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spk12: 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.
spk14: 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.
spk08: 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.
spk11: Thank you, Ofer. Today, I will review the highlights and key financial and operational drivers of our Q2 and H1 2023 performance, and we'll also discuss our forward-looking guidance. As a reminder, Q2 and H1 2023 results reflect the combined performance of Amobi and Tremor International, while Q2 and H1 2022 results do not include results from Amobi. For the three months ended June 30, 2023, we generated contribution extract of $80.2 million, reflecting 13% growth compared to $70.8 million in Q2 2022, as well as 20% growth from Q1 2023. For the six months ended June 30, 2023, we generated contribution x-stack of $147.1 million, reflecting an increase of 4% compared to $141.8 million in age 1, 2022. Growth in contribution X-TAC over Q2 and H1 2023 was driven largely by a significant increase in programmatic revenue and increased CTV revenue. We experienced strength in food and automotive vertical during Q2 2023, as well as in our PMP business. On the opposite side, toughness was observed in our retail vertical and also in non-CTV-related video and mobile formats. which were down year over year in Q2 and H1 2023, as well as in our non-core performance business as expected, as the company continues to strategically shift its sales focus into CTV. Programmatic revenue for the three months ended June 30, 2023, was $76.3 million, which reflected a 26% increase compared to $60.7 million in Q2 2022, as well as 22% growth from Q1 2023. For the six months ended June 30, 2023, we generated programmatic revenue of $138.8 million, which reflected a 16% increase from $119.8 million in Age 1, 2022. Programmatic revenue as a percentage of revenue increased dramatically to 91% in Q2, 2023, and 89% in Age 1, 2023, compared to 80% in Q2 2022 and 76% in H1 2022. We expect this increased programmatic footprint to remain the norm given the added programmatic base gained through Amobi, combined with the strategic shift of sales resources into our core programmatic business. We also continue to extend our CTV share despite challenging market conditions, generating CTV revenue of $24.7 million in Q2 2023, reflecting 5% growth compared to $23.6 million in Q2 2022, as well as 16% growth from Q1 2023. For the six months ended June 30, 2023, we generated CTV revenue of $45.9 million, which reflected a 17% increase from $39.4 million in H1 2022. Our success in CTV is no accident and has been driven by significant product investment and sales resource shift into this high growth segment over the last several years. We continue to expect to generate further momentum in CTV going forward, as this is a core focus of the business where we see a strong growth runway, particularly as market conditions improve. Video revenue continues to account for a majority of our programmatic revenue at 71% in Q2 2023 and 73% in H1 2023. Video revenue as a percentage of programmatic revenue was done slightly from 75% in Q1 2023, but this was largely attributable to a significant increase in programmatic revenue in Q2 2023. Video revenue as a percentage of programmatic revenue in both Q2 2022 and H1 2022 was 93%, and year-over-year decrease are attributable to the addition of Amobi, which had a historically stronger non-video revenue base, year-over-year decrease in non-CTV-related video revenue, and significant year-over-year increase in programmatic revenue. Over time, we expect to cross-sell our video capabilities to Amobi customers, increase the number of customers leveraging us for multiple solution within video, and attract new customers seeking our video solutions, which is expected to increase video revenue as a percentage of programmatic revenue. During Q2 2023, we also generated significantly improved adjusted EBITDA of $21 million, which increased 137% from $8.9 million in Q1 2023, despite an approximately $1.7 million adjusted EBITDA headwind related to the bankruptcy of MediaMath. This significant rebound in adjusted EBITDA was attributable to a combination of higher contribution X tax generated during Q2 2023 compared to Q1 2023, as well as cost benefits from the complete AMOBI integration. The approximately $65 million achieved in total annualized cost saving related to the Amobi integration was largely attributable to the reorganization of the Amobi employee base into Tremor International, as well as reduced technology, vendor, and data hosting fees associated with the consolidation of Tremor Video and Amobi DSPs into the Nexen DSP. For age one, 2023, we generated $29.9 million of adjusted EBITDA. Q2 and H1 2023 adjusted EBITDA compared to $39.1 million in Q2 2022 and $77.8 million in H1 2022. As adjusted EBITDA over the three and six months ended June 30, 2023, was impacted by the integration of Amobi, which was generating losses when we first acquired the company, as well as a weaker advertising demand environment earlier in 2023. We will continue to work towards further optimizing our cost structure on an ongoing basis to improve profitability. We believe as we generate higher levels of contribution XTAC that the majority of increased contribution XTAC will flow through to adjusted EBITDA given the strength of our horizontal operating model, which enables strong and increasing degrees of operating leverage. For the three months ended June 30, 2023, we generated an adjusted EBITDA margin of 25% on a revenue basis and 26% on a contribution ex-stack basis, which doubled from Q1, 2023, when we generated an adjusted EBITDA margin of 12% on a revenue basis and 13% on a contribution ex-stack basis. For H1 2023, we generated an adjusted EBITDA margin of 19% on a revenue basis and 20% on a contribution X-TAC basis. Q2 and H1 2023 adjusted EBITDA margins compared to 50% on a revenue basis in Q2 2022 and 55% on a contribution X-TAC basis in H1 2022. We continue to expect adjusted EBITDA margins to improve in H2 2023 compared to H1 2023. Turning to our cash flow, we generated $11.9 million in net cash from operating activities during Q2 2023, and $4 million in H1 2023, after generating net cash from operating activities of $30.4 million during Q2 2022, and $46.5 million in H1 2022. Year-over-year decreases were largely attributable to a weaker advertising demand environment compared to the prior year's periods. During H1 2023, we incurred approximately $5.7 million in severance and retention bonus related costs associated with the reorganization of a MOBI employee into the Tremor International Base. As of June 30th, we had $94.2 million in net cash, as well as $80 million undrawn on our revolving credit facilities. We intend to leverage our considerable cash reserve in the future for the ongoing need of the business, as well as to support our future strategic investments and initiatives, including potential future share repurchase programs and acquisitions. We also generated non-IFRS diluted earnings per ordinary share of $0.06 for Q2 2023 and $0.03 for H1 2023 versus non-IFRS diluted earnings per ordinary share of $0.16 in Q2 2022 and $0.33 in H1 2022. Finally, I now turn to our outlook. We continue to expect stronger contribution X-TAC, programmatic revenue, and CTV revenue in H2 2023 versus H1 2023 and H2 2022, with the majority of H2 2023 growth anticipated in Q4 2023. However, the combination of several factors have caused us to lower our full-year 2023 contribution X-TAC and adjusted EBITDA forecasts. First, we believe that continued challenging macroeconomics conditions, which have driven uncertainty and cautiousness in the advertising demand environment, will continue to drive lower spending by major agencies and advertisers in H2 2023, and will also limit their willingness to adopt new platforms and products over the near term. Major advertisers and agencies, including some of our largest customers, have reduced budgets and spending estimates for the second half of the year, which we believe will particularly impact our managed service business, while we are also seeing supply growth outpace ad budget growth, driving short-term pressure on CPMs. We believe these factors will alleviate as macro conditions improve and ad budgets begin to expand again. As mentioned earlier, we also believe that longer and more complex sales cycles will challenge our contribution X-TAC expectations. While intentional due to our ongoing strategic focus on expanding our programmatic footprint, we anticipate that continued decline in our performance business in H2 2023 compared to H2 2022 will also impact our full-year 2023 contribution X-TAC. Our items emphasize on driving growth within our programmatic and enterprise solutions, which we continue to believe is in the best long-term interest of the business and where the industry is heading, as also to an extent driven lower overall take rates for the company amidst this strategic revenue mix shift. Additionally, although we experienced some degree of increased stability in our sales organization as a result of combining the Amobi and Tremor team and providing significant training, recent sales team turnover over the last few months is expected to negatively impact H2 2023 results. That said, we expect to remedy this situation and have already allocated the resources necessary to unlock significant budgets for these pivotal positions in key metro areas. In some cases, we've already filled vacancies and are working hard to quickly ramp up new employees to drive future revenue growth. We anticipate being very active in the talent market over the new term, particularly for experienced sales and marketing team members with significant experience driving programmatic CTV and video revenue growth. As a result of all these factors, we are lowering our full year 2023 contribution x-stack expectation to a range of approximately $320 to $330 million. from a previously expected $400 million. We are also lowering our full-year 2023 adjusted EBITDA expectations to be in a range of approximately $85 to $90 million, from a prior range of $140 to $145 million, due mainly to the expectation for lower contribution XTAC. We continue to anticipate increasing our adjusted EBITDA in age 2, 2023 versus age 1, 2023, and to generate higher adjusted EBITDA during age 2, 2023 than we did in age 1, 2023. However, we do not currently expect adjusted EBITDA or adjusted EBITDA margins in age 2, 2023 to be higher than in age 2, 2022. We continue to expect programmatic revenue to reflect approximately 90% of full-year 2023 revenue. And with my remarks completed, I'll turn the call back to Ofer.
