Nexxen International Ltd (TRMR) 2020 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Tremor International Investor presentation. (Operator Instructions) The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. These will be available via your Investor Meet company platform. I'd also like to remind you that this presentation is being recorded.

Before we begin, I would like to submit the following poll. And I'd now like to hand over to Ofer Druker, CEO; Sagi Niri, CFO; and Yaniv Carmi, COO of Tremor International. Good afternoon to you all.

Good afternoon, everyone.

Good afternoon.

Hi there.

So good afternoon to everyone there in London. We will present today our company. We just announced yesterday the H1 results and Q3 updates, so it's -- I think it makes sense also to open a few pages and tell you a little bit about our company.

So our company is dealing with online advertising in the video business. We are basically a combination of 3 companies that we acquired in the last 3 years. The first company that we acquired was Tremor Video that brought us the demand side, meaning the bidder that we are using, the audiences' data that we are using in order to target audiences that we want to reach for our advertisers, our clients.

Then in April 2019, we acquired RhythmOne, that was also a traded company in London. We acquired the company for their media assets and their CTV specialties.

And in the beginning of this year, in January, we acquired Unruly, that was all -- that was held by News Corp. And basically, Unruly is adding to us a lot of relationship with advertisers and publishers, including a strong -- very strong brand in the advertising business, in the publisher business, and of course, strong relationship with News Corp that we -- as part of the deal, we got exclusivity on all their in-article media.

Well, basically in the last 3 years, we could emphasize on 3 elements that we will present why they are the most important. It's video advertising, which is the most engaging formats today on advertising; data audiences because today, advertisers are not trying to run across the board, they're trying to reach the audience that are really matter to them, so we are enabling them to do that through our data audiences platforms and through our agreements that we got with data providers; and media and CTV, meaning we have a full end stack -- end-to-end stack, technology stack that we also include the media side. And on that matter, we have a strong knowledge base and experience around CTV that's becoming a very important element in today's world. A lot of that is because of COVID, that people basically are staying at home and using this platform.

Something happened to the presentation. Okay. Sagi, I'm handing it over to you to talk about the performance of the company in the third quarter and in the first half.

Thank you, Ofer. So as Ofer stated, we have a strong performance in Q3, demonstrating the recovery and the fast integration we did with Unruly. Of course, restriction relating COVID-19 impacted our company as well in H1, particularly in Q2. Tremor's performance in Q3, of course, demonstrate strong recovery and reinforced strategy -- we are about to have, in Q3, a revenue of around $100 million. Core growth engine, that's evidencing our solid growth, our Connected TV, and we are going to touch all these KPIs, self-serve and private marketplace.

And as you can see on the right side of the slide, most of our revenue is coming from branding. A little bit is coming still from performance on Q2. Performance went a little bit up because branding went down in Q3, the trend that we had before continued and performance are around 8% of our revenues.

So H1 2020 highlights. So revenues were around $136.5 million compared to $145 million in 2019. We did some reduction mitigation activities due to the COVID situation. Gross profit is $45.8 million compared to $58.4 million in 2019. Gross margin went a little bit down to 33.6% and compared to 40% in 2019. And we'll touch the shift in our revenue streams later.

Positive adjusted EBITDA of $1.8 million compared to $21 million in H1 2019. Net cash inflow of operating activity is $7.2 million that we had in H1, mainly thanks to the collection of the AR balances from Q4 2019; and net cash as of 30th of June 2019 of $78 million.

Operational highlights. As previously stated, COVID-19 impacted our H1 result. Of course, we did some mitigate measures, taking into consideration we cut cost of $23 million in 2020 on a yearly basis compared to our budgeted cost structure. Some of it, around 50% are going to continue with us into 2021 and forward. And some of that was onetime only for this year, again, due to the COVID situation.

Strategy is focusing on CTV, self-serves and PMP. Yaniv is going to touch that later. Integration of Unruly completed ahead of schedule, with synergies being delivered in H2 2020 and we'll touch that as well. And now we have a combined offering that includes over 3,000 direct premium publisher partnerships, and we are delivering significant strategic relationship with some of the world's biggest advertisers and brands and we'll touch that in the coming slides.

