TIDMTRMR
RNS Number : 1799I
Tremor International Ltd
31 March 2020
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
31 March 2020
Tremor International Ltd
("Tremor" or the "Company")
Full Year Audited 2019 Results
- Tremor now focused on end-to-end video advertising solutions
- Delivered adjusted EBITDA of $60 million in FY 2019
Tremor International Ltd (AIM: TRMR), a global leader in video
advertising technologies, announces its full year results for the
year ended 31 December 2019.
Financial Highlights
-- A strong performance from Tremor's brand advertising
activities continued to drive profitability
-- Revenues of $325.8 million, up 18% (2018: $276.9 million),
underpinned by the acquisition and integration of RhythmOne plc
offsetting the decline in the performance-based division
o Revenue split by division: Branding: $248. 5 million;
Performance: $77. 3 million (2018: Branding $146.0 million,
Performance $130.8 million)
o Revenue from Connected TV ("CTV") grew from $2.2 million in Q1
2019, to $18.1 million in Q4 2019, total year of $31.9 million
-- Gross profit increased by 24% to $138.5 million (2018: $111.4 million)
-- Increase in gross margin to 42.5% (2018: 40.3%) resulting
from enhanced synergy and operational leverage in the branding
activity
-- Adjusted EBITDA* increased 37% to $60.4 million (2018: $44.1
million), as management focused on brand advertising.
-- Reported EPS of 5.6 cents (2018: 32.81 cents) and Adjusted
Diluted EPS of 37.05 cents (2018: 52.36 cents)
-- Net cash inflow from operating activities of $ 45.1 million (2018: $37.5 million)
-- Net cash as at 31 December 2019 of $76.9 million*** (31
December 2018: net cash of $54.4 million), this strong cash
position was delivered post the $25 million share buyback programme
during 2019 and $5 million of data pre-payments for 2020.
-- Business remains highly cash-generative with a strong balance sheet
*Adjusted EBITDA is defined as earnings before interest, taxes,
depreciation and amortisation, non-recurring income/expenses and
share-based payment expenses.
** Net cash is defined as cash and cash equivalents less short
and long-term interest-bearing debt including capital and finance
leases
Operational Highlights
-- Tremor is now an established digital video advertising
technologies business of real scale with an end-to-end technology
stack
-- Completed integration of RhythmOne, delivering $ 40 million
of cost savings (annualized) thanks to operational synergies (
payroll, data centers, rent and R&D tools)
-- Launched a number of combined product offerings, including:
o Private Marketplace Packages: provide high-quality video
supply, auction-based marketplaces
o A combined CTV solution
o The Creative Studio: dedicated team of video advertising
solution industry experts
o RhythmOne's programmatic advertising marketplace in Europe
o Introduction of a number of self-service enhancements to the
Company's existing DSP
-- Added a number of new clients including Estee Lauder, Honda
Powersports, Pinterest, Remy Martin, Symantec, Takeda, TikTok and
Twitch
-- Renewed global data partnership with Alphonso, the TV data
and measurement business, for a further two years, with data
continuing to drive Tremor's ongoing success
Post-period End / Outlook
-- In January 2020, Tremor announced the acquisition of Unruly
Ltd and a global partnership with News Corp, strengthening the
Company's focus on video
o The acquisition broadened Tremor's global footprint,
supply-side platform, customer base, and its data capabilities
o Tremor now has the exclusive right to sell outstream video to
more than 50 News Corp titles
-- COVID-19 update:
o It is too early in the outbreak of COVID-19 to fully assess
the impact on Tremor's performance and overall outlook for 2020,
but the Company will keep shareholders informed as to market
guidance as appropriate
o However, certain verticals will be more effected than others,
such as travel, hospitality and retail restaurants, whilst other
verticals such as entertainment, CPG, utility services,
pharmaceuticals, ecommerce and online services may be less
effected
o A number of initiatives are already being implemented to help
mitigate the impact of the pandemic on the Company, including
accelerating the Unruly integration, launching new initiatives and
solutions and closely monitoring Tremor's cost-base
o Much of Tremor's global workforce is successfully working
remotely, with the health and wellbeing of the Company's employees
remaining of the utmost importance
-- Despite the current uncertainty in the global economy, the
Company's business model remains strong and management is confident
Tremor's talent and market position will be maintained
-- The Company has a strong balance sheet with net cash of $76.9
million, which allows it to undertake a share buy-back of $10
million and be confident of trading through the coming period of
uncertainty
Ofer Druker, Chief Executive Officer of Tremor, commented:
"In 2019 we successfully established our business as a leading
player in video, one of the most exciting and high growth segments
within the advertising ecosystem. Clearly the RhythmOne merger has
been central in delivering this change and the success of our
strategy is reflected in the performance of our video brand
advertising division, which generated $248.6 million of high-margin
revenues in 2019.
"We have made a good start to 2020, most notably, executing on
the acquisition of Unruly, which is directly in line with our
strategy to focus on Video, CTV and data, and provides us with
further opportunities through which to drive material growth in our
core markets.
"We continue to closely monitor the impact of COVID-19 across
the world, with the health and safety of our staff of paramount
importance. As a business we remain optimistic about the long-term
prospects of the Company and we remain focused on delivering value
for all our key stakeholders."
A webcast detailing Tremor's full year results will be made
available this week on the Company's website:
https://www.tremorinternational.com/investors/
For further information please contact
Tremor International Ltd
Ofer Druker, Chief Executive Officer Tel: +972 3 545
Sagi Niri, Chief Financial Officer 3900
finnCap Ltd (Nominated Adviser and Broker) Tel: +44 (0)20
7220 0500
Corporate Finance - Jonny Franklin-Adams, James Thompson,
Hannah Boros
ECM - Tim Redfern, Richard Chambers
Vigo Communications (Financial Public Relations) Tel: +44 (0)20
Jeremy Garcia 7390 0230
Antonia Pollock
Charlie Neish
tremor@vigocomms.com
About Tremor International
Tremor International Ltd is a global leader in advertising
technologies, it has multiple core divisions: Tremor Video,
RhythmOne and Unruly.
Tremor Video helps advertisers deliver impactful brand stories
across all screens through the power of innovative video technology
combined with advanced audience data and captivating creative.
Tremor Video is one of the largest and most innovative video
advertising companies in North America, with offerings in CTV, in
stream, and in-app.
The media side of Tremor, RhythmOne, drives real business
outcomes in multiscreen advertising. Its highly ranked programmatic
platform efficiently and effectively delivers performance, quality,
and actionable data to demand and supply-focused clients and
partners.
Unruly is a strong video marketplace with more than 2,000 direct
integrations with publishers, unique demand relationships with the
world's biggest advertisers and privileged access to News Corp
inventory. Unruly works with 95% of the AdAge 100 and 82% of video
views are delivered across Comscore 1,000 sites.
Tremor International Ltd is headquartered in Israel and
maintains offices throughout the US and Canada, Europe,
Asia-Pacific and Australia and is traded on the London Stock
Exchange (AIM: TRMR).
CHAIRMAN'S STATEMENT
Tremor has entered 2020 in a strong and unique position
following a year in which management fundamentally repositioned the
business. This transformation was largely driven by the merger with
RhythmOne plc (the "Merger") and its subsequent integration and
consolidation into the group, enabling us to undergo a strategic
pivot to focus on video as our key digital advertising medium.
Clearly, the COVID-19 pandemic is having a significant global
impact. Tremor has put in place the initiatives necessary to
protect our workforce and we are taking measures to ensure the
capabilities of the Company are maintained. We will, of course,
continue to monitor the situation closely.
Tremor traded strongly throughout 2019 achieving a 18% increase
in revenues to $325.8 million (2018: $276.9 million), and a 36%
increase in adjusted EBITDA to $60.4 million (2018: $44.1 million),
with our brand advertising segment performing particularly well as
our focus on video began to come into fruition. Tremor remains
highly cash-generative, and at the year ended 31 December 2019, had
a net cash position of $76.9 million. this strong cash position was
delivered post the $25 million share buyback programme during 2019
and $5 million of data pre-payments for 2020. We are consistent in
our approach of deploying capital in the best interests of our
shareholders and we will continue to review options as a Board.
Today, we have also announced the commencement of a $10 million
buyback program. In addition, our strong cash position gives us the
flexibility to continue to evaluate select strategic acquisitions
which continues to form an important part of our growth
strategy.
One such example, is the acquisition of Unruly Group Ltd
("Unruly"), which we announced in January 2020 alongside the
exclusive partnership with News Corp. This highly strategic
transaction further augments our expert focus on video, and through
the alliance with News Corp gives us access to a roster of premium
titles globally. In addition, it provides us with a very
well-regarded brand in Unruly, from which to drive our
international growth outside North America, which is key to our
ongoing success.
During 2019 and post-period end, we announced a number of
appointments to the board and senior management in order to bolster
our leadership team. This included Ofer Druker's appointment as
Chief Executive Officer in April 2019 and Christopher Stibbs'
appointment as Non-executive Director in May 2019. In addition,
post period-end, in January 2020, we announced the addition of
Rebekah Brooks to the board as Non-executive Director (who joins
the Board as of today) as well as the appointments of Norm Johnston
as Non-Executive Director and Sagi Niri as Chief Financial Officer
who will bothjoin the Board, subject to shareholder approval, after
the upcoming Annual General Meeting. Once completed, we will have a
market-leading team with an unrivalled breadth and depth of
experience both across traditional and evolving media channels to
drive Tremor forward on our exciting growth trajectory.
Whilst we had aptly positioned the business for an exciting
2020, the COVID-19 pandemic is affecting the global economy
including business sentiment, and we anticipate it will have an
effect on our performance at least in the short-term, although it
is too early to tell the extent of this impact, however we feel
assured in the Company's capabilities, fundamentals and scale and
therefore its resilience amidst the current global uncertainty.
I would like to thank the whole Tremor team for their
contribution to-date in what has been a significant period of
change and adjustment. The board remains confident in delivering
year-on-year growth and we look forward to further updating our
shareholders as we continue to deliver on our strategy.
Tim Weller
Non-executive Chairman
30 March 2020
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
2019 was a milestone year for Tremor, as we established
ourselves as a global leader in the digital video advertising
technologies space. The merger with RhythmOne in April provided
Tremor with end to end technology capabilities, including a Media
platform with knowledge and deep business relationships in
Connected TV ("CTV"), one of the most exciting and high-growth
segments in video advertising, and Tremor is already benefitting
from this trend as demonstrated below. In addition, TV retargeting,
which has become core to Tremor in the past four years, is gaining
strong validation in the market.
We have succeeded in building a company of significant scale
with a comprehensive end-to-end technology solution, which includes
Tremor Video's demand-side platform ("DSP"), RhythmOne's exchange
and supply-side platform ("SSP"), that is CTV rich. This end-to-end
solution, puts our business at the vanguard of the space, providing
a substantial opportunity for further growth.
The acquisition of RhythmOne brought a number of strong
components and capabilities to the Company, including:
1) The RhythmOne Exchange, with a strong specialism and focus in video
2) A CTV component with a significant track-record rooted in
YuMe, a CTV focused company that was acquired by RhythmOne a year
prior to the Merger
3) A sales team and client base focused on using CTV as a medium to reach their target audiences.
4) A media business which has enabled Tremor to offer Private
Marketplaces ("PMP") to our top-tier clients who choose to work
with their preferred DSP
CTV has fast become an important element in video advertising
and today it's the driving force in the growth of the segment. In
the USA alone, the size of CTV market is growing rapidly with
advertising spend of c. $8.8 billion expected in 2020(1) .
After integrating the RhythmOne teams into Tremor and merging
the technology stack, CTV revenues grew from c. $2.2 million in Q1
2019, to $18.1 million in Q4 2019, and we expect our CTV
capabilities to form the bedrock of Tremor's growth in the short to
medium-term. In addition, RhythmOne's processes, such as accounting
policies, have been brought in-line with Tremor's.
We released our PMP product at the end of 2019 and this product,
along with the practices which are central to Unruly, which we
acquired in January 2020, will provide us with an important growth
engine in the coming years. In addition, Tremor is now able to
offer an end-to-end self-serve platform, focused primarily on CTV,
we expect to see growth in this business unit in the second half of
2020, and that it will become a key growth platform for Tremor
going forward.
The Company traded strongly in 2019, generating a 18% increase
in revenues to $325.8 million (2018: $276.9 million), and a 36%
increase in adjusted EBITDA to $60.4 million (2018: $44.1 million).
This is impressive growth, as the Taptica performance revenues
decreased, with revenues from video and branding mitigating this
well-flagged decline. Tremor also remains highly cash-generative,
with a net cash position at 31 December 2019 of over $76.9
million.
Our growth strategy continues to be underpinned by three core
components:
1) Video - the highest growth medium in digital advertising, with this trend expected to continue
-- Tremor has a sharp focus on video, which was further enhanced
through the acquisition of Unruly
2) Data - Tremor's commercial edge is bedded-in TV retargeting
-- The Company has had a leading position in this segment for
over four years and encompasses unique data sources
3) Media with an emphasis on Connected TV - our end-to-end
position is providing us with an advantage in the marketplace and
CTV is the engine of growth within the exchange
-- Tremor's presence within CTV through its now combined
RhythmOne assets is well ahead of much of the market with its
solution gaining significant traction
Video advertising market growth
The global market for digital video advertising both in the US -
a key market for Tremor - and worldwide is expected to continue to
grow markedly. Video advertising spend in the US alone is
anticipated to be c. $42.6 billion in 2020(2) . However, all
forecasts pre-date the outbreak of the COVID-19 pandemic.
