VerticalScope Holdings Inc

TSX:FORA

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Hello, everybody, and welcome to the VerticalScope Holdings, Inc., Q2 2024 earnings call. My name is Sam, and I'll be coordinating your call today. [Operator Instructions]

And I would now like to hand you over to your host, Diane Yu, Chief Legal Officer, to begin. So, Diane, please go ahead.

[Diane Yu, executive]

Thank you, operator. Good morning, everyone, and welcome to VerticalScope Holdings Second Quarter 2024 Earnings Call.

I'm joined by Rob Laidlaw, our Founder, Chair, and Chief Executive Officer; Vince Bellissimo, our Chief Financial Officer; and Chris Goodridge, our President and Chief Operating Officer. We'll begin with commentary on the quarter before opening the floor to questions.

Before we begin, I'd like to remind everyone that today's presentation contains forward-looking information that involves known and unknown risks and uncertainties and other factors that could cause actual events to differ materially from current expectations. These statements should not be read as assurances of future performance or results. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements.

A more complete discussion of the risks and uncertainties facing the company appears in the company's management discussion and analysis for the 3 and 6-month periods ended June 30, 2024, which is available under the company's profile on SEDAR+, as well as on the company's website. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The company disclaims any intention or obligation, except to the extent required by law to update and revise any forward-looking statements as a result of new information, future events or for any other reason.

Our discussion today will include references to adjusted financial measures, including adjusted EBITDA, free cash flow, free cash flow conversion and MAU, which are non-IFRS measures. All references to currency in this presentation shall refer to USD, unless otherwise specified.

Now, I will turn the call over to Rob Laidlaw, Founder, Chair, and CEO of VerticalScope. Rob?

[Robert Laidlaw, executive]

Thanks, Diane. Good morning, everyone, and thank you for joining us today.

Our business performed well in the second quarter of this year, growing revenue by 14% and demonstrating the significant operating leverage we have by growing EBITDA by 29% to $7.1 million in the quarter. Our online forums were leading the way and raising the bar on audience growth by posting a 42% increase in monthly active users, as an increasing number of users are turning to online forums to find the authentic perspectives that are trusted and valued in a world inundated with AI content. Overall, MAU growth in the business was 23% versus last year.

The advertising macro market remains tepid and subdued. For each sign of optimism and recovery, we see subsequent retreat, but our business is continuing to perform well with overall digital advertising up 20%, with programmatic and video both performing well. The macro still has plenty of room to recover, and we believe there are strong prospects of future ad market recovery as the broader economy finds stability, and that will provide an additional tailwind for our growth.

Speaking of a bumpy market, earlier this week, we saw a few bumps in the road on the public markets. We think this type of market could be very beneficial to our M&A strategy. We are building up our balance sheet and reducing debt, knowing that our time will come with M&A when buyers and sellers may once again see eye-to-eye on price. We will be patient and not be rushed to do any transactions. We've been there before and learned our lesson, but at the same time, when the right opportunities arise, we will move swiftly.

To hit on the point about the strength of our balance sheet, we are now sitting at 1.5x leverage as defined by our credit facility and produced $6.6 million in free cash flow in Q2. We made $6.5 million of principal payments in the quarter, of which $5.9 million were voluntary. We are continuing to reduce our future interest payments by reducing debt, while we build up our financial resources to be well prepared for opportunities that will come our way, whether those be investing in our own product strategy, buying online community forums, or share buybacks.

Product-wise, we are continuing to invest in our Fora mobile app, as we see an opportunity to really move the needle on our daily active users and overall user engagement. The app is still a small piece of our business, but we think it can be a meaningful one down the road. We've got a great team in place now that we have confidence can make it happen. We are also continuing to experiment with AI and looking at ways to make the user experience better on our communities, including around summaries, better thread titles and search. We believe there are some sizable wins to be had from integrating these technologies into our Fora platform.

