Telaria, Inc. (TLRA) Q1 2019 Earnings Call Transcript

TLRA earnings call for the period ending March 31, 2019.

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May 10, 2019 at 11:23AM
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Telaria, Inc. (NYSE:TLRA)
Q1 2019 Earnings Call
May. 09, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to the Telaria first-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, vice president, investor relations. Please go ahead, sir.

Andrew Posen -- Vice President, Investor Relations

Good morning. Welcome to Telaria's first-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 19th, 2019, and in our future SEC filings and reports by the company, including its Form 10-Q for the period ended March 31, 2019. All information provided on this conference call is as of today, May 9th, 2019. Except as required by law, we undertake no obligation to update publicly any forward-looking statements made on this call to conform the statement 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'd now like to turn the call over to Mark Zagorski, Telaria's CEO.

Mark Zagorski -- Chief Executive Officer

Thanks, Andrew. Good morning, and welcome to our first-quarter 2019 earnings call. This morning, we reported a strong quarter with revenue of $13.6 million, up 42% year over year and an adjusted EBITDA loss of negative $2.4 million compared to a $3.3 million loss last year. The momentum that we saw in Q4 continued into the quarter driven by our focus on expanding our connected television, or CTV, platform.

Our first-quarter performance, coupled with our expectations for Q2, give us the confidence to raise our guidance for the full year on both revenue and EBITDA. Our great results this quarter reflected our success in both increasing advertiser demand for CTV avails, and expanding the supply of CTV available that's available programmatically via the Telaria platform. CTV revenue continues to grow in both absolute dollars and as a percent of our total revenue. CTV revenue for the quarter increased 169% year over year to $5.2 million.

It comprised 38% of our total revenue, which is up from 33% of total revenue in Q4. Our CTV University program has connected with over 1,000 leading media buyers and planners educating them as to how to make CTV an integral part of their media strategy and driving demand for the programmatic execution of this strategy. And for publishers who are the core of our platform business, we continue to pursue auction optimization technologies and unconflicted business strategies that made it easy for them to confidently shift the sale of more of their premium inventory to programmatic channels. Additionally, we increased our CTV reach by adding new publishers, which added breadth and differentiation to our inventory pool.

The combination of these efforts meant more CTV transactions being managed through our VMP. As CTV CPMs are significantly higher than those in desktop or mobile, our CTV growth drove platform eCPM to $12.78 compared to $11.60 in the prior-year period. And while CTV continues to be the biggest contributor to our growth, our mobile and desktop businesses are also on the upswing, reflecting the success of the steps we took last year to structure our sales force and increase the amount of premium desktop inventory on our platform. CTV, under the umbrella category of OTT, continues to elicit excitement from advertisers and viewing attention from consumers.

Magna Global recently updated their 2018 U.S. OTT advertising spend by 35% to $2.7 billion, which represents a 54% increase from 2017. Magna also projects that this segment will grow to over $5 billion by the end of 2020, a 41% CAGR from 2017. Over the same period, eMarketer estimates that ad spend on linear TV will remain flat at around $71 billion, reflecting the continuing shift of advertiser spend to more addressable video.

While ad spend on CTV is increasing, publishers are still only monetizing a small portion of that growth programmatically, creating substantial future market upside for our business. And while new players like Viacom and Altice jumping into the AVOD space, the amount of inventory and the pressure to monetize it efficiently will only grow with programmatic as a logical solution. Given our leading position in the ecosystem, we believe that these trends will provide us with a significant opportunity to play a key role in this transition. A core principle that drives our product development and business strategy is to create a transparent programmatic buying environment in which advertisers can transact with confidence and publishers are assured that their data, premium inventory and business interests are protected.

Over the past year and a half, we've undertaken several initiatives to be industry leaders on both fronts. Last year, we led the industry with the introduction of our Fraud Fighter program, a first-to-market quality initiative that protected media buyers from fraudulent inventory risk. Then soon after, we became the first video monetization platform to attain 100% ads.txt compliance, a direct measure of publisher veracity across all the premium inventory transacted on our platform. And we went one step further by receiving an external stamp of approval from a Big Four accounting firm.

