ironSource Ltd. Class A Ordinary Shares

Hello, everyone, and welcome to the IronSource Limited Q1 2022 Earnings Conference Call. My name is Charlie, and I'll be coordinating the call today. You'll have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. And I'll hand the call over to your host, Daniel O'Neill, the VP of Investor Relations, to begin.

Daniel, please go ahead. Good morning, everyone, and welcome to IronSource's first quarter 2022 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 Omer 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 certain 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 and are not guaranteed. 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. 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 on 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 most directly comparable GAAP measures 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 these 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 Tomel.

Thank you, Daniel, and thanks for joining us today. We're very pleased to start the year on a strong note, continuing to deliver highly profitable revenue growth. We're one of the few software companies that grew revenues more than 55%, while also achieving an adjusted EBITDA margin of more than 30%. Now more than ever, having a strong balance sheet of a net cash balance of $441 million and highly profitability is critical to succeed. As important, we are proud of how our solutions continue to serve the key constituents of the app economy, app developers, and telcos worldwide. So first, let's go over the key numbers. In the first quarter, we achieved record results with total revenues of $190 million, up 58% year-over-year. We also had adjusted EBITDA of $59 million, up 49% year-over-year. Our success in the quarter was primarily driven by continued execution and performance, and we saw market share gains in both existing and new customers. our EBITDA margin was 31%, consistent with our long history of providing profitable revenue growth while also benefiting from operating leverage. We again saw the stickiness of our platform and the value it provides to our customers with a very high dollar-based net expansion rate, 153% for the quarter. During the quarter, we completed the integration of Tapjoy and Vidalgo and now have a global team of almost 1,400 employees with close to 50% of the headcount in R&D. This acquisition will help fuel our future growth and time expansion as we discussed last quarter. More broadly, as our results show, IslandSource serves as the gateway to the app economy. We help app developers turn their apps into successful businesses with our Sonic App Solution Suite and help carriers and OEMs engage with our customers with our Aura Telco Solution Suite. We strive to innovate and provide solutions that address our customers' needs, allow them to take advantage of new opportunities, and help our customers successfully weather changes in the industry. One of the key reasons our platform is able to drive value for customers is the unique combination of multiple data types and how we analyze them. The breadth of our solution means our users get app-centric data from a number of different sources on the platform. First-party data from Supersonic Publishing, third-party data from our SDK, which is widely integrated in our app partners, and on-device data from Aura. We funnel all this data through our machine learning algorithms, which were built predominantly on contextual models from day one. With a constant growth in data flowing in, we created a powerful flywheel of data advantage while prioritizing privacy, which is well positioned for the post-IDFA world and for future changes. This approach of analyzing app-centric data from multiple sources is a point of differentiation for our company. Now, I'd like to move to some of the key factors behind our strong quarter. I'll start with some of the larger trends and then cover products and partnership developments. First, our land and expand strategy. This is at the heart of our platform approach and continues to perform extremely well, as you can see by our 153% dollar-based net expansion rate. The breadth of our solution means that we have multiple points of entry to land with new customers and multiple potential avenues to expand with them. We see that more often than not, new customers will start using one solution and then expand to use additional solutions over time. A great example is HyperBeard, the largest mobile game developer and publisher in Mexico. HyperBeard started using Luna earlier this year, making it the fifth answer solution HyperBeard is using. HyperBeard started with level play mediation, then added bidding, then user acquisition and cross-promotion, all in the past couple of years. Second, our focus on app growth and marketing. In today's hyper-competitive market, incremental profitable app growth is critical to running a successful app business. Paid marketing across channels is a prerequisite to achieve this growth. This quarter, we continue to invest in solutions that help apps meet this growing challenge. First, we announced the launch of the new Luna platform, the only cross-channel marketing software that includes automated creative production and management. Luna closes the marketing loop across all channels so app marketers can build creative, deploy them across every major channel, and optimize to drive performance all in one unified platform. Luna helps customers like the leading dating app, Bumble, to grow at scale by analyzing and optimizing their marketing across channels to drive performance. As we mentioned last quarter, we believe that this marketing software increases our overall time as we're able to capitalize on significant additional streams of marketing spend in the app economy, increasing our share of wallet with customers. Second, we continue our product innovation around iOS ecosystem with tools to help customers grow their user base on iOS. After being first to market in Q4 with a product supporting Apple's custom product pages, this quarter we announced the