Earnings Call Transcript - DSP Q1 2022

Operator, Operator

Okay, hello, everyone. And welcome to Viant's First Quarter 2022 Earnings Call. My name is David, I'll be your operator today. Before I hand the call over to the Viant leadership team, I'd like to just go over a few housekeeping notes for the program. As a reminder, this webinar is being recorded. After the speakers’ remarks, there will be a question-and-answer session. Thank you for your attendance today. I would now like to turn the call over to Nicole Borsje with The Blueshirt Group.

Nicole Borsje, Investor Relations

Thank you, David. Good afternoon and welcome to Viant Technology’s first-quarter 2022 financial results conference call. On the call today are Tim Vanderhook, Co-Founder and Chief Executive Officer; Chris Vanderhook, Co-Founder and Chief Operating Officer; and Larry Madden, Chief Financial Officer. I’d like to remind you that we will make forward-looking statements on our call today that are based on assumptions and subject to future events, risks, and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update those statements, except as required by law. For more information about factors that may cause actual results to differ materially from our forward-looking statements and our entire Safe Harbor statement, please refer to the press release issued today as well as the risks and uncertainties described in our Form 10-K and other filings with the SEC. During today's call, we will also present both GAAP and non-GAAP financial results. Additional disclosures regarding these non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, are included in the press release we issued today and our filings with the SEC and in the supplemental financial slides posted to our investor relations website to accompany today’s presentation. I’d now like to turn the call over to Tim Vanderhook, Chief Executive Officer of Viant.

Tim Vanderhook, CEO

Thank you, everyone, for joining us for our first-quarter earnings call. Our team continued to execute very well in the first quarter, and we had a successful start to the year. Our first-quarter results were highlighted by accelerating growth and active customers, which increased 23% year-over-year as we continue to gain share across the programmatic advertising market. Larry will cover the financials in detail in a minute, but we again met our revenue and EBITDA guidance for the first quarter. Our people-based advertising platform is becoming more strategic for larger advertisers, and we are fostering deeper relationships across advertiser and agency customers. These customers see an opportunity to allocate more of their budgets to programmatic advertising through our Adelphic software, and they value its ability to offer personalized advertising in cookie-less environments. We are excited about the progress we are having with our customers, coupled with the robust growth we are seeing in total customer count. We continue to believe that Adelphic is gaining market share as the industry's leading people-based DSP. Digital advertising has been and continues to be one of the most exciting and dynamic industries to work in. The momentum driving advertisers to spend across programmatic advertising has never been stronger. At the same time, there has never been as much scrutiny on privacy and the sharing of personal data as there is today. Our people-based ad platform Adelphic, powered by our household ID technology, is squarely positioned to help advertisers successfully navigate these two major dynamics and drive better ROI on their ad dollars. The explosive growth in connected TV continues to be one of the biggest drivers of programmatic ad spend across the industry, and we have continued to see strong growth in CTV spend on our platform. Netflix is a prime example of how changes across the industry continue to drive momentum for programmatic spend growth. While Netflix has been steadfast in their vision of monetizing users solely through subscriptions, their recent announcement around launching an ad-supported option will open a massive new opportunity for CTV spend. Whether or not this strategy materializes for them, the CTV industry as a whole continues to expand and shift dollars, ad inventory and mindshare to programmatic advertising on CTV over the longer term. Looking at spending trends of advertisers across our customer base, we are seeing a very strong appetite from an increasingly diverse mix of consumer-facing businesses to reach customers through programmatic ads. This includes everything from crypto and online gaming to the rise of retail media networks and direct-to-consumer businesses. Advertisers are focused on not only driving online engagement and measuring attribution, but also connecting attribution between online and offline channels. Our Adelphic software is uniquely suited to help advertisers achieve this. One of the most interesting trends we have seen with advertisers across Adelphic is their growing interest in our measurement and advanced reporting tools. As advertisers are finding it more challenging to quantify their return on ad spend from certain digital channels, they are turning to our Adelphic platform and seeing better performance from our household ID technology. Our customers' willingness to spend more for our measurement and advanced reporting tools is an indication of the clear value we are providing to our customers. Chris will elaborate further on some of the updates to our platform that are driving better ROI for our customers. I want to reiterate my confidence in our ability to continue gaining market share in the very large and growing market for programmatic advertising. The spending trends we are seeing across our business, coupled with the strong new customer growth we are experiencing and the increasingly strategic conversations we are having with large customers are all highly encouraging trends that reinforce this confidence. We are excited by these micro and macro trends, and we'll continue to innovate and invest in expanding our infrastructure and technology to take advantage of this enormous opportunity. I'll now turn things over to Chris to discuss some key strategic updates across our customers and technology platform.

