Q4 2022 Perion Network Ltd Earnings Call
And finally I want to bring back our will afford the slide to remind you. This principle says as software companies combined revenue growth rate and profit margins should equal or exceed 40% Q4 was another quarter following seven consecutive ones, where we achieved the rule of 40.
Actually 54% of new rules for performance.
Performance, which belongs to the most respected and high value software company.
Now I would I would like to share with you. The our execution model that has guided purion thinking in my time at the company.
The explore and exploit model.
You could also think of it as innovate and improve model I'm sharing this because I keep getting asked the basic question, how does farrah and do it in fact, how does parallel manage to deliver quarter after quarter year after year of growth no matter, what the economy conditions in the midst of.
<unk> supply chain disruption and decades high inflation. The simple answer is our conviction that the ability to successfully execute is the core of our success is fundamental to demonstrate how this work in practice, let's look behind the scenes.
Because the more you know about how we approach strategy and execution, the better you'll be able to understand the sustainability and predictability of our business and to assess our growth.
The image shows the full concept is composed of two parts. The exploit greed contains our mature solution, which constantly you need to be improved in terms of growth and sustainability alongside our innovation engine.
Which empowers us to explore and invent new growth initiatives in the explorer Green our number are proof of the effectiveness of this model.
In 2022 hour exploring initiatives generated $64 million in revenue and $26 million in media margin. While in 2023, our expectation is to double the revenue to $110 million.
And generate $45 million and margin.
For our exploit solution, we visualized our portfolio on two vectors growth and sustainability, we extend our moats to protect us from any disruption in the marketplace. We're building measure API to continually assess the progress we're making to reach our profitability.
Later sustainability with that as a context I've chosen few highly relevant example to demonstrate our model.
First one that I choose with our video solution. Our video platform. It's one of our main growth drivers increasing in 2022 by 129% compared to 2021 depth.
That represents 43% of display advertising revenue. We've also seen an average increase in the three important metrics revenue per video platform publisher grew by 106%.
We experienced a 69% year over year increase in the number of publisher that are using our video platform 76 up from 45 in the in Q4 last year and finally.
Is 78% year over year increase in revenue from retained video platform in other words, our publisher are spending more and more on our platform.
Now I'll move to start our privacy first popular solution, which is another very interesting example of our explore solution.
It's growing maturity demonstrate the journey I talked about earlier, how with 2021 explore initiative moved into exploring grading 2022. The results in Q4 are powerful.
This campaign using store represent $26 million.
Up 82% quarter over quarter, reaching 21% of advertising revenue.
The number of store customer increased by 36% 76, new sort customer overall 191 customers using sort.
On average deal size, that's the most important factor using salt increased by 33% to 107 point $5000.
So when customer are using store, they feel comfortable and safe to spend more because thats, what consumer line and last but certainly not least.
<unk> delivered a 133% CPR.
Almost three times, the Google benchmark of Zero point 46, and let me repeat this is without <unk> with that successful absorbed as an in house service. We are working extensively that's an explore effort.
To offer sort of as a service to other companies that are interested in offering a privacy first solution that perform better than other targeting tactics.
Last on the exploit site is direct response and what we called the search.
Advertising, our it portfolio and healthy direct response solution via search advertising continues to be one of our most profitable and sustainable explode solution. The business is driven by two levers increasing the number of publisher an aggregate number of monetize number searches we transfer may.
Finally to Microsoft <unk> net.
That number is robust and impressive we are reporting today $22 million average of daily and weekly daily search that is growing through us in Q4 2022, an increase of 26% year over year. This number is growing every day and I can't.
Tell you that this quarter.
The first five weeks of the quarter, we are seeing a 25 million searches daily searches or average daily searches.
Let me quickly point out again, the direct response is one of the three pillars of our diversification strategy.
<unk> cost sensitive advertiser move to head search we are there.
With that we will move to the explorer greed.
When it comes to our innovation engine, we will continue to explore many different ideas, we recognize that the profit potential if any one of them will be unclear.
Outfit.
Thats how explore operates we have assigned a dedicated team and budget to design test and scale explore innovation.
They investigate the value proposition market appeal synergies with our existing product and business model only after all these are assessed is positive then in innovation initiatives makes it to the top right hand corner.
As desktop business <unk> substantial profit potential this enable us to focus on innovation and disruption ensuring that we stay ahead of the curve and not be blindsided.
Industry rapidly changes.
The Best example that I can take at this point from a CTV is the life CTV CTV is another broad explore opportunity that excite us specifically, we found very sizeable sub segment of light CTV within the sport event. According to Nielsen Sports Broadcasting reached.
