NEXXEN INTERNATIONAL LTD.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended |
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THE SECURITIES EXCHANGE ACT OF 1934 |
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OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Commission File No.
(Exact name of registrant as specified in its charter)
Not applicable
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
+972-3-545-3900
(Address of principal executive offices)
Chief Financial Officer
+
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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The Stock Market LLC (Global Market)
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Ordinary shares, par value
NIS 0.01 per share* |
* Not for trading, but only in connection with the listing of the American Depositary Shares, each American Depositary Share representing 2 ordinary shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or an emerging growth company.
See definition of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐ |
Accelerated filer ☐ |
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Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting fi rm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP ☐ |
the International Accounting Standards Board ☒ |
Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☒ No ☐
TREMOR INTERNATIONAL LTD.
Form 20-F
For the Fiscal Year
Ended December 31, 2022
TABLE OF CONTENTS
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3.A. [RESERVED] |
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3.B. CAPITALIZATION AND INDEBTEDNESS |
6 |
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3.C. REASONS FOR THE OFFER AND USE OF PROCEEDS |
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3.D. RISK FACTORS |
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4.A. HISTORY AND DEVELOPMENT OF THE COMPANY |
30 |
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4.B. BUSINESS OVERVIEW |
31 |
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4.C. ORGANIZATIONAL STRUCTURE |
41 |
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4.D. PROPERTY, PLANTS AND EQUIPMENT |
42 |
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4.E. UNRESOLVED STAFF COMMENTS |
42 |
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5.A. OPERATING RESULTS |
42 |
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5.B LIQUIDITY AND CAPITAL RESOURCES |
52 |
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5.C RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES |
54 |
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5.D TREND INFORMATION |
55 |
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5.E CRITICAL ACCOUNTING ESTIMATES |
55 |
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6.A. DIRECTORS AND SENIOR MANAGEMENT |
55 |
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6.B. COMPENSATION |
57 |
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6.C. BOARD PRACTICES |
59 |
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6.D. EMPLOYEES |
67 |
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6.E. SHARE OWNERSHIP |
67 |
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7.A. MAJOR SHAREHOLDERS |
67 |
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7.B. RELATED PARTY TRANSACTIONS |
69 |
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7.C. INTERESTS OF EXPERTS AND COUNSEL |
69 |
1
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8.A. COMBINED STATEMENTS AND OTHER FINANCIAL INFORMATION
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8.B. SIGNIFICANT CHANGES |
70 |
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9.A. OFFER AND LISTING DETAILS |
70 |
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9.B. PLAN OF DISTRIBUTION |
71 |
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9.C. MARKETS |
71 |
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9.D. SELLING SHAREHOLDERS |
71 |
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9.E. DILUTION |
71 |
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10.A. SHARE CAPITAL |
71 |
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10.B. MEMORANDUM AND ARTICLES OF ASSOCIATION |
71 |
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10.C. MATERIAL CONTRACTS |
71 |
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10.D. EXCHANGE CONTROLS |
71 |
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10.E. TAXATION |
72 |
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10.F. DIVIDENDS AND PAYING AGENTS |
78 |
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10.G. STATEMENT BY EXPERTS |
78 |
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10.H. DOCUMENTS ON DISPLAY |
78 |
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10.I. SUBSIDIARY INFORMATION |
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12.A. DEBT SECURITIES |
78 |
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12.B. WARRANTS AND RIGHTS |
79 |
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12.C. OTHER SECURITIES |
79 |
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12.D. AMERICAN DEPOSITARY SHARES |
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16.A. AUDIT COMMITTEE AND FINANCIAL EXPERT |
81 |
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16.B. CODE OF ETHICS |
81 |
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16.C. PRINCIPAL ACCOUNTANT FEES AND SERVICES |
82 |
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16.D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
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82 |
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16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS. |
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16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
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16.G. CORPORATE GOVERNANCE |
83 |
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16.H. MINE SAFETY DISCLOSURE |
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16.I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS |
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| SIGNATURES |
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2
INTRODUCTION
AND USE OF CERTAIN TERMS
We have prepared this annual report on Form
20-F (this “Form 20-F” or “Annual Report”) using a number of conventions, which you should consider when reading
the information contained herein. In this Form 20-F, except where the context otherwise requires or where otherwise indicated, references
to “Tremor,” the “Company,” “we,” “us,” “our,” “our company,”
“our business” and similar references refer to Tremor International Ltd., together with its consolidated subsidiaries as a
consolidated entity.
Tremor is a collection of brands uniting creativity,
data and technology across the open internet. Our end-to-end, video-first platform facilitates and optimizes engaging advertising campaigns
for brands, media groups and content creators worldwide—enabling powerful partnerships and delivering meaningful results. Our omni-channel
capabilities deliver global advertising campaigns across all formats and channels, with an expertise in video format ads on all devices
(“Video”) and Connected TV (“CTV”).
PRESENTATION
OF FINANCIAL AND OTHER INFORMATION
We publish combined financial statements expressed in U.S. dollars.
Our combined financial statements responsive to Item 17 of this Annual Report are prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). We present
our consolidated financial statements in U.S. dollars. All references in this Annual Report to “Israeli currency” and “NIS”
refer to New Israeli Shekels, the terms “dollar,” “USD” or “$” refer to U.S. dollars.
This
Annual Report includes the audited consolidated financial statements of the Company as of and for the years ended December 31, 2022, 2021
and 2020 prepared in accordance with IFRS. The audited consolidated financial statements of the Company for the year ended December 31,
2022 are not directly comparable with the audited consolidated financial statements of the Company as of and for the year ended December
31, 2021 and 2020. This is due to the integration of acquisitions over the course of 2022, 2021 and 2020 and the development of the Company’s
platform over that time. The Company’s audited consolidated financial statements of the Company as of and for the year ended December
31, 2022 include contributions from Amobee Inc., Amobee Asia Pte. Ltd. and Amobee ANZ Pty Ltd. (together with their subsidiaries, collectively
“Amobee”) for the September 12, 2022 through December 31, 2022 period, following the close of the acquisition of Amobee on
September 12, 2022. While we acquired SpearAd on October 19, 2021, SpearAd’s revenues following the acquisition through the end
of 2021 were immaterial to the Company, and therefore we consider all revenue growth from 2021 to be organic.
Our fiscal year ends on December 31 of each year.
Throughout this Annual Report, we provide a number of key performance
indicators used by our management and often used by others in our industry. We define these key performance indicators as follows:
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CTV revenue is revenue derived from CTV devices. |
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Video revenue is revenue derived from video format ads on all devices. |
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Contribution ex-TAC is defined as our gross profit plus depreciation and amortization attributable to cost of revenues and cost of
revenues (exclusive of depreciation and amortization) minus the Performance media cost (“traffic acquisition costs” or “TAC”).
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Adjusted EBITDA is defined as total comprehensive income for the period
adjusted for foreign currency translation differences for foreign operations, financing expenses, net, tax benefit, depreciation and amortization,
stock-based compensation, restructuring, acquisition and IPO-related costs and other income, net. |
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Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of revenue. |
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An active customer is defined as an advertiser, buyer, agency, trading desk or third-party demand side platform (“DSP”)
that has used our platform within a trailing 365-day period. |
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An active publisher is defined as a publisher or third-party supply side platform (“SSP”) that has used our platform
within a trailing 365-day period. |
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A unique user is defined as an unduplicated visitor to a publisher’s site connected to our platform from both direct and third-party
sites in a one-month period and “unique users” is the total number of unduplicated visitors to a publisher’s site connected
to our platform from both direct and third-party sites in a one-month period. When a user visits a publisher’s site that is connected
to our platform, we receive the request along with a field that holds a unique ID number that identifies the source from which the request
came, and as such “unique users” is a summation of unique ID numbers to produce a total of unduplicated visitors to publishers’
sites connected to our platform. |
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Contribution ex-TAC retention rate is defined as Contribution ex-TAC generated in a fiscal year from the customers who were existing
customers as of the last day of the previous fiscal year as a percentage of the Contribution ex-TAC generated in the previous fiscal year
from the same group of customers. We consider all of our revenue to be recurring. |
| • |
Net cash is defined as cash and cash equivalents minus long term debt and server leases. |
3
TRADEMARKS
We or our licensors have proprietary rights to trademarks, copyrights,
trade names or service marks used in this Annual Report that are important to our business, many of which are registered under the applicable
intellectual property laws. Solely for convenience, the trademarks, trade names and service marks referred to in this Annual Report may
appear without the “®” or “™”
symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable
law, our rights or the rights of the applicable licensor to these trademarks, trade names and service marks. This Annual Report also contains
trademarks, copyrights, tradenames and service marks of other companies, which are the property of their respective owners. We do not
intend our use or display of other companies’ trademarks, copyrights, trade names or service marks to imply a relationship with,
or endorsement or sponsorship of us by, any other companies. Each trademark, copyright, trade name or service mark of any other company
appearing in this Annual Report is the property of its respective holder.
MARKET
INFORMATION
Unless otherwise indicated, information in this Annual Report concerning
economic conditions, our industry, our markets and our competitive position is based on a variety of sources, including information from
independent industry analysts and publications, as well as our own estimates and research.
Our estimates are derived from publicly available information released
by third-party sources, as well as data from our internal research, which we believe to be reasonable. None of the independent industry
publications used in this Annual Report were prepared on our behalf.
Certain estimates of market opportunity and forecasts of market
growth included in this Annual Report may prove to be inaccurate. The estimates and forecasts in this Annual Report relating to the size
of our target market, market demand and adoption, capacity to address this demand and pricing may prove to be inaccurate. The addressable
market we estimate may not materialize for many years, if ever, and even if the markets in which we compete meet the size estimates in
this Annual Report, our business could fail to grow at similar rates, if at all.
Forecasts and other forward-looking information obtained from these
sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this Annual Report. See “Risk
Factors” and “Special Note Regarding Forward-Looking Statements and Risk Factor Summary.”
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS AND RISK FACTOR SUMMARY
This Annual Report contains certain estimates and “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995, the provisions of Section 27A of the Securities
Act of 1933 (the “Securities Act”) and Section 21E of the Exchange Act of 1934 (the “Exchange Act”). Forward-looking
statements include financial projections, statements of plans and objectives for future operations, statements of future economic performance,
and statements of assumptions relating thereto, including, but not limited to statements regarding: market opportunity; forecasts; market
growth and growth strategy; demand; dependence on third parties such as advertisers, publishers and third-party data providers; our technology
investment decisions; industry conditions; changes in technology and regulation and the impact thereof; plans with respect to our intellectual
property rights; our competition; global and local economic and geopolitical forces, including the COVID-19 pandemic; seasonality; dependence
on our sales and support team; our positioning and strategy; digital advertising trends overall; our solutions and platform; customers;
our dividend policy and our buyback program; working capital and the sufficiency thereof; financial metrics such as revenue, costs and
expenses, including capital expenditures; legal proceedings and tax. Forward-looking statements may appear throughout this report, including
without limitation, in Item 3. “Key Information⸺3.D. Risk Factors,” Item 4.
“Information on the Company,” Item 5. “Operating
and Financial Review and Prospects⸺5.A. Operating Results.” In some cases, these forward-looking statements can be
identified by words or phrases such as “may,” “might,” “will,” “could,” “would,”
“should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,”
“estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible”
or the negative of these terms or similar expressions. We have based these forward-looking statements largely on our current expectations
and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations.
Forward-looking statements involve known and unknown risks, uncertainties and other risks, assumptions and factors that could cause our
actual results or conditions to differ materially from our forward-looking statements include, among others, the items in the following
list, which also summarizes some of our most principal risks:
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our success and revenue growth are dependent on adding new advertisers and publishers, effectively educating and training our existing
advertisers and publishers on how to make full use of our platform and increasing usage of our platform by advertisers and publishers;
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our business depends on our ability to maintain and expand access to advertising spend, including spend from a limited number of
DSPs, agencies and advertisers; |
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our business depends on our ability to maintain and expand access to valuable inventory from publishers, including our largest publishers;
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we may not attract and retain advertisers and publishers if we may fail to make the right investment decisions in our platform, or
innovate and develop new solutions that are adopted by advertisers and publishers; |
4
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significant parts of our business depend on relationships with data providers for data sets used to deliver targeted campaigns;
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our business depends on our ability to collect, use and disclose certain data, including CTV data, to deliver advertisements. Any
limitation imposed on our collection, use or disclosure of this data could significantly diminish the value of our platform; |
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if the use of third-party “cookies,” mobile device IDs, CTV data collection or other tracking technologies is restricted
without similar or better alternatives (and adoption of such alternatives), our platform’s effectiveness could be diminished;
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our failure to meet content and inventory standards and provide services that our advertisers and publishers trust could harm our
brand and reputation; |
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we must grow rapidly to remain a market leader and to accomplish our strategic objective; |
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the market for programmatic buying for advertising campaigns is relatively new and evolving; |
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if we fail to detect or prevent fraud on our platform, or malware intrusion into the systems or devices of our publishers and their
consumers, publishers could lose confidence in our platform and we could face legal claims; |
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the rejection of digital advertising by consumers through opt-in, opt-out or ad-blocking technologies or other means; |
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our ability to scale our platform infrastructure to support anticipated growth and transaction volume; |
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disruptions to service from our third-party data center hosting facilities and cloud computing and hosting providers could impair
the delivery of our services; |
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potential liability and harm to our business based on the human factor of inputting information into our platform; |
| • |
any failure to protect our intellectual property rights; |
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if non-proprietary technology, software, products and services that we use are unavailable, have future terms we cannot agree to
or do not perform as we expect; |
| • |
the overall demand for advertising; |
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the macroeconomic headwinds including rising inflation, rising interest
rates and global supply chain constraints and the residual impacts of the COVID-19 pandemic; |
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any decrease in the use of the advertising or publishing channels that we primarily depend on, or failure to expand into emerging
channels; |
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if CTV develops in ways that prevent advertisements from being delivered to consumers; |
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the competitive nature of the market in which we participate; |
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seasonal fluctuations in advertising activity; |
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the effective growth and training of our sales and support teams; |
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we are a party to a credit agreement which contains a number of covenants that may restrict our current and future operations and
could adversely affect our ability to execute business needs; |
| • |
other risks relating to our employees or our location in Israel; |
| • |
other risks relating to legal or regulatory issues; and other risks associated with our financial profile and our American Depositary
Shares (“ADSs”). |
These risks factors are discussed in more detail
in this Annual Report, including under Item 3. “Key
Information – 3.D. Risk Factors.”
The forward-looking statements in this Annual Report are only predictions. These statements are inherently uncertain, subject to risks
and uncertainties, some of which cannot be predicted or quantified, and investors are cautioned not to unduly rely upon these statements.
The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ
materially from those projected in the forward-looking statements.
In addition, statements that “we believe” and similar
statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of
the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such information may
be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review
of, all potentially available relevant information.
You should read this Annual Report and the documents that we reference
in this Annual Report and have been filed as exhibits to this Annual Report with the understanding that our actual future results, levels
of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements
by these cautionary statements.
The estimates and forward-looking statements contained in this
Annual Report speak only as of the date of this Annual Report. Except as required by applicable law, we undertake no obligation to publicly
update or revise any estimates or forward-looking statements whether as a result of new information, future events or otherwise, or to
reflect the occurrence of unanticipated events.
5
PART I
ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
AND ADVISERS
Not applicable.
ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3: KEY INFORMATION
3.A. [RESERVED]
3.B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
3.C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
3.D. RISK FACTORS
You should carefully consider the risks described
below, together with all of the other information included in this Annual Report, in evaluating us and our ADSs and shares. Our business,
financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price and value
of our ordinary shares and ADSs could decline due to any of these risks, and you may lose all or part of your investment. This Annual
Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below
and elsewhere in this Annual Report.
Additional risks not presently known to us or that we currently
deem immaterial may also impair our business operations.
Risks Relating to Our Business
Our success and revenue growth are dependent
on adding new advertisers and publishers, effectively educating and training our existing advertisers and publishers on how to make full
use of our platform and increasing usage of our platform by advertisers and publishers.
Our success and sustainability are dependent on regularly adding
new advertisers and publishers and increasing their usage of our platform. Our contracts and relationships with advertisers and publishers
generally do not include long-term or exclusive obligations requiring them to use our platform or maintain or increase their use of our
platform. Advertisers and publishers typically have relationships with numerous providers and can use both our platform and those of our
competitors without incurring significant costs or disruption. They may also choose to decrease their overall advertising spend for any
reason, including if they do not believe they are receiving a sufficient return. Accordingly, we must continually work to add new advertisers
and publishers to our customer base, retain our existing advertisers and publishers, increase their usage of our platform and capture
a larger share of their advertising spend.
We may not be successful at educating and training advertisers
and publishers, especially new ones, on how to use our platform in order for them to most benefit from our platform and increase their
usage. If these efforts are unsuccessful or advertisers or publishers decide not to maintain or increase their usage of our platform for
any other reason, or if we fail to attract new advertisers or publishers, our revenue could fail to grow or may decline, which would materially
and adversely harm our business, operating results and financial condition.
Our business depends on our ability to maintain
and expand access to advertising spend, including spend from a limited number of DSPs, agencies and advertisers.
Our business depends on our ability to maintain
and expand our access to advertising spend from advertisers through DSPs, as well as agencies and direct advertisers (that execute their
purchases through DSPs), seeking to purchase impressions from our publishers. A limited number of large advertising customers may account
for a significant portion of our revenue.
For the year ended December 31, 2022, one buyer represents 10.7% of the revenue. For
the year ended December 31, 2021 one buyer represents 13.6% of revenue. For the year ended December 31, 2020, no individual buyer accounted
for more than 10% of revenue. As of December 31, 2022, two buyers accounted for 15.7% and 14.1% of trade receivables, while as of
December 31, 2021, two buyers accounted for 17.1% and 16.9% of trade receivables. As of December 31, 2022, one vendor accounted for 12.7%
of trade payables, and as of December 31, 2021, no individual vendor accounted for more than 10% of trade payables.
6
Our master service agreements with most DSPs and other customers
automatically renew each year for successive one-year terms. However, either party may generally terminate for convenience upon providing
30-day prior written notice. We expect to depend upon these few DSPs and advertising customers for a large percentage of impressions purchased
for the foreseeable future. Any disruptions in our relationships with DSPs, agencies or advertisers could harm our business, results of
operations and financial condition. To support our continued growth, we will seek to expand upon current levels of utilization with these
DSPs, agencies and advertisers.
In general, we have no minimum commitments from advertisers, agencies
or DSPs to spend on our platform, so the amount of demand available to us can change at any time, and we cannot assure you that we will
have access to a consistent volume or quality of advertising spend or demand. If an advertiser or DSP representing a significant portion
of the demand in our platform decides to materially reduce use of our services, it could cause an immediate and significant decline in
our revenue and profitability and adversely affect our business, results of operations and financial condition.
Our business depends on our ability to maintain
and expand access to valuable inventory from publishers, including our largest publishers.
Our business depends on our access to valuable advertising inventory.
We depend upon publishers, including channel partners, which aggregate large numbers of smaller publishers, to provide advertising inventory
which we can offer to prospective advertisers. A relatively small number of publishers have historically accounted for a significant portion
of the advertising inventory sold on our platform, as well as a significant portion of our revenue, including a relatively small number
of channel partners. To support our continued growth, we will seek to add additional publishers to our platform and to expand current
utilization with our existing publishers.
In general, our relationships with publishers do
not contain minimum commitments. The amount, quality and cost of inventory available on our platform can change at any time, and we cannot
assure you that we will have access to a consistent volume or quality of inventory at a reasonable cost, or at all. Any disruptions in
our relationships with publishers or our largest channel partners could adversely affect our business, results of operations and financial
condition. If we cannot retain or add individual publishers with valuable inventory, or if such publishers decide not to make their valuable
inventory available on our platform, then advertisers may be less inclined to use our platform, which could adversely affect our business,
results of operations and financial condition.
If we fail to make the right investment decisions
in our platform, or if we fail to innovate and develop new solutions that are adopted by advertisers and publishers, we may not attract
and retain advertisers and publishers, which could have an adverse effect on our business, results of operations and financial condition.
We face intense competition in the marketplace and are confronted
by rapidly changing technology, evolving industry standards, consumer preferences, regulatory changes and the frequent introduction of
new solutions by our competitors to which we must adapt and address. We need to continuously update our platform and the technology in
which we invest and develop, including our machine learning and other proprietary algorithms, in order to attract publishers and advertisers
and stay ahead of changes in technology, evolving industry standards and regulatory requirements. Our platform is complex and new solutions
can require a significant investment of time and resources to develop, test, introduce and enhance. These activities can take longer than
we expect and we may not make the right decisions regarding our pursuit of these investments. New formats and channels, such as mobile
header bidding and CTV, present unique challenges and our success in new formats and channels depends upon our ability to integrate them
with our platform. If our mobile and video solutions or our CTV solutions are not widely adopted by advertisers and publishers, we may
not retain advertisers and publishers. In addition, new demands from advertisers or publishers, superior offerings by competitors, changes
in technology, or new industry standards or regulatory requirements could render our platform or our existing solutions less effective
and require us to make unanticipated changes to our platform or business model. Furthermore, our focus on our end-to-end platform may
decrease our responsiveness and agility to respond to changes or innovations specific to either our DSP or SSP solutions. Our failure
to adapt to a rapidly changing market, anticipate changing demand, or attract and retain advertisers or publishers would cause our revenue
or revenue growth rate to decline and adversely affect our business, results of operations and financial condition.
Significant parts of our business depend on
relationships with data providers for data sets used to deliver targeted campaigns.
Our ability to deliver targeted advertising campaigns depends on
our ability to acquire effective data sets, which we do through a combination of proprietary data sets as well as data sets that we purchase
from third parties. If any third-party data providers decide not to make data sets available to us, decide to increase their price or
place significant restrictions on the use of their data, we may not be able to replace this with our own proprietary data sets or those
of other third-party providers that satisfy our requirements in a timely and cost-effective manner. In addition, some data set providers
in the industry may enter into exclusivity arrangements with our competitors, which could limit our access to a meaningful supply of data
and give them a competitive advantage. Any limitations on access to these third-party data sets could impair our ability to deliver effective
solutions, which could adversely affect our business, results of operations and financial condition.
7
Our business depends on our ability to collect,
use and disclose certain data, including CTV data, to deliver advertisements. Any limitation imposed on our collection, use or disclosure
of this data could significantly diminish the value of our platform and cause us to lose publishers, advertisers and revenue. Consumer
tools, regulatory restrictions and technological limitations all threaten our ability to use and disclose data.
As we process transactions through our platform, we collect large
amounts of data about advertisements and where they are placed, such as consumer, advertiser and publisher preferences for media and advertising
content. We also collect automatic content recognition data and data on ad specifications such as ad placement, size and format, ad pricing
and auction activity such as price floors, bid response behavior and clearing prices. Further, we collect certain data from consumers
that, while not identifying the individual, does include browser, device location and characteristics, online browsing behavior, exposure
to and interaction with advertisements, and inferential data about purchase intentions and preferences. We collect this data through various
means, including from our own systems, pixels that publishers allow us to place on their websites to track consumer visits, software development
kits installed in mobile applications and smart TVs, cookies and other tracking technologies. Our publishers, advertisers and data providers
may also choose to provide us with their proprietary data about consumers.
We aggregate this data and analyze it in order to enhance our services,
including the pricing, placement and delivery of advertisements. As part of our real-time analytics service offering, we also share the
data, or analyses based on such data, with our publishers and advertisers. Our ability to collect, use and share data about advertising
transactions and consumer behavior is critical to the value of our services. There are many technical challenges relating to our ability
to collect, aggregate, use and store the data, and we cannot assure you that we will be able to do so effectively. Evolving regulatory
standards, high profile investigations, and increased regulatory scrutiny of AdTech frameworks, cookies, and online consent mechanisms
more broadly could place restrictions on the collection, aggregation, use and storage of information, which could result in a material
increase in the cost of collecting or otherwise obtaining certain kinds of data and could limit the ways in which we may use or disclose
information. There has been increased regulations and enforcement activity in the United States, United Kingdom and Europe involving the
AdTech industry. For instance, a recent decision by the Belgium Data Protection Authority concerning the “Transparency and Consent
Framework” (“TCF”) (a widely used mechanism to manage user preferences relating to targeted online advertising, developed
by the Interactive Advertising Bureau (the “IAB”), an AdTech trade body), found that the TCF violates the GDPR and fined the
IAB EUR 250,000. The IAB has been given a period of time to take corrective measures to bring the TCF into compliance with GDPR requirements
and we are monitoring developments with respect to this decision. Because the TCF is the principal mechanism by which data subjects grant
consent to AdTech providers, and because consent is in most cases generally considered to be necessarily for behavioral advertising to
occur pursuant to the GDPR, the outcome of this proceeding could impact the amount of information we (and others in the AdTech ecosystem)
are able to use on our platforms. Further, the application of similar consent standards to the CTV and mobile ecosystems continues to
evolve and absent substantial adoption of the TCF or a similar cohesive standard for expression and storage of data subject preferences,
the amount of information we can access and use for advertising through those channels may decrease. Similarly, consumers can, with increasing
ease, implement practices or technologies that may limit our ability to collect and use data to deliver advertisements, or otherwise inhibit
the effectiveness of our platform, including opt out capabilities offered by various mobile applications, CTV manufacturers and web browsers,
as well as data deletion request mechanisms offered by us to consumers, following IDEA and GDPR protocols. Although our publishers and
advertisers generally permit us to aggregate and use data from advertising placements, subject to certain restrictions, existing or future
publishers or advertisers might decide to restrict our collection or use of their data or might determine that they cannot comply with
legal requirements imposed on them in relation to the transfer or information or information rights to us. Any limitations could impair
our ability to deliver effective solutions, which could adversely affect our business, results of operations and financial condition.
If the use of third-party “cookies,”
mobile device IDs, CTV data collection or other tracking technologies is restricted without similar or better alternatives (and adoption
of such alternatives), our platform’s effectiveness could be diminished and our business, results of operations and financial condition
could be adversely affected.
We use “cookies,” or small text files placed on consumer
devices when an Internet browser is used, as well as mobile device identifiers and CTV data collection devices, to gather data that enables
our platform to be more effective. Our cookies, mobile device IDs and CTV data collection devices do not identify consumers directly but
rather record information, such as when a consumer views or clicks on an advertisement, when a consumer uses a mobile app, the consumer’s
location and browser or other device information. Publishers and partners may also choose to share their information about consumers’
interests or give us permission to use their cookies and mobile device IDs. We use data from cookies, mobile device IDs, CTV data collection
devices and other tracking technologies to help advertisers decide whether to bid on, and how to price, an ad impression in a certain
location, at a given time, for a particular consumer. Without cookies, mobile device IDs, CTV data collection devices and other tracking
technology data, transactions processed through our platform would be executed with less insight into consumer activity, reducing the
precision of advertisers’ decisions about which impressions to purchase for an advertising campaign and limiting our reporting capabilities.
This could make placement of advertising through our platform less valuable and harm our revenue. If our ability to use cookies, mobile
device IDs, CTV data collection devices or other tracking technologies is limited, we may be required to develop or obtain additional
applications and technologies to compensate for the lack of cookies, mobile device IDs, CTV data collection devices and other tracking
technology data, which could be time consuming or costly to develop, less effective and subject to additional regulation.
8
Our failure to meet content and inventory standards
and provide services that our advertisers and publishers trust could harm our brand and reputation and negatively impact our business,
operating results and financial condition.
We do not provide or control the content of advertisements or that
of the digital media providing inventory. Advertisers provide the advertising content and publishers provide the inventory content. Both
advertisers and publishers are concerned about being associated with content they consider inappropriate, competitive or inconsistent
with their brands, or illegal, and they are hesitant to spend money or make inventory available without guaranteed brand and content security.
Consequently, our reputation depends, in part, on providing services that our advertisers and publishers trust and we have contractual
obligations to meet certain content and inventory standards. We use commercially reasonable efforts to contractually prohibit the misuse
of our platform by agencies (and their marketer customers) and publishers; however, we are not always successful in achieving a fulsome
level of protection. Despite such efforts, advertisers may inadvertently purchase inventory that proves to be unacceptable for their campaigns,
in which case we may not be able to collect revenue or recoup the amounts paid to publishers. Furthermore, the standards by which an advertiser
or a publisher may consider an advertising placement or inventory content offensive or inappropriate are constantly changing and our contractual
agreements are not always able to anticipate fully the preferences of our advertisers and publishers. Our advertisers could intentionally
run campaigns that do not meet the standards of our publishers or attempt to use illegal or unethical targeting practices or seek to display
advertising in jurisdictions that do not permit such advertising or in which the regulatory environment is uncertain, in which case our
supply of ad inventory from such suppliers could be jeopardized.
We must grow rapidly to remain a market leader
and to accomplish our strategic objectives. If we fail to grow, or fail to manage our growth effectively, the value of our company may
decline.
The advertising technology market is dynamic, and our success depends
upon the continued adoption of programmatic advertising and our ability to develop innovative new technologies and solutions for the evolving
needs of advertisers and digital media property owners. We need to grow significantly to develop the market reach and scale necessary
to compete effectively with large competitors. This growth depends to a significant degree upon the quality of our strategic vision and
planning. The advertising market is evolving rapidly, and if we make strategic errors, there is a significant risk that we will lose our
competitive position and be unable to recover and achieve our objectives. Our ability to grow requires access to, and prudent deployment
of, capital for hiring, expansion of physical infrastructure to run our platform, acquisition of companies or technologies, and development
and integration of supporting sales, marketing, finance, administrative and managerial infrastructure. Further, the growth we are pursuing
may strain our resources. If we are not able to innovate and grow successfully, the value of our business may be adversely affected.
The market for programmatic buying for advertising
campaigns is relatively new and evolving. If this market develops slower or differently than we expect, our business, operating results
and financial condition could be adversely affected.
We derive revenue from the programmatic advertising on our end-to-end
platform. We expect that programmatic advertising will continue to be our primary source of revenue for the foreseeable future and that
our revenue growth will largely depend on increasing our customers’ usage of our platform. While the market for programmatic advertising
for desktop and mobile is relatively established, the market in other channels is still emerging, and our current and potential customers
may not shift quickly enough to programmatic advertising from other buying methods, which would reduce our growth potential. If the market
for programmatic advertising deteriorates or develops more slowly than we expect, it could reduce demand for our platform and our business,
growth prospects and financial condition could be adversely affected.
If we fail to detect or prevent fraud on our
platform, or malware intrusion into the systems or devices of our publishers and their consumers, publishers could lose confidence in
our platform and we could face legal claims that could adversely affect our business, results of operations and financial condition.
We may be subject to fraudulent or malicious activities undertaken
by persons seeking to use our platform for improper purposes. For example, someone may attempt to divert or artificially inflate advertiser
purchases through our platform, or to disrupt or divert the operation of the systems and devices of our publishers, and their consumers
in order to misappropriate information, generate fraudulent billings or stage cyberattacks, or for other illicit purposes. We use our
proprietary technology and third-party services to, and we participate in industry co-ops that work to, detect malware and other content
issues as well as click fraud (whether by humans or software known as “bots”) and to block fraudulent inventory. Preventing
and combating fraud is an industry-wide issue that requires constant vigilance, as well as a balancing of cost effectiveness and risk,
and we cannot guarantee that we will be successful in our efforts to combat fraud. We may provide access to inventory that is objectionable
to our advertisers or we may serve advertising that contains malware or objectionable content to our publishers, which could harm our
and our advertisers’ and publishers’ reputation, causing them to scale-back or terminate their relationship with us, or otherwise
negatively impact our business, operating results and financial condition.
If the use of digital advertising is rejected
by consumers, through opt-in, opt-out or ad-blocking technologies or other means, it could have an adverse effect on our business, results
of operations and financial condition.
Consumers can, with increasing ease, implement technologies that
limit our ability to collect and use data to deliver advertisements, or otherwise limit the effectiveness of our platform. Cookies may
be deleted or blocked by consumers. The most commonly used Internet browsers allow consumers to modify their browser settings to block
first-party cookies (placed directly by the publisher or website owner that the consumer intends to interact with) or third-party cookies
(placed by parties, like us, that have no direct relationship with the consumer), and some browsers block third-party cookies by default.
For example, Apple recently moved to “opt-in” privacy models, requiring consumers to voluntarily choose to receive targeted
ads, which may reduce the value of inventory on its iOS mobile application platform. Many applications and other devices allow consumers
to avoid receiving advertisements by paying for subscriptions or other downloads. Mobile devices using Android and iOS operating systems
limit the ability of cookies to track consumers while they are using applications other than their web browser on the device. As a consequence,
fewer of our cookies or publishers’ cookies may be set in browsers or be accessible in mobile devices, which could adversely affect
our business.
9
Some consumers also download free or paid “ad-blocking” software on their
computers or mobile devices, not only for privacy reasons but also to counteract the adverse effect advertisements can have on the consumer
experience, including increased load times, data consumption and screen overcrowding. If more consumers adopt these measures, our business,
results of operations and financial condition could be adversely affected. Ad-blocking technologies could have an adverse effect on our
business, results of operations and financial condition if they reduce the volume or effectiveness and value of advertising. In addition,
some ad blocking technologies only block ads that are targeted through use of third-party data, while allowing ads based on first- party
data (i.e., data owned by the publisher). These ad blockers could place us at a disadvantage because we rely heavily on third-party data,
while some large competitors have troves of first-party data they use to direct advertising. Other technologies allow ads that are deemed
“acceptable,” which could be defined in ways that place us or our publishers at a disadvantage, particularly if such technologies
are controlled or influenced by our competitors. Even if ad blockers do not ultimately have an adverse effect on our business, investor
concerns about ad blockers could cause our share price to decline.
We must scale our platform infrastructure to
support anticipated growth and transaction volume. If we fail to do so, we may limit our ability to process inventory and we may lose
revenue.
Our business depends on processing inventory in milliseconds, and
we must handle an increasingly large volume of such transactions. The addition of new solutions, such as header bidding in mobile and
CTV formats, support of evolving advertising formats, handling and use of increasing amounts of data, and overall growth in impressions
place growing demands upon our platform infrastructure. If we are unable to grow our platform to support substantial increases in the
number of transactions and in the amount of data we process, on a high-performance, cost-effective basis, our business, results of operations
and financial condition could be adversely affected.
Disruptions to service from our third-party
data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services and harm our business.
A significant
portion of our business relies upon hardware and services that are hosted, managed and controlled by third-party co-location providers
for our data centers, and we are dependent on these third parties to provide continuous power, cooling, Internet connectivity and physical
and technological security for our servers. In the event that these third-party providers experience any interruption in operations or
cease business for any reason, or if we are unable to agree on satisfactory terms for continued hosting relationships, we would be forced
to enter into a relationship with other service providers or assume some hosting responsibilities ourselves. Even a disruption as brief
as a few minutes could have a negative impact on marketplace activities and could result in a loss of revenue. These facilities may be
located in areas prone to natural disasters and may experience catastrophic events such as earthquakes, fires, floods, power loss, telecommunications
failures, public health crises and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism, cyber-attacks
and similar misconduct. Although we have made certain disaster recovery and business continuity arrangements, such events could cause
damage to, or failure of, our systems generally, or those of the third-party cloud computing and hosting providers, which could result
in disruptions to our service.
We face potential liability and harm to our
business based on the human factor of inputting information into our platform.
We or our
customers set up campaigns on our platform using a number of available variables. While our platform includes several checks and balances,
it is possible for human error to result in significant over-spending. We offer a number of protections such as daily or overall spending
caps, but despite these protections, the ability for overspend exists. For example, campaigns which last for a period of time can be set
to pace evenly or as quickly as possible. If a customer with a high credit limit enters an incorrect daily cap with a campaign set to
a rapid pace, it is possible for a campaign to accidently go significantly over budget. While our customer contracts state that customers
are responsible for media purchased through our platform, we are ultimately responsible for paying the inventory providers and we may
be unable to collect when such issues occur.
We are subject to cybersecurity risks to operational
systems, security systems, infrastructure and customer data processed by us or third-party vendors or suppliers and any material failure,
weakness, interruption, cyber event, incident or breach of security could prevent us from effectively operating our business.
We expect to continue to be exposed to actual and attempted cyber-attacks of our IT
networks, such as through phishing scams and ransomware. For example, we are at risk for interruptions, outages and breaches of: operational
systems, including business, financial, accounting, product development, data processing or production processes, owned by us or our third-party
vendors or suppliers; facility security systems, owned by us or our third-party vendors or suppliers; in-product technology owned by us
or our third-party vendors or suppliers; the integrated software in our solutions; or customer or driver data that we process or our third-party
vendors or suppliers process on our behalf. Such cyber incidents could materially disrupt operational systems; result in loss of intellectual
property, trade secrets or other proprietary or competitively sensitive information; compromise certain information of customers, employees,
suppliers, drivers or others; jeopardize the security of our facilities; or affect the performance of in-product technology and the integrated
software solutions. A cyber incident could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious
third parties (including nation-states or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls,
encryption and other security defenses, including hacking, fraud, trickery or other forms of deception. The techniques used by cyber attackers
change frequently and may be difficult to detect for long periods of time. Although we maintain information technology measures designed
to protect us against intellectual property theft, data breaches and other cyber incidents, such measures will require updates and improvements,
and we cannot guarantee that such measures will be adequate to detect, prevent or mitigate cyber incidents. The implementation, maintenance,
segregation and improvement of these systems requires significant management time, support and cost. Moreover, there are inherent risks
associated with developing, improving, expanding and updating current systems, including the disruption of our data management, procurement,
production execution, finance, supply chain and sales and service processes. These risks may affect our ability to manage our data and
inventory, procure parts or supplies or produce, sell, deliver and service our solutions, adequately protect our intellectual property
or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. We cannot be
sure that the systems upon which we rely, including those of our third-party vendors or suppliers, will be effectively implemented, maintained
or expanded as planned. If we do not successfully implement, maintain or expand these systems as planned, our operations may be disrupted,
our ability to accurately and timely report our financial results could be impaired, and deficiencies may arise in our internal control
over financial reporting, which may impact our ability to certify our financial results. Moreover, our proprietary information or intellectual
property could be compromised or misappropriated and our reputation may be adversely affected. If these systems do not operate as we expect
them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.
10
A significant cyber incident could impact production capability,
harm our reputation, cause us to breach our contracts with other parties or subject us to regulatory actions or litigation, any of which
could materially affect our business, prospects, financial condition and operating results. In addition, our insurance coverage for cyber-attacks
may not be sufficient to cover all the losses we may experience as a result of a cyber incident. Any problems with our third-party cloud
hosting providers, whether due to cyber security failures or other causes, could result in lengthy interruptions in our business.
Any failure to protect our intellectual property
rights could negatively impact our business.
We regard the protection of our intellectual property, which includes
trade secrets, copyrights, trademarks and domain names, as critical to our success. We strive to protect our intellectual property rights
by relying on federal, state and common law rights, as well as contractual restrictions. We generally enter into confidentiality and invention
assignment agreements with our employees and contractors and confidentiality agreements with parties with whom we conduct business in
order to limit access to, and disclosure and use of, our proprietary information. However, we may not be successful in executing these
agreements with every party who has access to our confidential information or contributes to the development of our intellectual property.
Those agreements that we do execute may be breached, and we may not have adequate remedies for any such breach. These contractual arrangements
and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our intellectual property
or deter independent development of similar intellectual property by others. Breaches of the security of our solutions, databases or other
resources could expose us to a risk of loss or unauthorized disclosure of information collected, stored or transmitted for or on behalf
of advertisers or publishers, or of cookies, data stored in cookies, other user information or other proprietary or confidential information.
We register certain domain names, trademarks and service marks
in the United States and in certain locations outside the United States. We also rely upon common law protection for certain marks, such
as “Tremor Video.” Any of our patents, trademarks or other intellectual property rights may be challenged by others or invalidated
through administrative process or litigation. Our competitors and others could attempt to capitalize on our brand recognition by using
domain names or business names similar to ours. Domain names and trademarks similar to ours have been registered in the United States
and elsewhere. We may be unable to prevent third parties from acquiring or using domain names and other trademarks that infringe on, are
similar to, or otherwise decrease the value of our brands, trademarks or service marks. Effective trade secret, copyright, trademark,
domain name and patent protection are expensive to develop and maintain, both in terms of initial and ongoing registration requirements
and the costs of defending our rights. We may be required to protect our intellectual property in an increasing number of jurisdictions,
a process that is expensive and may not be successful or which we may not pursue in every location. We may, over time, increase our investment
in protecting our intellectual property through additional filings that could be expensive and time-consuming.
Risks Relating to the Market in Which We Operate
If the non-proprietary technology, software,
products and services that we use are unavailable, have future terms we cannot agree to or do not perform as we expect, our business,
operating results and financial condition could be harmed.
We depend on data sets and various technology, software, products
and services from third parties or available as open source, including for critical features and functionality of our platform to deliver
targeted advertising campaigns. Our ability to obtain necessary data licenses on commercially reasonable terms is critical to the success
of our platform and we could suffer material adverse consequences if we are unable to obtain data through our integrations with data suppliers
or if the cost of obtaining such data materially increases. Identifying, negotiating, complying with and integrating with third-party
terms and technology are complex, costly and time- consuming matters. Further, in the course of negotiations with third-party providers,
we may be required to provide material upfront minimum purchase commitments in order to secure favorable contractual terms. Failure by
third-party providers to acquire relevant data sets, or to maintain, support or secure their technology either generally or for our accounts
specifically, or downtime, errors or defects in their products or services, could materially and adversely impact our platform, our administrative
obligations or other areas of our business. Furthermore, changes in the costs of third-party services may result in us having to replace
any third-party providers or their data sets, technology, products or services and could result in outages or difficulties in our ability
to provide our services.
11
Our revenue and results of operations are highly
dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns, inflation,
supply constraints and the COVID-19 pandemic, can make it difficult to predict our revenue and could adversely affect our business, results
of operations and financial condition.
Our business depends on the overall demand for
advertising and on the economic health of our current and prospective advertisers. Recently, the economic health of advertisers has been
impacted by the macroeconomic headwinds including rising inflation, rising interest rates and global supply chain constraints. Our business
has been and may be impacted in the future by the COVID-19 pandemic and the resulting economic uncertainty in the United States and global
economy beginning in the first and second quarters of 2020, and as a result, advertising demand on our platform decreased in the first
half of 2020, with recovery in the second half of 2020 and 2021, although some verticals have still not recovered. Many advertisers also
suffered and continue to do so as a result of global supply chain constraints which materially impacted certain verticals. Many marketing
budgets, particularly those hardest hit by the pandemic such as travel, retail and hospitality, and those impacted by supply chain constraints,
decreased or paused their advertising spending as a response to the economic uncertainty, decline in business activity due to macroeconomic
conditions and COVID-19 related impacts which have, and may continue to have, a negative impact on our revenue and results of operations.
Various macroeconomic factors could cause advertisers to reduce their advertising budgets, and may include the following:
| • |
adverse economic conditions, rising inflation and interest rates and general uncertainty about an economic downturn, particularly
in North America where we do most of our business including recession and depression concerns; |
| • |
instability in political or market conditions generally; |
| • |
changes in the pricing policies of publishers and competitors; |
| • |
any changes in tax treatment of advertising expenses and the deductibility thereof; |
| • |
the seasonal nature of advertising spend on digital advertising campaigns; and changes and uncertainty in the regulatory and business
environment (for example, when Apple or Google change policies for their browsers and operating systems). |
Reductions in overall advertising spending as a result of these
factors could make it difficult to predict our revenue and could adversely affect our business, results of operations, and financial condition.
Our global operations subject us to certain
risks beyond our control and may adversely affect our financial results.
With operations in approximately 14 countries and territories around
the world, we are subject to numerous risks outside of our control, including risks arising from political unrest and other political
events, including the invasion of Ukraine by Russia, and increasing tensions between China and Taiwan, regional and international hostilities
and international responses to these hostilities, strikes and other worker unrest, natural disasters, the impact of global climate change,
acts of war, terrorism, international conflict, severe weather conditions, pandemics, including COVID-19, and other global health emergencies,
disruptions of infrastructure and utilities, cyberattacks, and other events beyond our control. Although it is not possible to predict
such events or their consequences, these events could materially adversely affect our reputation, business and financial results.
The extent to which the lingering impacts of
the COVID-19 pandemic or other infectious disease pandemics that may occur, including the resulting global economic uncertainty, and measures
taken in response to pandemics, could adversely affect our business, results of operations and financial condition will depend on future
developments, which are highly uncertain and difficult to predict.
Our business and operations have been and could in the future be
adversely affected by health epidemics, such as the global COVID-19 pandemic. The COVID-19 pandemic and efforts to control its spread
curtailed the movement of people, goods and services worldwide, and significantly impacted economic activity and financial markets. Many
marketers, particularly those in the travel, retail and hospitality industries, decreased or paused their advertising spending as a response
to the economic uncertainty, decline in business activity, and other COVID-19-related impacts, which negatively impacted, and may continue
to negatively impact, our revenue and results of operations, the extent and duration of which we may not be able to accurately predict.
The spread of an infectious disease may also result in, and, in the case of the COVID-19 pandemic has resulted in, regional quarantines,
labor shortages or stoppages, changes in consumer purchasing patterns, disruptions to service providers’ ability to deliver data
on a timely basis, or at all, and overall economic instability.
A recession, depression, excessive inflation or other sustained
adverse market events resulting from the spread of COVID-19, or other infectious disease pandemics that may occur, could materially and
adversely affect our business and that of our customers or potential customers. Typically, we are contractually required to pay advertising
inventory and data suppliers within a negotiated period of time, regardless of whether our customers pay us on time, or at all, and we
may not be able to renegotiate better terms. As a result, our financial condition and results of operations may be adversely impacted
if the business or financial condition of advertisers and marketers is negatively affected by any future adverse market events from COVID-19
or any other infectious disease.
12
The economic uncertainty caused by the COVID-19 pandemic has made
and may continue to make it difficult for us to forecast revenue and operating results and to make decisions regarding operational cost
structures and investments. Our business depends on the overall demand for advertising and on the economic health of advertisers and publishers
that benefit from our platform. As we experienced with the COVID-19 pandemic, economic downturns or unstable market conditions may cause
advertisers to decrease their advertising budgets, which could reduce usage of our platform and adversely affect our business, operating
results and financial condition.
Our results may also fluctuate unpredictably in connection with
a recovery from the pandemic and a return to non-pandemic business conditions. We cannot predict the impact of a post-pandemic recovery
on the economy, advertisers or consumer media consumption patterns or the degree to which certain trends, such as the growth in demand
for CTV, will continue.
Any decrease in the use of the advertising
or publishing channels that we primarily depend on, or failure to expand into emerging channels, could adversely affect our business,
results of operations and financial condition.
The future growth of our business could be constrained by the level
of acceptance and expansion of emerging channels, as well as the continued use and growth of existing channels in which our capabilities
are more established. Our revenue growth may depend on our ability to expand within mobile and, in particular, CTV, and we have been,
and are continuing to, enhance such channels. We may not be able to accurately predict changes in overall advertiser demand for the channels
in which we operate and cannot assure you that our investment in formats will correspond to any such trends. For example, we cannot predict
whether the growth in demand for our CTV offering will continue. Any decrease in the use of existing channels, whether due to advertisers
or publishers losing confidence in the value or effectiveness of such channels, regulatory restrictions or other causes, or any inability
to further penetrate CTV or enter new and emerging advertising channels, could adversely affect our business, results of operations, and
financial condition.
If CTV develops in ways that prevent advertisements
from being delivered to consumers, our business, results of operations and financial condition may be adversely affected.
As online video advertising has continued to scale
and evolve, the amount of online video advertising being bought and sold programmatically has increased dramatically; this market continues
to grow with the increased popularity of CTV media. However, despite the opportunities created by programmatic advertising, programmatic
solutions for CTV publishers are still nascent compared to desktop search and mobile video solutions. Many CTV publishers have backgrounds
in cable or broadcast television and have limited experience with digital advertising, and in particular programmatic advertising. For
these publishers, it is extremely important to protect the quality of the viewer experience to maintain brand goodwill and ensure that
online advertising efforts do not create sales channel conflicts or otherwise detract from their direct sales force. In this regard, programmatic
advertising presents a number of potential challenges, including the ability to ensure that ads are brand safe, comply with business rules
around competitive separation, are not overly repetitive, are played at the appropriate volume and do not cause delays in load-time of
content. We believe that our platform is well-positioned to allow publishers the opportunity to achieve these goals and also reliably
achieve “ad podding,” or the placement of the desired number of advertisements in commercial breaks. In fact, we have invested
significant time and resources cultivating relationships with CTV publishers to establish best practices and teach them about the benefits
of programmatic CTV. While we believe that programmatic advertising will continue to grow as a percentage of overall CTV advertising,
there can be no assurance as to the rate at which CTV publishers will adopt programmatic solutions such as ours, if at all, which could
adversely affect our business, results of operations and financial condition.
