07:00 Tue 22 Sep 2020
Tremor International - Interim Results & Q3 2020 Trading Update
Tremor International Ltd
("Tremor" or the "Company")
Interim Results
&
Q3 2020 Trading Update
Significant growth in Connected TV and video-based programmatic
revenues underpins anticipated strong recovery in H2
Tremor International Ltd (AIM: TRMR), a global leader in video advertising technologies, announces its interim results for the six months ended
Q3 Trading update
· Very strong performance in Q3 2020 across Tremor's key growth engines reinforces the Company's strategy and is generating overall growth
· Significant progress in transformation to a video-focused business, with Branding revenues expected to increase to between
· Tremor is back to strong profitability, with approximately
· Core growth engines:
o Connected TV ("CTV") revenues expected to double to
o Self-serve expected to deliver
o Private Marketplaces ("PMPs") expected to generate revenues of c.
· Benefits of the completion of the integration of Unruly coming into fruition in the quarter, with significant client interest and momentum achieved
· Overall, trading in Q3 2020 demonstrative of the strategy acceptance in the market and a solid recovery across H2 2020
H1 2020 Financial highlights
· Revenue:
o Reduction partially as a result of an anticipated decrease in performance revenues to
· Gross profit:
o Gross margin: 33.6% (H1 2019: 40.3%)
· Positive Adjusted EBITDA*:
· Reported EPS of
· Net cash as at
*Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortisation, non-recurring income/expenses and share-based payment expenses
** Net cash is defined as cash and cash equivalents less short and long-term interest-bearing debt including capital and finance leases
Operational highlights
· As previously flagged, COVID-19 adversely impacted the global advertising industry in H1 2020
· Pre-emptive measures taken by management are expected to deliver c.
· Strategy to focus on CTV, Self-serve and PMP platforms proved resilient and coming into fruition
· Integration of Unruly completed ahead of schedule with synergies being delivered in H2 2020
o Combined offering includes over 3,000 direct premium publisher partnerships
o Delivers significant strategic relationships with some of the world's biggest advertisers and brands and News Corp, which is one of the major publishers worldwide
The following table demonstrates the Adjusted EBITDA bridge from income statement for H1 2020:
|
|
Six months ended |
|
Year ended 31-Dec |
|
|
|
|
|||
|
|
2020 |
2019 |
|
2019 |
|
|
(Unaudited) |
|
(Audited) |
|
|
|
USD thousands |
|
USD thousands |
|
Revenues |
|
136,500 |
144,899 |
|
325,760 |
Cost of sales |
|
(90,689) |
(86,503) |
|
(187,246) |
Gross profit |
|
45,811 |
58,396 |
|
138,514 |
Research and development expenses |
|
16,297 |
15,148 |
|
33,042 |
Selling and marketing expenses |
|
40,638 |
27,410 |
|
62,025 |
General and administrative expenses |
|
19,249 |
18,568 |
|
40,244 |
|
|
76,184 |
61,126 |
|
135,311 |
|
|
|
|
|
|
Operating Profit |
|
(30,373) |
(2,730) |
|
3,203 |
Adjustments to adjusted EDITDA: |
|
|
|
|||
|
|
|
|
|
|
USD thousands |
Depreciation |
|
6,369 |
||||
Amortization |
|
14,513 |
||||
Share Base Payment exp. |
|
|
|
8,561 |
||
Acquisition and other reconstruction Expenses |
|
2,192 |
||||
Other expenses |
|
517 |
||||
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
1,779 |
Outlook
Whilst the Company continues to monitor the wider macroeconomic environment and the ongoing impact of COVID-19 very closely, trading in H2 2020 so far is demonstrating a strong recovery in global advertising (albeit not to previous levels) and as such, although the Company formally withdrew its guidance, it expects to be ahead of the consensus estimates that remain in the market for the current year. The Board remains confident in the medium-to-long term prospects of the Company which continues to have a strong balance sheet coupled with an unrivalled global proposition. This places Tremor in a prime position to benefit from the anticipated future resurgence in the global advertising markets.
The Company is close to completing its current buy back programme of
"Whilst Tremor has been impacted by the industry headwinds associated with the Covid-19 pandemic in the first half of 2020 and withdrew its guidance from the market, we are beginning to see very positive signs of a sustained recovery gathering momentum.
"The completion of the integration of Unruly, coupled with our ongoing strategy to expand our video advertising capabilities, is eliciting a positive result, which is very encouraging. Our strategy has allowed us to grow branding revenues significantly compared to the same period last year as we have moved away from any material dependency on our legacy activities."