general availability of Luna Search Ads. This product allows app marketers to better create, manage, and optimize campaigns on Apple Search Ads, a channel that has seen an increase in spend in the last year. The product allows app marketers to automate and streamline campaigns creation, keyword management and discovery, and data analysis. It also provides automated optimization all from within the same platform where app marketers manage campaigns on other channels. Essentially, marketers can now optimize their campaigns on Apple search ads while utilizing the cross-channel app marketing capabilities of IslandSource Luna. Both of these products constitute important added value and differentiation in the market by helping app marketers grow their user base profitability on iOS. Third, we launched a marketability testing tool for mobile gaming apps, which allows game developers to assess product market fit very early by evaluating whether a game can be marketed at scale. This tool is critical in a competitive industry where the cost of investing in the growth of a product that doesn't have the potential to scale can drive huge inefficiencies and wasted spend. This is a decision-making tool that offers a predictive sandbox matching the game to the audience. It results in a marketability score that gives the developer clarity on which titles to invest in and launch. It is the only tool in the market that addresses the question of game marketability together with a competitive analysis to support that decision. providing the app developers with a go-no-go conclusion. It allows developers to focus their time on those apps likely to be successful, while also not missing out on a potential hit. Finally, we're seeing growing interest in the unique on-device growth opportunity that Aura offers. Leading brands like Pinterest, Twitter, and United Airlines are leveraging Aura's native on-device inventory to connect with users as they're first setting up a new device and drive more app installs. This enhanced offering for app marketers is particularly important for apps in categories beyond games, who invest heavily in user growth and app marketing. The size of the mobile app ad install market is over $100 billion, and it is growing at a double-digit CAGR. We're also seeing a continuing trend of brands looking to connect with consumers in-app where they spend much of their time. For example, brands like Frito-Lay and Sparkling Eyes are using rich interactive in-app ads to build brand awareness with customers. We're also seeing Tier 1 big brand commerce apps leveraging unique in-app advertising experiences that enable a value exchange for users. In these instances, users playing a game can receive in-game currency in exchange for making a purchase in the app. This ad experience enables a win-win-win. The game app generates revenues from user engaging with an ad. The users opt in to an offer from an advertiser they find valuable, which results in better results for the advertiser. And the user is rewarded within the game app for engaging with an ad, receiving concrete in-game value in exchange. This ad functions more like a native in-app transaction engine, and we're seeing it get a lot of traction in apps outside of games, particularly in social, e-commerce, lifestyle, and utilities, providing our resource with a key differentiated offering to increase our market penetration in these segments. In addition, we're also continuing to see the power of our business platform for customers of all sizes. Many smaller, independent developers see IronSource as the platform of choice to publish their games using our supersonic publishing solution. We focus on productizing and automating the publishing process, creating a more effective, transparent, and seamless path to support the growth and profitability for published games. In Q1 2022, Color Match was the most downloaded hyper-casual game in the US. This follows highly successful games we saw in 2020 and 2021, like Joint Clash and Bridge Race. In addition, during the past couple of years, more than 30 games published by Supersonic reached the top 10 in the US. This is a strong testament of the robustness of our platform and how it helped developers of all sizes and stages achieve success. Now, let's move to Aura. As we discussed last quarter, the Aura solution, as of the end of 2021, had been installed cumulatively in over 1.1 billion devices, which reflects our strong leadership position in the market. In 2022, we are seeing a number of carriers ramping up their use of Aura. From partnership with Samsung and Vodafone that we announced in the second half of last year, to the two new customers that we announced last quarter from leading telecom operators in Europe and Asia. While it's difficult to predict the pace and timing of ramp-ups, we believe that in the coming quarters we will start to benefit from these partnerships' efforts. These partnerships are a testament of the unique value proposition of the Aura Solution Suite, which goes far beyond app promotion. By providing a solution for managing the entire device experience, we are able to continually expand to new touchpoints, giving telcos additional opportunities to engage with their users, providing value and drive incremental revenue. Since Aura is integrated at device level, it's very easy to add an additional in-life touchpoint, such as news, entertainment, or gaming hub, which encourages users to engage with their device the telcos brand more often to summarize this has been a good start of the year in a challenging macro environment with the launch of new products and the expansion of our partnerships we see the dials platforms continue to provide growing value to customers our results clearly validate our approach and prove that we are able to provide a robust and differentiated offering to the market We plan to continue build our platform offering throughout 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. With that, I will turn the call over to Asaf to provide you with details on our financial performance and guidance for the quarter.

