Nexxen (NEXN) Q1 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Wednesday, May 13, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Ofer Druker
• Chief Financial Officer — Sagi Niri

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Contribution ex-TAC -- $84.5 million, reflecting a 13% increase year over year, and establishing a new first-quarter record.
• Programmatic Revenue -- $81.9 million, up 14% year over year, reaching an all-time Q1 high.
• CTVIDAA Revenue -- $29.4 million, representing 12% year-over-year growth and a return to segment growth in the period.
• Mobile Revenue -- Increased 18% year over year, with management referencing ongoing acceleration.
• Desktop Revenue -- Increased 3% year over year, cited as incremental to overall channel performance.
• Data Products Contribution ex-TAC -- Up 81% year over year, indicating significant growth in data-driven monetization.
• Display Contribution ex-TAC -- Rose 57% year over year, contributing to overall programmatic strength.
• PMPs Contribution ex-TAC -- Decreased 17% year over year, noted as a weaker subcategory within programmatic operations.
• Non-programmatic Business Lines -- Declined by approximately $560,000 year over year, with the education vertical described as "soft."
• Adjusted EBITDA -- $16.3 million, translating to a 19% margin of contribution ex-TAC and surpassing Wall Street consensus.
• Net Cash Used in Operations -- $21 million, in contrast to $19.3 million generated in the same quarter of the previous year, with the shift attributed to working capital changes and strategic investments.
• Cash Position -- $94.6 million in cash and cash equivalents at quarter-end, no long-term debt, and $50 million available on a revolving credit line.
• Non-IFRS Diluted EPS -- $0.06, compared to $0.16 in the same period last year, reflecting a decline despite operational growth.
• Share Repurchase Activity -- 1.1 million shares repurchased during the quarter at a total cost of $7.2 million, and authorization to initiate a new $40 million program.
• Board-Authorized Additional Investment -- Plan to invest another $15 million in Q3 2026, increasing the total to $60 million and equating to roughly a 6% equity stake.
• Full Year 2026 Guidance Raised -- Contribution ex-TAC guidance increased to a range of $382 million to $397 million (previously $375 million to $390 million), and programmatic revenue now expected at $374 million to $388 million (previously $367 million to $381 million).
• Full Year Adjusted EBITDA Guidance -- Maintained at $122 million to $132 million, which is approximately 10% growth, equating to a 33% margin at the midpoint.
• Enterprise Client Momentum -- More new enterprise clients onboarded year-to-date than in all of 2025; each is expected to deliver at least $1 million annually, with projections of increased recur­rence and budget size in the second half.
• CTVIDAA Home Screen Expansion -- Programmatic access secured for TCL’s and TiVo’s native home screens, nearly 10 million additional devices added, with further OEM expansion and exclusivity on select TCL placements in the U.S. and Canada.
• Discovery Tool Efficiency -- Internal analysis shows the Discovery Assistant reduced audience research time by over 40% year over year in the quarter.
• DSP Assistant Workflow Gains -- Key processes saw over a 90% year-over-year efficiency improvement.
• Mobile Channel Share -- Stated as "about 40%" of overall revenue and above 35% of total platform value (TPV), emphasizing channel importance.
• Share Repurchases Since March 2022 -- Approximately 40% of outstanding shares repurchased for a total of $265 million.
• AI and Data Investment Focus -- Management stated "most of our dollars are going into investment in AI capabilities, data and platform innovation," estimating an 80-20 split versus sales and marketing spend.

SUMMARY

Nexxen International (NASDAQ:NEXN) reported record-setting operational results in the first quarter, achieving new highs for both contribution ex-TAC and programmatic revenue. Management detailed strategic expansion of CTVIDAA programmatic access across major OEMs, deepening partnerships with TCL, TiVo, and LG. Enhanced AI capabilities within the platform were cited as central to improved product efficiency and client onboarding, including documented workflow automation as adoption accelerates. The updated full-year guidance signals management’s confidence, with higher targeted contribution ex-TAC and programmatic revenue ranges driven by new enterprise wins, growing mobile in-app share, and major event tailwinds such as the FIFA World Cup and U.S. midterm election cycle.

• CEO Druker stated, "In 2026, we have already onboarded more new enterprise clients than we did in all of 2025."
• Nexxen TVIDAA on screen’s programmatic offering is now live on over 25 million V-powered devices, with plans to further scale this channel through additional OEM partnerships and exclusive inventory agreements.
• Management described their AI technology suite, NextAI, as a "structural AI advantage" with upcoming expansions to the SSP side intended to drive increased publisher monetization.
• “Mobile in app is becoming critical for advertisers seeking measurable performance driven outcomes,” according to Druker, with direct SDK integrations feeding continued channel growth.
• The company completed its previous $20 million buyback and is authorized for a new $40 million share repurchase initiative.
• Disciplined cost control and operating leverage are expected to support sustained profitability and allow reinvestment toward further innovation in CTVIDAA and mobile, according to Niri.