These overarching market trends underpinned the Company's
strategic shift to focus wholly on video advertising and more
specifically key areas like CTV, which given the proliferation of
smart TVs and the ever-increasing number of streaming providers,
will remain an exciting growth segment. In addition, the increase
in video advertising spend globally is showing no signs of abating,
with the market anticipated to grow to over $110 billion by 2024(3)
, and importantly the shift from desktop video to mobile video
spend is also expected to continue. International expansion is
central to Tremor's strategy and we believe we are well-placed to
do so following the acquisition of Unruly.
Our proposition
Tremor's proposition is all about video, and our robust
end-to-end solutions, which is the new model for companies in this
field, enables us to offer a diverse of products to generate a
number of revenue streams. These include:
-- Direct/managed - our sales force offers two main products,
which are CTV and retargeting solutions, as well as a combination
of both
-- Private Marketplaces - we enable leading agencies that only
work with preferred marketplaces, the ability to run, including on
CTV media, and use TV retargeting segments that are connected to
our Exchange
-- Self-Serve - we offer second tier agencies a full platform to
run their video campaigns and we offer a DSP with connectivity to
our exchange and a rich CTV portfolio, as well as offering TV
retargeting and other data segments
Operational Review
Brand Advertising
Tremor's video advertising business continued to trade well in
2019, benefitting from the incorporation of RhythmOne's video
assets into the Company. The division achieved record revenues in
2019 of $248.6 million (2018: $146 million), driven by the shift of
advertising spend to digital video, as outlined above. The division
added a number of key clients during the period, including Estee
Lauder, Honda Powersports, Pinterest, Remy Martin, Symantec,
Takeda, TikTok and Twitch.
In December 2019, we renewed our partnership with Alphonso, the
leading TV re-targeting enabler in the US and Canada, for a further
two years. Tremor leverages the data collected by Alphonso to
identify and target select audiences in real time on an exclusive
basis. When combined with RhythmOne's YuMe offering, Alphonso's
data allows Tremor to maintain a leadership position in the TV
retargeting market. This also goes beyond the TV screen, as
advertising campaigns can be delivered across platforms such as
mobile, CTV, laptop and tablet, which deliver maximum impact.
Media
Tremor's media platform is one of the most robust when it comes
to video and specifically CTV. We host thousands of direct premium
publishers and also connect to the leading SSPs in the market to
grow our reach.
Our media platform received further reinforcement following the
acquisition of Unruly in January 2020. Unruly is home to over 2,000
publishers, further increasing the reach of our platform. In
addition, in Q4 2020, we launched a self-serve platform for
publishers to manage their own media with advertisers.
Introducing RhythmOne's Exchange into international markets
began in mid-2019 and was further bolstered through the acquisition
of Unruly, which has strong presence in key markets including the
UK, Germany, Australia, Japan and Singapore.
Unruly
Post period-end, in January 2020, Tremor acquired Unruly and
entered into a global partnership with News Corp. Tremor now has
the exclusive right to sell outstream video to more than 50 News
Corp titles in the UK, US and Australia.
In addition, the transaction has:
-- Transformed the Company into a global business;
-- Bolstered Tremor's supply-side platform adding 2,000 direct premium publishers;
-- Expanded Tremor's customer base, adding leading blue-chip
customers; including U7 council members with tier 1 brands
including P&G, Unilever, Nestle, American Express and
others;
-- Deepened Tremor's data and insight capabilities through
Unruly's pioneering testing and targeting solution UnrulyEQ;
and
-- Added individuals from Unruly's management that contribute
significant knowledge and experience, with Rebekah Brooks, CEO of
News UK, joining the board from today.
The integration of Unruly into the enlarged group is already
underway, and significant progress has been made in the
consolidation of operations as well as the incorporation of its
technology. Crucially, the acquisition of Unruly brought even
greater scale to the Company and strong brand recognition, which is
key as we look to capitalise on the opportunity within video
advertising technologies internationally.
Growth strategy
2019 was a year in which the Company established the
infrastructure and technology stack, from which to deliver material
growth. Looking forward, we are focused on aggressively expanding
our global customer base alongside continuing to develop our
product offering. Therefore, our growth strategy priorities are
to:
-- Drive organic growth in the US - leverage our technology
stack and business capabilities to grow market share
-- Leverage CTV expertise and capabilities - use the strong
foundations which we have established in CTV to further grow, as
evidenced by the strong growth in CTV we demonstrated in 2019 in
this segment
-- Continue to offer innovative solutions - mainly focused on
CTV, generate growth through our PMPs and self-serve solutions to
agencies and clients
-- Expand international footprint - further growing our presence
beyond the US by introducing products into relevant markets in
Europe and Asia and leveraging international operations and the
Unruly brand
-- Target select acquisitions - evaluate potential acquisition
targets in order to further broaden the user base, leveraging
Tremor's position as a consolidator in the market
Capital allocation
The Company ended 2019 with over $76.9 million of net cash after
completing the $25 million share buyback program and making a $5
million advance payment for the extension of the Alphonso
partnership. The board constantly evaluates how best to deploy the
Company's cash to maximise shareholder value.
The Company has a strong balance sheet with net cash of over
$76.9 million, which therefore allows it to undertake a share
buy-back of $10 million whilst being confident in trading through
the coming period of uncertainty.
As referenced above, the board continues to assess strategic
acquisitions alongside continued organic investment in the
business.
Outlook / COVID-19 Update
Tremor has made a solid start to 2020, however the COVID-19
pandemic will continue to cause global uncertainty in the short to
medium-term. Management is aware that the pandemic could markedly
affect a number of our end-customers and continues to monitor the
situation closely.
Management are already undertaking a number of initiatives to
help mitigate the potential impact of COVID-19 on business
performance, which include:
-- Accelerating the integration of Unruly into Tremor, which is
due to be completed faster than anticipated
-- Launching new capabilities alongside enhanced existing
solutions to capture the wider opportunities in the market
-- Monitoring the cost structure of the Company
Much of Tremor's global workforce are successfully working
remotely as a result of the current regulations. The health and
wellbeing of the Company's employees remains of the utmost
importance.
Ofer Druker
Chief Executive Officer
30 March 2020
(1) Source: eMarketer, October 2019
(2) Source: eMarketer, February 2019
(3) Source: Cowen and Company, Jan 10, 2019
CHIEF FINANCIAL OFFICER'S REVIEW
Revenues for the twelve months ended 31 December 2019 increased
by 18% to $ 325.8 million compared with $276.9 million for 2018.
Revenue split by division in 2019 was as follows: Branding
contributed $248.5 million; and Performance: $77.3 million (2018:
Branding $146.0 million, Performance $130.8 million), reflecting
the decreasing contribution from the Performance division.
Gross profit increased by 24% to $138. 5 million (2018: $111.4
million). Cost of sales, which consists primarily of traffic
acquisition and data costs that are directly attributable to
revenue generated by the Company and based on the revenue share
arrangements with audience and content partners, decreased as a
proportion of revenue compared with the prior year.
Operating profit for the year decreased by 8 8% to $3.2 million
(2018: $26.7 million), mainly due to the acquisition and
integration of RhythmOne, increased in share based payments as
demonstrated below.
Adjusted EBITDA for full year 2019 was $60.4 million compared
with $44.1 million for 2018, which is comprised as follows:
2019 2018
$'m $'m
Operating profit 3.2 26.7
----- ------
11.9
Depreciation * 1.2
----- ------
Amortization 20.5 9.6
----- ------
Share-based payments 15.8 8.0
----- ------
Restructuring cost 5.5 -
----- ------
Acquisition-related cost 2.8 0.2
----- ------
Other income 0.7 (1.6)
----- ------
Adjusted EBITDA 60.4 44.1
----- ------
*Including 9.1 IFRS 16 influence
Net Profit for the year decreased by 72% to $6. 4 million (2018:
$22.5 million).
Operating costs for the year increased by 60% as a result of the
acquisition of RhythmOne. The Company continues to selectively
invest in areas that management believe should drive better results
and business performance whilst focusing on driving efficiencies
and savings across its operations.
R&D expenses increased to $33.1 million in the year (2018:
$20.2 million). The main increase is attributed from $12.2 million
due to RhythmOne consolidation.
Sales & Marketing expenses increased to $62.1 million (2018:
$44.7 million). The main increase is attributed from $20.4 million
due to RhythmOne consolidation, offset by cost saving efficiency of
$3.0 million.
General & administrative expenses increased to $40.2 million
(2018: $19.9 million). The main increase is attributed as follows;
$5.5 million due to RhythmOne consolidation, $7.8 million from
share based payments (mainly to CEO and COO) ,$ 2.6 million due to
increase in doubtful debt allowance and $ 2.6 million increase due
to acquisition cost
The Company continued to be cash-generative with cash generated
from operating activities of $45.1 million (2018: $37.5
million).
As at 31 December 2019, cash and bank deposits were c. $79.0
million after and net cash as at 31 December 2019 of $76.9 million*
was delivered post the $25.0 million share buyback programme during
2019 and $5.0 million of data pre-payments for 2020.
Tremor has announced its intention to launch a discretionary $10
million share buy-back imminently. The share buy-back commitment
forms parts of Tremor's broader strategy to deliver shareholder
value.
Sagi Niri
Chief Financial Officer
30 March 2020
* Net cash is defined as cash and cash equivalents less short
and long-term interest-bearing debt including capital and finance
leas
Auditors' Report to the Shareholders of Tremor International
Ltd.
We have audited the accompanying consolidated statements of
financial position of Tremor International Ltd. (hereinafter - "the
Company") as at 31 December 2019 and 2018 and the consolidated
statements of comprehensive income, statements of changes in equity
and statements of cash flows, for each of the two years in the
period ended 31 December 2019. These financial statements are the
responsibility of the Company's Board of Director and of its
Management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards in Israel, including standards prescribed by the
Auditors Regulations (Manner of Auditor's Performance) - 1973. Such
standards require that we plan and perform the audit to obtain
reasonable assurance that the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
Management, as well as evaluating the overall financial statements
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated
financial position of the Company and its consolidated subsidiaries
as of 31 December 2019 and 2018 and their results of operations,
changes in equity and cash flows for each of the two years in the
period ended 31 December 2019, in accordance with International
Financial Reporting Standards (IFRS).
Somekh Chaikin
Certified Public Accountants (Isr.)
Member Firm of KPMG International
March 30, 2020
Consolidated Statements of Financial Position as at 31
December
2019 2018
--------------- ---------------
Note USD thousands USD thousands
------ --------------- ---------------
Assets
Cash and cash equivalents 10 79,047 67,073
Trade receivables, net 8 95,278 64,329
Other receivables 8 13,340 6,990
--------- -----------
Total current assets 187,665 138,392
--------- -----------
Fixed assets, net 5 3,1 32 2,879
Right-of-use assets 6 21,003 -
Intangible assets, net 7 210,285 53,605
Deferred tax assets 4 17,606 2, 383
Other long term assets 1,332 -
--------- -----------
Total non-current assets 253,358 58, 867
--------- -----------
Total assets 441,023 197, 259
========= ===========
Liabilities
Current maturities of bank loans - 12,273
Current maturities of lease liabilities 6 9,637 399
Trade payables 9 70,428 39,630
Other payables 9 27,471 14,920
--------- -----------
Total current liabilities 107,536 67,222
--------- -----------
Employee benefits 556 836
Long-term lease liabilities 6 14,632 -
Deferred tax liabilities 4 17,687 991
Liability for put option on non-controlling
interests 16(C) - 3,941
--------- -----------
Total non-current liabilities 32,875 5,768
--------- -----------
Total liabilities 140,411 72,990
========= ===========
Equity 13
Share capital 351 198
Share premium 224,692 65,305
Capital reserves 16,791 7,713
Retained earnings 58,778 51,053
--------- -----------
Total equity 300,612 124, 269
--------- -----------
Total liabilities and equity 441,023 197, 259
========= ===========
Chairman of the Board CEO CFO
of Directors
* See Note 6 regarding initial application of IFRS 16, Leases.
According to the transitional method that was chosen, comparative
data were not restated.