Lastly, to answer the assumed question, we did not sign any LLM deals in the quarter and continue to have constructive conversations with multiple providers. We do not intend to provide any further comments on the timing of any potential deals on today's call. As a closing point, I'm happy to note that The Streamable turned positive on a year-over-year basis on revenue in July. While it's a much smaller property than it once was, we are happy to see it turn positive.

With that. I'll turn it over to Vince and Chris.

[Christopher Goodridge, executive]

Thanks, Rob, and good morning, everyone.

Our team delivered another solid result in Q2. Supported by double-digit organic growth in MAU, our high-margin programmatic advertising business is thriving. Gains in impression volumes, higher display CPMs and video, all contributed to double-digit growth. Total revenue in Q2 was $16.7 million, up 14% compared to prior year, with advertising delivering 20% growth in the quarter.

E-commerce, although down 16% year-over-year in Q2, had improved trending and is showing signs of bottoming. Year-to-date total revenue is $31.4 million, also up 14% compared to prior year. Drilling in on our advertising results. Advertising revenue was $14.5 million in Q2, up 20% compared to prior year and year-to-date advertising is $27 million, up 23% compared to prior year. Programmatic revenue posted a 35% gain in Q2, and made up approximately 68% of total ad revenue in the quarter. Higher impression volumes resulting from double-digit MAU growth, video advertising and stronger CPMs on display, all provided strong tailwinds for programmatic revenue.

We attribute the stronger year-over-year CPMs to the ad tech improvements that we are constantly making, and our new partnership with The Trade Desk, which started to contribute in June. Direct advertising made up 32% of our ad revenue and was flat in the quarter compared to the 7% growth posted in Q1. Revenue recognition on a handful of direct deals was pushed into Q3, and was partially responsible for the lower trending experienced in the quarter. Categories like power sports and outdoors continue to perform well, but we're still seeing muted spending levels in historically strong categories for us like insurance. We expect the back half of the year to be closer to mid-single-digit growth from direct advertising.

Turning to e-commerce. As I mentioned off the top, e-commerce is ceasing to be a headwind for our business. In the quarter, e-commerce revenue was $2.2 million, down 16% from prior year but down only 4% compared to Q1. 66% of e-commerce revenue in Q2 is subscription-based. The main source of lower e-commerce volumes continue to be non-form properties, although the gap to prior year has been rapidly closing for sites like thestreamable.com, which, as Rob mentioned, had a positive year-over-year growth month in July. Form MAU growth will be an important driver of e-commerce in the back half of the year, and we continue to believe that commerce will be a long-term source of growth on our platform as users turn to the trusted information in our communities to make purchase decisions.

Turning to our outlook. Q3 has started out well as we continue to benefit from strong MAU trends and solid programmatic CPMs. We expect our advertising business to continue to deliver organic revenue growth in Q3, while e-commerce continues to stabilize. In July, Google announced that it's no longer going to deprecate third-party cookies in the Chrome browser after a few years of attempting to build a replacement. This announcement provides some welcome stability to the programmatic ad market in the short term, but doesn't change VerticalScope's long-term strategy. We have very valuable first-party data built off an authenticated audience with high purchase intent and contextual relevance. These attributes will continue to support our organic growth for the long term.

Turning briefly to M&A. We completed one small community acquisition in the quarter that we mentioned on our last call, and our pipeline continues to grow. However, we are being very selective and will only close on the most attractive opportunities. In the meantime, as Rob mentioned in his remarks, our balance sheet continues to strengthen, which only increases our optionality moving forward.

And with that, I'll turn it over to Vince to walk through the rest of our financial results.

[Vincenzo Bellissimo, executive]

Thanks, Chris, and good morning to everyone who has joined our call today.

This was another strong quarter for VerticalScope and rounded a great first half of the year that included achieving record MAUs, double-digit revenue growth and impressive free cash flow generation that we continue to deploy towards strengthening our financial position and building that solid foundation to drive future growth. Profitability is the cornerstone of our business model and continues to be a key highlight of our financial results, delivering positive earnings along with expanded margins and free cash flow generation in the quarter compared to prior year.

