Welcome to Tremor International's First Quarter 2022 Conference Call. At this time, participants are in a listen-only mode, with the 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 and will remain posted for the next 30 days. I will now hand it over to Billy Eckert, Senior Director of Investor Relations, for introductions and the reading of the Safe Harbor statement. Please go ahead.

Thank you, operator. Good morning, everyone. And welcome to Tremor International's first quarter ended March 31, 2022 earnings call. 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 website at investors.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 about our anticipated future financial results and including discussions about our revenue, margin, expenses and guidance for Q2 2022 and future business, anticipated benefits of Tremor's current and future potential strategic transactions, product launches and commercial partnerships, anticipated continued and accelerated future growth in both U.S. and international markets, expected strengthening of Tremor's products and reach, expected ability to continue repurchasing shares, investing in technology, sales and marketing and evaluating strategic opportunities to acquire companies, forward-looking industry and economic statements and outlooks, and 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. 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 registration statement on Form-20F. 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 of 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 giving an overview of our results and strategy, followed by our Chief Financial Officers, Sagi Niri, will review the highlights of our Q1, 2022 financials. We will then open the call up for questions. The first quarter followed an incredible 2021 for Tremor, which was the strongest year of growth and profitability in the company's history and represent what we believe to be best-in-class performance across the adtech industry. During the quarter, our end-to-end technology and data-driven business platform focused on CTV and video expanded and enhanced capabilities while continuing to generate strong customer's adoption. Despite challenging market condition that impacted advertiser spending such as supply chain constraints, inflation, rising interest rates, and the war in Ukraine that began on February 24th when we last announced earning, Tremor was able to achieve strong year-to-year revenue growth, free cash flow conversion, and profitability. We were also able to continue maintaining industry-leading adjusted EBITDA margin, which is critically important during period of economic uncertainty and serves as a testament to the strength and durability of our end-to-end business model. We will continue to maintain a strong focus on generating robust profitability as we believe these positions us well for the current environment, as well as future growth opportunities. Tremor operating model enabled to be opportunistic and continue investing in technology, sales and marketing to drive organic growth, continue researching shares, and as the means to engage in meaningful M&A in the market where valuation premiums have decreased to drive long-term shareholder value. Our ability to achieve this strong fundamentals and our success in Q1 was largely driven by the strategic path we intentionally chose in 2019 to become an end-to-end platform. Our belief in this model is stronger…

Thank you, Ofer. We were excited to see another record first quarter of revenue and profitability and strong business momentum and are pleased to see similar trends as we progress through the second quarter. Today, I will review highlights of our Q1, 2022 performance, as well as some of the key financial and operational drivers for the quarter. Tremor international achieved an outstanding quarter in Q1, with revenue and adjusted EBITDA propelled by continued impressive organic revenue growth and our efficient operating model. Q1, 2022 net revenue increased 13% to $71 million compared to $63 million in Q1, 2021. All of which was driven through strong organic growth. This growth was particularly impressive given the fact that Q1 tends to be the seasonally weakest quarter for FX and amidst well known macro pressure associated with supply chain constraints, inflation, and the ongoing war in Ukraine. CTV spends on our platform grew 21% in Q1, 2022 versus Q1, 2021. And we are well-positioned to continue this growth, as more business is increasingly being transacted through programmatic platforms and we expect performance budget to continue to move towards CTV and programmatic in the future. During the same period, our video net revenues grew 9% year-over-year. We also continue to generate very strong adjusted EBITDA margin, while investing in the critical areas of our business that can drive future growth. For Q1 2022, we generated adjusted EBITDA of $33.6 million, which reflected 22% growth from Q1, 2021, and adjusted EBITDA margin of 42% out of reported revenue and 47% out of net revenue. We believe our end-to-end platform gives us a competitive advantage versus point solution. We have developed a highly profitable business model with high efficiency around operating costs, leading to operating leverage and economies of scale. Tremor can achieve significant profitability…