Date of approval of the financial statements: March 30, 20
20
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated Statements of Comprehensive Income for the Year
Ended 31 December
2019 2018
--------------- ---------------
Note USD thousands USD thousands
------ --------------- ---------------
Revenues 11 325,760 276,872
Cost of sales 187,246 165,440
--------- ------------
Gross profit 138,514 111,432
Research and development expenses 33,042 20,187
Selling and marketing expenses 62,025 44,702
General and administrative expenses 12 40,244 19,847
--------- ------------
135,311 84,736
Profit from operations 3,203 26,696
------------------------------------------------ ---- ========= ============
Profit from operations before amortization
of purchased intangibles
and business combination related expenses* 23,148 35,642
------------------------------------------------ ---- --------- ------------
Financing income 773 1,251
Financing expenses (1,088) (778)
--------- ------------
Financing income (expenses), net (315) 473
--------- ------------
Other income 700 -
Profit before taxes on income 3,588 27,169
(5, 015
Taxes on income 4 2,636 )
--------- ------------
Profit for the year 6,224 2 2 , 154
========= ============
Profit for the year before amortization of
purchased intangibles and
business combination related expenses (net
of tax)** 22,452 30, 960
------------------------------------------------ ---- --------- ------------
Other comprehensive income items:
Foreign currency translation differences
for foreign operation 139 361
--------- ------------
Total other comprehensive income for the
year 139 361
Total comprehensive income for the year 6,363 22, 515
========= ============
Earnings per share
Basic earnings per share (in USD) 14 0.0 560 0.32 81
Basic earnings per share (in USD) before
amortization of purchased 14 0.2018 0.458 5
Intangibles and business combination related
expenses (net of tax)**
Diluted earnings per share (in USD) 14 0.0 542 0.3179
Diluted earnings per share (in USD) before
amortization of purchased 14
Intangibles and business combination related
expenses (net of tax)** 0.1956 0.44 42
* Amounting to USD 19,945 thousand (2018: USD 8,946 thousand) of
amortization of purchased intangibles acquired in business
combination and related acquisition expenses.
** A mounting to USD 16,228 thousand (2018: USD 8,806 thousand)
of amortization of purchased intangibles acquired in business
combination and related acquisition expenses, net of tax.
*** See Note 6 regarding initial application of IFRS 16, Leases.
According to the transitional method that was chosen, comparative
data were not restated.
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated Statements of Changes in Equity for the Year Ended
31 December
Share Share Capital Retained
capital premium reserves* Earnings Total
-------- -------- ---------- --------- ------
USD thousands
-------------------------------------------------
Balance as at
1 January 2018 180 32,886 1,276 30,576 64,918
Total comprehensive
income for the
year
Profit for the year - - - 22,154 22,154
Other comprehensive
income - - 361 - 361
----- --------- -------- -------- ----------
Total comprehensive
income for the
year - - 361 22,154 22, 515
Transactions with
owners, recognized
directly in equity
Revaluation of liability
for
put option on non-
controlling interests - - - 4,678 4,678
Issuance of shares
(net of
issuance cost) 15 29,707 - - 29,722
Buy Back shares - (135) - - (135)
Share based payments - 25 8,012 - 8,037
Exercise of share
options 3 2,822 (1,936) - 889
Dividends to owners - - - (6,355) (6,355)
----- --------- -------- -------- ----------
Balance as at
31 December 2018 198 65,305 7,713 51,053 124, 269
===== ========= ======== ======== ==========
Comprehensive
income for the
year
Profit for the year - - - 6,224 6,224
Other comprehensive
income - - 139 - 139
----- --------- -------- -------- ----------
Total comprehensive 139 6,224 6,363
income for the
year
Transactions with
owners, recognized
directly in equity
Revaluation of liability
for
put option on non-
controlling interests - - - 1,501 1,501
Issuance of shares
(net of 184 175,166 - - 175,350
issuance cost)
Buy Back shares (41) (24,696) - - (24,737)
Share based payments - 26 16,016 - 16,042
Exercise of share
options 10 8,891 (7,077) - 1,824
Balance as at
31 December 2019 351 224,692 16,791 58,778 300,612
===== ========= ======== ======== ==========
* Includes reserves for share-based payments and other comprehensive income.
** See Note 6 regarding initial application of IFRS 16, Leases.
According to the transitional method that was chosen, comparative
data were not restated.
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated Statements of Cash Flows for the Year Ended 31
December
2019 2018
--------------- ---------------
USD thousands USD thousands
--------------- ---------------
Cash flows from operating activities
Profit for the year 6,224 22,154
Adjustments for:
Depreciation and amortization 32,359 10,808
Net financing income (19) (505)
Loss (gain) on sale of fixed assets 11 -
Loss (gain) on IFRS 16 change contracts (2,705) -
Loss (gain) on sale of business unit (700) -
Share-based payment 15,809 8,037
Income tax expense (2,636) 5, 015
Change in trade and other receivables 38,017 15,557
Change in trade and other payables (35,754) (10,580)
Change in employee benefits (290) (73)
Income taxes received 3,184 217
Income taxes paid (8,089) (12,774)
Interest received 604 381
Interest paid (942) (693)
---------- ----------
Net cash provided by operating activities 45,073 37,544
========== ==========
Cash flows from investing activities
Decrease (increase) in pledged deposits 532 51
IFRS 16 Receipt 1,669 -
Payment of earn-out - (1,218)
Acquisition of fixed assets (1,063) (1,461)
Acquisition and capitalization of intangible
assets (5,672) (1,444)
Proceeds from sale of intangible assets 6 118
Grant of short-term loans 309 -
Decrease (Increase) in bank deposit, net (57) -
Acquisition of subsidiaries, net of cash 23,714 -
acquired
--------- ---------
Net cash used in investing activities 19,438 (3,954)
========= =========
Cash flows from financing activities
Issuance of shares - 29,539
Repayment of loans (17,273) (18,195)
Buy back of shares (24,737) (135)
Proceeds from exercise of share options 1,824 889
IFRS 16 repayment (12,607) -
Dividends paid - (6,355)
---------- ----------
Net cash provided by financing activities (52,793) 5,743
========== ==========
Net increase in cash and cash equivalents 11,718 39,333
Cash and cash equivalents as at the beginning
of the year 67,073 26,985
Effect of exchange rate fluctuations on
cash and cash equivalents 256 755
-------- ---------
Cash and cash equivalents as at the end
of the year 79,047 67,073
======== =========
* See Note 6 regarding initial application of IFRS 16, Leases.
According to the transitional method that was chosen, comparative
data were not restated.
The accompanying notes are an integral part of these
consolidated financial statements.
Notes to the Consolidated Financial Statements as at 31 December
2019
Note 1 - General
A. Reporting entity
Tremor International Ltd. (the "Company" or "Tremor
International") formerly named Taptica International Ltd. was
incorporated in Israel under the laws of the State of Israel on 20
March 2007, and is listed on the AIM Market of the London Stock
Exchange. The address of the registered office is 121 Hahashmonaim
Street Tel-Aviv, Israel.
Tremor International Ltd is a global leader in advertising
technologies, it has multiple core divisions: Tremor Video,
RhythmOne and Unruly. Tremor International Ltd is headquartered in
Israel and maintains offices throughout the US and Canada, Europe,
Asia-Pacific and Australia and is traded on the London Stock
Exchange (AIM: TRMR).
On April 1, 2019, the Company completed an Acquisition
Transaction (hereinafter-"Acquisition") with RhythmOne Plc, a
company incorporated under the laws of England and Wales, whereby
the Company acquired the entire issued ordinary shares of RhythmOne
and each RhythmOne shareholder received 28 new shares of the
Company for every 33 RhythmOne shares held, so that following the
completion of the Acquisition, the Company ' s current shareholders
held 50.1% and, RhythmOne Shareholders held 49.9% of the merged
Group. In addition, as part of the Acquisition, the RhythmOne
options and RhythmOne RSUs holders rolled over the equivalent
options and RSUs over Tremor shares, see also Note 15 (3).
The consideration of the Acquisition amounted to USD 176 million
(including consideration allocated to issuance of ordinary shares
and Replacement Award).
See also Note 18B (1).
Following the completion of the Acquisition the Company executed
share buy-back program, see also Note 13A (4).
With respect to an acquisition announced by the Company
subsequent to the balance sheet date, see note 21.
Since January 2020, the Coronavirus outbreak has dramatically
expanded into a worldwide pandemic creating macro-economic
uncertainty and disruption in the business and financial markets.
Many countries around the world, including Israel, have been taking
measures designated to limit the continued spread of the
Coronavirus, including the closure of workplaces, restricting
travel, prohibiting assembling, closing international borders and
quarantining populated areas. Such measures present concerns that
may dramatically affect the Company's ability to conduct its
business effectively, including, but not limited to, adverse effect
relating to employees' welfare, slowdown of commerce, travel and
other activities which are essential and critical for maintaining
on-going business activities. Given the uncertainty around the
extent and timing of the future spread or mitigation of COVID-19
and around the imposition or relaxation of protective measures, the
Company cannot reasonably estimate the impact to its future results
of operations, cash flows or financial condition; infections may
become more widespread and the limitation on the ability to work,
travel, as well as any closures or supply disruptions, may be
extended for longer periods of time and to other locations, all of
which would have a negative impact on the Company's business,
financial condition and operating results. In addition, the unknown
scale and duration of these developments have macro and micro
negative effects on the financial markets and global economy which
could result in an economic downturn that could affect demand for
the Company's products and have a adverse effect on its operations
and financial results, earnings, cash flow and financial
condition.
B. Definitions
In these financial statements -
(1) The Company - Tremor International Ltd. (former name: Taptica International Ltd.)
(2) The Group - Tremor International Ltd. and its subsidiaries.
(3) Subsidiaries - Companies, the financial statements of which
are fully consolidated, directly or indirectly, with the financial
statements of the Company.
(4) Related party - As defined by IAS 24, "Related Party Disclosures".
Note 2 - Basis of Preparation
A. Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRS).
The consolidated financial statements were authorized for issue
by the Company's Board of Directors on March 30, 2020.
B. Functional and presentation currency
These consolidated financial statements are presented in USD,
which is the Company's functional currency, and have been rounded
to the nearest thousands, except when otherwise indicated. The USD
is the currency that represents the principal economic environment
in which the Company operates.
C. Basis of measurement
The consolidated financial statements have been prepared on a
historical cost basis except for the following assets and
liabilities:
-- Deferred tax assets and liabilities
-- Put option to non-controlling interests
-- Provisions
For further information regarding the measurement of these
assets and liabilities see Note 3 regarding significant accounting
policies.
D. Use of estimates and judgments
The preparation of financial statements in conformity with IFRS
requires management of the Group to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
The preparation of accounting estimates used in the preparation
of the Group's financial statements requires management of the
Group to make assumptions regarding circumstances and events that
involve considerable uncertainty. Management of the Group prepares
estimates on the basis of past experience, various facts, external
circumstances, and reasonable assumptions according to the
pertinent circumstances of each estimate.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future periods
affected.
Information about assumptions made by the Group with respect to
the future and other reasons for uncertainty with respect to
estimates that have a significant risk of resulting in a material
adjustment to carrying amounts of assets and liabilities in the
next financial year are included in Note 6, on leases, with respect
to determining the lease term and determining the discount rate of
a lease liability, in Note 7, on intangible assets, with respect to
the accounting of software development, and Note 18, on
subsidiaries, with respect to business combination
E. Determination of fair value
Preparation of the financial statements requires the Group to
determine the fair value of certain assets and liabilities. When
determining the fair value of an asset or liability, the Group uses
observable market data as much as possible. There are three levels
of fair value measurements in the fair value hierarchy that are
based on the data used in the measurement, as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable, either directly or indirectly
-- Level 3: inputs that are not based on observable market data (unobservable inputs).
Further information about the assumptions that were used to
determine fair value is included in the following notes:
-- Note 15, on share-based payments;
-- Note 16, on financial instruments; and
-- Note 18, on subsidiaries (regarding business combinations).
F. Initial application of new standards, amendments to standards and interpretations
(1) IFRS 16, Leases
As from January 1, 2019 (hereinafter: "the date of initial
application") the Group applies International Financial Reporting
Standard 16, Leases (hereinafter: "IFRS 16" or "the standard"),
which replaced International Accounting Standard 17, Leases
(hereinafter: "IAS 17" or "the previous standard").
The main effect of the standard's application is reflected in
annulment of the existing requirement from lessees to classify
leases as operating (off-balance sheet) or finance leases and the
presentation of a unified model for lessees to account for all
leases similarly to the accounting treatment of finance leases in
the previous standard. Until the date of application, the Group
classified most of the leases in which it is the lessee as
operating leases, since it did not substantially bear all the risks
and rewards from the assets.
In accordance with IFRS 16, for agreements in which the Group is
the lessee, the Group recognizes a right-of-use asset and a lease
liability at the inception of the lease contract for all the leases
in which the Group has a right to control identified assets for a
specified period of time, other than exceptions specified in the
standard. Accordingly, the Group recognizes depreciation and
amortization expenses in respect of a right-of-use asset, tests a
right-of-use asset for impairment in accordance with IAS 36 and
recognizes financing expenses on a lease liability. Therefore, as
from the date of initial application, lease payments relating to
assets leased under an operating lease, which were presented as
part of general and administrative expenses in the income
statement, are capitalized to assets and written down as
depreciation and amortization expenses. Furthermore, leased assets,
which were classified as finance
leases at inception of the lease and were recognized in the
statement of financial position as fixed assets, were reclassified
as right-of-use assets.
The Group elected to apply the modified retrospective approach
upon the initial adoption of the new Lease Standard by measuring
the right-of-use asset at an amount equal to the lease liability,
as measured on the transition date.
