Q3 2021 Ironsource Ltd Earnings Call

[music].

Hello, everyone and welcome to the <unk> Q3 earnings call. My name is Daisy and I'll be coordinating today's call you'll have the opportunity to ask a question at the end of the presentation, if you'd like to register a question. Please press star followed by one no telephone keypad.

I'll now hand over to Heise, Daniel <unk> head of Investor Relations at all and so Daniel. Please go ahead. Good morning, everyone and welcome to Iron sources third quarter fiscal 2021 earnings conference call My.

My name is Daniel Amir VP of Investor Relations with me today, we have Thomas <unk> <unk>.

Chief Executive Officer.

I've been in my Chief Financial Officer are known Harish, President and Marc Hoffman Chief revenue Officer.

Before handing the call over to Tom ill, let me remind you that this call is being recorded.

A replay of this recording will be made available on our website shortly after the call.

We have posted the earnings release and the accompanying slide presentation on our Investor Relations webpage at investors Dot I S Dot com.

Elements of this presentation as well as statements. We may make on this call are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, and these statements are based on current expectations and assumptions.

Please consider the risk factors included in our public filings with the SEC that could cause our actual results to differ materially from these forward looking statements.

For more detailed information please see disclaimers in the earnings material relating to forward looking statements that involve risks uncertainties and assumptions.

For a discussion of some of these risks uncertainties and assumptions. Please refer to iron sources SEC reports.

Other than as required by law, we assume no obligation and do not intend to update any such forward looking statements.

We also note that the financial information discussed on this call reflects estimates based on information available now and could differ materially from the amounts ultimately reported in iron sources. Other SEC filings. During this webcast unless otherwise specifically noted all comparisons are year over year.

Comparisons with the corresponding prior year period.

For financial information that has been expressed on a non-GAAP basis. We've included reconciliations to the comparable GAAP information.

Other than with respect to adjusted EBITDA guidance for which we have not provided a reconciliation because certain items that impact adjusted EBITDA or out of the company's control and or cannot be reasonably predicted and accordingly, our reconciliation is not available without unreasonable effort.

Please refer to the tables and slide presentation accompanying today's earnings release for these reconciliations.

The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP.

We use these non-GAAP financial measures for financial and operational decision, making and as a means to evaluate period to period comparisons.

We believe that these measures provide useful information about operating results enhance the overall understanding of past financial performance and future prospects.

And allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

With that I'd like to turn it over to Tomer.

Thank you Daniel Hi, everyone and thank you for joining us today for Q3 earnings call.

It's been another great quarter for island source not only from a financial perspective, but also in terms of the meaningful expansion of our platform offering and the value we deliver to customers.

We also recently announced two strategic acquisitions, which we are very excited about and which ones close will serve to deepen our platform offering further as well as increase our scale in the market across both apps and games.

We've maintained our leadership position in the App economy with some of the largest apps games and telcos using our platform to grow their business.

Last quarter, 86% of the top 100, most downloaded games across both the App and play stores use our platform to grow their business and we've signed a strategic partnership with one of Europe's leading telecom operators Vodafone.

Before I dive into the platform and business highlight in more details I'd like to shell few quick financial highlights.

In the third quarter, we achieved record results with total revenues of $140 million up 60% year over year. This was primarily driven by continued momentum across both the sonic and RF solution suites and market share gains as we've seen an increasing the use of our platform.

By both existing and new customers.

For the third quarter adjusted EBITDA was 51 million.

Up 70% year over year in the same quarter last year.

And that's consistent with our long history of providing profitable revenue growth, while benefiting from operating leverage.

Finally, we saw further evidence of the stickiness of our platform and the value. It provides <unk> customers with a dollar base net expansion rate for the quarter of 170%.

As a quick reminder, the island, whose platform is designed to serve the two co constituents of the App economy, Abdelal hers and telecom operators.

It's made up of two solution suites.

Sony, which empowers our developers who create the content of the App economy to turn that content into our business in aura, which enables telecom operators, who provide the infrastructure that content from phone to create a retail device experience to drive more value and differentiation with end consumers.

Together. These two solution suites make I offers the most comprehensive platform providing business creation sulfur for the App economy.

And as we'll see in the next few minutes. We've recently made meaningful addition to that platform offering making it even more comprehensive.

A key element in the successful platform is the strength of our data.

This is driven by two main factors first our scale.

Today, the majority of the leading mobile game developers are using our SDK.

In our RF solution suite is integrated on more than 160 million active devices.

Second the comprehensiveness of our platform means we provide multiple solutions for every stage of the op wrote lifecycle. These means well integrated multiple touch points within the customer's business and we're able to get visibility across the entire lifecycle.

