Q2 2022 Perion Network Ltd Earnings Call
A press release detailing the financial results is available on the company's website at Www Dot Perry on Dot com.
Before we begin I'd like to read the following safe Harbor statement.
Today's discussion includes forward looking statements. These statements reflect the company's current views with respect to future events.
These forward looking statements involve known and unknown risks uncertainties and other factors, including those discussed under the heading risk factors and elsewhere in the Companys annual report on form 20-F that may cause actual results performance or achievements to be materially different and any future.
<unk> performance or achievements anticipated or implied by these forward looking statements.
The company does not undertake to update any forward looking statements to reflect future events or circumstances.
As in prior quarters. The results reported today will be analyzed both on a GAAP and a non-GAAP basis.
While mentioning EBITDA, we will be referring to adjusted EBITDA.
We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website and has also been filed on form 6K.
Hosting the call today are drawing herself Carry-ons Chief Executive Officer.
And my Oc Grun Carry-ons Chief Financial Officer.
I would now like to turn the call over to the wrong yourself. Please go ahead.
Thank you very much good morning, everyone and thanks for joining our second quarter 2022, earning pool.
Together with me.
On this call and these are mostly grown oh.
Our CFO and myself Doron Gerstel CEO .
Before diving before so before diving into our exciting second quarter.
Financial results I'd like sharing with you.
You probably aware off.
The macro environment is filled with talks about it spending being reduced.
What I want to stress is there.
Not all ethic is impacted.
The same way.
We heard the same very statement the start of the pandemic two years ago.
And we had a positive comp them.
As we have had for the last eight consecutive quarters. We are built for volatility instead of trying to evade.
We embrace volatility in FIC.
Epic volatility is highly predictable for example.
Names are now favoring search.
As direct response campaigns are we're anxious and revising our investing first.
With that I would like before diving into the numbers and share with you the five things to remember.
When volatility is now when you norm.
We are a diversified to capitalize on shifting spending across the three main channel of digital advertising search.
Advertising, social advertising and display CTV advertising.
We are continuously we are continuously expanding.
Sure.
We're continuously expanding our margins demonstrating the effectiveness of our intelligent hub, that's known as IHOP.
We are meeting the demand for higher user engagement with our high impacted suites and four were bringing innovation in response to advertiser recognition that privacy matter, we sort <unk>.
Last but not least we execute and acquire with strategic operational.
With that I feel comfortable diving into the numbers so from a revenue or revenue standpoint, the company is reporting 34%.
Year over year growth.
$147 million the macro environment.
Okay.
Okay, we see where spending is growing in real time and it just we have the diverse platform and signal intelligence to do that from the supply and demand side. We don't look at the rear view mirror and makes a decision based on that our results very much speak by themselves.
From a macro perspective.
I definitely can say based on a 39% CAGR between the years 'twenty to 'twenty two is that our seasoned team who knows how to make the most tailwind and cope with the headwinds. So that we continue to outperform the category and win new business.
Asian of Intrapreneur, real energy and strong R&D as well as our diversified model.
Now to the EBITDA, which we are so proud of 99% year over year growth $28 million of <unk> in the second quarter of EBITDA, but the most important part is this part of the 47% to 47% as you can see a degree.
Green bar is getting to 47% of EBITDA to revenue ex Tac, putting us as the best of class.
Thanks, very much thanks to our investment to further develop our AI engine, which is behind the IHOP.
<unk> in efficiency that benefits, our clients and our bottom line efficiencies in terms of optimizing media margin and reducing cost of operation. The best innovation is what we show you and your clients are margin demonstrate the continuing value.
We bring to our advertisers.
From a from our perspective, our IHOP sits in the center of the supply and the demand side of the market. This is an innovative model that no one else in the industry.
Aggregate data signals from all channels and from both sides of the open web to create a model that eliminates waste and rewards clients. The data goes into pairings privacy first scrupulous solution known as source.
So the IHOP is both a source of data and operational platform mentioning source very important to talk again about our flywheel, but before that I would like to relate to Google's recent announcements that are very much delaying the cookie layer solutions in 2020.
Four.
That gives us the time to cement our leadership in clearly drove the bright line.
Between companies that are on the right side versus those that are not.
And the right side, we believe are those that debt since the future of epic.
Address consumer privacy.
Many of you know the U S. Congress is looking to stricter regulations Europe is already further ahead.
