Welcome to Nexxen’s Earnings Call for the 3 and 12 months Ended December 31, 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 call is being recorded and a replay of today's call will be made available on Nexxen’s Investor Relations 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 our first official earnings call as Nexxen. During today’s call, we will discuss our financial and operating results for the three and 12 months ended December 31, 2023 as well as our forward-looking guidance. This morning, we issued a press release, which you can access on our updated IR website at investors.tremorinternational.com. This morning, we issued a press release, which you can access on our updated IR website at investors. nexxen.com. Please note, all financial results you hear on today's call for the three and 12 months ended December 31, 2023, as well as the three months ended December 31, 2022, reflect the combined financial performance of Nexxen and Amobee, while results for the 12 months ended December 31, 2022, include results for Amobee early from September 12, 2022 through December 31, 2022. Given how that transpired in 2023, including our rebrand in Nexxen and the completed integration of Amobee, we're approaching this quarter's call a bit differently. During today's call and only for this quarter, you'll hear from our Chief Product Officer, Karim Rayes, who will set the stage for how the digital advertising industry is evolving and how our platform and business model positions us for success now and in the future. Then we'll turn the call over to our Chief Executive Officer, Ofer Druker to discuss, amongst other things, the evolution of our strategic business partnership and revenue initiatives and follow that with an overview of our Q4 and full year 2023 financial results and update on our forward-looking guidance from our Chief Financial Officer, Sagi Niri, before turning the call back to Ofer for closing remarks. During today's conference call, we will make forward-looking statements. All statements other than statements of historical fact could be deemed as…

Thanks, Billy. Hello, and welcome to everyone joining us today. As Billy noted, I'm Karim Rayes, and I'm the Chief Product Officer at Nexxen and I served in the role for over five years. Without a doubt, 2023 was a transformational year for Nexxen, highlighted by major advancement and enhancement to our technology and products, which is why we felt it was fitting for me to open the call today. In 2023, we rebranded the company and integrated the largest acquisition in our history, strengthening our tech and data assets and enhanced by talent base with industry-leading experts in ad-tech veteran. With all this happening, it was a bit difficult to affiliate our story, value proposition and the industry position in real time. So before Ofer provides an update on our strategic business initiatives, I will provide a brief overview of the industry and highlight why we are confident that our tech platform model is differentiated. I will also explain why our model and platform enables us to help customers achieve flexibility and greater success in both the current and future digital advertising ecosystem, enables our customers to address challenges like cookie deprecation has strongly position us for long-term growth and market share gains. The industry has undergone significant changes over the past two years that have driven advertisers and agencies to become more sophisticated and rely heavily on data and technology to navigate a fragmented and rapidly evolving digital media landscape. Because potential touch points with customers exist across an increasing number of formats and devices, advanced technology and strong data capabilities are critical to enable advertisers to reach our KPI. This has driven advertisers to shift from exclusively buying media to buy against audiences by working with data field asset partners like Nexxen that offers the type of…

Thank you, Karim. That was a great overview and explanation of how our tech ecosystem, capabilities and differentiated model, positions us for success and to gain share in the digital advertising ecosystem. Welcome everyone to our first earnings call after rebranding to Nexxen, which we celebrated on February 28 when we rang the NASDAQ closing bell in Time Square. From our perspective, the refection of our brands under NexxenNow, reflects the true strength and value proposition, our entire tech stack offers customers and prospects. And we expect it will open doors to larger multi-solution deals over time. We believe the rebrand combined with the steps taken in 2023 to increase brand awareness and better position our sales force and product marketing narrative is beginning to pay off. Hence, we are excited to see this effort continues to gain traction. We have continued to focus on growing our streaming TV and data relationship, enhancing and expanding our customer offerings, building deeper industry ties, and introducing our newest tech and data capabilities to position ourselves to drive significant long-term partnerships with major TV players and agencies. We are hyper-focused on further enhancing our presence in broader streaming and CTV advertising ecosystem and are confident this will serve as a long-term growth driver for Nexxen given our long-standing streaming DNA and strategic positioning within video and CTV. We believe our strategic emphasis and indexing towards these trends will enable us to achieve outsized long-term growth, particularly as customers seek premium advertising solution as market headwinds refers to become tailwinds, which we have cautious optimism for in 2024. I'm pleased to report we are once again working with LG, one of the main CTV players in the industry after years of not doing business together, following our favorable settlement agreements and multiyear strategic partnership…