As part of our growth strategy, we recently announced two acquisitions, which have deepened and expanded our platform offering while also strengthening our data advantage by increasing our market scale and penetration in Africa degrees outside of games first let me talk about <unk>.

In October we announced the acquisition of <unk>.

A leading mobile advertising in App monetization company full $400 million in cash.

<unk> has a strong well known brand in the App economy and brings to island serves an experienced management team with a large U S presence.

Let me highlight a few of the reasons for the acquisition.

First complementary technology, enabling the optimization of in game and in App economy.

Second an expanded customer base beyond gaming since a significant percentage of <unk> revenues come from non gaming as an area of strategic importance for us.

Third additional in market scale and increase SDK footprint given that the capture SDK is integrated on a wide range of apps. These further bolsters our scale in data advantage.

And finally attractive financial metrics, which includes expected revenues of $81 million in 2021.

And accretion to our financials in 2022.

We believe that the acquisition of a fast growing highly profitable and strategically complimentary business in and are financially accretive manner is illustrative of our ongoing M&A strategy and opportunity ahead.

Our second acquisition was be dialed.

A marketing software company, focusing on data driven optimization tools for mobile marketers.

Today have developers need to be able to run and optimize marketing campaigns across multiple channels in order to grow our scale.

We'd be dialed go we're able to offer cross channel management and optimization for every element of marketing activity throughout the island falls platform.

The BD acquisition together with our creative management solutions Luna labs expand our cross channel capabilities on the marketing side of the growth cycle, increasing value add and stickiness with Abdelal Perth.

Like the tabular acquisition acquiring beat Algo, we also deepen our market presence across the entire app economy, given be dialed goes customer base in app categories beyond games.

It's interesting to note that many of our existing customers use both be dialed go and tap Joy. In addition to multiple of our current solutions on the island falls platform.

These not only highlights the value of the combined offering and expected increased stickiness with customers, but it's also a testament to our platform based approach to the App economy.

We're looking forward to closing these transactions in the coming months subject to regulatory approvals and believe these acquisitions will accelerate our growth going forward.

This quarter also saw the launch of products and partnerships designed to increase our value proposition to our customers and drive further growth.

Let's look at Sonic first.

As a reminder, our Sonic solutions suite provide AB developers with everything they need to grow their business from expanding their user base cost efficiently to monetizing their apps and generating revenues for meat to analyzing their business and optimizing it for profitable future growth.

Put simply our platform allows developers to focus on creating great absent content, while we provide the infrastructure for the business expansion.

This quarter, we announced the launch of two products that support our developers in the evolving landscape on iOS.

One that allows app developers to evaluate the quality of an acquired user and another which gives them critical transparency on the user acquisition performance across all networks.

Both these tools are designed to empower developers to continue growing their businesses in a cost efficient and profitable way as the industry evolves.

Now, let's move to or.

As a reminder, all enabled telcom operators to enrich the device experience by creating new engagement touch points that deliver relevant content to their users.

These not only increase and on device distribution channel for Abdellah Perth. It also give telecom operators a way to increase adoption of the owned and operated content and services, increasing incremental revenue and customer engagement.

We've seen another successful quarter with the announcement of our partnership with Vodafone one of Europe's leading telecom operators.

The partnership includes integrating the Atlas dose or a solution suite on verifone devices across Europe, including in the U K, Germany, Spain and Italy.

This follows the announcement last quarter of the exclusive deal to power Samsung open market phones in Europe.

Increasing our scale in the European market and our value proposition for all developers looking to reach users on devices in that market.

These partnerships are a testament of the unique value proposition of our solution suite, which goes far beyond our promotions.

By providing a solution for managing the entire device experience, we were able to continually expand to new touch points, giving telcos additional opportunities to engage the users provide value and drive incremental revenue.

Since already integrated at the device level, it's very easy to add additional in life touch points, such as news entertainment or gaming hub, which encourages users to engage with their devices and the telcos brands more often.

This has been a great quarter on all fronts.

Our financial performance through strategic M&A and important product update and partnership agreements. We are continuing to fulfill our goal of providing the most comprehensive business platform for the App economy.

Most importantly, we're providing value to our customers and helping create more up businesses.

With that I will turn the call over to a sub to provide you with details of our financial performance and guidance for the quarter.

Thank you Donna.

We're excited to deliver another quarter of excellent results.

Before diving into the results I wanted to start with a brief reminder, about our business model.

Our revenue consist of three main drivers revenue share usage based and dean that monetization and majority of our revenue is currently generated under that revenue show more than where we retain a shell of the revenue our customers generate using our platform.

Our ability to increase our revenue is highly aligned with our customer success.

As our customers see greater benefits from our platform they increase their usage and adult additional solutions that in turn further accelerate the growth. This strategy has resulted in higher net expansion rate, which is the average 157% in the past 10 quarters.

