Nexxen International Ltd. Q4 FY2022 Earnings Call

Welcome to Tremor International's Fourth Quarter and Year Ended December 31, 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. 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 fourth quarter and year ended December 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 limitations; statements and projections about our anticipated future financial results, including discussions about our revenue, margins, expenses, and guidance for full year 2023, as well as future business; anticipated benefits of Tremor's strategic transactions and commercial partnerships; anticipated features and benefits of Tremor's products and service offerings; Tremor's positioning for future growth in both the US and international markets in 2023 and beyond; Tremor's implementation of a substantial share repurchase program, while also continuing to evaluate strategic opportunities to acquire companies and invest in technology, product, sales, and marketing to further expand its platform; Tremor's medium to long-term prospects; management's belief that Tremor is well positioned to benefit from anticipated future industry growth trends and company-specific catalysts; the potential negative impacts of inflationary pressures, rising interest rates, geopolitical and macroeconomic uncertainty, recession concerns, and the widespread global supply chain issues that have limited advertising activity; and the anticipation that these challenges could continue to have an impact for the remainder of 2023 and beyond; the anticipated benefits from the company's investment in VIDAA and its enhanced strategic relationship with Hisense; the anticipated benefits and synergies from the acquisition of Amobee and the ability of Tremor to continue to recognize those synergies; Tremor's ability to continue to execute on cross-selling opportunities and its introduction of new technology products to a significantly larger customer base and addressable market; the timing to complete the technology integration of Amobee 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 United States Securities and Exchange Commission, including but not limited to, those risks and uncertainties listed in the section entitled risk factors and our most recent annual report on Form 20-F. Tremor does not intend to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information IFRS and non-IFRS terms. We refer you to the company's press release for additional details, including definitions of non-IFRS items and reconciliations of IFRS to non-IFRS results. At this time, it is my pleasure to introduce Ofer Druker, CEO of Tremor International. Ofer, please go ahead.

