Welcome to Tremor International's Conference Call for the Three and Nine months Ended September 30th, 2023. 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 nine months ended September 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 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 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 initiatives, then we'll end the call over to our CFO, Sagi Niri, to discuss our financials. We will then open the call for questions. Please note, results for the three and nine months ended September 30, 2023, reflect the combined performance of Tremor International and Amobee, while results from the same prior year periods include Amobee contributions from September 12, 2022 through September 30, 2022. I would like to start today's call by thanking everyone who has reached out and extended their thoughts, prayers, and sympathies following the October 7 terrorist attack on Israel, where our company is at quarter and where many of our employees and their families go home. Your support means a lot to us and is greatly appreciated. While Tremor International is a global ad tech company, we generate the vast majority of our contribution aspect over 85% in the U.S., which is also where the overwhelmingly largest base of our employees sits. Despite the conflict weighing heavily on our thoughts and despite certain Israel-based team members being called to active duty, we are doing our best to keep our business activities and operations relatively unaffected by the situation. We commend the bravery of our active duty employees in service to their country and intend to honor them by working out to continue providing best-in-class service and solutions to our customers and partners in their absence and supporting them and their families in every way we can. With the holistic integration of Amobee, which emphasize bringing its valuable employees, customers and technology into our company, and the initial revamp to Nexxen behind us. In Q3 we focus primarily on scaling mid to long-term revenue…

Thank you, Ofer. Today, I will review the highlights and key financial and operational drivers of our performance over the three and nine months ended September 30, 2023, and we'll also discuss our forward-looking guidance. As a reminder, results for the three and nine months ended September 30, 2023, reflect the combined performance of Tremor International and Amobee, while results for the three and nine months ended September 30, 2022, include Amobee contribution only from September 12, 2022 through September 30, 2022. For the three months ended September 30, 2023, we generated contribution ex-TAC of $76.6 million, reflecting 18% growth from $64.9 million in Q3 2022. For the nine months ended September 30, 2023, we generated contribution ex-TAC of $223.7 million, reflecting an increase of 8%, compared to $206.7 million in the same prior year period. Contribution ex-TAC growth over both periods was driven largely by a significant increase in programmatic revenue. We experienced strength in shopping and food verticals during Q3 2023, as well as in mobile desktop display and PMPs. Conversely, softness was observed within our CPG vertical and within CTV, as challenging market conditions drove reduced advertising demand and softness in managed service, particularly in July, causing customers to temporarily shift spending from CPG into lower cost options such as desktop and mobile as well as display. While we believe conditions in the CTV advertising market have stabilized, compared to July, We expect ongoing market uncertainty and managed service toughness to constrain advertising badges and drive customers to continue to more so leverage our lower cost solution through at least the end of 2023. Programmatic revenue for the three months ended September 30, 2023 was $74.2 million, which reflected a significant 23% increase, compared to $60.1 million in Q3 2022. For the nine months ended September 30,…

Thank you, Sagi. With Amobee’s team members and technology successfully integrated into our business, we believe we are developed and now both one of the most comprehensive TV and video focused platforms in the market, differentiated by unmatched data power solution that enable better outcomes and greater efficiency for customers across the entire advertising value chain. The integration of Amobee further accelerated our product innovation leadership role and enable us to launch thought after and desperately needed solutions that we believe will deepen our relationship with customers, attract new customers and further position us as a trusted industry partner and leaders in the combined future CTV and TV advertising ecosystem. Moving forward, the core focus will now be to build on the initial success and momentum generated through our rebrand by ensuring our marketing and sales efforts strongly complement and best emphasize the strength of our platform. We have confidence we made important steps on this front that will better position us for 2024 and beyond. We believe the combination of our rebrand alongside our strengthened sales and marketing organization positions us much more strongly to showcase how our current and future customers can best leverage one data-fueled platform to meet and exceed their advertising goals in KPI. We also believe we will be able to achieve outside future share gains, grow contribution aspect and improve profitability over time, particularly as market condition improved and as customers continue to embrace and grow spending within our data-driven suite of programmatic CTV and video solutions. We have many reasons to be excited and look forward to continuing to provide best-in-class service and solution to our customers and partners. I would like to thank all of our employees and shareholders for their continued support, and operator we will now take questions.

Thank you. [Operator Instructions] Our first question comes from Matt Swanson with RBC Capital Markets. Please go ahead.