Most CTV user and yielding out 94 of the 100, most watched telecast on TV in 2022.
Commercializing this.
Live sports CTV required unique technology that is huge challenge is.
Add insertion cannot be planned ahead of time in terms of timing and more importantly in terms of format and needs to be executed on their own.
As an example here is our doctor pepper used our lives CTV platform to reach us user U S viewer watching college football.
It's a rare win win win.
The viewer gets to continue watching their sport content without interruption, the advertiser maximize attention, which might have been lost during the commercial black great. The publisher retains viewer they don't change the channel or jumped to a different app. This means more revenue for everyone.
Next example on the explorer is retail the growth of retail media is also dramatically.
Huge players from Cvs.
To the home depot to Macys are building retail network. It is another tool explore opportunity for pairing retail media has become the fourth largest advertising media with AD spend forecast to reach $121 billion globally. In 2023, that's 10% increase from last year growth of.
Retail media is positioned to do for the 2020, what search powered digital advertising business.
For 2000, and what social media for the 2010 <unk> is uniquely positioned to take advantage of this new way, we are working with the largest retailers such as albertsons.
During the first year after establishing our retail division, we generated $22 $3 million in revenue and expecting to deliver $30 million in revenue in 2023.
Last but that place and iron nickel with our chat Gbt's method, two earning calls so I would refer to it especially after yesterday.
Yesterday meetings at being the advertising industry is one on the cost of a major transformation advancing in generating AI are set to revolutionize the way brand reach and engage with their target audience. This capability has the potential to dramatically streams.
The advertising production process and open up new avenues for creative expressions with regard to search our expectation is the chest GPT will reveal the evolutionary being search capabilities by providing more advanced and intuitive search experience for each user.
Better meeting their needs and expectation, we believe that such superior search results would increase.
With increased advertising spending and as a result, we expect to see a very positive impact on our search business.
Microsoft <unk> currently is only 3% of the global global search market, if the new being search with Chet GPT spark even modest share gains Marcos Microsoft can do very well in the business as the CFO Amy hold said yesterday.
Every percentage point of share gains in search it was roughly two $2 billion in additional advertising revenue.
And a strategic partner or Microsoft being I'm sure. We will be benefit from this increase let me also point out that chip GBT, which is the number one technology story of the year fits beautifully in our explore explore framework in parallel we will develop new exploratory application.
Of what AI can accomplish in our technology stack.
Going forward. It's also important to point out that the relationship between exploit and explore is dynamic.
Sure Peter pointed out in his famous theory of creative disruption Uavs are continually destroying and replacing the old.
That's why continued exploration is the lifeblood of any business and Thats why.
Taylor is not to be feared you cannot explore without making mistakes and we've made our share. This is why for example, we shut down <unk> and privacy web browser.
With that I would like to pass it through models malls.
Okay.
Thank you the launches.
Thank you Don and good afternoon, and good morning to those of you joining us on the U S. I'm happy to be here today to present continued strong result.
For <unk> for the fourth quarter and full year of 2008 financial driven.
<unk> continued to outperform the ASIC industry consistently improving our results during the last two years, despite the global macroeconomic challenges and market volatility.
In the diversified business model technology differentiation and innovation focused approach continues to enable us to navigate out of our way through.
Challenging market, resulting in excellent performance.
Let's look at the key financial achievements for 2022, reflecting the strength of our business model and our ability to execute to execute our strategy.
Revenue grew by 34%.
Record of over $640 million adjusted EBITDA of $132 4 million another record, 98% year over year growth non.
non-GAAP net income of nearly 120 million doubled year over year non-GAAP diluted earnings per share increased by 57% to 2.47% we.
<unk> to demonstrate our ability to generate cash with operating cash flow jumping, 72% year over year to $122 1 million.
I would like to share with you one additional and meaningful financial Kpis that in my opinion reflect the strength of down performance over time, the revenue and EBITDA LTM show, our ability to consistently execute our business strategy during the last 10 quarter.
The average quarter over quarter growth of revenue LPN was 9% and EBITDA LTM was 17%.
The financial metrics, clearly reflect our strong results overtime, and P&L robust sustainable and predictable business model.
Our ability to grow our revenue while continuously improving profitability quarter over quarter is most impressive and show long term execution in a volatile environment.
I would like to take this opportunity to talk a bit about our inorganic careful and more specifically about the visa acquisition. The Veda acquisition in October 2021 is a great demonstration of how we approach and execute our M&A strategy.
Our M&A strategy includes the following being profitable and accretive on day one.
Second a solid golf perspective, third strong synergy with turn organic business.
