Nexxen International Ltd. (NEXN) Earnings

Management highlights

- Strategic Focus & Competitive Positioning - Management frames the company's competitive advantage as built on an end-to-end integrated platform with proprietary data, exclusive media assets, and open interoperable technology, rather than standalone AI capabilities. Next.ai is positioned as a long-term strategic growth engine, not just an efficiency tool. - Core long-term priorities are accelerating enterprise customer adoption, growing CTV leadership, expanding mobile in-app footprint, enhancing data capabilities, and advancing AI innovation through Next.ai. - Product & Platform Innovation - Launched an updated DSP UI and enhanced Next.ai DSP assistance, which have seen growing enterprise customer usage and improved performance. Deepened integration between the DSP and Nexen Discovery (proprietary audience insights/segmentation solution) to help customers identify and activate new audiences. - Enhanced first-party data onboarding to cut time from audience upload to activation to 24 hours, paired with an improved unified identity graph to simplify campaign execution and boost effectiveness. - Announced Next.ai Interoperability, enabling Nexen AI agents to connect with external AI tools via open standards, allowing customers to access Nexen's data and activation capabilities directly from their existing AI ecosystems. - AI now supports approximately 95% of software development efforts, speeding up new product delivery and improving operational efficiency. - Customer Growth & Momentum - Enterprise spend grew over 25% year-over-year in Q2 2026; the number of active advertisers through enterprise customers increased from under 400 in Q2 2025 to over 750 in Q2 2026, with most customers adopting multiple platform solutions. The customer pipeline remains strong. - CTV growth is broad-based across integrated technology solutions, exclusive data assets, and premium media; momentum has continued into Q3 2026. Nexen TV Home Screen (the first programmatic CTV home screen ad solution) has strong partner pipeline and is expected to begin meaningful revenue contribution in Q4 2026, ramping through 2027. - Mobile in-app revenue grew strongly year-over-year in Q2, with momentum continuing into Q3, supported by key integrations like Unity; mobile in-app remains a durable long-term growth driver. - The company expects incremental H2 2026 revenue from the U.S. midterm election political advertising cycle. - Organizational Updates - Promoted Chance Johnson (former Chief Commercial Officer) to President, Cara Fucinelli (former Chief Customer Officer) to Chief Commercial Officer, and Ken Su (former Chief Strategy Officer) to Chief Business Officer to unify commercial execution and accelerate growth across core segments.

Guidance

- Management raised full-year 2026 Contribution X-TAC guidance to a range of $388 million to $402 million, up from the prior range of $385 million to $400 million, representing ~12% year-over-year growth at the midpoint. This is the third upward guidance revision so far in 2026, with the midpoint growth estimate increased from 8% to 12% since initial guidance in March. - Full-year 2026 programmatic revenue guidance was raised to a range of $380 million to $393 million, up from the prior range of $377 million to $391 million, representing ~13% year-over-year growth at the midpoint. The midpoint growth estimate was increased from 10% to 13% since initial March guidance. - Full-year 2026 adjusted EBITDA guidance was maintained at $122 million to $132 million, representing ~10% year-over-year growth and a 32% margin on a Contribution X-TAC basis at the midpoint. The reaffirmation reflects management's plan to continue investing in strategic growth initiatives in H2 2026. - Management reaffirmed a long-term target of 40% adjusted EBITDA margin, and projects the margin will reach ~34% in 2027 as AI-driven operational efficiencies become more material.

Segment performance

Q2 2026 total Contribution X-TAC was $97.8 million, an 11% year-over-year increase; Programmatic revenue was $95.2 million, up 12% year-over-year, both Q2 records. CTV: All-time record quarterly revenue of $37.8 million, up 33% year-over-year, representing ~40% of total programmatic revenue. Mobile: Revenue increased 23% year-over-year. Data products: Contribution X-TAC increased 46% year-over-year. Display: Contribution X-TAC increased 18% year-over-year. Desktop: Revenue declined 13% year-over-year. Non-programmatic business lines: Contribution X-TAC declined year-over-year; the company initiated a strategic wind-down of the non-programmatic influencer marketing business Rhythm Influence during the quarter. Adjusted EBITDA was $27.6 million, with a 28% margin relative to Contribution X-TAC. Non-IFRS diluted earnings per share was 23 cents, compared to 29 cents in Q2 2025. Operating cash flow was $61.3 million, up from $17.4 million in Q2 2025.

Risks & headwinds

- Forward-looking statements are inherently subject to risks and uncertainties, including unexpected changes in business conditions, macroeconomic trends, and industry dynamics that could cause actual results to differ materially from projected guidance. - Approximately 20-25% of the company's employees are based in Israel, so unfavorable fluctuations in the U.S. dollar to Israeli new shekel exchange rate increase operating costs; this FX impact added ~$2.5 million in unexpected costs in the first half of 2026. - Integration of new products and partnerships, such as Nexen TV Home Screen OEM and demand partner integrations, takes longer than expected to ramp to meaningful revenue contribution. - Acquisitions carry the potential for business disruption if not properly integrated alongside core operations.

Analyst Q&A

• Q: What has driven CTV's recent strong growth, and how durable is this growth rate? /

  A: Growth stems from three core factors: improved overall execution bringing more demand sources to the platform, incentives driving enterprise customers to allocate more budget to Nexen's CTV inventory, and new data and native programmatic CTV ad initiatives generating strong partner interest. CTV growth is broad-based, not concentrated in one area, and the company will continue prioritizing CTV expansion to sustain momentum. The new Nexen TV Home Screen product is not yet contributing meaningfully to current growth, so it represents future upside starting in Q4.

• Q: Why did you raise revenue guidance but maintain EBITDA guidance, and what is the outlook for margin expansion? /

  A: The maintained EBITDA guidance reflects intentional, strategic investments in AI, data, infrastructure, go-to-market capabilities, and strategic partnerships to capture long-term market share. Additional unanticipated cost from unfavorable U.S. dollar/Israeli new shekel exchange rate fluctuations also accounts for the delta between higher revenue and flat EBITDA guidance. Management reaffirms a long-term 40% EBITDA margin target, and expects margins will reach ~34% in 2027 as existing efficiency investments become more material.

• Q: How does Next.ai drive incremental revenue rather than just internal efficiency? /

  A: Next.ai improves campaign outcomes for customers on the Nexen platform, leading existing customers to shift more of their overall advertising budget to Nexen from competing providers. It also helps the company onboard new enterprise customers by demonstrating improved results compared to competing offerings, and enables better monetization of Nexen's existing end-to-end platform assets. Nexen's AI advantage comes from its deep integration into the company's full stack of proprietary data and media, rather than being a standalone tool.

• Q: What is the current status of M&A planning, and what types of targets are you pursuing? /

  A: The company has sourced and shortlisted potential acquisition targets that are small, non-disruptive, and complementary to core growth areas including CTV, mobile in-app, and AI. Management expects to close an acquisition within the next 6 to 9 months, after completing integration of the company's prior major acquisition and reaching a strong core execution position. The company prioritizes internal reinvestment and disciplined M&A over share repurchases currently, given the strong returns generated by internal investment.