Tremor International Ltd
LSE:TRMR
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Tremor International Ltd
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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.
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.
Thank you, Billy, and welcome to everyone joining us today. I will begin by providing an overview of our results and strategic initiative. 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 customer, 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 with 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 note 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, multiply solution 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 both 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 adtech platform in the open internet, which we are confident will enable us to gain share within CTV for years to come.
Our platform, both differentiated and exclusive data including exclusive global ACR data through VIDAA as well as robust and unique planning, activation, targeting and measurement solution. This solution our 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, enable us to holistically serve customers, providing them 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 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 out 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 of customers adopting multiplied tech solution 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 planned campaigns simultaneously across linear TV and CTV.
While CTV is expected to grow at 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 opportunity 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 the 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 amount 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, maximize 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 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 emission of median spend within CTV.
This tool has generated significant interest from an adoption by agencies and 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 LTE 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 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 border 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 cycle 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 condition improved over time and as advertisers appetite to increase spending and adopt new efficient CTV related solution increase, 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 $17.8 million in Q2 2022 as well as 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 and programmatic revenues of $138.8 million in H1 2023, reflecting 16% growth from $119.8 million in H1 2022.
We also successfully expanded within CTV, generating Q2 CTV revenues of $24.7 million, reflecting 5% year-over-year growth from $23.6 million in Q2 2022 as well as 16% growth from Q1 2023. We generated CTV revenues of $45.9 million during H1 2023, reflecting 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 an impact on our adjusted EBITDA during Q2 2023, we believe we may benefit from potential new advertisers and talent additions related to this major DSP company exiting the market.
Our adjusted EBITDA margin increased to 25% on revenue basis and 26% on 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 underscore our success 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 as the fastest growth rate in the world for CTV shipments in H1 2023, shipping approximately 12.4 million smartTVs, 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 ship venture. If Hisense continue to grow market share and it's VIDAA, Hisense CTV operating system continue to grow distribution, we expect to benefit from revenue opportunities associated with our investment in VIDAA and anticipate customers will increasingly fix 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 and entertainment verticals as well as others.
Nexxen studio formerly Unruly also launched the industry first voice activated ad able to run across all CTV environment, further expanding on our company 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 sport and gaming. H/L, a multiservice agency following his 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 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 adapt 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.
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 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 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 in 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 decrease are attributable to the addition of Amobee, which had a historically stronger non-video revenue base, year-over-year decrease in non-CTV related video revenue and significant year-over-year increase 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 solution within 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 was largely attributable to the reorganization of the Amobee employee base into Tremor International as well as reduce 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. And as adjusted EBITDA over 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 that 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 employee 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 reserve in the future for the ongoing need of the business as well as to support our future strategic investments and initiatives, including 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 have 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 outpaced ad budgets growth, driving short-term pressure on CPMs.
We believe these factors will alleviate as macro conditions improve and ad budget 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 continued decline in our performance business in H2 2023 compared to H2 2022 will also impact our full year 2023 contribution ex-TAC.
Our items emphasize 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 team 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 the 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.
Although the macroeconomic environment remains challenging, limiting advertisers near term willingness to spend and adapt 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 broadcaster, 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 gain through Amobee will give us an increasing edge over time, especially when coupled with the growing distribution of VIDAA and Hisense and the powerful partnership and exclusivity where we have the relationship.
Following significant investment in CTV related to a development over the last several years, our platform is now more technology-based and customer-centric than ever 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 multiply solution 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 Instructions] Your first question comes from the line of Matt Swanson from RBC Capital Markets. Please go ahead. Your line is open.
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?
Thanks, Matt, for the question. Okay. So you asked a couple of questions in one question, I try to answer everything. So I think we are not seeing like as the industry is suffering from macroeconomic headwind I think we are suffering as well. We are more of a pure branding player, while the other are doing a little bit tweaks into some performance and more display media. Having said that, we are not seeing like 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 for 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 of 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.
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.
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 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 we 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 like very -- it's coming very clear to that now. And in the past, it was most of a slogan, but now it's reality, meaning when you're looking at the big broadcasters and the big TV station. 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 in a good path around that. But it's not something that happened overnight. But I think that it will give us a lot of power in the future in the midterm 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 enable 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 is 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 integrated 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, it's like 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 tighter, again, of the innovator of the CTV world, that is very important. I hope that I answered your question.