The market in which we participate is intensely
competitive, and we may not be able to compete successfully with our current or future competitors.
We operate in a highly competitive and rapidly changing industry.
We expect competition to persist and intensify in the future, which could harm our ability to increase revenue and our market share and
maintain profitability. New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants
develop and offer new products and services, such as analytics, automated media buying and exchanges, aimed at capturing advertising spend
or disrupting the digital marketing landscape. Further, our competitors may begin offering similar products or services to those we currently
offer, including our end-to-end platform, and our ability to compete effectively could be significantly compromised.
We may also face competition from new companies entering the market,
including large established companies and companies that we do not yet know about or do not yet exist. If existing or new companies develop,
market or resell competitive high-value products or services that result in additional competition for advertising spend or advertising
inventory or if they acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to
compete effectively could be significantly compromised and our results of operations could be harmed.
Our current and potential competitors may have significantly more
financial, technical, marketing and other resources than we have, which may allow them to devote greater resources to the development,
promotion, sale and support of their products and services. They may also have more extensive advertiser bases and broader publisher relationships
than we have and may be better positioned to execute on advertising conducted over certain channels, such as social media, mobile and
video. Some of our competitors may have a longer operating history and greater name recognition. As a result, these competitors may be
better able to respond quickly to new technologies, develop deeper advertiser relationships or offer services at lower prices. Any of
these developments would make it more difficult for us to sell our platform and could result in increased pricing pressure, increased
sales and marketing expense, or the loss of market share.
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Seasonal fluctuations or market changes in
advertising activity could have a material impact on our revenue, cash flow and operating results.
Our revenue, cash flow, operating results and other key operating
and performance metrics may vary from quarter to quarter due to the seasonal nature of our customers’ spending on advertising campaigns.
For example, in prior years, customers tended to devote more of their advertising budgets to the fourth calendar quarter to coincide with
consumer holiday spending. In contrast, the first quarter of the calendar year has typically been the slowest in terms of advertising
spend. Political advertising could also cause our revenue to increase during election cycles and decrease during other periods, making
it difficult to predict our revenue, cash flow and operating results, all of which could fall below our expectations. In addition, adverse
economic conditions, inflation, changes in foreign exchange rates or interest rates, or general economic uncertainty may cause customers
to decrease their advertising spend, adversely affecting our revenue, cash flow and operating results.
If we do not effectively grow and train our
sales and support teams, we may be unable to add new customers or increase usage of our platform by our existing customers and our business
will be adversely affected.
We are substantially dependent on our sales and support teams to
obtain new customers and to increase usage of our platform by our existing customers. We believe that there is significant competition
for sales personnel with the skills and technical knowledge that we require. Our ability to achieve revenue growth will depend, in large
part, on our success in recruiting, training, integrating and retaining sufficient numbers of sales personnel to support our growth. Due
to the complexity of our platform, a significant time lag exists between the hiring date of sales and support personnel and the time when
they become fully productive. Our recent and planned hires may not become productive as quickly as we expect, and we may be unable to
hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. If we are unable
to hire and train sufficient numbers of effective sales personnel, or the sales personnel are not successful in obtaining new customers
or increasing our existing customers’ spend with us, our business may be adversely affected.
The United Kingdom’s withdrawal from
the European Union may have a negative effect on global economic conditions, financial markets and our business.
Following a national referendum and enactment of legislation by
the government of the United Kingdom, the United Kingdom formally withdrew from the European Union on January 31, 2020 and ratified a
trade and cooperation agreement governing its future relationship with the European Union which was provisionally applied until ratified
on January 1, 2021 by the European Parliament and the Council of the European Union, addresses trade, economic arrangements, law enforcement,
judicial cooperation and a governance framework including procedures for dispute resolution, among other things. Because the agreement
merely sets forth a framework in many respects and will require complex additional bilateral negotiations between the United Kingdom and
the European Union as both parties continue to work on the rules for implementation, significant political and economic uncertainty remains
about how the precise terms of the relationship between the parties will differ from the terms before withdrawal.
These developments, or the perception that any related developments
could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial
markets, and may significantly reduce global market liquidity, restrict the ability of key market participants to operate in certain financial
markets or restrict our access to capital. Any of these factors could have a material adverse effect on our business, financial condition
and results of operations and reduce the price of our ADSs.
Risks Relating to Global Operations Including Location in Israel
and Our Employees
Our long-term success depends on our ability
to operate internationally making us susceptible to risks associated with cross-border sales and operations.
We serve advertisements in more than 140 countries and maintain
offices in North America, Europe, Asia and Australia. Our expansive global footprint subjects us to a variety of risks and burdens, including:
| • |
the need to localize our solutions, including product customizations and adaptation for local practices and regulatory requirements;
|
| • |
lack of familiarity and burdens of ongoing compliance with local laws, legal standards, regulatory requirements, tariffs, customs
formalities and other barriers, including restrictions on advertising practices, regulations governing online services, restrictions on
importation or shipping of specified or proscribed items, importation quotas, shopper protection laws, enforcement of intellectual property
rights, laws dealing with shopper and data protection, privacy, encryption, denied parties and sanctions, and restrictions on pricing
or discounts; |
| • |
heightened exposure to fraud; |
| • |
legal uncertainty in foreign countries with less developed legal systems; |
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| • |
unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or customs formalities, embargoes,
exchange controls, government controls or other trade restrictions; |
| • |
differing technology standards; |
| • |
difficulties in managing and staffing international operations and differing employer/employee relationships; |
| • |
fluctuations in exchange rates that may increase our foreign exchange exposure; |
| • |
potentially adverse tax consequences, including the complexities of foreign tax laws (including with respect to value added taxes)
and restrictions on the repatriation of earnings; |
| • |
increased likelihood of potential or actual violations of domestic and international anti-money laundering laws and anticorruption
laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) and the U.K. Bribery Act 2010 (the “U.K.
Bribery Act”), which correlates with the scope of our sales and operations in foreign jurisdictions and operations in certain industries,
such that an increase in such operations would increase risk of non-compliance with the aforementioned laws; |
| • |
uncertain political and economic climates in foreign markets; |
| • |
managing and staffing operations over a broader geographic area with varying cultural norms and customs; |
| • |
varying levels of Internet and mobile technology adoption and infrastructure; |
| • |
reduced or varied protection for intellectual property rights in some countries; and |
| • |
new and different sources of competition. |
These factors may require significant management attention and
financial resources. Any negative impact from our international business efforts could adversely affect our business, results of operations
and financial condition.
We depend on our executive officers and other
key employees, and the loss of one or more of these employees could harm our business.
Our success depends largely upon the continued services of our
executive officers and other key employees. From time to time, there may be changes in our executive management team resulting from the
hiring or departure of executives, which could disrupt our business. We do not have employment agreements with our executive officers
or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their
employment with us at any time subject only to the notice periods prescribed by their respective executive agreements. The loss of one
or more of our executive officers or key employees could harm our business.
Inability to attract and retain other highly
skilled employees could harm our business.
To execute our growth plan, we must attract and retain highly qualified
personnel. Competition where we maintain offices is intense, especially for engineers experienced in designing and developing software
and experienced sales professionals. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring
and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater
resources than we have and may attempt to recruit our highly skilled employees. In addition, certain domestic immigration laws restrict
or limit our ability to recruit internationally. Any changes to Israeli, United Kingdom, European or the U.S. immigration policies that
restrain the flow of technical and professional talent may inhibit our ability to recruit and retain highly qualified employees. In addition,
job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment.
If the perceived value of our equity awards declines, it may harm our ability to recruit and retain highly skilled employees.
Volatility or lack of appreciation in the price
of our ADSs may also affect our ability to attract and retain our key employees. Many of our senior personnel and other key employees
have become, or will soon become, vested in a substantial amount of options restricted share units (“RSUs”) and performance
share units (“PSUs”). Employees may be more likely to leave us if the shares they own or the shares underlying their vested
options, RSUs or PSUs have significantly decreased in value relative to the original purchase price of the shares or the exercise price
of the options.
Conditions in Israel could materially and adversely
affect our business.
Many of our employees, including certain management members, operate
from our offices that are located in Tel Aviv, Israel. In addition, a number of our officers and directors are residents of Israel. Accordingly,
political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations. In recent
years, Israel has been engaged in sporadic armed conflicts with certain terrorist organizations and with Iranian-backed military forces
in Syria. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian targets in various parts
of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions
in Israel. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Any hostilities involving Israel or
the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of
operations.
15
Our commercial insurance does not cover losses that may occur as
a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct
damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or
that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our
business. Any armed conflicts or political instability in the region could negatively affect our business conditions and harm our results
of operations.
Further, in the past, the State of Israel and Israeli companies
have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies.
These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business.
A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.
In addition, many Israeli citizens are obligated
to perform several days, or in some cases extended periods of, annual military reserve duty each year until they reach the age of 40 (or
older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called
to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists.
It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which
may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial
condition and results of operations.
Furthermore, the Israeli government is currently
pursuing extensive changes to Israel’s judicial system. In response to the foregoing developments, individuals, organizations and
institutions, both within, and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment
in Israel including due to reluctance of foreign investors to invest, or conduct business, in Israel, as well as to increased currency
fluctuations, downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in
macroeconomic conditions. Such proposed changes may also adversely affect the labor market in Israel or lead to political instability
or civil unrest. To the extent that any of these negative developments do occur, they may have an adverse effect on our business, our
results of operations, and our ability to raise additional funds, if deemed necessary by our management and board of directors.
Your rights and responsibilities as our shareholder
will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.
We are incorporated under Israeli law. The rights and responsibilities
of holders of our ordinary shares are governed by our amended and restated articles of association and the Israeli Companies Law, 5759-1999
(the “Companies Law”). These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders
in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an Israeli company has to act in good faith
and in a customary manner in exercising his, her or its rights and fulfilling his, her or its obligations toward the Company and other
shareholders and to refrain from abusing his, her or its power in the Company, including, among other things, in voting at the general
meeting of shareholders, on amendments to a company’s articles of association, increases in a company’s authorized share capital,
mergers and certain transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder
of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has
the power to appoint or prevent the appointment of a director or officer in the Company, or has other powers toward the Company, has a
duty of fairness toward the Company. However, Israeli law does not define the substance of this duty of fairness. There is little case
law available to assist in understanding the implications of these provisions that govern shareholder behavior.
Provisions of Israeli law and our amended and
restated articles of association may delay, prevent or make undesirable an acquisition of all or a significant portion of our ADSs or
assets.
Provisions of Israeli law and our amended and restated articles
of association could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to
acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be considered to be beneficial
by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares. Among
other things:
| • |
Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares
in a company are purchased; |
| • |
Israeli corporate law requires special approvals for certain transactions involving directors, officers or significant shareholders
and regulates other matters that may be relevant to these types of transactions; |
| • |
Israeli corporate law does not provide for shareholder action by written consent for public companies, thereby requiring all shareholder
actions to be taken at a general meeting of shareholders; |
| • |
our amended and restated articles of association do not permit a director to be removed except by a vote of the holders of at least
65% of our outstanding shares entitled to vote at a general meeting of shareholders; and |
| • |
our amended and restated articles of association provide that director vacancies may be filled by our board of directors. |
Further, Israeli tax considerations may make potential transactions
undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief
to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as
U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent
on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which certain
sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions,
the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.
16
Our amended and restated articles of association
provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum for
the resolution of any claims arising under the Securities Act of 1933, as amended (the “Securities Act”), which may limit
the ability of our shareholders to initiate litigation against us or increase the cost thereof.
Our amended and restated articles of association provide that unless
we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive
forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Section 22 of the Securities Act
creates concurrent jurisdiction for federal and state courts over all such Securities Act actions, and accordingly, both state and federal
courts have jurisdiction to entertain such claims. While the federal forum provision in our amended and restated articles of association
does not restrict the ability of our shareholders to bring claims under the Securities Act, we recognize that it may limit shareholders’
ability to bring a claim in the judicial forum that they find favorable and may increase certain litigation costs, which may discourage
the filing of claims under the Securities Act against the Company, its directors and officers. However, the enforceability of similar
forum provisions (including exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under
the Securities Act) in other companies’ organizational documents has been challenged in legal proceedings, and there is uncertainty
as to whether courts would enforce the exclusive forum provisions in our amended and restated articles of association. If a court were
to find the choice of forum provision contained in our amended and restated articles of association to be inapplicable or unenforceable
in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely
affect our business, financial condition and results of operations. We note that investors cannot waive compliance with the federal securities
laws and the rules and regulations thereunder may have the effect of discouraging lawsuits against our directors and officers.
It may be difficult to enforce a U.S. judgment
against us, our officers and directors in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process
on our officers and directors.
Not all of our directors or officers are residents of the United
States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors
and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and executive officers
may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to
assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions
of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or
our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an
Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found
to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain
matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described
above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered
against us or our non-U.S. officers and directors.
Moreover, an Israeli court will not enforce a non-Israeli judgment
if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases),
if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence
of due process, if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit
in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought.
Risks Relating to Our Financial Position
Our operating history makes it difficult to
evaluate our business and prospects and may increase the risk associated with your investment.
Our business has evolved over time, including through several successful acquisitions
such as our acquisitions of RhythmOne plc (“RhythmOne”) in 2019, Unruly Holdings Limited and Unruly Media, Inc. (collectively,
“Unruly”) in 2020, SpearAd GmbH (“SpearAd”) in 2021 and Amobee in 2022, such that our operating history makes
it difficult to evaluate our current business and future prospects. As a result of such acquisitions, our financial results across different
periods may not be directly comparable. We expect to face challenges, risks and difficulties frequently experienced by growing companies
in rapidly developing industries, including those relating to:
| • |
recruiting, integrating and retaining qualified and motivated employees, particularly engineers |
17
| • |
developing, maintaining and expanding relationships with publishers, agencies and advertisers; |
| • |
innovating and developing new solutions that are adopted by and meet the needs of publishers, agencies and advertisers; |
| • |
competing against companies with a larger customer base or greater financial or technical resources; |
| • |
global economic disruption and technological changes driven by the COVID-19 pandemic; |
| • |
further expanding our global footprint; |
| • |
managing expenses as we invest in our infrastructure and platform technology to scale our business and operate as a U.S. listed public
company; and |
| • |
responding to evolving industry standards and government regulations that impact our business, particularly in the areas of data
protection and consumer privacy. |
If we are not successful in addressing these and other issues,
our business may suffer, our revenue may decline and we may not be able to achieve further growth or sustain profitability.
We often have long sales cycles, which can result in significant
time and investment between initial contact with a prospect and execution of an agreement with an advertiser or publisher, making it difficult
to project when, if at all, we will obtain new advertisers or publishers, and when we will generate revenue from them.
Our sales cycle, from initial contact to contract execution and implementation, can
take significant time. As part of our sales cycle, we may incur significant expenses before we generate any revenue from a prospective
advertiser or publisher, if at all. We have no assurance that the substantial time and money spent on our sales efforts will generate
significant revenue. If conditions in the marketplace, generally or with a specific prospective advertiser or publisher, change negatively,
it is possible that we will be unable to recover any of these expenses. Our sales efforts involve educating advertisers and publishers
about the use, technical capabilities and benefits of our platform. Some advertisers and publishers undertake an evaluation process that
frequently involves not only our platform but also the offerings of our competitors. As a result, it is difficult to predict when we will
obtain new advertisers or publishers and begin generating revenue from them. Even if our sales efforts result in obtaining a new advertiser
or publisher, the advertiser or publisher controls when and to what extent it uses our platform and therefore the amount of revenue we
generate, and it may not sufficiently justify the expenses incurred to acquire the advertiser or publisher and the related training support.
As a result, we may not be able to add advertisers or publishers to our customer base, or generate revenue, as quickly as we may expect,
which could harm our growth prospects.
We are subject to payment-related risks and,
if our advertisers do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected.
Many of our contracts with advertising agencies provide that if
the advertiser does not pay the agency, the agency is not liable to us, and we must seek payment solely from the advertiser, a type of
arrangement called sequential liability. Contracting with these agencies, which in some cases have or may develop higher-risk credit profiles,
may subject us to greater credit risk than if we were to contract directly with advertisers. This credit risk may vary depending on the
nature of an advertising agency’s aggregated advertiser base. We may also be involved in disputes with agencies and their marketers
over the operation of our platform, the terms of our agreements or our billings for purchases made by them through our platform. When
we are unable to collect or make adjustments to our bills to advertisers, we incur write-offs for bad debt, which could have a material
adverse effect on our results of operations for the periods in which the write-offs occur. In the future, bad debt may exceed reserves
for such contingencies and our bad debt exposure may increase over time. Any increase in write-offs for bad debt could have a materially
negative effect on our business, operating results and financial condition.
Furthermore, we are generally contractually required to pay suppliers
of advertising inventory and data within a negotiated period of time, regardless of whether our advertisers or publishers pay us on time,
or at all. While we attempt to negotiate long payment periods with our suppliers and shorter periods with our advertisers and publishers,
we are not always successful. As a result, our accounts payable are often due on shorter cycles than our accounts receivables, requiring
us to remit payments from our own funds, and accept the risk of bad debt.
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This payment
process will increasingly consume working capital if we continue to be successful in growing our business. In addition, like many companies
in our industry, we often experience slow payment by advertising agencies. In this regard, we had average days sales outstanding (“DSO”)
of 90 days and average days payable outstanding (“DPO”) of 92 days for the year ended December 31, 2022. We compute our average
DSO as of a given month end based on a weighted average of outstanding accounts receivable. Specifically, the DSO is calculated by multiplying
the percentage of accounts receivable outstanding for each monthly billing period by the number of days outstanding related to each billing
period and then summing the weighted days outstanding. We compute our DPO as of a given month end by dividing our trade payables (including
accrued liabilities) by the average daily cost of media, data, other direct costs and certain operating expenses over the prior four months.
Historically, our DSOs have fluctuated. If our DSOs increase significantly, and we are unable to borrow against these receivables on commercially
acceptable terms, our working capital availability could be reduced, and as a consequence our results of operations and financial condition
would be adversely impacted. We cannot assure you that as we continue to grow, our business will generate sufficient cash flow from operations
to fund our working capital needs. If our cash flows are insufficient to fund our working capital requirements, we may not be able to
grow at the rate we currently expect or at all.
The Amobee acquisition and any future acquisitions
or strategic investments could be difficult to integrate, divert the attention of management, and could disrupt our business, dilute shareholder
value and adversely affect our business, results of operations and financial condition.
As part of our growth strategy, we have pursued strategic acquisitions, such as our
acquisitions of RhythmOne in 2019, Unruly in 2020, SpearAd in 2021 and Amobee in 2022, and our investment in Hisense’s VIDAA platform
in 2022 and we may acquire or invest in other businesses, assets or technologies that are complementary to our business and align with
our strategic goals. Any acquisition or investment may divert the attention of management and require us to use significant amounts of
cash, issue dilutive equity securities or incur debt. In addition, the anticipated benefits of any acquisition or investment may not be
realized, and we may be exposed to unknown risks, any of which could adversely affect our business, results of operations and financial
condition, including risks arising from:
| • |
difficulties in integrating the operations, technologies, product or service offerings, administrative systems and personnel of acquired
businesses, especially if those businesses operate outside of our core competency or geographies in which we currently operate;
|
| • |
ineffectiveness or incompatibility of acquired technologies or solutions; |
| • |
potential loss of key employees of the acquired business; |
| • |
inability to maintain key business relationships and reputation of the acquired business; |
| • |
diversion of management attention from other business concerns; |
| • |
litigation arising from the acquisition or the activities of the acquired business, including claims from excluded assets, terminated
employees, customers, former shareholders or other third parties; |
| • |
assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual
property rights, or increase our risk of liability; |
| • |
complications in the integration of acquired businesses or diminished prospects, including as a result of the COVID-19 pandemic and
its global economic effects; |
| • |
failure to generate the expected financial results and synergies related to an acquisition on a timely manner or at all; |
| • |
failure to accurately forecast the impact of an acquisition transaction; and |
| • |
implementation or remediation of effective controls, procedures and policies for acquired businesses. |
To fund part of the acquisition of Amobee, we entered into a new debt facility (See
Note 11 to our audited consolidated financial statements). To fund future acquisitions, we may obtain additional debt financing, pay cash
or issue additional ADSs, which could dilute our shareholders’ value or diminish our cash reserves. Borrowing to fund the Amobee
acquisition resulted in increased fixed obligations and subjected us to covenants or other restrictions that can potentially limit the
ability to run our business.
We are a party to a credit agreement which
contains a number of covenants that may restrict our current and future operations and could adversely affect our ability to execute business
needs.
In September 2022,
in connection with the consummation of the Amobee acquisition, Unruly Group US Holding entered into a senior secured term loan and a senior
secured revolving credit facility with letter of credit sub-facility (collectively, the “Loan”), which
contains a number of covenants that limit our ability and our subsidiaries’ ability to, among other things, incur indebtedness,
create liens, make investments, merge with other companies, dispose of our assets, prepay other indebtedness and make dividends and other
distributions. The terms of our Loan may restrict our current and future operations and could adversely affect our ability to finance
our future operations or capital needs or to execute business strategies in the means or manner desired. In addition, complying with these
covenants may make it more difficult for us to successfully execute our business strategy, invest in our growth strategy and compete against
companies who are not subject to such restrictions. The Loans require compliance with various financial and non-financial covenants, including
affirmative and negative covenants. The financial covenants require that the total net leverage ratio not exceed 3x and the interest coverage
ratio not be less than 4x, in each case measured as of the end of each fiscal quarter. We may not be able to generate sufficient cash
flow or sales to meet the financial covenant or pay the principal or interest under the Loan. See Note 11 of our audited consolidated
financial statements for additional information.
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If we are unable to comply with our payment requirements,
our lender may accelerate our obligations under our Loan and foreclose upon the collateral, or we may be forced to sell assets, restructure
our indebtedness or seek additional equity capital, which would dilute our shareholders’ interests. If we fail to comply with our
covenants under the Loan, it could result in an event of default under the agreement and our lender could make the entire debt immediately
due and payable. If this occurs, we might not be able to repay our debt or borrow sufficient funds to refinance it. Even if new financing
is available, it may not be on terms that are acceptable to us.
Risks Relating to Legal or Regulatory Constraints
We are subject to regulation with respect to
political advertising, which lacks clarity and uniformity.
We are subject to regulation with respect to political advertising
activities, which are governed by various federal and state laws in the United States and national and provincial laws worldwide. Online
political advertising laws are rapidly evolving and our publishers may impose restrictions on receiving political advertising. The lack
of uniformity and increasing compliance requirements around political advertising may adversely impact the amount of political advertising
spent through our platform, increase our operating and compliance costs and subject us to potential liability from regulatory agencies.
We are subject to laws and regulations related
to data privacy, data protection and information security and consumer protection across different markets where we conduct our business,
including in the United States, the European Economic Area (“EEA”) and the United Kingdom and industry requirements and such
laws, regulations and industry requirements are constantly evolving and changing.
We receive, store and process data about or related to consumers
in addition to advertisers, publishers, employees and services providers. Our handling of this data is subject to a variety of federal,
state and foreign laws and regulations and is subject to regulation by various government authorities and other regulatory bodies. Our
data handling is also subject to contractual obligations (some of which are statutorily required) and may be deemed to be subject to industry
standards.
The U.S. federal and various state and foreign governments have
adopted or proposed limitations on the collection, distribution, use, transfer and storage of data relating to individuals, including
the use of contact information, web and device-based identifiers, and other data for marketing, advertising and other communications with
individuals and businesses. In the United States, various laws and regulations apply to the collection, processing, disclosure and security
of certain types of data. these and other types of data. Many aspects of these laws, and regulations underlying them, have not been interpreted
by the applicable courts, and the full nature and scope of their application is therefore uncertain. Likewise, these laws impose particular
obligations regarding the collection, use and transfer of certain categories of “sensitive” information, but the precise application
of these laws to inferenced audience segments often used by advertising platforms remains unclear. Therefore, it is possible that standards
of data usage, disclosure, collection or transfer may be interpreted or redefined in a manner that restricts us from how we collect or
use information that is important to our platforms and services.
Additionally, the U.S. Federal Trade Commission (“FTC”)
and many state attorneys general are interpreting federal and state consumer protection laws as imposing certain “fairness”
standards for the online collection, use, dissemination and security of data, but the precise scope and impact of these standards are
presently unclear. If we fail to comply with any such laws or regulations, or if they are defined in a manner that imposes onerous restrictions
on targeted advertising, we may be subject to enforcement actions that may not only expose us to litigation, fines and civil and/or criminal
penalties but may also require us to change our business practices as well as have an adverse effect on our business, results of operations
and financial condition.
More generally, the regulatory framework for and enforcement of
data privacy issues worldwide is currently evolving and is likely to remain uncertain for the foreseeable future. The occurrence of unanticipated
events often rapidly drives the adoption of legislation or regulation affecting the use, collection or other processing of data and manners
in which we conduct our business. Restrictions could be placed upon the collection, management, aggregation and use of information, which
could result in a material increase in the cost of collecting or otherwise obtaining certain kinds of data and could limit the ways in
which we may use or disclose information. In particular, interest-based advertising, or the use of data to draw inferences about a user’s
interests and deliver relevant advertising to that user, and similar or related practices (sometimes referred to as behavioral advertising
or personalized advertising), such as cross-device data collection and aggregation, steps taken to de-identify personal data, and to use
and distribute the resulting data, including for purposes of personalization and the targeting of advertisements, have come under increasing
scrutiny by legislative, regulatory and self-regulatory bodies in the United States, the European Union and in other jurisdictions that
focus on consumer protection or data privacy. Much of this scrutiny has focused on the use of cookies and other technology to collect
information about consumers’ online browsing activity on web browsers, mobile devices and other devices, to associate such data
with user or device identifiers or de-identified identities across devices and channels.
In
addition, providers of Internet browsers, app stores or platforms such as Apple or Google have engaged in, or announced plans to continue
or expand, efforts to provide increased visibility into, and certain controls over, cookies and similar technologies and the data collected
using such technologies, as further described above in the section “—Risks Relating to our
Business—If the use of digital advertising is rejected by consumers, through opt-in,
opt-out or ad-blocking technologies or other means, it could have an adverse effect on our business, results of operations and financial
condition.” For example, in January 2020, Google announced that the Chrome browser will block third-party cookies at some
point during the subsequent 24 months. Such providers could also change their technical requirements,
guidelines or policies, including through their default settings, in other ways that adversely impact the way in which we or our customers
collect, use and share data from user devices, including restricting our ability to use or read device identifiers, other tracking features
or other device data. Because we, our advertisers and our publishers, rely upon large volumes of such data collected primarily through
cookies and similar technologies, it is possible that these efforts may have a substantial impact on our ability to collect and use data
from consumers, and it is essential that we monitor developments in this area domestically and globally, and engage in responsible privacy
practices, including providing consumers with notice of the types of data we collect, how we use that data to provide our services and
the ability to opt out of such use. There also is the risk that a provider could limit or discontinue our access to its platform or app
store if it establishes more favorable relationships with one or more of our competitors or it determines that it is in their business
interests to do so, and we would have no recourse against any such provider, which could have a material adverse effect on our business.
20
In the United States, the U.S. Congress and state legislatures,
along with federal regulatory authorities have recently increased their attention on matters concerning the collection and use of consumer
data, including by digital advertisers. For example, the FTC regulates digital advertising through the Federal Trade Commission Act, which
prohibits “unfair” or “deceptive” trade practices, including misrepresentations regarding the collection and use
of consumer data. States have also begun to introduce more comprehensive privacy legislation. California enacted the California Consumer
Privacy Act of 2018 (the “CCPA”) that took effect on January 1, 2020. The CCPA gives California residents expanded rights
to access and delete their personal information, opt out of sale of their personal information, and receive detailed information about
how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for
certain data breaches, which is expected to increase the volume and success of class action data breach litigation. In addition to increasing
our compliance costs and potential liability, the CCPA created restrictions on “sales” of personal information that may restrict
the disclosure of personal information for advertising purposes. Our advertising business relies, in part, on such disclosure, and decreased
availability and increased costs of information could adversely affect our ability to meet advertisers’ and publishers’ requirements
and could have an adverse effect on our business, results of operations and financial condition.
We are also subject to the California Privacy Rights Act (“CPRA”),
which was passed into law on November 3, 2020, and took substantial effect on January 1, 2023. The CPRA modifies and supplements the CCPA,
including by imposing additional regulation on online advertising and particularly cross-context behavioral advertising, potentially resulting
in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. The effects of the CCPA and CPRA
are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial
costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.
The CCPA and CPRA has encouraged “copycat” laws and
in other states across the country, such as in Virginia and Washington. This legislation may add additional complexity, variation in requirements,
restrictions and potential legal risk, require additional investment in resources to compliance programs and could impact strategies and
availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
In the EEA, we are subject to the General Data Protection Regulation
2016/679 (“GDPR”) and in the United Kingdom, we are subject to the United Kingdom data protection regime consisting primarily
of the UK General Data Protection Regulation and the UK Data Protection Act 2018, in each case in relation to our collection, control,
processing, sharing, disclosure and other use of data relating to an identifiable living individual (personal data). The GDPR, and national
implementing legislation in EEA member states and the United Kingdom, impose a strict data protection compliance regime including: providing
detailed disclosures about how personal data is collected and processed (in a concise, intelligible and easily accessible form); demonstrating
that an appropriate legal basis is in place or otherwise exists to justify data processing activities; granting new rights for data subjects
in regard to their personal data (including the right to be “forgotten” and the right to data portability), as well as enhancing
current rights (e.g., data subject access requests); introducing the obligation to notify data protection regulators or supervisory authorities
(and in certain cases, affected individuals) of significant data breaches; defining for the first time pseudonymized (i.e., key-coded)
data; imposing limitations on retention of personal data; maintaining a record of data processing; and complying with the principal of
accountability and the obligation to demonstrate compliance through policies, procedures, training and audit. Fines for certain breaches
of the GDPR and the UK data protection regime are significant (e.g., fines for certain breaches of the GDPR are up to the greater of 20
million Euros or 4% of total global annual turnover). In addition to the foregoing, a breach of the GDPR or UK GDPR could result in regulatory
investigations, reputational damage, orders to cease/change our processing of our data, enforcement notices and/ or assessment notices
(for a compulsory audit). We may also face civil claims including representative actions and other class action type litigation (where
individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs,
diversion of internal resources and reputational harm.
Further, in the European Union and the United Kingdom, we are subject
to evolving EU and UK privacy laws on cookies and e-marketing. Regulators in these countries are increasingly focusing on compliance with
requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly
likely to be replaced by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance.
While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance
are driving increased attention to cookies and tracking technologies. As regulators start to enforce the strict approach, this could lead
to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of
our technology personnel and subject us to additional liabilities. This strict approach to enforcement has already begun in a number of
European jurisdictions. For instance, high profile investigations into the AdTech industry are underway in Germany and the United Kingdom.
In a recent decision, the Belgium DPA found that a widely used mechanism to manage user preferences relating to targeted online advertising,
the TCF, violated the GDPR and fined the industry body that developed it EUR 250,000.
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We are also subject to laws and regulations that dictate whether,
how and under what circumstances we can transfer, process and/or receive certain data that is critical to our operations, including data
shared between countries or regions in which we operate and data shared among our products and services. Specifically, the GDPR, UK GDPR
and other European and UK data protection laws generally prohibit the transfer of personal data from the EEA, UK and Switzerland to the
United States and most other countries unless the transfer is to an entity established in a country deemed to be provide adequate protection
(such as Israel) or the parties to the transfer have implemented certain safeguards to protect the transferred personal data. Where we
transfer personal data outside the EEA to a country that is not deemed to be “adequate,” we strive to comply with applicable
laws including where we can rely on derogations (e.g., where the transfer is necessary for the performance of a contract) or we may put
in place standard contractual clauses.
In addition, some jurisdictions may impose data localization laws,
which require personal information, or certain subcategories of personal information to be stored in the jurisdiction of origin. These
regulations may inhibit our ability to expand into those markets or prohibit us from continuing to offer our products in those markets
without significant additional costs.
We also depend on a number of third parties in relation to the
operation of our business, a number of which process personal data on our behalf. With each such provider we attempt to mitigate the associated
risks of using third parties by conducting due diligence, entering into contractual arrangements to require that providers only process
personal data in accordance with the applicable laws, and that they have appropriate technical and organizational security measures in
place. Where we transfer personal data outside the EEA or the United Kingdom to such third parties, we do so in compliance with the relevant
data export requirements, as described above. There is no assurance that these contractual measures and our own privacy and security-related
safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any
violation of data or security laws by our third-party processors could have a material adverse effect on our business and result in the
fines and penalties outlined above. In addition to government regulation, privacy advocacy and industry groups may propose new and different
self-regulatory standards that either legally or contractually apply to us, our advertisers or our publishers. We are members of self-regulatory
bodies such as Data Advertising Alliance, European Digital Advertising Alliance, Digital Advertising Alliance of Canada, National Advertising
Initiative and Interactive Advertising Bureau (“IAB”), among others, that impose additional requirements related to the collection,
use and disclosure of consumer data. Under the requirements of these self- regulatory bodies, in addition to other compliance obligations,
we are obligated to provide consumers with notice about our use of cookies and other technologies to collect consumer data and of our
collection and use of consumer data for certain purposes, and to provide consumers with certain choices relating to the use of consumer
data. Some of these self-regulatory bodies have the ability to discipline members or participants, which could result in fines, penalties
and/or public censure (which could in turn cause reputational harm). Additionally, some of these self-regulatory bodies might refer violations
of their requirements to the FTC or other regulatory bodies. If we were to be found responsible for such a violation, it could adversely
affect our reputation, as well as our business, results of operations and financial condition.
Any failure to achieve the required data protection standards (which
are sometimes unclear when applied to the online advertising ecosystem) may result in lawsuits, regulatory fines or other actions or liability,
all of which may harm our results of operations. Because the interpretation and application of privacy and data protection laws such as
the CCPA and GDPR, and the related regulations and standards, are uncertain, it is possible that these laws, regulations and standards
may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our data management practices or the technological
features of our solutions.
If publishers, buyers, and data providers do
not obtain necessary and requisite consents from consumers for us to process their personal data, we could be subject to fines and liability.
Because we do not have direct relationships with consumers, we
rely on publishers, buyers, and data providers, as applicable, to obtain the consent of the consumer on our behalf to process their data
and deliver interest-based advertisements, and to implement any notice or choice mechanisms required under applicable laws, but if publishers,
buyers, or data providers do not follow this process (and in any event as the legal requirements in this area continue to evolve and develop),
we could be subject to fines and liability. We may not have adequate insurance or contractual indemnity arrangements to protect us against
any such claims and losses.
We generally do not have a direct relationship
with consumers who view advertisements placed through our platform, so we may not be able to disclaim liabilities from such consumers
through terms of use on our platform.
Advertisements on websites, applications and other digital media
properties of publishers purchased through our platform are viewed by consumers visiting the publishers’ digital media properties.
Those publishers often have terms of use in place with their consumers that disclaim or limit their potential liabilities to consumers,
or pursuant to which consumers waive rights to bring class actions against the publishers. We generally do not have terms of use in place
with such consumers, so we cannot disclaim or limit potential liabilities to them through terms of use, which may expose us to greater
liabilities than certain of our competitors.
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We face potential liability and harm to our
business based on the nature of our business and the content on our platform and we are, and may be in the future, involved in commercial
disputes with counterparties with whom we do business.
Advertising often results in litigation relating to misleading
or deceptive claims, copyright or trademark infringement, public performance royalties or other claims based on the nature and content
of advertising that is distributed through our platform. Though we aim to contractually require advertisers to represent to us that their
advertisements comply with our ad standards and our publishers’ ad standards and that they have the rights necessary to serve advertisements
through our platform, we do not independently verify whether we are permitted to deliver, or review the content of, such advertisements.
Likewise, while we aim to contractually require publishers to represent to us that their content comply with our publisher standards and
does not infringe on any third-party rights, we do not independently verify whether we are permitted to deliver, or review the content
of such inventory. If any of these representations are untrue, we may be exposed to potential liability and our reputation may be
damaged. While our advertisers and publishers are typically obligated to indemnify us, such indemnification may not fully cover us, or
we may not be able to collect. In addition to settlement costs, we may be responsible for our own litigation costs, which can be expensive.
Further, operating in the advertising industry involves numerous
commercial relationships, uncertain intellectual property rights and other aspects that create heightened risks of disputes, claims, lawsuits
and investigations. In particular, we may face claims related to intellectual property matters, commercial disputes and sales and marketing
practices. For example, on May 18, 2021, we filed a complaint against Alphonso, Inc. (“Alphonso”) asserting claims for breach
of contract, tortious interference with business relations, intentional interference with contractual relations, unjust enrichment, and
conversion in connection with Alphonso’s breach of certain contracts with us and related misconduct. The Court enjoined Alphonso
from using Tremor’s confidential information but did not grant relief on our other claims. On June 21, 2022, Alphonso, Inc. (“Alphonso”)
filed a complaint against the Company in the United States District Court for the Northern District of California, asserting claims for
misappropriation of trade secrets under federal and state law. On July 19, 2022, Alphonso also filed a motion for a preliminary injunction.
On October 31, 2022, the Court denied Alphonso’s motion for a preliminary injunction. Alphonso and the Company are currently engaged
in fact discovery. See Item 8.A. “Combined Statements and Other Financial Information⸺Legal Proceedings”
for further information. Any commercial dispute, claim, counterclaim, lawsuit or investigation, including our commercial dispute with Alphonso,
has and may divert our management’s attention away from our business, we have and may continue to incur significant expenses in
addressing or defending any commercial dispute, claim, counterclaim or lawsuit or responding to any investigation, and we may be required
to pay damage awards or settlements.
We are subject to anti-bribery, anti-corruption
and similar laws and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and
reputation.
We may be subject to certain economic and trade sanctions laws
and regulations, export control and import laws and regulations, including those that are administered by the U.S. Department of Treasury’s
Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council and
other relevant governmental authorities.
We are also subject to the FCPA, the U.K. Bribery Act, Chapter
9 (sub-chapter 5) of the Israeli Penal Law, 5737-1977, the Israeli Prohibition on Money Laundering Law, 5760-2000 and other anti-bribery
laws in countries in which we conduct our activities. These laws generally prohibit companies, their employees and third-party intermediaries
from authorizing, promising, offering, providing, soliciting or accepting, directly or indirectly, improper payments or benefits to or
from any person whether in the public or private sector. In addition, the FCPA’s accounting provisions require us to maintain accurate
books and records and a system of internal accounting controls. We have policies, procedures, systems and controls designed to promote
compliance with applicable anti-corruption laws.
As we increase our global sales and business, we may engage with
business partners and third-party intermediaries to market our solutions and obtain necessary permits, licenses and other regulatory approvals.
In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government
agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party
intermediaries, our employees, representatives, contractors, partners and agents, even if we do not authorize such activities.
Our advertisers or publishers may have consumers in countries that
are subject to U.S. economic sanctions laws and regulations administered by the Office of Foreign Assets Control (“OFAC”),
the Israeli Trade with the Enemy Ordinance, 1939 and sanction laws of the EU and other applicable jurisdictions, which prohibit the sale
of products to embargoed jurisdictions or sanctioned parties (“Sanctioned Countries”). We have taken steps to avoid serving
advertisements to consumers located in Sanctioned Countries and are implementing various control mechanisms designed to prevent unauthorized
dealings with Sanctioned Countries going forward. Although we have taken precautions to prevent our solutions from being provided, deployed
or used in violation of sanctions laws, due to the remote nature of our solutions and the potential for manipulation using VPNs, we cannot
assure you that our policies and procedures relating to sanctions compliance will prevent any violations in the future. If we are found
to be in violation of any applicable sanctions regulations, it can result in significant fines or penalties and possible incarceration
for responsible employees and managers, as well as reputational harm and loss of business.
Despite our compliance
efforts and activities, there can be no assurance that our employees or representatives will comply with the relevant laws and we may
be held responsible. Noncompliance with anti-corruption, anti-money laundering, export control, economic and trade sanctions and other
trade laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions,
disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from
contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences.
If any subpoenas or investigations are initiated, or governmental or other sanctions are imposed, or if we do not prevail in any possible
civil or criminal litigation, our business, financial condition and results of operations could be materially harmed. Responding to any
action could result in a materially significant diversion of management’s attention and resources and significant defense and compliance
costs and other professional fees. In addition, regulatory authorities may seek to hold us liable for successor liability for violations
committed by companies in which we invest or that we acquire. As a general matter, enforcement actions and sanctions could harm our business,
financial condition and results of operations.
23
Risks Relating to Our ADSs
The price of our ADSs and the trading volume
of our ADSs may be volatile, and you may lose all or part of your investment.
Technology stocks have historically experienced high level of price
and volume fluctuation. The market prices of our ADSs and ordinary shares and volume trading have fluctuated substantially and may continue
to do so as a result of many factors, including:
| • |
actual or anticipated fluctuations in our results of operations; |
| • |
variance in our financial performance from the expectations of market analysts; |
| • |
announcements by us or our direct or indirect competition of significant business developments, changes in service provider relationships,
acquisitions or expansion plans; |
| • |
the impact of the COVID-19 pandemic on our management, employees, partners, merchants and operating results; |
| • |
changes or proposed changes in laws or regulations or differing interpretations or enforcement of laws or regulations affecting our
business; |
| • |
changes in our pricing model; |
| • |
our involvement in litigation or regulatory actions; |
| • |
our sale of ADSs or other securities in the future; |
| • |
our buyback program for our ordinary shares or the implementation of a buyback program for our ADSs; |
| • |
market conditions in our industry; |
| • |
changes in key personnel; |
| • |
the dual listing and the trading of our ordinary shares on AIM (as defined herein); |
| • |
the trading volume of our ADSs; |
| • |
publication of research reports or news stories about us, our competition or our industry, or positive or negative recommendations
or withdrawal of research coverage by securities analysts; |
| • |
changes in the estimation of the future size and growth rate of our markets; and |
| • |
general economic, geopolitical and market conditions. |
Although our ADSs are traded on Nasdaq, the trading volume is low.
Given the lower trading volume of our ADSs, any sale of our ADSs could cause our market price to fall. Due to the nature of our compensation
program, our executive officers can sell our ADSs, often pursuant to trading plans established under Rule 10b5-1 of the Exchange Act,
and certain of our executive officers currently have 10b5-1 trading plans in place. As a result, sales of ADSs and ordinary shares by
our executive officers may not be indicative of their respective opinions of our performance at the time of sale or of our potential future
performance. Nonetheless, the market price of our ADSs and ordinary shares may be affected by sales of shares by our executive officers.
In addition, the stock markets have experienced extreme price and volume fluctuations. Broad market and industry factors may materially
harm the market price of our ADSs and ordinary shares, regardless of our operating performance. In the past, following periods of volatility
in the market price of a company’s securities, securities class action litigation has often been instituted against that company.
If we were involved in any similar litigation, we could incur substantial costs and our management’s attention and resources could
be diverted.
There was no public market for our ADSs prior to the listing of
our ADSs on the Nasdaq Global Market effective in June 2021 (the “IPO”), and an active trading market may not develop at the
rate and volume expected which may impact investors’ ability to sell our ADSs.
Prior to our IPO, there was no public market for our ADSs, although
our ordinary shares have traded on the Alternate Investment Market of the London Stock Exchange (“AIM”). An active trading
market for our ADSs may not develop at the rate or volume expected or such market may not be sustained. The lack of an active market may
impair your ability to sell your ADSs at the time you wish to sell them or at a price that you consider reasonable. An inactive market
may also impair our ability to raise capital by selling ADSs and may impair our ability to acquire other companies by using our ADSs as
consideration.
24
If we do not meet the expectations of equity
research analysts, if they do not publish research or reports about our business or if they issue unfavorable commentary or downgrade
our ADSs, the price of our ADSs and trading volume could decline.
The trading market for our ADSs rely in part on the research and
reports that equity research analysts publish about us and our business. The analysts’ estimates are based upon their own opinions
and are often different from our estimates or expectations. If our results of operations are below the estimates or expectations of public
market analysts and investors, the price of our ADSs could decline. Moreover, the price and trading volume of our ADSs could decline if
one or more securities analysts downgrade our ADSs or if those analysts issue other unfavorable commentary or cease publishing reports
about us or our business.
The dual listing of our ordinary shares and
our ADSs may adversely affect the liquidity and value of our ordinary shares and ADSs.
Our ordinary shares are also admitted to trading on AIM in a
different currency (U.S. dollars on Nasdaq, and £ on AIM), and at different times (resulting from different time zones and different
public holidays in the United States and the U.K.). We cannot predict the effect of this dual listing on the value of our ADSs and ordinary
shares. However, the dual listing of our ADSs and ordinary shares may dilute the liquidity of these securities in one or both markets
and may adversely affect the development of an active trading market for our ADSs in the United States. The price of our ADSs could also
be adversely affected by trading in our ordinary shares on AIM or by our repurchase program.
Although our ordinary shares are currently admitted to trading
on AIM, we may decide to cancel the admission of our ordinary shares to trading on AIM. Cancellation of the admission of our ordinary
shares to trading on AIM would require the requisite consent of shareholders in a general meeting prescribed by AIM Rules for Companies
unless the London Stock Exchange agrees otherwise. We cannot predict the effect such cancellation would have on the market price of our
ADSs or ordinary shares.
We qualify as an emerging growth company, as
defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies
will make our ADSs less attractive to investors because we may rely on these reduced disclosure requirements.
We qualify
as an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act
(“JOBS Act”). For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not emerging growth companies, including presenting
only limited selected financial data and not being required to comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information that they may deem important. We could be
an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total
annual revenue equals or exceeds $1.235 billion, if we issue more than $1.0 billion in non-convertible debt securities during any three-year
period, or if before that time we are a “large accelerated filer” under U.S. securities laws. We cannot predict if investors
will find our ADSs less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive
as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile.
We are foreign private issuer and, as a result,
we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient
and less frequent than those of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S. company with foreign
private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of
the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the
solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the
Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who
profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly
reports on Form 10-Q containing unaudited financial and other specified information, although we are subject to Israeli laws and regulations
with regard to certain of these matters and intend to furnish comparable quarterly information on Form 6-K. In addition, foreign private
issuers are not required to file their annual report on Form 20-F until four months after the end of each fiscal year, while U.S. domestic
issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal
year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days
after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from
making selective disclosures of material information. As a result of all of the above, you may not have the same protections afforded
to shareholders of a company that is not a foreign private issuer.
We may lose our “foreign private issuer”
status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore,
we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination
of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal
quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2023. In the future, we would lose our foreign
private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our
directors or executive officers are U.S. citizens or residents, more than fifty percent (50%) of our assets are located in the United
States, or our business is administered principally in the United States. If we lose our foreign private issuer status, we will be required
to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive
than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and
our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of
Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance rules
of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting
and other expenses that we will not incur as a foreign private issuer.
25
As we are a “foreign private issuer” and follow certain
home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies
that are subject to all Nasdaq corporate governance requirements.
As a foreign private issuer, we have the option to follow certain
home country corporate governance practices rather than those of Nasdaq, provided that we disclose the requirements we are not following
and describe the home country practices we are following. We may in the future elect to follow home country practices with regard to other
matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all
Nasdaq corporate governance requirements.
The market price of our ADSs could be negatively
affected by future issuances and sales of our ADSs or ordinary shares.
As of February 28, 2023, 143,510,865 ordinary shares
were outstanding, including 29,915,952 ordinary shares in the form of American Depositary Shares. Sales by us or our shareholders of a
substantial number of ADSs or ordinary shares in the public market, or the perception that these sales might occur, could cause the market
price of our ADSs to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our
equity securities.
We cannot guarantee that we will repurchase
any of our ordinary shares pursuant to our announced repurchase plan or that our repurchase plan will enhance long-term shareholder value.
On February
24, 2022, we announced a repurchase plan under which up to $75.0 million is available to purchase our ordinary shares. Pursuant to the
plan, which was completed in the third quarter of 2022, we repurchased a total of 13,792,485 ordinary shares at an average price of 437.54
pence, for a total investment of approximately £60.5 million, or $75.0 million, including fees. In September 2022, our board of directors
authorized a new share repurchase program, authorizing the repurchase of up to $20.0 million of ordinary shares on AIM. The new repurchase
plan commenced on October 1, 2022, and will continue until April 1, 2023, or until it has been completed and the program may be suspended,
modified, or discontinued at any time at our discretion, subject to applicable law. From October 1, 2022 through December 31, 2022, we
repurchased under such plan a total of 3,114,310 ordinary shares at an average price of 304.48 pence, for a total investment of approximately
£9.5 million, or $11.3 million, including fees. Since January 1, 2023, and through February 28, 2023, we repurchased an additional
1,250,391 ordinary shares.