spk08: Although the macroeconomic environment remains challenging, limiting advertisers' new-term willingness to spend and adapt new products and platforms, we believe these conditions and contribution aspects' growth will improve over time. We also believe that as our new products and unified platform gains more traction in the marketplace, and as our sales and marketing teams continue to ramp efforts, the length of our sales cycle will shorten for large enterprise deals featuring multiplied technology solutions. With the integration of Amobi now complete and the business operating under our new unified Nexen brand, we believe we are ideally positioned to offer advertisers, agencies, CTV publishers, and media broadcasters a state-of-the-art platform designed to unlock more favorable outcomes and returns within CTV. We continue to feel we are well-positioned to capitalize on the rapid growth and adoption of CTV over the long term. As the market continues to favor horizontal solutions like we have operated for years, and as the industry is now more data-driven and more obsessed with efficiency than ever before. We also believe the newly added CTV capabilities and scale gained through Amobi will give us an increasing edge over time, especially when coupled with the growing distribution of Vida and iSense and the powerful partnership and exclusivity we have via the relationships. Following significant investments in CTV-related product development over the last several years, our platform is now more technology-based and customer-centric than ever for partners on both sides of the ecosystem. While it's taking more time than initially expected to accelerate growth and for our platform and new capabilities to gain more significant traction with customers in the market, we feel very strongly that these investments will pay off over the long term. We remain confident that our data-driven horizontal technology platform will continue to position us as a key CTV partner and first call for advertisers and agencies and increasingly drive new and current customers to adopt multiplied solutions and increase spending across our ecosystem in the future. We remain excited for what's to come. and want to thank our customers, employees, partners, and shareholders for their continued support. Operator, we will now take questions.
spk12: If you would like to ask a question, please press star 1 on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question comes from the line of Matt Swanson from RBC Capital Markets. Please go ahead. Your line is open.
spk02: Yeah, thank you for taking my questions. Sagi, I think both from your comments and what we've seen from peers, it's obviously a complicated macro environment right now. But do you mind breaking down the guidance a little further and maybe focusing on what parts of the business have remained the most durable? And then any color on how much of a Q4 recovery is embedded in guidance and kind of what gives you confidence around that from a timing perspective?
spk06: Thanks, Matt, for the question.
spk13: Okay, so you asked a couple of questions in one question. I tried to answer everything.
spk11: So I think we are not seeing like, you know, as the industry is suffering from macroeconomic headwinds, I think we are suffering as well. We are more of a pure branding player, while the other doing a little bit tweaks into some performance and more display media having said that we are not seeing like a major weakness in one of our revenue streams so you know customers agencies are pushing back their campaigns and their spend into h2 some of them are completely moving it out We are not seeing anything on any specific verticals because we are very diversified. And I think when we are looking on H2, at the beginning of 2023, probably a lot of people thought that H2 is going to be a massive recovery. As long as we are seeing it now and we are trying to be cautious, we are not seeing a huge recovery. Of course, Q4 is will be the stronger over the year. And we are anticipating like a moderate 20% growth from Q4 to Q3, which if I'm looking on our peers is somewhere around the average of what we are seeing. So we are thinking the same. Of course, now it's mid of August, so we have a very clear forecast around what will happen in Q3.
spk02: and uh good visibility around q4 so we are not like we are trying to be realistic uh and cautious together that's that's that's really helpful and then over maybe on a product side it was great to hear some more about the cross-platform planner and it just feels really well positioned for kind of the moment we're in right now in ctv So could you just expand a little bit more specifically, I guess, on the feedback you're hearing from customers on this solution? And then maybe just helping us think about how this materializes over time in terms of how customers who have adopted will ramp with it.
spk08: Of course. Thank you, Matt, for the question. I think that when you're looking at the industry, and we mentioned it several times in the past, CTV is becoming more and more mature and and bigger in the market. So when advertisers wants to reach their audiences, and if they are linear advertisers in the past, they need to consider also running on basically streaming and CTV. They cannot reach their targets just on linear anymore. I think it's becoming evident also on the national level and most likely also on the local level. So basically advertisers needs to reach also CTV and streaming. So when we are looking at that, I think that our timing to go up with this solution that allow basically linear advertisers to spend also in an efficient manner on CTV and linear is very meaningful because they need it, but they need to do that smart. They cannot basically run in blind way both on both sides because then they will lose a lot of dollars that will run and create duplication to the same user and we show you the same ad. and the same reach linear and CTV, which is not efficient. So basically we can offer them now to do that in the most smart area. And I think that the slogan of better planning, better results is like very, it's coming very clear to that now. And in the past it was most of a slogan, but now it's reality. Meaning when you're looking at the big broadcasters and the big TV station, they need this tool in order to basically offer spread and to direct some of the money into CTV and streaming in order to reach their target audience that they are trying to reach. I think that it's a long process. It's not happening overnight. The broadcasters, the linear advertisers are learning that. We see very good reaction already in the market from big broadcasters, big agencies that like the product. They feel that it's needed and unique in the market. And I think that we are in a good path around that. But it's not something that happened overnight. But I think that it will give us a lot of power in the future, in the mid-term and long-term, because basically what does it mean? It means that we can basically help advertisers that are linear advertisers, which is like around $60 billion in the US, to spend and to move also to CTV. A lot of people are talking about this conversion, but I think that we can really offer a solution that basically enables them to run smartly on both platforms. And we can help them also to do what we call the user extension because we have a very big SSP that is rich with CTV media that can basically fulfill their needs in order to reach their audiences in any campaign that they are running. So I feel that the timing, the need, and the reaction in the market are very good, and we need to be a little bit patient because it's not a solution that is being embedded overnight, and it takes some time to basically integrated and to educate and to teach and work together with the partners in order to operate it in the smart manner. And I think that this is the challenge now. But as we see, it's like the reaction and the solution is being accepted very well in the market. And the fact that we are the first one to issue that is also giving us the title, again, of the innovator of the CTV world that is very important. I hope that I answered your question.
spk04: Yeah, thank you.
spk08: Thank you, Matt.
spk12: Your next question comes from the line of Laura Martin from Needham & Company. Please go ahead. Your line is open. Give me one moment here.
spk15: Okay. Hello, Laura. Can you hear me okay? Hi. Can you hear me?
spk05: Yes.
spk17: Okay, fantastic. Could you bring us up to date on the Hisense Vita measurement product you guys were working on? When that's going to have an impact on your revenue and then if you're going to actually sell it to third parties. Could you update us on that, please?
spk08: Of course. So first of all, iSense is growing very immensely, as we can see by the numbers. It's not related to our efforts. It's related to their efforts. But they are becoming a very strong player in the CTV globally and also in the U.S. And we already reached numbers that are efficient for us to do targeting and measurements. As you know, we didn't build our own solution, so we are now in discussions with several companies about measurement, and also we'll open some of the segments into DSPs in order to allow people to use this data in order to target and in the future or in parallel to measure. And I think that we reached an interesting point because we are talking about it for a long time, but it's like long processes about building the infrastructure, building the technology, testing it with a a live TV manufacturer that he has also other challenges, of course, and he needs to make sure that the user experience is perfect, and that's what we try to achieve, of course, and we achieved with iSense and that own also Toshiba, just to mention. I think that we are now in the moment that it will start to play in our favor in the fronts of targeting and measurement, and we will basically empower also other companies and allow them to use this data. And we are also going to open the international markets very soon, and it will be a very unique solution because in the U.S., it's something that is around for six, seven years, but in the other markets, it's very small or not existing at all, and we are going to basically launch it in some of the markets that we are being active in, and I'm sure that it will bring us a lot of value and also to the market because we are basically enabling our advertisers and clients to target much better and to measure the results with ACR data.
spk17: Super helpful. And then my second question is on Amobi. As we've taken down the projections for the full year so much and you guys talked about Salesforce turnover and elongating the sales cycle, which sounds like part of that is you have to hire salesmen. In the short term, was Amobi actually additive to your business or is it actually hurting your combined financials. What's your point of view on that?
