Nexxen International Ltd. Q4 FY2021 Earnings Call

Welcome to Tremor International's Fourth Quarter and Year Ended 2021 Conference Call. 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 there for the next 30 days. I will now turn the call 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 fourth quarter and full year ended December 31, 2021, 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, projections about our future financial results and future business, and statements concerning the expected development performance in market share or competitive performance relating to 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. 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, Chief Executive Officer of Tremor International. Ofer, please go ahead.

Thank you, Billy. And welcome to everyone joining us today. Let me start off by saying that I'm extremely pleased with our results for both the fourth quarter and full year. 2021 represented the strongest year of growth and profitability in the company's history. During the fourth quarter and full year, we continued to validate our strategy of being an end-to-end tech and business platform with a focus on CTV video and data, and continued to experience strong market adoption of our products. We remain encouraged by the results we are generating. We believe that our strong balance sheet, profitability, and cash flow will enable us to maintain continued growth both organically and through potential M&A, while adding value for our shareholders through the $75 million share buyback we announced today. I will begin by giving an overview of our results and strategy followed by our Chief Financial Officer, Sagi Niri, who will give you the highlights of our Q4 and full year 2021 financials. We will then open the call up for questions. For the 3 months ended December 31, 2021, we generated contribution ex-TAC of $88.6 million compared to $74 million in Q4 2020, representing 20% organic growth and adjusted EBITDA of $54 million compared to $39.1 million in Q4, which reflects 1.4x growth. These results were highlighted by continued growth in advertising spend on CTV, which increased 47% during Q4 2021 compared to Q4 2020, and greater adoption of our self-service and various tech-enabled programmatic offering. The greater adoption of this technology solution supported our ability to generate strong profitability. The efficiency of our platform, our end-to-end strategy and the growth we achieved in this segment drove a 53% adjusted EBITDA margin in Q4 2021 on a reported revenue basis and a 61% margin on a net revenue basis. We believe this margin represents the best-in-class for our industry. For the 12 months ended December 31, 2021, we generated contribution ex-TAC of $302 million compared to $184.3 million during the full year 2020, reflecting organic growth of 64% and adjusted EBITDA of $161.2 million compared to $60.5 million during the same period last year, reflecting 2.7x growth. These record results reflected the best year in Tremor history and serve as an indicator that customers prefer our offering, which provides simplicity and enhanced data through our differentiated end-to-end technology and business platform. Full year growth for Tremor in 2021 was also driven by increased CTV spend across our platform, which increased 108% compared to 2020. While we also continue to see the necessity of our managed service offering, we are currently seeing and expect to continue observing core growth driven primarily by our self-service solutions and programmatic offering. We believe the key to our continued growth and success in our differentiated end-to-end technology and business platform, which is comprised of a demand-side platform, data management platform, supply-side platform, and most recently, a CTV server. Our strong focus on product development and every acquisition we have successfully integrated over the last few years has driven us towards creating the platform we have today, with the ability to service a wide variety of customers across all screens. We believe end-to-end is the most efficient model in the industry as customers desire simplicity, better data to enhance their returns and targeting efforts, and to move towards supply path optimization. Because we maintain the relationships with both advertisers and publishers, we are able to connect with them directly in the most efficient way while providing better installation against future privacy changes. Customers leveraging us for their end-to-end buying needs also enjoy strong pricing advantages because we consolidate all transaction fees within one ecosystem to maximize the advertiser's budget going to the publishers. Our end-to-end model also helped enable us to generate a strong 2021 customer net retention rate of 150.3%. We believe these strong retention rates offer evidence that our model is working well and fulfilling our customer's holistic needs. Furthermore, we believe this model is better for Tremor and its shareholders as it enables maximum revenue opportunities and profitability due to the cost efficiencies we achieved from splitting costs across both sides of our platform while owning our global server infrastructure. CTV and video remained a key growth driver for Tremor as we saw 27% and 80% of our contribution ex-TAC respectively, generated in this segment as of the end of 2021 as revenues grew 118% and 69%, respectively, during the year. According to e-marketers, U.S. advertising spend on CTV is projected to grow at approximately 24% CAGR through 2025, while U.S. spend on video and CTV combined is projected to grow at roughly 17% CAGR through 2025. We believe our footprint in these fast-growing segments should result in strong continued growth for Tremor. We have also taken steps to enhance and differentiate our offering within CTV, as evidenced by the recent acquisition of Spearad, our exclusive global ACR data partnership with VIDAA, the launch of our programmatic TV marketplace, and the launch of our content level targeting solution. Tremor is also well positioned for challenges within the industry due to its robust data footprint, end-to-end technology and business platform, and focus on CTV. Privacy changes have been a significant theme in our industry, particularly around IDFA changes and cookie depreciation. In addition, last week Google announced a multiyear initiative to build the privacy sandbox on Android, which will limit the sharing of user data with third parties and operate without cross-app identifiers. Tremor is well positioned to address all of these changes due to our end-to-end operating model as our DSP and SSP share the same audience, which eliminates data loss when linking platforms. Our exposure to cookies from a revenue standpoint is also relatively low, allowing Tremor and its customers to remain well positioned for privacy changes compared to other industry peers with higher levels of third-party cookie exposure. We are confident that this combination of factors ensures we remain able to meet our customers' needs. Regarding challenges associated with supply chain constraints and inflation, we saw evidence of lower advertising spend during Q4 2021, which have continued to disappoint in Q1 2022 in certain sectors such as automotive due to acute shortages. However, these issues have been offset by increased demand in