Thank you, Ofer. Today, I will review the key financial and operational drivers of our performance over the three and 12 months ended December 31, 2023, and we'll also discuss our guidance. In Q4 2023, we generated contribution ex-TAC of $90.5 million, reflecting a 12% decrease from Q4 2022. This decrease was driven by continued challenging market conditions that disproportionately impacted the budgets and spending of some of our higher spending small and mid-sized agencies to whom we are heavily indexed. A trend we experienced throughout 2023 as well as a continued shift by those customers and others to our lower-cost programmatic solutions. Full year 2023 contribution ex-TAC increased over 1% compared to full year 2022 as programmatic revenue or contribution ex-TAC attributable to programmatic activities in our core business grew by roughly $24.6 million, which slightly outpaced a roughly $20.2 million decline in contribution ex-TAC related to our non-core legacy non-programmatic business line. Throughout 2023, we were impacted by challenges related to the complex integration of Amobee, which contributed to a weaker than initially anticipated contribution ex-TAC. Keep in mind, with Amobee, we took a roughly 1,000 person company and integrated it with our pre-existing employee base of around 600 employees to create a roughly 900 employee company at the end of 2023, a massive task, which required a tremendous amount of the management team's focus. While competitors were able to focus exclusively on teaching customers for 2023, as soon as the acquisition closed, we were occupied with redefining our offerings, refining our story in market as well as enhancing our platform capabilities, talent base and marketing efforts for the longer term. Additionally, the amount of time, resources and focus required to combine platforms and integrate Amobee stack, establish our sales leadership team and train our teams to sell…

Thank you, Sagi. While results in Q4 and throughout 2023 were challenged by difficult market and advertising conditions, particularly for our small and midsized agency customers, we feel we created a solid foundation for the future. We completed the integration of Amobee, which was the largest company we ever acquired. While it was a challenge that required a massive amount of attention, resources and energy, we were able to make it happen through our unwavering focus on our vision and robust acquisition and integration experience. The acquisition bolstered our self-serve stack and added unique and differentiated planning capabilities such as the discovery tool and the ability to plan across the converged TV ecosystem, which we believe enable us to attract new customers and position our existing customers for success. The acquisition also enabled us to grow our US and international customers and partners reach and brought us amazing industry experts and ex-TAC [indiscernible] that enhance our talent base across all aspects of the organizations. We also successfully rebranded to NEXEN, which we feel is so important to better present our company and platform solution within the industry and to the financial markets. We now feel we are well-positioned with all the key elements we need to succeed in the video streaming and TV advertising ecosystem and to grow and take market share in 2024 without the need for another major acquisition or the heavy lifting, focus and resource dedication required to execute a major integration. We believe our unified platform now reflects one of the most scaled data reach and advanced tech platform in the industry for customers on both sides of the ecosystem. It was built to several years of R&D and five major acquisitions that reflects roughly $1 billion in total R&D investments. In 2024 and beyond, we will continue to seek to grow our new customer base and increase revenues relationship and product adoption with existing customers, while also focusing on growing our self-service enterprise customer base, data customer base and the relationship with major agency, CTV and broadcast partners. We believe, this will enable us to grow contribution extract and expand profitability, which we can then reinvest in tech and product innovation to benefit our customers and share repurchases to drive added long-term value for our shareholders. As a management team, we feel we are in the strongest position we have been in for some time to accelerate our growth and take our rightful place amongst the leaders in the ad tech ecosystem and are excited for what this year can bring. As always, I want to thank our customers, employees and shareholders for their continued support, and we look forward to continuing to work hard to grow our business and expand and enhance our offering and capabilities to the benefit of all stakeholders. Operator, we will now take questions.

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

Yes. Thank you for taking my question and congratulations on a year of investment completed. Now that we're through kind of the heavy lifting of the integration as you spoke to, Ofer, maybe Karim, if you're still on, what are the key areas of investment you're shifting to in 2024, now that you can maybe focus on the things you want to do more than what you need to do with the integration. And then Sagi, if I could sneak kind of a half question and after that, just how you think about those investments in terms of the adjusted EBITDA guidance we just got. Thank you.