Our customers range from large global enterprises to small independent developers itself.

As of the end of Q3, we surpassed 5000 customers for the first time using our platform. This compares to less than 4000 customers in air ago period.

S. Thermal mentioned Q3, 2021 was a record quarter, both topline and bottom line and higher than our guidance.

We are pleased to report that we generated $140 million of revenue compared to 88 million in Q3, 2020, representing easily vote of 60%.

For the quarter Sonic was 87% of our total revenue and dollar was 13%.

The growth in the quarter was fueled mainly by the expansion of Sonic and Ora solution suites within our platform.

Our revenue is driven mainly by our large customers. We define large as does generate over 100 K in the last trailing 12 months.

This group grew three ended at 32 customers in Q3, 2021 up from 269 in Q3 last year, representing elder is growth of 23%.

These numbers were achieved while maintaining a very high gross retention rate of 98% in Q3.

This large custom misrepresent, 95% of our total revenue in the trailing 12 months of Q3 2021.

Due to that increased usage of our solutions, we are able to cross sell and upsell a greater portion of our solutions to them as well as generic growth in the number of new customers that contributed more than 100 K off revenue.

This large customers a very important source of stability and predictability in our financial model.

Our dollar based net expansion rate for Q3 remains exceptionally high at 170% compared to an average of 157% in the last 10 quarters.

This high rate is driven by product and solutions launch over the course of 'twenty 'twenty that drove significant growth and in line with our business model, which is focused on customer success.

Although we expect our dollar based net expansion rate to remain very healthy we anticipate that it will vary from quarter to quarter and it would normalize at double historical levels over the next couple quarters.

We had another strong profitable quarter.

Oh, it is growth and investment, but we believe in profitability and healthy margins, we generated adjusted EBITDA of $51 million in Q3, 2021 representing growth of 70% from our adjusted EBITDA of $30 million in Q3 of <unk>.

Last year.

This growth was driven mainly by revenue growth across all of our solutions.

Our non-GAAP diluted EPS for the quarter was four cents and our net cash position was $788 million.

Now, let me turn to guidance.

Our guidance takes into consideration the following factors.

The recent Q3 results the momentum across our platform the near term potential impact of idea Fay and it also does not include any revenue from our recently announced acquisitions.

For the fourth quarter of 2021.

Total revenue is expected to be in the range of $140 million to $145 million, representing 32% growth on a yearly basis at the midpoint.

Adjusted EBITDA is expected to be in the range of $50 million to $52 million, representing 57% growth on a yearly basis at Demeter point.

We expect our fully diluted share count to be approximately one 1 billion shares.

For the full year 2021.

We are raising our full year 2021 guidance for the third time this year.

Total revenue is expected to be in the range of $535 million to $540 million compared to $510 million to $520 million previously.

Representing 62% growth at the midpoint.

Adjusted EBITDA is expected to be in the range of $186 million to $188 million compared to 173 to 178 million previously.

Representing 81% growth at the midpoint.

We will now open the call to questions. Operator. Please go ahead.

Okay.

Yeah.

Thank you very much if anyone would like to register a question. Please press star followed by one on your telephone keypad. If you would like to withdraw your question. Please press star followed by T. When preparing to ask you. A question. Please ensure you have unwanted lately.

Star one on your telephone keypad perfect question.

Our first question is from Colin Sebastian from Bad Colin Your line is open. Please go ahead.

Thanks, very much good morning, and good afternoon, everyone.

I guess first tomorrow.

With the consolidation of game development and advertising kind of changing the competitive environment is this an area, where you're able to capitalize from these trends from a business development perspective, and then secondly would you say at this point that the iOS I DFA issues are are a net positive to the platform as <unk>.

Or is have to broaden out their customer acquisition and monetization efforts is that fair. Thank you.

Hi, Colin Great to hear from you again and thank you for joining today.

So so briefly on both on both points. So indeed, we have seen a lot of consolidation in the ecosystem are.

Both around the game developers are among them and also the different platforms, adding additional solutions to their stack Island source, we announced two acquisitions top gen be dougall, which goes very much in line with our strategy of growing both organic and Nonorganic Leann.

I do believe we will continue to see further consolidation.

With with two main I would say two main.

Narratives, expanding we would see we would see game developers acquiring other game developers to expand the offering build their portfolio of games, we would see summer casuals developers going into hyper casual all we will see the other way around hyper casual and may be growing into casual I and we will see more.

More of dose and I believe we will continue to see the platform's growing also non organically, adding additional solutions as for island service. We repeatedly said that we as a platform as a business platform for the epic economy are going to continue focusing on expanding the platform expanding the solutions we add.