other segments such as CPG. Our highly diversified customer base across our end-to-end platform has helped offset any significant adverse impact to our business. We received a lot during Q4 2021 that helped us strengthen our offering within CTV. In October 2021, we strengthened our CTV and data capability through a unique and meaningful partnership with VIDAA, a subsidiary of HiSense, which provides us exclusive global access to ACR data starting later this year. The partnership is expected to accelerate our U.S. and international growth, and we anticipate this growth will mainly start in the second half of 2022 in key markets such as Canada, Australia, the U.K., and Germany. This powerful data partnership, which we will utilize for targeting purposes, provides access to VIDAA's distribution. We believe VIDAA quality reaches approximately 20 million smart TVs worldwide, and we expect this reach to grow to more than 40 million TVs in the coming years. VIDAA is the operating system for major OEMs that include Hisense, Toshiba and others. This partnership makes Tremor the only end-to-end technology platform with this type of exclusive data outside of the world gardens. VIDAA has also proven that its relationship with Tremor extends deeper than data. In January, VIDAA selected Unruly as its strategic SSP to enable global access to all its video and native display media while also integrating our newly acquired CTV and server experience to enable better control over the CTV delivery with granular ad pod controls and targeting. In October 2021, we acquired Spearad, which provides Tremor with a global CTV ad server and other bidder, featuring a robust user interface with advanced tools for ad and pod monetization. We anticipate that the addition of the Spearad technology will allow us to capture a large segment of global CTV inventory through both current and future media partners while providing added benefits to help those partners better control their inventory and maximize revenue opportunities. Like the VIDAA partnership, we anticipate the addition of Spearad will open greater opportunities internationally. In October, we increased our investment in CTV by announcing the launch of our programmatic TV marketplace, which is a centralized platform for planning TV campaigns. The launch enables advertisers to gain access to a diversified marketplace that features premium TV-centric supply and curated PMP packages. Advertisers also gained the ability to leverage an efficient planning process to help improve and streamline costs, inventory, and reach while gaining greater transparency into what inventory is included in each package. In December, we introduced in our SSP Unruly, a content level targeting solution, which provides a new contextual solution for buyers amid growing privacy regulations. Content level targeting allows buyers to tap into traditional linear TV buying tactics with granular targeting options like January ratings and show timing within the digital CTV and over-the-top environment. We believe this solution successfully positions Tremor and its customers for future changes in privacy. 2021 was an amazing year for Tremor from a business win perspective, and I will go over the major wins and highlights from both the fourth quarter and full year. As we mentioned, in the fourth quarter, we significantly enhanced our offering and innovation within CTV through our partnership with VIDAA, the acquisition of Spearad, and the launches of the programmatic TV marketplace and content level targeting. Our SSP Unruly significantly increased its reach and added 42 new U.S. supply partners during Q4 2021 across critical growth verticals in both entertainment and lifestyle, as well as OEM and multicast video-on-demand businesses. This comes after adding 35 new U.S. supply partners during Q3 2021. Our Unruly control offering has received outstanding feedback from premium partners in the CTV arena. During Q4 2021, PMP revenue from this self-service platform for publishers saw an increase of 184% compared to Q3 2021. Tr.ly, our in-house creative studio, was heavily involved in many deals we promoted with customers and empowered campaigns while enhancing engagement in a meaningful manner. During 2021, creative requests to Tr.ly increased 74%. Tr.ly generated about 21,000 unique video creatives and created stickier relationships and spending trends with our customers. Tr.ly is a differentiator for us, as not many DSPs or SSPs have a creative studio in-house. This power output drives higher levels of campaign spending on our platform. For example, new and existing clients who hadn't yet booked a campaign in 2021 spent an average of 301% more on their first campaign leveraging Tr.ly's creative solution. Our data-driven creative studio has experienced strong and growing adoption and combines two of our greatest advantages: our robust data footprint and our ability to provide all-screen creative solutions to better support our advertisers' needs in connecting with consumers. Last year, we also recognized that large video advertisers who are looking for complementary omnichannel solutions to their video campaigns drove us to launch the ability to run display and audio campaigns in our DSP. Additionally, we launched our TV intelligence solution, enabling in-house severely targeting and measurement solutions that provide advertisers the ability to reach and engage TV viewing audiences at scale with data-driven video creatives. This solution received a further boost from our VIDAA data partnership, the launch of the programmatic TV marketplace, and the launch of our content level targeting solution, which also enhanced targeting capabilities for customers. Finally, we successfully executed a dual listing on NASDAQ in June, generating $134.6 million in cash proceeds, net of issuance costs, and enabling strong exposure to the U.S. market, greater access to capital, and increased access to a broader investor base. Today, we are also very pleased to announce a $75 million share buyback program, which allows us to retain significant value for shareholders and take advantage of the opportunity amidst macro pressure that many companies in adtech have been under recently. We increased our cash balance by $270.3 million to $367.7 million as of the end of 2021. Our strong balance sheet and cash-generating business enable us to implement this plan while we also continue to evaluate opportunities to acquire companies and continue to invest in technology, sales, and marketing. Finally, since our last earnings call, we have delivered on our promise to engage more proactively with the U.S. and international investment communities. In November, we presented a Q3 update for U.K. investors and participated in RBC Global tech conferences. In December, we participated in Raymond James’ Tech Conference. In January, we participated in Needham's Annual Growth Conference. We also conducted a significant number of institutional investor meetings and participated in NDR with numerous banking and IR partners. Finally, we recently launched our inaugural quarterly IR newsletter, which we intend to update each quarter to make investors more aware of main developments and trends. Please subscribe on the Investors Relations tab on our website. It is now my pleasure to turn the call over to Sagi to review our financial results.