Yes, thank you for taking the questions. And I of course, would like to extend my thoughts and prayers to you and your employees impacted by the war in Israel. But maybe starting with you, Sagi, and kind of where you left off on the comments, looking at the guidance, thinking about the macro environment you've seen in October and then November to-date, can you just kind of help us think about what your guidance implies for the end of November and December? And basically, like, are you thinking of the macro getting better, stabilizing, kind of like you've seen, or getting worse within that context?

Thank you, Matt. Yes, I think as I said, we are seeing like in October, November, December is already coming. We are seeing stabilization in the macro. Of course, it's not as it's been before the macro challenges and headwinds hit all of us. I think the guidance that we give is cautious and conservative. We have a lot of different deals that are being handled as we are talking. But since we are not sure everything is going to hit our revenues by the end of the year, and maybe some will move into 2024, we're trying to be cautious as we can.

Yeah, that's helpful. And then maybe this is for Ofer and Sagi. You know, the strategic gains we've been talking about, especially the cross-platform planner, and then Nexxen Discovery sounds exciting, and seeing some more traction from the APR data, it's obviously getting offset a little bit by the macro currently. So could you just maybe give us a little more color on the CTV market specifically about what's giving you confidence that you are making those strategic gains, even though the macro is kind of impacting some of the top line results from that?

Of course, thank you Matt and thank you also for your support. When we are looking at the CTV market in general, we are in this business for only in already for five years and we invested two years ago in VIDAA in order to create the ACR. Now it's operational in the U.S. and also in U.K. Next quarter, we are going to push it also to Australia. And then we will probably announce more markets that we are going to launch our ACR solution. And I think this is like a, of course, all our initiative, including the cross-platform, is being shadowed a little bit by the macroeconomic situation, because people are spending less on CTV, which is more expensive format as Sagi indicated, people are moving more of their attention to more performance-oriented formats like display, mobile, and so on. But in general, when you look at the ecosystem, and we have some luck that we are the last that are basically reporting, so we can hear the rest of the peers talking about it. But many people spoke about the conversion between linear and digital CTV, basically. And we are -- I think, the most ready around that, why? Because basically, through the acquisition of Amobee that we made a year ago, a little bit more than a year ago, we basically acquired the ideology that there's like a very strong linear planning tools, one of a kind in the industry. And we added to that the cross-platform solution that we basically launched in April was already integrated and used by a few of the biggest broadcasters. And now we are moving the attention also to the demand side for that. And I think that linear advertisers in general, they understand now that in order to…

Yes, that was great. Thank you.

Thank you.

Our next question comes from Laura Martin with Needham. Please go ahead.

Hi, can you hear me? Okay, you guys always.

Always. Hi, Laura.

Great. Hi, there. Okay, so I want to focus on partnerships. You brought up partnerships a couple of times, Ofer. But I noticed you're petitioning the Israeli courts to buy in another 20 million of shares, and you just finished buying 95 million of shares. So typically, partnerships bring money with them, which obviously you don't need or you wouldn't be buying shares. So can you talk about what you're looking for from your partnerships you're talking about?

So I don't think that we are talking about partnership that's supposed to bring us the money. We are looking at partnership that can give us capabilities or reach to market and stuff like that. We are, of course, cash generated company and we have cash -- net cash of close to $100 million. So we are not looking for partnerships that will give us, we are not looking for investment, we are generating cash and we are cash positive. We are buying shares because for two reasons. First of all, we already fulfill a lot of our ambitions around acquisitions in the past few years. The last acquisition was last year that we acquired Amobee, a massive company with a lot of capabilities that are added into our stack now. And all the companies basically integrated into our company was a huge effort. And it came after additional three acquisitions that we've done in the last four years. So we are not looking now for additional acquisition in the near future in general. And when you have cash like we do and we generate cash, we think that according to the share price that we are witnessing now, it makes sense for us to repurchase our shares in order to basically support the shareholders and potential investors that will come to the company. And this is the best usage of cash as you see that right now.

Yes, it's the best investment we are seeing outside now.

Yes.

Okay, but the capabilities you're looking for in partnerships are more new products or add-on platforms or like what you did with VIDAA?

So it's typically, we have, of course, the partnership is a wide definition, but we have, for example, the partnership with VEDDA gave us the ACR data, gave us media on CTV, giving us a lot of access to data that we need in several different markets and so on. But we have a lot of partnerships that we are holding with measurement companies, we target with data companies, with media companies. So it's a very wide definition. Usually, we are doing that in order to create many integration with partnerships that are adding on complementary to our capability or they can use our technology in order to gain their targets, but that's in general. And we always look for good partners that can grow together in our business.

Okay. Super helpful. And then can you -- I think Google is finally going to deprecate cookies after pushing it off 4 times. Can you remind us how much of your ad targeting comes from cookies and how you guys are positioned over 2021 as Google finally starts deprecating cookies started in Q1 of '24.

