ironSource Ltd.
Q1 2022 Earnings Call Transcript

Published: 12 May 2022

[Operator:]

Hello, everyone. And welcome to the ironSource Limited Q1 '22 Earnings Conference Call. My name is Charlie and I'll be coordinating the call today. You have the opportunity to ask a question at the end of the presentation. . We now like to ask your host, Daniel Amir, the Chief Investor Relations to begin. Daniel, please go ahead.

[Daniel Amir:]

Good morning, everyone. And welcome to ironSource's first quarter 2022 earnings conference call. My name is Daniel Amir, VP of Investor Relations. With me today, we have Tomer Bar-Zeev, Chief Executive Officer, Assaf Ben Ami, Chief Financial Officer, Arnon Harish, President and Omer Kaplan, Chief Revenue Officer. Before handing the call over to Tomer, let me remind you that this call is being recorded. A replay of this recording will be made available on our website shortly after the call. We have posted the earnings release and the accompanying slide presentation on our Investor Relations web page at investors.is.com. Elements of this presentation, as well as certain statements we may make on this call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. And these statements are based on current expectations and assumptions and are not guaranteed. Please consider the risk factors included in our public filings with the SEC that could cause our actual results to differ materially from these forward-looking statements. Other than as required by law, we assume no obligation and do not intend to update any such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on information available now and could differ materially from the amounts ultimately reported in ironSource's other SEC filings. During this webcast, unless otherwise specifically noted, all comparisons are year-over-year comparisons with the corresponding prior year period. For financial information that has been expressed on a non-GAAP basis, we've included reconciliations to the most directly comparable GAAP measures other than with respect to adjusted EBITDA guidance for which we have not provided a reconciliation because certain items that impact adjusted EBITDA are out of the company's control and or cannot be reasonably predicted. And accordingly, a reconciliation is not available without unreasonable effort. Please refer to the tables and slide presentation accompanying today's earnings release for these reconciliations. The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. With that, I'd like to turn it over to Tomer.

[Tomer Bar-Zeev:]