Thank you, Ofer. We were excited to see another record quarter of revenue, profitability, and strong business momentum, closing out a fantastic 2021 and moving into the first quarter of 2022. Today, I will review highlights of our Q4 and full year 2021 performance as well as some of the key financial and operational drivers for the quarter and year. Tremor International achieved an outstanding record quarter in Q4 with revenue and adjusted EBITDA propelled by continued organic revenue growth. Q4 2021 net revenue increased 20% to $88.6 million compared to $74 million in Q4 2020, all of which was driven by strong organic growth. This growth was particularly impressive when considering the higher levels of political spend from the U.S. election cycle across assets during Q4 2020. CTV spend on our platform grew 47% in Q4 2021 versus Q4 2020, and we are well-positioned to continue this growth as more business is increasingly being transacted through programmatic platforms. We also continue to generate very strong adjusted EBITDA and margins while investing in the critical areas of our business that can drive future growth. For Q4 2021, we generated adjusted EBITDA of $54 million, which reflected 38% growth from Q4 2020 and adjusted EBITDA margin of 53% out of reported revenue, and 61% out of net revenue. For the 12 months ended December 31, 2021, net revenue increased an impressive 64% to $302 million compared to $184.3 million in the full year 2020 period, all of which was driven through strong organic growth. We focused on being highly competitive in the CTV and video space as a result of the enhancements we made to our offering during the pandemic. CTV spend on our platform grew 108% in 2021 versus 2020, while our video net revenues grew 69% from $143.4 million during 2020 to $242.6 million during 2021. We continue to generate very strong adjusted EBITDA while investing in the critical areas of our business that can drive our future growth. Costs were lower than expected, driven by a postponement of our return to the office, lower marketing spend, and reduced travel and entertainment costs. During 2021, we generated full year adjusted EBITDA of $161.2 million, which reflected 166% growth from 2020 and finished the full year with an adjusted EBITDA margin of 53% as a percentage of contribution ex-TAC. The significant growth and profitability we achieved during 2021 was driven by our data-driven end-to-end technology and business platform with a focus on the key growth segments in the market, CTV, video, and data usage. Our growth exceeded market expectations and proved once again that our strategy is working and our products and services adoption is accelerating. We believe we have a competitive advantage with our end-to-end platform versus point solutions. We have developed a highly profitable business model with high efficiency around operating costs, leading to operating leverage and economies of scale. Tremor is able to achieve significant profitability due to our ability to split costs across both sides of our end-to-end platform while maximizing revenue opportunities. We also achieved cost efficiencies as we own and operate our global server infrastructure, which results in significantly lower costs than we were to operate exclusively on third-party cloud services. As we mentioned previously, we believe we have best-in-class industry margin and operational profitability, and for Q4 and full year 2021 generated adjusted EBITDA margin of 61% and 53% out of net revenues, respectively. Turning to our cash flow, we generated net cash from operating activities of $48.7 million for Q4 2021 versus $23.5 million in Q4 2020, an increase of 107%. For the 12 months ended December 31, 2021, we generated net cash from operating activities of $170.1 million versus $35.2 million in the 12 months ended December 31, 2020, which represents a 384% increase. As of December 31, we had $367.7 million cash and cash equivalents with no debt. We also experienced 98% free cash flow conversion during the quarter and for the full year 2021. Non-IFRS diluted earnings per ordinary share is $0.27 for Q4 2021 versus $0.20 in Q4 2020, an increase of 35%, and $0.83 for the 12 months ended December 31, 2021, versus $0.28 for the 12 months ended December 31, 2020, which represents a 201% increase. As we look ahead, in order to continue achieving strong organic growth in the business and monetize our new partnership and acquisition, we intend to increase our investment in product and R&D as well as sales and marketing. Finally, I'll now turn to our outlook. As a reminder, we expect that return to office, marketing, and travel costs will add approximately an incremental $1 million per quarter in operating expenses this year. For the first quarter of 2022, we expect net revenue to be at least $73 million and Q1 2022 adjusted EBITDA to be at least $33 million. This guidance underscores that our efficient end-to-end model focused on CTV is helping us achieve excellent growth and profitability. We believe that our growth profile and efficient end-to-end model, which enabled strong profitability, investments for growth, and a healthy balance sheet, position Tremor to continue taking advantage of a rapidly growing digital advertising and CTV market, both in the U.S. and internationally. With my remarks completed, I'll turn the call back to Ofer.