Okay. So we have, of course, our graph. We have, of course, the fact that we are end-to-end solution is reducing the dependency on the usage of cookies, of course, the fact that we are heavy on CTV also reduced this equity dependency. So I think that in general, we are getting ready for that. And I think that in general, the fact that we are an end-to-end solution will give us even advantage if it will happen because of the fact that we are sitting on both sides and we can basically create the match even without the cookie in most cases. So I think that we are in a very good position on that front.

Okay. And your comment followed by Matt's question earlier, you're flying for a dramatic deceleration in Q4, and we're already sitting here six weeks into the quarter. And your ex-TAC revenue has been accelerating in every quarter to date, like really nice growth in the third quarter. So congratulations on that. But you're showing negative year-over-year growth in your guidance for Q4. So I just wanted to push on that a little bit and find out what you've seen in the first six weeks of this quarter that is so decelerated like what verticals specifically have so decelerated from that wonderful Q3, 18% revenue growth rate?

So I think that, Laura, again, the fact that we are coming great with our growth is helping us to look at other people and what they are seeing and thinking. I think that there is a lot of instability in the market. So people are feeling that – the advertisers are more cautious about their spending. Sometimes they are creating orders and then delaying them or minimizing them and so on. So I think that the macro is still affecting us, and we want to be on the conservative side of that matter. The second thing is we have a lot of partnerships and agreements that we are doing with companies that’s supposed to use our services but we feel that we are taking the opportunity, we are taking into account the possibility that it will flip into Q1 instead of happening this quarter. So we are trying to be cautious around our guidance. But I think that the major thing is the macroeconomic that is a little bit better than the beginning or the middle of the year, but it’s still not great in Q4. And you see the accident of the advertisers and their cautiousness about investing the money right now in advertising the equity.

Okay. Thank you very much.

Thank you.

Our next question comes from Andrew Marok with Raymond James. Please go ahead.

Great. Thanks for taking my questions. I wanted to dig in a little bit on your recent leadership hires in the sales and marketing organization. Just any color you can provide there on any potential changes in strategy, how your incoming leadership tends to think about the overall sales and marketing strategy, if that differs from what you have now?

Of course. Thank you for this question. So I will start with marketing, if you don't mind. Well, when we are looking at what we did in the past year or so, we basically took a very big company like Amobee, and we integrated it into Tremor. Just to give you a little bit of scale, Amobee was 1.5 times in size than Tremor in general, with a lot of technology that was developed and acquired over like 10 years or so. So when we connected everything together, we took the best of every solution, and we sunset some of our solutions we sold. And we had a lot of brands that we were using, like we were using Tremor, Unruly, and Amobee and so on. So we basically rebranded, but it's not enough to rebrand. You need to do a lot of work about your offering in the market to make it more simple to the salespeople and to the market to understand what you are offering. So we look for a CMO that will have a very strong product marketing experience that will be able to help us to connect the doors, explain it in a meaningful manner to the market. So it will make the story simple and also for the sales people to compare and understand it very easier and to be offering without confusing the clients or using so many names like we used before. So that's a massive change that we've done. The rebrands hiring this CMO ban that is standing with a lot of experience in product marketing because I think that the rest of the marketing we are doing very well. But on the product and sales enablement side, we wanted to bring someone that can take us to the next level.…

Got it. Thank you for that. And then one more on the macro, I'm afraid. So in terms of customers seeking kind of lower-priced formats, like one thing that we've heard kind of across the space this quarter is that CPMs on non-CTV video are coming down. And so if there is a flight to like discounted inventory or lower-priced inventory, I may have expected non-CTV video to be a little bit stronger for you guys. Is there anything else at play there? Or is it really just customers are seeking the lowest CPMs on an absolute basis, which is driving more strength in mobile and desktop? Thank you.

I think it's a combination of two things. First of all, it’s what you said is to buy cheaper CPM basically. But the second thing is also performance metrics. And I think that still, we spoke about it in several of our earnings calls in the past that we believe that CTV will become a performance also platform-oriented format, but it will take some time. So I think that right now, when people are looking for performance in this macroeconomic situation, they are basically looking for mostly for a different solution and different formats than CTV, which is they have more track record of proving that generous performance, which is display, OLV, mobile and so on and less TV. But we feel that, of course, when the macroeconomics will improve again, I think that people will shift again their attention to CTV, that’s one. And I think that this is important also to remember that some of the key verticals that we’re doing with CTV like automotive, entertainment and so on, we are not in great shape in the last six months, some of them with strikes and slowdown. So we feel that it’s also influenced a little bit the market of the CTV in general, even for the people that are willing to pay ICTN in order to reach their target audiences.