A webcast detailing Tremor's interim results will be made available this week on the Company's website: https://www.tremorinternational.com/investors/.
For further information please contact:
Tremor International Ltd |
via Vigo Communications |
|
|
finnCap Ltd
|
Tel: +44 20 7220 0500 |
Vigo Communications |
Tel: +44 20 7390 0230 |
About Tremor International
Tremor International Ltd is a global leader in advertising technologies, it has three core capabilities: Video, Data and CTV, and our unique approach is centred on offering a full stack end-to-end solution which provides the Company with a major advantage in the marketplace.
Tremor Video helps advertisers deliver impactful brand stories across all screens through the power of innovative video technology combined with advanced audience data and captivating creative content. Tremor Video is one of the largest and most innovative video advertising companies in
The media side of Tremor, Unruly, drives real business outcomes in multiscreen advertising. Its highly ranked programmatic platform efficiently and effectively delivers performance, quality, and actionable data to demand and supply-focused clients and partners. Tremor has a meaningful number of direct integrations with publishers, unique demand relationships with the world's biggest advertisers and privileged access to News Corp inventory. Unruly works with 95% of the AdAge 100 and 82% of video views are delivered across Comscore 1,000 sites.
Tremor International Ltd is headquartered in
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
Following the acquisition of Unruly in
We have seen significant client interest and traction in the third quarter, driven by our market leading end-to-end technology stack, with branding revenues expected to increase to between
We are also pleased with the growth delivered in the third quarter across our programmatic offerings, which include Self-Serve and Private Marketplace Packages platforms. Self-serve is expected to deliver c.
We believe the CTV, Self-serve and PMPs platforms are significant growth engines for our business and will define our success over the coming years.
Tremor made a solid start to the year, however, as previously flagged in our June trading update, COVID-19 and the associated lockdown restrictions had a marked impact on the global advertising industry and therefore on Tremor's trading performance in the first half of 2020.
Given the reduction in trading volumes in certain key sectors for the Company, management have taken preemptive measures to mitigate the effect of the net reduction in demand, including a number of cost-cutting initiatives, which are expected to provide savings of c.
Revenues for the six months to
|
Q1 20191 ($m) |
Q2 20192 ($m) |
Q3 20192 ($m)
|
Q4 20192 ($m)
|
Q1 2020 ($m) |
Q2 2020 ($m) |
Q3 20203 ($m) |
Branding |
27.5 |
75.0 |
67.1 |
78.8 |
61.0 |
55.7 |
90-95 |
Performance |
18.0 |
24.3 |
19.0 |
16.0 |
9.5 |
10.6 |
7.5-8.5 |
Total revenue |
45.5 |
99.4 |
86.1 |
94.8 |
70.5 |
66.3 |
97.5-103.5 |
1 Prior to the acquisitions of RhythmOne and Unruly
2 Prior to the acquisition of Unruly
3Forecast based on July and August preliminary results
Tremor continues to evolve its business placing Video, CTV and Data at the heart of its growth initiatives. Tremor has been formed through the combination of three leading complementary video-focused companies: Tremor Video, RhythmOne (including the assets of YuMe) and Unruly. These three businesses have been integrated seamlessly to deliver a number of unique benefits and advantages, including:
1) An end-to-end technology stack (demand and supply side) centred around video programmatic advertising
2) A keen focus on data usages, creating audience targeting, including an exclusive agreement with Alphonso, one of the leading solutions in TV retargeting
3) Strong growth engines of CTV, Self-Serve and Private Marketplace Packages
4) A unique global reach as a result of the acquisition of Unruly, that added further direct premium publisher partnerships and an exclusive in article global partnership with News Corp
5) A cash generative business with a strong balance sheet
Therefore, whilst COVID-19 has impacted trading in the first half of the year and it is anticipated that many of these headwinds will continue through to year-end, management believes that Tremor's position in the market will prove resilient and the Company will demonstrate growth as it has done in Q3 2020.