In respect of all the leases, the Group elected to apply the
transitional provisions such that on the date of initial
application it recognized a liability at the present value of the
balance of future lease payments
discounted at its incremental borrowing rate at that date
calculated according to the average duration of the remaining lease
period as from the date of initial application, and concurrently
recognized a right-of-use asset at the same amount of the
liability, adjusted for any prepaid or accrued lease payments that
were
recognized as an asset or liability before the date of initial
application. Therefore, application of the standard did not have an
effect on the Group's equity at the date of initial
application.
Furthermore, as part of the initial application of the standard,
the Group has chosen to apply the following expedients:
(1) Not separating non-lease components from lease components
and instead accounting for all the components as a single lease
component;
(2) Relying on a previous definition and/or assessment of
whether an arrangement is a lease in accordance with the accounting
principles that existed before IFRS 16 with respect to agreements
that exist at the date of initial application;
(3) Applying a single discount rate to a portfolio of leases
with reasonably similar characteristics;
(4) Assessing whether a contract is onerous in accordance with
IAS 37, Provisions, Contingent Liabilities and Contingent Assets
(hereinafter: "IAS 37") immediately before the date of initial
application instead of assessing impairment of right-of-use
assets.
(5) Using hindsight when determining the lease term if the
contract includes an extension or termination option.
The table below presents the cumulative effects of the items
affected by the initial application on the statement of financial
position as at January 1, 2019:
According According
to to
IAS 17 The change IFRS 16
-------------- -------------- --------------
USD thousands USD thousands USD thousands
-------------- -------------- --------------
Fixed assets, net 2,879 (418) 2,461
Right-of-use assets - 11,244 11,244
Deferred rent liability 185 (185) -
Lease liabilities 399 10,917 11,316
In measurement of the lease liabilities, the Group discounted
lease payments using the nominal incremental borrowing rate at
January 1, 2019. The discount rates used to measure the lease
liability range between 2.322% and 3.128%. This range is affected
by differences in the lease term, differences between asset groups,
and so forth .
(2) IFRIC 23, Uncertainty Over Income Tax Treatments
IFRIC 23 clarifies how to apply the recognition and measurement
requirements of IAS 12 for uncertainties in income taxes. According
to IFRIC 23, when determining the taxable profit (loss), tax bases,
unused tax losses, unused tax credits and tax rates when there is
uncertainty over income tax treatments, the entity should assess
whether it is probable that the tax authority will accept its tax
position. Insofar as it is probable that the tax authority will
accept the entity's tax position, the entity will recognize the tax
effects on the financial statements according to that tax position.
On the other hand, if it is not probable that the tax authority
will accept the entity's tax position, the entity is required to
reflect the uncertainty in its accounts by using one of the
following methods: the most likely outcome or the expected value.
IFRIC 23 clarifies that when the entity examines whether or not it
is probable that the tax authority will accept the entity's
position, it is assumed that the tax authority with the right to
examine any amounts reported to it will examine those amounts and
that it has full knowledge of all relevant information when
doing so. Furthermore, according to IFRIC 23 an entity has to
consider changes in circumstances and new information that may
change its assessment. IFRIC 23 also emphasizes the need to provide
disclosures of the judgments and assumptions made by the entity
regarding uncertain tax positions.
Note 3 - Significant Accounting Policies
The accounting policies set out below have been applied
consistently for all periods presented in these consolidated
financial statements, and have been applied consistently by Group
entities.
A. Basis of consolidation
(1) Business combinations
The Group implements the acquisition method to all business
combinations. The acquisition date is the date on which the
acquirer obtains control over the acquiree. Control exists when the
Group is exposed, or has rights, to variable returns from its
involvement with the acquiree and it has the ability to affect
those returns through its power over the acquiree. S ubstantive
rights held by the Group and others are taken into account when
assessing control.
The Group recognizes goodwill on acquisition according to the
fair value of the consideration transferred less the net amount of
the identifiable assets acquired and the liabilities assumed.
The consideration transferred includes the fair value of the
assets transferred to the previous owners of the acquiree, the
liabilities incurred by the acquirer to the previous owners of the
acquiree and equity instruments that were issued by the Group . In
addition, the consideration transferred includes the fair value of
any contingent consideration. After the acquisition date, the Group
recognizes changes in the fair value of contingent consideration
classified as a financial liability in profit or loss, whereas
contingent consideration classified as an equity instrument is not
re-measured.
If share-based payment awards (replacement awards) are required
to be exchanged for awards held by the acquiree's employees
(acquiree's awards) and relate to past services, then all or a
portion of the amount of the acquirer's replacement awards is
included in measuring the consideration transferred in the business
combination. This determination is based on the market-based value
of the replacement awards compared with the market-based value of
the acquiree's awards and the extent to which the replacement
awards relate to past and/or future service. The unvested portion
of the replacement award that is attributed to post-acquisition
services is recognized as a compensation cost following the
business combination.
Costs associated with the acquisitions that were incurred by the
acquirer in the business combination such as: finder's fees,
advisory, legal, valuation and other professional or consulting
fees are expensed in the period the services are received.
(2) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial
statements of the subsidiaries are included in the consolidated
financial statements from the date that control commenced, until
the date that control is lost.
(3) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements.
(4) Issuance of put option to non-controlling interests
A put option issued by the Company to non-controlling interests
that is settled in cash is recognized as a liability at the present
value of the exercise price under the anticipated acquisition
method. In subsequent periods, the Group elected to account for the
changes in the value of the liability in respect of put options in
the Equity (see also note 16(C)).
Accordingly, the Group's share of a subsidiary's profits
includes the share of the non-controlling interests to which the
Group issued a put option.
B. Foreign currency
(1) Foreign currency transactions
Transactions in foreign currencies are translated to the
respective functional currencies of the Group at exchange rates at
the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are
translated in to the functional currency at the exchange rate on
that date. The foreign currency gain or loss on monetary items is
the difference between amortized cost in the functional currency at
the beginning of the year, adjusted for effective interest and
payments during the year, and the amortized cost in foreign
currency translated at the exchange rate as of the end of the
year.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are retranslated to the
functional currency at the exchange rate on the date that the fair
value was determined. Non-monetary items that are measured in terms
of historical cost in a foreign currency are translated using the
exchange rate on the date of the transaction.
(2) Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are
translated to USD at exchange rates at the reporting date. The
income and expenses of foreign operations are translated to USD at
exchange rates at the dates of the transactions.
Foreign currency differences are recognized in other
comprehensive income and are presented in equity in the capital
reserve.
C. Financial instruments
(1) Non-derivative financial assets
Initial recognition and measurement of financial assets
The Group initially recognizes trade receivables and debt
instruments issued on the date that they are created. All other
financial assets are recognized initially on the trade date at
which the Group becomes a party to the contractual provisions of
the instrument. A financial asset is initially measured at fair
value plus transaction costs that are directly attributable to the
acquisition or issuance of the financial asset. A trade receivable
without a significant financing component is initially measured at
the transaction price. Receivables originating from contract assets
are initially measured at the carrying amount of the contract
assets on the date classification was changed from contract asset
to receivables.
Derecognition of financial assets
Financial assets are derecognized when the contractual rights of
the Group to the cash flows from the asset expire, or the Group
transfers the rights to receive the contractual cash flows on the
financial asset in a transaction in which substantially all the
risks and rewards of ownership of the financial asset are
transferred. When the Group retains substantially all of the risks
and rewards of ownership of the financial asset, it continues to
recognize the financial asset.
Classification of financial assets into categories and the
accounting treatment of each category
Financial assets are classified at initial recognition to one of
the following measurement categories: amortized cost; fair value
through other comprehensive income - investments in debt
instruments; fair value through other comprehensive income -
investments in equity instruments; or fair value through profit or
loss.
Financial assets are not reclassified in subsequent periods
unless, and only if, the Group changes its business model for the
management of financial debt assets, in which case the affected
financial debt assets are reclassified at the beginning of the
period following the change in the business model.
A financial asset is measured at amortized cost if it meets both
of the following conditions and is not designated at fair value
through profit or loss:
- It is held within a business model whose objective is to hold
assets so as to collect contractual cash flows; and
- The contractual terms of the financial asset give rise to cash
flows representing solely payments of principal and interest on the
principal amount outstanding on specified dates.
A debt instrument is measured at fair value through other
comprehensive income if it meets both of the following conditions
and is not designated at fair value through profit or loss:
- It is held within a business model whose objective is achieved
by both collecting contractual cash flows and selling financial
assets; and
- The contractual terms of the debt instrument give rise to cash
flows representing solely payments of principal and interest on the
principal amount outstanding on specified dates.
All financial assets not classified as measured at amortized
cost or fair value through other comprehensive income as described
above, as well as financial assets designated at fair value through
profit or loss, are measured at fair value through profit or loss.
On initial recognition, the Group designates financial assets at
fair value through profit or loss if doing so eliminates or
significantly reduces an accounting mismatch that would otherwise
arise.
The Group has balances of trade and other receivables and
deposits that are held within a business model whose objective is
collecting contractual cash flows. The contractual cash flows of
these financial assets represent solely payments of principal and
interest that reflects consideration for the time value of money
and the credit risk. Accordingly, these financial assets are
measured at amortized cost.
Subsequent measurement and gains and losses
Financial assets at fair value through profit or loss
These assets are subsequently measured at fair value. Net gains
and losses, including any interest income or dividend income, are
recognized in profit or loss (other than certain derivatives
designated as hedging instruments).
Financial assets at amortized cost
These assets are subsequently measured at amortized cost using
the effective interest method. The amortized cost is reduced by
impairment losses. Interest income, foreign exchange gains and
losses and impairment are recognized in profit or loss. Any gain or
loss on derecognition is recognized in profit or loss.
(2) Non-derivative financial liabilities
Non-derivative financial liabilities include bank overdrafts,
loans and borrowings from banks, and trade and other payables.
Initial recognition of financial liabilities
The Group initially recognizes debt securities issued on the
date that they originated. All other financial liabilities are
recognized initially on the trade date at which the Group becomes a
party to the contractual provisions of the instrument.
Subsequent measurement of financial liabilities
Financial liabilities (other than financial liabilities at fair
value through profit or loss) are recognized initially at fair
value less any directly attributable transaction costs. Subsequent
to initial recognition these financial liabilities are measured at
amortized cost using the effective interest method. Financial
liabilities are designated at fair value through profit or loss if
the Group manages such liabilities and their performance is
assessed based on their fair value in accordance with the Group's
documented risk management strategy, providing that the designation
is intended to prevent an accounting mismatch, or the liability is
a combined instrument including an embedded derivative.
Transaction costs directly attributable to an expected issuance
of an instrument that will be classified as a financial liability
are recognized as an asset in the framework of deferred expenses in
the statement of financial position. These transaction costs are
deducted from the financial liability upon its initial recognition,
or are amortized as financing expenses in the statement of income
when the issuance is no longer expected to occur.
Derecognition of financial liabilities
Financial liabilities are derecognized when the obligation of
the Group, as specified in the agreement, expires or when it is
discharged or cancelled.
(3) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares and share
options are recognized as a deduction from equity, net of any tax
effects.
Incremental costs directly attributable to an expected issuance
of an instrument that will be classified as an equity instrument
are recognized as an asset in deferred expenses in the statement of
financial position. The costs are deducted from equity upon the
initial recognition of the equity instruments, or are amortized as
financing expenses in the statement of income when the issuance is
no longer expected to take place.
Treasury shares
When share capital recognized as equity is repurchased by the
Group, the amount of the consideration paid, which includes
directly attributable costs, net of any tax effects, is recognized
as a deduction from equity. Repurchased shares are classified as a
deduction in Share Premium . When treasury shares are sold or
reissued subsequently, the amount received is recognized as an
increase in equity, and the resulting surplus on the transaction is
carried to share premium, whereas a deficit on the transaction is
deducted from retained earnings.
D. Fixed Assets
Fixed assets are measured at cost less accumulated depreciation.
Depreciation is provided on all property, plant and equipment at
rates calculated to write each asset down to its residual value
(assumed to be nil), using the straight line method, over its
expected useful life as follows:
Years
Computers and servers 3
Office furniture and equipment 3-17
Leasehold improvements The shorter of the lease term
and the useful life
An asset is depreciated from the date it is ready for use,
meaning the date it reaches the location and condition required for
it to operate in the manner intended by management.
Depreciation methods, useful lives and residual values are
reviewed at the end of each reporting year and adjusted if
appropriate.
E. Intangible assets
(1) Software development
Costs that are directly associated with the development of
identifiable and unique software products controlled by the Group
are recognized as intangible assets when all the criteria in IAS 38
are met.
Development costs are capitalized only when it is probable that
future economic benefit will result from the project and the
following criteria are met:
-- The technical feasibility of the product has been ascertained;
-- Adequate technical, financial and other resources are
available to complete and sell or use the intangible asset;
-- The Group can demonstrate how the intangible asset will
generate future economic benefits and the ability to use or sell
the intangible asset can be demonstrated;
-- It is the intention of management to complete the intangible
asset and use it or sell it; and
-- The development costs can be measured reliably.
In subsequent periods, these costs are amortized over the useful
economic life of the asset.
Where these criteria are not met development costs are charged
to the statement of comprehensive income as incurred.
The estimated useful lives of developed software are three
years.
Amortization methods, useful lives and residual values are
reviewed at the end of each reporting year and adjusted if
appropriate.