INDUSTRY GLOSSARY

• Contribution ex-TAC: Revenue minus traffic acquisition costs, highlighting net value generated by platform operations.
• Programmatic: Automated, real-time bidding and trading of digital advertising inventory across various channels.
• CTVIDAA: Connected TV (CTV) advertising format deployed through VIDAA, a smart TV operating system present in select OEM TVs.
• DSP (Demand Side Platform): Platform for advertisers and agencies to automate campaign buying across digital ad spaces.
• SSP (Supply Side Platform): Platform for publishers to manage, sell, and optimize available ad inventory programmatically.
• OEM (Original Equipment Manufacturer): Companies manufacturing smart TV devices that integrate VIDAA operating systems and offer advertising inventory.
• SDK (Software Development Kit): Tools allowing integration of Nexxen’s ad-serving technology directly into third-party apps or environments.
• TPV (Total Platform Value): Sum of all revenue or value transacted through the company's platform.
• PMP (Private Marketplace): Programmatically reserved digital advertising inventory offered exclusively to select advertisers or agencies.
• ACR Data (Automatic Content Recognition Data): Device-level data derived from smart TVs, providing insights on media consumption for targeting and measurement.
• Agentic Ad Management Protocol: Industry-standard protocol enabling AI-powered, agent-driven advertising transaction and management workflows.
• NextAI: Nexxen’s cross-platform suite of artificial intelligence-driven optimization, automation, and analytics features.

Full Conference Call Transcript

Ofer Druker, Nexon's Chief Executive Officer and Sagi Niri, the company's Chief Financial Officer. This morning, we issued a press release, which you can access on our IR website at investors.nexon.com. During today's call, we will make forward looking statements. All statements other than statements of historical fact may be deemed forward looking. Advise caution in relying on them. These statements include, without limitation, statements and projections regarding our anticipated future financial and operating performance, market opportunity, growth prospects, strategy and financial outlook. They also include, without limitation, statements regarding our partnerships and anticipated benefits related to those partnerships, as well as expected benefits from our growth initiatives and platform investments.

In addition, we may provide forward looking views on macroeconomic and industry conditions and other statements regarding the expected development, performance market share or competitive position of our products and services. All forward looking statements are based on information available to us as of the date of this call. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those implied by these statements. These include, among other things, unexpected changes in our business or macroeconomic or industry conditions.

More detailed information about these risk factors and additional risk factors are set forth in our filings with the US Securities and Exchange Commission including, but not limited to, those listed in the section entitled risk factors in our most recent annual report on form 20 f. Nexon does not intend to update or alter its forward looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, company's press release and management's statements during this call will include discussions of certain measures and financial information in IFRS and non IFRS terms.

We refer you to the company's press release for additional details including definitions of non IFRS items and reconciliations of IFRS to non IFRS results. At this time, it is my pleasure to introduce Ofer Druker, CEO of Nexen. Ofer, please go ahead.

Ofer Druker: Thanks, Billy. We have had a strong start to the year. Delivering record Q1 results and continued momentum into Q2. Enabling us to raise our full year guidance. Which Sagi will expand upon. In Q2, contribution ex-TAC programmatic revenue and CTVIDAA revenue are trending ahead of our expectation following a record April and a strong start to the month of May. We are happy to report strong execution on the strategy we laid out and on the steps we have taken to support it.

Including advancing our enterprise go to market efforts to reach more clients and partners in The US and globally, continuing to enhance the platform's full funnel performance and usability through integration with our unique data media, and growing AI capabilities. Extending our CTVIDAA leadership through our first mover advantage in programmatic smart TVIDAA home screen which we expect to support CTVIDAA revenue growth. And expanding our mobile in app footprint to strengthen long term growth durability, and resilience to AI driven disruption. This execution is translating into measurable results across the business.

We have made targeted investment to strengthen and differentiate our DSP, capitalizing on the advantage we have built over the past several years around data, direct connectivity to premium media, and more recently, accelerating AI capabilities and enablement. Our AI capabilities are becoming more and more important to customer decisions to work with Nexen and grow their spend and platform utilization over time. In late 25, we invested in growing our enterprise teams and enhancing our go to market strategy through both new hires and internal resource shift. Which is paying off through increased enterprise partnerships and contribution ex-TAC growth. In 2026, we have already onboarded more new enterprise clients than we did in all of 2025.

Based on current expectations, these customers each have the potential to generate more than $1 million of spend annually. Early indicators point to larger budgets higher recurrence and deeper engagement with enterprise spend expected to accelerate in the second half and beyond through increasing full stack adoption growing wallet share, and new customer additions. As part of our strategy to more deeply integrate our data into our DSPs activation stack, we enhance connectivity with our discovery tool. Enabling proprietary insight to flow directly into a activation. Based on internal analysis, the Discovery Assistance help customers reduce audience research time By over 40% year over year in Q1.

Enhancements to our DSP assistant are also improving optimization, QA, and troubleshooting driving over 90% year-over-year efficiency gains across key workflows. We are also expanding programmatic access to scaled AI resilient media unlocking high attention, performance driven mobile in app and CTVIDAA native home screen media for advertisers. Next AI, our branded suite of platform wide AI capabilities and solutions, is at the core of our strategy and is reinforcing our tech stacks value proposition acting as a force multiplier. We believe we have a structural AI advantage due to our end to end model enabling NextAI to operate across the full campaign life cycle and drive more efficient higher performing planning, activation, and optimization.

Our AI approach combines data, machine learning, generative AI, and agenting capabilities to deliver speed performance, and automation across advertisers workflow. While NexGen and others are working towards fully autonomous advertising, We are deliberately differentiating with a core focus on transparency and customer control to enhance decision making and performance. Our goal is to empower buyers. Not bypass them. As trust builds, these systems can take on greater responsibility progressing from insight to assisted execution to higher level of automation, driving productivity without disrupting how partners operate. We are also aligning with standards such as ADSP, and integrating our Agen.T solution with MCP and broader agent to agent workflows.