Repurchases of our ordinary shares pursuant to our repurchase plan
could affect the market price of our ADSs and/or ordinary shares or increase the volatility. Additionally, our repurchase plan could diminish
our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions.
There is no assurance that our repurchase plan will enhance long-term shareholder value, and short-term share price fluctuations could
reduce the repurchase plan’s effectiveness.
There can be no assurance that we will not
be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to United States
Holders of our ADSs.
We would be classified as a passive foreign investment company
(“PFIC”) for any taxable year if, after the application of certain look-through rules, either: (i) 75% or more of our gross
income for such year is “passive income” (as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended),
or (ii) 50% or more of the value of our assets (determined on the basis of a quarterly average) during such year is attributable to assets
that produce or are held for the production of passive income. For these purposes, cash and other assets readily convertible into cash
or that do or could generate passive income are categorized as passive assets, and the value of goodwill and other unbooked intangible
assets is generally taken into account. Passive income generally includes, among other things, rents, dividends, interest, royalties,
gains from the disposition of passive assets and gains from commodities and securities transactions. For purposes of this test, we will
be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation of which
we own, directly or indirectly, 25% or more (by value) of the stock. Based on the current and anticipated composition of our income, assets
and operations, and the current price of the ADSs, we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable
future. However, whether we are a PFIC is a factual determination that must be made annually after the close of each taxable year. Moreover,
the value of our assets for purposes of the PFIC determination may be determined by reference to the public price of our ADSs, which could
fluctuate significantly. In addition, it is possible that the Internal Revenue Service (the “IRS”) may take a contrary position
with respect to our determination in any particular year, and therefore, there can be no assurance that we will not be classified as a
PFIC in the current taxable year or in the future. Certain adverse U.S. federal income tax consequences could apply to a United States
Holder (as defined in Item 10.E. “Taxation—U.S. Federal Income Tax Considerations”)
if we are treated as a PFIC for any taxable year during which such United States Holder holds our ADSs. United States Holders should consult
their tax advisors about the potential application of the PFIC rules to their investment in our ADSs. For further discussion, see Item
10.E. “Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company.”
26
If a United States person is
treated as owning at least 10% of our shares (by vote or value), such holder may be subject to adverse U.S. federal income tax consequences.
If a United States person is treated as owning
(directly, indirectly or constructively) at least 10% of the value or voting power of our outstanding shares, such person may be treated
as a “United States shareholder” with respect to each controlled foreign corporation (“CFC”) in our group (if
any). Because our group includes U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as CFCs (regardless of whether
we are treated as a CFC). A United States shareholder of a CFC may be required to report annually and include in its U.S. taxable income
its pro rata share of “Subpart F income,” “global intangible low-taxed income,” and investments in U.S. property
by CFCs, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a CFC generally
would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S.
corporation. Failure to comply with the associated reporting obligations may subject a United States shareholder to significant monetary
penalties and may prevent the statute of limitations with respect to such shareholder’s U.S. federal income tax return for the year
for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether we are
or any of our non-U.S. subsidiaries is treated as a CFC or whether any investor is treated as a United States shareholder with respect
to any such CFC or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting
and tax paying obligations. The IRS has provided limited guidance on situations in which investors may rely on publicly available information
to comply with their reporting and tax paying obligations with respect to foreign-controlled CFCs. A United States investor should consult
its advisors regarding the potential application of these rules to an investment in our ADSs.
We have broad discretion over the use of proceeds
we received in our IPO and may not apply the proceeds in ways that increase the value of your investment.
We intend to use and have used the net proceeds from our IPO for
working capital, general corporate purpose and to fund growth, including for possible acquisitions. However, we do not currently have
any definitive or preliminary plans with respect to the use of proceeds for such purposes in the future. Consequently, our management
has broad discretion over the specific use of the net proceeds from our IPO and may do so in a way with which our investors disagree.
The failure by our management to apply and invest these funds effectively may not yield a favorable return to our investors and may adversely
affect our business and financial condition. Pending their use, we may invest the net proceeds in a manner that does not produce income
or that loses value. If we do not use the net proceeds effectively, our business, results of operations and financial condition could
be adversely affected.
We incur increased costs as a result of operating
as a U.S. listed public company, and our management is required to devote substantial time to new compliance initiatives and corporate
governance practices.
As a U.S. listed public company, and particularly after we are
no longer an emerging growth company, we will incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act, the Dodd-Frank
Wall Street Reform and the Consumer Protection Act, the listing requirements of Nasdaq and their applicable securities rules and regulations
impose various requirements on non-U.S. reporting companies, including establishment and maintenance of effective disclosure and financial
controls and corporate governance practices. Our management and other personnel need to devote a substantial amount of time to these compliance
initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming
and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability
insurance and make it more difficult for us to attract and retain qualified members of our board of directors.
In addition, the applicable rules and regulations are often subject
to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve
over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance
matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
Because we may not pay any cash dividends on
our ADSs in the future, capital appreciation, if any, may be holders of ADSs sole source of gains and they may never receive a return
on their investment.
Our board of directors has sole discretion whether to pay dividends.
If our board of directors decides to pay dividends, the form, frequency, and amount will depend upon our future, operations and earnings,
capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem
relevant. The Israeli Companies Law, 5759-1999, or the Companies Law, imposes restrictions on our ability to declare and pay dividends.
See Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources”
for additional information. Payment of dividends may also be subject to Israeli withholding taxes. See Item 10.E. “Taxation”
for additional information. As a result, capital appreciation, if any, on our ADSs may be your sole source of gains, and you will suffer
a loss on your investment if you are unable to sell your ADSs at or above the price at which you purchased the ADSs. See Item 8.A. “Consolidated
Statements and Other Financial Information—Dividend Policy.”
27
Securities traded on AIM may carry a higher
risk than securities traded on other exchanges, which may impact the value of your investment.
Our ordinary shares are currently traded on AIM. Investment in
equities traded on AIM is sometimes perceived to carry a higher risk than an investment in equities quoted on exchanges with more stringent
listing requirements, such as the main market of the London Stock Exchange, New York Stock Exchange or the Nasdaq Stock Market. This is
because AIM is less heavily regulated and imposes less stringent corporate governance and ongoing reporting requirements than those other
exchanges. In addition, AIM requires only half-yearly, rather than quarterly (which would apply to us in the U.S., if we are no longer
classified as a foreign private issuer), financial reporting. You should be aware that the value of our ordinary shares may be influenced
by many factors, some of which may be specific to us and some of which may affect AIM-quoted companies generally, including the depth
and liquidity of the market, our performance, a large or small volume of trading in our ordinary shares, legislative changes and general
economic, political or regulatory conditions, and that the prices may be volatile and subject to extensive fluctuations. Therefore, the
market price of our ordinary shares, our ADSs or the ordinary shares underlying our ADSs, may not reflect the underlying value of our
company.
You may not be able to exercise your right
to vote the ordinary shares underlying your ADSs.
ADS holders may only exercise voting rights with respect to the
ordinary shares underlying their respective ADSs in accordance with the provisions of the deposit agreement, which provides that a holder
may vote the ordinary shares underlying any ADSs for any particular matter to be voted on by our shareholders either by withdrawing the
ordinary shares underlying the ADSs or, to the extent permitted by applicable law and as permitted by the depositary, by requesting a
temporary registration as shareholder and authorizing the depositary to act as proxy. However, you may not know about the meeting far
enough in advance to withdraw those ordinary shares, and after such a withdrawal you would no longer hold ADSs, but rather you would directly
hold the underlying ordinary shares. You also may not know about the meeting far enough in advance to request a temporary registration.
The depositary will try, as far as practical, to vote the ordinary
shares underlying the ADSs as instructed by the ADS holders. In such an instance, if we ask for your instructions, the depositary, upon
timely notice from us, will notify you of the upcoming vote and arrange to deliver our voting materials to you. We cannot guarantee that
you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ordinary shares or to withdraw
your ordinary shares so that you can vote them yourself. If the depositary does not receive timely voting instructions from you, it may
give a discretionary proxy to a person designated by us to vote the ordinary shares underlying your ADSs; provided, however, that no such
discretionary proxy shall be given with respect to any matter to be voted upon as to which we inform the depositary that (i) we do not
wish such proxy to be given, (ii) substantial opposition exists, or (iii) the rights of holders of ordinary shares may be adversely affected.
Voting instructions may be given only in respect of a number of ADSs representing an integral number of ordinary shares or other deposited
securities. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner
of carrying out voting instructions. This means that you may not be able to exercise any right to vote that you may have with respect
to the underlying ordinary shares, and there may be nothing you can do if the ordinary shares underlying your ADSs are not voted as you
requested. In addition, the depositary is only required to notify you of any particular vote if it receives notice from us in advance
of the scheduled meeting.
Holders of the ADSs are not able to exercise
the preemptive subscription rights related to the ordinary shares that they represent and may suffer dilution of their equity holding
in the event of future issuances of our ordinary shares.
As an AIM-quoted company, our articles of association currently
in effect follow English law which generally provides shareholders with preemptive rights when new shares are issued for cash. Shareholders’
preemptive subscription rights, in the event of issuances of ordinary shares against cash payment, may be disapplied by a special resolution
of the shareholders at a general meeting of our shareholders. The absence of preemptive rights for existing equity holders may cause dilution
to such holders.
Furthermore, the ADS holders are not entitled, even if such rights
accrued to our shareholders in any given instance, to receive such preemptive subscription rights related to the ordinary shares that
they represent. Rather, the depositary is required to endeavor to sell any such subscription rights that may accrue to the ordinary shares
underlying the ADSs and to remit the net proceeds therefrom to the ADS holders pro rata. In addition, if the depositary is unable to sell
rights, the depositary will allow the rights to lapse, in which case you will receive no value for these rights. Further, if we offer
holders of our ordinary shares the option to receive dividends in either cash or ordinary shares, under the deposit agreement, ADS holders
will not be permitted to elect to receive dividends in ordinary shares or cash but will receive whichever option we provide as a default
to shareholders who fail to make such an election.
Holders of ADSs may not receive distributions
on our ordinary shares in the form of ADSs or any value for them if it is illegal or impractical to make them available to holders of
ADSs.
The depositary for our ADSs has agreed to pay to holders of ADSs
the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting
its fees and expenses. Holders of our ADSs will receive these distributions in proportion to the number of our ordinary shares their ADSs
represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a
distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary
shares, rights or anything else to holders of our ADSs. This means that holders of ADSs may not receive the distributions we make on our
ordinary shares or any value from them if it is unlawful or impractical to make them available to them. These restrictions may have a
material adverse effect on the value of a holder’s ADSs.
28
ADS holders may not be entitled to a jury trial
with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such
action.
The deposit agreement governing the ADSs representing our ordinary
shares provides that, to the fullest extent permitted by applicable law, holders and beneficial owners of ADSs irrevocably waive the right
to a jury trial of any claim that they may have against us or the depositary arising from or relating to our ordinary shares, our ADSs
or the deposit agreement, including any claim under the U.S. federal securities laws. The waiver continues to apply to claims that arise
during the period when a holder holds the ADSs, even if the ADS holder subsequently withdraws the underlying ordinary shares.
However, you will not be deemed, by agreeing to the terms of the
deposit agreement, to have waived our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations
promulgated thereunder. In fact, you cannot waive our or the depositary’s compliance with U.S. federal securities laws and the rules
and regulations promulgated thereunder. If we or the depositary opposed a demand for jury trial relying on above-mentioned jury trial
waiver, it is up to the court to determine whether such waiver was enforceable considering the facts and circumstances of that case in
accordance with the applicable state and federal law.
If this jury trial waiver provision is prohibited by applicable
law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability
of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court or by the United States Supreme
Court. Nonetheless, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which
govern the deposit agreement, by a federal or state court in the City of New York. In determining whether to enforce a jury trial waiver
provision, New York courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently
prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit
agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or
counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s
demand, or in the case of an intentional tort claim, none of which we believe are applicable in the case of the deposit agreement or the
ADSs. If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary relating to the matters arising
under the deposit agreement or our ADSs, including claims under federal securities laws, you or such other holder or beneficial owner
may not have the right to a jury trial regarding such claims, which may limit and discourage lawsuits against us or the depositary. If
a lawsuit is brought against us or the depositary according to the deposit agreement, it may be heard only by a judge or justice of the
applicable trial court, which would be conducted according to different civil procedures and may have different outcomes compared to that
of a jury trial, including results that could be less favorable to the plaintiff(s) in any such action.
Moreover, as the jury trial waiver relates to claims arising out
of or relating to the ADSs or the deposit agreement, we believe that, as a matter of construction of the clause, the waiver would likely
continue to apply to ADS holders who withdraw the ordinary shares from the ADS facility with respect to claims arising before the cancellation
of the ADSs and the withdrawal of the ordinary shares, and the waiver would most likely not apply to ADS holders who subsequently withdraw
the ordinary shares represented by ADSs from the ADS facility with respect to claims arising after the withdrawal. However, to our knowledge,
there has been no case law on the applicability of the jury trial waiver to ADS holders who withdraw the ordinary shares represented by
the ADSs from the ADS facility.
Holders of our ADSs or ordinary shares have
limited choice of forum, which could limit your ability to obtain a favorable judicial forum for complaints against us, the depositary
or our respective directors, officers or employees.
The deposit agreement governing our ADSs provides that (i) the
deposit agreement and the ADSs will be interpreted in accordance with the laws of the State of New York, and (ii) as an owner of ADSs,
you irrevocably agree that any legal action arising out of the deposit agreement and the ADSs involving us, or the depositary may only
be instituted in a state or federal court in the city of New York. Any person or entity purchasing or otherwise acquiring any our ADSs,
whether by transfer, sale, operation of law or otherwise, shall be deemed to have notice of and have irrevocably agreed and consented
to these provisions.
This choice of forum provision may increase your cost and limit
your ability to bring a claim in a judicial forum that you find favorable for disputes with us, the depositary or our and the depositary’s
respective directors, officers or employees, which may discourage such lawsuits against us, the depositary and our and the depositary’s
respective directors, officers or employees. However, it is possible that a court could find either choice of forum provision to be inapplicable
or unenforceable. The enforceability of similar choice of forum provisions has been challenged in legal proceedings. It is possible that
a court could find this type of provisions to be inapplicable or unenforceable.
To the extent that any such claims may be based upon federal law
claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability
created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent
jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the
rules and regulations thereunder. Accordingly, actions by holders of our ADSs or ordinary shares to enforce any duty or liability created
by the Exchange Act, the Securities Act or the respective rules and regulations thereunder must be brought in a federal court in the city
of New York. Holders of our ADSs or ordinary shares will not be deemed to have waived our compliance with the federal securities laws
and the regulations promulgated thereunder.
29
Holders of ADSs may be subject to limitations
on transfer of their ADSs.
ADSs are transferable on the books of the depositary. However,
the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance
of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the
books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law
or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with
the terms of the deposit agreement.
Exposure to foreign currency exchange rate
fluctuations could negatively impact our results of operations.
While the majority of the transactions through our platform
are denominated in U.S. dollars, we have transacted in foreign currencies, both for inventory and for payments by advertisers or publishers
from use of our platform. We also have expenses denominated in currencies other than the U.S. dollar. Given our anticipated international
growth, we expect the number of transactions in a variety of foreign currencies to continue to grow in the future. While we generally
require a fee from advertisers or publishers that pay in non-U.S. currency, this fee may not always cover foreign currency exchange rate
fluctuations. Although we currently have a program to hedge exposure to foreign currency fluctuations, the use of hedging instruments
may not be available for all currencies or may not always offset losses resulting from foreign currency exchange rate fluctuations. Moreover,
the use of hedging instruments can itself result in losses if we are unable to structure effective hedges with such instruments.
A small number of significant beneficial owners of our shares have
significant influence over matters requiring shareholder approval, which could delay or prevent a change of control.
The four largest beneficial owners of our ordinary
shares, entities and individuals affiliated with Mithaq Capital SPC, Toscafund Asset Management LLP, Schroder Investment Management and
News Corporation, each of which beneficially owns more than 5% of our outstanding ordinary shares as of February 28, 2023 and in the aggregate
55.1% of our ordinary shares. As a result, these shareholders could exercise significant influence over our operations and business strategy
and, acting together, would have sufficient voting power to influence the outcome of matters requiring shareholder approval. These matters
may include:
| • |
the composition of our board of directors which has the authority to direct our business and to appoint and remove our officers;
|
| • |
approving or rejecting a merger, consolidation or other business combination; |
| • |
raising future capital; and |
| • |
amending our articles of association which govern the rights attached to our ordinary shares. |
This concentration of ownership of our ADSs or ordinary shares
could delay or prevent proxy contests, mergers, tender offers, open-market purchase programs or other purchases of our ADSs or ordinary
shares that might otherwise give you the opportunity to realize a premium over the then-prevailing market price of our ADSs. This concentration
of ownership may also adversely affect our share price.
ITEM 4: INFORMATION ON THE COMPANY
4.A. HISTORY AND DEVELOPMENT OF THE COMPANY
General Corporate Information
We were incorporated as Marimedia Ltd. in 2007 in Israel under
the Companies Law. We changed our name to Taptica International Ltd. in September 2015 and then to Tremor International Ltd. in June 2019.
Our principal executive offices are located at 82 Yigal Alon Street, Tel Aviv, 6789124, Israel. Our website address is www.tremorinternational.com,
and our telephone number is +972-3-545-3900. Information contained on, or that can be accessed through, our website does not constitute
a part of this Annual Report and is not incorporated by reference herein. We have included our website address in this Annual Report solely
for informational purposes.
The effective date of the registration statement (Commission File No. 333-256452) for
our initial public offering of our ADSs on the Nasdaq Global Market was June 17, 2021. The offering commenced on June 17, 2021 and was
closed on July 15, 2021.
Our SEC filings are available to you on the SEC’s website
at www.sec.gov.com, which contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC. The information on that website is not part of this Annual Report and is not incorporated by reference herein. Our agent
for service of process in the United States is Tremor Video, Inc., located at 1177 6th Ave 9th floor, New York, NY 10036, telephone number
(646) 787-0804.
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4.B. BUSINESS OVERVIEW
Our Mission
Our mission is to bring together an end-to-end platform to enable
powerful partnerships and deliver results across the advertising ecosystem.
Overview
Tremor International is a collection of brands
uniting creativity, data and technology across the open internet. Our end-to-end, video-first platform facilitates and optimizes engaging
advertising campaigns for brands, media groups and content creators worldwide—enabling powerful partnerships and delivering meaningful
results. A leader in Connected TV and video, Tremor International’s footprint is expanding across some of the industry’s fastest-growing
activities, driven by a global team of seasoned technologists and digital natives.
We believe there is a significant market opportunity within the
approximately $567 billion global digital advertising market that is expected to grow at a CAGR of approximately 10% through 2026, according
to eMarketer. Publishers rely on advertising to support their businesses and brands, and advertisers use digital mediums to capture uniquely
targeted and viewable impressions. We believe the digital advertising market remains fragmented and that our full-service end-to-end platform
and vast expertise within Video and CTV puts us in a strong position to continue to increase our market share from traditional ad sales
channels.
We believe that we are positioned to benefit from several trends
in the evolving advertising ecosystem, including the proliferation of digital media consumption, adoption of programmatic advertising,
a growing focus on premium formats such as Video and CTV, and the increasing sophistication of the overall digital landscape. We address
the broad and evolving digital advertising market through our three core offerings, including proprietary DSP solutions that advertisers
leverage to manage digital advertising campaigns, a proprietary SSP solution that publishers leverage to optimally monetize digital inventory
and a proprietary data management platform (“DMP”) solution which is integrated with both our DSP and SSP solutions. Our versatile
DMP solution benefits from vast amounts of data and provides optimal campaign recommendations for audience sets by employing advanced
machine learning algorithms. The contextualization of the data synthesized by our DMP solution provides advertisers with a comprehensive,
personalized view of audiences, enabling more effective targeting across formats and devices and optimizes the monetization of publisher
inventory. By combining these three proprietary solutions as well as integrations with industry-leading partners, we provide an end-to-end
platform that is dynamic and flexible to our customers’ needs, which enables us to address more digital ad spend.
Our customers are comprised of both ad buyers, including brands
and agencies, and digital publishers. Our platform includes a diversified customer base of approximately 1,250 active customers and approximately
1,530 active publishers as of December 31, 2022, with approximately 20 billion unique users for the month ended December 31, 2022 and
serves advertisements in 246 countries. These figures include combined reach between both Tremor International and Amobee. We generate
revenue through platform fees that are tailored to fit the customer’s specific utilization of our solutions and include (i) a percentage
of spend, (ii) flat fees and (iii) fixed CPM.
During 2022, the Company, its customers, and its
partners, continued to face challenges associated with the COVID-19 pandemic,
and residual impacts from combatting the COVID-19 pandemic, as well as persistent macroeconomic challenges driven by several additional
factors. Monetary and fiscal policy makers intervened to cool an overheated global economy which experienced challenges associated with
rising inflation caused by several factors including pandemic-era policies, consumers having more money to spend, supply chain constraints
putting upward pressure on input costs, and an expensive labor market, to alleviate significant cost pressures felt by consumers. As a
result, monetary policymakers made coordinated efforts to drive higher interest rates to limit consumer spending and, this intentional
cooling of the economy, combined with broader geopolitical, macroeconomic and advertiser uncertainty, drove challenging economic conditions
during 2022. While certain activities of the market proved to be more resilient than others, the impacts were broad-based across industries
and the global economy.
As a result, our Video revenue and CTV revenue
grew from $242.7 million and $80.3 million, respectively, in the twelve months ended December 31, 2021 to $243.3 million and $97.2 million,
respectively, in the twelve months ended December 31, 2022. The 2022 results include contributions from Amobee for the period from when
the acquisition closed on September 12, 2022 through December 31, 2022. Video revenue for Tremor International as a standalone company
was impacted by challenging macroeconomic conditions experienced across several industries, including rising interest rates, supply chain
constraints, rising inflation, geopolitical uncertainty, and recession concerns, which pressured the advertising demand environment. This
pressure, however, was offset by Video revenue contributed by Amobee for the period from when we closed the acquisition, through the end
of 2022. CTV revenue for Tremor as a standalone company, however, was more resilient during 2022 as advertisers continued to advertise
using CTV to increase brand awareness through our scaled end-to-end suite of technology solutions and expertise within the actvity, despite
challenging market conditions. Amobee also contributed positive CTV revenue from when we closed the acquisition through the end of 2022,
furthering the Company’s year-over-year growth within the activity. This growth within Video and CTV, including contributions from
Amobee from when we closed the acquisition on September 12, 2022 through December 31, 2022, contributed to 3% growth in Programmatic revenue
for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Our total
comprehensive income for the twelve months ended December 31, 2022, decreased by $54.4 million from the equivalent figure for the twelve
months ended December 31, 2021, and represented a 77.0% year-over-year decrease as compared to our total comprehensive income for the
twelve months ended December 31, 2021. We generated $16.2 million and $70.6 million in total comprehensive income for the years ended
December 31, 2022, and 2021, respectively. Our Adjusted EBITDA for the twelve months ended December 31, 2022, decreased by $16.3 million
from the equivalent figure for the twelve months ended December 31, 2021 and represented a 10.1% year-over-year decrease. Additionally,
we generated $144.9 million and $161.2 million of Adjusted EBITDA for the years ended December 31, 2022 and 2021, respectively. Further,
we had a net cash position of $115.5 million as of December 31, 2022.
31
Our Industry
We operate in the digital advertising industry,
which is a core pillar of monetizing digital properties accessible by the Internet. We specialize in digital video advertising, which
collectively comprised 73% of our revenue for the year ended December 31, 2022, across mobile video, desktop video and CTV.
We believe the key industry trends shaping the digital advertising
market include continued growth of digital media consumption, shift to programmatic advertising, data-driven decision making, consumer
privacy and regulatory concerns, and seasonality.
Continued Growth of Digital Media Consumption
Audiences continue to spend an increasing amount of time online
for social, business, and purchasing needs. We believe that the COVID-19 pandemic and the subsequent work-from-home and shelter-in-place
orders accelerated the adoption of numerous traditionally offline activities to be conducted online, including telehealth, fitness classes,
food delivery, and e-commerce. As consumers continue to spend more time online for everyday activities, we believe that brands and advertisers
will increasingly allocate ad budgets to where the audiences are. According to eMarketer, in the United States, more than a third of the
day is expected to be spent on digital media consumption during 2023. This digital consumption is happening across all devices, including
mobile, desktop, tablet, and CTV. We expect that these trends will further increase both the supply and demand of available ad impressions
that can be monetized programmatically.
Shift to Programmatic Advertising
Programmatic advertising is the use of software and algorithms to match buyers and sellers
of digital advertising in a technology-driven marketplace. The transactions are executed in milliseconds and do not require manual labor
for execution. It is becoming increasingly prominent in the digital advertising industry, as publishers and advertisers prefer that their
bids/asks for digital ad inventory be completed in an easy, efficient, and automated manner. Additional advantages of programmatic advertising
include enhanced audience targeting, attribution, and measurement as well as improved customized campaign management workflow solutions.
According to eMarketer, US programmatic digital video ad spending is expected to increase from approximately $67 billion in 2022 to roughly
$97 billion in 2024, at a CAGR of approximately 21%.
Data Driven Decision Making
As the digital media industry grows, increased consumer engagement
by audiences has created vast amounts of data and behavioral insights that can be harnessed to maximize return on investment (“ROI”)
for advertisers and optimize the monetization of digital inventory for publishers. These insights include industry compliant anonymized
data sets relating to consumer interests, preferences and intent, as well as auction data of advertising bid requests. Technology solutions
must efficiently and effectively digest, analyze and process an ever-increasing amount of data seamlessly while navigating the increased
requirements of regulatory challenges and audience protection.
Consumer Privacy and Regulatory Concerns
Over the last few years, there has been increased scrutiny concerning consumer data
and the ways in which that data is being used in connection with ad targeting. Globally and locally, new legislation has been introduced
and enforced that requires new industry rules and standards. Some of these regulations include the GDPR, CCPA and CPRA, and IDFA. Additionally,
web browsers such as Safari and Firefox have also removed third-party cookies. These rules and regulations require all constituents within
digital advertising to consistently adapt and evolve.
Seasonality
In the advertising industry, companies commonly experience seasonal fluctuations in
revenue. For example, many marketers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order
to coincide with increased holiday purchasing. Historically, the fourth quarter of the year has reflected our highest level of advertising
activity for the year. We generally expect the subsequent first quarter to reflect lower activity levels. In addition, historical seasonality
may not be predictive of future results given the potential for changes in advertising buying patterns and consumer activity due to the
COVID-19 pandemic, and efforts to combat residual impacts from the COVID-19 pandemic, rising inflation, and several other challenging
macroeconomic conditions. For example, in 2020, advertising activities were less associated with the holiday spending patterns. Instead,
as business activities adapted to the new environment amidst the COVID-19 pandemic, in the second half of 2020, we saw a significant resurgence
in advertising demand on our platform. Similarly, in 2022 due to residual impacts of the COVID-19 pandemic, supply chains and advertising
buying patterns and consumer activity continued to fluctuate. Nevertheless, as countries continue to recover from the COVID-19 pandemic
and return to pre-pandemic business conditions, we expect our revenue to continue to fluctuate based on seasonal factors that affect the
advertising industry as a whole.
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Our Market Opportunity
We believe that we are well positioned to capitalize
on some of the fastest-growing activities of digital advertising, such as Video, including CTV, which reflected 73% of our revenue for
the year ended December 31, 2022.
Global digital advertising spend is forecasted to be $567 billion for 2022 and is expected
to grow at an approximately 10% CAGR to $836 billion in 2026. As advertisers follow audiences to next-generation mediums, digital advertising
channels are expected to outpace growth of total global media ad spend. The increased internet bandwidth in developing countries is acting
as an additional tailwind, and the increasing proliferation of next-generation mobile, CTV, and on-the-go technology devices in developed
countries is driving video viewership. We believe these trends will amplify full-screen video usage, which has long been the preferred
choice of advertisers. We expect these long-term systemic shifts will enable us to grow at a faster rate than the broader digital advertising
market.
Digital Video and CTV Advertising
We address some of the fastest growing areas within
digital advertising, Video and CTV, which are expected to grow at an accelerated rate compared to other formats. In the United States,
where we generate the majority of our revenue, the growth rates and adoption of Video and CTV are expected to be even higher. According
to eMarketer, U.S. CTV ad spend is projected to grow at a CAGR of approximately 19.9% from 2022 to
2026, reaching roughly $43.0 billion. U.S. Video ad spend is projected to grow at a CAGR of approximately
17.0% from 2022 to 2026, reaching roughly $143.2 billion. Additionally, the number of digital video viewers worldwide is expected
to reach approximately 3.81 billion people by 2025.
Linear TV budgets are also shifting towards digital
video and CTV, further driving demand for these premium ad formats. These overarching market trends underpin our strategic shift to focus
on these activities of digital advertising, which given the proliferation of smart TVs and the increasing number of streaming providers,
will remain an exciting growth activity. Additionally, as linear TV and CTV continue to converge, with many linear TV broadcasters now
opportunistically launching, or expanding, their CTV footprints through digital assets such as FAST channels, we believe customers will
continue to seek platforms such as ours that can assist advertisers and broadcasters with cross-planning capabilities between linear TV
and CTV, a capability we gained through our acquisition of Amobee, which we anticipate can drive even higher levels of CTV spend to our
end-to-end platform over time as well.
Mobile Advertising
The number of consumers with smart phones and high-speed internet is expected to continue
rising, which will make mobile advertising a prominent channel within digital. According to eMarketer, U.S. mobile ad spend is projected
to grow at a CAGR of approximately 10.8% from 2022 to 2026, reaching approximately $257 billion.
Our Role in the Digital Advertising Ecosystem
Advertisers and Agencies
Spending begins with advertisers, who often engage advertising agencies to help plan
and execute their advertising campaigns. To better control and optimize their advertising operations, advertisers and agencies are consolidating
spend with fewer, larger technology platform providers who can deliver transparency and ensure the highest level of inventory quality
and control. These advertisers and agencies access our platform through Tremor Video, Amobee, and third-party DSPs. We believe our end-to-end
technology platform and direct relationships with advertisers and agencies will lead to significant consolidation of spend on our platform.
Demand Side Platforms (“DSP”)
Advertisers and agencies often engage DSPs, which serve as advertising demand aggregators,
to execute their digital marketing campaigns across various ad formats. We offer both full-service and self-managed options through our
DSPs, enabling highly customized and robust campaigns. We are also integrated with other leading DSPs globally, such as The Trade Desk,
Inc. and Google DV360, enabling customers to execute real-time transactions with our publisher clients.
Supply Side Platforms (“SSP”)
SSPs such as ours are designed to monetize digital inventory for
publishers and app developers by enabling their content to have the necessary software code and requirements for programmatic integration.
Buyers and sellers come together through our marketplace to monetize, target, and purchase available digital advertising inventory. Our
platform rapidly and efficiently processes significant volumes of advertising bid information, providing a seamless digital experience
for our customers. Traditionally, SSPs have focused exclusively on the needs of sellers in this process and have limited their interactions
with buyers to the buyer’s agent, the DSP. As buyers have sought greater control of their advertising supply chains, we have extended
the capabilities of our specialized platform over the last several years to serve the needs of advertisers and agencies.
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Publishers and Content Providers
Digital publishers and app developers create websites, digital
content and applications that contain content/mediums for consumption for users, along with adjacent viewable space for digital advertisements.
As consumers navigate these websites and apps, individual ad impressions are presented to them across different formats/channels. These
impressions are typically sold to advertisers and agencies programmatically, in real-time via a third-party technology infrastructure
platform or SSP solution. Publishers and app developers rely on advertising revenue as the key driver for their businesses and depend
on the capabilities of these third parties in order to achieve optimal yield for their advertising inventory. As of December 31, 2022,
we served approximately 1,530 active publishers worldwide on our platform, consisting of 145,809 active sites and apps that we have direct
access to publish an ad for our customers. These figures reflect the combined reach between both Tremor International and Amobee as of
December 31, 2022.
Our Strengths
We believe the following attributes and capabilities provide us
with long-term competitive advantages.
Established Expertise in Video and CTV
We believe Video, including CTV and mobile video,
are amongst the fastest growing activities of digital advertising, and exposure to these activities constituted 73% of our total revenue
for the year ended December 31, 2022 and approximately 90% of our revenue without performance activity for the year ended December 31,
2022. These results include contributions from Amobee for the period from when we closed the acquisition on September 12, 2022 through
December 31, 2022. We were one of the first movers in the digital video advertising and CTV markets, which gave us early traction, strong
customer adoption, and recognition as a leading technology within the space. Our platform was intentionally built as an end-to-end video
campaign delivery solution and over time, both through organic investment and acquisitions, we have further enhanced our platform’s
technology capabilities within Video, including CTV.
End-to-End Platform with Proprietary Technology
We leverage our advanced technology stack to enable
advertisers and publishers to maximize their ROI, while optimizing the path between audiences and brands by leveraging our proprietary
data sets. We believe we have a competitive advantage by accessing the entire ecosystem through our proprietary data, unique demand and
supply sources and partnerships with premium vendors. As a technology first solution, we have the flexibility of an agnostic platform
capable of integrating with different third-party sources to service our customers.
Scale and Reach on the Audience, Advertiser
and Publisher
Our platform currently accommodates over 135 billion
daily ad requests, approximately 1,500 terabytes of daily data, approximately 320 million daily ad impressions, and more than 100 million
daily unique sites or apps. These figures reflect daily ad requests, data, and ad impressions accommodated by both Tremor International
and Amobee combined. Our significant daily volume of ad requests, data, and ad impressions gives us scale with publishers and provides
access to direct and exclusive supply of premium advertising inventory, enabling our advertising customers to avoid intermediaries and
reduce costs. Operating an end-to-end platform strongly positions the Company to minimize loss of scale typically associated with two
independent platforms user-syncing with each other. This advantage positions the Company to maintain efficiency and high scalability on
buying strategies that leverage audience targeting.
Robust Data Set Fully Integrated into and Generated
by Our Platform
Our proprietary DMP is a flexible platform that can be easily integrated
across various campaigns and formats. Our DMP leverages first-party data and third-party partnerships to identify and reach curated audiences,
benefiting both our advertising and publisher customers. Our platform provides artificial intelligence in the form of machine learning
algorithms and statistical models to aggregate and analyze vast amounts of data and contextualizes it into easily usable action items,
which can be used across campaigns in real-time.
Our machine learning algorithms enable us to process
millions of requests per second which supports several of the optimization and prediction models in our platform including invalid traffic
monitoring, viewability, queries per second, bidding and pricing models. These machine learning capabilities help our customers achieve
their key performance indicators, optimize cost of media and protect against invalid traffic. Additionally, our DMP utilizes machine learning
algorithms to build and expand activities in real time.
Management Team of Industry Veterans with Extensive
Expertise
Our senior management has an extensive background in the advertising
technology industry, which we believe gives us a competitive advantage. We have vast experience in acquiring synergistic businesses and
a strong track record of integrating successful acquisitions, further driving growth and profitability.
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Profitable Business Model
We have been Adjusted EBITDA and total comprehensive
income profitable since 2014 and continue to improve our cost structure. For the year ended December 31, 2022, our net profit margin was
4.8% and our Adjusted EBITDA margin was 43.2%. These figures include contributions from Amobee for the period from when the acquisition
closed on September 12, 2022 through December 31, 2022. When we acquired Amobee, it was a loss-making operation which adversely impacted
our margins in 2022. As we continue with the ongoing integration of Amobee into the Tremor International technology ecosystem, we expect
to incrementally increase our margins over time, back towards historical levels. Our structural cost advantages enable us to continuously
invest in driving innovation both organically and through acquisitions, while delivering both top line revenue growth and profitability.
Our Growth Strategy
We believe that programmatic advertising is still an underpenetrated
market that will experience robust growth over the next decade as ad budgets continue to shift to digital and as digital continues to
shift towards programmatic execution. We intend to capitalize on these secular trends by pursuing growth opportunities that include:
Focus on Core Areas of Growth in Video and
CTV
CTV is one of the fastest growth formats within digital advertising, and this trend
is expected to continue over the next several years according to eMarketer. In the United States, CTV ad spend is expected to grow at
a CAGR of approximately 19.9% from 2022 to 2026, and Video is expected to grow at a CAGR of approximately 17.0%, reaching roughly $143.2
billion by 2026. Digital video and CTV comprise approximately 91% of our revenue without performance activity for the year ended
December 31, 2022, including contributions from Amobee for the period from when we closed the acquisition on September 12, 2022 through
December 31, 2022, and have been core focuses for us since inception. We plan to leverage our existing expertise in Video and CTV to increase
our market share and introduce new technologies and solutions.
Introduce New Products and Invest in our Technology
Stack
As we grow our market share and add new customers, we continue
to invest in our technology stack and develop new innovative products. We are continuously trying to introduce new innovative solutions
and products to the rapidly evolving digital advertising market. Some potential areas of growth and investment include enhancing our proprietary
data sets, enhancing our CTV solution capabilities and marketplace, enhancing our audience targeting capabilities, expanding our alternative
identifier solutions and enhancing our global platform coverage capabilities.
We are providing customers with creative alternatives to plan and
execute their campaigns, giving them complimentary scale and opportunities to enhance current audience targeting strategies. For example,
we offer, and will continue to enhance, contextual targeting solutions from content data collected via our publisher partnerships as well
as third-party solutions integrated into our ecosystem.
There is market movement away from cookie-based tracking which has created an increase
in demand for alternative solutions. We have partnerships, and are integrating, with major alternative identifier solutions such as IdentityLink
and Unified ID 2.0. We are committed to helping define and support new privacy requirements and identifier mechanisms as industry standards
evolve. We believe that not everyone in the industry will adopt a single solution alternative to cookie-based tracking and we are building
our platform to support various identifier solutions.
Strengthen Our Relationship with Existing Customers
We are constantly improving functionality on our platform to attract new customers and
encourage our existing customer base to allocate more of their ad spend and ad inventory to our platform. We believe as programmatic gains
more widespread adoption and as brands and publishers continue to focus on Video and CTV, we are strongly positioned to increase our customer
base and generate additional revenue from existing customers.
Expand Our International Footprint and United
States Market Share
We continue to acquire new publishers and advertisers globally
and invest in expanding our global footprint, providing significant global demand and supply of digital ad impressions across all channels
and formats. We will continue to invest in third-party integrations, maintaining and enhancing our platform’s flexibility. We are
leveraging our existing technology stack to provide innovative solutions to new and existing customers regardless of location or platform.
We consistently innovate and develop new tools and products that enable our customers to maximize their benefit from using our platform
and services.
Continue to Bolster our Data Capabilities
We leverage real-time data, artificial intelligence and machine
learning capabilities to synthesize, aggregate and contextualize vast amounts of data sets to help our advertisers and publishers optimize
their digital ad spend/inventory. Our DMP solution was architected to be flexible, which allows us to deliver impactful and unique insights
that are agnostic to format or device type. By owning our own proprietary DMP solution, we are able to provide robust analytics, insights,
and better segmentation on a global basis. We believe this gives us a large competitive advantage and enables higher ROI to our advertisers
and optimal yield on digital inventory to our publishers.
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Leverage our Industry Expertise and Target
Select Acquisitions
We have been successful in past acquisitions and may direct our
industry experience and focus to identify future complementary acquisitions to further broaden our scale and technology solutions. To
the extent we identify attractive acquisition opportunities, we have the experience, leadership and track record to successfully execute
strategic transactions and integrate acquired businesses into our platform.
Our Solution and End-to-End Technology Platform
Our Solution
Our end-to-end platform is a comprehensive software suite that
supports a wide range of media types (e.g., Video, display, etc.) and devices (e.g., mobile, CTVs, streaming devices, desktop, etc.),
creating an efficient marketplace where advertisers can purchase high quality advertising inventory from publishers at scale. Our solutions
offer many advantages, including an advanced real-time bidding auction optimization engine, a quality and global marketplace, and flexibility
to enact concurrent campaign strategies that drive strong returns for investments in digital ad real estate.
Our platform handles approximately 135 billion
daily ad requests, approximately 1,500 terabytes of daily data, and approximately 320 million daily ad impressions. Each transaction is
processed in a fraction of a second (55ms on average) and powered by our real-time bidding engine, which leverages private servers and
infrastructure in three strategically located data centers located in the United States, Europe and Asia Pacific. These figures include
combined results between both Tremor International and Amobee.
Key Components of our platform include:
| • |
Demand Side Platform – We offer self-service DSP solutions for advertisers and their agencies to efficiently and intuitively
manage omni-channel campaigns. We also offer full-service options to agencies in addition to our self-service DSP solutions. Our DSP solutions
provide access to wide-reaching and high-quality inventory, audience targeting, and advanced reporting to optimize advertising campaigns,
improve ROI, and gain deep insights and analytics into brand engagement. |
| • |
Data Management Platform – We offer a fully integrated DMP solution that sits at the center of our
platform that unlocks the power of data flowing through our DSP and SSP solutions. Our DMP enables advertisers and publishers to use data
from various sources in order to optimize results of their advertising campaigns. Our DMP provides insights and recommendations pertaining
to geographic, behavioral, and demographic data, among others in a unified solution. We believe an integrated DMP is a key component to
the marketplace because it enables advertisers and publishers to use and activate data to target audiences with more accuracy across several
different channels. |
| • |
Supply Side Platform – We offer a self-service SSP solution for digital publishers to sell their online ad placements via a
real-time bidding auction across all screens including mobile, CTVs, streaming devices and desktops. Our SSP provides access to significant
amounts of data, unique demand and a comprehensive product suite to drive more effective inventory management and revenue optimization.
|
| • |
Analytics/Artificial Intelligence – We collect, synthesize and analyze the data sets across our platform through extensive
artificial intelligence technologies and advanced machine learning capabilities. These recommendations ultimately provide key insights
into valuable ad impressions and forecasts for auction behavior. We believe these technologies drive optimal results for our advertisers
and publishers. |
| • |
Advanced TV (ATV) Platform – We offer broadcasters and demand
side partners an advanced planning product for their premium linear TV and digital video investments that allows broadcasters to improve
yields on their inventory while helping to maximize return-on-ad-spends for advertisers. We recently launched a cross platform offering
which allows broadcasters to package both linear and digital supplies together for their upfront deals. We are also working to expand
this offering for demand side agency partners who we believe would benefit from such a solution to reduce waste and offer maximum flexibility
to their clients when budgets are shifted across linear and digital premium video during the broadcast year. The integration of ATV into
Tremor’s technology stack creates a significant growth opportunity for us in the premium activity of the market where we can create
precise cross platform planning and activate the digital portion of the cross-planning via Tremor International’s digital activation
ecosystem. |
| • |
Brand intelligence – An audience insight and activation platform unifying insights from cross channel
data sources with the additional ability to leverage first party data. This platform helps our customers gain a comprehensive view of
their audiences to better plan, optimize and activate their advertising campaigns. |
DSP
Key features of our DSPs include:
| • |
Comprehensive, insightful and modern self-service interface that intuitively supports the needs of advertisers and enables them to
operate and implement strategies effectively and independently. |
36
| • |
Superior artificial intelligence-based real-time bidding models, to drive efficient buying and meet our customers’ key performance
indicators. |
| • |
Enables seamless access to and integration of an advertisers’ own first-party data, our proprietary data and a wide list of
premium third-party data segments. |
| • |
Meaningful forecasting and reporting tools, as our DSPs can accurately measure how many households and
unique users an advertising campaign is able to reach through any targeting initiatives to ensure campaign strategies are achievable.
|
| • |
Robust omni-channel reporting and insights tools which enables advertisers to analyze across device and channel campaign effectiveness
against various key performance indicators with the ability to compare their statistics through various comprehensive benchmarks.
|
| • |
Access to our creative studio (Tr.ly) with deep expertise to support a variety of creative needs and generate
ideas to enrich messaging and consumer engagements. |
| • |
Data and brand surveys that provide meaningful information for advertisers to evaluate brand lift and behavioral
and emotional engagement. |
| • |
Our proprietary brand safety technology uses a combination of machine-learning and propriety algorithms as well as data ingestion
from industry-leading verification providers to develop and maintain dynamic block lists and a scoring mechanism to grade our traffic
before, during and after ad requests are made. |
SSP
Key features of our SSP include:
| • |
Comprehensive and highly intuitive self-service platform which enables publishers to easily integrate into our ecosystem, manage
their digital inventory, access reporting and insights, and transact with their programmatic buyers through private marketplace deals.
Once integrated with our SSP solution, publishers also benefit from our unique and differentiated demand available through our proprietary
DSP solution and additionally through demand facilitation initiatives driven by our global salesforce. |
| • |
Connection to the world’s largest DSPs and compatibility with most AdAge top 100 brands. Our SSP solution delivers over 6 billion
advertisements to viewers every month and optimizes content for different formats, builds effective custom audiences and delivers impressive
ROI at scale. |
| • |
Omni-channel marketplace with access to approximately 1,530 active publishers across the globe and exclusive
access to VIDAA digital advertising inventory. |
| • |
Industry-leading forecasting analytics and data-driven yield optimization tools to maximize inventory monetization and delivers impressive
ROI at scale. |
| • |
Enables publishers to customize their experience through the ability to opt out of certain ad verticals or specific advertisers in
order to customize demand for their media and manage channel conflicts. |
| • |
Support for all major integration types, including open real-time bidding, header-bidding solutions, as well as our proprietary client-side
solutions, including our video player, giving publishers the flexibility of choosing the methods through which they want to offer their
ad inventory to advertisers. |
| • |
Recent acquisition of SpearAd, a platform purpose-built for broadcasters and TV content companies to deliver
seamless TV-like experiences in CTV, linear addressable TV and over the top (OTT) environments. The platform includes a robust user interface
with advanced data driven tools for TV ad pod management and monetization on both pre-recorded and live TV content as well as a unified
auction tool, enabling broadcasters and publishers to seamlessly mediate their demand partnerships. |
Data and Data Management Platform (“DMP”)
Key features of our DMP include:
| • |
Audience segments that are generated directly within our platform, leveraging a collection of first- and third-party data sets, including
strategic data partnerships. Our platform also enables advertisers and publishers to connect and leverage their own first party data for
activation across our ecosystem. Based on our platform’s statistical models, we are able to uncover deep insights from behavioral
data, feeding into a machine learning platform that allows us to achieve our advertisers’ and publishers’ performance metrics.
|
| • |
Ability for advertisers and publishers to layer custom data segments against their campaigns and private marketplace deals.
|
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| • |
Includes unique data driven insights available through our self-service user interfaces or custom built and curated by our team,
along with the ability for advertisers and publishers to forecast scale, reach and media cost against the audiences they are looking to
target. |
| • |
Provides for audience driven creative optimization, combining the power of the DMP with our proprietary
creative platform (Tr.ly). |
| • |
Specific focus and expertise around the collection and packaging of TV viewership data for activation and insights, providing advertisers
strong content retargeting, insight and attribution capabilities on digital formats. |
| • |
Our EQ product, fully integrated into our DMP, is a proprietary emotional
analytics tool that provides advertisers with the data they need to maximize the emotional, social and business impact of their advertising.
|
| • |
Our EQ product compiles surveys along with facial recognition of users
to see how those individuals respond to questions or advertising, which further engages targeting for our advertisers’ campaigns.
|
Key features of ATV include:
| • |
Linear TV Planning: Data driven
linear TV has been growing in significance. Our Linear TV Planning feature allows sellers at national broadcasters to generate linear
TV plans during and after upfronts. Budgets ranging from hundreds of thousands to hundreds of millions of dollars can be allocated at
the program airing with a high level of granularity around key data points such as schedules, days of weeks and time of the day. While
data driven linear TV is expected to grow slowly due to digital content taking precedence, it is expected to remain a significant portion
of the ad spend for many years to come. |
| • |
Cross-Platform Planning: Due
to fragmentation in the industry, advertisers often experience significant budget waste when
trying to mirror similar audiences across linear and digital video channels. Our Cross-platform planner allows sellers and buyers to use
a deduplicated audience universe across linear and digital channels to produce a precise plan for upfront investment and post upfront
adjustments. We recently launched this product with our strategic national broadcaster clients. The Cross-Platform Planning platform was
built using advanced data science and AI/ML methodologies. We believe cross-platform planning is a highly differentiated and unique offering
in the market. |
Brand Intelligence
Key features of Brand Intelligence include:
| • |
A platform that unifies disparate data across digital, linear and social environments to uncover insights and turn them into robust
and seamless targeting capabilities. |
| • |
Superior artificial intelligence and natural language processing capabilities,
to drive accurate and unique insights and changes in behaviors and trends. |
| • |
Provides clients with a comprehensive set of capabilities to discover, understand, and keep pace with their customers across channels,
so they can leverage real time insights to inform and enrich tactical activation based on consumer behaviors, sentiment, trends and interests.
|
| • |
Leveraging a multitude of rich, cross-channel data sources, including
linear TV, CTV, digital and social, combined with a proprietary panel, for clients to extend their reach with greater relevance across
targeting strategies and tactics. |
Our Customers
Our customers consist of leading global brands and advertising
agencies on the demand side, and high-quality publishers on the supply side, across several industries, including retail, entertainment,
consumer, financial services, healthcare and more. We had approximately 1,250 active customers for the year ended December 31, 2022 including
prominent members of the U7 Council such as American Express Company, GSK plc, Proctor Gamble Co, Unilever plc and others. This
figure includes combined customer reach between both Tremor International and Amobee for the year ended December 31, 2022.
