Tremor International Ltd (TRMR) Q3 2021 Earnings Call Transcript

Tremor International Ltd (TRMR -0.71%)
Q3 2021 Earnings Call
Nov 11, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to Tremor International's third quarter and nine-month 2021 conference call. At this time participants are in a listen-only mode. The question-and-answer session to follow at the end of the presentation. This conference call is being recorded and a replay of today's call will be made available on the investor relations section of Tremor's website and will remain posted there for the next 30 days.

I will now hand the call over to Billy Eckert, senior director of investor relations, for introductions and the reading of the Safe Harbor statement. Please go ahead.

Billy Eckert -- Senior Director of Investor Relations

Thank you, operator. Good morning, everyone, and welcome to Tremor International's third quarter and nine-month 2021 earnings call. With us on today's call are Ofer Druker, Tremors 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 website at investors.tremorinternational.com.

During today's call, we may make forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. We advise caution and reliance on forward-looking statements. These statements include without limitation projections about our future financial results and future business, and statements concerning the expected development performance and market share, or competitive performance relating to products or 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 forward-looking statements including unexpected changes in our business. 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 risks and uncertainties listed in the section entitled Risk Factors in our registration statement on Form F-1.

Tremor 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, the company's press release and management statements during this conference 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 reconciliation of IFRS to non-IFRS results. At this time, it is my pleasure to introduce Ofer Druker, CEO of Tremor International.

Ofer, please go ahead.

Ofer Druker -- Chief Executive Officer

Thank you, Billy, and welcome to everyone joining us on today's third quarter earnings webcast. Let me start by saying this quarter has been a significant build of growth for the company. Today, we reported our strongest quarter in corporate history and we are encouraged by the momentum we have generated across our core verticals, which I will cover in more detail on today's call. Afterward, our chief financial officer Sagi Niri will review the highlights of our Q3 financial results.

Following that, we will be happy to take your questions. First, I would like to cover some brief performance highlights. For the three months ended September 30, 2021, we generated a contribution ex-TAC of $76.7 million, compared to $49.7 million in Q3 2020, 54% organic growth, and adjusted EBITDA of $42.3 million, compared to $19.6 million in Q3 2020, which is two point two times growth. This reflected our strongest quarter reported today.

Highlighted by September being the strongest single month since the company's inception. For the nine months ended September 30, '21, we generated a contribution ex-TAC of $213.4 million, compared to $110.3 million in nine months of 2020, which reflects organic growth of 92% and adjusted EBITDA of US dollar $107.2 million, compared to $21.4 million during the period last year, which resulted in a five times growth. Our core growth driver in CTV services where our revenues grew 115% in Q3 2021 versus Q3 2020 and 188% in the nine-month period ended September 30, 2021, versus same the nine months period in 2020. We also achieved a 49% EBITDA margin in Q3 2021 when a reported revenue basis and a 55% margin on net revenue, which is higher than the median of our direct view.

I emphasize that core of this performance is the strength of Tremor's end-to-end technology and business platform, which covers the three pillars of this business: DSP, DMP, and SSP. Our end-to-end technology platform provides simplicity for our customers better data empowerment for our advertisers and publishers and is accelerating the industry's move toward supply path optimization. As we serve customers on both the demand side and supply side, Tremor obtains robust access to first and third-party data from both advertisers and media partners, which customers can leverage to generate better returns on ad spend and maximize their ad inventory revenue. Tremor's platform also offers customers key optionality on who they choose as a partner with to best suit their needs.

Our DSP Tremor video is compatible with our SSP Unruly as well as with other providers. While our SSP can also be leveraged by other DSPs as well. Later in this presentation, I will touch upon the continued progress we are making in CTV, which is a key performance driver for Tremor. Tremor's consistent primary focus on video and CTV is proving an impression in today's market.

