Hello, and thank you for your patience, and welcome to the ironSource Limited Second Quarter Earnings Conference Call. My name is Emily, and I will be coordinating the call today. I would now like to hand the call over to our host, Daniel Amir, VP of Investor Relations at ironSource, to begin. Daniel, please go ahead.

Good morning, everyone, and welcome to ironSource's second quarter fiscal 2021 earnings conference call. My name is Daniel Amir, VP of Investor Relations. With me today, we have Tomer Bar-Zeev, Chief Executive Officer; Assaf 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 web page at investors.is.com. Elements of this presentation as well as statements we may make on this call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and these statements are based on current expectations and assumptions. Please consider the risk factors included in our public filings with the SEC that could cause our actual results to differ materially from these forward-looking statements. For more detailed information, please see disclaimers in the earnings materials relating to forward-looking statements that involve risks, uncertainties and assumptions. For a discussion of some of these risks, uncertainties and assumptions, please refer to ironSource's SEC reports. Other than as required by law, we assume no obligation and do not intend to update any such forward-looking statements. We also note that the financial information discussed 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 comparable GAAP information other than with respect to adjusted EBITDA guidance for which we have not provided a reconciliation because certain items that impact adjusted EBITDA are out of the company's control and/or cannot be reasonably predicted. And accordingly, a reconciliation is not available without unreasonable effort. Please refer to the tables and slide presentation accompanying today's earnings release for those reconciliations. The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. With that, I'd like to turn it over to Tomer.

Thank you, Daniel. Hi, everyone, and thank you for joining us today for our Q2 earnings call, which is our first as a public company listed on the New York Stock Exchange. As some of you may know, we began this new chapter after successfully completing our business combination with Thoma Bravo Advantage on June 28 of this year, a partnership which we believe will be important to our growth as a public company moving forward. As part of the merger, we raised a total of $2.15 billion in cash profit, including an oversubscribed PIPE of $1.3 billion. With the money raised, we are well positioned to continue solidifying our market leadership as the most comprehensive business platform for the 2 core constituents of the App Economy. Without those platform, app developers focus on creating great apps and sell to operators and OEMs focus on offering competing user experiences. In the second quarter, we achieved record results with total revenues of $135 million, up 83% year-over-year. This was primarily driven by enhancements made to our platform and an increase in the use of our platform by both existing and new customers. For the second quarter, adjusted EBITDA was $46 million, up from $21 million in the same quarter last year, consistent with our long history of providing profitable revenue growth while benefiting from operating leverage. I'm also happy to report that our dollar-based net expansion rate for the quarter was a record 181%. We see the testament to the comprehensiveness of our platform and the value it provides to our customer businesses. Since this is our first call as a public company, before diving into the results, I would like to spend a few minutes providing an overview of ironSource, the platform we built and the market we operate in,…

Thank you, Tomer. We delivered record results for the second quarter with strong top line growth and high profitability, consistent with our robust financial profile. Before sharing detailed results, I want to share a quick overview on our business model. Our business model is aligned with the success of our customers. This is a very important element of our strategy. When we think about new products and solutions, we always try to find the correlation between our success and that of our customers. Today, our revenue consists of three main drivers: revenue share, usage base and in-app monetization. A majority of our revenue is currently generated under the revenue share model where we retain a share of the revenue our customers generate using our platform. The reminder consist of usage base fee and in-app monetization revenue. Our ability to increase our revenue is highly aligned with our customers' success. As our customers see greater benefit from our platform, they increase their usage and adopt additional solutions that, in turn, further accelerate the growth. In many cases, customers adopt our solutions at an early stage of their business development and scale their usage as they grow. Our customers range from large global enterprises to small indie developer. As of the end of the second quarter, we had over 4,000 customers using our platform. As Tomer mentioned, Q2 2021 was a record quarter, both top line and bottom line. We generated $135 million in revenue compared to $74 million in Q2 2020, representing year-over-year growth of 83%. This growth was fueled primarily by the expansion of Sonic and our solution to it within our platform. Our revenue is driven mainly by our large customers. We define large as those who generate over $100,000 in the last trailing 12 months. This group grew…

[Operator Instructions] Our first question comes from Colin Sebastian from Robert Baird. Colin, your line is now open.

Congratulations on the merger, the IPO and the nice quarter. First off, Tomer, you talked about expanding the platform outside of gaming and onto devices beyond mobile. So maybe from a high level, if you could expand a bit on those opportunities and the go-to-market strategy. And then secondly, maybe for Assaf. With respect to IDFA, you mentioned the competitive advantages that ironSource has in this environment. Could you maybe go through that in more detail as both Apple and Google are making privacy a de facto standard now?