Due to the differing solution suites, we have in within Donaldson's platform. So we can better serve our customers, helping them concentrate on creating great content, great ops and relying on us to grow their business and they believe this will we will continue to see that in quarters ahead.

As for idea Fe as of also repeatedly said in previous calls we continue to pay close attention to every development Ah in that in that area in the ecosystem I think it's could eat becomes clearer and clearer today that some companies are a net benefit.

<unk> of the changes some a little bit less.

In in again as I previously said, we so far thus far we've seen idea phase being a net positive so iron source steal a bit difficult to quantify it exactly.

And we when we look at guidance as we continue giving and when we contemplate into the future. We all are still taking into account potentially short term a negative effect of idea failed, though we still havent seen them for the last three quarters or so.

So we are still budgeting a dose IV, if he's still not completely over but it's even clearer than ever before that in the long term island tours as we already stated is going to be.

One of the platforms clearly beneficially beneficiary from from idea Fay.

Okay. Thank you Tamara.

Thank you very much. Our next question comes from Bonnie met Tandon from Needham <unk> Company.

Your line is open. Please go ahead.

Thanks for taking the questions you highlighted in the slide deck your work with <unk> on subway surfers with in that bidding driving greater efficiency for the customer can you talk through how unique and differentiated your product is for in that bidding relative to peers.

And then just a follow up on Vodafone.

The commentary that you provided in the prepared remarks, but how should we how should we be thinking about this revenue stream starting off and growing over time and how big of an opportunity can it be.

Sure Hi, Bernie and thank you for joining as well Oh, Mel we let you address the first part of the question Ramon you can address the second part on Vodafone sure Yeah, Hi, Bernie so regarding any bidding and so we've we also spoke about it in our previous earning call wheel.

We today know intermediation is basically completed their migration to play mainly work on either bidding or to allow our customers to use all mediation intuit within a bidding with all of the relevant network partners.

It gives us several advantages right. So in addition to increasing the level of revenue any C. P. M. Like you've stated in the subway says for example, and we've also seen a very big increase in efficiency when you're using in the beating it really really save some of the menu will work aimed at that in the past developers needed to do to manage.

Monetization. So that's a great value. We offer is definitely something that we've a M led the market in that migration and we'll happy to be one of the platforms that are really in leading these in having the majority of everything done INO mediation working through in a beating.

Hi, Verde regarding Vodafone again.

One it is one of the largest telcos in Europe, and we are obviously, starting the partnership with them is going to fully materialize.

2022 we're going to integrate more and more solutions into their devices and obviously, it's going to be a meaningful we're continuing to add additional products. Both that are currently in the market and one that we are developing two are kind of the platform, allowing us to do more and more with each and every user that we have in our.

Platform.

Thank you.

Thank you very much. Our next question comes from Clark. Your line is open. Please go ahead.

Good morning, I have two please the first is on Sonic publishing I understand you guys don't want to provide a formal revenue breakdown, but I'm curious if you could.

Maybe update us on the number of submission games that you've partnered with year to date and then also the performance of some of the title.

Second question is on.

Apple and epic apples requests her stay was denied recently I'm curious if you guys might share with us what you expect the impact to be if anything on the gaming space and your customers ad budget.

Do you envision that in a scenario where gross profits are up that most of those would be redeployed on marketing and on your platform as well.

Sure Hi, Clark. This is Thomas I will start with your second question and the only you can probably give a bit more stats on onto publishing solutions.

I think the the we've been asked about this question.

About Apple and at peak and our what we our approach here is of course, we all are all four full Democratic nation of the App economy. So we believe our developers should have a choice of who.

Who they want to work with and how and I'm more choices always better and we are all for competition. This is part of our of the values of Downfalls platform right. The full Democratic Asian of content creation, and so we very much believe in that as for how I think this might evolve into you know practically what.

What it means in terms of numbers and who would benefit from that so at the end of the day. There is one basic truth, we cheese whenever developers can generate higher revenues or whenever their lifetime value. The lifetime value of a user is higher which is what potentially can happen here.

Developers will be able to spend more into user acquisition right because each user will potentially generate more revenues seems there will be a gaining gaining more more revenue they will be able to spend that in our platform and other so clearly this one way or the other right either.

Or if we'll see more competition or we will see apple reducing the different fees that the that the child's dis Ah Ah Delta. These are additional revenues will flow back into the App economy.

A a usually in the form of additional user acquisition, because all of a sudden a user would be worth more for those game developers and they will be able to spend more within the platform. So I think that that's a very that's.

That's a clear assumption that I believe we will see although you want to comment on publishing the issue. So the digester. The note when our polishing product we launch our publishing product in February 2020, and we've seen great success with it with it so far up until the end of Q3, we've launched 35.