Thank you, Billy, and welcome to everyone joining us today. I will begin by providing an overview of our results and strategy, and then will hand over the call to our CFO, Sagi Niri, to discuss our financials. Results for Q4 include contributions from Amobee and full year 2022 results include contributions from Amobee for the September 12, 2022, through December 31, 2022 period. Following record organic growth in 2021, we continue to deliver strong results in 2022, highlighted by significant market share expansion and above-average growth rates within CTV. We were able to achieve this result while executing a strategic acquisition and investment that strongly position the company and its customers for future success despite continuing challenging market conditions that weighed heavily on advertising demands throughout 2022. In the fourth quarter, we generated record contributions ex-TAC of $103 million, reflecting 16% year-over-year growth, as well as record full-year contributions ex-TAC of $309.7 million, reflecting 3% year-over-year growth. We achieved this growth while remaining focused on generating high levels of cash flow and profitability, which we find even more important in certain markets. We strongly believe our operational efficiency driven by our end-to-end technology stack is a strong competitive advantage and differentiator. It positions us well to weather periods of advertisers’ uncertainty and provides flexibility to invest in our platform to drive future growth and innovation. For both Q4 and full year 2022, we achieved our most recent adjusted EBITDA target, generating $36.9 million and $144.9 million of adjusted EBITDA respectively. For the full year, we generated an adjusted EBITDA margin of 43% as a percentage of reported revenue and 47% as a percentage of net revenue. These results are particularly impressive, as we invested significant management and combined team efforts in acquiring and integrating Amobee, which operated at a loss when we closed the acquisition in September. In addition to generating record net revenues and strong profitability, we continue to grow our share within CTV at what we believe to be rates faster than several competitors in the industry. This outperformance in CTV highlighted our strength and resiliency in the segment and was driven as a direct result of our intentional strategy to emphasize and invest significant resources in CTV-related product development over the last several years. We believe this ongoing emphasis on growing and expanding our capabilities within CTV will provide the company and its customers with increasing advantages over time. In Q4, we generated record CTV spend of $99.6 million, reflecting a significant year-over-year growth of 59%. For the full year, we generated record CTV spend of $283.6 million, reflecting 41% growth compared to 2021. CTV and programmatic activities have been and will continue to be primary focus and growth drivers for the business. We strongly believe advertisers seeking solutions within CTV will continue to favor end-to-end tech platforms, as they provide added cost and data advantages compared to one-sided solutions and better optimize the supply chain, which other major ad tech companies are increasingly echoing. We have observed several companies across the industry investing more and more resources into SPO while intentionally rearranging their operations to more closely mirror an end-to-end business model. While these companies are moving to operate end-to-end at the business level, we take a step further as we are supported by our end-to-end technology platform, which provides the company with what we believe to be a massive advantage that can assist us in growing our market share over the coming years. In addition to having even stronger conviction in our end-to-end tech and operating model, in 2022, we further enhanced our programmatic capabilities of CTV, data, and video offerings through the acquisition of Amobee and investment in VIDAA. Amobee has significantly enhanced and further differentiated our technology platform through the addition of important TV capabilities, including TV planning, new cross-planning, and segmentation. We believe this newly added capability strongly enhances the company's positioning as linear TV and CTV continue to converge and as advertisers and agencies increasingly select solutions that enable them to more effectively plan and deploy spend across both linear and digital. Recent technology developments in the advertising ecosystem, as well as ongoing uncertainty in the advertising environment, have driven customers to be more prudent, data-driven, and strategic in how they plan campaigns and deploy spend to achieve their KPIs. Customers are consolidating budgets and spending with fewer advanced tech platforms that can deliver data-driven solutions across planning and activation, enabling improved returns on expense and better positioning them to react and adapt quickly to rapidly changing industry conditions. The linear TV planning features added through Amobee, combined with our pre-existing strength in a variety of data capabilities within CTV and in-house SSP, enable us to create a new and unique technology to plan campaigns across both linear TV and CTV simultaneously. We believe this is the first of its kind technology that has massive potential in the market and that it is the perfect time for this tech to be integrated into our ecosystem to capitalize on current trends within the industry. As ad-supported streaming continues to grow and linear TV broadcasters increasingly expand into CTV, we believe cost planning is becoming strategic and vital to agencies and brands. This technology enables partners to reduce duplication that took hold when presenting ads on both formats to the same user to better understand each one. While the technology increases our CTV capabilities, it also significantly expands our addressable market as we can now offer powerful and highly desirable solutions to customers within the linear TV market. While we expect faster growth in CTV ad spending, linear TV advertising continues to represent a much larger market than CTV advertising at the moment. We believe well over $50 billion per year will be spent advertising on linear TV in the US versus approximately $20 billion per year in CTV in the US currently. Our new linear TV and cross-planning capabilities have already positioned the company better during initial commercial and partnership discussions with some of the world's leading