Thank you, Daniel. And thanks for joining us today. We're very pleased to spell the year on a strong note, continuing to deliver highly profitable revenue growth. We're one of the few software companies that grew revenue more than 55%, while also achieving an adjusted EBITDA margin of more than 30%. Now more than ever, having a strong balance sheet of a net cash balance of $441 million and highly profitability is critical to succeed. As important, we are proud of how our solutions continue to serve the key constituents of the app economy, app developers and telcos worldwide. So first, let's go over the key numbers. In the first quarter, we achieved record results with total revenues of $190 million, up 58% year-over-year. We also had adjusted EBITDA of $59 million, up 49% year-over-year. Our success in the quarter was primarily driven by continued execution and performance and we saw market share gains in both existing and new customers. Our EBITDA margin was 31% consistent with our long history of providing profitable revenue growth while also benefiting from operating leverage. We again, saw the stickiness of our platform and the value it provides our customers with a very high dollar-based net expansion rate, 153% for the quarter. During the quarter, we completed the integration of Tapjoy and Bidalgo and now have a global team of almost 1400 with close to 50% of the headcount in R&D. This acquisition will help fuel our future growth and time expansion as we discussed last quarter. More broadly, as our results show ironSource serves as the gateway to the App Economy. We help app developers turn their apps into successful businesses with our Sonic App solutions suite and help carriers and OEMS engage with our customers, with our Aura Telco solution suite. We strike to innovate and provide solutions that address our customers needs, allow them to take advantage of new opportunities, and help our customers successfully weather changes in the industry. One of the key reasons our platform is able to drive value for customers is the unique combination of multiple data types and how we analyze them. The breadth of our solution means ironSource gets app - centric data from a number of different sources on the platform. First-party data from Supersonic publishing, third-party data from our SDK, which is widely integrated in our app partners, and on-device data from Aura. We funnel all these data through our machine learning algorithms, which were built predominantly on contextual models from day one. With the constant growth and data flowing in, we created a powerful flywheel of data advantage while prioritizing privacy, which is well-positioned for the post IDFA role and for future changes. This approach of analyzing appcentric data from multiple sources is a point of differentiation for our company. Now, I'd like to move to some of the key factors behind our strong quarter. At first, with some of the louder trends and then cover products and partnership developments. First, our land and expense strategy. This is at the heart of our platform approach and continues to perform extremely well. As you can see by our 153% dollar base net expansion rate. The breadth of our solution means that we have multiple points of entry to land with new customers and multiple potential avenues to expand with them. We see that more often than not. New customers will start using one solution and then expand to use additional solutions over time. A great example is HyperBeard, the largest mobile game developer and publisher in Mexico. HyperBeard started using Luna earlier this year. Making it the 5th ironSource solution HyperBeard is using. Hyper Baird started with leveled play mediation, then added beating, then user acquisition and cross-promotion, all in the past couple of years. Second, our focus on up growth and marketing. In today's hypercompetitive market Incremental, profitable up growth is critical to running our successful app business. Paid marketing across channels is per to achieve these growth. These quarter, we continue to invest in solutions that helps us meet these growing challenge. First, we announced the launch of the new Luna platform. The only cross-channel marketing software that include automated created production and management. Luna closes the marketing loop across all channels. So app marketers can build creative, deploy them across every major channel and optimize to drive performance all in one unified platform. LUNA helps customers like the leading dating up Bumble, to grow at scale by analyzing and optimizing their marketing across channels to drive performance. As we mentioned last quarter, we believe that these marketing software increases our overall TAM, as we're able to capitalize on significant additional streams of marketing spent in the App Economy, increasing our share of wallet with customers. Second, we continue our product innovation around iOS ecosystem with tools to help customer grow the user base on iOS. After being first-to-market in Q4 with a product supporting Apple's customer product pages. This quarter, we announced the general availability of Luna Search Ads. This product allows app marketers to better create, manage, and optimize campaigns on Apple Search Ads, a channel that has seen an increasing spend in the last year. The product allows app marketers to ultimate and streamline campaigns creation, keyword management and discovery, and data analysis. It also provides automated optimization all from within the same platform where up marketers managed campaigns on other channels. Essentially, marketers can now optimize our campaigns on Apple Search Ads while utilizing the cross-channel up merging capabilities of ironSource LUNA. Both of these products constitute important added value and differentiation in the market by helping app marketers grow their user base, profitability on iOS. Third, we launched our marketability testing tool for mobile gaming apps, which allows game developers to assess product market feed very early by evaluating whether a game can be marketed at scale. This tool is critical in a competitive industry where the cost of investing in the growth of a product that doesn't have the potential to scale can drive huge inefficiencies and wasted spend. This is a decision making tool that offers a predictive sandbox matching the game to the audience. It results in a marketability score that gives the developer clarity on which titles to invest in and launch. It is the only tool in the market that addresses the question of game marketability together with a competitive analysis to support that decision, providing the app developers with a go, no-go conclusion. It allows developers to focus their time on those apps likely to be successful while also not missing out on a potential hit. Finally, we're seeing growing interest in the unique on-device growth opportunity that Aura offers. Leading brands like Pinterest, Twitter and United Airlines are leveraging Aura's native on-device inventory to connect with users of their first setting up a new device and drive more app installs. These enhanced offering for app marketers is particularly important for apps in categories Beyond Games, who invest heavily in user growth and app marketing. The size of the mobile app at the install market is over $100 billion and it is growing at a double-digit CAGR. We're also seeing a continuing trend of brands looking to connect with consumers in-app, where they spend much over their time. For example, brands like Frito-Lay and Sparkling Ice are using rich, interactive, in-app ads to build brand awareness with customers. We're also seeing Tier 1 big brand commerce apps, leveraging unique enough advertising experiences that enable a value exchange for users. In these instances, users playing a game can receive in-game currency in exchange for making a purchase in the app. These ad experience enables a win-win-win. The game app generates revenues from user engaging with an ad. The users opt in to an offer from an advertiser they find valuable, which results in a better result for the advertiser and the user is rewarded within the game app for engaging with an ad, receiving concrete in-game value in exchange. These ad functions more like a native in-app transaction engine and we're seeing it get a lot of traction in apps outside of games, particularly in social, e-commerce, lifestyle, and utilities providing ironSource with a key differentiated offering to increase our market penetration in these segments. In addition, we're also continuing to see the power of our business platform for customers of all sizes. Many smaller, independent developers see ironSource as the platform of choice to publish their games using our Supersonic publishing solution. We're focused on productizing and automating the publishing process, creating a more effective, transparent, and seamless path to support the growth and profitability for publish gains. In Q1 2022 color match was the most downloaded hyper-casual game in the U.S. This follows highly successful games we saw in 2020 and 2021 like Join Clash and Bridge Race. In addition, during the first couple of years, more than 30 games published by Supersonic reached the top 10 in the U.S. This is a strong testament of the robustness of our platform and how we help developers of all sizes and stages achieved success. Now, let's move to Aura. As we discussed last quarter, the other solution as of the end of 2021 had been installed cumulatively in over 1.1 billion devices, which reflects our strong leadership position in the market. In 2022, we're seeing a number of carriers ramping up their use of Aura. From partnership with Samsung and Vodafone that we announced in the second half of last to the two new customers that we announced last quarter from leading telecom operators in Europe and Asia. While it's difficult to predict the pace and timing of ramp-ups, we believe that in the coming quarters, we will start to benefit from these partnership's efforts. These partnerships are the testament of the unique value proposition of the Aura solution suite, which goes far beyond our promotion. By providing a solution for managing the entire device experience, we're able to continually expand to new touch points, giving telco the additional opportunities to engage with the users providing value and drive incremental revenue. Since Aura is integrated at device level, it's very easy to add an additional in-life touch point such as news, entertainment or gaming hub, which encourages users to engage with their device and the telco's brand more often. To summarize, this has been a good start of the year in a challenging macro-environment. With the launch of new products and the expansion of our partnerships, we see that the ironSource platforms continue to provide growing value to customers. Our results clearly validate our approach and prove that we're able to provide a robust and differentiated offering to the market. We plan to continue build our platform offering through our technological innovation and strategic M&A in order to increase the use of our platform by existing customers and gain market share with new customers. With that, I will turn the call over to Assaf to provide you with details on our financial performance and guidance for the quarter.