Leading to meaningful growth across our exchange and putting us ahead of platforms only recently evolving from this play. We have enhanced our offering further through the acquisition of Spearad our exclusive global ACL data partnership with VIDAA and our recent launch of a programmatic TV marketplace. I would like also to comment on perceived headwinds in our sector. As it relates to challenges associated with IDFA, changes, and cookie applications that are impacting our industry players.

We did not anticipate a significant impact on our business. Our end-to-end platform and presence in the growth of all screens provide us with the key advantages that reduce Tremor's exposure to these issues. We believe this strategy is proven successful and we will continue to advance and enhance this model as we look to the future. It's also worth noting that although COVID-19 proved to be challenging, it is also served as an opportunity for Tremor by accelerating growth trends in segments that we have strong exposure, such as CTV and video.

Recently, however, many companies have been citing supply chain constraints attributable to the COVID-19 pandemic as a negative catalyst for the sector as certain advertisers have reduced budgets due to these constraints. While we have seen some evidence of floor advertising spend to this point in Q4 2021 in certain sectors particularly automotive due to chip shortages, we have seen stronger demand in other segments and the diversification of our customers based on both the demand and supply side has helped offset any significant adverse impact to our business. I will now shift the discussion to our vision and some of the key development that they've occurred since last quarter. As I have stated before four years ago, our senior team set the plan to transform Tremor or into a market-leading company focused on video, data, and CTV.

With the ability to capture users' growth across all screens. Deliver through a full end-to-end tech platform. Our theme has emanated execution experience and is successfully integrated companies in the past. We are constantly searching for strategic opportunities to acquire additional companies that can become meaningful contributors in video, data, and CTV.

Such as what we accomplished with the recent acquisition of Spearad. We believe we have delivered on a promise to continue expanding and enhancing each element of our end-to-end platform with an emphasis on CTV and we'll continue to do so going forward. One recent example of this comes from the previously mentioned acquisition of Spearad. A global CTV ad server featuring a robust user interface with advanced tools for ad port monetization.

Spearad was purpose-built for broadcasters to deliver a seamless TV-like experience in CTV and over-the-top environments. Spearad will integrate it into Tremor Unruly SSP enabling CTV header bidding, channel inventory management, and ad port mode management. This transaction was particularly compelling as the addition of the CTV ad server further expand our depreciation and strengthen our position within CTV. But also, significantly deepening the relationship with our media partners and further complementing our end-to-end CTV offering.

Prior to these media clients were reliance on either in-house ad servers or third parties. Whereas now, broadcasters with deep relationships with Tremor can leverage us for our ad server and header bidder capabilities. This enables us to maintain more of the relationship in-house and allows us to better serve our customers through other technology solutions. This will also allow us to potentially expand our revenue footprint with current customers and we expect that it will also attract future media partners seeking to utilize this advanced technology solution.

Not all ad servers as CTV ad port monetization capabilities like Spearad, which is why we were particularly excited about adding that technology built by several industry veterans to our end-to-end platform. We anticipate this technology addition will allow us to capture a greater portion of CTV inventory through both current and future media partners and provide added benefits to help those partners better control their inventory and maximize revenue opportunities. We will also continue to evaluate future strategic exclusive global partnerships that expand our data reach and differentiation within [Inaudible] TV. Such as the partnership we've recently announced with VIDAA.

The partnerships give us exclusive global access to VIDAA's automatic content recognition, ACR data free installed on most Hisense smart TV. And is also integrated into a number of premium original equipment manufacturers such as Toshiba. These partnerships give us access on an exclusive basis to VIDAA global ACR data accelerating our US and international growth and footprint. We will utilize this data for targeting purposes making us one of the only end-to-end technology platforms outside of the walled gardens with this type of data exclusivity.