Colin, this is Tomer. Nice to talk to you again. So look, we built ironSource platform is a platform for the App Economy. We've always stated that, and this is why we build it in a way that it, by definition, provides a service and a solution for the two main constituents of the App Economy, app developers and telecom operators. It is true that we see in our Sonic solutions suite, we're best known for solutions for game developers. But already today, even in the Sonic solutions suite, around 10% or so of our revenues come from non-game developers. And the vast majority of what we do in Aura today is for non-game developers. And we expect that to grow both in Sonic and in Aura. And we remain very focused on continue building the platform, so the App Economy across all the different constituents, across all different type of developers and telecom operators. Yes, of course, we will grow -- also in Aura, we will grow beyond mobile devices. Already today, we have a solution for smart TVs. And we have new developments, which we'll be happy to present to you in the next quarters. What was -- Colin, if you can please remind us what was the second question.

Yes. With respect to the IDFA impact, I think Assaf mentioned the competitive advantage, the ironSource has in this environment. So just given that Apple and Google are moving in this direction with privacy across both operating systems, what about the ironSource platform makes you competitively advantaged in that environment?

Sure. Look, so I think a lot have been said about IDFA in the last few months. And with a few months already into the rollout of IDFA, I think we have a much better view of the current impact and also, I think, a fair estimate on how it will look going forward. And I would say that when we last talked, we said that the ironSource platform is probably best geared to cope with the IDFA changes, among other reasons, because it was originally built to provide contextual -- to analyze contextual data. So by definition, the platform was built with a lot of -- taking into account a lot of privacy issues. So we thought that we would potentially be one of the beneficence of the IDFA changes. That's not to say that we still might see some short-term effect from IDFA in the very short term, but we remain very positive about our estimation that long-term IDFA is a net-net benefit for ironSource because of the way we deal with contextual data and the way the platform has built from the get-go.

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

Great. Just wanted to drill down on margins a little bit. I know investments in publishing had been weighing on margins and then seeing the increase of the guide. So are you spending less investment necessary on publishing going forward? Are revenues just coming in better? Just trying to think through the substantial increase to EBITDA margins guide this year versus the prior guide. And then is the 33% to 35%, the right way to think about a baseline going forward to grow on top of if we're thinking about '22 and beyond. And I have a follow-up as well.

Thank you, Bernie. So I think that, first of all, our EBITDA margins gain better than we expected at the beginning, first of all, because of beating our revenue guidance. In general, it's very important to understand that we prioritize growth and investment, but we believe in profitability and healthy margins. From time to time, we will make investments at the expense of the margins in order to strengthen our position in the market and drive growth. In 2020, we did exactly this by lowering our margins from 41% in 2019 to 31% in 2020. For '21, as you mentioned, we expected our EBITDA margins to be around 34% at midpoint. Over the long run, we anticipate to reach 40% plus EBITDA margins. To summarize, we're not trying to maximize EBITDA at this point, and we prioritize growth. But still, our G&A from day one was to be a profitable company with healthy margins.

Understood. Just wanted to see -- I didn't see a breakout between Sonic versus Aura in the quarter. Just wondering if you could comment on the performance of each.

Yes. Bernie, this is Tomer. So Arnon, you can, of course, say a few words about Aura if you want. So both Sonic and Aura have been growing very fast. Aura, the breakdown is -- Aura is around 12%, 13% of the total revenues. Aura has been growing at around 90% year-over-year and Sonic at around 81%. Arnon, do you want to say a few words about Aura?

Sure. I'm one of the founders, and I lead the Aura part of our platform. Yes, like Tomer said, the growth has been 90%, 91%. Again, the growth in Aura is really only capped by how fast telcos can adopt our various solutions. As you know, telcos move a bit slower than developers. And we foresee significant growth for Aura in the coming quarters. It's important to note that Aura is a really unique value proposition for telcos. So I think we're the only platform that provides an end-to-end solution for telcos to engage with their users throughout the life cycle of the device, again, from the moment the user opens that device until the moment that user is ready to trade that device in. So we're really helping telcos promote content, promote services and really participate effectively in the App Economy. And another value from our solution for telcos is that we're really helping them also with digital transformation. We're really helping telcos do more outside of the store and the on device, whether it's trade-in or device protection and other services that we provide them. And of course, there is more in development that we will expose in future quarters. Thank you.

Our next question comes from Bhavan Suri from William Blair. Your line is now open.

