Nexxen International - Q4 and FY2023 Results
06/03/2024 07:00
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RNS Number : 7267F Nexxen International Ltd 06 March 2024
6 March 2024
Nexxen International Ltd
("Nexxen" or the "Company")
Nexxen Reports Results for the Fourth Quarter and Year Ended December 31,
2023
Achieved full year 2023 Contribution ex-TAC and Adjusted EBITDA above the
midpoints of the Company's guidance
Grew programmatic revenue 9% for full year 2023 vs. 2022; expanded
programmatic revenue to 90% of full year 2023 revenue from 82% in 2022
Launched new $20 million Ordinary share repurchase program
Nexxen International Ltd. (AIM/NASDAQ: NEXN) ("Nexxen" or the "Company"), a
global, unified advertising technology platform with deep expertise in video
and Connected TV ("CTV"), announced today its financial results for the fourth
quarter and year ended December 31, 2023. The Company's financial results for
the fourth quarter and year ended December 31, 2023, as well as the fourth
quarter ended December 31, 2022, reflect the combined financial performance of
Nexxen and Amobee, while comparative figures for the year ended December 31,
2022 include Amobee contribution only from September 12, 2022 through December
31, 2022.
Financial Summary
· Contribution ex-TAC: Generated Contribution ex-TAC of $90.5 million
in Q4 2023, reflecting a 12% decrease from $103.0 million in Q4 2022, and
Contribution ex-TAC of $314.2 million for the year ended December 31, 2023,
reflecting a 1% increase compared to $309.7 million for the year ended
December 31, 2022. Weakness in Q4 2023 Contribution ex-TAC was a byproduct of
reduced managed service, video, and CTV spending from some of the Company's
highest-spending agency customers it is heavily indexed to, as well as Nexxen
discontinuing less profitable relationships with certain customers. Full year
2023 Contribution ex-TAC was also affected by challenging advertising
conditions throughout the year which disproportionately impacted budgets and
spending for several of the Company's small- and mid-sized agency customers, a
notable decline in the Company's non-core business focused on legacy
non-programmatic performance-related activities, and challenges stemming from
the initial integration of Amobee's and Nexxen's sales teams, technology
stack, and management teams. Nexxen believes its sales team is well-positioned
to drive growth in 2024 as it is now exclusively focused on selling as opposed
to integration initiatives and is equipped with a significantly enhanced
platform featuring in-demand tech and data capabilities. Nexxen is cautiously
optimistic that macroeconomic and advertising conditions will improve in 2024,
potentially driving increased budgets and spending for its larger customers.
· Programmatic Revenue: Programmatic revenue was $86.0 million in Q4
2023, reflecting a 9% decrease from $94.5 million in Q4 2022, while
programmatic revenue was $299.0 million for the year ended December 31, 2023,
reflecting a 9% increase compared to $274.4 million for the year ended
December 31, 2022. Reduced programmatic revenue in Q4 2023 compared to Q4 2022
was a byproduct of lower overall Contribution ex-TAC driven by weaker
comparative advertising demand and spending from some of the Company's larger
customers, while increases for the year ended December 31, 2023, compared to
the year ended December 31, 2022, were driven largely by the completed
integration of Amobee, which included a strong programmatic revenue footprint.
· CTV Revenue: CTV revenue was $19.9 million in Q4 2023, compared to
$33.0 million in Q4 2022. CTV revenue was impacted by a combination of factors
including the SAG-AFTRA strike, and reduced CTV spending from some of the
Company's largest small- and mid-sized agency customers. Importantly, these
customers continued to spend within Nexxen's broader platform offerings during
Q4 2023 but largely selected the Company's lower-cost, performance-based
programmatic solutions, such as mobile video and display. The Company believes
this was a result of cost-savings efforts and the continued evolution of
on-the-go streaming preferences as consumers increasingly stream content on
mobile phones and tablets, in addition to CTVs, all of which are options the
Company can flexibly service advertising customers across. CTV revenue was
$85.5 million for the year ended December 31, 2023, reflecting a 12% decrease
from $97.2 million for the year ended December 31, 2022. The Company believes
it will achieve CTV revenue growth in 2024 amidst optimism that macroeconomic
conditions will improve, and its larger customers' budgets and spending will
increase.
· CTV and Programmatic Revenue Percentages: CTV revenue during the
three and twelve months ended December 31, 2023 represented 23% and 29% of
programmatic revenue, respectively, compared to 35% for the same prior year
periods. Programmatic revenue increased to 90% of revenue for the three and
twelve months ended December 31, 2023, compared to 88% and 82% of revenue,
respectively, for the same prior year periods.
· Adjusted EBITDA: Generated Adjusted EBITDA of $32.0 million for the
three months ended December 31, 2023, and $83.2 million for the twelve months
ended December 31, 2023, compared to $36.9 million and $144.9 million for the
same prior year periods. Year-over-year decreases were attributable to the
integration of Amobee, whose business lines operate at a lower profitability
profile than Nexxen's pre-acquisition standalone business, and reduced
spending from some of the Company's largest customers throughout 2023 compared
to 2022.
· Adjusted EBITDA Margins: Achieved a 35% Adjusted EBITDA Margin on a
Contribution ex-TAC basis, and 33% on a revenue basis, for the three months
ended December 31, 2023, compared to 36% on a Contribution ex-TAC basis, and
34% on a revenue basis for the three months ended December 31, 2022. Nexxen
achieved an Adjusted EBITDA Margin of 26% on a Contribution ex-TAC basis, and
25% on a revenue basis, for the twelve months ended December 31, 2023,
compared to 47% on a Contribution ex-TAC basis, and 43% on a revenue basis for
the twelve months ended December 31, 2022. The Company anticipates Adjusted
EBITDA Margins will expand in full year 2024 compared to full year 2023 amidst
expectations for increased Contribution ex-TAC.
· Video Revenue: Video revenue continued to represent most of the
Company's programmatic revenue at 67% and 69% for the three and twelve months
ended December 31, 2023, respectively, compared to 80% and 89% for the three
and twelve months ended December 31, 2022, respectively.
· Liquidity Resources: As of December 31, 2023, the Company had net
cash of $134.3 million, consisting of cash and cash equivalents of $234.3
million, offset by approximately $100.0 million in principal long-term debt,
as well as $80 million undrawn on its revolving credit facility. The Company's
net cash balance as of March 4, 2024, increased to approximately $146.0
million. The Company intends to prioritize near-term cash resources on
strategic internal growth investments and initiatives and its ongoing Ordinary
share repurchase program, as well as future potential share repurchase
programs. The Company does not anticipate any major near-term acquisitions as
it believes its technology and data stack now offers the necessary components
to enable market share gains within the digital advertising ecosystem.
