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spk06: of Investor Relations for introductions and the reading of the Safe Harbor Statement. Billy, please go ahead.
spk07: Thank you, Operator.
spk00: Good morning, everyone, and welcome to Nexen's second quarter earnings call. During today's call, we will discuss our financial and operating results for the three and six months ended June 30th, 2024, as well as our forward-looking guidance. With us on today's call are Ofer Druker, Nexen's Chief Executive Officer, and Sagi Neri, the company's Chief Financial Officer. This morning, we issued a press release, which you can access on our IR website at investors.nexon.com. During today's conference call, we will make forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. We advise caution and reliance on forward-looking statements. These statements include, without limitation, statements and projections regarding our anticipated future financial and operating performance, market opportunity, growth prospects, strategy, financial outlook, partnerships, and anticipated benefits related to those partnerships, and forward-looking views on macroeconomic and industry conditions, as well as any other statements concerning the expected development, performance, and market share, or competitive performance relating to our products or services. All forward-looking statements are based on information available to us as of the date of this call. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those implied by these forward-looking statements, including unexpected changes in our business or unexpected changes in macroeconomic or industry conditions. More detailed information about these risk factors and additional risk factors are set forth in our filings with the U.S. Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled Risk Factors in our most recent annual report on Form 20F. Nexen does not intend to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in IFRS and non-IFRS terms. We refer you to the company's press release for additional details, including definitions of non-IFRS items and reconciliations of IFRS to non-IFRS results. At this time, it is my pleasure to introduce Ofer Druker, CEO of Nexen. Ofer, please go ahead.
spk19: Thank you, Billy. In the second quarter, we benefited from significantly improved execution while taking important steps to enhance the strength of our platform and advance our sales and marketing strategy to drive further momentum. Our improved ability to execute enabled us to generate strong performance resulting in record Q2 contribution extracts, programmatic revenues, and CTV revenues alongside significantly expanded adjusted data. Our rebrand to Nexen was clearly a catalyst that contributes to our better performance in Q2 and is continuing to position us for new and expanded partnership with industry leaders. The rebrand has driven greater recognition in the market, clarified the holistic value proposition of our full-stack offering, and fueled a better understanding of how Nexen addresses the industry's biggest challenges, including maximizing the value of data to generate better results and returns to customers. Nexen is placing data firmly at the center of its strategy. Data is historically given access An advantage over other ATT&CK competitors is our full-stack platform has been unified by robust data management platform that integrates directly with our DSP and SSP to improve activation. Through the integration of Amobi, we were able to improve our data capabilities further by integrating some of Amobi's products into our ecosystem. Today, on top of our data-rich activation elements, we offer other unique data solutions that provide comprehensive audience segmentation, insights, and data enrichment capabilities, as well as an ID graph. Since completing the integration, we have also been able to free up resources to invest more into driving innovation. This innovation has enabled the recent release of many of the data capabilities that has helped Nexen gain greater recognition and win new partnerships with some of the leading forces in the industry. Our data capabilities are serving as a massive differentiator for us and as a base for some of these important new partnerships. And we believe they will continue to benefit Nexen and its customers over the immediate and long term. Data is present in every component of our offering and drive enhanced outcomes across all steps of our advertiser and publisher customers' workflow. Our data sources and capabilities enable advertisers to better understand audiences and create valuable audience segments. Find and target likely-to-engage or buy customers across platforms and devices, maximize reach, boost return, and measure effectiveness. Our exclusive advanced TV data access and unique capabilities alongside our premium supply roster are also materially enriching our customers' advertising results across CTV and other formats and driving partners to increasingly choose to work with Nexen. As I mentioned, our data sources and capabilities have been key along the journey to attracting advertisers and publishers to engage with Nexen. and the number of partners seeking to work with us is growing, particularly following the launch of our new robust Nexen data platform in Q2. Nexen data platform combines and better unifies all our data assets and applications, resulting in an unrivaled full-stack end-to-end data offering that has strengthened our competitive positioning and amplified the effectiveness of our solutions. Through Nexon Data Platform, customers can now directly and securely onboard first-party data. After onboarding, customers can leverage Nexon Discovery to create audiences, unlock insights, and reach first-party data. Our customers highly value this tool. It has been adopted by important new partners like LG and SegWare who are using it to enhance insights for them and their customers and is also attracting significant interest from other major players in the industry. Additionally, customers can also take advantage of our robust TV intelligence solutions, which have the ability to meaningfully enhance their CTV targeting and measurement. Our full suite of data capabilities is unique to Nexen and provides operational, performance, and economic benefits for our partners. Within Accent Data Platform, we also launched our unified entity graph in Q2, which combines multiple identifiers into a merged graph, enabling increased scale and better targeting capabilities. While Google has pivoted from full cookie duplication to an opt-in approach, our graph better positions Nexen and its customers for changes in identity and privacy regardless. We were well-positioned for cookie duplication But Google recent decisions reduces risk and removes an industry overhang. That said, we continue to embrace the industry's need for alternative ID solutions like ours, and our agnostic identity strategy hasn't changed in wake of Google decisions, nor is our preparedness for their evolving approach. We have also recently furthered our IDGraph capabilities by partnering with Experian to bring in PII data, which helps customers reduce cost and audience loss in the data onboarding process. Advertisers are now seeking to partner with our data platform, including our IDGraph, as these solutions enable them to extract greater value from their budgets, reach a wider audience, optimize returns, and remain prepared for identity changes. Our data platform has already attracted key new partners to Nexen while unlocking new data licensing and commerce media opportunities, and we expect it will serve as a long-term growth driver and differentiator. As a direct byproduct of our data platform and identity graph launch in Q2, Tagwell selected Nexen as its edtech and data partner, and their relationship is off to a great start. The partnership enables Tagwell Marketing Cloud clients to utilize Nexen data platform to onboard and enhance their customer data, improve targeting and planning efforts, and extend audience reach across formats and devices. Tagwell's clients can then seamlessly activate this enriched data in campaigns across Nexen platforms to improve returns on ad spending. Since beginning the relationship, we have led training and education sessions with Stegwell employees and customers to accelerate the partnership benefits. As the partnership continues to scale, we are optimistic our solutions will not only enhance Stegwell's customers' results, but also drive increased revenue opportunities for both companies over time. Our data platform launch also led to Nexen being selected as the first to market audience extension partner for United Airlines Commerce Media Network, Connective Media. This partnership unlocked a new revenue growth opportunity for Nexen in Commerce Media, where we weren't active previously. Connective Media is leveraging Nexen data platforms onboarding capabilities to extend travel and transaction data from United Mileage Plus program to partner leveraging Nexen for activation. United Mileage Plus program reflects a massive database that is now accessible on Nexen data platform and able to serve our advertiser customers with the guidance and cooperation of connected media. Through the partnership, brands can unlock new off-site media network revenue streams, while Nexen's advertisers' clients can leverage the data to efficiently extend audience reach. Nexen's data platform is also driving new data licensing opportunities. Our platform features access to robust sources of advanced TV data for targeting and measurement, highlighted by exclusive access to global ACL data through our partnership with VIDA, the CTV operating system for iTunes and Toshiba. VIDA's growing global reach enabled us to recently enter into global ACR data licensing partnership with the Tradesk, creating new revenue opportunities and boosting our industry of mission. Next then is providing the Tradesk ACR data segments to offer their clients advanced cross-channel and cross-device targeting capabilities which are now available on their self-service platform for activation in the US, UK, Canada, and Australia. We are in licensing discussions with a large number of other industry players, and we are optimistic about achieving additional new partnerships, particularly around international ACR data, given the scarcity of TV data in markets outside the US. We continue to believe Data licensing is a huge long-term growth opportunity for Nexen. We also recently released data power tools for political advertisers, enabling them to leverage Nexen's suite of tech and measurement capabilities to gain deeper campaign insights and maximize audience reach to enhance results and fully capitalize on the U.S. election cycle. New solutions include political district targeting, an excellent discovery-powered political dashboard, providing candidates issue and sentiment analysis, and the ability to retarget custom audiences that has previously been exposed to political ads through a partnership with ComSchool. In Q2, we didn't observe significant political ad spending on our platform. However, in Q3, we are seeing increased demand and expect this to accelerate in Q4 as we get closer to Election Day. Given our enhanced suite of tools, new partnerships and increased sales focus on the verticals. In Q2, we added 86 new actively spending first-time advertiser customers. This included 60 new enterprise self-service customers and two new independent agencies leveraging NextSense self-service offerings. We also added 78 new supply partners in Q2, including 74 in the U.S. In all, Q2 was a great quarter that indicates we have reached an inflection point in the business following the transformational milestones we have achieved over nearly the last two years. Our strategy to connect our cutting-edge data platform to our flexible, unified, full-stack edtech solution to drive better customer outcomes is working and enabling us to win wallets and market share through increased spending and product adaption. It is also empowering us to gain traction with the world's top tech companies, agencies, and brands. On the sales front, we are continuing to focus on generating increased customer spending and full-stack product adaption, attracting major new partners to our platform deepening relationship with streaming players, and scaling our data opportunities. From a product perspective, we will also continue to invest in innovation and focus on expanding our Gen AI and machine learning utilization. We believe Gen AI will advance the effectiveness of our data, audience, insights, and activation tools, as well as our health features. This is expected to benefit our customers. increase our platform tech and data advantages, and create efficiencies. We remain excited for anticipated catalysts in the back half of 2024 and beyond, including our recent partnership generating increased revenues, data licensing revenue scaling, and potential modest tailwinds from the US election cycle. I'm more confident than ever we have the right people and solutions. in place to drive continuous execution, capitalize on our long-term growth opportunity, and realize our vision of becoming the industry go-to strategic tech and data partner. With that, I'm happy to turn the call over to Segi to discuss our financial results and outlook.
