Welcome to Tremor International's Second Quarter Ended June 30th, 2023 Conference Call. At this time, participants are in a listen-only mode with a question-and-answer session to follow at the end of the presentation. This conference call is being recorded and a replay of today's call will be made available on the Investor Relations section of Tremor's website. I will now hand the call over to Billy Eckert, Vice President of Investor Relations for introductions and the reading of the Safe Harbor statement. Billy, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Tremor International's financial and operating results call for the three and six months ended June 30th, 2023. With us on today's call are Ofer Druker, Tremor's Chief Executive Officer; and Sagi Niri, the company's Chief Financial Officer. This morning, we issued a press release, which you can access on our IR website at investor.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 access at 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 US 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 20-F. Tremor does not intend to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in IFRS and non-IFRS terms. We refer you to the company's press release for additional details, including definitions of non-IFRS items and reconciliation of IFRS to non-IFRS results. At this time, it is my pleasure to introduce Ofer Druker, CEO of Tremor International. Ofer, please go ahead.

Thank you, Billy, and welcome to everyone joining us today. I will begin by providing an overview of our results and strategic initiative. I will then hand the call over to our CFO, Sagi Niri 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 Amobee while Q2 and H1 2022 figures do not include results from Amobee. 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 believe and correctly predicted that CTV was the next major frontier for advertisers to reach potential customer, enhance brand recognition and drive future growth. After more than four years, highlighted by significant organic growth, a public listing in the US, 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 Amobee, a massive tech-rich acquisition we announced last September, which earned us with significantly added scale and important data planning and enterprise DSP capability. We took a very important step to rebrand our major products and platforms under a single united brand Nexxen. 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 Nexxen is a note to the horizontal nature of our platform,…

Thank you, Ofer. Today, I will review the highlights and key financial and operational drivers of our Q2 and H1 2023 performance and will also discuss our forward-looking guidance. As a reminder, Q2 and H1 2023 results reflect the combined performance of Amobee and Tremor International while Q2 and H1 2022 results do not include results from Amobee. For the three months ended June 30, 2023, we generated contribution ex-TAC 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 ex-TAC of $147.1 million, reflecting an increase of 4% compared to $141.8 million in H1 2022. Growth in contribution ex-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, softness 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 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 H1 2022. Programmatic revenue as a percentage of revenue increased dramatically to 91% in Q2 2023, and 89% in H1 2023 compared to 80% in Q2 2022 and 76% in H1 2022. We expect…

Although the macroeconomic environment remains challenging, limiting advertisers near term willingness to spend and adapt new products and platforms. We believe these conditions and contribution ex-TAC growth will improve over time. We also believe that as our new product, a 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 Amobee now complete and the business operating under our new unified Nexxen brand. We believe we are really positioned to offer advertisers, agencies, CTV publishers and media broadcaster, 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 gain through Amobee will give us an increasing edge over time, especially when coupled with the growing distribution of VIDAA and Hisense and the powerful partnership and exclusivity where we have the relationship. Following significant investment in CTV related to a 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 core for advertisers and agencies and increasingly drive new and current customers to adopt multiply solution 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.

[Operator Instructions] Your first question comes from the line of Matt Swanson from RBC Capital Markets. Please go ahead. Your line is open.

Yeah, thank you for taking my question. 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 the Q4 recovery is embedded in guidance? And kind of what gives you confidence around that from a timing perspective?

Thanks, Matt, for the question. Okay. So you asked a couple of questions in one question, I try to answer everything. So I think we are not seeing like as the industry is suffering from macroeconomic headwind 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 like 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 this 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 for 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 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 saying. 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 and good visibility around Q4. So we are not like we are trying to be realistic and cautious together.

That's really helpful. And then, Ofer, maybe on the product side, it was great to hear some more about the cross-platform planner. 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 the 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.

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 bigger in the market. So when advertisers want 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 a national level and most likely also on the local level. So basically advertisers need 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 allows 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 a spread and to direct some of the money into CTV and streaming in order to reach their target audience that they're trying to reach. I think that…

Yeah, thank you.

Thank you, Matt.

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. Okay. Can you hear me, okay?

Of course.

Hi. Can you hear me?

Yes.

Okay. Fantastic. Could you bring us up to date on the Hisense Beta 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?

