Earnings Call
Nexxen International Ltd. (NEXN)
Earnings Call Transcript - NEXN Q2 2023
Operator, Operator
Welcome to Tremor International's Second Quarter Ended June 30th, 2023 Conference Call. 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 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 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.
Billy Eckert, Vice President of Investor Relations
Thank you, operator. Good morning, everyone, and welcome to Tremor International's financial and operating results call for the three and six months ended June 30th, 2023. 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 IR website at investor.tremorinternational.com. During today's conference call, we will make forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. We advise caution and reliance on forward-looking statements. These statements include, without limitation, statements and projections regarding our anticipated future financial and operating performance, market opportunity, growth prospects, strategy, financial outlook, partnerships and anticipated benefits related to those partnerships and forward-looking views on macroeconomic and industry conditions as well as any 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 access at 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 or unexpected changes in macroeconomic or industry conditions. More detailed information about these risk factors and additional risk factors are set forth in our filings with the US Securities and Exchange Commission including, but not limited to, those risks and uncertainties listed in the section entitled Risk Factors in 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 in IFRS and non-IFRS terms. We refer you to the company's press release for additional details, including definitions of non-IFRS items and reconciliation of IFRS to non-IFRS results. At this time, it is my pleasure to introduce Ofer Druker, CEO of Tremor International. Ofer, please go ahead.
Ofer Druker, CEO
Thank you, Billy, and welcome to everyone joining us today. I will begin by providing an overview of our results and strategic initiatives. I will then hand the call over to our CFO, Sagi Niri, to discuss our financials. We then open the call for questions. As a reminder, Q2 and H1 2023 results reflect the combined performance of Tremor International and Amobee, while Q2 and H1 2022 figures do not include results from Amobee. Several years ago, beginning with the acquisition of RhythmOne in 2019, we embarked on a mission and strategic journey to become leaders in the CTV advertising arena. We strongly believe and correctly predicted that CTV was the next major frontier for advertisers to reach potential customers, enhance brand recognition and drive future growth. After more than four years, highlighted by significant organic growth, a public listing in the US, the creation of key partnerships and the successful acquisition and integration of three additional companies, I am pleased to report that Q2 reflects an important milestone on our path to CTV leadership. In parallel with the completed integration of Amobee, a massive tech-rich acquisition we announced last September, which earned us significantly added scale and important data planning and enterprise DSP capability, we took a very important step to rebrand our major products and platforms under a single united brand Nexxen. The intent of the rebrand was to simplify our story to the market, and it seems that this intention has been well received by customers and prospects, resulting in an overall better understanding of our business. While the rebrand was just announced in June 2023, and it's still early days, we believe it will drive massive improvements in our market position. The name Nexxen is a nod to the horizontal nature of our platform, borrowing from the Latin word, 'nectere,' which means to connect or bind. We believe the new name captures our ability to link different parts of the ecosystem, including the demand and supply side as well as Linear and Connected TV, to create something that is both future-facing and impactful. As part of the rebrand, we changed the name of our DSP to Nexxen DSP, our SSP to Nexxen SSP, and our Ad Server to Nexxen Ad Server, with Nexxen SSP and Nexxen Ad Server collectively going to market as Nexxen CTRL. The rebrand has simplified the value proposition of our unified data-driven platform for our sales teams, customers, and prospects. It has also positioned our sales team to achieve greater success packaging, multiplying solutions for customers to enable them to better accomplish goals, all of which we are confident will drive increased revenues per account over time. We also plan to change our parent company name from Tremor International to Nexxen International, which is subject to shareholders' approval at our AGM later this year. During the second quarter, we achieved our ambitious targets of both completing the majority of the technology integration of Amobee and realizing $65 million in annualized operating cost synergies by the end of Q2 2023. We believe this underscores the efficiency of our horizontal operating model and our proven track record of successfully integrating large-scale acquisitions in a timely manner for the benefit of customers and shareholders. As I mentioned, we strongly believe in CTV and bet on its growth since 2019, working for several years and investing significant resources to enhance our technology capabilities and footprint in the segment. We believe we now possess one of the most scaled data-field and comprehensive unified horizontal ad tech platforms in the open internet, which we are confident will enable us to gain share within CTV for years to come. Our platform offers both differentiated and exclusive data including exclusive global ACR data through VIDAA as well as robust and unique planning, activation, targeting, and measurement solutions that are purpose-built for advertisers, agencies, CTV publishers, and broadcasters to optimize return and exceed KPIs, particularly within CTV. Our ability to cater to both sides of the ecosystem enables us to holistically serve customers, providing significant data and cost advantages while positioning the company to maximize future revenues and profitability. We quickly executed our integration plan, saving significant costs through the reorganization of our now unified employee base as well as through technology, vendor, and data hosting cost savings associated with the consolidation of our DSP into a significantly enhanced Nexxen DSP. We believe Nexxen DSP is one of the most powerful DSPs in the open internet. It features robust enterprise sales service and media buying capabilities, unmatched linear and CTV cost planning technology, and critical TV data including exclusive global access to VIDAA's ACR data for targeting and measurement. The combination of which is extremely beneficial for advertisers and agencies. Following the bankruptcy of MediaMath, we believe the Nexxen DSP is one of the only major DSP options remaining in the open internet and that we will benefit from both the added scale of the Amobee acquisition as well as this industry consolidation. Over the past several months, we have also worked to enhance our combined sales capabilities, go-to-market strategy, and overall market awareness. We believe this combination puts us in a stronger position to accelerate future revenue growth and increase our best customers adopting multiplied tech solutions across our ecosystem going forward. Through the Amobee acquisition, we added two important technology capabilities that we are particularly excited about. We believe both strongly enhance and complement our already robust platform and position us extremely well to attract new customers and encourage current customers to increase spending on our platform. As announced in April, we launched our first-to-market growth platform planner, enabling broadcasters, advertisers, and agencies to holistically plan campaigns simultaneously across linear TV and CTV. While CTV is expected to grow at a much faster CAGR of around 17% through 2025, according to eMarketer, and its primary focus for Nexxen, Linear TV currently represents a significantly larger market. We believe the ability to cross-plan