They conducted an independent review to certify that our VMP had 100% fee transparency, underscoring the fact that we have no hidden fees in any deal transactions on our platform. This year, we've upped the ante and increased our commitment to lead the programmatic industry further and faster into a new era of accountability. We recently announced that Telaria is the first video monetization platform to institute a comprehensive transparency initiative to help increase clarity and efficiency throughout the advertising supply chain. As brands and agencies consolidate their spend on high quality programmatic platforms, they're demanding more clarity on fees and access to auction level data to ensure that spend is optimized and auction mechanics are fair and efficient.

Telaria is leading the way to support these demands through two major technology upgrades. First, we are delivering granular auction mechanics data to agencies and brands to provide bidding insights to ensure buyers that the auctions they are participating in are fair, clean and transparent. Second, we're providing aggregated take rates across specific buyer campaigns to enable brands and agencies to have a more transparent view of their ad spend across the supply chain. We believe this increased transparency will encourage agencies and brands to spend more through our platform as they could be assured of where their dollars are ultimately going and appreciate true ROI on their spend.

So far, the market feedback has been exceptional. And as leading agencies and brands call the ranks of nonpremium, nontransparent platforms, Telaria has assumed a leadership position to take advantage of the resulting share shift. In addition to helping our current clients grow their programmatic business, we also continue to add new and exciting partners to our platform. With the addition of Zilo this quarter, we now have five of the top seven virtual MVPDs using the Telaria VMP.

Globally, we also enhanced our platform footprint. This quarter, we added True Digital, Thailand's leading pay-TV operator with over 10 million viewers across 25 live video channels and a comprehensive VOD portfolio. And we renewed our long-running partnership with Network 10 in Australia, underscoring our market position in the region. These great partner additions highlight the growing strength of our platform and our increasingly global footprint.

Q1 was a great quarter and represents a strong start to the year. We are successfully executing our strategy to build market-leading proprietary CTV advertising technology, which is helping to deliver solid financial results against our plan. We continue to focus on the large screen world of CTV, which we believe has significant long-term potential to grow as more consumers cut the cord and more publishers embrace programmatic technology at an increasing pace. And in addition to the great results from our CTV business, our desktop and mobile video segments have shown momentum, as well as more OTT content is streamed wherever consumers have access to a screen.

Telaria has come a long way in the last 20 months, and our drive to evolve the business has not abated. We continue to enhance our organization through industry-leading hires and sales product and engineering, most recently adding FreeWheel's Paige Bilins as chief product officer. We continue to grow our premium roster of publishers by adding the top names in OTT content in markets around the world, and we continue to add features and functions to the platform that drive differentiation and build confidence with marketers, and trust with the publishers who align our software to build new programmatic video revenue streams. And 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.

John Rego -- Chief Financial Officer

Thanks, Mark. This was our strongest first quarter on record with revenue of $13.6 million, up 42% from the same period last year; and an adjusted EBITDA loss of $2.4 million, an improvement of nearly $1 million from the first quarter last year when we reported an adjusted EBITDA loss of $3.3 million. Both revenue and adjusted EBITDA exceeded our expectations this quarter and builds on the momentum we saw last quarter. Our gross profit increased to $11.2 million from $8.6 million in the prior-year quarter.

Our quarterly core operating expenses, which exclude noncash items, increased 14% from the same period last year principally due to head count growth from our acquisition, which we completed in the second quarter last year. However, as a percentage of revenue, we demonstrated improved operating leverage with core operating expenses for the quarter at 99% of revenue, down from 124% of revenue in Q1 2018. We ended the quarter with approximately $63 million of available liquidity, including $38 million of working capital and the $25 million line of credit. I'd like to finish our call this morning with our expectations for the second quarter, and provide a positive update to our outlook for 2019.

For the second quarter, we expect revenue to be between $15.5 million and $16.5 million and adjusted EBITDA to be between a loss of $1 million and breakeven. For the full year, we are raising our revenue guidance to be between $66 million and $70 million. Additionally, we are raising our adjusted EBITDA guidance to be between $2 million and $5 million. We'll now open up the line for some questions.