Here you can see one of the major trends Tremor is benefiting from, so traditional TV budget shifting into digital video. So as you can see, 82% growth in U.S. digital video ad spend from 2018 to 2022. I think COVID even made that trend expedite; 2.5% decline in U.S. TV ad spend from 2018 to 2022.

Going to the next slide, Slide #7, you can see that CTV is booming. U.S. OTT ad spend is going from $1.8 billion in '17 to $5 billion in 2020. You see that number of CTV viewers in the U.S.A. is decreasing on a yearly basis, going from 150 million in 2016 to more than 200 million in 2021. And you can see that the break -- that the breakeven point where pay TV went down and CTV went up was somewhere around 2018.

Going to Slide #8, you can see another trend that Tremor is benefiting from. So as we said, people are moving more and more into OTT. And within OTT, AVOD is outpacing SVOD. AVOD is advertising-based VOD and SVOD is subscription-based VOD. So you see that the increase in SVOD is 3% from January '20 to June '20, and in AVOD, it's 7%. So it's outpacing it in double time.

Another interesting trend that COVID accelerated is, of course, the connected TV adoption. So you see pre-COVID like the ad of TV, of CTV and other smart screen were quite stable. And since COVID, numbers went out dramatically high, again, enabling Tremor and its advertisers to reach more and more media screens.

Now I'm shifting the presentation to Yaniv.

Can you hear me? All right. So just about our tech stack. It was always our strategy to be ahead of the curve, and we are one of the -- not many that have end-to-end solution in the market. The idea is to be a one-stop shop to its client or publisher, website owner or app developer. Basically, we are enabling a self-serve solution in both sides. So if client want to manage his own campaign or his own media on a self-serve basis, it's optional using our tech. And enjoying all the benefits of our targeting capability, data capability and long range of inventory provider, mainly around CTV, that's the focus in the last years.

So in the last few years, we were focusing our M&A strategy to complete this end-to-end solution and to enjoy an increased relationships. We are now in a situation that the tech stack is pretty much complete and we're in a scaling position right now. We just need to add more and more clients and publisher to the mix and enjoy the growth of the whole ecosystem.

So from the left side, you can see advertisers, which mean clients going through agencies or trading desks or directly to us. We're providing them few services. We can manage their campaign completely. We can build to them a dedicated creative solution, any kind of support and any wish that they want to have on their campaigns with any kind of research, brand lifting and targeting and get service about their commercials and how people responded to their adverts. We provide a self-serve solution for agencies that want to manage their own campaigns without using anyone else's support. And for the ones that are using other DSPs that it's not ours, like for example, The Trade Desk or Amobee or any other DSP out there, Google and all the rest, they can buy our media with the direct connectivity to our exchange, Unruly, and use our data and use our segmentation and much wider capabilities.

Same thing from the supply side. On the right side is the direct publishers that are connecting to our tech stack. They're using it to drive their own ideas, like deal ideas with clients directly, and they're using us as a demand partner for them to monetize their inventory. You need to think about it, it's like the stock exchange. For every request, there's a bid and ask. And we are basically the exchange, the whole market, helping everyone to transact and providing a full stack to support each side of this equation.

So having this end-to-end ensure for our clients and our advertisers on the left side that we know where their campaign are running on. It's our tech on the page and on the app. We can ensure the delivery and we know the pricing and we know how the market is trading. It gives us much more control and also position on the main publisher. We're focusing on CTV. So companies like Viacom and Pluto and CBS see us as a material demand partner for them to drive revenue to their inventory programmatically.

And we are focusing, as Ofer mentioned, a lot around data. And our DMP is ingesting a lot of information from the campaigns, a lot of behavioral targeting, a lot of contextual targeting. And through our partnership with many data provider, we are able to target users much more precisely. It can be target users that's seeing a specific show on TV, that are interested in drama or are a sports fan. And it's basically an endless variety of option to target.

So -- and with all that, we're having -- we're enjoying the both ends, margins and profitability. Usually, companies split it out to the demand side or the supply side while we are enjoying both sides activity. And it gives us also the flexibility to drive more businesses compared to companies that have just one side and they don't have a lot of -- like the full tools to support the growth.