Yeah, thank you.
Thank you, Matt.
Your next question comes from the line of Laura Martin from Needham & Company. Please go ahead. Your line is open.
Give me one moment here. Okay. Can you hear me, okay?
Of course.
Hi. Can you hear me?
Yes.
Okay. Fantastic. Could you bring us up to date on the Hisense Beta measurement product you guys were working on, whether that's -- when that's going to have an impact on your revenue and then if you're going to actually sell it to third parties, could you update us on that please?
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 like long processes about building the infrastructure, building the technology testing it with a live TV manufacturer that it has also other challenges, of course, and it needs to make sure that the user experience is like 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 in the moment that it will start to play in our favor in the issues of -- in the front 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 is 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 being 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.
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 sales force turnover and elongating the sales cycle, which sounds like part of that is you have to hire sales line. 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?
It's not hurting us, but we need to remember that in the last nine months, we placed a lot of resources, attention into the integration from Amobee. It was a bigger company than us. We have to remember that we when we started this integration, they were like about 1,000 employees. We were around 600 employees. So to integrate these two big companies into one is taking time. The second thing is to create the synergies and to basically reduce cost, we reduced cost by $65 million, which is about 20% of our growth, which is very difficult to do. It's like when you are flying, it's basically changing the engine of an airplane when you -- while you are flying and we did it. I think that if we were doing that in the beginning, we will suffer today a lot because it's a loss that was generated, but we took this decision of acquiring Amobee not based on the short-term, but on the long-term and what technology they can offer us. So I think that also on that front, when you're looking at the technology front, we basically managed to integrate these two companies, two DSPs, two DMPs all the activities around it in a very short period of time. So like in the end of the second quarter, we already sunset one of our DSPs. We have already one platform, one sales force, one teams that are operating together, which is a very meaningful event and it's not easy to conduct. So I think that it's not slowing us down. And it just gave us the opportunity now to rebrand. So we also conducted a rebranding in June. We changed the names of all the companies, we unify them, we unify the products. We did a lot of work across the company in order to do that, which will help us to do three things. First of all, internally to give the people association to the new brand. So it's not a brand that -- it's a brand that we choose. It's the first time that we choose the brand that we didn't adopt the brand. The second thing is to make it more clear to all the clients and partners and potential partners, what we really can offer. And in our last meeting with people. Suddenly, it's come evident to them what we can really offer to them because before that, it was much more confusing with all the different brands that we are using. And the third point is also to the financial markets to investors, shareholders to understand what we are offering to the market, which is very powerful. So I think that in general, when you're looking at what we achieved with Amobee is a lot. And I will mention -- two elements that I feel that will give us a lot of power in the future or even three elements. One of them is the DSP itself. So the DSP that Amobee is very rich in functionalities of enterprise solution. It's very common. You can look at all the sentiment of clients and the market to the brands, to the capabilities that it represents. It's very powerful. And I think that the future belongs to the enterprise solution, meaning if you want to create stability, if you want to create prediction, you need to have an enterprise solution in your company, you need to be -- you have a strong one. So people will use it. And we can offer them more and more capabilities like you can see with our last deal with H/L that started with the DSP, but moved along to using our ACR data using our DMP using our SSP, which is exactly what we are trying to achieve. So I think that the DSP was very meaningful. And to build these all functionalities by yourself, will take you years as we know, we don't have years to get better on the enterprise solution. You need to get these capabilities today. The second two elements is the planning tool, the planning tool of the cross platform that is very unique, like I mentioned to Matt, it will give us value in the mid and long-term. And I think that it's very powerful. And we need to plan for the long time -- for the long-term, we cannot work for quarter for quarter. I think it will be a mistake after serving so many years in the industry, I learned that you need to plan and to build things that will serve you in the future. And the discovery tool that is basically a very powerful element because the DSP by itself, it's -- in a way, it's a commodity. But if you have all this planning tool, if you have the discovery tools that enable it, advertisers to learn about their audiences to create segments and so on and to -- in a click of a button to launch as a segment to targeting on our DSP. I think it's very powerful, and it's giving the agencies and the brands. The reason to adapt our DSP. So that's what we are doing. And I'm really glad for the acquisition of Amobee, and I think that it's was really the missing part for us in the strategy. And now we feel completed and that's why we rebranded, and we are ready for the future.
Thank you very much.
Thank you, Laura.