Strategy
Despite the current macroeconomic backdrop, the Company's growth strategy remains largely unchanged, with our overarching aim being to leverage our unique end-to-end technology proposition to continue to drive growth in the US, whilst utilizing our global footprint to expand internationally in EMEA and APAC, management believes that the Company's core growth engines will continue to be:
· Connected TV - leveraging our expertise, capabilities and relationships to expand market share
· Self-Serve - broadening our relationships with agencies/advertisers by giving access to a full platform to run their campaigns underpinned by our unique data segments, significant media reach and pricing leverage
· Private Marketplaces - adding leading tier one agency customers by providing high-quality video and display supply including CTV media and TV retargeting segments that are connected to the company's media Platform
· The Exchange - continuing to introduce our media platform into international markets beyond the US and connecting with global advertisers
· Global brands - Post the integration of Unruly, Tremor has added strong relationships with dozens of leading global advertisers and a strong premium base of publishers
· M&A - evaluating select opportunities focused on adding demand, leveraging Tremor's position as a consolidator in the market with a proved track record to drive success
Key Performance Indicators
Despite the unprecedented operating environment in the first six months of the year, certain positive trends have continued, including sustained growth in both the CTV and data-driven advertising segments. Usage of CTV during lockdown increased markedly, with a continued consumer shift from linear TV to streaming content on-demand from OTT providers. There are currently over 200 million CTV viewers in the US alone4 and, as expected, advertisers have followed suit, allocating increasingly large proportions of their budgets to where individuals are consuming the most content.
Tremor's increased focus on CTV is clearly evident in our key performance indicators ("KPIs"), which were introduced earlier in the year to monitor the revenue growth of our core strategic growth drivers. Revenues generated from CTV increased by 359% in H1 2020 when compared to the same period in 2019. This growth is set to continue in Q3, with revenues generated expected to be c.
A further important indicator is the growth around programmatic activities such as Self-serve and Private Marketplaces. Self-serve is expected to deliver
Revenue KPIs |
H1 2019 ($m) |
H1 2020 ($m) |
% growth |
Q3 2019 ($m) |
Q3 2020 FORECAST ($m) |
% growth |
Connected TV |
6.1 |
28.1 |
359% |
10.8 |
22.0-25.0 |
122% |
PMPs |
1.2 |
14.5 |
1,134% |
1.0 |
16.0-17.0 |
1,548% |
Self-serve Platform |
3.4 |
8.4 |
147% |
1.3 |
8.5-9.5 |
557% |
4 eMarketer:
Unruly integration
Central to Tremor's efforts to mitigate the impact of COVID-19, was the accelerated integration of Unruly into the Company, which was completed in
As part of the Unruly transaction, in
Board composition
As Tremor continues to expand its offering and international presence, a number of management and board changes have come into effect in the first half of 2020, reflecting the Company's operational progress. In
In
Outlook
Whilst the Company continues to monitor the wider macroeconomic environment and the ongoing impact of COVID-19 very closely, trading in H2 2020 so far is demonstrating a strong recovery in global advertising (albeit not to previous levels) and as such, although the Company formally withdrew its guidance, it expects to be ahead of the consensus estimates that remain in the market for the current year. The Board remains confident in the medium-to-long term prospects of the Company which continues to have a strong balance sheet coupled with an unrivalled global proposition. This places Tremor in a prime position to benefit from the anticipated future resurgence in the global advertising markets.
The Company is close to completing its current buy back programme of
Chief Executive Officer
Review Report of the Independent Auditors to the Shareholders of Tremor International Ltd.
Introduction
We have reviewed the accompanying financial information of Tremor International Ltd. and its subsidiaries (hereinafter - "the Company") comprising the condensed consolidated interim statement of financial position as of
Scope of Review
We conducted our review in accordance with Standard on Review Engagements (
A review is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying financial information was not prepared, in all material respects, in accordance with IAS 34.
Somekh Chaikin
Certified Public Accountants (Isr.)