spk16: Thank you, Ofer. In Q2, we generated contribution extract of $83.1 million. achieving 4% growth from Q2 2023 and 19% growth from Q1 2024. Programmatic revenue was $78.6 million in Q2, reflecting 3% growth from Q2 2023 and 20% growth from Q1 2024, while contribution extract from our non-programmatic business line was up slightly year-over-year in Q2 2024. Growth in Q2 was broad-based, driven by enhanced sales execution, scaling partnerships, and improved market conditions. We observed strength in CPV, video, mobile, display, data products, and PMPs, and across our finance, health, retail, government, and automotive verticals. On the opposite side, we observed the year-over-year decrease in our travel and technology verticals in Q2. CTV was a bright spot in Q2 as we generated $28.2 million in CTV revenue, reflecting 14% growth from Q2 2023 and 50% growth from Q1 2024. This was the second best CTV revenue quarter in Exxon's history, as CTV revenue represented 36% of programmatic revenue in Q2 2024, up from 32% in Q2 2023. CTV revenue growth was driven by a broad customer shift into our premium CTV solution and our partnership with Alfonso and LG Electronics beginning to scale. E-Marketer projects U.S. CTV advertising spend will grow at a roughly 14% CAGR over the next several years, fueled by billions of dollars of linear budget shifting to advanced TV, new advertiser migrating to streaming as consumer and services increasingly embrace ad-supported content, and live sports going digital. We believe our longstanding streaming DNA, TV data capabilities and solution, access to premium supply, and flexible unified platform designed to enhance CTV results for customers across the ecosystem are uniquely positions us to capitalize on this long-term growth opportunity and gain market share. Video revenue continues to account for most of our programmatic revenue, expanding to 74% in Q2 2024 from 71% in Q2 2023. This year-over-year increase was driven by video revenue strength, fueled primarily by CTV outpacing programmatic revenue growth. We continue to anticipate outsized video revenue growth over time due to our strategic video and CTV focus and capabilities, and believe we are among the most heavily indexed asset companies to video on the open Internet. Contribution extract from display grew 14% year-over-year in Q2, while contribution extract from mobile increased 5%. Contribution extract from data products increased 57%, and contribution extracts from PMPs increased 29%. Our ability to offer a variety of software solutions across formats and devices is a tremendous advantage which enables us to retain customers, attract new partners, and proactively adapt to changing market conditions and the industry's diverse and evolving needs. Being able to service customers across formats and devices also allows us to capitalize on a larger total addressable market, while our data solutions are creating a flywheel effect that is opening new opportunities and attracting more spend to our platform. In Q2, we generated adjusted EBITDA of $26.8 million, which reflected a 27% year-over-year increase from Q2 2023 and a 126% increase from Q1 2024. Our adjusted EBITDA growth was a byproduct of higher contribution extract, improving cost efficiencies, and our platform model's ability to generate increasing degrees of operating leverage. Our adjusted EBITDA margin in Q2 increased to 32% on a contribution extract basis from 26% in Q2 2023, and we remain confident in our ability to continue expanding our adjusted EBITDA margins over time. In Q2, we generated $20.9 million in net cash from operating activities, after generating $11.9 million in Q2 2023. As of June 13th, we had $151.9 million in net cash and $90 million undrawn on our revolving credit facility, following the full repayment of our outstanding long-term debt in April. We also reported non-IFRS diluted earnings per ordinary share of $0.09 in Q2 2024 compared to $0.06 in Q2 2023. During Q2, we repurchased roughly 2.5 million ordinary shares through our completed $20 million repurchase program and newly launched $50 million program, reflecting an investment of 5.8 million pounds or $7.3 million dollars. From March 1, 2022 through June 30, 2024, we invested around $119 million in our repurchase program, buying back roughly 28.3 million ordinary shares, or 18.3% of shares outstanding. If shares remain at prices the Board believes reflect a discount to fair value at the end of our current repurchase program, we will consider initiating a new one. Finally, I'll turn to our outlook. For full year 2024, we are reaffirming our guidance for contribution extract in a range of approximately $340 to $345 million, adjusted EBITDA of approximately $100 million, and for programmatic revenue to reflect approximately 90% of full year 2024 revenue. Our momentum from Q2 has carried over into Q3. We're seeing continued strength across our core growth drivers, solid spending trend, growing benefits from recently launched partnership, increasing pipeline demand, and improved visibility, reinforcing our confidence in our ability to meet our guidance. As a result, we expect contribution extract and programmatic revenue acceleration in H2, with year-over-year growth anticipated in Q3, Q4, H2, and full year 2024. We anticipate a record year for political contribution x-stack in 2024, with most of the benefits likely to be recognized in Q4. We also continue to anticipate CTV revenue acceleration in H2, with year-over-year growth expected in Q3, Q4, H2, and full year 2024, driven by increasing demand for our CTV solution and growing revenue tied to our partnership with Alfonso and LG. Additionally, we continue to expect growth in our data licensing revenue in full year 2024 compared to full year 2023, with further acceleration anticipated in 2025. We also anticipate adjusted EBITDA and adjusted EBITDA margins will be higher in Q3, Q4, H2, and full year 2024 than in the prior year period, driven by expectations for increased contribution extracts. Our debt-free balance sheet and cash-generating capabilities enable flexibility to invest in share repurchases, sales growth initiatives, and innovation. And at this point in time, we don't plan any major new-term acquisitions. We will continue shifting our focus to product innovation and expand our Gen AI and machine learning utilization and expect Gen AI to be a primary product investment focus in 2025. We will also boost our sales and marketing investments to further our commercial traction and ensure we continue expanding upon our recent momentum. As Ofer mentioned, the success we are seeing now is a byproduct of our hard work enhancing our realistic ability to execute. Our platform approach and ability to offer customers synergistic software and data solutions across the ethics supply chain and across their workflows continues to differentiate Nexen, enables more shots on goal, and positions us for sustainable and accelerated long-term growth and expanded profitability. Our recently launched data platform is also unlocking new high-margin data licensing revenue opportunities, and commerce media revenue opportunities, and attracting more advertising spend as the industry increasingly takes a data-driven approach to achieve better results and returns. The industry's major players are now actively seeking multi-solution data and tech partnerships across our platform, leading to more sizable and durable revenue opportunities, and their adoption and recognition is driving other big names to engage with us, accelerating our growth prospects. For some time, challenging market condition and our focus on improving the business for the long term forced us to be on defense. Now, we're back on the offensive and excellently positioned to realize our strategic vision of becoming one of the industry's most sought after strategic asset and data partners.
spk08: We're excited for what lies ahead and operator will now take questions.
