPD relationships to more traditional integrations?

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Mark S. Zagorski, Telaria, Inc. - CEO & Director [9]

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Thanks, Austin. Great question. Let's take a second here to define how we're looking at addressable. There's -- what the market has kind of considered addressable to date, which is addressable linear or addressable cable-based, which is a relatively small market. I think it's expected to be a couple of billion dollars this year, and that's more or less kind of the purview of the traditional media guys. And then there is the kind of emerging form addressable, which is using either the publishers or the first-party data that, that media company owns as well as third-party data to allow for targeting in an OTT or CTV environment. And that OTT or CTV environment can be both on-demand or linear -- or I mean, I'm sorry, on-demand or live.

And so that market is really coming to bear in a similar way and the way it's growing is taking advantage of the initial interest that folks had in traditional-cable based or linear-based addressable and moving that in the OTT and CTV world. So at the end of the day, we look at this as not being in competition with traditional cable addressable. We look it as being an entirely new animal that at the end of the day is going to be a big play for those guys who are buying CTV, but also the folks that have traditionally or have in the last few years started buying the cable or linear-based addressable. Has the same capabilities, which is targetability by household, targetability by specific first-party data and first-party information. But I think, it has the added capabilities of being both on-demand and live in a CTV environment.

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Austin William Moldow, Canaccord Genuity Corp., Research Division - Associate [10]

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Appreciate that color. My second question is on pricing. I don't know if you gave an eCPM number this quarter, but curious if you can maybe give that and comment on what you're seeing in terms of like-for-like pricing increases? And maybe how the mix shift to CTV is affecting you?

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Mark S. Zagorski, Telaria, Inc. - CEO & Director [11]

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Yes. So we noted that overall eCPM growth was pretty significant this quarter, up to about $15.41, which is from $11.58 a year ago, so 33% year-over-year growth, driven in part by the growth of CTV as a percentage of our business, but also some -- the efficiencies and change in our publisher mix and how we've approached auction dynamics. So there's a couple of factors there. The first is, as we said, CTV being a bigger part of our overall suite of publishers and our overall suite of revenue. The second is, as we've worked on becoming more premium, the publishers that were -- [moved across the board], whether they're desktop, mobile or CTV, are better brands, demanding higher CPMs. The third is our ability to manage auction dynamics.

So things like first-price auctions and managing the optimization of revenue for publishers has also had a positive impact in our ability to drive a higher CPM across the board. So net-net -- there's a few factors driving that. On a line-per-line basis, we've seen certainly increases across-the-board in all 3 areas, differing sizes. So we haven't broken them out, I don't think, publicly. But at the end of the day because this is being driven -- the last 2 factors by both auction dynamics and more premium publishers, we've seen increases across desktop, mobile and CTV.

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Operator [12]

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The next question is from Mark Argento of Lake Street Capital.

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Mark Nicholas Argento, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst, Founding Partner & Head of Institutional Equities [13]

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Congrats on another strong quarter. Just a couple of quick ones. In terms of the model, Mark, historically at least over the last year or so that the opportunity you're almost going to add a SaaS component to the business in terms of the tools and analytics. Just wanted to see probably the latest thinking there relative to the traditional take rate model? And then, John, if you could just give us an update on your thoughts in terms of kind of the target operating model here at scale if anything's changed there from historical?

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Mark S. Zagorski, Telaria, Inc. - CEO & Director [14]

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Thanks, Mark. So we'd noted in the past that the business is starting to look more SaaS-like in the types of skills that were being approached with and the way that we're looking at the market in the future. To date, we are -- focused our strategy on kind of moving towards enterprise clients. Those enterprise clients are looking for more stability in what their ongoing fees are as well as longer-term relationships in which our platform becomes the de facto platform for their business. We have that type of relationship with Hulu in which we are the only platform to which they're pushing programmatic inventory through. The fee structure is based on that type of relationship.

It's also very similar to what we have in APAC, in which we are, if not the exclusive, the only platform, which those publishers are using. I think the U.S. market is slowly evolving to that type of market as well in which it's not just supply path optimization from a seller side -- from a buyer side, it's from the seller side as well and looking at moving towards not multiple platforms to work with on the programmatic side, but a single platform. As more companies move down that road, we see a greater opportunity to build enterprise relationships and do so on in a manner, which is more SaaS like. So that's a long answer to the question.

Yes, we see a future in which this business becomes more SaaS-like, more stable as more clients could become comfortable with an enterprise model and using a single platform for all of their business to run through programmatically. We think those opportunities are greatest in the CTV space, where most transactions are run through private marketplaces and private marketplaces on themselves to having a single partner manage those. So I think that's a mid- to long-term play for us as we look at the kinds of clients we're talking to and how our relationships are evolving.

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Mark Nicholas Argento, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst, Founding Partner & Head of Institutional Equities [15]

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And John, just quick -- John, quickly on any updates on the target operating model?

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John S. Rego, Telaria, Inc. - Senior VP & CFO [16]

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No. I think if you look at us again on the operating expenses of the business -- core operating expenses, our cash-based operating expenses, they're so relatively consistent and stable, and they don't really change very much. So I'm looking at Q1 and Q2 looking around 13.5 cash operating expenses around the business, that's slight uptick from a year ago, but remember, we bought a company and picked up 200-plus heads in doing that. So it's increased our cost base a little bit. So it still remains relatively fixed.