Thank you, Sagi. To summarize, Tremor had a very strong finish to 2021 in what was a transformational year for the business as we achieved strong organic growth without contribution from acquisitions. We believe our data-driven end-to-end technology and business platform focused on CTV and video reflects the preferred model that our customers desire through the simplicity, installation from privacy changes, supportiveness of industry trends, and ability to maximize returns. The 64% contribution to expected growth and customer adoption we achieved during 2021 and the fact that we are seeing others in the industry attempt to replicate this structure only enhance our confidence that the model is working. This model also benefits shareholders as it enables significant profitability and cash generation, which allows us to expand our investment in technology, sales, and marketing to grow the business organically while evaluating future M&A opportunities. We also look forward to returning value to shareholders through a $75 million buyback we just announced. Tremor also continued to fulfill its promise to enhance and expand its CTV, data, and video capabilities, which now accounts for 80% of our net revenues and 91% of our programmatic net revenues. Our exclusive global ACR data partnership with VIDAA will enable targeting within highly desirable data sets and accelerate our international growth around CTV as we look to monetize the unique and meaningful partnership in the second half of 2022. We are also extremely pleased to have VIDAA select Unruly as our strategic SSP and integrated Spearad, which positions Tremor well for future U.S. and international growth with an aggressively growing partner for years to come. Our recently acquired CTV Ad server and Header/Bidder Spearad allow us to capture a greater portion of CTV inventory globally with current and future media partners. The launch of the programmatic TV marketplace and content level targeting furthers our innovation and differentiation within CTV, while providing better insulation against privacy changes. Finally, we look forward to continuing to engage with both U.S. and international investors through continued participation in conferences, tech demos, and NDR with firms that cover Tremor. We believe we have a compelling value proposition for investors and remain excited for additional future opportunities to tell our story. Operator, we will now open the call to investors' questions.

