Nexxen International Ltd. Ordinary Shares Rosenblatt's 6th Annual Technology Summit: The Age of AI (Part II)
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Okay. Good morning, everybody. Thanks for joining us at our fireside chat session now with Nexxen. I am Barton Crockett, Internet Media Analyst with Rosenblatt. I am joined by Sagi Niri, Chief Financial Officer of Nexxen, and Karim Rayes, who is the Chief Product Officer. Nexxen is an over $600 million market cap company in the ad tech space that we cover with a buy rating, arguing that the proxy for revenue growth, which is contribution ex-TAC, is growing in the low double-digit range, with margin expansion driving adjusted EBITDA growth faster than that, and that that is not fairly reflected in an EV to adjusted EBITDA multiple near 5x on a US GAAP adjusted basis that we look at. We think it should be re-rated higher. Our $16 price target is up over 50%, assumes kind of a 9 times multiple.
But the ad tech space is a complicated space with a lot of different kind of puts and takes, so we are really happy to have Sagi and Karim here to kind of talk us through the space and talk us through Nexxen's place in it. So maybe we will start with that. Sagi, Karim, one of you or both of you, give me a sense of what differentiates Nexxen. Why do clients use it? What is your place in the market?
Sure. I can take that. First and foremost, we are a fully integrated platform, a unified end-to-end programmatic platform. So we operate a demand-side platform, a supply-side platform, a data platform, all powered by AI. So these platforms sit on differentiated proprietary data, exclusive media assets and technologies, particularly around CTV that we have built out. So we have full funnel capabilities spanning from audience discovery to planning, to activation, optimization, monetization. So we are really a one-stop shop for customers. So this ability to do all of these things and integrate these solutions together help us drive value for customers, minimize their fees and cost, and ultimately drive return on investment. Increasingly, over the last couple of years, we have invested heavily in AI.
So we have streamlined these workflow and connected these platform leveraging our AI solutions called nexAI as well that we believe will be a strong growth driver for us in the future.
Okay. To drill into that a little bit, as I understand, Nexxen combined the functionality of a DSP with an SSP, which is relatively unique, I think, in this space. Most people will call themselves one or the other, but not both. But there is this kind of crossover happening, which is the DSPs are kind of moving deeper into the SSP space saying, "Hey, you don't need to pay an SSP. You can work directly through us." The SSPs are doing kind of a similar thing from their side of the universe. You guys offer both. But unlike the other kind of single sources, I think you'll charge a take rate for both sides, versus the other suggesting that one of their efficiency can be to eliminate the take rates of the other side of it. How do you stay competitive?
Do take rates really matter, or is it ultimately the spend driven by return on ad spend?
Ultimately, it's really about return on ad spend and the outcomes you're driving for the advertisers, but take rates are part of that calculation as well, right?
It comes down to the optimization you'll do, the performance you're driving and, ultimately, what is the cost of media. But when you look at the capabilities as a whole, it's more than just supply and demand. Bringing in planning, measurement, data activation, data insights, et cetera, into one platform. We're consolidating many fees that are happening across the ad tech ecosystem into one solution. On take rates in general as well, we have fees on both sides, but it really depends on how customers are transacting. The reason we do that is because we also trade with third-party DSPs, and our DSP also trades with third-party SSPs, so we need to be able to charge fees when it comes to that.
When customers are buying end-to-end on our platform, we are unifying those fees and bringing in savings to those customers, so we're highly competitive there when it comes to that as well. Really, it's a combination of the tools and technology we've built driving strong return on investment and very efficient fees that make us extremely competitive in market, and the results speak for themselves. We just, in our last earning, talked about Toyota that saw a 62% reduction in cost per vehicle sold through our advertising solutions, and we have many of these examples. Ultimately, that's why customers are joining our platform.
Okay. Can you drill down a little bit deeper and explain why is it that having both a DSP and an SSP in one entity would make a difference? How is it that you're able to deliver some of these better returns like you cited with Toyota?
It starts with being able to manage the entire transactions. We have very strong signals across the transaction. We understand the media that's being bought. We have the data around that. We understand the outcomes the buyers are looking to drive, and we're able to unify all of that data into a single solution to drive those outcomes. So, strength of signal, strength of efficiency as well. When you're combining everything in one technology, we're able to combine our OPEX against that as well and bring those savings back to both publishers and advertisers. Ultimately, publishers are seeing unique demand from us, and lower fees when that demand's coming from our platform. Same for the advertisers on the other side, seeing direct access to publishers at a lower cost. Again, all that tied to the optimization we do on top.
What we're seeing in the market today, let's say for us, we see it as a validation of our strategy that we've put together over five years ago now, in terms of bringing these technologies together. I think the market is trying to catch up to that and build the technologies on the other side today. We already have it, so that gives us a leg up in the market and the ability to go quickly. Again, we're seeing this in our results. Advertisers want access to unique data. They want premium direct media. We're able to offer that to them today with a full suite of technology that an SSP offers, whereas DSPs are building that technology today, they're playing catch up there. You could say the same on the supply side as supply partners, supply platforms are looking to build buy-side technology.
I would say that technology today is rudimentary compared to a full stack DSP and what that's able to do. Really having the strength, technology on both sides is a huge differentiator for us.
Okay. We are certainly dealing with a market that is digesting what it means to live in an age of artificial intelligence, right? There's so much investment, so much change. I think ad tech has been, the sector generally has been subject to a lot of questions around this. One of the questions is: What is really, at the end of the day, drive durable value for ad tech entities? I think one of the theses out there is value will accrue to those with exclusive, meaningful data. I wanted you to talk a little bit about what do you think about that kind of thesis, and what does Nexxen do in that regard?
Before you go into the answer, I did want to also say one thing to the audience, which is, if people want to put some questions in, there is a Q&A kind of function in your webcast kind of interface. If you put something in, I'll see it pop up on my screen, and I can try and work it into the conversation. Yeah, what do you think about the idea of exclusive data, and that being important in the age of AI and Nexxen's positioning in that regard?
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