Thank you, Matt. Good question, of course. Karim can, of course, join me. But in general, I think that our -- we finished basically the integration of all the elements that we acquired over the years into one platform, end-to-end solution that is putting a focus on CTV, video and data. I think that our major thing that we are going to put emphasize now this time in the near future is about our data, and to combine identity graph that we got into one graph that we will hold and manage, because this is the essence, I think, of the differentiation, basically, the amount of data and the capability that we are connected across the end-to-end solution with all the platforms to our DMP and the ACI agreement, exclusive agreement that we have for the next couple of years is giving us advantage around data, and we want to utilize it. And I will hand over to Karim to talk a bit more about the graph and the DMP.

Sure. So this year, I'd say the focus of the investments to continue to improve our identity solution, add more partners to it, expand our graph. Beyond that on the data, it's a lot of focus on our direct assets. So we're launching our ACR solution globally. As Ofer mentioned earlier, we launched in the UK. We're live in the US. We're launching multiple other countries in 2024. So we'll be working on expansion and then continue to improve our first-party onboarding of data and tools around that to help serve our customers.

And I will hand over now to Sagi to...

Yes, Matt. Regarding your question, all the investments that both Karim and Ofer mentioned are already embedded within our 2024 plan and guidance. We think that all of these investments will bear fruit in 2024, and of course, onwards. And it will take us in 2024 to our 30-ish percent of adjusted EBITDA margin and probably and hopefully, going forward into 2025, it will go higher.

Your next question comes from the line of Laura Martin from Needham. Please go ahead.

Hi, there. I'll stick to one. So, one of the questions I have for you is the war in Israel. How much do you think it affected the fourth quarter financial performance? And related to that, how many people actually were -- what percent of your FTEs got called into the war, and are they all back now? And could that be a non-recurring area of weakness that doesn't actually affect -- is better for 2024? What's your point of view on that?

Thank you, Laura. First of all, of course, the events of October 7 affected us maybe in more in our mindset and so on. But in Israel -- our business is not basically based in Israel. It's based in the US and across Asia and Europe. So, it's less affecting our day-to-day business doing -- doing business, sorry. Regarding the teams that are in Israel, I think that they did an amazing job to basically cover for the people that were called to the Army, and we didn't felt any slowdown in anything that we are -- meaningful that we are doing. And people are coming in and out. So basically, we have about 20% of our team in Israel that was related or going to the army out of, let's say, 185 people, about 20% we called occasionally to the Army. And it's not like something that is affecting us or will affect us. We will do better next year. It's not like helping us this way, because basically the people that stay in the office and stay working with the cover for the people that went to the army, they get extra hours and maintain them for this.

Thank you.

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

Hi. Thank you for taking my question. Maybe building off of an earlier question in and your prepared remarks. How are you thinking about prioritization on the several growth factors you kind of outlined in the call? Is there anything that needs to be in place first before you move on to other aspects of your growth outlook? And how should we be measuring kind of those interim mile-markers along the way? Thank you.

I will ask maybe Karim. I will take it. I think that, first of all, we have teams that are working on all the fronts of what we are doing. So, as I said all the heavy integration that was done for between the DSPs and upgrading the DMP and so on already done in 2023. I think that what we are doing now is just finalizing the last elements of the DMP, which is to connect all the identity graph into one, which will bring us a lot of value, connected also to our discovery tool that will enable us to create like more insights, more smart segmentation for clients that want to target. But I think that it's done through the teams that are dealing with data. So, it's -- we don't have to wait. It's already on the work, and it's supposed to be done by -- in the next couple of -- in the next two to three months, basically. So, I don't see any -- if we slow us down, nothing that needs to be in parallel. The rest of the things that we are doing is about we are able now to move some more resources to innovation because last year, a lot of our manpower a lot of our attention, and a lot of our, let's say, our mind was, first of all, to conclude the integration of the platform, which are very heavy platform to integrate. And now I think that basically, we are expecting our teams to go back to innovation like they did in the last years. And we have a lot to do like around again -- sorry for mentioning it again, but data, pure logic integration, ACR expanding into more countries, integrating all these capabilities into our systems is meaningful. And I think that this is the innovation that we are looking to get, which is around basically CTV, data that we are doing already for the last couple of years. Karim, it's your fine focus. So, that's it basically. Thank you.

