Nexxen International Ltd. (NEXN) Earnings Call Transcript & Summary

All right. Kicking off. I'm JamesMichael Sherman-Lewis. I'm on the Internet team here at Citi. Joining us is Sagi Niri, Chief Financial Officer of Nexxen. Thank you so much for being here today. Let's sit right in. Nexxen in a spent several years integrating assets and building this unified platform with both an SSP and a DSP. As we talked about at your Analyst Day, momentum has really picked up. Nexxen is raised full year guidance 3x. Why is the market more receptive now to our unified kind of end-to-end model versus several years ago? And how does consolidating demand, supply data help Nexxen capture more value and lower customer costs. Loading question, but I wanted to really get started off right. .

Sure. No problem. Thanks for having me. I think that, as you said, in the last couple of years, we integrated and consolidated different companies. So we acknowledge like back in 2019 even that going end-to-end probably is making the more sense economically and for the clients and our partners. . I know that there are still some companies that are one-sided and saying that they will not go dual side it because of transparency and conflict of interest and other than that. Having said that, we are going in that direction. I think that it took us a while in order to put everything in place, some sunset of the asset, putting everything on the same infrastructure. and refine our offering in order for the market to acknowledge and understand exactly what we are offering and what we are doing. I think that it's making sense because at the end of the day, if you are controlling the full funnel, you are really controlling everything you are doing for both of your partners, i.e., the publishers, the broadcasters, the apps, or the clients, which can be agencies, DSPs, direct clients and others. I think sitting on 1 infrastructure and having a full functional DSP and a full function and in the middle, controlling the DMP, which is being leveraged by first-party data of the demand-side partners, and first party data coming from the supply side partners and our own exclusive ACR data and over 70 different data publisher that are connected into our own DMP is making the efficiency and the life of all of our partners, much easier. So instead of getting like an activation partner, which is only a DSP and utilize only that with us, we are getting a technology partner, which is answering all the full funnel of their ask. So we are doing discovery. We are doing planning, we are doing activation. We are doing optimization, we are doing measurements without the technology stack and the end-to-end abilities, we couldn't do that. And this is the reason I think that now enterprise clients are moving towards us much more because they acknowledge that they need a technology partner and not only an activation partner. They understand the level of efficiency we are getting from working on our end-to-end platform. And I'll give you a good example. For example, Toyota like onboarded our platform in early 2025. At the beginning, we were only using our DSP. And they did well, they were happy from the performance from the matrix has they got and from the measurements that we had. But after that, I think it was Q3 2025. We managed to make them understood that they should utilize more than the DSP itself, we should utilize our data and our SSP and our premium inventory and exclusive inventory. They did that and what happened in the 12 months after they lowered their cost per vehicle by 62%. So we're paying only 38% right now in order to get the same result they got before. And their return on advertising spend went up by more than 2.5x. So this is like an example of showing you why utilizing everything on the same infrastructure is giving you a lot of advantages when you are utilizing that. So I think this is where the market is. This is what now enterprise clients are acknowledging and probably there will be a question on AI. So I will make sure you understand why AI now is much doing all of that much bigger and much streamlined.

So that was a good example. First of all, so many things to touch on there. So Too was a great example of kind of the enterprise focus, which is now your primary go-to-market motion. Your enterprise spending grew 25%, advertisers activated to enterprise customers now over 750, right? As the DST has historically been Nexxen's entry point, into these new kind of enterprise relationships. How is that go-to-market motion evolved to win these larger agencies and brands? And how do you move customers up the value chain from DST onboarding to becoming just a more core technology partner?

