Tremor International Ltd.

Second quarter ended June 30th, 2023 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 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.

Thank you, Operator. Good morning, everyone, and welcome to Tremor International's Financial and Operating Results Call for the three and six months ended June 30th, 2023. 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 IR 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 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. Trevor does not intend to update or alter its following 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 We'll include discussions of certain measures of 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 Over Druker, CEO of Tremor International. Over, please go ahead.

Thank you, Billy, and welcome to everyone joining us today. I will begin by providing an overview of our results and strategic initiatives. I will then hand the call over to our CFO, Sagi Nuri, to discuss our financials. We then open the call for questions. As a reminder, Q2 and H1 2023 results reflect the combined performance of Tremor International and Amobi, while Q2 and H1 2022 figures do not include results from a model. Several years ago, beginning with the acquisition of FreedomOne in 2019, we embarked on a mission and strategic journey to become leaders in the CTV advertising arena. We strongly believed and correctly predicted that CTV was the next major frontier for advertisers to reach potential customers, enhance brand recognition, and drive future growth. After more than four years, highlighted by significant organic growth, a public listing in the U.S., the creation of key partnerships, and the successful acquisition and integration of three additional companies, I am pleased to report that Q2 reflects an important milestone on our path to CTV leadership. In parallel with the completed integration of Amobi, a massive tech-rich acquisition, we announced last September, which armed us with significantly added scale and important data, planning, and enterprise DSP capabilities, we took a very important step to rebrand our major products and platforms under a single, united brand, Nexon. The intent of the rebrand was to simplify our story to the market, and it seems that this intention has been well received by customers and prospects, resulting in an overall better understanding of our business. While the rebrand was just announced in June 2023, and it's still early days, we believe it will drive massive improvements in our market position. The name Nexen is a note to the horizontal nature of our platform, going from the Latin word, next away, which means to connect or bind. We believe the new name captures our ability to link different parts of the ecosystem, including the demand and supply side, as well as linear and connected TV to create something that is both future-facing and impactful. As part of the rebrand, we changed the name of our DSP to Nexen DSP, our SSP to Nexen SSP, and our ad server to Nexen ad server, with Nexen SSP and Nexen ad server collectively going to market as Nexen control. The rebrand has simplified the value proposition of our unified data-driven platform for our sales teams, customers, and prospects. It has also positioned our sales teams to achieve greater success, packaging multiple solutions for customers to enable them to better accomplish goals all of which we are confident will drive increased revenues per account over time. We also plan to change our parent company name from Tremor International to Nexen International, which is a subject to shareholders' votes at our AGM later this year. During the second quarter, we achieved our ambitious targets of both completing the majority of the technology integration for Mobi and realizing that $65 million in annualized operating cost synergies by the end of Q2 2023. We believe this underscores the efficiency of our example operating model and our proven track record of successfully integrating large-scale acquisitions in a timely manner for the benefit of customers and shareholders. As I mentioned, we strongly believe in CTV and bet on its growth since 2019. working for several years and investing significant resources to enhance our technology capabilities and footprint in the segment. We believe we now possess one of the most scaled, data-fueled, and comprehensive unified horizontal edtech platform in the open internet, which we are confident will enable us to gain share within CTV for years to come. Our platform boasts depreciated and exclusive data including exclusive global ACR data through VIDA, as well as robust and unique planning, activation, targeting, and measurement solutions. These solutions are purpose-built for advertisers, agencies, CTV publishers, and broadcasters to optimize return and exceed KPIs, particularly within CTV. Our ability to cater to both sides of the ecosystem enable us to holistically serve customers, providing them significant data and cost advantages, while positioning the company to maximize future revenues and profitability. We quickly executed our integration plan, saving significant costs through