broadcasters and agencies, and we expect this traction to continue going forward. We are currently engaged in ongoing partnership discussions with leading broadcasters and agencies and are offering trials to those seeking to leverage our cross-planning tools. We are encouraged by early signs that this technology increases the willingness of major broadcasters and agencies to evaluate our tech solutions as well as the likelihood of those broadcasters and agencies adapting offerings across our end-to-end stack. We are optimistic that the tool and enhanced relationships with large broadcasters will not only enable us to effectively access the linear TV market but will also drive more CTV spending across our platform as advertisers seek solutions to help them plan and execute campaigns across both linear and digital. Over time, we will work to onboard more partners and encourage those partners to adapt more of our products, while also seeking to gain an increased level of spending and budget from those partners to deploy across our ecosystem. In addition to the important new planning capabilities we have gained, Amobee also significantly enhanced our omnichannel enterprise, self-serve DSP display and performance media buying capabilities as well. The acquisition also increased financial scale and demand for the significant number of new global brands and agency customers who we are excited to be working with. Since concluding the acquisition, we have made significant progress in quickly combining the company. We consolidated management, sales, marketing, product, and R&D teams, improving efficiency while saving approximately $50 million in annualized operating costs. The integration of new sales team members and getting everyone cross-trained on our product ecosystem took slightly longer than anticipated. However, we believe the teams are now fully integrated and we are confident the combined team is prepared for success going forward. We will remain focused on generating further cost savings by consolidating tech and vendor fees as we work towards combining the Tremor Video and Amobee DSPs into one enhanced platform. We continue to expect to achieve $65 million in total annualized operating cost synergies attributable to the acquisition and to mostly finalize the tech integration by the end of H1 2023. Upon completing the integration, we believe we will have one of the most comprehensive, efficient, and scaled CTV and video-focused end-to-end platform offerings in the open market. Our platform will also be further differentiated through our relationship with Hisense and strategic investment in VIDAA, which we believe will further support our growth and leadership position within CTV for years to come. In mid-2022, we invested $25 million in VIDAA, a small TV operating system and streaming platform and subsidiary of Hisense. This investment created a powerful partnership with one of the fastest growing global CTV operating systems and one of the largest and fastest growing smart TV OEM brands, while further enhancing our data and media offerings. Over the past several months, VIDAA has made significant progress growing its global market share. VIDAA has recently driven increased adoption by several additional smart TV brands and major CTV partners. We also believe VIDAA now delivers a wide variety of major US export services and streams an average of roughly 1 billion hours of content per month. VIDAA also recently announced the launch of VIDAA Free, its streaming app offering video on demand, live linear, FAST, and ad-supported content, which will be available on millions of VIDAA powered smart TVs from Hisense. VIDAA Free is currently live in the US, with plans to expand globally later this year. As VIDAA, equivalent to channels like Roku Channel, continues to scale and as VIDAA adds more ad-supported content in the future, we expect to see increasing benefit from the ad monetization exclusivity in the US, UK, Canada, and Australia gained through our investment. VIDAA Parent company Hisense, which also owns the Toshiba smart TV brand, has also recently achieved major success and recognition for growing its global smart TV distribution. According to AVC Revo, Hisense rose to number one in the world for monthly global smart TV shipments for the first time during December. As Hisense continued to grow share in the global smart TV market, our exclusive right to distribute VIDAA Global ACR data gained through our VIDAA investment should provide increasing benefit and become even more desirable to those seeking this data set for CTV targeting and measurements. I can't emphasize enough how unique our access to this data is as most other major smart TV OEMs monetize ACR data in-house. While other ad tech companies in the open internet may have limited access to ACR data, we don't believe any of our peers have global exclusivity like we do with one of the fastest growing global CTV brands. As we look ahead, we expect our investment in VIDAA will begin generating meaningful revenues for the company starting in late 2023 and beyond. We also continue to invest in our share repurchase program during the fourth quarter to drive what we believe will be added long-term value for our shareholders. In Q4, we repurchased approximately 3.1 billion ordinary shares, reflecting an investment of GBP9.5 million or $11.3 million. For the full year 2022, we repurchased approximately 16.9 million ordinary shares or roughly 11% of shares outstanding, reflecting a total investment of approximately GBP70 million or $86.2 million. Should shares remain at discounted levels, we will seriously consider extending the program or authorizing a new program to take advantage of valuation opportunities once the current program is finished. In addition, we continue to generate increased momentum and adoption across Tremor Video and Unruly. During Q4, Unruly added 87 new supply partners, including 56 in the US. For all of 2022, Unruly added 319 new supply partners, including 160 in the US. During Q4, Tremor Video added 42 new advertiser customers and 233 for all of 2022 across retail, political, CPG, travel, and automotive verticals as well as others. Finally, we intend to rebrand the company and consolidate our brand portfolio under one name later this year. We believe this will enhance our commercial focus and better convey the holistic value proposition of our unified end-to-end technology stack in the market for the company's next phase of growth. With that, it is now my pleasure to turn the call to Sagi.