Probably 35 games 25 of them reached the top 10, most downloaded game in the store.

All of our vision around around all of our publishing product is really to completely automate the process baidu completely product is publishing and allow indie developers we can't use the other elements of our softgel independently to use our publishing bullet I think in that way to automate the entire process with them and we will continue.

To see great success with that product.

Very helpful. Thanks.

Our next question is from Mike <unk> from Goldman Sachs. Mike. Your line is open. Please go ahead.

Great. Thank you for the question I just have two first I was just wondering if he could talk a little bit more about the non gaming mobile AD ecosystem and some of the differences between.

Gaming based apps in terms of monetization and ecosystem.

So for instance to do non gaming advertisers use a lot utilize different AD formats or work with a different set of AD publishers are you seeing them advertise on gaming and then second I was just wondering if you could talk a little bit more about the fourth quarter revenue guidance.

Do you see a typical seasonal uplift and as the.

Guidance burden by IDF, a headwinds and if you could quantify what assumption youre, making there that'd be great. Thank you.

Sure Hi, Mike I will start O'malley and a soft if you if you would like to add please feel free.

So look at it.

I often I often describe gaming goes are the countering the mine for other type of verticals within the App economy are very often.

That games are really a leading the way and then the rest of the verticals will photo we've seen that multiple times in the past and I think this is what what's happening at the moment. We are our non gaming revenues are growing fast very fast.

By the way the two acquisitions that we made tab Joy N B dougall, both companies generate significant revenues from non gaming ops and in that scenario of strategic importance.

For us because we've always said that islands of we want I want us to be the business platform for the App economy, not just a game economy granted gaming is the biggest part of our platform today and will continue in the near future to be that but we are focusing very much also in growing outside of our games and events.

We believe that there is a need for one platform.

Providing an end to end solution for the App economy. So of course non games are very important now I think a different AD formats and different characteristics vary between the different verticals in the App economy, but eventually I believe that there were pretty much are all look the same.

In terms of what type of ads and what type of formats worker. It's a it's a matter of evolution, which eventually I believe also other verticals are will catch up with with games.

As for Q4, a look so we started the year with a I think it was 37% year over year our growth. We're now at a 62% year over there. So so evidently we've we've increased our guidance as we see when we started the year.

There are there are some unknowns I would say.

Mostly around idea Fe, how will that rollout and so we wanted to be.

A conservative and prudent in the way, we budget and the way we guide Ah as.

As it's becoming clearer and clearer quarter after quarter that our that as as a REIT originally yes.

Assume bias where are net beneficiaries of of dispose a D. F era, we feel more comfortable increasing increasing guidance.

As we've also done this time right we've for a three consecutive quarters, we've increased guidance twice by $30 million now by $25 million. So we feel very strong with our ability to continue performing and also looking a beyond that we feel very strong with.

The growth drivers.

Of the business across the different activities or different solution suite. So.

I think as mentioned, we feel very bullish about our ability to continue continue growing now that idea Fei mostly is a is a is a thing behind us.

Great. Thank you for the thoughts I was very helpful.

Yeah.

Thank you very much Mike. Our next question comes from Jason Bazinet from Citi. Jason. Your line is open. Please go ahead.

Thanks, so much.

If I if I decompose your revenue growth between growth and large customers year over year as opposed to growth in our revenue per customer.

It seems like Jason I'm, sorry, I I can hardly hear you.

Jason If you are I can hardly hear you.

Thank you I'll try and speak up is that better.

Yep Yep Yep. Thank you.

Okay. So if I, if I try and decompose your revenue between growth in the number of large customers as opposed to growth in revenue per customer.

It feels like back in 19 and in 2020 most of your growth is coming from an increase in customers and this year, it's been more about revenue growth per customer driving that sort of top line.

Given that you're moving more into non gaming, but youre also doing acquisitions to broaden your portfolio, how do you anticipate that mix changing.

'twenty two 'twenty three 'twenty four.

Customers are growth and revenue per customer and that's the main driver. Thanks.

Sure Hi, Jason now a good here you well and thank you for joining today so.

Look I would I if you if you analyze different kpis and they do think it's important to analyze different kpis, we provide to understand the way, we run and manage and operate the business right. So I think the the the triangulation between our net dollar base expansion rate.

Our gross retention rate and also for example, we said that in this quarter I think the number is 886% of the top 100 games using our platform.

At least one one product within our platform. So our model the way and the unique way a islands, we run islands hers as the platform for the App economy, the land and expand is really our main focus for us.

Because the flywheel effect, where here remember that we have a full alignment between us.

And the customers, we serve will here to help them concentrate on creating great content, while we help them expand that into expand our business into a scalable successful business. So what we want is for them to continuously adopt more and more products within the platform because that will eventually make them a better beast.