On our demand side, we have brands and agencies using our self-service
offerings, our own managed services offerings and third-party DSP integrations. Buyers and advertisers transact through these tools. On
the supply side, we service digital publishers, app developers and subscribers to our self-service platform.
We generally enter into contracts with our customers
either through master services agreements (“MSAs”) and/or insertion orders. An insertion order is an agreement entered into
by an advertiser and publisher to govern the terms of running a particular campaign. Our customers typically enter into MSAs with us that
give users access to our platform. These MSAs typically have one-year terms that renew automatically, unless earlier terminated.
We have long-standing relationships with our customer
base. Our customers tend to repeatedly use our platform, illustrated by our Contribution ex-TAC retention rate of 80% for the year ended
December 31, 2022. While our retention rate is solid, the retention rate was significantly impacted by challenging macroeconomic conditions
that created uncertainty, and reduced spend, within the advertising demand environment. These conditions were observed within the industry
throughout 2022. However, over time, and in more normalized market conditions, we expect customers to typically increase their level of
spend, and adoption of additional products, across our end-to-end technology platform due to the convenience of transacting with one vendor
that can service them in multiple ways, the inconvenience associated with switching vendors and learning a new technology, as well as
the data, return on ad spend, and cost benefits provided by our suite of technology solutions.
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Our Competition
We have a number of competitors that operate in
portions of our business, but few of our competitors provide the full end-to-end technology solution that we offer.
We believe that our long track record and expertise
in the digital advertising industry gives us significant advantages with regards to platform development and expertise, as well as a long
development lead ahead of new entrants. We also believe that we compete primarily based on the performance of campaigns running on our
platform, capabilities of our platform, our identity resolution capabilities, omni-channel capabilities, planning tools and our advance
reporting and measurement capabilities.
On the demand side, companies such as Roku Inc., Viant Technology, Inc., Samsung, Inc.
and The Trade Desk, Inc. are some of our key competitors.
On the supply side, companies such as Magnite, Inc., Freewheel
and PubMatic, Inc. are our main competitors, all of which compete to provide publisher inventory to advertisers.
We believe the principal competitive factors in our industry include
the following:
| • |
proven technology, software-as-a-service offering and optimization capabilities; |
| • |
omni-channel execution; |
| • |
quality and scale of digital inventory and demand; |
| • |
depth and breadth of relationships with brand advertisers, premium publishers and agencies; |
| • |
full suite of viewability, measurement, verification and brand safety offerings; |
| • |
flexible pricing; and |
| • |
transparency in the ecosystem. |
We believe that we compete favorably with respect to all of these
factors and are well positioned as a full-service end-to-end platform catering to both advertisers and publishers.
Technology and Development
Our business model enables us to invest in our research and development efforts, which
have helped grow our business. Our platform is extremely efficient at managing large amounts of complex data and is leveraged by both
advertisers and publishers in real time. We are committed to innovative technologies and the rapid introduction of enhanced functionalities
to support the dynamic needs of our advertisers and publishers. We therefore expect technology and development expense to increase as
we continue to invest in our platform to support increased advertising spend volume and international expansion. Our technology and development
team is based in the United States and Israel. As of December 31, 2022, research and development expenses accounted for 14.7% of our operating
expenses. This includes expenses from Amobee for the period from when we closed the acquisition on September 12, 2022 through December
31, 2022.
Sales and Marketing
As an end-to-end platform, we have highly qualified sales teams
dedicated to acquiring new premium advertising and publisher customers, which we further grew and enhanced through the acquisition of
Amobee, and subsequent integration of those sales team members into the combined Company. These teams focus on selling access to our platform
through self-service and managed service offerings. Our global sales and marketing team consisted of approximately 621 employees as of
December 31, 2022, including team members added through the acquisition of Amobee, and takes a proactive hands-on approach to cultivating
and enhancing new and existing advertiser and publisher relationships.
We have dedicated teams focused on post-sale support to ensure
customer success as well. Our client success team onboards advertisers and liaises directly with the customer on a regular basis to optimize
delivery against key performance indicators and help meet their goals throughout the campaign life cycle. Our publisher operations team
onboards publishers and engages directly with the customer to support their needs and effectively monetize inventory. We expect to continue
to expand our sales and marketing and customer support teams as we expand into new industry verticals and geographical markets and add
additional products across our technology ecosystem.
39
Our Team and Culture
As part of our track record of successfully integrating acquisitions,
we pride ourselves on bringing together new teams under one culture. Each day, we strive to be as innovative, committed, collaborative
and authentic as possible, with no ego which is why these are our global company values.
Our management team encourages employees to share their feedback,
ideas, and thoughts by promoting a transparent organizational culture and an open-door policy. We also introduced internal surveys to
garner employee feedback and satisfaction and to receive suggestions.
We communicate and build relationships with external stakeholders
via our marketing efforts, including digital and social media, events, public relations, direct marketing and online advertising among
other initiatives. We have “People Culture” programs, which provide employees with volunteer opportunities in many of
our local communities, particularly focused on education and serving underprivileged communities. We as a company also regularly donate
to volunteer associations.
Our employees tend to be long-tenured across our entities, with
an average tenure of the leadership team being approximately seven years, and more than three years across all employees.
We believe we attract talented employees to our company, and sophisticated
customers to our platform, in large part because of our vision and unwavering commitment to using cutting-edge technologies to create
products that help advance the digital advertising industry.
As of December 31, 2022, we had 1,087 employees globally, including
employees integrated into the combined Company through the acquisition of Amobee.
Intellectual Property
Our success depends, in part, on our ability to protect the proprietary
methods and technologies that we develop or otherwise acquire. We rely on copyright, trade secret laws, confidentiality procedures and
contractual provisions to protect our proprietary methods and technologies and own more than 50 patents. We rely upon common law protection
for certain marks, such as “Tremor” and “Tremor Video.”
We generally enter into confidentiality and/or license agreements
with our employees, consultants, vendors and advertisers, and we generally limit access to, and distribution of, our proprietary information.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.
Privacy and Data
Modern consumers use multiple platforms to learn about and purchase
products and services, and consumers have come to expect a seamless experience across all channels. This challenges marketing organizations
to balance the demands of consumers and the most effective advertising techniques with responsible, privacy-compliant methods of managing
data internally and with advertising technology intermediaries.
In the United States, both state and federal legislation govern
activities such as the collection and use of data by companies that engage in digital advertising like us. Also, because our platform
reaches users throughout the world, some of our activities may also be subject to foreign legislation. As we continue to expand internationally,
we will be subject to additional legislation and regulation, and these laws may affect how we conduct business.
The U.S. Congress and state legislatures, along with federal regulatory
authorities, have increased their attention on matters concerning the collection and use of consumer data, including relating to internet-based
advertising. Data privacy legislation has been introduced in the U.S. Congress, and several states, including California, Virginia, Colorado
and Utah, have enacted comprehensive privacy legislation granting rights to consumers to enable increased control over the use of their
data. These laws include a consumer’s ability to restrict use of data for behavioral or cross-context advertising purposes. Additional
state legislatures have proposed, a variety of types of data privacy legislation. Many non-U.S. jurisdictions have also enacted or are
developing laws and regulations governing the collection and use of personal data.
Additionally, U.S. and foreign governments have enacted or are
considering enacting legislation that could significantly restrict our ability to collect, augment, analyze, use and share data collected
through cookies and similar technologies, such as by regulating the level of consumer notice and consent required before a company can
employ cookies or other electronic tools to track people online. In the United States, the FTC has commenced the examination of privacy
issues that arise when marketers track consumers across multiple devices, otherwise known as cross-device tracking. In addition to the
requirements relating to cookies or similar technologies described in the section “Risk Factors—Risks
Relating to Legal or Regulatory Constraints—We are subject to laws and regulations
related to data privacy, data protection, and information security, and consumer protection across different markets where we conduct
our business, including in the United States, the EEA and the United Kingdom and industry requirements and such laws, regulations, and
industry requirements are constantly evolving and changing. Our actual or perceived failure to comply with such laws and regulations could
have an adverse effect on our business, results of operations and financial condition”, in the European Union and the United
Kingdom, informed consent is required for the placement of a cookie or similar technologies
on a user’s device and for direct electronic marketing. The GDPR also imposes conditions on obtaining valid consent, such as a prohibition
on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. Detailed
guidance relating to these requirements has been published by the European Data Protection Board (and its predecessor, the Article 29
Working Party) as well as various supervisory authorities in the European Union and the United Kingdom. While not legally binding, such
guidance reflects the position and understanding of the regulators and their approach to enforcement. Supervisory authorities in the European
Union and the United Kingdom are increasingly focusing on the AdTech industry and its compliance with these requirements. Several high-profile
investigations are currently underway, and a number of fines have been issued against businesses for their failure to, amongst other things,
properly notify individuals of how their data is being used and to collect informed consent.
40
Additionally, our compliance with our privacy policy and our general
consumer data privacy and security practices are subject to review by regulatory bodies such as the FTC, which may bring enforcement actions
to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations or material
omissions therein.
Certain State Attorneys General in the United States may also bring
enforcement actions based on comparable state laws or federal laws that permit state-level enforcement. In California, for example, the
Attorney General may bring enforcement actions for violations of the CCPA, as modified by the Attorney General’s enforcement guidelines.
When we receive bid requests that include an opt-out signal, we do not sell personal information, as defined by the CCPA. We have also
adopted the Digital Advertising Alliance (“DAA”) CCPA Compliance Framework, which includes a technical specification to identify
consumer signals to opt-out of sale of their data and have signed the IAB Limited Service Provider Agreement that imposes service provider
obligations for certain opted-out bid requests. These IAB frameworks are designed to facilitate compliance with the CCPA although the
California Attorney General’s office has not yet approved such frameworks. The CCPA sets forth high potential liabilities for data
privacy violations on a per-incident basis, and the industry faces an uncertain compliance burden as our partners and publishers work
to become compliant with the law. Also, the CPRA, once it takes effect in January 2023, will impose additional data protection obligations
on companies doing business in California, including additional consumer rights processes and opt-outs for certain uses of sensitive data
and sharing of personal data.
Since California enacted the CCPA and CPRA), Virginia enacted the
Virginia Privacy Act (effective January 1, 2023), Colorado enacted the Colorado Privacy Act (effective July 1, 2023) and Utah enacted
the Utah Consumer Privacy Act (effective December 31, 2023). We expect the trend of enacting new and comprehensive privacy legislation
to continue not only in the US but also around the globe.
To protect against unlawful content (advertiser and publisher),
we include restrictions on content in our terms and conditions. We also utilize various technologies and processes to review publisher
properties and use third party software to screen impressions we acquire through advertising exchanges.
4.C. ORGANIZATIONAL STRUCTURE
The following table sets out details of the Company’s significant
subsidiaries:
|
Name of company |
Country of Incorporation
|
Ownership Percentage
| ||
|
Taptica Inc. |
USA |
100% | ||
|
Tremor Video Inc. |
USA |
100% | ||
|
Adinnovation Inc. |
Japan |
100% | ||
|
Taptica UK |
UK |
100% | ||
|
Unruly Group US Holding Inc.* |
USA |
100% | ||
|
YuMe Inc.* |
USA |
100% | ||
|
Perk.com Canada Inc |
Canada |
100% | ||
|
R1Demand LLC* |
USA |
100% | ||
|
Unruly Group LLC |
USA |
100% | ||
|
Unruly Holdings Ltd.* |
UK |
100% | ||
|
Unruly Group Ltd. |
UK |
100% | ||
|
Unruly Media GmbH |
Germany |
100% | ||
|
Unruly Media Pte Ltd.* |
Singapore |
100% | ||
|
Unruly Media Pty Ltd. |
Australia |
100% | ||
|
Unruly Media KK |
Japan |
100% | ||
|
Unruly Media Inc |
USA |
100% | ||
|
SpearAd GmbH |
Germany |
100% | ||
|
Unmedia Video Distribution Sdn Bhd |
Malaysia |
100% | ||
|
Amobee Inc* |
USA |
100% | ||
|
Amobee EMEA Limited |
UK |
100% | ||
|
Amobee International Inc |
USA |
100% | ||
|
Amobee Ltd |
IL |
100% | ||
|
Amobee Asia Pte Ltd* |
Singapore |
100% | ||
|
Amobee ANZ Pty Ltd |
Australia |
100% |
* Under these companies, there are twenty-seven (27) wholly
owned subsidiaries that are inactive and/or in liquidation process.
41
4.D. PROPERTY, PLANTS AND EQUIPMENT
Our headquarters are located in Tel Aviv, Israel where we occupy facilities totaling
approximately 11,800 square feet under a lease that expires in May 2024. In addition, we have key locations in New York, New York, Los
Angeles, California, Redwood City, California, Chicago, Illinois, and Baltimore, Maryland in the United States, as well as international
locations in the United Kingdom, Japan, Singapore, Australia and Germany. These locations support our key business functions including
sales and marketing, customer support, business development, engineering, product development and infrastructure support. We believe that
our current facilities are suitable to meet our existing needs.
4.E. UNRESOLVED STAFF COMMENTS
None
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial
condition and results of operations together with Item 4. “Information on the Company – 4B. Business Overview” and our
audited consolidated financial statements and the related notes thereto appearing at the end of this Annual Report. We present our audited
consolidated financial statements in USD and in accordance with International Financial Reporting Standards, or IFRS, as issued by the
International Accounting Standards Board, or IASB.
You should carefully review and consider the information
regarding our financial condition and results of operations set forth under Item 5. “Operating and Financial Review and Prospects”
in our Annual Report on Form 20-F for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on March
15, 2022, for an understanding of our operating results and liquidity discussions and analysis comparing fiscal year 2021 to fiscal year
2020.
Some information included in this discussion
and analysis, including statements regarding industry outlook, our expectations regarding our future performance, liquidity and capital
resources and other statements regarding our plans and strategy for our business and related financing, are forward-looking statements.
These forward-looking statements are subject to numerous risks and uncertainties. Please see “Special Note Regarding Forward-Looking
Statements and Risk Factor Summary in this Annual Report. You should read the “Risk Factors” section of this Annual Report
for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by
the forward-looking statements contained in the following discussion and analysis.
We maintain our books 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, and we prepare our financial statements in accordance
with IFRS as issued by the IASB.
5.A. OPERATING RESULTS
Overview
We are a global company offering an end-to-end software platform
that enables advertisers to reach relevant audiences and publishers to maximize yield on their digital advertising inventory. We use our
proprietary technology to deliver impactful brand stories to target audiences through digital ad technology and advanced audience data.
Our omni-channel capabilities deliver global advertising campaigns across all formats and channels, with an expertise in Video and CTV.
We believe there is a significant market opportunity within the approximately $567 billion
global digital advertising market that is expected to grow at a CAGR of approximately 10% through 2026, according to eMarketer. Digital
publishers rely on advertising to support their businesses and brands, and advertisers use this medium to capture uniquely targeted and
viewable impressions. We believe the digital advertising market remains fragmented and that our full-service end-to-end software platform
and vast expertise within Video and CTV puts us in a strong position to continue to increase our market share from traditional ad sales
channels.
We believe that we are positioned to benefit from several trends in the evolving advertising
ecosystem, including the proliferation of digital media consumption, adoption of programmatic advertising, a growing focus on premium
formats such as Video and CTV, and the increasing sophistication of the overall digital landscape. We address the broad and evolving digital
advertising market through our three core offerings, including proprietary DSP solutions that advertisers leverage to manage digital advertising
campaigns, a proprietary SSP solution that publishers leverage to optimally monetize digital inventory and a proprietary DMP solution
which is integrated with both our DSP and SSP solutions. Our versatile DMP solution benefits from vast amounts of data and provides optimal
campaign recommendations for audience sets by employing advanced machine learning algorithms and now includes the Linear TV Planning and
Cross-Platform tools. The contextualization of the data synthesized by our DMP solution provides advertisers with a comprehensive, personalized
view of audiences, enabling more effective targeting across formats and devices and optimizes the monetization of publisher inventory.
These three solutions are enhanced by our Brand Intelligence offering helping our customers gain a comprehensive view of their audiences.
By combining these proprietary solutions as well as integrations with industry-leading partners, we provide an end-to-end software platform
that is dynamic and flexible to our customers’ needs, which enables us to address more digital ad spend.
42
Our customers are comprised of both ad buyers, including brands and agencies, and digital
publishers. Our platform included a diversified customer base of approximately 1,250 active customers and approximately 1,530 active publishers
as of December 31, 2022 with approximately 20 billion unique users for the month ended December 31, 2022, and serves advertisements in
246 countries. These figures include combined results from both Tremor International and Amobee.
We generate revenue through platform fees that are tailored to
fit the customer’s specific utilization of our solutions and include (i) a percentage of spend, (ii) flat fees and (iii) fixed CPM.
Recently, the economic health of advertisers has
been impacted by impacts of the COVID-19 pandemic beginning in 2020 and residual impacts that continued through 2022, as well as current
inflation issues and the resulting economic uncertainty in the United States and global economy which continued through 2022. Many advertisers
also suffered, and continue to do so, as a result of supply chain constraints which are materially impacting certain verticals. Many marketing
budgets, particularly those hardest hit by the pandemic and economic uncertainty such as travel, retail and hospitality, and those impacted
by supply chain constraints such as automotive, decreased or paused their advertising spending as a response to the economic uncertainty,
decline in business activity and other COVID-19 related impacts which have not fully recovered, and may continue to have, a negative impact
on our revenue and results of operations. The advertising industry was significantly impacted in 2022 by supply chain constraints, inflation,
the economic uncertainty in the global economy and the residual impact of the COVID-19 pandemic, including in the United States (where
the majority of our revenue is generated). As a result of all of these contributing factors, advertising demand on our platform decreased
significantly in the second half of 2022, as economic activity across most markets contracted and marketing budgets were reduced. Despite
recovery as parts of the economy reopened at the end of the second quarter of 2020 into 2021, the residual impacts of the COVID-19 Pandemic,
increasing inflation concerns and economic uncertainty around the globe has continued to limit advertising spending over this period,
other industries drove growth in advertising spending, particularly in Video (including CTV).
On August 18, 2022, the Company completed a $25
million investment in VIDAA, a smart TV operating system, streaming platform, and subsidiary of Hisense. Through its investment, the Company
received a minority equity stake in VIDAA, a multi-year extension to exclusively share VIDAA’s global ACR data for targeting and
measurement across the Company’s end-to-end platform, and ad monetization exclusivity on media in the U.S., UK, Canada, and Australia.
On September 12, 2022, the Company completed its acquisition of Amobee, a leading global advertising platform that optimizes outcomes
for advertisers and media companies and improves cross channel performance across linear, Connected TV, and digital media, for $211.8
million, as adjusted. The acquisition of Amobee drives added scale and advertiser demand to the Company’s platform, while also adding
a number of brand and agency customers that were previously either not leveraging the Company’s technology products or were leveraging
them very minimally. The acquisition also enhances Tremor International’s enterprise self-service DSP capabilities, performance
media buying capabilities, and data-driven planning capabilities, highlighted by the creation of cross-planning capabilities for advertisers
and broadcasters across linear TV and CTV simultaneously. The acquisition consideration of $211.8 million, as adjusted, was funded through
a combination of existing cash resources, and approximately $100 million from a new $180 million secured credit facility. The credit facility
consisted of a $90 million secured Term Loan A drawn at closing, and a $90 million Revolving Credit Facility, of which $10 million was
drawn at closing. The remaining $80 million capacity on the Revolving Credit Facility provides the Company with additional liquidity,
which may be utilized for a variety of investments including future strategic investments and initiatives alongside existing surplus cash
resources.
Our Video revenue
grew from $242.7 million in the year ended December 31, 2021 to $243.3 million in the year ended December 31, 2022. These results include
contributions from Amobee for the period from when we closed the acquisition on September 12, 2022 through December 31, 2022. Video revenue
for Tremor International as a standalone company was impacted by challenging macroeconomic conditions experienced across several industries,
including rising interest rates, supply chain constraints, rising inflation, geopolitical uncertainty, and recession concerns, which pressured
the advertising demand environment. This pressure, however, was partially offset by Video revenue contributed by Amobee for the period
from when we closed the acquisition through the end of 2022. Our Video revenue growth included the rapid growth of CTV revenue over the
same period, which grew from $80.3 million in the year ended December 31, 2021 to $97.2 million in the year ended December 31, 2022. CTV
revenue for Tremor as a standalone company, however, was more resilient during 2022 as advertisers continued to advertise using CTV to
increase brand awareness through our scaled end-to-end suite of technology solutions and expertise within the activity despite challenging
market conditions. Amobee also contributed positive CTV revenue from when we closed the acquisition through the end of 2022, furthering
the Company’s year-over-year growth within the activity. The growth of Video (including CTV) revenue contributed to 3% growth in
Programmatic revenue for the year ended December 31, 2022 from the year ended December 31, 2021. The programmatic growth figure includes
results from Amobee for the period from when the acquisition closed on September 12, 2022 through December 31, 2022.
Our total comprehensive
income for the twelve months ended December 31, 2022, decreased by $54.4 million from the equivalent figure for the twelve months ended
December 31, 2021, and represented a 77.0% year-over-year decrease as compared to our total comprehensive income for the twelve months
ended December 31, 2021. We generated $16.2 million and $70.6 million in total comprehensive income for the years ended December 31, 2022,
and 2021, respectively. Our Adjusted EBITDA for the twelve months ended December 31, 2022, decreased by $16.3 million from the equivalent
figure for the twelve months ended December 31, 2021 and represented a 10.1% year-over-year decrease. Additionally, we generated $144.9
million and $161.2 million in Adjusted EBITDA for the years ended December 31, 2022 and 2021, respectively. The Company had a net cash
position of $115.5 million as of December 31, 2022.
43
Our Business Model
Tremor International is a collection of brands uniting creativity, data and technology
across the open internet. Our end-to-end, video-first platform facilitates and optimizes engaging advertising campaigns for brands, media
groups and content creators worldwide—enabling powerful partnerships and delivering meaningful results. A leader in CTV and Video,
Tremor International’s footprint is expanding across some of the industry’s fastest-growing activities, driven by a global
team of seasoned technologists and digital natives.
Our end-to-end platform is a comprehensive software suite that
supports a wide range of media types (e.g., Video, display, etc.) and devices (e.g., mobile, CTVs, streaming devices, desktop, etc.),
creating an efficient marketplace where advertisers can purchase high quality advertising inventory from publishers at scale. Our solutions
offer many advantages, including an advanced real-time bidding auction optimization engine, a quality and global marketplace, and flexibility
to enact concurrent campaign strategies that drives strong returns for investments in digital ad real estate.
Our platform handles approximately 135 billion daily ad requests,
approximately 1,500 terabytes of daily data and approximately 320 million daily ad impressions. Each transaction is processed in a fraction
of a second (55ms on average) and powered by our real-time bidding engine, which leverages thousands of private servers and infrastructure
in three strategically located data centers located in the United States, Europe and Asia Pacific. These figures include combined accommodations
between both Tremor International and Amobee.
Key Components of our platform include:
| • |
Demand Side Platform – We offer self-service DSP solutions for advertisers and their
agencies to efficiently and intuitively manage omni-channel campaigns. We also offer full-service options to agencies in addition to our
self-service DSP solutions. Our DSP solutions provide access to wide reaching and high-quality inventory, audience targeting, and advanced
reporting to optimize advertising campaigns, improve ROI, and gain deep insights and analytics into brand engagement. |
| • |
Data Management Platform –
We offer a fully integrated DMP solution that sits at the center of our platform that unlocks the power of data flowing
through our DSP and SSP solutions and includes Linear TV and Cross-Planning tools. Our DMP enables advertisers and publishers to use data
from various sources in order to optimize results of their advertising campaigns. Our DMP provides insights and recommendations pertaining
to geographic, behavioral and demographic data, among others in a unified solution. We believe an integrated DMP is a key component to
the marketplace because it enables advertisers and publishers to use and activate data to target audiences with more accuracy across a
number of different channels. |
| • |
Supply Side Platform – We offer a self-service SSP solution for digital publishers
to sell their online ad placements via a real-time bidding auction across all screens including
mobile, CTVs, streaming devices and desktops. Our SSP provides access to significant amounts of data, unique demand and a comprehensive
product suite to drive more effective inventory management and revenue optimization. |
| • |
Brand Intelligence –
We collect, synthesize and analyze the data sets across our platform through extensive artificial intelligence technologies
and advanced machine learning capabilities. These recommendations ultimately provide key insights into valuable ad impressions and forecasts
for auction behavior. We believe these technologies drive optimal results for our advertisers and publishers. |
Key Factors Affecting Our Results of Operations
We believe our results of operations is influenced by several factors,
including the following:
Attract,
Retain and Grow our Customer Base: A large part of our growth in recent years has been driven by expanding the usage of our platform
by our existing advertisers and publishers as well as by adding new advertisers
and publishers. As a result, our revenue growth depends upon our ability to retain our existing advertisers and publishers and to capture
a larger amount of their advertising spend through our platform.
For the year ended December 31, 2022, we achieved gross profit per active customer (calculated
as our gross profit for the period divided by our active customers for the period) of $251,693 excluding results from Amobee ($199,200
including results from Amobee) and Contribution ex-TAC per active customer (calculated as our Contribution ex-TAC for the period divided
by our active customers for the period) of $308,062 excluding results from Amobee ($247,780 including results from Amobee). In comparison,
for the year ended December 31, 2021, we achieved gross profit per active customer of $332,054 and Contribution ex-TAC per active customer
of $395,254. During the year ended December 31, 2022, gross profit per active customer and Contribution ex-TAC per active customer decreased
on an organic basis (excluding Amobee), largely due to challenging macroeconomic conditions which adversely impacted the advertising demand
environment and advertising budgets within the industry.
We continued to add enhanced capabilities to our
already scaled and widely adopted technology ecosystem to encourage existing advertisers and publishers to increase their usage of our
platform. As a result of this and other similar engagement initiatives, we achieved a Contribution ex-TAC retention rate of 80% for the
year ended December 31, 2022. While our retention rate is solid, the retention rate was significantly impacted by challenging macroeconomic
conditions that created uncertainty, and reduced spend, within the advertising demand environment. These conditions were observed within
the industry throughout 2022. However, over time, and in more normalized market conditions, we expect customers to typically increase
their level of spend, and adoption of additional products, across our end-to-end technology platform due to the convenience of transacting
with one vendor that can service them in multiple ways, the inconvenience associated with switching vendors and learning a new technology,
as well as the data, return on ad spend, and cost benefits provided by our suite of technology solutions.
44
Investment
in Growth: We believe that the advertising market is in the early stages of a secular shift towards digital video advertising.
We have been specializing in digital video advertising, which collectively
accounts for approximately 90% of our Programmatic revenue for the year ended December 31, 2022. The figure for the year ended December
31, 2022, includes contributions from Amobee for the period from when we closed the acquisition on September 12, 2022 through December
31, 2022. We plan to invest in long-term growth by focusing on key drivers of digital advertising growth: Video and CTV. We anticipate
that our operating expenses will increase in the foreseeable future as we invest in platform operations and technology and development
to enhance our product capabilities including acquisitions (such as Amobee and SpearAd), deployment of more self-service capabilities
both to our advertisers and publishers, expediting and expanding data relationships and technology (such as our partnership with VIDAA,
including the additional equity investment), and adding more ad formats to our platform (e.g., audio, display, etc.). We believe that
these investments will contribute to our long-term growth, although it is uncertain whether they may impact our profitability in the near-term.
Growth of the
Digital Advertising Market and Macroeconomics Factors: We expect to continue to benefit from overall adoption of digital video advertising
by both advertisers and publishers. Any material change in the growth rate of digital video advertising or the rate of adoption could
affect our performance. Recent trends have indicated that advertising spend is closely tied to advertisers’ financial performance
and economic conditions, either generally or in one or more of the industries in which our advertisers operate or our publishers focus.
An economic downturn could adversely impact the digital advertising market and our operating results. For example, the challenges posed
by the COVID-19 pandemic on the global economy increased significantly throughout 2020 and 2021. In response to COVID-19, national and
local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns
of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. Certain marketers in industries
such as travel and tourism, hospitality and automotive, decreased or paused their advertising spend as a response to the economic uncertainty.
As
the overall economic environment improved during the second half of 2021, but experienced challenges throughout 2022, our Video revenue
and CTV revenue grew from $242.7 million and $80.3 million, respectively, for the year ended December 31, 2021, to $243.3 million and
$97.2 million, respectively, for the year ended December 31, 2022. These results include contributions from Amobee for the period from
when the acquisition closed on September 12, 2022 through December 31, 2022. Video revenue for Tremor International as a standalone company
was impacted by challenging macroeconomic conditions experienced across several industries, including rising interest rates, supply chain
constraints, rising inflation, geopolitical uncertainty, and recession concerns, which pressured the advertising demand environment. This
pressure, however, was offset by Video revenue contributed by Amobee for the period from when we closed the acquisition through the end
of 2022. CTV revenue for Tremor as a standalone company, however, was more resilient during 2022 as advertisers continued to advertise
using CTV to increase brand awareness through our scaled end-to-end suite of technology solutions and expertise within the activity, despite
challenging market conditions. Amobee also contributed positive CTV revenue from when we closed the acquisition through the end of 2022,
furthering the Company’s year-over-year growth within the activity. This growth of Video (including CTV) contributed to 3% growth
in Programmatic revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021. This programmatic growth figure
includes results from Amobee for the period from when the acquisition closed on September 12, 2022 through December 31, 2022.
During 2022, the Company, its customers, and its partners, continued to face persistent
macroeconomic challenges associated with several factors including: the COVID-19 pandemic, and residual impacts of efforts to curtail
its spread and reduce further economic damage sustained; rising interest rates; rising inflation; global supply chain constraints; changes
in foreign currency exchange rates; recession concerns; and geopolitical uncertainty, the combination of which drove advertisers across
several industries to reduce, or delay deployment of, budgets and advertising spend, see “Risk
Factors—Our revenue and results of operations are highly dependent on the overall demand for advertising. Factors that affect the
amount of advertising spending, such as economic downturns, inflation, supply constraints and the COVID-19 pandemic, can make it difficult
to predict our revenue and could adversely affect our business, results of operations and financial condition.”
Seasonality:
In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, many marketers allocate the
largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing. Historically,
the fourth quarter of the year has reflected our highest level of advertising activity for the year. We generally expect the subsequent
first quarter to reflect lower activity levels. In addition, historical seasonality may not be predictive of future results given the
potential for changes in advertising buying patterns and consumer activity due to economic uncertainty, rising inflation, supply chain
constrains and residual impacts of the COVID-19 pandemic. Nevertheless, when macro-economic conditions improve and as countries continue
to recover from the COVID-19 pandemic, we expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising
industry as a whole.
Components of Our Results of Operations
In this section, we use the
following terms:
“Programmatic”
means our end-to-end platform of programmatic advertising, which uses software and algorithms to match buyers and sellers of digital advertising
in a technology-driven marketplace; transactions in our Programmatic activities are executed in milliseconds and beginning in 2020, human
intervention or discretion for execution has significantly decreased.
“Performance”
means our non-core performance activities consisting primarily of mobile-based solutions that help brands reach their users; revenue generated
in the Performance activities is contingent on the occurrence of performance-based metrics, such as app downloads and installations.
Revenue.
Our revenue is generated from transactions where we provide a platform for the purchase and sale of digital advertising inventory. Our
end-to-end platform is a comprehensive software suite that supports a wide range of media types (e.g., Video, display, etc.) across various
devices (e.g., mobile, CTVs, streaming devices, desktop, etc.), creating an efficient marketplace where advertisers (buyers) are able
to purchase high quality advertising inventory from publishers (sellers) at scale.
45
We generate revenue through fees that we charge,
based on customer type, to utilize our solutions and services and upon usage and delivery.
Often, advertisers use our DSP solution in connection
with access to our DMP for optimizing media buys from our SSP solution.
Cost of revenues
(exclusive of depreciation and amortization). Cost of revenues (exclusive of depreciation and amortization) primarily consists
of hosting fees and data costs for both Programmatic and Performance activities, as well
as media costs for Performance activities that are directly attributable to revenue generated by the Company and generally based on the
revenue share arrangements with audience and content partners.
Research and development expenses. 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. Where required, development expenditures are capitalized in
accordance with the Company’s standard internal capitalized development policy in accordance with International Accounting Standard
(“IAS”) 38. All research costs are expensed when incurred.
Selling and marketing expenses.
Selling and marketing expenses primarily consist of compensation and related costs for personnel engaged in customer
service, sales and sales support functions, as well as advertising and promotional expenditures.
General and administrative expenses.
General and administrative expenses primarily consist 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 external legal, information technology consulting and outsourcing services
that are not directly related to other operational expenses.
Depreciation and
amortization. Depreciation and amortization primarily consist of depreciation of fixed assets and amortization of intangible assets,
as well as depreciation and amortization of right of use assets.
Financing income. Financing
income primarily consists of foreign currency gains and interest income.
Financing expense. Financing
expense primarily includes exchange rate differences, interest and bank fees and other expenses.
Other income (expense).
Other income (expense) includes gain on sale of business unit and income from expired financial liability offset by a disposal of intangible
assets.
Taxation. Taxation consists
primarily of income taxes related to the jurisdictions in which we conduct business. Our effective tax rate is affected by
non-deductible expenses net of tax-exempt income, utilization of tax losses from prior years for which deferred taxes is recognized, effect
on deferred taxes at a rate different from the primary tax rate, effect of reduced tax rate on preferred income and differences in previous
tax assessments. As of December 31, 2022, we have tax loss carry forwards from US in the amount of $65.7 million and other international
jurisdictions in the amount of $22.3 million and no tax loss carry forwards for Israeli tax purposes.
Results of Operations
The following tables set forth our results of operations in U.S.
dollars and as a percentage of revenue for the years indicated:
|
|
Year Ended
December 31, 2022 |
Year Ended
December 31, 2021 |
||||||||||||||
|
|
(In thousands) |
As a % of revenue |
(In thousands) |
As a % of revenue
|
||||||||||||
|
Revenues |
$ |
335,250 |
100.0 |
% |
$ |
341,945 |
100.0 |
% | ||||||||
|
Cost of revenues (exclusive of depreciation and amortization shown separately below) |
60,745 |
18.1 |
71,651 |
21.0 |
||||||||||||
|
Research and development |
33,659 |
10.0 |
18,422 |
5.4 |
||||||||||||
|
Selling and marketing |
89,953 |
26.8 |
74,611 |
21.8 |
||||||||||||
|
General and administrative |
68,005 |
20.3 |
63,499 |
18.6 |
||||||||||||
|
Depreciation and amortization |
42,700 |
12.7 |
40,259 |
11.7 |
||||||||||||
|
Other income, net |
(4,564 |
) |
(1.4 |
) |
(959 |
) |
(0.3 |
) | ||||||||
|
Profit (loss) from operations |
44,752 |
13.3 |
74,462 |
21.8 |
||||||||||||
|
Financing income |
(2,284 |
) |
(0.7 |
) |
(483 |
) |
(0.1 |
) | ||||||||
|
Financing expenses |
4,611 |
1.4 |
2,670 |
0.8 |
||||||||||||
|
Financing expenses, net |
2,327 |
0.7 |
2,187 |
0.7 |
||||||||||||
|
Profit before taxes on income |
42,425 |
12.7 |
72,275 |
21.1 |
||||||||||||
|
Tax benefit (expenses) |
(19,688 |
) |
(5.9 |
) |
948 |
0.3 |
||||||||||
|
Profit for the year |
22,737 |
6.8 |
73,223 |
21.4 |
||||||||||||
|
Foreign currency translation differences for foreign operation |
(6,499 |
) |
(1.9 |
) |
(2,632 |
) |
(0.8 |
) | ||||||||
|
Total comprehensive income for the year |
$ |
16,238 |
4.8 |
% |
$ |
70,591 |
20.6 |
% | ||||||||
46
Year Ended December 31, 2022 compared to Year Ended December 31,
2021
Revenue
|
Year Ended December 31, |
Change |
|||||||||||||||
|
2022
(In thousands) |
2021
(In thousands) |
|||||||||||||||
|
$ |
% |
|||||||||||||||
|
(in thousands, except for percentages) |
||||||||||||||||
|
Revenue |
$ |
335,250 |
$ |
341,945 |
$ |
(6,695 |
) |
(2.0 |
)% | |||||||
Revenue decreased by $6.7 million, or 2.0%, to $335.3 million for the year ended December
31, 2022, from $341.9 million for the year ended December 31, 2021. Excluding results from Amobee, the $43.5 million decrease in annual
revenue attributable to Tremor International as a standalone company was driven primarily by challenging macroeconomic conditions which
negatively impacted the advertising demand environment throughout 2022 including widespread global supply chain constraints, rising interest
rates, rising inflation, geopolitical uncertainty, and recession concerns. This decrease however was offset by $36.8 million in revenue
contribution from Amobee for the period from when the acquisition closed on September 12, 2022 through December 31, 2022.
Cost of revenues
|
Year ended
December 31, |
Change |
|||||||||||||||
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
|||||||||||||
|
(in thousands, except for percentages) |
||||||||||||||||
|
Cost of revenues (Exclusive of Depreciation and Amortization) |
$ |
60,745 |
$ |
71,651 |
$ |
(10,906 |
) |
(15.2 |
)% | |||||||
Cost of revenues (exclusive of depreciation and amortization) decreased by $10.9 million,
or 15.2%, to $60.7 million for the year ended December 31, 2022 from $71.7 million for the year ended December 31, 2021. Excluding cost
of revenues associated with Amobee (exclusive of depreciation and amortization), the $15.6 million decrease in cost of revenues (exclusive
of depreciation and amortization) associated with Tremor International as a standalone company was primarily driven by a decrease in Performance
revenue and corresponding costs, as several direct-to-consumer brand customers experienced significant pressure on advertising budgets
due to rising inflation during 2022. This decrease however was offset by $4.7 million in cost of revenues (excluding depreciation and
amortization) associated with Amobee for the period from when the acquisition closed on September 12, 2022 through December 31, 2022.
Research and development expenses
|
Year ended
December 31, |
Change |
|||||||||||||||
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
|||||||||||||
|
(in thousands, except for percentages) |
||||||||||||||||
|
Research and development |
$ |
33,659 |
$ |
18,422 |
$ |
15,237 |
82.7 |
% | ||||||||
Research and development expenses increased by
$15.2 million, or 82.7%, to $33.7 million for the year ended December 31, 2022 from $18.4 million for the year ended December 31, 2021.
Excluding research and development expenses associated with Amobee, the $7.2 million increase in research and development costs associated
with Tremor International as a standalone company was driven by increased investment in technology and product innovation which drove
a $1.8 million increase in salary and related expenses as a result of increased headcount, a $0.9 million increase in expenses related
to research and development and engineering tools and services and a $4.5 million increase in share-based compensation expense. Amobee
added $8.0 million in research and development expenses for the period from when the acquisition closed on September 12, 2022, through
December 31, 2022, primarily as a result of salary and related expenses.
47
Selling and marketing expenses
|
Year ended
December 31, |
Change |
|||||||||||||||
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
|||||||||||||
|
(in thousands, except for percentages) |
||||||||||||||||
|
Selling and marketing |
$ |
89,953 |
$ |
74,611 |
$ |
15,342 |
20.6 |
% | ||||||||
Selling and marketing expenses increased by $15.3 million or 20.6% to $90.0 million
for the year ended December 31, 2022 from $74.6 million for the year ended December 31, 2021. Excluding selling and marketing expenses
associated with Amobee, the $0.4 million decrease in selling and marketing expenses for Tremor International as a standalone company was
primarily driven by a $6.1 million decrease in wages and salaries mainly connected to lower revenue performance, which was largely offset
by a $3.5 million increase in share-based compensation expense and a $2.2 million increase in marketing, advertising, sales, and client-related
expenses due to increased in-person sales and marketing events taking place, as certain COVID-19 restrictions began to abate in 2022.
Amobee added $15.7 million in selling and marketing expenses for the period from when the acquisition closed on September 12, 2022, through
December 31, 2022, which was driven primarily by salary and related expenses.
General and administrative expenses
|
Year ended
December 31, |
Change |
|||||||||||||||
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
|||||||||||||
|
(in thousands, except for percentages) |
||||||||||||||||
|
General and administrative |
$ |
68,005 |
$ |
63,499 |
$ |
4,506 |
7.1 |
% | ||||||||
General and administrative expenses increased by
$4.5 million, or 7.1%, to $68.0 million for the year ended December 31, 2022 from $63.5 million for the year ended December 31, 2021.
Excluding general and administrative expenses associated with Amobee, the $1.3 million decrease in general and administrative expenses
for Tremor International as a standalone company was driven primarily by an approximately $ 3.1 million decrease in allowance for
doubtful debts mainly attributable to past debt collection compared to $5 million expenses in prior year, a $1.4 million decrease in rent
expense, and a $3.0 million decrease in special bonuses awarded as a result of the successful completion of the Company’s initial
public offering on Nasdaq in 2021. These decreases were offset mainly by a $5.1 million increase in professional service fees and expenses
largely associated with increased legal, director’s insurance and audit fees due to public company reporting requirements in the
United States, as well as a $5.8 million increase in acquisition costs, including investment in Amobee and a $0.4 million increase in
share- based compensation. Amobee added $5.8 million in general and administrative expenses for the period from when the acquisition closed
on September 12, 2022 through December 31, 2022, which was largely driven by salaries and related expenses.
Depreciation and amortization expenses
|
Year ended
December 31, |
Change |
|||||||||||||||
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
|||||||||||||
|
(in thousands, except for percentages) |
||||||||||||||||
|
Depreciation and amortization |
$ |
42,700 |
$ |
40,259 |
$ |
2,441 |
6.1 |
% | ||||||||
Depreciation
and amortization expenses increased by $2.4 million, or 6.1%, to $42.7 million for the year ended December 31, 2022 from $40.3 million
for the year ended December 31, 2021. Tremor International as a standalone company experienced a $1.1 million increase in depreciation
and amortization on servers and internally developed intangible assets as well as a $0.6 million increase in depreciation of the lease
assets of data centers and offices attributable to the optimization of assets, which was offset by an $11.2 million amortization of acquired
intangible assets from a previous acquisition that were fully amortized. Amobee added $11.9 million in depreciation and amortization expenses
for the period from when the acquisition closed on September 12, 2022 through December 31, 2022, mainly attributable to the amortization
of intellectual property and depreciation of servers and lease assets of data centers and offices.
Other income, net
|
Year ended
December 31, |
Change |
|||||||||||||||
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
|||||||||||||
|
(in thousands, except for percentages) |
||||||||||||||||
|
Other income, net |
$ |
4,564 |
$ |
959 |
$ |
3,605 |
375.9 |
% | ||||||||
Other income, net, increased by $3.6 million,
or 375.9%, to $4.6 million for the year ended December 31, 2022 from $1.0 million for the year ended December 31, 2021. This increase
was largely attributable to a $5.1 million expired of financial liability, which was offset by a $1.0 million decrease in other income
as a result of revenue and profit sharing associated with the sale of certain non-core business units, as well as a $0.5 million disposal
of certain intangible assets.
48
Net financial expenses (income)
|
Year ended
December 31, |
Change |
|||||||||||||||
|
(in thousands, except for percentages)
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
||||||||||||
|
Financial income |
$ |
(2,284 |
) |
$ |
(483 |
) |
$ |
(1,801 |
) |
372.9 |
% | |||||
|
Financial expenses |
$ |
4,611 |
$ |
2,670 |
$ |
1,941 |
72.7 |
% | ||||||||
|
Financial expenses, net |
$ |
2,327 |
$ |
2,187 |
$ |
140 |
6.4 |
% | ||||||||
Net financial expenses increased by $0.1 million, or 6.4%, to $2.4
million for the year ended December 31, 2022 from $2.2 million for the year ended December 31, 2021. This increase was primarily driven
by a $0.6 million increase in currency exchange rate fluctuations and a $0.1 million increase in finance expenses related to lease liabilities
but was offset by a $0.6 million decrease in interest expenses, net, as interest income increased on bank deposits while loan expenses
were incurred as a result of the acquisition of Amobee during 2022.
Tax benefit (expenses)
|
Year ended
December 31, |
Change |
|||||||||||||||
|
(in thousands, except for percentages)
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
||||||||||||
|
Tax benefit (expenses) |
$ |
(19,688 |
) |
$ |
948 |
$ |
(20,636 |
) |
(2176.8 |
)% | ||||||
Tax benefit
decreased by $20.6 million or 2176.8% to $19.7 million tax expenses for the year ended December 31, 2022 from $0.9 million tax benefits
for the year ended December 31, 2021. The tax expenses for the year ended December 31, 2022 was primarily due to non-deductible share-based
compensation and capitalization for tax purposes of research and experimental expenditures, for which deferred taxes were not recognized,
partially offset by research and development tax credits, and utilization of carry forward losses for which no deferred tax assets had
been recognized in the previous years.
Profit for the year
|
Year ended
December 31, |
Change |
|||||||||||||||
|
(in thousands, except for percentages)
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
||||||||||||
|
Profit for the year |
$ |
22,737 |
$ |
73,223 |
$ |
(50,486 |
) |
(69.0 |
)% | |||||||
Profit decreased
by $50.5 million, or 69.0%, to $22.7 million for the year ended December 31, 2022 from $73.2 million for the year ended December 31, 2021.
This decrease was primarily attributable to a $6.7 million decrease in revenue, a $15.2 million increase in research and development expenses
as a result of increased investment in technology and product innovation as well as the acquisition of Amobee, a $15.3 million increase
in selling and marketing expenses largely attributable to the acquisition of Amobee, a $4.5 million increase in general and administrative
expenses mainly associated with the acquisition of Amobee, a $2.4 million increase in depreciation and amortization primarily due to the
acquisition of Amobee, and a $0.1 million increase in financial expenses, net. The decrease was offset by $10.9 million lower cost of
revenues (exclusive of depreciation and amortization) primarily associated with lower performance revenue generated, a $3.6 million increase
in other income, net, tying largely to an expiration of financial liability and a $20.6 million decrease in tax benefits.
Total comprehensive income for the year
|
Year ended
December 31, |
Change |
|||||||||||||||
|
(in thousands, except for percentages)
|
2022
(In thousands) |
2021
(In thousands) |
$ |
% |
||||||||||||
|
Total comprehensive income for the year |
$ |
16,238 |
$ |
70,591 |
$ |
(54,353 |
) |
(77.0 |
)% | |||||||
|
Net profit margin |
4.8 |
% |
20.6 |
% |
||||||||||||
Total comprehensive
income decreased by $54.4 million, or 77.0%, to $16.2 million for the year ended December 31, 2022 from $70.6 million for the year ended
December 31, 2021. This decrease was primarily attributable to a $50.5 million reduction in annual profits as well as $3.9 million associated
with fluctuations in foreign currency translation differences for foreign operations stemming mainly from the translation of British pound
sterling and Japanese yen to U.S. dollars.
49
Net profit margin decreased to 4.8% for the year
ended December 31, 2022 from a net profit margin of 20.6% for the year ended December 31, 2021. This decrease was primarily driven by
a research and development expense increase of 82.7%, selling and marketing expense increase of 20.6% and increase in tax expenses of
2176.8%.
Key Performance Indicators and Other Operating Metrics
We review the following indicators to measure our performance,
identify trends affecting our business, formulate business plans, and make strategic decisions. Increases or decreases in our key performance
indicators may not correspond with increases or decreases in our revenue. In this section, we use the following terms:
“Programmatic”
means our end-to-end platform of programmatic advertising, which uses software and algorithms to match buyers and sellers of digital advertising
in a technology-driven marketplace; transactions in our Programmatic activities are executed in milliseconds and beginning in 2020, human
intervention or discretion for execution has significantly decreased.
“Performance”
means our non-core performance activities consisting primarily of mobile-based solutions that help brands reach their users; revenue generated
in the Performance activities is contingent on the occurrence of performance-based metrics, such as app downloads and installations.
The following tables summarize the key performance indicators that
we use to evaluate our business for the years presented.