campaigns will accelerate our CTV opportunities as we can now serve linear advertisers seeking to expand into CTV to reach incremental audiences and enhance returns as the two formats converge. This is a unique technology that will take time to accelerate adoption, but we believe it will generate value for our customers and drive long-term strategic partnerships. We have already seen adoption by and significant interest from some of the world's largest agencies and broadcasters. The second pivotal technology gained through Amobee is Nexxen Discovery, which helps advertisers leverage and organize significant amounts of data simultaneously across web, social media, and TV to enable enhanced audience knowledge and better audience targeting, to more efficiently and effectively plan campaigns. By leveraging Nexxen Discovery, advertisers and agencies can integrate powerful audience data into campaign plans to seamlessly activate through our DSP with a push of a button, ultimately maximizing return on advertising spend. This offering has generated adoption by and significant interest from both customers and prospects, and we have confidence it will continue to drive additional customers to our platform. We also announced a partnership with Scope3, creating a first-to-market Green Media Product for CTV. The partnership enables Scope3's carbon emission measurement methodology to be applied to CTV inventory with buyers able to access GMP curated deals to the Nexxen SSP. This allows customers to achieve performance goals while mapping and measuring carbon emissions of media spend within CTV. This tool has generated significant interest from and adoption by agencies as sustainability has become an increasingly core focus for them and their customers. Continued strategic investment in creating products purpose-built for success within CTV has been core to our ability to generate as much momentum as we have in the format, and we believe it will be instrumental to us continuing to grow share in the future. In Q2 2023, we delivered year-over-year and quarter-over-quarter increases in contribution ex-TAC, CTV revenues, and programmatic revenue. We also significantly improved adjusted EBITDA and adjusted EBITDA margin compared to Q1 2023 due to higher contribution ex-TAC driven by increased demand for our programmatic solutions and improved environment compared to early Q1 2023 and the cost benefit associated with completing the Amobee integration. However, contribution ex-TAC was partly offset by declines in our performance business as well as continued challenging advertising conditions driven by macro uncertainty, which, to some degree, reduced advertiser spending and willingness to try and adopt new products. The decline in our performance business was expected as we devoted more resources to our core programmatic business. In addition to challenges in the broader environment, lower-than-expected contribution ex-TAC in Q2 was also the result of some unexpected sales team turnover and longer and more complex sales cycles related to our strategic focus on driving enterprise deals featuring multiplied technology solutions. This, in some cases, pushed larger expected deals out to 2024. As conditions improve over time and as advertisers' appetite to increase spending and adopt new efficient CTV-related solutions increases, we are confident that we will be better positioned than ever to capitalize on growth opportunities within CTV and to reaccelerate contribution ex-TAC growth. During the second quarter, we generated contribution ex-TAC of $80.2 million, reflecting a year-over-year increase of 13% from $70.8 million in Q2 2022 as well as a 20% increase from Q1 2023. For H1 2023, we generated contribution ex-TAC of $147.1 million, reflecting an increase of 4% compared to $141.8 million in H1 2022. Contribution ex-TAC growth was driven primarily by increased programmatic revenue. We generated programmatic revenue of $76.3 million in Q2 2023, reflecting 26% growth from $60.7 million in Q2 2022 as well as 22% growth from Q1 2023. We also successfully expanded within CTV, generating Q2 CTV revenues of $24.7 million, reflecting a 5% year-over-year growth from $23.6 million in Q2 2022, as well as a 16% growth from Q1 2023. We generated CTV revenues of $45.9 million during H1 2023, reflecting a 17% year-over-year growth from $39.4 million in H1 2022. In addition, we significantly improved adjusted EBITDA and margin in Q2 2023, delivering adjusted EBITDA of $21 million, which increased 137% from $8.9 million in Q1 2023. We generated this impressive quarter-over-quarter increase despite an approximately $1.7 million adjusted EBITDA headwind related to the bankruptcy of MediaMath. While the bankruptcy of MediaMath has impacted our adjusted EBITDA during Q2 2023, we believe we may benefit from potential new advertisers and talent additions related to this major DSP company's exit from the market. Our adjusted EBITDA margin increased to 25% on a revenue basis and 26% on a contribution ex-TAC basis in Q2 2023, doubling from adjusted EBITDA margins of 12% on a revenue basis and 13% on a contribution ex-TAC basis in Q1 2023. Please note that Amobee was operating at a significant loss when we acquired the company, which reduced our margins compared to periods prior to the acquisition. This increase following the completed integration underscores our success in optimizing our cost structure to expand profitability, which we continue to expect to further improve over H2 2023 compared to H1 2023. Our partners at VIDAA and ICE continue to achieve success growing global share and distribution. VIDAA now serves as a CTV operating system for over 21 million connected TVs in approximately 180 countries. Hisense, including Toshiba, according to the data from AVC Revo, has the fastest growth rate in the world for CTV shipments in H1 2023, shipping approximately 12.4 million smart TVs, a year-over-year increase of roughly 22%. Hisense's global shipment share increased to approximately 14%, a record high for Hisense, and they continue to rank second in the world for global TV shipments. If Hisense continues to grow market share and its VIDAA operating system continues to grow distribution, we expect to benefit from revenue opportunities associated with our investment in VIDAA and anticipate customers will increasingly seek to leverage VIDAA ACR data for CTV targeting and measurement. Our investment enables global ACR data exclusivity and ad monetization exclusivity on VIDAA media in the US, UK, Canada, and Australia for several years. We believe this reflects an incredibly powerful partnership given VIDAA and Hisense growth rate, and as most major OEMs operate as walled gardens, offering very unique data and advertising opportunities for our customers. Finally, we continue successfully growing our advertisers and supply partners base in Q2 and H1, while also retaining the vast majority of our largest and most significant customers. During Q2 2023, the company added 65 new active spending first-time advertiser customers, including 30 new enterprise self-serve advertising customers, and added 110 new actively spending first-time advertiser customers during H1 2023 across travel, CPG, entertainment verticals, and others. Nexxen Studio, formerly Unruly, also launched the industry-first voice activated ad able to run across all CTV environments, further expanding on our company's robust and significant CTV capability. Additionally, we added 112 new supply partners, including 100 in the US during Q2 2023, and 174 new supply partners, including 149 in the US during H1 2023 across several verticals and formats including CTV, broadcast TV, live sports, and gaming. H/L, a multi-service agency, following its satisfaction with the Nexxen DSP, expanded its product adoption to leverage more of our solutions, including Nexxen Discovery, VIDAA's ACR data, and our cost plan. Now that we have rebranded, completed the unification and integration of our platforms and people, and added new CTV capabilities, we anticipate being able to generate more success stories like H/L, where partners adopt multiplied technology and data solutions across our product suite, particularly as market conditions improve. With that, it's my pleasure to turn the call over to Sagi.