The agreement provides us access to VIDAA distribution, which reaches approximately 20 million smart TV globally and we will anticipate this reach could roughly double over the course of our partnership. The data will be available for activation for customers on both sides of the end-to-end platform, which will enable their ability to offer proprietary measurement capabilities for TV intelligence campaigns. I also want to highlight the recent launch of Tremor programmatic TV marketplace, which enables advertisers to access a centralized platform for planning CTV campaigns, facilitating turnkey campaigns activation, and providing greater transparency into the creation of data-driven audiences. Our TV marketplace gives brands the ability to take even greater control over their planning execution and customization of their CTV campaigns coupled with a more transparent view into the supply and audience targeting capabilities available to them.

Within this marketplace, advertisers can activate deals leveraging Tremor content level targeting solutions enabled by TV-like content attributes from direct media partners by curating deals based on content attributes like genre and rating from Tremor media partners. Advertisers can tap into traditional and media TV buying tactics in digital environments like CTV at scale. This expansion of Tremor contextual capabilities also addresses the market needs for more privacy mindful, verifiable targeting solutions across CTV, and video. Tremor also achieved a number of important business needs during the quarter.

In Q3, we had 35 new user supply partners across critical growth verticals such as sports, entertainment, and lifestyle. As well as original equipment manufacturers, OEM, and multicast video on demand and VOD businesses. Our Unruly product team also streamlined revenue opportunities for publishers by rolling out consolidated and enhanced header bidding adapters on both the client-side and server-side. Publishers can now access Tremor video demand for all Unruly formats via a single adapter rather than the legacy version.

Additionally, through Q3 '21 Tremor video observed a major increase in adoption of our data-driven creative offering, Tr.ly, since 2020. Including expansion across CTV as well as a substantial increase in client usage of our custom QR code solution for CTV. Tr.ly continues to be a differentiator for Tremor and is a unique offering and advantage within our end-to-end solution. Tr.ly is our in-house creative studio and it allows us to provide custom data-driven creative solutions for our advertising customers to align with their complex global campaign objective.

Leveraging Tr.ly underpins our strategy of being completely end-to-end where advertisers and media partners can utilize us in all key aspects of their buying process across all screens, which offers us numerous growth trajectories and differentiation of revenue streams. Finally, our strong balance sheet and cash position give us a strong foundation from which to continue exploring future growth opportunities through additional exclusive strategic global partnerships or acquisitions. Tremor has a robust history and proven track record of successfully integrating this into our unified end-to-end platform. And we will continue to remain active in evaluating deals that can further complement and enhance our existing platform.

With those comments complete, it's now my pleasure to turn the call over to Sagi to review our financial results.

Sagi Niri -- Chief Financial Officer

Thank you, Ofer. Thank you, everyone, for joining us today. We are encouraged to see another record quarter of revenue and strong business momentum as we move into the fourth quarter of 2021. Today, I'll be discussing some of the highlights of our Q3 performance.

As well as some of the key financial and operational drivers during the quarter. Tremor International achieved an outstanding records quarter in Q3 with revenue and adjusted EBITDA propelled by steady organic revenue growth. Our net revenue grew 54% in Q3 year over year and resulted in $76.7 million for Q3 2021 versus $49.7 million in Q3 2020. All of which was driven through strong organic growth.

Our CTV revenues grew 115% in Q3 2021 versus Q3 2020, and we are poised to continue this growth as more business is increasingly being transacted through programmatic platforms. During the same period, our video net revenues grew 58%. For the nine months ended September 30, 2021, CTV in video net revenue grew 188% and 110% respectively. As a result, we achieve an adjusted EBITDA of $42.3 million in Q3 2021 and $107.2 million in the nine-month period of 2021.

Or adjusted EBITDA margins of 55% and 50% out of net revenue for the same period respectively. For the nine months ended September 30, 2021, Tremor generated $213.4 million in net revenue, which is an increase of 93% year over year. We continue to generate very strong adjusted EBITDA were investing in the critical areas of our business that can drive our future growth. Costs were lower than expected.

Driven by a postponement of our return to the office, lower anticipated marketing events then, and reduced travel and entertainment costs. We saw very strong year-over-year growth in Q3 and the nine-month period of 2021, which increased our EBITDA by two point two times and five times respectively compared to the same period in 2020. We are focused on being highly competitive in the CTV space and entered the segment early. With the enhancement, we made to our offering during the pandemic, our efforts resulted in 115% year-over-year CTV revenue growth in Q3 2021.

