TIDMTRMR
RNS Number : 3776N
Tremor International Ltd
24 September 2019
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
24 September 2019
Tremor International Ltd
("Tremor" or the "Company")
Interim Results
Integration of RhythmOne a major step-change; the Company
well-positioned to deliver stronger second half
Tremor International Ltd (AIM: TRMR), a global leader in video
advertising technologies, announces its interim results for the six
months ended 30 June 2019.
Following the Company's successful merger with RhythmOne,
completed in April 2019 ("the Merger"):
-- Management are focused on exploiting both scale and
operational benefits of the enlarged company alongside delivering
significant cost savings
o Tremor has already made substantial progress on integration,
identifying over $20 million of cost savings and synergy benefits
in the current financial year
o A number of integration milestones have already been achieved
with further initiatives expected in the short to medium-term
-- The Company will continue to prioritise the branding side of
the business (Tremor and RhythmOne), which generates the majority
of revenue, and is well-positioned to deliver a stronger second
half for the Company
Financial highlights
-- Revenue: $144.9 million (H1 2018: $144 million), including
three months contribution from RhythmOne
o As previously announced, the Taptica Performance business
showed further weakness in earnings, balanced out by three months'
contribution from RhythmOne
o Revenue split by division: $102.6 million (71%) of revenue
from the Branding business (Tremor Video and Q2 only for
RhythmOne's branding activity) and $42.3 million (29%) from the
consolidated Performance business in H1(only Q2 for RhythmOne(,
compared to $71.9 million (50%) branding and $72.1 million (50%)
from the performance business in H1 2018
o The Company remains highly cash generative with a strong
balance sheet
-- Gross profit: $58.4 million (H1 2018: $58.5 million)
o Gross margin: 40.3% (H1 2018: 40.6%)
-- Adjusted EBITDA*: $21.4 million (H1 2018: $21.6 million)
-- Reported EPS of (0.05) cents (H1 2018: 0.16 cents) and
Adjusted DPS** of 0.12 cents (H1 2018: 0.24 cents)
-- Net cash inflow from operating activities: $19.7 million (H1 2018: $21.5 million)
-- Net cash as at 30 June 2019 of $66.5 million*** (31 December
2018: $54.5 million), after paying $18.9 million in share
buybacks
-- Repaid all RhythmOne and Tremor bank loans totalling $18 million from Company resources
*Adjusted EBITDA is defined as earnings before interest, taxes,
depreciation and amortisation, non-recurring income/expenses and
share-based payment expenses.
**Designates Diluted Earnings Per Share, not Dividend Per
Share
*** Net cash is defined as cash and cash equivalents less short
and long-term interest-bearing debt including capital and finance
leases
Operational highlights
-- Transformational merger with RhythmOne, completed in April 2019:
o Initial focus has been on consolidating teams and resources,
streamlining operations and leveraging technology synergies
o Expanding the Company's global customer base, while continuing
to foster greater cross-selling opportunities
-- Significant progress has been made in combining product capabilities as further detailed below
-- Ofer Druker appointed as Chief Executive Officer in April
2019, and Christopher Stibbs as Non-executive Director in June
2019.
-- In June 2019, completed the renaming of the Company to Tremor
International Ltd to better reflect the Company's ongoing focus on
video and to leverage Tremor's brand equity
Acquisition of RhythmOne Plc
Management is focused on exploiting both scale and operational
benefits of the enlarged company alongside delivering significant
cost savings. Tremor has already made substantial progress with
integration and has implemented over $20 million of annualised cost
savings and synergy benefits in the current financial year.
Tremor Video and YuMe's (RhythmOne's advanced TV solution)
capabilities have been successfully merged creating a powerful
connected TV ("CTV") offering. Underpinning the rationale for the
Merger, the combination is a significant milestone within the
integration plan and presents a compelling platform for brands to
utilise in order to realise value from CTV advertising.
Tremor's media division (RhythmOne) has launched its
programmatic advertising platform in Europe and APAC. It is amongst
the largest in the world with a potential reach of 334.2 million
unique customers worldwide. The Company's data management platform
("DMP") allows for further tailoring of audiences using the
Company's proprietary data, as well as being connected to
RhythmOne's RhythmGuard technology to combat fraud and invalid
traffic.
In the current year, Tremor has successfully launched Private
Marketplace Packages ("PMP"), a combination of Tremor Video's
demand side platform ("DSP") and RhythmOne's video advertising
capabilities enabling the Company's clients to share their stories
with unique, highly relevant and qualified audiences. The PMP also
benefits from RhythmGuard, ensuring precision and quality.
Bolstering this enhanced video advertising offering, the Company
has also launched Creative Studio, a dedicated team of industry
experts whose primary focus is the innovation of video and
advertising solutions to further increase the value of the
Company's offerings.
The Company continues to focus primarily on the branding and CTV
side of the business (Tremor and RhythmOne's YuMe), which generates
the majority of revenue, and is well-positioned to capitalise on
the growth in the CTV market worldwide by effectively activating
audiences using the Company's combined DMP, DSP and Exchange.
Outlook
Despite the continuing weakness in the Performance business, the
Board was pleased to see this mitigated by the first contributions
from RhythmOne. The Board is continuing to refocus the business on
video and branding and has undertaken mitigating actions to
stabilise the Performance side of the business. As the mix of
Performance revenues decreases, this weakening will have a reduced
impact on the Company as a whole.