Okay. That's a good one as well. So I think at the beginning, when we are pitching on the demand side to our enterprise client or independent agencies or whoever direct clients as well, we understand that the DSP is the entry point into our full ecosystem. And this is what we are looking for. At the end when they are looking for something -- they understand that they need someone to activate their campaigns and bring them the desirable action and to get to the audience that we are looking for. Having said that, we are onboarding and the flow is like we are teaching and they are onboarded into the system. It's taking around between 3 to 6 to 9 months in order to expand, get the right confidence, understand how the ecosystem is working. After we are acknowledging that there is no reason why not do everything through the same entry point. So it's very easy without doing anything now to buy inventory over Nexxen SSP. It's very easy without doing anything to utilize exclusive data and a lot of data discovery and data audience through our DMP. So it only makes sense that -- when they are onboarded, they are utilizing a very small portion of our abilities. Over time, when we're getting the confidence and we are seeing the matrix and the KPIs that are being met, they are moving up the ladder in order to get like the full functionality of the ecosystem. And then they are acknowledging that the efficiency that we are getting in the Toyota example, is much higher than they can get only utilizing part of the ecosystem.

On that kind of end-to-end expansion, your long-term target there in terms of makes us 65% as everyone knows. -- as you continue to add more capabilities and improve the economics for these customers that have 35% better performance with end-to-end relationships. How do you think about customers consolidating increasingly more activity on your platform and gaining share relative to peers?

I think that within the question, you have the answer. First of all, you just mentioned that most of our clients are transparent with us. There is no almost 1 client that is utilizing only 1 DSP. Most of them are using at least 2 in order to benchmark and to understand what DSP is performing better, and that's fine. . And when we are finding that, of course, we are allocating more spend towards the winning DSP or the winning platform. I think that, as you mentioned, An average of our clients are doing better 35% on performance when we are utilizing our ecosystem. That means either they can take 35% less or buy less media or they can get much more with the same budget that we are spending somewhere else. So I think the answer is there. When people are acknowledging that and they understand that the efficiency and the key performance and the metric that we are looking for is much more positive on our platform. We are allocating more and more towards our platform. I think that we are seeing a shift in the move from managed campaigns that were the majority, I don't know, 10 years ago, of course, to now enterprise or what we are calling self-serve clients. And we have, in the middle even another layer, which we are calling hybrid clients because the movement from managed into self-serve is not easy for anyone. So we are offering a level of service that is higher than the self-serve, but as transparent as the seller -- and for that, they are paying somewhere between managed to self-serve activation. And I think this is -- and we are seeing a lot of movement from managed clients into this hybrid model. And from the hybrid model model, it's much easier for them to go to the self-serve or to the enterprise solution.

Makes sense. Let's switch gears a little bit, talk about CTV One of Nexon's largest growth engines, I think you grew 33% this past quarter despite minimal contribution so far from smart home TV screen. What's driving your CTV momentum today? Are you seeing a shift from, call it, the reach-based buying towards more programmatic measurable performance?