We're at the forefront of the privacy trend, which soared in.
In fact, delivering privacy without sacrificing performance.
Will is.
More and more advertisers are now recognizing that the importance of privacy for their business and we are ready to serve them with a world class innovation sort flywheel effectiveness is being measured by <unk> API number of new advertiser and how existing advertiser explain.
The spin.
So from the flywheel perspective, I would like to mention.
We are continuing and adding more place that drives better performance as you can see three times, what Google reporting and Thats and Thats. Our benchmark that's increased the Ross the return on AD spend which drive and that's the two major kpis.
126.
Which is 61 more new customer in the second quarter, but more importantly existing storage customers that experienced sword. We found out that these customers spending 50, 50% more quarter over quarter, So thats a true effective flywheel.
I will and instead that while we are talking with these customers more and more we find out that advertisers recognize that consumers increasingly favor brand that protect their privacy very very important to acknowledge that.
Next.
Our revenue line is split it into two advertising.
With.
Advertising revenue.
Well done.
Yes.
In line and split it into two advertising revenue in search revenue from an advertising revenue standpoint.
I must say that even though we're reporting 41% year over year growth, which is $82 million of revenue of advertising is getting harder everyday to capture and hold attention, but it is more and more vital it takes only a fraction of protections to make it.
First impression.
Our high impact AD units are the breakthrough creative formats that are essential in today's environment. This.
These units are effective across all vertical travel entertainment retail CPG I will show you. Three example, just in the second in fact, we have decade of data, which shows that our units outperform conventional ones by up to three times. This is always.
As important, but especially so during a slowing economy.
Taking our proven high impact suites to cross channel, especially on CTV, we're very excited.
With our advertiser reaction to our high impact CTV Sweet revs.
Revenue grew by 90% year over year, representing 6% of display advertising revenue.
Main factor.
Behind such growth is there is the step up in the average deal size by 5% to $105000.
Video revenue grew by 273% year over year, representing 44 of the display advertising revenue readers, who are our latest acquisition, which we call. The shopify of video because of its ability to empower longtime publisher is booming.
<unk>.
Okay.
The main objective of this campaign, which we did with.
Beyond Burger, which.
And thats beyond meat the public company. The main objective was to drive net new consumer to take their product.
<unk> aware of their of their new product, which is the hamburger.
And we described this concept this awareness to performance campaign. So it's not just sort of in the sale cycle. Most importantly, it's ended significant amount of new consumer that experienced this product in the first time you can see the results here 102000, 4000 product added to the card.
In this case.
You can see on the horizon, that's Walmart card.
$1 million processed product value and to ask in terms of the recall the recall list. So thats definitely a very interesting concept of a full funnel awareness to performance. The second thing, which I would like to show you is the new innovation in this new innovation has to do.
With high impact suites on gaming and in this case.
We are using gaming that is on PC console and mobile and the whole idea is to target. This very unique 90 million engaged gamers across all ages and gender.
Mainly gen Z audience.
And as you can see here for the example of Nike.
<unk>. The most important is that this AD unit sales of 100% Viewable theyre non intrusive in non intrusive placement with an average time spent of five plus seconds.
Very very useful very at the performance is very high and our customer are very pleased with this with this format.
But that please.
I would like.
I would like to share with you our innovation in retail.
As retailers face increasing pressure from Amazon with a massive amount of personal data they need new solutions to deliver personalized recommendation in real time.
We're having a very positive early success in this emerging vertical our ability to personalize and target that scale fits nicely with retailers need to be more relevant to their customer and support their overall effort shifting budget from linear TV to CTV.
You can see in the left is that we identified.
We identified.
Quite different persona.
And with 904 store in 17 states.
In the second we are able to produce 4520 different.
Type of video units that you can see that is running on the right.
That's all runs and its very much support as I mentioned before the huge trend of retailer that shifting budgets from what known as linearity.
Get the full advantage of the personalization of CTV.
This is <unk>.
The area, where we are going to invest more and more.
With our customer and providing them, thereby the personalization that theyre looking for.
When it comes to video.
Special attention from our customers from.
Our business has to do with the adoption of the video Clarkson.
I will not go through each one of the products. This video platform, but the essence of it.
That our publisher first and second tier publishers are very much focusing solidly and yet all the tools from this holistic platform. We are very happy to share that 54 publisher already using our video platform from.