The Board remains focused on generating quality revenues
ensuring that the Company's margins and cash generation remain
strong. The Company's strategic shift to focus on video, data and
CTV operations, has created a stronger platform for growth, which
we anticipate will deliver tangible results during H2 2019.
Management is confident in the Company's growth prospects in the
medium to long-term, with the Merger being key to achieving the
scale required to prosper in the brand ecosystem. In order to
right-size the Company and to capitalise on this significant
opportunity, management has taken a number of proactive measures in
H1, which included exiting a number of sub-scale markets, divesting
from non-core and loss-making activities and more importantly
applying Tremor's stringent accounting policies to RhythmOne. This
coupled with the weakness in the Performance division year on year
means that the Board believe the Company will be marginally behind
full year expectations on profitability for 2019. However, cost
controls and cash generation remain strong.
Ofer Druker, Chief Executive Officer of Tremor, commented:
"The merger with RhythmOne has been truly transformational for
the Company and is central to our vision of creating a robust and
innovative video advertising company, now amongst the largest in
the US. Despite only completing the transaction in April, we have
already made significant progress in identifying, maximizing and
delivering the full potential that the merger has created, taking
those first critical steps to implement our vision.
"Our initial focus has been on both streamlining our operational
footprint, as well as consolidating our product stack to ensure we
are best-placed to capitalise on the significant opportunity that
we believe exists in video, data and Connected TV, which is now our
core focus. We have already received a hugely encouraging response
from our enlarged customer base as we launch a number of exciting
product opportunities.
"Given the merger, 2019 was always going to be a year of
transition for Tremor, and there is still much to be done in
completing the integration and in re-energizing parts of RhythmOne.
We are however, fast realising the synergies and benefits that the
enlarged business has presented and, although much of the heavy
lifting is being carried out in the current financial year, we
expect the Company to feel the full benefit thereafter.
"We continue to remain hugely optimistic about the future growth
prospects of the Company."
For further information please contact:
Tremor International Ltd Tel: +972 3 545 3900
Ofer Druker, Chief Executive Officer
Yaniv Carmi, Chief Financial Officer
finnCap Ltd (Nominated Adviser) +44 20 7220 0500
Corporate Finance - Jonny Franklin Adams,
James Thompson, Hannah Boros
ECM - Tim Redfern, Richard Chambers
Vigo Communications +44 20 7390 0230
Jeremy Garcia, Antonia Pollock, Charlie tremor@vigocomms.com
Neish
About Tremor International
Tremor International Ltd is a global leader in video advertising
technologies, has three core divisions: Tremor Video (brand
advertising), RhythmOne (media) and Taptica (performance
advertising).
Tremor Video helps advertisers deliver impactful brand stories
across all screens through the power of creative video
intelligence-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 USA,
with offerings in CTV, influencer marketing, and private
marketplaces.
Tremor International Ltd is headquartered in Israel and
maintains offices throughout the US and Canada, Asia-Pacific,
Europe, India, and Latin America, and is traded on the London Stock
Exchange (AIM: TRMR).
Operational review
Introduction and integration update
The first six months of the current financial year have been
dominated by the Company's merger with RhythmOne, completed in
April 2019. Management's core focus has therefore been on the
integration of both businesses, with the enlarged company well
positioned to generate significant value for stakeholders. The
rationale for the transaction was underpinned by the broader trends
in the digital advertising market and the Company's intention to
create an industry player of significant scale to focus on video as
the central medium for digital advertising, specifically with a
focus on data and CTV.
In the first six months of the year, the Company completed share
buybacks totaling $18.9 million in order to generate value for
shareholders. The Board continues to evaluate how best to deploy
the Company's cash reserves in order to optimise shareholder value,
but currently does not intend to pay an interim dividend to
shareholders, as it wishes to focus on long-term value
generation.
Revenue was slightly ahead of H1 last year, up to $144.9 million
(H1 2018: $144 million), with Adjusted EBITDA* flat at $21.4
million (H1 2018: $21.6 million). Performance revenue continues to
weaken but was mitigated by the three months' synergetic
contribution from RhythmOne. Notwithstanding the integration,
adjusted operating expenses did not change thanks to synergy and
cost saving efforts. In addition, both gross profit and gross
margin were flat and, when naturalising the one-time effect of last
year, were higher by $1.5 million, despite the weakness in the
Performance business revenue where margins are considerably higher.
The Company aligned RhythmOne to Tremor's existing, more prudent
accounting policies and reporting methods, in-line with the Board's
strategy of delivering quality revenue, further contributing to
this year's numbers.
The following table demonstrates the non-accounting GAAP income
statement for H1:
Six months ended Year ended
June 30 31-Dec
--------------------------- -------------
2019 2018 2018
------------ ------------- -------------
(Unaudited) (Audited)
--------------------------- -------------
USD thousands USD thousands
Revenues 144,899 144,027 276,872
Cost of sales (86,503) (87,124) (167,038)
Gross profit 58,396 56,903 109,834
Research and development expenses 7,289 5,883 12,302
Selling and marketing expenses 22,415 20,698 38,162
General and administrative expenses 7,258 8,758 15,234
------------ ------------- -------------
36,962 35,339 65,698
------------ ------------- -------------
Adjusted EBITDA 21,434 21,564 44,136
------------------------------------- ------------ ------------- -------------
Adjustments to adjusted
EDITDA:
Depreciation and amortization
- Fixed assets 5,148
Depreciation and amortization
- Intangible assets 8,247
Share Base Payment
exp. 7,251
Acquisition and other reconstruction
Expenses 3,518
Adjusted EBITDA 21,434
--------------------------------------- ---------
The performance-based division has continued to be impacted in
2019 by the well-documented headwinds which have affected both
topline revenue and profitability. The Company has adjusted the
structure of this business to accommodate these changes in the
marketplace and will continue to assess the viability of this
division.