"Q4 2023 capped off a transformational year for Nexxen. In 2023 we achieved a
key milestone by rebranding from Tremor International. Also, through the
significant investment of focus and resources, we efficiently combined two
massive technology platforms and employee bases, successfully completing the
integration of Amobee, our largest acquisition ever. This combination created
a state-of-the-art data-driven end-to-end platform built through approximately
$1 billion of cumulative R&D investment, and loaded with in-demand tech,
planning, video, CTV, and data capabilities critical to helping our customers
succeed in the digital advertising ecosystem," said Ofer Druker, CEO of
Nexxen.
Mr. Druker added, "In 2024, we are continuing to focus on expanding our base
of end-to-end customers leveraging us for multiple enterprise tech and data
solutions, growing our data licensing revenue, and expanding our streaming,
TV, and agency partnerships to drive growth and increased profitability,
against a macroeconomic backdrop we are cautiously optimistic is showing signs
of improvement. With the integration of Amobee now complete, we believe we can
shift our primary investment focus towards innovation and our share repurchase
program to generate long-term value for our customers and shareholders."
Operational Highlights
· Completed rebrand to Nexxen (from Tremor International), better
positioning the Company with customers and investors
o Simplified and enhanced the holistic value proposition of the Company's
advanced data-driven tech stack.
o Updated the Company's parent name to Nexxen International Ltd. and changed
its stock tickers in the U.S. and U.K. markets from "TRMR" to "NEXN" in
January 2024.
o Celebrated the Company's rebranding at NASDAQ's Closing Bell ceremony on
February 28, 2024, generating further momentum with customers and investors,
and increased industry awareness.
· Investment in VIDAA enabled the creation of new data licensing
revenue streams, reflecting an exciting growth opportunity
o Nexxen is generating notable initial demand for automatic content
recognition ("ACR") data licensing partnerships from major third-party DSPs,
agencies, and key research and measurement players within the industry seeking
to leverage the Company's exclusive global access to VIDAA's rapidly growing
smart TV data footprint.
o This high-margin annually recurring data licensing revenue is expected to
reflect a significant growth opportunity for Nexxen, while also enabling
greater resiliency in the Company's revenue base, as the Company believes the
revenue is less susceptible to volatility in advertising demand conditions.
· Significantly expanded TV Intelligence data footprint through
exclusive partnership with PeerLogix and continued growth by VIDAA; now
offering solution in U.S. and U.K. with further international expansion
expected in 2024
o Nexxen entered a new exclusive partnership with PeerLogix, an audience
discovery platform, to augment the Company's TV Intelligence solution with
premium on-the-go streaming viewership data from platforms like Netflix, Hulu,
and Disney+. TV Intelligence is an expansive dataset inclusive of Set-Top Box
("STB"), ACR, and cross-screen panel data that can offer insights on TV and
streaming viewership data across approximately 50 million households in the
U.S. alone, enabling more effective targeting for customers across the TV and
streaming ecosystem.
o VIDAA, Hisense's primary CTV operating system, whose global ACR data can
be exclusively monetized and distributed by Nexxen through at least the end of
2026, grew its reach to over 25 million Connected TVs during 2023,
significantly expanding and enhancing Nexxen's TV viewership data footprint.
According to VIDAA, this number has already increased to over 26 million
Connected TVs thus far in 2024.
o Launched TV Viewership Audiences in the U.K. while expanding the Company's
TV Intelligence offering in the U.S., generating notable and increased
adoption during Q4 2023. The Company expects further growth in both markets in
2024.
o The Company expects to launch its TV Intelligence solution in additional
major international markets in 2024, enhancing and expanding the Company's
international CTV growth opportunity.
· Scaled and expanded CTV partnership roster; established relationships
with more of the world's major smart TV OEMs
o Expanded the Company's strategic partnership with TCL FFALCON ("TCL")
beyond solely granting advertising customers access to CTV and OTT supply in
the TCL channel, to also exclusively sell TCL's native display inventory as a
preferred supply partner.
o Following Nexxen's settlement and partnership agreement with Alphonso Inc.
and LG Electronics, Inc., the Company now holds relationships with a larger
base of the world's major smart TV OEMs.
o Partnered with out-of-home ("OOH") advertising group, Taiv, to broaden
Nexxen's CTV OOH opportunities for clients across the advertising ecosystem.
The partnership delivers immersive, high impact ad experiences by reaching
audiences on screens in U.S. sports bars and restaurants, hitting another CTV
touchpoint within Nexxen's larger CTV OOH offering.
· Nexxen Discovery's audience finding and targeting capabilities
generating increased adoption and significant interest ahead of the 2024 U.S.
election cycle
o Nexxen Discovery, the Company's data fueled B.I. tool, has been adopted by
key industry partners and is generating significant interest with political
advertisers and agencies ahead of the 2024 U.S. election cycle.
o While political has not historically been a material vertical for Nexxen,
with the addition of Nexxen Discovery to the Company's product portfolio, and
an increased dedicated sales focus on the vertical, Nexxen anticipates growth
within the vertical in 2024 in an election year where eMarketer estimates over
$12 billion in U.S. political ad spending.
· Added a significant number of new customers on the buy- and
sell-sides of the ecosystem during the three and twelve months ended December
31, 2023, while retaining the vast majority of the Company's highest-spending
customers throughout 2023
o Nexxen DSP added 111 new actively-spending first-time advertiser customers
during Q4 2023 across entertainment, food and beverage, automotive, and
finance verticals, as well as others. This figure included 14 new enterprise
self-service advertiser customers, highlighted by some of the world's largest
and most-recognized CTV publishers, broadcasters, and Consumer Packaged Goods
("CPG") companies, as well as three new independent agencies leveraging the
Company's solutions in a self-service capacity. The Company added 334 new
actively-spending first-time advertiser customers for the twelve months ended
December 31, 2023.
o Nexxen SSP added 89 new supply partners, including 78 in the U.S., during
Q4 2023, across several verticals and formats, including CTV, broadcast TV,
mobile, and mobile gaming. The Company added 372 new supply partners during
the twelve months ended December 31, 2023, including 327 in the U.S.
o The Company achieved a 73% net revenue retention rate for the year ended
December 31, 2023, compared to 80% for the year ended December 31, 2022. The
decrease was driven by reduced budgets for some of the Company's largest
small- and mid-sized agency customers due to challenging macroeconomic
conditions, which drove lower overall spending and shifts to lower-cost
options within Nexxen's broader product ecosystem, as well as Nexxen
discontinuing less profitable relationships with certain customers.
