What happened
Shares of advertising technology (adtech) platform Tremor International (TRMR +0.00%) plummeted on Tuesday after the company reported financial results for the second quarter. As of 12:15 p.m. ET today, Tremor stock was down 21%.
So what
Tremor is a demand-side platform, like The Trade Desk, but it also has its Unruly platform, which functions as a supply-side platform, like Magnite. In the second quarter, Tremor generated revenue of $75.8 million, down 7% year over year.
NASDAQ: TRMR
Key Data Points
For adtech companies like Tremor, there are traffic acquisition costs (TAC) that distort revenue. Therefore, looking at the contribution ex-TAC can be helpful. In the first quarter, Management guided for a second-quarter contribution ex-TAC of $75 million to $80 million. However, it came up short of this guidance with just $70.8 million, which partly explains the stock's drop today.
The bottom line was a tad more complicated. The company had guided for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $40 million, a 50% margin compared to revenue ex-TAC. In the second quarter, it had adjusted EBITDA of $39.1 million, lower than its guidance, but the margin of 51% was better than expected. But that slight positive wasn't enough to lift the stock.
Now what
Management expects a contribution ex-TAC of $290 million, a slight decline from the $302 million it had in 2021.
For 2023, it expects to have a contribution ex-TAC of $500 million. But this includes business from Amobee, an adtech it's acquiring for $239 million. Amobee by itself has a contribution ex-TAC of $150 million over the last 12 months. Therefore, Tremor and Amobee together are expected to grow in a way Tremor alone hasn't been able to lately.
In the meantime, Tremor is still very profitable and has a healthy balance sheet. And management believes its stock is undervalued. It spent $45 million in the second quarter alone repurchasing shares. That leaves roughly $30 million to repurchase by September.
With a market capitalization of just $610 million, the buyback plan is significant and could boost shareholder value if Tremor can indeed deliver on its 2023 growth aspirations.