From 18.
54, punish already using our platform from 2020 in the second quarter of 2021.
As you can see the video platform is a comprehensive ecosystem is what attracted us to <unk> and it is a perfect example, when it makes sense to buy enough to build we will deploy such a strategic and disciplined M&A in the future as I mentioned in my five reasons slides.
From that I would like to move into the search advertising.
And we are gaining search market share and becoming a stronger player in the search ecosystem. So in search advertising, where our reporting 26% year over year growth.
Two a $65 million of revenue in the second quarter, what is more important for our API is the following while we see that the number of searches are in a way flat between the quarters, We're reporting 17, and it was around $17 one a year ago.
What is more important.
<unk>.
The effect.
That advertiser are willing to pay more for their end in search advertising in other words, our RPM there.
Rate per thousand place on search advertising is being increased by 43% quarter over quarter. It was 50% to 52% in the last few but to what you're able to see here and Thats a COVID-19 quarter the rate was dropped.
The rate towards drop, but look how we bounce back and we are very much.
Yeah.
Thinking that this is thanks to change in advertiser preference towards direct response.
There is nothing better than direct response than search advertising whether searchers.
It definitely demonstrates the highest possible intent and which gives advertisers a great opportunity to go after them. So Dr is definitely showing its results here. The other thing that I want to mention or actually two things. One is that we increased the number of publisher.
To 124 from 93 in last year and the other thing based on the intent toward the searches that we analyzed we definitely can say there.
The trouble is back and it's back in a big way.
We're more and more consumer is looking for travel deals and this is it gives advertiser a great way to spend more on its own search advertising spend more means or the increase the RPM in order to be higher in the place where.
Whereas we're advertise where consumer searching for travel deals.
With that I would like to turn the call tomorrow for a financial overview malls.
Thank you dawn.
Well, let me just stop sure.
Hi.
Okay.
Yeah.
Thank you Dawn and good day everybody.
Sure.
Our net debt to present to you another strong quarter with record financial results.
<unk> continued to demonstrate the ability to execute our diversification strategy, leading to strong performance, despite the macroeconomic situation and uncertainty.
The current macroeconomic environment being more challenging we are constantly monitoring external and internal signals and based on what we see and hear from our customers and partners. We are confident that this momentum will continue in the second half of 'twenty expenditure.
Let me share with you four of our key financial achievements during the second quarter.
Revenue of $146 7 million, reflecting 34% year over year growth the highest second quarter revenue since 2014.
Adjusted EBITDA of $28 5 million, 19% from revenue compared to 13% last year, 99% year over year growth the highest second quarter adjusted EBITDA ever.
GAAP net income of $19 5 million in your record with 175% year over year growth the highest GAAP net income area.
non-GAAP diluted earnings per share of <unk> 51, a new record for the second quarter with 55% year over year growth.
<unk> unique technology solutions led to a great diversity in our business the scalability of <unk> business model translates into strong predictable and sustainable performance.
We are able to improve our margin and our efficiency during the second quarter of 2022.
As a result of our continuous efforts to evolve their financial power.
Turning now to the quarterly results in more detail.
As I just noted revenue for the second quarter was 146.
$7 million, an increase of 34% year over year since the second quarter of 2020, we have consistently delivered strong double digit revenue growth, reflecting a CAGR of 56%.
Display advertising revenue was $81 6 million during the second quarter of 2022, an increase of 41% year over year.
Digital revenue grew by 273% year over year, representing 44% of display advertising revenue.
The number of video platform <unk> increased by 145% year over year from 22 to 54.
And the revenue from the retained video platform partnerships increased by 52% year over year.
CTV revenue grew by 90% year over year, representing 6% of its day advertising revenue.
<unk> customers nearly doubled quarter over quarter for 65% to 126, so customer spending increased by 62%.
Revenue represent 40% of display advertising revenue.
Second quarter search advertising revenue was $65 1 million, an increase of 26% year over year growth was driven by a 42% increase in Netherlands, RPM and the addition of 31, new publishers to our network.
The 70 million daily 33rd on Everest remained consistent with the number of searches in the second quarter of last year.
In terms of revenue mix display advertising revenue represents 66% of the second quarter revenue.
Compared to 53% in 2021.
With search advertising represented 44% of revenue compared to 47% in Venezuela.