Enabling interoperability across AI driven environment and positioning Nexen to lead in the new era of programmatic advertising. As part of this, we are actively contributing to the IAB agentic ad management protocol helping shape the standards that will define our agent based advertising systems operate across the ecosystem. In 2026, we will expand NextAI within our SSP to enhance publisher performance and monetization and introduce more autonomous deal creation, negotiation, management solution for advertiser and customers. Internally, our AI capabilities are expected to drive increasing efficiency faster development timelines and operating leverage, with benefits scaling into late 26, and beyond.

As mentioned, we are already seeing success with our AI strategy which has been integral to our winning and retaining clients and partners across the ecosystem. CTVIDAA revenue returned to growth in Q1, increasing 12% year-over-year with momentum building into Q2 and a clear path to acceleration in the second half and beyond. Driven by our industry first programmatic smart TVIDAA home screen, ad activation solution. Nexen TVIDAA on screen. With Nexxen TVIDAA on screen, we are not just enhancing our CTVIDAA differentiation, We are defining and leading a new programmatic category. This offering enable advertisers to access high attention, non skippable CTVIDAA inventory at scale through existing programmatic workflows.

Unlocking the full potential of a surface where consumers spend over 10 minutes per day on average. Historically, this inventory has been transacted through direct deals and ad servers. Limiting scale and efficiency for advertisers, while constraining monetization for OEMs. By bringing this surface into programmatic, we are unlocking a sizable under monetized opportunity for advertisers and OEMs. And are capitalizing on our first moving advantage. Our solution is now line across V-powered devices and leading DSPs and agencies including the Trade Desk, StackAdapt, Basis, H and L, and others are onboarding and expected to start scaling spend soon. We are also rapidly growing our home screen reach and monetization potential.

We initially launched with programmatic access to over 25 million V-powered home screens and has since expanded our footprint through partnership with additional OEMs. We secured programmatic access to TCL's native home screen inventory globally including exclusivity on select native placement in The US and Canada on TCL Android TVIDAA devices. Additionally, we gain programmatic access to TiVo's native home screen inventory in North America and The UK. This partnership has increased our base by nearly 10 million devices and we expect to expand to more by year end. We also expanded our partnership with LG and are now testing activating their native home screen inventory through Nexen platform.

Further reinforcing our role in enabling programmatic workflows across this premium and rapidly growing CTVIDAA category. Nexxen TVIDAA on screen represents a clear structural growth driver for our CTVIDAA business, 1 that accelerate our enterprise strategy and expands our end to end CTVIDAA revenue opportunities. Our exclusive ACR data from the also continues to drive licensing momentum creating incremental high margin revenue opportunities. In Q1, AdForm joined as a partner expanding a growing roster that includes leading platforms such as The Trade Desk, Stack Adap, and Yahoo DSP. Further validating the value and scalability of our data revenue strategy. Our mobile in app supply expansion is enhancing our growth profile in an AI resilient channel supported by secular tailwinds.

Mobile revenue increased 18% year over year in Q1 and we see early signs of acceleration. We have strengthened our position through direct SDK integration with Unity and others, expanding access to scale high quality supply, driving strong performance and enabling greater platform wide monetization. Mobile in app is becoming critical for advertisers seeking measurable performance driven outcomes in high engagement environment with strong identity and signals quality, as where our platform is advantaged. We believe mobile in app will represent a meaningful growth driver while reinforcing our AI resilience revenue diversification and enterprise opportunity.

In closing, we believe our integrated platform differentiated CTVIDAA and data offering and AI innovation are establishing Nexen as an industry leader and must have partner. As we move into the second half, we see catalysts that can further accelerate our momentum. The FIFA World Cup and US midterm election cycle represent meaningful incremental revenue opportunities where we are well positioned to capture spend. For the World Cup, this is driven by Nexen TVIDAA home screen NEXON Sports, and our exclusive data while our political solutions growing partnership and expanded access to budget across both sides of the aisle position us to capitalize on what is expected to be a strong political ad cycle.

As our platform strengthens, we expect to attract greater enterprise spend expand profitability, and reinvest to scale performance and adoption. Reinforcing a powerful growth flywheel. The industry shift towards AI driven data rich advertising defined by performance, aligns directly with our strengths. Positioning us for share gains in the quarters and years ahead. With that, I will turn the call to Sagi.

Sagi Niri: Thank you, Ofer. Q1 marked a clear financial inflection point with record results that exceeded both our expectation and Wall Street consensus. Importantly, momentum is carried into Q2, supported by broad based strength across our programmatic business line. In Q1, we delivered contribution ex-TAC, of $84.5 million a Q1 record reflecting a 13% year over year increase driven by robust programmatic growth. Programmatic revenue was $81.9 million up 14% year over year also representing a Q1 record. This performance underscores the success of our deliberate mix shift, to our durable, higher-growth, higher quality programmatic channel.

This progress reflects our platform investments in disciplined execution, as we scale our programmatic capabilities advance our enterprise strategy, and strengthen our position across mobile in app CTV, and data. We expect each of these drivers to accelerate through 2026 and beyond. Performance in the quarter was driven by broad based strength, across our programmatic channels, particularly within CTV, mobile, data products, and display, supported by growth across our entertainment, retail, finance, government, and automotive verticals. In contrast, contribution ex-TAC from our nonprogrammatic business lines which we are actively evaluating strategic options for, declined by approximately $560 thousand year over year and we saw softness within our education vertical.

CTVIDAA returned to growth in the quarter, with record Q1 CTVIDAA revenue of $29.4 million up 12% year-over-year. We are seeing continued momentum in Q2 and remain confident in CTVIDAA as a core growth engine for 2026 and beyond. This is supported by multiple catalysts, including increasing utilization of our robust CTVIDAA data, technology and media offering, as well as the FIFA World Cup, the US midterm elections, and growing adoption of NexxenTVIDAA on screen. Our expansion within mobile in app is also delivering results. Mobile revenue increased 18% year over year in Q1, with strength continuing in Q2. Desktop revenue also increased 3% year over year.