This is Dylan on for Bhavan. Congrats on an excellent quarter here. I guess, first, I wanted to kind of touch on the data set around kind of the, I think, the maybe most recent number, kind of 2.5 billion monthly active users. And as we think about kind of maybe traction with apps and gaming, but also kind of outside of gaming, which is maybe historically not a market that's leverage kind of in-app advertising in the past. But as we think about kind of the momentum here, you mentioned 10% of revenues. What are kind of some of the key drivers of this opportunity? And Is there anything that could limit the value from a targeting perspective here as you look to drive further adoption across kind of both the gaming and non-gaming opportunity?

Sure. So I'll start. And Omer, please add if needed. So again, Dylan, as I previously said, the platform is built for the App Economy. We've built a solution to serve both game developers and other type of app developers and telcos and other type of OEM providers. And I think what we've shown is that if you use the full range of solutions within our platform, the full solution suite, what you will see is a flywheel that will help you increase your business because we will help you with everything, starting from user acquisition to monetization, to analytics, creative management and on and on. These are all elements that every app developer out there needs. I think the case study was proven with game developers. And now we see other type of app developers, other type of verticals adopting some of the know-how, some of the techniques, some of what made game developers become so strong and that segment growing so fast. And we're adapting the platform to also understand the needs of other app developers. Already today, a substantial revenue number is being generated by these activities, and we expect them to grow. And we've taken all the know-how, all the knowledge, all the technology that we have initially built to serve those game developers. And now it's being extended to other verticals, and we see great initial results. And we plan to go very strongly after those verticals. And the initial reaction that we see from talking to our customers are very, very positive. So I'm very proud and I feel great with the current results. And I do very much look forward to expanding and growing those verticals within the total business that ironSource is creating in the App Economy. But Omer, if you want to add to that.

Yes. Maybe just a quick note. My name is Omer, one of the founders and the CRO. Yes, so like Tomer said, our platform today without any -- before any additional changes already provide great value for web developers, just like for game developers, enabling them to turn their app into great businesses. So it's mainly -- the growth that we've seen, which is already like Tomer said, around 10% of our revenues in Sonic, it's mainly increasing. It's mainly around market education and sales, and you can provide very high value with the existing platform offering. And of course, we also plan to add additional offering in the future, but already it's a very, very exciting opportunity.

And then maybe just kind of dig in as well. Could you kind of give us a sense of what the typical kind of customer adoption path looks like seeing kind of strength in that enterprise customer kind of cohort, but giving a sense of kind of where the initial land is, kind of what's the path for expansion, clearly generating a lot of value for these app developers. But any kind of additional color you could give us on kind of what that broader adoption kind of path looks like across the platform.

Sure. Tomer, shall I start?

Sure, sure.

Yes. So it really depends on the type of customer, right? In the game -- in the mobile games ecosystem, we have a very strong brand. So the majority of the game developers will come to us, right? They use our platform, whether independently or if they need our support. But they'll mainly come to us and we have companies that, of course, with marketing and brand awareness, but it less requires day to-day-sales activity. When it's very big enterprise customers, it will be a combination, mainly around onboarding. By the way, as a result of that, our customer growth teams are much bigger than our sales teams because of our strong positioning in the market. And the fact that we are a go-to platform for game developers, they need to work with us in order to maximize their potential. When you're looking at newer initiatives like EPS, which is one of our biggest growth trajectories right now, that's where we are using more active sales and market education. And again, the idea is like everything that we do is to -- our customers are starting to use our platform in one of the products. It can change to the specific needs of any one of them. And then also like you'll see in our data, they really grow and expand to using more and all of our products once they understand the power of the platform, right? Hence, the growth expansion rate and the numbers that we've discussed.

Our next question comes from Mike Ng from Goldman Sachs. Your line is now open.

Great. Congratulations on the first quarter as a public company. I just have two. First, can you talk a little bit more about the strong dollar-based net expansion rate in the quarter? I know you mentioned some new products and solutions that helped drive that number. Are you seeing anything in terms of share gains because of IDFA or any improved win rates that are helping that number? And I have a good follow up.

Thank you, Mike. Tomer, I will start and maybe you can add, if needed. In the past two quarters, our dollar-based net expansion has been exceptionally high with 176% in Q1 and 181% in Q2. This increase was driven by new products and solutions launched over the course of 2020 that drove significant growth. We achieved 95% growth in revenue in the last 12 months. View to H1 of this year, in the past 8 quarters, we averaged to 149% within dollar-based net expansion. We expect our dollar-based net expansion to remain very healthy going forward, though it may derive from quarter-to-quarter. We expect it to normalize at our historical levels over the course of 2021. Our platform approach and of land and expand, together with our business model, which is aligned with our customers and a very high gross retention rates of 99% in Q2 also in Q1 this year, are the drivers for the strong dollar-based net expansion rates.