Thank you.

Thank you.

Our next question comes from Andrew Boone with JMP Securities. Please go ahead.

Good morning and thanks for taking my question. I'd also like to just say, hey, we're thinking about you guys as the Israel Conflict continues to progress. Going back to kind of Laura's question on thinking through the 4Q '23 guide. The run rate now implies something that's fairly negative into 2024. Is there any way that you can help us understand organic growth maybe for 3Q or any thoughts on 2024 as we begin to really fine-tune our estimates for next year?

Yes, Andrew. Thanks. So we are not guiding the market regarding like giving a four month guidance regarding 2024. I think that when -- as Ofer mentioned, we are seeing all the opportunities that are laying in front of us, the different capabilities, the different products that we can enable different players within the industry and the deals that we are now trying to facilitate through Q4 and maybe Q1. I think that to say that we will be in the lower double-digit growth is something that we can stand behind.

That's very helpful. And then Sagi, another one for you. In your prepared comments, you said Tremor will work towards further optimizing our cost structure. Can you talk about what's left in the business to optimize where maybe areas that there can be additional efficiencies runup?

Yes. I think we did a lot during 2023, sorry, and we optimized our cost structure all over the year. We are doing it from time to time on an ongoing basis regardless of any acquisition or any restructuring. I think that we are seeing some of the products that we inherit through the Amobee acquisition and some other acquisitions that we can optimize the structure of the R&D teams over there because now we are more familiar with the tools and we tweak them so we can be more efficient over there. Of course, some of it is part of implementing different AI solutions in order to make our work better, faster, and cheaper. Other than that, I think sales and marketing, we will continue to invest in. The other supporting departments. We are optimizing as we are moving. So most of the optimization will come from R&D probably and taking our resources and taking more out of that with probably lower staff.

And then the last one for me is, Ofer historically, Tremor Nexxen has been kind of built by M&A. Amobee is now fully integrated. How do you think about M&A going forward as you guys have kind of a new streamlined run rate business?

So we just finished the integration of Amobee. I think that we mentioned it in the previous calls that was also slow us down is because we needed to work very hard on the integration. I think that we need to give the company some space now to get together like we do and to start performing on the assets that we got. When we are looking at our technological assets, I think that we have everything that we need, we can always enhance something, but I think that we have everything that we need. We have a very strong DSP that is basically a result of a lot of DSPs that we integrated into one technology, and we did it best-of-breed technology around the DSP. We have a DMP, we have an SSP. We have a server for CTV. We have planning tools. We have discovery tools. We have all the technology that we can really dream around. I think that if you will make an additional acquisition is always we are looking at, we call it, for capabilities, for clients or for additional territories or geographies that we want to include in our growth. But I think that in the -- as we say in the near future, it's less of an issue. And I think that like we indicated, the best investment that we see now is to repurchase, for now, our shares whenever we can in order to support our growth and the value return for our shareholders.

Thank you.

Thank you.

Our next question comes from Eric Martinuzzi with Lake Street. Please go ahead.

I wanted to better understand the Q4 guide. Your contribution ex-TAC is based on the outlook, you expect it to be up about 15% quarter-on-quarter. Wondering how you would compare that with normal seasonality?

Yes. So I think the numbers that you extracted from our guidance, of course, are the right numbers. I think that as we said, we had a lot of deals going on in Q4, which all of us understand macro or not macro, are supposed to be the strongest quarter within the year and seasonality is eating over there. I think that we wanted or we assume that we are going to do better in Q4, but then because we have now a lot of new revenue stream, which are, as Ofer mentioned, the sales cycles over there are much longer and it needs to take more time for us to educate the clients about exactly what we are buying and how we're operating it. So some of the deals that we assume that will happen in Q4 will go and sign in Q1. And again, I think, as Ofer mentioned as well, the macro is putting a little bit of share over year. Companies does not want to sign a new contract for a new product tool in Q4, and we prefer to do it at the beginning of a new year. So this is like the color behind why we are growing 15%. And of course, Q4 is the strongest.

Okay. And then a layer deeper on CTV. CTV revenue declined from Q2 to Q3, essentially went from in round numbers, $25 million in Q2 to $20 million in Q3. What is implied in the Q4 outlook, the CTV increase? And if so, what's the expectation?