And we will get to our questions and answers in just one moment. And our first question is from Matt Swanson of RBC Capital.

All right. Congratulations on a strong finish in what's been kind of a challenging environment here. Ofer, I think you did a great job of explaining kind of the lack of risk from some of the signal loss, but kind of flipping that, based on all the new offerings you have, whether it be the programmatic TV marketplace, content level targeting, the creative suite, and obviously both your data sets coming from VIDAA and then the data you get from a full stack. What do you think the potential is for signal loss to actually be a catalyst for the company and to be something that becomes more about market share gains than risk, especially kind of in the wake of STL?

Matt, it's a great question and a great point to discuss. I think that what we understand, what we see now in the marketplace is that everybody is preparing, of course, for this loss of signals in the market. I think that Tremor in general is better suited to deal with it because of our focus basically on CTV and growing on CTV and mobile and less on cookie-supported businesses. That's one. The second thing is the end-to-end solution that we spoke about and the data that we are able to gather from partnerships that we do. So I think that it can become a potential advantage in the future. But right now, and I hope that all the other companies and all our peers are, of course, preparing themselves also for the situation. But I think as we mentioned also in the notice that we are well situated in this situation in order to tackle it in the coming years when all these regulations and changes in security come into effect. And I think that when people are now viewing and looking for partners for the long term, they can rely basically on Tremor to be that partner for the long run.

Yes. No, absolutely. And then, Sagi, kind of thinking through guidance, it was helpful to get the context around the supply chain and the inflation concerns in Q1. But then we also have VIDAA coming on in the second half as well as expectations for a return of a lot of political spend. Can you give us some context on how that might kind of work out in terms of full year seasonality? Does this feel like maybe more of a back half-loaded year?

Yes. Matt, thanks for the question. I think, again, as we said previously, we don't have like a real concentration on any vertical supply chain issues, of course, affecting the flow globally. I think that we are well positioned in order to increase some other verticals that are not affected by that issue. And we did it in the past and during 2021 and probably we'll do it in 2022. Regarding VIDAA I think, again, as Ofer mentioned, it kicks in on the 1st of May. It will give us a lot of exclusive ACR data, which we can execute for the first time outside of the U.S. internationally. So we are very excited to do that and take our international activity much further and scale it up in 2022. And again, we are waiting for that as well as our clients and publishers and partners, and it will happen.