<unk> strong market position and last but not least important deals model one third.
Cash and two third anodes innovator rule, we found a company, but the product we were missing in our offering we wanted to enhance our impact in video offering.
<unk> an end to end solution for publishers, eliminating all existing intra mid areas and <unk> group is the Huntsville, Vietnam was accretive since day, one and add a clear growth trajectory their ability to attract new publisher and gained more traffic from existing one of them.
To grow faster than our expectation.
But more importantly, we identified clear synergies with our existing businesses, our ability to expose all tier one assets to <unk> and use <unk> as a default video solution and introduce the video of platts onto Purion Publisher's network created significant synergy.
During 2022 and.
And more to come in the next year.
The revenue CAGR between 'twenty, and 2020 'twenty, two was 101% and the EBITDA CAGR for the same period was 118% <unk> growing their business automatically while improving depth of stability, which is exactly aligned with you on DNA.
Based on <unk> management into EBITDA, and the total consideration of nine <unk>.
<unk> $993 5 million Davita, the multiple at four 5% compared with 22 multiple of eight five.
Yes.
Now, let's move to the key financial achievements of Q4 2022 revenue for the fourth quarter was $209 7 million, reflecting 33% year over year growth.
Adjusted EBITDA of $48 2 million increased by 67% year over year GAAP net income was $38 7 million, representing 119% year over year growth the highest quarterly net income is a non.
non-GAAP diluted earnings per share was <unk>, 90%, reflecting 45% year over year growth.
Let's turn to the next slide to discuss our results in more detail.
The revenue of the fourth quarter of 2022 was $209 7 million, an increase of 33% year over year, reflecting a strong continued three year CAGR of 33%. The revenue of the full year 2022 was $640 3 million, an increase of 34% year over year affecting us.
We'll continue a three year CAGR of 40%.
Fourth quarter display advertising revenue increased by 24% year over year to $123 8 million, 59% of total revenue.
This was driven primarily by the continued market adoption of our holistic video platform solution the increase in salt revenue and growth of our <unk> business.
Video revenue increased by 33% year over year, representing 42% of display advertising revenue compared with 39% in Q4 2021.
The number of video platform publishers increased by 17, 9% year over year from 42% to 75, the revenue form retain video platform <unk> increased by 78% year over year.
Our CTG business continued to gain traction growing by 42% year over year, representing 10% of the total display advertising revenue.
Our innovative <unk> targeting salt solution is being adopted more and more by the market in the light of consumer growing awareness and the increasing regulatory pressure on companies to protect consumer privacy. The number of salt customer rose to 191, this quarter and 36.
<unk> increased quarter over quarter solid customer revenue increased by 82% during that period now representing 21% of display advertising revenue there.
<unk>, 17% in the previous quarter.
Fourth quarter, <unk> revenue increased by 49% year over year to $95 9 million.
Even by a growing trend of advertising favoring our IL 10 direct response advertising the.
The year over year increase in revenue was driven by a 13% increase in RPM and it's been a 6% increase in the number of average daily searches.
The results demonstrate our strategic diversification and business model of our two main revenue plan the fourth quarter, the fourth quarter display advertising revenue accounted for 59% of total revenue compared with 63% in 2021 with search advertising representing 51%.
41% of revenue compared with 37% in 2021.
On an annual basis display advertising revenue accounted for 56% of the total revenue compared with 55% in 2021, we continue to expand into the fast growing segment of video CTV and retail business. Our SaaS business continues to grow as we benefit.
From the current shift to direct response advertising.
Our media margin continued to show year over year improvement revenue, excluding stock was $87 7 million or 42% of revenue compared with 41% of revenue in the fourth quarter of 2021, the intelligence that we have developed and several other processes and automation.
Leverage data and buying power to control and improve the overall media buying system.
This has resulted in better selling and buying power translating into a continuous improvement in media margin.
We take great pride in our ability to implement efficiency measures and progress in our day to day operations, each and every efficiency measures show continuous improvement over the last three years, our opex plus cost in 2022 accounted for 23% of revenue compared with 28% in <unk>.
2021, and 33% in 2020 in 'twenty spending at.
At the same time EBITDA.
EBITDA per FTE has risen from 78000 in 2020.
Two over 300002 thousand 22.
This impressive achievements reflect the execution of our business strategy and a disciplined manner.
We run our operation.
Over the past few years, we have invested in innovation and automation and creating the infrastructure that allow incremental top and bottom line growth as a lower cost basis.
We have improved our budget control and are consistently looking for new efficiency initiatives.