Thank you, Tomer. We're excited to start the year with delivering strong results. As Tomer mentioned, Q1 2022 was a record quarter, both top line and bottom line, and higher than our guidance. We generated $190 million of revenue, compared to $120 million in Q1 of 2021, representing a growth of 58%. For the quarter, Sonic was 90% of our total revenue, and Dora was 10%. The overall growth in the quarter was fueled mainly by the expansion of Sonic and Aura Solutions Swiss within our platform. Our revenue is driven mainly by our large customers. This group grew to 397 customers in Q1 2022, up from 292 in Q1 last year, representing year-over-year growth of 36%. These numbers were achieved while maintaining a very high growth retention rate. 99% in Q1. These large customers represent 94% of our total revenue in the trailing 12 months of Q1 of 2022. Due to the increasing usage of our solutions, we are able to cross-sell and up-sell a greater portion of our solutions to them, as well as general growth in the number of new customers that contributed more than $100,000 in revenue. Our customers range from large global enterprises to small independent developers. As of the end of Q1, we reached 7,000 customers using our platform. This compares to approximately 4,000 customers at the end of Q1 of 2021. Our dollar-based net expansion rate for Q1 remains very healthy at 153%. It is within the guidance provided last quarter and reflects our business model which is focused on customer success. As we communicated previously, we continue to expect our dollar-based expansion rate to remain very healthy in 2022 and be at a similar level to our historical range. We had another strong profitable quarter. We generated adjusted EBITDA of $59 million in Q1 2022, representing year-over-year growth of 49% from our adjusted EBITDA of $40 million in Q1 of last year. This growth was driven mainly by revenue growth across all of our solutions. We delivered an adjusted EBITDA margin of 31% in Q1, in line with our guidance, as we continue to invest in the future of our business while focused on sustained profitability and positive free cash flow. Our increase in OPEX for the quarter reflects a combination of our ongoing rate of investment in the business, as well as a step up in hiring, integration of acquisitions completed in the past few quarters, and a more normal cost structure post-pandemic, including travels, events, and other operation costs. Our non-GAAP diluted EPS for the quarter was 5 cents. and we had $441 million of cash and cash equivalents as of the end of Q1 2022. Our decline in cash and cash equivalents compared to the previous quarter was due to the closing of the TapJar acquisitions in early Q1. Now let me turn to guidance. Our guidance takes into consideration the following factors. The near-term growth trajectory headwinds that some of our mobile gaming customers are facing seasonal trends, and overall macro uncertainty. For the second quarter of 2022, total revenue is expected to be in the range of $180 to $185 million, representing 35% growth on a yearly basis at the midpoint. Adjusted EBITDA is expected to be in the range of $52 to $54 million, representing 15% growth on a yearly basis at the midpoint. We expect our fully diluted share count to be approximately 1.15 billion shares. For full year 2022, due to the factors I just mentioned, we are slightly reducing our guidance for the year. We expect total revenue to be in the range of $750 to $780 million, compared to $790 to $820 million previously, representing 38% growth at the midpoint. Adjusted EBITDA is expected to be in the range of $230 to $240 million, compared to $255 to $265 million previously, representing 21% growth at the midpoint. In summary, we are pleased with our first quarter results, and despite our lowered guidance, we are confident in our market opportunity in the app economy. I am very proud of what our team has accomplished, as we continue to execute and maintain market leadership. With that, I will turn the call back to Daniel.