Member Firm of KPMG International
September 21, 2020
Condensed Consolidated Interim Statements of Financial Position as at
|
|
|
|
|
|
|
2020 |
*2019 |
2019 |
|
|
(Unaudited) |
(Audited) |
|
|
|
USD thousands |
USD thousands |
|
Assets |
|
|
|
|
Cash and cash equivalents |
|
79,143 |
69,849 |
79,047 |
Trade receivables, net |
|
66,688 |
103,390 |
95,278 |
Other receivables |
|
18,124 |
10,543 |
13,340 |
Total current assets |
|
163,955 |
183,782 |
187,665 |
|
|
|
|
|
Fixed assets, net |
|
3,011 |
3,939 |
3,132 |
Right-of-use assets |
|
23,824 |
29,153 |
21,003 |
Intangible assets, net |
|
239,120 |
219,291 |
210,285 |
Deferred tax assets |
|
19,637 |
13,944 |
17,606 |
Other long term assets |
|
1,043 |
1,154 |
1,332 |
Total non-current assets |
|
286,635 |
267,481 |
253,358 |
|
|
|
|
|
Total assets |
|
450,590 |
451,263 |
441,023 |
|
|
|
|
|
Liabilities |
|
|
|
|
Current maturities of lease liabilities |
|
10,825 |
14,552 |
9,637 |
Trade payables |
|
71,132 |
74,324 |
70,428 |
Other payables |
|
42,846 |
31,971 |
27,471 |
Total current liabilities |
|
124,803 |
120,847 |
107,536 |
|
|
|
|
|
Employee benefits |
|
515 |
710 |
556 |
Long-term lease liabilities |
|
16,764 |
21,195 |
14,632 |
Deferred tax liabilities |
|
18,830 |
20,094 |
17,687 |
Liability for put option on non-controlling interests |
|
- |
4,214 |
- |
Total non-current liabilities |
|
36,109 |
46,213 |
32,875 |
|
|
|
|
|
Total liabilities |
|
160,912 |
167,060 |
140,411 |
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
|
380 |
353 |
351 |
Share premium |
|
242,351 |
221,752 |
224,692 |
Capital reserves |
|
13,396 |
16,027 |
16,791 |
Retained earnings |
|
33,551 |
46,071 |
58,778 |
Total equity |
|
289,678 |
284,203 |
300,612 |
|
|
|
|
|
Total liabilities and equity |
|
450,590 |
451,263 |
441,023 |
*See note 7(B)(1)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Comprehensive Income
|
|
Six months ended |
Year ended |
|
|
|
|
|
|
|
|
2020 |
2019 |
2019 |
|
|
(Unaudited) |
(Audited) |
|
|
|
USD thousands |
USD thousands |
Revenues |
136,500 |
144,899 |
325,760 |
Cost of sales |
90,689 |
86,503 |
187,246 |
Gross profit |
45,811 |
58,396 |
138,514 |
|
|
|
|
Research and development expenses |
16,297 |
15,148 |
33,042 |
Selling and marketing expenses |
40,638 |
27,410 |
62,025 |
General and administrative expenses |
19,249 |
18,568 |
40,244 |
|
76,184 |
61,126 |
135,311 |
|
|
|
|
Profit/(Loss) from operations |
(30,373) |
(2,730) |
3,203 |
|
|
|
|
Profit/(loss) from operations before amortization of purchased |
|
|
|
intangibles and business combination related expenses* |
(18,145) |
6,735 |
23,148 |
|
|
|
|
Financing income |
1,362 |
344 |
773 |
Financing expenses |
(360) |
(926) |
(1,088) |
Financing income (expenses), net |
1,002 |
(582) |
(315) |
|
|
|
|
Other income |
- |
- |
700 |
|
|
|
|
Profit /(Loss) before taxes on income |
(29,371) |
(3,312) |
3,588 |
|
|
|
|
Taxes on income |
4,254 |
(1,397) |
2,636 |
Profit/(Loss) for the period |
(25,117) |
(4,709) |
6,224 |
|
|
|
|
Profit/(loss) for the year before amortization of purchased intangibles and business combination related expenses |
|
|
|
(net of tax)** |
(21,038) |
3,437 |
22,452 |
|
|
|
|
Other comprehensive income items: |
|
|
|
Foreign currency translation differences for foreign operation |
(3,551) |
262 |
139 |
Total other comprehensive income for the year |
(3,551) |
262 |
139 |
|
|
|
|
Total comprehensive income (loss) for the period |
(28,668) |
(4,447) |
6,363 |
|
|
|
|
Earnings per share |
|
|
|
Basic earnings (loss) per share (in USD) |
(0.1869) |
(0.0476) |
0.0560 |
Basic earnings (loss) per share (in USD) before amortization |
|
|
|
of purchased Intangibles and business combination |
|
|
|
related expenses (net of tax)** |
(0.1566) |
0.0348 |
0.2018 |
Diluted earnings (loss) per share (in USD) |
(0.1869) |
(0.0476) |
0.0542 |
Diluted earnings (loss) per share (in USD) before amortization |
|
|
|
of purchased Intangibles and business combination |
|
|
|
related expenses (net of tax)** |
(0.1566) |
0.0340 |
0.1956 |
*Amounting to
**Amounting to
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity
|
Share |
Share |
Capital |
Retained |
|
|
capital |
premium |
Reserves (*) |
earnings |
Total |
|
US$ thousands |
For the six months ended |