This show all our efficiency and cost control measures, coupled with focus on growth and high margin business translated into impressive bottom line growth.
Quarter, adjusted EBITDA was $8 $48 2 million, reflecting 67% year over year growth adjusted EBITDA margin was 23% compared with 18% last year, while adjusted EBITDA revenue, excluding <unk> increased from 45% in the fourth quarter of 2021 to 55.
5% in the fourth quarter of 2022.
Full year, adjusted EBITDA was $132 4 million up 90% year over year and with a three year CAGR of 111%, 101% 20 expenditure EBITDA margin was 21% compared with 60% last year 'twenty has been into EBITDA, excluding Tac margin.
Significantly increased to 49% compared with 37% last year.
On a CAGR basis for Fortinet income was $38 7 million or 17, nine centers diluted share an increase of 119% compared with $17 7 million or 44 cents per diluted share in the fourth quarter of 2021 for the full year our GAAP.
Net income was $99 2 million or two zero.
Six cents per diluted share an increase of 156, compared with $38 7 million or one point.
Zero two cents per diluted share in 2021.
On a non-GAAP basis fourth quarter net income was $44 7 million or 19 cents per diluted share an increase of 77% compared with $25 3 million or <unk> 62, a center of diluted share in the fourth quarter of 2021 for the full year non-GAAP net income was $119 eight.
Million, all 2.47 center dilutive share double the $60 million or 157 cents per diluted share in 2021.
They continue to demonstrate our solid ability to generate cash fourth quarter operating cash flow was $38 2 million compared with $28 8 million in the fourth quarter of 2021, reflecting 32% year over year growth for the full year cash from operations amounted to 120.
$2 1 million up 72% year over year.
As of December 31st when it's been into our cash cash equivalents and short term bank deposits amounted to nearly $430 million up 40.
$40 million on previous quarter, and 108 million since December 31st 2021, our strong cash generating ability and the accumulated $430 million in cash provide us with valuable resource to execute both organic and inorganic growth.
Two entities.
Given our strong performance in a sustainable and predictable business model, we expect the solid business momentum to carry on in 2023 with our visibility into the year. We are today publishing our guidance for 2000 <unk>.
Revenue of between $7 20 to 740, and adjusted EBITDA between $1 $49 million to $153 million.
This concludes my financial and guidance overview, and with that I will and over to Dawn <unk>.
Thank you.
This point.
At this point I'd like to elaborate on what we shared earlier today.
I'm stepping down as CEO .
I joined <unk> as CEO in 2017, almost six years ago actually was April 2nd 2017.
<unk> recruited me to turn the business around they recognize that they had had the career of doing just that so it was no stranger to cleaning up masses.
But this was quite a big one.
The challenge in front of me was to fix the capital structure build our competitive advantage and moat strengthen our technology and enhance operational efficiency.
Only by doing those things all of them not one of them would growth be restored.
I am proud of the fact that we have reached the point, where we outperform our industry and demonstrate continuous growth and high profitability, even during the most volatile economy, including the worst pandemic that we've seen in decades.
We've accomplished this by creating an execution model that is positioned to benefit from wherever AD spending flows across the three pillars of our industry.
Thats why we are the only one of 52 AD tech and market publicly traded companies, whose sole share price growth in 2022.
We have become a true technology leader with innovations like <unk>, which has won awards, we've made smart and strategic acquisition, which have enabled us to enter into a new category and created Oregon organizational synergies.
We have attracted world class brands strengthen our relationship with Microsoft Bing and build culture fit is committed and creative.
And we did all that with agility speed and resourcefulness.
With all that behind Us and Purion is now well past the turnaround point I felt it was the right time to move forward with our succession plan.
It was clear for me to recommend <unk> as my successor to the board I recruited dialed from similar web in 2018 to drive the turnaround at Goldfield is deposition, our search business for accelerated growth.
<unk> is a visionary entrepreneur, but they also have great expertise as an operator.
Under his leadership broad fuel our search advertising Bu reorganized modernize its technology infrastructure and further developed our strong and mutually beneficial partnership with Microsoft <unk>, What's more called fuel technology has played an important role in the development of <unk> in <unk>.
Diligent hub.
He was instrumental in making that happen.
As many of you have followed us and seen the growth of our search and direct response business.
Where the performance has been superb.
SDM dull drove them. In addition talent being my side as a key member of the executive team involving all important strategic discussion, including M&A.
This more broadly medicine in Permian business.
Beyond cost you gave me an opportunity the opportunity to collaborate with other business units he knows them understands them and works well within the next six months will be transition period, allowing us enough time to ensure that we're entirely assumed the CEO role.
It will go very smoothly.