(2) Acquired software
Acquired software licenses are capitalized on the basis of the
costs incurred to acquire and bring to use the specific software
licenses. These costs are amortized over their estimated useful
lives (3 years) using the straight line method. Costs associated
with maintaining software programs are recognized as an expense as
incurred.
( 3 ) Goodwill
Goodwill that arises upon the acquisition of subsidiaries is
presented as part of intangible assets. For information on
measurement of goodwill at initial recognition, see Note 3A(1).
In subsequent periods goodwill is measured at cost less
accumulated impairment losses. The Group has identified its entire
operation as a single cash generating unit (CGU). According to
management assessment, no impairment in respect to goodwill has
been recorded.
( 4 ) Other intangible assets
Other intangible assets that are acquired by the Group, which
have finite useful lives, are measured at cost less accumulated
amortization and accumulated impairment losses.
(5) Amortization
Amortization is a systematic allocation of the amortizable
amount of an intangible asset over its useful life. The amortizable
amount is the cost of the asset less its accumulated residual
value.
Internally generated intangible assets, such as software
development costs, are not systematically amortized as long as they
are not available for use, i.e. they are not yet on site or in
working condition for their intended use. Goodwill is not
systematically amortized as well, but is tested for impairment at
least once a year.
The Group examines the amortization methods, useful life and
accumulated residual values of its intangible assets at least once
a year (usually at the end of each reporting period) in order to
determine whether events and circumstances continue to support the
decision that the intangible asset has an indefinite useful
life.
Amortization is recognized in profit or loss on a straight-line
basis over the estimated useful lives of the intangible assets from
the date they are available for use, since this method most closely
reflects the expected pattern of consumption of the future economic
benefits embodied in each asset, such as development costs, are
tested for impairment at least once a year until such date as they
are available for use.
The estimated useful lives for the current and comparative
periods are as follows:
- Trademarks 1.75-5 years
- Software (developed and acquired) 3 years
- Customer relationships 3-5.75 years
- Technology 3.75-5 years
- Distribution channel 3 years
F. Impairment
Non-derivative financial assets
Financial assets, contract assets and lease receivables
The Group recognizes a provision for expected credit losses in
respect of:
- Financial assets at amortized cost;
- Lease receivables.
The Group has elected to measure the provision for expected
credit losses in respect of financial assets and lease receivables
at an amount equal to the full lifetime credit losses of the
instrument.
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition, and when
estimating expected credit losses, the Group considers reasonable
and supportable information that is relevant and available. Such
information includes quantitative and qualitative information, and
an analysis, based on the Group's past experience and informed
credit assessment, and it includes forward looking information.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of
credit losses. Credit losses are measured as the present value of
the difference between the cash flows due to the Group in
accordance with the contract and the cash flows that the Group
expects to receive.
Presentation of provision for expected credit losses in the
statement of financial position
Provisions for expected credit losses of financial assets
measured at amortized cost and are deducted from the gross carrying
amount of the financial assets.
Write-off
The gross carrying amount of a financial asset is written off
when the Group does not have reasonable expectations of recovering
a financial asset at its entirety or a portion thereof. This is
usually the case when the Group determines that the debtor does not
have assets or sources of income that may generate sufficient cash
flows for paying the amounts being written off. However, financial
assets that are written off could still be subject to enforcement
activities in order to comply with the Group's procedures for
recovery of amounts due. Write-off constitutes a de-recognition
event.
G. Impairment of non-financial assets
Non-financial assets that are subject to amortization are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which an asset's
carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset's fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units).
Non-financial assets that were subject to impairment are
reviewed for possible reversal of the impairment recognized in
respect thereof at each statement of financial position date.
H. Employee benefits
(1) Post-employment benefits
The Group's main post-employment benefit plan is under section
14 to the Severance Pay Law ("Section 14"), which is accounted for
as a defined contribution plan. In addition, for certain employees,
the Group has an additional immaterial plan that is accounted for
as a defined benefit plan. These plans are usually financed by
deposits with insurance companies or with funds managed by a
trustee.
(a) Defined contribution plans
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and has no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution
pension plans are recognized as an expense in the statement of
comprehensive income in the periods during which related services
are rendered by employees.
According to Section 14 the payment of monthly deposits by a
company into recognized severance and pension funds or insurance
policies releases it from any additional severance obligation to
the employees that have entered into agreements with the company
pursuant to such Section 14. The Company has entered into
agreements with a majority of its employees in order to implement
Section 14. Therefore, the payment of monthly deposits by the
Company into recognized severance and pension funds or insurance
policies releases it from any additional severance obligation to
those employees that have entered into such agreements and
therefore the Company incurs no additional liability with respect
to such employees.
(b) Defined benefit plans
A defined benefit plan is a post-employment benefit plan other
than a defined contribution plan. The Group's net obligation in
respect of defined benefit pension plans is calculated separately
for each plan by estimating the amount of future benefit that
employees have earned in return for their service in the current
and prior periods. That benefit is discounted to determine its
present value, and the fair value of any plan assets is deducted.
The Group determines the net interest expense (income) on the net
defined benefit liability (asset) for the period by applying the
discount rate used to measure the defined benefit obligation at the
beginning of the annual period to the then-net defined benefit
liability (asset).
(2) Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided or upon the actual absence of the employee when the
benefit is not accumulated (such as maternity leave).
A liability is recognized for the amount expected to be paid
under short-term cash bonus or profit-sharing plans if the Group
has a present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and the
obligation can be estimated reliably.
The employee benefits are classified, for measurement purposes,
as short-term benefits or as other long-term benefits depending on
when the Group expects the benefits to be wholly settled.
(3) Share-based payment transactions
The grant date fair value of share-based payment awards granted
to employees is recognized as a salary expense with a corresponding
increase in equity, over the period that an employee becomes
unconditionally entitled to an award. The amount recognized as an
expense in respect of share-based payment awards that are
conditional upon meeting service vesting conditions, is adjusted to
reflect the number of awards that are expected to vest.
I. Revenue recognition
IFRS 15 replaces the current guidance regarding recognition of
revenues and presents a new model for recognizing revenue from
contracts with customers. The model includes five steps for
analyzing transactions so as to determine when to recognize revenue
and at what amount. Furthermore, IFRS 15 provides new and more
extensive disclosure requirements than those that exist under
current guidance.
The standard introduces a new five-step model for recognizing
revenue from contracts with customers:
(1) Identifying the contract with customer
(2) Identifying distinct performance obligations in the contract.
(3) Determining the transaction price.
(4) Allocating the transaction price to distinct performance obligations
(5) Recognizing revenue when the performance obligations are satisfied.
The Group earns its revenue from providing user acquisition
services by using technological tools and developments. The
Company's business is based on optimizing real time trading of
digital advertising between buyers and sellers.
The revenue is comprised of different pricing schemes such as
Cost per Mil Impression (CPM), performance based metrics that
include Cost per Click (CPC) and Cost per Action (CPA) options.
Revenue from advertising services is recognized by multiplying
an agreed amount per Mil Impression/click/ action/ ad call with the
volumes of these units delivered.
The Group acts as the principle in these arrangements and
reports revenue earned and costs incurred on a gross basis.
As from 1 January 2018, the Group initially applies IFRS 15
J. Classification of expenses
Cost of revenues
Cost of revenues consists primarily of video advertising costs,
traffic acquisition costs, data and hosting and research cost that
are directly attributable to revenue generated by the Company.
Research and development
Research and development expenses consist primarily of
compensation and related costs for personnel responsible for the
research and development of new and existing products and services
and amortization of certain intangible assets (see also Note 7).
Where required, development expenditures are capitalized in
accordance with the Company's standard internal capitalized
development policy in accordance with IAS 38 (also see Note 3E).
All research costs are expensed when incurred.
Selling and marketing
Selling and marketing expenses consist primarily of compensation
and related costs for personnel engaged in customer service, sales,
and sales support functions, as well as advertising and promotional
expenditures and amortization of certain intangible assets (see
also Note 7).
General and administrative
General and administrative expenses consist primarily of
compensation and related costs for personnel, and include costs
related to the Company's facilities, finance, human resources,
information technology, legal organizations and fees for
professional services. Professional services are principally
comprised of outside legal, and information technology consulting
and outsourcing services that are not directly related to other
operational expenses.
K. Financing income and expenses
Financing income mainly comprises foreign currency gains and
interest income.
Financing expenses comprises of exchange rate differences,
interest and bank fees, interest on loans and other expenses.
Foreign currency gains and losses on financial assets and
financial liabilities are reported on a net basis as either
financing income or financing expenses depending on whether foreign
currency movements are in a net gain or net loss position.
L. Income tax expense
Income tax comprises current and deferred tax. Current tax and
deferred tax are recognized in the statement of comprehensive
income except to the extent that they relate to a business
combination.
Current taxes
Current tax is the expected tax payable (or receivable) on the
taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date.
Deferred taxes
Deferred tax is recognized in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes.
Deferred tax is not recognized for the following temporary
differences:
-- The initial recognition of goodwill; and
-- Differences relating to investments in subsidiaries to the
extent it is probable that they will not
reverse in the foreseeable future, either by way of selling the
investment or by way of distributing taxable dividends in respect
of the investment.
The measurement of deferred tax reflects the tax consequences
that would follow the manner in which the Group expects, at the end
of the reporting period, to recover or settle the carrying amount
of its assets and liabilities. Deferred tax is measured at the tax
rates that are expected to be applied to temporary differences when
they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
A deferred tax asset is recognized for tax benefits and
deductible temporary differences, to the extent that it is probable
that future taxable profits will be available against which they
can be utilized. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realized.
Offset of deferred tax assets and liabilities
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax
authority.
Determining whether an arrangement contains a lease
On the inception date of the lease, the Group determines whether
the arrangement is a lease or contains a lease, while examining if
it conveys the right to control the use of an identified asset for
a period of time in exchange for consideration. In its assessment
of whether an arrangement conveys the right to control the use of
an identified asset, the Group assesses whether it has the
following two rights throughout the lease term:
(a) The right to obtain substantially all the economic benefits
from use of the identified asset; and
(b) The right to direct the identified asset's use.
For lease contracts that contain non-lease components, such as
services or maintenance, that are related to a lease component, the
Group elected to account for the contract as a single lease
component without separating the components.
O. Leases- Policy applicable as from January 1, 2019
Leased assets and lease liabilities
Contracts that award the Group control over the use of a leased
asset for a period of time in exchange for consideration, are
accounted for as leases. Upon initial recognition, the Group
recognizes a liability at the present value of the balance of
future lease payments (these payments do not include certain
variable lease payments), and concurrently recognizes a
right-of-use asset at the same amount of the lease liability,
adjusted for any prepaid or accrued lease payments or provision for
impairment, plus initial direct costs incurred in respect of the
lease.
Since the interest rate implicit in the Group's leases is not
readily determinable, the incremental borrowing rate of the lessee
is used. Subsequent to initial recognition, the right-of-use asset
is accounted for using the cost model, and depreciated over the
shorter of the lease term or useful life of the asset.
The lease term
The lease term is the non-cancellable period of the lease plus
periods covered by an extension or termination option if it is
reasonably certain that the lessee will or will not exercise the
option, respectively.
Variable lease payments
Variable lease payments that depend on an index or a rate, are
initially measured using the index or rate existing at the
commencement of the lease and are included in the measurement of
the lease liability. When the cash flows of future lease payments
change as the result of a change in an index or a rate, the balance
of the liability is adjusted against the right-of-use asset.
Other variable lease payments that are not included in the
measurement of the lease liability are recognized in profit or loss
in the period in which the event or condition that triggers payment
occurs.
Depreciation of right-of-use asset
After lease commencement, a right-of-use asset is measured on a
cost basis less accumulated depreciation and accumulated impairment
losses and is adjusted for re-measurements of the lease liability.
Depreciation is calculated on a straight-line basis over the useful
life or contractual lease period, whichever earlier, as
follows:
- Buildings 1-8 years
- Data centers 1-3 years
Reassessment of lease liability
Upon the occurrence of a significant event or a significant
change in circumstances that is under the control of the Group and
had an effect on the decision whether it is reasonably certain that
the Group will exercise an option, which was not included before in
the lease term, or will not exercise an option, which was
previously included in the lease term, the Group re-measures the
lease liability according to the revised leased payments using a
new discount rate. The change in the carrying amount of the
liability is recognized against the right-of-use asset, or
recognized in profit or loss if the carrying amount of the
right-of-use asset was reduced to zero.
Lease modifications
When a lease modification increases the scope of the lease by
adding a right to use one or more underlying assets, and the
consideration for the lease increased by an amount commensurate
with the stand-alone price for the increase in scope and any
appropriate adjustments to that stand-alone price to reflect the
contract's circumstances, the Group accounts for the modification
as a separate lease.
O. Leases (cont'd)
In all other cases, on the initial date of the lease
modification, the Group allocates the consideration in the modified
contract to the contract components, determines the revised lease
term and measures the lease liability by discounting the revised
lease payments using a revised discount rate.
For lease modifications that decrease the scope of the lease,
the Group recognizes a decrease in the carrying amount of the
right-of-use asset in order to reflect the partial or full
cancellation of the lease, and recognizes in profit or loss a
profit (or loss) that equals the difference between the decrease in
the right-of-use asset and re-measurement of the lease
liability.