Programmatic and Performance Revenue by Media
Type and Device
The following table summarizes the Programmatic and Performance
revenue by selected media type and device for the years ended December 31, 2022 and 2021.
|
2022 Revenue |
2021 Revenue |
|||||||||||||||||||||||
|
Yearly revenue matrix |
Programmatic |
Performance |
Group |
Programmatic |
Performance |
Group |
||||||||||||||||||
|
(unaudited, in thousands) | ||||||||||||||||||||||||
|
Video |
$ |
243,306 |
— |
$ |
243,306 |
$ |
242,724 |
— |
$ |
242,724 |
||||||||||||||
|
CTV(1)
|
40 |
% |
— |
40 |
% |
33 |
% |
— |
33 |
% | ||||||||||||||
|
Mobile(1)
|
47 |
% |
— |
47 |
% |
47 |
% |
— |
47 |
% | ||||||||||||||
|
Desktop(1)
|
12 |
% |
— |
12 |
% |
20 |
% |
— |
20 |
% | ||||||||||||||
|
Other(1) |
1 |
% |
— |
1 |
% |
— |
— |
— |
||||||||||||||||
|
Display |
$ |
24,810 |
$ |
60,895 |
$ |
85,705 |
$ |
23,891 |
$ |
75,330 |
$ |
99,221 |
||||||||||||
|
Other (2) |
$ |
6,239 |
— |
$ |
6,239 |
— |
— |
— |
||||||||||||||||
|
Total Group |
$ |
274,355 |
$ |
60,895 |
$ |
335,250 |
$ |
266,616 |
$ |
75,329 |
$ |
341,945 |
||||||||||||
(1) Percent
of total Video revenue
(2) Mainly
ATV
|
Selected Device – CTV |
||||||||||||
|
|
Year Ended December 31, 2022 |
Year Ended December 31, 2021 |
% Change |
|||||||||
|
Revenue (in thousands) |
$ |
97,164 |
$ |
80,299 |
21 |
% | ||||||
|
% of Programmatic revenue |
35 |
% |
30 |
% |
— |
|||||||
CTV revenue increased by $16.9 million, or 21%, to $97.2 million
for the year ended December 31, 2022, from $80.3 million for the year ended December 31, 2021. The increase was mainly attributable to
the increase in our CTV partners’ utilization of our end-to-end platform.
|
Selected Media Type – Video |
||||||||||||
|
Year ended December 31, 2022 |
Year Ended December 31, 2021 |
% Change |
||||||||||
|
Revenue (in thousands) |
$ |
243,306 |
$ |
242,724 |
0.2 |
% | ||||||
|
% of Programmatic revenue |
89 |
% |
91 |
% |
— |
|||||||
Video revenue increased by $0.6 million, or 0.2%, to $243.3 million
for the year ended December 31, 2022, from $242.8 million for the year ended December 31, 2021. This increase was mainly attributable
to continued spending on our DSP platform driven by our strong expertise in digital video advertising.
50
|
Other Key Financial Metrics |
||||||||||||
|
Year ended December 31, |
||||||||||||
|
2022 |
2021 |
2020 |
||||||||||
|
IFRS measures |
||||||||||||
|
Revenue (in thousands) |
$ |
335,250 |
$ |
341,945 |
$ |
211,920 |
||||||
|
Gross profit (in thousands) |
$ |
249,138 |
$ |
253,689 |
$ |
132,517 |
||||||
|
Total comprehensive income |
$ |
16,238 |
$ |
70,591 |
$ |
4,975 |
||||||
|
Net profit margin |
5 |
% |
21 |
% |
2 |
% | ||||||
|
Non-IFRS measures |
||||||||||||
|
As adjusted (non-IFRS) revenue (in thousands) |
— |
— |
— |
|||||||||
|
Contribution ex-TAC (in thousands) |
$ |
309,726 |
$ |
301,975 |
$ |
184,282 |
||||||
|
Adjusted EBITDA (in thousands) |
$ |
144,889 |
$ |
161,238 |
$ |
60,513 |
||||||
|
Adjusted EBITDA margin |
43.2 |
% |
47 |
% |
29 |
% | ||||||
(1) Contribution
ex-TAC is defined as our gross profit plus depreciation and amortization attributable to cost
of revenues and cost of revenues (exclusive of depreciation and amortization) minus both the Programmatic
media cost (as defined below) and the Performance media cost (as defined below) (collectively, “traffic acquisition costs”
or “TAC”), since we arrange for the transfer of such costs from the supplier to the customer through the use of our platform
and do not control such features prior to transfer to the customer.
Contribution ex-TAC is a supplemental measure of our financial
performance that is not required by, or presented in accordance with, IFRS. Contribution ex-TAC should not be considered as an alternative
to gross profit as a measure of financial performance. Contribution ex-TAC is a non-IFRS financial measure and should not be viewed in
isolation. We include Contribution ex-TAC in this Annual Report because we believe it is a useful measure in assessing the performance
of Tremor International because it facilitates a consistent comparison against our core business without considering the impact of traffic
acquisition costs related to revenue reported on a gross basis.
We define Adjusted EBITDA as total comprehensive income for the period adjusted for
foreign currency translation differences for foreign operations, financing expenses, net, tax benefit, depreciation and amortization,
stock-based compensation, restructuring, acquisition and IPO-related costs and other income, net.
Adjusted EBITDA is included in this Annual Report because it is
a key metric used by management and our board of directors to assess our financial performance. Adjusted EBITDA is frequently used by
analysts, investors and other interested parties to evaluate companies in our industry. Management believes that Adjusted EBITDA is an
appropriate measure of operating performance because it eliminates the impact of expenses that do not relate directly to the performance
of the underlying business.
The following table reconciles Contribution ex-TAC to the most
directly comparable IFRS financial performance measure, which is gross profit:
|
Year Ended December 31, |
||||||||||||
|
(in thousands) |
2022 |
2021 |
2020 |
|||||||||
|
Revenues |
$ |
335,250 |
$ |
341,945 |
$ |
211,920 |
||||||
|
Cost of revenues (exclusive of depreciation and amortization) |
(60,745 |
) |
(71,651 |
) |
(59,807 |
) | ||||||
|
Depreciation and amortization attributable to Cost of Revenues |
(25,367 |
) |
(16,605 |
) |
(19,596 |
) | ||||||
|
Gross profit (IFRS) |
249,138 |
253,689 |
132,517 |
|||||||||
|
Depreciation and amortization attributable to Cost of Revenues |
25,367 |
16,605 |
19,596 |
|||||||||
|
Cost of revenues (exclusive of depreciation and amortization) |
60,745 |
71,651 |
59,807 |
|||||||||
|
Performance media cost(a)
|
(25,524 |
) |
(39,970 |
) |
(27,638 |
) | ||||||
|
Contribution ex-TAC (Non-IFRS) |
$ |
309,726 |
$ |
301,975 |
$ |
184,282 |
||||||
(a) Represents
the costs of purchases of impressions from publishers on a cost per thousand impression basis in our Performance activities.
(5) Adjusted
EBITDA is defined as total comprehensive income (loss) for the year adjusted for foreign currency translation differences for foreign
operations, financing expenses, net, tax benefit (expenses), depreciation and amortization, stock-based compensation, restructuring and
acquisition-related costs, IPO related one-time costs and other expenses, net. Adjusted EBITDA margin is defined as Adjusted EBITDA as
a percentage of revenue. Adjusted EBITDA is a non-IFRS financial metric.
51
The following table reconciles Adjusted EBITDA to the most directly
comparable IFRS financial performance measure, which is total comprehensive income (loss) for the year:
|
Year Ended December 31, |
||||||||||||
|
2022 |
2021 |
2020 |
||||||||||
|
(in thousands) |
||||||||||||
|
Total comprehensive income (loss) for the year |
$ |
16,238 |
$ |
70,591 |
$ |
4,975 |
||||||
|
Foreign currency translation differences for foreign operation |
6,499 |
2,632 |
(2,836 |
) | ||||||||
|
Taxes on income |
19,688 |
(948 |
) |
(9,581 |
) | |||||||
|
Financial expense (income), net |
2,327 |
2,187 |
1,417 |
|||||||||
|
Depreciation and amortization |
42,700 |
40,259 |
45,187 |
|||||||||
|
Stock-based compensation |
50,505 |
42,818 |
14,490 |
|||||||||
|
Other expenses |
540 |
|
— |
1,700 |
||||||||
|
Restructuring |
307 |
508 |
4,637 |
|||||||||
|
Acquisition-related cost |
6,085 |
253 |
524 |
|||||||||
|
IPO related one-time cost |
— |
2,938 |
— |
|||||||||
|
Adjusted EBITDA |
$ |
144,889 |
$ |
161,238 |
$ |
60,513 |
||||||
Contribution ex-TAC
Our contribution ex-TAC increased by 2.6% from
$302.0 million for the year ended December 31, 2021 to $309.7 million for the year ended December 31, 2022. The increase was mainly attributable
to contribution from the acquisition of Amobee for the period from when we closed the acquisition on September 12, 2022 through December
31, 2022, which helped to offset lower Contribution ex-TAC from Tremor International as a standalone Company, driven by challenging macroeconomic
conditions which significantly pressured advertising budgets during 2022.
Adjusted EBITDA
Our Adjusted EBITDA decreased by $16.3 million
from $161.2 million for the year ended December 31, 2021 to $144.9 million for the year ended December 31, 2022. The decrease was driven
primarily by challenging macroeconomic conditions which negatively impacted the advertising demand environment throughout 2022 including
widespread global supply chain constraints, rising interest rates, rising inflation, geopolitical uncertainty, and a minor Amobee Adjusted
EBITDA contribution of $3.8 million.
|
Key Operating Metrics |
||||||||||||
|
2022 |
2021 |
2020 |
||||||||||
|
Active customers |
||||||||||||
|
Number of active customers(1)
|
1,250 |
764 |
889 |
|||||||||
|
Gross profit per active customer (in thousands) |
$ |
199
|
$ |
332 |
$ |
149 |
||||||
|
Contribution ex-TAC(2)
per active customer (in thousands) - Organic |
$ |
308 |
$ |
395 |
$ |
207 |
||||||
|
Contribution ex-TAC retention rate(3)
|
80 |
% |
150 |
% |
112 |
% | ||||||
|
Active publishers |
||||||||||||
|
Number of active publishers(4)
|
1,526 |
1,578 |
1,444 |
|||||||||
|
Ad impressions |
||||||||||||
|
Number of ad impressions(5)
(in millions) |
123,936 |
94,363 |
53,839 |
|||||||||
(1) An
active customer is defined as an advertiser, agency, trading desk or third-party DSP that has used our platform within a trailing 365-day
period.
(2) Contribution
ex-TAC is a non-IFRS financial measure and should not be viewed in isolation. We include Contribution ex-TAC in this Annual Report because
we believe it is a useful measure in assessing the performance of Tremor International because it facilitates a consistent comparison
against our core business without considering the impact of traffic acquisition costs related to revenue reported on a gross basis.
(3) Contribution
ex-TAC retention rate is defined as contribution ex-TAC generated in the year ended December 31, 2022 from the customers who were existing
customers as of December 31, 2021 as a percentage of the contribution ex-TAC generated in the year ended December 31, 2021 from the same
group of customers. Contribution ex-TAC retention rate is intended to provide an aggregated view of positive and negative changes for
the same group of customers over a 12-month period, including customer attrition, customer renewal, service upgrades and service downgrades.
(4) An
active publisher is defined as a publisher or third-party SSP that has used our platform within a trailing 365-day period.
(5) An
ad impression is defined as each time an ad is displayed within our platform.
5.B. LIQUIDITY AND CAPITAL RESOURCES
Overview
As
of December 31, 2022, we had net cash of $115.5 million and a working capital, consisting of current operating assets less current
operating liabilities, of $179.6 million. We believe our working capital is sufficient for our present working capital requirements. Additionally,
we believe we have the ability to generate and obtain adequate amounts of cash to meet our requirements during fiscal year 2023 and in
the long-term.
52
The following table presents the summary consolidated cash flow
information for the years presented.
|
(in thousands) |
2022 (as reported) |
2021 (as reported) |
2020 (as reported) |
|||||||||
|
Net cash provided by operating activities |
$ |
83,008 |
$ |
170,088 |
$ |
35,163 |
||||||
|
Net cash provided by (used in) investing activities |
(232,994 |
) |
(16,487 |
) |
4,919 |
|||||||
|
Net cash provided by (used in) financing activities |
3,056 |
116,862 |
(22,367 |
) | ||||||||
Net cash provided by operating activities
Net cash
provided by operating activities was $83.0 million for the year ended December 31, 2022, which is derived from our profit for the year
of $22.7 million, adjusted for non-cash adjustments of $115.6 million, including depreciation and amortization of $42.7 million, stock-based
compensation of $50.5 million, finance expense of $2.1 million, loss on sale and disposal of fixed and intangible assets of $0.5 million,
and loss on leases of $0.1 million, tax expanses of $19.7 million. In addition, there was $55.4 million in cash used in operating activities,
which includes a decrease in accounts receivable of $57.1 million, a decrease in accounts payable of $100.1 million, a decrease in employee
benefit of $0.2 million, income taxes paid, net of $13.6 million and interest received, net of $1.5 million.
Net cash provided by operating activities was $170.1 million for
the year ended December 31, 2021, which is derived from our profit for the year of $73.2 million, adjusted for non-cash adjustments of
$82.8 million, including depreciation and amortization of $40.3 million, stock-based compensation of $42.8 million, finance expense of
$2.0 million and offset by tax benefit of $0.9 million, gain on leases of $0.4 million and gain on sale of business unit of $1.0 million.
In addition, there was $14.1 million in cash provided by operating activities, which includes an increase in accounts receivable of $11.7
million, an increase in accounts payable of $26.8 million, a decrease in employee benefit of $0.1 million, income taxes paid, net of $1.0
million and interest paid, net of $0.1 million.
Net cash provided by operating activities was $35.2 million for
the year ended December 31, 2020, which is derived from our profit for the year of $2.1 million, adjusted for non-cash adjustments of
$48.8 million, including depreciation and amortization of $45.2 million, finance expenses of $1.3 million, stock-based compensation of
$14.5 million and offset by income tax of $9.6 million, gain on lease contract change of $2.1 million, gain on sale of business unit of
$0.5 million as well as a cash adjustment primarily attributable to an increase in accounts payable of $25.9 million, an increase in accounts
receivable of $39.4 million, income taxes paid, net of $1.7 million and interest paid, net of $0.6 million.
Net cash provided by (used in) investing activities
Net cash used in investing activities was $233.0 million for the
year ended December 31, 2022, which is derived from acquisition of subsidiaries, net of cash acquired of $195.1 million, investment in
shares of $25.0 million, acquisition and capitalization of intangible assets of $8.8 million as well as the acquisition of fixed assets
of $6.4 million, and an increase in pledged deposits of $0.2 million, partially offset by lease payment receipt of $1.3 million and proceeds
from sale of business unit of $1.2 million.
Net cash used in investing activities was $16.5 million for the
year ended December 31, 2021, which is derived from acquisition of subsidiaries, net of cash acquired of $11.0 million, acquisition and
capitalization of intangible assets of $5.0 million as well as the acquisition of fixed assets of $3.4 million, partially offset by lease
payment receipt of $2.5 million and proceeds from sale of business unit of $0.4 million.
Net cash provided by investing activities was $4.9 million for
the year ended December 31, 2020 and was primarily comprised of the acquisition of Unruly, net of cash acquired of $6.2 million, lease
payment receipt of $2.9 million, repayment of loan of $0.8 million, proceeds from sale of business unit of $0.2 million, and a net decrease
in pledged deposits of $0.2 million, partially offset by the acquisition and capitalization of intangible assets of $4.9 million and the
acquisition of fixed assets of $0.6 million.
Net cash provided by (used in) in financing
activities
Net cash provided by financing activities was $3.1 million for
the year ended December 31, 2022, which is derived from receipt of long-term debt, net of debt cost of $98.9 million and proceeds from
exercise of share options of $2.2 million, partially offset by acquisition of own shares of $86.0 million and leases repayment of $12.0
million.
Net cash provided by financing activities was $116.9 million for
the year ended December 31, 2021, which is derived from issuance of share, net of issuance cost of $134.6 million and proceeds from exercise
of share options of $1.4 million, partially offset by acquisition of own shares of $6.6 million and leases repayment of $10.0 million,
as well as payment of financial liability of $2.4 million.
Net cash used in financing activities was $22.4 million for the
year ended December 31, 2020 and was primarily comprised of leases repayment of $13.4 million and buy back of shares of $10 million, partially
offset by proceeds from exercise of share options of $1.0 million.
53
Credit agreement
In September 2022, Unruly Group US Holding Inc. entered into
a $90 million senior secured term loan facility (the Term Loan Facility) and a $90 million senior secured revolving credit facility with
a $15 million letter of credit sub-facility (the Revolving Credit Facility and, together with the Term Loan Facility, collectively, the
Credit Facilities). The Company used the net proceeds of the Term Loan Facility and $10 million of net proceeds of the Revolving Credit
Facility to fund a portion of the cash consideration required to close its acquisition of Amobee Inc. The Company may use borrowings made
from time to time under the Revolving Credit Facility for general corporate purposes or other purposes not prohibited under the Credit
Facilities. Each of the Credit Facilities matures on September 15, 2025 and bears interest, at the Company’s discretion, at a base
rate plus a margin of 0.25% to 1.00% per annum or SOFR rate plus a spread of 1.25% to 2.00% per annum plus a credit spread adjustment
of 0.10% to 0.25% based on the interest period duration of the applicable borrowing, in each case with such margin being determined by
the Company’s consolidated total net leverage ratio. The Revolving Credit Facility may be borrowed, repaid, and re-borrowed until
its maturity. The Company may prepay the Credit Facilities at its discretion without premium or penalty. The Credit Facilities are each
due and payable in full on the respective maturity date of such Credit Facility.
The Company is also obligated to pay a commitment
fee on the undrawn amounts of the Revolving Credit Facility at an annual rate ranging from 0.20% to 0.35%, determined by the Company’s
total net leverage ratio. The Credit Facilities require compliance with various financial and non-financial covenants, including affirmative
and negative covenants. The financial covenants require that the total net leverage ratio not exceed 3x and the interest coverage ratio
not be less than 4x, in each case measured as of the end of each fiscal quarter. As of December 31, 2022, the Company was in compliance
with all related covenants. The letter of credit sub-facility includes a fee at a rate per annum equal to the applicable margin for SOFR
Loans then in effect on the daily maximum amount then available to be drawn as well as a fronting fee equal to 0.125% per annum along
with other standard fees.
Unruly Group US Holding Inc.’s obligations under the Credit
Facilities are (i) jointly and severally guaranteed by Tremor International Ltd. and certain of Tremor International Ltd.’s direct
and indirect, existing and future wholly owned restricted subsidiaries, subject to certain exceptions and (ii) secured on a first-lien
basis by substantially all of the tangible and intangible assets of Unruly Group US Holding Inc. and the guarantors of the Credit Facilities,
subject to certain permitted liens and other agreed upon exceptions.
Capital Expenditures
Our capital
expenditures consist primarily of purchases of hardware and software. Our capital expenditures during the year ended December 31, 2022
were $17.1 million, a $10.1 million increase compared to the year ended December 31, 2021. We will continue to make capital expenditures
to meet the expected growth of our business.
Contractual Obligations
As of December
31, 2022, and December 31, 2021, the Group’s contractual obligation of financial liability is in respect of leases, trade, and other
payables in the amount of USD 361,820 thousand and USD 193,213 thousand, respectively. The contractual maturity of the financial liability
that is less than one year is in the amount of USD 240,590 thousand and USD 185,337 thousand for December 31, 2022, and December 31, 2021,
respectively.
5.C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
Our business model enables us to invest into our research and development
efforts, which have helped grow our business. Our platform is extremely efficient at managing large amounts of complex data and is leveraged
by both our advertisers and publishers in real time. We are committed to innovative technologies and rapid introduction of enhanced functionalities
to support the dynamic needs of our advertisers and publishers. We therefore expect technology and development expense to increase as
we continue to invest in our platform to support increased volume of advertising spend and our international expansion.
Our technology and development team is based in the United States
and Israel and is comprised of 108 employees.
Research and development expenses were $33.7 million, $18.4 million and $13.3 million
in 2022, 2021 and 2020, respectively, and accounted for 14.7%, 9.4%, and 8.4% of our operating expenses in 2022, 2021 and 2020 respectively.
Our success depends, in part, on our ability to protect the proprietary
methods and technologies that we develop or otherwise acquire. We rely on copyright, trade secret laws, confidentiality procedures and
contractual provisions to protect our proprietary methods and technologies and own more than 50 patents. We rely upon common law protection
for certain marks, such as “Tremor” and “Tremor Video.”
We generally enter into confidentiality and/or license agreements
with our employees, consultants, vendors and advertisers, and we generally limit access to, and distribution of, our proprietary information.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.
54
5.D. TREND INFORMATION
Advertising Ecosystem. We believe that we are
positioned to benefit from several trends in the evolving advertising ecosystem, including the proliferation
of digital media consumption, adoption of programmatic advertising, a growing focus on premium formats such as Video and CTV, and the
increasing sophistication of the overall digital landscape. We address the broad and evolving digital advertising market through our three
core offerings, including a proprietary DSP solution that advertisers leverage to manage digital advertising campaigns, a proprietary
SSP solution that publishers leverage to optimally monetize digital inventory and a proprietary DMP solution which is integrated with
both our DSP and SSP solutions. Our versatile DMP solution benefits from vast amounts of data and provides optimal campaign recommendations
for audience sets by employing advanced machine learning algorithms. The contextualization of the data synthesized by our DMP solution
provides advertisers with a comprehensive, personalized view of audiences, enabling more effective targeting across formats and devices
and optimizes the monetization of publisher inventory. By combining these three proprietary solutions as well as integrations with industry
leading partners, we provide an end-to-end software platform that is dynamic and flexible to our customers’ needs, which enables
us to address more digital ad spend.
During 2022, the Company, its customers, and its partners, continued to face persistent
macroeconomic challenges associated with several factors including: the COVID-19 pandemic, and residual impacts of efforts to curtail
its spread and reduce further economic damage sustained; rising interest rates; rising inflation; global supply chain constraints; changes
in foreign currency exchange rates; recession concerns; and geopolitical uncertainty, the combination of which drove advertisers across
several industries to reduce, or delay deployment of, budgets and advertising spend. The Company believes the aforementioned factors will
continue to impact the advertising demand environment and financial markets during 2023, and potentially beyond.
5.E. CRITICAL ACCOUNTING ESTIMATES
Critical Accounting Policies, Judgments and Estimates
We prepare our audited consolidated financial statements in accordance
with IFRS as issued by the IASB. In preparing our audited consolidated financial statements, we make assumptions, judgments and estimates
that can have a significant impact on amounts reported in our audited consolidated financial statements. We base our assumptions, judgments
and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results
could differ materially from these estimates under different assumptions or conditions. We regularly re-evaluate our assumptions, judgments
and estimates. Our critical accounting estimates and judgments are described in Note 2 to our audited consolidated financial statements
included elsewhere in this Annual Report.
An accounting policy is deemed to be critical if it requires an
accounting estimate to be made on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates
reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that
may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our audited consolidated
financial statements included elsewhere in this Annual Report.
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6.A. DIRECTORS AND SENIOR MANAGEMENT
Board of Directors and Senior Management
The following table sets forth information regarding our executive
officers and directors, including their ages as of the date of this Annual Report:
|
Name |
Age |
Position | ||
|
Executive Officers |
||||
|
Ofer Druker |
57 |
Chief Executive Officer and Director | ||
|
Sagi Niri |
51 |
Chief Financial Officer and Director | ||
|
Yaniv Carmi |
41 |
Chief Operating Officer and Director | ||
|
Directors |
||||
|
Christopher Stibbs |
60 |
Non-Executive Chairperson | ||
|
Rebekah Brooks |
52 |
Non-Executive Director | ||
|
Norm Johnston |
56 |
Non-Executive Director | ||
|
Neil Jones |
56 |
Senior Non-Executive Director | ||
|
Joanna Parnell |
44 |
Non-Executive Director | ||
|
Lisa Klinger |
55 |
Non-Executive Director |
55
Directors
Christopher Stibbs.
Christopher Stibbs has served as a member of our board of directors since May 2019 and as our Non-Executive Chairperson since
September 2020. Mr. Stibbs has over 25 years of experience as an executive in the media industry. From July 2013 to August 2019, he served
as Chief Executive of The Economist Group Ltd. (the “Economist Group”), a media company. Previously, he held a number of roles
within the group including head of the Economist Intelligence Unit (the group’s B2B arm) and Chief Financial Officer. He is credited
with overseeing the Economist Group’s resilience and transition through the unprecedented disruption experienced by the publishing
industry over the last 15 years. Prior to this, he held positions with Pearson (NYSE:PSO), a publishing company and Incisive Media, a
B2B information and events company. Mr. Stibbs is a fellow of the Associations of Chartered Accountants and Corporate Treasurers and currently
serves as a non-executive director at Oxford University Press and serves as a chairman of Times Higher Education, IWSR Topco Limited and
Sagacity Solutions Ltd.
Rebekah Brooks.
Rebekah Brooks has served as a member of our board of directors since June 2020. Since 2015, Ms. Brooks has been Chief Executive
of British newspaper publisher News Corp UK Ireland Limited, part
of New News Corporation (NASDAQ:NWSA), a mass media and publishing company (“News Corp”), having first joined News Corp in
1989. Starting as a feature writer for the News of the World, Ms. Brooks became Editor of the Sun in 2003, a position she held until July
2009. From 2009 to 2011, she served as Chief Executive of News International, overseeing a period of significant growth in newspaper operating
profit and paid-for digital subscriptions at The Times. Following her appointment as Chief Executive of News Corp UK and Ireland, Ms.
Brooks restructured the Sun’s online strategy, driving significant audience growth. In 2016, she also oversaw the strategic acquisition
of Wireless, the owner of national radio brands talkSPORT, talkRADIO and Virgin Radio. Ms. Brooks is a Director of News Group Newspapers
and Times Newspapers, and a Non-Executive Director of PA Group, the parent company of the Press Association.
Norm
Johnston. Norm Johnston has served as a member of our board of directors since June 2020.
Mr. Johnston is a veteran employee of News Corp. Until recently, he was the Chief Executive Officer of Unruly, the digital advertising
business we acquired in January 2020, a position he held from April 2018. Mr. Johnston has been involved in digital marketing since joining
the marketing industry’s first digital agency, Modem Media in 1995. In 1997, Mr. Johnston launched Modem Media UK (“Modem”),
one of Britain’s first and most successful digital agencies. After Modem was acquired by Publicis in 2007, Mr. Johnston joined WPP
plc and GroupM’s media service company, Mindshare Media UK Limited, where he held a number of senior roles between 2007 and 2018,
including Global Chief Digital Officer and Global Chief Executive Officer of its FAST business unit, a team of over 2,000 specialists
in 115 cities working for global clients such as Unilever plc, Nestle S.A. and American Express Company. Mr. Johnston holds a B.A. in
Economics and Political Science from Northwestern University and an M.B.A. in Marketing from Duke University’s Fuqua School of Business.
Neil Jones.
Neil Jones has served as a member of our board of directors since 2014. Mr. Jones has spent most of his career in the media sector
leading the Finance and MA functions of UK listed businesses. He is currently Corporate Development Director of Inizio Group Limited,
the international life science services company created from the merger of UDG Healthcare plc and Huntsworth plc ("Huntsworth") in August
2021. Prior to that he was Chief Operating Officer and Chief Financial Officer at Huntsworth plc from February 2016. He joined Huntsworth
plc from ITE Group plc, the international exhibitions group, where he held the position of Chief Financial Officer from 2008. Between
2003 and 2008, Mr. Jones was Chief Financial Officer at Tarsus Group plc, an international media company. Mr. Jones has a B.A. in Economics
from the University of Manchester and completed his ACA in July 1990 with PricewaterhouseCoopers. Mr. Jones is also a non-executive
Director of Sivota plc a UK listed special opportunities vehicle that invests in undervalued technology business.
Joanna Parnell.
Joanna Parnell has served as a member of our board of directors since 2014. Ms. Parnell is the Co-Founder of strategic marketing consultancy
Project50, designing commercial growth strategies for C-suite business leaders in the United Kingdom and the United States. Previously,
Ms. Parnell was Managing Partner at Wavemaker (formerly MEC), one of the world’s leading media agency networks and owned by WPP
plc, where she led the paid digital and data team, overseeing the agency’s focus on data driven campaigns. Prior to moving to Wavemaker
in March 2016, Ms. Parnell was Director of Strategy and sat on the management team at Unique Digital, a digital marketing agency (now
a WPP plc company), with responsibility for setting product and business strategy, including leading the multichannel planning strategy
(cross-device and cross-platform), managing product heads and driving key initiatives across data buying, attribution modelling and biddable
media adaptation. Ms. Parnell has a Masters in German and Business from the University of Edinburgh and studied at the London School of
Marketing between 2005 and 2006.
Lisa Klinger.
Lisa Klinger has served as a member of our Board of Directors since April 2021. Ms. Klinger has nearly 30 years of experience in
international finance. Most recently, between 2018 and 2019, Ms. Klinger served as Chief Financial Officer at Ideal Image Development
Corp, an L Catterton portfolio company and the largest U.S. retail provider of nonsurgical cosmetic and aesthetic procedures. Prior
to that, between 2016 and 2017, she held the role of Chief Financial and Administrative Officer at Peloton Interactive Inc., (NASDAQ:PTON),
the leading connected fitness platform. Ms. Klinger's previous Chief Financial Officer roles include Vince Holding Corp. (NYSE:VNCE),
a fashion apparel company and The Fresh Market, Inc., a specialty food retailer. At both companies, Ms. Klinger led go-public processes
and subsequently served on the Executive Leadership team of the public entities. Ms. Klinger also held senior finance roles at Limited
Brands and at Michael’s Stores, Inc. where she was Senior Vice President, Finance and Treasurer, and Acting Chief Financial Officer.
She currently serves on the Board of Directors and as Audit Committee Chair of Emerald Holdings, Inc. (NYSE: EEX), a leading U.S. business-to-business
platform producer of trade shows, events, conferences, marketing, and B2B software solutions, since 2018, and also serves on the Board
of Directors and both the Audit Committee and Compensation Committee of The Container Store Group, Inc. (NYSE:TCS), the leading specialty
retailer of storage, organization products, custom closets and in-home services in North America. Ms. Klinger also served on the Board
of Directors and Audit Committee of Party City Holdco, Inc. (NYSE: PRTY), a vertically integrated party goods supplier and retailer from
2015 to 2021. Ms. Klinger holds a B.S.B.A. in Finance from Bowling Green State University.
56
Executive Officers
Ofer Druker. Ofer
Druker has served as our Chief Executive Officer and as a member of our board of directors since April 2019 following the completion
of the merger with RhythmOne, a digital advertising technology company. From November 2017 to April 2019, Mr. Druker served as our Executive
Chairman of the Tremor Video division and was instrumental in our successful integration of Tremor Video after its acquisition in August
2017. Previously, Mr. Druker was the founder and Chief Executive Officer of Matomy Media Group Ltd. (LSA:MTMY), a data-driven advertising
company (“Matomy”) until April 2017, having built Matomy from its inception in 2007 into a digital media company. Mr. Druker
was responsible for leading and integrating Matomy’s most important strategic transactions, including the acquisitions of Team Internet,
Media Whiz, Mobfox and Optimatic.
Sagi Niri.
Sagi Niri has served as our Chief Financial Officer since March 2020 and as a member of our board of directors since June 2020.
Mr. Niri has over 20 years of experience in finance and leadership roles
in the technology and real estate sectors. Mr. Niri previously served as Chief Executive Officer of Labs (“Labs”), and Chief
Financial Officer of LabTech Investments Ltd., Labs’ parent company, which owns and manages office, retail and residential real
estate in London. In addition, Mr. Niri spent over nine years at Matomy, initially as Chief Operating Officer/Chief Financial Officer
and more recently as Chief Executive Officer. Mr. Niri is a member of the Institute of Certified Public Accountants in Israel and holds
an M.B.A. in Finance from Manchester University and a B.A. in Corporate Finance from the College of Management in Israel.
Yaniv Carmi.
Yaniv Carmi has served as our Chief Operating Officer since March 2020 and as a member of our board of directors since 2014. Mr.
Carmi previously served as our Chief Financial Officer from January 2010 to March 2020. He is currently responsible for the delivery of
our business plan and driving our growth ambitions. Mr. Carmi was instrumental in our initial public offering of our ordinary shares on
AIM in 2014 and in the subsequent global expansion in operations, including significant MA activity. He is an experienced finance
professional, whose previous roles include tax and audit senior at KPMG Israel. Mr. Carmi is also a Certified Public Accountant and holds
a B.A. in Economics and Accounting from Ben-Gurion University and an M.B.A. in Financial Management from Tel Aviv University.
Arrangements Concerning Election of Directors; Family Relationships
We are not a party to, and are not aware of, any arrangements pursuant
to which any of our senior management members or directors was selected as such. In addition, there are no family relationships among
our senior management members or directors.
6.B. COMPENSATION
Aggregate Compensation of Office Holders
The aggregate compensation, including share-based compensation,
paid by us and our subsidiaries to our executive officers and directors for the year ended December 31, 2022 was approximately $30.7 million.
This amount includes approximately $0.4 million set aside or accrued to provide pension, severance, retirement or similar benefits or
expenses, but does not include business travel, relocation, professional and business association dues and expenses reimbursed to office
holders, and other benefits commonly reimbursed or paid by companies in Israel.
As of December 31, 2022, 3,992,500 RSUs and PSUs granted to our
executive officers and directors were outstanding under our equity incentive plans.
Compensation Disclosure in Accordance with Israeli Law
The table below is required under applicable Israeli Law and sets forth the compensation
earned by our five most highly compensated office holders during or with respect to the year ended December 31, 2022. We refer to the
five individuals for whom disclosure is provided herein as our “Covered Executives.” For purposes of the table and the summary
below, “compensation” includes base salary, bonuses, equity-based compensation, retirement or termination payments, and any
benefits or perquisites such as car, phone and social benefits, as well as any undertaking to provide such compensation in the future.
57
Summary Compensation Table
|
|
||||||||||||||||||||
|
Information Regarding Covered Officers
(1) |
||||||||||||||||||||
|
Name and Principal Position (2) |
Base Salary |
Benefits and Perquisites (3) |
Variable Compensation (4) |
Equity-Based
Compensation (5) |
Total |
|||||||||||||||
|
Ofer Druker, Chief Executive Officer |
$ |
720,000 |
$ |
217,827 |
$ |
540,000 |
$ |
15,187,086 |
$ |
16,664,913 |
||||||||||
|
Yaniv Carmi, Chief Operating Officer |
$ |
600,000 |
$ |
130,903 |
$ |
360,000 |
$ |
6,693,867 |
$ |
7,784,770 |
||||||||||
|
Sagi Niri, Chief Financial Officer |
$ |
383,855 |
$ |
41,236 |
$ |
225,000 |
$ |
5,649,299 |
$ |
6,299,390 |
||||||||||
|
Tal Mor, Chief Technology
Officer |
$ |
303,245 |
$ |
36,116 |
$ |
262,500 |
$ |
1,837,099 |
$ |
2,438,961 |
||||||||||
|
Amy Rothstein, Chief Legal
Officer |
$ |
400,000 |
$ |
61,963 |
$ |
150,000 |
$ |
1,546,177 |
$ |
2,158,140 |
||||||||||
(1) In
accordance with Israeli law, all amounts reported in the table are in terms of cost to our company, as recorded in our audited consolidated
financial statements for the year ended December 31, 2022.
(2) All
current officers listed in the table are full-time employees. Cash compensation amounts denominated in currencies other than the U.S.
dollar were converted into U.S. dollars at the average conversion rate for the year ended December 31, 2022.
(3) Amounts
reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may
include, to the extent applicable to each executive, payments, contributions and/or allocations for savings funds, pension, severance,
vacation, car or car allowance, medical insurances and benefits, risk insurances (such as life, disability and accident insurances), convalescence
pay, payments for Medicare and social security, tax gross-up payments and other benefits and perquisites consistent with our guidelines,
regardless of whether such amounts have actually been paid to the executive.
(4) Amounts
reported in this column refer to variable compensation such as earned commissions, incentives and earned or paid bonuses as recorded in
our audited consolidated financial statements for the year ended December 31, 2022.
(5) Amounts
reported in this column represent the expense recorded in our audited consolidated financial statements for the year ended December 31,
2022 with respect to equity-based compensation, reflecting also equity awards made in previous years which have vested during the current
year. Assumptions and key variables used in the calculation of such amounts are described in Note 17 to our audited consolidated financial
statements, which are included in this Annual Report.
Executive Officers
Chief Executive Officer and Executive
Director. Ofer Druker, our Chief Executive Officer and executive director, currently receives an annual base salary
of $720,000, and he is eligible to an annual bonus equal to up to 100% of his annual base salary (or $720,000), subject to compliance
with annual performance criteria to be determined by the compensation committee each year.
In 2021, Our compensation committee, board of directors and shareholders
approved to grant to Mr. Druker, effective upon completion of the IPO, 2,625,000 RSUs and 1,125,000 PSUs pursuant to our 2017 Equity Incentive
Plan (the “2017 Plan”). The RSUs vest gradually over a period of three years, with 8.33% of the grant vesting each quarter,
subject to Mr. Druker continuing to be employed by the group on the applicable vesting date. The PSUs vest gradually over a period of
three years, with 33.33% of each grant vesting each year, subject to (i) Mr. Druker continuing to be employed by the group on the applicable
vesting date, and (ii) compliance with performance-based metrics as determined by the compensation committee. The vesting of the RSUs
and PSUs shall accelerate in full automatically upon the consummation of a change in control of the Company. Mr. Druker was not granted
any equity awards in 2022.
Chief Operating
Officer and Executive Director. Yaniv Carmi, our Chief Operating Officer and executive director, has a current annual base salary
of $600,000, and he is eligible to an annual bonus equal to up to 80% of his annual base
salary (or $480,000), subject to compliance with annual performance criteria to be determined by the compensation committee each year.
Mr. Carmi is entitled to a special bonus of £300,000 (or $363,090) in the event of a company sale (or a pro rata portion in the case
of a partial sale).
In 2021, our compensation committee, board of directors and shareholders
approved to grant to Mr. Carmi, effective upon the IPO, 1,155,000 RSUs and 495,000 PSUs pursuant to our 2017 Plan. The RSUs vest gradually
over a period of three years, with 8.33% of the grant vesting each quarter, subject to Mr. Carmi continuing to be employed by the group
on the applicable vesting date. The PSUs vest gradually over a period of three years, with 33.33% of each grant vesting each year, subject
to (i) Mr. Carmi continuing to be employed by the group on the applicable vesting date, and (ii) compliance with performance-based metrics
as determined by the compensation committee. The vesting of the RSUs and PSUs shall accelerate in full automatically upon the consummation
of a change in control of the Company. Mr. Carmi was not granted any equity awards in 2022.
Chief Financial
Officer and Executive Director. Sagi Niri, our Chief Financial Officer and executive director, has a current annual base salary
of NIS 1,200,000 (approximately $357,774), and he is eligible to an annual bonus equal to
up to 84% of his annual base salary (or $300,000), subject to compliance with annual performance criteria to be determined by the compensation
committee each year. Mr. Niri received a special bonus of $500,000 upon completion of the IPO.
In 2021, our compensation committee, board of directors and shareholders
approved to grant to Mr. Niri, effective upon the completion of the IPO, 945,000 RSUs and 405,000 PSUs pursuant to our Global Share Incentive
Plan (2011), as amended (the “2011 Plan”). The RSUs vest gradually over a period of three years, with 8.33% of the grant vesting
each quarter, subject to Mr. Niri continuing to be employed by the group on the applicable vesting date. The PSUs vest gradually over
a period of three years, with 33.33% of each grant vesting each year, subject to (i) Mr. Niri continuing to be employed by the group on
the applicable vesting date, and (ii) compliance with performance-based metrics as determined by the compensation committee. The vesting
of the RSUs and PSUs shall accelerate in full automatically upon the consummation of a change in control of the Company. Mr. Niri was
not granted any equity awards in 2022.
58
Non-Executive Directors
We currently pay the chairman of our board of directors an annual cash retainer of £150,000
(approximately $184,877) and each of our other non-executive directors an annual cash retainer of £43,000 (approximately $52,998).
In addition, we pay the chair of our audit committee an annual cash retainer of $18,000 and the chair of our compensation committee an
annual cash retainer of £7,000 (approximately $8,628), and we pay our senior non-executive director, Neil Jones, an additional annual
cash retainer of £5,000 (approximately $6,162).
Equity Incentive Plans
2011 Equity Incentive Plan
We maintain the 2011 Plan, under which we may grant equity-based
incentive awards to attract, motivate and retain the talent for which we compete.
The 2011 Plan is administered by our board of directors with the
assistance of the compensation committee, and provides for the grant of options, restricted shares and restricted share units.
The 2011 Plan provides for granting awards under various tax regimes,
including, without limitation, in compliance with Section 102 of the Israeli Income Tax Ordinance (New Version), 5721-1961 (the “Ordinance”).
Section 102 of the Ordinance allows employees, directors and officers who are not controlling shareholders and are considered Israeli
residents to receive favorable tax treatment for compensation in the form of shares, restricted share units or options, subject to the
terms and conditions set forth in the Ordinance. Our non-employee service providers and controlling shareholders may only be granted awards
under section 3(i) of the Ordinance, which does not provide for similar tax benefits.
2017 Equity Incentive Plan
We maintain the 2017 Plan under which we may grant equity-based
incentive awards to attract, motivate and retain the talent for which we compete.
The 2017 Plan is administered by our board of directors with the
assistance of the compensation committee.
The 2017 Plan provides for granting awards under various tax regimes,
including, without limitation, awards granted to our United States employees or service providers, including those who are deemed to be
residents of the United States for tax purposes, Section 422 of the Internal Revenue Code (the “IRC”) and Section 409A of
the IRC.
The 2017 Plan provides for the grant of stock options (including
incentive stock options and nonqualified stock options), restricted shares, restricted share units, performance bonus awards, performance
units and performance shares. Options granted under the 2017 Plan to our employees who are U.S. residents may qualify as “incentive
stock options” within the meaning of Section 422 of the IRC, or may be non-qualified stock options.
As of December 31, 2022, a total of 4,771,576 options to
purchase ordinary shares, with a weighted average exercise price of £6.04 ($7.31) per share and 7,033,992 RSUs and PSUs were outstanding
under the 2011 and 2017 Plans. As of December 31, 2022, 489,588 ordinary shares were available for future issuance under the 2011 and
2017 Plans.
In connection with the SpearAd acquisition in October 2021,
we issued the sellers 370,000 restricted share awards subject to time and performance vesting criteria. As of December 31, 2022, 246,666
restricted share awards were outstanding. The restricted share awards were not issued as part of the Company’s equity incentive
plans.
6.C. BOARD PRACTICES
Corporate Governance Practices; External Directors
As an Israeli company, we are subject to various corporate governance
requirements under the Companies Law, including the requirement to appoint at least two external directors to the board of directors.
However, pursuant to regulations promulgated under the Companies Law, companies with shares or ADSs traded on certain U.S. stock exchanges,
including Nasdaq, may, subject to certain conditions, “opt out” from the Companies Law requirements to appoint external directors
and related Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors
(other than the gender diversification rule under the Companies Law, which requires the appointment of a director from the other gender
if at the time a director is appointed all members of the board of directors are of the same gender).
In connection with the IPO, we elected to “opt out”
from such requirements of the Companies Law effective upon the closing of the IPO in June 2021, and our three external directors, Neil
Jones, Joanna Parnell and Lisa Klinger, became regular directors, except that their current term of office shall expire at the 2023 annual
general meeting. Under these regulations, the exemptions from such Companies Law requirements will continue to be available to us so long
as: (i) we do not have a “controlling shareholder” (as such term is defined under the Companies Law), (ii) our shares or ADSs
are traded on certain U.S. stock exchanges, including Nasdaq, and (iii) we comply with the director independence requirements and the
audit committee and compensation committee composition requirements under U.S. laws (including applicable rules of Nasdaq) applicable
to U.S. domestic issuers.
We are a “foreign private issuer” (as such term is
defined in Rule 405 under the Securities Act). As a foreign private issuer, we are permitted to comply with Israeli corporate governance
practices instead of the corporate governance rules of Nasdaq, provided that we disclose which requirements we are not following and the
equivalent Israeli requirement.
59
We rely on this “foreign private issuer exemption”
with respect to the quorum requirement for shareholder meetings. As permitted under the Companies Law, pursuant to our amended and restated
articles of association, the quorum required for an ordinary meeting of shareholders consists of at least two shareholders present in
person, by proxy or by other voting instrument in accordance with the Companies Law who hold at least 25% of the voting power of our shares
(and if the meeting is adjourned for a lack of quorum, the quorum for such adjourned meeting will be, subject to certain exceptions, any
number of shareholders), instead of 331/3% of the issued
share capital as required under the corporate governance rules of Nasdaq. We otherwise comply with the rules generally applicable to U.S.
domestic companies listed on Nasdaq. We may, however, in the future decide to use the “foreign private issuer exemption” and
opt out of some or all of the other corporate governance rules.
Board of Directors
Under the Companies Law and our amended and restated articles of association, our business
and affairs are managed under the direction of our board of directors. Our board of directors may exercise all powers and may take all
actions that are not specifically granted to our shareholders or to executive management. Our Chief Executive Officer (referred to as
a “general manager” under the Companies Law) is responsible for our day-to-day management. Our Chief Executive Officer is
appointed by, and serves at the discretion of, our board of directors, subject to the employment agreement that we have entered into with
him. All other executive officers are appointed by the Chief Executive Officer, subject to applicable corporate approvals, and are subject
to the terms of any applicable employment or consulting agreements that we may enter into with them.
Under our amended and restated articles of association, the number
of directors on our board of directors will be no less than four and no more than nine directors. At each annual general meeting of our
shareholders, the election or re-election of directors following the expiration of the term of office of the directors will be for a term
of office that expires on next annual general meeting following such election or re-election.
Our directors are appointed by a simple majority vote of holders
of our ordinary shares, participating and voting at an annual general meeting of our shareholders, provided that (i) in the event of a
contested election, the method of calculation of the votes and the manner in which the resolutions will be presented to our shareholders
at the general meeting shall be determined by our board of directors in its discretion, and (ii) in the event that our board of directors
does not or is unable to make a determination on such matter, then the directors will be elected by a majority of the voting power represented
at the general meeting in person or by proxy and voting on the election of directors provided that if the number of nominees so elected
exceeds the number of directors that are proposed by the board of directors to be elected, then as among such elected nominees the election
shall be by a plurality of the votes cast. Each director holds office until the annual general meeting of our shareholders for the year
in which such director’s term expires, unless the tenure of such director expires earlier pursuant to the Companies Law or unless
such director is removed from office as described below.
Under our amended and restated articles of association, the approval
of the holders of at least 65% of the total voting power of our shareholders is generally required to remove any of our directors from
office or amend the provision requiring the approval of at least 65% of the total voting power of our shareholders to remove any of our
directors from office. In addition, vacancies on our board of directors may only be filled by a vote of a simple majority of the directors
then in office. A director so appointed will hold office until the next annual general meeting of our shareholders for the election of
the class of directors in respect of which the vacancy was created, or in the case of a vacancy due to the number of directors being less
than the maximum number of directors stated in our amended and restated articles of association, until the next annual general meeting
of our shareholders for the election of the class of directors to which such director was assigned by our board of directors.
Chairperson of the Board
Our amended and restated articles of association provide that the
chairperson of the board of directors is appointed by the members of the board of directors from among them. Under the Companies Law,
the chief executive officer of a public company, or a relative of the chief executive officer, may not serve as the chairperson of the
board of directors, and the chairperson of the board of directors, or a relative of the chairperson, may not be vested with authorities
of the chief executive officer unless approved by a special majority of the company’s shareholders. The shareholders’ approval
can be effective for a period of up to three years.
In addition, a person who is subordinated, directly or indirectly,
to the chief executive officer may not serve as the chairperson of the board of directors, the chairperson of the board of directors may
not be vested with authorities that are granted to persons who are subordinated to the chief executive officer and the chairperson of
the board of directors may not serve in any other position in the company or in a controlled subsidiary, but may serve as a director or
chairperson of a controlled subsidiary.
Audit Committee
Companies Law Requirements
Under the Companies Law, the board of directors of a public company
must appoint an audit committee.
60
Listing Requirements
Under the corporate governance rules of Nasdaq, we are required
to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom
has accounting or related financial management expertise.