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Questions & Answers:


Operator

[Operator instructions] Our first question today is coming from Jason Kreyer from Craig-Hallum. Your line is now live.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

Gentlemen, good morning. Congrats on the strong quarter.

Mark Zagorski -- Chief Executive Officer

Thanks, Jason.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

Mark, just starting out with more of a big-picture question on CTV. Just wondering if you can kind of lay out where you see the new revenue opportunity coming in because as I've talked through this, I feel like there are three different buckets that can come from. You can add more CTV content providers, you can kind of work with existing platforms to move more inventory from a manual to a more automated process or it can just be kind of tailwinds from the industry from higher consumer adoption. So just wondering, if in that kind of a hierarchy, where you see growth coming from.

Mark Zagorski -- Chief Executive Officer

Thanks for the question, Jason. And you know, you really nailed it. We've got -- on the CTV front, we've got three main drivers of growth. And when we look in our business, obviously, consumer adoption is one in which it just runs on its own, we don't have a lot of control over.

The other two, we do, and that we proactively, you know move against, which is adding new partners to the platform and driving more of their business programmatically. And of those two factors, the one we really focus on the most is what we'll consider same-store sales, which is when you have relationships with five of the top seven virtual MVPDs and great people, other partners out there, like Pluto and others, the drive then is how do we get those partners to transact more of their business programmatically. And some of that is market driven as advertisers and agencies become more comfortable. But a lot of that is, a, making the tools and the technology more seamless with how they operate, and more seamless with how buyers want to buy.

And that's why things like our transparency initiative becomes such -- so important to us with driving same-store sales. If we can make advertisers feel more comfortable and publishers feel more comfortable using a transparent software platform, then it's just natural that more dollars will flow into programmatic channels versus direct sales channels. So of those three factors, really, the one we focus on the most and we continue to focus on the most is really same-store sales, which is driving a higher percentage of revenue that the CTV companies transacts in sales and sales to be done programmatically.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

And you mentioned the upswing that you're seeing in mobile and desktop. Just wondering if this is enough or do you think we're seeing a change in the growth trajectory? I think in the past, you've kind of suggested that desktop could be flattish and mobile could be -- may be a high single digits, low double-digit type of grower. So I'm just wondering if there's enough there for you to change that longer-term outlook.

Mark Zagorski -- Chief Executive Officer

No. Look, we see both of them, like I said, still growing, still in the positive column. I think the organic growth there has slowed a bit just in the market in general. But net-net, I think we'll still say that they're both in the growth trajectory, they're both in the high single-, low double-digit kind of numbers, and we expect that to continue throughout the year.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

OK. Last one for me. Obviously, raising guidance this morning, CTV has been a key source of that strength. Just wondering, when you break down what you're guiding for the year, how you view the trajectory of CTV growth as the year progresses.

Mark Zagorski -- Chief Executive Officer

So I'll talk about this from a top level maybe, and John can maybe dig a bit deeper. But you know when we look at CTV, obviously, it's going to grow in absolute dollars, and we continue to see that trend throughout the year and throughout the quarters. On the other hand, we -- as we just noted, our desktop and mobile business continue to grow. So as a percentage of our business, I think CTV will continue to show growth and moderate growth as a percentage.

On an absolute basis, we see that that business continued to have momentum. So overall, again, that's why we looked to raise, and we have positive momentum on all three fronts. And I think CTV will continue to show the greatest growth of those three areas. But John, do you want to talk -- any more detail on it?

John Rego -- Chief Financial Officer

Well, I think that said, I mean all the trends seem very positive to us, and it's still a big grower. It's the biggest grower we have. So I don't see anything abating that at all.

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

All right. Great. Thank you, guys.

Mark Zagorski -- Chief Executive Officer

Thanks.

Operator

Our next question is coming from Mark Argento from Lake Street Capital Markets. Your line is now live.