Q2 net income was up $400,000 compared to -- was at $400,000 compared to a $2 million net loss in the prior year, driven by a decrease in share-based compensation and amortization relating to acquired intangible assets. Q2 adjusted EBITDA increased by 29% year-over-year to $7.1 million, bringing the total adjusted EBITDA generated in the first half of the year to $12.3 million, which is up an impressive 46% compared to prior year.

The key drivers of our growing profitability include revenue growth and operating leverage generated by our efficient operations and disciplined approach to investing in areas that will provide long-term growth for our shareholders. Our non-IFRS operating expenses in the quarter grew by $429,000 year-over-year, driven by increased travel and investments in key areas of our business such as recruiting and Investor Relations. Q2 revenue increased by $2 million to $16.7 million and Q2 adjusted EBITDA increased by $1.6 million to $7.1 million, applying approximately $0.80 of every incremental sales dollar reached the bottom line.

This operating leverage drove a 42% adjusted EBITDA margin in the quarter, up from 37% in the prior year. Over the trailing 12-month period, we have operated with adjusted EBITDA margins of 41%, and our goal is to continue to target these levels or higher in the second half of the year. Our business continues to demonstrates its strong ability to convert profits into cash. In Q2, our free cash flow increased 58% year-over-year to $6.6 million, reflecting a free cash flow conversion of 93%. Over the trailing 12 months, we have generated $25.8 million in free cash flow for a conversion of 94%. We continue to use this free cash flow to deliver on our three-pronged capital allocation strategy, which includes paying down debt, share buybacks and tuck-in M&A.

In the quarter, we made $6.5 million in principal payments towards our credit facility, of which $5.9 million were voluntary, further reducing our net debt position to $41.2 million and further reducing our net leverage to a very manageable 1.5x. Subsequent to the quarter, we have continued our focused approach to paying down debt, making another $3 million voluntary principal payments towards our credit facility in early August, giving us $73 million available to draw on our revolver. During the quarter, we repurchased 80,300 shares under NCIB at an average share price of CAD 7.35 at an aggregated cost of $436,000. And we closed a small form acquisition for $200,000.

Going forward, we will continue to take a very strategic approach towards deploying our free cash flow towards share buybacks and selective M&A. As we enter into the second half of the fiscal year, we begin to lap the monetization initiatives that drove over 30% organic growth in programmatic advertising and over 20% growth in digital advertising in the first 6 months of the year. This includes our first half 2023 optimizations and ad layout and investments in our ad tech, as well as the launch of our video advertising unit that rolled out across our platform in May of last year.

This incremental video revenue has been a catalyst for growth, making approximately 10% of our year-to-date revenue results. As we lap these initiatives in the back half of the year, we expect digital advertising to continue to grow at double digits -- at a double-digit growth rate that aligns more with our long-term organic growth rate, driven by our investments and the exciting continued trends we are seeing in MAU.

And with that, I'll pass it back to Rob for some closing remarks.

[Robert Laidlaw, executive]

Thanks, Vince. We remain very excited about the future of the Fora platform and delivering on continued long-term growth for our shareholders.

With that, we'll open it up for questions.

[Operator]

[Operator Instructions] Our first question comes from Vince Valentini from TD Cowen.

[Vince Valentini, analyst]

Yes. So good quarter, guys. But on your Q1 call, you said you thought digital ad revenue would accelerate in the second quarter versus the first quarter with 26% in Q1, and now we see 20% in Q2. Did something happen late in the quarter related to CPM, or the mix of direct versus programmatic? Or can you just help us grasp what changed versus what you had said on the Q1 call?

[Christopher Goodridge, executive]

Vince, it's Chris here. Yes. So, a couple of things. I mean, CPMs overall were solid through the quarter, probably not quite as strong as we were expecting or where we started out -- started out the quarter. And on direct, we did have some deals that were signed, but revenue recognition for some of that was pushed into Q3. So, that explained part of it. On direct, generally, I think it's become a bit more challenging to predict. At times, there's great momentum and at other times, advertisers are a little bit slower with decision making. Whereas in the programmatic business, we see a little bit more predictability and the investments we've made in the underlying ad tech are really supporting that growth. So, we delivered 20%, not 26% or higher in Q2, obviously. But we continue to think we're well positioned to grow that ad revenue double-digit.