Our audit committee consists of Neil Jones, Joanna Parnell and
Lisa Klinger. Lisa Klinger serves as the chairperson of the audit committee. All members of our audit committee meet the requirements
for financial literacy under the applicable rules and regulations of the SEC and the corporate governance rules of Nasdaq. Our board of
directors has determined that Neil Jones is an audit committee financial expert as defined by the SEC rules and has the requisite financial
experience as defined by the corporate governance rules of Nasdaq.
Our board of directors has determined that each member of our audit
committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the
general test for independence of board and committee members.
Audit Committee Role
Our board of directors has adopted an audit committee charter setting forth the responsibilities
of the audit committee, which are consistent with the Companies Law, the SEC rules and the corporate governance rules of Nasdaq and include:
| • |
retaining and terminating our independent auditors, subject to ratification by the board of directors, and in the case of retention,
to ratification by the shareholders; |
| • |
pre-approving audit and non-audit services to be provided by the independent auditors and related fees and terms; |
| • |
overseeing the accounting and financial reporting processes of our company and audits of our financial statements, the effectiveness
of our internal control over financial reporting and making such reports as may be required of an audit committee under the rules and
regulations promulgated under the Exchange Act; |
| • |
reviewing with management and our independent auditor our annual and quarterly financial statements prior to publication or filing
(or submission, as the case may be) to the SEC; |
| • |
recommending to the board of directors the retention and termination of the internal auditor, and the internal auditor’s engagement
fees and terms, in accordance with the Companies Law as well as approving the yearly or periodic work plan proposed by the internal auditor;
|
| • |
reviewing with our general counsel and/or external counsel, as deemed necessary, legal and regulatory matters that could have a material
impact on the financial statements; |
| • |
identifying irregularities in our business administration by among other things, consulting with the internal auditor or with the
independent auditor, and suggesting corrective measures to the board of directors; |
| • |
reviewing policies and procedures with respect to transactions between the Company and officers and directors (other than transactions
related to the compensation or terms of service of officers and directors), or affiliates of officers or directors, or transactions that
are not in the ordinary course of the Company’s business and deciding whether to approve such acts and transactions if so required
under the Companies Law; and |
| • |
establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to
be provided to such employees. |
Compensation Committee
Companies Law Requirements
Under the Companies Law, the board of directors of a public company
must appoint a compensation committee.
Listing Requirements
Under the corporate governance rules of Nasdaq, we are required
to maintain a compensation committee consisting of at least three independent directors.
Our compensation committee consists of Neil Jones, Joanna Parnell
and Lisa Klinger. Neil Jones serves as chairperson of the committee. Our board of directors has determined that each member of our compensation
committee is independent under the corporate governance rules of Nasdaq, including the additional independence requirements applicable
to the members of a compensation committee.
61
Compensation Committee Role
In accordance with the Companies Law, the roles of the compensation
committee are, among others, as follows:
| • |
making recommendations to the board of directors with respect to the approval of the compensation policy for office holders;
|
| • |
reviewing the implementation of the compensation policy and periodically making recommendations to the board of directors with respect
to any amendments or updates of the compensation policy; |
| • |
resolving whether or not to approve arrangements with respect to the terms of office and employment of office holders; and
|
| • |
exempting, under certain circumstances, transactions with our Chief Executive Officer from the approval of our shareholders.
|
Our board of directors has adopted a compensation committee charter
setting forth the responsibilities of the committee, which are consistent with the corporate governance rules of Nasdaq and include among
others:
| • |
recommending to our board of directors for its approval a compensation policy in accordance with the requirements of the Companies
Law as well as other compensation policies, incentive-based compensation plans and equity-based compensation plans, and overseeing the
development and implementation of such policies and recommending to our board of directors any amendments or modifications the committee
deems appropriate, including as required under the Companies Law; |
| • |
reviewing and approving the granting of options and other incentive awards to our Chief Executive Officer and other executive officers,
including reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other
executive officers, including evaluating their performance in light of such goals and objectives; |
| • |
approving and exempting certain transactions regarding office holders’ compensation pursuant to the Companies Law; and
|
| • |
administering our equity-based compensation plans, including without limitation, approving the adoption of such plans, amending and
interpreting such plans and the awards and agreements issued pursuant thereto, and making awards to eligible persons under the plans and
determining the terms of such awards. |
Compensation Policy under the Companies Law
In general, under the Companies Law, a public company must have
a compensation policy approved by its board of directors after receiving and considering the recommendations of the compensation committee.
The compensation policy must be based on certain considerations,
include certain provisions and reference certain matters as set forth in the Companies Law. The compensation policy must serve as the
basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification
or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must be determined and
later reevaluated according to certain factors, including: the advancement of the company’s objectives, business plan and long-term
strategy; the creation of appropriate incentives for office holders, while considering, among other things, the company’s risk management
policy; the size and the nature of the company’s operations; and with respect to variable compensation, the contribution of the
office holder towards the achievement of the company’s long-term goals and the maximization of its profits, all with a long-term
objective and according to the position of the office holder. The compensation policy must furthermore consider the following additional
factors:
| • |
the education, skills, experience, expertise and accomplishments of the relevant office holder; |
| • |
the office holder’s position and responsibilities; |
| • |
prior compensation agreements with the office holder; |
| • |
the ratio between the cost of the terms of employment of an office holder and the cost of the employment of other employees of the
company, including employees employed through contractors who provide services to the company, in particular the ratio between such cost
to the average and median salary of such employees of the company, as well as the impact of disparities between them on the work relationships
in the company; |
| • |
if the terms of employment include variable components — the possibility of reducing variable components at the discretion
of the board of directors and the possibility of setting a limit on the value of non-cash variable equity-based components; and
|
| • |
if the terms of employment include severance compensation — the term of employment or office of the office holder, the terms
of the office holder’s compensation during such period, the company’s performance during such period, the office holder’s
individual contribution to the achievement of the company goals and the maximization of its profits and the circumstances under which
he or she is leaving the company. |
62
The compensation policy must also include, among other things:
| • |
with regards to variable components: |
| • |
with the exception of office holders who report to the chief executive officer, a means of determining the variable components on
the basis of long-term performance and measurable criteria; provided that the company may determine that an immaterial part of the variable
components of the compensation package of an office holder shall be awarded based on non-measurable criteria, if such amount is not higher
than three months’ salary per annum, taking into account such office holder’s contribution to the company; |
| • |
the ratio between variable and fixed components, as well as the limit of the values of variable components at the time of their payment,
or in the case of equity-based compensation, at the time of grant; |
| • |
a condition under which the office holder will return to the company, according to conditions to be set forth in the compensation
policy, any amounts paid as part of the office holder’s terms of employment, if such amounts were paid based on information later
to be discovered to be wrong, and such information was restated in the company’s financial statements; |
| • |
the minimum holding or vesting period of variable equity-based components to be set in the terms of office or employment, as applicable,
while taking into consideration long-term incentives; and |
| • |
a limit to retirement grants. |
Our compensation policy was last adopted by our compensation committee,
board of directors and shareholders on April 30, 2021 and is filed as an exhibit to this Annual Report.
Sustainability, Nominating and Governance Committee
Our sustainability, nominating and governance committee consists
of Neil Jones, Joana Parnell and Christopher Stibbs. Christopher Stibbs serves as chairperson of the committee. Our board of directors
has adopted a sustainability, nominating and governance committee charter setting forth the responsibilities of the committee, which include:
| • |
overseeing and assisting our board in reviewing and recommending nominees for election as directors; |
| • |
assessing the performance of the members of our board; and |
| • |
establishing and maintaining effective corporate governance policies and practices, including, but not limited to, developing and
recommending to our board a set of corporate governance guidelines applicable to our business. |
Compensation of Directors and Executive Officers
Directors
Under the Companies Law, the compensation of our directors requires
the approval of our compensation committee, the subsequent approval of the board of directors and, unless exempted under regulations promulgated
under the Companies Law, the approval of the shareholders at a general meeting. If the compensation of our directors is inconsistent with
our stated compensation policy, then those provisions that must be included in the compensation policy according to the Companies Law
must have been considered by the compensation committee and board of directors, and shareholder approval will also be required, provided
that:
| • |
at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest
in such matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions; or |
| • |
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting
against the compensation package does not exceed two percent (2%) of the aggregate voting rights in the Company. |
Executive Officers other than the Chief Executive
Officer
The Companies Law requires the approval of the compensation of
a public company’s executive officers (other than the chief executive officer or an executive officer who also serves as a director)
in the following order: (i) the compensation committee, (ii) the company’s board of directors, and (iii) if such compensation arrangement
is inconsistent with the company’s stated compensation policy, the company’s shareholders (by a special majority vote as discussed
above with respect to the approval of director compensation). However, if the shareholders of the company decline to approve a compensation
arrangement with an executive officer that is inconsistent with the company’s stated compensation policy, the compensation committee
and board of directors may override the shareholders’ decision if each of the compensation committee and the board of directors
provide detailed reasons for their decision.
63
An amendment to an existing arrangement with an office holder (who
is not a director) requires only the approval of the compensation committee, if the compensation committee determines that the amendment
is not material in comparison to the existing arrangement. However, according to regulations promulgated under the Companies Law, an amendment
to an existing arrangement with an office holder (who is not a director) who is subordinate to the chief executive officer shall not require
the approval of the compensation committee, if (i) the amendment is approved by the chief executive officer, (ii) the company’s
compensation policy provides that a non-material amendment to the terms of service of an office holder (other than the chief executive
officer) may be approved by the chief executive officer and (iii) the engagement terms are consistent with the company’s compensation
policy.
Chief Executive Officer
Under the Companies Law, the compensation of a public company’s
chief executive officer is required to be approved by: (i) the company’s compensation committee; (ii) the company’s board
of directors, and (iii) the company’s shareholders, provided that:
| • |
at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest
in such matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions; or |
| • |
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting
against the compensation package does not exceed two percent (2%) of the aggregate voting rights in the Company. |
However, if the shareholders of the company decline to approve
the compensation arrangement with the chief executive officer, the compensation committee and board of directors may override the shareholders’
decision if each of the compensation committee and the board of directors provide a detailed report for their decision. The approval of
each of the compensation committee and the board of directors should be in accordance with the company’s stated compensation policy;
however, in special circumstances, they may approve compensation terms of a chief executive officer that are inconsistent with such policy
provided that they have considered those provisions that must be included in the compensation policy according to the Companies Law and
that shareholder approval was obtained (by a special majority vote as discussed above with respect to the approval of director compensation
that is inconsistent with the compensation policy). In addition, the compensation committee may waive the shareholder approval requirement
with regards to the approval of the engagement terms of a candidate for the chief executive officer position, if they determine that the
compensation arrangement is consistent with the company’s stated compensation policy and that the chief executive officer candidate
did not have a prior business relationship with the company or a controlling shareholder of the company and that subjecting the approval
of the engagement to a shareholder vote would impede the company’s ability to employ the chief executive officer candidate. Such
waiver does not preclude the need for approval of the compensation of a chief executive officer candidate who also serves as a member
of the board of directors, and his or her compensation terms as chief executive officer must be approved in accordance with the rules
applicable to approval of compensation of directors.
Approval of Related Party Transactions under Israeli Law
Fiduciary Duties of Directors and Executive
Officers
The Companies Law codifies the fiduciary duties that office holders
owe to a company. An office holder is defined in the Companies Law as a general manager, chief business manager, deputy general manager,
vice general manager, any other person assuming the responsibilities of any of these positions regardless of such person’s title,
a director and any other manager directly subordinate to the general manager. Each person listed in the table above under “Board
of Directors and Senior Management” is an office holder under the Companies Law.
An office holder’s fiduciary duties consist of a duty of
care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder
in the same position would have acted under the same circumstances. The duty of care includes, among other things, a duty to use reasonable
means, in light of the circumstances, to obtain:
| • |
information on the business advisability of a given action brought for his, her or its approval or performed by virtue of his, her
or its position; and |
| • |
all other important information pertaining to such action. |
The duty of loyalty requires that an office holder act in good
faith and in the best interests of the company, and includes, among other things, the duty to:
| • |
refrain from any act involving a conflict of interest between the performance of his, her or its duties in the company and his, her
or its other duties or personal affairs; |
| • |
refrain from any activity that is competitive with the business of the company; |
| • |
refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for himself, herself
or itself or others; and |
| • |
disclose to the company any information or documents relating to the company’s affairs which the office holder received as
a result of his, her or its position as an office holder. |
64
Under the Companies Law, a company may approve an act specified
above which would otherwise constitute a breach of the office holder’s fiduciary duty, provided that the office holder acted in
good faith, neither the act nor its approval harms the company and the office holder discloses his, her or its personal interest a sufficient
time before the approval of such act. Any such approval is subject to the terms of the Companies Law setting forth, among other things,
the appropriate bodies of the company required to provide such approval and the methods of obtaining such approval.
Disclosure of Personal Interests of an Office
Holder and Approval of Certain Transactions
The Companies Law requires that an office holder promptly disclose
to the board of directors any personal interest that such office holder may have and all related material information known to such office
holder concerning any existing or proposed transaction with the company. A personal interest includes an interest of any person in an
act or transaction of a company, including a personal interest of one’s relative or of a corporate body in which such person or
a relative of such person is a 5% or greater shareholder, director or general manager or in which such person has the right to appoint
at least one director or the general manager, but excluding a personal interest stemming solely from one’s ownership of shares in
the company. A personal interest includes the personal interest of a person for whom the office holder holds a voting proxy or the personal
interest of the office holder with respect to the office holder’s vote on behalf of a person for whom he or she holds a proxy even
if such shareholder has no personal interest in the matter.
If it is determined that an office holder has a personal interest
in a non-extraordinary transaction, meaning any transaction that is in the ordinary course of business, on market terms or that is not
likely to have a material impact on the company’s profitability, assets or liabilities, approval by the board of directors is required
for the transaction unless the company’s articles of association provide for a different method of approval. Any such transaction
that is adverse to the company’s interests may not be approved by the board of directors.
Approval first by the company’s audit committee and subsequently
by the board of directors is required for an extraordinary transaction (meaning any transaction that is not in the ordinary course of
business, not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities)
in which an office holder has a personal interest.
A director and any other office holder who has a personal interest
in a transaction which is considered at a meeting of the board of directors or the audit committee may generally (unless it is with respect
to a transaction which is not an extraordinary transaction) not be present at such a meeting or vote on that matter unless a majority
of the directors or members of the audit committee, as applicable, have a personal interest in the matter. If a majority of the members
of the audit committee or the board of directors have a personal interest in the matter, then all of the directors may participate in
deliberations of the audit committee or board of directors, as applicable, with respect to such transaction and vote on the approval thereof
and, in such case, shareholder approval is also required.
Certain disclosure and approval requirements apply under Israeli
law to certain transactions with controlling shareholders, certain transactions in which a controlling shareholder has a personal interest
and certain arrangements regarding the terms of service or employment of a controlling shareholder. For these purposes, a controlling
shareholder is any shareholder that has the ability to direct the company’s actions, including any shareholder holding 25% or more
of the voting rights if no other shareholder owns more than 50% of the voting rights in the company. Two or more shareholders with a personal
interest in the approval of the same transaction are deemed to be one shareholder for these purposes.
For a description of the approvals required under Israeli law for
compensation arrangements of officers and directors, see “—Compensation of Directors
and Executive Officers.”
Shareholder Duties
Pursuant to the Companies Law, a shareholder has a duty to act
in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power with respect
to the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following
matters:
| • |
an amendment to the company’s articles of association; |
| • |
an increase of the company’s authorized share capital; |
| • |
a merger; or |
| • |
interested party transactions that require shareholder approval. |
In addition, a shareholder has a general duty to refrain from discriminating
against other shareholders.
Certain shareholders also have a duty of fairness toward the company.
These shareholders include any controlling shareholder, any shareholder who knows that it has the power to determine the outcome of a
shareholder vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or
exercise any other rights available to it under the company’s articles of association with respect to the company. The Companies
Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a breach of contract
will also apply in the event of a breach of the duty of fairness.
65
Exculpation, Insurance and Indemnification of Office Holders
Under the Companies Law, a company may not exculpate an office
holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability
to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision
authorizing such exculpation is included in its articles of association. Our amended and restated articles of association include such
a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.
An Israeli company may indemnify an office holder in respect of
the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an event or following an
event, provided a provision authorizing such indemnification is contained in its articles of association:
| • |
a financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s
award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance,
then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s
activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors
as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria; |
| • |
reasonable litigation expenses, including legal fees, incurred by the office holder (1) as a result of an investigation or proceeding
instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment
was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal
penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if
such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2)
in connection with a monetary sanction; |
| • |
reasonable litigation expenses, including legal fees, incurred by the office holder or imposed by a court in proceedings instituted
against him or her by the company, on its behalf or by a third-party or in connection with criminal proceedings in which the office holder
was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent; and |
| • |
expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative
proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder
by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law, 1968 (the “Israeli Securities Law”).
|
An Israeli company may insure an office holder against the following
liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association:
| • |
a breach of the duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis
to believe that the act would not prejudice the company; |
| • |
a breach of the duty of care to the company or to a third-party, including a breach arising out of the negligent conduct of the office
holder; |
| • |
a financial liability imposed on the office holder in favor of a third-party; |
| • |
a financial liability imposed on the office holder in favor of a third-party harmed by a breach in an administrative proceeding;
and |
| • |
expenses, including reasonable litigation expenses and legal fees, incurred by the office holder as a result of an administrative
proceeding instituted against him or her, pursuant to certain provisions of the Israeli Securities Law. |
An Israeli company may not indemnify or insure an office holder
against any of the following:
| • |
a breach of the duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe
that the act would not prejudice the company; |
| • |
a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the
office holder; |
| • |
an act or omission committed with intent to derive illegal personal benefit; or |
| • |
a fine, monetary sanction or forfeit levied against the office holder. |
66
Under the Companies Law, exculpation, indemnification and insurance
of office holders must be approved by the compensation committee and the board of directors (and, with respect to directors and the chief
executive officer, by the shareholders). However, under regulations promulgated under the Companies Law, the insurance of office holders
does not require shareholder approval and may be approved by only the compensation committee, if the engagement terms are determined in
accordance with the company’s compensation policy, which was approved by the shareholders by the same special majority required
to approve a compensation policy, provided that the insurance policy is on market terms and the insurance policy is not likely to materially
impact the company’s profitability, assets or obligations.
Our amended and restated articles of association allow us to exculpate,
indemnify and insure our office holders for any liability imposed on them as a consequence of an act (including any omission) which was
performed by virtue of being an office holder. Our office holders are currently covered by a directors and officers’ liability insurance
policy.
We have entered into agreements with each of our directors and
executive officers exculpating them in advance, to the fullest extent permitted by law, from liability to us for damages caused to us
as a result of a breach of duty of care and undertaking to indemnify them to the fullest extent permitted by law. This indemnification
is limited to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria
determined by the board of directors as reasonable under the circumstances.
The maximum indemnification amount set forth in such agreements
is limited to an amount equal to the higher of $50 million and 25% of our total shareholders’ equity as reflected in our most recent
consolidated financial statements prior to the date on which the indemnity payment is made (other than indemnification for an offering
of securities to the public, including by a shareholder in a secondary offering, in which case the maximum indemnification amount is limited
to the gross proceeds raised by us and/or any selling shareholder in such public offering). The maximum amount set forth in such agreements
is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.
In the opinion of the SEC, indemnification of directors and office
holders for liabilities arising under the Securities Act, however, is against public policy and therefore unenforceable.
Internal Auditor
Under the Companies Law, the board of directors of a public company
must appoint an internal auditor based on the recommendation of the audit committee. The role of the internal auditor is, among other
things, to examine whether a company’s actions comply with applicable law and orderly business procedure. Under the Companies Law,
the internal auditor cannot be an interested party or an office holder or a relative of an interested party or an office holder, nor may
the internal auditor be the company’s independent auditor or its representative. An “interested party” is defined in
the Companies Law as (i) a holder of 5% or more of the issued share capital or voting power in a company, (ii) any person or entity who
has the right to designate one or more directors or to designate the chief executive officer of the company or (iii) any person who serves
as a director or as chief executive officer of the company. Fahn Kanne Control Management Ltd., Grant Thornton Israel, serves as our internal
auditor.
6.D. EMPLOYEES
As of December 31, 2022, we had 1,087 employees, including 682
in the US, 181 in Tel Aviv and 224 employees in other international locations. None of our employees are represented by labor unions or
covered by collective bargaining agreements. We consider our relationship with our employees to be good.
6.E. SHARE OWNERSHIP
For information regarding the share ownership of directors and
officers, see Item 7. “Major Shareholders and Related Party Transactions—7.A. Major Shareholders.”
For information as to our equity incentive plans, see Item 6.B. “Director, Senior Management and
Employees—Compensation—Equity Incentive Plans.”
6.F. DISCLOSURE OF REGISTRANT’S
ACTION TO RECOVER ERRONEOUSLY AWARDED COMPENSATION
None.
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A. MAJOR SHAREHOLDERS
The following table sets forth information with respect to the
beneficial ownership of our ordinary shares as of February 28, 2023:
| • |
each person or entity known by us to own beneficially more than 5% of our outstanding ordinary shares; |
| • |
each of our directors and executive officers individually; and |
| • |
all of our executive officers and directors as a group. |
The beneficial ownership of ordinary shares is determined in accordance
with the SEC rules and generally includes any ordinary shares over which a person exercises sole or shared voting or investment power,
which includes the power to dispose of or to direct the disposition of such security. For purposes of the table below, we deem shares
subject to options, RSUs or PSUs that are currently exercisable or exercisable or vested within 60 days of February 28, 2023 to be outstanding
and to be beneficially owned by the person holding the options RSUs, or PSUs for the purposes of computing the percentage ownership of
that person but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person, except
with respect to the ownership and percentage ownership of all executive officers and directors as a group.
67
The percentage of shares beneficially owned are based on 143,510,865 ordinary shares
outstanding as of February 28, 2023.
Unless otherwise noted below, each shareholder’s address
is 82 Yigal Alon Street, Tel Aviv, 6789124, Israel.
A description of any material relationship that our principal shareholders
have had with us or any of our affiliates within the past three years is included under “Certain
Relationships and Related Party Transactions.”
|
|
Beneficial Ownership as of February 28, 2023 |
| ||||||
|
|
|
Ordinary Shares |
|
|
Voting Power |
| ||
|
Name of Beneficial Owner |
|
Number |
|
|
% |
| ||
|
Principal Shareholders |
|
|
|
|
|
| ||
|
Mithaq Capital SPC(1)
|
|
|
34,591,438 |
|
|
|
24.1 |
|
|
Toscafund Asset Management LLP(2)
|
|
|
21,691,454 |
|
|
|
15.1 |
|
|
Schroder Investment Management Limited(3)
|
|
|
14,328,218 |
|
|
|
10.0 |
|
|
News Corporation(4)
|
|
|
8,525,323 |
|
|
|
5.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Directors and Executive Officers |
|
|
|
|
|
|
|
|
|
Ofer Druker(5) |
|
|
3,981,513 |
|
|
|
2.8 |
|
|
Sagi Niri(6) |
|
|
1,063,900 |
|
|
|
* |
|
|
Yaniv Carmi(7) |
|
|
1,823,917 |
|
|
|
1.3 |
|
|
Christopher Stibbs |
|
|
— |
|
|
|
— |
|
|
Rebekah Brooks |
|
|
— |
|
|
|
— |
|
|
Norm Johnston |
|
|
8,000 |
|
|
|
* |
|
|
Neil Jones |
|
|
— |
|
|
|
— |
|
|
Joanna Parnell |
|
|
— |
|
|
|
— |
|
|
Lisa Klinger |
|
|
— |
|
|
|
— |
|
|
All executive officers and directors as a group (9 persons) |
|
|
6,877,330 |
|
|
|
4.8 |
% |
* Indicates ownership of
less than 1%.
(1) This
information is based upon an Amendment No. 2 to Schedule 13D jointly filed by Mithaq Capital SPC (“Mithaq Capital”), Turki
Saleh A. AlRajhi and Muhammad Asif Seemab with the SEC on July 27, 2022, and a Form TR-1 provided by Mithaq Capital on December 29, 2022.
Mithaq Capital SPC is managed by its Board of Directors, which consists of Turki Saleh A. AlRajhi and Muhammad Asif Seemab, and the Board
has exclusive authority concerning purchases, dispositions and voting of the ordinary shares. Each of Mr. AlRajhi and Mr. Seemab possesses
an ownership interest in Mithaq Capital, and Mr. Seemab may share in any profits realized from Mithaq Capital’s investment in the
ordinary shares. Mithaq Capital may be deemed to beneficially own 34,591,438 ordinary shares of the Company and has sole voting and dispositive
power with respect to the shares, while Mr. AlRaji and Mr. Seemab each have shared voting and dispositive power with respect to the shares.
The principal address of Mithaq Capital is c/o Synergy, Anas Ibn Malik Road. Al Malqa, Riyadh 13521 Saudi Arabia.
(2) This
information is based upon an Amendment No. 2 to a Schedule 13G jointly filed by Toscafund Asset Management LLP (“Toscafund”),
Tosca Opportunity, Toscafund Limited, Old Oaks Holdings Limited and Martin Hudges with the SEC on February 14, 2023, and a Form TR-1 provided
by Toscafund on August 17, 2022 and other information provided to the Company by Toscafund. Toscafund is the entity for which Toscafund
Limited, Old Oak Holdings and Martin Hughes may be considered a holding company or control person, as applicable, and therefore may be
deemed to have beneficial ownership over 21,691,454 ordinary shares of the Company and has shared voting and dispositive power with respect
to the shares. Tosca Opportunity may be deemed to beneficially own 16,376,931 ordinary shares and has shared voting and dispositive power
with respect to the shares. The principal address of Toscafund is 5th Fl, Ferguson House, 15 Marylebone Rd, London, United Kingdom NW1
5JD. The principal address of Tosca Opportunity is Ugland House, Box 309, Grand Cayman, Cayman Islands KY1-1104.
(3) This
information is based upon a Form TR-1 provided by Schroder plc on February 24, 2023. Schroder Investment Management Limited is formed
in England and is directly or indirectly controlled by Schroder plc, an asset manager formed in England and operating from 37 locations
across Europe, the Americas, Asia, the Middle East and Africa. Schroder Investment Management Limited and Schroder plc may be deemed to
have beneficial ownership over 14,328,218 ordinary shares of the Company, and have shared voting and dispositive power with respect to
the shares. The principal address of Schroder Investment Management Limited is 1 London Wall Place, London EC2Y 5AU, United Kingdom.
(4) This
information is based upon a Schedule 13G filed by News Corporation with the SEC on February 11, 2022. News Corp UK Ireland Limited
and News Preferred Holdings Inc, both wholly-owned subsidiaries of News Corporation, are the record holders of the 8,525,323 ordinary
shares of the Company. News Corporation has sole voting and investment power with respect to the shares of the Company held by such subsidiaries.
The principal address of News Corporation is 1211 Avenue of the Americas, New York, New York 10036.
(5)
Includes 218,750 RSUs vesting within 60 days of February 28, 2023.
(6)
Includes 148,750 RSUs and 70,000 PSUs vesting within 60 days of February 28, 2023.
(7)
Includes 96,250 RSUs vesting within 60 days of February 28, 2023.
68
Significant Changes in Percentage Ownership
On February 23,
2022, our board of directors authorized a repurchase plan under which up to $75.0 million ordinary shares could be purchased on AIM. By
September 30, 2022, the Company completed the $75.0 million share repurchase program, repurchasing a total of 13,792,485 ordinary shares
at an average price of 437.54 pence, for a total investment of approximately £60.5 million, or $75.0 million, including fees.
In September
2022, our board of directors authorized a new share repurchase program, authorizing the purchase of up to $20.0 million of its ordinary
shares on AIM. The new repurchase plan commenced on October 1, 2022, and will continue until April 1, 2023, or until it has been completed
and the program may be suspended, modified, or discontinued at any time at the Company’s discretion, subject to applicable law.
All share repurchases will be made in accordance with all applicable securities laws and regulations. From October 1, 2022 through December
31, 2022, the Company repurchased under such plan a total of 3,114,310 ordinary shares at an average price of 304.48 pence, for a total
investment of approximately £9.5 million, or $11.3 million, including fees
In 2022,
the Company’s $75.0 million share repurchase program and $20.0 million share repurchase program, combined to repurchase 16,906,975
ordinary shares on AIM, or approximately 11% of shares outstanding, at an average price of 413.03 pence which reflected a total combined
investment of approximately £70.0 million, or $86.3 million.
Other than as set forth above and otherwise disclosed in this Annual Report, no significant
changes have occurred since December 31, 2022.
7.B. RELATED PARTY TRANSACTIONS
Our policy is to enter into transactions with related parties on
terms that, on the whole, are no more or less favorable than those available from unaffiliated third parties. Based on our experience
in the business sectors in which we operate and the terms of our transactions with unaffiliated third parties, we believe that all of
the transactions described below met this policy standard at the time they occurred
The following is a description of our related party transactions
since January 1, 2022.
Agreements with Directors and Officers
Employment Agreements
We have entered into written employment agreements with each of
our executive officers. See Item 6. “Directors, Senior
Management and Employees.”
Equity Incentive Awards
Since our inception, we have granted to our executive officers
and certain of our directors restricted share units, performance share units and options to purchase our ordinary shares. See Item 6. “Directors,
Senior Management and Employees.”
Exculpation, Indemnification and Insurance
Our amended and restated articles of association permit us to exculpate,
indemnify and insure certain of our office holders to the fullest extent permitted by the Companies Law. We have entered into agreements
with each of our directors and executive officers exculpating them in advance, to the fullest extent permitted by law, from liability
to us for damages caused to us as a result of a breach of duty of care and undertaking to indemnify them to the fullest extent permitted
by law. See Item 6. “Directors, Senior Management and Employees.”
Rights of Appointment
Our current board of directors consists of nine directors. We are
not a party to, and are not aware of, any voting agreements among our shareholders.
Related Party Transaction Policy
Our board of directors has adopted a written related party transaction
policy to set forth the policies and procedures for the review and approval or ratification of related person transactions. This policy
covers, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship,
or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved
exceeds $120,000 and a related person had or will have a direct or indirect material interest, including, without limitation, purchases
of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees
of indebtedness and employment by us of a related person.
7.C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
69
ITEM 8: FINANCIAL INFORMATION
8.A. COMBINED STATEMENTS AND OTHER FINANCIAL INFORMATION
Combined Financial Statements
We have appended our audited consolidated financial statements at the end of this Annual
Report, starting at page F-3, as part of this Annual Report.
Legal Proceedings
We may from time to time, be party to legal or regulatory proceedings
arising in the ordinary course of business. Defending any such legal proceedings is costly and can impose a significant burden on management
and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation
can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
On May 18, 2021, we filed a complaint against Alphonso, Inc.
(“Alphonso”) in the Supreme Court of the State of New York, County of New York (the “Court”), asserting claims
for breach of contract, tortious interference with business relations, intentional interference with contractual relations, unjust enrichment,
and conversion (the “Alphonso Lawsuit”). The lawsuit arose out of Alphonso’s breach of a Strategic Partnership Agreement
and an Advance Payment Obligation and Security Agreement (the “Security Agreement”) with us, and LG Electronics Inc.’s
(“LG”) tortious interference with Tremor’s contractual relationships and business relations and related misconduct.
We are seeking damages and other relief, including an order foreclosing on Alphonso’s collateral under the Security Agreement, from
the Court. On May 24, 2021, Alphonso filed a complaint against Tremor in the Supreme Court of the State of New York, County of New York,
asserting claims for breach of contract, unfair competition, and tortious interference with business relations. This proceeding is related
to the Alphonso Lawsuit. Alphonso, LG, and the Company are currently engaged in depositions and expert discovery.
On June 21, 2022, Alphonso filed a complaint against the Company
in the United States District Court for the Northern District of California, asserting claims for misappropriation of trade secrets under
federal and state law. On July 19, 2022, Alphonso also filed a motion for a preliminary injunction. On October 31, 2022, the Court
denied Alphonso’s motion for a preliminary injunction. Alphonso and the Company are currently engaged in fact discovery.
Policy on Dividend Distributions
We do not anticipate paying any dividends in the foreseeable future.
We currently intend to retain future earnings, if any, to finance operations and expand our business. Our board of directors has sole
discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon
our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other
factors that our directors may deem relevant.
Our board of directors has sole discretion whether to pay dividends.
If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings,
capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem
relevant. Although we have paid dividends in the past, we do not anticipate paying any dividends in the foreseeable future.
The Companies Law imposes restrictions on our ability to declare
and pay dividends. Pursuant to the Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated
over the previous two years, according to our then last reviewed or audited financial statements (less the amount of previously distributed
dividends, if not reduced from the earnings), provided that the end of the period to which the financial statements relate is not more
than six months prior to the date of the distribution. If we do not meet such criteria, then we may distribute dividends only with court
approval. In each case, we are only permitted to distribute a dividend if our board of directors and, if applicable, the court determines
that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations
as they become due.
8.B. SIGNIFICANT CHANGES
No significant changes have occurred since December 31, 2022, except
as otherwise disclosed in this Annual Report.
ITEM 9: THE OFFER AND LISTING
9.A. OFFER AND LISTING DETAILS
Our ADSs have been listed on the Nasdaq Global Market under the
symbol “TRMR” since June 18, 2021. Each ADS represents the right to receive two ordinary shares. Prior to that date, there
was no public trading market for our ADSs. Our ordinary shares have traded on AIM, a market operated by the London Stock Exchange, under
the symbol “TRMR,” since May 28, 2014.
As of February 28, 2023, the last reported sale price of our ADSs
on the Nasdaq Global Market was $7.84 per ADS.
Citibank, N.A. is the depositary bank for the ADSs. Citibank’s
depositary offices are located at 388 Greenwich Street, New York, New York 10013.
70
9.B. PLAN OF DISTRIBUTION
Not applicable.
9.C. MARKETS
See Item 9.A. “Offer and
Listing Details.”
9.D. SELLING SHAREHOLDERS
Not applicable.
9.E. DILUTION
Not applicable.
9.F. EXPENSES OF THE ISSUE
Not applicable.
ITEM 10: ADDITIONAL INFORMATION
10.A. SHARE CAPITAL
Not applicable.
10.B. MEMORANDUM AND ARTICLES OF ASSOCIATION
Our authorized share capital consists of 500,000,000 ordinary shares, par value NIS
0.01 per share, of which 143,510,865 shares are issued and outstanding as of February 28, 2023, and 47,048,482 ordinary shares are held
in treasury.
A copy of our amended and restated articles of association is attached as Exhibit 1.1
to this Annual Report on Form 20-F. The information called for by this item is set forth in Exhibit 2.1 to this Annual Report on Form
20-F and is incorporated herein by reference.
10.C. MATERIAL CONTRACTS
Summaries of the following material contracts and amendments to
these contracts are included in this Annual Report in the places indicated.
|
Material
Contract |
Location in This Annual Report | |
|
Global Share Incentive Plan (2011)
|
Item 6.B. Directors,
Senior Management and Employees⸺ Compensation⸺Equity Incentive Plans. |
|
|
2017 Equity Incentive Plan |
Item 6.B. Directors,
Senior Management and Employees⸺ Compensation⸺Equity Incentive Plans. |
|
|
Compensation Policy |
Item
6.C. Directors, Senior Management and Employees⸺Board Practices – Compensation Policy under the Companies Law. |
|
|
Form of Indemnification Agreement
|
Item
6.C. Directors, Senior Management and Employees⸺Board Practices⸺Exculpation, Insurance and Indemnification of Office Holders. |
|
|
Credit Agreement |
Item 5.B. Liquidity
and Capital Resources |
|
|
Amobee Share and Asset Purchase Agreement
|
On July 25, 2022, the Company and its subsidiaries entered
into a Share and Asset Purchase Agreement with Amobee Group Pte. Ltd to acquire Amobee, Inc., Amobee Group Pte. Ltd. and Amobee ANZ Pty
Ltd. The acquisition was completed on September 12, 2022. |
10.D. EXCHANGE CONTROLS
There are currently no Israeli currency control restrictions on
remittances of dividends on our ordinary shares, proceeds from the sale of the ordinary shares or ADSs or interest or other payments to
non-residents of Israel, except for shareholders who are subjects of countries that are, have been, or will be, in a state of war with
Israel.
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10.E. TAXATION
The following description is not intended to constitute a complete
analysis of all tax consequences relating to the acquisition, ownership and disposition of our ADSs. You should consult your own tax advisor
concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state,
local, foreign or other taxing jurisdiction.
Tax Considerations
The following is a brief summary of the material Israeli tax laws
applicable to us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition
of our ADSs. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of
his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of
such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion.
To the extent that the discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation,
we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion
below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations
of Israeli law, which change could affect the tax consequences described below. The discussion should not be construed as legal or professional
tax advice and does not cover all possible tax considerations.
General Corporate Tax Structure in Israel
Israeli companies are generally subject to corporate tax. The current corporate tax
rate is 23%. Capital gains derived by an Israeli company are generally subject to the prevailing corporate tax rate. Nevertheless, as
elaborated below, the Law for the Encouragement of Capital Investments provides tax benefits for Israeli enterprises meeting certain requirements
and criteria. In our context, the Company's enterprise may be eligible to the “preferred technological enterprise” and a “special
preferred technological enterprise” that awards reduced tax rates of 12%. Additionally, the taxable income of the company outside
the Company's enterprise will be subject to corporate tax as mentioned above.
Tax Benefits and Grants for Research and Development
Israeli tax law allows, under certain conditions, a tax deduction
for expenditures, including capital expenditures, related to scientific research and development for the year in which they are incurred.
Expenditures are deemed related to scientific research and development projects, if:
| • |
the expenditures are approved by the relevant Israeli government ministry, determined by the field of research; |
| • |
the research and development must be for the promotion of the company; and |
| • |
the research and development are carried out by or on behalf of the company seeking such tax deduction. |
The amount of such deductible expenses is reduced by the sum of
any funds received through government grants for the finance of such scientific research and development projects. Under these research
and development deduction rules, no deduction is allowed for any expense invested in an asset depreciable under the general depreciation
rules of the Israeli Income Tax Ordinance (New Version), 5721-1961. Expenditures that do not qualify for this special deduction are deductible
in equal amounts over three years.
From time to time, we may apply to the Israel Innovation Authority
for approval to allow a tax deduction for all research and development expenses during the year incurred. There can be no assurance that
such request will be granted. If we will not be able to deduct research and development expenses during the year of the payment, we will
be able to deduct research and development expenses during a period of three years commencing in the year of the payment of such expenses.
Digital Services Tax
The Company constantly examines the potential applicability of
the digital services tax legislation on its activities in the various jurisdictions. In addition, the Company studies the Organisation
for Economic Co-operation and Development (OECD) Pillar I and Pillar II publications and their effect on the Company.
Taxation of Non-Israeli Resident Shareholders
Capital Gains Taxes
Israeli capital gains tax is imposed on the disposition of capital
assets by a non-Israeli resident if those assets (i) are located in Israel, (ii) are shares or a right to shares in an Israeli resident
corporation or (iii) represent, directly or indirectly, rights to assets located in Israel, unless a tax treaty between Israel and the
seller’s country of residence provides otherwise. The Israeli tax law distinguishes between “Real Capital Gain” and
“Inflationary Surplus.” Inflationary Surplus is a portion of the total capital gain which is equivalent to the increase in
the relevant asset’s price that is attributable to the increase in the Israeli Consumer Price Index or, in certain circumstances,
a foreign currency exchange rate, between the date of purchase and the date of disposition. Inflationary Surplus is currently not subject
to tax in Israel. Real Capital Gain is the excess of the total capital gain over the Inflationary Surplus. Generally, Real Capital Gain
accrued by individuals on the sale of our ADSs will be taxed at the rate of 25%. However, if the shareholder is a “substantial shareholder”
at the time of sale or at any time during the preceding 12-month period, such gain will be taxed at the rate of 30%. A “substantial
shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with
such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation.
“Means of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive
assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. Real
Capital Gain derived by corporations will be generally subject to a corporate tax rate of 23% (in 2022).
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A non-Israeli resident who derives capital gains from the sale
of shares of an Israeli resident company that were purchased after the company was listed for trading on a stock exchange outside of Israel
will be exempt from Israeli capital gains tax so long as the shares were not held through a permanent establishment that the non-Israeli
resident maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents (i)
have a controlling interest of more than 25% in any of the means of control of such non-Israeli corporation or (ii) are the beneficiaries
of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
In addition, such exemption is not applicable to a person whose
gains from selling or disposing the shares are deemed to be business income.
Additionally, a sale of securities by a non-Israeli resident may
be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the tax treaty between the
Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended (the
“United States-Israel Tax Treaty”), the sale, exchange or other disposition of shares by a shareholder who is a United States
resident (for purposes of the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident
by the United States-Israel Tax Treaty (a “Treaty U.S. Resident”) is generally exempt from Israeli capital gains tax unless:
(i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital
gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange
or disposition is attributed to a permanent establishment in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly
or indirectly, shares representing 10% or more of the voting capital during any part of the 12-month period preceding the disposition,
subject to certain conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during
the relevant taxable year. In any such case, the sale, exchange or disposition of such shares would be subject to Israeli tax, to the
extent applicable. However, under the United States-Israel Tax Treaty, a Treaty U.S. Resident may be permitted to claim a credit for the
Israeli tax against the U.S. federal income tax imposed with respect to the sale, exchange or disposition of the shares, subject to the
limitations under U.S. laws applicable to foreign tax credits. The United States-Israel Tax Treaty does not provide such credit against
any U.S. state or local taxes.
Regardless of whether non-Israeli shareholders may be liable for
Israeli capital gains tax on the sale of our ADSs, the payment of the consideration for such sale may be subject to withholding of Israeli
tax at source and holders of our ADSs may be required to demonstrate that they are exempt from tax on their capital gains in order to
avoid withholding at source at the time of sale. Specifically, the Israel Tax Authority may require shareholders who are not liable for
Israeli capital gains tax on such a sale to sign declarations in forms specified by the Israel Tax Authority, provide documents (including,
for example, a certificate of residency) or obtain a specific exemption from the Israel Tax Authority to confirm their status as non-Israeli
residents (and, in the absence of such declarations or exemptions, the Israel Tax Authority may require the purchaser of the shares to
withhold tax at source).
Capital gains taxes applicable to Israeli resident shareholders.
An Israeli resident corporation that derives capital gains from
the sale of shares in an Israeli resident company that were purchased after the company was listed for trading on a stock exchange outside
of Israel will generally be subject to tax on the real capital gains generated on such sale at the corporate tax rate of 23%. An Israeli
resident individual will generally be subject to capital gain tax at the rate of 25%. However, if the individual shareholder claims deduction
of interest expenditures or is a “substantial shareholder” at the time of the sale or at any time during the preceding 12-months
period, such gain will be taxed at the rate of 30%. A “substantial shareholder” is generally a person who alone or together
with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly,
at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right
to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any
of the aforesaid rights how to act, regardless of the source of such right. Individual holders dealing in securities in Israel for whom
the income from the sale of securities is considered “business income” as defined in section 2(1) of the Ordinance are taxed
at the marginal tax rates applicable to business income (up to 47% in 2022). Certain Israeli institutions who are exempt from tax under
section 9(2) or section 129(a)(1) of the Ordinance (such as exempt trust fund, pension fund) may be exempt from capital gains tax from
the sale of the shares.
Taxation on
Receipt of Dividends. Non-Israeli
residents (whether individuals or corporations) are generally subject
to Israeli income tax on the receipt of dividends paid on our ADSs at
the rate of 25% or 20% if the dividend is distributed from income attributed to a Preferred Enterprise or a Preferred Technological Enterprise
(see more details below). which tax will be withheld at source, unless relief is provided in an applicable tax treaty between Israel and
the shareholder’s country of residence. However, if the shareholder who is a “substantial shareholder” at the time of
receiving the dividend or at any time during the preceding 12-month period, the applicable tax rate will be 30%. Such dividends are generally
subject to Israeli withholding tax at a rate of 25% so long as the shares are registered with a nominee company (whether the recipient
is a substantial shareholder or not).
73
However, a reduced tax rate may be provided under an applicable
tax treaty. For example, under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends
paid to a holder of our ADSs who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends
that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year in which the
dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income for such
preceding year consists of certain types of dividends and interest.
An Israeli resident
individual is generally subject to Israeli income tax on the receipt of dividends at the rate of 25%. With respect to a person who is
a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding 12-months period, the
applicable tax rate is 30%. Such dividends are generally subject to Israeli withholding tax at a rate of 25% if the shares are registered
with a nominee company (whether the recipient is a substantial shareholder or not), and 20% if the dividend is distributed from income
attributed to a Preferred Enterprise or a Preferred Technological Enterprise (see more details below). If the recipient of the dividend
is an Israeli resident corporation such dividend income will be exempt from tax provided the income from which such dividend is distributed
was derived or accrued within Israel and was received directly or indirectly from another corporation that is liable to Israeli corporate
tax. An exempt trust fund, pension fund or other entity that is exempt from tax under section 9(2) or section 129C(a)(1) of the Israeli
Tax Ordinance is exempt from tax on dividend.
Surtax. Subject
to the provisions of an applicable tax treaty, individuals who are subject to income tax in Israel (whether any such individual is an Israeli
resident or non-Israeli resident) are also subject to an additional tax at a rate of 3% on annual income (including, but not limited to,
income derived from dividends, interest and capital gains) exceeding NIS 663.240 for 2022, which amount is linked to the annual change
in the Israeli consumer price index.
Estate and
Gift Tax. Israeli law presently does not impose estate taxes. Gift tax may be applicable in certain cases.
Law for the Encouragement
of Industry (Taxes), 1969
The Law for the Encouragement of Industry (Taxes), 1969, generally
referred to as the Industry Encouragement Law, provides several tax benefits for “Industry Companies.” We currently qualify
as an Industrial Company within the meaning of the Industry Encouragement Law. The Industry Encouragement Law defines an “Industrial
Company” as a company resident in Israel, of which 90% or more of its income in any tax year, other than income from defense loans,
is derived from an “Industrial Enterprise” owned by it and located in Israel. An “Industrial Enterprise” is defined
as an enterprise whose principal activity in a given tax year is industrial production. The following corporate tax benefits, among others,
are available to Industrial Companies:
| • |
Amortization over an eight-year period of the cost of purchased know-how and patents and rights to use a patent and know-how which
are used for the development or advancement of the company; |
| • |
Under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies; and |
| • |
Expenses related to a public offering are deductible in equal amounts over a three-year period. |
Eligibility for benefits under the Industry Encouragement Law is
not contingent upon the approval of any governmental authority. The Israeli tax authorities may determine that we do not qualify as an
Industrial Company, which could entail our loss of the benefits that relate to this status. There can be no assurance that we will continue
to qualify as an Industrial Company or that the benefits described above will be available in the future.
Law for the Encouragement of Capital Investments,
1959
The Law for the Encouragement of Capital Investments (the “Investments
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 as of 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, an Amendment to the Investments Law was enacted
and 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
by 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 of January 1, 2017.
The Amendment also provides that no tax will apply to a dividend
distributed out of preferred income of preferred technological enterprise to a shareholder that is an Israeli resident company. In addition,
a tax rate of 20% shall apply to a dividend distributed out of preferred income preferred technological enterprise to an individual shareholder
or foreign resident, in addition 4% dividend withholding tax would apply in case at least 90% of the company’s shares are held directly
by, one or more, foreign entities.
74
Effective until December 31, 2022, the Company has a tax ruling which was obtained from
the Israeli Tax Authorities and determines that the company owns an industrial enterprise and Preferred Technological Enterprise as defined
in the Investments Law. The Company is in the process to apply to the Israeli Tax Authorities for an extension of the approval.
U.S. Federal Income Tax Considerations
The following summary describes certain United States federal income tax considerations
generally applicable to United States Holders (as defined below) of our ADSs. This summary deals only with our ADSs held as capital assets
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, (the “Internal Revenue Code”). This summary
also does not address the tax consequences that may be relevant to holders in special tax situations including, without limitation, dealers
in securities, traders that elect to use a mark-to-market method of accounting, holders that own our ADSs as part of a “straddle,”
“hedge,” “conversion transaction,” or other integrated investment, banks or other financial institutions, individual
retirement accounts and other tax-deferred accounts, insurance companies, tax-exempt organizations, United States expatriates, holders
whose functional currency is not the U.S. dollar, holders that are real estate investment trusts or regulated investment companies, grantor
trusts, holders subject to special tax accounting rules as a result of any item of gross income with respect to our ADSs being taken into
account in an applicable financial statement, holders which are entities or arrangements treated as partnerships, S-corporations or other
pass-through entities for United States federal income tax purposes, holders who acquired ADSs pursuant to the exercise of any employee
share option or otherwise as compensation or holders that directly, indirectly, or constructively own 10% or more of the total voting
power or value of our outstanding stock.