Thank you, Ofer. Today, we’ll review highlights and key financial and operational drivers of our Q4 and full year 2022 performance. As a reminder, Q4 results include contributions from Amobee, while full year results include contributions from Amobee for the September 12, 2022, through December 31, 2022 period. For the three months ended December 31, 2022, we generated record contributions at stack of $103 million compared to $88.6 million in Q4 2021, alongside Q4 adjusted EBITDA of $36.9 million compared to $54 million in Q4 2021 in line with market expectations. We also generated record programmatic net revenue of $94.5 million in Q4, reflecting year-over-year growth of 27%. During the quarter, we saw an improvement in the advertising demand environment compared to Q3, particularly when compared to July and August. However, macroeconomic challenges continue to impact advertising demand across several verticals and formats, most notably in December, and the holiday shopping and advertising season wasn't as strong as we've seen in prior years. Additionally, the US midterm election cycle and 2022 FIFA World Cup didn't generate significant revenues for the company during the fourth quarter. From a vertical perspective, we saw advertising spend in Q4 increase year-over-year in industries such as automotive, entertainment, food, retail, sports, and political, while verticals such as CPG, personal and consumer finance, fashion, electronics, and other sectors tied heavily to consumer discretionary spending saw advertising spend decline year-over-year during Q4. Importantly, despite the macro backdrop continuing to impact the overall advertising demand environment, we continue to significantly expand our market share within CTV, generating record CTV spend on our platform in the fourth quarter. CTV spend on our platform increased to $99.6 million in Q4, reflecting 59% year-over-year growth compared to CTV spend of $62.5 million during Q4 2021. Video, including CTV, continued to account for an overwhelming majority of our Q4 and full year 2022 net revenue at 73% and 79% respectively. Our ongoing focus on CTV and video was further enhanced through the acquisition of Amobee, investment in VIDAA, and integration of Spearad, positioning us very well to continue expanding our market share in this fast-growing segment of digital advertising. Additionally, as streaming services continue to launch new ad-supported tiers and advertisers increasingly transact programmatically, we feel that we are indexed to some of the fastest growing parts of the market with scale and ability to service customers across their entire workflow. We also continue to generate strong margins during our first full quarter of being combined with Amobee, which was a loss-making business when we first acquired the company. In Q4, we generated an adjusted EBITDA margin of 34% on a reported revenue basis and 56% on a net revenue basis. As we continue to integrate the company, we expect to incrementally drive margin back towards historical levels over time. For full year 2022, we generated record contributions ex-TAC of $309.7 million compared to $302 million in full year 2021, which was in line with market expectations. We also generated record programmatic net revenue in 2022 of $274.4 million, which reflected 3% growth compared to 2021. The company also drove record annual CTV spend of $283.6 million, which reflected 41% year-over-year growth from the $201 million of CTV spend generated in 2021. In 2022, CTV spend reflected 39% of total spend and 42% of programmatic spend. During full year 2022, we also generated adjusted EBITDA of $144.9 million in line with market expectations compared to $161.2 million of adjusted EBITDA in 2021. For full year 2022, we generated an adjusted EBITDA margin of 43% on a reported revenue basis and 47% on a net revenue basis. We will continue to remain acutely focused on generating high levels of profitability, as we believe this enables us to invest in our platform to drive future growth and technological innovation, while also positioning us strongly to opportunistically invest in our shares at discounted valuation levels to generate added long-term value for shareholders. We also achieved a net retention rate of 80% during 2022. While the company net retention rate declined year-over-year, largely due to lower spending by advertising customers amid challenging market conditions, the company was able to increase its active customer base. Turning to our cash flow. We generated net cash from operating activities of $23.9 million during Q4 2022 versus $48.7 million in Q4 2021. For full year 2022, we generated net cash from operating activities of $83 million versus $170.1 million in 2021 and Amobee contributed negative $1.5 million to those full year results. In 2022, we also incurred approximately $4.9 million in one-time severance and retention bonus related costs associated with the reorganization of Amobee employees into the Tremor International base, and again, maintain the particular focus on retaining sales, marketing, technology, and product talent during the consolidation process to further the combined companies’ go-to-market and technology strategy. In addition, we currently expect our 2023 share-based compensation expense to be significantly lower than in 2021 and 2022. Under the currently in place plan, we expect to incur less than 25 million in share-based compensation in 2023. Further, if we are unable to obtain shareholders’ authorization to extend our employee equity incentive grants, we may be required to incur higher cash-based compensation charges to replace employee equity incentive grants in order to continue to attract and retain talented employees. As of December 31st, we had $115.5 million net cash, as well as $80 million undrawn on our revolving credit facility, providing ample liquidity for the ongoing needs of the business, as well as for future potential strategic investments and initiatives. During the fourth quarter of 2022, we experienced an 85% free cash flow conversion and for full year 2022, we experienced a free cash flow conversion of 96%. Non-IFRS diluted earnings per ordinary share was $0.15 for Q4 2022 versus $0.27 in Q4 2021, and $0.60 for the 12 months ended December 31, 2022, versus $0.83 for the 12 months ended December 31, 2021. Finally, I'll now turn to our outlook. Global macroeconomic uncertainty, which negatively impacted the advertising industry throughout 2022, has continued to drive challenges for Tremor with global customers and its partners to this point in 2023. We saw the advertising environment significantly soften during the month of December and January and into early February, but we've observed potential signs of recovery and stability in the market since that time. However, due to these ongoing challenges driving continued advertiser uncertainty, we expect global advertising to remain constrained during H1 2023 and potentially longer. Although, we do not anticipate at this time for advertising demand to weaken to the soft level observed in late 2022 and earlier in 2023. As a result, we are lowering our full year 2023 contribution ex-TAC outlook to approximately $400 million and our 2023 adjusted EBITDA outlook to be in the range of approximately $140 million to $145 million. Despite this lowered annual guidance, we believe the company will experience incrementally improved results in H2 2023, driven by anticipated positive effects of completing the integration of Amobee, expected meaningful revenue benefits from the company's investment in VIDAA, which we believe will begin in late 2023, and expectations for tempered improvement in the global advertising demand environment. In 2023, we believe revenue tied to our core business focused on programmatic activities will grow approximately 5% on a combined pro forma basis while revenue in our performance business is expected to decline year-over-year. Despite near-term challenges, we believe our deepened footprint within CTV, video, and data, powerful partnerships, and newly enhanced and differentiated tech capabilities position us incredibly well for future growth and market share gains. We also believe our efficient end-to-end operating model enables us to generate healthy levels of cash and profitability, offering us the flexibility to opportunistically invest in further tech enhancements and platform differentiation to more strongly position the company for when market and advertiser conditions improve. I'm incredibly excited for the company's positioning within the industry and the recent milestones we've achieved, and I believe our future looks bright. With my remarks completed, I'll turn the call back to Ofer.