Sagi Niri, CFO
Thank you, Ofer. Today, I will review the highlights and key financial and operational drivers of our Q2 and H1 2023 performance and will also discuss our forward-looking guidance. As a reminder, Q2 and H1 2023 results reflect the combined performance of Amobee and Tremor International, while Q2 and H1 2022 results do not include results from Amobee. For the three months ended June 30, 2023, we generated contribution ex-TAC of $80.2 million, reflecting 13% growth compared to $70.8 million in Q2 2022, as well as 20% growth from Q1 2023. For the six months ended June 30, 2023, we generated contribution ex-TAC of $147.1 million, reflecting an increase of 4% compared to $141.8 million in H1 2022. Growth in contribution ex-TAC over Q2 and H1 2023 was driven largely by a significant increase in programmatic revenue and increased CTV revenue. We experienced strength in the food and automotive vertical during Q2 2023, as well as in our PMP business. On the opposite side, softness was observed in our retail vertical and also in non-CTV related video and mobile formats, which were down year-over-year in Q2 and H1 2023, as well in our non-core performance business as expected, as the company continues to strategically shift its sales focus into CTV. Programmatic revenue for the three months ended June 30, 2023, was $76.3 million, which reflected a 26% increase compared to $60.7 million in Q2 2022, as well as 22% growth from Q1 2023. For the six months ended June 30, 2023, we generated programmatic revenue of $138.8 million, which reflected a 16% increase from $119.8 million in H1 2022. Programmatic revenue as a percentage of revenue increased dramatically to 91% in Q2 2023, and 89% in H1 2023 compared to 80% in Q2 2022 and 76% in H1 2022. We expect this increased programmatic footprint to remain the norm given the added programmatic base gained through Amobee, combined with the strategic shift of sales resources into our core programmatic business. We also continue to expand our CTV share despite challenging market conditions, generating CTV revenue of $24.7 million in Q2 2023, reflecting a 5% growth compared to $23.6 million in Q2 2022, as well as 16% growth from Q1 2023. For the six months ended June 30, 2023, we generated CTV revenue of $45.9 million, which reflected a 17% increase from $39.4 million in H1 2022. Our success in CTV is no accident and has been driven by significant product investment and sales resource shift into this high-growth segment over the last several years. We continue to expect to generate further momentum in CTV going forward as this is a core focus of the business where we see a strong growth runway, particularly as market conditions improve. Video revenue continued to account for a majority of our programmatic revenue at 71% in Q2 2023 and 73% in H1 2023. Video revenue as a percentage of programmatic revenue was down slightly from 75% in Q1 2023, but this was largely attributable to a significant increase in programmatic revenue in Q2 2023. Video revenue as a percentage of programmatic revenue in both Q2 2022 and H1 2022 was 93%, and year-over-year decreases are attributable to the addition of Amobee, which had a historically stronger non-video revenue base, year-over-year decreases in non-CTV related video revenue, and significant year-over-year increases in programmatic revenue. Over time, we expect to cross-sell our video capabilities to Amobee customers, increase the number of customers leveraging us for multiple solutions in video, and attract new customers seeking our video solutions, which is expected to increase video revenue as a percentage of programmatic revenue. During Q2 2023, we also generated significantly improved adjusted EBITDA of $21 million, which increased 137% from $8.9 million in Q1 2023 despite an approximately $1.7 million adjusted EBITDA headwind related to the bankruptcy of MediaMath. This significant rebound in adjusted EBITDA was attributable to a combination of higher contribution ex-TAC generated during Q2 2023 compared to Q1 2023, as well as cost benefits from the complete Amobee integration. There are approximately $65 million achieved in total annualized cost savings related to the Amobee integration, which was largely attributable to the reorganization of the Amobee employee base into Tremor International, as well as reduced technology, vendor, and data hosting fees associated with the consolidation of Tremor Video and Amobee DSP into the Nexxen DSP. For H1 2023, we generated $29.9 million of adjusted EBITDA. Q2 and H1 2023 adjusted EBITDA compared to $39.1 million in Q2 2022 and $77.8 million in H1 2022. Adjusted EBITDA for the three and six months ended June 30, 2023 was impacted by the integration of Amobee, which was generating losses when we first acquired the company, as well as a weaker advertising demand environment earlier in 2023. We will continue to work towards further optimizing our cost structure on an ongoing basis to improve profitability. We believe as we generate higher levels of contribution ex-TAC, the majority of increased contribution ex-TAC will flow through to adjusted EBITDA, given the strength of our horizontal operating model, which enables strong and increasing degree of operating leverage. For the three months ended June 30, 2023, we generated an adjusted EBITDA margin of 25% on a revenue basis and 26% on a contribution ex-TAC basis, which doubled from Q1 2023 when we generated an adjusted EBITDA margin of 12% on a revenue basis and 13% on a contribution ex-TAC basis. For H1 2023, we generated an adjusted EBITDA margin of 19% on a revenue basis and 20% on a contribution ex-TAC basis. Q2 and H1 2023 adjusted EBITDA margin compared to 50% on a revenue basis in Q2 2022 and 55% on a contribution ex-TAC basis in H1 2022. We continue to expect adjusted EBITDA margin to improve in H2 2023 compared to H1 2023. Turning to our cash flow, we generated $11.9 million in net cash from operating activities during Q2 2023 and $4 million in H1 2023, after generating net cash from operating activities of $30.4 million during Q2 2022 and $46.5 million in H1 2022. Year-over-year decreases were largely attributable to a weaker advertising demand environment compared to the prior year's period. During H1 2023, we incurred approximately $5.7 million in severance and retention bonus related costs associated with the reorganization of Amobee employees into the