[Vince Valentini, analyst]

Okay. And to be clear, you think you can sustain north of 10% digital ad revenue growth in both the third and the fourth quarter?

[Vincenzo Bellissimo, executive]

Yes.

[Vince Valentini, analyst]

One other, if I could just. The MAU trends seem quite favorable, and momentum has been building nicely here for a couple of quarters. Do you -- if I missed it in your opening remarks, I apologize, but did you have any sort of guidance on that for the third quarter? Are you continuing to see pretty robust usage and trends in the beginning of Q3?

[Robert Laidlaw, executive]

Thanks, Vince. Yes. Volumes on MAUs are still looking really good. From a percentage year-over-year perspective, we're going to start to come up against some good quarters in Q3, Q4 of last year, particularly on Fora. So, we'll end up probably bringing the percentage gains year-over-year down, but the volumes are still looking very strong.

[Operator]

Our next question comes from Aravinda Galappatthige from Canaccord.

[Aravinda Galappatthige, analyst]

Just going back to the MAUs. Rob, maybe can you sort of talk to sort of the roadmap with respect to sort of new initiatives to improve the user experience? I know you've done a lot of work in the past, but you're seeing great MAU growth right now. I was wondering, are there things that you sort of want to deploy in the upcoming quarters that can possibly help maintain that momentum? Maybe I'll stop there.

[Robert Laidlaw, executive]

Thanks, Aravinda. Yes. MAUs have been really strong for our business, and I think driven by kind of a fundamental shift in the market and one where users are really now seeking out this user-generated content and authentic perspectives. So from our end, what we're doing is a couple of things. One is we're actually a little bit less focused, to be completely honest, on the MAU number. And we're now trying to figure out how do we turn more MAUs into more DAUs and get the daily active users up and really drive higher user engagement for a really strong kind of long-term user value. And one of those initiatives is the mobile app. So, definitely trying to just get users coming back more and more to the platform and spend more time on our communities, which will ultimately drive higher ARPU. So, there's some focus around that.

And then on the MAU front and just kind of getting more users onto the platform, we just think continuing to iterate and build a better platform. And really, the initiative there is more around integrating AI. So, I talked about a better search experience, providing summaries for those users that maybe don't want to dig into the 28 or 30-page long thread. And also just from kind of an optimization perspective, we've looked around kind of how do we use AI to help us with better thread titles. When you see the form thread that's like a title of Need Help, how do we make that a little bit more interesting and draw more traffic, more visitors into that thread, get more help for that user and ultimately have better visibility in the search engine long term. So, I think we have a little more focus on DAU than MAU at the moment. But at the same time, we've got some, I think, strong initiatives, particularly with AI to drive that MAU up higher as well.

[Aravinda Galappatthige, analyst]

And then my second and last question. With respect to direct advertising, I know Chris alluded to, I think, mid-single-digit growth in the second half. Considering you're seeing good audience growth, do you sort of see direct ads catching up to programmatic in the near to medium term? Is that sort of a bigger opportunity down the road? I wanted to get a sense of the dynamics there.

[Christopher Goodridge, executive]

Yes. Thanks, Aravinda. So, I think it's a stretch to say that direct would catch up to programmatic. Like, I don't think we're seeing in the near term that direct would grow at 35% or anything like that. They're bigger deals. There is a longer cycle associated with them. But we do believe, as you point out, like as that audience growth really starts to show, the audience then becomes even that much more attractive to direct advertisers. And so we do think it will support longer-term growth, but in the near term, more of that growth, or we'll see the outsized growth come from the investments we've made in programmatic.

[Operator]

Our next question comes from Andy Nguyen of Raymond James.

[Andy Nguyen, analyst]

So touching on the mobile app, are there any challenges you guys are facing to maybe increase the speed of the deployment of the app to the user?