Elsewhere, contribution ex-TAC from data products and display increased 81%, 57% year over year, respectively, while contribution ex-TAC from PMPs decreased 17%. Adjusted EBITDA for Q1 was $16.3 million ahead of Wall Street consensus representing a 19% margin as a percentage of contribution ex-TAC We remain confident in our ability to extend margin, over time through greater enterprise adoption, increased end to end platform utilization, disciplined cost management, and growing benefits from NextAI. In Q1, we used $21 million in net cash from operating activities, compared to generating $19.3 million in Q1 25.

As of March 31, we had $94.6 million in cash and cash equivalents, no long term debt, and $50 million available under our revolving credit The year over year decrease in operating cash flow as well as the sequential decline in cash and cash equivalents largely reflects changes in working capital, including collection to normalize in Q2 26 alongside strategic investments. Non IFRS diluted earnings per share was $0.06 compared to $0.16 in Q1 25. On capital allocation, we repurchased roughly 1.1 million shares in Q1, investing approximately $7.2 million From March 2022 through 2026, we repurchased approximately 40% of our outstanding shares investing roughly $265 million. During the quarter, we completed our previous $20 million share repurchase program.

In addition, we have authorization to initiate a new program of up to $40 million We also remain on track to invest an additional $15 million in Q3 26 bringing our total investment to $60 million reflecting an approximately 6% equity stake. We continue to believe this investment alongside our commercial partnership, drives compounding value. As we expand its smart TVIDAA footprint, it increases the value of our data exclusivity, expands our monetization opportunities, and drive equity upside benefiting Nexen and its shareholders. At the same time, we are continuing to evaluate targeted smaller scale strategic opportunities, to accelerate programmatic revenue growth and strengthen our position across mobile, CTVIDAA and data. Turning to our outlook.

Are raising our full year 2026 contribution ex-TAC in program revenue guidance following outperformance in Q1 continued momentum into Q2, and expected acceleration in the second half. We now expect contribution ex-TAC in the range of $382 million to $397 million up from our previous guidance of $375 million to $390 million representing over 10% year-over-year growth at the midpoint. Programmatic revenue is now expected at the range of $374 to $388 million up from our previous guidance of $367 million to $381 million representing 12% year-over-year growth at the midpoint. We continue to expect adjusted EBITDA in the range $122 million to $132 million representing approximately 10% year over year growth, and a 33% margin at the midpoint.

As mentioned, we are seeing continued momentum into Q2, which we believe reflects the early payoff from our investments in platform scale enterprise go to market execution, mobile in app expansion, and our strategic partnership with the Looking ahead, we expect 2026 growth be driven by increasing enterprise adoption, growing end to end platform utilization, accelerating CTVIDAA revenue, scaling mobile in app contribution, and continued data revenue momentum. We believe Nexxen TVIDAA home screen represents a significant opportunity in 2026 and beyond, given our first mover advantage and its early traction across industry leaders. We expect revenue contribution to scale over time, with the potential to represent a meaningful percentage of contribution ex-TAC in future years.

To support our growth drivers, we will continue investing in AI, data infrastructure, our CTVIDAA and mobile in app capabilities. We are encouraged by our first quarter results, and the continued trends we are seeing into Q2. What we are seeing is not just improvement. It is sustained acceleration across our core growth engine, particularly in CPV, mobile in app and data, supported by increasing enterprise adoption, deeper end to end platform utilization, and disciplined execution across our team. With momentum, clear competitive advantages, a profitable and cash generative model, and a disciplined flexible capital allocation framework, we believe we are well positioned to deliver durable growth expanding profitability, and increasing long term shareholder value.

As always, we thank our shareholders, employees and partners for their support and look forward to hosting our upcoming Investor Day on June 16. Operator, we are now ready to take questions.

Operator: Thank you. And we will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad to join the queue. If you would like to withdraw your question, simply press 1 again. If you are called upon to ask your question and are listening via loud speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Participants may ask 1 question and 1 follow-up during their turn and can simply join the queue again. After that, if they have more questions. Thank you. And your first question comes from Matt Swanson from RBC Capital Markets.

Please go ahead. Great.

Analyst (Matt Swanson): Thank you. Congratulations on such a strong start to the year. I wanted to click on the enterprise go to market success, especially kind of that idea of signing more enterprise customers year to date than all of 2025. I mean, is it the CTVIDAA differentiation, the new AI capabilities that are kind of driving these conversations or maybe a combination of both?

Ofer Druker: Hi, Matt. Thank you for the question. I will give some color on that. Our DSP basically is winning more clients now with more attention because of a situation that is placed inside our platform that include also our PMPs. So very strong connection to data. And it is helping for people to make a decision to choose this DSP as their main DSP.

Apart from that, all the tools that we created lately around AI most of them in the last 12 to 18 months were directed to DSP side and to the audience side to the data side, which is basically enabling to use the platform in a much more efficient manner with less efforts and with great results. Because also our algorithm was upgraded in the last few years So the operational when people are operating the DSP, are generating better results, but not just that. Through the AI, they are able to basically conduct it in a much more efficient manner. And to integrate data, unique data, and data into the mix and generate better results.

Apart from that is the connection, of course, to our SSP and the CTVIDAA part. Which is growing as you can see also by the report. But apart from that, we are now it is even that did not affect it yet, but it is building up all the issue of the native edge on the CTVIDAA front of the of the surface of the operating system, which will I am sure we launch late this quarter, but the effect in Q3 and Q4. Which is giving people additional and new exciting way to generate results to get engagement with users on the big screen.

