Nexxen International(NEXN) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Tremor International reported a contribution ex-TAC of USD $74 million for Q2 2021, a 160% increase from $28.5 million in Q2 2020, and adjusted EBITDA of $37 million, up from $1.2 million, representing a 29 times growth [9][24] - For H1 2021, contribution ex-TAC was USD $137 million, a 125% increase from $61 million in H1 2020, with adjusted EBITDA of USD $65 million compared to $1.8 million in the same period last year, a 35 times growth [9][24] - The company achieved a 46% EBITDA margin in Q2 2021 on a reported revenue basis and a 51% margin on net revenue [10][29] Business Line Data and Key Metrics Changes - Connected TV (CTV) revenue grew 280% in Q2 2021 compared to Q2 2020 and 249% in H1 2021 compared to H1 2020 [10][24] - Video revenues increased almost 200% year-over-year, significantly outpacing the industry’s 4% CAGR for video advertising [25][28] - CTV and mobile channels accounted for 79% of net revenues and 86% of programmatic net revenues, with CTV and mobile growth at 167% year-over-year compared to 20% for CTV and 12% for mobile in the U.S. [17] Market Data and Key Metrics Changes - 92% of net revenues in Q2 2021 were generated in the U.S., indicating strong market presence and potential for global expansion [10] - The company operates in key international markets including Australia, Japan, Singapore, Germany, and the U.K., with plans to expand as COVID-19 restrictions ease [86][88] Company Strategy and Development Direction - Tremor aims to capitalize on the shift of advertising budgets from traditional media to digital platforms, focusing on video, data, and CTV through an end-to-end technology platform [12][15] - The company has completed three major acquisitions in the past three years to enhance its capabilities and market position [12][80] - Future growth is expected to be driven by continued investment in technology, product innovation, and expanding sales efforts [55][57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of CTV, anticipating increased advertiser participation and budget allocation to this channel over the next 1.5 years [64][67] - The company expects Q3 2021 net revenue to be at least $75 million, representing approximately 50% year-over-year growth, and adjusted EBITDA of around $37 million, indicating an 85% year-on-year growth [32] Other Important Information - Tremor generated net cash from operating activities of $57 million for Q2 2021, a 700% increase from $7 million in Q2 2020, and ended the quarter with cash and cash equivalents of $275 million [30] - Non-IFRS diluted earnings per share for Q2 2021 was $0.23 compared to a loss of $0.02 in Q2 2020 [31] Q&A Session Summary Question: CTV vs Online Video - Management indicated that both CTV and online video are growing, with clients expanding into both areas [41][42] Question: News Corp Revenue Contribution - The deal with News Corp is valued at £30 million over three years, which is not significant to total net revenue [44] Question: Investment Focus in CTV - Management emphasized investments in technology and product innovation, particularly around CTV, to capture market share [49][55] Question: Margin Outlook - Management noted that while margins are currently high, they may see some decline post-pandemic due to increased costs, but revenue scaling will help maintain strong margins [70][71] Question: Acquisition Pipeline - The company is actively looking for acquisition targets to continue growth, supported by a strong track record of successful integrations [80][81] Question: International Market Focus - Management highlighted the potential for growth in international markets, particularly in APAC and EMEA, once COVID-19 restrictions are lifted [86][89] Question: PMP and Self-Serve Business Update - Management reported significant growth in PMP and self-serve businesses, although specific metrics are no longer disclosed as they fall under the programmatic umbrella [92]