Thank you, Asi. Before we open the call for questions, we'd like to share answers to three questions that we've gotten from analysts that we think might be of interest. Afterwards, we will go to your live questions. The first question comes from Dylan Becker at William Blair. The question is, How much of growth in large customers comes from the ability to leverage tools like IronSource that require significantly less capital for developers to get up and running? We've seen more and more successful businesses established across app stores than ever before, and that's being enabled by products like yours. But how are you thinking about this broader tailwind and IronSource positioning here? Omer, this question is for you.

Thank you, Dylan, for your question. IronSource is a software company for app developers. While it has become easier than ever to create an app, it has also become harder than ever to commercialize an app. Today, there are over 4.7 million apps across the App Store, but only very few are successful. That's where our Sonic Solution Suite comes in. It is built to help developers launch, grow, and scale their apps into successful businesses. Our platform allows developers to focus on creating great apps and content while we provide the infrastructure for their business expansion. This past quarter, we had 397 large customers, which is a 36% year-over-year increase. The growth in our large customers is largely attributed to our land and expense strategy, which we had highlighted in the prepared remarks. The success of this strategy is illustrated by the fact that the majority of our large customers use both our user acquisition tools and our monetization tools. Our future positioning is focused on two areas. First, we aim to expand our software offering within our platform. Second, we aim to expand our reach into new markets to attract new customers. In expanding our software offering, We have taken both an organic and inorganic approach. Our publishing solution is an example of a product which we developed in-house that in two years has become one of the largest game publishing solutions in the market. Our Luna platform is evidence of a new product offering that is based primarily on two acquisitions that we did last year, Luna and Bidalgo, which we believe significantly expands our overall TAM with marketing software. Therefore, you should expect that going forward, we will continue to strive to innovate and expand our product offering to address our customer needs. In expanding into new markets, we currently see a big opportunity in apps beyond games. While still in its early days, apps beyond games are an important growth driver in our long-term TAM of $50 billion that we highlighted last quarter. Our platform-based approach is relevant to the whole app economy, and many of our UA and monetization tools are relevant for apps beyond games as well. We believe that there is an opportunity to increase penetration into apps beyond games like social, e-commerce, lifestyle, and utilities, which are areas we have identified that could use our tools for user acquisition or are expanding into ads as a source of revenue. In terms of revenue size, as we mentioned before, 10% of our Sonic sales and almost all of our Aura sales come from apps beyond games. We believe that share will likely increase in 2022, and we are excited about this opportunity in years to come.

The next question comes from Eric Sheridan at Goldman Sachs. With fingerprinting becoming an increasing focal point within the broader app ecosystem, can you help us better understand how much exposure IronSource has to it should Apple start to police it? And how do you view the Aura system as a way to differentiate yourself among an ever-evolving app ecosystem? Tomer, this question is for you.

Thank you, Eric, for your questions. We're one of the platforms that have benefited from the release of the App Tracking Transparency Framework, or ATT, by Apple in iOS 14.5. We do not know what Apple's plans are with respect to the continuing evolution of ATT and how such plans will take effect, if at all. However, we believe that we have already demonstrated our ability to quickly react and adjust to changes introduced by Apple. One reason for our ability to quickly adapt is that our model is predominantly based on contextual data. This is combined with additional key elements in the success of our platform, our scale and breadth of offering. As we previously mentioned, IronSource gets app-centric data from a number of different sources on the platform, which is different from others in the industry. First, our SDK is widely used and last quarter, 89 of the top 100 games in the U.S. used the IronSource platform. Almost every major game developer uses our solution. Second, our OAS solution suite has been integrated with over 1.1 billion devices globally, giving us significant device-level data. Third, we're able to leverage first-party data from our publishing software which has generated more than 2 billion downloads to date. While we continue to work with attribution solutions provided by our app partners, we are one of the few platforms that have been able to successfully work with one of the components of Apple's ATT, Scan. In fact, in many cases, we're actually seeing higher level of attributed installs when looking at Scan installs compared to installs of MMPs. the attribution companies. Therefore, based on our experience to date, we believe in our continued ability to quickly react and adjust to changes while leveraging our advantages. As it relates to the second part of your question on Aura, Aura enables Celcom 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 set 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. As I just mentioned, Aura has been integrated on over 1.1 billion devices globally. giving us significant device-level data that puts us in a unique position to perform targeting and attribution that is not based on common device identifiers, such as Google Advertising ID, but based on proprietary Aura device user information.