Launched $20 Million Ordinary Share Repurchase Program
o On December 20, 2023, the Company launched a new $20 million Ordinary
share repurchase program, following approval from the Israeli Court and the
Company's Board of Directors.
o The Company repurchased 221,506 shares during Q4 2023 at an average price
of 201.01 pence, reflecting a total investment of £446,139, or $565,714.
o The Company's Ordinary share repurchase program will continue until the
earlier of June 18, 2024 and the date the program is completed. The share
repurchase program does not obligate Nexxen to repurchase any particular
amount of Ordinary Shares and the program may be suspended, modified, or
discontinued at any time at the Company's discretion, subject to applicable
law.
o Upon completion of the current share repurchase program, the Company's
Board of Directors intends to evaluate the implementation of an additional
share repurchase program, subject to then current market conditions and
obtaining requisite regulatory approval, including, if required, approval from
the Israeli Court.
Reached Favorable Settlement Agreement with Alphonso Inc. and LG Electronics,
Inc. ("LGE") and Entered into Multi-Year Strategic Partnership
o On February 28, 2024, Nexxen announced it reached a favorable settlement
agreement and launched a three-year strategic partnership with Alphonso Inc.
and LGE, resolving the disputes underlying the complaints, and concluding the
parties' litigation.
o The executed settlement agreement includes a cash component and a
commercial strategic partnership. Through the partnership and settlement
agreement, Alphonso Inc. will grant Nexxen limited access to monetize a
portion of LG's premium CTV inventory and will also leverage Nexxen's
data-driven discovery and segmentation tools.
Financial Guidance
o Management believes ongoing macroeconomic headwinds and uncertainty may
continue to limit near-term budgets and spending for some of the Company's
largest small- and mid-sized agency customers, drive continued managed service
softness, and cause customers to continue to focus spending on lower-cost
solutions within Nexxen's broad suite of offerings, but is cautiously
optimistic these customers will revert to the Company's premium solutions
amidst anticipated improvement in macroeconomic and advertising demand
conditions.
o Management also believes the Company is well-placed to capitalize on
industry growth trends following the completed integration of Amobee given its
unique positioning to flexibly serve customers on both sides of the ecosystem
across formats and devices, expand its end-to-end customer base, increase its
base of customers leveraging multiple enterprise tech and data solutions, grow
its data licensing revenue, and increase its agency and TV partnerships.
Management also anticipates Adjusted EBITDA Margin expansion and CTV revenue
growth in full year 2024 compared to full year 2023, and Nexxen provides the
following financial guidance:
· Full year 2024 Contribution ex-TAC in a range of
approximately $340 - $345 million
· Full year 2024 Adjusted EBITDA of approximately $100 million
· Full year 2024 Programmatic revenue to reflect approximately 90%
of full year 2024 revenue
Fourth Quarter and Full Year 2023 Financial Highlights ($ in millions, except
per share amounts)
Three months ended December 31 Twelve months ended December 31
2023 2022 % 2023 2022 %
IFRS highlights
Revenues 95.9 107.7 (11%) 332.0 335.3 (1%)
Programmatic Revenues 86.0 94.5 (9%) 299.0 274.4 9%
Operating Profit (loss) 9.6 10.8 (11%) (17.0) 44.8 (138%)
Net Income (loss) Margin on a Gross Profit basis 5% 6% (10%) 9%
Total Comprehensive Income (loss) 5.3 9.8 (45%) (18.1) 16.2 (212%)
Diluted earnings (loss) per share 0.02 0.03 (36%) (0.15) 0.15 (201%)
Non-IFRS highlights
Contribution ex-TAC 90.5 103.0 (12%) 314.2 309.7 1%
Adjusted EBITDA 32.0 36.9 (13%) 83.2 144.9 (43%)
Adjusted EBITDA Margin on a Contribution ex-TAC basis 35% 36% 26% 47%
Non-IFRS net Income 14.5 22.2 (35%) 32.2 91.8 (65%)
Non-IFRS Diluted earnings per share 0.10 0.15 (35%) 0.22 0.60 (63%)
Fourth Quarter and Full Year 2023 Financial Results Webcast and Conference
Call Details
· Nexxen International Fourth Quarter and Twelve Months Ended
December 31, 2023 Earnings Webcast and Conference Call
· March 6, 2024, at 6:00 AM PT / 9:00 AM ET / 2:00 PM GMT
· Webcast Link: https://edge.media-server.com/mmc/p/93my32xz
(https://edge.media-server.com/mmc/p/93my32xz)
· Participant Dial-In Numbers:
o U.S. / Canada Participant Toll-Free Dial-In Number: (888) 596-4144
o U.K. Participant Toll-Free Dial-In Number: +44 800 260 6470
o International Participant Toll-Free Dial-In Number: (646) 968-2525
o Conference ID: 5462475
Use of Non-IFRS Financial Information
In addition to our IFRS results, we review certain non-IFRS financial measures
to help us evaluate our business, measure our performance, identify trends
affecting our business, establish budgets, measure the effectiveness of
investments in our technology and development and sales and marketing, and
assess our operational efficiencies. These non-IFRS measures include
Contribution ex-TAC, Adjusted EBITDA, Adjusted EBITDA Margin, Non-IFRS Net
Income, and Non-IFRS Earnings per share, each of which is discussed below.
These non-IFRS financial measures are not intended to be considered in
isolation from, as substitutes for, or as superior to, the corresponding
financial measures prepared in accordance with IFRS. You are encouraged to
evaluate these adjustments and review the reconciliation of these non-IFRS
financial measures to their most comparable IFRS measures, and the reasons we
consider them appropriate. It is important to note that the particular items
we exclude from, or include in, our non-IFRS financial measures may differ
from the items excluded from, or included in, similar non-IFRS financial
measures used by other companies. See "Reconciliation of Revenue to
Contribution ex-TAC," "Reconciliation of Total Comprehensive Income (Loss) to
Adjusted EBITDA," and "Reconciliation of Net Income (Loss) to Non-IFRS Net
Income," included as part of this press release.
o Contribution ex-TAC: Contribution ex-TAC for Nexxen is defined as gross
profit plus depreciation and amortization attributable to cost of revenues and
cost of revenues (exclusive of depreciation and amortization) minus the
Performance media cost ("traffic acquisition costs" or "TAC"). Performance
media cost represents the costs of purchases of impressions from publishers on
a cost-per-thousand impression basis in our non-core Performance activities.
Contribution ex-TAC is a supplemental measure of our financial performance
that is not required by, or presented in accordance with, IFRS. Contribution
ex-TAC should not be considered as an alternative to gross profit as a measure
of financial performance. Contribution ex-TAC is a non-IFRS financial measure
and should not be viewed in isolation. We believe Contribution ex-TAC is a
useful measure in assessing the performance of Nexxen, because it facilitates
a consistent comparison against our core business without considering the
impact of traffic acquisition costs related to revenue reported on a gross
basis.
o Adjusted EBITDA: We define Adjusted EBITDA for Nexxen as total comprehensive
income (loss) for the period adjusted for foreign currency translation
differences for foreign operations, foreign currency translation for
subsidiary sold reclassified to profit and loss, financing expenses (income),
net, tax expenses, depreciation and amortization, stock-based compensation,
restructuring, acquisition-related costs and other expenses, net. Adjusted
EBITDA is included in the press release because it is a key metric used by
management and our board of directors to assess our financial performance.