Brand advertising continues to trade in parallel with the
seasonality of the sector. Within the first three months of
integration, considerable effort has been made in consolidating the
enlarged company's sales functions in order to foster better
cross-selling opportunities in the second half of the year. Given
Q4 is a key period of trading for this division, this was
considered a priority from a future revenue generation
perspective.
A full audit of the Company's technology stack has been carried
out as part of the integration process. Several of RhythmOne's
products have been discontinued alongside its demand-side platform
("DSP"). The development of RhythmOne's data management platform
("DMP) has also been taken in-house. This initiative created an
operational challenge for management, however they believe the
decision will markedly benefit the company in the medium-term. The
reduced development, maintenance and data centre costs form part of
the wider initiative to streamline the Company's operations.
A central focus in our activity since the Merger has been to
shut down activities that are either not profitable or not in-line
with the Company's overall strategy. In addition, as the Board
highlighted prior to completion of the Merger, RhythmOne's
performance to the year-ended 31 March 2019 was below market
expectations on a standalone basis. Management have implemented a
number of proactive integration measures in order to rationalise
the cost base of the enlarged company.
Post-merger, management is now wholly focused on rightsizing the
business in terms of our geographical footprint and developing our
technology stack and go-to-market strategy, which the Board
believes will future-proof our business.
The integration of RhythmOne into the Company has continued at
pace. Initially the Company has been split into three core
divisions:
-- Tremor Video: Video division, which consists of Tremor Video and RhythmOne's legacy YuMe
-- Taptica: Performance arm, which consists of Taptica, Perk
Media and other small business units
-- RhythmOne: Media division, which consists of the RhythmOne
programmatic Exchange platform, RhythmOne Influencer, AdKarma and
Perk Apps
Management anticipates that following completion of the
integration, the Company will be consolidated into two central
lines of business: Performance (Taptica) and Branding (Tremor and
RhythmOne).
To-date, management has delivered the following integration
initiatives:
1. Established a strong unified management team to achieve our global ambition
2. Consolidated the sales teams of Tremor Video and RhythmOne's
Yume and RadiumOne, to generate cross selling opportunities
3. Combined the capabilities of the Video offering, which we
anticipate will deliver tangible results during H2 2019
4. Unified the Company's management platform (Salesforce), which concluded in August 2019
5. Launched the process of consolidating the finance function
under the Tremor practice, which will be finalised at the end of
Q3
6. Identified technology synergies including adjusting the size
and cost of the technology and product teams, consolidating and
shutting down RhythmOne's DSP, adjusting the investment in the DMP
and moving it in-house, and removing niche products
7. Reviewed and optimised the Company's data centres
8. Consolidated all regional offices
9. Implemented initiatives to ensure key talent is retained
Growth strategy
The clear shift in the wider industry landscape continues as
advertisers and brands are increasingly growing their budgets for
digital video - US ad spend is set to grow from $27.8 billion in
2018 to over $42 billion by 2020, with 54% of advertisers
increasing spend on digital video advertising in the following 12
months (eMarketer Sept 2017, eMarketer Feb 2019, IAB Video
Advertising Spend Report 2019). The global increase in the
consumption of content through CTV platforms and the resultant
consumption of over-the-top ("OTT") media continues to accelerate.
The rapid rise of platforms such as Amazon Prime and Netflix are
testament to this trend, with Android TV set to further disrupt the
digital advertising landscape.
Video is the fastest growing segment in online advertising and
the optimal format for advertisers to communicate their messages.
Data is enabling advertisers to better reach the audiences that
they are trying to engage with, and CTV is where most users are
interacting in the new digital age. Tremor has major assets in this
ecosystem and continues to see this as a considerable opportunity
for the Company.
Following completion of the Merger, we have invested heavily in
consolidating the assets around video, CTV and data. Our strategy
is to streamline operations and monetise product consolidations and
synergies to focus resources on the strategic areas of activity
that will generate growth in 2020 and beyond.
Specifically, our growth will stem from branding activities that
were further enhanced by the Merger. We recognise that we have a
major opportunity in the managed-video vertical and that the
Exchange and the Data Management Platform we acquired have created
substantial growth opportunities for the Company.
Our main growth initiatives, are to:
1. Further integrate our technology platforms to closely align
our data and CTV offering under one managed offer
2. Focus on 'self-serve' for our customers by launching new
unique capabilities that would expand our addressable market with
clients
3. Enhance the resources around our Exchange in the US and
retain and grow our relationships with CTV platforms
4. Expand the Exchange into international markets by leveraging
our strong centre in Israel, supported by a number of regional
sales and business development offices across Asia and Europe
The Company's Performance business (Taptica) continues to face
the well-documented industry headwinds as both regulation and
competition continue to compress margins. Management continues to
assess the Performance business in order to optimise margins and
cash generation within this division.
The Board's vision for the Company is to create one of the
largest unified programmatic marketplaces specialised in Video and
powered by Tremor's Supply Side Platform, Data Management Platform
and Demand Side Platform. This will enable us to connect
self-service and managed service buyers directly to publishers and
their audiences at scale, while enriching transactions through
unique audience segments and insights.