A little bit about our presence. So around 600 employees, roughly 20%, R&D, 120 sales reps globally. Main offices and main revenue coming from the U.S., around 80%, 85% coming from the U.S. And we have several offices, the biggest ones are in New York and L.A. and Chicago and we have offices in Seattle, Atlanta and San Francisco and other locations.

The main location that we added outside of the U.S. were coming from the acquisition of Unruly. Unruly, widely spread across EMEA and APAC. And we are now focusing and moving and delivering all the tech stack and all our capabilities that prove themselves in the U.S. towards the rest of the world. And we're seeing already like good adoption rate and a good performance and increase of interest by clients and suppliers.

A little bit about our clients. Ofer started with our focus on video, CTV. This is an appealing offering to main clients so we can see -- you can see a large variety of many kind of clients and many different verticals from CPG to entertainment to telecom, retail and shows and much more that we have. Those are just the main client that we wanted to highlight, but there was also financials. And we are now depending on a specific vertical in a high volume of our revenue.

Same for our CTV partners, the main ones are the ones that are mentioned below, but we have much more than just those. We ran around $25 million of CTV revenue in Q3. We have exclusive relationships with LG. We are the only one that is playing on the UI and commercials over there, or any kind of advert that is listed on their UI and much more. So this business is just growing and expanding.

We enjoy, from the collaboration and the acquisition of Unruly, a lot of global names. They set up the U7 club. And the decision to acquire Unruly was that we saw a great company having a very strong relationship with clients and publisher on the publisher side, the relation -- a close relationship with News Corp. And we saw that the main thing that holds them back is the technology that we felt very comfortable and dominant around our tech stack.

So this is why we decided to acquire this company, and it proved itself pretty in short time that once we are on-boarding the relationship to our platform, companies like P&G, Unilever, Coca-Cola and many, many others, with extended capabilities, CTV, video and much more formats, we're seeing much more expense growth running through our platform, and basically one of the main reason to fuel our massive growth in Q3 until today.

So on the publisher side, you can see some of the properties that we are working in. Again, it's global, across the world, not just the U.S. And of course, the exclusive access that we have from News Corp, the agreement was part of the acquisition and we secured 3 years of exclusive relationship with News Corp around any kind of the properties globally. You can see some of the names down here.

And we are the only tech that's listed on their out-stream solution. So it gives us a lot of relevancy from a lot of clients, and we're seeing a very strong fill rate that we are able to demonstrate to them. So this is highly encouraging for us as well. And we're just trying to make this relationship with News Corp even much stronger and enjoy the sales capabilities all across the world, but making sure that it's profitable and incremental for us.

A little bit about the data. I just -- I touched base on that briefly, but we have a very good relationships and footprint around data to supply our clients and publishers, make sure that the targeting is in the right spot. So we are enriching our DMP and giving them the flexibility to choose any kind of data provided, any kind of targeting as they wish to transact.

And we are enabling any kind of request if it's a demo targeting, if it's a contextual targeting or, on the right side, the exclusive relationship that we have with Alphonso that is mainly focused on TV retargeting, making sure that if you wish to target clients that -- users that saw Grey's Anatomy Season 2, you have the capability to do so.

So it gets a lot of attention from our entertainment client like HBO and ABC that are one of our biggest folks, et cetera. So this is a unique relationship that we have in place and support a lot of growth.

There's still some areas, the dividend that we saw significant growth. There's still areas that we did not recovered in full, mainly around hospitality, the travel, everything around that, airlines, that used to be also revenue generative channel for us. And also the entrainment, they just started lately to add new production and to start to release new series. But in Q2 and Q1, they were pretty much on a freeze to see how COVID will develop.

So we're now seeing them going back to a kind of normality, focusing on driving more production and releasing new series and titles. So we believe that we're still far from being on the 100% capacity around the entertainment, travel and hospitality verticals. So our main growth engines -- and Ofer, if you want to step in.

