ironSource Ltd. Class A Ordinary Shares

Hello and thank you for your patience and welcome to the IronSource Limited second quarter earnings conference call. My name is Emily and I will be coordinating the call today. I would now like to hand the call over to our host, Daniel Amir, VP of Investor Relations at IronSource to begin. Daniel, please go ahead.

Good morning, everyone, and welcome to IronSource's second quarter fiscal 2021 earnings conference call. My name is Daniel Amir, VP of Investor Relations. With me today, we have Tomer Barzaev, Chief Executive Officer, Asaf Ben-Ami, Chief Financial Officer, Arnon Harish, President, and Omar Kaplan, Chief Revenue Officer. Before handing the call over to Tomer, let me remind you that this call is being recorded. A replay of this recording will be made available on our website shortly after the call. We have posted the earnings release and the accompanying slide presentation on our investor relations webpage at investors.is.com. Elements of this presentation, as well as statements we may make on this call, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and these statements are based on current expectations and assumptions. please consider the risk factors included in our public filings with the SEC that could cause our actual results to differ materially from these forward-looking statements. For more detailed information, please see disclaimers in earnings materials relating to forward-looking statements that involve risks, uncertainties, and assumptions. For a discussion of some of these risks, uncertainties, and assumptions, please refer to IronSource's SEC reports. Other than as required by law, we assume no obligation and do not intend to update any such forward-looking statements. We also note that the financial information discussed in this call reflects estimates based on information available now and could differ materially from the amounts ultimately reported in IronSource's other SEC filings. During this webcast, unless otherwise specifically noted, all comparisons are year-over-year comparisons with the corresponding prior year period. For financial information that has been expressed on a non-GAAP basis, we've included reconciliations to the comparable GAAP information other than with respect to adjusted EBITDA guidance for which we have not provided a reconciliation because certain items that impact adjusted EBITDA are out of the company's control and or cannot be reasonably predicted, and accordingly, a reconciliation is not available without unreasonable effort. Please refer to the tables and slide presentation accompanying today's earnings release for those reconciliations. The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making.