Mark Argento -- Lake Street Capital Markes -- Analyst

Hi, guys. Congrats on a solid quarter. Just a question, talking about the business model a little bit. I know when you renewed the Hulu deal, I believe it had kind of almost like a software component to it.

Could you talk a little bit about how you see the model evolving from kind of a transaction platform to almost more of like a platform as a service or software as a service type of a model?

Mark Zagorski -- Chief Executive Officer

Yeah. Hey, Mark, thanks for the question. And you bring up a great point. Last quarter, we talked a little about the renewal of the Hulu deal, which had multiple components to it, both a transaction component and a development component.

You know we look at that as being kind of a bellwether of things to come, both for how we want to direct the business but how we think our clients will start looking at the business as well. And that's a business in which we drive toward multiple streams of revenue, both transaction-based and license fee-based. And really, it's driven by both our business modeling, but the market's comfortableness with it. When markets always emerge, the first thing they look to do is what's the lowest-cost wave for me to enter into the programmatic space, for example.

And the lowest-cost way is to give a percentage of revenue or give some percentage of the upside that I get out of the business. That usually evolves into some type of transaction fee, which then evolves into a more stable license fee. I think we'll see the evolution of that business -- of our business at some point. I don't see it any time soon in the short term.

And I think we will always have some variable component of the business that's driven by the number of transactions that run through the platform because obviously there are expenses that are associated with that, but it's part of how most high-volume models work. So net-net, I think it's an opportunity for us down the road to create a more software and SaaS-like revenue stream. And we are having discussions with some of our publishers, but it's still early for them as well. They're early into the programmatic business, particularly the CTV guys.

So for them, models that have more flexibility are ones in which that are more appealing to them at this stage.

Mark Argento -- Lake Street Capital Markes -- Analyst

That was helpful. And then in terms of -- I know you made some changes or enhanced the sales and distribution efforts there. Can you touch on that a little bit? Looks like it's starting to pay some dividends. Have you grown the sales force? What have you done there specifically?

Mark Zagorski -- Chief Executive Officer

Yeah. So I think we mentioned in the last couple of calls, we did two things. We brought in new sales leadership, and then we also looked at enhancing and expanding the team under that leadership. So we brought them out of Huawei back in -- I think it was like Q4 of 2018.

Adam has done a great job kind of revamping, restructuring the team and bringing on additional head count and not in a massive way. So I think we said this in previous calls that where our sales outreach on the buy-side or to the agencies and to the advertisers is an evangelism, it's a market driver, it's a partnership with our sellers, but it's not an IO-carrying sales force that we have the scale to drive sales. And I think what we were able to do over the last quarter, two quarters, was build out that team in a way that we had national coverage, that we were spending time with the agencies and marketers the way we needed to. And we've gotten than to a size now where we feel comfortable that's in the right place.

And I think Adam and the team did a great job expanding, getting to the right size. We were understaffed when we were in Q3. I think we're right staffed now for the size of the business. Obviously, as we get to certain plateaus, that team will continue to grow, but it's not growing on a linear basis with revenue the way kind of a traditional ad network or ad sales team would.

Mark Argento -- Lake Street Capital Markes -- Analyst

Excellent. One quick one for John, in terms of the model. Any larger capex needs? Any kind of changes to the thoughts on kind of leverage points in the model, gross margins, any thoughts there?

John Rego -- Chief Financial Officer

So I think on capex needs, we are capex light, and we'll continue to be capex light, so we're good to go with that. On margins, I think you'll see the margin start to expand and as we go forward in the subsequent quarters of this year. As you know, in our constant revenue, the biggest component of that are our server-to-server connections, which are in the cloud. And we've driven so much business in Q4 and in Q1 that we essentially raised ourselves into a new tier of pricing that we're going to have to grow into.

So I would look for some margin expansion to happen starting in Q2, Q3, Q4, so I would definitely put that in. So our expectations on margin for the year are relatively unchanged from what we told you last time around.

Mark Argento -- Lake Street Capital Markes -- Analyst

Great. Thanks, guys.

Mark Zagorski -- Chief Executive Officer

Thanks, Mark.