This change in our revenue mix is in line with our diversification strategy.
As we continue to extend into the video CTV and later.
Revenue, excluding Tac was $60 7 million or 41% of revenue compared to $43 5 million in the second quarter of 2021 of 40% of revenue.
The media margin improvement was primarily due to improved commercial terms are favorable product mix of AD formats, and the IR control system.
Opex and Cogs were $35 6 million in the second quarter, reflecting 24% of revenue compared to 38% last year.
We're constantly achieving operating leverage mainly due to operational excellence and automation.
<unk> ability embedded in our business model as well as the continued successful implementation of fire.
Okay.
Second quarter net income was an all time record of $19 5 million or 41 centers diluted share an increase of 175% compared to $7 1 million or 19 center diluted share in the second quarter of 'twenty or 'twenty one.
On a non-GAAP basis net income was 24 5 million or 51 cents per diluted share an increase of 19, 9% compared to $12 3 million.
<unk> Center those are chairing the second quarter of 2021.
Adjusted EBITDA of $28 5 million and margin of 19% compared to adjusted EBITDA of $14 3 million and a margin of 13% last year adjusted.
Adjusted EBITDA to revenue, excluding <unk> increased from 33% in the second quarter of 2021% to 47% during the second quarter of benefit into our efforts to keep the media margin levels stable and to generate incremental revenue with lower variable costs continue to improve efficiency and profitability.
Net cash provided by operations operating activities was $25 7 million compared to $40 6 million in the second quarter of 2021, reflecting 76% year over year growth.
As of June 32022, with cash cash equivalents and short term bank deposits of $353 million compared to 322 million as of December 31st Venezuela, One week.
We continue to conduct a responsible and disciplined capital allocation approach and we expect to continue generating positive cash flow.
This will allow us to execute on both organic and inorganic growth opportunities.
This concludes my financial overview for the second quarter of 2022, I will now turn the call back to dawn.
None.
Globally.
Yeah.
Yes.
Now let's go on.
Yes, but not in the present.
Yeah.
Our loan per se.
Okay.
No.
Right.
No.
Okay, sorry about that so for closing remark.
Three slides first I would like to share with you.
It's the first time, what we as management see as the Uber Kpis that we are running the company upon which combine both growth in revenue and profitability and we are very very encouraging, especially when it's calculated in a trailing 12 months method and the poor.
<unk> is always be above the 40%, which is a combination of in bloom the year over the year over year revenue growth as you can see as a percentage.
For the last 12 months of course, and then you were able to see the EBITDA margin, which is 18.
Adding these two is providing the kpis and I'm very happy that instead of calling it the rule of 40 as Youre all familiar we should change the name the rules in 50 years in some cases, even 60 enough. So that's that's showing the sustainability and predictability of our business.
The next thing I would like is very much sure we feel our.
Guidance.
Uh huh.
Before for the year so.
In that sense, we have realized the chief digital officer.
Must be hyper alert and is constantly adjusting allocation to business and market conditions, which means that all removed with purion will widen because its brands have more access to data to determine.
Determine where they will allocate their spending they're making decisions faster and faster and they are raising the bar on their platform, which we are benefiting form.
From our strong performance and $353 million in cash and zero debt, our team's excellent execution, continuing market share gain and improving efficiency give us confidence that we will at least achieve the high end of our full year adjusted.
The EBITDA guidance, even when taking farther global recessionary conditions into account.
As real closing note.
I want to bring you back to the five things to remember because that's adapt the differentiation applies to why we performed so well and why.
We'll continue to perform so well with that I would like to open the line for Q&A. Thank you so much.
Thank you.
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Our first question comes from the line of Laura Martin with Needham. Please proceed with your question.
Hi, guys can you hear me okay.
Hi long Aloha.
All right numbers really congratulations this is fantastic numbers for the quarter.
Let me start with that very strong search revenue graph as you know I always give you a hard time for the 12 growth rates at FERC at Google Voice search at 14% and you guys were starts at 26% can you talk about what is driving for ordinary strength of search for your Baltimore for the quarter. Please.
So first and foremost what drives US is that we increased substantially the number of new publisher that we are working with that's number one so more publisher more search this will provide to our partner. This is one the second thing is that we are seeing.
The increase on the or on the on the RPM, but let me because RPM is definitely something that impact, Google and others as well, but we have a very interesting way to direct and guide our publisher.