And they will be able to because of the flywheel effect, there will be able to expand or are there business also with us.

And this is the reason, we keep adding additional solutions to the platform, which we also can plan to continue doing that both organically and inorganically because again. This flywheel effect. These key for for the App economy in general of course, our platform. So very much focused on on growing the beast.

With our current customers as well as adding additional customers, but adding expanding the business with customers I would say is our top priority as you can as you can see from our net dollar based expansion rate this quarter of 170% I believe it's a it's the best in in <unk>.

Our appeal group, so we're very much focusing on that and that's the whole idea of the the overall end to end platform for those developers.

Thank you.

Thank you very much. Our next question comes from Bhavan Suri from William Blair. Your line is open. Please go ahead.

A team nice nice job, there really really solid quarter, I guess I wanted to touch it at a high level of October just about.

This ability of developers or if they're able to circumvent potentially app stores leveraged third party payment providers.

Love to learn a little more about the potential for ion source here I guess, a do you just take advantage of it which I think developers will but to what adjacent areas could you know you had iron trusts enabled us with like us payments integration just a natural adjacency how should we think about the adjacencies to the App ecosystem that you would do hypothetically, if we could circumvent the app stores and <unk>.

Third party payment providers directly.

Yeah. So thanks for the question Am I I think I think it's important to first understand it if of course D. The payment to the to the apps. Those will eventually be low will then then the developers will have more money to invest in doing in doing marketing led.

And that of course will make us another tussle net native beneficiaries of that and improve the entire ability of web developers to scale a M. I think that it's it's a bit too early to to predict what's going to happen, but our our mission is to provide a comprehensive.

Business platform Philip developers, so everything they need to tune their app into into our business. So we we definitely might look at helping them also with the aim with finding relative tenant is there. It is something that we have of course, a flowing close the units the potential future opportunity.

Yeah, Yeah, and ferrets, it's too early to predict.

I want to ask a second follow up just on the AD creative marketing teams I'd love to dig into the opportunity. There you know you obviously have quite a company in our space.

But as you see budget spread out across the board networks more campaigns.

Et cetera, and then there's limitations on the number of potential campaign ideas to analyze how should we think about that how should we think about the budget spend given some of the acquisitions you've made you've moved into sort of this not just mediation, but the marketing and the communications piece of reaching developers and the developers use just I'd love to ask answer to how you've seen budgets expand or the potential for the addressable budget that you have access to.

Expand within your customers.

Yep, So I assume you're referring to the Vidal GUL acquisition that I'd say that if there is a marketing software that allows developers to basically yep yep to basically manage and their creative in their user acquisition across the multiple channels and so.

Yeah, what what he does is it gives us the ability to increase the depth of solution that we gave also from the marketing side light and really be this one stop shop to D. C. The management console of everything they need longer you a it also AIDS a roughly an incremental tam.

Or $7 billion to $10 billion in because we were looking you. It really all of the all of the performance budget that Aps are spending on all of the relevant channels and again it really seats with we sell mission to continually expand our business platform and to give L. F developer with more and more.

Tools of course, the entire the entire lifecycle and in their entire set of needs in order to tune to apps into businesses.

Yeah, I think that makes sense I guess I guess the question was sort of also additionally, there must be a data piece that flows into sort of the the data you have so if you think about contractual data the ability to understand sort of the response rate things how does that adds the data moat you have today. Thank you.

Yeah, Yeah, no. It's a great question. Thank you. So are are in general our arm one of our one of our main advantages on.

The ability to tell it in an effective way is a close relationship and partnerships with all of our customers that really generates really deep data integration right. So we have we have data flowing form form for many many of our customers in and of course, when we add more.

Our solutions and then we have a wider viewing the market will schools that that it also helps give us and give us more data flowing into our systems and then of course, we've invested heavily and we continue to invest in our machine learning capabilities and to really have the best data science team is out there and to be able to get all.

These data coming from all of the sources out there and to improve our targeting and in machine learning capabilities.

Thanks, guys.

Thank you. Our next question comes from Ken Niland for Macquarie. Tim. Your line is open. Please go ahead.

Well, thanks, very much couple of questions on the AD mediation side. Please just a bit more on tap Joy, if you wouldn't mind first off.

There's been a bit more consolidation in the space I know you already quite large there just how important is scale there and what more really this tap joy bring you on the on the AD mediation side and then secondly, I saw your announcement about the custom adapters.

Getting.

Customers more flexibility more options.

And who they work with within the SDK network could you just explain a bit more what's new about this what this offers to customers, that's new and different from what you or anybody else offers thanks.

Yeah, So I'll I'll I'll take that I'm a M. We didn't identify before so I might all male taking the the the question. Thank you. Thank you for the question. So I'll start with the second part regarding the customer adapters M. So so the change there is that be full before we will.