For other lease modifications, the Group re-measures the lease
liability against the right-of-use asset.
Subleases
In leases where the Group subleases the underlying asset, the
Group examines whether the sublease is a finance lease or operating
lease with respect to the right-of-use received from the head
lease. The Group examined the subleases existing on the date of
initial application based on the remaining contractual terms at
that date.
Policy applicable before January 1, 2019
Finance Lease
Leases, where the Group assumes substantially all the risks and
rewards of ownership are classified as finance leases. Upon initial
recognition the leased assets are measured and a liability is
recognized at an amount equal to the lower of its fair value and
the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for in
accordance with the accounting policy applicable to that asset.
Minimum lease payments made under finance leases are apportioned
between the financing expense and the reduction of the outstanding
liability. The financing expense is allocated to each period during
the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
Operating Lease
Leases that do not transfer substantially all the risks and
rewards incidental to ownership of an underlying asset are
classified as operating leases, and the leased assets are not
recognized on the Group's statement of financial position.
Payments made under operating leases, other than conditional
lease payments, are recognized in profit or loss on a straight-line
basis over the term of the lease. Lease incentives received are
recognized as an integral part of the total lease expense on a
straight-line basis, over the term of the lease.
Note 4 - Income Tax
A. Tax under various laws
The Company and its subsidiaries are assessed for income tax
purposes on a separate basis. Each of the subsidiaries is subject
to the tax rules prevailing in the country of incorporation.
B. Details regarding the tax environment of the Israeli companies
(1) Corporate tax rate
Taxable income of the Israeli parent is subject to the Israeli
corporate tax at the rate of 23%.
(2) Benefits under the Law for the Encouragement of Capital Investments
The Investment Law provides tax benefits for Israeli companies
meeting certain requirements and criteria. The Investment Law has
undergone certain amendments and reforms in recent years.
The Israeli parliament enacted a reform to the Investment Law,
effective January 2011. According to the reform, a flat rate tax
applies to companies eligible for the "Preferred Enterprise"
status. In order to be eligible for Preferred Enterprise status, a
company must meet minimum requirements to establish that it
contributes to the country's economic growth and is a competitive
factor for the gross domestic product.
On December 22, 2016 the Knesset plenum passed the Economic
Efficiency Law (Legislative Amendments for Achieving Budget
Objectives in the Years 2017 and 2018) - 2016, by which the
Encouragement Law was also amended (hereinafter: "the Amendment").
The Amendment added new tax benefit tracks for a "preferred
technological enterprise" and a "special preferred technological
enterprise" that awards reduced tax rates to a technological
industrial enterprise for the purpose of encouraging activity
relating to the development of qualifying intangible assets.
Preferred technological income that meets the conditions
required in the law, will be subject to a reduced corporate tax
rate of 12%, and if the preferred technological enterprise is
located in Development Area A to a tax rate of 7.5%. The Amendment
is effective as from January 1, 2017.
The Amendment also provides that no tax will apply to a dividend
distributed out of preferred income to a shareholder that is an
Israeli resident company. A tax rate of 20% shall apply to a
dividend distributed out of preferred income to an individual
shareholder or foreign resident, subject to double taxation
prevention treaties
On May 16 , 2017 the Knesset Finance Committee approved
Encouragement of Capital Investment Regulations (Preferred
Technological Income and Capital Gain of Technological Enterprise)
- 2017 (hereinafter: "the Regulations"), which provides rules for
applying the "preferred technological enterprise" and "special
preferred technological enterprise" tax benefit tracks including
the Nexus formula that provides the mechanism for allocating the
technological income eligible for the benefits.
In June 2016, Taptica appealed for a tax ruling to apply "the
preferred enterprise" track, which was obtained on April 2017 and
will be apply for the years 2016-2020.
On December 3, 2018, the Company together with Taptica (fully
owned subsidiary) submitted a request to the Israeli tax
authorities for a tax ruling regarding to restructuring, whereby
Taptica will be merged with and into the Company in such a manner
that Taptica will transfer to the Company all its assets and
liabilities for no consideration and thereafter will be liquidated.
On May 8 , 2019 the merger between the companies approved by the
Israeli Tax Authority and the effective merge date was determined
as December 31, 2018. Following the approval of the restructuring,
the tax ruling regarding Taptica owns an industrial enterprise and
preferred technological enterprise which was obtained on December
2018 will apply on the merged company for the years 2017-2021 with
relative agreed changes.
C. Details regarding the tax environment of the non-Israeli companies
Non Israeli subsidiaries are taxed according to the tax laws in
their countries of residence as reported in their statutory
financial statement prepared under local accounting
regulations.
In May 2019 the Company submitted a request for a tax-exempt
transfer of assets between its subsidiaries in accordance with the
provisions of Section 104A(a) of the Ordinance, by which the
Company requests to carry out a restructuring that will unite the
subsidiaries companies of the Group (Taptica Inc. and Tremor Video
DSP) under one American holding subsidiary. As at the date of
approval of the financial statements, The Company's aforesaid
request was approved in March 2020.
D. Composition of income tax expense
Year ended 31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Current tax expense
Current year 4,571 5,494
-------- -------
4,571 5,494
-------- -------
Deferred tax expense (income)
Creation and reversal of temporary differences (7,207) (954)
Change in tax rate - 475
-------- -------
(7,207) (479)
-------- -------
Income tax expense (income) (2,636) 5,015
======== =======
E. Reconciliation between the theoretical tax on the pre-tax profit and the tax expense:
Year ended 31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Profit before taxes on income 3,588 27,169
Primary tax rate of the Company 23% 23%
-------- --------
Tax calculated according to the Company's primary
tax rate 825 6,249
Additional tax (tax saving) in respect of:
Non-deductible expenses net of tax exempt income
* 3,584 2,665
Effect of reduced tax rate on preferred income
and differences in previous tax assessments (1,433) (5,452)
Utilization of tax losses from prior years for
which deferred taxes
were not created (5,050) (27)
Effect on deferred taxes at a rate different
from the
primary tax rate (873) 1,109
Foreign tax rate differential 311 447
Other differences - 24
-------- --------
Income tax expenses (2,636) 5,015
======== ========
*including non- deductible share based compensation expenses
F. Deferred tax assets and liabilities
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities are
presented below:
Intangible Employees
Assets and Compensation Other Total
R&D expenses
-------------- -------------- -------------- --------------
USD thousands USD thousands USD thousands USD thousands
-------------- -------------- -------------- --------------
Balance of deferred tax
asset
(liability) as at 1 January
2018 (579) 697 624 742
Changes recognized in
profit or 697 151 106 954
loss
Effect of change in tax
rate (168) ) 22) ) 285) (475)
Changes recognized in
equity (24) 12 183 171
------ ------ ------- -------
Balance of deferred tax
asset
(liability) as at 31
December
2018 (74) 838 628 1,392
====== ====== ======= =======
Intangible Employees
Assets and Compensation Other Total
R&D expenses
-------------- -------------- -------------- --------------
USD thousands USD thousands USD thousands USD thousands
-------------- -------------- -------------- --------------
Balance of deferred tax
asset (74) 838 628 1,392
(liability) as at 1 January
2019
(20,720) - 11,825 (8,895)
Business combinations 1,176 2,631 3,400 7,207
Changes recognized in
profit or
loss - - - -
Effect of change in tax
rate - 215 - 215
Changes recognized in
equity
--------- ------ ------- --------
Balance of deferred tax
asset
(liability) as at 31
December
2019 (19,618) 3,684 15,853 (81)
========= ====== ======= ========
Note 5 - Fixed Assets, net
Office
Computers furniture Leasehold
and
And Servers equipment improvements Total
------------ ---------- ------------- ------
USD thousands
-----------------------------------------------
Cost
Balance as at 1 January 2018 2,531 369 799 3,699
Additions 1,202 236 485 1,923
------- ----- ------- ---------
Balance as at 31 December 2018 3,733 605 1,284 5,622
======= ===== ======= =========
Exchange rate differences - - 2 2
Classification due to implementation
of IFRS16 see note 6A(2) (945) - - (945)
Additions 869 16 178 1,063
Business combinations (See Note
17) 2,023 109 271 2,403
Additions
Disposals (106) (6) - (112)
Balance as at 31 December 2019 5,574 724 1,735 8,033
======= ===== ======= =========
Depreciation
1 , 5
Balance as at 1 January 2018 932 129 497 5 8
Additions 980 67 138 1,185
------- ----- ------- ---------
Balance as at 31 December 2018 1,912 196 635 2,743
======= ===== ======= =========
Classification due to implementation
of IFRS16 see note 6A(2) (527) - - (527)
Disposals (95) (1) - (96)
Additions 2,149 185 447 2,781
Balance as at 31 December 2019 3,439 380 1,082 4,901
======= ===== ======= =========
Carrying amounts
As at 1 January 2018 1,599 240 302 2,141
======= ===== ======= =======
As at 31 December 2018 1,821 409 649 2,879
======= ===== ======= =======
As at 31 December 2019 2,135 344 653 3,132
======= ===== ======= =======
Note 6 - Leases
A. Leases in which the Group is the lessee
The Group applies IFRS 16, Leases, as from as from 1 January,
2019. The Group has lease agreements with respect to the following
items:
1. Offices;
2. Data center;
(1) Information regarding material lease agreements
(a) The Group leases Offices mainly at USA, Israel and Canada
with original lease periods expiring between 2020 and 2027 from
several lessors. The Group did not assume renewals in determination
of the lease term unless the renewals are deemed to be reasonably
assured at lease commencement.
A lease liability and right-of-use asset in the amount of USD
21,105 thousand and USD 13,155 thousand, respectively, have been
recognized in the statement of financial position as at December
31, 2019 in respect of leases of offices.
(b) The Group leases data center and related network
infrastructure with original lease periods expiring between 2020
and 2022. The Group did not assume renewals in determination of the
lease term unless the renewals are deemed to be reasonably assured
at lease commencement
A lease liability and right-of-use asset in the amount of USD
3,162 thousand and USD 3,560 thousand, respectively have been
recognized in the statement of financial position as at December
31, 2019 in respect of data centers.
(2) Right-of-use assets - Composition
Offices Data center Total
-------- ------------ ------
USD thousands
------------------------------
Cost
Balance as at 1 January 2019
(first date of adoption) 9,33 6 1,372 10,708
Business combinations (See Note
18 ) 12,992 11,924 24,916
Additions 391 33 424
Lease modifications ( 473 ) ( 6 ,223) (6,696)
Disposals (951) - (951)
Balance as at 31 December 2019 21,295 7,106 28,401
======== ========== ========
Depreciation and impairment losses
Balance as at 1 January 2019 - 527 527
Business combinations (See Note - - -
18 )
Additions 5,644 5,258 10,902
Provision for Impairment (See
Note 6A(3)) 2,994 145 3,139
Lease modifications (349) (2,384) (2,733)
Disposals (149) - (149)
Balance as at 31 December 2019 8,140 3,546 11,686
======== ========== ========
Carrying amounts
As at 31 December 2019 13,155 3,560 16,715
======== ========== ========
(3) Impairment loss
As of December 31, 2019 the company has impairment balance due
to not in use offices and data centers following the acquisition of
Rhythmone in the amount of USD 3,139 thousands, See also Note
18.
(4) Lease liability
Maturity analysis of the Group's lease liabilities
December
31,
2019
--------------
USD thousands
--------------
Less than one year 9,637
One to five years 12,088
More than five years 2,544
-------
Total 24,269
=======
Current maturities of lease liability 9,637
=======
Long-term lease liability 14,632
=======
(a) Amounts recognized in profit or loss
Year ended
December
31,
--------------
2019
--------------
USD thousands
--------------
Interest expenses on lease liability (779)
Depreciation of right-of-use assets, net (9,109)
Gains (losses) recognized in profit or loss 1,749
--------------
Total (8,139)
==============
(b) Amounts recognized in the statement of cash flows
Year ended
December
31,
2019
--------------
USD thousands
--------------
Cash outflow for leases (13,386)
=========
B. Leases in which the Group is a lessor
(1) Information regarding material lease agreements
The Group subleases offices at USA and Canada for periods
expiring in 202 3 .