Chris Vanderhook, COO

Thanks, Tim. We believe our software is best-in-class and offers immense value to our clients. The virtuous cycle we're seeing play out with our customers begins with Viant creating best-in-class software that also has some of the lowest infrastructure costs in the industry. This combination allows us to offer compelling pricing options to our customers that save them money, which in turn allows them to consolidate more of their ad spending with Viant. Our steady stream of innovation keeps this cycle in play. Last year, our mediator technology brought us more than four times the cost efficiency of handling millions of ad requests every second. More recently, we released new features that enable our clients to strike direct deals with large content owners like Fox, NBC, Hulu, and Paramount, all with the goal of consolidating even more of their spending in Adelphic. Once a client starts consolidating spending across all channels, our software becomes ingrained within their organization and makes us very sticky. In Q1, we achieved 44% growth in advertiser spend, which is nearly twice the market growth rate. What does this mean? We are winning more new customers, consolidating even more ad spend with existing customers, and attracting much larger customers who have the ability to spend a lot more. We are undoubtedly increasing our share of the market. In Q1, we signed 27 new customers, surpassing our forecasts. Impressively, more than 60% of them went straight to our MSA process and adopted our percent-of-spend pricing option, completely bypassing the need to test us on a fixed-price basis. This is a testament to the increasing momentum our software has gained with brands and their agencies. For the same period last year, it was reversed; 65% of our new customer wins came through our fixed-price option. This means that we are shortening the sales cycle for customers to scale their spending in Adelphic. As a further example of this shift in client behaviour, Nestle Waters and their agency became a significant customer in the first quarter on the platform under our percent-of-spend pricing option; they did not start as a fixed-price customer. Instead, they capitalized on our platform's omni-channel capabilities, as well as advanced reporting and measurement capabilities to drive a significant return on ad spend, which gave our client confidence to then double their planned spend in the first quarter. This is just one example of a customer adopting our software on a shortened sales cycle and continuing to consolidate more spending on our platform. This shift to our percent-of-spend pricing option is extremely encouraging for the future. And here's why: in 2020, year-one percent-of-spend customers spent twice the amount compared to year-one fixed-price customers. In 2021, year-one percent-of-spend customers are now spending four times that of year-one fixed-price customers. Although we make a lower percentage per dollar of ad spend in this pricing option in the short term, our long-term goal of consolidating all of their ad spend is being achieved as these customers spend dramatically more. I talked about how we are attracting larger customers. We also recently signed updated agreements with three advertising holding companies. These agreements, and others, are bringing us much larger brands like Disney, Amazon, and Papa John's. With more customers and more ad spending, all happening in our percent-of-spend pricing option, this means that we're accelerating our market penetration. It also means that we are becoming a go-to platform for not only CTV, but across all channels, as evidenced by the broad-based spending growth we're seeing in desktop and mobile, which is up 67%, audio up 60%, and digital out-of-home up 346%. In closing, our market share gains are very exciting. Our clients' needs are only increasing as we introduce new capabilities into our software; updates in our data marketplace, identity resolution, advanced measurement, and our updated household ID offering are resulting in heavy momentum with clients that we believe will further improve our revenue growth rates in the second half of the year. Let me now turn things over to our CFO, Larry Madden, to discuss our financials and offer more detail on some of the spending trends we're seeing.