Yes. Thank you, Yaniv. So (inaudible) basically, we mark them in order to have our KPIs that we can also share with the market. So we are talking about CTV, which as was discussed and presented, is a major force in the -- on an advertiser -- advertising. The audience is moving to this platform, and so the advertiser wants to be there also. This is a unique opportunity for us, and we have the knowledge and the technology in order to serve them.

Self-serve means that we are able to license our technology to other partners in order to run their campaigns on our platform or other platforms through this platform. And we started it about 2 years ago, but it's getting much more robust in the past year, and you will see the numbers in a few minutes.

PMP, it's like Yaniv mentioned, when people wants -- advertisers wants to buy from us but they want to use their own DSP and not our DSP. So they just connected their DSP that they use to our media, and they can use above, of course, the data that Yaniv before in order to target the audiences that they are looking to reach.

Global expansion. Basically, I saw some of the questions that I got on the Q&A regarding more territories. So we feel that we are spread really well right now in the major markets. So we have offices in U.K., Germany, in Australia, Japan and Singapore, and discovering South Pacific. So I think that we have coverage from territory's point of view right now. And what we are enjoying from after the acquisition of Unruly is the ability to work with global partners -- with global advertisers that are looking for global reach. Companies like P&G, Unilever, Nestlé, Mars, AB InBev and others that are basically looking to work with global companies.

M&A. As you well know, we acquired in the last 3 years 3 major companies. Tremor was the first, as I mentioned, then RhythmOne and Unruly. We always evaluate more opportunities in the marketplace. We believe that there will be more opportunities in the coming months. But again, we don't look for -- in this matter, we are looking for things that can be incremental on our revenues or can give to us something strategic from our offering perspective. And this is the major thing that we are looking at now in acquisitions.

When we're looking on our KPIs in the H1 compared to H1 2019, we see on the CTV that we grow 4.6x from $6 million in H1 2019 to $28.3 million in H1 2020, 45% CAGR over quarters. In self-serve, we grew from $3.4 million in the first half of 2019 to $8.5 million almost in H1 2020 at 2.5x, at 22% CAGR quarter-over-quarter. And on PMPs, we see a huge jump, also thanks to Unruly because that's the place that will also contribute to us. So we grow from $1.1 million in H1 2019 to $14.4 million in H1 2020, more than 12x more.

If I'm adding to that, also the Q3 results, our estimated results, may I say, you see a huge jump again. So we see the Q3 in CTV, we generated more than double than Q3 in 2019. We almost generated like the first 6 months in the third quarter and 49% CAGR quarter-over-quarter. Self-serve, we saw a jump from $1.3 million to $8.5 million -- between $8.5 million to $9.5 million. But the interesting point here is that we did, in the third quarter, revenues that we generated in the first 6 months of the year and 3 -- 33% CAGR quarter-over-quarter. And on PMP level, we can see the jump from $1 million to $16 million to $17 million, 70% CAGR. And again, more money in Q3 than basically in the first 2 quarters of the year.

The U7 council that we start talking about is consists of the 24 of the largest advertisers in the world and agencies of the world that basically worked with Unruly for the last few years. And you can see very famous names like the Diageo, Unilever, P&G and so on, and most of the biggest and bigger agencies, that we have sessions with them about the future of the industry, about innovation of the industry, and we have a working relationship with them. They are representing $16 billion -- just as direct advertisers represent more than $16 billion of buying power that, of course, is very meaningful. And since we acquired Unruly, we see a very nice upside -- uptick in debt revenue that we generate from them because the ability of us to offer them much more product that Unruly used to offer them.

About M&A, just a quick note, again, what we are looking to buy. It's mostly companies with -- that we can basically take direct demand, that are dealing with direct demand, their relationship with clients, their relationship with agencies, and they are buying media somewhere. If we will shift the media basically to buy from us, we'll be able to grow in a very meaningful way there.