[Assaf Ben Ami:]

Thank you, Tomer. We're excited to start the year with delivering strong results. As Tomer mentioned, 2/1/2022, was a record quarter both top line and bottom line. And the higher than our guidance. We generated $190 million of revenue compared to $120 million in Q1 of 2021, representing the operated growth of 58% for the quarter. Suncor's 90% of our total revenue, and the Aura was 10%. The overall growth in the quarter was fueled mainly by the expansion of Sonic and Aura solution to which within our platform. Our revenue is driven mainly by a rollouts customers. This group grew to 319 customers in Q1 2022 up from 292 in Q1 last year, representing a little bit in growth of 36%. These numbers were achieved while maintaining a very high gross retention rate of 99% in Q1. This large customers represent 94% of our total revenue in the trailing 12 months of Q1 of 2022. Due to the increasing usage of our solutions, we are able to cross-sell and up sell a greater portion of our solutions to them, as well as general growth in the number of new customers that contributed more than $100,000 in revenue. Our customers range from large global enterprises to small independent developers. As of the end of Q1, we reached 7,000 customers using our platform. This compares to approximately 4,000 customers at the end of Q1 of 2021. Our dollar-based net expansion rate for Q1 remains very healthy at 153%. It is within the guidance provided last quarter and reflects our business model, which is focused on customer success. As we communicated previously, we continue to expect our dollar-based net expansion rate to remain very healthy in 2022 and be at a similar level to our historical range. We had another strong, profitable quarter. We generated adjusted EBITDA of $59 million in Q1 2022, representing year-over-year growth of 49% from our adjusted EBITDA of $40 million in Q1 of last year. This growth was driven mainly by revenue growth across all of our solutions. We delivered an adjusted EBITDA margin of 31% in Q1 in line with our guidance as we continue to invest in the future of our business while focused on sustained profitability and positive free cash flow. Our increasing OPEX for the quarter reflects a combination of our ongoing rate investment in the business, as well as a step-up in hiring, integration of acquisition completed in the past few quarters, and then more normal cost structured post the pandemic including travels, events, and other operation costs. Our non-GAAP diluted EPS for the quarter was $0.05 and we had $441 million of cash and cash equivalent as of the end of Q1 2022. Our decline in cash and cash equivalents compared to the previous quarter was due to the closing of the Tapjoy acquisitions in early Q1. Now, let me turn to guidance. Our guidance takes into consideration the following factors. The near-term growth trajectory headwinds that some of our mobile gaming customers are facing, seasonal trends and overall in macro uncertainty. For the second quarter of 2022, total revenue is expected to be in the range of $180 million to $185 million, representing 35% growth on a yearly basis at the midpoint. Adjusted EBITDA is expected to be in the range of $52 million to $54 million representing 15% growth on a yearly basis at the midpoint. We expect our fully diluted share count to be approximately $1.15 billion shares. For full year 2022 due to the factors I just mentioned, we are slightly reducing our guidance for the year. We expect total revenue to be in the range of $750 million to $780 million compared to $790 million to $820 million previously, representing 38% growth at the midpoint. Adjusted EBITDA is expected to be in the range of $230 to $240 million compared to $255 to $265 million previously, representing 21% growth at the midpoint. In summary, we are pleased with our first quarter results and despite our lowered guidance, we are confident in our market opportunity in the App Economy. I'm very proud of what our team has accomplished as we continue to execute and maintain market-leadership. With that, I will turn the call back to Daniel.