Two because the RPM that we're reporting here as an average and their RPM that worth more than others I mentioned travel so working with publishers that they able to drive searches in areas, where RPM is higher.
That's I think our secret sauce.
That's super helpful. And you then also the other thing I'd be very curious to learn from you because you're adding talks are sort of very different from Google and metal.
Could you talk about relative geographic strength.
And also brand versus Dr. With 20, some are strengthened during the quarter.
So on brand versus Dr. That's very interesting because of this recession is very much or one hit us really will hit us in the last quarter. So we see a shift from advertiser not dramatic shifts, but we definitely can recognize it as I mentioned on the call and.
Glad that we are in this part of businesses as well so we are able.
To capitalize on any on any changes our customer doing and their preference between the display into you know with D. R. But that's definitely a movement that we should look very carefully.
And deaths has to do with <unk>.
Changes of Advertiser preference.
And then we see it on the on the numbers.
No sorry says they are stronger or bandwidth stronger so on the overall display is growing more and has to do with there has to do with video and has to do with with the CTV. So on the overall pie, we definitely reporting that we are going.
Uh huh.
The growth is greater on display advertising.
Then on search advertising is 43% to 26 years.
The difference.
But so that's the numbers I can tell you that discussion that we have with advertiser that theyre looking about two things first of all the concept of Praful. The awareness to performance is really working very nice, especially on CPG.
<unk> vertical on product that is now require a long sales cycle.
I think that beyond Borger is is definitely for us it's the.
The use case of the quarter.
Our able to drive net new consumer that will be aware of it and then click and with one click able to continue the purchase.
It was always the Holy Grail in advertising that.
Getting to expand the market share of of our brand. This is always the discussion that we have with them.
And so we are able to drive.
Two new products to the market, which reflected on the on the display advertising at the same time I think that the fact that advertising is shifting budget also towards D. R is definitely something which is notable.
Okay, and then geographic atrophy geographic relative positive about its about 80% U S and 20%, whereas the role more or less.
Although we are a stronger U R chop.
Whereas stronger right.
80% around <unk> around let's say, 80%.
Okay. Thank you.
You.
Thank you. Our next question comes from the line of Andrew Tomorrow. Please on the airline or proceed with your question.
Hi, guys. Thank you for taking my question today, I think you touched on it a little bit in my previous answer, but you said earlier that not all AD tech is being affected by macro in the same ways and your results definitely reflect that so I guess from where you said if your business isn't being affected as sharply what parts.
AD Tech do you see as being affected by macro.
So I think that first and foremost I will using I think third or fourth time in this call the word diversification.
I think that the.
Bump and is that are having a point solution rather being diverse.
We are a company that big diversification into extreme.
If you think about it is not just the three channels that we cover.
In all of them. We cover also both sides of the open web which is the supply and the demand. So you can envision the metrics, which is three by two that's the maximum diversification. The Titan can think of I think that companies that are will be a point solution and very much Neil.
And you know they're offering.
They are very much subject to all kinds of wins.
My effect.
Their business because we've seen the volatility we've seen that advertiser are changing and that has to do with that.
The platform they can do it and they can do it.
In a short period of time, where they definitely can change the mix.
And the question is is how you are pressure then to what extend you are able to capitalize on those changes.
Got it. Thank you. That's that's very helpful. And then one more if I could on IHOP.
It looks like IHOP is definitely starting to contribute to cost efficiencies and I think you've given some numbers in the past on on expectations. There is that progress on schedule ahead of schedule and have your thoughts on the bottom line benefits. It can provide have changed at all.
So we are financing where we are.
Currently our alignment with the plan and doing as you know the numbers that we planned for the second quarter, Alex expecting to see the same impact for the full year, we mentioned that.
<unk> plus a number for the full year is about $6 million benefit GP benefits. So we are running based on our plan and just finding new area of optimization that part of them all of that reflected in the second quarter.
Great. Thank you Wilson.
Thank you. Our next question comes from the line of Mark Kelly. Please on mute and proceed with your question.
Great. Thank you very much good morning, everybody.
Got it.
I missed part of the a bomb.
Prepared remarks, so I apologize if I'm asking something you already addressed but.
With cookies being.
Cookie deprecation being pushed out to the second half of 2024.
How do you expect that to impact adoption of sorts if at all.
No.