The EBITDA that we are generating and that company is generating. And of course, on top of that, we can cut costs about tech and operational leverage and take a company -- I will give you an example. A company that is generating $100 million of sales, usually, they will buy media for $80 million. And when you have a company of $100 million, the EBITDA will be like up to $5 million. So when you're taking a company like that and you move the media buy of $80 million to buy from us, immediately, you can generate more than additional $15 million EBITDA, and that's before taking operational leverage. So we think these deals are very interesting for a company like us and this is something that we are looking to conduct more in the marketplace, basically. And as I mentioned before, also more things that can be strategic, helping us to grow in some segments, mostly in CTV.

Our resilience too and advantage. So when we're looking at COVID, is COVID basically resulted in a number of market trends, which Tremor is well-placed to address. I will touch it in a minute. But we see that COVID is here and probably will stay for a couple of months or even a year ahead. So we need to look at that as a threat to the industry, to the trade, to the marketplace in a way. We see, until now, also a lot of trends that are reinforcing our position, which is helping us.

So it's, first of all, increased the importance of online advertisers, small advertisers. More and more businesses are moving to run things online because they lost their ability to make things physically. And it's helping us because we see growth in budgets around that, enhance the growth of CTV because of the usage out there of people that are watching more CTV than linear TV. And it's something that is growing in the U.S. and all over the world. We are basically ready to entertain them and it's making our offer much more valued, and that's why we see much more engagement from enterprises that we are approaching.

Costing more relevance to agencies, they're looking for more solutions that will help them to cut their cost. We offer self-serve DSP and a are prudent in cost and support in creating media, buying on our change that, of course, lower their overall cost and make it very attractive for them. And we see them coming to us in order to use this technology and increase significance of self-serve tools in general. Meaning people wants to keep more money to their bottom line. If they already manage to generate revenues, now more than ever, they want to try and get more of that run to their bottom line. We have the tools to do that and also tools to -- we have basically, already soft launched self-serve platform for publishers, and we are going to increase it in this magnitude in the coming quarters.

Summary and outlook. Trading in H1 adversely affected by COVID-19 restrictions. Proactive cost-cutting measures has been undertaken by management. Very strong performance in Q3, reinforced the company's strategy and strong recovery in H2. Key growth engines of Connected TV. Self-serve and private marketplaces continue to generate meaningful growth. This is the engine that will drive top line up.

Tremor remains profitable, and with strong cash position, continues to monitor wider macroeconomic environment and ongoing impact of COVID very closely, but trading in H2, so far, demonstrating a recovery in the advertising markets. We, of course, related to the momentum and the sentiment in the market. In the last 3 months, it was -- we saw growth in the sentiment and supporting for our business.

Despite the continued global uncertainty, the Board believes the Tremor's medium- to long-term prospects remain very positive. On that part, I want just to say that we are very optimistic for what we created, the platform, the big and small business strategy. We are more conscious about the market trends because of the uncertainty around COVID. I think that's changing over time. And as we see it more, we have a strong momentum as was demonstrated in Q3, but we are cautious, going forward, because we want to see what will happen in the winter, specifically in U.S. and in the other places, mostly in the U.S. because this is the most affecting market for us.

Here, we just made more comparison to Magnite, which is a traded company in the U.S. but it's a combination of 2 of our largest competitors in the past, Rubicon and Telaria. So we see that, first of all, the are -- both of them together are the major forces here in the U.S. market. If you're looking at net revenues, we are not far behind. We generated in H1 about $60 million. They generated about $78 million. If you're looking at the adjusted EBITDA, we were positive, they were a little bit negative. And our reduction in revenues from Q1 to Q2 was less thrusting than theirs. We had 6% and 18%, but we see a very big difference on the valuation. The valuation is around $700 million, and ours is around $250 million to $300 million (inaudible). And they multiply, but here you can see the EBITDA multiplier and the net revenue multiplier, which are much more higher in NASDAQ, and this is something that, of course, we experienced because we believe that we are traded (inaudible)

Perfect. Thank you, Ofer, Sagi and Yaniv. Thank you very much for such a comprehensive presentation.

(Operator Instructions) I'd like to remind you that we're recording this presentation along with a copy of the slides and the published Q&A could be accessed via our Investor Meet company dashboard. I'd also like to remind you that feedback is important. And immediately after the presentation has ended, you'll be redirected to provide the company feedback in order that they can better understand your views and expectations, and we would very much encourage you to do that where possible.

