Tremor International Ltd.

Welcome to Tremor International's second quarter and six months ending June 30th, 2022 conference call. At this time, participants are in a listen-only mode with a question and answer session to follow at the end of the presentation. This conference call is being recorded and a replay of today's call will be made available on the Investor Relations section of Tremor's website and will remain posted there for the next 30 days. I will now hand over to Billy Eckert, Senior Director of Investor Relations. For introductions and the reading of the Safe Harbor Statement, please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Tremor International's second quarter and six-month end of June 30th, 2022 earnings call. With us on today's call are Ofer Druker, Tremor'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 website at investors.tremorinternational.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 about our future anticipated financial results, including discussions about our revenue, margin, expenses, and guidance for full year 2022 and full year 2023 and future business, anticipated benefits of TREMOR's current and future potential strategic transactions, product launches, and commercial partnerships, Management's belief that Tremor is well-positioned to benefit from future anticipated industry growth trends and company-specific catalysts, anticipated continued and accelerated future growth in both U.S. and international markets, expected strengthening of Tremor's products and reach, expected ability to continue repurchasing shares, investing in technology, sales, and marketing, and evaluating strategic opportunities to acquire companies, the potential negative impact of inflationary pressures, rising interest rates, geopolitical and macroeconomic uncertainties, recession concerns, and widespread global supply chain issues, forward-looking industry and economic statements and outlooks, and 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. 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. Tremor 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 Tremor International. Ofer, please go ahead.

Thank you, Billy, and welcome to everyone joining us today. I will begin by providing an overview of our results and strategy, followed by our Chief Financial Officer, Sagi Niri, who will review our Q2 and H1 2022 financials. We will then open the call up for questions. During the second quarter, Tremor experienced increased customer seduction and delivered record profitability, alongside achieving an impressive industry-leading adjusted EBITDA margins of 55%, as a percentage of net revenues. Our durable data-driven end-to-end technology and business platform has continued to drive strong and resilient results, fueling our ability to execute on our long-term strategic vision. Looking at the market environment, the advertising industry faced several global headwinds in Q2 that we are continuing to see drive microeconomics uncertainty and recession concerns in Q3, which could remain for the duration of the year. Challenges associated with inflation, rising interest rates, supply chain constraints in certain sectors, such as automotive, due to continued cheap shortages, and the ongoing war in Ukraine have been well publicized and are factored into our planning for the remainder of 2022. On a positive note, however, we are seeing additional signs of recovery in sectors that have been historically strong for trend, such as entertainment and CPG, and continue to believe we will see benefits from the FIFA World Cup and U.S. midterm elections later this year. We remain confident that our highly diversified customers and revenue base, coupled with our robust operating model, position us well to successfully navigate these market challenges while continuing to invest to future scale, differentiate, enhance, and expand our platforms. Since the beginning of 2022, we achieved several important milestones to drive long-term value for our customers and shareholders and reinforce our position in the market over the coming years. First, we increased our CTV and video reach and significantly strengthened and expanded our platform capabilities through several initiatives, including the completed integration of our CTV ad server stream. Through our strategic investment in video, we further strengthened our CTV assets by extending our exclusive global ACR data agreements while gaining head monetization exclusivity in key markets such as the U.S., U.K., Canada, and Australia. In addition to deepening our partnership through an investment in what we believe to be a rapidly growing global operating system, we also build strong relationships with ISA, with our parent companies. Our pre-existing and recently enhanced strength is within CTV. and strong strategic partnership with Vida and iSense enable powerful additional capabilities and high-quality content opportunities, particularly around exclusive content for our customers. For example, iSense is an official sponsor of this year's FIFA World Cup, and we'll also sponsor an exclusive daily show throughout the tournament. It was also recently announced that FIFA Plus, FIFA's digital app, we launched on iSense and Toshiba Vita-enabled smart TVs. This is the