Thank you, Sagi. Tremor was able to achieve great success during the first quarter, which we believe positions us well for the industry and Tremor specific catalysts expected in the second half of 2022. We continue to see evidence that our data-driven CTV and video focused end-to-end technology platform reflects the best model for advertisers, media partners, Tremor, and its shareholders. Our ability to generate significant cash and profitability fuels our ability to invest in technology, sales and marketing, to grow business organically, continue to evaluate M&A opportunities at rewarding valuation and continue buying back shares. Our conviction in the model is stronger than ever for these reasons, and because we are seeing others in the industry attempts to replicate a model that we have been capitalizing for years. We also continue to fulfill our promise to enhance and expand our CTV data and video capabilities, which now accounts for approximately 80% of our net revenue and 93% of our programmatic net revenues. We are excited to be in a position to start monetizing our Spearad acquisition, as well as our unique global ACR data partnership and media relationship with VIDAA. Over the seasonally stronger second half of 2022 for adtech, which we expect to be boosted by the U.S. midterm election cycle and the soccer world cup, which Hisense is an official sponsor of. We believe we have built a strong technology and resilient end-to-end business model to serve our customer holistic needs and that we are in the right industry at the right time, with the strong global partners. I have now been in the adtech industry for 25 years, and can honestly say that I'm truly excited for what the future can bring for Tremor International. Operator, we will now open the call for investors' questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] All right. And our first question is from Matt Swanson from RBC Capital Markets.

All right. Thank you guys so much for taking my question. Sagi, maybe picking up kind of where you left off, the durability of leverage in the model really shined in the quarter, being able to beat the adjusted EBITDA guidance despite those top line headwinds. And it seems like there's a similar dynamic and guidance for Q2. Could you talk a little bit more though about the back half of the year specifically, are there going to be incremental investments needed to be made around VIDAA, Spearad to drive that second half revenue? Or are those kind of the investments we're seeing you make right now?

Thanks Matt for the question. Yes. I think that our end-to-end business model is what's allowing us to have this magnificent profitability margins. As we said, I think, in Q4 earning, we are investing more in our R&D department, product and sales and marketing, of course, to keep the organic growth, although, the very challenging macro environment. Again, per your question, I think that Spearad is already fully integrated into Unruly and it became the ad server of VIDAA/Hisense. So, I think all the things you mentioned and Ofer went, will of course, enable us to have an amazing H2. Of course, everything is according to what the macro will throw at us.

Thank you. And then, Ofer, the one positive thing, maybe from a Q1 sentiment standpoint is just really a lot of good news around CTV, especially that Netflix news. So, thinking about this a couple of different ways, one, could you maybe talk about what the impact on the overall CTV environment is from this amount of inventory potentially being added to the market between Netflix and Disney, HBO, Max, and Apple? And then kind of more from a sentiment standpoint, what you think it says that the largest subscription streaming service feels the need to add ad support. And maybe what that says about the long-term health of ASBO.

For sure. Thank you, Matt, for the question. So, first of all, in previous conversation, we spoke about it. And I said that basically, when you look at this market of CTV, it will follow what's happened in display or desktop and after that in mobile, meaning the people are willing to pay with their time in order to see more it in order to get subscriptions or content for less or for free. And this will extend also, of course, to CTV. And we see this phenomena really happening now, also with this declaration and conversation above moving this big ASBO [ph] to become partly able. And I think that, it's a good statement because it show for us okay, that addressable market for us is growing. And I think that with our set of products, that is really the first line in products of targeting and first line of content targeting and targeting with ACR and our TV intelligence product and TV library and so on. I think that it'll give much more opportunities for advertisers to buy more media taking into account, that all this effort will open their market also to the open web basically. And I think that the amount of demand that is coming for CTV is really great and it can serve all these needs from all these companies that are basically joining this model. And I think that it will just increase the size of our business and will give us more opportunities in the market. So, we are really excited about it. And we feel that it's even came before we thought that it will come because we felt that it will maybe happen in the next two or three years. And now, I think that it will happen probably faster.

Right. Thank you.

And the last point is that it'll probably enhance the movement from linear to CTV, which is also welcome for us, because it basically serve our purpose and interest that more budgets will move to digital.

We'll go to our next question is from Mark Kelly from Stifel.

Great. Good morning. Thanks very much. I want to get your thoughts on just with the upfronts this week. Curious how much visibility you tend to get for the end of this year and the start of next year, after this week is over, or perhaps during the week? And second, just on CTV, obviously, you have some healthy growth in the first quarter. It did deaccelerate a bit from the fourth quarter, just would love to get the moving pieces as to what caused deceleration. Thank you.

Mark, just to ask to, can you shorten the question about what is the acceleration that you are asking about CTV, is what product or what is basically bringing this upside in this CTV front?

No, I guess, in Q1, the CTV growth was 21%. And in Q4, it was in the high-40s. Just curious to get the delta like -- still healthy growth, no matter how you slice it, but just would love to get a sense for why the deceleration from the Q4 exit rate.