Larry Madden, CFO

Thanks, Chris. And thank you everyone for joining us today. Before I begin, I'd like to remind everyone that we have posted supplemental financial slides to our Investor Relations website to accompany today's presentation. As Tim and Chris both mentioned, we are extremely pleased with the market share gains we achieved in Q1. Advertisers' spend on the platform increased 44% over the prior year period, which represented our second highest quarterly growth rates since 2019. Such growth also represented a significant acceleration from full year 2021 levels, where advertisers' spend grew 29%. Marketers and their agencies are allocating more of their advertising budgets to our platform, and we are winning new customers at an accelerating rate, which makes us more bullish than ever that our solution is resonating with customers. Revenue growth for the quarter was in line with our expectations and adjusted EBITDA was slightly better than expected. As we indicated in March, growth across our percent-of-spend pricing model is far outpacing growth across fixed price, and we expect this trend to continue going forward. This is coming from both new and existing customers. Our easy-to-use self-serve software is driving increased adoption and more dollars are moving to our platform. While this mix shift between pricing models will impact revenue growth rates in the near term, we do expect the relationship between growth in advertiser spend and growth in revenue to improve as we move through the year and beyond. This afternoon, I will be discussing some of the highlights of our Q1 performance as well as some of the key financial and operational drivers during the quarter. And I will also be reviewing our current expectations for Q2 and the full year 2022. In terms of top-line metrics for the first quarter, as I said, advertisers spent across our platform increased 44% over the prior year period, accelerating from 26% growth in Q4. Revenue was $42.6 million, an increase of 6% over the prior year period. Contribution ex TAC was $27.5 million, an increase of 3% over the prior year period. Advertisers' spend on the platform in Q1 grew well in excess of the overall growth rates expected for the U.S. programmatic market. And as we previously indicated, we expect that trend to continue going forward. The lifetime value of a customer using our percentage spend pricing option is significantly greater than that of a fixed-price customer, as percent-of-spend customers ramp spend more significantly over time and have higher retention rates. Increasing customer adoption of our percent-of-spend pricing option has always been our goal because we believe that better positions us for more consistent, predictable long-term value creation. During the quarter, we saw solid growth in advertisers' spend across all key digital channels as customers are increasingly using the full omni-channel capabilities of our platform. CTV continues to be a big driver of our growth and continues to represent our largest channel based on advertisers' spend. Additionally, mobile, desktop, streaming audio, and digital out-of-home all had strong increases in advertisers' spend for the quarter. From a customer vertical perspective, during the quarter, we saw broad-based strength across all key customer verticals outside of automotive, with automotive continuing to be negatively impacted by supply chain issues. Advertisers' spend increased 53% across all customer verticals excluding automotive, and 68% across three of our largest customer verticals: retail, healthcare, and entertainment. Further investment in our sales, marketing, and technology teams is also paying dividends as evidenced by the significant increase in the number of active customers. At the end of Q1, we had 327 active customers versus 266 in the prior year period, representing a net increase of 61 customers over the past 12 months, or an increase of 23% year-over-year. Sequentially, the number of active customers increased by 18 compared to Q4, exceeding our expectations and representing a quarter-over-quarter increase of 6%. One last point on revenue as it relates to geographic mix. As we mentioned in the past, virtually all of our revenue is generated in the United States. We have been intentional with this strategy and have little exposure to international advertising budgets at this time. We recognized that geopolitical and macro uncertainty is causing some concern over advertising spend in international markets, but given our limited exposure to international markets, we believe we have minimal risks associated with these events. Turning now to operating expenses, non-GAAP operating expenses, which represent the difference between contribution ex TAC and adjusted EBITDA, totaled $31.4 million in the quarter, representing a year-over-year increase of 44%. The year-over-year increase is primarily attributable to the planned investments we've made over the past 12 months across the organization to further accelerate growth in advertiser spend and drive market share gains. Adjusted EBITDA for the quarter was negative $3.9 million, slightly better than our expectations. For the quarter, our non-GAAP net loss, which excludes stock-based compensation, totaled negative $6.8 million, and non-GAAP loss per diluted share of Class A common stock was negative $0.09 for the quarter. From a cash flow perspective, we generated $11.6 million of net cash from operating activities in Q1 and ended the quarter with $248 million in cash, or just over $4 per share outstanding as of March 31, 2022. We also ended the year with a modest amount of debt totaling $17.5 million and significant availability under our line of credit. We believe that our growth profile and healthy balance sheet position us extremely well to take advantage of the rapidly growing market opportunity in front of us. Before moving on to discussing our forward guidance, I'd like to briefly cover a couple of housekeeping items for modeling purposes. In terms of share counts, we ended the quarter with 14.1 million Class A common shares outstanding and 61.2 million total shares outstanding. By the end of 2022, we expect the Class A common share counts to increase to approximately 15.2 million and total shares outstanding to increase to approximately 62.2 million. The expected increases are primarily the result of vesting activity under our long-term incentive plan. With respect to stock-based compensation, we recorded $6.4 million of SBC in the first quarter and expect SBC to be approximately $8 million per quarter for the balance of 2022. And with that, I'll now turn to our guidance for Q2 and for the full year 2022. For the second quarter of 2022, we expect advertiser spend across our platform to continue to outpace expected market growth rates, with expected growth of at least 35%. We expect revenue in the range of $52.5 million to $55 million, which represents year-over-year growth of approximately 4% to 9% and adjusted EBITDA in the range of negative $3 million to negative $5 million, reflecting continuing investments in our growth initiatives. For the full year, we are reaffirming our previously issued guidance and expect advertiser spend across our platform to grow at least 35%. We expect revenue in the range of $260 million to $270 million, which represents year-over-year growth of approximately 16% to 20%, and adjusted EBITDA in the range of $25 million to $35 million. As we indicated in March, we intend to continue investing in critical areas of our business in 2022 to further accelerate growth in advertiser spend across our platform. We believe these incremental investments, although impacting EBITDA in the short term, will further accelerate our growth and market share gains going forward. Our goal is to deliver outside growth in advertiser spend on the platform for many years to come. As a percentage of spend, we expect to be the main driver of such growth. We believe our revenue and contribution ex TAC growth rates will significantly improve over time as such growth rates move closer to the overall growth in advertisers' spend on the platform. In closing, we have the utmost confidence that we will achieve our long-term targets of at least $500 million in revenue and 35% adjusted EBITDA margins by 2025, if not sooner. Our conviction is centered around how marketers and agencies are responding to our solution today, as evidenced by the acceleration in both advertiser spend and new customer wins that we are currently seeing across the platform. Our total addressable market is massive, and we firmly believe our solution uniquely and effectively addresses many of the challenges that marketers are facing in today's dynamic digital landscape. That concludes our prepared remarks today, and with that, I will now turn it back over to the operator to open the lines to questions.