Our unique proposition
Our business is about using technology to efficiently connect
advertisers to their target audiences. This is achieved by
collaborating with leading publishers (who need to monetise their
content) and delivering the best return on their investment. Our
clients want scale and an increasingly broader service offering.
The acquisition of RhythmOne brought this to the Company as well as
an increasingly sophisticated ability in-house to analyse data.
These capabilities, combined with our scale, gives the Company a
number of advantages over its peers, specifically in terms of:
-- Pricing: our access to a large number of direct publisher
partnerships through our DSP gives us a strong price advantage that
benefits both our supply and demand partners
-- Reach: the addition of RhythmOne has significantly increased
our scale and reach, which is key
-- Data unification: our unified platform enables us to transact
across the same audience database providing accurate insights and
forecasts with no cross-platform loss
-- Audience intelligence: the combination of RhythmOne's and
Tremor's audience analysis capabilities gives us unique
insights
Litigation update
In June 2019, Uber Technologies, Inc. ("Uber") filed a complaint
against Taptica Ltd. and Taptica, Inc. Taptica was one of a number
of adtech vendors, which was retained by Fetch Media Ltd. ("Fetch")
to promote Uber's mobile app. There was no direct engagement
between Uber and the Company or any of its subsidiaries. The
revenue associated with the Uber Campaign directly relating to the
Company does not represent a material portion of Tremor's revenue
and the relationship between Uber and Fetch has been troubled
historically. Therefore, the Company reiterates that it considers
the claims to be without merit. The Company has hired a law firm to
handle the case and together are currently reviewing the options
before deciding on next steps.
Board composition
Following completion of the Merger, Ofer Druker was appointed
Chief Executive Officer of the Company in April 2019. Having
previously been Executive Chairman of the Tremor Video division, Mr
Druker was considered by the Board to be the ideal candidate to
lead the enlarged company given its ongoing focus on digital video.
In addition, Christopher Stibbs, who is currently CEO of the
Economist Group, was appointed as an independent non-executive
director in June 2019.
Outlook
Despite the continuing weakness in the Performance business, the
Board were pleased to see this mitigated by the first contributions
from RhythmOne. The Board is continuing to refocus the business on
Video and Branding and has undertaken mitigating actions to
stabilise the Performance side of the business. As the mix of
Performance revenue decreases, this weakening will have a reduced
impact of the Company as a whole.
The Board remains focused on generating quality revenues to
ensure that the Company's margins and cash generation remain
strong. The Company's strategic shift to focus on video, data and
CTV operations, has created a stronger platform for growth, which
we anticipate will deliver tangible results during H2 2019.
Management is confident in the Company's growth prospects in the
medium to long-term, with the acquisition of RhythmOne being key to
achieving the scale required to prosper in the brand ecosystem. In
order to right size the Company and to capitalise on this
significant opportunity, management has taken a number of proactive
measures in H1, which included exiting a number of sub scale
markets, divesting from non-core and loss-making activities and
more importantly applying Tremor's stringent accounting policies to
RhythmOne. This coupled with the weakness in the Performance
division year on year means that the Board believe the Company will
be marginally behind full year expectations of revenue and
profitability for 2019. Cost controls and cash generation remain
strong.
Ofer Druker Yaniv Carmi
Chief Executive Officer Chief Financial Officer
23 September 2019
Tremor International Ltd.
Condensed Consolidated Interim Financial
Statements
As at June 30, 2019
(Unaudited)
Tremor International Ltd.
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
Group") comprising the condensed consolidated interim statement of
financial position as of June 30, 2019 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 1, "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.
Sincerely,
Somekh Chaikin
Certified Public Accountants (Isr.)
Member Firm of KPMG International
September 24, 2019
Tremor International Ltd.
Condensed Consolidated Interim Statements of Financial Position
as at
June 30 December
31
----------------- ---------------
2019* 2018 2018
--------- ------ ---------------
(Unaudited) (Audited)
----------------- ---------------
USD thousands USD thousands
----------------- ---------------
Assets
Cash and cash equivalents 69,849 57,734 67,073
Trade receivables, net 105,663 64,817 64,329
Other receivables 10,549 5,106 6,990
-------------- ------------------- ----------------------
Total current assets 186,061 127,657 138,392
-------------- ------------------- ----------------------
Fixed assets, net 32,003 2,096 2,879
Long-term deposit 1,154 - -
Intangible assets, net 211,308 57,540 53,605
Deferred tax assets 13,944 2,798 2,383
Total non-current assets 258,409 62,434 58,867
-------------- ------------------- ----------------------
Total assets 444,470 190,091 197,259
============== =================== ======================
Liabilities
Credit and current maturities of
loans 2,049 5,870 12,672
Trade payables 74,058 42,553 39,630
Other payables 40,557 14,905 14,920
Total current liabilities 116,664 63,328 67,222
-------------- ------------------- ----------------------
Employee benefits 710 946 836
Long-term loans 1,274 9,706 -
Other Long-term liabilities 18,355 - -
Deferred tax liabilities 19,492 1,304 991
Liability for put option on non-controlling
interests 4,214 8,901 3,941
Total non-current liabilities 44,045 20,857 5,768
-------------- ------------------- ----------------------
Total liabilities 160,709 84,185 72,990
============== =================== ======================
Equity
Share capital 353 196 198
Share premium 221,752 63,056 65,305
Capital reserves 15,585 5,054 7,713
Retained earnings 46,071 37,600 51,053
Total equity 283,761 105,906 124,269
-------------- ------------------- ----------------------
Total liabilities and equity 444,470 190,091 197,259
============== =================== ======================
*Includes Business combination with respect of the purchase of
RhythmOne- See Note 1
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
Tremor International Ltd.
