TIDMTRMR
RNS Number : 6990Z
Tremor International Ltd
22 September 2020
22 September 2020
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 30 June 2020.
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 $
90-95 million in Q3 2020 (Q3 2019: $67 million), reflecting c. 40%
growth in like for like sales and c. 70% compared to Q2 2020
-- Tremor is back to strong profitability, with approximately
$11 million Adjusted EBITDA anticipated in Q3 2020
-- Core growth engines:
o Connected TV ("CTV") revenues expected to double to $22-25
million in Q3 2020 (Q3 2019: $10.8 million), compared to the $28
million generated across the whole of H1 2020
o Self-serve expected to deliver $8-9 million of revenue in Q3
2020, an increase of 557% (Q3 2019: $1.3 million)
o Private Marketplaces ("PMPs") expected to generate revenues of
c. $16-17million (Q3 2019: $1 million) compared to $14.5 million
across the whole of H1 2020
-- 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: $136.5 million (H1 2019: $144.9 million)
o Reduction partially as a result of an anticipated decrease in
performance revenues to $22.1 million (H1 2019: $42.3 million)
-- Gross profit: $45.8 million (H1 2019: $58.4 million)
o Gross margin: 33.6% (H1 2019: 40.3%)
-- Positive Adjusted EBITDA*: $1.8 million (H1 2019: $21.4
million). Better result achieved than anticipated as a result of a
stronger performance in June and some cost adjustments
-- Reported EPS of (0.19) cents (H1 2019: (0.05) cents) and
Adjusted Diluted EPS of (0.04) cents (H1 2019: 0.12 cents). Net
cash inflow from operating activities: $7.2million (H1 2019: $19.7
million)
-- Net cash as at 30 June 2020 of $78 million** (31 December
2019: $76.9 million), after paying $5.2 million in a share buyback
programme since March 2020
*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. $23 million of savings in 2020 to mitigate the reduction
in trading volumes experienced
-- 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 Year ended
ended June 31-Dec
30
--------------------- ----------------------
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 $10 million. The board continues to evaluate the best
use of deploying its capital for the benefit of shareholders.
Ofer Druker, Chief Executive Officer of Tremor, commented:
"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
Ofer Druker, Chief Executive Officer
Sagi Niri, Chief Financial Officer
finnCap Ltd Tel: +44 20 7220 0500
Jonny Franklin-Adams
James Thompson
Vigo Communications Tel: +44 20 7390 0230
Jeremy Garcia
Antonia Pollock
Charlie Neish
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 North America and globally, with
offerings in CTV, in-stream, out-stream and in-app.
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 Israel and
maintains offices throughout the US and Canada, Europe,
Asia-Pacific and Australia and is traded on the London Stock
Exchange (AIM: TRMR).
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
Following the acquisition of Unruly in January 2020, we
completed its integration into Tremor in the first six months of
the year, which was a significant achievement. Having now nearly
completed Q3 2020, we are able to provide an update on how our
strategy of creating one of the largest unified programmatic
marketplaces specialized in CTV and video advertising is coming
into fruition, as the advertising markets begin to recover.
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
$90-95million (Q3 2019: $67 million). Revenues generated from
Connected TV are expected to increase to $22-25 million in Q3 2020
alone (Q3 2019: $10.8 million), compared to $28 million for the
whole of the first half of 2020.
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. $8-9 million of revenue in Q3 2020 (Q3 2019: $1.3
million) and our PMPs are expected to generate revenues of $16-17
million (Q3 2019: $1.0 million) compared to $14.5 million in H1
2020.
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. $23 million against our initial yearly budget. Demand
from mid-March through to the end of April was heavily reduced as a
result of advertiser budget cuts across a number of verticals.
Since May, we have seen an encouraging level of volume increase,
alongside continued demand from those sectors less impacted by the
pandemic. However - despite this recovery - and as anticipated,
demand in H1 2020 did not reach the levels experienced in the same
period in 2019.
Revenues for the six months to 30 June 2020 were $136.5 million
with Adjusted EBITDA for the period of $1.8 million. The Company
continue to maintain a strong balance sheet with $78 million in net
cash. Some of the reduction in top line is as a result of the
anticipated continued decline in the performance revenues.
Q1 2019(1) Q2 2019(2) Q3 Q4 Q1 Q2 Q3
($m) ($m) 2019(2) 2019(2) 2020 2020 2020(3)
($m) ($m) ($m) ($m) ($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
(3) Forecast 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 alone(4) 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. $23-25
million, which is nearly the same amount generated across the whole
of H1 2020.