The next question comes from Colin Sebastian at Baird. The question is, can you update us on the progress with integrating recent acquisitions And what is your view on the outlook for further M&A and market consolidation? Tomer, this question is for you.

Thank you, Colin, for your question. We're very pleased thus far for the integration of Bidalgo and TabJoy. Bidalgo integration is essentially complete and is part of the rebranded Luna platform that we announced during the quarter. Bidalgo's marketing software solution fits well with the automated ad creative production and and management solutions that together comprise the overall Luna platform. We have been in front of many customers in recent months, and thus far, the reception has been going well. The top-down integration is far along, and we are happy to see that it's going as planned. We are combining products and integrating the platform in order to provide a clear offering to customers. We are moving to common collaboration in engineering platforms, as well as common ERP, HR, and CRM systems, while also looking at consolidating facilities. Overall, IslandSource has a proven track record of identifying, acquiring, integrating, and growing acquisitions. And we remain excited by our inorganic growth prospects, which will complement our ongoing organic growth initiatives. With regard to the second part of your question on overall market consolidation, the consolidation of the gaming industry is natural for an industry at this stage of growth. It continues the trend we've seen in recent years, but at larger scale. Economies of scale in the gaming industry are critical, and that has been the driving force. As we look at the industry, We may also see new players entering this market and acquiring game developers to build franchises, which is a trend we have not seen much in the past. Our view on consolidation is that it will lead game developers to further focus on what they do best, which is to create great games. So further consolidation will only strengthen our position in the market as we have seen over the past few years. More broadly, the industry is moving towards using platforms. Given our machine learning algorithms, scale, and breadth of available solutions, we continue to predict that tier one gaming companies will increase businesses with us over time. We therefore believe that we will see further consolidation on the platform side and see ourselves as our market consolidators as small players have more difficulty to compete.

Thank you, Tomer. With that, we will now open the floor to your questions. Operator?

Thank you. If you'd like to ask your question, please press star followed by 1 on your telephone keypad. If you'd like to withdraw your question, please press star followed by 2. When preparing to ask your question, please ensure you're unmuted locally. Our first question comes from Steven Chu of Credit Suisse. Steven, your line is now open.

right thank you so asaf any other detail that you can add in terms of the software outlook uh for the full year uh between sonic aura or supersonic i get that these are all interconnected um or any other commentary you can offer uh in terms of what you may be seeing from a regional softness perspective and tomer um the sweat coin example that you had on the deck is pretty interesting. Um, it seems like more app developers who primarily rely on subscriptions or other consumer payments should adopt some form of ad driven strategy to supplement their earnings. So, you know, this is a free to play example, but with even Netflix talking about adding ad supported consumer offerings, um, it seems like more developers should be thinking along these lines. So, Can you talk about, I guess, the opportunity that theoretically the incremental inventory could provide for you, as well as potential challenges from a supply and demand perspective of inventory and add dollars? Thanks.

Hi, Stephen. This is Tomer. Thanks for joining today. I will let Omar address your second part of the question, and then I will address the first part.

Perfect. Thanks, Tomer. And hi, Stephen. Thank you for the question. When we're looking at the Epstein Games opportunity, we're extremely excited about this, and we divided into two segments. First of all, there is the business of today. Our current products today already provide great value for apps beyond games, both on UA and on ad monetization. It represents about 10% of Sonic and most of all our revenues already, and we expect this to continue and grow. But like you said, there is a huge opportunity here around the business of tomorrow. I'm sure that many of you heard about Netflix comments about releasing an ad-supported version. There is the Sweatcoin example that we spoke about. And in general, what we're doing is think about the concept of doing ad-supported payments for any transactional or subscription apps that have massive scale. You can watch Netflix for one day or get Ubermised by completing offers from other games, apps, or brand advertisers. We already have many examples. We see that work. We have the best technology to support this at massive scale, and we think of this as creating a transaction engine for the app economy and are very excited and bullish about this direction, exactly what you said about Netflix.