|
|
|
|
|
(unaudited) |
|
|
|
|
|
Balance as at |
351 |
224,692 |
16,791 |
58,778 |
300,612 |
Total comprehensive income for the period |
|
|
|
|
|
Loss for the period |
- |
- |
- |
(25,117) |
(25,117) |
Other comprehensive loss |
- |
- |
(3,551) |
- |
(3,551) |
Total comprehensive loss for the period |
- |
- |
(3,551) |
(25,117) |
(28,668) |
|
|
|
|
|
|
Transactions with owners, recognized |
|
|
|
|
|
directly in equity |
|
|
|
|
|
Revaluation of liability for put option on |
|
|
|
|
|
non-controlling interests |
- |
- |
- |
(110) |
(110) |
Issuance of shares in a business combination |
25 |
14,093 |
- |
- |
14,118 |
Share based payments |
- |
- |
8,346 |
- |
8,346 |
Exercise of share options |
12 |
8,738 |
(8,190) |
- |
560 |
Buy Back shares |
(8) |
(5,172) |
- |
- |
(5,180) |
Balance as at |
380 |
242,351 |
13,396 |
33,551 |
289,678 |
For the six months ended |
|
|
|
|
|
(unaudited) |
|
|
|
|
|
Balance as at |
198 |
65,305 |
7,713 |
51,053 |
124,269 |
Total comprehensive income for the period |
|
|
|
|
|
Loss for the period |
- |
- |
- |
(4,709) |
(4,709) |
Other comprehensive income |
- |
- |
262 |
- |
262 |
Total comprehensive income (loss) for the period |
- |
- |
262 |
(4,709) |
(4,447) |
|
|
|
|
|
|
Transactions with owners, recognized |
|
|
|
|
|
directly in equity |
|
|
|
|
|
Revaluation of liability for put option on |
|
|
|
|
|
non-controlling interests |
- |
- |
- |
(273) |
(273) |
Issuance of shares in a business combination |
184 |
175,166 |
- |
- |
175,350 |
Share based payments |
- |
- |
8,322 |
- |
8,322 |
Exercise of share options |
1 |
597 |
(270) |
- |
328 |
Buy Back shares |
(30) |
(19,316) |
- |
- |
(19,346) |
Balance as at |
353 |
221,752 |
16,027 |
46,071 |
284,203 |
For the year ended |
|
|
|
|
|
Balance as at |
198 |
65,305 |
7,713 |
51,053 |
124,269 |
|
|
|
|
|
|
Total comprehensive income for the year |
|
|
|
|
|
Profit for the year |
- |
- |
- |
6,224 |
6,224 |
Other comprehensive income |
- |
- |
139 |
- |
139 |
Total comprehensive income for the year |
- |
- |
139 |
6,224 |
6,363 |
|
|
|
|
|
|
Transactions with owners, recognized |
|
|
|
|
|
directly in equity |
|
|
|
|
|
Revaluation of liability for put option |
|
|
|
|
|
on non-controlling interests |
- |
- |
- |
1,501 |
1,501 |
Issuance of shares (net of issuance cost) |
184 |
175,166 |
- |
- |
175,350 |
Buy Back shares |
(41) |
(24,696) |
- |
- |
(24,737) |
Share-based payments |
- |
26 |
16,016 |
- |
16,042 |
Exercise of share options |
10 |
8,891 |
(7,077) |
- |
1,824 |
Balance as at |
351 |
224,692 |
16,791 |
58,778 |
300,612 |
(*) Includes reserves for share-based payments and a commitment to issue shares under business combination and other comprehensive income.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Cash Flows
|
|
Six months ended |
Year ended |
|
|
|
|
|
|
|
|
2020 |
2019 |
2019 |
|
|
(Unaudited) |
(Audited) |
|
|
|
USD thousands |
USD thousands |
Cash flows from operating activities |
|
|
|
Profit/(Loss) for the period |
(25,117) |
(4,709) |
6,224 |
Adjustments for: |
|
|
|
Depreciation and amortization |
20,883 |
13,395 |
32,359 |
Net financing (income) expense |
(1,132) |
315 |
(19) |
Loss on sale of fixed assets |
- |
- |
11 |
Loss (Gain) on IFRS 16 change contracts |
(2,843) |
(93) |
(2,705) |
Loss (Gain) on sale of business unit |
- |
- |
(700) |
Share-based payments |
8,561 |
7,251 |
15,809 |
Income tax expense |
(4,254) |
1,397 |
(2,636) |
|
|
|
|
Change in trade and other receivables |
44,196 |
33,946 |
38,017 |
Change in trade and other payables |
(32,801) |
(30,863) |
(35,754) |
Change in employee benefits |
(40) |
(136) |
(290) |
Income taxes received |
903 |
3,064 |
3,184 |
Income taxes paid |
(1,047) |
(3,609) |
(8,089) |
Interest received |
290 |
354 |
604 |
Interest paid |
(404) |
(355) |
(942) |
Net cash provided by operating activities |
7,195 |
19,957 |
45,073 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Decrease in pledged deposits |
185 |
30 |
475 |
Receipt of lease liability |
1,279 |
589 |
1,669 |
Acquisition of fixed assets |
(393) |
(211) |
(1,063) |
Acquisition and capitalization of intangible assets |
(2,438) |
(2,371) |
(5,672) |
Proceeds from sale of intangible assets |
- |
- |
6 |
Grant of short-term loans |
817 |