Adjusted EBITDA is frequently used by analysts, investors, and other
interested parties to evaluate companies in our industry. Management believes
that Adjusted EBITDA is an appropriate measure of operating performance
because it eliminates the impact of expenses that do not relate directly to
the performance of the underlying business.
o Adjusted EBITDA Margin: We define Adjusted EBITDA Margin as Adjusted EBITDA
on a Contribution ex-TAC basis.
o Non-IFRS Income (Loss) and Non-IFRS Earnings (Loss) per Share: We define
non-IFRS earnings (loss) per share as non-IFRS income (loss) divided by
non-IFRS weighted-average shares outstanding. Non-IFRS income (loss) is equal
to net income (loss) excluding stock-based compensation, and cash- and
non-cash-based acquisition and related expenses, including amortization of
acquired intangible assets, merger-related severance costs, and transaction
expenses. In periods in which we have non-IFRS income, non-IFRS
weighted-average shares outstanding used to calculate non-IFRS earnings per
share includes the impact of potentially dilutive shares. Potentially dilutive
shares consist of stock options, restricted stock awards, restricted stock
units, and performance stock units, each computed using the treasury stock
method. We believe non-IFRS earnings (loss) per share is useful to investors
in evaluating our ongoing operational performance and our trends on a per
share basis, and also facilitates comparison of our financial results on a per
share basis with other companies, many of which present a similar non-IFRS
measure. However, a potential limitation of our use of non-IFRS earnings
(loss) per share is that other companies may define non-IFRS earnings per
share differently, which may make comparison difficult. This measure may also
exclude expenses that may have a material impact on our reported financial
results. Non-IFRS earnings (loss) per share is a performance measure and
should not be used as a measure of liquidity. Because of these limitations, we
also consider the comparable IFRS measure of net income.
We do not provide a reconciliation of forward-looking non-IFRS financial
metrics, because reconciling information is not available without an
unreasonable effort, such as attempting to make assumptions that cannot
reasonably be made on a forward-looking basis to determine the corresponding
IFRS metric.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 (as implemented into English law) ("MAR"). With the
publication of this announcement via a Regulatory Information Service, this
inside information is now considered to be in the public domain.
About Nexxen
Nexxen empowers advertisers, agencies, publishers and broadcasters around the
world to utilize video and Connected TV in the ways that are most meaningful
to them. Comprised of a demand-side platform (DSP), supply-side platform
(SSP), ad server and data management platform (DMP), Nexxen delivers a
flexible and unified technology stack with advanced and exclusive data at its
core. Our robust capabilities span discovery, planning, activation,
measurement and optimization - available individually or in combination - all
designed to enable our partners to reach their goals, no matter how
far-reaching or hyper niche they may be. For more information, visit
www.nexxen.com (http://www.nexxen.com)
Nexxen is headquartered in Israel and maintains offices throughout the United
States, Canada, Europe and Asia-Pacific, and is traded on the London Stock
Exchange (AIM: NEXN) and NASDAQ (NEXN).
For further information please contact:
Nexxen International Ltd.
Billy Eckert, Vice President of Investor Relations
ir@nexxen.com (mailto:ir@nexxen.com)
Caroline Smith, Vice President of Communications
csmith@nexxen.com (mailto:csmith@nexxen.com)
KCSA (U.S. Investor Relations)
David Hanover, Investor Relations
nexxenir@kcsa.com (mailto:nexxenir@kcsa.com)
Vigo Consulting (U.K. Financial PR & Investor Relations)
Jeremy Garcia / Peter Jacob / Aisling Fitzgerald
Tel: +44 20 7390 0230 or nexxen@vigoconsulting.com
(mailto:nexxen@vigoconsulting.com)
Cavendish Capital Markets Limited
Jonny Franklin-Adams / Charlie Beeson / George Dollemore (Corporate Finance)
Tim Redfern / Harriet Ward (ECM)
Tel: +44 20 7220 0500
Forward Looking Statements
This press release contains forward-looking statements, including
forward-looking statements within the meaning of Section 27A of the United
States Securities Act of 1933, as amended, and Section 21E of the United
States Securities and Exchange Act of 1934, as amended. Forward-looking
statements are identified by words such as "anticipates," "believes,"
"expects," "intends," "may," "can," "will," "estimates," and other similar
expressions. However, these words are not the only way Nexxen identifies
forward-looking statements. All statements contained in this press release
that do not relate to matters of historical fact should be considered
forward-looking statements, including without limitation statements regarding
anticipated financial results for full year 2024 and beyond; anticipated
benefits of Nexxen's strategic transactions and commercial partnerships;
anticipated features and benefits of Nexxen's products and service offerings;
Nexxen's positioning for accelerated growth and continued future growth in
both the US and international markets in 2024 and beyond; Nexxen's medium- to
long-term prospects; management's belief that Nexxen is well-positioned to
benefit from future industry growth trends and Company-specific catalysts; the
Company's expectations with respect to Video revenue; the potential negative
impact of ongoing macroeconomic headwinds and uncertainty that have limited
advertising activity and the anticipation that these challenges could continue
to have an impact for the remainder of 2024 and beyond; the Company's plans
with respect to its cash reserves and its intent to not undertake any major
acquisitions in the near-term; its continued focus in 2024 on expanding its
base of end-to-end customers, growing data licensing revenue and expanding its
streaming, TV, and agency partnerships to drive growth and increased
profitability; the expectation of launching its TV Intelligence solution in
additional major international markets in 2024, enhancing and expanding the
Company's international CTV growth opportunity; the anticipated benefits from
the Company's investment in VIDAA and its enhanced strategic relationship with
Hisense; the anticipated benefits of the rebranding of the Tremor group to
Nexxen, and the Company's plans with respect thereto, as well as any other
statements related to Nexxen's future financial results and operating
performance. These statements are neither promises nor guarantees but involve
known and unknown risks, uncertainties and other important factors that may
cause Nexxen's actual results, performance or achievements to be materially
different from its expectations expressed or implied by the forward-looking
statements, including, but not limited to, the following: negative global
economic conditions; global conflicts and war, including the current terrorist
attacks by Hamas, and the war and hostilities between Israel and Hamas and
Israel and Hezbollah, and how those conditions may adversely impact Nexxen's
business, customers, and the markets in which Nexxen competes; changes in
industry trends; the risk that Nexxen will not realize the anticipated
benefits of its acquisition of Amobee and strategic investment in VIDAA; and,
other negative developments in Nexxen's business or unfavourable legislative
or regulatory developments. Nexxen cautions you not to place undue reliance on
these forward-looking statements. For a more detailed discussion of these
factors, and other factors that could cause actual results to vary materially,
interested parties should review the risk factors listed in the Company's most
recent Annual Report on Form 20-F, filed with the U.S. Securities and
Exchange Commission (www.sec.gov
(https://www.globenewswire.com/Tracker?data=gPgQB1DRd3uO04Pe1Nw8HIpq46d0Dt1v2Oxk6rZfSqGQFu9JJd9FAB5SQGpGWUSLBV6GTasGV0uIK2SWvdiElw==)
) on March 7, 2023. Any forward-looking statements made by Nexxen in this
press release speak only as of the date of this press release, and Nexxen does
not intend to update these forward-looking statements after the date of this
press release, except as required by law.