Tremor International base. As of June 30, we had $94.2 million in net cash as well as $80 million undrawn on our revolving credit facility. We intend to leverage our considerable cash reserves in the future for the ongoing need of the business as well as to support our future strategic investments and initiatives, including a potential future share repurchase program and acquisitions. We also generated non-IFRS diluted earnings per ordinary share of $0.06 for Q2 2023 and $0.03 for H1 2023 versus non-IFRS diluted earnings per ordinary share of $0.16 in Q2 2022 and $0.33 in H1 2022. Finally, I'll now turn to our outlook. We continue to expect stronger contribution ex-TAC, programmatic revenue, and CTV revenue in H2 2023 versus H1 2023 and H2 2022, with the majority of H2 2023 growth anticipated in Q4 2023. However, the combination of several factors has caused us to lower our full year 2023 contribution ex-TAC and adjusted EBITDA forecast. First, we believe that continued challenging macroeconomic conditions, which have driven uncertainty and cautiousness in the advertising demand environment, will continue to drive lower spending by major agencies and advertisers in H2 2023 and will also limit their willingness to adopt new platforms and products over the near term. Major advertisers and agencies, including some of our largest customers, have reduced budgets and spending estimates for the second half of the year, which we believe will particularly impact our managed service business, while we are also seeing supply growth outpace ad budgets growth, driving short-term pressure on CPMs. We believe these factors will alleviate as macro conditions improve and ad budgets begin to expand again. As mentioned earlier, we also believe that longer and more complex sales cycles will challenge our contribution ex-TAC expectations. While intentional due to our ongoing strategic focus on expanding our programmatic footprint, we anticipate that a continued decline in our performance business in H2 2023 compared to H2 2022 will also impact our full year 2023 contribution ex-TAC. Our emphasis on driving growth within our programmatic and enterprise solutions, which we continue to believe is in the best long-term interest of the business and where the industry is heading, has also, to an extent, driven lower overall take rates for the company amid this strategic revenue mix shift. Additionally, although we experienced some degree of increased stability in our sales organization as a result of combining the Amobee and Tremor teams and providing significant training, recent sales team turnover over the last few months is expected to negatively impact H2 2023 results. That said, we expect to remedy this situation and have already allocated the resources necessary to unlock significant budgets for these pivotal positions in key metro areas. In some cases, we've already filled vacancies and are working hard to quickly ramp up new employees to drive future revenue growth. We anticipate being very active in the talent market over the near term, particularly for experienced sales and marketing team members with significant experience driving programmatic CTV and video revenue growth. As a result of all these factors, we are lowering our full year 2023 contribution ex-TAC expectation to a range of approximately $320 million to $330 million from a previously expected $400 million. We are also lowering our full year 2023 adjusted EBITDA expectations to be in a range of approximately $85 million to $90 million from a prior range of $140 million to $145 million, due mainly to the expectation for lower contribution ex-TAC. We continue to anticipate increasing our adjusted EBITDA in H2 2023 versus H1 2023 and to generate higher adjusted EBITDA during H2 2023 than we did in H1 2023. However, we do not currently expect adjusted EBITDA or adjusted EBITDA margins in H2 2023 to be higher than in H2 2022. We continue to expect programmatic revenue to reflect approximately 90% of full year 2023 revenue. And with my remarks completed, I'll turn the call back to Ofer.
Ofer Druker, CEO
Although the macroeconomic environment remains challenging, limiting advertisers' near-term willingness to spend and adopt new products and platforms, we believe these conditions and contribution ex-TAC growth will improve over time. We also believe that as our new product, a unified platform gains more traction in the marketplace, and as our sales and marketing teams continue to ramp efforts, the length of our sales cycle will shorten for large enterprise deals featuring multiplied technology solutions. With the integration of Amobee now complete and the business operating under our new unified Nexxen brand, we believe we are really positioned to offer advertisers, agencies, CTV publishers, and media broadcasters a state-of-the-art platform designed to unlock more favorable outcomes and returns within CTV. We continue to feel we are well positioned to capitalize on the rapid growth and adoption of CTV over the long-term, as the market continues to favor horizontal solutions like we have operated for years and as the industry is now more data-driven and more obsessed with efficiency than ever before. We also believe the newly added CTV capabilities and scale gained through Amobee will give us an increasing edge over time, especially when coupled with the growing distribution of VIDAA and Hisense as well as the powerful partnerships and exclusivity we have in the relationship. Following significant investment in CTV related to development over the last several years, our platform is now more technology-based and customer-centric for partners on both sides of the ecosystem. While it's taking more time than initially expected to accelerate growth and for our platform and new capabilities to gain more significant traction with customers in the market, we feel very strongly that these investments will pay off over the long-term. We remain confident that our data-driven horizontal technology platform will continue to position us as a key CTV partner and first core for advertisers and agencies and increasingly drive new and current customers to adopt multiplied solutions and increase spending across our ecosystem in the future. We remain excited for what's to come and want to thank our customers, employees, partners, and shareholders for their continued support. Operator, we will now take questions.