spk06: Thank you. Ladies and gentlemen, we will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Thank you. Your first question comes from the line of Matt Swenson from RBC Capital Markets. Please go ahead.
spk04: Thanks for taking my questions, and congratulations on the quarter. Great to see the rebound in CTV. I know we talked last quarter about some advertisers opting to lower-cost formats. Could you dive in a little bit deeper on the dynamics that led to the growth, kind of the mix of the benefit from more adoption of premium solutions versus the increased CTV supply that maybe makes some of these ads more affordable?
spk19: Hi, Matt. Of course. Thank you for the question. For many years, we are putting a lot of emphasis on CTV, and I think that a few things happened, basically. One of them is that the market is in better condition, so people are willing to spend more or to invest more on CTV channels instead of what we said before, that they were running to cheaper channels in order to get results. Again, we see movement of budget to CTV, which is good for us. The second thing is the amount of tools and technology that we created for CTV is really unparalleled. When you're looking at the abilities of our clients to target, to measure, and the major booster of publishers that we got is giving them a lot of opportunities, basically, not just to Target well, but also to reach big audience. Thanks to the to the spread of the publishers that we got So they are getting much better results Than usual when they are using our platform for CTV and we see that for many for long time But now it's even in ends. Thanks to the release of our data and management platform and to our and the enablement of the discovery with the ACL data Vida that is included and enabled to create segments and and audiences and to learn more insights about the users. So all of that is coming together. There is still work to do, but we are on the right trend and we see that in the numbers.
spk04: Thanks. And then also great to see the margin expansion after all the heavy lifting you've done for the platform integration. So, Guy, how should we think about margins moving forward as you reap the benefits from those previous investments, but then also highlighting some of the new investments specifically around Gen AI and sales and marketing?
spk16: Hey, Matt. I think that, you know, we did this quarter 32% of adjusted EBITDA margin out of contribution extract. I think that this, you know, Again, we are weighted as our peers in the industry and as the industry at all for H2. And of course, it's all around a scale game. So as long as our scale will increase, for sure, our margins will be better. Having said that, I think we are still reaffirming our guidance of around $100 million of adjusted EBITDA out of Let's take the midpoint of 342.5. So it's somewhere around 30%. I think that on a yearly basis, this will represent what we can do now. Of course, going into 2025, I think that we can do better. And again, the weighted margin between the different quarters is reflected and related to decisionality. I'm guessing that in Q4, we will do much more than 32%. But on an early basis, and this is the way you should look at it, I think we should, now we will settle it around on the 30-ish. And going forward, I think that we can do more than that.
spk08: Thank you. Thank you, Matt.
spk06: Your next question comes from the line of Laura Martin from Needham. Please go ahead.
spk03: Good morning. The first question I have is, could you talk about your Gen AI roadmap, please? Where do you think you're going to be focusing first on integrating Gen AI into your product portfolio?
spk19: Hi, Laura. Of course. Hi. So our advantage when we look at Gen AI is that we have also a lot of point of data connected to our activation platform, which is giving us a lot of opportunities to integrate Gen AI into into our work stream and into our platform. The first place that we are going to integrate GenAI will be around our discovery, which is basically the unit, the data platform that enable advertisers to source their audiences, to learn about, to get more insights, and to get sentiment to their products and services, and to create segments that they can operate on our platform. So we believe that this is the first place that we need to invest and integrate Gen AI, and it's in the process already. And we believe that thanks to the fact that it's all around data that is connected to our activation tools, the Gen AI will have more capabilities and power. And basically, the ability of users to utilize the service will not just be based on the person that is operating the discovery tool, but on the Gen AI and the accumulative knowledge and capabilities of our company.
spk02: Okay, and it's built on which cloud? Are you using OpenAI or are you using Google Cloud? Which one are you using?
spk19: We are using also Google Cloud, but it's not, I think, the issue. In general, we are using our own infrastructure for everything. also for certain purposes, we are using Google and Amazon Cloud.
spk03: Okay. And then my second question is about, you talked about United Airlines, which is pretty exciting, but when you do a partnership with American Airlines, is there revenue in that for you immediately, or is it more like you do a partnership with United and that then attracts new types of advertisers around e-commerce capability and new categories? How does the revenue work when with things like United Airlines and your partnership?
spk19: So basically, when we look at United Airlines, for us, it's the first step into the retail world, first of all, and commercial world, which is collected data, which is a very important step that they give us the trust and we, of course, honor them and respect this step and we do everything to to touch their expectation from us and from the market. The idea is to basically enable, it's not that we are, we are going to make you two sources of revenue. One to operate their activity. Basically they have the whole system that is selling media, selling activation based on their data. And the second one is that we will be able to offer this data also to our clients on the programmatic level. So these two levels, these two revenues channels will basically come into fruition in the near future. It's new to us, so it's hard to say how much revenues it will generate for us, but since it's a very interesting data set of more than 100 million travelers, we believe that it will be meaningful in the years to come.
spk21: Okay, perfect. Thanks so much. Thank you. Have a great day. Thank you.
spk20: Thank you, Laura.
spk06: Your next question comes from the line of Matt Condon from JMP. Please go ahead.
spk05: Thank you for taking my questions. My first one is just following the integration of Amobi, it seems that sales execution has improved. Can you just elaborate on this and maybe how you feel about the sales force and where it sits today?
spk19: Of course. Basically, about close to two years ago, we acquired Amobi. which was a bigger company than us. We had close to 1,000 people. We were 600 people. When you are combining two sales teams, there is a lot of noise, work, integration, and synchronization that needs to happen between the teams. That's one. The second thing is the offering that needs to be aligned because we are integrating new products. We are creating new offerings into the market. We need to, first of all, build the offering. The second thing is Basically, educate, first of all, our people about the new offering and adjust them to the market needs. Sometimes you need to, it's a process. It's not that the first time that you are creating an offer, it's like working 100%. So you need to adjust it over time. And what we saw lately is, first of all, the establishment of a team. People, they know their assignments. They believe, they feel confident about the technology and product that we are offering. We package it and tighten the packaging in a way that they can explain it to the other side in a more meaningful and simple manner. And we feel the results, meaning people understand what we have to offer in the marketplace. They understand what is the value that our products can bring to them, and they sign in and grow their revenues with us. And it's a process that I think that will just get better over time because basically we are learning also from the process. As I said, it's an ongoing process. And the advantage that we got is that we basically got a lot of products that we integrated into a packaging that makes really – clear advantage to the clients on the other side to use. So when our teams are aligned, educated, trained, and they are coming to the market with organized material and offering, it's working. That's why we are talking about better execution. We are hiring more people. We are basically training them better, and we are able to give them more tools in order to win in the market.
spk05: Great, that's helpful. And then maybe my second one, can you talk about the progress you're making with the Stagwell partnership and just how demand has trended, I guess, relative to your expectations?
spk19: Stagwell is an important partner for us. They are a great company that is basically also challenging the market in so many ways and forms. And we are in the process now of working together, training, as we mentioned, educating, building together products that, you know, they are helping us to improve some of our products because of their better experience working with clients. They are closer to clients. They are an agency, of course. And in some ways, we are helping them on a technology level. So I think it's in process, and we believe that it will grow, and it's meaningful because we believe that Tegwell is one of the challenges of this industry, and we believe that they will keep growing and we will be able to keep growing our business with them.
spk05: Great. Thank you so much.
spk08: You're welcome.
spk06: Your next question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead.
spk10: I wanted to revisit one of the issues that you brought up last quarter, and this was mentioned earlier on the call, but this, you know, one of the issues for Q1 was, and the CTV revenue was the, you know, customers, small and mid-sized agency customers that were opting for the company's lower-cost programmatic display and mobile and desktop video solutions. With this recovery that we're seeing in that business, is this these same customers coming back because their end advertisers have budget, or is this kind of larger customers larger brands and agencies moving the needle for you?