This summary is based upon the Internal Revenue Code, applicable
United States Treasury regulations, administrative pronouncements and judicial decisions, in each case as in effect on the date hereof,
all of which are subject to change (possibly with retroactive effect). No ruling will be requested from the Internal Revenue Service,
or IRS, regarding the tax consequences described herein, and there can be no assurance that the IRS will agree with the discussion set
out below. This summary does not address any United States federal tax consequences other than United States federal income tax consequences
(such as the alternative minimum tax, estate and gift tax or the Medicare tax on net investment income).
As used herein, the term “United States Holder” means
a beneficial owner of our ADSs that is, for United States federal income tax purposes, (i) an individual who is a citizen or resident
of the United States, (ii) a corporation or other entity taxable as a corporation created or organized under the laws of the United States
or any state thereof or therein or the District of Columbia, (iii) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust (a) that is subject to the supervision of a court within the United States and the
control of one or more “United States persons” as defined in Internal Revenue Code Section 7701(a)(30), or (b) that has a
valid election in effect under applicable United States Treasury regulations to be treated as a “United States person.”
If an entity or arrangement treated as a partnership for United
States federal income tax purposes acquires our ADSs, the tax treatment of a partner in the partnership generally will depend upon the
status of the partner and the activities of the partnership. Partners of a partnership considering an investment in our ADSs should consult
their tax advisors regarding the United States federal income tax consequences of acquiring, owning, and disposing of our ADSs.
The discussion below assumes that the representations contained
in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement will be complied with in
accordance with their terms. Generally, a holder of an ADS should be treated for U.S. federal income tax purposes as holding the ordinary
shares represented by the ADS. Accordingly, no gain or loss will generally be recognized upon an exchange of ADSs for ordinary shares.
THE SUMMARY OF UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES SET OUT BELOW IS FOR GENERAL INFORMATION ONLY. ALL CURRENT OR PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS
AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING AND DISPOSING OF OUR ADSS, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL
AND NON-U.S. TAX LAWS AND POSSIBLE CHANGES IN TAX LAW.
Dividends
Subject to the discussion below under “—Passive
Foreign Investment Company,” the amount of dividends paid to a United States Holder with respect to our ADSs before reduction
for any Israeli taxes withheld therefrom generally will be included in the United States Holder’s gross income as dividend income
from foreign sources to the extent paid out of our current or accumulated earnings and profits (as determined for United States federal
income tax purposes). Distributions in excess of earnings and profits are generally treated as a non-taxable return of capital to the
extent of the United States Holder’s adjusted tax basis in those ADSs and thereafter as capital gain. However, we do not intend
to calculate our earnings and profits under United States federal income tax principles. Therefore, United States Holders should expect
that a distribution will generally be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return
of capital or as capital gain under the rules described above. The dividends will not be eligible for the dividends received deduction
available to corporations in respect of dividends received from other United States corporations. The amount of any distribution paid
in foreign currency will be equal to the U.S. dollar value of such currency, translated at the spot rate of exchange on the date such
distribution is included in the United States Holder’s income, regardless of whether the payment is in fact converted into U.S.
dollars at that time.
75
Dividends paid on our ADSs generally will constitute “foreign
source income” for purposes of the foreign tax credit. Foreign withholding tax (if any) paid on dividends on our ADSs at the rate
applicable to a United States Holder (taking into account any applicable income tax treaty) may, subject to limitations and conditions,
be treated as foreign income tax eligible for credit against such holder’s United States federal income tax liability or, at such
holder’s election, eligible for deduction in computing such holder’s United States federal taxable income. If a refund of
the tax withheld is available under the laws of the state of Israel or under the applicable income tax treaty, the amount of tax withheld
that is refundable will not be eligible for such credit against a United States Holder’s U.S. federal income tax liability (and
will not be eligible for the deduction against U.S. federal taxable income). If the dividends are taxed as “qualified dividend income,”
as discussed below, the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will generally
be limited to the gross amount of the dividend, multiplied by the reduced rate applicable to the qualified dividend income, divided by
the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately
with respect to specific classes of income. For this purpose, any dividends distributed by us with respect to ADSs will generally constitute
“passive category income.”
The rules governing the treatment of foreign taxes imposed on a
United States Holder and foreign tax credits are complex, and United States Holders should consult their tax advisors about the impact
of these rules in their particular situations.
Dividends received by certain non-corporate United States Holders (including individuals)
may be “qualified dividend income,” which is taxed at the lower capital gain rate, provided that (i) either our ADSs are readily
tradable on an established securities market in the United States or we are eligible for benefits under a comprehensive United States
income tax treaty that includes an exchange of information program and which the United States Treasury Department has determined is satisfactory
for these purposes, (ii) we are neither a PFIC (as discussed below) nor treated as such with respect to the United States Holder for either
our taxable year in which the dividend is paid or our preceding taxable year, (iii) the United States Holder satisfies certain holding
period and other requirements and (iv) the United States Holder is not under an obligation to make related payments with respect to positions
in substantially similar or related property. In this regard, shares generally are considered to be readily tradable on an established
securities market in the United States if they are listed on the Nasdaq, as is the case with our ADSs. United States Holders should consult
their tax advisors regarding the availability of the reduced tax rate on dividends paid with respect to our ADSs.
Disposition of ADSs
Subject to the discussion below under “—Passive
Foreign Investment Company,” a United States Holder generally will recognize capital gain or loss for United States federal
income tax purposes on the sale or other taxable disposition of our ADSs equal to the difference, if any, between the amount realized
and the United States Holder’s adjusted tax basis in those ADSs. A United States Holder’s initial tax basis in shares generally
will equal the cost of such shares. If any foreign tax is imposed on the sale, exchange or other disposition of our ADSs, a United States
Holder’s amount realized will include the gross amount of the proceeds of the deposits before deduction of the tax. In general,
capital gains recognized by a non-corporate United States Holder, including an individual, are treated as long term capital gain and thus
subject to a lower rate under current law if such United States Holder’s holding period in our ADSs exceeds one year. The deductibility
of capital losses is subject to limitations. Any such gain or loss generally will be treated as United States source income or loss for
purposes of the foreign tax credit. Because gain for the sale or other taxable disposition of our ADSs will be treated as United States
source income, and you may use foreign tax credits against only the portion of United States federal income tax liability that is attributed
to foreign source income in the same category, your ability to utilize a foreign tax credit with respect to any foreign tax imposed on
any such sale or other taxable disposition, if any, may be significantly limited. In addition, if you are eligible for the benefit of
the income tax convention between the United States and the State of Israel and pay Israeli tax in excess of the amount applicable to
you under such convention or if the Israeli tax paid is refundable, you will not be able to claim any foreign tax credit or deduction
with respect to such Israeli tax. You should consult your tax advisor as to whether the Israeli tax on gains may be creditable or deductible
in light of your particular circumstances and your ability to apply the provisions of an applicable treaty.
If the consideration received upon the sale or other taxable disposition
of our ADSs is paid in foreign currency, the amount realized will be the U.S. dollar value of the payment received, translated at the
spot rate of exchange on the date of taxable disposition. If our ADSs are treated as traded on an established securities market, a cash
basis United States Holder and an accrual basis United States Holder who has made a special election (which must be applied consistently
from year to year and cannot be changed without the consent of the IRS) will determine the U.S. dollar value of the amount realized in
foreign currency by translating the amount received at the spot rate of exchange on the settlement date of the taxable disposition. An
accrual basis United States Holder that does not make the special election will recognize exchange gain or loss to the extent attributable
to the difference between the exchange rates on the date of the taxable disposition and the settlement date, and such exchange gain or
loss generally will constitute ordinary income or loss.
Passive Foreign Investment Company
We would be a PFIC for any taxable year if, after the application
of certain look-through rules, either: (i) 75% or more of our gross income for such year is “passive income” (as defined in
the relevant provisions of the Internal Revenue Code), or (ii) 50% or more of the value of our assets (determined on the basis of a quarterly
average) during such year is attributable to assets that produce or are held for the production of passive income. Passive income generally
includes, among other things, rents, dividends, interest, royalties, gains from the disposition of passive assets and gains from commodities
and securities transactions. For purposes of this test, we will be treated as owning a proportionate share of the assets and earning a
proportionate share of the income of any other corporation of which we own, directly or indirectly, 25% or more (by value) of the stock.
76
Based on the current and anticipated composition of our income,
assets and operations we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable future. However, whether
we are a PFIC is a factual determination that must be made annually after the close of each taxable year. This determination will depend
on, among other things, the composition of the Company’s income and assets, as well as the market value of our ADSs and assets,
which may fluctuate significantly. In addition, it is possible that the IRS may take a contrary position with respect to our determination
in any particular year. Therefore, there can be no assurance that we will not be classified as a PFIC for the current taxable year or
any future taxable year.
Certain adverse United States federal income tax consequences could
apply to a United States Holder if we are treated as a PFIC for any taxable year during which such United States Holder holds our ADSs.
Under the PFIC rules, if we were considered a PFIC at any time that a United States Holder holds our ADSs, we would continue to be treated
as a PFIC with respect to such holder’s investment unless (i) we cease to be a PFIC, and (ii) the United States Holder has made
a “deemed sale” election under the PFIC rules. If such election is made, a United States Holder will be deemed to have sold
our ADSs at their fair market value on the last day of our last taxable year in which we were a PFIC, and any gain from the deemed sale
would be subject to the rules described in the second following paragraph. After the deemed sale election, so long as we do not become
a PFIC in a subsequent taxable year, the ADSs with respect to which such election was made will not be treated as shares in a PFIC.
United States Holders should consult their tax advisors as to the
possibility and consequences of making a deemed sale election if we are (or were to become) and then cease to be a PFIC, and such election
becomes available.
If we are a PFIC for any taxable year that a United States Holder
holds our ADSs, unless the United States Holder makes one of the elections described below, any gain recognized by the United States Holder
on a sale or other disposition of our ADSs would be allocated pro-rata over the United States Holder’s holding period for the ADSs.
The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary
income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or the highest
rate in effect for corporations, as appropriate, for that taxable year, and an interest charge would be imposed. Further, to the extent
that any distribution received by a United States Holder on our ADSs exceeds 125% of the average of the annual distributions on the ADSs
received during the preceding three years or the United States Holder’s holding period, whichever is shorter, that distribution
would be subject to taxation in the same manner as gain on the sale or other disposition of our ADSs if we were a PFIC, described above.
If we are treated as a PFIC with respect to a United States Holder for any taxable year, the United States Holder will be deemed to own
shares in any of the foreign entities in which we may hold equity interests that also are PFICs, or lower-tier PFICs.
Certain elections may be available that would result in alternative
treatments (such as mark-to-market treatment or treatment as a qualified electing fund (“QEF”)) of our ADSs if we are considered
a PFIC. However, we do not expect to furnish United States Holders of our ADSs with the tax information necessary to enable a United States
Holder to make a QEF election. In addition, an election for mark-to-market treatment is unlikely to be available to mitigate any adverse
tax consequences with respect to a subsidiary that is also a PFIC. If we are considered a PFIC, a United States Holder will also be subject
to annual information reporting requirements. United States Holders should consult their tax advisors about the potential application
of the PFIC rules to an investment in our ADSs and the potential consequences related thereto.
United States Holders should consult their tax
advisors regarding whether we are a PFIC as well as the potential U.S. federal income tax consequences of holding and disposing of our
ADSs if we are or become classified as a PFIC, including the possibility of making a mark-to-market election in their particular circumstances.
Information Reporting and Backup Withholding
Distributions on our ADSs and proceeds from the sale or other taxable
disposition of our ADSs may be subject to information reporting to the IRS and possible backup withholding. Backup withholding will not
apply, however, to a United States Holder who furnishes a correct taxpayer identification number and certifies that it is not subject
to backup withholding or that is otherwise exempt from backup withholding. United States Holders that are required to establish their
exempt status generally must provide such certification on IRS Form W-9.
Backup withholding is not an additional tax. Rather, any amount
withheld under the backup withholding rules will be refundable or creditable against the United States Holder’s United States federal
income tax liability, provided the required information is timely furnished to the IRS. United States Holders should consult their tax
advisors regarding the application of the United States information reporting and backup withholding rules.
Foreign Financial Asset Reporting
Certain United States Holders are required to report their holdings
of certain foreign financial assets, including our ADSs, if the aggregate value of all of these assets exceeds certain threshold amounts,
subject to certain exceptions (including an exception for ADSs held in accounts maintained by certain financial institutions). Penalties
can apply if United States Holders fail to satisfy such reporting requirements. United States Holders should consult their tax advisors
regarding the application of these reporting requirements on the ownership and disposition of our ADSs.
77
10.F. DIVIDENDS AND PAYING AGENTS
Not applicable.
10.G. STATEMENT BY EXPERTS
Not applicable.
10.H. DOCUMENTS ON DISPLAY
Any statement in this Annual Report about any of our contracts
or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this Annual Report, the contract
or document is deemed to modify the description contained in this Annual Report. You must review the exhibits themselves for a complete
description of the contract or document.
We are subject to the informational requirements of the Exchange Act. Accordingly, we
are required to file reports and other information with the SEC, including annual reports on Form 20-F and periodic reports on Form 6-K.
The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with
the SEC. The address of that website is www.sec.gov. In addition, copies of all information and documents pertaining to press releases,
media conferences, investor updates and presentations at analyst and investor presentation conferences can be downloaded from our website
www.tremorinternational.com. The information contained on our website is not a part of this Form 20-F.
As a foreign private issuer, we are exempt under the Exchange Act
from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors
and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange
Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently
or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we furnish or make available to our
shareholders certain reports including Annual Reports on Form 20-F, periodic reports on Form 6-K and other information, with the SEC pursuant
to the rules and regulations of the SEC that apply to foreign private issuers.
10.I. SUBSIDIARY INFORMATION
Not applicable.
ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We are exposed to market risk in the ordinary course of our business.
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
Our market risk exposure is primarily a result of foreign currency exchange rates and interest rates, which are discussed in detail below.
See Note 18f and 18g of our audited consolidated financial statements for further information about market risk sensitivity.
Interest rate risk
We believe that we have no significant exposure to interest rate
risk as we have no significant long-term loans. However, our future interest income may fall short of expectations due to changes in market
interest rates.
Foreign currency exchange risk
Foreign currency transactions
Transactions in foreign currencies are translated to the respective
functional currencies of us and our subsidiaries at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are translated into 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.
Foreign operations
The assets and liabilities of foreign operations, including goodwill
and fair value adjustments arising on acquisition, are translated to U.S. dollars at exchange rates at the reporting date. The income
and expenses of foreign operations are translated to U.S. dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognized in other comprehensive
income and are presented in equity.
ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES
12.A. DEBT SECURITIES
Not applicable.
78
12.B. WARRANTS AND RIGHTS
Not applicable.
12.C. OTHER SECURITIES
Not applicable.
12.D. AMERICAN DEPOSITARY SHARES
Citibank, N.A. (“Citibank”), is our depositary bank
for the American Depositary Shares representing our ordinary shares.
Citibank was appointed as depositary bank pursuant to a deposit agreement. The form
of the deposit agreement will be filed with the SEC under cover of a Registration Statement on Form F-6. You may obtain a copy of the
deposit agreement from the SEC’s website (www.sec.gov). Please refer to Commission File No. 333-256452 when retrieving such copy.
Fees and Charges
As an ADS holder, you will be required to pay the following fees
under the terms of the deposit agreement:
|
Service |
Fees | |
|
• Issuance of ADSs (e.g., an issuance
of ADS upon a deposit of ordinary shares, upon a change in the ADS(s)-to-ordinary share(s) ratio, or for any other reason), excluding
ADS issuances as a result of distributions of ordinary shares)
|
Up to U.S. 5¢ per ADS issued | |
|
• Cancellation of ADSs (e.g., a cancellation
of ADSs for delivery of deposited property, upon a change in the ADS(s)-to-ordinary share(s) ratio, or for any other reason)
|
Up to U.S. 5¢ per ADS cancelled | |
|
• Distribution of cash dividends or other
cash distributions (e.g., upon a sale of rights and other entitlements)
|
Up to U.S. 5¢ per ADS held | |
|
• Distribution of ADSs pursuant to (i)
stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs
|
Up to U.S. 5¢ per ADS held | |
|
• Distribution of securities other than
ADSs or rights to purchase additional ADSs (e.g., upon a spin-off)
|
Up to U.S. 5¢ per ADS held | |
|
• ADS Services
|
Up to U.S. 5¢ per ADS held on the applicable record date(s) established by the depositary
bank | |
|
• Registration of ADS transfers (e.g.,
upon a registration of the transfer of registered ownership of ADSs, upon a transfer of ADSs into DTC and vice
versa, or for any other reason)
|
Up to U.S. 5¢ per ADS (or fraction thereof) transferred | |
|
• Conversion of ADSs of one series for
ADSs of another series (e.g., upon conversion of Partial Entitlement ADSs for Full Entitlement ADSs, or upon conversion of Restricted
ADSs (each as defined in the Deposit Agreement) into freely transferable ADSs, and vice versa).
|
Up to U.S. 5¢ per ADS (or fraction thereof) converted |
As an ADS holder you will also be responsible to pay certain charges
such as:
| • |
taxes (including applicable interest and penalties) and other governmental charges; |
| • |
the registration fees as may from time to time be in effect for the registration of ordinary shares on the share register and applicable
to transfers of ordinary shares to or from the name of the custodian, the depositary bank or any nominees upon the making of deposits
and withdrawals, respectively; |
| • |
certain cable, telex and facsimile transmission and delivery expenses; |
| • |
the fees, expenses, spreads, taxes and other charges of the depositary bank and/or service providers (which may be a division, branch
or affiliate of the depositary bank) in the conversion of foreign currency; |
79
| • |
the reasonable and customary out-of-pocket expenses incurred by the depositary bank in connection with
compliance with exchange control regulations and other regulatory requirements applicable to ordinary shares, ADSs and American Depositary
Receipts (“ADRs”); and |
| • |
the fees, charges, costs and expenses incurred by the depositary bank, the custodian, or any nominee in connection with the ADR program.
|
ADS fees and charges for (i) the issuance of ADSs,
and (ii) the cancellation of ADSs are charged to the person for whom the ADSs are issued (in the case of ADS issuances) and to the person
for whom ADSs are cancelled (in the case of ADS cancellations). In the case of ADSs issued by the depositary bank into DTC, the ADS issuance
and cancellation fees and charges may be deducted from distributions made through DTC, and may be charged to the DTC participant(s) receiving
the ADSs being issued or The Depositary Trust Company (“DTC”), participant(s) holding the ADSs being cancelled, as the case
may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account of the applicable beneficial
owner(s) in accordance with the procedures and practices of the DTC participants as in effect at the time. ADS fees and charges in respect
of distributions and the ADS service fee are charged to the holders as of the applicable ADS record date. In the case of distributions
of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed. In the case of (i) distributions
other than cash and (ii) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of the ADS fees and charges
and such ADS fees and charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADS fees and
charges for distributions other than cash and the ADS service fee may be deducted from distributions made through DTC, and may be charged
to the DTC participants in accordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the
amount of such ADS fees and charges to the beneficial owners for whom they hold ADSs. In the case of (i) registration of ADS transfers,
the ADS transfer fee will be payable by the ADS Holder whose ADSs are being transferred or by the person to whom the ADSs are transferred,
and (ii) conversion of ADSs of one series for ADSs of another series, the ADS conversion fee will be payable by the Holder whose ADSs
are converted or by the person to whom the converted ADSs are delivered.
In the event of refusal to pay the depositary bank fees, the depositary
bank may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of
the depositary bank fees from any distribution to be made to the ADS holder. Note that the fees and charges you may be required to pay
may vary over time and may be changed by us and by the depositary bank. You will receive prior notice of such changes. The depositary
bank may reimburse us for certain expenses incurred by us in respect of the ADR program, by making available a portion of the ADS fees
charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree from time to time.
The additional information called for by this item is set forth in Exhibit 2.1 to this
Annual Report on Form 20-F.
80
PART II
ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM 15: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act that are designed to ensure that information required to be disclosed in the Company’s reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Any controls and procedures can provide
only reasonable assurance of achieving the desired objectives of the disclosure controls and procedures. Our management, with the participation
of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of December 31, 2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that, as of December 31, 2022, our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial
Reporting
Our management is responsible for establishing
and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting. Internal control over financial reporting is defined in rules 13a-15(f) and 15d-15(f) under the Exchange Act as a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on
the audited consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not
prevent or detect material misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on
the criteria set forth in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this assessment, our management concluded that, as of December 31, 2022, our internal control over
financial reporting was effective.
This
Annual Report does not include an attestation report of our registered public accounting regarding internal control over financial reporting
firm because we are currently an emerging growth company in accordance with the Exchange Act.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting (as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Annual Report that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16: [RESERVED]
16.A. AUDIT COMMITTEE AND FINANCIAL EXPERT
Our board of directors has determined that Neil Jones qualifies
as an audit committee financial expert, as defined by the rules of the SEC and has the requisite financial experience defined by the Nasdaq
rules. In addition, Mr. Jones is independent as such term is defined in Rule 10A-3(b)(1) under the Exchange Act and under the listing
standards of the Nasdaq Global Market. See Item 6. “Directors,
Senior Management and Employees⸺6.C. Board Practices” of this Annual Report.
16.B. CODE OF ETHICS
We have adopted a Code of Ethics and Conduct that applies to all our employees, officers
and directors, including our principal executive, principal financial and principal accounting officers. Our Code of Ethics and Conduct
addresses, among other things, competition and fair dealing, conflicts of interest, financial matters and external reporting, company
funds and assets, confidentiality and corporate opportunity requirements and the process for reporting violations of the Code of Ethics
and Conduct, employee misconduct, conflicts of interest or other violations. A copy of the code is delivered to every employee of the
Company and all of its subsidiaries and is available to investors and others on our website at investors.tremorinternational.com/governance/governance-overview
or by contacting our investor relations department. Our Code of Ethics and Conduct is intended to meet the definition of “code of
ethics” under Item 16.B. of Form 20-F.
81
16.C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees
Somekh Chaikin, a member firm of KPMG International, located in Tel Aviv, Israel (PCAOB
ID No. 1057), has served as our independent registered public accounting firm for 2022 and 2021. The following are KPMG fees for professional
services in each of the respective years:
|
Year Ending December 31, |
||||||||
|
2022 |
2021 |
|||||||
|
(in thousands) |
||||||||
|
Audit fees |
842 |
551 |
||||||
|
Audit-related fees |
130 |
125 |
||||||
|
Tax fees |
288 |
213 |
||||||
|
Total |
1,260 |
889 |
||||||
(1) “Audit
fees” are the aggregate fees billed for professional services rendered for the audit of our annual financial statements or services
that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.
(2) “Audit-related
fees” are the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit
and are not reported under audit fees. These fees primarily consist of accounting consultations regarding the accounting treatment of
matters that occur in the regular course of business, implications of new accounting pronouncements and other accounting issues that occur
from time to time.
Pre-Approval Policies and Procedures
The advance approval of our audit committee or members thereof,
to whom approval authority has been delegated, is required for all audit and non-audit services provided by our auditors.
Our audit committee has adopted a pre-approval policy for the engagement
of our independent accountant to perform certain audit and non-audit services. Pursuant to this policy, which is designed to assure that
such engagements do not impair the independence of our auditors, the audit committee pre-approves annually a catalog of specific audit
and non-audit services in the categories of audit service, audit-related service and tax services that may be performed by our independent
accountants.
ITEM 16.D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
Not applicable.
ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS.
On
February 23, 2022, our board of directors authorized a repurchase plan under which up to $75.0 million ordinary shares could be purchased
on AIM. By September 30, 2022, the Company completed the $75.0 million share repurchase program, repurchasing a total of 13,792,485 ordinary
shares representing approximately 9% of shares outstanding at an average price of 437.54 pence, for a total investment of approximately
£60.5 million, or $75.0 million, including fees.
On
September 20, 2022, our board of directors authorized a new share repurchase program, authorizing the purchase of up to $20.0 million
of its ordinary shares on AIM. The new repurchase plan commenced on October 1, 2022, and will continue until April 1, 2023, or until it
has been completed and the program may be suspended, modified, or discontinued at any time at the Company’s discretion, subject
to applicable law. From October 1, 2022 through December 31, 2022, the Company repurchased under such plan a total of 3,114,310 ordinary
shares at an average price of 304.48 pence, for a total investment of approximately £9.5 million, or $11.3 million, including fees.
All share repurchases are made in accordance with all applicable securities laws and regulations.
82
During 2022 under the prior repurchase plan and the new repurchase
plan, we used $86.3 million to repurchase 16,906,795 ordinary shares on AIM pursuant to the publicly announced share repurchase programs,
representing approximately 11% of shares outstanding. The table below provides detailed information.
|
Period |
|
Total Number of Ordinary Shares Purchased (1) |
|
|
Average Price Paid per Ordinary Share |
|
|
Total Number of Ordinary Shares Purchased as Part of Publicly Announced
Plans or Programs (2) |
|
|
Maximum Number (or Approximate Dollar Value) of Ordinary Shares
that May Yet be Purchased under the Plans or Programs (2) |
| ||||
|
January 1 – January 31 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
February 1 – February 28 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
March 1 – March 31 |
|
|
1,684,510 |
|
|
$ |
7.55 |
|
|
|
1,684,510 |
|
|
$ |
75,000,000 |
|
|
April 1 – April 30 |
|
|
1,575,151 |
|
|
$ |
6.87 |
|
|
|
1,575,151 |
|
|
$ |
62,285,772 |
|
|
May 1 – May 31 |
|
|
1,835,509 |
|
|
$ |
5.63 |
|
|
|
1,835,509 |
|
|
$ |
51,468,912 |
|
|
June 1 – June 30 |
|
|
2,306,300 |
|
|
$ |
4.91 |
|
|
|
2,306,300 |
|
|
$ |
41,136,764 |
|
|
July 1 – July 31 |
|
|
2,200,981 |
|
|
$ |
4.75 |
|
|
|
2,200,981 |
|
|
$ |
29,812,463 |
|
|
August 1 – August 31 |
|
|
4,061,034 |
|
|
$ |
4.61 |
|
|
|
4,061,034 |
|
|
$ |
19,368,757 |
|
|
September 1 – September 30 |
|
|
129,000 |
|
|
$ |
3.80 |
|
|
|
129,000 |
|
|
$ |
666,048 |
|
|
October 1 – October 31 |
|
|
489,203 |
|
|
$ |
3.69 |
|
|
|
489,203 |
|
|
$ |
20,000,000 |
|
|
November 1 – November 30 |
|
|
1,770,572 |
|
|
$ |
3.54 |
|
|
|
1,770,572 |
|
|
$ |
18,192,559 |
|
|
December 1 – December 31 |
|
|
854,535 |
|
|
$ |
3.70 |
|
|
|
854,535 |
|
|
$ |
11,927,953 |
|
|
Total |
|
|
16,906,795 |
|
|
$ |
5.09 |
* |
|
|
16,906,795 |
|
|
|
|
|
* Equivalent to $10.18 per ADS Each ADS represents two ordinary shares.
(1) All
shares purchased were purchased as part of the publicly announced repurchase program.
(2) The
first repurchase program of $75.0 million which was publicly announced on February 24, 2022, commenced on March 1, 2022 and was completed
by September 30, 2022. The second repurchase program of $20.0 million which was publicly announced on September 20, 2022, commenced on
October 1, 2022 and will continue until April 1, 2023, or until it has been completed.
16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
None.
16.G. CORPORATE GOVERNANCE
As a foreign private issuer, we are permitted to comply with Israeli
corporate governance practices instead of the Nasdaq Stock Market requirements, provided that
we disclose those Nasdaq Stock Market requirements with which we do not comply and the equivalent Israeli requirement that we follow instead.
We rely on this “foreign private issuer exemption”
with respect to the quorum requirement for shareholder meetings. As permitted under the Companies Law, pursuant to our amended and restated
articles of association, the quorum required for an ordinary meeting of shareholders consists of at least two shareholders present in
person, by proxy or by other voting instrument in accordance with the Companies Law who hold at least 25% of the voting power of our shares
(and if the meeting is adjourned for a lack of quorum, the quorum for such adjourned meeting will be, subject to certain exceptions, any
number of shareholders), instead of 33-1/3% of the issued share capital as required under the corporate governance rules of Nasdaq. We
otherwise comply with the rules generally applicable to U.S. domestic companies listed on Nasdaq. We may, however, in the future decide
to use the “foreign private issuer exemption” and opt out of some or all of the other corporate governance rules.
See Item 6.C. “Board
Practices.”
16.H. MINE SAFETY DISCLOSURE
Not applicable.
16.I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 17: FINANCIAL STATEMENTS
We have provided the financial statement information required by
this Item 17 in, and pursuant to Item 18, such disclosure which is incorporated by reference herein.
ITEM 18: FINANCIAL STATEMENTS
Please refer to the financial statements filed as part of this
Annual Report beginning on page F-1.
83
ITEM 19: EXHIBITS
See exhibit index incorporated herein by reference.
| Exhibit No. |
Description |
| 1.1 |
| 2.1 |
| 2.2 |
| 2.3 |
| 4.1 |
| 4.2 |
| 4.3 |
| 4.4 |
| 8.1 |
| 12.1 |
| 12.2 |
| 13.1 |
| 13.2 |
| 15.1 |
| 101.INS |
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within
the Inline XBRL document. |
| 101.SCH |
XBRL Taxonomy Extension Schema Document. |
| 101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF |
XBRL Taxonomy Definition Linkbase Document. |
| 101.LAB |
XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 |
Cover Page Interactive Data File (the cover page iXBRL tags are embedded within the Inline XBRL document). |
___________
* The schedules and exhibits to this agreement have been omitted pursuant to Instructions as to Exhibits
to Form 20-F. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.
84
SIGNATURES
The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
|
|
TREMOR INTERNATIONAL LTD.
By: /s/
Ofer Druker
Ofer Druker Chief Executive Officer By: /s/
Sagi Niri Sagi Niri Chief Financial Officer |
Date: March 7, 2023
85
TREMOR INTERNATIONAL LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2022
TABLE OF CONTENTS
|
Page
|
|
|
F - 2
|
|
|
CONSOLIDATED FINANCIAL STATEMENTS:
|
|
|
F - 3
|
|
|
F - 4
|
|
|
F - 5 - F - 6
|
|
|
F - 7
|
|
|
F - 8 - F - 59 |
F - 1
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Tremor International Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Tremor International Ltd. and its subsidiaries (the Group) as of December 31, 2022 and 2021, the related consolidated statements of operation and other comprehensive income, change in equity, and cash flows for each of the years in the three‑year period ended December 31, 2022 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2022, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Somekh Chaikin
Member Firm of KPMG International
We have served as the Company’s auditor since 2014.
March 6, 2023
F - 2
TREMOR INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
December 31
|
|||||||||||
|
2022
|
2021
|
||||||||||
|
Note
|
USD thousands
|
||||||||||
|
Assets
|
|||||||||||
|
ASSETS:
|
|||||||||||
|
Cash and cash equivalents
|
10
|
|
|
||||||||
|
Trade receivables, net
|
8
|
|
|
||||||||
|
Other receivables
|
8
|
|
|
||||||||
|
Current tax assets
|
|
|
|||||||||
|
TOTAL CURRENT ASSETS
|
|
|
|||||||||
|
Fixed assets, net
|
5
|
|
|
||||||||
|
Right-of-use assets
|
6
|
|
|
||||||||
|
Intangible assets, net
|
7
|
|
|
||||||||
|
Deferred tax assets
|
4
|
|
|
||||||||
|
Investment in shares |
18 |
|
|||||||||
|
Other long-term assets
|
|
|
|||||||||
|
TOTAL NON-CURRENT ASSETS
|
|
|
|||||||||
|
TOTAL ASSETS
|
|
|
|||||||||
|
Liabilities and shareholders’ equity
|
|||||||||||
|
LIABILITIES:
|
|||||||||||
|
Current maturities of lease liabilities
|
6
|
|
|
||||||||
|
Trade payables
|
9
|
|
|
||||||||
|
Other payables
|
9
|
|
|
||||||||
|
Current tax liabilities
|
|
|
|||||||||
|
TOTAL CURRENT LIABILITIES
|
|
|
|||||||||
|
Employee benefits
|
|
|
|||||||||
|
Long-term lease liabilities
|
6
|
|
|
||||||||
|
Long term debt |
11 | ||||||||||
|
Other long-term liabilities
|
20
|
|
|
||||||||
|
Deferred tax liabilities
|
4
|
|
|
|
|||||||
|
TOTAL NON-CURRENT LIABILITIES
|
|
|
|||||||||
|
TOTAL LIABILITIES
|
|
|
|||||||||
|
SHAREHOLDERS’ EQUITY:
|
15
|
||||||||||
|
Share capital
|
|
|
|||||||||
|
Share premium
|
|
|
|||||||||
|
Other comprehensive income (loss)
|
(
|
) |
|
||||||||
|
Retained earnings
|
|
|
|||||||||
|
TOTAL SHAREHOLDERS’ EQUITY
|
|
|
|||||||||
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|||||||||
|
Chairman of the Board of Directors |
CEO |
|
CFO |
Date of approval of the financial statements: March 6, 2023.
The accompanying notes are an integral part of these consolidated financial statements.
F - 3
TREMOR INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF OPERATION AND OTHER COMPREHENSIVE INCOME
|
Year ended
December 31
|
|||||||||||||||
|
2022
|
2021
|
2020
|
|||||||||||||
|
Note
|
USD thousands
|
||||||||||||||
|
Revenues
|
12
|
|
|
|
|||||||||||
|
Cost of Revenues (Exclusive of depreciation and amortization shown separately below)
|
13
|
|
|
|
|||||||||||
|
Research and development expenses
|
|
|
|
||||||||||||
|
Selling and marketing expenses
|
|
|
|
||||||||||||
|
General and administrative expenses
|
14
|
|
|
|
|||||||||||
|
Depreciation and amortization
|
|
|
|
||||||||||||
|
Other expenses (income), net
|
|
(
|
)
|
(
|
) |
|
|||||||||
|
Total operating costs
|
|
|
|
||||||||||||
|
Operating Profit (Loss)
|
|
|
(
|
) | |||||||||||
|
Financing income
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Financing expenses
|
|
|
|
||||||||||||
|
Financing expenses, net
|
|
|
|
||||||||||||
|
Profit (Loss) before taxes on income
|
|
|
(
|
) | |||||||||||
|
Tax benefit (expenses)
|
4
|
(
|
) |
|
|
||||||||||
|
Profit for the year
|
|
|
|
||||||||||||
|
Other comprehensive income (loss) items:
|
|||||||||||||||
|
Foreign currency translation differences for foreign operations
|
(
|
)
|
(
|
) |
|
||||||||||
|
Total other comprehensive income (loss) for the year
|
(
|
)
|
(
|
) |
|
||||||||||
|
Total comprehensive income for the year
|
|
|
|
||||||||||||
|
Earnings per share
|
|||||||||||||||
|
Basic earnings per share (in USD)
|
16
|
|
|
|
|||||||||||
|
Diluted earnings per share (in USD)
|
16
|
|
|
|
|||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F - 4
TREMOR INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
Share
capital
|
Share
premium
|
Other
comprehensive
income
|
Retained
Earnings
|
Total
|
||||||||||||||||
|
USD thousands
|
||||||||||||||||||||
|
Balance as of January 1, 2020 |
|
|
|
|
|
|||||||||||||||
|
Total Comprehensive income for the year
|
||||||||||||||||||||
|
Profit for the year
|
|
|
|
|
|
|||||||||||||||
|
Other comprehensive Income:
|
||||||||||||||||||||
|
Foreign currency translation
|
|
|
|
|
|
|||||||||||||||
|
Total comprehensive income for the year
|
|
|
|
|
|
|||||||||||||||
|
Transactions with owners, recognized directly in equity
|
||||||||||||||||||||
|
Issuance of shares in a Business Combination
|
|
|
|
|
|
|||||||||||||||
|
Revaluation of liability for put option on non- controlling interests
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Own shares acquired
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
||||||||||||
|
Share based compensation
|
|
|
|
|
|
|||||||||||||||
|
Exercise of share options
|
|
|
|
|
|
|||||||||||||||
|
Balance as of December 31, 2020
|
|
|
|
|
|
|||||||||||||||
|
Total Comprehensive Income (loss) for the year |
||||||||||||||||||||
|
Profit for the year
|
|
|
|
|
|
|||||||||||||||
|
Other comprehensive loss:
|
||||||||||||||||||||
|
Foreign Currency Translation
|
|
|
(
|
) |
|
(
|
) | |||||||||||||
|
Total comprehensive Income (loss) for the year |
|
|
(
|
) |
|
|
||||||||||||||
|
Transactions with owners, recognized directly in equity
|
||||||||||||||||||||
|
Revaluation of liability for put option on non- controlling interests
|
|
|
|
|
|
|||||||||||||||
|
Own shares acquired
|
( |
) | ( |
) | ( |
) | ||||||||||||||
|
Share based compensation
|
|
|
|
|
|
|||||||||||||||
|
Exercise of share options
|
|
|
|
|
|
|||||||||||||||
|
Issuance of shares
|
|
|
|
|
|
|||||||||||||||
|
Issuance of Restricted shares
|
|
(
|
) |
|
|
|
||||||||||||||
|
Balance as of December 31, 2021
|
|
|
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F - 5
TREMOR INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Cont.)
|
|
Share capital |
Share premium |
Other comprehensive income |
Retained Earnings |
Total |
|||||||||||||||
|
|
USD thousands |
|||||||||||||||||||
|
|
||||||||||||||||||||
|
Total Comprehensive Income (loss) for the year |
||||||||||||||||||||
|
Profit for the year |
|
|
|
|
||||||||||||||||
|
Other comprehensive loss: |
||||||||||||||||||||
|
Foreign Currency Translation |
|
|
( |
) |
( |
) |
||||||||||||||
|
|
||||||||||||||||||||
|
Total comprehensive Income (loss) for the year |
|
|
( |
) |
|
|
||||||||||||||
|
|
||||||||||||||||||||
|
Transactions with owners, recognized directly in equity |
||||||||||||||||||||
|
Own shares acquired |
( |
) |
( |
) |
|
|
|
|
( |
) |
||||||||||
|
Share based compensation |
|
|
|
|||||||||||||||||
|
Exercise of share options |
|
|
|
|
|
|||||||||||||||
|
|
||||||||||||||||||||
|
Balance as of December 31, 2022 |
|
|
( |
) |
|
|
||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F - 6
TREMOR INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Profit for the year
|
|
|
|
|||||||||
|
Adjustments for:
|
||||||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Net financing expense
|
|
|
|
|||||||||
|
Disposals of fixed and intangible assets
|
|
|
|
|||||||||
|
Loss (Gain) on leases change contracts
|
|
|
(
|
)
|
(
|
)
|
||||||
|
Gain on sale of business unit
|
|
|
(
|
)
|
(
|
)
|
||||||
|
Share-based compensation and restricted shares
|
|
|
|
|||||||||
|
Tax (benefit) expense
|
|
|
(
|
)
|
(
|
)
|
||||||
|
Change in trade and other receivables
|
|
|
(
|
)
|
(
|
) | ||||||
|
Change in trade and other payables
|
(
|
) |
|
|
||||||||
|
Change in employee benefits
|
(
|
) |
(
|
)
|
(
|
)
|
||||||
|
Income taxes received
|
|
|
|
|||||||||
|
Income taxes paid
|
(
|
) |
(
|
)
|
(
|
)
|
||||||
|
Interest received
|
|
|
|
|||||||||
|
Interest paid
|
(
|
) |
(
|
)
|
(
|
)
|
||||||
|
Net cash provided by operating activities
|
|
|
|
|||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
|
Change in pledged deposits, net
|
(
|
) |
(
|
) |
|
|||||||
|
Payments on finance lease receivable
|
|
|
|
|||||||||
|
Repayment of long-term loans
|
|
|
|
|||||||||
|
Acquisition of fixed assets
|
(
|
) |
(
|
)
|
(
|
)
|
||||||
|
Acquisition and capitalization of intangible assets
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Proceeds from sale of business unit
|
|
|
|
|
||||||||
|
Investment in shares |
( |
) |
||||||||||
|
Acquisition of subsidiaries, net of cash acquired
|
(
|
) |
(
|
) |
|
|||||||
|
Net cash provided by (used in) investing activities
|
(
|
) |
(
|
) |
|
|||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Acquisition of own shares
|
(
|
) |
(
|
)
|
(
|
)
|
||||||
|
Proceeds from exercise of share options
|
|
|
|
|||||||||
|
Leases repayment
|
(
|
) |
(
|
)
|
(
|
)
|
||||||
|
Issuance of shares, net of issuance cost
|
|
|
|
|||||||||
|
Receipt of long-term debt, net of transaction cost |
||||||||||||
|
Payment of financial liability
|
|
|
(
|
) |
|
|||||||
|
Net cash provided by (used in) financing activities
|
|
|
(
|
)
|
||||||||
|
Net increase (decrease) in cash and cash equivalents
|
(
|
) |
|
|
||||||||
|
CASH AND CASH EQUIVALENTS AS OF THE BEGINNING OF YEAR
|
|
|
|
|||||||||
|
EFFECT OF EXCHANGE RATE FLUCTUATIONS ON CASH AND CASH EQUIVALENTS
|
(
|
) |
(
|
) |
|
|||||||
|
CASH AND CASH EQUIVALENTS AS OF THE END OF YEAR
|
|
|
|
|||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F - 7
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 1: |
GENERAL
|
| a. |
Reporting entity:
Tremor International Ltd. (the “Company” or “Tremor International”), formerly known as Taptica International Ltd., was incorporated in Israel under the laws of the State of Israel on March 20, 2007. The ordinary shares of the Company are listed on the AIM Market of the London Stock Exchange and the American Depositary Shares ("ADSs"), each of which represents two ordinary shares of the Company, represented by the American Depositary Receipts ("ADR") are listed on the Nasdaq Capital Market. The address of the registered office is 82 Yigal Alon Street Tel-Aviv, 6789124, Israel.
Tremor International is a global Company offering an end-to-end digital advertising technology platform that supports a wide range of media types (e.g., video, display, etc.) and devices (e.g., mobile, Connected TVs, streaming devices, desktop, etc.), creating an efficient marketplace where advertisers (buyers) can purchase high quality advertising inventory from publishers (sellers) at scale. Tremor Video Inc. (“Tremor Video’’) and Amobee, wholly owned subsidiaries of Tremor International, serve as the Company’s Demand Side Platforms (“DSP”) which provide full-service and self-managed marketplace access to advertisers and agencies to execute their digital marketing campaigns in real time across various ad formats. Unruly Group, LLC (formerly RhythmOne, LLC), provides customers with access to a Sell Side Platform (“SSP”) designed to monetize digital inventory for publishers, media companies, and app developers by enabling their content to have the necessary code and requirements for programmatic advertising integration. The SSP provides access to significant amounts of data, unique demand, and a comprehensive product suite to drive more effective inventory management and revenue optimization. The Company also provides a Data Management Platform (“DMP”) solution which integrates both DSP and SSP solutions, enabling advertisers and publishers to use data from various sources to optimize results of their advertising campaigns. Tremor International Ltd. is headquartered in Israel and maintains offices throughout the United States, Canada, Europe, and Asia-Pacific.
|
| b. |
Starting June 18, 2021, the Company's ADSs trade on the Nasdaq Global Market under the ticker symbol “TRMR”. The aggregate proceeds from the IPO and the options to the underwriters provided as part of the IPO were USD 147.9 million before deducting underwriting discounts and commissions.
|
| c. |
During 2022, the Company, its customers, and its partners, continued to face persistent macroeconomic challenges associated with several factors including: the COVID-19 (“COVID-19”) pandemic, and residual impacts of efforts to curtail its spread and reduce further economic damage sustained, rising interest rates, rising inflation, global supply chain constraints, changes in foreign currency exchange rates, recession concerns, and geopolitical uncertainty. The combination of which drove advertisers across several industries to reduce, or delay deployment of budgets and advertising spend.
|
F - 8
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 1: |
GENERAL (Cont.)
|
| d. |
Material events in the reporting period:
|
| 1. |
On February 23, 2022, the Board of Directors approved a share buyback program of up to USD
On September 20, 2022, the Board of Directors approved a USD |
| 2. |
On June 19, 2022, Unruly Media Pte. Ltd., a subsidiary of the Company, entered into a definitive agreement to make a strategic USD
|
| 3. |
On July 25, 2022, the Company and its subsidiaries entered into a definitive agreement with Amobee Group Pte. Ltd (the “Seller”) to acquire the voting shares capital of Amobee Inc., Amobee Asia Pte. Ltd. and Amobee ANZ Pty Ltd (“Amobee”), and the DSP operation from Amobee Inc. The acquisition was completed on September 12, 2022, for a total consideration of USD
|
| e. |
Definitions:
In these financial statements –
|
|
The Company
|
-
|
Tremor International Ltd.
|
||
|
The Group
|
-
|
Tremor International Ltd. and its subsidiaries.
|
||
|
Subsidiaries
|
-
|
Companies, the financial statements of which are fully consolidated, directly, or indirectly, with the financial statements of the Company such as Unruly Group LLC, Unruly Holding Ltd, Tremor Video Inc, Amobee Inc, SpearAd.
|
||
|
Related party
|
-
|
As defined by IAS 24, “Related Party Disclosures”.
|
F - 9
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 2:
|
BASIS OF PREPARATION
|
| a. |
Statement of compliance:
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board ("IASB").
The consolidated financial statements were authorized for issue by the Company’s Board of Directors on March 6, 2023.
|
| b. |
Functional and presentation currency:
These consolidated financial statements are presented in US Dollars (USD), which is the Company’s functional currency, and have been rounded to the nearest thousand, 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 and current tax assets and liabilities
|
| • |
Put option to non-controlling interests
|
| • |
Provisions
|
| • |
Derivatives
|
|
|
• |
Investment in shares |
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.
|
F - 10
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 2:
|
BASIS OF PREPARATION (Cont.)
|
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 capitalization and impairment testing for goodwill, in Note 4, on Income Tax, with respect to uncertain tax position, in Note 20, on subsidiaries, with respect to business combination and in Note 18 on investments in shares .
| 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 17, on share-based compensation;
|
| • |
Note 18, on financial instruments;
|
| • |
Note 18, on investments in shares.
|
|
|
• |
Note 20, on subsidiaries (regarding business combinations). |
F - 11
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 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 the Group.
| 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. Substantive 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 the statements of operation and other comprehensive income.
If share-based compensation 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. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.
F - 12
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 3:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| 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.
| 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 into 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.
| 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.
|
F - 13
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 3:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
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.
|
F - 14
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 3:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
Subsequent measurement and gains and losses
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.
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).
|
| 2) |
Non-derivative financial liabilities
Non-derivative financial liabilities include trade and other payables, finance lease liability and other long term liabilities.
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.
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.
Offset of financial instruments
Financial assets and liabilities are offset, and the net amount presented in the statement of financial position when, and only when, the Group currently has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
|
F - 15
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| 3) |
Derivative financial instruments:
Economic hedges
Hedge accounting is not applied to derivative instruments that economically hedge financial assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognized in profit or loss under financing income or expenses.
|
| 4) |
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. The cost of fixed assets includes expenditure that is directly attributable to the acquisition of the asset. Depreciation is provided on all property 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
|
|
|
Office furniture and equipment
|
|
|
Leasehold improvements
|
|
|
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.
|
||
F - 16
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| e. |
Intangible assets:
|
| 1) |
Software development:
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss when incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group has the intention and sufficient resources to complete development and to use or sell the asset. The expenditure capitalized in respect of development activities includes the cost of materials, direct labor and overhead costs that are directly attributable to preparing the asset for its intended use, and capitalized borrowing costs. Other development expenditure is recognized in profit or loss as incurred.
In subsequent periods, capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses.
Where these criteria are not met, development costs are charged to the statement of operation and other 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 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 as of December 31, 2022, no impairment in respect to goodwill has been recorded.
|
|
F - 17
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| 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 the statements of operation and other comprehensive income 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
|
|
|
Software (developed and acquired)
|
|
|
Customer relationships
|
|
|
Technology
|
|
|
Amortization methods, useful lives and residual values are reviewed at the end of each reporting year and adjusted if appropriate.
|
||
F - 18
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| 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 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.
With respect to other debt assets, the Group measures the provision for expected credit losses at an amount equal to the full lifetime expected credit losses, other than the provisions hereunder that are measured at an amount equal to the 12-month expected credit losses:
|
| - |
Debt instruments that are determined to have low credit risk at the reporting date; and
|
| - |
Other debt instruments and deposits, for which credit risk has not increased significantly since initial recognition.
|
|
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.
|
||
F - 19
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 3:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| 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 financial reporting date.
|
| h. |
Restricted Cash and Deposit:
The Company classifies certain restricted cash and deposit balances within other current assets on the consolidated statement of financial position based upon the term of the remaining restrictions. On December 31, 2022, and 2021 the Company had restricted cash and deposit of USD
|
| i. |
Share Based Compensation:
Compensation expense related to stock options, restricted stock units and performance stock units. The Company’s employee stock purchase plan is measured and recognized in the consolidated financial statements based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. Stock-based compensation expense related to stock options and restricted stock is recognized over the requisite service periods of the awards.