Operator, Operator
Your first question comes from the line of Matt Swanson from RBC Capital Markets. Please go ahead; your line is open.
Matthew Swanson, Analyst
Yeah, thank you for taking my question. Sagi, I think both from your comments and what we've seen from peers, it's obviously a complicated macro environment right now. But do you mind breaking down the guidance a little further and maybe focusing on what parts of the business have remained the most durable? And then any color on how much of the Q4 recovery is embedded in guidance? And kind of what gives you confidence around that from a timing perspective?
Sagi Niri, CFO
Thanks, Matt, for the question. Okay. So you asked a couple of questions in one question, I'll try to answer everything. So I think we are not seeing like as the industry is suffering from macroeconomic headwinds; I think we are suffering as well. We are more of a pure branding player, while the others are doing a little bit tweaks into some performance and more display media. Having said that, we are not seeing a major weakness in one of our revenue streams. So customers, agencies are pushing back their campaigns and their spend into H2. Some of them are completely moving this out. We are not seeing anything on any specific verticals because we are very diversified. And I think when we are looking on H2. At the beginning of 2023, probably a lot of people thought that H2 is going to be a massive recovery. As long as we are seeing it now and we are trying to be cautious, we are not seeing a huge recovery. Of course, Q4 will be the stronger over the year, and we are anticipating like a moderate 20% growth from Q4 to Q3, which, if I'm looking on our peers, is somewhere around the average of what we are saying. So we are thinking the same. Of course, now it's mid-August, so we have a very clear forecast around what will happen in Q3 and good visibility around Q4. So we are not like we are trying to be realistic and cautious together.
Matthew Swanson, Analyst
That's really helpful. And then, Ofer, maybe on the product side, it was great to hear some more about the cross-platform planner. It just feels really well positioned for kind of the moment we're in right now in CTV. So could you just expand a little bit more specifically, I guess, on the feedback you're hearing from customers on the solution? And then maybe just helping us think about how this materializes over time in terms of how customers who have adopted will ramp with it.
Ofer Druker, CEO
Of course. Thank you, Matt, for the question. I think that when you're looking at the industry, and we mentioned it several times in the past, CTV is becoming more and more mature and bigger in the market. So when advertisers want to reach their audiences and if they are linear advertisers in the past, they need to consider also running on basically streaming and CTV; they cannot reach their targets just on linear anymore. I think it's becoming evident also on a national level and most likely also on the local level. So basically advertisers need to reach also CTV and streaming. So when we are looking at that, I think that our timing to go up with this solution that allows basically linear advertisers to spend also in an efficient manner on CTV and linear is very meaningful because they need it, but they need to do that smart. They cannot basically run in a blind way, both on both sides because then they will lose a lot of dollars that will run and create duplication to the same user and show you the same ad and the same reach, linear and CTV, which is not efficient. So basically, we can offer them now to do that in the most smart area. And I think that the slogan of 'better planning, better results' is very clear to that now. And in the past, it was mostly a slogan, but now it's reality. When you're looking at the big broadcasters and the big TV stations, they need this tool in order to basically offer a spread and to direct some of the money into CTV and streaming in order to reach their target audience that they're trying to reach. I think that it's a long process. It's not happening overnight; the broadcasters, the linear advertisers are learning that. We see very good reaction already in the market from big broadcasters, big agencies that take the product. They feel that it's needed and unique in the market. And I think that we are on a good path around that. But it's not something that happens overnight. But I think that it will give us a lot of power in the future in the mid-term and long-term because basically, what does it mean? It means that we can basically help advertisers that are linear advertisers, which is like around $60 billion in the US, to spend and to move also to CTV. A lot of people are talking about this conversion, but I think that we can really offer a solution that basically enables them to run smartly on both platforms. And we can add them also to do what we call the user extension because we have a very big SSP that has reached with CTV media, that can basically fulfill their needs in order to reach their audience in any campaign that they are running. So I feel that the timing, the need and the reaction in the market are very good, and we need to be a little bit patient because it's not a solution that is being embedded overnight, and it takes some time to basically integrate and to educate and to teach and work together with the partners in order to operate it in a smart manner. And I think that this is the challenge now. But as we see, the reaction and the solution is being accepted very well in the market. And the fact that we are the first one to issue that is also giving us the title of innovator of the CTV world, which is very important. I hope that I answered your question.
Matthew Swanson, Analyst
Yeah, thank you.
Operator, Operator
Your next question comes from the line of Laura Martin from Needham & Company. Please go ahead. Your line is open.
Laura Martin, Analyst
Give me one moment here. Okay. Can you hear me, okay?
Ofer Druker, CEO
Of course.
Laura Martin, Analyst
Hi. Can you hear me?
Ofer Druker, CEO
Yes.
Laura Martin, Analyst
Could you provide us with an update on the Hisense Beta measurement product you were developing, including when it might start affecting your revenue and if there are plans to sell it to third parties?
Ofer Druker, CEO
Of course. So first of all, Hisense is growing very immensely, as we can see by the numbers. It's not related to our efforts; it's related to their efforts, but they are becoming a very strong player in the CTV globally and also in the US. And we already reached numbers that are efficient for us to do targeting and measurement. As you know, we didn't build our own solutions. So we are now in discussions with several companies about measurement and also we'll open some of the segments into DSP in order to allow people to use this data in order to target and in the future or in parallel to measure. And I think that we reached an interesting point because we are talking about it for a long time, but it's a long process about building the infrastructure, building the technology, testing it with a live TV manufacturer. That also has other challenges, of course, and it needs to make sure that the user experience is perfect, and that's what we try to achieve, of course, and we achieved with Hisense and that one also Toshiba just to mention. And I think that we are now at the moment that it will start to play in our favor in terms of targeting and measurement, and we will basically empower also other companies and allow them to use this data. And we are also going to open the international market very soon, and it will be a very unique solution because in the US, it's something that has been around for six, seven years. But in the other markets, it's very small or not existing at all. And we are going to basically launch it in some of the markets that we are active in, and I'm sure that it will bring us a lot of value and also to the market because we are basically enabling our advertisers and clients to target much better and to measure the results with ACR data.