spk19: Basically, when you're looking at business, business cannot grow so fast, Eric, just based on new money. It's always a mix of better revenues that is coming from your current clients, and we have hundreds of clients, other of partners and clients, advertisers that are buying from us, CTV Media. So, What we feel that, as I mentioned, better education, better sales processes that we basically brought into the game because of what I answered before about the better integration, alignment of the sales teams, and so on. And, of course, something which is very meaningful in CTV is what I mentioned in the first quarter is true, and that's what's happening, and you can see that across the industry. is basically when there is like doubt or uncertainty, people are pulling their budgets more to the side of performance media and less to CPV and high-end inventory. And that's what hurt us last year and the beginning of this year. And we see improvement in the sentiment of the advertisers to invest more. And together with our better capabilities, better organization, more tight products and offerings, we see the upside and we see the results in the CTV front, which made a very big jump in revenues and in our capability basically to provide good solutions to partners.
spk10: Okay. And then revisiting the free cash flow expectation for 2024. Sagi, I think you've said that there's roughly $100 million of adjusted EBITDA. you expected that to translate into around 60 million pre-cash flow. Is that still the expectation for 2024?
spk16: Yes, I think it's still. It's like the low range of what we are anticipating. It can go up to 65%, but yes, this is like the range that we anticipate that we can generate through 2024. Of course, we are still utilizing a lot of the cash through our buyback plan, the one that we already ended in Q1 of the $20 million that we announced already at the end of 2023 and issued a new one in April, May of $50 million. So yes, as long as the board and management will think that the undervalue of the company is worth spending our money and buy back our shares, we will continue to do that as well.
spk08: Thank you. Thank you.
spk06: Your next question comes from the line of Mauricio Munoz from Raymond James. Please go ahead.
spk15: Yeah, thank you for taking my question. This is Mauricio in for Andrew today. Yeah, I just wanted to go back to the questions on margins. So obviously, margins were quite strong in the quarter. just trying to understand the sources of upside and how sustainable these are so you talked about your ability to capture cost efficiencies and i'm assuming some headcount rationalization and maybe capability integrations now that a mobile has been fully integrated for for over a quarter we're just wondering about any positive margin contributions from the revenue mix particularly any margin upside from data licensing revenue or as VITA license revenues ramp with the platform scaling. So any call around that would be helpful.
spk16: Sure. So I think you touched all of the right points. We announced yesterday on Nexens and the Traders Partnership around ACR data in the U.S. Canada, UK, and Australia. I think that this is like the, you know, our foray into this vertical or line of business where we are generating money out of the data that we have exclusively. And probably, you know, over time we will have more partnerships on that front and the revenue that we'll generate from that will grow up as the partners will use it and utilize it more and more as they will see, you know, the benefit from that, and as Vida and iSense will sell more TV sets. So I think that this line of business is contributing direct to the Vida line. We don't have any cost or any extra incremental cost around that. I think that's what I said, you know, everything in our industry is a right decisionality, so we can have, you know, a better... quarter or a much better quarter in the margin, the adjusted EBITDA line will be better at that quarter specifically. But again, I think we should look on our margins on an early basis. And for that, I think that in 2024, we are going to generate something around the 30 percent. Going forward, as you said, and as Ofer mentioned, the Amobi integration that is already being fulfilled, I don't want to say long time ago, but it's already there. I think that now, as we said in the call before, we are back on the offense and we are going to more and more efficiency and more cost leverage on our cost base. And I think that in the last, I don't know, four quarters at least, we are seeing like the numbers of the total ad count of the companies decreasing revenue quarter over quarter. And of course, this is helping to increase our margin. And it will be, you know, the same as we will move forward.
spk15: Great. Thank you. Very helpful. And then on capital allocation, maybe you can give us an an update on your plans. Obviously, you retired $100 million in debt, now have $152 million in cash. So I'm assuming that following the acquisition of Amovi, you're probably going to pause on your M&A plans. But how should we think about the pace of the ongoing share buyback program? And any plans to simplify your share structure? Thank you.
spk16: Yes, I think, as I said before, we are generating money on a regular basis. Our net cash after we fully repaid our $100 million of loan that we took in order to finance some of the Amovi acquisition already was fully repaid. And we will keep generating money. This is our DNA and this is our plan. And as long as management and board will think that the value of the company is undervalued in the market, we will keep on buying back our shares. And according to your first part of the question, yes, I think that now, after the full integration of Amobi, we don't think that we are missing any critical part and any important part. Of course, we may go into something that can add value a critical piece that we may need, but again, it will be a small acquisition or an IT acquisition in order to make a fast progress instead of developing it by ourselves. But again, we are not actively engaged in any M&A and we are not looking actively for any M&A. We think that we have all the parts we need and it now only about going to offense, execute, and scaling our numbers up.
spk08: Great, thank you. You're welcome.
spk06: Your next question comes from the line of Mark Kelly from Stifel. Please go ahead.
spk09: Great, thank you. Good morning, everyone. I want to ask you about just CTV bigger picture. Are you seeing more, you know, biddable open programmatic or is it still primarily private marketplace deals? And then second, you know, can you maybe expand a bit on the commerce media strategy over the long term? Do you see that more as like a data strategy or is it going to be data paired with, you know, your ability to buy across, you know, disparate, you know, commerce media and retail media networks? Any help there would be great. Thank you.
spk19: I will start with your second question about usage of data with retail media and in general. So we are not trying to become like traders in data in general, but we are utilizing data in two elements. One of them is on the DSP side in order to enable better targeting for advertisers in order to reach better results. And usually what we do is we tie our ability to provide data to people spent moving to our platforms and to our platform from technology perspective and our platform from media perspective, which of course contributes to us meaningfully. So this is something that we are putting emphasize for a long time on the advertiser side. Also for publishers, publishers started to use data in a very meaningful manner in order to upgrade their capabilities to sell not media but audiences. And we see this trend growing, and we want, of course, to be part of that because we believe in the ability to generate meaningful revenues from the combination of data and media. So that's one thing that we are doing. In some cases, we can sell also just data, but it will not be the majority of the revenues that we will generate from that activity. And we believe that... the major thing will come when we will basically merge it or connect it to media. On the question of CTV, if you can refine your question, it would be great. Just for me to understand what you are trying me to answer about. Yeah, of course.
spk09: Sure. Yeah, I guess in terms of how CTV inventory is bought today, are you seeing a shift towards more biddable and kind of open programmatic, or is it still private marketplace direct deals that you're seeing primarily today? Thank you.
spk19: I think it's a mix. I think that advertisers are closing deals with their publishers, and they want to run one-to-one, as they call it, which is they need the pipes in order to do that, and they can use our technology in order to do it in a very good manner. or sometimes they want to buy programmatically. We are, of course, we are able to do both, and we can enable our partners to buy one-on-one or to buy programmatically. In general, I think that the market is opening up. You see a lot of new publishers coming into the market, increasing their inventory and opportunities from one side. On the other side, you see more and more advertisers that are interested to create one-on-one deals with certain publishers in order to buy their media. Of course, we respect both. It's hard for me to say which one is bigger right now because I think that even that we are in a major player in CTV, it's very hard to say the full picture because right now we see that we see growth. We see a lot of programmatic, of course, activity, but we start to see growth on one-on-one when people are basically using our technology in order to serve campaigns on publishers that they, one, they can ask to buy just these specific publishers or they have a deal with these publishers that they can utilize through our technology.
spk08: Great, thank you, Ofer. You're welcome.
spk06: As there are no further questions at this time, I would now like to turn the call over back to Mr. Ofer Druker for closing remarks.
spk19: Thank you. So, as we indicated also in our PR and our message, after a long period of time of working very hard in order to integrate the companies, the companies that we acquired at Amobi, into our company, to merge the sales teams like was mentioned here in our conversation, to build a unified offering and messaging, and basically to be able to package better. And after the rebranding process that we did last year that helped us a lot and helped people to understand better what we are offering, we see very good improvement in the parameters and the performance of the company. from almost every aspect that we can look at. And we are happy about it, of course, because we worked for a long time very hard in order to create this situation. And we are really excited and we believe in what we are doing. We still hold our strategy, which is around CTV video and enhanced data that is basically unifying our platform and touching every point of the journey. And I think that we are equipped with the right tools and partnership in order to be a major player in this industry around the elements that I just mentioned, which is video, CTV, and data. So thank you, everyone, and hope to see you soon again. Thank you very much.
spk06: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
spk03: Please wait. The conference will begin shortly. We'll be right back. you Thank you.