One more thing to add to Sagi is Spearad that we acquired last October that is in the first quarter now is being integrated into Unruly, and we believe that will make its major effect starting from the second half of this year because we know these cycles of integrating Ad servers and Header/Bidders take longer than a usual business. So we believe that it will start affecting the business mostly in the second half of the year going forward.

Our next question is from Laura Martin of Needham.

Great numbers. You guys should be really proud of it. Congratulations. I have a couple. So 38% of your net revenue came from third-party DSPs is my recollection. And I'm really interested in the Trade Desk's announced Open Pass and whether that has a positive or negative impact on Tremor as the largest DSP tries to squeeze out some of the supply path optimization. Can you comment on that?

Thank you, Laura. I believe the Trade Desk's move will bring about several changes in the marketplace. Publishers currently have multiple avenues to connect with bidders for selling their traffic. They are likely to seek out more channels to collaborate with an SSP if it offers them a clear advantage. Unruly and Tremor provide significant value to publishers through additional data and unique demand generated from our other DSPs and self-service platforms. Publishers working with us may choose to switch to different platforms to access our demand, regardless of the Trade Desk's operations. We provide valuable services, and if an SSP fails to deliver value, publishers will likely stop connecting with that SSP. Therefore, the Trade Desk's action is likely to enhance and expedite supply path optimization. Our company continues to offer numerous benefits to publishers, and we see no issues arising in these relationships. We are also capable of connecting through pre-bid and other methods for running campaigns related to the Trade Desk, so we view this as a non-issue. In fact, with potentially fewer SSPs to collaborate with, we may gain an advantage.

I think that we are very happy with the announcement of the Trade Desk because it's validating our end-to-end solution. We are happy that we're seeing the advantages in that as well.

Super helpful, really. My second and last question is about the advertising opportunities at the bottom of the funnel for CTV. This leads me to the convergence of e-commerce with CTV, and I’m interested in your thoughts on that. One of your competitors mentioned that not having an e-commerce strategy in 2022 is akin to lacking a mobile strategy a decade ago. That might be an exaggeration, but my question is, do you believe that e-commerce and bottom of funnel strategies will be significant growth drivers for CTV ad revenue in the next year or two?

Thank you, Laura, for that. I want to remind you that in our previous conversation, we discussed this topic. I mentioned that I believe the large volumes of CTV media will also be driven by performance-related campaigns. These campaigns will definitely include lower funnel and e-commerce as a key part, but there can also be other products or services sold through performance. We are focused on this and believe it will be a significant player. I agree with your earlier statement that if you're not building a lower funnel or e-commerce strategy around CTV, you might be missing out on something important. We think CTV will also embrace performance advertising and video since this has occurred in other sectors. We are aware of this and are preparing for it, and it's been an ongoing focus for us.

Our next question is from Mark Kelley of Stifel.

Great. I appreciate you taking my questions. I had two quick ones. First one is on the increase in R&D for this year. I guess, is there a component of that that's kind of onetime in nature to get ready for this upcoming VIDAA partnership? That's the first one. And the second one is, can you remind us what political was in Q4 of last year, just to give us a better sense of the growth ex-political?

I will start by saying that we are putting a lot of emphasis in the last three years on technology and innovation, mainly in CTV. And you can see also when we spoke about all the things that we've done in the past year, these includes the TV marketplace, content-based targeting, and we are talking about the Spearad integration, not just as a connection but a complete integration. And when we are talking about VIDAA, of course, to build it and integrate it into our ecosystem, all of that is innovation and things that enhance our capabilities around CTV. We are proud of that. I think that in this ecosystem that we are living now, we need to invest in technology and innovation around CTV because this is a major part of our future and a significant revenue source. It had been 25% already of our business. We will keep innovating and building tools around CTV, and I can let Sagi talk about any one-time investments and about political budget now.