spk08: It's not hurting us, but we need to remember that in the last nine months, we placed a lot of resources, attention into the integration for Mobi. It was a bigger company than us. We have to remember that when we started this integration, they were like about 1,000 employees. We were around 600 employees. So to integrate these two big companies into one, It's taking time. The second thing is to create the synergies and to basically reduce costs. We reduced costs by $65 million, which is about 20% of our growth, which is very difficult to do. It's like when you are flying. It's basically changing the engine of an airplane while you are flying, and we did it. I think that if we weren't doing that in the beginning, we will suffer today a lot because it's a loss that was generated. But we took this decision of acquiring Amobi not based on the short-term, but on the long-term and what technology they can offer us. So I think that also on that front, when you're looking at the technology front, we basically managed to integrate these two companies, two DSPs, two DMPs, all the activities around it in a very short period of time. So in the end of the second quarter, we already sunset one of our DSPs. We have already one platform, one Salesforce, one teams that are operating together, which is a very meaningful... event, and it's not easy to conduct. So I think that it's not slowing us down, and it just gave us the opportunity now to rebrand. So we also conducted the rebranding in June. We changed the names of all the companies. We unified them. We unified the products. We did a lot of work across the company in order to do that, which will help us to do three things. First of all, internally, to give the people association to the new brand so it's not a brand that It's a brand that we choose. It's the first time that we choose a brand and we didn't adapt to the brand. The second thing is to make it more clear to all the clients and partners and potential partners what we really can offer. And in our last meetings with people, suddenly it's become evident to them what we can really offer to them because before that it was much more confusing with all the different brands that we were using. And the third point is also to the financial markets, to investors, shareholders, to understand what we are offering to the market, which is very powerful. So I think that in general, when you're looking at what we achieved with Amobi is a lot. And I will mention two elements that I feel that will give us a lot of power in the future, or even three elements. One of them is the DSP itself. So the DSP of Amobi is very rich in functionalities of enterprise solution. It's very common. You can look at all the sentiment of clients and the market to the brand, to the capabilities that it represents. It's very powerful. And I think that the future belongs to the enterprise solution, meaning if you want to create stability, if you want to create prediction, you need to have an enterprise solution in your company and you have a strong one so people will use it. And we can offer them more and more capabilities, like you can see with our last deal with HNL that started with the DSP but moved along to using our ACR data, using our DMP, using our SSP, which is exactly what we are trying to achieve. So I think that the DSP was very meaningful. And to build these whole functionalities by yourself will take you years. As we know, we don't have years to get better on the enterprise solution. You need to get these capabilities today. The second two elements is the planning tool. The planning tool of the cross-platform that is very unique, like I mentioned to Matt, it will give us value in the mid and long-term, and I think that it's very powerful. We need to plan for the long-term. We cannot work for quarter for quarter. I think it will be a mistake. After serving so many years in the industry, I learned that you need to plan and to build things that will serve you in the future. The discovery tool that is basically a very powerful element because the DSP by itself, in a way, it's a commodity. But if you have all these planning tools, if you have the discovery tool that is enabling advertisers to learn about their audiences, to create segments and so on, and to in a click of a button to launch as a segment to targeting on our DSP. I think it's very powerful and it's giving the agencies and the brands the reason to adapt our DSP. So that's what we are doing and I'm really glad for the acquisition of Amobi and I think that it was really the missing part for us in the strategy and now we feel completed and that's why we rebranded and we are ready for the future.
spk12: Thank you very much.
spk08: Thank you, Laura.
spk12: Your next question comes from the line of Andrew Marock from Raymond James. Please go ahead. Your line is open.
spk21: Hi. Thanks for taking my questions. In the context of your commentary around longer sales cycles and some of the sales staff turnover and things like that, citing a few notable wins in the quarter bringing on 65 new advertisers, over 100 new supply partners, what does the ramp period look like for a new customer or a supply partner for you? Are they materially contributing in the near term, or is there a test phase before committing more substantially?
spk08: Okay. So I will split my answer to two. On the supply side, the outcome is much shorter. So basically when you integrate a new supply source, first of all, the integration is like a, not long, it's in a matter of weeks. And also the testing is not long, it's a matter of less than a few weeks. Some of that can be done in parallel. So the effect of the media side is faster. Regarding the new wins of advertisers, it's a longer process, and I will explain why. Because basically, advertisers don't need to use five or six DSPs. They are trying to lower the number of DSPs that they are using. They are trying to lower the number of systems that they are using because of two elements. First of all, they cannot train their people on so many platforms. It's becoming very complicated. The second thing is cost. You know, so they don't need so many platforms. They don't need so many complications to complicate their basically activity. So when we are coming in, we need to basically replace someone, which usually takes more time and people are scheduling their, let's say, RFIs or consideration for the future, so it takes some time to integrate, but we already see a lot of interesting conversation that in the past, like when I'm talking about the past, let's say before we acquired Amobi, we were never being even considered, but now we are talking to top retailers, to top travel companies, to top other companies that are showing interest in our solution because of all the elements that I indicated to to Laura also and to Matt before. So I think that it's a longer process, but it will do two things that can be very interesting for investors and shareholders. One of them, it's long-term revenue. So basically, even when it's taking us time to integrate our solution and to win an account, it will also take time to take us out of there. If the future, if someone wants to change, it's giving you more stability, and it's a long-term solution, and you can sit and work with these companies for many, many years. Usually if you are providing them good service, they have no reason to replace you and we are very Working together and transparent with our customers So we don't see any reason for people to to switch the second thing is giving a lot a better Predictability about how much revenues we can generate in the future compared to the managed business which is an IO that is being renewed all the time so in these prices you have a discussion with the client about how much they are going to spend in the next quarter, how much money they are going to spend next year, what is their need from technology perspective, and you can address it in a much better way. So I think that the longer process, it's painful in the beginning, but it's much better in the future because it's giving us predictability and stability to our business in the future, which is, of course, something that you really need when you're running a big business and you want to basically lead the market of CTV. You need to have these anchors that are working with you closely in order to win the accounts.
spk21: Great, thank you. And then just a quick one. I know you mentioned a little bit on the call the impact of the MediaMath bankruptcy. I was wondering if you could go into any more detail in terms of the customer overlap or the potential revenue opportunity that that could provide to you having one fewer competitor in the market. Thank you.
spk08: Of course. So MediaMath, of course, we We used to work with them. They used to buy on us media. We look at them and we feel bad for them to lose their business in so many ways. We know the people for a long time. They are colleagues from the industry. So it's not ever nice to see something like that that is happening. On the other side, it's opened a lot of their clients to review. So these clients are looking at the market, trying to replace MediaMat. We need to remember that the MediaMat shutdown happened almost overnight. So it was not like a a planned process that people were saying, listen, in April 2024, we will shut down our service. No, it's happening in a notice of a few days or even less than that, of a few hours. So basically they shut down their business. And some of their clients are already adopted other solution, including ours. Some of them are still searching. And I think that we are, of course, in the mix and we are trying to win as much business as we can. And I think that we have a very good chance to do that. I think that eventually this solution that we saw of Mediamat, this bankruptcy, it just shows in light or giving an highlight to the fact that you need an end-to-end solution and you need a horizontal solution in order to win in this market. One-sided companies will face difficulties to win and to stay in the market because, of course, of margin issues and capabilities to basically manage the future. It's giving us another evidence that the solution and the strategy that we choose in 2019, when we choose to be end-to-end horizontal integration, gave us a lot of power, and it's giving us reassurance that we are on the right side. And also, I must say, from initial discussions with some of their clients, they see the same. They don't want to switch platform. They don't want to... change platform every two or three years. They want to keep their clients and to keep the infrastructure that they choose to use. And I think that with us, they can feel much safer because they see the performance of our company. Great. Thank you. Thank you.
spk12: Your next question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead. Your line is open.
spk20: I was curious to Dive into the linearity of demand here you came out of the q1 print you know the end of May and I'm just There was softness earlier in the year just curious to know what you saw in June versus May and April and then maybe if you could come in on July versus June Again, I didn't understand the the first part of the question you asked about what we saw and Yeah, linearity of demand. So you were two-thirds of the way through the second quarter when you gave your outlook or reiterated the outlook for the year, and now we've got a pretty substantial reset. So just wondering when you saw the weakness.
spk08: Okay, of course. So I will give also after that, Sagi, if he wants to add something. But from my perspective, you know, the last few years didn't act as usual, right? I'm 25 years in this business. Usually, you see heavy lifting and much better results in the second half of the year. We saw it already several times in the last few years. For example, in 2020, even at the beginning of the year, it started very weak because of corona, if you remember. We saw a very big pickup in the second half. In 2021, it was starting okay. Then there was the unrest in the U.S. We are mostly U.S.-based, so more than 90% of our business is in the U.S., So we saw, again, weakness a little bit in the middle of the year, and then we saw a better finish of the year in 2021. In 2022, I think that all the year was started after the invasion of Russia to Ukraine, the sentiment, the macroeconomics, everything. I think that the second half of the year was not as strong as people expected, usually the Q4. And people were feeling that in this year, basically, what will happen is that we started soft, but People will like to invest their money in marketing in order to grow their business, so we'll see a very strong second half of the year. So we also believe in that also because we saw that evident also in the few last years. What we encountered in the last few weeks is that we saw that if we are looking at that and we are already in the middle of August and we see also our peers that reconsider their Q3 numbers, it means that the second half of the year will not be for sure a great momentum. So we decided to be more cautious, to prevent from adjusting a few times or changing our course a few times, but to do that once. So we look at it and we are looking at it in a very cautious way. And we feel that if the market will pick up, great. But if not, we are ready for that. And I think this is more about experience and being transparent and not about They're still believing that Q4 will make us miracles, you know, because we have to be careful if we are in the middle of August and we see that the market is not as strong as was expected. Even that, as you can see, we show improvement in the two halves. So even if we are saying that in the first half we generated around $140-something million, we are saying in the second half we do much more than that. which is about 20% more, which makes sense. And I think that we need to be cautious and careful because the market is very hard to predict. And I feel that the market economy is very fragile and changing, and we need to be listening to the voice of the market and to take a cautious when we are sharing results and focused with the market.