Cool. So, Stephen, on your first part of the question regarding guidance, so some additional color to help you guys understand our view ahead of the guidance, the updated guidance we provided. So across everything that we do here in IronSource, over the last few quarters, I hope you got a feeling of our approach to guidance. And it's a very prudent and transparent one, and it will continue to be so. And while we don't see any core indications of declining in the performance of the platform, our business model is really aligned with the customers we serve. meaning when they generate more revenues, we also generate more revenues. Most of our business model is based on RevShare. And given some of the gaming companies out there, which are our customers, that have communicated lower growth rates due to macroeconomics and other reasons, we believe that the responsible thing to do here is to take that into consideration. This is why we ultimately decided to slightly lower our guidance, our outlook by 5%, to make sure we take into consideration what's happening out there in the macroeconomics. So again, we don't see a slowdown in the platform or any indication in the core KPIs, but we want to be prudent and try to anticipate any potential effects due to the fact that they they guided some lower numbers going forward. And finally, I would add that we are a very profitable company with EBITDA margins greater than 30%, and we intend to focus on that. Reminding you all, we guided that in the long term, our EBITDA margins will be in the mid-40s. We've already been in the 40s, and we We plan to continue balancing between top-line growth and profitability with a higher emphasis on profitability and continue monitoring macroeconomic developments and what's happening with our customers in the next few quarters.

Thank you.

Thank you. Our next question... Matthew Cost of Morgan Stanley. Matthew, your line is now open.

Great, everyone. Thanks for taking the questions. I guess just to follow up there on the guidance, understanding, I think you're very clear about how things in OneQ and so far you're not seeing any indications in the core KPIs of a slowdown. I guess when you think about the rest of the year and the macro environment, what sort of macro environment does your guidance contemplates? Because, like, if I look at the guide, I think, you know, you just average it over four quarters. It kind of implies total revenue more or less staying flat between here and the end of the year. And I guess, like, is the backdrop for that a weakening environment where you're continuing to gain share? Is it a flat environment? You know, what are you assuming that there's a lot of pressure on your customers between here and the end of the year just out of prudence? What is the macro backdrop of your guide? Thank you.

Sure. Hey, Matt. So again, to add additional color on that, we in Q1 and we believe that also in the next quarters, we believe we will continue gaining market share. We've seen it very strongly in Q1 and we believe this will continue to be the case. All the indications in the platform show that. What I referred to earlier about macro environment is we assume that that the report, the guidance by some of the gaming companies out there, some weakness in their guidance is mostly around their ability to invest in user acquisition. That might go down. That's our assumption, again, based on macroeconomics. And we don't know yet if this will happen for sure, right? But we are trying to be, again, as I said earlier, prudent and conservative in a way, taking that into consideration. And it really depends on their ability to continue growing and investing, how aggressive they can be, how many new titles they will release, how the general market will look like as for that. But again, to emphasize, we see strong market share for iron source. We see an increase across all the different areas in the platform in our ability to grow market share. But we are conscious of the guidance that they give, and we want to take that into account while continuing our style for guidance and being very prudent and careful ahead of future quarters.

Great, thank you. Thank you, Matthew. Our next question comes from Tim Nolan of Macquarie. Tim, your line is now open.

Hi, thanks. maybe I'll ask a question about aura. Um, if you could please help us understand what the market penetration opportunity is in the markets where you operate there, uh, as in, is there a sort of a market penetration figure you could give us? Like what percentage of, you know, devices or, or chuckle operators or whatever are you, are you on and what type of, um, growth in that penetration rate do you think you could see over time? Um, the 1.1 billion device number, I think you mentioned just now in Q1, Is that the same as the number you gave for Q4? And is that number rising? Thanks.

Arnon, I will let you take this one.

Sure, sure. Hi, Tim. Thank you. So, yeah, I don't think we updated our accumulated Aura device installs, but it is growing. It's growing significantly. And basically for us, again, there's two growth drivers for Aura. The first is simply continuing to add additional touch points to our existing customers. This is something that drives unit economics growth that is very significant and is something that is growing across all of our partners. Unit economics are growing dramatically. And the second is, of course, onboarding new customers. And again, we haven't released the actual names, and this is because of marketing reasons on the telco side. It will be hopefully approved soon. But we have onboarded major new telcos, significant ones across the world, and we also onboarded additional OEMs. So we're very pleased with our pipeline of new customers, and it's going to continue to grow for the foreseeable future.