spk06: Welcome to Nexon's second quarter earnings call. At this time, all participants are in a listen-only mode, with a question-and-answer session to follow at the end of the presentation. This call is being recorded, and a replay of today's call will be made available on the Nexon's Investor Relations website. I will now hand the call over to Billy Eckert, Vice President of Investor Relations, for introductions and the reading of the Safe Harbor Statement. Billy, please go ahead.
spk07: Thank you, Operator. Good morning, everyone, and welcome to Nexen's second quarter earnings call.
spk00: During today's call, we will discuss our financial and operating results for the three and six months ended June 30th, 2024, as well as our forward-looking guidance. With us on today's call are Ofer Druker, Nexen's Chief Executive Officer, and Sagi Neri, the company's Chief Financial Officer. This morning, we issued a press release, which you can access on our IR website at investors.nexen.com. During today's conference call, we will make forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. We advise caution and reliance on forward-looking statements. These statements include, without limitation, statements and projections regarding our anticipated future financial and operating performance, market opportunity, growth prospects, strategy, financial outlook, partnerships, and anticipated benefits related to those partnerships, and forward-looking views on macroeconomic and industry conditions, as well as any other statements concerning the expected development, performance, and market share, or competitive performance relating to our products or services. All forward-looking statements are based on information available to us as of the date of this call. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those implied by these forward-looking statements, including unexpected changes in our business or unexpected changes in macroeconomic or industry conditions. More detailed information about these risk factors and additional risk factors are set forth in our filings with the U.S. Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled Risk Factors in our most recent annual report on Form 20F. Nexen does not intend to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in IFRS and non-IFRS terms. We refer you to the company's press release for additional details, including definitions of non-IFRS items and reconciliations of IFRS to non-IFRS results. At this time, it is my pleasure to introduce Ofer Druker, CEO of Nexen. Ofer, please go ahead.
spk19: Thank you, Billy. In the second quarter, we benefited from significantly improved execution while taking important steps to enhance the strength of our platform and advance our sales and marketing strategy to drive further momentum. Our improved ability to execute enabled us to generate strong performance across the business, resulting in record Q2 contribution extracts, programmatic revenues, and CTV revenue alongside significantly expanded adjusted data. Our rebrand to Nexen was clearly a catalyst that contributes to our better performance in Q2 and is continuing to position us for new and expanded partnership with industry leaders. The rebrand has driven greater recognition in the market, clarified the holistic value proposition of our full-stack offering and fueled a better understanding of how Nexen addresses the industry's biggest challenges, including maximizing the value of data to generate better results and returns to customers. Nexen is placing data firmly at the center of its strategy. Data has historically given Nexen an advantage over other tech competitors, as our full-stack platform has been unified by a robust data management platform that integrates directly with our DSP and SSP to improve activation. Through the integration of Amobi, we were able to improve our data capabilities further by integrating some of Amobi's products into our ecosystem. Today, on top of our data-rich activation elements, we offer other unique data solutions that provide comprehensive audience segmentation, insights, and data enrichment capabilities, as well as an ID graph. Since completing the integration, we have also been able to free up resources to invest more into driving innovation. This innovation has enabled the recent release of many of the data capabilities that have helped Nexen gain greater recognition and win new partnerships. with some of the leading forces in the industry. Our data capabilities are serving as a massive differentiator for us and as a base for some of this important new partnership. And we believe that we continue to benefit Nexen and its customers over the immediate and long term. Data is present in every component of our offering and drive enhanced outcome across all steps of our advertiser and publisher customer's workflow. Our data sources and capabilities enable advertisers to better understand audiences and create valuable audience segments. Find and target likely to engage or buy customers across platforms and devices, maximize reach, boost return, and measure effectiveness. Our exclusive advanced TV data access and unique capabilities Alongside our premium supply roster are also materially enriching our customers' advertising results across CTV and other formats, and driving partners to increasingly choose to work with Nexen. As I mentioned, our data sources and capabilities have been key along the journey to attracting advertisers and publishers to engage with Nexen. And the number of partners seeking to work with us is growing. particularly following the launch of our new robust Nexon Data Platform in Q2. Nexon Data Platform combines and better unifies all our data assets and applications, resulting in an unrivaled full-stack end-to-end data offering that has strengthened our competitive positioning and amplified the effectiveness of our solutions. Through Nexon Data Platform, Customers can now directly and securely onboard first-party data. After onboarding, customers can leverage Nexon Discovery to create audiences, unlock insights, and reach first-party data. Our customers highly value this tool. It has been adopted by important new partners like LG and Segway who are using it to enhance insights for them and their customers and is also attracting significant interest from other major players in the industry. Additionally, customers can also take advantage of our robust TV intelligence solutions, which have the ability to meaningfully enhance their CTV targeting and measurement. Our full suite of data capabilities is unique to Nexen and provides operational, performance, and economic benefits for our partners. Within Nexen Data Platform, we also launch our unified entity graph in Q2, which combines multiple identifiers into a merged graph, enabling increased scale and better targeting capabilities. While Google has pivoted from full cookie duplication to an opt-in approach, our graph better positions Nexen and its customers for changes in identity and privacy regardless. We were well positioned for cookie duplication, but Google's recent decision reduces risk and removes an industry overhang. That said, we continue to embrace the industry's need for alternative ID solutions like ours, and our diagnostic identity strategy hasn't changed in wake of Google decisions, nor is our preparedness for their evolving approach. We have also recently furthered our ID graphs capabilities by partnering with Experian to bring in PII data, which helps customers reduce costs and audience loss in the data onboarding process. Advertisers are now seeking to partner with our data platform, including our IDGraph, as these solutions enable them to extract greater value from their budgets, reach a wider audience, optimize returns, and remain prepared for identity changes. Our data platform has already attracted key new partners to Nexen, while unlocking new data licensing and commerce media opportunities, and we expect it will serve as a long-term growth driver and differentiator. As a direct byproduct of our data platform and identity graph launch in Q2, tech was selected next time as its edtech and data partner, and the relationship is off to a great start. The partnership enables TechWell Marketing Cloud clients to utilize Nexen data platform to onboard and enhance their customer data, improve targeting and planning efforts, and extend audience reach across formats and devices. TechWell's clients can then seamlessly activate this enriched data in campaigns across Nexen platform to improve return on ad spending. Since beginning the relationship, We have led training and education sessions with Stegwell employees and customers to accelerate the partnership benefits. As the partnership continues to scale, we are optimistic our solutions will not only enhance Stegwell's customers' results, but also drive increased revenue opportunities for both companies over time. Our data platform launch also led to Nexen being selected as the first to market audience extension partner for United Airlines Commerce Media Network, Connective Media. This partnership unlocked a new revenue growth opportunity for Nexen in Commerce Media, where we weren't active previously. Connective Media is leveraging Nexen data platforms onboarding capabilities to extend travel and transaction data from United Mileage Plus program to partner leveraging Nexen for activation. United Mileage Plus program reflects a massive database that is now accessible on Nexen data platform and able to serve our advertiser customers with the guidance and cooperation of connective media. Through the partnership, brands can unlock new off-site media network revenue streams, while Nexen's advertisers' clients can leverage the data to efficiently extend audience reach. Nexen's data platform is also driving new data licensing opportunities. Our platform features access to robust sources of advanced TV data for targeting and measurement, highlighted by exclusive access to global ACL data through our partnership with VIDA, the CTV operating system for iTunes and Toshiba. VIDA's growing global reach enabled us to recently enter into global ACR data licensing partnership with the Trade Desk, creating new revenue opportunities and boosting our industry of mission. Next then is providing the Trade Desk ACR data segments to offer their clients advanced cross-channel and cross-device targeting capabilities which are now available on their self-service platform for activation in the US, UK, Canada, and Australia. We are in licensing discussions with a large number of other industry players, and we are optimistic about achieving additional new partnerships, particularly around international ACR data, given the scarcity of TV data in markets outside the US. We continue to believe Data licensing is a huge long-term growth opportunity for Nexen. We also recently released data power tools for political advertisers, enabling them to leverage Nexen's suite of tech and measurement capabilities to gain different campaign insights and maximize audience reach to enhance results and fully capitalize on the U.S. election cycle. New solutions include political district targeting, an excellent discovery-powered political dashboard, providing candidates issue and sentiment analysis, and the ability to retarget custom audiences that has previously been exposed to political ads through a partnership with Comscore. In Q2, we didn't observe significant political ad spending on our platform. However, in Q3, we are seeing increased demand and expect this to accelerate in Q4 as we get closer to Election Day. Given our enhanced suite of tools, new partnerships, and increased sales focus on the verticals. In Q2, we added 86 new actively spending first-time advertiser customers. This included 60 new enterprise sales service customers and two new independent agencies leveraging NextSense sales service offerings. We also added 78 new supply partners in Q2, including 74 in the U.S. In all, Q2 was a great quarter that indicates we have reached an inflection point in the business following the transformational milestones we have achieved over nearly the last two years. Our strategy to connect our cutting-edge data platform to our flexible, unified, full-stack edtech solution to drive better customer outcomes is working and enabling us to win wallets and market share through increased spending and product adaption. It is also empowering us to gain traction with the world's top estate companies, agencies, and brands. On the sales front, we are continuing to focus on generating increased customer spending and full-stack product adaption, attracting major new partners to our platform, deepening relationship with streaming players, and scaling our data opportunities. From a product perspective, we will also continue to invest in innovation and focus on expanding our Gen AI and machine learning utilization. We believe Gen AI will advance the effectiveness of our data, audience, insights, and activation tools, as well as our health features. This is expected to benefit our customers. increase our platform tech and data advantages, and create efficiencies. We remain excited for anticipated catalysts in the back half of 2024 and beyond, including our recent partnership generating increased revenues, data licensing revenue scaling, and potential modest tailwinds from the U.S. election cycle. I'm more confident than ever we have the right people and solutions. in place to drive continuous execution, capitalize on our long-term growth opportunity, and realize our vision of becoming the industry go-to strategic tech and data partner. With that, I'm happy to turn the call over to Sergei to discuss our financial results and outlook.