spk13: Yes, I agree with both of you. And I think that, you know, per your question, we saw –
spk11: In the second quarter after our Q1 earnings, like in June itself and through June, decreases in advertisers' appetite and spend, we saw some pushback into H2, and we even saw some cancellation of campaigns. So we waited until now in order to forecast exactly how our Q3 is going to look like. And as Ofer mentioned, we are not counting on an amazing Q4. We think it will be strong, but not as strong as we anticipated before. And again, we are seeing our peers as well. So taking all of that into consideration, we decided the outcome is the lower guidance that we took now out.
spk07: Thank you.
spk12: Your next question comes from the line of Andrew Boone from JMP Securities. Please go ahead. Your line is open.
spk19: Good morning, guys. Thanks for taking my question. I wanted to go back to Laura's question and ask about Amobi. If we go back to the disclosure at the time of the acquisition, it was $150 million of contribution XTAC when you guys acquired it. Can you talk about where the business is today? How much of that stuck around? And maybe how do we think about the retention of those customers?
spk08: Yeah, I would take this one, and Sagi, feel free to fill any gaps that I left. But in general, I think that, again, I think that what we also reported last time, I think it's still standing and from our last check, of course, is that it's not about losing clients, it's about dropping budgets by the advertisers and by the clients. People are adjusting their budgets according to the microeconomic environment. So they can run on your platform, but they spend less than they're used to or less than they plan to, which makes sense. And we see that across the board in almost all verticals, basically, that's related to branding. We need to remember that these people are like us. They are facing uncertainty. They don't want to spend their money now. They don't know what will happen in some senses tomorrow. So they are more cautious than they used to. So I don't think it's about losing business. It's not about losing clients. It's about people that are dropping their spend in order to protect themselves, to keep their cash, to look at the future, to try and understand when is the right time for them to start spending again or investing again heavily in order to retain their clients, to engage with them, and to win new clients. So I think this is the major issue. We don't see any major mistakes. failure or drop of clients or stuff like that. It's happening more on the ground of people dropping their or lowering their spend, lowering their activity in order to cross this storm that is happening in the macroeconomics in order to understand where they are standing. And as I mentioned, how to use the resources in the best way. So that's the major stuff. And just to maybe to add one more thing after looking at that from from perspective of many years in this industry, I think that what we see is that we are a company that, as Sagi mentioned, we are purely branding companies. So this is the first thing to be cut when there is difficulties and macroeconomic challenges. But when people are feeling the relief and the change in momentum, this is the first thing that will grow. So I feel that we choose the right model. We are running on branding. We are putting our emphasis on on CTV and video, more than 70% of our revenues is video. We are heavily invested in CTV and we are winning on that front and we are using data. And I don't think that it can be a challenge that this is the right way to run a business today in the edtech when you're looking at all the trends and everything that is done around it. But I think that in every company, in every economy, there are cycles. So now I think that the uncertainty The advertisers and the partners, when they are looking at the future, they have doubts, they have still question marks, and they are waiting to see when will be the right time for them to keep running and to push their big budgets in order to win accounts and to win market share again. So that's the major thing.
spk19: And then I'm going to ask a tough question here. Understood the difficulty in terms of thinking about 24 with the current macro environment, but given the fact that guidance seems to imply that we're exiting 4Q with basically flat programmatic revenue XTAC, can you guys just talk about when should we start to think about the recovery for 24? Should we expect you guys to grow in line with programmatic, or could headwinds continue into next year? Thanks so much.
spk08: Okay. So regarding headwinds, It's the $1 trillion question, I think. Nobody knows what will happen to the sentiment in the market and the macroeconomics. I wish I knew. But I think that from, I can look at our company and what we did in the past nine months almost and what we are planning to do. So I think that by concluding the integration of the technology, the integration of the companies, finishing the cost reduction that we've done, I think that it's giving, like, much more clear view to the managers, to the company about the future, and there is a lot of dust that went down that allow us now to focus on the business, which is very meaningful. Also, the size of what we mentioned about sales and sales cycles and so on, to get people into the picture, to prepare the sales materials, to conduct, to teach and to train about the next pitch, how to address to change the targets of the people in order to reach new clients in a different manner and so on, in order to not just to take their campaign, but also to integrate the solution, which is technology oriented. It's taking time. I feel that we made a lot of progress from the beginning of the year. We are in different position. I look positive at 2024. I think that from our company perspective, of course, I cannot guess how the market will look like, but if the market will show signs of improvements, I think that we'll enjoy from that in a very big way. And if not, I think that the numbers that we provided make sense because we took into account still Edwins, but we look at it that we are much more prepared in order to deal with them, and we are much more ready in our infrastructure and about our training and people on the ground in order to win accounts in any condition and to be able to basically grow the company again.
spk18: Thank you, guys.
spk08: Thank you.
spk12: We have no further questions offered. I'll turn the call back to you for closing remarks.
spk08: Thank you. Thank you, everyone, for your questions and for listening and taking into account, of course, our input. I think that I'm really excited about where we are now because it seems maybe that we are talking every quarter, but I'm looking at it also from multi-year process that we've done. So I think that since 2019, what we choose to do to be horizontal integrated, to have end-to-end solution. In the beginning, people look at us as like, why you are doing that? And it's crazy, everybody's trying to specialize. Why you are doing this end-to-end solution? I think that now there is no question about it. I saw the headlines of some of the analysts. I saw, also on this call, about the future of SSP, the future of a standalone DSP. I think that there is no doubt that you need horizontal integration. And I think that we predicted that and we act on that since 2019. And I feel proud about it because I think that it's very hard to look at trends and fulfill them so early. And I think that we've done it in a very powerful way. We made also four major acquisitions during this time in order to solidify and to bring these capabilities all together into one platform. And usually I'm not using marketing slogans, but in this case, when I'm looking at that one platform, endless opportunities is true. And we have everything that advertisers and publishers need in order to reach their KPIs. And we did it in a long process that we concluded it in the end of the second quarter, basically, when we finished the integration of Amobi into our business. And we don't see any more major acquisitions that we need in order to build the best tech. We have that. This is one. The second thing is around CTV. So also the decision that we made in 2019 when we invested in RhythmOne that they acquired Yumi before is to run very strongly on CTV, and we are doing that. So we're still growing on the CTV front. We are challenging the market. We are bringing innovation. We are bringing solutions that are needed. We focus on the future, and I think that we are providing Great solution for the trends and the needs of publishers and advertisers, and I think that our plan is to keep doing that. And I think that also the rebranding now, as I mentioned before, it's the first time that we choose a brand and we didn't buy a brand or adopt a brand. I think it's very meaningful for the company, for the clients to present this new brand unification and consolidation of all the capabilities under one brand. I think it will be helpful and powerful. And you just don't judge these things over two months, three months. You judge them over a course of time. I think that we are coming to the market in a very full tech stack and very strong one that if you will bring the best experts to examine our platform, they will tell you that we have the most comprehensive solution, most fitting the trends and the needs and the challenges and the risk of the market in order to win in the future. And I think that this is what we try to build. And we did it. And we are proud of that. And we worked very hard in order to achieve that. And I think now it's time for execution. And as we proved in the past, we know how to execute. It takes some time sometimes. It's not happening overnight. We have the right people. We have the right talent. We are growing our sales teams. We are growing our teams in order to to get like more market share in the market. And we have the resources to do that, which is very important. And we are going to do that during 2024 and going forward. And I feel very secure about the position, the technology, the infrastructure that we created. So I'm excited about it. And we are looking forward for the future. And we hope, all of us, that the macroeconomic will change and will give us a boost because, of course, when the market, the trend, the sentiment is better, Things happen faster, and we hope that it will happen. But if not, we will cross the storm, and we believe in the future of the company, and we are ready for that in any case. So thank you, everyone, for the call today. And as I say, we are positive. We are looking excited for the future, and I think that we are well-equipped to win in this marketplace and to provide a good solution for all the stakeholders and outcome in the company. Thank you very much.
spk12: And this concludes today's conference call. Thank you for your participation and you may now disconnect. Music. Thank you. Thank you. Thank you. Thank you. Welcome to Tremors International 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 Tremors 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.
spk14: 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 will 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.