Okay. I guess maybe given that you don't necessarily have a lot of direct competition in the markets where Aura is already established or is building a presence Is there still a lot of runway to add further penetration of devices for Aura in those countries?

Yeah, so the main thing that is slowing us down a bit compared to, I would say, our work on the developer side is simply the rate that telcos adopt and release new features of our platform. They're, again, a bit more prudent and a bit more slow in increasing touch points. So again, the main growth driver for us is new touch points within our existing customers. We have grown in our unit economics since we started in hundreds of percent, and we see no cap to that in terms of new products, new features we can deploy within our existing telco partners. In addition, again, today, and this is the feedback that we're getting from customers, we are the best solution in the market for telcos to engage their users on device. And we have a significant number of telcos, both in the U.S. and outside of the U.S., that will eventually adopt our solutions. Again, some are already live and we'll announce them soon. Big companies that are selling a lot of devices. So the growth is, again, if you wanted to quantify it, I would say our future growth is maybe 30%, 40% new customers and 60% from increasing our touch points and increasing our unit economics within existing customers. And again, this can grow almost indefinitely.

Okay, that helps. Thanks very much.

Thank you, Tim. Our next question comes from Jason Bazinet of Citi. Jason, your line is now open.

Okay, so... I guess this quarter we've seen Unity take down guidance on a data issue, Applovin do it because of an accounting issue related to ASC 606, related to MoPub, and now you guys. So all the narratives are sort of different, but the sort of odd question we're getting from clients, which I don't think is correct, but I just want to check, is that some clients are speculating that somehow... Applovin's acquisition of MoPub has sort of injected some sort of headwinds for everyone else in the industry. And I don't think that's correct because I think it's just doing mediation. But I guess if you could comment on that narrative that's sort of swirling around the street, I think that would be helpful to clients. Thanks.

Sure. Sure. Hey, Jason. Thanks for the question. I think it's an important one. So I don't know to comment about what Unity guided and Apple has been guided, but I can reiterate what I just said earlier. We truly don't see any indications in the platform for slowing down on numbers or future growth. And you've seen the results in Q1 that were very strong. But I think it is very important to take into consideration the macroeconomics, meaning it's quite clear to everyone that it's either we are in or we're entering a recession of some sort, and that cannot have a zero effect out there. So I think this is why I think some of the gaming companies out there lower their guidance, and that will have an implication also on the platforms. Specifically on your question on Mopup, so Mopup is a mediation platform that Apploving acquired. And I can tell you that in the last quarter, for example, in Q1, specifically on the mediation, we grew our share of voice by 15% quarter over quarter, meaning it didn't slow us down, quite the opposite, because some of the Mopup platforms previous Mopab customers had to move, had to migrate to other mediations, and some of those migrated to our mediation. So it didn't slow us down quite the opposite, to be honest. So I don't think that is the reason. I think the reason for our slightly lower guidance, 5%, is strictly and directly connected to our view. about potential macro effects. And our approach to you guys and to our investors, well, we have been and we will continue being responsible, prudent, and have a very transparent dialogue with the investors.

Well, we appreciate that. Thank you very much.

Thank you for your question. Our next question comes from Bernie McTernan of Needham & Co. Bernie, your line is now open.

Great. Thanks for taking the question. I was commenting that you're hearing from other gaming companies that are weakening their guide, but are you seeing anything on the supersonic business that's weaker? Just wondering, because since you're running your own publishing platform, is there anything you're reading what you're actually seeing in your results that would impact the guidance?

Hey, Bernie. Omar, I will take this one.