Thank you, Sagi. 2022 was an incredible year. We significantly grew our CTV market share and maintained our focus on generating strong cash flow and profitability, while enhancing our tech capabilities to drive further growth and added long-term shareholder value. The added scale, tech, data, and cross-planning capabilities gained through Amobee, as well as the exclusive global ACR data rights and enhanced monetization of exclusivity gained through investing in VIDAA, also enhanced our end-to-end platform in a meaningful way. Our differentiated ability to provide solutions across planning, data, activation, and media put us on a very short list of providers that can benefit brands, agencies, broadcasters, and CTV partners, enabling them to achieve their KPIs in ways no other single vendor can. We remain excited for the coming enhancements to our platform and unifying our brands, which we believe will further solidify our position as a leader in the linear TV and CTV advertising ecosystem. Operator, we will now open the call for questions.

Our first question comes from Matt Swanson from RBC Capital Markets.

Sagi, we haven't seen a lot of full year guides come from your ad tech peers. So I think it'd be really helpful if you could give us a little bit more detail on your macro assumptions and kind of maybe even some of the seasonality or linearity we should expect when thinking about our models from first half to second half split?

Yes, I think we are like expecting or experiencing some weaknesses in Q1, of course, driven by the well-known challenging macroeconomic factors. I think as Ofer mentioned, the integration of Amobee team members and cross-sale training took us a little bit more than expected. Although, we managed to get the efficient plan in place very quickly. And of course, we are anticipating that during 2023 we will see some improvements from the scale of the number of ACR data or the level of ACR data that we will get from VIDAA and of course from other initiatives that we are seeing already for the first time. Regarding the seasonality, of course, as the marketing/advertising market is growing, we think that in H1, we will see somewhere around 42% and of course, 58% will come in H2. Again, I'm reading several analysts and other surveys; people are expecting H2 macroeconomics to get on a better trend. So of course, we will benefit from that as well. But I think this is what we are seeing for now.

And then Ofer, I know it's early for Amobee, it's great to see the cost synergies. But maybe from conversations with their customers or if you have seen anything yet in forms of revenue synergies? I know getting Amobee to go cross-platform was one of the big intriguing points of this deal.