Nexxen, and the Nexxen logo are trademarks of Nexxen International
Ltd. in the United States and other countries. All other trademarks are the
property of their respective owners. The use of the word "partner" or
"partnership" in this press release does not mean a legal partner or legal
partnership.
Reconciliation of Total Comprehensive Income (Loss) to Adjusted EBITDA
Three months ended Twelve months ended December 31
December 31
2023 2022 % 2023 2022 %
($ in thousands)
Total comprehensive income (loss) 5,341 9,796 (45%) (18,127) 16,238 (212%)
Foreign currency translation differences for foreign operation (2,114) (4,735) (2,126) 6,499
Foreign currency translation for subsidiary sold reclassified to profit and - - (1,234) -
loss
Tax expenses 6,487 5,040 2,503 19,688
Financial expense (income), net (105) 717 2,008 2,327
Depreciation and amortization 21,047 17,184 78,285 42,700
Stock-based compensation 1,386 7,986 19,169 50,505
Acquisition related costs - 93 171 6,085
Restructuring - 307 796 307
Other expense - 540 1,765 540
Adjusted EBITDA 32,042 36,928 (13%) 83,210 144,889 (43%)
Reconciliation of Revenue to Contribution ex-TAC
Three months ended December 31 Twelve months ended
December 31
2023 2022 % 2023 2022 %
($ in thousands)
Revenues 95,916 107,697 (11%) 331,993 335,250 (1%)
Cost of revenues (exclusive of depreciation and amortization) (17,886) (17,265) (62,270) (60,745)
Depreciation and amortization attributable to Cost of Revenues (13,682) (11,810) (50,825) (25,367)
Gross profit (IFRS) 64,348 78,622 (18%) 218,898 249,138 (12%)
Depreciation and amortization attributable to Cost of Revenues 13,682 11,810 50,825 25,367
Cost of revenues (exclusive of depreciation and amortization) 17,886 17,265 62,270 60,745
Performance media cost (5,392) (4,695) (17,810) (25,524)
Contribution ex-TAC (Non-IFRS) 90,524 103,002 (12%) 314,183 309,726 1%
Reconciliation of Net Income (Loss) to Non-IFRS Net Income
Three months ended Twelve months ended
December 31 December 31
2023 2022 % 2023 2022 %
($ in thousands)
Net Income (loss) 3,227 5,061 (36%) (21,487) 22,737 (195%)
Acquisition related costs - 93 171 6,085
Amortization of acquired intangibles 14,931 8,496 42,952 20,768
Restructuring - 307 796 307
Stock-based compensation expense 1,386 7,986 19,169 50,505
Other expense - 540 1,765 540
Tax effect of Non-IFRS adjustments ((1)) (5,086) (262) (11,153) (9,130)
Non-IFRS Income 14,458 22,221 (35%) 32,213 91,812 (65%)
Weighted average shares outstanding-diluted (in millions) (2) 147.5 147.6 145.2 153.1
Non-IFRS diluted Earnings Per Share (in USD) 0.10 0.15 (35%) 0.22 0.60 (63%)
(1) Non-IFRS income includes the estimated tax impact from the expense items
reconciling between net income (loss) and non-IFRS income
(2) Non-IFRS earnings per share is computed using the same weighted-average
number of shares that are used to compute IFRS earnings per share
Somekh Chaikin
17 Ha'arba'a Street, PO Box 609
KPMG Millennium Tower
Tel Aviv 6100601, Israel
+972 3 684 8000
Auditors' Report to the Shareholders of Nexxen International Ltd. (Formerly
-Tremor International Ltd.)
We have audited the accompanying consolidated statements of financial position
of Tremor International Ltd. and its subsidiaries (hereinafter - "the
Company") as of December 31, 2023 and 2022 and the related consolidated
statements of operation and other comprehensive income, statements of changes
in equity and statements of cash flows, for each of the three years in the
period ended December 31, 2023. These financial statements are the
responsibility of the Company's Board of Director and of its Management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards in Israel, including standards prescribed by the Auditors
Regulations (Manner of Auditor's Performance) - 1973. Such standards require
that we plan and perform the audit to obtain reasonable assurance that the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by Management, as well as
evaluating the overall financial statements presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company and its subsidiaries as of December 31, 2023 and 2022 and their
results of operations, changes in equity and cash flows for each of the three
years in the period ended December 31, 2023, in accordance with International
Financial Reporting Standards (IFRS).
Somekh Chaikin
Member Firm of KPMG International
March 6, 2024
KPMG Somekh Chaikin, an Israeli partnership and a member firm of the KPMG
global organization of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee
NEXXEN INTERNATIONAL LTD. (FORMERLY TREMOR INTERNATIONAL LTD.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Audited)
December 31
2023 2022
Note USD thousands
Assets
ASSETS:
Cash and cash equivalents 10 234,308 217,500
Trade receivables, net 8 201,973 219,837
Other receivables 8 8,293 23,415
Current tax assets 7,010 750
TOTAL CURRENT ASSETS 451,584 461,502
Fixed assets, net 5 21,401 29,874
Right-of-use assets 6 31,900 23,122
Intangible assets, net 7 362,000 398,096
Deferred tax assets 4 12,393 18,161
Investment in shares 18 25,000 25,000
Other long-term assets 525 406
TOTAL NON-CURRENT ASSETS 453,219 494,659
TOTAL ASSETS 904,803 956,161
Liabilities and shareholders' equity
LIABILITIES:
Current maturities of lease liabilities 6 12,106 14,104
Trade payables 9 183,296 212,690
Other payables 9 29,098 44,355
Current tax liabilities 4,937 9,417
TOTAL CURRENT LIABILITIES 229,437 280,566
Employee benefits 237 238
Long-term lease liabilities 6 24,955 15,234
Long-term debt 11 99,072 98,544
Other long-term liabilities 6,800 8,802
Deferred tax liabilities 4 754 1,162
TOTAL NON-CURRENT LIABILITIES 131,818 123,980
TOTAL LIABILITIES 361,255 404,546
SHAREHOLDERS' EQUITY: 15
Share capital 417 413
Share premium 410,563 400,507
Other comprehensive loss (2,441) (5,801)
Retained earnings 135,009 156,496
TOTAL SHAREHOLDERS' EQUITY 543,548 551,615
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 904,803 956,161
Chairman of the Board of Directors CEO CFO
Date of approval of the financial statements: March 6, 2024.
