Tremor International .(US:TRMR)2023-06-30 20:15Financial Performance - Tremor International generated record Contribution ex-TAC of $309.7 million in FY 2022, reflecting a resilient performance despite market volatility [11]. - Adjusted EBITDA for the year was $144.9 million, resulting in an impressive adjusted EBITDA margin of 47% [10]. - The company achieved a 21% year-on-year growth in Connected TV (CTV) revenue [15]. - Tremor maintained a healthy net cash position of $115.5 million as of the end of 2022 [10]. - Free cash flow conversion during the period was outstanding at 96% [10]. - Tremor generated record CTV revenue of $97.2 million in 2022, reflecting a 21% year-over-year growth from 2021 [41]. - Adjusted EBITDA decreased by $16.3 million, from $161.2 million in 2021 to $144.9 million in 2022, primarily due to challenging macroeconomic conditions [56]. - Revenue decreased by $6.7 million, or 2.0%, to $335.3 million in 2022, with a $43.5 million decrease attributed to Tremor International, offset by a $36.8 million contribution from Amobee [57]. - Cost of revenues decreased by $10.9 million, or 15.2%, to $60.7 million in 2022, driven by a decrease in Performance revenue and corresponding costs [58]. - Gross profit margin increased by approximately 4%, to 82% in 2022, as costs of revenues declined at a faster rate than revenues [59]. Strategic Acquisitions and Investments - The acquisition of Amobee for $239 million was completed in September 2022, enhancing Tremor's CTV and video platform capabilities [16]. - Tremor is on track to complete the bulk of technology integration and DSP consolidation from the Amobee acquisition by the end of H1 2023 [16]. - The acquisition of Amobee is projected to save approximately $65 million in total annualized operating costs and enhance Tremor's technology capabilities [40]. - Tremor's investment of $25 million in VIDAA is expected to generate meaningful revenues starting in late 2023 [46]. - The Company completed the acquisition of Amobee, the largest in its history, enhancing its technology and data solutions while adding significant scale to its platform [54]. Market and Growth Outlook - Tremor's programmatic advertising market is expected to grow significantly, with CTV ad spend projected to increase at a CAGR of approximately 15.5% from 2022 to 2026, and video ad spend expected to grow at a CAGR of approximately 13.0%, reaching roughly $121.5 billion by 2026 [89]. - Tremor's strategic focus on CTV and programmatic activities is anticipated to drive future growth and revenue increases [41]. - The company expects to capture a larger share of existing customer budgets and attract new customers through its comprehensive technology suite [32]. - The company aims to strengthen relationships with existing customers by improving platform functionality to encourage increased ad spend and inventory allocation [92]. - Tremor is expanding its international footprint and U.S. market share by acquiring new publishers and advertisers globally, enhancing its platform's flexibility [93]. Operational Efficiency and Technology - The company added 319 new supply partners across Unruly and 233 new advertiser customers within Tremor Video during 2022 [51]. - Tremor plans to enhance its technology stack and introduce new innovative products, focusing on improving proprietary data sets and audience targeting capabilities [90]. - The company leverages real-time data, AI, and machine learning to optimize digital ad spend and inventory, providing robust analytics and insights through its proprietary DMP solution [94]. - Research and development expenses increased by $15.2 million, or 82.7%, to $33.7 million in 2022, driven by increased investment in technology and product innovation [60]. - Selling and marketing expenses increased by $15.3 million, or 20.6%, to $90.0 million in 2022, with Amobee contributing $15.7 million for the period post-acquisition [61]. Corporate Governance and Culture - The company recognizes the importance of high standards of corporate governance and has adopted the QCA Code as its governance framework [85]. - Tremor engages with shareholders through regular communication and meetings, ensuring transparency and responsiveness to queries [97]. - The company promotes a transparent organizational culture, encouraging employee feedback and participation in leadership programs [103]. - The Board held 17 meetings in 2022, with executive directors working full-time and non-executive directors dedicating a minimum of two days per month [113]. - The audit committee consists of three independent directors, ensuring compliance with Nasdaq corporate governance rules [132]. Risks and Challenges - The company faces significant risks related to maintaining access to advertising spend and valuable inventory from publishers [182]. - The company’s business is highly dependent on the overall demand for advertising, which can be affected by economic downturns and other factors [186]. - The company is subject to various legal and regulatory constraints, including data privacy and consumer protection laws across different markets [191]. - The company’s global operations expose it to risks beyond its control, which may adversely affect financial results [186].