<unk> this new capability the the customers who are using a mediation could only work with networks that when that debt, although mediation a certified and they're in it was it was a group that would have existing network partner is in limited to that group that was certified in and maintained bio mediation when we've launched.

<unk> got some with others. It means that basically any network out there related of course follows all our political in guidance, but any network out there basically it can work least cost with our customers while using our remediation through adapter is that they can build in order to support. These connections. So now all of the customers using them ADH.

<unk> can basically work with any network that they want through customer that there is a not only with the existing certified networks.

The operating INO mediation.

So that's that's regarding that regarding your question about the about tape Joy. So of course this acquisition really reflect sell our platform based approach to the economy in and they really are important solutions to our platform that increase our total value add and stickiness with our customers. It's also aim in extremely.

<unk>, a a season and great executive team play Middle U S based but globally in like Thomas said, both tape Joy N V. Dougall gives us a additional customers additional knowhow in digital technology around also helping at the developers right and not only gained availability.

Something that we all scaling as well, but with them. It's it's again it is something that will help us to generate that growth, even faster and allow us to scale our activity with App developers in addition to helping game developers.

Got it thank you.

Yeah.

Thank you. Our next question comes from Brent Thill from Jefferies. Please go ahead. Your line is open.

Thanks, Taylor as we look into 2022, maybe if you could share.

Your top two strategic drivers are.

Areas that you're most excited about is as we hadn't been in in the air.

Hi, Brent are indeed, very much looking forward to 2022, I think we've with the current growth of the platform and new additions were really best geared to continue capturing and expanding.

Our leadership in the App economy, So I think in 'twenty in 2022, what we will see full Iris was specifically we were we're going to see our.

Expansion within games, if you remember typically ourselves.

Very strong still very very strong with the triple a gaming companies earn well with our Oh, we've as automating. The publishing solution. We are expanding also to the longer tail of a of the <unk> of the category with a clear ambition to fully democratized content creation Ah.

I think we've added a lot of a lot of products to the Sonic solution suite that will accelerate that growth.

Of course, the recent addition of Luna labs, which we announced last quarter to a help help developers with everything around creative and now with the addition of stub Joy and Vidal boom.

Also together with the Luna labs, which we did before I expect that to really help us grow across the across the category.

And of course of course growing faster with other verticals outside of games.

Bolt I remind you all that most of what we do in aura is non games and already around now 10, probably a bit more than 10% of Sonic is non games and we expect to grow that similarly to the way we've led the gaming category and the democratization of content in the gaming category, we expect to.

Do that beyond games, and he's going to be a very strong area of focus for us in 2022.

Yeah.

And in real quick on tap Chile.

Integration of this asset can you can you speak to how quickly you can you can get to market is there is there a considerable amount of heavy lift on the backend to get this integrated or is this I know these arent easy to do that is it is it a slightly easier integration from your perspective.

So look the I the additional color that are at the moment I can add to that as a as I stated before are a very big part of our current customers are using both tap joy and be Dougall. In addition to our at least few of the products within that.

Or split from itself. So we know these customers very well and they know our islanders and of course Vidal Wouldnt tap joy so to that extend its being very well received because what all all day care and a weak Harry's again, the flywheel effect of how we can help them become a better business. So.

It's still a bit early to say you know how the full PMI will look like we're in in initial stages, there, but we know those businesses very very well and of course, we know very intimately the customers of those businesses as well because there are also I once those customers today. So the barriers are.

And I hope I'm right, but the barriers to those pmi's in the market as well as integrating the platforms. We downslope bathrooms I do expect that to be and I hope it will be even easier than previous acquisitions. We've made reminding you. All that also sees a fairly acquisitive company. So we have.

Experience with that for us our transactions shortly of these type of very very much related to how are impressed we are in in this case will deeply deeply impressed with the quality of the management teams and are in the overall teams in both companies and we feel the full.

Feet to our DNA that will be able to unlock really significant value for the app economy going forward and I'll be happy to update on how the PMI is going in in future calls.

Thank you Taylor.

Okay.

Thank you. Our next question comes from Martin Young from Oppenheimer. Martin. Your line is open. Please go ahead.

Well. Thank you for taking my question and good afternoon.

First question is on your customer total customer count of over 100 K revenues.

Total net adds in this quarter seems to have accelerated can you maybe breakdown what was driving that was it from existing customers growing much bigger or from art or your school, maybe more customers are moving from other platforms over to yours.

I E high morphing Ah I don't have the breakdown of or the exact breakdown, but I would assume maybe Seth you can you can elaborate but I would assume both.

Both contributed to the addition of the <unk> of the new customers spending more than 100, K, but maybe a softer you have some some color on this.