Ofer, we had a couple of questions that were pre-submitted by investors that I wanted to start off the Q&A by submitting to you. And then following that, you obviously had a number of questions that have come in on the Q&A chat that you can see. And what I'd ask you to do is perhaps read out the questions and then give your response where it's appropriate.

But if I start off with these pre-submitted questions. The first one is, what are you doing to drive share prices? Current price is down nearly 257% from 2 years ago despite the acquisitions.

So what we are doing now, we are increasing the -- first of all, we were -- it was difficult, I think, for the market to understand the strategy that we took in the past almost 2 years, 3 years. I think that now, we are starting to demonstrate what we were talking about, what we tried to achieve. I think that we built a very strong platform in the main junction of this industry, of online advertising, that it's growing, and we are able to do it in a profitable manner. So we are really hopeful, both the management and the Board, that we'll get the support of our shareholders in order to -- and other investors in order to increase the share value.

We are going to increase our marketing efforts in the U.S. because we believe that U.S. investors, when they're looking at these numbers, are more appreciative of what we achieved, and they have more peers to compare to. So this is something very meaningful.

And we will continue to evaluate and to perform -- and to take into action with the strategies like buyback, dividends and so on, that we are now fulfilling this buyback that we announced in March and until the end of the year, and then we will take more measures around buyback and dividend as I just mentioned.

That's great. Sorry, sorry, Ofer. No, I was just going to say that, that actually ties very nicely into the second question, which was the company has significant cash, would you continue to do share buybacks or pay a dividend too, so as you were saying?

Yes. There is a cash that we need in order to keep growing from cash flow issues and to have the ability to conduct more acquisitions if they will feel that they are fit into our strategy. But in general, as I mentioned, we look positively on continuing the buyback, and we will evaluate the options to develop the dividends.

And the thing is that we're doing M&A or they look for M&A. And we're looking for companies that are profitable, cash generative for low multiple and the like. There's no many that are showing the same multiplier that we do, another positive, growing, cash generative and profitable, of course. So we're always on the look to make sure that we are maximizing our investors' value and [share] price.

So we definitely -- we're more focused. I think that in the last year, there was a lot of question about our capabilities to grow revenue and the combination of these companies, that we saw them as a strong asset, but we believe that we can take them in a consolidated basis with all the synergies to the next level. And we are satisfied to see that side, getting into action aggressively in Q3.

So we still believe that if there's a -- and we're not afraid to do our M&As. We did a few in the past. We have a strong track record for doing acquisition and combine businesses that drive success. So we are known as the ones that can buy relatively cheap assets and leverage on them and increase their value and increase the full group value. So we are not afraid to do this. So it's definitely on the table, and we believe that if we can shift $1 from cash to a multiply, and hopefully, our multiply will increase as well, then it will serve the investor interest in a much greater way.

That's great. So as I said earlier, if I could then draw your attention to the Q&A tab on the right-hand side. And if you start at the top, and if you could just read out the question, obviously, because no one can see anyone else's question. That would be great.

I'll read it. Are there any new territories that you would like to expand into? So as I mentioned before, I think that we are covered right now with most of the growing markets that are out there, like the U.K. -- I mean meaningful ones, like U.K., Germany, Australia, Japan and South Pacific Asia. I think these are the major markets. We don't see any reason now to get into more markets before, so we utilize the markets that we just added to our business. So in this stage, we are not looking at expanding to new territories. And to some of the territories that we don't have an office there, we can work from our current offices.

The second question was how do you foresee revenue mix behind the U.S., currently 80% of your turnover evolving over the next 24 months, EMEA, Asia and beyond. So to say the truth, I think that everything is -- we don't think that in the next 1 year or 2 years, U.S. will lose its leadership of the share of revenue that we are generating. I think that everything will grow. So here, we have still a lot of room to grow also in the U.S. So I think that is basically ratios with states, we're still around the same. We hope to see much more growth coming from Europe and Asia and Japan in the next year or so. But again, I think that the main markets, the main revenues will keep coming from the U.S. So if the ratio will change, it will not be very meaningful.

