Tremor International Ltd.

Welcome to Tremor International's fourth quarter and year-ended December 31st, 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. I will now hand it 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 fourth quarter and year-ended December 31st, 2022 earnings call. With us on today's call are Ofer Druker, Tremor's chief executive officer, and Sigi 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 limitations, statements and projections about our anticipated future financial results, including discussions about our revenue margins, expenses, and guidance for full year 2023, as well as future business, anticipated benefits of Tremor's strategic transactions and commercial partnerships, anticipated features and benefits of Tremor's products and service offerings, Tremor's positioning for future growth in both the U.S. and international markets in 2023 and beyond. Tremor's implementation of a substantial share repurchase program, also continuing to evaluate strategic opportunities to acquire companies and invest in technology, product, sales, and marketing to further expand its platform. Tremor's medium to long-term prospects. Management's belief that Tremor is well-positioned to benefit from anticipated future industry growth trends and company-specific catalysts. The potential negative impact of inflationary pressures, rising interest rates, geopolitical and macroeconomic uncertainty, recession concerns, and widespread global supply chain issues that have limited advertising activity and the anticipation that these challenges could continue to have an impact for the remainder of 2023 and beyond. The anticipated benefits from the company's investment in Vita and its enhanced strategic relationship with Hisense. The anticipated benefits and synergies from the acquisition of Amobi and ability of Tremor to continue to recognize those synergies. Tremor's ability to continue to execute on cross-selling opportunities and its introduction of new technology products to a significantly larger customer base and addressable market, the timing to complete the technology integration of Amobi, and other statements concerning the expected development, performance, and market share or competitive performance related 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 United States Security 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 20-F. 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 Drucker, 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, and then we'll end over the call to our CFO, Sagi Neri, to discuss our financials. We will then open the call for questions. Results for Q4 include contribution from Amobi and full year 2022 results include contribution from Amobi for the September 12th, 2022 through December 31, 2022 period. Following record organic growth in 2021, we continue to deliver strong results in 2022, highlighted by significant market share expansion and above average growth rates within CTV. We were able to achieve This result, while executing a strategic acquisition and investment, strongly positioned the company and its customers for future success, despite continuing challenging market conditions that weighed heavily on advertising demand throughout 2022. In the fourth quarter, we generated record contribution XTEC of $103 million, reflecting 16% year-over-year growth, as well as a record full-year contribution ex-tech of $309.7 million, reflecting 3% year-over-year growth. We achieved this growth while remaining focused on generating high levels of cash flow and profitability, which we find to be even more important in our certain markets. We strongly believe our operational efficiency, driven by our end-to-end technology stack, is a strong competitive advantage and differentiator. It positioned us well to weather periods of advertisers' uncertainty and provide flexibility to invest in our platform to drive future growth and innovation. For both Q4 and full year 2022, we achieved our most recent adjusted EBITDA target, generating $36.9 million and $144.9 million of adjusted EBITDA, respectively. For the full year, we generated adjusted dividend margin of 43% as a percentage of reported revenue and 47% as a percentage of net revenue. These results are particularly impressive as we invested significant management and combined team efforts acquiring and integrating Amobi, which operated at the loss when we closed the acquisition in September. In addition to generating record net revenues and strong profitability, We continue to grow our share within CTV at what we believe to be rates faster than several competitors in the industry. This outperformance in CTV highlighted our strength and resiliency in this segment and was driven as a direct result of our intentional strategy to emphasize and invest significant resources in CTV-related product development over the last several years. We believe this ongoing emphasize on growing and expanding our capabilities within CTV will provide the company and its customers with increasing advantages over time. In Q4, we generated record CTV spend of $99.6 million, reflecting a significant year-over-year growth of 59%. For the full year, we generated record CTV spend of $283.6 million, reflecting 41% growth compared to 2021. CTV and programmatic activities has been and will continue to be primary focus and growth drivers for the business. We strongly believe advertisers seeking solutions within CTV will continue to favor end-to-end tech platforms as they provide added costs and data advantages compared to one-sided solutions and better optimize the supply chain, which other major ed tech companies are increasingly echoing. We have observed several companies across the industry investing more and more resources into SPO, while intentionally rearranging their operations to more closely mirror an end-to-end business model. While these companies are moving to operate end-to-end at the business level, we take a step further as we are supported by our end-to-end technology platform, which provides a company with what we believe to be a massive advantage that can assist us in growing our market share over the coming years. In addition to having even stronger conviction in our end-to-end tech and operating model, in 2022, we further enhance our programmatic capabilities of CTV data and video offering through the acquisition of Amobis and investment in VIDA. Amobi has significantly enhanced and further differentiated our technology platform through the addition of important TV capabilities, including TV planning, new cross-planning and segmentation. We believe these newly added capabilities strongly enhance the company positioning as linear TV and CTV continue to converge. And as an advertising agency, increasingly thick solutions that enable them to more effectively plan and deploy spend across both linear and digital. Recent technology and developments in the advertising ecosystem, as well as ongoing uncertainty in the advertising environment, have driven customers to be more prudent, data-driven, and strategic in how they plan campaigns and deploy spend to achieve their KPIs. Customers are consolidating budget and spend with fewer advanced tech platforms that can deliver data-driven solutions across planning and activation, enable improved returns on ad spend, and better position them to react and adapt quickly to rapidly changing industry conditions. The Linear TV planning features added through Amobi, combined with our pre-existing strength and variety of data capabilities within CTV and in-house SSD, enable us to create a new and unique technology to plan campaigns across both Linear TV and CTV Simultaneous TV. We believe this is the first of its kind