[Daniel Amir:]

Thank you, Assaf. Before we open the call for questions, we'd like to share answers to three questions that we've gotten from analysts that we think might be of interest. Afterwards, we will go to your live questions. The first question comes from Dylan Becker at William Blair. The question is, how much of growth in large customers comes from the ability to leverage tools like ironSource that require significantly less capital for developers to get up and running? We've seen more and more successful businesses established across app stores than ever before, and that's being enabled by products like yours. But how are you thinking about this broader tailwind in ironSource positioning here? Tomer, this question is for you. Thank you for your question. I also see the software company for app developers. While it will become easier than ever to create an app, it has also become harder than ever to commercialize an app. Today, there are over 4.7 million apps that closed the App Store, but only very few are successful. That's why Sonic Solutions suite comes in. It is built to help developers launch, grow, and scale their apps into successful businesses. Our platform allows developers to focus on creating great apps and content while we provide the infrastructure for their business expansion. This past quarter, we had 397 large customers, which is a 36% deal over a year increase. The growth in our large customers is largely attributed to our lean and expense strategy, which we had highlighted in the prepared remarks. The success of the strategy is illustrated by the fact that the majority of our large customers use both our user acquisition tools and our monetization tools. Our future positioning is focused on two areas. First, we aim to expand our software offering within our platform. Second, we aim to expand our reach into new markets to attract new customers. In expanding our software offering, we have taken both an organic and inorganic approach. Our publishing solution is an example of a product which we developed in-house that in two years has become one of the largest game publishing solutions in the markets.

[Assaf Ben Ami:]

Our Luna platform is evidenced of a new product offering that is based primarily on two acquisitions that we did last year, Luna and Bidalgo, which we believe significantly expands our overall TAM with marketing software. Therefore, you should expect that going forward, we will continue to strive to innovate and expand our product offering to address our customer needs. In expanding into new markets, we currently see a big opportunity in Apps Beyond Games. While still in its early days, Apps Beyond Games are an important growth equalizer in a long-term TAM of $50 billion that we highlighted last quarter. Our platform-based approach is relevant to the whole App Economy and many of our UAN monetization tools are relevant for Apps Beyond Games as well. We believe that there is an opportunity to increase penetration into Apps Beyond Games like social, e-commerce, lifestyle, and utilities, which are areas we have identified that could use our tools for user acquisition, or our expanding into ads as a source of revenue. In terms of revenue size, as we mentioned before, 10% of our Sonic sales and almost all of our Aura sales come from Apps Beyond Games. We believe that share will likely increase in 2022 and we are excited about this opportunity in years to come.

[Daniel Amir:]

The next question comes from Eric Sheridan at Goldman Sachs, "With fingerprinting become an increasing focal point within the broader app ecosystem, can you help us better understand how much exposure ironSource has to which should Apple start to police it? And how do you view the Aura system as a way to differentiate yourself among an ever evolving app ecosystem? " Tomer, this question is for you.

[Tomer Bar-Zeev:]

Thank you, Eric, for your question. Well, one of the platforms that have benefited from the release of the app tracking transparency framework, or ATT by Apple in iOS 14.5, we do not know what Apple's plans are with respect to the continuing evolution of ATT and how such plans will take effect, if at all. However, we believe that we have already demonstrated our ability to quickly react and adjust to changes introduced by Apple. One reason for our ability to quickly adapt is that our model is predominantly based on contextual data. This is combined with additional key elements in the success of our platform, our scale and breadth of offering. As we previously mentioned, ironSource gets app - centric data from a number of different sources on the platform which is different from others in the industry. First, our SDK is widely used, and last quarter 89 of the top 100 games in the U.S. used the ironSource platform. Almost every major game developer uses our solution. Second, our Aura solution suite has been integrated with over 1.1 billion devices globally, giving us significant device level data. Third, will able to leverage first party data from our publishing software, which has generated more than 2 billion downloads to date. While we continue to work with attribution solutions provided by our app partners, we're one of the few platforms that have been able to successfully work with one of the components of Apple's a CT scan. In fact, in many cases, we're actually seeing higher level of our attributed installs when looking at scanning installs compared to installs of MMPs, the attribution companies. Therefore based on our experience to date, we believe in our continued ability to quickly react and adjust to changes while leveraging our advantages. As it relates to the second part of your question on Aura. Aura enabled cellphone operators to enrich the device experience by creating new engagement touch points that deliver relevant content to the users. This touch points occur across the entire life cycle of a device. From the time a user first set up their new device until they trade it in. Aura provides an on-device distribution channel for app developers, as well as a platform to expand the adoption of content and services for telecom operators. As I just mentioned, Aura has been integrated on over 1.1 billion devices globally, giving us significant device level data that puts us in a unique provision to perform targeting an attribution that it's not based on common device identifiers such as Google Advertising ID, but based on proprietary or a device useful information.