Our video net revenue increased 58% from $40.1 million in Q3 2020 to $63.4 million in Q3 2021, which was driven by our video capabilities in sharp focus on this segment. We delivered significant growth in the nine-month period of 2021. During we exceeded market expectations and proved once again that our strategy is working. Representing the latest milestone in the evolution of our end-to-end video-first platform and TV intelligence solution, our recent acquisition of Spearad an exclusive VIDAA partnership will enable more effective TV campaigns going forward for our partners in several important ways.

Enhance our TV intelligence solution not only by providing an exclusive dataset but also by providing an opportunity for real-time targeting capabilities. VIDAA has a global reach of approximately 20 million smart TV, allowing us to provide our international partners with a scalable TV targeting and measurement solution across the premium supply footprint, which we didn't have before. Spearad is a purpose-built technology for broadcasters addressing the unique needs of delivering a seamless TV-like experience for consumers that can benefit our media partners through operational and cost efficiencies, increased buyer power, maximize revenue opportunities, and advanced UI, and our customers we've expanded access to premium global CTV and OTT supply and advanced ad port targeting capabilities. We believe we have a competitive advantage with our omnichannel end-to-end platform versus other one-dimensional solutions.

We have developed a profitable business model with high efficiency around operating costs, leading to operating leverage, economies of scale, and strong productivity. Among our ad deck peers, Tremor is one of the highest margin and operational profitability resulting in a 49% adjusted EBITDA margin in Q3 2021 on a reported revenue basis and 55% on a net revenue basis. Turning to our cash flow, we generated net cash from operating activities of $44.6 million for Q3 2021 versus $4.5 million in Q3 2020, which is an increase of around 900%. For the nine months end of September 30, 2021, we generated net cash from operating activities of $121.4 million versus $11.7 million in the nine months ended September 30, 2020, and a 940% increase.

As of the 13th of September, we had $333.3 million cash and cash equivalent with no debt. We also experience 99% free cash flow conversion during the quarter. Non-IFRS diluted earnings per ordinary share is $0.21 for Q3 2021 versus $0.11 in Q3 2020 and 56% for the nine months ended September 30, 2021, versus $0.7 for the nine months ended September 30, 2020. Finally, I'll now turn to our outlook.

As a reminder, we expect that's returned to office marketing and travel costs will add an incremental $1.5 million to $2 million per quarter in operating expenses next year. For the fourth quarter of 2021, we expect net revenue to be at least $85 million, which represents year-over-year growth of approximately 16%. In Q4 '21 adjusted EBITDA to be at least $42 million, which represents year-over-year growth of approximately 7%. We also expect the annual 2021 adjusted EBITDA to be at least $149 million, which represents year-over-year growth of approximately 145%, and an expected annual 2021 adjusted EBITDA margin of 50% as a percentage of net revenue compared to fit 33% in 2020.

This guidance reflects anticipated full-year organic contribution ex-TAC and adjusted EBITDA growth of approximately 62% in 150% respectively. And underscores that our efficient end-to-end model focused on CTV is helping us achieve excellent growth and profitability. We believe that our growth profile is an efficient end-to-end model and healthy balance sheet positions Tremor more to continue taking advantage of a rapidly growing digital advertising market. With my remarks completed, I'll turn the call back to Ofer.

Ofer Druker -- Chief Executive Officer

Thank you, Sagi. To summarize, we believe we are well-positioned within the industry. Thanks to the key advantages we achieved from being complete end-to-end. Our unified platform provides advertisers and media partners with simplicity and better data empowerment while also accelerating the industry's move toward supply path optimization.