The accompanying notes are an integral part of these consolidated financial
statements.
NEXXEN INTERNATIONAL (FORMERLY TREMOR INTERNATIONAL LTD.)
CONSOLIDATED STATEMENTS OF OPERATION AND OTHER COMPREHENSIVE INCOME (LOSS)
(Audited)
Year ended
December 31
2023 2022 2021
Note USD thousands
Revenues 12 331,993 335,250 341,945
Cost of Revenues (Exclusive of depreciation and amortization shown separately 13 62,270 60,745 71,651
below)
Research and development expenses 49,684 33,659 18,422
Selling and marketing expenses 105,914 89,953 74,611
General and administrative expenses 14 51,051 68,005 63,499
Depreciation and amortization 78,285 42,700 40,259
Other expenses (income), net 1,765 (4,564) (959)
Total operating costs 286,699 229,753 195,832
Operating Profit (loss) (16,976) 44,752 74,462
Financing income (8,192) (2,284) (483)
Financing expenses 10,200 4,611 2,670
Financing expenses, net 2,008 2,327 2,187
Profit (loss) before taxes on income (18,984) 42,425 72,275
Tax benefit (expenses) 4 (2,503) (19,688) 948
Profit (loss) for the year (21,487) 22,737 73,223
Other comprehensive income (loss) items:
Foreign currency translation differences for foreign operations 2,126 (6,499) (2,632)
Foreign currency translation for subsidiary sold reclassified to profit and 1,234 - -
loss
Total other comprehensive income (loss) for the year 3,360 (6,499) (2,632)
Total comprehensive income (loss) for the year (18,127) 16,238 70,591
Earnings per share
Basic earnings (loss) per share (in USD) 16 (0.15) 0.15 0.51
Diluted earnings (loss) per share (in USD) 16 (0.15) 0.15 0.48
The accompanying notes are an integral part of these consolidated financial
statements.
NEXXEN INTERNATIONAL LTD. (FORMERLY TREMOR INTERNATIONAL LTD.)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Audited)
Share capital Share premium Other comprehensive income (loss) Retained Earnings Total
USD thousands
Balance as of January 1, 2021 380 264,831 3,330 60,472 329,013
Total Comprehensive income (loss) for the year
Profit for the year - - - 73,223 73,223
Other comprehensive loss:
Foreign currency translation - - (2,632) - (2,632)
Total comprehensive income (loss) for the year - - (2,632) 73,223 70,591
Transactions with owners, recognized directly in equity
Revaluation of liability for put option on non- controlling interests - - - 64 64
Own shares acquired (3) (6,640) - - (6,643)
Share based compensation - 41,822 - - 41,822
Exercise of share options 17 1,353 - - 1,370
Issuance of shares 47 136,111 - - 136,158
Issuance of Restricted shares 1 (1) - - -
Balance as of December 31, 2021 442 437,476 698 133,759 572,375
Total Comprehensive Income (loss) for the year
Profit for the year - - - 22,737 22,737
Other comprehensive loss:
Foreign Currency Translation - - (6,499) - (6,499)
Total comprehensive Income (loss) for the year - - (6,499) 22,737 16,238
Transactions with owners, recognized directly in equity
Own shares acquired (50) (86,202) - - (86,252)
Share based compensation - 47,049 - - 47,049
Exercise of share options 21 2,184 - - 2,205
Balance as of December 31, 2022 413 400,507 (5,801) 156,496 551,615
The accompanying notes are an integral part of these consolidated financial
statements.
NEXXEN INTERNATIONAL LTD. (FORMERLY TREMOR INTERNATIONAL LTD.)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Cont.)
(Audited)
Share capital Share premium Other comprehensive income (loss) Retained Earnings Total
USD thousands
Balance as of January 1, 2023 413 400,507 (5,801) 156,496 551,615
Total Comprehensive Income (loss) for the year
Loss for the year - - - (21,487) (21,487)
Other comprehensive income:
Foreign Currency Translation - - 2,126 - 2,126
Foreign Currency Translation for subsidiary sold - - 1,234 - 1,234
Total comprehensive Income (loss) for the year - - 3,360 (21,487) (18,127)
Transactions with owners, recognized directly in equity
Own shares acquired (8) (9,306) - - (9,314)
Share based compensation - 19,141 - - 19,141
Exercise of share options 12 221 - - 233
Balance as of December 31, 2023 417 410,563 (2,441) 135,009 543,548
The accompanying notes are an integral part of these consolidated financial
statements.
NEXXEN INTERNATIONAL LTD. (FORMERLY TREMOR INTERNATIONAL LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Audited)
Year ended
December 31
2023 2022 2021
USD thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit (loss) for the year (21,487) 22,737 73,223
Adjustments for:
Depreciation and amortization 78,285 42,700 40,259
Net financing expense 1,699 2,147 2,023
Loss from disposals of fixed and intangible assets 2 542 -
Loss (gain) on leases modification 119 56 (377)
Loss (gain) on sale of business unit 1,765 - (982)
Share-based compensation and restricted shares 19,169 50,505 42,818
Tax (benefit) expense 2,503 19,688 (948)
Change in trade and other receivables 30,603 57,050 (11,676)
Change in trade and other payables (43,077) (100,145) 26,845
Change in employee benefits (1) (179) (69)
Income taxes received 352 1,175 2,231
Income taxes paid (8,721) (14,784) (3,185)
Interest received 8,016 2,103 496
Interest paid (8,486) (587) (570)
Net cash provided by operating activities 60,741 83,008 170,088
CASH FLOWS FROM INVESTING ACTIVITIES
Change in pledged deposits, net 1,498 (213) (11)
Payments on finance lease receivable 1,112 1,306 2,454
Repayment of long-term loans 51 - -
Acquisition of fixed assets (4,495) (6,433) (3,378)
Acquisition and capitalization of intangible assets (15,126) (8,750) (4,966)
Proceeds from sale of business unit - 1,180 415
Investment in shares - (25,000) -
Acquisition of subsidiaries, net of cash acquired - (195,084) (11,001)
Net cash used in investing activities (16,960) (232,994) (16,487)
CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of own shares (9,518) (86,048) (6,643)
Proceeds from exercise of share options 233 2,205 1,370
Leases repayment (17,262) (12,018) (10,009)
Issuance of shares, net of issuance cost - - 134,558
Receipt of long-term debt, net of transaction cost - 98,917 -
Payment of financial liability - - (2,414)
(26,547) 3,056 116,862
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents 17,234 (146,930) 270,463
CASH AND CASH EQUIVALENTS AS OF THE BEGINNING OF YEAR 217,500 367,717 97,463
EFFECT OF EXCHANGE RATE FLUCTUATIONS ON CASH AND CASH EQUIVALENTS (426) (3,287) (209)
CASH AND CASH EQUIVALENTS AS OF THE END OF YEAR 234,308 217,500 367,717
The accompanying notes are an integral part of these consolidated financial
statements.