- |
309 |
Acquisition of subsidiaries, net of cash acquired |
6,227 |
25,715 |
23,714 |
Net cash provided by investing activities |
5,677 |
23,752 |
19,438 |
|
|
|
|
Cash flows from financing activities |
|
|
|
Repayment of loans |
- |
(17,273) |
(17,273) |
Buy back of shares |
(5,180) |
(18,891) |
(24,737) |
Proceeds from exercise of share options |
560 |
328 |
1,824 |
payment of lease liability |
(8,058) |
(5,185) |
(12,607) |
Net cash used in financing activities |
(12,678) |
(41,021) |
(52,793) |
|
|
|
|
Net increase in cash and cash equivalents |
194 |
2,688 |
11,718 |
|
|
|
|
Cash and cash equivalents as at the beginning of the period |
79,047 |
67,073 |
67,073 |
Effect of exchange rate fluctuations on cash and cash equivalents |
(98) |
88 |
256 |
|
|
|
|
Cash and cash equivalents as at the end of the period |
79,143 |
69,849 |
79,047 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Notes to the Condensed Consolidated Interim Statements as of June 30, 2020
Note 1 - General
A. Reporting entity
Tremor International Ltd. (the "Company" or "Tremor International"), formerly named Taptica International Ltd., was incorporated in
Tremor International Ltd is a global leader in advertising technologies. Tremor Video helps advertisers deliver impactful brand stories across all screens through the power of innovative video technology combined with advanced audience data and captivating creative. Tremor Video is one of the largest and most innovative video advertising companies in
Unruly is a strong video marketplace with more than 2,000 direct integrations with publishers, unique demand relationships with the world's biggest advertisers.
Tremor International Ltd is headquartered in
On April 1, 2019, the Company completed an acquisition transaction with RhythmOne Plc.
The consideration of the acquisition amounted to USD 176.4 million, see note 7(B)(1).
With respect to the acquisition of Unruly which was announced by the Company in the reporting period, see note 1(B)(1) and 7(A)(1).
B. Material events in the reporting period
(1) Business combination
On January 4, 2020, the Company entered into an agreement (the "Purchase Agreement") with News Corp
Pursuant to the Purchase Agreement, the Company allotted to the
(2) Effects of the spreading of the coronavirus
Following the outbreak of the coronavirus (COVID-19) in
Given the reduction in trading volumes in certain key sectors for the Company, the Company has introduced a number of measures to mitigate the impact of COVID-19, including cost-cutting initiatives with respect to reducing operating expenses, reducing headcount, freezing new hires, as well as accelerating the integration of Unruly which has been completed two months ahead of schedule.
C. Definitions
In these financial statements -
(1) The Company - Tremor International Ltd. (former name: Taptica International Ltd.)
(2) The Group - Tremor International Ltd. and its subsidiaries.
(3) Subsidiaries - Companies, the financial statements of which are fully consolidated, directly or indirectly, with the financial statements of the Company.
(4) Related party - As defined by IAS 24, "Related Party Disclosures".
Note 2 - Basis of Preparation
A. Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and do not include all of the information required for full annual financial statements. They should be read in conjunction with the financial statements as at and for the year ended December 31, 2019 (hereinafter - "the annual financial statements").
These condensed consolidated interim financial statements were authorized for issue by the Company's board of directors on September 21, 2020.
B. Use of estimates and judgments
The preparation of financial statements in conformity with IFRSs requires management to exercise judgment when making assessments, 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 significant judgments made by management in applying the Company's accounting policies and the principal assumptions used in the estimation of uncertainty were the same as those that applied to the annual financial statements.
Note 3 - Significant Accounting Policies
Except as described below, the accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its annual financial statements.