Operator, Operator

Thank you very much. Our first question is from Maria Ripps with Canaccord. You may now ask your question.

Maria Ripps, Analyst

Well, thanks so much for taking my questions. So first, your revenue guidance implies approximately 25% growth for the second half of the year. Can you maybe just talk about what's embedded in your guidance in terms of sort of continued mix shift towards percent of spend model? Do you expect that mix to sort of moderate? And is there a way to quantify that? And then any thoughts you can share on the linearity of revenue growth in the second half of the year?

Tim Vanderhook, CEO

Yes. Larry, you want to take that?

Larry Madden, CFO

Hi, Maria. Thanks for the question. In terms of the second half, yes, those numbers kind of mid to high 20s, we're very confident that we'll be able to achieve them. We do, as we've said, expect the percentage of spend pricing options to continue to drive that growth. But one of the factors in terms of the growth rates and revenue and ex TAC that we are expecting to improve in the second half is, if you look back at the first half of 2021, we had a significant amount of testing on the platform on fixed price that now is on percentage of spend. So the first half in terms of 2022, the growth rates in revenue and the growth rates in ex TAC are quite a bit lower than the growth rates in spend. We expect that to improve significantly in the second half. So spend will continue to grow significantly, but revenue in ex TAC will begin to catch up in the second half.

Maria Ripps, Analyst

Got it. And then, my second question is also related to this topic. So with increasing mix shift towards percent of spend, can you maybe give us some color on the relative take rates between your different pricing models? And maybe you can talk about sort of how those take rates have been trending over the past several quarters. So I guess just any numbers you can share with us to bridge the gap between the platform usage and revenue growth here in the near term that will be helpful.