And what do you see as growth...

I just want to like get into the like -- even if you look on the general market value, U.S. (inaudible) consists like 60 (inaudible) definitely, will open up through the acquisition of Unruly. And there, we used to like run around $30 million of revenue outside of the U.S., that we believe that there's a lot of room to grow from this point, but we definitely don't want to remove our eyes from the world in the U.S. where there's massive spend and growth in this market.

And we are not a company that can do just lag -- put those lag in each territory just to -- very Imperialist ambitions. We are closing markets and opening markets based on the -- of our research and our capability to drive profits. And (inaudible) on that. So we'll definitely look at everything economically and (inaudible). Can you hear me?

Your audio has just been interrupted. Your audio is just interrupted, sir. If I could hand back to Ofer, perhaps, to jump on to the next question that's come through.

Yes. What do you see as gross margin going forward due to EBITDA margins? So what we see is that we -- a few percentage of our margin, because of the change of the mix, our advertising products. Basically, it's coming from lower managed service that is usually higher revenue, but we see a pickup on this. But in general, what we see, I think that it will be a balance. We may be seeing a few points down in margins but much more growth. It will compensate for the drop of the margins, and we're -- generally, for us (inaudible). This is the change that we are conducting now because of what we just discussed about, PMP growth, the self-serve growth and the margins that are lower, and then the [methods] that we were used to. But again, it will compensate by a bigger portion of the bigger revenue sales.

How much is coming -- in the coming -- in coming years are you looking to invest to grow? What levels of return on investment do you believe possibly likely? So yes. Very, very general question. So of course, you need always to invest in order to grow. It's not the kind of business that you cannot stand still. You have to evolve all the time, to invest in technology and product, in acquiring new clients because also the market is changing, the need of the market is changing for advertising and so on.

So it's a -- in general, it's an ongoing process of investment, but we are acting in a way, like Yaniv just answered about markets. So in everything that we are doing, we are measuring our success by revenues and profits. So we are investing money in things. But if it's working, we are exceeding. It's not working, we are shifting budgets or resources to other places. And we always measure return of investments for our business.

It's very general to say how much we expect to do because it depends on what. But we are -- of course, every element, every business unit is being measured in order to promise return of investment for the shareholders.

Are you done -- are you now done on acquisition? This is another question. So as I said, I think that first of all, we prove now -- we are proving now that we can grow organically, which is very important for the market and for us as a business. But I think that we should keep looking at acquisitions.

This is a consolidation period. Companies are being -- trying to consolidate. And as Yaniv and we discussed before, I think that if we have like good opportunities, we should seize them in order to and move out our profit to make more acquisitions in order to grow the top line and the bottom line in the future. And this is still short in our time to do more interesting things for our shareholders.

What impact data pricing on your gross margins? How variable? How much inflation? How much ongoing disruption? Should Tremor and Alphonso be one company? So I will start from the end. I think that we have a lot of providers. The main provider is Alphonso. It does not always makes sense to acquire a company that is your provider. We are working very closely with Alphonso. We have an exclusive relationship with them. So I think that right now, it doesn't really make sense to acquire this company in the current circumstances. But when we're looking at that, we are, of course, happy with the relationship with Alphonso. We are working with them for over 4 years now, and we have an agreement for a year to come until the end of next year. Potentially, we'll extend this relationship.

Regarding how much inflation, how much -- it's very hard to answer like that. So maybe we will drop something and share it with a forum to where...

Ofer, can you hear me?

Yes.

We can hear you now.

So I want to add to that. First of all, the acquisition of Alphonso, you need to bear in mind that clients' flavor and our business ecosystem is very dynamic. So you can tell that, that will be the main focus 5 years from now as well. And paying what, like I multiplied for the tech, it's not always like the best approach, in our eyes at least.

In terms of the data cost, that is also related to our gross profit margin. We pretty much have a flat data cost of -- it's a bit very well, but the vast majority is flat. And so I would say we're investing around $25 million to $30 million a year on data cost.