first major example of how having an exclusive data, ad monetization, and CTV media partnership with an operating system and strong relationship with the major global OEMs can benefit Tremel as brand and agencies we look to leverage on Woolley to advertise on this highly desirable sports content. Furthermore, we took steps to dramatically scale the business and further diversify our offering and ability to serve customers through our pending acquisition of Amobi. The acquisition is expected to significantly grow our global market share, extend our self-service, data, technology, and performance capabilities, and add critical new linear PV capabilities. These new linear PV capabilities allow us to better serve broadcasters, which needs you to be important as we continue to see a convergence within the linear and digital worlds. The acquisition will also enable us to offer our specialized CTV product, such as TV intelligence across a significantly wider customer base, creating additional revenue opportunities. Following the anticipated closing and integration of the proposed acquisition of Amobi, we expect to generate a contribution aspect of approximately $500 million, and adjusted EBITDA of approximately $200 billion on a combined pro forma basis for the full year of 2022. We believe our proven track record of successfully and efficiently integrating acquisitions will enable us to smoothly integrate our model and create a strong combined business. Finally, we were also able to repurchase under our previously announced share repurchase program a sizable number of shares at attractive prices. Our ability to achieve these milestones while generating strong results in a challenging operating environment has solidified the conviction that we have in our long-term prospects and stems directly from the benefits derived from operating in Zooms. Our model provides several advantages, including simplicity for customers, beneficial positioning for changes in data privacy regulation, better installation against challenging market conditions, and the ability to maximize revenue streams and profitability. Our ability to service across all screens, regardless of service level requirements, enable us to maximize revenues opportunities and build deep relationships, stickiness, and trust with our customers. Our operating model allows us to generate extremely attractive margins and profits while enabling customers to achieve data and return benefits particularly when they leverage our platform into it. Our platform also contains a significant and growing footprint of first- and third-party data, with minimal exposure to cookies, and our BFD and SSP share the same audience graph to eliminate data loss during cookie sync, which better ensure we remain well-insulated against privacy changes. Our decision to intentionally build and scale end-to-end platform was the correct one, as we continue to see competitors attempt to replicate elements of our well-established model. As our competitors of newly operating end-to-end platforms focus on learning and nuances of engaging with both sides of the ecosystem, Tremor has well-established expertise, as well as relationships with brands, agencies, media partners, and data providers, and is focusing on its next leg of growth and differentiations. On July 26, we entered into a definitive agreement to acquire Mobi for a total consideration of $239 million, subject to certain customer adjustments. We intend to satisfy the purchase price using a combination of existing cash resources and new debt facilities we expect to obtain prior to closing the transaction. The acquisition, which we expect to close later in the third quarter, is expected to significantly increase our global market share and create one of the most compelling in-scale CPG and video end-to-end platform in the market. The acquisition also significantly enhanced our technology and business footprint across self-service, DSP, performance, CPV, and data, while adding new insight tools and linear TV capabilities. The transaction also greatly expands Remo U.S. and international talent footprints, market presence, and customer switch. Amobi's 500-plus global customers include Fortune 500 brands and multinational aid agencies, and the company maintains strong relationships with some of the world's leading media partners. For the 12 months ended in June 30, 2022, Amobi generated preliminary unaudited contribution assets of approximately $150 million, which will therefore meaningful impact on Tremor financial scale. We also expect to benefit post-integration from significant operating cost synergies. We initially expect to achieve annual run-rate operating cost synergies of approximately $50 million on a combined pro forma basis post-closing and following the completion of the integration. Following the anticipated closing and integration of the proposed acquisition of Amobi, we expect to generate contribution excess of approximately $500 million and adjusted EBITDA of approximately $200 million for full year 2023 on a combined performer basis. Amobi represents our largest acquisition to date and delivered on our commitment to execute meaningful and strategic M&A in a market where valuations have decreased. We remain confident that we have