I will remain on the board of Purion and so be very involved in the future of the company.
I'd like now to turn the call over to downtown.
Yeah. Thank you Don.
It's an honor to be named as <unk> next CEO and I look forward to continued collaboration with the one in the next six months as we work through the transition I want to thank the board of directors for the confidence in the IMAX.
I am excited about the opportunities before us and ready for the challenges.
For those who don't know me I've joined Purion, a 2018 as the general manager of <unk> Mike.
My task, which will transform the search business, which was in the period of decline into sustainable profitable growing business.
By solidifying our key relationship with Microsoft advertising investing in technology and focusing on quality, we achieved just that.
Today, our search advertising business enjoys a robust relationship with Microsoft advertising.
Just one year ago, we were named Microsoft advertising global supplier partner of the year.
This is aligned with the Purion with what Purion status for <unk>.
An innovator.
Leader in technology, and a differentiator in the entire ethnic market.
In the past over the past six years, the one led a momentous restructuring pivoting the strategy and developing and leading the team.
That together establish purion as a true innovator.
I've had the pleasure of working closely with Don and I look forward to continuing our work together from the board seat that Don is going to continue with us.
I believe we.
We have only scratched the surface of the opportunities, we're facing including search retail and CTV.
We are positioned to address all key facets of digital advertising.
Delivering high impact solutions for brands at every step of the consumer decision journey.
We have proven our ability to identify shift in AD spending delivering the right solution at the right time.
This is evidenced in our market leadership, our expanding margins are growing share.
Our overall financial performance.
The future of Purion is bright.
With that I would like to turn the call back to dawn.
Thanks, So much we will open the line for Q&A. Please operator.
Thank you the floor is now open for questions.
I'd like to ask a question and are connected via the phone. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is in the question queue. If he would like to remove your question from the queue. You May press star tail on your telephone keypad participants connected and via the webcast. Please click on the raise hand icon and <unk>.
<unk> will be called when it's time to ask a question.
Our first question today is coming from Jason <unk> of Oppenheimer. Please go ahead.
Thank you for your questions first there on models off on your tenure.
What you've been able to do at the company.
I think the market is concerned with maybe the timing of you leaving.
Given that the results speak for themselves yet the stock price to be down. So is there anything youre seeing kind of in the short term kind of what are you seeing kind of in.
In the business, perhaps as far out as you can see.
So that's question one just maybe try to help the market.
In <unk>.
He is itself the stack in.
As you think about retail media are these contractual relationships, obviously, youre seeing really nice growth, but you're competing against some pretty big companies, who are trying to become platform plays of retail media. So just talk about the contractual nature of retail media and then laugh.
Just on kind of chat GPT, what Microsoft is doing is your initial take that.
For Purion, specifically, you will benefit if they are able to bring more advertisers onto bang it drives up CPC that ultimately you benefit from that.
Obviously very early with this to all AI driven search, but just any thoughts there. Thank you. Thank.
Thank you. Thank you, Jason So I will start with the easy one which is the chip GBT because.
The floor is as follow when it comes to our business.
Firstly, it's all has to do with consumer we believe that this technology first and foremost.
Trucked more consumer.
That will use bank and as I mentioned before it's all about how many are using the technology and I think that Microsoft CFO said that each one point is $2 billion.
And while you have more that are using the being search advertiser are aligning with it because it's all about scale.
And if advertisers are aligning in what way they won't spend more next one so they put more apps into this platform compared to other platforms that exist and the second they're willing to bid the mark. So we are expecting the two things will happen.
While we will have more in terms of searches.
And right now you have seen the number and we're expecting them to grow and the other thing is if advertisers will be willing to spend more because we believe that.
The demand will be higher it will increase the rpms. So we've done two factor by itself and I'm not talking about any kind of technology Corporation or something that we are able to do this only by that.
I have no doubt that we will benefit from I think what Microsoft Bing is doing and it's all about giving a five.
To Google and become more dominant.
From the 3% market share that they have today, that's that's clear.
As far as what I'd seen in 2023. So first of all you didn't know us by now very well, we're very conservative and we are mostly conservative when it comes to the first time that we provide guidance for the year happened to be in this call.
Having said, we're not seeing any slowdown in this quarter.
We're five weeks into the quarter.
And if I'm trying to compare this quarter to the last quarter to the first quarter of 'twenty 'twenty. Two I think we are in a very very good shape.
As I mentioned there are some other.
There are some other areas, where we are changing our business model.
All resolved and I mentioned it on the last call with our retail customer.
Which gives us a better way to predict our business. So all in all on one end we are conservative on the other end, we are very optimistic as far our ability.