Laura Martin, Analyst
Super helpful. And then my second question is on Amobee. As we've taken down the projections for the full year so much, and you guys talked about Salesforce turnover and elongating the sales cycle, which sounds like part of that is you have to hire sales staff. In the short-term, was Amobee actually additive to your business? Or is it actually hurting your combined financials? What's your point of view on that?
Ofer Druker, CEO
It hasn't hurt us, but we should keep in mind that over the past nine months, we've invested significant resources and attention into integrating Amobee, which is a larger company than we are. When we began this integration, Amobee had about 1,000 employees compared to our 600. Merging these two substantial companies is a time-consuming process. Additionally, to achieve synergies and reduce costs, we've managed to cut expenses by $65 million, equating to roughly 20% of our growth, which is quite challenging. It's similar to changing an airplane's engine while it’s in flight. If we had tackled this at the onset, we would be facing greater losses now. However, our decision to acquire Amobee was driven by long-term potential, considering the technology they bring us. In terms of technology, we've successfully merged these two companies, their DSPs and DMPs, and all related activities within a relatively short timeframe. By the end of the second quarter, we had already phased out one of our DSPs, resulting in a unified platform, sales force, and team, which is a significant achievement and not an easy task. I don't believe this is slowing us down; rather, it has allowed us to rebrand. In June, we undertook a rebranding effort, consolidating the names of all companies involved and unifying our products. This involved extensive work across the organization, aimed at achieving three main objectives. Firstly, it helps our employees connect with the new brand we've actively chosen rather than adopting one. Secondly, it clarifies our offerings for clients, partners, and potential partners; our recent meetings demonstrated that it is now clearer what we can provide, which was previously muddled by various brands. Lastly, it helps investors and shareholders comprehend what we're bringing to the market, which is powerful. Overall, regarding our achievements with Amobee, there’s a lot to be proud of. I’d highlight three key elements that will empower us moving forward. The first is the DSP itself, which is robust and rich in functional enterprise solutions. Client and market sentiment reflects its strength. The future is moving towards enterprise solutions; stability and predictability rely on having a strong enterprise solution. We're also enhancing our capabilities, as seen in our latest deal with H/L that began with the DSP and expanded to incorporate our ACR data, DMP, and SSP, which aligns with our strategic goals. Building these functionalities independently would take years, and time is of the essence for improving our enterprise solutions. The second important element is our unique planning tool, which I believe will add significant value in the mid to long term. After years in the industry, I've learned the importance of planning for future needs. The third element is our discovery tool. While the DSP might be somewhat of a commodity, the combination of the planning and discovery tools allows advertisers to learn about their audiences, create segments, and target those segments on our DSP with ease, providing a compelling reason for agencies and brands to adopt our DSP. We're excited about the Amobee acquisition, as it fills a crucial gap in our strategy. We now feel complete and are poised for the future.
Laura Martin, Analyst
Thank you very much.
Ofer Druker, CEO
Thank you, Laura.
Operator, Operator
Your next question comes from the line of Andrew Marok from Raymond James. Please go ahead. Your line is open.
Andrew Marok, Analyst
Thanks for taking my question. In the context of your commentary around longer sales cycles and some of the sales staff turnover and things like that, citing a few notable wins in the quarter, bringing on 65 new advertisers over 100 new supply partners. What does the ramp period look like for a new customer or a supply partner for you? Are they materially contributing in the near term? Or is there a test phase before committing more substantially?
Ofer Druker, CEO
Okay. So I will split my answer into two. On the supply side, the outcome is much shorter. So basically, when you integrate a new supply source, the integration is not long; it's a matter of weeks. And also the testing is not long; it's a matter of less than a few weeks. Some of that can be done in parallel. So the effect on the media side moves faster. Regarding the new wins of advertisers, it's a longer process, and I will explain why. Because basically, advertisers don't need to use five or six DSPs; they are trying to lower the number of DSPs that they are using. They are trying to lower the number of systems that they are using because of two elements. First of all, they cannot train their people on so many platforms; it's becoming very complicated. The second thing is cost. So they don't need so many platforms. They don't need so many complications to complicate their activities. So when we are coming in, we need to replace someone, which usually takes more time, and people are scheduling the RFIs or consideration for the future. So it takes some time to integrate. But we already see a lot of interesting conversations that in the past, like when I'm talking about the past, let's say, before we acquired Amobee we were never being even considered. But now we are talking to top retailers, top travel companies, and top other companies that are showing interest in our solution because of all the elements that I indicated to Laura and to Matt before. So I think that it's a longer process, but it will give two things that can be very interesting for investors and shareholders. One of them is long-term revenue. So basically, even when it's taking us time to integrate our solution and to win an account, it will also take time to take us out if someone wants to change; it's giving you more stability, and it's a long-term solution. You can see it and work with these companies for many years. Usually, if you are providing them good service, they have no reason to replace you. We are working closely and transparently with our customers. So we don't see any reason for people to switch. The second thing is giving a lot better predictability about how much revenue we can generate in the future compared to the managed business, which is an IO that is being renewed all the time. So in this process, you have discussions with the client about how much they are going to spend in the next quarter, how much money they're going to spend next year, and what is their need from a technology perspective; you can address it in a much better way. So I think that the longer process, it's painful in the beginning, but it's much better in the future because it's giving us predictability and stability to our business, which is, of course, something that you really need when you're running a big business and you want to lead the CTV market; you need to have these anchors that are working with you closely in order to win the accounts.
Andrew Marok, Analyst
Great. Thank you. And then just a quick one. I know you mentioned a little bit on the call about the impact of the MediaMath bankruptcy. I was wondering if you could go into any more detail in terms of the customer overlap or the potential revenue opportunity that could provide to you, having one fewer competitor in the market. Thank you.