technology that has massive potential in the market, and that is the perfect time for this tech to be integrated into our ecosystem to capitalize on current trends within the industry. As ad-supported streaming continues to grow and as linear TV broadcasters increasingly expanded into CTV, we believe cross-planning is becoming strategic and vital to agencies and brands. This technology enabled partners to reduce deduplication that occurs when presenting ads on both formats to the same user to better understand through which. While the technology increased our CTV capabilities, it also significantly expanded our addressable market, as we can now offer powerful and highly desirable solutions to customers within the linear TV ecosystem. While we expect faster growth in CTV ad spending, Linear TV advertising continues to represent a much larger market than CTV advertising at the moment. We believe well over $50 billion per year is spent advertising on linear TV in the U.S. versus approximately $20 billion per year in CTV in the U.S. currently. Our new linear TV and cross-planning capabilities have already better positioned the company during initial commercial and partnership discussions with some of the world's leading broadcasters and agencies, and we expect this traction to continue going forward. We are currently engaged in an ongoing partnership discussion with leading broadcasters and agencies, and are offering trial to those seeking to leverage our cross-planning tools. We are encouraged by early signs that this technology increases the willingness of major broadcasters and agencies to evaluate our tech solution as well as the likelihood of those broadcasters and agencies adopting offering across our end-to-end tech. We have optimism that the tool and enhanced relationship with large broadcasters will not only enable us to effectively access the linear TV market, but will also drive more CTV spend across our platform as advertisers seek solutions to help them plan and execute campaigns across both linear and digital. Over time, we will work to onboard more partners and encourage those partners to adapt more of our products while also seeking to gain increased level of spend and budget from those partners to deploy across our ecosystem. In addition to the important new planning capabilities, we gain AMOBI also significantly enhance our omnichannel enterprise self-serve DSP display, and performance media buying capabilities as well. The acquisition also added financial scale and increased demand for the significant number of new global brand and agency customers who we are excited to be working with. Since concluding the acquisition, we have made a significant progress in quickly combining the companies. We consolidated management, sales, marketing, product, and R&D teams improving efficiency while saving approximately $50 million in annualized operating costs. The integration of new sales team members and getting everyone cross-trained on our product ecosystem took slightly longer than anticipated. However, we believe the teams are now fully integrated and we have confidence the combined team is prepared for success going forward. We will remain focused on generating further cost savings by consolidating tech and vendor fees as we work towards combining the Tremor Video and Amobi DSPs into one enhanced platform. We continue to expect to achieve $65 million in total annualized operating cost synergies attributable to acquisition and to mostly finalize the tech integration by the end of H1 2023. Upon completing the integration, we believe we will have one of the most comprehensive, efficient, and scale CTV and video-focused end-to-end platform offering in the open market. Our platform will also further be differentiated through our relationship with iSense and strategic investment in Vida, which we believe will further support our growth and leadership position within CTV for years to come. In mid-2022, we invested $25 million in Vida, a smart TV operating system and streaming platform and subsidiary of iSIMS. This investment created a powerful partnership with one of the fastest-growing global CTV operating systems and one of the largest and fastest-growing smart TV OEM brands, while further enhancing our data and media offerings. Over the past several months, Vida has made significant progress growing its global market share. Vida has recently driven increased adoption by several additional Smart TV brands and major CTV partners. We also believe Vida now delivers a wide variety of major U.S. export services and streams on an average of roughly 1 billion hours of content per month. Vida also recently announced a launch of Vida Free, its streaming app offering video-on-demand, live-linear, fast, and ad-supported content which will be available on millions of Vida-powered smart TV from iSense. Vida 3, currently live in the U.S. state, with plans to expand globally later this year. As Vida is equivalent to channels like Roku Channel, continues to scale, and as Vida unboards additional ad-supported content in the future, we expect increasing benefit from the ad monetization exclusivity in the U.S., UK, Canada, and Australia, we gained through our investment. Vita parent company, iSense, which also owned the Toshiba Smart TV brand, has also recently achieved major success and recognition in growing its global Smart TV distribution. According to ABC Revo, iSense rose to number one in the world for monthly global Smart TV shipments for the first time during December. As iSense continued to grow share in the global Smart TV market, our exclusive right to distribute VIDA global ACR data gained through our VIDA investment should provide increasing benefits and become even more desirable to those seeking this data set for CTV targeting and measurement. I can't emphasize enough how unique our access to this data is, as most other major Smart TV OEMs monetize ACR data in-house. While other edtech companies in the open Internet may have limited access to ACR data, we don't believe any of our peers have global exclusivity like we do with one of the fastest-growing global CTV brands. As we look ahead, we expect our investment in VIDA will begin generating meaningful revenues for the company starting in late 2023 and beyond. We also continue to invest in our share repurchase program during the fourth quarter to drive what we believe will be added long time value for our shareholders. In Q4, we repurchased approximately 3.1 million ordinary share, reflecting an investment of 9.5 million pounds or $11.3 million. For full year 2022, we repurchased approximately 16.9 million or roughly 11% of share outstanding, reflecting a total investment of approximately 70 million pounds or 86.2 billion dollars. Should shares remain at discounted levels, we will seriously consider extending the program or authorizing new program to take advantage of the valuation of utility once the current program is finished. we continue to generate increased momentum and adoption across Tremor Video and Unruly. During Q4, Unruly added 87 new supply partners, including 56 in the U.S. For all of 2022, Unruly added 319 new supply partners, including 160 in the U.S. During Q4, Tremor Video added 42 new advertisers' customers, and 233 for all of 2022 across retail, political, CPG, travel, and automotive verticals, as well as others. Finally, we intend to rebrand the company and consolidate our brand's portfolio under one name later this year. We believe this will enhance our commercial focus and better convey the holistic value proposition of our unified end-to-end technology stack in the market for the company's next phase of growth. With that, it is now my pleasure to turn the call to Sagi.