[Daniel Amir:]

The next question comes from Colin Sebastian at Baird. The question is, can you update us on the progress with integrating recent acquisitions, and what is your view on the outlook for further M&A and market consolidation? Tomer, this question is for you.

[Tomer Bar-Zeev:]

Thank you, Colin, for your question. We're very pleased thus far for the integration of Bidalgo and Tapjoy. Bidalgo integration is essentially complete and it's part of the re-branded Luna platform that we announced during the quarter. Bidalgo's marketing software solution fits well with the automated, upgraded production and management solution that together comprise the overall Luna platform. We've been in front of many customers in recent months, and thus far the reception has been going well. The Tapjoy integration is far along and we're happy to see that it's going as planned. We're combining products and integrating the platform in order to provide a clear offering to customers. We are moving to common collaboration in engineering platforms, as well as common ERP, , and CRM systems while also looking at consolidating facilities. Overall, ironSource has a proven track record of identifying, acquiring, integrating, and growing acquisition. And we remain excited by our inorganic growth prospects, which will complement our ongoing organic growth initiatives. With regard to the second part of your question on overall market consolidation; the consolidation of the gaming industry is natural for an industry at this stage of growth. It continues the trend we've seen in recent years, but at louder scale. Economies of scale in the gaming industry are critical, and that has been the driving force. As we look at the industry, we may also see new players entering these market and acquiring game developers to build franchises, which is a trend we have not seen much in the past. Our view on consolidation is that it will lead game developers to further focus on what they do best, which is to create great games. So further consolidation will only strengthen our provision in the market as we have seen over the past few years. More broadly, the industry is moving towards using platforms. Given our machine learning algorithms, scale and breadth of available solutions, we continue to predict the Tier 1 gaming companies will increase businesses with us over time. We therefore believe that we will see further consolidation on the platform side and see ourselves as their market consolidators, as more players have more difficulty to compete.

[Daniel Amir:]

Thank you, Tomer. With that, we will now open the floor to your questions. Operator.

[Operator:]

Thank you. Our first question comes from Stephen Ju of Credit Suisse. Stephen, your line is now open.

[Stephen Ju:]

All right. Thank you. Assaf, any other detail that you can add in terms of the software outlook for the full year between Sonic or Supersonic? I get that these are all interconnected or any other commentary you can offer in terms of what you may be seeing from a regional softness perspective. And Tomer, the Sweatcoin example that you had on the deck is pretty interesting. It seems like more app developers who primarily rely on subscriptions or other consumer payments should adopt some form of ad driven strategy to supplement the earnings. So there's a free-to-play example, but would even Netflix talking about adding ad supported consumer offerings. It seems that more developers should be thinking along these lines. So can you talk about, I guess the opportunity that theoretically, the incremental inventory could provide for you as well as potential challenges from a supply and demand perspective of inventory and add dollars. Thanks.

[Tomer Bar-Zeev:]

Steve. This is Tomer, thanks for joining today. I will let Tomer address your second part of the question and then I will address the first part.

[Omer Kaplan:]

Thanks, Tomer. And hi Stephen, thank you for the question. And when you're looking at the FDA Beyond Games opportunity, we're extremely excited about this. And we divided into two segments. First of all there is the business of today. products today already provide great value for Apps Beyond Games. Both the new A and on Headwind utilization. It represents about 10% of Sonic and most of all our revenues already in, and we expect these to continue and grow. But like you said, there is a huge opportunity here around the business of tomorrow. Like I'm sure that many of you heard about Netflix comments about releasing an ad-supported version. That is the Sweatcoin example that -- that we spoke about. And in general, what we're doing is think about the concept of doing ad-supported payments for any transactional or subscription apps that have massive scale. You can watch Netflix for one day or get Uber miles by competing offers from other games apps or advertisers. We already have many examples. We see that work. We have the best technology to support this at massive scale. And we think of this has creating a transaction engine for the App Economy and are very excited and bullish about this direction, exactly what you said about Netflix.