Presented hereunder is a description of the changes in accounting policies applied in these condensed consolidated interim financial statements and their effect:
A. Initial application of new standards, amendments to standards and interpretations
As from January 1, 2020 the Company applies the new standards and amendments to standards described below:
(1) Amendment to IFRS 3, Business Combinations
The Amendment clarifies when a transaction to acquire an operation is the acquisition of a "business" and when it is the acquisition of a Company of assets that according to the standard is not considered the acquisition of a "business". For the purpose of this examination, the Amendment added an optional concentration test so that if substantially all of the fair value of the acquired assets is attributable to a Company of similar identifiable assets or to a single identifiable asset, this will not be the acquisition of a business. In addition, the minimum requirements for definition as a business have been clarified, and examples illustrating the aforesaid examination were added, such as for example the requirement that the acquired processes be substantive so that in order for it to be a business, the operation shall include at least one input element and one substantive process, which together significantly contribute to the ability to create outputs. Furthermore, the Amendment narrows the reference to the outputs element required in order to meet the definition of a business and added examples illustrating the aforesaid examination.
The Amendment is effective for transactions to acquire an asset or business for which the acquisition date is in annual periods beginning on or after January 1, 2020.
In the opinion of the Company, application of the Amendment did not have a material effect on the Company's financial statements and accounting treatment of acquisitions of operations.
Note 4 - Share-Based Payment
A. Share- based compensation plan
Following the acquisition of Unruly, the Company granted 415,074 restricted share units (RSUs) to Unruly executives and employees to replace the pre-acquisition News Corp equity incentive awards held by such Unruly executives and employees.
B. New grants during the period
During the six months period ended June 30, 2020, the Company granted 1,551,000 share options, 2,324,074 Restricted Share Units (RSUs) and 725,000 Performance Share Units (PSUs) to its executives officers and employees from outstanding awards under the Company's share incentive plans. (see also Note 15 to the Company's financial statement for December 31, 2019).
C. The total expense recognized in the condensed consolidated interim statement of Comprehensive Income in the six-month period ended June 30, 2020 with respect to the options, RSUs and PSUs granted to employees, amounted to USD 8,561 thousand.
The grant date fair value of the share options granted was measured based on the Black-Scholes option pricing model.
D. The number of share options (in thousands) is as follows:
|
|
|
Weighted |
|
|
|
|
average exercise |
Number of |
|
|
|
price |
options |
|
|
|
GBP |
(Unaudited) |
Outstanding at January 1, 2020 |
|
|
1.01 |
13,868 |
Exercised |
|
|
0.08 |
(4,289) |
Granted |
|
|
0.53 |
4,600 |
Forfeited |
|
|
2.39 |
(1,699) |
|
|
|
|
|
Outstanding at June 30, 2020 |
|
|
0.52 |
12,480 |
Exercisable at June 30, 2020 |
|
|
1.27 |
535 |
Note 5 - Capital and Reserves
A. Share capital (in thousands of shares of NIS 0.01 par value)
|
|
|
|
|
|
|
|
|
June 30, 2020 |
|
|
|
|
(Unaudited) |
Issued and paid-in ordinary share capital |
|
|
133,596 |
|
|
|
|
Authorized share capital |
|
|
300,000 |
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.
B. Issuing new public shares
Following the acquisition of Unruly, as described in Note 1(B)(1) and in note7(A)(1), the Company issued 8,525,323 new shares at a quoted price of the Company's share as at the business combination date to former Unruly shareholders which became admitted to trading on AIM on January 10, 2020 and are subject to a 18-month lock-up.
C. Own shares acquisition
As part of the Company's approvals in March 2020 for a share buyback program for a total consideration of USD 10 million, the Company purchased during the six month period ended June 30, 2020 2,833,395 shares for a total consideration of USD 5,180 thousand.
The Ordinary Shares acquired pursuant to the Buyback Program reclassified as dormant shares under the Israeli Companies Law (without any rights attached thereon) and held in treasury.
Note 6 - Income Tax
(1) On December 3, 2018, the Company together with Taptica (fully owned subsidiary) submitted a request to the Israeli tax authorities for a tax ruling regarding to restructuring, whereby Taptica will be merged with and into the Company in such a manner that Taptica will transfer to the Company all its assets and liabilities for no consideration and thereafter will be liquidated. As of June 30, 2019, the merger between the companies approved by the Israeli Tax Authority and the effective merge date was determined as December 31, 2018. Following the approval of the restructuring, the tax ruling regarding Taptica owns an industrial enterprise and preferred technological enterprise which was obtained on December 2018 will apply on the merged company for the years 2017-2021 with relative agreed changes.