[Robert Laidlaw, executive]

Thanks, Andy. I can take that one. It's not so much. There's not any blockers. It's more just -- we really want the app from a performance perspective. And when I say performance, I mean, it's doing its job. It's increasing DAUs. It's increasing posting activities, and it's doing the job we want it to do for the long term. So it's more about when do we really get behind the push to get our users on it? And that's just a kind of a view of, like, how do we make sure it's -- it's never going to be perfect, but how do we get it to a point where we're really, really excited about getting our users switching over?

So, I would say that we've got the team in place now that we feel confident that they can do that. And the app is growing. It's just -- we're growing it methodically and taking a lot of user feedback and really working at making it better. So, there's no kind of formal blocker, other than just myself and the team kind of looking at it and saying, okay, when do we feel great about getting our users pushed over to the app? And that is supported by both data and gut feel. So it's not quite 100% of the way there yet, but we really hope to have it there in the next quarter or 2.

[Andy Nguyen, analyst]

Got you. And good to hear that Streamable is showing positive progress. Maybe you could give us some more color on the outlook for that segment?

[Christopher Goodridge, executive]

Sure, Andy. I can do that. It's Chris here. So, Streamable, as we mentioned, it showed some growth in July, which we're very encouraged by. It's a relatively small part of the business though, right, in commerce overall. You can see the numbers there. So it'll cease to be a headwind. And we think there's some really good opportunities. We've got a really good team working on The Streamable. And so we do think there's -- there'll be opportunity for it to show organic growth going forward. But as far as it having a significant contribution to our results, the rest of this year, I think that'll be relatively muted.

[Operator]

Our next question comes from Valery Heckel from CIBC World Markets.

[Valery Heckel, analyst]

I have a question for Vince or Chris. In your prepared remarks, you mentioned that certain of your verticals saw slight weakening. I was wondering if you could elaborate a little bit more on what these verticals are and whether the impact is mostly felt in direct advertising or if it's also spilled over into programmatic?

[Christopher Goodridge, executive]

Yes. Thanks, Valery. It's Chris. Yes, what I was referring to there was some -- again, when I said historically strong categories for us, so not really a vertical per se. And I call out insurance and insurance -- auto insurance, power sports, insurance for us has historically been a very strong direct category for us. It was softer throughout 2023 and it hasn't really returned in a meaningful way for us. We attribute that to just spending patterns from a lot of those insurers. Most of our conversations in that category are starting to shift towards next year's plans, and so we're encouraged that those dollars will start to come back to us, but it has been a headwind for direct. Stronger categories where we've been, again, historically strong with the audience size we have, I mentioned power sports and outdoors, where we just provide something in the market that other platforms just don't have as far as that enthusiast audience that's really targeted in niche. So, that tends to be a bit stickier for us and has held up really, really well. If we saw a return to historic spending levels in the insurance category, that would certainly support a higher growth rate than we're suggesting for direct advertising.

[Valery Heckel, analyst]

Okay. That's really helpful. And then just a second question related to categories. A number of your peers have in their earnings call cited a more cautious digital ad market for the second half of the year, with concerns around elections being one source for flattening ad budgets. And I just wanted to clarify if VerticalScope has any exposure to the political advertising space.

[Christopher Goodridge, executive]

So again, Chris here, Valery. So, historically, what we've seen in election cycles in the U.S. is overall spending increasing, right? That's just what we've seen in our business. Again, because we're more heavily weighted to programmatic. When you have those dollars that kind of come into the market in that year when they're not there in other years, there's just more demand generally for advertising. So it's historically supported stronger revenue. We don't get a lot of direct spend from political. Where it shows up in our numbers would be through programmatic channels and some of the partnerships we have in place, like things like The Trade Desk, we think probably give us an opportunity to capture some dollars now that we -- where we haven't had that opportunity in the past. So, I guess we look at it as probably supporting our programmatic business more than being any sort of a headwind.

[Valery Heckel, analyst]

Okay. Just one final question here. I was hoping to get an update on your rollout of video ads and just to hear your thoughts on whether it's trending according to expectations.