spk16: Thank you, Ofer. In Q2, we generated contribution extract of $83.1 million. achieving 4% growth from Q2 2023 and 19% growth from Q1 2024. Programmatic revenue was $78.6 million in Q2, reflecting 3% growth from Q2 2023 and 20% growth from Q1 2024, while contribution extract from our non-programmatic business line was up slightly year-over-year in Q2 2024. Growth in Q2 was broad-based, driven by enhanced sales execution, scaling partnerships, and improved market conditions. We observed strength in CPV, video, mobile, display, data products, and PMPs, and across our finance, health, retail, government, and automotive verticals. On the opposite side, we observed the year-over-year decrease in our travel and technology verticals in Q2. CTV was a bright spot in Q2 as we generated $28.2 million in CTV revenue, reflecting 14% growth from Q2 2023 and 50% growth from Q1 2024. This was the second best CTV revenue quarter in Exxon's history, as CTV revenue represented 36% of programmatic revenue in Q2 2024, up from 32% in Q2 2023. CTV revenue growth was driven by a broad customer shift into our premium CTV solution, and our partnership with Alfonso and LG Electronics beginning to scale. E-Marketer projects U.S. CTV advertising spend will grow at a roughly 14% CAGR over the next several years, fueled by billions of dollars of linear budget shifting to advanced TV, new advertiser migrating to streaming as consumer and services increasingly embrace ad-supported content, and live sports going digital. We believe our longstanding streaming DNA, TV data capabilities and solutions, access to premium supply, and flexible unified platform designed to enhance CTV results for customers across the ecosystem are uniquely positions us to capitalize on this long-term growth opportunity and gain market share. Video revenue continues to account for most of our programmatic revenue, expanding to 74% in Q2 2024 from 71% in Q2 2023. This year-over-year increase was driven by video revenue strength, fueled primarily by CTV outpacing programmatic revenue growth. We continue to anticipate outsized video revenue growth over time due to our strategic video and CTV focus and capabilities, and believe we are among the most heavily indexed asset companies to video on the open Internet. Contribution extract from display grew 14% year-over-year in Q2, while contribution extract from mobile increased 5%. Contribution extract from data products increased 57%, and contribution extracts from PMPs increased 29%. Our ability to offer a variety of software solutions across formats and devices is a tremendous advantage which enables us to retain customers, attract new partners, and proactively adapt to changing market conditions and the industry's diverse and evolving needs. Being able to service customers across formats and devices also allows us to capitalize on a larger total addressable market, while our data solutions are creating a flywheel effect that is opening new opportunities and attracting more spend to our platform. In Q2, we generated adjusted EBITDA of $26.8 million, which reflected a 27% year-over-year increase from Q2 2023 and a 126% increase from Q1 2024. Our adjusted EBITDA growth was a byproduct of higher contribution extract, improving cost efficiencies, and our platform model's ability to generate increasing degrees of operating leverage. Our adjusted EBITDA margin in Q2 increased to 32% on a contribution extract basis from 26% in Q2 2023, and we remain confident in our ability to continue expanding our adjusted EBITDA margins over time. In Q2, we generated $20.9 million in net cash from operating activities, after generating $11.9 million in Q2 2023. As of June 13th, we had $151.9 million in net cash and $90 million undrawn on our revolving credit facility, following the full repayment of our outstanding long-term debt in April. We also reported non-IFRS diluted earnings per ordinary share of $0.09 in Q2 2024, compared to $0.06 in Q2 2023. During Q2, we repurchased roughly 2.5 million ordinary shares through our completed $20 million repurchase program and newly launched $50 million program, reflecting an investment of 5.8 million pounds, or $7.3 million. From March 1, 2022 through June 30, 2024, we invested around $119 million in our repurchase program, buying back roughly 28.3 million ordinary shares, or 18.3% of shares outstanding. If shares remain at prices the Board believes reflect a discount to fair value at the end of our current repurchase program, we will consider initiating a new one. Finally, I'll turn to our outlook. For full year 2024, we are reaffirming our guidance for contribution extract in a range of approximately $340 to $345 million, adjusted EBITDA of approximately $100 million, and for programmatic revenue to reflect approximately 90% of full year 2024 revenue. Our momentum from Q2 has carried over into Q3. We're seeing continued strength across our core growth drivers, solid spending trend, growing benefits from recently launched partnership, increasing pipeline demand, and improved visibility, reinforcing our confidence in our ability to meet our guidance. As a result, we expect contribution extract and programmatic revenue acceleration in H2, with year-over-year growth anticipated in Q3, Q4, H2 and full year 2024. We anticipate a record year for political contribution ex-stack in 2024 with most of the benefits likely to be recognized in Q4. We also continue to anticipate CTV revenue acceleration in H2 with year over year growth expected in Q3, Q4, H2 and full year 2024 driven by increasing demand for our CTV solution and growing revenue tied to our partnership with Alfonso and LG. Additionally, we continue to expect growth in our data licensing revenue in full year 2024 compared to full year 2023, with further acceleration anticipated in 2025. We also anticipate adjusted EBITDA and adjusted EBITDA margins will be higher in Q3, Q4, H2, and full year 2024 than in the prior year period, driven by expectation for increased contribution access. Our debt-free balance sheet and cost-generating capabilities enable flexibility to invest in share repurchases, sales growth initiatives, and innovation. And at this point in time, we don't plan any major new term acquisitions. We will continue shifting our focus to product innovation and expand our Gen AI and machine learning utilization and expect Gen AI to be a primary product investment focus in 2025. We will also boost our sales and marketing investments to further our commercial traction and ensure we continue expanding upon our recent momentum. As Ofer mentioned, the success we're seeing now is a byproduct of our hard work enhancing our realistic ability to execute. Our platform approach and ability to offer customers synergistic, Software and data solutions across the ethics supply chain and across their workflows continues to differentiate Nexen, enables more shots on goal, and positions us for sustainable and accelerated long-term growth and expanded profitability. Our recently launched data platform is also unlocking new high-margin data licensing revenue opportunities and commerce media revenue opportunities, attracting more advertising spend as the industry increasingly takes a data driven approach to achieve better results and returns. The industry's major players are now actively seeking multi-solution data and tech partnerships across our platform, leading to more sizable and durable revenue opportunities. And their adoption and recognition is driving other big names to engage with us, accelerating our growth prospects. For some time, Challenging market condition and our focus on improving the business for the long term force us to be on defense. Now, we're back on the offensive and excellently positioned to realize our strategic vision of becoming one of the industry's most sought after strategic asset and data partners. We're excited for what lies ahead and operator will now take questions.