Condensed Consolidated Interim Statements of Comprehensive
Income
Six months ended June Year ended
30
-------------------------
December
31
2019 2018 2018
------------ ----------- ---------------
(Unaudited) (Audited)
------------------------- ---------------
USD thousands USD thousands
------------------------- ---------------
Revenues 144,899 144,027 276,872
Cost of sales (86,503) (85,526) (165,440)
---------- ----------- ------------
Gross profit 58,396 58,501 111,432
Research and development expenses 15,148 10,053 20,187
Selling and marketing expenses 27,410 24,054 44,702
General and administrative expenses 18,568 10,490 19,847
---------- ----------- ------------
61,126 44,597 84,736
Profit/(Loss) from operations (2,730) 13,904 26,696
Profit from operations before amortization
of purchased
intangibles and business combination
related expenses* 6,735 18,330 35,642
--------------------------------------------- ---------- ----------- ------------
Financing income 344 774 1,251
Financing expenses (926) (445) (778)
---------- ----------- ------------
Financing income (expenses), net (582) 329 473
---------- ----------- ------------
Profit /(Loss) before taxes on income (3,312) 14,233 27,169
Taxes on income (1,397) (3,431) (5,015)
---------- ----------- ------------
Profit/(Loss) for the period (4,709) 10,802 22,154
---------- ----------- ------------
Profit for the year before amortization
of purchased intangibles
and business combination related expenses
(net of tax)** 3,437 15,087 30,960
--------------------------------------------- ---------- ----------- ------------
Other comprehensive income items:
Foreign currency translation differences
for foreign operation 262 56 361
---------- ----------- ------------
Total other comprehensive income for
the year 262 56 361
---------- ----------- ------------
Total comprehensive income for the
period (4,447) 10,858 22,515
========== =========== ============
Earnings per share
Basic earnings per share (in USD) (0.0476) 0.1612 0.3281
Basic earnings per share (in USD) before
amortization
of purchased Intangibles and business
combination
related expenses (net of tax)** 0.0348 0.2251 0.4585
Diluted earnings per share (in USD) (0.0466) 0.1553 0.3179
Diluted earnings per share (in USD)
before amortization
of purchased Intangibles and business
combination
related expenses (net of tax)** 0.0340 0.2170 0.4442
* Amounting to USD 9,465 thousand (December 31 2018: USD 8,946
thousand, June 30 2018: USD 4,426 thousand) of amortization of
purchased intangibles acquired in business combination and related
acquisition expenses.
** Amounting to USD 8,146 thousand (December 31 2018: USD 8,806
thousand, June 30 2018: USD 4,285 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.
Tremor International Ltd.
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 2019
(unaudited)
Balance as at January 1 2019 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
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)
Public issuance of shares 184 175,166 - - 175,350
Share based payments - - 7,880 - 7,880
Exercise of share options 1 597 (270) - 328
Buy Back shares (30) (19,316) - - (19,346)
----------------- --------- ------- -------- ----------------
Balance as at June 30 2019 353 221,752 15,585 46,071 283,761
================= ========= ======= ======== ================
For the six months ended June
30 2018
(unaudited)
Balance as at January 1 2018 180 32,886 1,276 30,576 64,918
Total comprehensive income
for the period
Profit for the period - - - 10,802 10,802
Other comprehensive income - - 56 - 56
----- -------- ------- -------- ---------
Total comprehensive income
for the period - - 56 10,802 10,858
----- -------- ------- -------- ---------
Transactions with owners,
recognized
directly in equity
Revaluation of liability for
put option on
non-controlling interests - - - (127) (127)
Issuance of shares (net of
issuance cost) 15 29,707 - - 29,722
Share based payments - - 3,835 - 3,835
Exercise of share options 1 463 (113) - 351
Dividend to owners - - - (3,651) (3,651)
----- -------- ------- -------- ---------
Balance as at June 30 2018 196 63,056 5,054 37,600 105,906
===== ======== ======= ======== =========
For the year ended December
31 2018 (Audited)
Balance as at January 1 2018 180 32,886 1,276 30,576 64,918
Total comprehensive income
for the year
Profit for the year - - - 22,154 22,154
Other comprehensive income - - 361 - 361
----- -------- -------- -------- ---------
Total comprehensive income
for the year - - 361 22,154 22,515
Transactions with owners,
recognized
directly in equity
Revaluation of liability for
put option
on non-controlling interests - - - 4,678 4,678
Issuance of shares (net of
issuance cost) 15 29,707 - - 29,722
Buy Back shares - (135) - - (135)
Share-based payments - 25 8,012 - 8,037
Exercise of share options 3 2,822 (1,936) - 889
Dividends to owners - - - (6,355) (6,355)
----- -------- -------- -------- ---------
Balance as at December 31
2018 198 65,305 7,713 51,053 124,269
===== ======== ======== ======== =========
(*) Less than 1 thousand USD
(**) 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.
Tremor International Ltd.