To once again delivered the growth into profitability as we did in the last three years or so.
Other than the retail media.
As a contractual.
So the retail media is a very interesting.
We still defined it as an explorer business, even though the appetite is really a big for 2023, I mentioned $30 million, which is our target versus the $22 million to did this year, but I think what is more important is the quality of the revenue of frequent media.
Because if we're talking about sustainability and predictability I think thats. The Great example, because what is always on always on is type of contractual business.
Sure.
Advertiser in this case retailers are in a waste commit for spending along the year and it snapped a line to a certain campaign.
So for us for modeling those these dollars that are considered to be retail dollars move more than that.
That they are coming from campaigns that we are questioning.
Their sustainability.
Thank you <unk>.
Erica.
Thank you. The next question is coming from Laura Martin of Needham. Please go ahead.
Hey.
Hi, Laura.
Hello, Yes.
Can you hear me okay.
Yes, yes, we can hear you.
Fantastic.
Okay. So starting with your accounts and drill down on chat GPT as it related to Bang and Microsoft comments yesterday I wanted to pivot your insight and asking about you said that you thought cap GPT and as Janet if AI can really streamline the production process for AD Tech.
Wanted to step out of search and go to the other part of your business and could you give us your early thoughts on how you think cat <unk> and <unk>.
The advertising part of your business over the next 10 years, excluding our search business.
And then second for you Don I'd like to say TBD.
10%, you guys had a 10% of display advertising.
And how fast can that get.
I think over the next year or can you continue to project growth in your mind about 42%.
Or do you see it flowing and then Terry.
Are you Kidding me like I get that you guys are conservative, but how are you.
Now from growing Avenue at 33% in both the fourth quarter and the full year to 14% like what's falling off a cliff because its not search.
Following up a question.
The deceleration half outsourced.
Our programmatic platform.
So first.
This shift cheap GPT, so other than the search.
The most let's say obvious trivial one that we are very much.
Around it it has to do with reducing all.
Creating more content torque everything that has to do with friend during video and putting a lot of AI.
I mentioned in one of our calls the technology of <unk>.
Dynamic creative optimization, the CTO CEO that is growing.
Zinc to be a commodity everyone is going to use it. The idea is very much to be as personalized as possible. When you are targeting no matter its business performance our awareness campaign.
This is going to be I think the first very much the first phase.
Using the GBT internally so.
The minor minor factor was reducing the labor cost that's associated with this development I think the main benefit will be our ability to deliver greater value greater return on AD spend to our advertisers because the personalization is going to get a huge boost.
That's that's the trivial, but if you're looking about it in a way beyond beyond that.
One of them one of the most important thing it has to do with the modeling and our ability and that's that's a very interesting I think we are sitting in a gold mine, which they're up I mentioned, the fact that we creating.
The technology the table to capture signal from all over the channels, if its the supply and the demand and things like that that's a huge boost into our model we are already.
Looking about how are we able to upload.
The huge amount of data and what is the results that we get them back.
That's that's going to be a huge step forward in a way that we are able to optimize demand and supply and most importantly.
Bid smartly.
Against our competitor so the harvest is going to be the main beneficiary, even though it's quite challenging we talk about huge amount of data.
We're still not sure.
What is the pricing model of the <unk>.
These type of AI startup at currently it's not that cheap.
To upload all the data and developing key remodel.
And we are looking about it when price will go down on it will be other opportunity for us doing it in the most economic way, but thats something that we as a company see it as the next.
The next phase of using <unk>.
<unk> in our internally in terms of pricing lags CTV and CTV in general which was your next question.
So you know better than anyone else that this CTV things got Commoditized and we are always looking about the growth and we're looking about the profitability in this regards to gross margin.
The reason that we are trying to develop all kind of.
Product into niches and currently there is a reason where I mentioned like CTV within the CTV, we need to step away from the competition, we need to step away from the Commoditization that is happening on CTV and keep a very very high margin.
So.
The outlook on CTV will be on margin more on the growth.
I think that there is a great opportunity to.
To get high margin.
Other area that we are focusing from CTV standpoint is to go with the converge of CTV and retail.
Which is very interesting.
We're having.
Some advanced discussions with our retailers custom.
Customer how the two definitely can.
Can work together retail media and CTV.
We were going to launch soon.
One of the most impressive campaigns that we're working on it right now.
So to summarize I think that it's time to break CTV into verticals.
In order for us to dominant those verticals.
Mark do you want to take that Eric and.
And I will take the last months. So thank you for the question.
I'll say that in the last year as well.