NEXXEN INTERNATIONAL LTD. (FORMERLY TREMOR INTERNATIONAL LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL
a. Reporting entity:
Nexxen International Ltd. (the "Company" or "Nexxen International"), formerly
known as Tremor International Ltd., was incorporated in Israel under the laws
of the State of Israel on March 20, 2007. The ordinary shares of the Company
are listed on the AIM Market of the London Stock Exchange and the American
Depositary Shares ("ADSs"), each of which represents two ordinary shares of
the Company, represented by the American Depositary Receipts ("ADR") are
listed on the Nasdaq Capital Market. The address of the registered office is
82 Yigal Alon Street Tel-Aviv, 6789124, Israel.
Nexxen International is a global Company offering a unified data-driven
end-to-end software platform that supports a wide range of media types (e.g.,
video, display, etc.) and devices (e.g., mobile, Connected TVs, streaming
devices, desktop, etc.), creating an efficient marketplace where advertisers
(buyers) are able to purchase high quality advertising inventory from
publishers (sellers) in real-time and at scale. Nexxen International's
technology stack is comprised of a Demand Side Platform ("DSP"), Supply-Side
Platform ("SSP"), Ad Server, and Data Management Platform ("DMP"), empowering
customers on both the buy- and sell-sides of the ecosystem to leverage a full
suite of data-driven planning and technology solutions to achieve greater
efficiency, effectiveness, and outcomes in their advertising efforts. The
Company's DSP solution is delivered through wholly owned subsidiary Nexxen
Inc. (formerly known as Amobee Inc. and which also includes Tremor Video
Inc.'s activity that was transferred to Nexxen Inc. in 2023) and is designed
to assist customers in a self-managed or full-service capacity to plan and
execute digital marketing campaigns in real-time across various ad formats.
The Company's SSP solution (delivered through Nexxen Group LLC, formerly known
as Unruly Group, LLC) is designed to monetize digital inventory for publishers
by enabling their content to have the necessary code and requirements for
programmatic advertising integration, and provides access to significant
amounts of data and unique demand to drive more effective inventory management
and revenue optimization. The Company's "DMP" integrates both its DSP and SSP
solutions, enabling advertisers and publishers to use data from various
sources, including web, social media, Connected TV and linear TV, and mobile
devices, to optimize results of their advertising campaigns. Following the
acquisition of Nexxen Inc., the Company gained a Linear TV Planning feature,
enabling sellers at national broadcasters to generate linear TV plans during
and after upfronts. Nexxen International Ltd. is headquartered in Israel and
maintains offices throughout the U.S., Canada, EMEA and Asia-Pacific.
On June 12, 2023, the Company initially rebranded all of its core products and
platforms under the unified Nexxen brand. On January 2, 2024, the Company's
name was officially changed to Nexxen International Ltd. and, in connection
with the change, its stock ticker on both the NASDAQ and London Stock Exchange
changed from "TRMR" to "NEXN". The Company believes rebranding and unifying
under Nexxen has enhanced its commercial focus, and has better conveyed the
holistic value proposition of its end-to-end technology stack to the market
for its next phase of growth. As part of the rebranding, the Company changed
the expected useful life of its previous brands, which completed by the end of
the year. See Note 7.
b. Definitions:
In these financial statements -
The Company - Nexxen International Ltd.
The Group - Nexxen International Ltd. and its subsidiaries.
Subsidiaries - Companies, the financial statements of which are fully consolidated, directly,
or indirectly, with the financial statements of the Company such as Nexxen
Group LLC, Unruly Holding Ltd, Tremor Video Inc, Nexxen Inc.
Related party - As defined by IAS 24, "Related Party Disclosures".
NOTE 2: BASIS OF PREPARATION
a. Statement of compliance:
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board ("IASB").
The consolidated financial statements were authorized for issue by the
Company's Board of Directors on March 5, 2024.
b. Functional and presentation currency:
These consolidated financial statements are presented in US Dollars (USD),
which is the Company's functional currency, and have been rounded to the
nearest thousand, except when otherwise indicated. The USD is the currency
that represents the principal economic environment in which the Company
operates.
c. Basis of measurement:
The consolidated financial statements have been prepared on a historical cost
basis except for the following assets and liabilities:
• Deferred and current tax assets and liabilities
• Provisions
• Derivatives
• Investment in shares
For further information regarding the measurement of these assets and
liabilities see Note 3 regarding material accounting policies.
d. Use of estimates and judgments:
The preparation of financial statements in conformity with IFRS requires
management of the Group to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these
estimates.
The preparation of accounting estimates used in the preparation of the Group's
financial statements requires management of the Group to make assumptions
regarding circumstances and events that involve considerable uncertainty.
Management of the Group prepares estimates on the basis of past experience,
various facts, external circumstances, and reasonable assumptions according to
the pertinent circumstances of each estimate.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected.
Information about assumptions made by the Group with respect to the future and
other reasons for uncertainty with respect to estimates that have a
significant risk of resulting in a material adjustment to carrying amounts of
assets and liabilities in the next financial year are included in Note 6, on
leases, with respect to determining the lease term and determining the
discount rate of a lease liability, in Note 7, on intangible assets, with
respect to the accounting of software development capitalization and
impairment testing for goodwill, in Note 4, on Income Tax, with respect to
uncertain tax position, in Note 18 on investments in shares.
e. Change in classification:
The Company changed the classification of the current maturities of the
unfavorable contract from other payables to other long-term liabilities.
Comparative amounts were reclassified for consistency in the amount of USD
1,350 thousand.
f. Determination of fair value:
Preparation of the financial statements requires the Group to determine the
fair value of certain assets and liabilities. When determining the fair value
of an asset or liability, the Group uses observable market data as much as
possible. There are three levels of fair value measurements in the fair value
hierarchy that are based on the data used in the measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
• Level 2: inputs other than quoted prices included within Level 1
that are observable, either directly or indirectly.