We have built this platform with a heavy focus on CTV, video, and data, where our customized rely on our deep expertise and actionable insights and which now accounts for 92% of our programmatic net revenue. We continue to believe that advertisers and media partners will rely on and allocate additional spending toward fewer companies with a diverse portfolio of solutions that can service them across all parts of the buying processes and across all screens regardless of their service level needs. We will also continue to deliver on our promise to expand and enhance our end-to-end CTV capabilities for customers. Such as what we achieved through our recent acquisition of Spearad, which further complements that our end-to-end platform offerings.

We also have taken steps to further our US and international footprint and accelerate our growth in those scale markets while differentiating ourselves through global data exclusivity with our partnership with VIDAA. As we look ahead, we will continue to evaluate additional strategic acquisition opportunities while also continuing to make investments in our product, R&D, sales, and marketing to help propel future growth and increase our market share. Finally, on the investor relationship front, we anticipate being far more active with both US and global investors through attending investor conferences, conducting text labels, and participating in non-deal vouchers with the firms that discovered Tremor. We will be very busy working toward garnering additional interest from current and prospective shareholders.

We believe that we have a compelling story and value proposition with strategic differentiation and advantages that more investors and customers will see the benefit of as we move it. We look forward to speaking with current and prospective investors at RBC Global Technology, Internet, Media and Telecom Virtual Conference on November 17, and Raymond James Technology Investors Conference on December 6, and Needham Growth Conference on January 10. We believe that we have significant room for growth and remain confident about our future. Operator, we will now open the call to investors' questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Matt Swanson with RBC Capital. Your line is open.

Matt Swanson -- RBC Capital Markets -- Analyst

All right. Thank you, and congratulations on the results this quarter. Ofer, you mentioned SPO as kind of a growing theme and it certainly seems like there's no better way for customers to take advantage of that than going with a full satellite-like Tremor. Can you talk about just kind of what sort of tailwind this has been for you during the quarter, during the year? And do you think there's a chance that the team accelerates in 2022?

Ofer Druker -- Chief Executive Officer

Thank you, Matt. Good morning. Yes, we started this process about two and a half years ago when we acquired it in April 2019. When we acquired RhythmOne and connected the RhythmOne basically to Tremor and created the end-to-end solution platform that includes the DSP and SSP.

And we believe that in this way it's creating a few elements, which are really important for the advertisers, but also for the publishers. The first one is simplicity for them to buy the traffic to run their campaigns according to their objectives and so on. The second one is run data that is also emphasized for us. And the third one is the supply path optimization and meaningless and mediators between basically than the DSP and the buyers through their media and reaching their clients.

And what we see in the market is that many companies and of course advertisers and publishers are adopting that and this will become a standard in the near future. So, we believe that it will grow in 2022 and it will support our growth also going forward.

Matt Swanson -- RBC Capital Markets -- Analyst

Thank you. And then for Sagi, the profitable growth you're achieving this year is really noteworthy. And when we think about the strength particularly adjusted EBITDA it was great to get that additional color on the returning expenses next year. But how are you thinking about balancing investments in growth for the opportunities in front of you compared to profitability when we're looking out to 2022?

Sagi Niri -- Chief Financial Officer

Hey, Matt, thank you. I think we are all aware that we want to grow the business organically and keep growing it into 2022 and going forward. We understand that in order to do that we need to invest more in marketing, R&D, sales, and product. Having said that and expecting the growth to come in 2022 and going forward I think we still can maintain somewhere around 45% adjusted EBITDA margins out of net revenue.

Matt Swanson -- RBC Capital Markets -- Analyst

All right. Fantastic. Thank you for the time.

Sagi Niri -- Chief Financial Officer

Thank you.

Ofer Druker -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Laura Martin with Needham and Company. Your line is open.

Laura Martin -- Needham and Company -- Analyst

Good morning. I have three. The first is on these margins, just following up on the prior question. They are quite a bit higher structurally, you were at 55% in the quarter.

You just said structurally, you can stay at 45% just green sort of over Trade that did 41% in the quarter, but really only committed to 30% margins. So the first question I have for you is what is it about your business that structurally it's so much more profitable than all the other ad tech firms. That's my first one. My second one is on your Slide14.