Chris Vanderhook, COO

Yes. I think it's less of the take rate per se. We do make less as I said earlier. We do make less than a percentage of spend per dollar that's spent, but the dollars are bigger. As I highlighted when someone's on percentage of spent. When someone's on fixed price, yes, you're making more per dollar, but you certainly don't have the spend ability that you get out of the percent of spend type customers. I think it really is though, if you listen to what Larry just said in his remarks around gross accounting or fixed price, that's really the other piece that is the larger factor. Because we had a higher mix of fixed price testing last year, and now so many of those have moved over percentage of spend, and so many of our new customers are on percentage of spend, we expect that back half really the growth rates in revenue to really increase to where our full year guide will end up at.

Tim Vanderhook, CEO

And I would add over time post-2022 because we believe percentage of spend will continue to be the driver, you will see the growth rates in revenue in ex TAC get closer and closer to the growth rates in percentage of spend in terms of advertisers spend as fixed price component becomes a smaller and smaller piece of the total spent.

Maria Ripps, Analyst

Got it. Thank you so much for the color.

Operator, Operator

Okay, thank you. Our next question comes from Laura Martin with Needham.

Laura Martin, Analyst

Great. I'm interested in your thoughts on Netflix given that Disney Plus is introducing an ad-supported tier this year and Netflix is expected to follow next year. Does this situation pose a challenge for you? It seems like there will be a significant increase in the availability of CTV ad units, which could negatively impact CPMs in the short term, and since you earn a percentage of total ad spend, this might not be beneficial for you. Considering that CTV is your largest category, isn't this a concerning development as more ad-supported services enter the market?

Chris Vanderhook, COO

I wouldn't say that at all, I'd say definitely the opposite. I think everybody reacted in our industry reacted similarly, which was wow! I would probably pick Netflix, if you put them out there today, in terms of CTV, if they were to be ad-supported, they're likely number two compared to YouTube, which is massive, and marketers are going to need access to that. They’re also—if you're seeing the trend is that a lot of these companies may need the independent ad tech infrastructure to pull off an advertising business. I think about Netflix opening up has so many benefits: one, it's going to enable all of linear television to shift. We need the growth in CTV and consumption and more content to be ad-supported. So I think that's a huge benefit number one because we still have another half of videos over in linear TV. And then, the second part is, this is yet another example of yet another company in customer type building an ads business, and they just keep exploding. Last year, all the talk around retail media networks, I mean, I can't tell you how many conversations we're having with different types of companies, content owners included, looking for key ad technology, mainly a DSP to help power that business. So I think it's positive in tons of different directions.

Laura Martin, Analyst

Super helpful. My second question is for Larry. I understand that you are ramping up sales and technology, which will lead to increased revenue in the second half. However, when I review the year-over-year expenses, I see that sales and marketing are down 3% and technology and development are down 15%. It seems that most of the cost increases are in platform operations. Can you clarify why those expenses are going down when I thought the main reason for margin compression was due to your investments in sales and marketing?

Larry Madden, CFO

That is on a GAAP basis. You have to remember our GAAP figures include quite a significant amount of stock-based compensation. Last year was over $17 million in the quarter. This year, it was over $6 million in the quarter. We do have slides on our Investor Relations website that show basically taking the GAAP OpEx backing out these non-cash items like D&A and SBC. And with that perspective, you can see the increase. The increase this year, particularly in Q1, is larger than the increase will be for the full year because a lot of the increase is coming from the annualization of the investments we made last year. Most of the investments we made last year were post-Q1. So Q1 this year in particular has a higher percentage increase in OpEx and that will go down over the course of the year. But you have to look at it without stock-based compensation, without TAC and without D&A; all three numbers are included in the GAAP operating expenses.

Laura Martin, Analyst

Super helpful. Thank you so much. Thanks, guys.

Operator, Operator

Okay. Our next question comes from Andrew Boone with JMP.