A further important indicator is the growth around programmatic
activities such as Self-serve and Private Marketplaces. Self-serve
is expected to deliver $8 million of revenue in Q3 2020 (Q3 2019:
$1.3 million) and our PMPs are set to generate revenues of c. $15
million-$16 million (Q3 2019: $1 million) compared to $14.5 million
in H1 2020.
Revenue KPIs H1 2019 H1 2020 % growth Q3 2019 Q3 2020 % growth
($m) ($m) ($m) FORECAST
($m)
---------
Connected TV 6.1 28.1 359% 10.8 22.0-25.0 1 22 %
-------- -------- --------- ------- ---------
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 5 57 %
-------- -------- --------- ------- ---------
(4) eMarketer: November 2019
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 June 2020, two months ahead of schedule. The
combination of Unruly and Tremor Video has created a truly
stand-out offering, which includes over 3,000 direct premium
publisher partnerships with many of largest and most read media
outlets globally. The transaction also delivers significant
strategic relationships with some of the world's biggest
advertisers and brands. The Company is also benefitting from
Unruly's U7, a brand and agency-powered council designed to engage
the advertising community worldwide, providing access to some of
the world's biggest brands.
As part of the Unruly transaction, in January 2020, Tremor
entered into a global partnership with News Corp, one of the
leading publishers in the world, giving Tremor the exclusive right
to sell outstream video on more than 50 News Corp titles in the UK,
US and Australia.
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 March 2020, Yaniv Carmi, the Company's
Chief Financial Officer was appointed to the role of Chief
Operating Officer, with Sagi Niri joining Tremor as Chief Financial
Officer, and subsequently being appointed to the Board in June
2020. In addition, as part of the acquisition of Unruly, both
Rebekah Brooks (News Corp UK CEO) and Norman Johnston (Head of ad
strategy at News Corp) joined the Board as non-executive directors,
bringing with them unrivalled experience in the media markets in
which we operate.
In June 2020, Tim Weller, Non-Executive Chairman of Tremor
informed the Board of his intention to step down having held the
position for six years during a transformational period for the
Company. Chris Stibbs, Non-Executive Director of Tremor was
appointed Non-Executive Chairman from 1 September 2020. Having
spent 25 years as an executive in the media industry, serving as
the CEO of The Economist, Chris is an ideal candidate to guide the
Company as we continue to progress on our trajectory.
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 $10 million. The board continues to evaluate the best
use of deploying its capital for the benefit of shareholders.
Ofer Druker
Chief Executive Officer
21 September 2020
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 June 30, 2020 and the related condensed
consolidated interim statements of comprehensive income, changes in
equity and cash flows for the six-month period then ended. The
Board of Directors and Management are responsible for the
preparation and presentation of this interim financial information
in accordance with IAS 34 "Interim Financial Reporting". Our
responsibility is to express a conclusion on this interim financial
information based on our review.
Scope of Review
We conducted our review in accordance with Standard on Review
Engagements (Israel) 2410 , "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" of
the Institute of Certified Public Accountants in Israel. A review
of interim financial information consists of making inquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards in Israel
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
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
June 30 December
31
----------------- ---------------
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 18,12 4 10,543 13,340
----------- -----------
163,95
Total current assets 5 183,782 187,665
----------- ----------- ----------
Fixed assets, net 3,011 3, 9 39 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 1,04 3 1,15 4 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 71,13 2 74,324 70,428
Other payables 4 2 , 846 31,971 27,471
----------- ----------- ----------
12 4 ,
Total current liabilities 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 - 4,214
interests -
----------- ----------- ----------
Total non-current liabilities 3 6 , 109 46, 213 32,875
----------- ----------- ----------
16 0 , 16 7 ,
Total liabilities 912 060 140,411
=========== =========== ==========
Equity
Share capital 380 353 351
242,35
Share premium 1 221,752 224,692
Capital reserves 13,396 16,027 16,791
Retained earnings 33,551 46,071 58,778
----------- ----------- ----------
28 4 ,
Total equity 289, 678 203 300,612
----------- ----------- ----------
4 5 1,
Total liabilities and equity 450,590 263 441,023
=========== =========== ==========
* 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 June Year ended
30
-------------------------
December
31
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
(30, 373
Profit/(Loss) from operations ) (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 (2 5 ,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 (2 8 , 668
the period ) (4,447) 6,363
============ ========== ==========
Earnings per share
Basic earnings (loss) per share (in
USD) (0.1869) (0.0476) 0.0 560
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 USD 12,228 thousand (December 31 2019: USD 19,945
thousand, June 30 2019: USD 9,465 thousand) of amortization of
purchased intangibles acquired in business combination and related
acquisition expenses.