(2) On May 2019 the Company submitted a request for a tax-exempt transfer of assets between its subsidiaries in accordance with the provisions of Section 104A(a) of the Ordinance, by which the Company requests to carry out a restructuring that will unite the subsidiaries companies of the Company (Taptica Inc and Tremor Video DSP) under one American holding subsidiary. The Company's aforesaid request was approved in March 2020.
Note 7 - Subsidiaries
A. Business combination during the current period measured at provisional amounts
(1) Acquisition of Unruly
As detailed in Note 1(B)(1), on January 4, 2020, the Company entered into an agreement to purchase the entire issued share capital of Unruly
Pursuant to the Purchase Agreement, the Company (i) allotted to
The aggregate 8,525,323 new Ordinary Shares of the Company allotted to
In connection with the acquisition, Tremor Video, Inc., a subsidiary of the Company ("Tremor Video"), entered into a global partnership with News Corp that will equip Tremor Video with the exclusive right to sell outstream video on various News Corp titles in the
The purchase price was allocated to the acquired tangible assets, intangible assets and liabilities on the basis of their fair value at the acquisition date including the Tremor Video and News Corp three-year period exclusive agreement.
The fair value of the assets and liabilities is subject to a final allocation of the purchase price to the fair value of the assets and liabilities, which has not yet been completed at the date of approval of these financial statements. Presented hereunder are the assets and liabilities that were allocated to Unruly at the acquisition date on a provisional basis:
|
|
|
|
|
USD millions |
Current assets |
|
|
|
29.0 |
Non current assets (A) |
|
|
|
40.6 |
Current liabilities |
|
|
|
(38.2) |
Non current liabilities |
|
|
|
(3.7) |
|
|
|
|
27.7 |
(A) Comprised as follow:
|
|
|
Fair value as at |
|
|
|
January 4, 2020 |
|
|
|
USD millions |
Backlog |
|
|
0.1 |
Non Compete |
|
|
0.9 |
Technology |
|
|
2.3 |
Customer relations |
|
|
7.7 |
Brand |
|
|
8.5 |
Residual goodwill Other non current assets |
|
|
24.0 0.8 |
|
|
|
44.3 |
Deferred tax liabilities |
|
|
(3.7) |
The aggregate cash flow derived for the Company as a result of the Unruly acquisition in 2020:
|
|
|
|
USD millions |
Purchase price shares |
|
|
|
0.9 |
Working capital adjustments |
|
|
|
(0.5) |
Onerous contract |
|
|
|
14.1 |
|
|
|
|
13.2 |
Total purchase price - Non cash |
|
|
|
27.7 |
|
|
|
|
|
Less- Cash and cash equivalents at Unruly |
|
|
|
7.1 |
Add - acquisition costs |
|
|
|
0.9 |
Acquisition of subsidiary - Cash |
|
|
|
6.2 |
|
|
|
|
21.5 |
B. Business combination in prior period
(1) Acquisition of RhythmOne
On April 1, 2019, the Company completed the acquisition transaction of RhythmOne Plc (hereinafter- "RhythmOne")
The consideration of the acquisition amounted to USD 176.4 million (including consideration allocated to issuance of ordinary shares and Replacement Award).
The financial statements of the Company as at June 30, 2019 include provisional amounts in respect of leases and provision of doubtful debts of RhythmOne . Upon completing the independent valuation for the business combination, amounts were retrospectively adjusted as follows:
Effect on the statement of financial position
|
|
June 30, 2019 (unaudited) |
||||
|
|
|
|
As presented |
|
|
|
|
|
|
in the past |
Effect of |
As presented in |
|
|
|
|
financial |
retrospective |
these financial |
|
|
|
|
statements |
adjustment |
statements |
|
|
USD millions |
Current assets |
|
|
186 |
(2) |
184 |
Non current assets |
|
|
258 |
9 |
267 |
Current liabilities |
|
|
(116) |
(5) |
(121) |
Non current liabilities |
|
|
(44) |
(2) |
(46) |
Measurement period adjustments recorded in the statement of comprehensive income were not material.
Note 8 - Contingent Liability
(1) On June 11, 2019 the Company was informed that Uber Technologies, Inc. filed a complaint in the Superior Court of the
(2) In January 2018, AlmondNet, Inc. and its affiliates (Datonics LLC and Intent IQ) contacted RhythmOne asserting that RhythmOne's online advertising system infringes eleven
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