I think that there are a few reason for pressure on the CTV as we indicated, I think that if even started this quarter, it started a little bit earlier. We are talking about macroeconomics. So as we mentioned, people are looking for lower CPM pressure on CPM. So even if they are buying, they are buying on lower CPM, and they are basically saving some of their costs. So it's less revenues for companies like us in the AdTech. The second thing is also verticals that in the last year that were like very strong on CTV like entertainment, and automotive suffered from internal issue for them of the verticals that basically affected also the they're buying metrics and affected the size of the industry. And as we say, a shifting of budget basically from CTV to performance. So even if people are willing to buy CTV and because of the macroeconomic and because of them being cautious, they preferred to go some of them, the newcomers to things that they are more familiar with, and they are moving their spend to areas like display, mobile and OLV, which is online video instead of CPD, which is much more decorative, expensive, but it's, let's say, less performance-driven at this stage. So I think that all of that together showing weakness in CTV like we see across the board, not just with us, but I think that we have the tools, as I mentioned, like the ACR that we are now expanding into new territories with success and the cross platform that we are initiated to the publisher side, and we are moving it now to the demand side next year. These will be elements that will help us to grow the demand of CTV and to offer like something unique in the market that is able to capture the attention of the advertisers and serve their needs.

But do you expect it to grow sequentially?

We expect it to grow, but we don't know we are -- we believe that in general, if the macroeconomic will improve, we will see a much bigger opportunity for us. But if the macroeconomic will keep pushing the market down, it will be more limited. But in general, we believe that it will, of course, will keep going.

Thank you.

Thank you.

Our last question comes from Mark Kelley with Stifel. Please go ahead.

Great. Thank you. Two quick ones. Sorry to go back to the macro. But I guess how would you frame the visibility into next year at this point? I know, obviously, last year, budgets really didn't come to fruition or people didn't really have visibility until February or March. Is it better this year? I guess that's the first thing. And then the second thing, just back on CTV, with more inventory coming online, CPMs and CTV have come down as well. So I guess, what's the bigger factor in your eyes in terms of the cautiousness in CTV? Is it the absolute CPM of the inventory that is out there? Or is it the services component of CTV and folks are just not willing to pay the markup for your services? I guess how would you kind of parse those two dynamics out? Thank you.

Okay. I will start with the focus thing that you mentioned about next year. Usually only in the middle of Q4, you start seeing -- we see that already earlier, but the push for next year is starting in the second half of Q4. Basically, people are shifting gears and basically starting to look at the next year, 2024. It's too early to say, of course, as we mentioned last year only in February or March, people were able to give like a better picture about the year. I think that especially when you have like a situation and macroeconomic situation like we are experiencing now is very hard to basically predict now what will happen in the end of 2024. But in general, we have like two streams of revenue. One of them, which is more infrastructure and selling platforms and so on that we can we see the interest. We have new platforms that we are sharing with the market that we are marketing like the ACR, like the cross platform, like the discovery tools that we see that -- as we said, that seems to happen in the next six to maybe slipping a little bit into Q1, but will serve us next year. And the second thing is basically booking of business that is coming, and we believe that in the next six weeks, we will start seeing like an acceleration of that, and we will be able to know more in the areas of time that you mentioned, which is the mid of Q1, usually you could get like a better feeling on the planning, on the fiber budget of advertisers for the full next year. So I think it’s too early now, but we are – since we have much more products, much more…

Understood. Thanks very much.

Thank you.

There are no further questions at this time. I will now turn the call back to Ofer for any closing remarks.

Thank you. I have a short summary that I would like to share with you today. Basically, people are asking us about the situation in Israel all the time and how we are affected. It's important to me to say that, well, every human being should be affected when terrorist organization enter into a civilian city of villages, massacring, torturing, kidnapping kids, women, older people, and full families, and all the civilized worlds should be affected by that, for sure. We are doing our best to keep our duties and aligned. And I want to use this opportunity to thank our employees in Israel and all over the world for the extra effort. I hope that the people that were kidnapped will be returning soon, the wounded will recover, and I give my condolences to the families that lost their loved ones I want to make a few comments about what we discussed about the macro. So we all heard about from our peers also, that there is a pressure from macroeconomics on the performance of the advertising industry for sure. We believe that after the massive acquisition of Amobee, we build our teams and we are ready for the future. And hopefully, with better economy that will encourage growth, you will see the results of what we created and built in the last few years. About CTV, I think that there are two points that I would like to indicate here. First of all, linear to CTV. So when we heard all the discussions and conversations that are happening in the industry lately about this conversion between linear and CTV. I think that, as I mentioned also in this call, we got the technology and which is according to what we see is the best in the market now…

This concludes today's conference call. Thank you for joining us. You may now disconnect.