I love this slide. So basically, if I look at your CTV grew 115% year over year, and doing the math it looks like online video grew 40%. My question is cannibalization or additive. Why is online video growing so much slower than CTV? And then my third is again referencing Trade Desk again, Jeff Green said that he believes that CTV creates a competitive advantage for the open internet to take share back from the big walled gardens.  And I'm interested in whether you agree with that? And if so, what you're thinking it would be supporting that thesis because that would be wonderful for investors, if true? Thank you.

Ofer Druker -- Chief Executive Officer

Thank you, Laura. It's Ofer. I would take maybe the third question that you asked about CTV and that is giving an option for the open market to basically to grow compared to the walled gardens. 

Laura Martin -- Needham and Company -- Analyst

OK.

Ofer Druker -- Chief Executive Officer

So, agree with this statement and with Jeff that's saying that. I think that the CTV is an open market first-of-all, other companies also to grow their business and it's not controlled by the walled garden basically.  And there is a lot of optimism growing elements in independent companies that can basically grow the business in parallel to that. And that's also the reason that we sign this agreement -- important agreement with VIDAA, which is a Hisense company. That basically it's the operational system of this platform that allows us now to get ACR data from all their TV and CTV basically around the globe in an exclusive basis.

And we believe that this competition will just immense and it's less related to the walled garden and also advertisers would like to reach more and more users through different channels and not just to the basically the legacy one.

Sagi Niri -- Chief Financial Officer

Thank you, Ofer. Laura, hey good morning. I will answer the first two questions. So regarding profitability.

Yes, probably we are the highest profitability margin in our industry. I think that it's come from a couple of parameters. Of course, the main one is our end-to-end platform and our end-to-end business model where we are catering to both sides of our partners, the media partners, and the advertisers and agencies. The second one is our infrastructure tech and product infrastructure where we are running very efficiently and it's allowing us to maintain a low-cost base of both of that are contributing to our amazing adjusted EBITDA margins.

For your first question, regarding CTV growth versus video growth. So, there is no cannibalism around that because CTV of course is the device that we are running on and video is the format. So, we are very everly generating revenue through video. It's more than 80% of our revenues coming from video.

So the growth over there can be as high as we are doing and CTV where we started of course lower. We're doing around 26% of our revenues from CTV and probably will grow it will grow still higher than our increase in the video going forward.

Ofer Druker -- Chief Executive Officer

Just to add one point to -- about the EBITDA margin and so on. We are talking about, we grow our cost investments in basically all the related engines by around 30%, but our income grows by 100% and of course, this extra income went down to EBITDA. That's why we see this growth in EBITDA compared to the market into our focus basically.

Laura Martin -- Needham and Company -- Analyst

Thank you very much. Great results for you guys.

Ofer Druker -- Chief Executive Officer

Thank you.

Sagi Niri -- Chief Financial Officer

Thank you.

Operator

[Operator instructions] Our next question comes from Andrew Boone with JMP Securities. Your line is open.

Andrew Boone -- JMP Securities -- Analyst

Good morning, guys. And thanks for taking the question. Two, please. So, the possibly highlighted strength in the Creative offering.

Can you just talk about the value that Tr.ly offers and how customers are leaning into it? And then how did how does that relate in terms of thinking through your relationships with advertisers as well as their agencies in Tr.ly? And then question number two is on VIDAA, the international component, the global nature of that agreement was kind of highlighted multiple times, going back to when we started our relationship with you guys, our understanding with the focus of us more U.S.-based. So, can you just step back and review kind of how you guys are thinking about international and any potential there? Thank you so much.

Ofer Druker -- Chief Executive Officer

Of course, good morning. So, I would start with the second question if you don't mind, regarding VIDAA. So first of all, our main focus is the US, and of course, close to 90% of our revenues are coming from the US. But we still have a very nice infrastructure in the international markets like in the UK, Germany, in Singapore, Australia, and Japan.