[Christopher Goodridge, executive]

Yes. Thanks, Valery. It's Chris here again. So video, as Vince mentioned, it's been about 10% of our revenue. We've been very happy with what it's contributed. We've been relatively, I think, cautious with the degree to which it's been rolled out across the user base and different platforms to be really sensitive to that user experience. There is likely some opportunity to continue to improve that without sacrificing user experience, as we've learned more along the way about how our users engage with video advertising. Obviously, it was a shot in the arm when we introduced it and it contributed quite a bit, but we absolutely think it'll be a continued source of growth for the business.

[Operator]

Our next question comes from Drew McReynolds from RBC.

[Drew McReynolds, analyst]

Yes. One follow-up for me. Maybe for you, Rob. Just in your opening comments, talking about the ad market being tepid and relatively subdued for now. If we go back a year, I think the commentary was very similar, but company-specific drivers for VerticalScope are really driving your recovery. So, can you just kind of help us understand what you're seeing today relative to what you've seen on the overall ad market the last 12 months? And how that ties into kind of what your expectation is here in the back half in terms of that eventual tailwind as you characterize kicking in?

[Robert Laidlaw, executive]

Yes. Thanks, Drew. So, I mean, the way I'm thinking about the ad market, it feels like every time we get a little bit of a green shoot, a little bit of optimism, there's a setback. And it just feels like it's a market that just can't really get out of the starting gates. It took a big step back, as we all know, and it's just struggling to recover. And I think as mentioned earlier in the call, other large platforms are kind of, again, I think calling for a bit of a subdued or kind of slow-moving market in the second half. And that's what we're seeing. It's just advertisers are tepid. They're kind of holding onto their dollars tight and you really see it. So on the programmatic side, usually at the end of quarters, you kind of get a nice -- I'm going to call it a demand bump. So, advertisers are starting to spend and ramp up and try -- and sometimes they're trying to hit their own numbers, sometimes they're trying to spend the budgets that maybe they were a little late on getting started. But we're just not seeing that type of demand. It seems like the end of quarters are always kind of slightly disappointing.

On the direct side, we're seeing advertisers kind of -- they move slowly. They don't quite get the contract done on time. Then they push it to next quarter. So it just feels like a real lack of urgency in the market. And it's a market that I feel is just -- it's stuck a little bit. And it needs a little bit of good news. It needs a little bit of stability. And it's just been -- if I look at a longer-term kind of view of having been in the advertising market, I think this is still one of the worst ad markets we've experienced kind of over the last decade. It's just really kind of stagnant. And I feel like it's going to come around, and it always does, but it kind of needs a little -- a good shot in the arm and maybe that'll be as interest rates start to come down. But it does feel like it needs a bit of a push and it needs something to get moving. So, we're kind of -- in terms of what we're thinking about for the second half and into next year is we're thinking it remains a little bit kind of subdued or tepid, and we're okay with that. And we'll continue to grow based on our own initiatives. But once that macro recovery kicks in, we think that can be a bit of a tailwind for us and frankly, it'll be nice to have.

[Operator]

Our next question comes from Gabriel Leung from Beacon Securities.

[Gabriel Leung, analyst]

Just a couple of follow-up items. First, just wondering if you could provide more color around The Trade Desk integration, what you're seeing in the early days and sort of what your expectations are around that partnership in terms of revenue contributions potentially and potentially on the ARPU side as well?

[Christopher Goodridge, executive]

Yes, Gabriel. Thanks for the question. We don't disclose, like, individual contributions from individual partners. What I would say is The Trade Desk is really opening up new opportunities for us. It's adding CPM pressure to our auctions. It's creating a more direct path to our inventory. So it's making the auctions more efficient. So for all of those reasons, it's a really good thing. And having that connection where we're in constant dialogue with one of the largest ad buying platforms in the world is really, really good for our business. So whether it's new deals that are coming up, things like political advertising, that kind of thing really opens the door for us. So it's very supportive of our programmatic business. But, yes, we're not going to specifically comment on its contribution. And frankly, it's a little bit hard to do because it's adding -- even if it doesn't win an auction, it's adding pressure, right, to the auction and supporting overall CPMs.