Yes. So we had an investor meeting before that fireside chat, and it was asked -- we had like almost the same question. So I think that at the end of the day, we were like the -- I don't want to say the first one, but 1 of the first 1 to make a foray into the CTV industry or phenomena. I think that after the pandemic or within the pandemic, it got like huge kick and boost into that. People were sitting home consuming content through CTVs all the time. And I think that what is driving now the meaningful growth, as you said, 33% Q2 2026 versus Q2 2025 and already 40% of our net revenues are coming from CTV campaigns is, first of all, the enterprise growth. So a lot of clients that are coming into the enterprise solution are utilizing our capabilities. So we have like endless touch points within that. We are not missing anyone. We just brought into the system, I think Universal, Disney and very soon Netflix. So we are all done. We are not missing any major or even nonmajor streaming service. On top of that, I think that we have depreciated very much because we have an exclusive ACR data with Vida, and this is another very important point. So -- we are already invested in Vida around $60 million, which reflects almost 6% of their outstanding shares. It's giving us on top of course of the partnership and being a shareholder -- it's allowing us to enjoy ACR worldwide. VIDA, which is a company -- an affiliate company of iSense is spread at around 50 million screens worldwide. So we are touching like 50 million different users, and this is tons of data in order to facilitate. ACR is very important in order to target within the CTV industry because it's like -- it's like a mirror or a glass that you are looking into the TV and know exactly what the people that are watching the TV are consuming even if it's content or commercial. So for example, if someone is utilizing now Netflix, Netflix is aware what is watching when he's in Netflix. But the minute is shifting to Amazon Prime or to Disney or to paramount. They don't have a clue where exactly is -- because we are owning this ACR data within the TV, we are like totally transparent and totally clear around what these people is consuming. Even if he is going on is Xbox or PlayStation 5, we know exactly what gaming is playing. So it's like endless really. You are looking into the TV and seeing everything. This is very important. The second part is that we have in North American inventory exclusivity on Vida inventory. We have it only in North America, and it's giving us another layer of exclusivity and differentiator through other peers. And I think that the most important part is what we are talking now where we just launched at the beginning of 2026. And now we are evolving that. It's what we are calling on screen. So when you are opening a CTV -- you are seeing an own screen. And with the on screen, you are seeing all the different apps, Netflix, prime video, Power One, whatever you want to see. So servers are saying that people are around 10.5 minutes a day in the home screen. I can tell you from my own experience, I'm probably over there much more because you don't know exactly what you want to see. You are moving between apps. You are not sure. Everyone is saying go to Netflix -- at that 10.5 minutes a day, there's a premium inventory that has not been utilized until today and why it wasn't utilized because every OEM and every TV set has different standards. And because it has different standards, it was only consumed or transacted manually. So a lot of salespeople went and try to sell it to Coca-Cola or McDonald's weather, but it's not something that can grow and can scale. Because we are an end-to-end solution and have the end-to-end stack and have the DSP and the SSP, we made their own studetization within that. And we are now allowing every partner that can be a third-party DSP, a direct client and agency to transact it programmatically on this on screen. And this is like an opportunity which is -- can be medium can be large, can be extra X or extra large, until now and within our Q2 earnings, it didn't materialize to a lot of money. So we are seeing it coming strongly in Q3 and after that in Q4 and onwards into 2027. This is a huge opportunity that from 1 side, we are seeing the traction from the advertisers. So to this 1 screen, let's call arena, we have already onboarded from the demand side, the Trade Desk and stack adapt and soon Amazon and others and basis. And from the supply side, we have already, of course, iSense and Toshiba and Vida. On top of that, we have TCL and TiVo and hopefully soon LG. So for everyone, it's like incremental either revenue for the demand partners or revenue for the supply partners. No reason for them not to come into our. We are the first in market to allow that or to service that. And we hope that it will do a lot of money going forward.

So integrating all these partnerships, layering on the ACR VA data, that's the key unlock. On the specific ramp, I think you talked about it contributing more meaningfully in Q4 and then obviously 2 -- how do you think about the milestones for ramping not just financial contribution, but call it, advertiser count and budgets from there?

I have to tell you the truth because it's supposed suppose it will transact programmatically. The minute we have stacked the Trade Desk, Amazon, let's say, another, I don't know, DFI360, which hopefully will come soon to the system as well. We don't need a lot of other partners in order to transact and to utilize it, the vast majority of this inventory will be utilized because these are the big players, which is buying -- which are buying in tens or hundreds or billions of dollars. So -- and from the other side, I think that having like the OEMs connected, Vida, Toshiba, TCA, Ultivo, hopefully soon LG. We are not missing a lot of the inventory out there. So in my eyes, commercially-wise, we are already in a good place because it's really active only for a couple of months. It's taking time. And by the way, now you can show only a native banner. Very soon, we are deploying an opportunity to show a video over there within the manner, which will make it much easier and probably much more demandable. So I think we are already there, and hopefully, very soon, it will do a lot of money.

Makes sense. Parallel to this home screen opportunity is mobile. Mobile advertisers increasingly using CTV to drive downloads and other, call it, more measurable outcomes. How is your presence across mobile in-app and CTV position you to capture more of that cross channel spend?