You gave a ton of great statistics about how.
Our pro farm's cookies anyway, so maybe it's a moot point, but any thoughts there would be.
Helpful and then the second one just.
You have a strong relationship with Microsoft and.
And obviously they are a partner and initial partner for.
For Netflix with their Avon offering I don't know the details are pretty.
Men are pretty vague at this point, but just curious if you think that relationship.
With Microsoft on your side might help you.
Put you in a good position to participate in.
Netflix with that thank you.
So I mentioned on the call that Google recent announcement, it is definitely something which gives us more time, and then and we need more time very much to cement our leadership.
I think that you need to you need to remember in source does lead to be divided into two parts. One parts is to what extent you're very much overcome the cookie less issue. That's one part, but the part that we are really focusing at this point you know with the market is the privacy firms.
And that's that surprise us because we were looking about when we introduced the product, we said sort cookie less solution.
But now we changing and we changing and it's very important by looking at the tagline because we said privacy first spookiness solution, because we are hearing more and more from our advertiser that consumer increasingly favor brands, they're protecting their privacy and <unk>.
Think this is very important and I'm glad you mentioned it needs to presume for me to distinguish all out there and you know we all looking at points since unify their need that being pushed by traders, which you know we definitely need to support but I can tell you that they might solve technical technologically.
The cookie less problem, okay. They solve it.
But by all means they didn't touch the user the consumer privacy.
They didn't.
And I think that the challenge that we took upon ourselves.
To make it privacy first two killer solution.
Is definitely something that with the legislation and what's happening in Europe and more importantly, what advertisers are recognized I think it is very important and it's going to play a major major role in our ability to grow our business.
And to get more market share.
Now to your second question as far as being.
We are having discussion already because being as part of Microsoft's advertising Division and.
The executive there are supervised all part of the business that we're having discussion on on Microsoft Redbird side.
<unk> recent acquisition of Zehnder is the win as you know the remarkable partnership that they did with Netflix that's.
That's great news instead used for everyone, who is looking for quality supply inventory in CTV.
And I am sure that we will be able to leverage our great partnership just to remind the audience that we want the partner of the year in 2021.
We are having a great partnership and integrate dialogue of how we are able to enjoy to enjoy.
The Microsoft advertising success with metrics.
Perfect. Thank you very much lower income.
Thank you. Our next question comes from the line of Eric Martin Newsy with Lake Street. Please proceed with your question.
Yes, I was curious about the expectation of further revenue mix between advertising and search for the year I know there are some seasonal aspects.
So Eric here too, we've got 56% advertising, 44% search that really was despite your commentary about.
Global macro challenges is kind of what I was modeling for them also modeling for a higher percentage of advertising in Q3 and Q4, such that we finished out the year or like a 50 842.
Wanted to know if that's in line with your expectations or would you expect that.
This is going to be a lesser percentage than that.
Yes, I think that you're very much at the point and if there is one thing which I.
It's very hard for us to predict things.
The word volatility is very much describe them.
Chief Digital officer are changing their preference and in this macro environment here those changes are happening overnight.
I'm glad you know that our diversification strategy and allows us to capitalize on these changes, but I can tell you that from a modeling perspective.
We are we have some hard time.
To model it.
Because again those changes are happening.
A more frequent than it happened in previous years. So currently the model supporting what you describe but.
I E.
We are looking at it with.
With the caveat upon on changes that can happen and has to do again with the advertiser preference.
Okay.
I appreciate it.
The fast changing environment and the differ.
Difficulty in forecasting.
And also kudos for the good execution in acute care arena.
The outlook for the year the big upside here is obviously, the adjusted EBITDA target being raised for 2022.
<unk> adjusted EBITDA to revenue ex Tac percent debt, 47%.
Versus 33% a year ago at aspect.
This begs the question of kind of how high can we go yeah, you're talking about a challenging macro environment and thats reporting of outperformance.
Adjusted EBITDA margins of revenue ex Tac, where can that go.
Where it can go I don't know.
I am having the pressure from my board and that's enough, but we are at the end of the day, we definitely put the foundation, there and when two years ago or even a bit more when we start investing in the IHOP concept.
The way way more let's say modest type of expectation.
As far as what we able to generate and to what extent are IHOP will.
Eliminate as we like to say the waste and allows us to perform better in both swing one has to do with optimizing the media cost and the other thing which is very very important it has to do with reduce operational costs by.