Ofer Druker, CEO
Of course. MediaMath, of course, we used to work with them; they used to buy media from us. We look at them, and we feel bad for them losing their business in so many ways. We know the people for a long time. They are colleagues from the industry, so it's not very nice to see something like that happening. On the other side, it's opened a lot of their clients to review. So these clients are looking at the market, trying to replace MediaMath. We need to remember that the MediaMath shut down happened almost overnight; it was not a planned process that people were saying, 'Listen, in April 2024, we will shut down our service.' It happened in a notice of a few days, or even less than that, of a few hours. So basically, they shut down their business, and some of the clients have already adopted other solutions, including ours; some of them are still searching. I think that we are, of course, in the mix, and we are trying to win as much business as we can. I think that we have a very good chance to do that. Eventually, this solution that we saw with MediaMath's bankruptcy just shows in light or highlights the fact that you need an end-to-end solution or a horizontal solution in order to win in this market. One side of companies will face difficulties to remain in the market because of margin issues and capabilities to manage the future. It gives us more evidence that the solution and strategy we chose in 2019, when we decided to be end-to-end horizontal integration, has given us a lot of power, and it's reassured us that we are on the right side. Also, I must say from initial discussions with some of their clients, they see the same. They don't want to switch platforms. They don't want to change platforms every two or three years; they want to keep their clients and the infrastructure that they chose to use. With us, they can feel much safer because they see the performance of our company.
Andrew Marok, Analyst
Great. Thank you.
Operator, Operator
Your next question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead. Your line is open.
Eric Martinuzzi, Analyst
I was curious to dive into the linearity of demand here. You came out of the Q1 print at the end of May, and I'm just curious if there was softness earlier in the year. Just wondering what you saw in June versus May and April? And then maybe if you could comment on July versus June.
Ofer Druker, CEO
Again, I didn't understand the first part of the question you asked about what we saw?
Eric Martinuzzi, Analyst
Yes, linearity of demand. So you were two-thirds of the way through the second quarter when you gave your outlook or reiterated the outlook for the year. And now we've got a pretty substantial reset. So just wondering when you saw the weakness.
Ofer Druker, CEO
Okay. Of course. So I will give also, after that, Sagi if he wants to add something. But from my perspective, the last few years haven't acted as usual. I'm 25 years in this business. Usually, you see heavy lifting and much better results in the second half of the year. We saw it already several times in the last few years. For example, in 2020, even at the beginning of the year it started very weak because of Corona, if you remember, we saw a very big pickup in the second half. In 2021, it started okay, then there was the unrest in the US. We are mostly US-based, so more than 90% of our business is in the US. So again, we witnessed a little bit in the middle of the year, and then we saw a better finish of the year in 2021. In 2022, I think that all the year started after the invasion of Russia into Ukraine, the sentiment, the macroeconomics, everything, I think that the second half of the year was not as strong as people expected, usually the Q4. People were feeling that this year basically started soft, but they would like to invest their money in marketing in order to grow their business. So we'll see a very strong second half of the year. We also believed in that as we saw evidence in the few last years. What we encountered in the last few weeks is that we saw that if we look at it, and we are already in the middle of August, and we see also our peers reconsidering their Q3 numbers, it means that the second half of the year will not be for sure a great momentum. So we decided to be more cautious to prevent from adjusting a few times or changing our course a few times, but to do it once. So we look at it, and we are looking at it in a very cautious way. We feel that if the market will pick up, great. But if not, we are ready for that. I think this is more about experience in being transparent and not about still believing that Q4 will be a miracle for us because we have to be careful since we are in the middle of August, and we see that the market is not as strong as expected. Even that, as you can see, we show improvement in the two halves. So even if we are saying that in the first half, we generated around $140-something million, we are saying in the second half we do much more than that, which is about 20% more, which makes sense, and I think that we need to be cautious and careful because the market is very hard to predict. I feel that the macroeconomic is very fragile and changing, and we need to be listening to the voice of the market and to take caution when we are sharing results and focus with the market.
Sagi Niri, CFO
Yes. I agree with Ofer, and I think that's for your question. We saw in the second quarter after our Q1 earnings, like in June itself and through June decreases in advertisers' appetite and spend. We saw some pushback into H2, and we even saw some cancellation of campaigns. So we waited until now in order to forecast exactly how our Q3 is going to look like. And as Ofer mentioned, we are not counting on an amazing Q4. We think it will be strong, but not as strong as we anticipated before. And again, we are seeing our peers as well. So taking all of that into consideration, we decided would lead to the lower guidance that we took now out.
Eric Martinuzzi, Analyst
Thank you.
Operator, Operator
Your next question comes from the line of Andrew Boone from JMP Securities. Please go ahead. Your line is open.
Andrew Boone, Analyst
Good morning, guys. Thanks for taking my question. I wanted to go back to Laura's question and ask about Amobee. If we go back to the disclosure at the time of the acquisition, it was $150 million of contribution ex-TAC when you guys acquired it. Can you talk about where the business is today, how much of that stuck around? And maybe how do we think about the retention of those customers?