Okay. So, first of all, CTV is our main focus already for a long time. And we -- most of -- as we also indicated by Sagi a lot of our basically product development and R&D efforts are of the front of the CTV because we believe that this is the future and is coming along with other things that we are basically developing all the time, which is the data. And I think that when you look at that, I think that we build like a very strong portfolio of product that basically serve our clients. And today, when they look for CTV for targeting so that coming to us, we have to remember that also the ACR data that will basically be available in a very meaningful manner from the second half of this year will basically support us and will differentiate us in the market. Because when we look at that in the open web, there is not anyone else that got -- basically got this amount and this size of a database, the data of ACR. The potential -- yesterday, occasionally there was a Comscore article that was talking about that in the U.S., there is 10% already of the CTV world that it belongs to using Hisense and Toshiba. Toshiba is part of Hisense basically, and this is our reachable market from ACR data now from next -- from in couple of months from now. And I think that we'll accelerate even more the -- it'll accelerate even more the potential and the growth of our CTV in the future, because we have like a very interesting unique offering in the market, which is ACR data, which is not part of the world gathering. Regarding the upfront in the CTV, we feel the growth and we see the potential and we keep booking, as we said, that are coming in the next thing in the -- already this quarter in the coming quarter. So, we feel confident that CTV is something that is growing. And there is a strange situation now that from one side we feel that booking and CTV setting and so on is growing. But there is a movement in the market that basically we taking into accounts and we are looking at the quarter, but we still believe that in the overall of the years, we'll be able to basically deliver growth, but we expected in the beginning of year.

All right. Thank you very much.

Our next question is from Michael Hill from finnCap.

Great. Thank you. Could I just check if there's any detail that you can give on the percent of your ad spend that's from autos? And also, if there's any sectors that say over 15% or 20% of the ad spend, or is it really quite a diverse mix of sectors that you have on the platform?

Again, I couldn't understand what…

Ofer, I will take that question.

Okay.

Michael, hey, thanks for the question. I think that out of CPG that is more than 10%, all of our verticals are less than that. So, we are quite diversified on that front. Automotive, of course, because of the supply chain constraint is a little bit lower than it was in the past. I think that today it's something around 3%. In the past, it was like 5% to 6%. And other than that, of course, we are seeing a growing trend within a travel and hospitality, like post-pandemic environment. So, I think that I answer your question.

Yeah. That's brilliant. Thanks very much.

Thank you.

Our next question is from Andrew Marok from Raymond James.

Hi. Thanks for taking my questions. I wanted to dig in a little bit on the programmatic versus non-programmatic revenue breakout. This was kind of the third consecutive quarter in a row of like 40%-plus growth in the performance side of the business. Was wondering any of the drivers behind that, and does that change your thinking in the strategic importance of that side of the business? And then, second, on the M&A outlook, with valuations coming in, I know that you spoke about it briefly on the prepared remarks. But has the -- coming in evaluations changed your thinking around what's available from an M&A perspective and what could be on the shopping list? Thank you.

I will start with an M&A. We are always looking for to grow in both ways, organically, and also to an M&A. And we have the cash, and we have the capabilities of doing that, not just cash, but also the knowledge and the experience so far to basically choose our companies that we want to acquire. And more importantly, how we integrate them fully into our business. Just to indicate that, for example, last year in October, we acquired Spearad and it's already fully integrated in the end of the quarter, the first quarter into a ruling. So, of course, I think that the market is moving to our direction, basically because last year, everybody looked at the public company's evaluations and asked for even more on the private side. And I think that now things are moving back to something more reasonable, that we will make sense for us to make an acquisition and to bring value to our shareholders from that. And we are looking and examining these opportunities all the time in parallel to the growth that we are generating on the organic growth. On the second question that you ask us about performance, so performance is growing because I think that the people in our performance team are doing a great job around that. And they're growing basically the offering and the business with the partners that we bring along and so on. And I think that we said it -- I said it, and we said it in the past that I feel that in the future also CTV will feel that there will be more and more connectivity to performance and it'll serve us for that. I think that our knowledge, our basically the ability to bring also DNA from performance behavior and marketing into the CTV can help us to open new channels that will be able to -- we will be able to benefit together with our partners around that, and is something that we are putting attention in the next 12 to 80 months.

Thank you.

Yes. And just to add -- just what Ofer said, I think we have like clients that are using both channels i.e. using the programmatic platform and the performance channel. And sometime we're putting their focus on the performance side and some quarter putting their effort on the programmatic front. So, it's nourishing both sides of the one arm that we have. And it's clearly helping us, because we're bringing clients on one end and then we are executing sometimes on the other end and vice versa.

Hope that we answered your question.

Definitely. Thank you.

And our next question is from Andrew Boone from JMP Securities.