Using the same model. This is the same model that help us so maybe guidance in the last three years.
Implementing the same model and this is where we all know with 40% of revenue and 40% EBITDA growth for 2023.
I'm very comfortable it is number one and we will keep the same order the model at the same time change the market is changing we're expecting all of you know on the model.
But this is how we did it in this zone.
Moving forward.
Thank you very much frankly.
Thank you. The next question is coming from Andrew Morocco, Raymond James. Please go ahead.
Yes.
Hi, Thanks for taking my questions. Another one on <unk>, if I could.
Is there potentially a risk of that being could decline to renew the agreement maybe not this current agreement or even the next agreement, but it being is able to fundamentally transform the search marketplace and gained significant share on an organic basis is there a risk that being made.
No longer needs partnerships to help drive traffic to Bang, because theyre already doing enough and I guess, what would the contingency plans be there and then second sword I guess, what does kind of the quote unquote sales cycle look like for <unk>, We're seeing obviously, great expansion in that product, but how does it actually get into advertisers plan.
<unk> from awareness to implementation. Thank you.
So as far as Chuck GBP, and we're having a very close conversation with the guys I definitely see no risk the other way around.
Are all they are 10 billion theme.
Our into technology I'm sure that someone has put an.
And our ROI planned how they've got to get this back.
And the only way to get back is to increase their market share.
The only way to get this deck is that they will increase revenue and they will rely more on partners like cut fuel to drive more searches underlying quality searches.
They are able to monetize and very much generating LLC.
Business for advertisers, so I think that this risk diminished by the fact that they double down on.
On being in terms of their strategy Sim.
Simple it's deck.
Now to your question about sort so.
Surprisingly the sales cycle, we sort as to as I said two phases phase one.
Advertiser.
This concern and they said Okay. You know what is there is no free lunch here in other words.
We are adapting sort out with compromising on results in other words ctr.
So when they started the campaigns using sourced each always and always being done in an <unk> fashion.
Some of the campaign is sort using sorts alongside of using cookies, that's 100% of the cases.
Now once they've been doing their initial campaign, sometimes it's even more than one I must say because markets are quite skeptical how the hell.
You able.
Using cookies and yes.
Altra reform.
The cookies using cookies, that's that seems for them a bit of a miracle.
That's why there is an experiment here that's why it takes a bit long for us to take 100% of their campaign, but once they reach this level or day.
Clear for them.
That we able to deliver and they are not compromising on performance.
What's happened here is that they increase their spend.
And Thats, what we showed on the average deal size.
Significantly graff, our average deal size because of that they gained confidence on the technology and for them, it's definitely doing more mean ctr wise.
And listen to their consumer.
And on previous call I talked about the ESG and the movement. It's very much in line of what Advertiser believe is the right things to do for their consumers.
Alright, great. Thank you.
Thank you.
Question today is coming from Mark Kelley of Stifel. Please go ahead.
Sure.
Great. Good morning, Thanks very much.
Not to go back to the chat GPT question, one more time.
I just want to make sure I'm fully grasping how that benefits you guys.
I think if the consumer starts to think that being as a better place too.
To search versus Google and they go directly to being that would make sense, but I guess, how does that manifest itself in the.
Preemptive search product.
You guys have I, just I'm, having a hard time wrapping my head around it so I apologize for making you repeat yourself a bit there and then second just on the retail media business.
Two quick ones is that entirely in the undertone segment today and then.
With the with your with IHOP do you expect to.
Be a part of the supply side as well thank you.
Thank you so.
First on <unk>.
On the Czech GBP.
But I think we need to take a step back. So how are we able to enjoy and monetize them in but we do it regardless.
And.
<unk> is being policy.
Is to rely on a very limited.
Mount of partner, which they searched certificates. We are one of them, we're not the only one but it's a handful of part D. That's being Polish now what they ask for each partner is to deal with hundreds of publisher.
And the way.
And they are expecting from the partner as well as from us that we will screen.
All searches.
And we will deliver only quality searches because quality means searches with high intent.
Otherwise.
Being as you know being discharging the advertiser once they click on an AD on in any given search AD page our search results page now.
Now what is the what is the quality quality search searcher quality search into the ones that click and actually have true intent to buy or to intend to visit. This web site. What is the non quality is box and everything here, which is that having an impact.
That's why in the.
<unk> is expecting for us to increase the number of quality searches and wait for us to translate that is working with more and more more and more publisher and more and more quality publisher improve at the same time, our quality infrastructure enable to screen and develop and deliver only those searches.
That we believe that there are quality searches.
First and foremost.
Now what is going to happen here is the fact is that while they.