And I was just wondering if you could talk a little bit about Sonic publishing. Obviously, Bridge Race and Join Clash, as you mentioned, are doing phenomenally well. Is there anything on the horizon in the Sonic publishing pipeline for the rest of the year that you're particularly excited about?

Sure, Mike. Omer, I'll take this and please at again, if needed. So we launched Supersonic, our publishing solution within the Sonic solutions suite with the aim, with the strategy to really address the long tail of the category and be able to serve smaller or very small indie developers because we fundamentally thought that if you -- as a game developer, if you focus on creating great content on creating a great app, a great game, you can rely on our platform. And by doing so, you can actually win the charts. And again, Join Clash and a few other examples, Bridge Race and a few other examples are a clear testament of that narrative. But the Supersonic publishing solution, we see it as power -- as one solution we see in our platform. Again, we are focusing on providing a full platform for the developers. And they usually start working with us with 1 solution, and they expand as a subset. They land and expand with our platform. Hence, the very high net dollar-based expansion rate, which is a testament to that, right? They would start working with us with 1 solution, expand. And while they do so, they grow their business. And again, as a derivative of that, we grow ours. And we feel very, very strong with our platform going forward. We see the pipeline on both Supersonic. But mostly on the rest of the platform, we see how that will continue growing, again, evidently as you can see from the current results and our ability to increase guidance for the next quarter and the rest of the year.

Our next question comes from Brent Thill from Jefferies. Brent, Please go ahead.

Maybe anything you could call out from an international perspective. Was there any particular customers that came into the platform that were interesting to note? Or was this pretty balanced from a geographic perspective in terms of where you saw the business flow?

Sure. So putting aside for a second, Samsung, which we announced our strategic partnership with them in Europe. And I will let -- this is more related to Aura. I would let Arnon address that separately. Overall, our platform is really very global. In general, the nature of the App Economy is really global. You can be, again, a Tier 1 gaming company in the U.S., and we -- our platform will help you, will serve you. And we will also serve very small indie developers that can be in many, many places globally across the globe, and the platform will serve you. So it's by nature, it's by nature, very global. I would say that the majority of the revenues are still coming from the U.S., but the number of customers and the companies and the developers who we serve is pretty global. But with that, Arnon, if you want to say a few words about the strategic partnership with Samsung in Europe.

Sure, So yes, we have a strategic exclusive partnership with Samsung in Europe, again, on open-market devices and separating that from devices sold by telcos. We're the exclusive provider for on-device engagement and monetization. And this is the partnership that we're going to see growing and continuing hopefully in the years to come. We also have some very interesting Tier 1 telcos that we have partnered with in Europe. Hopefully, I can announce them in the next quarter or two, which will drive, again, significant growth for our European activity.

And maybe if you could provide just a little more color about maybe what's been the most surprising thing to you from where you guys said that maybe we can't see through the numbers. Are there 1 or 2 higher-level themes or interesting customer behavior data points that you would point to that we can all see through the eyes of your financials?

So I don't think we can point to any surprise. I think we -- the results, as you've seen them, are -- the Q2 results and our increase in guidance for Q3 and the rest of the years -- the rest of the year are following our already strong results in Q1 and following that as increasing guidance for Q2 and the rest of the year. So this pretty much goes naturally as we expected and as we see the business. I would say that one element that we're very conscious about is how to best anticipate and to be able to adjust the model for potential IDFA changes, which I think we and the rest of the industry initially thought that we would see some effects in Q1, which really didn't happen, and then in Q2, which really didn't happen. And still, we are conscious and we're keeping monitoring potential, again, short-term effects. And those are budgeted already in the guidance that we're giving for Q3 and the rest of the year. But I would say, very consistent with our views and our expectations going forward. So I would say, luckily, no surprises so far.

Our next question comes from Martin Yang from Oppenheimer & Co. Martin, please go ahead.

First one, can you maybe highlight the particular new products that really contributed to the near-term momentum in the net expansion rate?

So Martin, so as I said, it's not necessarily a one product or two products that were new that drove the increase in the net dollar-based expansion rate. It's pretty much across the platform. And that's the whole thing. That's the whole point of how -- why we win, why we gain market share and why we grow. All the products are really connected. Because when one of our customers would use one of our products, they would typically expand to other products because it's truly helping them become a better business. So I cannot point out to one product. But Omer, maybe you want to say a few words about the in-app bidding and us completing that and how that comes to play and how that will help us increase going forward.