First of all, I think that Amobee brought to us a lot of capabilities that we were not having before. We just added a full capability for planning on linear but also cross-planning, which is really important in this period of time. And we will touch this point in a minute, but about the business model that is also taking into account the elements of Tremor and helping it to become much more profitable. But in general, when we are looking at planning tools, I think that there are two elements that are really important to mention here. One of them is the timing. Meaning that people want to get more out of their money. So better planning usually means better results. And I think that with the tools that we are offering now to linear and cross-platform advertisers, they can get more out of their money. And working with us, they can basically achieve more when they are running on linear but also when they are running on streaming and digital alongside that. The second thing is the growth or the rise of the AVOD. Meaning in the past, I feel that linear that was a very big element, more than $50 billion just in the US. People were looking at the CTV and so on but it was not meaningful for them to move their attention also to this channel. Now, because of the growth of the AVOD, people are looking at that and we are there to basically help them and move also budget to this side of the equation. So I think that this is very meaningful, because when you are just selling planning tools without activation and without the SSP part or the connection between the planning, the DSP, and the SSP as a full platform, end-to-end platform, you are not able to basically keep this business profitable. But when you are connecting the dots like we are now offering in the market, you are able to do that in a very meaningful manner. And as we wrote also in the script when we spoke about it, we are looking at that, that advertisers really interested in that, it's increasing the interest of broadcasters, big agencies, and advertisers to work with us. And I think that it will give us a lot of room to grow together with Amobee. Regarding synergies, aside from that, is also shifting and growing the trust of the Amobee advertisers in the full system, in the end-to-end system to push more budget to enrolling, to enjoy from our products around the data and targeting that is very meaningful for them and adds a lot of value when they are buying media on a network solution. So in general, I feel that Amobee's combination with Tremor is very meaningful to us, and it's two big systems that we are connecting now in the last few months, but it's starting to show the fruits that we were expecting to see.

Our next question comes from Laura Martin from Needham.

Could we go back to the ACR data? A couple of things you said were really intriguing. You said that other people sort of use their ACR captively, which definitely Roku does. Are you guys going to actually sell your ACR data and sort of compete with the Samba TVs and the iSpot TVs, or are you just going to use the ACR data to give your platform a competitive advantage? So let's start with that.

We have a strong belief in ACR, which we've been utilizing for over five to six years. Recently, we signed a strategic agreement with VIDAA, in which we invested $25 million to secure long-term exclusivity. This gives us exclusive rights to the ACR data from Hisense, tied to the VIDAA narrative, for the next couple of years globally. This is significant because, as you mentioned, many are using ACR in isolation. We intend to enable users to leverage targeting to access the open web, and we have the rights, under our agreement with Hisense, to sell or license this data to third parties for targeting and measurement purposes. When we began discussions with Hisense around two years ago, they were ranked fourth or fifth, and we even mentioned in our press releases that we aspired to be number two one day. By last year, VIDAA had risen to number two, and Hisense became number two in TV deliveries. In December of last year, they briefly achieved the top spot as the best-selling CTV worldwide, delivering smart TVs globally. We view this as a significant development. We hold the rights to this data for the next few years, which we plan to use for our targeting efforts, while also enabling others to target through media purchases or our platform, and we can license this data to third parties for targeting and measurement.

My second question is about your reported 80% retention rate and the increase in active customers. Could you provide some details on how many active customers you added in the quarter or the year, and what segments are you gaining them from? Are the new customers coming from the automotive sector or other areas?

What we mean to say is that our retention rate is very high, but some of our customers have reduced their spending this year compared to last year due to microeconomic factors. Given the current market conditions, they are not investing as they did in the past and are lowering their volumes. However, we continue to add more clients. In the earnings call, we mentioned that we added around 200 advertisers. We have significantly increased our client base, and we are not focusing on a specific industry; instead, we are targeting various sectors. Our teams in the US and internationally are promoting our product to all verticals and types of advertisers. Typically, we approach these clients through agencies while also working directly with them. Most of our business is in the US, where we target what we call national advertisers who can spend substantially on advertising. In terms of numbers, we added about 233 new clients in 2022.

Our next question comes from Thomas Doheny from Stifel.

This is Thomas on for Mark Kelley. First, I was wondering if you could please provide any color on CTV growth expectations for the year. And then kind of following up on that, how much visibility do you guys have for the full year now compared to the end of last year?

When we examine CTV, we see impressive growth, achieving 41% year-over-year and 59% in the fourth quarter. Despite the challenges of last year, we maintained CTV growth. Now, as we report, we have the advantage of analyzing our peers and recognize that we are outperforming many of them in the CTV space, which is quite noteworthy. This achievement stems from several factors, including our advanced technology for CTV, targeted products we have developed over the years, and our unique data-driven solutions like Tr.ly, which help clients manage costs effectively and improve efficiency. Additionally, our extensive network of publishers contributes to our market reach. In 2022, we sustained growth with a year-over-year increase of 41% and 59% in the fourth quarter, and we believe this trend will persist. Our strong market position and the expertise of our sales, operations, and data teams enhance the service we provide to advertisers purchasing CTV. They consistently choose us for managing their CTV campaigns, which reinforces our expectation of continued growth. While it is challenging to predict growth for this year due to the macroeconomic climate, we believe we will see meaningful growth moving forward.