With that, I'd like to turn it over to Thoma. Thank you, Daniel. Hi, everyone, and thank you for joining us today for Q2 Earnings Call, which is our first as a public company listed on the New York Stock Exchange. As some of you may know, we began this new chapter after successfully completing our business combination with Tomo Bravo Advantage on June 28 of this year, a partnership which we believe will be important to our growth as a public company moving forward. As part of the merger, we raised a total of $2.15 billion in cash proceeds, including an over-subscribed price of $1.3 billion. With the money raised, we are well-positioned to continue solidifying our market leadership as the most comprehensive business platform for the two core constituents of the app economy. With Amazon's platform, app developers focus on creating great apps and tell some operators, and OEMs focus on offering competing user experiences. In the second quarter, we achieved record results with total revenues of $135 million, up 83% year over year. This was primarily driven by enhanced nature of our platform and an increase in the use of our platform by both existing and new customers. For the second quarter, adjusted EBITDA was $46 million, up from $21 million in the same quarter last year, consistent with our long history of providing profitable revenue growth while benefiting from operating leverage. I'm also happy to report that our dollar-based net expansion rate for the quarter was a record 181%. We see the testament to the comprehensiveness of our platform and the value it provides to our customers' businesses. Since this is our first call as a public company, before diving into the results, I would like to spend a few minutes providing an overview of iHeartSearch, the platform we built, and the market we operate in, the app economy. If you think about your day-to-day life, chances are you spend a good amount of time on your phone. The average is over four hours per day. On average, 83% of that time is spent on apps that provide entertainment, productivity, and connectivity. In 2020, there were 6.7 billion mobile devices, and we downloaded 140 billion apps to those devices. Yes, what is often forgotten is that every single app on your phone is someone's business. AdWords is a software company. Our platform is designed to serve the two core constituents of the app economy, app developers and telecom operators. allowing them to grow and prosper. First, the app developer. When it has become easier than ever to create an app, it has also become harder than ever to commercialize an app. That's where our Sonic Solution Suite comes in. It is built to help developers launch, grow, and sell their apps into successful businesses. The second co-conspirator It is the telecom operators who provide the vehicle which that content runs on. Tapping into the app economy can be a huge challenge for them, but also a huge opportunity. Telecom operators use our platform to connect with our customers and provide a better user experience throughout the device lifecycle. So iLocal Sonic is our solution suite for app developers, and iLocal Spora is our solution suite for telecom operators and OEMs. Together, these solutions are one comprehensive platform that sells our customers at scale, with a focus on creating the best local solution for the app economy. To give a bit more color on iLocal Sonic, it provides developers with the solution they need to grow their business. from expanding the user growth base cost-effectively to monetizing their app and generating revenue from it, to analyzing their business and optimizing it for profitable future growth. Put simply, our platform allows developers to focus on creating great apps and content while we provide the infrastructure for the business expansion. This approach is one of the key market differentiators, as we are only focused on providing business solutions to our customers and not creating content. Within apps, games are the most popular category, and we build our market leadership within the gaming industry. Today, we are the business growth of thousands of apps, including that of many of the tier one game developers. We also provide the support and the launchpad for indie game developers. With Atmos' platform, indie game developers can top the charts and turn their games into worldwide hits in an incredibly crowded and competitive market. Our strategy has resulted in that today we power the lion's shell of the top 100 mobile games. And to give a bit more color on Atmos' aura, Aura enables Telcom operators to enrich the device experience by creating new engagement touchpoints that deliver relevant content to their users. These touchpoints occur across the entire lifecycle of a device, from the time a user first sets up their new device until they trade it in. Aura provides an on-device distribution channel for app developers, as well as a platform to expand the adoption of content and services for telecom operators. At the core of our operational philosophy is a focus on creating a shared vision of success with our customers. As a result, our business model is primarily revenue share, which means that our growth is highly aligned with that of our customers. And the more our platform empowers them to grow their businesses, the more we grow ours. Now, I'd like to share some business highlights from the recent quarter. This quarter saw the launch of several products designed to drive more efficient business growth for our customers across different solutions on our platform. In our sonic monetization solution, we completed the shift to in-app bidding technology. This technology enables our customers to maximize their revenue by creating a real-time auction, allowing different demand sources to bid each available ad impression. This technology is designed to increase competition for ad space, raise efficiency, and decrease customer open, delivering real value for our customers. Our in-app billing technology is already widely used by our customers and has shown significant impact, giving us a competitive advantage. In our Sony Creative Management solution, we announced the launch of Luna Elements as part of our recent acquisition of Luna Labs. We acquired Luna Labs in the first quarter of this year to add automation tools to our ad-creative production and management to our platform. Luna Elements extends Luna's creative management offerings. It allows game studios to build interactive, playable experiences in a matter of minutes without requiring any development experience or resources. Offering tools to automate and optimize interactive ads at speed and scale is an important addition to our platform, which further establish our advantage in the market of creative management. In our Sonic Publishing solution, we announced our live game product. We launched Sonic Publishing in February 2020. The goal was to provide indie game developers who had limited access to capital or business know-how with the infrastructure, technology, and expertise to launch and scale their mobile games. Live games give developers self-serve access to games management tools with visibility and transparency in a multitude of in-game metrics. This enables them to better understand the performance of their ads, to manage and grow their game independently. Live games is another important enhancement in our automated publishing solution, and it's important addition in the disruption we have led to fully productize the publishing process. And finally, we're excited that Bridge Race, a game that was published using our Sonic Publishing solution, was the most downloaded game worldwide in Q2, with over 100 million installs. This success followed Joint Cache, another game that was published using our Sonic Publishing solution, which was the most downloaded mobile game worldwide in Q1. This achievement reflects the power of our platform and is also a testament to the amazing growth and the business opportunities available to developers, large and small, in the app economy. Partnerships form a core part of our DNA, and we continue to invest, grow, and expand our partnership with key customers this quarter. We announced the extension of our growing partnership with Samsung, with the integration of ARTOS Aura solution for Telcom operators and OEM on Samsung device in Germany. This follows our existing integration with Samsung in Russia, India, Southeast Asia, and other European countries. This partnership began with our first integration on Samsung devices in 2018. With the launch of new products and the expansion of our partnership, Gansu's platform continues to provide additional value to customers while helping to further differentiate our offering. Our goal is to continue building out our platform offering through our technological innovation and strategic M&As in order to increase the use of our platform by existing customers and gain market share with new customers. We are also uniquely positioned to further expand to new categories beyond gaming and devices beyond mobile. This has been a great quarter, which is particularly gratifying since this is our first as a public company. We look forward to continuing on our journey to delivering the most comprehensive software platform for the app economy. With that, I will turn the call over to Asaf to provide you with details on our financial performance and guidance for the quarter.