the reorganization of our now unified employee base, as well as through technology vendor and data hosting cost savings associated with consolidation of our DSPs into a significantly enhanced Nexon DSP. We believe Nexon DSP is one of the most powerful DSPs in the open internet. It features robust enterprise self-service and media buying capabilities unmatched linear and CTV course planning technology, and critical TV data, including exclusive global access to VIDA's ACR data for targeting and measurement, the combination of which is extremely beneficial for advertisers and agencies. Following the bankruptcy of Mediamet, we believe the Nexon DSP is one of the only major DSP options remaining in the open Internet, and that we will benefit from both the added scale of the Amobi acquisitions as well as this industry consolidation. Over the past several months, we have also worked hard to enhance our combined sales capabilities, go-to-market strategy, and overall market awareness. We believe this combination puts us in a stronger position to accelerate future revenue growth and increase our base of customers, adapting multiplied tech solutions across our ecosystem going forward. Through the AMOBI acquisition, we added two important technology capabilities that we are particularly excited about. We believe both strongly enhance and complement our already robust platform and position us extremely well to attract new customers and encourage current customers to increase spending on our platforms. As announced in April, we launched our first two-market cross-platform planner, enabling broadcasters, advertisers, and agencies to holistically plan campaigns simultaneously across linear TV and CTV. While CTV is expected to grow at a much faster figure of around 17% through 2025, according to eMarketer, and its primary focus for next-gen linear TV currently represent a significantly larger market. We believe the ability to cross-plan campaigns will accelerate our CTV opportunity as we can now serve linear advertisers seeking to expand into CTV to reach incremental audiences and enhance returns as the two formats converge. This is the unique technology that will take time to accelerate adoption. but we believe it will generate value for our customers and drive long-term strategic partnerships. We have already seen adoption by and significant interest from some of the world's largest agencies and broadcasters. The second physical technology gained through Amobi is Nexon Discovery, which helps advertisers leverage and organize significant amount of data simultaneously across web, social, media, and TV to enable enhanced audience knowledge and better audience targeting, to more efficiently and effectively plan campaigns. By leveraging XM Discovery, advertisers and agencies can integrate powerful audience data into campaign plans to seamlessly activate through our DSP with the push of a button, and ultimately, maximize return on advertising spend. This offering has generated adoption buy and significant interest from both customers and prospects, and we have confidence it will continue to drive additional customers to our platform. We also announced a partnership with Scope3, creating a first-to-market green media product for CTV. The partnership enables Scope3's carbon emission measurement methodology to be applied to CTV inventory with buyers able to access GMP curated deals through the Nexon SSP. This allows customers to achieve performance goals while mapping and measuring carbon emission of media spent within CTV. This tool has generated significant interest from an adoption by agencies and sustainability has become an increasingly core focus for them and their customers. Continued strategic investment in creating products purpose-built for success within CTV has been core to our ability to generate as much momentum as we have in the format, and we believe it will be instrumental to us continuing to grow, share in the future. In Q2 2023, we delivered LTE overview and quarter-over-quarter increases in contribution XTAC, CTV revenues, and programmatic revenue. We also significantly improved adjusted EBITDA and adjusted EBITDA margin compared to Q1 2023 due to higher contribution XTAC driven by increased demand for programmatic solutions. And improved environment compared to early Q1 2023. And the cost benefit associated with completing the AMOBI integration. Contribution X-Tech was partly offset by declines in our performance business, as well as continued challenging advertising conditions, driven by macro uncertainty, which, to a degree, reduced advertiser spending and willingness to try and adapt new products. The decline in our performance business was expected as we devoted more resources to our co-programmatic business. In addition to challenges in the border environment, Lower-than-expected contribution, XTEC, and Q2 was also the result of some unexpected sales team turnover and longer and more complex sales cycles related to our strategic focus on driving enterprise deals featuring multiplied technology solutions. This, in some cases, pushed larger expected deals out to 2024. As conditions improve over