Yes, sure. So like Tomer said at the beginning, we've completed the shift into Sonic monetization solution into working almost completely through -- or the vast majority of our activities through in-app bidding, which gives our customers a lot of advantages both on the revenue that, that can generate. And as a result, our business model is revenue share. So of course -- and we are aligned with our partners. And also, on usability, right, on their ability to effectively manage all of their monetization and really automating anything that has been manual in the past. So whether it's additions like that, whether it's launching a new product in 2020, like our Sonic publishing product, whether it's the growth of our customers with us, right, the fact that it's a -- when we have a customer who are starting with us because of our strong flywheel, because of the fact that we improve monetization and then they grow with us, right, we enable them to accelerate their growth. And that's also a very important factor in our net dollar-based growth expansion rate. But all of these combined really embedded and got us into the numbers that you're seeing and the great success that we have with our customers.

My next question is on Sonic publishing. I'm just very curious that if you have the ability to bring an indie game to the global top charts, wouldn't other more established developers want the same thing for us? Maybe not, moving their establishment to your publishing platform, but maybe one day build a new game and then they will choose to work with you instead of they publish the games themselves.

Tomer, shall I start?

Omer, please.

Yes. So it's one of the core capabilities of our publishing product is the ability to predict based on a prototype, which means based on a game before it's completely ready to complete what is the business liability or what is the marketability potential of this prototype of this game to become a big business. And the way it works is that we have in -- primarily in the developers, right, submitting their prototypes in a completely automated way into our platform. And our platform in an automated way evaluate what is the business potential. And then once we identify that this prototype has the potential to become a very big game, then it moves into all of the growth part and the monetization part, and we maximize the scale. So in essence, it's really something that helps the overall democratization of this ecosystem. And really, the examples that we showed you or other games work with us, we are seeing cases of really small developer companies who are managing to create this huge game or these new successes because of that identification to this content, right? When you connect to our platform, you can reach such scale level. The difference between that and what an enterprise game company will use is the automation. Our publishing product is basically our -- all of our solutions in our platform, but automated, right? Because indie developers, in many cases, they need this automation because they elect the in-house expertise. So the big customers are already using us for that, but they usually manage it themselves because they have their teams who are doing it and their own systems that they connect to ours. So that's the main difference.

Got it. The -- a follow-up on that, the predictability of the tool seems quite interesting. Is there any way to -- in the future to productize that and then make it available for the enterprise users, essentially for them to evaluate their own in-house for that and how successful they can be?

Yes. So first of all, it's a very -- you're right, the value is very high. It is today mainly used for indie developers to evaluate the product, but also, like you said, to some extent, for bigger game customers to evaluate the potential of their games when they're building it in-house, yes. So it provides value for both.

And we only have time for one more question today. And so our final question comes from Bhavin Shah from Deutsche Bank. Please go ahead.

Congrats on the strong performance in the quarter. Very impressive 181% net retention rates. Maybe can you just help us understand how much of that is driven by stronger engagement with your current customers' properties versus some of your customers adopting more solutions such as creative management, analytics and publishing?

So most of the growth in ironSource are coming from existing customers that constantly add, as I said, the -- a typical customer will start engaging with ironSource's platform across one or two of our solutions and would expand to adding more solutions and eventually using the full power of the platform, which drive the very strong dollar-based retention rates. That and, of course, the very strong 99% gross retention is what's driving the very strong results. And as I said, the nature of the platform is really driven by this flywheel effect that when you start using multiple -- when you start using one product and then add additional products, eventually, it will help you increase the total usage of the platform, making your business better, growing your business. And again, this is how we also benefit from that because of our rev share model with our customers.

And just a quick follow-up. On the Aura side of things, I know you talked about Samsung in Germany and India. How should we think about the time lines of those kind of flowing through the financial model?

Yes. This is Arnon. We announced specifically the partnership with Samsung in Germany. But again, we're working with Samsung exclusively across all of Europe, again, in open market. And it will -- again, I'm not sure I understand exactly what you mean regarding the contribution, but it's going to continue growing as we deploy new features and new parts of our solutions. And it will grow quarter-over-quarter, again, with Samsung and with additional telcos, Tier 1 telcos that we'll be announcing in Europe.

I would now like to hand back to Daniel for any closing comments.

Great. Thank you for all dialing in today. I want to thank everyone for joining the call. We look forward to connecting with you over the coming weeks, and hope everyone is continuing to stay safe and healthy during these times. Thank you.

Thank you, everyone, for joining us today. This now concludes today's conference call, and you may now all disconnect your lines.