That is there and it's just -- it was suffering because of COVID and that nonability to move the people here in order to train or to go there and raise more and move more knowledge between the companies. But we feel that that is a big potential source internationally and one of the things that we learn how to do in the last five years is surrounding ACR targeting in the US. And we feel that there is a huge potential also in the international market. So think that it would be a differentiator for us in some of these markets since VIDAA is a very major player in some of them like Japan, Australia, and also the UK.

So, we believe that it's important to mention it because we believe it would give us an edge and a differentiator in this market. And we'll be able to grow revenues from the middle of 2022 going forward. Regarding your first question about Tr.ly. So basically, the agencies and advertisers are looking for unique and creative ways to basically reach their offering.

It's not the video itself it's behind. It's around the video that is like enabling to get more information on the product or the service point of contact to download the brochure to scan a QR upfront and get more information. Or to download the product into the mobile phone and so on. And we are able to do that through Tr.ly that is growing very fast in demand.

And also, we need to remember that the agencies conducted a few changes that lower the resources around that. So advertisers are looking for that and it's giving them simplicity. Again, when they are running with us to get all these services when they are running with us on their platform. And another point is that Creative is now connected to our DMP and allows us basically to take decisions and to change the Creative according to the data.

And according to the user that is basically watching the Creative in order to adapt it to the goal and the KPI of their clients, which is very meaningful.

Andrew Boone -- JMP Securities -- Analyst

Can I just follow up, really quickly on that last point?

Ofer Druker -- Chief Executive Officer

Sure.

Andrew Boone -- JMP Securities -- Analyst

Does -- do you accelerate that at all in terms of now having an ad server as well as then the Creative elements, and can you just talk about how those two things are intertwined?

Ofer Druker -- Chief Executive Officer

So of course, it will accelerate it when you have an ad server, and header bidder and mostly ad server in such a sophisticated ad serve Spearad into the platform, it will enhance our capabilities, of course, together with -- also even with VIDAA that is creating or providing us data. So all these elements together of course in creating increase the effectiveness of the ad that we are showing through the user according to different parameters and the KPI of the advertiser. And I think that in general, we spoke a lot yet about Spearad, but we are going to do that in the near future. It's one of the most advanced platforms that we saw that is incorporating and CTV ad server and header bidder in the platform.

This was built by very experienced industrial veterans that basically build this platform and created it and sold the company like that in the past of ad server to AOL a few years ago. Basically, what we will be able to offer -- what basically what we will be able to offer is a one-stop-shop for all the data, creating serving capabilities regarding CTV. That's what we enhanced basically in the last few months through the launch of Tr.ly, the acquisition of Spearad, and the deal that we've done with VIDAA for the next couple of years.

Andrew Boone -- JMP Securities -- Analyst

Great, thank you.

Ofer Druker -- Chief Executive Officer

You're welcome.

Operator

Our next question comes from Johnathan Barrett with Panmure. Your line is open.

Johnathan Barrett -- Panmure Gordon -- Analyst

Thank you. Can you hear me, guys? 

Ofer Druker -- Chief Executive Officer

Yes.

Johnathan Barrett -- Panmure Gordon -- Analyst

Great. Thank you.  And just obviously, you changed your accounting insure a while ago.I just wondered if you could, first of all, give this an update on the size of the billings that you are now involved with. Just give us a sense of the scale of what the annualized run rate is, first of all. And then second, I wondered if you could give us a breakdown of your net revenue? So that we can understand how you're getting paid by clients now.

What you're getting paid for most and or having already some of your revenues from the media buying and selling side. Just so we can get an understanding of that mix of income and perhaps you can talk about how that mix is evolving as well and what we might expect going forward? And then thirdly, just on our process parts on Tr.ly, but I guess it's the widergroup as well. It's just what you see in terms of the demands for putting up guarantees on better quality media and your financial commitments and the like. Yet perhaps talk around that subject matter.