Determining the fair value of stock options awards requires judgment. The Company’s use of the Black-Scholes option pricing model requires the input of subjective assumptions. The assumptions used in the Company’s option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment.
These assumptions and estimates are as follows:
Risk-Free Interest Rate. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities approximating the expected term of the awards.
Expected Term. The expected term of an award is calculated based on the vesting date and the expiration date of the award.
Volatility. The Company determined the price volatility based on daily price observations over a period equivalent to the expected term of the award.
Dividend Yield. The dividend yield assumption is based on the Company’s history and current expectations of dividend payouts.
Fair Value of Common Stock. The fair value of common stock is based on the closing price of the Company's common stock on the grant date.
|
|
F - 20
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 3:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| j. |
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 and as such, no additional liability with respect to such employees exist.
| 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.
F - 21
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
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.
| k. |
Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability without adjustment for the Company’s credit risk. The carrying amount of the provision is adjusted each period to reflect the time that has passed and the amount of the adjustment is recognized as a financing expense.
The Company recognizes a reimbursement asset if, and only if, it is virtually certain that the reimbursement will be received if the Company settles the obligation. The amount recognized in respect of the reimbursement does not exceed the amount of the provision.
Restructuring
A provision for restructuring is recognized when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. The provision includes direct expenditures caused by the restructuring and necessary for the restructuring, and which are not associated with the continuing activities of the Group.
Onerous contracts
A provision for onerous contracts is recognized when the unavoidable costs of a contract exceed the benefits expected to be received from the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the unavoidable costs (net of the revenues) of continuing with the contract. Unavoidable costs are costs the Group cannot avoid as they are subject to a contract. |
|
l. |
Revenue recognition:
|
The Company recognizes revenue through the following five-step model:
| (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 Company generates revenue from transactions where it provides access to a platform for the purchase and sale of digital advertising inventory.
Its customers are both ad buyers, including brands and agencies, and digital publishers.
F - 22
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
The Company generates revenue through platform fees that are tailored to fit the customer’s specific utilization of its solutions and include: (i) a percentage of spend, (ii) flat fees and (iii) fixed costs per mile (“CPM”). CPM refers to a payment option in which customers pay a price for every 1,000 impressions an advertisement receives.
The Company maintains agreements with each publisher and buyer in the form of written service agreements, which set out the terms of the relationship, including payment terms and access to the Company’s platform.
Publishers provide digital advertising inventory to the Company’s platform in the form of advertising requests, or ad request. When the Company receives ad requests from a publisher, it send bid requests to buyers, which enable buyers to bid on sellers’ digital advertising inventory according to a predefined set of parameters (e.g., demographics, intent, location, etc.). Winning bids create advertising, or paid impressions, for the publisher to present to the buyers.
The Company generates revenue from its Programmatic and Performance activities. Programmatic revenue is derived from the end-to-end platform of programmatic advertising, which uses software and algorithms to match buyers and sellers of digital advertising in a technology-driven marketplace. Performance revenue is derived from non-core activities, consisting of mobile-based activities that help brands reach their users.
F - 23
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
Following the full integration with RhythmOne and the acquisition of Unruly in 2020, the Company positions itself as a stronger digital advertising platform in the marketplace with an integrated, end-to-end platform connecting the DSP and SSP sides of the business in a unified platform. The Company concluded that its Programmatic activity (i) does not have manual control over the process, (ii) the Company is not primarily responsible for fulfillment, (iii) the Company has no inventory risk and (iv) the Company obtains only momentary a title to the advertising space offered via the end-to-end platform.
As a result, the Company reports its Programmatic business, tech stack, features, business models and activity as an agent and therefore presented revenue from Programmatic on a net basis.
For the Performance activity the Company is the primary obligor to provide the services and, as such, revenue is presented on a gross basis. Management is focused on driving growth with the Programmatic activity through the end-to-end platform, while the Performance activity is declining over time.
The Company estimates and records reduction to revenue for volume discounts based on expected volume during the incentive term.
The Company generally invoices buyers at the end of each month for the full purchase price of ad impressions monetized in that month. Accounts receivables are recorded at the amount of gross billings for the amount it is responsible to collect and accounts payable are recorded at the net amount payable to publishers. Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis.
F - 24
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| m. |
Classification of expenses
|
Cost of revenue
Cost of revenue includes expenses related to third-party hosting fees and the cost of data purchased from third parties, traffic acquisition costs, data and hosting that are directly attributable to revenue generated by the Company (see Note 13).
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. 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(1)). 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.
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.
| n. |
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.
F - 25
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| o. |
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.
Uncertain tax positions
A provision for uncertain tax positions, including additional tax and interest expenses, is recognized when it is more likely than not that the Group will have to use its economic resources to pay the obligation.
F - 26
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| p. |
Leases:
|
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.
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.
F - 27
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
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 | ||
| ☐ | Data centers |
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.
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.
F - 28
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| q. |
Earnings per share:
|
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for treasury shares. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding, after adjustment for treasury shares, for the effects of all dilutive potential ordinary shares, which comprise restricted stock.
| r. |
New standards, amendments to standards and interpretations not yet adopted:
|
Amendment to IAS 1, Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current and subsequent amendment: Non-Current Liabilities with Covenants
The Amendment, together with the subsequent amendment to IAS 1 replaces certain requirements for classifying liabilities as current or non-current.
According to the Amendment, a liability will be classified as non-current when the entity has the right to defer settlement for at least 12 months after the reporting period, and it "has substance" and is in existence at the end of the reporting period.
According to the subsequent amendment, as published in October 2022, covenants with which the entity must comply after the reporting date, do not affect classification of the liability as current or non-current. Additionally, the subsequent amendment adds disclosure requirements for liabilities subject to covenants within 12 months after the reporting date, such as disclosure regarding the nature of the covenants, the date they need to be complied with and facts and circumstances that indicate the entity may have difficulty complying with the covenants.
Furthermore, the Amendment clarifies that the conversion option of a liability will affect its classification as current or non-current, other than when the conversion option is recognized as equity.
According to the amendment companies must provide disclosure of their material accounting policies rather than their significant accounting policies. Pursuant to the amendment, accounting policy information is material if, when considered with other information disclosed in the financial statements, it can be reasonably be expected to influence decisions that the users of the financial statements make on the basis of those financial statements.
The amendment to IAS 1 also clarifies that accounting policy information is expected to be material if, without it, the users of the financial statements would be unable to understand other material information in the financial statements. The amendment also clarifies that immaterial accounting policy information need not be disclosed.
The Amendment and subsequent amendment are effective for reporting periods beginning on or after January 1, 2024, with earlier application being permitted. The Amendment and subsequent amendment are applicable retrospectively, including an amendment to comparative data.
The Company is examining the effects of the Amendment on the financial statements with no plans to early adopt.
F - 29
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
Amendment to IAS 12, Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
The Amendment narrows the scope of the exemption from recognizing deferred taxes as a result of temporary differences created at the initial recognition of assets and/or liabilities, so that it does not apply to transactions that give rise to equal and offsetting temporary differences.
As a result, companies will need to recognize a deferred tax asset or a deferred tax liability for these temporary differences at the initial recognition of transactions that give rise to equal and offsetting temporary differences, such as lease transactions and provisions for decommissioning and restoration.
The amendment clarifies the accounting treatment of variable payments of a seller-lessee in a sale and leaseback transaction. According to the amendment, a seller-lessee shall include estimates of variable lease payments upon the initial measurement of the lease liability, and subsequent to initial recognition, it shall apply the subsequent measurement requirements to the lease liability, in a way that it does not recognize any gain or loss that relates to the right-of-use it retains.
The Amendment is effective for annual periods beginning on or after January 1, 2023, by amending the opening balance of the retained earnings or adjusting a different component of equity in the period the Amendment was first adopted.
The Group is examining the effects of the amendment on the financial statements with no plans for early adoption.
| NOTE 4: |
INCOME TAX
|
| a. |
Details regarding the tax environment of the Israeli company:
|
| 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.
F - 30
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 4: |
INCOME TAX (Cont.)
|
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 and preferred technological 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.
The Company obtained tax rulings confirming that the Company is eligible for the Law for the Encouragement of Capital Investments. The tax rulings which were obtained applied for the years 2017-2021. The Company approached the Israeli Tax Authority, for the renewal of the tax ruling, regarding industrial enterprise and preferred technological enterprise, for the next five years.
| b. |
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.
| (1) |
US
|
Provisions enacted in the Tax Cuts and Jobs Act in 2017 related to the capitalization for tax purposes of research and experimental expenditures (“R&E”) became effective on January 1, 2022. These new R&E provisions require us to capitalize certain research and experimental expenditures and amortize them on the U.S. tax return over five or fifteen years, depending on where these costs are conducted. The tax expense in the U.S. would increase as a result, unless these provisions are modified through legislative processes in the future. The Company consider the effect of the new enacted act in the current year tax provision and the deferred tax asset.
As of the acquisition date of RhythmOne, RhythmOne had U.S. federal net operating loss carryforwards, or NOLs, of approximately USD 100.8 million, which will expire starting 2038. As of December 31, 2022, the NOLs are approximately USD 65.7 million (2021: USD 79.4 million).
As of the acquisition date of Amobee, Amobee had U.S. federal net operating loss carryforwards, or NOLs, and the Company estimates that approximately USD 315 million NOLs can be utilized over the next 53 years .
F - 31
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 4: |
INCOME TAX (Cont.)
|
Additionally, for tax years beginning after December 31, 2017, the Tax Cuts and Jobs Act limits the NOL deduction to 80 % of taxable income, repeals carryback of all NOLs arising in a tax year ending after 2017 and permits indefinite carryforwards for all such NOLs. NOL’s arising in a tax year ending on or before 2017 can offset 100% of taxable income, are available for carryback, and expire 20 years after they arise. It should be noted that the Coronavirus Aid, Relief and Economic Security (“CARES”) Act suspended the 80% limitation for tax years 2018, 2019 and 2020 and allowed for a 5-year carryback for NOLs for tax years beginning after December 31, 2017, and before January 1, 2021.
Pursuant to Section 382 of the Internal Revenue Code, RhythmOne and Amobee underwent ownership changes for tax purposes (i.e., a change of more than 50% in stock ownership involving 5% shareholders) on April 2, 2019 and September 12, 2022, respectively. As a result, the use of the Company’s total US NOL carryforwards and tax credits generated prior to the ownership change is subject to annual use limitations under Section 382 and potentially also under section 383 of the Code and comparable state income tax laws. Starting from the acquisition date, Amobee is included in the US federal group tax return.
| (2) |
International
|
As of December 31, 2022, the NOLs are approximately USD 22.3 million (2021: USD 16.6 million).
F - 32
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 4: |
INCOME TAX (Cont.)
|
| c. |
Composition of income tax benefit:
|
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Current tax expense
|
||||||||||||
|
Current year
|
|
|
|
|||||||||
|
Deferred tax expense (income)
|
||||||||||||
|
Creation and reversal of temporary differences
|
|
|
(
|
)
|
(
|
)
|
||||||
|
Tax (benefit) expenses
|
|
|
(
|
)
|
(
|
)
|
||||||
The following are the domestic and foreign components of the Company’s income taxes (in thousands):
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Domestic
|
|
|
|
|
||||||||
|
US
|
|
|
(
|
)
|
(
|
)
|
||||||
|
International
|
|
|
(
|
)
|
(
|
)
|
||||||
|
Tax (benefit) expenses
|
|
|
(
|
)
|
(
|
)
|
||||||
F - 33
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 4: |
INCOME TAX (Cont.)
|
| d. |
Reconciliation between the theoretical tax on the pre-tax profit and the tax expense:
|
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Profit (Loss) before taxes on income
|
|
|
(
|
)
|
||||||||
|
Primary tax rate of the Company
|
|
%
|
|
%
|
|
%
|
||||||
|
Tax calculated according to the Company’s primary tax rate
|
|
|
(
|
)
|
||||||||
|
Additional tax (tax saving) in respect of:
|
||||||||||||
|
Non-deductible expenses net of tax exempt income (*)
|
|
(
|
)
|
(
|
)
|
|||||||
|
Difference between measurement basis of income/expenses for tax purposes and measurement basis of income/expenses for financial reporting purposes
|
(
|
)
|
|
|
||||||||
|
Effect of reduced tax rate on preferred income and differences in previous tax assessments
|
(
|
)
|
(
|
)
|
|
|||||||
|
Utilization of tax losses from prior years for which deferred taxes were not created
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Effect on deferred taxes at a rate different from the primary tax rate
|
|
(
|
)
|
(
|
)
|
|||||||
|
Recognition of deferred taxes for tax losses and benefits from previous years for which deferred taxes were not created in the past
|
(
|
) |
(
|
) |
|
|||||||
|
Recognition in temporary differences for which deferred taxes are not recognized
|
|
|
|
|
||||||||
|
Foreign tax rate differential
|
|
|
|
|||||||||
|
Tax (benefit) expenses
|
|
(
|
)
|
(
|
)
|
|||||||
|
Effective income tax rate
|
|
%
|
(
|
)%
|
|
%
|
||||||
| (*) |
including non- deductible share-based compensation expenses.
|
F - 34
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 4: |
INCOME TAX (Cont.)
|
| e. |
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
Assets and R&D expenses |
Employees
Compensation |
Carryforward
Losses |
Accrued
Expenses |
Doubtful
Debt |
Other
|
Total
|
||||||||||||||||||||||
|
USD thousands
|
||||||||||||||||||||||||||||
|
Balance of deferred tax asset (liability) as of January 1, 2021
|
(
|
)
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Business combinations
|
(
|
)
|
|
|
|
|
|
(
|
)
|
|||||||||||||||||||
|
Changes recognized in profit or Loss
|
|
|
(
|
) |
(
|
) |
(
|
)
|
(
|
) |
|
|||||||||||||||||
|
Changes recognized in equity
|
|
|
(
|
) |
(
|
) |
|
(
|
) |
|
|
|||||||||||||||||
|
Balance of deferred tax asset (liability) as of December 31, 2021
|
(
|
)
|
|
|
|
|
|
|
||||||||||||||||||||
|
Business combinations
|
(
|
) |
|
|
|
|||||||||||||||||||||||
|
Changes recognized in profit or Loss
|
|
(
|
) |
(
|
) |
(
|
) |
(
|
) |
(
|
) |
(
|
) |
|||||||||||||||
|
Effect of change in tax rate |
|
|
|
|
||||||||||||||||||||||||
|
Changes recognized in equity
|
|
(
|
) |
(
|
) |
|
|
|
( |
) |
(
|
) |
||||||||||||||||
|
Balance of deferred tax asset (liability) as of December 31, 2022
|
(
|
) |
|
|
|
|
|
|
||||||||||||||||||||
As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets.
As of December 31, 2022, and 2021, the Company has gross unrecognized tax benefits of approximately USD 7,188 thousand and USD 4,370 thousand, respectively. The Company classifies liabilities for unrecognized tax benefits in Current tax liabilities.
| f. |
Tax assessment:
|
The Company considers tax year 2017 and the US federal group tax year 2018 as close for tax assessment.
F - 35
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 5: |
FIXED ASSETS, NET
|
|
Computers
and Servers |
Office
furniture and equipment |
Leasehold improvements
|
Total
|
|||||||||||||
|
USD thousands
|
||||||||||||||||
|
Cost
|
||||||||||||||||
|
Balance as of January 1, 2021
|
|
|
|
|
||||||||||||
|
Exchange rate differences
|
(
|
) |
|
|
|
|||||||||||
|
Additions*
|
|
|
|
|
||||||||||||
|
Business combinations
|
|
|
|
|
||||||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Balance as of December 31, 2021
|
|
|
|
|
||||||||||||
|
Exchange rate differences
|
|
|
|
|
|
|||||||||||
|
Additions*
|
|
|
|
|
||||||||||||
|
Business combinations (See Note 20)
|
|
|
|
|
||||||||||||
|
Disposals
|
(
|
) |
(
|
) |
(
|
) |
(
|
) |
||||||||
|
Balance as of December 31, 2022
|
|
|
|
|
||||||||||||
|
Depreciation
|
||||||||||||||||
|
Balance as of January 1, 2021
|
|
|
|
|
||||||||||||
|
Exchange rate differences
|
(
|
) |
|
(
|
) |
|
||||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Additions
|
|
|
|
|
||||||||||||
|
Balance as of December 31, 2021
|
|
|
|
|
||||||||||||
|
Exchange rate differences
|
|
|
|
|
|
|
||||||||||
|
Disposals
|
(
|
) |
(
|
) |
(
|
) |
(
|
) |
||||||||
|
Additions
|
|
|
|
|
||||||||||||
|
Balance as of December 31, 2022
|
|
|
|
|
||||||||||||
|
Carrying amounts
|
||||||||||||||||
|
As of December 31, 2021
|
|
|
|
|
||||||||||||
|
As of December 31, 2022
|
|
|
|
|
||||||||||||
* As of December 31, 2022, USD
F - 36
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 6: |
LEASES
|
| a. |
Leases in which the Group is the lessee:
|
The Group applies IFRS 16, Leases. The Group has lease agreements with respect to the following items:
| - |
Offices;
|
| - |
Data center;
|
| 1) | Information regarding material lease agreements: |
| a) | The Group leases Offices mainly in the United States of America (US), Israel, Canada and UK with contractual original lease periods ends between the years 2023 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 in the amount of USD |
| b) | The Group leases data center and related network infrastructure with contractual original lease periods ends between the years 2023 and 2026. 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 in the amount of USD |
| 2) |
Lease liability:
|
Maturity analysis of the Group's lease liabilities:
|
December 31
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Less than one year (0-1)
|
|
|
||||||
|
One to five years (1-5)
|
|
|
||||||
|
More than five years (5+)
|
|
|
||||||
|
Total
|
|
|
||||||
|
Current maturities of lease liability
|
|
|
||||||
|
Long-term lease liability
|
|
|
||||||
F - 37
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 6: |
LEASES (Cont.)
|
| 3) |
Right-of-use assets - Composition:
|
|
Offices
|
Data center
|
Total
|
||||||||||
|
USD thousands
|
||||||||||||
|
Balance as of January 1, 2021
|
|
|
|
|||||||||
|
Depreciation and amortization on right-of-use assets |
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Additions |
|
|
|
|||||||||
|
Lease modifications
|
|
|
|
|||||||||
|
Disposals
|
|
(
|
)
|
(
|
)
|
|||||||
|
Exchange rate differences
|
(
|
)
|
|
(
|
)
|
|||||||
|
Balance as of December 31, 2021
|
|
|
|
|||||||||
|
Business Combinations
|
|
|
|
|||||||||
|
Depreciation and amortization on right-of-use assets |
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Additions
|
|
|
|
|||||||||
|
Lease modifications
|
(
|
)
|
|
(
|
)
|
|||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Exchange rate differences
|
(
|
)
|
|
(
|
)
|
|||||||
|
Balance as of December 31, 2022
|
|
|
|
|||||||||
| 4) |
Amounts recognized in statement of operation:
|
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Interest expenses on lease liability
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Depreciation and amortization of right-of-use assets
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Gain (loss) recognized in profit or loss
|
(
|
)
|
|
|
||||||||
|
Total
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
F - 38
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 6: |
LEASES (Cont.)
|
| 5) |
Amounts recognized in the statement of cash flows:
|
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Cash outflow for leases
|
(
|
) |
(
|
)
|
(
|
)
|
||||||
| b. |
Leases in which the Group is a lessor:
|
| 1) |
Information regarding material lease agreements:
|
The Group subleases offices at the US for periods expiring in 2027.
| 2) |
Net investment in the lease:
|
Presented hereunder is the movement in the net investment in the lease:
|
Offices
|
||||||||
|
Year ended
December 31
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Balance as of January 1,
|
|
|
||||||
|
Sublease receipts
|
(
|
)
|
(
|
)
|
||||
|
Additions
|
|
|
|
|||||
|
Business combinations (See Note 20) |
|
|
|
|||||
|
Balance as of December 31,
|
|
|
||||||
| 3) |
Maturity analysis of net investment in finance leases:
|
|
Year ended
December 31
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Less than one year (0-1)
|
|
|
||||||
|
One to five years (1-5)
|
|
|
||||||
|
More than five years (5+)
|
|
|
||||||
|
Total net investment in the lease as of December 31,
|
|
|
||||||
F - 39
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 6: |
LEASES (Cont.)
|
| 4) |
Amounts recognized in statement of operation:
|
|
Offices
|
||||||||||||
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Gain from finance subleases |
|
|
|
|
||||||||
|
Financing income on the net investment in the lease
|
|
|
|
|||||||||
|
Total
|
|
|
|
|||||||||
| NOTE 7: |
INTANGIBLE ASSETS, NET
|
|
Software
|
Trademarks
|
Customer
relationships
|
Technology
|
Others
|
Goodwill
|
Total
|
||||||||||||||||||||||
|
USD thousands
|
||||||||||||||||||||||||||||
|
Cost
|
||||||||||||||||||||||||||||
|
Balance as of January 1, 2021
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Exchange rate differences
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||
|
Additions
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Disposals
|
(
|
)
|
|
|
|
|
|
(
|
)
|
|||||||||||||||||||
|
Business combinations
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance as of December 31, 2021
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Exchange rate differences
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||
|
Additions
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Disposals
|
(
|
) |
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
|
Business combinations (see Note 20)
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance as of December 31, 2022
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Amortization
|
||||||||||||||||||||||||||||
|
Balance as of January 1, 2021
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Exchange rate differences
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
|
Additions
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Disposals
|
(
|
)
|
|
|
|
|
|
(
|
)
|
|||||||||||||||||||
|
Balance as of December 31, 2021
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Exchange rate differences
|
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
|
Additions
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Disposals
|
(
|
) |
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
|
Balance as of December 31, 2022
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Carrying amounts
|
||||||||||||||||||||||||||||
|
As of December 31, 2021
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
As of December 31, 2022
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Capitalized development costs
Development costs capitalized in the period amounted to USD 8,743 thousand (2021: USD 4,933 thousand) and were classified under software.
F - 40
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 7: |
INTANGIBLE ASSETS, NET (Cont.)
|
Impairment testing for intangible assets
The Company's qualitative assessment during the years ended December 31, 2022, and December 31, 2021, did not indicate that it is more likely than not that the fair value of its intangible assets, and other long-lived assets is less than the aggregate carrying amount.
As of December 31, 2022, the estimated recoverable amount based on company’s market value was lower than the carrying amount, and therefore the recoverable amount was estimated based on value in use and was determined by discounting the future cash flows. The estimated value in use was higher than the carrying amount, and therefore there was no need for impairment. As of December 31, 2021, the recoverable amount was based on fair value less cost of disposal which higher than the carrying amount.
Key assumptions used in the calculation of recoverable amounts are:
Pre-tax discount rate 15 % (WACC)
Terminal value growth rate 3 %
EBITDA growth rate 21 %-33 %
The cash flow projections include specific estimates for five years and a terminal value growth rate thereafter. EBITDA growth rate is expressed as the annual growth rate in the initial five years of the plans used for impairment testing and has been mainly based on past experience and management expectations.
Management has identified two key assumptions for which there reasonably could be a possible change that could cause the carrying amount to exceed the recoverable amount. The table below shows the amount that these two assumptions are required to change individually in order for the estimated recoverable amount to be equal to the carrying amount.
| 2022 | ||||
| % | ||||
|
Increase Pre-tax discount rate |
|
|
||
|
Decrease Terminal value growth rate |
|
|
||
F - 41
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 8: |
TRADE AND OTHER RECEIVABLES
|
|
December 31
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Trade receivables:
|
||||||||
|
Trade receivables
|
|
|
||||||
|
Allowance for doubtful debts
|
(
|
)
|
(
|
)
|
||||
|
Trade receivables, net
|
|
|
||||||
|
Other receivables:
|
||||||||
|
Prepaid expenses
|
|
|
||||||
|
Loan to third party
|
|
|
||||||
|
Institutions
|
|
|
||||||
|
Pledged deposits
|
|
|
||||||
|
Acquisition consideration adjustment |
||||||||
|
Other
|
|
|
||||||
|
|
|
|||||||
| NOTE 9: |
TRADE AND OTHER PAYABLES
|
|
December 31
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Trade payables
|
|
|
||||||
|
Other payables:
|
||||||||
|
Contract liabilities
|
|
|
||||||
|
Wages, salaries and related expenses
|
|
|
||||||
|
Provision for vacation
|
|
|
||||||
|
Institutions
|
|
|
||||||
|
Ad spend liability
|
|
|
||||||
|
Onerous contract |
||||||||
|
Interest to pay
|
|
|
||||||
|
Pledged deposits |
||||||||
|
Others
|
|
|
||||||
|
|
|
|||||||
F - 42
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 10: |
CASH AND CASH EQUIVALENTS
|
|
December 31
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Cash
|
|
|
||||||
|
Bank deposits
|
|
|
||||||
|
Cash and cash equivalents
|
|
|
||||||
The Group’s exposure to credit, and currency risks are disclosed in Note 18 on financial instruments.
NOTE 11: LONG-TERM DEBT
In September 2022, Unruly Group US Holding Inc. entered into a $
The Company is also obligated to pay a commitment fee on the undrawn amounts of the Revolving Credit Facility at an annual rate ranging from
Unruly Group US Holding Inc.’s obligations under the Credit Facilities are (i) jointly and severally guaranteed by Tremor International Ltd. and certain of Tremor International Ltd.’s direct and indirect, existing and future wholly owned restricted subsidiaries, subject to certain exceptions and (ii) secured on a first-lien basis by substantially all of the tangible and intangible assets of Unruly Group US Holding Inc. and the guarantors of the Credit Facilities, subject to certain permitted liens and other agreed upon exceptions.
F - 43
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 12: |
REVENUE
|
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020 |
||||||||||
|
USD thousands
|
||||||||||||
|
Programmatic
|
|
|
|
|||||||||
|
Performance
|
|
|
|
|||||||||
|
|
|
|
||||||||||
For the year ended December 31, 2022, one buyer represents
| NOTE 13: |
COST OF REVENUE
|
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Programmatic
|
|
|
|
|||||||||
|
Performance
|
|
|
|
|||||||||
|
Cost of Revenue
|
|
|
|
|||||||||
F - 44
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 14: |
GENERAL AND ADMINISTRATIVE EXPENSES
|
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Wages, salaries and related expenses
|
|
|
|
|||||||||
|
Share base payments
|
|
|
|
|||||||||
|
Rent and office maintenance
|
|
|
|
(
|
) | |||||||
|
Professional expenses
|
|
|
|
|||||||||
|
Doubtful debts
|
(
|
) |
|
|
(
|
) | ||||||
|
Acquisition costs
|
|
|
|
|||||||||
|
Other expenses
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| NOTE 15: |
SHAREHOLDERS’ EQUITY
|
Issued and paid-in share capital:
|
Ordinary Shares
|
||||||||
|
2022
|
2021
|
|||||||
|
Number of shares
|
||||||||
|
Balance as of January 1
|
|
|
||||||
|
Own shares held by the Group
|
(
|
)
|
(
|
)
|
||||
|
Share based compensation
|
|
|
||||||
|
Issuance of shares in IPO
|
|
|
||||||
|
Issuance of Restricted shares *
|
|
|
||||||
|
Issued and paid-in share capital as of December 31
|
|
|
||||||
|
Authorized share capital
|
|
|
||||||
* See Note 17
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.
Own shares acquisition:
On March 26, 2021, the Board of Directors terminated the buyback program due to the Company’s election to pursue the Proposed Offering, which was completed in the second quarter of 2021.
On February 23, 2022, the Board of Directors approved a share buyback program of up to USD 75 million of its ordinary shares. The share repurchase program was completed in the third quarter of 2022.
On September 20, 2022, the Board of Directors approved a USD 20 million share repurchase program under which the Company is authorized to purchase up to USD 20 million of its Ordinary Shares. During 2022, the Company repurchased 16,906,795 ordinary shares in aggregate amount of USD 86.3 million which was financed by existing cash resources.
F - 45
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 16: |
EARNINGS PER SHARE
|
Basic earnings per share
The calculation of basic earnings per share as of December 31, 2022, 2021 and 2020 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
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Profit for the year
|
|
|
|
|||||||||
Weighted average number of ordinary shares:
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
Shares of NIS
|
||||||||||||
|
0.01 par value
|
||||||||||||
|
Weighted average number of ordinary shares used to calculate basic earnings per share as at December 31
|
|
|
|
|||||||||
|
Basic earnings per share (in USD)
|
|
|
|
|||||||||
F - 46
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 16: |
EARNINGS PER SHARE (cont.)
|
Diluted earnings per share:
The calculation of diluted earnings per share as of December 31, 2022, 2021 and 2020 was based on profit or 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
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
Shares of NIS
|
||||||||||||
|
0.01 par value
|
||||||||||||
|
Weighted average number of ordinary shares used to calculate basic earnings per share
|
|
|
|
|||||||||
|
Effect of share options on issue
|
|
|
|
|||||||||
|
Weighted average number of ordinary shares used to calculate diluted earnings per share
|
|
|
|
|||||||||
|
Diluted earnings per share (in USD)
|
|
|
|
|||||||||
At December 31, 2022 8,851 thousand options (in 2021 and 2020: 3,061 thousand and 2,946 thousand, respectively) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.
| NOTE 17: |
SHARE-BASED COMPENSATION ARRANGEMENTS
|
| a. |
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 ordinary shares or ADSs.
|
| • |
Vesting conditions are based on a service period of
|
F - 47
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17: |
SHARE-BASED COMPENSATION ARRANGEMENTS (Cont.)
|
| b. |
Stock Options:
|
The number of share options is as follows:
|
Number of options
|
Weighted average
exercise price
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
(Thousands)
|
(USD)
|
|||||||||||||||
|
Outstanding of 1 January
|
|
|
|
|
||||||||||||
|
Forfeited during the year
|
(
|
)
|
(
|
)
|
|
|
||||||||||
|
Exercised during the year
|
(
|
)
|
(
|
)
|
|
|
||||||||||
|
Granted during the year
|
|
|
|
|
||||||||||||
|
Outstanding of December 31
|
|
|
|
|
||||||||||||
|
Exercisable of December 31
|
|
|
||||||||||||||
Information on measurement of fair value of share-based compensation 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 (See Note 3i).
The parameters used in the measurement of the fair values at grant date of the equity-settled share-based compensation plans were as follows:
|
2022
|
2021
|
||||||
|
Grant date fair value in USD
|
|
|
|||||
|
Share price (on grant date) (in USD)
|
|
|
|||||
|
Exercise price (in USD)
|
|
|
|||||
|
Expected volatility (weighted average)
|
|
% |
|
% |
|||
|
Expected life (weighted average)
|
|
|
|||||
|
Expected dividends
|
|
% |
|
% |
|||
|
Risk-free interest rate
|
|
% |
|
% |
|||
The total expense recognized in the year ended December 31, 2022, with respect to the options granted to employees, amounted to approximately USD
| c. |
Restricted Share Units:
|
During 2022 and 2021, the Group granted 777,448 and 7,366,472 Restricted Share Units (RSU’s) to its executive officers and employees, respectively.
F - 48
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17: |
SHARE-BASED COMPENSATION ARRANGEMENTS (Cont.)
|
The number of restricted share units is as follows:
|
Number of RSU's
|
Weighted-Average Grant
Date Fair Value
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
(Thousands)
|
||||||||||||||||
|
Outstanding at 1 January
|
|
|
|
|
||||||||||||
|
Forfeited during the year
|
(
|
)
|
(
|
)
|
|
|
||||||||||
|
Exercised during the year
|
(
|
)
|
(
|
)
|
|
|
||||||||||
|
Granted during the year
|
|
|
|
|
||||||||||||
|
Outstanding at December 31
|
|
|
|
|
||||||||||||
The total expense recognized in the year ended December 31, 2022, with respect to the RSU’s granted to employees, amounted to approximately USD 31,923 thousand (2021: USD 29,530 thousand).
| d. |
Performance Stock Units:
|
During 2022 and 2021, the Group granted 168,048 and 2,668,240 Performance Stock Units (PSU’s) to its executive officers, respectively.
The number of performance stock units is as follows:
|
Number of PSU's
|
Weighted-Average Grant
Date Fair Value
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
(Thousands)
|
||||||||||||||||
|
Outstanding at January 1
|
|
|
|
|
||||||||||||
|
Forfeited during the year
|
(
|
)
|
(
|
)
|
|
|
||||||||||
|
Exercised during the year
|
(
|
)
|
(
|
)
|
|
|
||||||||||
|
Granted during the year
|
|
|
|
|
||||||||||||
|
Outstanding at December 31
|
|
|
|
|
||||||||||||
The vesting of the PSU’s is subject to continues employment and compliance with the performance criteria determined by the Company’s Remuneration Committee and the Company’s Board of Directors.
The total expense recognized in the year ended December 31, 2022, with respect to the PSU’s granted to employees, amounted to approximately USD 12,715 thousand (2021: USD 9,876 thousand).
| e. |
Expense recognized in the statement of operation and other comprehensive income is as follows:
|
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
Selling and marketing
|
|
|
|
|||||||||
|
Research and development
|
|
|
|
|||||||||
|
General and administrative
|
|
|
|
|||||||||
|
|
|
|
||||||||||
F - 49
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 18: |
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.
In order to manage these risks and as described hereunder, the Group executes transactions in derivative financial instruments. Presented hereunder is the composition of the derivatives:
|
December 31
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Derivatives presented under current assets
|
||||||||
|
Forward exchange contracts used for hedging
|
|
|
||||||
|
Derivatives presented under non-current assets
|
||||||||
|
Forward exchange contracts used for hedging
|
|
|
||||||
|
Derivatives presented under current liability |
||||||||
|
Forward exchange contracts used for hedging |
( |
) | ||||||
|
Total
|
(
|
) |
|
|||||
| b. |
Risk management framework:
|
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board is responsible for developing and monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management of standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
F - 50
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 18: |
FINANCIAL INSTRUMENTS (Cont.)
|
| c. |
Credit risk:
|
The Group’s credit risk is arise from the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
The carrying amount of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at the reporting date was as follows:
|
December 31
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Cash and cash equivalents
|
|
|
||||||
|
Trade receivables, net (a)
|
|
|
||||||
|
Other receivables
|
|
|
||||||
|
Long term deposit
|
|
|
||||||
|
Long term receivables
|
|
|
||||||
|
|
|
|||||||
| (a) |
At December 31, 2022, the Group included provision for doubtful debts in the amount of USD
As of December 31, 2022, two buyers accounted for
|
|
Allowance for Doubtful debts
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Balance at January 1
|
|
|
||||||
|
Allowance for doubtful debts expenses (income)
|
(
|
) |
|
|
||||
|
Write-off
|
(
|
|
(
|
)
|
||||
|
Exchange rate difference
|
(
|
)
|
(
|
)
|
||||
|
Balance at December 31
|
|
|
||||||
| d. |
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, 2022, and December 31, 2021, the Group’s contractual obligation of financial liability is in respect of leases, trade, and other payables in the amount of USD 361,820 thousand and USD 193,213 thousand, respectively. The contractual maturity of the financial liability that is less than one year is in the amount of USD 240,590 thousand and USD 185,337 thousand for December 31, 2022, and December 31, 2021, respectively.
F - 51
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 18: |
FINANCIAL INSTRUMENTS (Cont.)
|
| e. |
Market risk:
|
Market risk is the risk that changes in market prices, such as foreign exchange rates, the CPM, 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.
At December 31, 2022, USD 15,111 thousand are held in AUD, USD 7,642 thousand are held in SGD, USD 7,092 thousand are held in JPY, USD 5,144 thousand are held in EUR, USD 3,517 thousand are held in GBP, USD 3,423 thousand are held in CAD, USD 843 thousand are held in NIS, USD 875 thousand are held in other currencies and the remainder held in USD.
As of December 31, 2022, one vendor accounted for 12.7 % of trade payables. As of December 31, 2021, no individual vendor accounted for more than 10% of trade payables.
| f. |
Sensitivity analysis:
|
A change as of December 31 in the exchange rates of the following currencies against the USD, as indicated below, would have affected the measurement of financial instruments denominated in a foreign currency and would have increased (decreased) profit or loss and equity by the amounts shown below (after tax). This analysis is based on foreign currency exchange rate that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted sales and purchases.
|
2022
|
2021
|
|||||||||||||||
|
GBP/USD
|
+10%
|
|
-10%
|
+10%
|
|
-10%
|
|
|||||||||
|
USD thousands
|
||||||||||||||||
|
Profit / (Loss)
|
(
|
)
|
|
(
|
)
|
|
||||||||||
|
Increase / (Decrease) in Shareholders’ Equity
|
(
|
)
|
|
(
|
) |
|
|
|||||||||
|
2022
|
2021
|
|||||||||||||||
|
NIS/USD
|
+10%
|
|
-10%
|
|
+10%
|
|
-10%
|
|
||||||||
|
USD thousands
|
||||||||||||||||
|
Profit / (Loss)
|
(
|
)
|
|
(
|
)
|
|
||||||||||
|
Increase / (Decrease) in Shareholders’ Equity
|
(
|
)
|
|
(
|
)
|
|
||||||||||
|
2022
|
2021
|
|||||||||||||||
|
SGD/USD
|
+10%
|
|
-10%
|
|
+10%
|
|
-10%
|
|
||||||||
|
USD thousands
|
||||||||||||||||
|
Profit / (Loss)
|
(
|
)
|
( |
)
|
||||||||||||
|
Increase / (Decrease) in Shareholders’ Equity
|
(
|
)
|
( |
)
|
||||||||||||
F - 52
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 18: |
FINANCIAL INSTRUMENTS (Cont.)
|
Linkage and foreign currency risks
Currency risk
The Group is not exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Group, the USD. The principal currencies in which these transactions are denominated are GBP, NIS, Euro, CAD, SGD, MXN, AUD 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.
Interest rate risk
Interest rate risk
The Group is exposed to a cash flow risk from its variable-rate debt instruments.
An increase of 5 % in interest rate would have a decrease in profit and in shareholders’ equity by 1,067 thousand.
| g. |
Level 3 financial instruments carried at fair value
|
Investment in shares is a financial asset measured at fair value through profit or loss under level 3.
|
|
December 31, 2022 |
|||
|
Level 3 |
||||
|
USD thousands
|
||||
|
Financial assets measured at fair value through profit or loss: |
||||
|
Investment in shares |
|
|||
Valuation processes used by the Company
The fair value of non-marketable shares is determined by external valuer on an annual basis.
The principal unobservable inputs are as follows:
| • |
The estimated royalties from App share and remote-control button which is based on the expected increase in market share.
|
| • |
The average operating profit margin which is based on the stage of research and development.
|
| • |
The discount rate, which is based on
|
F - 53
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 19: |
RELATED PARTIES
|
Compensation and benefits to key management personnel
Executive officers also participate in the Company’s share option programs. For further information see Note 17 regarding share-based compensation.
Compensation and benefits to key management personnel (including directors) that are employed by the Company and its subsidiaries:
|
Year ended
December 31
|
||||||||
|
2022
|
2021
|
|||||||
|
USD thousands
|
||||||||
|
Share-based compensation
|
|
|
||||||
|
Other compensation and benefits
|
|
|
||||||
|
|
|
|||||||
F - 54
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 20: |
SUBSIDIARIES
|
| a. |
Details in respect of subsidiaries:
|
Presented hereunder is a list of the Group’s subsidiary:
|
Principal
|
The Group’s ownership interest |
|||||||||
|
location of
|
in the subsidiary for the
|
|||||||||
| the |
year ended
|
|||||||||
|
Company’s
|
December 31
|
|||||||||
| Name of company | activity | 2022 |
2021
|
|||||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
%
|
|
%
|
|||||
|
|
|
|
% |
|
% |
|||||
|
|
|
|
% |
% |
||||||
|
|
|
|
% |
% |
||||||
|
|
|
|
% |
% |
||||||
|
|
|
|
% |
% |
||||||
|
|
|
|
% |
% |
||||||
| * |
|
|
F - 55
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 20: |
SUBSIDIARIES (Cont.)
|
| b. |
Acquisition of subsidiaries and business combinations during the current period:
|
Acquisition of Amobee:
On July 25, 2022, the Company and its subsidiaries entered into a definitive agreement with Amobee Group Pte. Ltd (the “Seller”) to acquire
The primary reasons for the business combination are the goals to increase Company’s global market presence, significantly enhance and expand Company’s technology capabilities, add new linear TV capabilities and cross selling opportunities, and enrich Company’s growth and competitive positioning within the industry.
The purchase price of consideration transferred, and the recognized amounts of assets acquired, and liabilities assumed at the acquisition date of USD
In the consolidated period from the acquisition date to December 31, 2022 the subsidiary contributed USD
Identifiable assets acquired and liabilities assumed:
|
USD thousands
|
||||
|
Cash and Cash equivalents
|
|
|||
|
Accounts Receivables |
|
|||
|
Other assets
|
|
|||
|
Fixed Assets
|
|
|||
|
Intangible Assets
|
|
|||
|
Right-of-use assets |
|
|||
|
Deferred tax Assets |
|
|
||
|
Trade payables
|
( |
)
|
||
|
Other Payables
|
( |
) | ||
|
Lease Liabilities |
( |
) | ||
|
Onerous contract (a) |
( |
) | ||
|
Net identifiable assets
|
|
|||
F - 56
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 20: |
SUBSIDIARIES (Cont.)
|
| (a) |
In 2019, Amobee Asia Pte Ltd ("Amobee SG") entered into an agreement with MediaCorp Pte Ltd ("MediaCorp") for the design, development, implementation, integration, testing, delivery, and maintenance of a Dynamic Ad Platform based on Amobee technology.
As of the date of acquisition and as part of the PPA, the Group assessed that the obligation for the net discounted future payments exceeding market fair value aggregated to present value of USD
As of December 31, 2022, the liability balance aggregated to present value of USD |
Measurement of fair values:
The fair value of the technology is based on the research and development costs, the relief from royalty method was utilized in the determination of the fair value of the existing and developed technologies.
The fair value of the brand is based on the discounted estimated royalty income that could have generate if the trademark was licensed, in an arm’s length transaction, to a third party.
The fair value of customer relationships is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.
The following table summarizes the components of the acquired intangible assets and estimated useful lives as of the acquisition date:
|
Amount |
Estimated Useful Life |
|||||||
|
USD thousands |
Years | |||||||
|
Technology |
|
|
||||||
|
Customer relations |
|
|
||||||
|
Brand |
|
|
||||||
|
|
|
|
|
|
||||
The aggregate cash flow derived for the Company as a result of the Amobee acquisition:
|
USD thousands
|
||||
|
Consideration transferred
|
|
|||
|
Cash and cash equivalents at Amobee
|
(
|
)
|
||
|
Acquisition of subsidiary – Cash
|
|
|
||
F - 57
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 20: |
SUBSIDIARIES (Cont.)
|
Goodwill
The goodwill is attributable mainly to the increase offering to customers, enhanced opportunities for growth and the synergies expected to be achieved from integration into the Company’s digital advertising platforms.
Goodwill was recognized as a result of the acquisition as follows:
|
USD thousands
|
||||
|
Consideration transferred
|
|
|||
|
Less fair value of identifiable net assets
|
(
|
) | ||
|
Goodwill
|
|
|||
The following table summarizes the components of the acquired goodwill that is deductible for tax purposes:
|
|
USD thousands |
|||
|
|
||||
|
Deductible for tax purposes |
|
|||
|
Not deductible for tax purposes |
|
|||
|
|
||||
| Goodwill | ||||
Acquisition-related costs
The Company incurred acquisition-related costs of USD
Settlement of pre-existing relationship with the acquiree
The Company and the acquiree are parties to a long-term relationship under which the acquiree and the Company supplies each other with services at changing prices. The transactions between the parties were done based on market value. This pre-existing relationship were not terminated as part of the acquisition.
F - 58
TREMOR INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 21: |
OPERATING SEGMENTS
|
The Group has a single reportable segment as a provider of marketing services.
Geographical information
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of consumers.
|
Year ended
December 31
|
||||||||||||
|
2022
|
2021
|
2020
|
||||||||||
|
USD thousands
|
||||||||||||
|
America
|
|
|
|
|||||||||
|
APAC
|
|
|
|
|||||||||
|
EMEA
|
|
|
|
|||||||||
|
Total
|
|
|
|
|||||||||
| NOTE 22: |
CONTINGENT LIABILITY
|
| 1. |
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. 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.
|
| 2. |
On May 18, 2021, the Company filed a complaint against Alphonso, Inc. (“Alphonso”) in the Supreme Court of the State of New York, County of New York (the “Court”), asserting claims for breach of contract, tortious interference with business relations, intentional interference with contractual relations, unjust enrichment, and conversion. On September 10, 2021, the Company amended its complaint against Alphonso and added LG Electronics, Inc. (“LGE”) as a Defendant.
|
The lawsuit arose out of Alphonso’s breach of a Strategic Partnership Agreement and an Advance Payment Obligation and Security Agreement (the “Security Agreement”) with the Company, Alphonso and LGE’s tortious interference with Tremor’s contractual relationships and business relations, and related misconduct. The Company is seeking damages and other relief, including an order foreclosing on Alphonso’s collateral under the Security Agreement, from the Court.
On May 24, 2021, Alphonso filed a complaint against the Company in the Supreme Court of the State of New York, County of New York, asserting claims for breach of contract, unfair competition, and tortious interference with business relations. Alphonso, LGE, and the Company are currently engaged in depositions and expert discovery.
| 3. |
On June 21, 2022, Alphonso, Inc. (“Alphonso”) filed a complaint against the Company in the United States District Court for the Northern District of California, asserting claims for misappropriation of trade secrets under federal and state law. On July 19, 2022, Alphonso also filed a motion for a preliminary injunction. On October 31, 2022, the Court denied Alphonso’s motion for a preliminary injunction. Alphonso and the Company are currently engaged in fact discovery. The Company believes that the likelihood of a loss is remote and at this point is unable to reasonably estimate any potential loss and financial impact to the Company resulting from this matter.
|
F - 59
TABLE OF CONTENTS
Part IItem 1: Identity Of Directors, Senior Management and AdvisersItem 2: Offer Statistics and Expected TimetableItem 3: Key InformationItem 4: Information on The CompanyItem 5: Operating and Financial Review and ProspectsItem 6: Directors, Senior Management and EmployeesItem 7: Major Shareholders and Related Party TransactionsItem 8: Financial InformationItem 9: The Offer and ListingItem 10: Additional InformationItem 6. B. Directors, Senior Management and Employees Compensation Equity Incentive PlansItem 5. B. Liquidity and Capital ResourcesItem 11: Quantitative and Qualitative Disclosures About Market RiskItem 12: Description Of Securities Other Than Equity SecuritiesPart IIItem 13: Defaults, Dividend Arrearages and DelinquenciesItem 14: Material Modifications To The Rights Of Security Holders and Use Of ProceedsItem 15: Controls and ProceduresItem 16: [reserved]Item 16. D. Exemptions From The Listing Standards For Audit CommitteesItem 16. E. Purchases Of Equity Securities By The Issuer and Affiliated PurchasersPart IIIItem 17: Financial StatementsItem 18: Financial StatementsItem 19: ExhibitsNote 1: GeneralNote 1: General (cont.)Note 2: Basis Of PreparationNote 2: Basis Of Preparation (cont.)Note 17, on Share-based Compensation;Note 18, on Financial Instruments;Note 18, on Investments in SharesNote 20, on Subsidiaries (regarding Business Combinations)Note 3: Significant Accounting PoliciesNote 3: Significant Accounting Policies (cont.)Note 4: Income TaxNote 4: Income Tax (cont.)Note 5: Fixed Assets, NetNote 6: LeasesNote 6: Leases (cont.)Note 7: Intangible Assets, NetNote 7: Intangible Assets, Net (cont.)Note 8: Trade and Other ReceivablesNote 9: Trade and Other PayablesNote 10: Cash and Cash EquivalentsNote 11: Long-term DebtNote 12: RevenueNote 13: Cost Of RevenueNote 14: General and Administrative ExpensesNote 15: Shareholders EquityNote 16: Earnings Per ShareNote 16: Earnings Per Share (cont.)Note 17: Share-based Compensation ArrangementsNote 17: Share-based Compensation Arrangements (cont.)Note 18: Financial InstrumentsNote 18: Financial Instruments (cont.)Note 19: Related PartiesNote 20: SubsidiariesNote 20: Subsidiaries (cont.)Note 21: Operating SegmentsNote 22: Contingent Liability