spk08: 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 end 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 RhythmOne 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 connectivity 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 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 dollars in annualized operating cost synergies by the end of Q2 2023. We believe this underscore the efficiency of our horizontal 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 differentiated 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 CTVs. 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 cost 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 Nexen 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 acquisition 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 platform. 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 cager of around 17% through 2025, according to eMarketer, and its primary focus for next-gen linear TV currently represents 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 a 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 Scope 3, creating a first-to-market green media product for CTV. The partnership enables Scope 3 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. These two 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 called 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 over year and quarter over quarter increases in contribution X tax, CTV revenues, and programmatic revenues. We also significantly improved adjusted EBITDA and adjusted EBITDA margin compared to Q1 2023 due to higher contribution XTEC driven by increased demand for our programmatic solutions and improved environment compared to early Q1 2023 and the cost benefit associated with completing their mobile integration. However, contribution XTEC 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 advertisers' 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 adapt 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 X-back growth. During the second quarter, we generated contribution XTAC 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 XTAC 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 percent growth from q1 2023 and programmatic revenues of 138.8 million dollars in h1 2023 reflecting 16 percent growth from 119.8 million dollars 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 Mediamet. While the bankruptcy of Mediamet 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 Amobi was operating at a significant loss when we acquired the company, which reduced our margins compared to the period 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 iSense 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 Weather, 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 based 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. Nexon Studio, formerly Trulie, also established launched the industry's first voice-activated ed-able to run across all CTV environments, further expanding on our company's robust and significant CTV capabilities. Additionally, we added 112 new supply partners, including 100 in the U.S. during Q2 2023 and 174 new supply partners, including 149 in the U.S. during H1 2023. They call several verticals and formats, including CTV, broadcast TV, live sport, and gaming. H&L, a multi-service agency, following its satisfaction with the Nexon DST, expanded its product adoption to leverage more of our solution, 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 solutions across our product suite, particularly as market conditions improve. With that, it's my pleasure to turn the call over to Sagi.
spk11: Thank you, Ofer. Today, I will review the highlights and key financial and operational drivers of our Q2 and H1 2023 performance, and we'll also discuss our forward-looking guidance. As a reminder, Q2 and H1 2023 results reflect the combined performance of Amobi and Tremor International, while Q2 and H1 2022 results do not include results from Amobi. For the three months ended June 30, 2023, we generated contribution extract of $80.2 million, reflecting 13% growth compared to $70.8 million in Q2 2022, as well as 20% growth from Q1 2023. For the six months ended June 30, 2023, we generated contribution x-stack of $147.1 million, reflecting an increase of 4% compared to $141.8 million in age 1, 2022. Growth in contribution X-TAC over Q2 and H1 2023 was driven largely by a significant increase in programmatic revenue and increased CTV revenue. We experienced strength in food and automotive vertical during Q2 2023, as well as in our PMP business. On the opposite side, toughness was observed in our retail vertical and also in non-CTV-related video and mobile formats. which were down year over year in Q2 and H1 2023, as well as in our non-core performance business as expected, as the company continues to strategically shift its sales focus into CTV. Programmatic revenue for the three months ended June 30, 2023, was $76.3 million, which reflected a 26% increase compared to $60.7 million in Q2 2022, as well as 22% growth from Q1 2023. For the six months ended June 30, 2023, we generated programmatic revenue of $138.8 million, which reflected a 16% increase from $119.8 million in Age 1, 2022. Programmatic revenue as a percentage of revenue increased dramatically to 91% in Q2, 2023, and 89% in Age 1, 2023, compared to 80% in Q2 2022 and 76% in H1 2022. We expect this increased programmatic footprint to remain the norm given the added programmatic base gained through Amobi, combined with the strategic shift of sales resources into our core programmatic business. We also continue to expand our CTV share despite challenging market conditions, generating CTV revenue of $24.7 million in Q2 2023, reflecting 5% growth compared to $23.6 million in Q2 2022, as well as 16% growth from Q1 2023. For the six months ended June 30, 2023, we generated CTV revenue of $45.9 million, which reflected a 17% increase from $39.4 million in H1 2022. Our success in CTV is no accident and has been driven by significant product investment and sales resource shift into this high growth segment over the last several years. We continue to expect to generate further momentum in CTV going forward, as this is a core focus of the business where we see a strong growth runway, particularly as market conditions improve. Video revenue continues to account for a majority of our programmatic revenue at 71% in Q2 2023 and 73% in H1 2023. Video revenue as a percentage of programmatic revenue was done slightly from 75% in Q1 2023, but this was largely attributable to a significant increase in programmatic revenue in Q2 2023. Video revenue as a percentage of programmatic revenue in both Q2 2022 and H1 2022 was 93%, and year-over-year decrease are attributable to the addition of Amobi, which had a historically stronger non-video revenue base, year-over-year decrease in non-CTV-related video revenue, and significant year-over-year increase in programmatic revenue. Over time, we expect to cross-sell our video capabilities to Amobi customers, increase the number of customers leveraging us for multiple solution within video, and attract new customers seeking our video solutions, which is expected to increase video revenue as a percentage of programmatic revenue. During Q2 2023, we also generated significantly improved adjusted EBITDA of $21 million, which increased 137% from $8.9 million in Q1 2023, despite an approximately $1.7 million adjusted EBITDA headwind related to the bankruptcy of MediaMath. This significant rebound in adjusted EBITDA was attributable to a combination of higher contribution X tax generated during Q2 2023 compared to Q1 2023, as well as cost benefits from the complete AMOBI integration. The approximately $65 million achieved in total annualized cost saving related to the Amobi integration was largely attributable to the reorganization of the Amobi employee base into Tremor International, as well as reduced technology, vendor, and data hosting fees associated with the consolidation of Tremor Video and Amobi DSPs into the Nexen DSP. For age one, 2023, we generated $29.9 million of adjusted EBITDA, Q2 and H1 2023 adjusted EBITDA compared to $39.1 million in Q2 2022 and $77.8 million in H1 2022, as adjusted EBITDA over the three and six months ended June 30, 2023, was impacted by the integration of Amobi, which was generating losses when we first acquired the company, as well as a weaker advertising demand environment earlier in 2023. We will continue to work towards further optimizing our cost structure on an ongoing basis to improve profitability. We believe as we generate higher levels of contribution XTAC, that the majority of increased contribution XTAC will flow through to adjusted EBITDA, given the strength of our horizontal operating model, which enables strong and increasing degrees of operating leverage. For the three months ended June 30, 2023, we generated an adjusted EBITDA margin of 25% on a revenue basis and 26% on a contribution extract basis, which doubled from Q1, 2023, when we generated an adjusted EBITDA margin of 12% on a revenue basis and 13% on a contribution extract basis. For H1 2023, we generated an adjusted EBITDA margin of 19% on a revenue basis and 20% on a contribution X-TAC basis. Q2 and H1 2023 adjusted EBITDA margins compared to 50% on a revenue basis in Q2 2022 and 55% on a contribution X-TAC basis in H1 2022. We continue to expect adjusted EBITDA margins to improve in H2 2023 compared to H1 2023. Turning to our cash flow, we generated $11.9 million in net cash from operating activities during Q2 2023, and $4 million in Age 1, 2023, after generating net cash from operating activities of $30.4 million during Q2, 2022, and $46.5 million in Age 1, 2022. Year-over-year decreases were largely attributable to a weaker advertising demand environment compared to the prior year's periods. During H1 2023, we incurred approximately $5.7 million in severance and retention bonus related costs associated with the reorganization of a MOBI employee into the Tremor International Base. As of June 30th, we had $94.2 million in net cash, as well as $80 million undrawn on our revolving credit facilities. We intend to leverage our considerable cash reserve in the future for the ongoing need of the business, as well as to support our future strategic investments and initiatives, including potential future share repurchase programs and acquisitions. We also generated non-IFRS diluted earnings per ordinary share of $0.06 for Q2 2023 and $0.03 for H1 2023 versus non-IFRS diluted earnings per ordinary share of $0.16 in Q2 2022 and $0.33 in H1 2022. Finally, I'll now turn to our outlook. We continue to expect stronger contribution X-TAC, programmatic revenue, and CTV revenue in H2 2023 versus H1 2023 and H2 2022, with the majority of H2 2023 growth anticipated in Q4 2023. However, the combination of several factors have caused us to lower our full-year 2023 contribution X-TAC and adjusted EBITDA forecasts. First, we believe that continued challenging macroeconomics conditions, which have driven uncertainty and cautiousness in the advertising demand environment, will continue to drive lower spending by major agencies and advertisers in H2 2023, and will also limit their willingness to adopt new platforms and products over the near term. Major advertisers and agencies, including some of our largest customers, have reduced budgets and spending estimates for the second half of the year, which we believe will particularly impact our managed service business, while we are also seeing supply growth outpace ad budget growth, driving short-term pressure on CPMs. We believe these factors will alleviate as macro conditions improve and ad budgets begin to expand again. As mentioned earlier, we also believe that longer and more complex sales cycles will challenge our contribution XTAC expectations. While intentional due to our ongoing strategic focus on expanding our programmatic footprint, we anticipate that continued decline in our performance business in H2 2023 compared to H2 2022 will also impact our full-year 2023 contribution XTAC. Our items emphasize on driving growth within our programmatic and enterprise solutions, which we continue to believe is in the best long-term interest of the business and where the industry is heading, as also to an extent driven lower overall take rates for the company amidst this strategic revenue mix shift. Additionally, although we experienced some degree of increased stability in our sales organization as a result of combining the Amobi and Tremor team and providing significant training, recent sales team turnover over the last few months is expected to negatively impact H2 2023 results. That said, we expect to remedy this situation and have already allocated the resources necessary to unlock significant budgets for these pivotal positions in key metro areas. In some cases, we've already filled vacancies and are working hard to quickly ramp up new employees to drive future revenue growth. We anticipate being very active in the talent market over the new term, particularly for experienced sales and marketing team members with significant experience driving programmatic CTV and video revenue growth. As a result of all these factors, we are lowering our full year 2023 contribution x-stack expectation to a range of approximately $320 to $330 million, from a previously expected $400 million. We are also lowering our full-year 2023 adjusted EBITDA expectations to be in a range of approximately $85 to $90 million, from a prior range of $140 to $145 million, due mainly to the expectation for lower contribution XTAC. We continue to anticipate increasing our adjusted EBITDA in A2 2023 versus H1 2023, and to generate higher adjusted EBITDA during H2 2023 than we did in H1 2023. However, we do not currently expect adjusted EBITDA or adjusted EBITDA margins in H2 2023 to be higher than in H2 2022. We continue to expect programmatic revenue to reflect approximately 90% of full-year 2023 revenue. And with my remarks completed, I'll turn the call back to Ofer.