Yeah sure. So of course, it's both remember that we count them more than 100 K for the last trailing 12 months. So customers. The joined few quarters ago. The day, they will get to the above 100 K. After few months at least so this is one just to mention that the.

32 O the 23% increase from last quarter last year.

It's after about 40 customers that smelled sweet to other large customers because of the lot of medicine in our industry. So basically this is also why the the value built large customers increasing because we went to customers. So merging two large customers are melting.

Counting the only one we're counting on the parent company.

And so this is the reason and and again boats new customers that are increasing the usage of the platform.

With the land and expand approach and they become large customers and of course, the large customers continue to growing in the platform.

Thank you My second question is on the M&A landscape, maybe can you update us or.

What you see in M&A environment, whether you feel that you have a good pipeline.

And that will continue to provide you with more services to add onto your platform.

Sure, yes, so so very consistent with our growth our growth our strategy. The fact that we operate our island tourists as a platform as a business platform for the App economy with two solution suites right Sonic for abdicate uppers in aura for telco operators and because of the south.

Is of the of the platform and adopt ins of the platform within the different customers. We serve we are very very very this is our main focus adding additional solutions through the platforms to increase the stickiness to increase the level of service we provide to the customers we serve and we plan to continue growing that.

By doing that we focus on we focus on doing that both organically and non organically.

Since we since we went public we've we've done four full acquisitions are and our and we plan. We have a we have a very healthy pipeline of different companies that we that we're looking at potential targets and in Asia.

Say that one is a very acquisitive company.

Company, we see for a company of our size and our platform of our sizing the App economy, we see all or most of the deal flow out there and we know what makes sense to our platform. For example, as I said with a top joined Vidal go through acquisitions, we announced now.

Dave the our customers out anyways I'll already working with our with both companies where it really makes sense to make it one make it as part of the platform. So that the flywheel effect can can can increase can expedite and so we can better serve our customers. So very much a this was part of the main reef.

Then to go public at the moment, we're very much focusing on.

Our growing also true M&a's and of course those are also organically and now expect our ability to continue being the consolidators in the market to remain as a as we've as we've shown today or even increase.

Got it thank you very much.

Thank you. Our next question comes from Stephen Ju from Credit Suisse. Steven Your line is open. Please go ahead.

Okay, great. Thank you. So much. So I was wondering if you can talk about what percent of advertisers are buying into both sonic and Ora inventory.

Are there any impediments longer term to driving that adoption higher over time, and especially as you're set to onboard I guess, a more users and inventory with the Vodafone partnerships and.

Second from a definitely more of a bigger picture perspective.

There's a lot of acquisitions and initiatives that you have announced between capture it but I'll go and.

Vodafone So what do you think your global user reach will be when everything is integrated and rolled out.

Especially as you think about cutting I guess, a more attractive destination for AD budgets, particularly for those marketers that are outside of the games industry. Thank you.

Hi, Stephen I'm not sure I got the second question, but let me start with a with a personal and see how much time, we have left but so as I said, we operate one platform with two solution suites, I think that the number of customer around 16%.

Of the of our of the large customers are using both our solution suites, and we and we plan to actually increase that whereas as also sonic will take a bigger part in the non gaming category.

When that happens will win that continue happens at larger scale, we expect to see more correlation between sonic and and Ora, which at the moment is around 16% I'm sorry, I didn't understand the second part of the question or the second question. If you can please repeat.

I mean, you've done a lot of you know you've announced a couple of acquisitions and you now have the Vodafone partnership. So these are all designed to bring on additional supply and demand to your platform. So when everything is integrated and rolled out.

Just wondering how many users do you think you'll have exposure too across the globe.

Because some of them you're trying to become the more attractive destination for AD budget. So there has to be.

Our consideration therefore marketers outside the game as the games industry, because they are going to be looking for reach in some cases. In addition to I guess the direct performance type ads.

Right of course, Luke so the as a whole that also spot from C. Billions of unique users a month a write billion of unique users and on the oral side. We have a 160 million device daily is devices that are connected.

And the platform that of course, that's a very very unique supply source right. So of course with the addition of Vodafone and in current and future operators that we will add two aura that number will increase and will create a very premium very high premium very special supply source that of course will help other type.

Earth delegate users in a more efficient way and the most scalable way. So we very much look forward to expanding those numbers in the daily active users and monthly active users.

This is all the questions we have time for.

I will now hand back over to Daniel for any closing remarks.

Great. Thank you for dialing in today, we look forward to connecting with you over the coming weeks and Investor conferences and hope everyone continues to stay safe and healthy during these times. Thank you very much.

Thank you everyone for joining today's call you may now disconnect your lines and have a lovely day.

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