Yes. So again, to add to what Ofer said, I don't think it's a one-time increase in R&D and product, which we are doing all the time, and we are doing this in marketing and sales too. It's an increased investment in those fields, as Ofer said, because we are a technology company and we need more and more components in order to scale our business. By the way, it's not related to VIDAA. We've done it before and we probably will do it more in the future. Regarding political spend, I don't have the exact number or the absolute number we did in Q4 and a little bit in Q3 2020. It wasn't material but to some extent, we did a couple of million dollars on that as well.

Our next question is from Andrew Boone of JMP Securities.

Can you discuss the factors behind the 74% increase in creative requests in 2021? Additionally, I'd like to hear more about the competitive differentiation you mentioned earlier. Is this truly a way to attract new customers, or does it primarily lead to increased spending? How should we understand this aspect?

On the creative, we're seeing that the pandemic in general created a situation where creative is getting much more stage in this business because people want to control better how they engage with our customers due to sensitivity and a lot of things that have happened, not just the pandemic but also social unrest in the U.S. and other places we see today. People want to control the way they engage with their clients and potential customers. I think that what happened in the last two years is transformational in many ways because advertisers and clients are looking to get better creative responses and more options to run their campaigns. I feel that I was asking in the past, and when I think about it again and again, this is something that will stay with us post-pandemic, meaning people will prefer more control over their messaging. Targeting is part of that, and we're already doing a lot around data, signing a lot of unique and exclusive data partnerships to enhance this targeting capability. On top of that, you can see a lot of importance now around messaging to create more efficient creative. We saw a big trend in the last two years, mostly in 2021, that clients are using our solutions. We are unique in that because we don't know many other SSPs or DSPs that provide these capabilities to their clients, and we are doing that as part of the package.

That makes a lot of sense. And then for my second question, I wanted to touch on the contextual tools you're talking about. Are you seeing more demand for these from advertisers as there are greater privacy announcements? Like where are we in terms of the adoption curve for contextual tools more broadly across digital advertising?

Thank you. Yes, we have seen that when we announced the solution, we got many inquiries from potential clients wanting more information and to learn about the product because they want to test it and use it. I believe this shows that people are taking into account the forthcoming changes around privacy, and they need to adapt and learn more tools to run effectively in the marketplace post-changes. We've been engaged with many clients around that, and it will continue to enhance because we've just seen this sandbox issue in Android, which is, of course, creating more requests from people to find targeting solutions. I feel that it's the right solution at the right time, and together with other advantages, our focus on CTV and mobile, we are providing peace of mind for clients that we are here to stay and can provide solutions even in the future.

Our next question is from Andrew Marok of Raymond James.

You've talked in the past about your focus on programmatic revenue versus non-programmatic. Over the last couple of quarters, we've seen non-programmatic accelerate while programmatic came in at about 11% this quarter. What are some of the moving pieces that went into the dynamic in Q4? And how should we be thinking about the growth in respective lines into 2022?

So again, I think as we said in the past, performance is where we grew, and we're proud of that. Having said that, we are not investing a lot in that activity. It's like an activity that we did a lot in the past, and we are calling it legacy. Again, we are not aiming to grow this part of the business, but we are not unhappy if it continues to grow. In 2021, what happened was we estimated this activity would decrease by 5%, but it instead increased. Going into 2022, I think the aim is to keep this activity on a flat basis. This is what we are aiming for.

And this concludes our question-and-answer session. We'd like to turn the call back to Ofer Druker for closing comments.

Thank you. Thank you everyone. I think as I said, we had a very exciting year last year, and we finished it very strongly. Thank you for your support and your interest, and for the questions. I hope to see you soon in our additional calls that we'll have during the year. Thank you very much.

And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.