Revenue's been going up, gross profit's been going up. And I described it's going to take us a bit more time to stabilize or increase the gross margin, even though gross profit dollars are going up and that's really just a function of math, some of the stuff from the outstream business, it's just in a lower gross margin. We're just going to have to work our way through that. But aside from that, the model is solid. The fixed element of the overhead is still very much the case. I don't see any changes in that, and it was a good quarter for us. You're starting to see the real leverage effect of -- with operating expenses being stable and contained and revenue and gross profit going up. So I feel pretty good about it.

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Operator [17]

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The next question is from Lee Krowl of B. Riley FBR.

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Lee T. Krowl, B. Riley FBR, Inc., Research Division - Associate Analyst [18]

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Congrats on a solid quarter as well. Just kind of wanted to dive into the upside in the quarter and maybe just some overall trends. On past calls, you kind of talked about growing same-store sales with the existing publishers. So I was kind of curious on the mix of growth driven by existing publishers versus contribution from new publishers in the quarter?

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Mark S. Zagorski, Telaria, Inc. - CEO & Director [19]

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Thanks, Lee. It's a good question. I mean I think we noted a decent amount of new clients that were signed in the quarter. Those clients, for the most part, were not revenue drivers for the quarter. So we're looking for those guys to grow down the pipe, hence we get them launched and live and ready. But net-net, our growth continues to come from our core client group of CTV partners and a handful of the leading desktop and mobile guys and it's about digging deeper into those relationships.

So we haven't broken out kind of same store versus new business growth, but as has been in the past, I would say, a significant majority of our revenue growth has come from same-store sales. It's come from current clients, getting a larger percentage of their current business and growing with them as they move a larger share of their business programmatically.

If you remember, we have got a couple of different levers here. The first is obviously just more dollars flowing to the ad-supported CTV guys that we mentioned earlier. The second is the fact that those guys are becoming increasingly comfortable moving more of their inventory into programmatic. And then third is our ability to get a bigger share of that business, right, either through more of an enterprise-type relationship or making sure that our technology gives them advantages that other platforms don't.

And whether that's the new addressable features that we launched, which gives them targeting capabilities with first-party data or the relationship with folks like Nielsen, which allows buyers to buy both across CTV inventory using traditional Nielsen data. Those are things that are helping us get a bigger share of our current clients' business. So again, a long answer to say, our growth is still being driven by same-store sales, and that same-store sales is being supported by both endemic growth of those clients, but also our ability to take market share.

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Lee T. Krowl, B. Riley FBR, Inc., Research Division - Associate Analyst [20]

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Got it. And then kind of on that market share point. I guess just the overall competitive landscape as a whole, maybe kind of talk, perhaps maybe year-to-date or a little bit longer in terms of what you guys are seeing out in the marketplace in terms of your peers? And I guess, you guys kind of mentioned an STO element to some of the conversations with publishers. Maybe just talk about how you guys feel positioned when you go into these publishers, even in some exclusive deals? And maybe how these addressable TV offerings kind of differentiate yourself versus some of your other SSP peers?

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Mark S. Zagorski, Telaria, Inc. - CEO & Director [21]

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Yes, it's a great question. I mean the one thing that you hear a lot of noise around the CTV space with kind of everyone saying that they do it, but the reality of it is, there's a pretty small competitive set for Telaria with clients who actually really have the chops to manage connected television and the intricacies around that. I mean it's a complex space. It's more TV-like than it is digital in many ways.

The ability to deal with ad pods and competitive separation in those ad pods and frequency capping across pods with multiple different types of buyers and suppliers. It creates a pretty complex matrix to have to deal with as a partner in that space, particularly around programmatic. So we've seen that space -- to be honest with you, it still remains the same handful of players that we've mentioned before, the SpotXs and FreeWheels of the world are really the folks we run into the most. Other guys may play around the fringes in the desktop and mobile space and be great competitors there.

But in reality, the CTV space is a pretty small space to the complexity of the builds. And that's why one of the reasons why we focused on it so intently which is, we believe we have a great technology advantage in that space because the amount of investment we've made over the last several years. So whether it's things like addressable or data or our ability to manage pods or kind of most recently our positioning in the technology we built about transparency, we're constantly driving to build differentiators. And you brought up supply path optimization.

I think at the end of the day, we are very well positioned with regard to STO based, not only on kind of the advantage of our technology brings, but our positions around transparency and the demands that buyers have had around what -- how clean or how transparent that supply path needs to be? And how much information they want from it? You're going to be hearing a lot more about STO as well as transparency over the next few quarters. And I think the work that we've done earlier in this year really positions us at the forefront of that space.

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Lee T. Krowl, B. Riley FBR, Inc., Research Division - Associate Analyst [22]

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Great. And then just one just on cash flow, given your guidance for cash flow and kind of the assumed CapEx rate, would you guys expect to be free cash flow positive for the full year?

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John S. Rego, Telaria, Inc. - Senior VP & CFO [23]

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It will be close. We almost got there last year, we were very, very close. So we'll track along with you, but I think we have a shot at it.

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Operator [24]

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There are no further questions at this time. I would like to turn the floor back over to Mark Zagorski, CEO, for closing comments.

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Mark S. Zagorski, Telaria, Inc. - CEO & Director [25]

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Thank you, operator, and thank you all for joining us this morning.

In closing, this was another strong quarter for the company in which we exceeded our expectations. The market leadership in CTV, enhanced by strong secular tailwinds, continues to power our business forward. Our expanding list of premium partners and robust transparency programs are helping to build more advertiser trust and drive spend to programmatic CTV, and our advancements in platform technology are creating more revenue opportunities and a stronger relationship with our partners. These factors, coupled with the operating leverage that exists in our business model, give us confidence in our outlook for the remainder of the year.

Thank you for your participation in the call this morning, and we look forward to updating you in the months ahead.

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Operator [26]

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This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.