Operator

Our next question today is coming from Austin Moldow from Canaccord. Your line is now live.

Austin Moldow -- Canaccord Genuity Inc. -- Analyst

Hi, thanks for taking my questions, and congrats on the really nice quarter. I wanted to ask the same-store sale new business question in a slightly different way. So you've got five of the top seven virtual MVPDs. You've got Hulu.

You have some relationship with most of the emerging AVOD platforms like the Tubis of the world from what I can tell. So my question is, if you are adding new business, I imagine you are still going after clients. What -- are there any material new AVOD customers out there for you to sign? What kind of segments of the market are still sort of ripe to go after from here?

Mark Zagorski -- Chief Executive Officer

Yeah. Thanks, Austin. It's a great question. And you know the short answer is yes, there are still lots of green fields out there that we haven't pursued.

And I'll give some broad categories. The first is kind of traditional broadcast. When we say traditional, obviously, most of them have already started building OTT businesses or created OTT businesses. And I think we arguably have a lot of opportunity there.

It's a place where we haven't penetrated. We were kind of the digital-first guys. And now as those companies start to mature and build more businesses online, I think there's opportunity there. And the model that we look to is kind of what we've done in Australia and in Asia-Pacific region where that team works with a majority of the top broadcasters in Australia, New Zealand on a quasi-exclusive basis.

And I think we certainly are going to use some of the work and the model that they've done with the broadcast-type AVOD guys to make that happen in the U.S. So I think there are some opportunities there. And that's kind of the first bucket. And the second bucket, there's just a good number of emerging companies that still are somewhat on the fringes of the OTT space.

I mean when you look at the number of apps out there, last number I heard is something like we had 1,000 different OTT apps that were available on the system. We certainly don't have 1,000 clients on the -- on our CTV front. So there's more opportunities there as well. So I think the reality of it is there's some big fish out there in the broadcast space that we don't work with, and there's lots of other fish that are swirling around on the edges that can be interesting when you put them in aggregate, and I think that's the key, so still opportunities to get to new business out there.

Austin Moldow -- Canaccord Genuity Inc. -- Analyst

Got it. That's very helpful. And a nice segue, I wanted to ask if you're able to share your international revenue contribution.

Mark Zagorski -- Chief Executive Officer

Yeah. Yeah. So we talk a lot about international, and we do focus a lot about around APAC because that team has done just a stellar job. They've started -- we have a team based in Sydney.

They started there, moved out to New Zealand and now have done a really good job getting into Southeast Asia, so in places like Singapore and Malaysia and Thailand. They've done just an amazing job building that business out. So when we look at percentage of revenue, we're still looking at somewhere between 12% to 13% of revenue is international. It's been relatively consistent over the last several quarters.

As our overall business grows, they've grown nicely with it. So still not a huge contributor to overall growth but a nice supplement, a nice growing business. And like I said many times in these calls and even earlier today, it's really an interesting model for us to see how they progress because in many places, particularly in Asia or Australia, those markets are sometimes 12 to 18 months ahead of us when it comes to technology, consumer adoption and even some of the ad models that they're using.

Austin Moldow -- Canaccord Genuity Inc. -- Analyst

Got it. And then my last question is I'm wondering if you're able to share what the blended take rate is across the company. I think in the past, you've shared around 20% or something like that. Wondering if it's below that point or any other color you're able to give.

Mark Zagorski -- Chief Executive Officer

So we have never really shared an exact take rate because, again, we're a net revenue business running off a SaaS-like model. So you know I think it's fair for us to say take rates are still in the 15% to 20% zone like we've always kind of said. They ebb and flow a bit based on the types of deals that we pull in, and how much, what percentage global is versus U.S. But we've been able to keep them relatively stable.

Austin Moldow -- Canaccord Genuity Inc. -- Analyst

Got it. Thanks very much, and congrats again.

Mark Zagorski -- Chief Executive Officer

Absolutely. Thanks, Austin.

Operator

Our next question today is coming from Lee Krowl from B. Riley FBR. Your line is now live.