Condensed Consolidated Interim Statements of Cash Flows
Six months ended Year ended
June 30
--------------------
December
31
2019 2018 2018
--------- --------- ---------------
(Unaudited) (Audited)
-------------------- ---------------
USD thousands USD thousands
-------------------- ---------------
Cash flows from operating activities
Profit/(Loss) for the period (4,709) 10,802 22,154
Adjustments for:
Depreciation and amortization 13,395 5,404 10,808
Net financing (income) expense 315 (329) (505)
Share-based payments 7,251 3,835 8,037
Income tax expense 1,397 3,431 5,015
Change in trade and other receivables 34,442 16,564 15,557
Change in trade and other payables (31,721) (7,025) (10,580)
Change in employee benefits (136) 131 (73)
Income taxes received 3,064 - 217
Income taxes paid (3,609) (11,097) (12,774)
Interest received 354 178 381
Interest paid (355) (388) (693)
-------------------- ------------------ -------------
Net cash provided by operating activities 19,688 21,506 37,544
==================== ================== =============
Cash flows from investing activities
Decrease (increase) in pledged deposits 30 (755) 51
Payment of earn-out - (1,218) (1,218)
Acquisition of fixed assets (211) (567) (1,461)
Acquisition and capitalization of intangible
assets (2,371) (679) (1,444)
Proceeds from sale of intangible assets - 118 118
Acquisition of subsidiaries, net of 25,715 - -
cash acquired
-------------------- ------------------ -------------
Net cash provided (used in) by investing
activities 23,163 (3,101) (3,954)
==================== ================== =============
Cash flows from financing activities
Issuance of shares - 29,539 29,539
Repayment of loans (18,098) (15,328) (18,195)
Buy back of shares (18,891) - (135)
Proceeds from exercise of share options 328 351 889
Lease liability repayment (3,502) - -
Dividends paid - (2,921) (6,355)
-------------------- ------------------ -------------
Net cash provided by (used in) financing
activities (40,163) 11,641 5,743
==================== ================== =============
Net increase in cash and cash equivalents 2,688 30,046 39,333
Cash and cash equivalents as at the
beginning of the period 67,073 26,985 26,985
Effect of exchange rate fluctuations
on
cash and cash equivalents 88 703 755
-------------------- ------------------ -------------
Cash and cash equivalents as at the
end of the period 69,849 57,734 67,073
==================== ================== =============
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
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, listed on AIM Market of the London Stock Exchange.
The address of the registered office is 121 Hahashmonaim Street
Tel-Aviv, Israel.
Tremor International (AIM: TAP) is a global end-to-end
performance-based mobile marketing and brand advertising platform
that helps top brands reach their users worldwide. Tremor
International works with leading brands and companies in a variety
of segments all over the world. The Company is headquartered in Tel
Aviv with offices in USA (the biggest offices are located in San
Francisco and New York) Beijing, Seoul, London, Tokyo, Berlin, New
Delhi Mexico and Singapore.
On April 1, 2019, the Company completed Acquisition Transaction
(hereinafter-"Acquisition") with RhythmOne Plc, a company
incorporated under the laws of England and Wales, whereby the
Company acquired the entire issued ordinary shares of RhythmOne and
each RhythmOne shareholder received 28 new shares of the Company
for every 33 RhythmOne shares held, so that following the
completion of the Acquisition, the Company's current shareholders
held 50.1% and, RhythmOne Shareholders held 49.9% of the merged
Group. In addition, as part of the Acquisition, the RhythmOne
options and RhythmOne RSUs holders rolled over the equivalent
options and RSUs over Tremor shares, see also Note 4B.
The consideration of the Acquisition amounted to USD 176 million
(including consideration allocated to issuance of ordinary shares
and Replacement Award).
Following the completion of the Acquisition the Company executed
share buy-back program, see also Note 5(C).
B. Definitions
In these financial statements -
(1) The Company - Tremor International Ltd. (former name: Taptica International Ltd.)
(2) The Group - Tremor International Ltd. and its subsidiaries.
(3) Subsidiaries - Companies, the financial statements of which
are fully consolidated, directly or indirectly, with the financial
statements of the Company.
(4) Related party - As defined by IAS 24, "Related Party Disclosures".
Note 2 - Basis of Preparation
A. Statement of compliance
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, 2018
(hereinafter - "the annual financial statements").
These condensed consolidated interim financial statements were
authorized for issue by the Company's board of directors on
September 24, 2019.
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
Group'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 Group in these condensed consolidated interim financial
statements are the same as those applied by the Group 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, 2019 the Group applies the new standards and
amendments to standards described below:
(1) IFRS 16, Leases
In January 2016, the IASB issued IFRS 16, "Leases" ("the new
Lease Standard"). The new Lease Standard is effective for annual
periods beginning on or after January 1, 2019. According to the new
Lease Standard, a lease is a contract, or part of a contract, that
conveys the right to use an asset for a period of time in exchange
for consideration.
The effects of the adoption of the new Lease Standard are as
follows:
-- According to the new Lease Standard, lessees are required to
recognize all leases in the statement of financial position
(excluding certain exceptions, see below). Lessees will recognize a
liability for lease payments with a corresponding right-of-use
asset, similar to the accounting treatment for finance leases under
the existing standard, IAS 17, "Leases". Lessees will also
recognize interest expense and depreciation expense separately.
A. Initial application of new standards, amendments to standards and interpretations
(1) IFRS 16, Leases
-- Variable lease payments that are not dependent on changes in
the Consumer Price Index ("CPI") or interest rates, but are based
on performance or use are recognized as an expense by the lessees
as incurred and recognized as income by the lessors as earned.