And one follow-up. So I was just curious if you could quantify or talk a little bit more about how big the World Cup was for key results?

It wasn't significant. What we were able to showcase this time was more about our capabilities, specifically entering into an exclusive agreement with FIFA to manage their CTV globally, enhancing distribution on VIDAA and Android TV to reach millions of users worldwide and to facilitate advertising on that platform. This is an important milestone and has enhanced our ability to do so. However, it wasn't impactful because it took place at the end of the year, which wasn't particularly strong. December did not perform as robustly as usual. Additionally, the event occurred in Qatar, which presented some challenges with certain advertisers. In summary, while it wasn't impactful, it highlighted our capacity to effectively manage a sports event on CTV, tying together our comprehensive solution, our partnership with VIDAA, and our collaboration with Hisense globally.

Our next question comes from Eric Martinuzzi from Lake Street.

I wanted to revisit the guidance given the reset. It's a significant shift in net revenue and contribution excluding TAC. We are now estimating $400 million, down from the previous $460 million, which is approximately a 13% decrease in just the last 90 days. On a pro forma basis, the core programmatic is up about 5%. Can you help me better understand the factors influencing this change?

Yes. The environment is very dynamic right now. When we provided our guidance at the beginning of the fourth quarter last year, we were cautiously optimistic about the future. However, it became evident that Q4 was not typical; it was underwhelming, especially in December, which performed below expectations. This year also started slowly. Many agencies and clients are delaying their spending and investment decisions, which pushes things further out and gives us less time to fulfill this demand. Additionally, there's a lot of uncertainty. We are facing two main challenges: the macroeconomic landscape and the need to integrate Amobee with Tremor effectively. Given these factors, managing to grow by 5%, as many of our peers have shown, while maintaining high profitability is significant. We're achieving this not due to any major developments, but rather due to the macroeconomic conditions that have reduced client spending. Conversations with our clients indicate that we don't expect a substantial change in this situation throughout the year.

Eric, in addition to what Ofer mentioned, when we examine our peers' guidance, it appears that none, excluding The Trade Desk, are projecting even a modest single-digit increase. Therefore, our decision to lower guidance aligns with the trends observed among our peers, most of whom are experiencing around 5% growth. Moreover, as you pointed out, our programmatic activities, which are central to our operations, are growing year-over-year on a pro forma basis by 5%, while our legacy non-core performance activities are on the decline.

I am new to the story and would like to understand the seasonality. I realize you haven't provided specific guidance for Q1, but could you explain what is typical for the pro forma combined with Amobee? What is the usual seasonal decline from Q4 to Q1?

So again, I think that's what has happened in the last two years, with the emergence of the pandemic in 2020 and stepping out of the pandemic in 2021. That situation has mixed and shifted our understanding of seasonality. I believe that the first half of the year will be around 42% and the second half will be approximately 58%.

Historically, that was the number a few years ago, but I think that all the seasonality in the past few years changed because of the pandemic. And after that, in the last year or so, like in 2020, the pandemic started, and 2021, we saw a rise in the second half and then up and down because of the social unrest. And then again, in 2022, we saw like a little bit different behavior than we saw years before because of Q4 that was not acting really like a Q4 in January.

And my last question is on the new brand. Is this potentially consolidating to an existing brand? Or is this creating a new brand out of whole cloth?

Regarding the brand, there are a couple of reasons why we want to pursue rebranding. One reason is to internally connect all our employees to the company, helping them feel like they are part of a new family. The second reason is to establish a new brand that clearly communicates to clients and partners what we offer, avoiding confusion from using multiple brands. This effort serves to showcase our capabilities externally while also fostering better internal connections, and we are already in the process of doing this with plans to complete it soon. So we wouldn't have any baggage from legacy brands. It would be something new.

Our next question comes from Andrew Boone from JMP Securities.

I wanted to ask about VIDAA Free. It seems like a tremendous opportunity as you guys have, I would assume, exclusive access to a CTV streaming channel and AVOD channel. Can you just double-click on what that could possibly mean? Help us understand what it is, the timing of it, and then just the overall opportunity.