[Tomer Bar-Zeev:]

Cool. So Stephen, on your first part of the question regarding guidance, so some additional color to help you guys understand our review ahead of the guidance -- the updated guidance we provided. So across everything that we do here in ironSource, you've -- over the last few quarters, you've -- I hope you got a feeling of our approach to guidance. And it's a very prudent and transparent one, and it will continue to be so. And while we don't see any core indications of declining in the performance of the platform, our business model is really aligned with the customers we serve. Meaning when they generate more revenues, we also generate more revenues most of our business model is based on RevShell. And given some of the gaming companies out there, which all our customers that have communicated lower growth rates due to macroeconomics and other reasons. We believe that the responsible thing to do here is to take that into consideration. This is why we ultimately decided to slightly lower our guidance, our outlook by 5% to make sure we take into consideration what's happening out there in the macroeconomics. So again, we don't see a slowdown in the platform or any indication in the called KPIs, but we want to be prudent and try to anticipate any potential effect due to the part of the day they guided some lower numbers going forward. And finally, I would say that I would add that we are a very profitable company with EBITDA margins greater than 30%, and we intend to focus on that. I'm reminding you all, we guided that in the long-term our EBITDA margins would be in the mid-40s. We've already been in the 40s and we plan to continue balancing with -- between top-line growth and profitability with a higher emphasis on profitability, and continue monitoring macroeconomic developments and what's happening with our customers in the next few quarters.

[Operator:]

Our next question from Matthew Cost of Morgan Stanley. Matthew, your line is now open.

[Matthew Cost:]

Hi, everyone. And thanks for taking the question. Just a follow-up there on the guidance, understanding, I think you're very clear about how things in Q1 and so far you're not seeing any indications in the core KPI s of a slowdown. When you think about the rest of the year and the macro environment, what's sort of macro environment does your guidance contemplate? Because if I look at the guide, I think you just averaged it over four quarters. It implies total revenue more or less staying flat between here and the end of the year. It's the backdrop for that a weakening environment where you're continuing to gain share? Is it a flat environment? What are you assuming that there's a lot of pressure on your customers between here and the end of the year, just out of prudence? What is the macro backdrop of your guidance? Thank you.

[Tomer Bar-Zeev:]

Sure. Hey, Matt. So again, to add additional color on that, we in Q1, and we believe that also in the next quarters, we believe we will continue gaining market share. We've seen it very strong in Q1 and we believe this will continue to be the case, all the indications in the platform show that. What I referred to earlier about macro environment is we assume that the reports, the guidance by some of the gaming companies out there, some weakness in their guidance is mostly around their ability to invest in user acquisition, that might go down. That's our assumption again based on macroeconomics, and we don't know yet if this will happen for sure, right? But we are trying to be again, as I said earlier, prudent and conservative in a way, taking that into consideration, and it really depends on their ability to continue growing and investing, how aggressive they can be, how many new titles they will release, how the general market will look like as for that. But again, to emphasize, we see strong market share final sources, we seeing increase across all the different areas in the platform in our ability to grow market share, but we are conscious of the guidance that they gave and we want to take that into account while continuing our style for guidance and being very prudent and careful ahead of future quarters.

[Matthew Cost:]

Thank you.

[Operator:]

Thank you, Matthew. Our next question comes from Tim Nollen of Macquarie. Tim, your line is now open.

[Tim Nollen:]

Hi. Thanks. Maybe I'll ask a question about Aura. If you could please help us understand what the market penetration opportunity is in the markets where you operate there, uh, and then there a sort of a market penetration taker, you could give us like what percentage of devices or cooperators or whatever are you on? And what type of growth in that penetration rate do you think you could see overtime? The 1.1 billion device number I think you mentioned just now in Q1, is that the same as the number you gave for Q4? And is that number rising? Thanks.

[Assaf Ben Ami:]

At the moment, we'll let you take this one.

[Tomer Bar-Zeev:]

Sure. Hi Tim, Thank you. I don't think we updated our accumulated Aura device installs, but it is growing, it's growing significantly. And basically for us again, there's two growth drivers for us. The first is simply continuing to add additional touch points to our existing customers. This is something that drives unit economics growth that is very significant and is something that is going across all of our partners. Unit economics are growing dramatically. And the second is of course, on-boarding new customers. And again, we haven't released the actual names and this is because of marketing reasons on the Telco side, it will be hopefully approved soon. But we have on boarded major new Telco's significant ones across the world, and we also on/boarded additional OEMS, so we're very pleased with our pipeline of new customers, and it's going to continue to grow for the foreseeable future.