-- In the event of a change in variable lease payments that are
CPI-linked, lessees are required to remeasure the lease liability
and record the effect of the remeasurement as an adjustment to the
carrying amount of the right-of-use asset.
-- The accounting treatment by lessors remains substantially
unchanged from the existing standard, namely classification of a
lease as a finance lease or an operating lease.
-- The new Lease Standard includes two exceptions which allow
lessees to account for leases based on the existing accounting
treatment for operating leases - leases for which the underlying
asset is of low financial value and short-term leases (up to one
year).
The Group elected to apply the standard using the modified
retrospective approach, resulting in an increase in the company's
assets and liabilities as at January 1, 2019 and without a
restatement of comparative data.
In measurement of the lease liabilities, the Group discounted
lease payments using the nominal incremental borrowing rate at
January 1, 2019. The discount rates used to measure the lease
liability range between 3.128% and 3.118%. This range is affected
by differences in the lease term, differences between asset groups,
and so forth.
As a result of applying IFRS 16, in relation to the leases that
were classified as operating leases according to IAS 17, the Group
recognized right-of-use assets and lease liabilities as at June 30,
2019 in the amount of USD 24,176 thousand and USD 25,963 thousand,
respectively.
Furthermore, instead of recognizing lease expenses in relation
to those leases, during the six months period ended June 30, 2019
the Group recognized additional depreciation expenses in the amount
of USD 3,343 thousand, and additional financing expenses in the
amount of USD 255 thousand.
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:
-- Offices 1-8 years
-- Data Centers 1-4 years
A. Initial application of new standards, amendments to standards
and interpretations (cont'd)
(2) IFRIC 23, Uncertainty Over Income Tax Treatments
IFRIC 23 clarifies how to apply the recognition and measurement
requirements of IAS 12 for uncertainties in income taxes. According
to IFRIC 23, when determining the taxable profit (loss), tax bases,
unused tax losses, unused tax credits and tax rates when there is
uncertainty over income tax treatments, the entity should assess
whether it is probable that the tax authority will accept its tax
position. Insofar as it is probable that the tax authority will
accept the entity's tax position, the entity will recognize the tax
effects on the financial statements according to that tax position.
On the other hand, if it is not probable that the tax authority
will accept the entity's tax position, the entity is required to
reflect the uncertainty in its accounts by using one of the
following methods: the most likely outcome or the expected value.
IFRIC 23 emphasizes the need to provide disclosures of the
judgments and assumptions made by the entity regarding uncertain
tax positions.
IFRIC 23 is effective for annual reporting periods beginning on
or after January 1, 2019.
The Group has examined the effects of applying IFRIC 23, and in
its opinion the effect on the financial statements will be
immaterial.
Note 4 - Share-Based Payment
A. Share- based compensation plan
On April 2, 2019 the Company's shareholders adopted the New
Taptica Management Incentive Scheme to provide for the grant of
11,772,932 equity incentive awards to executive officers. In
addition, following the Acquisition of RhythmOne the Company's
shareholders adopted RhythmOne Plan to provide for the grant of
1,607,403 equity incentive award to RhythmOne executives and
employees.
B. New grants during the period
During the six months period ended June 30, 2019, the Group
granted 458,946 share options, and 9,571,276 Restricted Share Units
(RSUs) to its executives officers and employees from outstanding
awards under the Company's share incentive plans (see also Note 14
to the Company's financial statement for December 31, 2018).
In addition, as part of the Acquisition as described in Note A,
849,325 RhythmOne options and 1,058,776 RhythmOne RSU's were Rolled
over to 458,946 the Company's options and 869,962 the Company's
RSU's under RhythmOne Plan, see Note 7 regarding the accounting
treatment.
C. The total expense recognized in the condensed consolidated
interim statement of Comprehensive Income in the six-month period
ended June 30, 2019 with respect to the options and RSUs granted to
employees, amounted to USD 7,244 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, 2019 2.44 9,835
Exercised 0.74 (345)
Granted 0.21 10,030
Forfeited 2.91 (1,272)
----- --------
Outstanding at June 30, 2019 0.99 18,248
===== ========
Exercisable at June 30, 2019 1.34 3,171
===== ========
Note 5 - Capital and Reserves
A. Share capital (in thousands of shares of NIS 0.01 par value)
June 30 2019
-------------
(Unaudited)
-------------
Issued and paid-in ordinary share capital 124,633
========
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 RhythmOne, as described in Note 1,
the Company issued 66,736,485 new shares at a quoted price of the
Company's share as at the business combination date to former
RhythmOne shareholders which became admitted to trading on AIM on
April 2, 2019.
C. Own shares acquisition
Following the Acquisition of RhythmOne, as described in Note 1,
and as part of the Company's approvals in April 2019 and June 2019
for a share buyback program for a total consideration of USD 25
million, the Company purchased during the six month period ended
June 30, 2019 10,978,628 shares (of which 5,743,731 were purchased
from former related parties) for a total consideration of USD
19,346 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 4, 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 2017-2022 with relative agreed changes.
(2) In May 2019 the Company submitted a request for a tax-exempt
transfer of assets between its subsidiaries in accordance with the
provisions of Section 104A(a) of the Ordinance, by which the
Company requests to carry out a restructuring that will unite the
subsidiaries companies of the Group (Taptica Inc. and Tremor Video
DSP) under one American holding subsidiary. As at the date of
approval of the financial statements, the Company's aforesaid
request has not yet been approved.