In EMEA rates to do with cloud expenses data expenses in all other things.
We are definitely very very happy with the return on the investment on developing the hub and we will continue.
Develop it far do more because the evidence that we are getting right now.
Very very promising.
<unk> is our ability.
To increase our margin.
Okay. So no answer other than there is still upside.
Sure.
Okay.
And then last question.
You talk about a.
Macro challenges in your diversification is how you overcome those macro challenges but.
Just do you have anecdotal evidence within your customer base of your customers spending less.
You talked about diversification, where you're it sounds like theyre not spending unless with you they are spending less with others.
But.
Why why are you, saying that there is.
Challenging macro environment and yet your revenue outlook is unchanged right.
First of all.
With the respect to our three $630 million is at the midpoint for revenue.
From overall perspective of the market, which is 600 <unk>.
Julien.
<unk>.
We are 110th of a percent.
And sometimes you enjoyed effects to CLR, one tenths of a percent.
Your agility and ability to capture market share from others is definitely playing favor.
We are in that that's basically what we are trying here to do them and the foundation that we set in place and that's.
So.
The macroeconomics are definitely there in the way for us to interpret that the micros economics is that our customer are changing their preference we need to be not just cover the three pillars, but also come with a wide wide range.
Opening in products I think I mentioned it in and showed it in our <unk>.
<unk> that they ever on the video platform. So the point here is that you have to have enough.
You know as largest possible of bandwidth with your customer to accommodate.
Their objective.
I think that the beyond Burger is a great example, Fred I think the fact that our.
Search advertising, what we're doing on CTV, the new innovation in gaming console gaming. So we are acting in a way it's not just the interpret new real kind of spirit is very much even in the 600.
Company, and we would like to retain it.
It is possible.
And Michelle Thanks for taking my questions. Thank you.
Thank you. Our next question comes from the line of Jason <unk> with Oppenheimer. Please on mute your line and proceed.
Hey, guys. How are you <unk> X. So just how are you thinking about advertising in the second half.
Do you think that we see a continued slowdown in offset by increased search share in obviously that search segment as you know.
While encompassing right, it's not just quote unquote search.
Or are is a function of you're seeing some of the newer channels such as video and AD targeting offsetting I guess I'll call. It the legacy perhaps headwinds in advertising. So just kind of unpack that a bit more and then the second question I don't think anybody asked them that they then you can skip it.
Just how are you thinking about acquisitions from here it seems like youre doing better than others, you've got a balance sheet.
Asset values are depressed or do you kind of keep it.
Heads down and focused on organic growth for the next.
Medium term thanks.
Thanks, So first to your question as far as what we've seen as far as age two.
I want to mention is we are very much into the third quarter and.
And I can say that at the end of the second quarter, we've seen some shifts and shifts from advertising spent towards VR the way for us to interpret a Dr has to do with search advertising as I mentioned in our calls in the the best the best evidence for <unk> and the reflection.
That has to do with RPM increased.
Dramatically.
In the second quarter I think we've seen for the 42% 42% increase on the RPM. This is continued into the third quarter, which is very much support the fact that.
Advertiser or might shift.
The spend.
<unk> traditional display advertising to more of a Dr plane, that's kind of an evidence that we see.
From from our customers that's number one.
As far as an M&A.
Yeah, we are definitely putting a lot of efforts we identified two areas and they remain focused in two area. One has to do with CTV and the other has to do with retail in both you know.
Great because we're doing a great progress.
We learned it well from our customer.
What really kick in and where is our gap and as I mentioned, it's always a question of the build versus buy.
At this point, we're doing a lot of the build in order to close this gap, but there are some great opportunity in the market I must tell you that we are waiting that valuation will come down as we are expecting and start seeing it from you.
Privately held companies so.
That we are in a great position.
To strike both from a cash standpoint, and what is more important even from the fact that we understand what we're really but we really looking for.
Jason.
GAAP now more on all of that thank you. Thank.
Thank you.
Yeah.
Thank you. Our next question is a follow up from Mark Kelley. Please I mean your lineup proceed with your question.
I forgot the till the horror by hand, I apologize I'm all set as well. Thank you. Thank you. Thank you thanks guys.
Okay.
Thank you and we do have a follow up from Jeff Martin. Please on mute your line of Cristina with your question.