Lee Krowl -- B. Riley FBR, Inc. -- Analyst

Great. Thanks for taking my questions. I just wanted to kind of piggyback on the take rate and kind of pivot toward CPM. Obviously, you know the pricing is significant relative to other inventory types.

But as you grow and more impressions become available, pricing becomes a little more stable versus growth, so just kind of curious where we are on the trajectory in terms of CPM growth for the overall business.

Mark Zagorski -- Chief Executive Officer

So thanks, Lee. It's a good question. And when you think about, you know the three lines: the mobile, desktop and CTV lines, they're obviously all -- the combined impact of all of those gives us our effective platform CPM. And as CTV grows, that platform CPM goes up, not because any of those individual lines have increased but because the mix has changed a bit.

But when we do look at those lines, you see slight declines in desktop and mobile CPMs as video becomes more ubiquitous and inventory goes up. I think when we look at CTV CPMs, it's still relatively early in that space, and the quality of the inventory that is in CTV is still pretty high. So the CPMs are still pretty high, and there's still a significant amount of demand for high-value CPMs. That being said, I think we can expect slight growth to continue.

We don't see an accelerated growth curve for CTV CPMs. I think we see them kind of balancing out, which is OK because we know, on the other side of that, we've got volume increasing exceptionally fast. So net-net, I think CPMs on a -- our blended CPM will continue to show some growth, probably not the accelerated growth that we've seen in the past, but we'll continue to grow. And the lines themselves have kind of settled as well.

So mobile and desktop, again, some slight declines but still relatively steady. CTV, I think will grow a bit but stay relatively calm in its growth as more volume comes into the market.

Lee Krowl -- B. Riley FBR, Inc. -- Analyst

Got it. And then you guys kind of talked about some of the ecosystem initiatives you guys have been putting in place like CTV University and the new transparency initiatives. But with the upfronts for both digital and linear in front of us, just kind of curious strategically what sort of things you guys are putting in place to kind of get the ecosystem to transition more of the linear dollars to digital dollars because that seems like the ultimate true growth opportunity for the business.

Mark Zagorski -- Chief Executive Officer

Yeah, that's -- it's an excellent question. And that's really where the rubber meets the road as when you think about a lot of the money, I would say a majority of the dollars that are still being spent on CTV right now are coming out of digital budgets not out of TV budgets. And there's a few reasons for that, the first being is that, on the agency side, the digital teams and the TV teams are still generally two separate organizations who purchase in two separate ways, and manage two separate budgets. And there's an internal battle that goes on there of who buys CTV and who buys OTT.

Is that the digital guys who are used to buying on a CPM/individual user basis or the TV guys who are trying to figure out what a GRP means in the over-the-top space? So I think part of what our drive is -- particularly through programs like CTV University, is to help them educate, help educate both sides of that, so for digital buyers to become more TV-like in their thinking, so thinking about day parts and reach; and for linear buyers to become more digital in their thinking, to be thinking about CPMs and forget about make goods. Obviously, it's a process, and it takes time. And I think for us, getting out there and pushing that messaging is super important, and education is important. The reality of it is though, and what we're hearing is we're going to go out there and bang the hammer and educate as many people as we can and spend time with the agencies and work with our partners to do that.

But the shift really comes when you have marketers trying to realize that 30% of their audience is unreachable through linear television today. And if you're a CPG brand, not a niche brand, you're somebody who wants to reach all of U.S., all of American consumers because everybody buys, so you have a blind spot now to 30% of the people who are cord cutters, you have no access to linear television. That's starting to sink in. And as I've seen in the last 20 years I've been in marketing, there you can give all the research in the world, the way things actually move in the advertising space is when anecdotally ad buyers' kids are no longer watching something or doing something or reading newspapers or watching television, so you can't reach them anymore, and they get it at the household level.

So I think you're going to start to see that happen just because -- not because of the agency structure but because the marketers themselves are going to say, "I don't watch linear television. So why am I advertising on linear television," right? And I think that's the real shift. So very long treaties on how we think this could change. But I think that we're seeing the sea change happen.