So I think all of that together, meaning the algorithm of the platform, the new UI that we generated, the AI that we built on top of that. The connection to data and the connection to the CTVIDAA inventory and to the in app and other inventories media. Which are very robust. All of them together are providing us, like, a strong a strong start for the year. And I think that also getting people prepared for the new you know, 2 events that are supposed to happen in the second half of this starting even from next month, is the World Cup in soccer, And midterm election that, of course, will be heavily relying also on CTV.

And our advantages on this front is pushing the people to use our platform.

Analyst (Matt Swanson): that is super helpful. If I can kind of double click on the CTVIDAA growth just because, I mean, it is great to see that return to a positive number this quarter. The home screen product, obviously, is comping kind of off zero from a growth rate perspective. So that is beneficial What else is going well that really, like, turned around the CTVIDAA growth?

Ofer Druker: I think, again, I think that it is the growth of the full platform, meaning all the elements of the platform, which is integrating data, unique data like the ACR data in some cases. 70 different partners from data that we are basically providing in order to improve measurement and targeting assigning new publishers all the time, growing our roster of publishers, And I think that also, we are starting to see, like, the first signs of CTVIDAA performance influencing our numbers. And we are, of course, going to put more emphasis on that in the future and grow this element.

But all of that together, you are driving good results of the enterprise, on the strategic sales, which mean our sales team on the ground are able to secure more deals that are pushing also for CTV. Our trading is getting paid better on the open market All of that together is supporting the CTV. that is comes with, as I mentioned, the performance. Element that is starting to kick in, and I am sure that it will grow. And in general, we generate better results.

And that is, as you indicated rightfully, it is even before we felt the acceleration, thanks to the native ads that we believe that will start kicking in and making a big effect in second half of the year. Alright. Congratulations again. Thanks.

Sagi Niri: Thank you, Matt.

Operator: Your next question comes from Andrew Marok from Raymond James. Please go ahead.

Analyst (Andrew Marok): Hi. Thanks for taking my questions. My first is on the home screen inventory access. Think you kind of hinted at this on your prepared remarks as you are talking about expansion. Into the second half of the year. But what do you think the TAM is here for your ability to access home screen ad inventory? Is there anybody who might want to lock that behind their own operating system or own ad tech And then I have a follow-up.

Ofer Druker: Yeah. Of course. Great, Andrew. I think that term of that is huge because the number of impressions that people are exposed when they are launching their TVs is really meaningful. According to Nielsen reports and studies, there is about 10.5 minutes a day that the user is being exposed to the interface of his operating system. Before he choose a channel that he wants to basically utilize or click on and get in. So there is a lot of impressions that are a lot of opportunities to show ads to these users in a very unique environment with high engagement.

If you think just on VIDAA, there is tens of millions of TVs around the globe that we can reach out Add to that the agreements that we signed with other partners like with, like, Tivo and TCL and our ability to run on other on other, platforms soon that we will announce soon. Together with the ability that we generate that turn it into programmatic. it is not a new location. It was always there.

But the big change that we have done a few months ago, sorry, was in order to turn this into a programmatic activity that enable pop advertisers to run programmatically with all the ways that they are used in order to run a campaign, to measure, to integrate targeting, and so on. And we see very great response from the market. We announced the first partnership with The Trade Desk, which we are very happy about. A few months ago, and we hope to launch it very, very soon. And the idea is to use basically all the infrastructure or a lot of the infrastructure of the, which is very present among so many clients globally.

In order to present to them the new opportunity with all the capabilities and the also the standards and the reputation of The Trade Desk in order to start buying this inventory from us. There are more DSPs like StackAdapt, Basis, and more to come that are showing interest We are already partnered with these 2, but are more that are joining and making the right adjustment in order to be able to operate on this interface. And I am sure that in this strategy of us, to move to move this media into programmatic instead of just running it with an ad server. I think this will be a winning solution for the market.

And basically for the for the OEMs that we are working with. Now about what you mentioned about getting into their closed gardens and so on. I believe that we what we are able to generate to most of them is incremental revenues. So I do not see any real reason for them to block or to avoid using this technology in the future because they can run whatever they want with the strong sales teams and strategy, but we can, for sure, deliver for them additional revenue programmatically through the strong partnership that we build. And through our strong sales team, which is a global 1.

Analyst (Andrew Marok): Great. Thank you. I really appreciate the detail. And then maybe a follow-up for Sagi. This is a little bit of a nitpick considering how good the numbers were this quarter. But looking at the cost of revenue line, that was a little bit higher than I think I was expecting. Just if you could give us a little bit of color on that kind of cost of revenue going forward and kind of how the, mix in formats and things like that might affect it as we look to forecast the rest of the year. Thank you.

Sagi Niri: Sure, Andrew. Thanks. So I think we raised the top line guidance, of course, driven by the stronger than expected Q1 execution. And, of course, we are seeing it continued into, Q2. And, of course, as Ofer mentioned, we are expecting acceleration in the second half across core programmatic businesses. I think we maintained the adjusted EBITDA guidance range as we are continuing to invest in strategic growth initiatives. That will support long term revenue growth, platform depreciation, and market share expansion, I think, per your, like, specific question, we are continuing to invest behind, key growth areas, including, enterprise adoption, as Ofer mentioned, AI capabilities, data CTVIDAA and platform innovation.