Your next question comes from the line of Andrew Marok from Raymond James. Please go ahead. Your line is open.
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?
Okay. So I will split my question -- my answer to two. On the supply side, the outcome is much shorter. So basically, when you integrate a new supply source that, first of all, the integration is like not long. It's in a matter of weeks. And also the testing is not long. It's a matter of less than a few weeks. It can do -- some of that can be done in parallel. So the effect of the media side is move 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 basically activity. So when we are coming in, we need to basically replace someone, which usually takes more time and people are scheduling the, let's say, 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 to top travel company to top other companies that are showing interest in our solution because of all the elements that I indicated to Laura also and to Matt before. So I think that it's a longer process, but it will two things that can be very interesting for investors and shareholders. One of them, it's 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 for there if the future if someone wants to change, it's giving you more stability, and it's a long-term solution. And you can see it and work with these companies for many, many years. And usually, if you are providing them good service, they have no reason to replace you. And we are very working together and transparent 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 revenues 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 discussion 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, what is their need from a technology perspective, and 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 in the future, which is, of course, something that you really need when you're running a big business and you want to basically lead the market of CTV, you need to have these anchors that are working with you closely in order to win the accounts.
Great. Thank you. And then just a quick one. I know you mentioned a little bit on the call 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, that could provide to you having one fewer competitor in the market. Thank you.
Of course. So MediaMath, of course, we used to work with them. They used to buy on us media. We look at them, and we feel bad for them to lose 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, that is 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. So it's not -- it was not like a planned process that people were saying, listen, in April 2024, we will shut down our service. It's 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 are already adopted other solutions, including ours. Some of them are still searching. And I think that we are, of course, in the mix, and we are trying to win as much business as we can. And I think that we have a very good chance to do that. And I think that eventually, this solution that we saw of MediaMath, this bankruptcy, it just shows in light or giving an highlight to the fact that you need an end-to-end solution in immediate or horizontal solution in order to win in this market and one side of companies will face difficulties to win and to stay in the market because, of course, of margin issues and capabilities to basically manage the future. So it's giving us another evidence that the solution and the strategy that we choose in 2019, when we choose to be end-to-end horizontal integration gave us a lot of power, and it's giving us reassurance that we are on the right side. And also, I must say from initial discussions with some of their clients, they see the same. They don't want to switch platform. They don't want to change platform every two or three years. They want to keep their clients and to keep the infrastructure that they choose to use. And I think that with us, they can feel much safer because they see the performance of our company.
Great. Thank you.
Thank you.
Your next question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead. Your line is open.
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 there was softness earlier in the year, just curious to know what you saw in June versus May and April? And then maybe if you could comment on July versus June.
Again, I didn't understand the first part of the question you asked about what we saw?
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.
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 didn't act like 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 started very weak because of Corona, if you remember, we saw a very big pickup in the second half. In 2021, it was starting okay, then there was the unrest in the US. We are mostly US-based. So 90 -- more than 90% of our business is in the US. So again 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 was started after the invasion of Russia to 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. And people were feeling that in this year, basically, what will happen is that we started soft, but people we 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. So we also believe in that also because we saw that evidence also in the few last years. What we encountered in the last few weeks is that we saw that if we are looking at that, and we are already in the middle of August, and we see also our peers that reconsider 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. And we feel that if the market will pick up, great. But if not, we are ready for that. And I think this is more about experience and being transparent and not about still believing that Q4 will be -- will make us miracles because we have to be careful if we are in the middle of August, and we see that the market is not as strong as well as expected. Even that as you can see, we show improvement in the -- in the two half . 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. And 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 cautious when we are sharing results and focus with the market.
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 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 -- or the outcome is the lower guidance that we took now out.
Thank you.
Your next question comes from the line of Andrew Boone from JMP Securities. Please go ahead. Your line is open.
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?