I'm sorry.
This is Jeff Martin did you call on me, Mike My Zoom keeps cutting in and out Yeah, Hi, Jeff.
Hi, guys, great to see such strong results and a strong outlook for the balance of the year I was curious if you could give us some insight into the strength in Brazil. It looks like it performed very well in the quarter and I Wonder what are some of the underlying drivers there.
The main the main underlying drivers is very much has to do with the fact that the <unk> platform, which is very much an holistic.
Roche and the idea is to what extent, we are able to drive the long term partnership.
With our publisher.
It's not a it's not a secret is very competitive.
Market, where there is a lot of the video monetization. They approached the readers who guys were taken by coming with a platform that.
Very much incorporate everything that publisher need from players too many chip monetization to onstream and in stream to display you name and we think that the slide described it will it is giving us a great position as I mentioned to develop the stickiness there.
It is so important for us the predictability factor of our business and we are very very happy that we're able to increase substantially.
The number of publisher.
In the in the second quarter and the same are the same metrics here. The idea is to look about net new publisher and to what extend existing publisher increase their spend over time those are the two the two API. So we are very happy with the fact that.
Are you able to penetrate.
And because we have such a long range of product within the platform, our publisher signing onto more and more product and based on that their increase increase their spend and we are developing here is very very useful.
The economic model, which the video video video platform is acting as the unit on this economy and gives us a very important factor to our predictability of our business.
Okay, Great and then my other question was on the retail side it sounds like that could be part of your imminent M&A strategy, but in the interim guarantee you. You also mentioned you're going to invest more here, how do you measure that from an options market opportunity standpoint.
And maybe give us a context of what kind of timing, we might expect that to be become a meaningful contributor too.
CTV revenue.
Yes, so I think that it's very very interesting.
We are seeing a we're looking about.
Two separate type of efforts one is retail and the other CTV, but they are.
Combine very nicely because those retail that we that we talk to them and I think the best example has to do with Safeway is there.
Major I mean majority of their spend was on very much leaner TV.
And they understand that while they are doing it on linear TV. They are very very much limited in terms of personalization.
So the reason educational process here, but what you're able to see I don't know if you had a chance to see the.
The use case that they showed on the call.
We are taking personalization to where the.
Ever been before only because linearity we cannot allow it cannot by all means get into 4520 permutations on reveal.
That cover five types of.
Persona.
904 store so.
The point here is that yes that there is a huge transformation in regards to how retail is viewing their advertising spend.
There are more or less.
Let me put at risk adverse.
It requires quite an education process by moving those dollars from traditional advertising to digital advertising, but we truly believe that this is definitely an area, which is a you know.
We're not the only one we see it but we're trying very much to blend into our product or offering the high impact units the innovation that you're able to see.
The ability to get to a one click and do this hoping form your CTV all the way to the gift shopping cards on on Walmart that was the example.
All of this is our is part of our offering to retailers. So yes youre right.
We are looking carefully on companies that are able to that will get us into.
The point, where we will close gaps that we identified and retain our position there and we're working closely.
With Albertsons.
Design partner in some of those.
Great initiative.
And yes, we identified retail is an area, which we will definitely would like to spend from an M&A standpoint.
Great. Thank you.
Thank you I am showing no further verbal questions I am showing we do have a written questions in the Q&A box.
Yes, so we cover that we cover very much the acquisition.
And <unk>.
When we will have some news as far as the more.
More on the CPD acquisition will definitely will share with you.
And the point of sharing anything, but we are devoting a lot of.
A lot of airports for an M&A. This is why we raised the money and that's why we are having a great as I said the great position to do more do you want to take them.
So from a pro forma point of view.
On the revenue growth, we are a pro forma basis is about 20%. This is more or less where we are in the second quarter.
From a sore point of view, we are if we are translating the the number of advertisers and the number of campaigns you're talking about 250, so far.
We are now running and based on our plan so.
Definitely we will keep an update later during there in the next two quarters just to remind you on the sort of kpis the number of new.
Campaigns that are exposed to source as well as.
To what extent advertiser that already being exposed increase their spend so those are like the two <unk>.
Very much a factor too.
To show the progress on <unk>.
Any other questions.
Okay, guys. We don't have more question with that our malls and I would end the call and thank you very much for your participation. Thank you. Thank you much.
Thank you. This does conclude today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.