We are not seeing, like, a specific, you know, pressure on our gross margin. it is just, as you mentioned, some of it is the mix of things. Some of it is other stuff, but I do not think we will see, like, a material or even nonmaterial change to our gross profit going forward. And I think that despite, you know, the continued investment that we are doing, we are expecting full year adjusted EBITDA margin and gross margin to remain generally consistent with previous, years, levels.

Operator: Okay. Thank you. And your next question comes from Jason Kreyer from Craig Hallum. Please go ahead.

Analyst (Jason Kreyer): Great. Thank you. I wanted to stick on the topic of the home screen expansion. Specifically adding TCL and TiVo. Is there any different scope to what you are doing there versus what you are doing with VIDAA And then what are the logical cross sell opportunities that as you land that home screen capability? Do you see other routes of monetization with these partners? Thanks.

Ofer Druker: Thank you for the question, Jason. So basically, we are looking to expand our activity on top of what we got with v because we want to get more reach in the market in every market that we are operating. So really, we approach other partners, other potential partners, OEMs in this industry in order to offer them the solution. And also, our big PR that we mentioned that we that we issued in November basically brought us a lot of interest from publishers and OEMs that wants to utilize media programmatically. And it is not different. We are working by IAB standard, so it is not that we are creating, like, different mechanism from each 1 of them.

But it is a get it is setting it is, like, taking some time to set the location, to integrate the you know, the right ads in the right place in order to generate the most of that and to be able to increase the reach for every client that is now a campaign on our platform. In general generally speaking. So I think that around that, it is-- it is a blessing that more people are coming. We are able to the reach for advertisers to get it more interesting for them.

And in the end of the day, this most of the advertisers start When they are issuing a new activity, they want to know what is the incremental. In this case, of course, joining all these OEMs to the mix is increasing the incremental for them. And making that more interesting. Regarding cross sell and stuff like that, of course, when people are buying from your media, people advertise. I am not saying everyone, but most of them likes to manage their campaigns on 1 platform that enable them to measure results apple to apples to see if they can ship budget between channels of revenues and media that they are running.

So, basically, when they will run with us on this native edge, which is super interesting for them, our engagement and so on, probably they will start running with us or increase their spend in other formats like in stream CTV, in video, in app, and so on, which is, of course, open a lot of new discussion and enhancing core discussion and partnership that we have. Which, of course, is good for us. Thank you, Jason.

Sagi Niri: Thank you.

Operator: Your next question comes from Matt Condon from Citizens. Please go ahead.

Analyst (Brianna Diaz): Great. Thank you so much for taking my question. My first just double clicking on the enterprise opportunity. You shared that each new enterprise customer has a potential to generate more than a million dollars in annual spend. Just how should we think about the ramping in the curve for these new enterprise customers that are joining the platform and how should we think about the levers that are contributing most to the ramp? And then just my second question is, video stepped down from 72% last quarter to 65% of programmatic revenue. Can you just help us understand the changes in the mix shift and what is driving that step down or just underlying strength in display?

Sagi Niri: Hey, I will take the second question. Did you ask around the decrease in our video revenue? That was the, yep, the video, mix of programmatic. Yeah. Okay. So first of all, programmatic revenue as a total went up. If you are talking specifically on video, so as we said, like, long time ago and for the last couple of years, we are very focused on, video as a format, which is the most, growing and the most engaging and on CTVIDAA and mobile as the most dominant and AI resilient devices.

I think that when you are looking on the, you know, on the on the total picture, you can see you know, maybe a momentary drop in our video percentage. I think that the absolute numbers it did not went down. But in percentage, it is because we grew different format in Q1 specifically. I think that on an all-year basis, probably it will go higher, and it will be, more close to the 70%. I think some of the Nexen home screen ecosystem is affected by that because some of the advertisers that are going over there are using, display or native display, what we are calling it. Some of them are using video in stream format as well.

I think over time, it will change from native display into in stream video. But for now, most of the advertisers are looking for this native display. So this is, like, the momentary, impact on our, video revenue.

Ofer Druker: And Matt Condon, on the other question that you asked about the $1 million we just wanted to show that the number of clients that basically joined our platform in the last few months are meaningful, meaning that they can deliver at least, like, minimum of $1 million with us. And, of course, we believe that it will grow more than 1.

They will deliver revenues to us or work with us for more than $1 million a year, but we wanted to stay some sort of a of a base so you will understand when we are talking about number of clients that are joining, it is a it is it is a meaningful 1 to deliver at least that we believe that they would deliver at least $1 million in revenue. In 12 months. The second thing, your question that you asked about is if this is the element of growth.

So we believe since our investment in Amobee in the 2022, we believe that we need to have a strong DSP and relationship with advertisers, that is why we acquired Amobee. that is why we integrated that is why in the last few in the few months, but in the last 1.5 years, we are moving more and more resources into the solution. We added some talent from the industry. We are we promoted people in our company to support this activity, and we see success. And we believe that this engine of growth for us is very meaningful already now.

But in the years to come, it will be the majority of the revenues from net revenue perspective in 2020 like, in 2 years from now and so on, it will be the massive generator for us. And we are making the right investment Also, as I mentioned around innovation and AI, innovation everything that is supporting the DSP meaning connection to unique data, connection to special media resources, so on, mainly CTV, but also in-app and so on. Which is AI resilience. In order to open up more opportunities with clients. And we see very good traction in the market right now. People are adapting our technology.

Are happy with the results, and we believe that it will just enhance and accelerate in the rest of the year. And will influence our revenues until the end of the year, but also in the years to come.

Analyst (Brianna Diaz): Great. Thank you so much.