Hi. Good morning. Thanks for taking my questions. The press release talked about an acceleration in the back half of 2022. Understood the contribution from political as well as the world cup, but is there anything you can help us to better understand those comments? And then secondly, as we think about just capital allocation, this may just kind of extend Andrew's last question. But as you think about capital allocation and the $75 million buyback, it looks like you guys executed $10 million in a quarter. Shares of trading is kind of three times EBITDA and just given the market downturn, how do you guys thinking about capital allocation in terms of M&A versus that, and then what's the possibility to accelerate the buyback and do something more meaningful, just getting more shares of trading? Thank you so much.

So, I will answer the question about M&A. I will give like more context. I agree with you that we are -- when you look at the deals and so on. And I think that we have cash and we have the ability to acquire, and it makes sense. We are trying to bring value to our shareholders in different manners, like by share buyback that Sagi can elaborate more about also extending and accelerating the reach around that. Basically, it's managed by [indiscernible] and when you are in a block deal, you cannot basically change it. But when it will -- when we have the chance to do that, we can consider that, of course. Regarding the M&A. We just mention it and I will manage -- mention it again. I think that we are in a great position now, because when you look at the market, I think that with our cash and our cash generation, that we keep bringing in, even in a challenging periods of time, or basically lower like software quarters, like usually Q1 software, but we still generated this amount of EBITDA and cash. I think it's giving us the ability to do this move and to basically accelerate or grow the buyback and parallel to that to do an M&A deal that can be meaningful for the company. And this is what we are looking to do and ask and searching in the market for the right target in order to get it into our company, basically, and to grow also through and acquisition and not just organically. Last year, basically we grow 60%, 64%. It's lost in transition -- in translation, basically because we gave our message on February 24 when Russia basically invaded Ukraine. So, it's like -- there was a lot of noise around that and the market change after that and so on. So -- but we go 64% last year organically. And this year, when we look at that, we are able to -- we keep going organically even that we made like a very big jump last year. And we feel that now -- also to M&A because the company is ready for that. And I think that we have the -- again, we have the means, the knowledge and the experience to make a good acquisition, and we're looking for the right opportunity in order to do this. Sagi, you want to elaborate more on the buyback.

Yeah. So, first question we did $12.7 million of repurchase only through March because we started the program on first of March. So, till today we almost triple it. Of course, when looking outside and looking on the valuation of Tremor, it may make economically sense to keep buying our shares. But if we are thinking about the long-term value to our shareholders, I think as Ofer mentioned, and as you asked there is -- or there are a lot of opportunities out there in a lower valuation than we saw before. And in order to scale the business and to enjoy all the synergies and to grow our business, I think that an M&A makes sense even at current Tremor valuation. But of course, if we will not manage to conclude an M&A, we may enhance or increase the repurchase plan.

Thank you. And now, I'd like to turn the call back over to Ofer Druker for closing remarks.

Thank you everyone. Thank you for participation and thank you for your questions. I think that we demonstrate again that the end-to-end solution that we built -- the platform that we built is a very strong one, is generating great results from return of investment to our shareholders from growth and from profitability. And this profitability is extremely important to this period of time of uncertainty when you look at the markets. And we are able to keep growing our EBITDA, keep growing our profitability and cash flow. I think that this is a very important in this market condition. And it enable us to do much more things in the future in order to grow our position in the market, and to keep our leadership positions in this important steps of CTV data and CTV data and video. And we believe that all the changes that we're mentioning on the call of movement of people from [indiscernible], in basically enhancing our ability to be a bigger player in the market with the video data and CTV and this is why we are here. And we are looking at the second half of the year with anticipation, because we are about to launch our partnership with VIDAA, which is very meaningful for us. We have to look at it as one of the biggest OEM companies that basically provide us exclusivity on all the ACR data that enable targeting and measurement. And we are talking here about a company that's already now is about 10% of the U.S. OEM. And with their plans and the growth paths, and also with the international markets that they are very active in, we believe that we can -- it will help us to grow our business even more and to be a dominant player in the CTV business. And to provide a lot of capabilities to the open web as we talk about it, because when you look at that, as I mention until now, the data is basically the property of small group of companies that our -- the world gather. And now, basically with us, we will be able to open it to more partners, to more media partners and to whoever more people to enjoy from this data for targeting and measurement from the demand side, but also from the supply side. So, we are very excited on the position that we are in. I feel that we are very good spot from strategic point of view, and we're looking ahead of the future to grow success. So, thank you everyone.

Thank you, ladies and gentlemen. That concludes today's call. Thank you for participating. And you may now disconnect.