spk08: Although the macroeconomic environment remains challenging, limiting advertisers' new-term willingness to spend and adapt new products and platforms, we believe these conditions and contribution aspects' growth will improve over time. We also believe that as our new products and unified platform gains more traction in the marketplace, and as our sales and marketing teams continue to ramp efforts, the length of our sales cycle will shorten for large enterprise deals featuring multiplied technology solutions. With the integration of Amobi now complete and the business operating under our new unified Nexen brand, we believe we are ideally positioned to offer advertisers, agencies, CTV publishers, and media broadcasters a state-of-the-art platform designed to unlock more favorable outcomes and returns within CTV. We continue to feel we are well-positioned to capitalize on the rapid growth and adoption of CTV over the long term. As the market continues to favor horizontal solutions like we have operated for years, and as the industry is now more data-driven and more obsessed with efficiency than ever before. We also believe the newly added CTV capabilities and scale gained through Amobi will give us an increasing edge over time, especially when coupled with the growing distribution of Vida and iSense and the powerful partnership and exclusivity we have via the relationships. Following significant investments in CTV-related product development over the last several years, our platform is now more technology-based and customer-centric than ever for partners on both sides of the ecosystem. While it's taking more time than initially expected to accelerate growth and for our platform and new capabilities to gain more significant traction with customers in the market, we feel very strongly that these investments will pay off over the long term. We remain confident that our data-driven horizontal technology platform will continue to position us as a key CTV partner and first call for advertisers and agencies and increasingly drive new and current customers to adopt multiplied solutions and increase spending across our ecosystem in the future. We remain excited for what's to come. and want to thank our customers, employees, partners, and shareholders for their continued support. Operator, we will now take questions.
spk12: If you would like to ask a question, please press star 1 on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question comes from the line of Matt Swanson from RBC Capital Markets. Please go ahead. Your line is open.
spk02: Yeah, thank you for taking my questions. Sagi, I think both from your comments and what we've seen from peers, it's obviously a complicated macro environment right now. But do you mind breaking down the guidance a little further and maybe focusing on what parts of the business have remained the most durable? And then any color on how much of a Q4 recovery is embedded in guidance and kind of what gives you confidence around that from a timing perspective?
spk06: Thanks, Matt, for the question.
spk13: Okay, so you asked a couple of questions in one question.
spk11: I tried to answer everything. So I think we are not seeing like, you know, as the industry is suffering from macroeconomic headwinds, I think we are suffering as well. We are more of a pure branding player, while the other are doing a little bit tweaks into some performance and more display media. Having said that, we are not seeing a major weakness in one of our revenue streams. So customers, agencies are pushing back their campaigns and their spend into H2. Some of them are completely moving it out. We are not seeing anything on any specific verticals because we are very diversified. And I think when we are looking on H2, at the beginning of 2023, probably a lot of people thought that H2 is going to be a massive recovery. As long as we are seeing it now and we are trying to be cautious, we are not seeing a huge recovery. Of course, Q4 is uh will be uh the stronger uh over the year and we are anticipating like a moderate 20 20 percent growth from q4 to q3 which if i'm looking on our peers is somewhere around the average of what we are saying so we are thinking the same of course now it's uh mid of august so we have a very clear forecast around what will happen in q3
spk02: and uh good visibility around q4 so we are not like we are trying to be realistic uh and cautious together that's that's that's really helpful and then over maybe on a product side it was great to hear some more about the cross-platform planner and it just feels really well positioned for kind of the moment we're in right now in ctv So could you just expand a little bit more specifically, I guess, on the feedback you're hearing from customers on this solution? And then maybe just helping us think about how this materializes over time in terms of how customers who have adopted will ramp with it.
spk08: Of course. Thank you, Matt, for the question. I think that when you're looking at the industry, and we mentioned it several times in the past, CTV is becoming more and more mature and and bigger in the market. So when advertisers wants to reach their audiences, and if they are linear advertisers in the past, they need to consider also running on basically streaming and CTV. They cannot reach their targets just on linear anymore. I think it's becoming evident also on the national level and most likely also on the local level. So basically advertisers needs to reach also CTV and streaming. So when we are looking at that, I think that our timing to go up with this solution that allow basically linear advertisers to spend also in a, in an efficient banner on CTV and linear is very meaningful because they need it, but they need to do that smart. They cannot basically run in blind way, both on both sides, because then they will lose a lot of dollars that will run and create duplication to the same user. And we show you the same ad, and the same reach linear and CTV, which is not efficient. So basically we can offer them now to do that in the most smart area. And I think that the slogan of better planning, better results is coming very clear to that now. And in the past it was most of a slogan, but now it's reality. Meaning when you're looking at the big broadcasters and the big TV station, they need this tool in order to basically offer spread and to direct some of the money into CTV and streaming in order to reach their target audience that they are trying to reach. I think that it's a long process. It's not happening overnight. The broadcasters, the linear advertisers are learning that. We see very good reaction already in the market from big broadcasters, big agencies that like the product. They feel that it's needed and unique in the market. And I think that we are in a good path around that. But it's not something that happened overnight. But I think that it will give us a lot of power in the future, in the mid-term and long-term, because basically what does it mean? It means that we can basically help advertisers that are linear advertisers, which is like around $60 billion in the US, to spend and to move also to CTV. A lot of people are talking about this conversion, but I think that we can really offer a solution that basically enables them to run smartly on both platforms. And we can help them also to do what we call the user extension because we have a very big SSP that is rich with CTV media that can basically fulfill their needs in order to reach their audiences in any campaign that they are running. So I feel that the timing, the need, and the reaction in the market are very good, and we need to be a little bit patient because it's not a solution that is being embedded overnight, and it takes some time to basically integrated and to educate and to teach and work together with the partners in order to operate it in the smart manner. And I think that this is the challenge now. But as we see, it's like the reaction and the solution is being accepted very well in the market. And the fact that we are the first one to issue that is also giving us the title, again, of the innovator of the CTV world that is very important. I hope that I answered your question. Yeah, thank you. Thank you, Matt.
spk12: Your next question comes from the line of Laura Martin from Needham & Company. Please go ahead. Your line is open. Give me one moment here.
spk15: Okay. Can you hear me okay? Hi.
spk17: Can you hear me?
spk05: Yes.
spk17: Okay, fantastic. Could you bring us up to date on the Hisense VEDA measurement product you guys were working on? whether that's, when that's going to have an impact on your revenue, and then if you're going to actually sell it to third parties. Could you update us on that, please?
spk08: Of course. So first of all, iSense is growing very immensely, as we can see by the numbers. It's not related to our efforts. It's related to their efforts, but they are becoming a very strong player in the CTV globally and also in the U.S., and we already reach numbers that are efficient for us to do targeting and measurements. As you know, we didn't build our own solution, so we are now in discussions with several companies about measurement, and also we'll open some of the segments into DSPs in order to allow people to use this data in order to target and in the future or in parallel to measure. And I think that we reached an interesting point because we are talking about it for a long time, but it's like long processes about building the infrastructure, building the technology, testing it with a a live TV manufacturer that he has also other challenges, of course, and he needs to make sure that the user experience is perfect, and that's what we try to achieve, of course, and we achieved with iSense and that own also Toshiba, just to mention. I think that we are now in the moment that it will start to play in our favor in the fronts of targeting and measurement, and we will basically empower also other companies and allow them to use this data. And we are also going to open the international markets very soon, and it will be a very unique solution because in the U.S., it's something that is around for six, seven years, but in the other markets, it's very small or not existing at all. And we are going to basically launch it in some of the markets that we are being active in, and I'm sure that it will bring us a lot of value and also to the market because we are basically enabling our advertisers and clients to target much better and to measure the results with ACR data.
spk17: Super helpful. And then my second question is on Amobi. As we've taken down the projections for the full year so much and you guys talked about Salesforce turnover and elongating the sales cycle, which sounds like part of that is you have to hire salesmen. In the short term, was Amobi actually additive to your business or is it actually hurting your combined financials. What's your point of view on that?