Operator: Your next question comes from Maria Ripps from Canaccord. Please go ahead.

Analyst (Maria Ripps): Great. Thanks for taking my questions. Just wanted to ask about your momentum in mobile. So with Unity and other now sort of integrated via SDK, how live is the SDK sort of integration pipeline beyond what is been announced so far? And I guess at what point does mobile in app becomes large enough to contribute more meaningfully to consolidated revenue growth?

Ofer Druker: What is your sorry, just the last question? The last point? I did not understand.

Analyst (Maria Ripps): Yeah. it is just at what point does mobile in app becomes large enough to contribute more meaningfully to become a more meaningful contributor to your overall sort of financials?

Ofer Druker: Okay. So all these agreements, we started this in-app stuff, in-app Activity Acceleration last year when we adopted this strategy to focus on media channels that are less affected by AI. Or we call it AI resilient. Because we believe that we know that web search and all that, we never touch in the past also sales, but web we started to become drive revenues through that, and we believe that it will be more difficult. So we said, okay. We will now basically focus on CTV. We developed this native advanced activity in the end of last year. We made last year moves, the first move in mobile in app in order to be efficient and growing in that.

We feel that last year was a good start. We saw meaningful revenues coming in. And we are accelerating now with Unity and other brands that we joined, but Unity is a is a massive partner that we believe that we can grow a lot of revenue with them. And we believe in mobile in-app in general. So we feel that the relationship that we got with Unity the mutual interest, the great technologies on both sides, the great branding that we have on both sides will help us to grow the revenues to be very meaningful. In general, mobile is already massive in our revenues. it is about 40%. And it is very meaningful already.

If you look at TPV, it is close to 35%, a little bit more than 35%. So I think that on that front, we are already in a good place. And together, it is more than 75% of our revenues in general. So we believe that we are in good spot. But we believe that the 2 media channels that will grow in the years to come and even until the end of the year, but mostly in the years to come, will be a CTVIDAA and mobile in-app. And that is why we are basically now structuring this agreement with mobile app mobile in-app partners, and also, of course, with CTVIDAA OEMs.

That are helping us to grow our reach, as I explained before. It does not-- we have, like, a more efficient to offer a better solution for clients that wants to work with us and need to get an extra reach and incremental reach. To their offering.

Analyst (Maria Ripps): Got it. that is very helpful. And then, my second question is, so you are investing another $15 million in the Q3, so that brings total to $60 million So a roughly 6% equity stake. Can you maybe help us understand sort of the return framework here? Is the value here primarily in the commercial relationship and data exclusivity, or do you see a path here to a liquidity event for the equity stake itself?

Ofer Druker: I think you touched a very good point. I think both. Meaning, our commercial activity with the VIDAA-Hisense is growing year over year. We believe that in the next 24 months, it is the year that we will see the fruits of the hard work that we have done in the last few years in order to build it. To build this relationship, and to nourish them, and to build technologies that can really serve both sides in the equation. On a separate path, VIDAA is their own agenda, which is a very interesting company. They are 1 of the most growing OEM to distributed TVs in the market. And, like, No. 2 or No.

3 in the market depends whether you are measuring and looking at, but it is very impressive. There is no doubt that CTVIDAA is an major force and super important platform in this market And when we are looking at VIDAA, and on every initiative that they choose to take, and to build, we believe in their management, in their support that they are getting from Hisense. In order to take it to the next level. And their ambitions are to, of course, to turn this company to be a leading 1 in the market, and we believe in this statement and this opportunity. Which will increase the value of the company.

And will generate for us also equity value which will grow to be bigger than the investment that we made.

Analyst (Maria Ripps): Got it. that is very helpful. Thank you.

Operator: Thank you. And your next question comes from Barton Crockett from Rosenblatt. Please go ahead.

Analyst (Barton Crockett): Okay. Thanks for taking the question. I was curious about the seeming kind of disconnect between the first quarter contribution ex-TAC growth of 13% the commentary around acceleration in April and May and more to come with the FIFA World Cup in June and political in the fall. And yet the guidance would call for deceleration for the year to 10%. Contribution ex TAC growth. So is, you know, is that conservatism, or, you know, is there some other explanation for why the guidance does not match the discussion of acceleration?

Ofer Druker: Thank you, Barton. it is a great question. it is helping us also to explain. Basically, in this case, when you look at the also the results of the other companies, you do not see impressive growth in most of the other companies. And, of course, there is a lot of risk factor in the market still there, no change. And we prefer to be conservative. So we increased the guidance in a number that we feel that is the right 1 for this for this period of time. We will keep watching our performance, which, as we said in Q2, we still feel strong momentum and above expectation, which is good for us.

And when the time will come and we will assess if we can increase further increase the guidance that we are giving. But in this case, when we are looking around at the market and there is a lot of lot of elements around that are basically making it easier for us to be conservative when you look at them because we do not want to overpromise in this case. But we see that we are delivering well, We see in Q1, we feel that the momentum continue in Q2. And we can always keep increasing the guidance as the time pass and we get more confidence that the market is stable and going to the right direction.

And what you mentioned is super true. The market shows that there is opportunities to grow further. Through the FIFA World Cup games, which increase commercial activity and the midterm election that is supposed to do that also. So we are optimistic, but on the same time, we are careful and we want to do step by step.

Analyst (Barton Crockett): Okay. Thank you for that. And then 1 other topic I am curious about. You would mentioned that your supporting Agen.T, and you have got some MCP capability Curious if you would see the future evolving to a world where agencies and marketers will be running access to many kind of marketing platforms through some type of orchestration layer within an LLM or chatbot like Claude. And if so, if everything's going to be going through Claude to orchestrate access to multiple different advertising kind of venues. Does that mean anything for take rates customer relationships, go to market? You know, your thoughts about how that evolves.