And you're exactly right, the exciting part of this is when that $70 billion in flat linear TV spend starts to move in real increments to over-the-top.

Lee Krowl -- B. Riley FBR, Inc. -- Analyst

Got it. That was helpful. Just last question for me. You know, you guys have had some M&A in the space with AppNexus last year, and maybe there's some share shift.

But now that everyone is talking about being levered to connected TV and OTT, it really kind of blurs the lines of the competitive landscape. So just kind of when you guys go in and you go in to compete for ad budget and you're going to compete for new ad inventory, just kind of your thoughts on the landscape and how it's evolved now that the industry has really shifted the focus on connected TV.

Mark Zagorski -- Chief Executive Officer

Yeah. I think there's two parts. I'll dissect that question in two ways. The first is the easier one for me, which is everyone's talking about connected TV, but very, very few people are doing it.

And -- but that means, I mean on the technology side, you'll see OTT and CTV thrown about like it's -- like the companies actually are doing business there. Most are not. There's a very small pool of companies, like Telaria, who actually programmatically can manage the complexities of ad pods, and some of the data flows that need to happen that get delivered to a large screen in someone's living room. It's very complex.

So the first thing is don't be deceived by how many people actually say they play in OTT. It's a small group of people who've mastered the complexities of delivering a large screen TV-like advertising experience to someone's living room. So that's part one. The second part is when we look at the landscape of, as you mentioned, acquisitions and mergers and consolidations, a lot of what's happened is you've seen a lot of kind of walled garden starting to be created.

And that's, I think, scary to advertisers but creates an opportunity to independent, unconflicted companies like Telaria. So walled gardens are great if you want to spend your life within those gardens, which means your data doesn't leave, and you're stuck with the content or the advertisers or the publishers within those walled gardens. And I think that creates an advantage, not just for Telaria but for all the other players who are out there who are not part of those gardens, who are basically more open, are a part of the open Internet and allow data to flow from place to place, allow advertisers to determine reach from platform to platform. So when we look at the competitive space, we certainly have players that we compete against that are bigger and part of larger walled gardens.

But our advantage is not just the nimbleness that we have, but the fact that since we're independent, we don't try to control data. Since we're independent, we don't create competing content against our publishers. Since we're independent, we have only one drive, and that's to maximize the transaction value for those publishers using our platforms. And I think that although the landscape may have changed, our position on that landscape has actually only gotten stronger based on the fact that we're not conflicted.

We don't have any biases. We're not driven by -- taking care of the mothership before our clients, and I think that's been a good thing for us.

Lee Krowl -- B. Riley FBR, Inc. -- Analyst

Great. Helpful, guys. Thanks for taking my questions.

Mark Zagorski -- Chief Executive Officer

Thank you.

Operator

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to Mark Zagorski for any further or closing comments.

Mark Zagorski -- Chief Executive Officer

Thank you, operator, and thank you all for joining us this morning. In closing, this was a strong quarter with accelerated revenue growth, improving operating leverage and increasing CTV penetration. We believe this momentum will continue and have increased our outlook for the rest of the year accordingly. We are pleased with our growing global footprint of leading CTV partners, the strides we have made in launching differentiated technology and the deepening relationships we've built with the biggest names in CTV.

We continue to maintain our strict focus on profitable growth, and we believe that we have the right technology, the right people and the right strategies to take advantage of the significant market tailwinds in the programmatic video market and the emerging CTV space. Thank you for your participation in the call this morning, and we look forward to updating you in the months ahead.

Operator

[Operator signoff]

Duration: 41 minutes

Call participants:

Andrew Posen -- Vice President, Investor Relations

Mark Zagorski -- Chief Executive Officer

John Rego -- Chief Financial Officer

Jason Kreyer -- Craig-Hallum Capital Group -- Analyst

Mark Argento -- Lake Street Capital Markes -- Analyst

Austin Moldow -- Canaccord Genuity Inc. -- Analyst

Lee Krowl -- B. Riley FBR, Inc. -- Analyst

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