spk08: It's not hurting us, but we need to remember that in the last nine months, we placed a lot of resources, attention into the integration for Mobi. It was a bigger company than us. We have to remember that when we started this integration, they were like about 1,000 employees. We were around 600 employees. So to integrate these two big companies into one, It's taking time. The second thing is to create the synergies and to basically reduce costs. We reduced costs by $65 million, which is about 20% of our growth, which is very difficult to do. It's like when you are flying. It's basically changing the engine of an airplane while you are flying, and we did it. I think that if we weren't doing that in the beginning, we will suffer today a lot because it's a loss that was generated. But we took this decision of acquiring Amobi not based on the short-term, but on the long-term and what technology they can offer us. So I think that also on that front, when you're looking at the technology front, we basically managed to integrate these two companies, two DSPs, two DMPs, all the activities around it in a very short period of time. So in the end of the second quarter, we already sunset one of our DSPs. We have already one platform, one sales force, one team that are operating together, which is a very meaningful... event, and it's not easy to conduct. So I think that it's not slowing us down, and it just gave us the opportunity now to rebrand. So we also conducted the rebranding in June. We changed the names of all the companies. We unified them. We unified the products. We did a lot of work across the company in order to do that, which will help us to do three things. First of all, internally, to give the people association to the new brand so it's not a brand that It's a brand that we choose. It's the first time that we choose a brand and we didn't adapt to the brand. The second thing is to make it more clear to all the clients and partners and potential partners what we really can offer. And in our last meetings with people, suddenly it's become evident to them what we can really offer to them because before that it was much more confusing with all the different brands that we were using. And the third point is also to the financial markets, to investors, shareholders, to understand what we are offering to the market, which is very powerful. So I think that in general, when you're looking at what we achieved with Amobi is a lot. And I will mention two elements that I feel that will give us a lot of power in the future, or even three elements. One of them is the DSP itself. So the DSP of Amobi is very rich in functionalities of enterprise solution. It's very common. You can look at all the sentiment of clients and the market to the brand, to the capabilities that it represents. It's very powerful. I think that the future belongs to the enterprise solution. Meaning, if you want to create stability, if you want to create prediction, you need to have an enterprise solution in your company and you have a strong one so people will use it. We can offer them more and more capabilities like you can see with our last deal with HNL that started with the DSP but moved along to using our ACR data, using our DMP, using our SSP, which is exactly what we are trying to achieve. So I think that the DSP was very meaningful. And to build these whole functionalities by yourself will take you years. As we know, we don't have years to get better on the enterprise solution. You need to get these capabilities today. The second two elements is the planning tool. The planning tool of the cross-platform that is very unique, like I mentioned to Matt, it will give us value in the mid and long-term and I think that it's very powerful. We need to plan for the long-term. We cannot work for quarter for quarter. I think it will be a mistake. After serving so many years in the industry, I learned that you need to plan and to build things that will serve you in the future. The discovery tool that is basically a very powerful element because the DSP by itself, in a way, it's a commodity. But if you have all these planning tools, if you have the discovery tool that is enabling advertisers to learn about their audiences, to create segments and so on, and to, in a click of a button, to launch as a segment to targeting on our DSP. I think it's very powerful and it's giving the agencies and the brands the reason to adapt our DSP. So that's what we are doing, and I'm really glad for the acquisition of Amobi, and I think that it was really the missing part for us in the strategy, and now we feel completed, and that's why we rebranded, and we are ready for the future.
spk12: Thank you very much.
spk08: Thank you, Laura.
spk12: Your next question comes from the line of Andrew Marock from Raymond James. Please go ahead. Your line is open.
spk21: Thanks for taking my questions. In the context of your commentary around longer sales cycles and some of the sales staff turnover and things like that, citing a few notable wins in the quarter bringing on 65 new advertisers, over 100 new supply partners, what does the ramp period look like for a new customer or a supply partner for you? Are they materially contributing in the near term, or is there a test phase before committing more substantially?
spk08: Okay. So I will split my answer to two. On the supply side, the outcome is much shorter. So basically when you integrate a new supply source, first of all, the integration is like a, not long, it's in a matter of weeks, and also the testing is not long, it's a matter of less than a few weeks. Some of that can be done in parallel, so the effect of the media side is faster. Regarding the new wins of advertisers, it's a longer process, and I will explain why, because basically advertisers don't need to use five or six DSPs. They are trying to lower the number of DSPs that they are using. They are trying to lower the number of systems that they are using because of two elements. First of all, they cannot train their people on so many platforms. It's becoming very complicated. The second thing is cost. So they don't need so many platforms. They don't need so many complications to complicate their, basically, activity. So when we are coming in, we need to basically replace someone, which usually takes more time, and people are scheduling their, let's say, RFIs or consideration for the future. So it takes some time to integrate. But we already see a lot of interesting conversation that in the past, like when I'm talking about the past, let's say before we acquired Amobi, we were never being even considered. But now we are talking to top retailers, to top travel company, to top other companies that are showing interest in our solution because of all the elements that I indicated to to Laura also and to Matt before. So I think that it's a longer process, but it will do two things that, you know, can be very interesting for investors and shareholders. One of them, it's long-term revenue. So basically, even when it's taking us time to integrate our solution and to win an account, it will also take time to take us out of there if the future, if someone wants to change, it's giving you more stability and it's a long-term solution and you can sit and work with these companies for many, many years. Usually, if you are providing them good service, they have no reason to replace you. We are very working together and transparent with our customers, so we don't see any reason for people to switch. The second thing is giving a better predictability about how much revenues we can generate in the future compared to the managed business, which is an IO that is being renewed all the time. In this process, you have a discussion with the client about how much they are going to spend in the next quarter, how much money they're going to spend next year, what is their need from technology perspective, and you can address it in a much better way. So I think that the longer process, it's painful in the beginning, but it's much better in the future because it's giving us predictability and stability to our business in the future, which is, of course, something that you really need when you're running a big business and you want to basically lead the market of CTV. You need to have these anchors that are working with you closely in order to win the accounts.
spk21: Great, thank you. And then just a quick one. I know you mentioned a little bit on the call the impact of the MediaMath bankruptcy. I was wondering if you could go into any more detail in terms of the customer overlap or the potential revenue opportunity that that could provide to you having one fewer competitor in the market. Thank you.
spk08: Of course. So MediaMath, of course, we used to work with them. They used to buy on us media. We look at them and we feel bad for them to to lose their business in so many ways. We know the people for a long time. They are colleagues from the industry, so it's not ever nice to see something like that that is happening. On the other side, it's opened a lot of their clients to review. So these clients are looking at the market, trying to replace MediaMat. We need to remember that the MediaMat shutdown happened almost overnight. So it was not like a planned process that people were saying, let's listen in April, 2024, we will shut down our service. No, it's happening in a, in a, in a notice of a few days or even less than that of a few hours. So basically they shut down their business and some of their clients are already adopted other solution, including ours. Some of them are still searching. And I think that we are of course in the mix and we are trying to win as much business as we can. And I think that we have a very good chance to do that. And I think that eventually, This solution that we saw of Mediamat, this bankruptcy, it just shows in light or giving an highlight to the fact that you need an end-to-end solution and you need a horizontal solution in order to win in this market. And one-sided companies will face difficulties to win and to stay in the market because, of course, of margin issues and capabilities to basically manage the future. It's giving us another evidence that the solution and the strategy that we choose in 2019, when we choose to be end-to-end horizontal integration, gave us a lot of power, and it's giving us reassurance that we are on the right side. And also, I must say, from initial discussions with some of their clients, they see the same. They don't want to switch platforms. They don't want to... change platform every two or three years. They want to keep their clients and to keep the infrastructure that they choose to use. And I think that with us, they can feel much safer because they see the performance of our company. Great. Thank you. Thank you.
spk12: Your next question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead. Your line is open.
spk20: I was curious to dive into the linearity of demand here. You came out of the Q1 print, you know, at the end of May, and I'm just, there was softness earlier in the year. Just curious to know what you saw in June versus May and April, and then maybe if you could comment on July versus June.
spk08: Again, I didn't understand the first part of the question. You asked about what we saw in
spk20: Yeah, linearity of demand. So you were two-thirds of the way through the second quarter when you gave your outlook or reiterated the outlook for the year, and now we've got a pretty substantial reset. So just wondering when you saw the weakness.