**Amounting to USD 4,079 thousand (December 31 2019: USD 16,228
thousand, June 30 2019: USD 8,146 thousand) of amortization of
purchased intangibles acquired in business combination and related
acquisition expenses.
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
June 30, 20 20
(unaudited)
Balance as at January 1,
20 20 351 224,692 16,791 58,778 300,612
Total comprehensive income
for the period
(2 5 , (2 5 ,
Loss for the period - - - 117 ) 117 )
( 3 , ( 3 ,
Other comprehensive loss - - 551 ) - 551 )
---- -------- -------- ------- --------
Total comprehensive loss for ( 3 , (2 5 , (2 8 ,
the period - - 551 ) 117 ) 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 - - 8,34 6 - 8,34 6
(8,1 90
Exercise of share options 12 8,738 ) - 56 0
Buy Back shares (8) (5,172) - - (5,180)
---- -------- -------- ------- --------
Balance as at June 30, 20 1 3 , 3 3 , 2 89 ,
20 380 242,351 396 551 678
==== ======== ======== ======= ========
For the six months ended
June 30, 201 9
(unaudited)
Balance as at January 1,
201 9 198 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 June 30, 201
9 353 221,752 16,027 46,071 284,203
===== ========= ======== ======== =========
For the year ended December
31, 2019 (Audited)
Balance as at January 1, 124,
2019 198 65,305 7,713 51,053 269
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 December 31,
2019 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
June 30
--------------------
December
31
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
( 1,132
Net financing (income) expense ) 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
( 4 , 254
Income tax expense ) 1,397 (2,636)
4 4,19
Change in trade and other receivables 6 33,946 38,017
(3 2 ,
Change in trade and other payables 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 ( 2,4 38) (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 19 4 2,688 11,718
Cash and cash equivalents as at the
beginning of the period 79,04 7 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 Israel under the laws of the state of Israel on
March 20, 2007, and is listed on the AIM Market of the London Stock
Exchange. The address of the registered office is 121 Hahashmonaim
Street Tel-Aviv, Israel.
Tremor International Ltd is a global leader in advertising
technologies. Tremor Video helps advertisers deliver impactful
brand stories across all screens through the power of innovative
video technology combined with advanced audience data and
captivating creative. Tremor Video is one of the largest and most
innovative video advertising companies in North America, with
offerings in CTV, in stream, and in-app. The media side of Tremor,
RhythmOne, drives real business outcomes in multiscreen
advertising. Its highly ranked programmatic platform efficiently
and effectively delivers performance, quality, and actionable data
to demand and supply-focused clients and partners.
Unruly is a strong video marketplace with more than 2,000 direct
integrations with publishers, unique demand relationships with the
world's biggest advertisers.
Tremor International Ltd is headquartered in Israel and
maintains offices throughout the US and Canada, Europe,
Asia-Pacific and Australia.
On April 1, 2019, the Company completed an acquisition
transaction with RhythmOne Plc.
The consideration of the acquisition amounted to USD 17 6.4 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 UK & Ireland Limited (the
"News Corp " or " UK Seller") and News Preferred Holdings, Inc.
(the "US Seller " , and collectively with the UK Seller, the
"Sellers") to purchase the entire issued share capital of Unruly
Holdings Limited ("Unruly UK") and Unruly Media Inc. ("Unruly US"
and collectively with Unruly UK, "Unruly") from the Sellers.
Pursuant to the Purchase Agreement, the Company allotted to the
UK Seller and the US Seller an aggregate of 8,525,323 new Ordinary
Shares of the Company and paid US$1 and GBP 1 in exchange for the
sale to the Company of a GBP 12.0 million intercompany loan, and in
consideration for the entire issued share capital of Unruly UK and
Unruly US. The aggregate new Ordinary Shares allotted to UK Seller
and US Seller represented approximately 6.91% of the Company's
issued voting share capital at such time, and are subject to a
18-month lock-up. In connection with the acquisition, Tremor Video,
Inc. entered into a global partnership with News Corp that will
equip Tremor Video with exclusive rights to sell outstream video on
various News Corp titles in the UK, US and Australia, and Tremor
Video committed to an ad spend of GBP 30 million with News Corp
over a three-year period. See note 7 (A)(1).