Of course. So first of all, Hisense 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 US. And we already reached numbers that are efficient for us to do targeting and measurement. As you know, we didn't build our own solutions. So we are now in discussions with several companies about measurement and also we'll open some of the segments into DSP 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 live TV manufacturer that it has also other challenges, of course, and it needs to make sure that the user experience is like perfect and that's what we try to achieve, of course, and we achieved with Hisense and that one also Toshiba just to mention. And I think that we are now in the moment that it will start to play in our favor in the issues of -- in the front 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 market very soon, and it will be a very unique solution because -- in the US, 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.

Super helpful. And then my second question is on Amobee. As we've taken down the projections for the full year so much and you guys talked about sales force turnover and elongating the sales cycle, which sounds like part of that is you have to hire sales line. In the short-term, was Amobee actually additive to your business? Or is it actually hurting your combined financials? What's your point of view on that?

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 from Amobee. It was a bigger company than us. We have to remember that we 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 is taking time. The second thing is to create the synergies and to basically reduce cost, we reduced cost 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 when you -- while you are flying and we did it. I think that if we were 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 Amobee 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 like in the end of the second quarter, we already sunset one of our DSPs. We have already one platform, one sales force, 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 a rebranding in June. We changed the names of all the companies, we unify them, we unify the products. We did a lot…

Thank you very much.

Thank you, Laura.

Your next question comes from the line of Andrew Marok from Raymond James. Please go ahead. Your line is open.

Thanks for taking my question. 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?

Okay. So I will split my question -- my answer to two. On the supply side, the outcome is much shorter. So basically, when you integrate a new supply source that, first of all, the integration is like 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. It can do -- some of that can be done in parallel. So the effect of the media side is move 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 the, let's say, RFIs or consideration for the future. So it takes some time to integrate. But we already see a lot of interesting conversations that in the past, like when I'm talking about the past, let's say, before we acquired Amobee 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 Laura also and to Matt before. So I think that it's a longer process, but it will two things that…

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.

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 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 very 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 MediaMath. We need to remember that the MediaMath shut down happened almost overnight. So it's not -- it was not like a planned process that people were saying, listen, in April 2024, we will shut down our service. It's happened 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 the clients are already adopted other solutions, 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 MediaMath, this bankruptcy, it just shows in light or giving an highlight to the fact that you need an end-to-end solution in immediate or horizontal solution in order to win in this market and one side of 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. So 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.

Your next question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead. Your line is open.

I was curious to dive into the linearity of demand here. You came out of the Q1 print 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.

Again, I didn't understand the first part of the question you asked about what we saw?

Yes, 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.

Okay. Of course. So I will give also after that Sagi, if he wants to add something. But from my perspective, 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 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 US. We are mostly US-based. So 90 -- more than 90% of our business is in the US. So again witnessed 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 we 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 evidence 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…

Yes. I agree with Ofer, and I think that's for your question. We saw 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 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 -- or the outcome is the lower guidance that we took now out.

Thank you.

Your next question comes from the line of Andrew Boone from JMP Securities. Please go ahead. Your line is open.

Good morning, guys. Thanks for taking my question. I wanted to go back to Laura's question and ask about Amobee. If we go back to the disclosure at the time of the acquisition, it was $150 million of contribution ex-TAC 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?

Yes. I will 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, meaning people are adjusting their budgets according to the macroeconomic environment. So they can run on your platform, but they spend less than they used to or less as they plan to, which makes sense. And we see that across the board in all -- 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 what is -- when is the right time for them to start spending again or investing in, 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 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 the 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…

I'm going to ask a tough question here. I 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 ex-TAC, 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.

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 a 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 improvement, I think that we'll enjoy from that in a very big way. And if not, I think that the numbers that we provide that make sense because we took into account steel headwinds, 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.

Thank you, guys.

Thank you.

We have no further questions. Ofer, I'll turn the call back to you for closing remarks.

Thank you. Thank you, everyone, for your questions and for listening and taking into account, of course, what 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 that also from multiyear process that we've done. So I think that since 2019, what we choose to do to be horizontally 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 is trying to specialize while you're 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 stand-alone 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 and this opportunity 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 that in the last -- in the end of the second quarter, basically when we finish the integration of Amobee into our business. And we don't see any more major acquisitions that…

And this concludes today's conference call. Thank you for your participation and you may now disconnect.