Your next question comes from the line of Matt Condon from JMP. Please go ahead.

Thank you for taking my question. Maybe just on the guidance. Can you guys parse through how much of it is just execution on your part or the improvement in execution versus a general macro recovery that we're going to see potentially in 2024? Thank you.

So, I will take this question and Sagi, if you want to add something, let me know. In general, I think that it's -- as we mentioned also in the script and when we are talking about 2023, I think that, again, our attention was on integration. We need to remember that we basically acquired a company of 1,000 people in the end of 2022 in the last quarter. We need to integrate it into a company of 600 people. We cut cost of about $65 million last year on run rate, which is very massive. And in general, I think that now it's about a lot about execution. And of course, if the market will be better, it will help us even more, but we cannot control it. What we can control is the execution of our team, putting more focus on doing business than integration. And as I said before, creating more innovation that can drive more business partnership and more business coming into our business. Sagi, you have something to add. Sagi, doesn’t -- no, he doesn't have something to add. Thank you.

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

I wanted to get a better sense of seasonality in the flow of the contribution ex-TAC. Your guidance for 2024, very robust there. At the midpoint, I've got 9% for the year. And my own model for the first quarter, I only had about a 5% growth rate for contribution ex-TAC. And I'm wondering what your comfort level is with the -- should we be modeling this kind of level loaded throughout the year on the growth rate? Or is it slightly less in Q1 and maybe more in Q4?

Yes. So, I think first, we believe strongly in our guidance. Second, I think we have, as we mentioned before, better drivers for this year contribution ex-TAC and trend as a whole. So we signed a Settlement Agreement with LG Ads, the former Alfonzo, which is giving us much more reach and a lot of other opportunities. Of course, all the new products that Karim and Ofer mentioned and of course, on top of that, a well-positioned sales force after the huge integration, that we did over there in 2023. And we are already in Q1, like seeing the pipelines and the fruits of that.

And in general, the second half of the year is stronger than the first half of the year for us historically...

Yeah.

So it's something like a...

Your next question comes from the line of Mark Kelley from Stifel. Please go ahead.

Great. Thank you. Good morning everyone. I was hoping maybe you could just go back to the political commentary that you offered. I would imagine that having the linear TV tool, this election cycle is probably a benefit to you, given that a lot of those budgets are still largely linear. I guess, when you're talking to those types of advertising clients, I guess, do you expect more digital this year? Is it still going to be primarily linear TV? And I guess, how do you fit into that ecosystem now that you've got all these different assets that you didn't have four years ago? And then, maybe one quick clarifying question, if I could. Did you guys say that you expect CTV CPMs to increase from here? As not I heard in the prepared remarks. I just want to make sure I heard that correctly. Thank you.

Just to cover the last point, we didn't say that about CPM or CTV. When we are talking about political, I think that for the first time, just in my career, we are coming ready for that in a meaning that we have very strong tools that are enabling basically to check -- to create segments according to sentiment, according to how people are related to ideas and parties and so on. And I think that it's giving us a lot of advantage in the market basically in order to gain some of the dollars that are going to political in order to support different candidates. And we are, of course, already in discussions. We built a dedicated team for that. And we feel the good vibe and the good support that we are getting from the market. So basically, first of all, the segmentation tools and the data related to the segmentation to the data that is related to political campaigns and activity, which is very meaningful. The second thing, of course, our capability around linear TV and cross-platform is helping also because, it basically can save some of the money of the parties when they want to promote a candidate to make more money, work for them in a smart manner if they're using our platforms and our technology, because it basically enabled them to identify where they need to -- where they need to invest their money in order to make it more effective and its cross-platform across linear and digital. In general, we believe that this year -- like if you're looking from -- in perspective to others before that were elections, I think that more money will go to digital basically, because the level of linear connection went down. So people when they want to reach targeted users in different regions of the country, they will have to use also digital in order to do that. And that's exactly where we are strong at, and we believe that this will enable us to win more of these dollars and to bring them to our P&L basically.

And just to add to that, political probably will influence our second half of the year, Q3 and mainly Q4.

Thanks.

As there are no further questions, I would like to thank our speakers for today's presentation. And thank you all for joining us. This now concludes today's conference. You may now disconnect.