VIDAA is currently developing streaming channels by collaborating with content partners. They are implementing this on TVs using their OEM system and operating system. We have exclusive rights with them due to our investment of $25 million over the past couple of years. This investment will allow us access to more exclusive media in the coming years across the US, Canada, Australia, and the UK. They are already seeing significant global traffic, and this partnership will enable us to provide even more unique and exclusive media offerings to our clients. We are closely collaborating with them and adjusting our technology to ensure seamless global operation on their platform.

And Andrew, just for you to understand, of course, the operating system is the one that is controlling what the user or the consumer will see on his TV. So of course, they can control the level of exposure and the exact location of where their first channel will be shown. So they can like put some kind of pressure or allocation towards the users in order to consume their content.

And the next thing I wanted to ask about was just the repurchase cadence as we think about 2023. Shares are down this morning. How do you guys continue to think about buybacks, especially given the fact that you're still generative in terms of cash flow and then the significant cash balance that you continue to operate with?

Sagi, do you want to take them?

Yes. I think as Ofer mentioned in his words, it's something that we are considering. Of course, as you said, our fundamentals are still very strong. We are cash generative, we are profitable. So as long as the share price and the valuation of the company will make sense for us to keep on and adjust our repurchase plan into a much massive one, of course, we will do that. For now, we announced like the $20 million repurchase in October, which is close to end. And of course, we'll take our decision in the next weeks.

Our last question will come from Andrew Marok from Raymond James.

Apologies if these have already been answered, been bouncing around between a couple of calls. We heard commentary from other players in the space about '23 being an inflection year, not only in the amount of AVOD supply but also the amount of inventory going biddable. What assumptions are you including in your outlook on these fronts?

So you're talking about growth of media, right?

Yes.

I believe that what we need to focus on is the demand side, specifically the budgets from clients that are being funneled through agencies or directly to the platform. Currently, the main issue isn't related to the media; we have a strong presence in the market concerning CTV, online video display, and various other formats. The real challenge lies in the investment levels that advertisers are prepared to contribute to the market, which is crucial for growth. Looking at the results from many companies purchasing media to promote their offerings, it’s clear they are reducing their spending on media. Therefore, the challenge stems not from the media side but from advertisers and agencies that drive the market. Over the past year, we have observed many advertisers and agencies cutting their expenditures. While we hope that the situation won’t worsen, we have seen a decline in spending from many of our advertisers since February of last year. Additionally, our peers seem to be experiencing similar trends.

Yes. In addition, I think that we have some kind of advantage here because we just go from the investment in Amobee, an ATV tool, which is a planning tool for linear TV. And now this planning tool knows how to take linear TV campaigns and find the same audience on digital. So this gives us some kind of advantage where an advertiser/agency/customer wants now to find his audience, he can very quickly find it through linear into digital and vice versa, which I'm not sure that most of our competitors have this technology capability right now.

And then just lastly on the guidance with your commentary around 5% combined pro forma programmatic growth, just want to be 100% clear that I understand the definition of what pro forma is and kind of what assumptions you're baking in for Amobee as well.

So when we are saying on a pro forma basis, we are meaning that if we are taking 2022 and adding the Tremor numbers into Amobee numbers on a full-year basis, this is what we are calling pro forma basis. So this number or this programmatic number will grow in 2023 by 5% and it will be offset by the decline of the non-core activity, which is performance.

We have no further questions in queue. I would like to turn the call back over to Ofer Druker for closing remarks.

Thank you all for being here. It's an exciting time for us as 2022 was crucial for our strategic growth and future development. We improved our capabilities and have focused on planning, which is essential during this challenging market phase, as people are looking to maximize their budgets. By utilizing our tools, they can achieve better results without increasing spending due to improved planning, which is vital. This also positions us to expand the enterprise solutions we offer, contributing to our long-term success. Our investment in VIDAA, particularly in connected TV, has already yielded impressive results, with a 59% growth in the fourth quarter and a 41% increase for the full year, which is significant. This success is attributed to our creativity and technological innovation, along with our market reach. The collaboration and investment in VIDAA provide us with a unique asset in ACR, allowing us to leverage it effectively. Additionally, VIDAA Free and VIDAA streaming offer us exclusive opportunities, which are critical in today's market. The outlook is promising; 2022 has laid a foundation for long-term growth. Our investments in Amobee and VIDAA are enhancing our strengths in TV, connected TV, data, and video, as we have focused on in recent years. Even during tough times, we believe we are heading in the right direction and are excited and confident about our future. Thank you, and I look forward to our next call. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.