If you can?

Sagi Niri -- Chief Financial Officer

OK. I'll take the first two questions. So we change like in 2020, our reporting basis instead of reporting only on a growth basis. We changed it where we are reporting now programmatic on a net basis and performance on a growth basis of where we are seeing our reported revenue it's a mix of growth and that.

And this is the reason we are emphasizing our contribution ex-TAC in order that we will be -- we can report on an apple-to-apple with our peers. And every average company of course billing and invoices are going on a growth basis. And this is how we are collecting the money and then paying to our media partners. We are not disclosing the gross revenues.

And as per, your question what is coming out of programmatic and what is coming out of performance. I think we highlighted that in our press release in Q3 we did in programmatic revenues, which are on a net basis almost 69%. So that GAAP to the total of 76.7 is of course performance. On in the nine months, we generated $192 million in programmatic, which again the GAAP to our $213.4 million of contribution ex-TAC is performance.

Regarding the MRG Ofer, do you want to take it?

Ofer Druker -- Chief Executive Officer

Yeah, MRG, we usually companies are not providing exclusivity in this world anymore like publishers are not providing exclusivity. We saw a very big advantage to get exclusivity from News Corp which is one of the biggest publishers in the world, the most respected one. So part of the deal of acquiring Unruly also provided an MRG to manage their media three years after the acquisition basically. And usually when we are providing MRG only for key media partners that we feel that it can be a differentiator or very interesting for advertisers to get there.

And although if and to run their campaigns against, but usually it's not a practiced anymore that is available so much in the industry. And most of the deals are done as we mentioned programmatically.

Johnathan Barrett -- Panmure Gordon -- Analyst

Okay. So, I have one more follow-up question, if it's OK?

Ofer Druker -- Chief Executive Officer

Of course.

Johnathan Barrett -- Panmure Gordon -- Analyst

Yeah. So, just we heard from ITV yesterday. And in the UK about their desire to control the transaction process and avoid middlemen. How does that sit with the wider video universe in your view? I mean, do you think it's credible for them to run their own platform that effectively is direct to advertisers? Or do you think they'll include you in that? How do you think that they go?

Ofer Druker -- Chief Executive Officer

I think that the -- this is exactly what I discussed when basically Matt asked his questions about supply path optimization. Meaning, that you are managing everything on one platform. Meaning you're managing your DSP which is the demand side, which is where the advertisers are basically running their campaigns or we are running for them. And through basically, SSP that is connected to auto direct publishers in the case of the publisher that you are talking about.

You can basically manage all these media and all these broadcasters under this platform. So it's exactly what is done. As we mentioned this is a phenomenon that is now growing. It's growing in two elements.

One of them is that cooperation, strong cooperation between DSPs and SSP to create supply path optimization. But we feel that the more advanced one is what we created, which is one platform that basically everything can be managed on one platform, and basically, you are avoiding or minimizing the usage of either one. So this is the path, and this is the vision that we created a few years ago, and that's what we are following now. So, I totally understand what they are trying and where they want to go, and it makes sense, and we are doing it already for a couple of years.

Johnathan Barrett -- Panmure Gordon -- Analyst

Thank you.

Operator

There are no further questions. I'd like to turn the call back over to Ofer for any closing remarks?

Ofer Druker -- Chief Executive Officer

Thank you very much. We are as we said in the beginning, we are very excited about the results and the progress in the company and we are looking forward to keep talking and making a progress with the company going forward. Thank you very much.

Operator

[Operator signoff]

Duration: 49 minutes

Call participants:

Billy Eckert -- Senior Director of Investor Relations

Ofer Druker -- Chief Executive Officer

Sagi Niri -- Chief Financial Officer

Matt Swanson -- RBC Capital Markets -- Analyst

Laura Martin -- Needham and Company -- Analyst

Andrew Boone -- JMP Securities -- Analyst

Johnathan Barrett -- Panmure Gordon -- Analyst

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