[Gabriel Leung, analyst]

Got you. Second one just on M&A. It sounds like that's going to be a bigger part of the growth profile for the company going forward. So I'm curious, what exactly is going to be the catalyst, which prompts the team to decide to accelerate M&A? Is it stellar expectations coming down in terms of valuation? Or do you feel you need to get to a lower sort of net leverage ratio before you start to accelerate things? Just curious your thoughts on that.

[Christopher Goodridge, executive]

Yes, Gabriel. It's Chris here again. A lot of it is wanting to make sure we're buying at very attractive pricing, right? And again, our model, the types of communities we're buying, we don't tend to be in competitive situations for these deals. And so we can afford to be very, very patient and buy them at the price that we want to buy them at. And so our pipeline continues to build. And we will, as we've done in the past, when those sellers are ready and the valuation expectation aligns with what we're willing to pay, we'll close on those deals. We're obviously not concerned at all about our leverage levels at this point. As we mentioned at 1.5x and generating the free cash flow this business is generating, leverage is -- it's already not an issue, but it's becoming even more and more comfortable. So, again, from our standpoint, strong balance sheet creates a ton of options for us. So, we just think the business continues to strengthen. It's producing great free cash flow. And so patience -- our patience we think will be rewarded and will close on the very, very best opportunities. So it may not be overly exciting to describe it that way, but we think we're going to be really careful stewards of capital, and we're going to close on the very, very best opportunities where we think Fora can deliver outsized gains for those communities. So that's the situation.

[Gabriel Leung, analyst]

Got you. Just one last housekeeping question, Chris. I missed your -- on your preamble, the revenue contribution from programmatic on the digital ad side of things and the year-over-year growth from that.

[Christopher Goodridge, executive]

Yes. So, programmatic was 68% of total ad revenue and the year-over-year growth rate on programmatic was 35%.

[Operator]

[Operator Instructions] Our next question comes from Adhir Kadve from Eight Capital.

[Kiran Sritharan, analyst]

This is Kiran on for Adhir. Just one question for me. I want to touch on the Google plans to end the cookie deprecation there and how it's impacted your strategy? How do we think about competitive dynamics also with the shift?

[Christopher Goodridge, executive]

Yes. I can take that one as well. It's Chris here. So, we've been watching this story play out for a long time now. Google has talked about deprecating third-party cookies, I think, for 3 years or 4 years and it was constantly kicked down the road. As you know, they're trying to have a substitute, more privacy-friendly substitute take hold and a lot of significant market participants had problems with that, including players like The Trade Desk. So it wasn't shocking to us that it didn't -- they didn't follow through with it. And really, the way we think about it is in the short term, because if Google just pulled cookies away overnight, that would create some volatility in the market and a little bit of unpredictability as spending kind of found its footing and we believe would find platforms like ours. So in the short term, that volatility or that issue has gone away and is off the table and I think it supports more stable programmatic markets.

But longer term, the bigger trends towards privacy in North America and beyond really support solutions that are privacy friendly. And so, again, we believe our platform, which is very privacy friendly, it's based off authenticated users. We have high contextual relevance on our platform. So people are on car sites, they are on motorcycle sites, they're talking about things they actually want to buy, and we have a ton of purchase intent with that audience. So, there's a lot of value in that. And the value will be surfaced through programmatic channels, but also through direct advertising as it becomes harder and harder to target users using things like third-party cookies. So short term, very little impact and longer term, there's no impact at all to our strategy.

[Operator]

And there are no further questions. I'd like to hand the call back to management for any closing remarks.

[Robert Laidlaw, executive]

Great. Thanks, everyone, for joining today. Thank you for the great questions and continued support. Looking forward to a strong back half of the year.

[Operator]

And this concludes today's call. Thank you, everyone, for joining. You may now disconnect.