spk08: Okay, of course. So I will give also after that, Sagi, if he wants to add something. But from my perspective, you know, the last few years didn't act like as usual. I'm 25 years in this business. Usually, you see heavy lifting and much better results in the second half of the year. We saw it already several times in the last few years. For example, in 2020, even at the beginning of the year, it started very weak because of corona, if you remember. We saw a very big pickup in the second half. In 2021, it was starting okay. Then there was the unrest in the U.S. We are mostly U.S.-based, so more than 90% of our business is in the U.S., So we saw, again, weakness a little bit in the middle of the year, and then we saw a better finish of the year in 2021. In 2022, I think that all the year was started after the invasion of Russia to Ukraine, the sentiment, the macroeconomics, everything. I think that the second half of the year was not as strong as people expected, usually the Q4. And people were feeling that in this year, basically, what will happen is that we started soft, but People will like to invest their money in marketing in order to grow their business, so we'll see a very strong second half of the year. So we also believe in that also because we saw that evident also in the few last years. What we encountered in the last few weeks is that we saw that if we are looking at that and we are already in the middle of August and we see also our peers that reconsider their Q3 numbers, it means that the second half of the year will not be for sure a great momentum. So we decided to be more cautious, to prevent from adjusting a few times or changing our course a few times, but to do that once. So we look at it and we are looking at it in a very cautious way. And we feel that if the market will pick up, great. But if not, we are ready for that. And I think this is more about experience and being transparent and not about They're still believing that Q4 will make us miracles, you know, because we have to be careful if we are in the middle of August and we see that the market is not as strong as was expected. Even that, as you can see, we show improvement in the two halves. So even if we are saying that in the first half we generated around $140-something million, we are saying in the second half we do much more than that. which is about 20% more, which makes sense. And I think that we need to be cautious and careful because the market is very hard to predict. And I feel that the market economic is very fragile and changing. And we need to be listening to the voice of the market and to take a cautious when we are sharing results and focused with the market.
spk13: Yes, I agree with Ofer. And I think that, you know, per your question, we saw...
spk11: In the second quarter after our Q1 earnings, like in June itself and through June, decreases in advertisers' appetite and spend, we saw some pushback into H2, and we even saw some cancellation of campaigns. So we waited until now in order to forecast exactly how our Q3 is going to look like. And as Ofer mentioned, we are not counting on an amazing Q4. We think it will be strong, but not as strong as we anticipated before. And again, we are seeing our peers as well. So taking all of that into consideration, we decided the outcome is the lower guidance that we took now out.
spk07: Thank you.
spk12: Your next question comes from the line of Andrew Boone from JMP Securities. Please go ahead. Your line is open.
spk19: Good morning, guys. Thanks for taking my question. I wanted to go back to Laura's question and ask about Amobi. If we go back to the disclosure at the time of the acquisition, it was $150 million of contribution XTAC when you guys acquired it. Can you talk about where the business is today? How much of that stuck around? And maybe how do we think about the retention of those customers?
spk08: Yeah, I would take this one, and Sagi, feel free to fill any gaps that I left. But in general, I think that, again, I think that what we also reported last time, I think it's still standing and from our last check, of course, is that it's not about losing clients, it's about dropping budgets by the advertisers and by the clients. People are adjusting their budgets according to the microeconomic environment. So they can run on your platform, but they spend less than they're used to or less than they plan to, which makes sense. And we see that across the board in almost all verticals, basically, that related to branding. We need to remember that these people are like us. They are facing uncertainty. They don't want to spend their money now. They don't know what will happen in some senses tomorrow. So they are more cautious than they used to. So I don't think it's about losing business. It's not about losing clients. It's about people that are dropping their spend in order to protect themselves, to keep their cash, to look at the future, to try and understand when is the right time for them to start spending again or investing again heavily in order to retain their clients, to engage with them, and to win new clients. So I think this is the major issue. We don't see any major mistakes. failure or drop of clients or stuff like that it's happening more on the ground of people dropping their or lowering their spend lowering their activity in order to cross this storm that is happening in the macroeconomics in order to understand where they are standing and as i mentioned how to use the resources in the best way so that's the major stuff and just to maybe to add one one more thing after looking at that from from perspective of many years in this industry, I think that what we see is that we are a company that, as Sagi mentioned, we are purely branding companies. So this is the first thing to be cut when there is difficulties and microeconomic challenges. But when people are feeling the relief and the change in momentum, this is the first thing that will grow. So I feel that we choose the right model. We are running on branding. We are putting our emphasis on on CTV and video, more than 70% of our revenues is video. We are heavily invested in CTV and we are winning on that front and we are using data. And I don't think that it can be a challenge that this is the right way to run a business today in the edtech when you're looking at all the trends and everything that is done around it. But I think that in every company, in every economy, there are cycles. So now I think that the uncertainty The advertisers and the partners, when they are looking at the future, they have doubts, they have still question marks, and they are waiting to see when will be the right time for them to keep running and to push their big budgets in order to win accounts and to win market share again. So that's the major thing.
spk19: And then I'm going to ask a tough question here. Understood the difficulty in terms of thinking about 24 with the current macro environment, but given the fact that guidance seems to imply that we're exiting 4Q with basically flat programmatic revenue XTAC, can you guys just talk about when should we start to think about the recovery for 24? Should we expect you guys to grow in line with programmatic, or could headwinds continue into next year? Thanks so much.
spk08: Okay. So regarding headwinds, It's the $1 trillion question, I think. Nobody knows what will happen to the sentiment in the market and the macroeconomics. I wish I knew. But I think that from, I can look at our company and what we did in the past nine months almost and what we are planning to do. So I think that by concluding the integration of the technology, the integration of the companies, finishing the cost reduction that we've done, I think that it's giving much more clear view to the managers, to the company about the future, and there is a lot of dust that went down that allow us now to focus on the business, which is very meaningful. Also, the size of what we mentioned about sales and sales cycles and so on, to get people into the picture, to prepare the sales materials, to conduct, to teach and to train about the next pitch, how to address to change the targets of the people in order to reach new clients in a different manner and so on, in order to not just to take their campaign, but also to integrate the solution, which is technology oriented. It's taking time. I feel that we made a lot of progress from the beginning of the year. We are in different position. I look positive at 2024. I think that from our company perspective, of course, I cannot guess how the market will look like, but if the market will show signs of improvements, I think that we'll enjoy from that in a very big way. And if not, I think that the numbers that we provided make sense because we took into account still Edwins, but we look at it that we are much more prepared in order to deal with them, and we are much more ready in our infrastructure and about our training and people on the ground in order to win accounts in any condition and to be able to basically grow the company again.
spk18: Thank you, guys.
spk08: Thank you.
spk12: We have no further questions offered. I'll turn the call back to you for closing remarks.
spk08: Thank you. Thank you, everyone, for your questions and for listening and taking into account, of course, our input. I think that I'm really excited about where we are now because it seems maybe that we are talking every quarter, but I'm looking at it also from multi-year process that we've done. So I think that since 2019, what we choose to do to be horizontal integrated, to have end-to-end solution. In the beginning, people look at us as like, why you are doing that? And it's crazy. Everybody's trying to specialize. Why you are doing this end-to-end solution? I think that now there is no question about it. I saw the headlines of some of the analysts. I saw also on this call about the future of SSP, the future of a standalone DSP. I think that there is no doubt that you need horizontal integration. And I think that we predicted that and we act on that since 2019. And I feel proud about it because I think that it's very hard to look at trends and fulfill them so early. And I think that we've done it in a very powerful way. We made also four major acquisitions during this time in order to solidify and to bring these capabilities all together into one platform. And usually I'm not using marketing slogans, but in this case, when I'm looking at that one platform, endless opportunities is true. We have everything that advertisers and publishers need in order to reach their KPIs. We did it in a long process that we concluded at the end of the second quarter, basically, when we finished the integration of Amobi into our business. We don't see any more major acquisitions that we need in order to build the best tech. We have that. So this is one. The second thing is around CTV. So also the decision that we made in 2019 when we invested in RhythmOne that they acquired Yumi before is to run very strongly on CTV, and we are doing that. So we're still growing on the CTV front. We are challenging the market. We are bringing innovation. We are bringing solutions that are needed. We focused on the future, and I think that we are providing great solutions for the trends and the needs of publishers and advertisers, and I think that we are Our plan is keep doing that. And I think that also the rebranding now, as I mentioned before, it's the first time that we choose a brand and we didn't buy a brand or adopt a brand. I think it's very meaningful for the company, for the clients to present this new brand unification and consolidation of all the capabilities under one brand. I think it will be helpful and powerful. And you just don't judge these things over two months, three months. You judge them over a course of time. I think that we are coming to the market in a very full tech stack and very strong one that if you will bring the best experts to examine our platform, they will tell you that we have the most comprehensive solution, most fitting the trends and the needs and the challenges and the risk of the market in order to win in the future. And I think that this is what we try to build, and we did it, and we are proud of that, and we worked very hard in order to achieve that. And I think now it's time for execution. And as we proved in the past, we know how to execute. It takes some time. Sometimes it's not happening overnight. We have the right people. We have the right talent. We are growing our sales teams. We are growing our teams in order to get like more market share in the market. And we have the resources to do that, which is very important. And we are going to do that during 2024 and going forward. And I feel very secure about the position. the technology, the infrastructure that we created. So I'm excited about it, and we are looking forward for the future. And we hope, all of us, that the macroeconomic will change and will give us a boost because, of course, when the market, the trend, the sentiment is better, things happen faster, and we hope that it will happen. But if not, we will cross the storm, and we believe in the future of the company, and we are ready for that in any case. So thank you, everyone, for the call today, and As I say, we are positive, we are looking excited for the future, and I think that we are well equipped to win in this marketplace and to provide a good solution for all the stakeholders and outcome in the company. Thank you very much.
spk12: And this concludes today's conference call. Thank you for your participation, and you may now disconnect.
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