(2) Effects of the spreading of the coronavirus
Following the outbreak of the coronavirus (COVID-19) in China in
December 2019, and it reaching many other countries as well at the
beginning of 2020, there was a decrease in economic activity in
many areas around the world, including Israel. The spread of the
virus has led, inter alia, to slowdown of commerce, a decrease in
global transportation, restrictions on travel and other activities
which are essential and critical for maintaining on-going business
activities that were announced by the state of Israel and other
countries around the world and a decrease in the value of financial
assets and commodities on the markets around the world.
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, 20 20 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 Number of
exercise
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 UK and Unruly US.
Pursuant to the Purchase Agreement, the Company (i) allotted to
UK Seller 7,960,111 new Ordinary Shares of the Company in exchange
for the sale to the Company of a GBP 12.0 million loan from Unruly
Company Limited (as subsidiary of UK Target)(as borrower) to UK
Seller (as lender); (ii) paid GBP 1 to UK Seller in consideration
for the sale of the entire issued share capital of Unruly UK; and
(iii) allotted to US Seller 565,212 new Ordinary Shares of the
Company and paid US Seller USD 1 in consideration for the sale of
the entire issued share capital of Unruly US.
The aggregate 8,525,323 new Ordinary Shares of the Company
allotted to UK Seller and US Seller, as purchase price (as detailed
above), represented approximately 6.91% of the Company's issued
voting share capital at such time. The Sellers agreed not to sell,
transfer or otherwise dispose of such Company Ordinary Shares for
an 18-month period, subject to customary exceptions. As part of the
transaction, the Sellers also agreed to contribute cash towards the
cost of integrating Unruly with the Company.
In connection with the acquisition, Tremor Video, Inc., a
subsidiary of the Company ("Tremor Video"), entered into a global
partnership with News Corp that will equip Tremor Video with the
exclusive right to sell outstream video on various News Corp titles
in the UK, US and Australia, and Tremor Video has committed to an
ad spend of GBP 30 million with News Corp over a three-year
period.
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 24 .0
Other non current assets 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
UK debt acquisition 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 Effect As presented
past of 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
State of California (U.S.), County of San Francisco, against the
Company. The complaint alleges fraud, negligence and unfair
competition. In October 2014, Taptica, alongside a number of other
adtech vendors, was retained by Fetch Media Ltd. ("Fetch") to
promote Uber's mobile app (the "Uber Campaign"). There was no
direct engagement between Uber and the Company or any of its
subsidiaries. Overall, thousands of campaigns ran with Fetch
directly liaising with Taptica on a daily basis. As is standard in
the Company's business, at the end of each month, reconciliation
reports were sent by the Company to Fetch and the final invoiced
amounts were approved by Fetch. The revenue associated with the
Uber Campaign directly relating to the Company does not represent a
material portion of Taptica's revenue. On August 23, 2019, Taptica
filed a demurrer relating to all causes of action asserted in the
Complaint. On September 18, 2019, the Court issued an order
transferring the case to the complex division of the Superior Court
of California, County of San Francisco, temporarily staying
discovery and assigning the matter for all purposes to Judge Teri
L. Jackson. On October 8, 2019, following a peremptory challenge to
Judge Jackson, the case was set for reassignment to a different
judge. On October 11, 2019, the case was reassigned to Judge
Anne-Christine Massullo. After the defendants' demurrers were fully
briefed, oral argument was heard on December 11, 2019, and
continued to January 7, 2020. On January 9, 2020, Judge Massullo
issued an order sustaining in part and overruling in part Taptica's
demurrer, with leave to amend. In particular, Judge Massullo
sustained Taptica's demurrer with respect to the fraudulent
concealment and unfair competition claims, but overruled the
demurrer with respect to alleged negligence. Uber filed its Amended
Complaint on January 29, 2020, asserting the same three claims as
in its original Complaint. Taptica demurred to all three claims on
March 3, 2020. Oral arguments on Taptica's demurrer were heard on
May 27, 2020. Judge Massullo sustained Taptica's demurrer with
respect to the fraudulent concealment and unfair competition
claims, with leave to amend. On August 17, 2020, Uber filed an
Amended Complaint asserting the same claims in the original
complaint. Taptica intends to demurrer within the appropriate
timeframe. The discovery stay has been partially lifted relating to
the negligence claims. The Company reiterates that it considers the
claims to be without merit and, as such, will continue to
aggressively defend against these claims. The Company believes that
the likelihood of a material loss is remote but at this point it is
too early to reasonably estimate potential loss any financial
impact to the Company resulting from this matter.
(2) 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.
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END
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(END) Dow Jones Newswires
September 22, 2020 02:00 ET (06:00 GMT)