spk06: Thank you. Ladies and gentlemen, we will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Thank you. Your first question comes from the line of Matt Swenson from RBC Capital Markets. Please go ahead.
spk04: Thanks for taking my questions, and congratulations on the quarter. Great to see the rebound in CTV. I know we talked last quarter about some advertisers opting to lower-cost formats. Could you dive in a little bit deeper on the dynamics that led to the growth, kind of the mix of the benefit from more adoption of premium solutions versus the increased CTV supply that maybe makes some of these ads more affordable?
spk19: Hi, Matt. Of course. Thank you for the question. For many years, we are putting a lot of emphasis on CTV, and I think that a few things happened, basically. One of them is that the market is in a better condition, so people are willing to spend more or to invest more on CTV channels instead of what we said before, that they were running to cheaper channels in order to get results. again, we see movement of budget to CTV, which is good for us. The second thing is the amount of tools and technology that we created for CTV is really unparalleled. And when you're looking at the abilities of our clients to target, to measure, and the major rooster of publishers that we got is giving them a lot of opportunities, basically, not just to target well, but also to reach big audience thanks to the spread of the publishers that we got. So they are getting much better results than usual when they are using our platform for CTV. And we see that for a long time, but now it's even enhanced thanks to the release of our data management platform and the enablement of the discovery with the ACL data of VIDA that is included and enabled to create segments. and audiences and to learn more insights about the users. So all of that is coming together. There is still work to do, but we are on the right trend and we see that in the numbers.
spk04: Thanks. And then also great to see the margin expansion after all the heavy lifting you've done for the platform integration. So, Guy, how should we think about margins moving forward as you reap the benefits from those previous investments, but then also highlighting some of the new investments specifically around Gen AI in sales and marketing?
spk16: Hey, Matt. I think that, you know, we did this quarter 32% of adjusted EBITDA margin out of contribution extract. I think that this, you know, Again, we are weighted as our peers in the industry and as the industry at all for H2. And of course, it's all around a scale game. So as long as our scale will increase, for sure, our margins will be better. Having said that, I think we are still reaffirming our guidance of around $100 million of adjusted EBITDA out of Let's take the midpoint of 342.5. So it's somewhere around 30%. I think that on a yearly basis, this will represent what we can do now. Of course, going into 2025, I think that we can do better. And again, the weighted margin between the different quarters is reflected and related to decisionality. I'm guessing that in Q4, we will do much more than 32%. But on an early basis, and this is the way you should look at it, I think we should, now we will settle it around on the 30s. And going forward, I think that we can do more than that.
spk08: Thank you. Thank you, Matt.
spk06: Your next question comes from the line of Laura Martin from Needham. Please go ahead.
spk03: Good morning. The first question I have is, could you talk about your GenAI roadmap, please? Where do you think you're going to be focusing first on integrating GenAI into your product portfolio?
spk19: Hi, Laura. Of course. Hi. So our advantage when we look at GenAI is that we have also a lot of point of data connected to our activation platform, which is giving us a lot of opportunities to integrate GenAI into into our work stream and into our platform. The first place that we are going to integrate GenAI will be around our discovery, which is basically the unit, the data platform that enable advertisers to source their audiences, to learn about, to get more insights, and to get sentiment to their products and services, and to create segments that they can operate on our platform. So we believe that this is the first place that we need to invest and integrate Gen AI, and it's in the process already. And we believe that thanks to the fact that it's all around data that is connected to our activation tools, the Gen AI will have more capabilities and power. And basically, the ability of users to utilize the service will not just be based on the person that is operating the discovery tool, but on the Gen AI and the accumulative knowledge and capabilities of our company.
spk02: Okay, and it's built on which cloud? Are you using OpenAI? Are you using Google Cloud? Which one are you using?
spk19: We are using also Google Cloud, but it's not, I think, the issue. In general, we are using our own infrastructure for everything. also for certain purposes, we are using Google and Amazon Cloud.
spk03: Okay. And then my second question is about, you talked about United Airlines, which is pretty exciting, but when you do a partnership with American Airlines, is there revenue in that for you immediately, or is it more like you do a partnership with United and that then attracts new types of advertisers around e-commerce capability and new categories? How does the revenue work when, with things like United Airlines and your partnership?
spk19: So basically, when we look at United Airlines, for us, it's the first step into the retail world, first of all, and commercial world, which is collected data, which is a very important step that they gave us the trust and we, of course, honor them and respect this step and we do everything to to touch their expectation from us and from the market. The idea is to basically enable, it's not that we are, we are going to make you two sources of revenue. One to operate their activity. Basically they have the whole system that is selling media, selling activation based on their data. And the second one is that we will be able to offer this data also to our clients on the programmatic level. So these two levels, these two revenues channels will basically come into fruition in the near future. It's new to us, so it's hard to say how much revenues it will generate for us, but since it's a very interesting data set of more than 100 million travelers, we believe that it will be meaningful in the years to come.
spk21: Okay, perfect. Thanks so much. Thank you. Have a great day. Thank you.
spk20: Thank you, Laura.
spk06: Your next question comes from the line of Matt Condon from JMP. Please go ahead.
spk05: Thank you for taking my questions. My first one is just following the integration of Amobi, it seems that sales execution has improved. Can you just elaborate on this and maybe how you feel about the sales force and where it sits today?
spk19: Of course. Basically, about close to two years ago, we acquired Amobi. which was a bigger company than us. They had close to 1,000 people. We were 600 people. And when you are combining two sales teams, there is a lot of noise, work, integration, and synchronization that need to happen between the teams. That's one. The second thing is the offering that need to be aligned because we are integrating new products. We are creating new offering into the market. So we need to, first of all, build the offering. The second thing is basically educate, first of all, our people about the new offering and adjust them to the market needs. Sometimes you need to, it's a process. It's not that the first time that you are creating an offer, it's like working 100%. So you need to adjust it over time. And what we saw lately is, first of all, the establishment of routine people, they know their assignments, they believe, they feel confident about the technology and product that we are offering. We package it and tighten the packaging in a way that they can explain it to the other side in a more meaningful and simple manner. And we feel the results, meaning people understand what we have to offer in the marketplace. They understand what is the value that our products can bring to them. And they sign in and grow their revenues with us. And it's a process that I think that will just get better over time because basically we are learning also from the process. As I said, it's an ongoing process. And the advantage that we got is that we basically got a lot of products that we integrated into a packaging that makes really clear advantage to the clients on the other side to use. So when our teams are aligned, educated, trained, and they are coming to the market with organized material and offering, it's working. That's why we are talking about better execution. We are hiring more people. We are basically training them better, and we are able to give them more tools in order to win in the market.
spk05: Great. That's helpful. And then maybe my second one is, can you talk about the progress you're making with the Stagwell partnership and just how demand has trended, I guess, relative to your expectations?
spk19: Stegwell is an important partner for us. They are a great company that is basically also challenging the market in so many ways and forms. And we are in the process now of working together, training, as we mentioned, educating, building together products that, you know, they are helping us to improve some of our products because of their better experience working with clients. They are closer to clients. They are an agency, of course. And in some ways, we are helping them on a technology level. So I think it's in process, and we believe that it will grow, and it's meaningful because we believe that Tegwell is one of the challenges of this industry, and we believe that they will keep growing, and we will be able to keep growing our business with them.
spk08: Great. Thank you so much. You're welcome.
spk06: Your next question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead.
spk10: I wanted to revisit one of the issues that you brought up last quarter, and this was mentioned earlier on the call, but this, you know, one of the issues for Q1 was, and the CTV revenue was the, you know, customers, small and mid-sized agency customers that were opting for the company's lower cost programmatic display and mobile and desktop video solutions. With this recovery that we're seeing in that business, Is this these same customers coming back because their end advertisers have budget, or is this kind of larger brands and agencies moving the needle for you?