[Tim Nollen:]

Given that you don't necessarily have a lot of direct competition in the markets where Aura is already established, or is building a presence, is there still a lot of runway to add further penetration of devices for Aura in those countries?

[Assaf Ben Ami:]

Yes. The main thing that is slowing us down a bit compared to, I would say our work with on the developers side, is simply the rates that telcos adopt and release in new features of our platform. There again, a bit more prudent and a bit more slow in increasing touch point. So again, the main growth driver for us is new touch points within our existing customers. We have grown in our unit economics since we started in hundreds of percent. And we see no cap to that in terms of new product, new features so we can deploy within our existing telco partners. In additional again today and this is the feedback that we're getting from customers, we are the best solution in the market for telecos to engage our users on device. And we have significant number of telecos both in the U.S. and outside of the U.S. that will eventually adopt our solutions. Again, some have already -- are already live and we'll announce them soon. Big companies with a -- that are selling a lot of devices. So the growth is, again, I would -- if you want me to quantify it, I would say our future growth is maybe 30%, 40% new customers and 60% from increasing our touch points and increasing our unit economics within existing customers. And again, this can grow almost indefinitely.

[Tim Nollen:]

Okay. Yeah, that helps. Thanks very much.

[Operator:]

Thank you, Tim. Our next question comes from Jason Bazinet of Citi. Jason, your line is now open.

[Jason Bazinet:]

So I guess this quarter we've seen unity ticked down guidance on a data issue, Apple doesn't do it because of the accounting issue related to AC606 related to MoPub, and now you guys. So all the narratives are sort of different, but the sort of odd question we're getting from clients, which I don't think is correct, but I just want to check. Is that some clients are speculating that somehow Apple having acquisition of MoPub has sort of injected some sort of headwinds for everyone else in the industry. And I don't think that's correct, because I think it's just doing mediation, but I guess if you could comment on that narrative, that's sort of swirling around the street, I think that would be helpful to clients. Thanks.

[Tomer Bar-Zeev:]

Sure. Hey, Jason. Thanks for the question. I think it's an important one. I don't want to comment about what unity guided and up that has been guided, but I can reiterate what I just said earlier. We truly don't see any indications in the platform for slowing down on numbers of future growth and you've seen the results in Q1 that were very strong. But I think it is very important to take into consideration the macroeconomics. Meaning it's quite clear to everyone that it's either we are in or we're entering a recession of some sort. And that cannot be -- that cannot have a zero effect out there. So I think it's -- this is why I think some of the gaming companies out there lower their guidance. And that will have an implication also on the platforms. Specifically on your question on MoPub, so MoPub is a mediation platform that AppLovin acquired. And I can tell you that in the last quarter, for example, in Q1, specifically on the mediation, we grew our share of voice by 15% quarter-over-quarter. Meaning it didn't slow us down, quite the opposite because some of the MoPub -- previous MoPub customers had to move, had to migrate to other mediations and some of those migrated to our mediation, so it didn't -- so was done quite the opposite, to be honest. So I don't think that is the reason. I think the reason for our slightly lower guidance 5% is strictly and directly connected to our view about potential macro effects and our approach to you guys, and to our investors. Well, we have been and we will continue being responsible, prudent, and have a very transparent dialogue with the investors.

[Jason Bazinet:]

We appreciate that. Thank you very much.

[Operator:]

Thank you for your question. Our next question comes from Bernie McTernan of Needam & Co. Bernie, your line is now open.

[Bernie McTernan:]

Great. Thanks for taking the question. I was commenting that you're hearing from other gaming companies that are weakening their guide but are you seeing anything on the Supersonic business that's weaker? Just wondering because since you're running your own publishing platform, is there is anything to read in what you're actually seeing in your results that would impact the guidance.

[Tomer Bar-Zeev:]

Hey, Bernie. Omer will take you this one.