And then like it's more technical because it depends on the revenue with the flat -- at fixed, pretty much in place. We [settled] the market. So like, if we grow revenue further, the investment in data is not material going forward. So the gross profit will be increased accordingly.

While in -- like in -- as you indicated in your question in (inaudible) period in H1, when you drop -- because data fee pretty much stayed the same, so the direct impact was (inaudible). We believe that we are currently in a very scalable position as a company. It means that we are like (inaudible) structure and every addition of $100 million of revenue, we will grab the majority of the gross profit or bottom line and to cash. So there's no, like, material massive investment that we need currently to generate an additional $100 million. It's more about (inaudible) and stuff like that, but it's not around technology or across the board headcount or data and those kind of stuff. (inaudible) scalable business model where we are today. And we demonstrated that in Q3, we said that growing the revenue to $100 million, and it includes around 40-plus in...

We can't hear you.

You can't you hear me? Can you hear me now?

Yes, we can hear you, Yaniv. Please continue.

Okay. So I'm saying that we demonstrated in Q3 that we said that we'll do over $10 million just for Q3. And September, that rose above $40 million. The margins was improving significantly because of that. Like most of the costs are fixed, and we're enjoying the incremental gross profit, pretty much the majority all the way down except from taxes and others. But -- so if we keep the same momentum in revenue, we'll be highly perfect on our EBITDA.

Perfect. I think we are just encountering a couple of technical issues in terms of the sound. I think we have now regained Yaniv. But Ofer, can you hear us if I unmute your microphone?

I think we may have lost Ofer. What I would just propose...

I can hear you.

You're okay there, Yaniv. Are you happy to continue taking the Q&A? We've got about 5 or so minutes.

Yes, if you could -- if you wouldn't mind just turning your camera off...

Okay, let me go over it.

If you wouldn't mind just turning your camera off and that will improve the bandwidth just coming through onto the platform. Thank you so much.

Can you hear me now?

We can hear you. I can hear you, Yaniv, very clearly. Ofer, if I could ask you to turn your camera off as well just to save your bandwidth coming through, that would be great. And then if I hand it back to you, Yaniv?

So I think Ofer touch based on the gross profit piece and the Alphonso engagement. I'm seeing one question around offices and employee located at the U.S. We believe (inaudible). Everything is on the table. We consider options to (inaudible) certain decision, one [way] or the other. That can raise as one of the options. We can be safer with that. In terms of the sales, the marketing cost, I really want to -- there's a bit of a gap between the accounting gap that we've seen on the reports and of real effective costs going forward. But (inaudible)...

Yes, Yaniv, if I could just jump in, just apologies because your audio is a little bit intermittent. Ofer, are you there with us? If we...

Are you asking me?

No, I'm asking Ofer, who is on the call. Okay. Well, when Ofer is just put on the line...

I think he was (inaudible) to the question about the (inaudible) the statement from the accounting gap (inaudible) are growing.

Sure. Do you want to take that one, Sagi?

Yes. So I just mentioned that, first of all, H1 would be treated regarding the COVID environment. So of course, cost overhead and other expenses like a decent increase in percentage-wise according to revenue because revenue was impacted by COVID-19. Going through Q3, it's looking like much more -- much better. Again, we consolidated, for the first time, Unruly as well, and it will take some time in order to integrate everything and then to get rid of the people we got with going forward. So you'll see, again, the percentage of these costs coming down.

That's very kind. Thank you. Ladies and gentlemen, due to the slight audio issues that we've had towards the end of the Q&A, what we propose to do is all the questions are and will be available for the company to review. We will have them do that. And obviously, we will publish those responses, and all investors will receive notification when they are ready to be published.

Apologies, once again, to both Yaniv, Ofer and Sagi, who is, I think, in Israel, and with Ofer and Yaniv, both in the U.S. currently. So apologies for those technical challenges. If I could ask investors, please, still to provide the company feedback. I think following the presentation, that would be most useful. I think with the number of investors on the call, that would also be very beneficial just so they can understand your views and expectations.

On that basis, ladies and gentlemen, I'd like to propose that we close today's session. So on behalf of the management team of Tremor, we'd like to thank you for attending today's presentation. Thank you.