Yes. I will take this one, and Sagi feel free to fill any gaps that I left. But in general, I think that -- again, I think that what we also reported last time, I think it's still standing 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 plan to, which makes sense. And we see that across the board in all -- almost all verticals basically that 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 in some senses tomorrow, so they are more cautious than they used to. So I don't think it's about losing business. It's not about losing clients. It's about people that are dropping their spend in order to protect themselves to keep their cash to look at the future to try and understand what is -- when is the right time for them to start spending again or investing in, again, heavily in order to retain their clients to engage with them and to win new clients. So I think this is the major issue. We don't see any major failure or drop of clients or stuff like that. It's happening more on the ground of people dropping their or lowering their spend, lowering their activity in order to cross the storm that is happening in the macroeconomics in order to understand where they are standing. And as I mentioned, how to use the resources in the best way. So that's the major stuff. And just to -- maybe to add one more thing after looking at that from perspective of many years in this industry. I think that what we see is that we are a company that as Sagi mentioned, we are truly branding company. So this is the first thing to be cut when there is difficulties and macroeconomic challenges. But when people are feeling the release and the change in momentum, this is the first thing that will grow. So I feel that we choose 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. And I don't think that it can be challenge that this is the right way to run a business today in the adtech 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. So now I think that the uncertainty the advertisers and the partners when they are looking in the future, they have doubt, they have still question marks, and they are waiting to see when will be the right time for them to keep running and to push their big budgets in order to win accounts and to win market share again. So that's a major thing.
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 4Q with basically flat programmatic revenue ex-TAC, Can you guys just talk about when should we 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.
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 think that from -- I can look at our company and what we did in the past nine months almost and what we are planning to do. So I think that by concluding the integration of the technology, the integration of the companies, finishing the cost reduction that we've done. I think that it's giving like much more clear 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 conduct to teach and to 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 to take their campaign, but also to 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 positive at 2024. I think that from our company perspective, of course, I cannot guess how the market will look like, but if the market will show signs of improvement, I think that we'll enjoy from that in a very big way. And if not, I think that the numbers that we provide that make sense because we took into account steel headwinds, but we look at it that we are much more prepared in order to deal with them, and we are much more ready in our infrastructure and about our training and people on the ground in order to win accounts in any condition and to be able to basically grow the company again.
Thank you, guys.
Thank you.
We have no further questions. Ofer, I'll turn the call back to you for closing remarks.
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 also from multiyear process that we've done. So I think that since 2019, what we choose to do to be horizontally integrated to have end-to-end solution. In the beginning, people look at us as like why you are doing that, and it's crazy. Everybody is trying to specialize while you're doing this end-to-end solution. I think 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. And I think that we predicted that, and we act on that since 2019, and I feel proud about it because I think that it's very hard to look at trends and fulfill them so early. And I think that we've done it in a very powerful way. We made also four major acquisitions during this time in order to solidify and to bring these capabilities all together into one platform. And usually, I'm not using marketing slogans, but in this case, when I'm looking at that one platform and this opportunity is true. And we have everything that advertisers and publishers need in order to reach their KPIs. And we did it in a long process that we concluded that in the last -- in the end of the second quarter, basically when we finish the integration of Amobee into our business. And 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. So also the decision that we made in 2019, when we invested in RhythmOne that was, they acquired YuMe before, is to run very strongly on CTV, and we are doing that. So we're still growing on the CTV front. We are challenging the market. We are bringing innovation, we are bringing solutions that are needed. We focused on the future. And I think that we are providing great solution for the trends and the needs of publishers and advertisers. And I think that we -- our plan is keep doing that. And I think that also the rebranding now, as I mentioned before, is the first time that we choose the brand, and we didn't buy a brand or adopt a brand. 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. I think it will be helpful and powerful. And you don't judge these things over two months, three months, you drag it over a course of time. I think that we are coming to the market in a very full tech stack a very strong one that if you will 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 risk of the market in order to win in the future. And I think that this is what we try to build and we did it, and we are proud of that, and we worked very hard in order to achieve that. And I think now it's time for execution. And as we proved in the past, we know how to execute. It takes some time sometimes. It's not happening overnight. We have the right people. We have the right talent. We are growing our sales teams. We are growing our teams in order to get like more market share in the market, and we have the resources to do that, which is very important, and we are going to do that during 2024 and going forward. And I feel very secure about the position, the technology, the infrastructure that we created. So I'm excited about it, and we are looking forward for the future. And we hope, all of us, that the macroeconomic will change and will give us a boost because, of course, when the market trend, the sentiment is better, things happen faster, and we hope that it will happen. But if not, we will cross the strong storm and 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. And as I said, we are positive. We are looking excited for the future. And I think that we are well equipped to win in this marketplace and to provide a good solution for all the stakeholders and outcome in the company. Thank you very much.
And this concludes today's conference call. Thank you for your participation and you may now disconnect.