That's a good one. So I think AI is changing the industry, okay? And people understand now, I don't know, like around 60% of people are going into sites not by clicking a Google search. So we're changing a lot. I think that the 2 most resilence devices or media channels, that are less affected by IR or CTV and mobile in up. This is where people are now consuming their content, over being and asking an LLM something. So -- we acknowledge that, again, I don't know, like 2 years ago, in 2025, we went dramatically and signed a lot of partnership with in-app mobile SDK networks in order to have the right inventory. The biggest 1 is Unity, but we have a lot of other partnership with a lot of other SDK networks. And I will say another thing here, probably the question will come later, but we understand that you need to control the SDK itself. The partnership itself is not enough. It's good but not good enough. So on the M&A side, we understand that we need and want to buy our own SDK network and to own like a NexxanSDK. So that's on a different side. because now we are -- our revenue is coming, 40% is generated through CTV and 40% is generated through mobile, like 80% is already there. I think that the cross-sell between the mobile and the CTV is very important. So because the CTV is connected to the home network into the home WiFi, we understand exactly when we are seeing the WiFi network, what other devices are connected in the same household. So we know this is the CTV of this person, and probably this is his mobile. And when we can, what we are calling gross retargeting from CTV to mobile and from mobile to CTV. So let's take the, I don't know, a McDonald's example. So you're seeing, I don't know, the new Big Mac or something on the TV. 10 seconds after. I'm showing you the same ad with a QR code on your mobile app. And click or do it or can or whatever you do in order to order a big Max. So I think gross targeting is very, very strong. It's making the engagement much, much scale and much higher. And of course, it's affecting the performance and the efficiency and the return on investment for the advertisers and for the publishers. So I think because 80% of our revenue is already in the mix. It's giving us a lot of advantage in order to find the right users to build the right audience and to attract the right end user.

Let's talk about the future of kind of a genetic transactions. One of your kind of more important product catalysts. You've got 6 agents already live, additional agents in development. You've got the DSP UI, next ADSP assistance, what next AI capabilities are you seeing the strongest customer adoption today? And what could you most excited about the product roadmap here?

That's a good one. I think at the end of the day, for us is a huge enablement on our system. So it's helping us to onboard clients much faster. It's like lowering around 50% the time that we are onboarding and activating an enterprise client, which is amazing because we can run in a double speed, and this is the reason we went from 400 like using our services clients within our enterprise to more than 800 only in H1 and probably to grow to 1,600 by the end of the year. I think this is the main catalyst for that. In addition, I think that at the end of the day, AI is strong as the data that is sitting on -- and this is the different within our ecosystem, again, from our peers. So if you are only a DSP or NSP, you are enjoying only 1 side of the data. When you are sitting on the full funnel and the full value chain, you can enjoy both. And then they can make the right decision all along the funnel. So from onboarding, to planning, to activation, to optimization, to discovery and to measurement. So our AI is different to our peers because it's giving you like the full fun. And as you said, we have like 6 active agents already running all the time on the funnel. Very soon, I think it's like now 7, if I'm not mistaken, but very soon, it will be 10. And -- it's really like -- it's the future. Amazingly, AI agent can connect to a different AI agent. So AI agent of the client, which is utilizing Claude or ChatGPT or whatever. -- can utilize our AI agent through an MCP. So you just need to put our MCP code into your AI agent. You are logging in, getting the credential from Nexxen AI infrastructure and you are transacting by not using any person. So first of all, for our customer, it's very -- it's amazing. They can utilize the system. We've out increased their staffing crazy and the level of efficiency we will get through our AI-Agentic solution, much, much, much higher than we will get from a one-sided peer.

Makes sense. On that subject, I mean, planning and reporting agents are becoming more widely available across ad tech. -- how does your ownership of the end-to-end DSD SSP, DMP, enable -- next AI to deliver outcomes that may be a stand-alone agenetic layer could not.