Andrew Boone, Analyst

Guys, good afternoon. Thanks for the questions. I wanted to hit first on privacy, just given all the conversations that we continue to have with investors and in terms of the changing privacy landscape. Can you parse out just the risks to the business? Like how do we think about the potential for IP deprecation for you guys as well as the tailwinds, right? So as Google ad ID goes away, likely over the next two years as cookies go away in 2023. Just update us overall in terms of the tailwinds and the headwinds as we think about the business as it relates to privacy.

Chris Vanderhook, COO

Yes. Let me start, you can fill in. When I think about, rewind a year ago, this was a lot of what we talked about during the IPO, is that these identifiers and these risks of these other businesses with IDs going away, and a heightened kind of awareness around privacy. This is really what our platform was built around. For us, the long-term view, it's not a silver bullet strategy of one ID that works versus the others. It really is a framework, what we talk about as our people-based framework. But really, what does that truly end up meaning? Where do we see where that kind of north star is? These IDs that are supplied by big tech may somewhat deprecate, go away, and evolve, definitely get watered down like they have been. But in the end, we think that addressable experiences only increase over time because they're going to be a benefit for consumers. What we're seeing right now is a huge trend, where content owners, who have direct relationships with consumers, and marketers who have direct relationships with consumers need a platform in the middle to connect both sets of first-party data; that's really what is happening. That's number one. Number two, where's that happening? It's not going to happen in the browser. It's not going to happen in Safari or across Android live on a device; it's all going to happen server-side between these entities. That really is going to allow for the privacy to take place and the disclosure to consumers. But marketers, in the end, get to offer personalized advertising and see what they get for their money in measurement. This is exactly where we're positioned. It's a big reason why we have such a large increase in our platform spend growing 44%, this quarter. So that's our view on the privacy piece; it's going to continue, just like we said a year ago, but it is exactly where our platform is built.

Tim Vanderhook, CEO

And I'll just add to that. I mean, really, at a high level, what's happening in the privacy landscape is cookies were an opt-out model. Consumers had to find them, delete them, figure out how to turn them off and keep doing that over and over. That privacy pendulum has shifted more towards an opt-in model, which is around the PII data associated with an email address or the registration on an actual website. So, I think what you're seeing at a high level is a move from opt-out to opt-in. And for us, that opt-in is usually on a people-based framework. That’s really where Chris mentioned, we bring in the data matching between the advertiser and the content owners. And that's what's been driving our growth. So we view digital identifiers being deleted as an absolute tailwind for our business. We've said it since we went public, and I think that will continue to be a tailwind for many years.

Andrew Boone, Analyst

Well, that's actually a nice segue into my second question. As you guys brought up measurement last quarter, in terms of the 100-plus partners this quarter, you guys brought it up in the prepared remarks in terms of continued advancements there? Can you just double click in terms of just the attribution and measurement side and just talk about the progress that you've made there as well as just how do you think you compare against other DSPs that are out there? And the differentiation between the platforms? Thanks so much.

Tim Vanderhook, CEO

Yes. Well, let me start on this. I think the biggest differentiation from the measurement that a people-based DSP offers versus our traditional large competitors is that we can measure in-store sales or offline activity as well as online and e-commerce transactions that are happening. Everyone that's relying on a digital identifier is only able to measure or report back sales in these ID-based environments, which is primarily Google Chrome now. The biggest advantage is right off the top. If any business that operates in a physical retail space and an e-commerce online as a sales channel, we blend both of those back in and are able for them to understand which ads are driving in-store sales, which ads are driving online sales, and what that means for the total revenue of that organization. That is by far the number one differentiator when it comes to measurement.

Chris Vanderhook, COO

I would say too, just from our standpoint, we continue to offer and roll out a ton of innovation around measurement. It's a huge reason why customers work with us. The value and the benefit of working with a people-based platform are in the measurement. You get to truly see the return on ad spend, and then you get to make clear decisions. This was taken for granted years ago because big tech, whether it’s been a cookie or an Apple giving you an IDFA, it was easy for everyone. It was the easy button for measurement. You knew that you showed an ad? Did they show up on your website, download something? But when you started to think about those going away, marketers have a huge challenge right now. The big trend that we're seeing is them really taking measurement in-house. They're really having to do measurement on their own in the cloud, and they need partners to do that. When you think about us, like I said, how longstanding here, we have our own Data Lake platform that connects in either customers use it on their own as their own clean room, or we connect into other third-party clean rooms like Snowflake. So we have a huge lead here, and I think that you're going to see more innovation come out of us; it's also going to be another big reason why I think our revenue growth rates pick up in the back half of the year as well.