time, And as advertisers' appetite to increase spending and adopt new efficiency-related solutions increase, we are confident that we will be better positioned than ever to capitalize on growth opportunities within CTV and to re-accelerate contribution-expect growth. During the second quarter, we generated contribution act stack of $80.2 million, reflecting an year-over-year increase of 13% from $17.8 million in Q2 2022, as well as 20% increase from Q1 2023. For H1 2023, we generated contribution act stack of $147.1 million, reflecting an increase of 4% compared to $141.8 million in H1 2022. Contribution XTAC growth was driven primarily by increased programmatic revenue. We generated programmatic revenue of $76.3 million in Q2 2023, reflecting 26% growth from $60.7 billion in Q2 2022. as well as 22% growth from Q1 2023 and programmatic revenues of $138.8 million in H1 2023, reflecting 16% growth from $119.8 million in H1 2022. We also successfully expanded within CTV. generating Q2 CTV revenues of $24.7 million, reflecting 5% EOV growth from $23.6 million in Q2 2022, as well as 16% growth from Q1 2023. We generated CTV revenues of $45.9 million during H1 2023, reflecting 17% EOV growth from $39.4 million in H1 2022. In addition, we significantly improved adjusted EBITDA in margin in Q2 2023, delivering adjusted EBITDA of $21 million, which increased 137% from $8.9 million in Q1 2023. We generated this impressive quarter-over-quarter increase. Despite an approximately $1.7 million adjusted EBITDA headwind, related to the bankruptcy of MediaMed. While the bankruptcy of MediaMed did have an impact on our adjusted EBITDA during Q2 2023, we believe we may benefit from potential new advertiser and talent additions related to this major DSP company exiting the market. Our adjusted EBITDA margins increased to 25% on revenue basis and 26% on contribution aspect basis in Q2 2023. Doubling from adjusted EBITDA margins of 12% on a revenue basis and 13% on a contribution extract basis in Q1 2023. Please note that Tamobi was operating at a significant loss when we acquired the company, which reduced our margins compared to previous prior to the acquisition. This increase following the completed integration underscores our success optimizing our cost structure to expand profitability, which we continue to expect to further improve over H2 2023 compared to H1 2023. Our partners at VIDA and ICES continue to achieve success growing global share and distribution. VIDA now serves as a CTV operating system for over 21 million connected TVs in approximately 180 countries. iSense, including Toshiba, according to the data from ABC Webber, has the fastest growth rate in the world for CTV shipment in H1 2023, shipping approximately 12.4 million small TVs, a year-over-year increase of roughly 22%. iSense global shipment share increased to approximately 14%, a record high for iSense, and they continue to rank second in the world for global TV shipment share. As iSense continues to grow market share, and as Vida, iSense, and CTV operating system continue to grow distribution, we expect to benefit from revenues opportunities associated with our investment in VIDA and anticipate customers will increasingly seek to leverage VIDA ACR data for CTV targeting and measurement. Our investment enables global ACR data exclusivity and ad monetization exclusivity on VIDA media in the U.S., U.K., Canada, and Australia for several years. We believe this reflects an incredibly powerful partnership given VIDA and iSense growth rate. and as most major OEMs operate as walled gardens, offering very unique data and advertising opportunities for our customers. Finally, we continue successfully growing our advertisers and supply partners base in Q2 and H1, while also retaining the vast majority of our largest and most significant customers. During Q2 2023, the company added 65 new actively spending first-time advertiser customers, including 30 new enterprise self-serve advertiser customers, and added 110 new actively spending first-time advertiser customers during H1 2023 across travel, CPG, and entertainment verticals, as well as others. Nexen Studio, formerly Trulie, also launched the industry's first voice activated and able to run across all ctv environments further expanding on our company robust and significant ctv capabilities additionally we added 112 new supply partners including 100 in the us during q2 2023 and 174 new supply partners, including 149 in the U.S. during H1 2023, across several verticals and formats, including CTV, broadcast TV, live sport, and gaming. H&L, a multi-service agency, following its satisfaction with the Nexon DSP, expanded its product adoption to leverage more of our solutions, including Nexon Discovery, VDAS ACR data, and our cross-planner. Now that we have rebranded, completed the unification integration of our platforms and people, and added new CTV capabilities, we anticipate being able to generate more success stories like H&L, where partners adopt multiplied technology and data solution across our product suite, particularly as market condition improves. With that, it's my pleasure to turn the call over to Sagi.