the expertise necessary to quickly integrate the company into our business and generate significant benefits for our customers and shareholders. In June, we also deepened our relationship with DITA through a strategic agreement to invest $25 million in DITA. The investment offered several key advantages to Tremont. The investment extended for multiple years the exclusive agreement to share VIDAS global ACL data for global measurement and targeting purposes across our end-to-end platform. It also allows us to offer additional data sets and advertising opportunities to our customers. As VIDAS leveraged the investment to support its plan to increase distribution across additional OEMs, we also expect the data set to become even more desirable and for Tremor to benefit further through this increased reach as well. Additionally, after initially being designated as VIDA's preferred global monetization platform in January, VIDA has granted Anwuli and Spirit exclusivity for monetization in the U.S., U.K., Canada, and Australia. This unique combination of exclusivity to share global ACR data and the exclusive ability to enable ad monetization in several key markets could have powerful future growth implications for Trevor. for which VITA serves as the operating system, is an official sponsor of the FIFA World Cup, set to take place in Qatar in November and December this year. In addition to expecting iSense to achieve a substantial increase in global awareness during the event, FIFA Plus will also launch on iSense VITA-enabled devices. iSense is also the lead sponsor for an exclusive daily show throughout the World Cup. featuring highlights for the merchants, style guests, and live reactions. As Vida's exclusive monetization platform in key markets, brands, and agencies, we look to utilize and willing to advertise on this desirable and exclusive content, which provides strong potential revenues, benefits, and leverage for Tremor. As iSense and Vida pursue future sports sponsorships and exclusive content opportunities, Tremor is well-positioned to significantly benefits from its recent investments. Outside of our company-specific catalyst, Tremor remains well-positioned to capitalize on expected industry tailwinds as well. CTV and video continue to grow at the fastest rates within digital advertising, and a vast majority of our platform's contribution extract is derived from this format. Additionally, we continue to expect meaningful growth within Evers over the next several years. as evidenced by several streaming services currently launching head-supported channels and tiers, and others showing interest to do so. This further reinforced the viability and long-term health of the CTV market, and we believe our strong footholds in the fast-growing sub-segment of digital advertising position us well for future growth and market share gains. We believe the fourth quarter will be further enhanced by the CIFI World Cup and that Tremor will experience added benefit through Iceland's efficient tournament sponsorship. We also expect industry tailwinds later this year from the U.S. midterm election circuit, which typically brings heightened levels of CTD and video ad spending from candidates leading into the election. Since our last Earning Call, we have continued to generate further business momentum alongside increased industry recognition. Our SST and Woolley added 63 new supply partners during Q2 2022, including 35 in the U.S., and 116 new supply partners, including 71 in the U.S. during H1 2022. Across critical growth verticals in sports, youth, entertainment, and lifestyles, including OGP apps from leading broadcast businesses. We also continue to generate strong adoption within our self-service platform for publishers, Unruly Control, which experienced a 560% increase in PAP spend during Q2 2022 versus Q2 2021, and 750% increase in H1 2022 versus H1 2021. Additionally, Tremor Video added 60 new advertisers signed during Q2 2022, and 135 new advertisers signed during H1 2022 across Travel, CPG, and retail verticals as well as others. Truly, our in-house creative studio continues to impress and create over 13 times more unique video ads in Q2 2022 than in Q2 2021, and over 15 times more unique video ads in H1 2022 than in H1 2021. We are continuing to see strong customer adoption across our data-driven creative products, robust international growth, and significant increase in demand for our creative services across travel and retail verticals. Finally, during the second quarter of 2022, we repurchased 5,716,960 ordinary shares at an average price of 452.6 pence for a total Q2 repurchase investment of approximately 25.9 million pounds, or $32.5 million. From March 1, 2022, when we launched the repurchase program through June 30, 2022, we repurchased 7,401,470 ordinary shares at an average price of 479.98 pence. Reflecting a total investment of approximately 35.6 million pounds, or $45.3 million, our ability to have repurchased shares at what we believe are discounted levels to drive long-term shareholders' value, in addition to our other ongoing growth initiatives, is a statement to our continuous balance sheet strengths and cash-generating abilities. It is now my pleasure to turn the call to Sagi to review the financial results.