(2) Finance leases
(a) Amounts recognized in profit or loss
Offices
--------------
USD thousands
--------------
For the year ended December 31,
2019
Gain (loss) from subleases 956
Financing income on the net investment
in the lease 71
------
Total 1,027
======
(b) Net investment in the lease
Presented hereunder is the movement in the net investment in the
lease for the year ended December 31, 2019:
Offices
--------------
USD thousands
-------- ---- ---- --------------
For the year ended December
31, 2019
Balance as at 1 January
2019
(first date of adoption) 1,06 4
Business combinations 3,327
Additions 1,566
Disposals -
Sublease receipts (1,669)
Total 4,28 8
==============
(c) Maturity analysis of net investment in finance leases
December
31,
2019
--------------
USD thousands
--------------
Less than one year 2,36 7
One to five years 1,921
More than five years -
-------
Total net investment in the lease as at December
31, 2019 4,28 8
=======
Note 7 - Intangible Assets, net
Customer Distribution Residual
Software Trademarks relationships Technology channel Goodwill Total
--------- ----------- -------------- ----------- ------------- --------- ------
USD thousands
-------------------------------------------------------------------------------------
Cost
Balance as at
1 January 2018 6,873 8,167 7,353 27,458 1,044 32,743 83,638
Exchange rate
differences 4 34 61 - - 242 341
Additions 1,444 - - - - - 1,444
Disposals (134) - - - - - (134)
------- ------- ------- -------- ------- -------- --------
Balance as at
31 December 2018 8,187 8,201 7,414 27,458 1,044 32,985 85,289
======= ======= ======= ======== ======= ======== ========
Exchange rate
differences - 12 21 - - 85 118
Additions 5,672 - - - - - 5,672
Business combinations
171,
(see Note 18) 5,378 17,470 30,284 17,629 - 100,633 394
------- ------- ------- -------- ------- -------- --------
Balance as at
31 December 2019 19,237 25,683 37,719 45,087 1,044 133,703 262,473
======= ======= ======= ======== ======= ======== ========
Amortization
Balance as at
1 January 2018 5,060 4,751 1,221 10,234 812 - 22,078
Exchange rate
differences - 10 18 - - - 28
Additions 854 2,212 1,357 4,968 232 - 9,623
Disposals (45) - - - - - (45)
------- ------- ------- -------- ------- -------- --------
Balance as at
31 December 2018 5,869 6,973 2,596 15,202 1,044 - 31,684
======= ======= ======= ======== ======= ======== ========
Exchange rate
differences - 13 23 - - - 36
Additions 3,363 4,472 5,238 7,395 - - 20,468
Balance as at
31 December 2019 9,232 11,458 7,857 22,597 1,044 - 52,188
======= ======= ======= ======== ======= ======== ========
Carrying amounts
As at 1 January
2018 1,813 3,416 6,132 17,224 232 32,743 61,560
======= ======= ======= ======== ======= ======== ========
As at 31 December
2018 2,318 1,228 4,818 12,256 - 32,985 53,605
======= ======= ======= ======== ======= ======== ========
As at 31 December
2019 10,005 14,225 29,862 22,490 - 133,703 210,285
======= ======= ======= ======== ======= ======== ========
Amortization
The amortization of technology and software is allocated to
research and development expenses and amortization of trademarks,
distribution channel and customer relationships is allocated to
selling and marketing expenses.
Capitalized development costs
Development costs capitalized in the period amounted to USD
4,651 thousand (2018: USD 1,093 thousand) and were classified under
software.
Note 8 - Trade and Other Receivables
31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Trade receivables, net 95,278 64,329
Other receivables :
Prepaid expenses 8,395 1,328
Institutions 4,577 5,336
Pledged deposits 368 326
-------- --------
13,340 6,990
-------- --------
108,618 71,319
======== ========
Note 9 - Trade and Other Payables
31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Trade payables 70,428 39,630
------- --------
Other payables:
Advances from customers 7,166 1,676
Wages, salaries and related expenses 9,109 9,620
Provision for vacation 612 841
Institutions 4,273 2,492
Liability for put option on non-controlling interests 2,440 -
(see Note 16 (c))
Others 3,871 291
------- --------
27,471 14,920
------- --------
97,899 54,550
======= ========
Note 10 - Cash and Cash Equivalents
31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Cash 54,486 40,941
Bank deposits 24,561 26,132
------- --------
Cash and cash equivalents 79,047 67,073
======= ========
The Group's exposure to credit, and currency risks are disclosed
in Note 15 on financial instruments.
Note 11 - Revenue
Year ended 31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Branding 248,500 146,052
Performance 77,260 130,820
-------- ---------
325,760 276,872
======== =========
Note 12 - General and Administrative Expenses
Year ended 31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Wages, salaries and related expenses 11,973 8,693
Share base payments 14,100 3,879
Rent and office maintenance 232 3,763
Professional expenses 1,282 1,527
Depreciation and Amortization 855 555
Depreciation of right of use assets 4,956 -
Doubtful debts 3,003 507
Acquisition costs 2,840 177
Other expenses 1,003 746
------- --------
40,244 19,847
======= ========
Note 13 - Equity
A. Share capital
Ordinary shares- number
of shares
--------------------------
2019 2018
------------ ------------
Issued and paid-in share capital as at 31 December 124,223,182 68,522
============ =========
Authorized share capital 300,000 300,000
============ =========
(1) Rights attached to share
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at general meetings of the Company. All shares rank equally
with regard to the Company's residual assets.
(2) Director share allotment
According to Director's employment commitment letter, the
Company is committed to issue shares worth of GBP 6,250 each
quarter in consideration of the director's services.
In the year ended 31 December 2019 and 2018, the Company issued
8,761 and 4,933 ordinary shares of a par value of NIS 0.01 based on
the share price on the date of the issuance, respectively.
The total expenses recognized in the statement of Comprehensive
Income in the year ended 31 December 2019 and 2018 with respect to
the director share allotment amounted to USD 8 and USD 33 thousand,
respectively.
(3) Issuing new public shares
Following the Acquisition of RhythmOne, as described in Note 1,
the Company issued 66,736,485 new shares at a quoted price of the
Company ' s share as at the business combination date to former
RhythmOne shareholders which became admitted to trading on AIM on
April 2, 2019.
(4) Own shares acquisition
Following the Acquisition of RhythmOne, as described in Note 1,
and as part of the Company's approvals in April 2019 and June 2019
for a share buyback program for a total consideration of USD 25
million, the Company purchased during the year ended December 31,
2019 24,695,283 shares (of which 5,743,731 were purchased from
former related parties) for a total consideration of USD 24,735 thousands.
The Ordinary Shares acquired pursuant to the Buyback Program
reclassified as dormant shares under the Israeli Companies Law
(without any rights attached thereon) and held in treasury.
B. Dividends
Details on dividends (in USD thousand):
For the year For the year
ended ended
31 December 31 December,
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Declared and paid - 6,355
=== ======
A dividend in the amount of USD 3,651 thousand (USD 0.054 per
ordinary shares) was declared in March 2018, was paid in June
2018.
A dividend in the amount of USD 2,704 thousand (USD 0.0398 per
ordinary shares) was declared in September 2018, was paid in
November 2018.
Note 14 - Earning Per Share
Basic earnings per share
The calculation of basic earnings per share as at 31 December
2019 and 2018 was based on the profit for the year divided by a
weighted average number of ordinary shares outstanding, calculated
as follows:
Profit for the year
Year ended 31 December
-------------------------
2019 2018
------------ -----------
USD thousands
-------------------------
Profit for the year 6,224 22,154
====== =======
Weighted average number of ordinary shares:
Year ended 31 December
-------------------------
2019 2018
------------ -----------
Shares of Shares of
NIS 1 NIS 1
------------ -----------
0.01 par 0.01 par
value value
------------ -----------
Weighted average number of ordinary shares used
to
calculate basic earnings per share as at 31
December 111,231,769 67,520,554
============ ============
Basic earnings per share (in USD) 0.0 560 0.3281
============ ============
Basic earnings per share (in USD) before amortization
of purchased intangibles and business combination
related expenses 0.2018 0. 45 85
============ ============
Diluted earnings per share
The calculation of diluted earnings per share as at 31 December
2019 and 2018 was based on profit for the year divided by a
weighted average number of shares outstanding after adjustment for
the effects of all dilutive potential ordinary shares, calculated
as follows:
Weighted average number of ordinary shares (diluted):
Year ended 31 December
-------------------------
2019 2018
------------ -----------
Shares of Shares of
NIS NIS
0.01 par 0.01 par
value value
------------ -----------
Weighted average number of ordinary shares
used to
67, 250
calculate basic earnings per share 111,231,769 ,554
Effect of share options on issue 3,576,114 2,446,429
------------ ------------
Weighted average number of ordinary shares
used to
calculate diluted earnings per share 114,807,883 69,696,983
============ ============
Diluted earnings per share (in USD) 0.0 542 0.3179
============ ============
Diluted earnings per share (in USD) before amortization
of purchased intangibles and business combination
related expenses 0.1956 0.4442
============ ============
Note 15 - Share-Based Payment Arrangements
(1) Expense recognized in the statement of comprehensive income is as follows:
Year ended 31 December
-------------------------
2019 2018
------------ -----------
USD thousands
-------------------------
Selling and marketing 1 ,25 7 2,738
Research and development 452 1,420
General and administrative 14,100 3,879
--------- -------
15 ,8 09 8,037
========= =======
(2) Share-based compensation plan
The terms and conditions related to the grants of the share
options programs are as follows:
-- All the share options that were granted are non-marketable.
-- All options are to be settled by physical delivery of shares.
-- Vesting conditions are based on a service period of between 0.75- 4 years.
On December 4, 2017, the Company's shareholders adopted the
Company's 2017 Equity Incentive Plan (the "2017 Plan") to provide
for the grant of equity incentive awards to the executive officers
and employees of Tremor Video DSP following the acquisition in
August 2017, and other U.S.-based employees of the Taptica
Group.
Under the 2017 Plan, the Company may grant incentive stock
options (ISOs that comply with U.S. tax requirements), nonstatutory
stock options, restricted shares, restricted share units (RSUs),
performance bonus awards, performance units and performance shared.
The maximum number of Ordinary Shares of the Company that may be
granted under the 2017 Plan is 7,700,000.
On April 2, 2019 the Company's shareholders adopted the New
Tremor International Ltd Management Incentive Scheme to provide for
the grant of 11,772,932 equity incentive awards to executive
officers. In addition, following the Acquisition of RhythmOne the
Company's shareholders adopted RhythmOne Plan to provide for the
grant of 1,328,908 equity incentive award to RhythmOne executives
and employees.
(3) New grants during the year
During 2019, the Group granted 458,946 share options, and
9,571,276 Restricted Share Units (RSUs) to its executives officers
and employees from outstanding awards under 2017 Plan and 2014
Plan.
In addition, as part of the acquisition as described in Note 1,
849,325 RhythmOne's options and 1,058,776 RSU's were Rolled over to
458,946 options and 869,962 of the Company's options and RSU's,
respectively, see also Note 3H(3) regarding the accounting
treatment.
The total expense recognized in the year ended 31 December 2019
with respect to the options granted to employees, amounted to
approximately USD 15,801 thousand.
The grant date fair value of the share options granted was
measured based on the Black-Scholes option pricing model.
(4) The number of share options is as follows:
Weighted average exercise Number of options
price
---------------------------- --------------------
2019 2018 2019 2018
------------- ------------- --------- ---------
(GBP) (Thousands)
---------------------------- --------------------
Outstanding at 1 January 2.44 1.82 9,835 6,733
Forfeited during the year 2.97 2.79 (2,488) (2,161)
Exercised during the year 0.32 0.55 (3,509) (1,238)
Granted during the year 0.21 2.83 10,030 6,501
-------- --------
Outstanding at 31 December 1.01 2.44 13,868 9,835
======== ========
Exercisable at 31 December 2,054 1,559
======== ========
(5) Information on measurement of fair value of share-based payment plans
The fair value of employees share options is measured using the
Black-Scholes formula. Measurement inputs include the share price
on the measurement date, the exercise price of the instrument,
expected volatility, expected term of the instruments, expected
dividends, and the risk-free interest rate (based on government
debentures).
The parameters used in the measurement of the fair values at
grant date of the equity-settled share-based payment plans were as
follows:
The parameters used to calculate fair value:
2019 2018
----------- ------------
Grant date fair value in USD 0-0.56 0.83-5.92
Share price (on grant date) (in GBP) 1.79 3.00-4.46
Exercise price (in GBP) 1.56-18.27 0-4.37
Expected volatility (weighted average) 45% 42%
Expected life (weighted average) 0-3.38 3.3-3.9
Expected dividends 1.35% 0.7%-1.35%
Risk-free interest rate 2.3% 2.26%-2.73%
Note 16 - Financial Instruments
A. Overview
The Group has exposure to the following risks from its use of
financial instruments:
- Credit risk
- Liquidity risk
- Market risk
This note presents quantitative and qualitative information
about the Group's exposure to each of the above risks, and the
Group's objectives, policies and processes for measuring and
managing risk.
B. Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's trade and other receivables.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit exposure.
The maximum exposure to credit risk at the reporting date was as
follows:
31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Cash and cash equivalents (1) 79 ,047 67,073
Trade receivables, net (2) 95,278 64,329
Other receivables 368 326
long term deposit 965 -
Long Term Receivables 367 -
-------- ---------
176,025 131,728
======== =========
(1) At 31 December 2019, USD 1,052 thousand are held in NIS, USD
4,004 thousand are held in GBP , USD 2,795 thousand are held in
EUR, USD 868 thousand are held in CAD, USD 6,352 thousand are held
in JPY, USD 1,037 thousands are held in MXN, USD 643 thousand are
held in SGD, USD 118 thousand are held in KRW, USD 348 thousand are
held in other currencies and the remainder held in USD.
(2) At 31 December 2019, the Group included provision to
doubtful debts in the amount of USD 22,376 thousand (31 December
2018: USD 2,822 thousand) in respect of collective impairment
provision and specific debtors that their collectability is in
doubt.
C. Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Group's approach to managing liquidity is to
ensure, as far as possible, that it has sufficient liquidity to
meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
As of December 31, 2019 and December 31, 2018, the Group's
contractual obligation of financial liability is in respect of
leases, trade and other payables in the amount of USD 83,936
thousand and USD 40,320 thousand, respectively. The contractual
maturity of this financial liability is less than one year and in
its carrying amount.
The Company is also committed to comply with certain financial
covenants as determined in the financing agreement.
In addition, in the framework of the acquisition of Adinnovation
INC on July 17(th) , 2017, a mutual option was granted to the
Company to acquire the remaining 43% of the shares. As of 31
December, 2019, the amount of the liability inherent in the
exercise of the option is USD 2,440 thousand and can be exercise
from the third year and for a period of six months.
The Company has a call option to purchase the remaining 43% of
the issued share capital of ADI for a price of 8x net profit and
for a period of six months commencing three years after closing.
Thereafter, ADI ' s minority shareholders have a put option for a
period of three months to sell at a price of 7x net profit. As a
result of the aforesaid, the Company recognized the acquisition of
full control (100%) over ADI and recorded liability inherent in
exercise of the option according to its discounted value. The
amount of the liability as at the acquisition date is estimated at
USD 8,496 thousand and was estimated based on ADI's current
business results and forecasts of ADI for the third year
capitalized with annual discount rate of 2.9%. The Company elected
to recognized changes in the value of the liability on every
reporting date in the equity. In 2019 and 2018 the Company recorded
a revaluation to decrease the liability in the amount of USD 1,501
thousand and 4,678 thousand, respectively.
D. Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, the CPI, interest rates and equity prices
will affect the Group's income or the value of its holdings of
financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable
parameters, while optimizing the return.
Linkage and foreign currency risks
Currency risk
The Group is exposed to currency risk on sales and purchases
that are denominated in a currency other than the respective
functional currency of the Group, the US dollar (USD). The
principal currencies in which these transactions are denominated
are NIS, Euro, GBP, CAD, SGD, KRW, MXN and JPY.
At any point in time, the Group aims to match the amounts of its
assets and liabilities in the same currency in order to hedge the
exposure to changes in currency.
In respect of other monetary assets and liabilities denominated
in foreign currencies, the Group ensures that its net exposure is
kept to an acceptable level by buying or selling foreign currencies
at spot rates when necessary to address short-term imbalances.
E. Fair value
The Company's financial instruments consist mainly of cash and
cash equivalents, bank deposits, trade and other receivables, trade
and other payables and contingent consideration. The carrying
amounts of these financial instruments, except for the contingent
consideration, approximate their fair value because of the short
maturity of these investments. The contingent consideration is
classified as level 3 under IFRS 13. Such amounts have been
recorded initially and subsequently at their fair value (see Note
17).
The table hereunder presents reconciliation from the beginning
balance to the ending balance of contingent consideration carried
at fair value level 3 of the fair value hierarchy.
Financial
instruments
level 3
-------------
Balance as at December 31, 2017 1,300
Settlement of contingent consideration (1,218)
Recognized in profit and loss ( 82 )
--------
Balance as at December 31, 2018 -
========
Note 17 - Related Parties
A. Compensation and benefits to key management personnel
Executive officers also participate in the Company's share
option programs. For further information see Note 14 regarding
share-based payments.
Compensation and benefits to key management personnel (including
directors) that are employed by the Company and its
subsidiaries:
Year ended 31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
Share-based payments 12,607 3,540
Other compensation and benefits 3,948 3,989
------- -------
16,555 7,529
======= =======
Note 18 - Subsidiaries
A. Details in respect of subsidiaries
Presented hereunder is a list of the Group's subsidiary:
Principal The Group's ownership
interest in
location the subsidiary for
of the the year ended
Company's December 31
------------------------
Name of company activity 2019 2018
---------- ----------- -----------
Taptica Ltd ISR 100% 100%
Taptica INC USA 100% 100%
Tremor Video DSP USA 100% 100%
Tremor Video PTE Ltd SGP 100% 100%
Adinnovation INC Japan 57% 57%
Taptica Japan Japan 100% 100%
Taptica UK United Kingdom 100% 100%
Taptica Korea Korea 100% 100%
Taptica CN China 100% 100%
RhythmOne PLC UK 100% -
YuMe Inc USA 100% -
Perk.com Inc USA 100% -
R1Demand LLC USA 100% -
RhythmOne LLC USA 100% -
B. Acquisition of subsidiaries and business combinations
(1) Acquisition of RhythmOne
On April 1, 2019, the Company completed Acquisition Transaction
(hereinafter- "Acquisition") with RhythmOne Plc (hereinafter-
"RhythmOne"), a company incorporated under the laws of England and
Wales, whereby the Company acquired the entire issued ordinary
shares of RhythmOne and each RhythmOne shareholder received 28 new
shares of the Company (as such new 66,736,485 shares of the Company
were issued , see also note 13A(3)) for every 33 RhythmOne shares
held, so that following the completion of the Acquisition, the
Company ' s current shareholders held 50.1% and, RhythmOne
Shareholders held 49.9% of the merged Group. In addition, 849,325
options and 1,058,776 restricted shares units over RhythmOne share
awarded were rolled over to 4 5 8,946 the Company ' s options and
to 869,962 the Company ' s restricted units. In order to determine
the portion of the replacement award that is part of the
Acquisition consideration and the portion that is remuneration for
post- combination service, the Company measures both the
replacement awards granted by Tremor and RhythmOne awards as of the
acquisition date in accordance with IFRS2. The portion of the
replacement award attributable to Acquisition consideration is the
fair-value of RhythmOne award multiplied by the ratio of the
portion of the
vesting period completed to the greater of the total vesting
period or the original vesting period of RhythmOne award
(hereinafter- "Replacement Award").
The consideration of the Acquisition amounted to USD 176.4
million (including consideration allocated to issuance of ordinary
shares and Replacement Award).
The purchase price was allocated to the acquired tangible
assets, intangible assets and liabilities on the basis of their
fair value at the acquisition date. Presented hereunder are the
assets and liabilities that were allocated to RhythmOne at the
acquisition date:
USD millions
---------------
Current assets 106.9
Non current assets (1) 187.6
Current liabilities (100.2)
Non current liabilities (17.9)
176.4
===================
(1) Comprised as follow (included within the Non- current assets):
Fair value
as at March
31, 2019
USD millions
Purchased and capitalized
Intangible assets 5.4
Brand and domain name 17.5
Technology 17.6
Customer relations 30.3
Residual goodwill 100.6
--------------
171.4
==============
Deferred tax liabilities (20.4)
==============
The aggregate cash flow derived for the Group as a result of the
RhythmOne acquisition in 2019 :
USD millions
-------------
Purchase price in ordinary shares 175.4
Purchase price according to Replacement
Award 1
Total purchase price - Non cash 176.4
-------------
Less- Cash and cash equivalents of
the RhythmOne 28.1
Add - acquisition costs* 4.4
Acquisition of subsidiary - Cash 23.7
-------------
152. 7
=============
* An amount of USD 130 thousand was paid to a related party due
to his efforts related to the Acquisition of RhythmOne.
Note 19 - Operating Segments
The Group has a single reportable segment as a provider of
marketing services.
Geographical information
The Company is domiciled in Israel and it produces its income
primarily in USA, Israel, China, Germany, Japan, India and UK.
In presenting information on the basis of geographical segments,
segment revenue is based on the geographical location of
customers.
Year ended 31 December
------------------------------
2019 2018
-------------- --------------
USD thousands USD thousands
-------------- --------------
America 261,534 182,067
Asia 33,052 72,061
Europe 25,504 18,867
Israel 5,446 3,483
Others 224 394
-------- ---------
Consolidated 325,760 276,872
======== =========
Note 20 - Contingent Liability
(1) On June 11, 2019 the Company was informed that Uber
Technologies, Inc. filed a complaint in the Superior Court of the
State of California (U.S.), County of San Francisco, against the
Company. The complaint alleges fraud, negligence and unfair
competition. In October 2014, Taptica, alongside a number of other
adtech vendors, was retained by Fetch Media Ltd. ("Fetch") to
promote Uber's mobile app (the "Uber Campaign"). There was no
direct engagement between Uber and the Company or any of its
subsidiaries. Overall, thousands of campaigns ran with Fetch
directly liaising with Taptica on a daily basis. As is standard in
the Company's business, at the end of each month, reconciliation
reports were sent by the Company to Fetch and the final invoiced
amounts were approved by Fetch. The revenue associated with the
Uber Campaign directly relating to the Company does not represent a
material portion of Taptica's revenue.
On August 23, 2019, Taptica filed a demurrer relating to all
causes of action asserted in the Complaint. On September 18, 2019,
the Court issued an order transferring the case to the complex
division of the Superior Court of California, County of San
Francisco, temporarily staying discovery and assigning the matter
for all purposes to Judge Teri L. Jackson. The defendants'
demurrers were taken off calendar in connection therewith, for
possible re-setting at a future date. On October 8, 2019, following
a peremptory challenge to Judge Jackson, the case was set for
reassignment to a different judge. On October 11, 2019, the case
was reassigned to Judge Anne-Christine Massullo. After the
defendants' demurrers were fully briefed, oral argument was heard
on December 11, 2019, and continued to
January 7, 2020. On January 9, 2020, Judge Massullo issued an
order sustaining in part and overruling in part Taptica's demurrer,
with leave to amend. In particular, Judge Massullo sustained
Taptica's demurrer with respect to the fraudulent concealment and
unfair competition claims, but overruled the demurrer with respect
to negligence. Uber filed its Amended Complaint on January 29,
2020, asserting the same three claims as in its original Complaint.
Taptica demurred to all three claims on March 3, 2020. A hearing on
Taptica's demurrer is currently scheduled on May 27, 2020. The
discovery stay has been partially lifted relating to the negligence
claims. The Company reiterates that it considers the claims to be
without merit and, as such, will continue to aggressively defend
against these claims. The Company believes that the likelihood of a
material loss is remote but at this point it is too early to
reasonably estimate potential loss any financial impact to the
Company resulting from this matter.
(2) RhythmOne litigation
(a) Edenbrook Capital LLC ("Edenbrook") sent a letter to
RhythmOne asserting several allegations, including breach of
fiduciary duties and conversion (detention of property). Edenbrook
alleged that the shareholders of YuMe that chose not to tender
their shares in the merger with RhythmOne were discriminated
against, in that the tendering shareholders received consideration
in a more expedient manner than those who did not tender. The
Company entered into a settlement agreement with Edenbrook and on
December 31, 2019, the claims were dismissed with prejudice.
(b) In January 2018, AlmondNet, Inc. and its affiliates
(Datonics LLC and Intent IQ) contacted RhythmOne asserting that
RhythmOne's online advertising system infringes eleven U.S. Patents
owned by the AlmondNet Group. RhythmOne's General Counsel informed
that AlmondNet offered to execute a patent license agreement for
$2,000,000, payable over a two-year period. As of the date of this
report, a claim was never filed and RhythmOne is currently in a
commercial agreement with AlmondNet's affiliate. The Company
believes that the likelihood of a material loss is remote but at
this point is unable to reasonably estimate any potential loss and
financial impact to the Company resulting from this matter.
Note 21 - Subsequent Events
On January 4, 2020, the Company entered into an agreement (the
"Purchase Agreement") with News Corp UK & Ireland Limited (the
"UK Seller") and News Preferred Holdings, Inc. (the "US Seller, and
collectively with the UK Seller, the "Sellers") to purchase the
entire issued share capital of Unruly Holdings Limited ("Unruly
UK") and Unruly Media Inc. ("Unruly US" and collectively with
Unruly UK, "Unruly") from the Sellers.
Pursuant to the Purchase Agreement, the Company (i) allotted to
UK Seller 7,960,111 new Ordinary Shares of the Company in exchange
for the sale to the Company of a GBP 12.0 million loan from Unruly
Group Limited (as subsidiary of UK Target)(as borrower) to UK
Seller (as lender); (ii) paid GBP 1 to UK Seller in consideration
for the sale of the entire issued share capital of Unruly UK; and
(iii) allotted to US Seller 565,212 new Ordinary Shares of the
Company and paid US Seller US$1 in consideration for the sale of
the entire issued share capital of Unruly US.
The aggregate 8,525,323 new Ordinary Shares of the Company
allotted to UK Seller and US Seller, as purchase price (as detailed
above), represented approximately 6.91% of the Company's issued
voting share capital at such time. The Sellers agreed not to sell,
transfer or otherwise dispose of such Company Ordinary Shares for
an 18-month period, subject to customary exceptions. As part of the
transaction, the Sellers also agreed to contribute cash towards the
cost of integrating Unruly with the Company.
In connection with the acquisition, Tremor Video, Inc., a
subsidiary of the Company ("Tremor Video"), entered into a global
partnership with News Corp that will equip Tremor Video with the
exclusive right to sell outstream video on various News Corp titles
in the UK, US and Australia, and Tremor Video has committed to an
ad spend of GBP30 million with News Corp over a three-year
period.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SDWSLFESSEED
(END) Dow Jones Newswires
March 31, 2020 02:00 ET (06:00 GMT)
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