[Omer Kaplan:]

Sure. Thanks Bernie. So we launched our publishing software of Supersonic in February 2020 and we've seen great success with it. Since inception, Supersonic published about 50 games and they've been downloaded more than 2 billion times. And when we look into 2021, we became the third biggest publisher in the U.S. in terms of downloads. Q1 has also been extremely successful, color mentions an example, an indie developer that used Supersonic was the most downloaded hyper-casual game in the world. And Supersonic is actually -- we look at that, the publishing software, we look at that as really a great demonstration of the power of our software and our platform, because when an indie developer is using Supersonic, they're basically using all of our different solutions, all of our different capabilities, and despite what we spoke, despite the fact that we are seeing some minor decreases and maybe some lower margins on some gaming companies, indie developers who are using Supersonic are seeing great success that is over performing that maybe potential slight decline in the ecosystem. So that's a great example of how our technology provide great value and great margin for partners.

[Bernie McTernan:]

Understood. And then since you're not seeing anything necessarily impact your core business yet, is it fair to assume that maybe the investment levels, the kind of the organic investments you guys are making in the company are continuing at a normal rate? So it's a pullback on a potential macro issue on the guide, but you're still investing. Would there be -- if there was a real macro hitting the revenue of the business, would you take a more aggressive approach in pulling back on some investments?

[Tomer Bar-Zeev:]

Bernie, so that was what I was referring to earlier. So we've previously mentioned that for forever and ever since inception, our sources have been focused on topping growth. We've been growing tremendously fast, but forever and ever would be in a very, very profitable company with EBITDA margins consistently above 30% and sometimes touching the 40% even exceeding it. And we said that long-term, we will reach the mid forties EBITDA margins. We are constantly monitoring what's happening out there. And if we see increased macro effect, if we see increased slowdown in -- we would adjust and we will focus primarily on EBITDA. We think that our EBITDA margins -- consistent EBITDA margin are one of the key reasons for our success and robustness in such a strong balance sheet that helps us and enable us being very strong both organically and non-organically being market consolidators. And we will, of course, adjust. In that case, we will reach higher multiple -- higher EBITDA percentages soon or rather than originally planned.

[Bernie McTernan:]

Got it. Thanks for defining a point on that, Tomer.

[Operator:]

Our next question comes from Colin Sebastian of Baird. Colin, your line is now open.

[Sebastian:]

All right, thanks. Good morning and good afternoon. I'm just curious. We're seeing a pretty significant shift in time spent on social platforms, such as -- obviously TikTok is gaining a lot of share. I'm curious how your platform performs with those types of structural changes in the audience -- in the components of the audience and with respect to mobile gaming app install ads? Those tend to be different across those platforms. But do those shifts represent more of a risk or an opportunity for the platform overall? Thanks.

[Tomer Bar-Zeev:]

Hey Colin, good to have you. Omer, I'll let you take this one.

[Omer Kaplan:]

Sure. Thanks, Colin for the question. I think that what we're seeing, and it's really important, is that despite what we're speaking about potential softness with some of our gaming partners, we still see users playing games at the same rates. We still see them continue to install games. We still see high usage time. And you'll still seeing them spending a lot of their time on mobile games and we believe that that will only continue and grow. So we don't see any impact which is related to differences in usage of social platforms.

[Operator:]

Thank you. Our next question comes from Bhavan Shah of Deutsche Bank. Bhavan, your line is now open.

[Unidentified Analyst:]

This is Dan also Bhavan thanks for taking the question. I wanted to ask, well, you mentioned you've recently launched Luna Search Ad. I'm curious what's been the feedback so far and the adoption for customers. And how should we think about the opportunity more broadly with Apple Search Ads and how large is this becoming as a portion of your customers overall ad budgets?

[Assaf Ben Ami:]

Yeah, Tomer I'll take the question. Thank you. And you have -- so we will see in graded option for our fall product. It's part of the overall Luna cross-channel marketing software, which means that now our customers can manage all of their advertising on all of the channels. And we just launched a new tools specifically aimed for managing the advertising on Apple by Apple Search and the other Apple advertising, and then we are seeing great adoption by it. We actually launched many unique features around it including automation of the process and things that provide great value for customers, and we are seeing great adoption. In general, we do see an increase in the Apple advertising activity and we're making sure that will be the platform of choice for customers to manage and optimize their activity with advertising.

[Operator:]

Unfortunately we have run out of time for today's Q&A session. I would love to pass call back over to Daniel Amir for any closing remarks.

[Daniel Amir:]

Thank you all for listening to the call today. We're planning to participate in a number of conferences this quarter. Needham, Wedbush, Oppenheimer, Jefferies, Baird, and William Blair. So we have a lot of conferences and we hope to see you all in these conferences, and thank you and have a great day. Thanks for dialing in.

[Operator:]

Ladies and gentlemen, this concludes today's call. You may now disconnect your lines.