Ofer Druker: Again, thank you for the good question. I think that the agentic we are dipping into that. We are working very closely with all the that is happening in the market around this technology that can basically assist companies like us. We are adopting MCP and the in order to be able to utilize better our capabilities and to integrate Agen.T elements into our technology. I believe that Agen.T connection between companies will grow. I am not sure that it is a I think that it will accelerate things. I am not sure it will replace people that are salespeople because at the end of the day, need people to create a relationship in this stage.

And then a lot of this industry is still pending on relationship and good employees and talent in your company. That will give the intuition the direction, the thought leadership, around these things in order to generate better results. But for sure, it will make things faster, It will make things much more efficient. And it will it can it can grow a partnership based on technology connection and not just a handshake like it used to be maybe a few years ago. So I believe that AI is, integrated is, like, challenging us all the time. And creating new fronts for us, which is a good thing.

We feel that we are in the right position because I just want to remind you the forum that we are end to end solution. So when you are end to end solution, the number of data points to the AI is very big. it is high, and you can influence the journey of the campaign in so many points, which is very helpful. The second thing is that our emphasis on data is helping us to feed the AI with more information in order to get the right decisions.

The way that we choose to implement the AI is innovative, it is more transparent, it is more friendly to the users, it is used-- it is like communicating with the people, not trying it is not a black box that basically is being integrated. So we are getting a lot of great response from our clients to this approach and to this technology that we built, and we feel that we are on the right path to that.

I think that in the near future, there is more and more companies that are talking to us about integration, that are talking to us about how to integrate basically these capabilities and I am sure that in the near future, which is a couple of months here, we are not talking about years, we will see more usage of adjunctive solution in the industry of advertisers, and we will be 1 of the leaders on that. On that front.

Analyst (Barton Crockett): Okay. Thank you.

Operator: Your next question comes from Tyler DiMateo from BTIG. Please go ahead.

Analyst (Tyler DeMatteo): Great. Thanks for taking the question. Ofer, I wanted to follow-up on Barton's comments there because that is where I was going to go. How much of the conservatism in the guide is predicated on overall macro and kind of some of those comments around the industry versus something more idiosyncratic in nature versus product adoption rates for the home screen, for example, how much of the conservatism is split between the 2?

Ofer Druker: Hello. You are balancing-- you need to assess every morning where your you wake up, what is going on in the market, But in general, we believe that everything that we control, we can of course manage, like processes, adoption mostly, issuing of new products and so on. But in general, I think that there is a you usually need to look at the market in a more careful manner. Like I said, I think that we raised the consensus We are we are in good momentum. We want to keep the some sort of conservativity around the decisions that we are making because when we are looking at things, not in everything, we control 100% of the effort.

When we are talking about partnership, you need 2 for tango, When you are looking at the economy, of course, we are not controlling the ecosystem. So I think that it is a mix of both in general.

Sagi Niri: Yeah. And just to add to Ofer, you know, if you could promise us that macro will stay the same as it was up to date, We may increase the guidance more, but I think the current guidance is reflecting a prudent approach given the broader macroeconomic and advertising market environment?

Analyst (Tyler DeMatteo): Okay. Great. And then a follow-up for Sagi. On the EBITDA and the operating expense contribution to the business, if you had to prioritize kind of where the investment dollars are going, is it more about sales and marketing and the go to market and customer acquisition? Is it more about kind of tech and development and AI investments? So can you kind of help us kind of frame up like where the dollars are going in terms of the reaffirmation of the EBITDA guide?

Sagi Niri: Yeah. Sure. So I think that, you know, we will continue to invest, in our key growth areas as also mentioned. So if you are asking me, it is a good question. I think that most of our dollars are going into investment in AI capabilities, data and platform innovation. Because this is, like it is not the bottleneck, but this is where we are seeing after we are deploying a new feature or a new capability. We are seeing, like, you know, greater utilization of existing clients over our platform and ecosystem. And, of course, generating more revenue and more cash for us.

The second thing is that when everything is going so good, and you are seeing the engagement and you are engaging new clients as well, because I have to tell you, I was in couple of our Agen.T AI presentation to different partners. And I did not really and they do not owe us anything because some of them are existing clients, and some of them were new. Everyone said that we have the most robust and the most advanced capabilities around the GenAI that they saw. So I think most of the money, if I need like, 80-20 is going to innovation. Product, development.

And, of course, in order to follow that, and in order to fulfill all the great and adoption of our platform, we need to invest more in sales and marketing. So I think we are investing in both, but most of the of the resources and most of the effort is going to product technology and capabilities.

Analyst (Tyler DeMatteo): Great. Thanks, guys. Really appreciate the time.

Ofer Druker: Thank you. I just want to use the last, I do not know, 1 to 2 minutes that you are you are I have your attention in order to close this session. By saying that we see the results from our strategic decisions. That we did. Great execution, drive improved results, We strongly support our strategy around our adoption and strongly promoting our DSP to focus on the AI resilient media channels of the CTVIDAA native and the in app mobile and to keep pushing and integrating and innovate around AI, which we strongly believe in, and we believe that will bring us a lot of value because of the points that I mentioned.

And I want to thank all our teams around the globe for their hard work, for their commitment, and for the great achievement that they generated in the past few months. So thank you very much, everyone.

Operator: Ladies and gentlemen, thank you all for joining, and that concludes today's conference call. All participants may now disconnect. Thank you. Thank you.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.