Sure. Thanks, Bernie. So we launched our publishing software, Supersonic, in February 2020 and have seen great success with it. Since inception, Supersonic published about 50 games and have been downloaded more than 2 billion times. And when we look at 2021, we became the third biggest publisher in the U.S. in terms of downloads. Q1 has also been extremely successful. Color Match is an example. An indie developer that used Supersonic was the most downloaded hyper-casual game in the world. And Supersonic is actually, we look at that, the publishing software. we look at that as really a great demonstration of the power of our software and our platform. Because when an indie developer is using Supersonic, they're basically using all of our different solutions, all of our different capabilities, and despite what we spoke, despite the fact that we are seeing some minor decreases and maybe some lower margins from some gaming companies, indie developers who are using Supersonic are seeing great success that is over-performing that may be potential slight decline in the ecosystem. So that's a great example of how our technology provides great value and great margin for our partners.

Understood. And then since you're not seeing anything necessarily impact your core business yet, is it fair to assume that maybe the investment levels, the kind of the organic investments you guys are making in the company are continuing at a normal rate. So it's a pullback on a potential macro issue on the guide, but you're still investing. Would there be, if there was a real macro hitting the revenue of the business, would you take a more aggressive approach in pulling back on some investments?

Sure, Bernie. So that was what I was referring to earlier. So we've previously mentioned that Forever and ever since inception, IslandSource has been focused on top-line growth. We've been growing tremendously fast. But forever and ever, we've been a very, very profitable company with EBITDA margins consistently above 30% and sometimes touching the 40%, even exceeding it. And we said that long-term, we will reach the mid-40s EBITDA margins. We are constantly monitoring what's happening out there, and if we see increased macro effect, if we see increased slowdown, we would adjust, and we will focus primarily on EBITDA. We think that our EBITDA margins, consistent EBITDA margins, are one of the key reasons for our success and robustness and such a strong balance sheet that helps us and enables us being very strong both organically and non-organically, being market consolidators. And we will, of course, adjust. In that case, we will reach higher EBITDA percentages sooner rather than originally planned.

Got it. Thanks for putting a finer point on that, Tomer.

Our next question comes from Colin Sebastian of Baird. Colin, your line is now open.

All right, thanks. Good morning and good afternoon. I'm just curious. I mean, we're seeing a pretty significant shift in time spent on social platforms, such as, you know, obviously TikTok is gaining a lot of share. I'm curious how your platform performs with those types of structural changes in the audience, in the components of the audience. And with respect to mobile gaming app install ads, those tend to be different across those platforms. But do those shifts represent more of a risk or an opportunity for the platform overall? Thanks.

Hey, Colin. Good to have you. Omar, I'll let you take this one.

Sure. Thanks, Colin, for the question. I think that what we're seeing, and it's very important, is that despite what we're speaking about, potential softness with some of our gaming partners, we still see users playing games at the same rate. So we still see them... continue to install games, we still see high usage time, and we are still seeing them spending a lot of their time on mobile games, and we believe that that will only continue and grow. So we don't see any impact which is related to differences in usage of social platforms.

Thank you.

Our next question comes from Bavin Shah of Deutsche Bank. Bavin, your line is now open.

Hey, guys. This is Dan on for Bavin. Thanks for taking the question. I wanted to ask about, you mentioned you recently launched the Luna search ad. I'm curious, what's been the feedback so far in the adoption from customers, and how should we think about the opportunity more broadly with Apple search ads, and how large is this becoming as a portion of your customers' overall ad budgets?

Yeah, so it's Omer. I'll take the question. Thank you. Yeah, so we're seeing great adoption for our product. It's part of the overall Luna cross-channel marketing software, which means that now our customers can manage all of their advertising on all of the channels. And we just launched a new tool specifically aimed for managing the advertising on Apple, like Apple Search and the other Apple advertising platforms. And we are seeing great adoption by it. We actually launched many unique features around it, including automation of the process and things that provide great value for customers. And we are seeing great adoption. In general, we do see an increase in the Apple advertising activity, and we are making sure that we'll be the platform of choice for customers to manage and optimize their activity with Apple advertising.

Unfortunately, we have run out of time for today's Q&A session. I would love to pass the call back over to Daniel Lemire for any closing remarks.

Thank you all for listening to the call today. We're planning to participate in a number of conferences this quarter. Needham, Wedbush, Oppenheimer, Jeffries, Baird, and William Blair. So we have a lot of conferences, and we hope to see you all in these conferences. And thank you, and have a great day. Thanks for dialing in.