Enhance or improve the consumer interaction with their search it will be more and more partners that will offer the search capability more partner that we need to certify more partners that will go for us as a result, more searches and we are expecting that the <unk>.
<unk> 22.
Millions of average daily searches will increase if this will increase returns.
Direct correlation so our ability to generate revenue.
Now in terms of retail media at this point retail media is only.
From under Tom undertook.
Undertone is developing its an explorer initiative.
Undertone establish.
Our whole division, which is the retail.
<unk> Commerce Division at this point, we have a dedicated salespeople dedicate R&D as we are doing it. It's a dedicated budget for this initiative currently under undertone.
We are expecting to leverage this relationship with the brands and basically expanded to other business units in periods.
Great. Thanks very much.
Thank you. The next question is coming from Eric Martin Do you see of Lake Street Capital. Please go ahead.
Hey, I wanted to ask about the.
The growth.
Our 2023, where we've got the 14% on the top line I'm wondering underlying that what's the implied growth rate for the two segments the display growth in the search growth.
So definitely.
When we are dialed into the different model, we are expecting advertising to grow more than the search we are more conservative around search.
But.
At the end with a 400%.
We all.
Again, not so far between the two.
I will say that the.
The third is low close to the 10% and the rest is growing today advertising which is.
Close to 20%.
Okay.
Why is that because in Q4, we had an eye assembly there organic comps.
Q4 search.
What.
For the 49% in display with a 24%.
So we did enjoy progress also during Q4 with MTN and probably shifted in that book as I mentioned before we are building the model based on where we are now and taking it further out and based on where we are now with this analogy and then Justin no amount of growth. This is our assumption.
For Q&A as Granny Smith.
Okay and then.
Congratulations.
Not only on the pending promotion here, but also the great work that you did.
Modernizing.
Could you just.
Just curious to know your your role in the Microsoft relationship or are you kind of the point person when it comes to the the contract renewal with Microsoft.
Yes, so first of all thank you.
Sure.
Yes, the main contact with Microsoft with the entire executive at Microsoft advertising have been for the past few years.
<unk> negotiated the last agreement and obviously are negotiated agreements.
So yes.
Okay.
Sure.
Good luck.
Thank you.
Okay.
Thank you. The next question is coming from Jeff Martin of Roth Capital. Please go ahead.
Thanks, Good evening guys. Congratulations on a great 2022 and ended the year two.
Two questions from me one.
How are you viewing the competitive dynamic are you seeing.
Your competitors in the marketplace trying to adopt similar models to the IHOP and.
And sort and then secondly.
Sort of as a service is that currently available if not when will it be available and what kind of opportunity do you see that becoming over over the long run. Thanks.
So.
Shortage of services and explore.
Initiatives in that.
Of course not trivial.
We're getting a lot of request.
To definitely externalized the service that is done internally.
We wanted to make sure first that short works.
So it works for us.
And it works for the 191 customers that are using sort and we are able to demonstrate that no. One is need to compromise on the results vice versa.
Then we feel comfortable externalizing it too.
<unk> publisher.
Two other DSP.
And we are let's say at this point.
Quite advanced.
In this in this effort.
We will go live or GAA as we like to say internally.
We definitely will share with you.
We are expecting that this will happen.
Hopefully in the first half of 2023.
From a competitive standpoint.
That is using us as an internal internal product I don't know what others are doing.
And it's not a secret sauce. The question is what Youre doing with the hub, we have one advantage and the advantage that we have.
The.
I don't know if our customer adds is great and huge amount of signals that we're getting.
Our direct response.
Our search and Retargeting.
Yes.
Search user consumer with our search.
Thats a goldmine.
If you compare this to the other signal that we have from both sides of the open web from the supply and the demand you're getting into a very let's say.
A great model, that's able to provide us an insight and based on that we're bidding all our modeling because what data drives those models.
We're keep.
Westing huge amount of R&D.
Resources into it.
And we are trying to believe the depths, creating us the greater and deeper mode from our from our customer.
Definitely.
Media margin and our EBITDA margin, if youre looking at it.
EBITDA as the ratio of revenue ex Tac, we are demonstrating the advantages of the hub.
<unk>.
It's not proprietary for sure, but we are we believe that.
There is a way to go for us.
We're getting quite a dividend for this investment.
Great. Thank you.
Yeah.
Thank you, we're showing no additional questions in queue at this time I'd like to turn the floor back over to Mr. Greg Hill for closing comments.
Hi, guys. Thank you very much for your participation in the next earning call. Thank you.
Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect your lines of log off the webcast at this time and enjoy the rest of your day.