Andrew Boone, Analyst

Thanks, guys.

Operator, Operator

Okay. Our next question comes from Andrew Marok with Raymond James.

Andrew Marok, Analyst

Hey, guys, thanks for taking my questions. One more swing at the percent of spend issue. So with 60% of new customers coming in at percent of spend and revenue kind of in line with guidance in 1Q? Does that imply that the shift to percent of spend is kind of progressing in line with your expectations so far?

Chris Vanderhook, COO

Yes. I don't control when we go to market or when a customer, like last year, tests us on a fixed-price basis. Their decision-making process is internal and can take time, especially with the MSA process. What we observed last year was strong success with those customers and tests on our platform; they have transitioned to a percentage of spend and are actually increasing their spending. We no longer have to demonstrate our value upfront as we did in the past couple of years. Now, awareness of our Adelphic software has significantly increased. Customers are now saying, 'I won't enter into an MSA yet; I want to start with fixed pricing.' Instead, they go straight to an MSA and begin spending. While this wasn't necessarily beyond our expectations, we know that retention rates improve with increased spending, and they are investing even more, which accelerates our progress and shortens the sales cycle with these customers. When we consider the amount customers are investing with us, this has advanced our long-term projections, and it's encouraging to see. However, it does create a temporary drag on short-term revenue growth. Nonetheless, we anticipate that this will improve in the latter half of the year.

Andrew Marok, Analyst

Understood. And also, we saw some strong results in some of the emerging channels like audio and digital out-of-home. Wondering you guys just a little bit of carte blanche to talk about how those channels are driving value for advertisers and your platform. And how big can those become for you over time?

Tim Vanderhook, CEO

Yes, definitely. When we think of streaming audio, it’s the next most exciting category behind connected TV. It has all of the target ability, all of the measurability, and the unique engagement with the end consumer where they're listening with full attention to a podcast or music in their car. So to us, we look at streaming audio as another huge channel that can be unlocked in the future. Everything we’re learning on connected television is applicable to streaming audio as well. Digital out-of-home, obviously, was a big grower prior to our IPO, prior to the pandemic hitting, and we've started to see this emerge now as a pretty substantial category on many media plans that marketers are looking to reach. Overall strength in all those channels is really a testament to our household ID technology. It's the ability to buy across all of those channels, and then understand which ad within those channels actually drove the revenue for the customer. That's where the measurement kicks in, leveraging this household ID as the best way to actually plan, buy, and measure omni-channel advertising in Adelphic. We see huge tailwinds in streaming audio, and enormous tailwinds, especially now that the pandemic has, for the most part, started to come to an end. I know COVID keeps flaring up, but society is moving past this period. Digital out-of-home, we're seeing on many, many plans.

Chris Vanderhook, COO

Now Andrew, one other point just around this and why it's important. When you have broad-based spending growth across all channels, it proves the point that Adelphic software is extremely valuable to the customers. There are plenty of other companies that will have one-off growth shoots within certain channels. But it really shows the value of our software. We've long said that you could have a great ID, you could have great capabilities, but if your software doesn't make it super easy for them to buy and then understand what they got for their money, they're not going to consolidate spend across your platform. They're just not; that’s the marketers I'm talking about. So, in the end, this is really another proof point that Adelphic software is really enterprise-grade, and we're making incredible inroads out there and now with even larger customers; those are all incredible things to see.

Andrew Marok, Analyst

Understood, very helpful. Very interesting. Thank you.

Operator, Operator

Okay. At this time, I do not see any more questions. So I will turn it back over to you for closing remarks.

Tim Vanderhook, CEO

All right. I'd like to thank everyone once again for joining our quarterly earnings call, and we'll see you next quarter. Bye.

Chris Vanderhook, COO

Thank you.