spk19: Basically, when you're looking at business, business cannot grow so fast, Eric, just based on new money. It's always a mix of... better revenues that is coming from your current clients. And we have hundreds of clients, other of partners and clients, advertisers that are buying from us, CTV Media. So what we feel that, as I mentioned, better education, better sales processes that we basically brought into the game because of what I answered before about the better integration, alignment of the sales teams and so on. And of course, Something which is very meaningful in CTV is what I mentioned in the first quarter is true, and that's what's happening, and you can see that across the industry is basically when there is doubt or uncertainty, people are pulling their budgets more to the side of performance media and less to CTV and IMs. and that's what helped us last year and the beginning of this year, and we see improvement in the sentiment of the advertisers to invest more, and together with our better capabilities, better organization, more tight products and offerings, we see the upside, and we see the results in the CTV front, which made a very big jump in revenues and in our capability, basically, to provide good solutions to partners.
spk08: Okay.
spk10: And then revisiting the free cash flow expectation for 2024. Sagi, I think you've said that this roughly $100 million of adjusted EBITDA, you expected that to translate into around $60 million of free cash flow. Is that still the expectation for 2024?
spk16: Yes, I think it's still the low range of what we are anticipating. It can go up to 65%, but yes, this is the range that we anticipate that we can generate through 2024. Of course, we are still utilizing a lot of the cash through our buyback plan, the one that we already ended in Q1 of the $20 million that we announced already at the end of 2023 and issued a new one in April, May of 50 million. So yes, as long as the board and management will think that the undervalue of the company is worth spending our money and buy back our shares, we will continue to do that as well.
spk08: Thank you. Thank you.
spk06: Your next question comes from the line of Mauricio Munoz from Raymond James. Please go ahead.
spk15: Yeah, thank you for taking my question. This is Mauricio in for Andrew today. Yeah, I just wanted to go back to the questions of margins. So, Sagi, obviously, margins were quite strong in the quarter. I'm just trying to understand the sources of upside and how sustainable these are. So, you talked about your ability to capture cost efficiencies, and I'm assuming some headcount rationalization and maybe capability integrations now that Amovi has been fully integrated for over a quarter. We're just wondering about any positive margin contributions from the revenue mix, particularly any margin upside from data licensing revenue or as Vita licensed revenues ramp with the platform scaling. So any color around that would be helpful.
spk16: Sure. So I think you touched all of the right points. We announced yesterday on Nexens and the Traders Partnership around ACR data in the U.S., Canada, U.K., and Australia. I think that this is like our foray into this vertical or line of business where we are generating money out of the data that we have exclusively. And probably, you know, over time we will have more partnerships. on that front and the revenue that will generate from that will grow up as the partners will use it and utilize it more and more as they will see, you know, the benefit from that and as Vida slash iSense will sell more TV sets. So I think that this line of business is contributing direct to the Vida line. We don't have any cost or any extra incremental cost around that. I think that's what I said, you know, Everything in our industry is a right decisionality, so we can have a better quarter or a much better quarter, and the margin at the adjusted EBITDA line will be better at that quarter specifically. But again, I think we should look on our margins on an early basis, and for that, I think that in 2024, we are going to generate something around the 30% percent, and Going forward, as you said, and as Ofer mentioned, the Amobi integration that is already being fulfilled, I don't want to say long time ago, but it's already there. I think that now, as we said in the call before, we are back on the offense and we are going to more and more efficiency and more cost leverage on our cost base. And I think that in the last, I don't know, four quarters at least, we are seeing like the numbers of the total ad count of the companies decreasing revenue quarter over quarter. And of course, this is helping to increase our margin. And it will be, you know, the same as we will move forward.
spk15: Great. Thank you. Very helpful. And then on capital allocation, maybe you can give us an an update on your plans. Obviously, you retired $100 million in debt, now have $152 million in cash. So I'm assuming that following the acquisition of a mobile, you're probably going to pause on your M&A plans. But how should we think about the pace of the ongoing share buyback program? And any plans to simplify your share structure? Thank you.
spk16: Yes, I think, as I said before, we are generating money on a regular basis. Our net cash after we fully repaid our $100 million of loan that we took in order to finance some of the AMOBI acquisition already was fully repaid. And we will keep generating money. This is our DNA and this is our plan. And as long as management and board will think that the value of the company is undervalued in the market, we will keep on buying back our shares. And according to your first part of the question, yes, I think that now, after the full integration of Amobi, we don't think that we are missing any critical part and any important part. Of course, we may go into something that can add you know, a critical piece that we may need. But again, it will be a small acquisition or an IT acquisition in order to make a fast progress instead of develop it by ourselves. But again, we are not actively engaged in any M&A and we are not looking actively for any M&A. We think that we have, you know, all the parts we need and it now only about going to offense, execute, and scaling our numbers up.
spk08: Great, thank you. You're welcome.
spk06: Your next question comes from the line of Mark Kelly from Stifel. Please go ahead.
spk09: Great, thank you. Good morning, everyone. I want to ask you about just CTV bigger picture. Are you seeing more, you know, biddable open programmatic or is it still primarily private marketplace deals? And then second, you know, can you maybe expand a bit on the commerce media strategy over the long term? Do you see that more as like a data strategy or is it going to be data paired with, you know, your ability to buy across, you know, disparate, you know, commerce media and retail media networks? Any help there would be great. Thank you.
spk19: I will start with your second question about usage of data with retail media and in general. So we are not trying to become like traders in data in general, but we are utilizing data in two elements. One of them is on the DSP side in order to enable better targeting for advertisers in order to reach better results. And usually what we do is we tie our ability to provide data to people spent moving to our platforms and to our platform from technology perspective and our platform from media perspective, which of course contributes to us meaningfully. So this is something that we are putting emphasize for a long time on the advertiser side. Also for publishers, publishers started to use data in a very meaningful manner in order to upgrade their capabilities to sell not media but audiences. And we see this trend growing, and we want, of course, to be part of that because we believe in the ability to generate meaningful revenues from the combination of data and media. So that's one thing that we are doing. In some cases, we can sell also just data, but it will not be the majority of the revenues that we will generate from that activity. And we believe that... the major thing will come when we will basically merge it or connect it to media. On the question of CTV, if you can refine your question, it would be great, just for me to understand what you are trying to, me to answer about. Yeah, of course.
spk09: Sure, yeah, I guess in terms of how CTV inventory is bought today, are you seeing a shift towards more biddable and kind of open programmatic, or is it still private marketplace direct deals that you're seeing primarily today? Thank you.
spk19: I think it's a mix. I think that advertisers are closing deals with their publishers and they want to run one-to-one, as they call it, which is they need the pipes in order to do that, and they can use our technology in order to do it in a very good manner. or sometimes they want to buy programmatically. We are, of course, we are enabling, we are able to do both, and we can enable our partners to buy one-on-one or to buy programmatically. In general, I think that the market is opening up. You see a lot of new publishers coming into the market, increasing their inventory and opportunities from one side. On the other side, you see more and more advertisers that are interested to create one-on-one deals with certain publishers in order to buy their media. And, of course, we respect both. It's hard for me to say which one is bigger right now, because I think that even that we are a major player in CTV, it's very hard to say the full picture, because right now we see growth. We see a lot of programmatic, of course, activity, but we start to see growth on one-on-one, when people are basically using our technology in order to serve campaigns on publishers that they, one, they can ask to buy just these specific publishers, or they have a deal with these publishers that they can utilize through our technology.
spk08: Great, thank you, Alfred. You're welcome.
spk06: As there are no further questions at this time, I would now like to turn the call over back to Mr. Alfred Ruecker for closing remarks.
spk19: Thank you. So as we indicated also in our PR and our message, after a long period of time of working very hard in order to integrate the companies, the company that we acquired, Amobi, into our company to merge the sales teams like was mentioned here in our conversation, to build a unified offering and messaging, and basically to be able to package better. And after the rebranding process that we did last year that helped us a lot and helped people to understand better what we are offering, we see very good improvement in the parameters and the performance of the company from almost every aspect that we can look at. And we are happy about it, of course, because we worked for a long time very hard in order to create this situation. And we are really excited and we believe in what we are doing. We still hold our strategy, which is around CTV video and enhanced data that is basically unifying our platform and touching every point of the journey. And I think that we are equipped with the right tools and partnership in order to to be a major player in this industry around the elements that I just mentioned, which is video, CTV, and data. So thank you, everyone, and hope to see you soon again. Thank you very much.
spk06: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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