Ofer Druker, CEO
Yes. I will take this one, and Sagi feel free to fill any gaps that I left. But in general, I think that, again, what we also reported last time stands and from our last check, of course, is that it's not about losing clients. It's about dropping budgets by the advertisers and by the clients, meaning people are adjusting their budgets according to the macroeconomic environment. So they can run on your platform, but they spend less than they used to or less as they planned to, which makes sense. We see that across almost all verticals basically that are related to branding. We need to remember that these people are like us; they are facing uncertainty. They don't want to spend their money now. They don't know what will happen tomorrow, so they are more cautious than they used to. I don't think it's about losing business; it's not about losing clients. It's more about dropping their spend in order to protect themselves, keep their cash, and look at the future to try and understand the right time for them to start spending again. This is the major issue. We don't see any major failure or drop of clients or stuff like that. It is happening more on the ground of people dropping or lowering their spend in order to cross the storm that is happening in the macroeconomics in order to understand where they are standing and how to use the resources in the best way. So that's the major stuff. And just to maybe add one more thing; after looking at that from the perspective of many years in this industry, I think that what we see is that we are a company that, as Sagi mentioned, is truly a branding company. This is the first thing to be cut when there are difficulties and macroeconomic challenges. But when people feel the release and the change in momentum, this is the first thing that will grow. So I feel that we chose the right model; we are running on branding, we are putting our emphasis on CTV and video, more than 70% of our revenues is in video, we are heavily invested in CTV, and we are winning on that front, and we are using data. I don't think that it can be challenged that this is the right way to run a business today in ad tech when you're looking at all the trends and everything that is done around it. But I think that in every company, in every economy, there are cycles. Now I think that the uncertainty of the advertisers and partners when they are looking to the future, they have doubt, they have still question marks, and they are waiting to see when will be the right time to keep running and push their big budgets to win accounts and to win market share again. So that's a major—and that's a major point for us.
Andrew Boone, Analyst
I'm going to ask a tough question here. I understood the difficulty in terms of thinking about '24 with the current macro environment. But given the fact that guidance seems to imply that we're exiting Q4 with basically flat programmatic revenue ex-TAC, can you guys just talk about when we should start to think about the recovery for '24? Should we expect you guys to grow in line with programmatic or could headwinds continue into next year? Thanks so much.
Ofer Druker, CEO
Okay. So regarding headwinds, it's the $1 trillion question. I think nobody knows what will happen to the sentiment in the market and the macroeconomics. I wish I knew. But I can look at our company and what we did in the past nine months almost and what we are planning to do. I think that by concluding the integration of the technology, the integration of the companies, finishing the cost reduction that we've done, it's giving a much clearer view to the managers, to the company about the future, and there is a lot of dust that went down that allow us now to focus on the business, which is very meaningful. Also, the size of what we mentioned about sales and sales cycles and so on, to get people into the picture, to prepare the sales materials, to teach and train about the next pitch, how to address to change the targets of the people in order to reach new clients in a different manner, and so on, in order to not just take their campaigns, but also integrate the solution, which is technology-oriented; it's taking time. I feel that we made a lot of progress from the beginning of the year. We are in a different position. I look positively at 2024. I think from our company perspective, of course, I cannot guess how the market will look like, but if the market shows signs of improvement, I think we will enjoy it in a big way. And if not, I think that the numbers we provided make sense because we took into account steel headwinds, but we look at it that we are much more prepared to deal with them, and we are much more ready in our infrastructure and about our training and the people on the ground in order to win accounts in any condition and to be able to basically grow the company again.
Andrew Boone, Analyst
Thank you, guys.
Ofer Druker, CEO
Thank you.
Operator, Operator
We have no further questions. Ofer, I'll turn the call back to you for closing remarks.
Ofer Druker, CEO
Thank you. Thank you, everyone, for your questions and for listening and taking into account, of course, what our input. I think that I'm really excited about where we are now because it seems maybe that we are talking every quarter, but I'm looking at that from a multi-year perspective that we've done. Since 2019, what we chose to do to be horizontally integrated, to have an end-to-end solution; in the beginning, people looked at us as if it was crazy why we were doing that. Now there is no question about it. I saw the headlines of some of the analysts. I saw also on this call about the future of SSP, the future of a stand-alone DSP; I think that there is no doubt that you need horizontal integration. I think that we predicted and acted on that since 2019, and I feel proud about it because it's very hard to look at trends and fulfill them so early. We made also four major acquisitions during this time in order to solidify and bring all these capabilities together into one platform. Usually, I'm not using marketing slogans, but in this case, when I'm looking at that one platform, the opportunity is true. We have everything that advertisers and publishers need to reach their KPIs, and we did it through a long process that we concluded at the end of the second quarter, basically when we finished the integration of Amobee into our business. We don't see any more major acquisitions that we need in order to build the best tech; we have that. So this is one. The second thing is around CTV. The decision we made in 2019 when we invested in RhythmOne that acquired YuMe before is to run very strongly on CTV, and we are doing that. We're still growing on the CTV front. We are challenging the market, we are bringing innovation, we are bringing solutions that are needed, and we're focused on the future. Our plan is to keep doing that. We believe that the rebranding now is the first time that we chose the brand, and we didn't buy it or adopt it. I think it's very meaningful for the company, for the clients to present this new brand unification and consolidation of all the capabilities under one brand. It will be helpful and powerful. You don't judge these things over two or three months; you track it over a course of time. We are coming to the market in a very full tech stack, a very strong one that if you bring the best experts to examine our platform, they will tell you that we have the most comprehensive solution, most fitting the trends and the needs and the challenges and the risks of the market to win in the future. This is what we try to build, and we did it, and we are proud of that; we worked very hard to achieve that. Now it's time for execution, and as we proved in the past, we know how to execute. It takes time sometimes; it's not happening overnight. We have the right people, we have the right talent. We are expanding our sales teams, we are growing our teams to gain more market share, and we have the resources to do that, which is very important, and we are going to do that during 2024 and going forward. I feel very secure about the position and the technology of the infrastructure that we created. I'm excited about it, and we are looking forward to the future. I hope that the macroeconomic conditions will change and give us a boost because, of course, when the market trend and sentiment improves, things happen faster, and we hope that it will happen. But if not, we will cross the strong storm; we believe in the future of the company, and we are ready for that in any case. So thank you, everyone, for the call today. We are positive, we are looking excited for the future, and we are well equipped to win in this marketplace and provide good solutions for all the stakeholders and outcomes in the company. Thank you very much.
Operator, Operator
And this concludes today's conference call. Thank you for your participation, and you may now disconnect.