Tremor reports weaker first quarter as advertisers hesitate

Advertising technology specialist Tremor International reported a first quarter contribution excluding traffic acquisition costs (contribution ex-TAC) of $66.9m on Tuesday, down 6% year-on-year.

The AIM-traded company put the decline down to the challenges faced by advertisers given the current macroeconomic conditions, particularly in January and February.

Additionally, its non-core business, focused on performance activities, experienced a negative impact from the weakened financial technology sector during the first quarter, as expected.

However, programmatic revenue increased to $62.5m in the three months ended 31 March, representing growth of 6% compared to $59.1m in the first quarter of 2022.

In terms of market share, Tremor said it continued to expand its presence in the CTV space, reporting CTV revenue of $21.3m - a significant increase from $15.8m a year earlier, marking a first quarter record and reflecting 34% year-on-year growth.

Adjusted EBITDA for the quarter totalled $8.9m, sliding from $38.7m year-on-year, which was primarily blamed on the weak advertising environment and the ongoing integration of Amobee.

However, Tremor said it expected an increase in contribution ex-TAC in the second quarter and the second half, driving corresponding growth in adjusted EBITDA.

The company's strong cost controls were expected to ensure that the majority of the additional contribution ex-TAC would flow through to adjusted EBITDA.

Tremor said its adjusted EBITDA margin in the first quarter stood at 12% on a revenue basis and 13% on a contribution ex-TAC basis.

That was a decrease from last year, when its adjusted EBITDA margin was 48% on a revenue basis and 54% on a contribution ex-TAC basis.

The board said it expected its adjusted EBITDA margins to improve throughout the rest of 2023.

It also faced a net loss margin of 25% on a revenue basis and 41% on a gross profit basis in the period, in contrast to a net income margin of 14% on a revenue basis and 19% on a gross profit basis in the first quarter of 2022.

CTV revenue accounted for 34% of programmatic revenue in the three months, up from 27% a year ago.

Additionally, programmatic revenue expanded to 87% of total revenue, from 73% year-on-year.

Video revenue continued to be the primary component of Tremor’s programmatic revenue, constituting about 75% in the quarter.

As the integration of Amobee progressed, the firm said it was aiming to cross-sell its video capabilities to Amobee customers and attract new customers, thus increasing video revenue as a percentage of programmatic revenue later in the year.

As at 31 March, Tremor International held net cash of $89.1m, including cash and cash equivalents of $190.5m, offset by $100m in long-term debt and $1.4m of capital leases, specifically server leases.

Additionally, the company had $80m undrawn on its revolving credit facility, ensuring ample liquidity for ongoing business requirements, as well as potential future strategic investments and initiatives.

“During the first quarter we achieved significant progress executing on our strategic vision to combine Tremor International and Amobee into a horizontally integrated CTV- and video-focused technology platform fueled by unique and exclusive data, for the benefit of customers on both sides of the ecosystem,” said chief executive officer Ofer Druker.

“The heaviest-lifting in the integration process has already been completed as we've enhanced and scaled our unified sales team through platform and process combination, as well as advanced training, made solid progress combining our DSPs, and launched our cross-platform planning technology, the combination of which we believe enhances our CTV growth opportunity as advertisers and broadcasters increasingly expand into CTV.”

“Our vision is becoming a reality as we expect to largely complete the technology integration of Amobee by the end of the first half of 2023, further positioning the company for accelerated CTV market share gains, contribution ex-TAC growth, and enhanced profitability for the remainder of 2023.”

Druker said that confidence was underpinned by recent improvements in advertising conditions, which Tremor expected to continue during the second half of 2023, and the expectation to generate revenue from its VIDAA investment later in the year.

“We are pleased to reiterate our full year 2023 contribution ex-TAC and adjusted EBITDA guidance and believe we are poised to capitalise on ongoing industry trends with enhanced scale to further our leadership position in programmatic CTV advertising.”

At 1557 BST, shares in Tremor International were up 4.5% at 270.24p.

Reporting by Josh White for Sharecast.com.