Note 7 - Business Combination
Acquisition of RhythmOne
On April 1, 2019, the Company completed Acquisition Transaction
(hereinafter- "Acquisition") with RhythmOne Plc (hereinafter-
"RhythmOne"), a company incorporated under the laws of England and
Wales, whereby the Company acquired the entire issued ordinary
shares of RhythmOne and each RhythmOne shareholder received 28 new
shares of the Company (as such new 66,736,485 shares of the Company
were issued , see also note 5B) for every 33 RhythmOne shares held,
so that following the completion of the Acquisition, the Company's
current shareholders held 50.1% and, RhythmOne Shareholders held
49.9% of the merged Group. In addition, 849,325 options and
1,058,776 restricted shares units over RhythmOne share awarded were
rolled over to 458,946 the Company's options and to 869,962 the
Company's restricted units. In order to determine the portion of
the replacement award that is part of the Acquisition consideration
and the portion that is remuneration for post- combination service,
the Company measures both the replacement awards granted by Tremor
and RhythmOne awards as of the acquisition date in accordance with
IFRS2. The portion of the replacement award attributable to
Acquisition consideration is the fair-value of RhythmOne award
multiplied by the ratio of the portion of the vesting period
completed to the greater of the total vesting period or the
original vesting period of RhythmOne award (hereinafter-
"Replacement Award").
The consideration of the Acquisition amounted to USD 176 million
(including consideration allocated to issuance of ordinary shares
and Replacement Award).
The purchase price was allocated to the acquired tangible
assets, intangible assets and liabilities on the basis of their
fair value at the acquisition date. 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 RhythmOne at the acquisition date on a
provisional basis:
Acquisition of RhythmOne (cont'd)
USD millions
---------------
Cash and cash equivalents 28.1
Accounts receivables 76.4
Other current asset 4.6
Property, plant and equipment 23.7
Other non- current assets 1.2
Deferred tax asset 11.5
Intangible assets - purchased and
capitalized see (1) below 163.5
Trade payables (57.2)
Other current liabilities (48.6)
Deferred tax liability (19.8)
Long term loan (6.7)
Other long term liabilities (0.7)
-------
176
=======
(1) Comprised as follow:
Fair value as
at March 31
2019
USD millions
Purchased and capitalized Intangible
assets 5.4
Brand and domain name 17.5
Technology 17.6
Customer relations 28.4
Residual goodwill 94.6
----------------------------------
163.5
==================================
Deferred tax liabilities (19.8)
==================================
The aggregate cash flow derived for the Group as a result of the
RhythmOne acquisition in 2019:
USD millions
----------------------
Purchase price in ordinary shares 175.4
Purchase price according to Replacement
Award 0.6
Total purchase price - Non cash 176
---------------------
Less- Cash and cash equivalents of
the RhythmOne 28.1
Add - acquisition costs* 2.4
Acquisition of subsidiary - Cash 25.7
---------------------
150.3
=====================
* An amount of USD 130 thousand was paid to a related party due
to his efforts related to the Acquisition of RhythmOne.
Note 8 - Contingent Liability
(1) 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..
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, alleging fraudulent concealment, negligence and unfair
competition.
The revenue associated with the Uber Campaign directly relating
to the Company does not represent a material portion of Taptica's
revenue.
The Company reiterates that it considers the claims to be
without merit and, as such, will aggressively defend against these
claims.
(2) RhythmOne litigation
(a) Edenbrook Capital LLC ("Edenbrook") sent a letter to
RhythmOne asserting several allegations, including breach of
fiduciary duties and conversion (detention of property). Edenbrook
alleges that the shareholders of YuMe that chose not to tender
their shares in the merger with RhythmOne were discriminated
against, in that the tendering shareholders received consideration
in a more expedient manner than those who did not tender. In the
case of Edenbrook (which did not tender), it received its RhythmOne
shares only on March 8, 2018, following a significant decline in
the stock price. As a result, Edenbrook claims to have suffered
losses as it intended to sell its stock immediately after the
merger closing. In addition, Edenbrook claims that it initially
received an incorrect number of shares from Computershare, which
further delayed its ability to sell its shares. Accordingly, it
demands that RhythmOne repurchase its stock for a price of GBP2.70
per share (for a total of $7,353,711).
On February 4(th) , Edenbrook filed a complaint in the US
District Court of Northern California against RhythmOne plc and
YuMe Inc, alleging RhythmOne violated Section 14(e) of the US
Securities Exchange Act of 1934. The complaint demands recessionary
and compensatory damages in an unstated amount and costs and
disbursements ofbringing the action, including reasonably attorneys
and experts fees.
On March 28(th) , RhythmOne filled a motion to dismiss
requesting dismissal of the action with prejudice.
The Company believes, based on its legal consuls, that the claim
is without merit and it cannot estimate at this time what the
damages might be with any certainty.
In January 2018, AlmondNet, Inc. and its affiliates (Datonics
LLC and Intent IQ) contacted RhythmOne asserting that RhythmOne's
online advertising system infringes eleven U.S. Patents owned by
the AlmondNet Group. RhythmOne's General Counsel informed that
AlmondNet offered to execute a patent license agreement, which as
of the report release date the sides did not came to an
agreement
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FZLBLKKFBBBD
(END) Dow Jones Newswires
September 24, 2019 02:01 ET (06:01 GMT)