• Level 3: inputs that are not based on observable market data
(unobservable inputs).
Further information about the assumptions that were used to determine fair
value is included in the following notes:
• Note 17, on share-based compensation;
• Note 18, on financial instruments;
• Note 18, on investments in shares.
NOTE 3: MATERIAL ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently for all
periods presented in these consolidated financial statements and have been
applied consistently by the Group.
a. Financial instruments:
1) Non-derivative financial assets
The Company's non-derivative financial assets, which are measured at amortized
cost, mainly consist of accounts receivable which are held to collect and
deposits. Accounts receivable represent amounts owed by customers resulting
from business transactions, and they are recognized at their original invoiced
values, adjusted for expected credit losses. Loss rates are based on
historical collection experience, while taking into consideration current
customer information, collection history, and other relevant data at each
reporting period.
The Company's non-derivative financial assets, which are measured at fair
value through profit and loss, consist of investment in shares. Net gains and
losses are recognized in profit or loss, finance income/expenses.
2) Non-derivative financial liabilities
The Company's non-derivative financial liabilities mainly include trade and
other payables, and loan, all measured at amortized cost.
3) Treasury shares:
When share capital recognized as equity is repurchased by the Group, the
amount of the consideration paid, which includes directly attributable costs,
net of any tax effects, is recognized as a deduction from equity. Repurchased
shares are classified as a deduction in Share Premium.
b. Fixed Assets:
Fixed assets are measured at cost less accumulated depreciation. The cost of
fixed assets includes expenditure that is directly attributable to the
acquisition of the asset. Depreciation is provided on all property and
equipment at rates calculated to write each asset down to its residual value
(assumed to be nil), using the straight-line method, over its expected useful
life as follows:
Years
Computers and servers 3-5
Office furniture and equipment 3-17
Leasehold improvements The shorter of the lease term and the useful life
c. Intangible assets and liabilities:
1) Software development:
Expenditure on research activities, undertaken with the prospect of gaining
new scientific or technical knowledge and understanding, is recognized in
profit or loss when incurred.
Development activities involve a plan or design for the production of new or
substantially improved products and processes. Development expenditure is
capitalized only if development costs can be measured reliably, the product or
process is technically and commercially feasible, future economic benefits are
probable, and the Group has the intention and sufficient resources to complete
development and to use or sell the asset. The expenditure capitalized in
respect of development activities includes the cost of direct labor costs that
are directly attributable to preparing the asset for its intended use. Other
development expenditure is recognized in profit or loss as incurred.
The estimated useful lives of developed software are three years.
2) Goodwill:
The Group has identified its entire operation as a single cash generating unit
(CGU). The Company conducts an annual assessment of goodwill impairment on an
annual basis, at year end. According to management assessment as of December
31, 2023, no impairment in respect to goodwill has been recorded. See note 7.
3) Amortization:
Internally generated intangible assets, such as software development costs,
are not systematically amortized as long as they are not available for use,
i.e., they are not yet on site or in working condition for their intended use.
Goodwill is not systematically amortized as well but is tested for impairment
at least once a year.
Amortization is recognized in the statements of operation and other
comprehensive income (loss) on a straight-line basis over the estimated useful
lives of the intangible assets from the date they are available for use.
The estimated useful lives for the current and comparative periods are as
follows:
Trademark Fully depreciated, See note 7
Software (developed and acquired) 3 years
Customer relationships 3-6 years
Technology 3-5.25 years
4) Unfavorable contracts
In the business combinations of Nexxen Inc., the Company recognizes a
liability for contracts when their terms are unfavorable compared to market
terms, to represent the off-market element at the acquisition date. As of
December 31, 2023, the aggregated liability balance, in the amount of USD 6.7
million, is entirely classified as long-term.
d. Share Based Compensation:
Compensation expense related to stock options, restricted stock units and
performance stock units. The Group's employee stock purchase plan is measured
and recognized in the consolidated financial statements based on the fair
value of the awards granted. The fair value of each option award is estimated
on the grant date using the Black-Scholes option-pricing model. Stock-based
compensation expense related to stock options and restricted stock is
recognized over the requisite service periods of the awards.
Determining the fair value of stock options awards requires judgment. The
Company's use of the Black-Scholes option pricing model requires the input of
subjective assumptions. The assumptions used in the Company's option-pricing
model represent management's best estimates. These estimates involve inherent
uncertainties and the application of management's judgment.
These assumptions and estimates are as follows:
Risk-Free Interest Rate. The risk-free interest rate is based on the yields of
U.S. Treasury securities with maturities approximating the expected term of
the awards.
Expected Term. The expected term of an award is calculated based on the
vesting date and the expiration date of the award.
Volatility. The Company determined the price volatility based on daily price
observations over a period equivalent to the expected term of the award.
Dividend Yield. The dividend yield assumption is based on the Company's
history and current expectations of dividend payouts.
Fair Value of Common Stock. The fair value of common stock is based on the
closing price of the Company's common stock on the grant date.
e. Employee benefits:
1) Post-employment benefits:
The Group's main post-employment benefit plan is under section 14 to the
Severance Pay Law ("Section 14") for the Israeli employees and under section
401K for US employees, which is accounted for as a contribution plan. In
addition, for certain employees, the Group has an additional immaterial plan
that is accounted for as a defined benefit plan. These plans are usually
financed by deposits with insurance companies or with funds managed by a
trustee.
2) Short-term benefits:
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided or upon the actual absence
of the employee when the benefit is not accumulated (such as maternity leave).
A liability is recognized for the amount expected to be paid under short-term
cash bonus or profit-sharing plans if the Group has a present legal or
constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably. The
employee benefits are classified, for measurement purposes, as short-term
benefits or as other long-term benefits depending on when the Group expects
the benefits to be wholly settled.
f. Revenue recognition:
The Group generates revenue from transactions where it provides access to a
platform for the purchase and sale of digital advertising inventory. Its
customers are both ad buyers, including brands and agencies, and digital
publishers.
The Group generates revenue through platform fees that are tailored to fit the
customer's specific utilization of its solutions and include: (i) a percentage
of spend, (ii) flat fees and (iii) fixed costs per mile ("CPM"). CPM refers to
a payment option in which customers pay a price for every 1,000 impressions an
advertisement receives.
The Company maintains agreements with each publisher and buyer in the form of
written service agreements, which set out the terms of the relationship,
including payment terms and access to the Group's platforms.
Publishers provide digital advertising inventory to the Group's platform in
the form of advertising requests, or ad request. When the Group receives ad
requests from a publisher, it send bid requests to buyers, which enable buyers
to bid on sellers' digital advertising inventory according to a predefined set
of parameters (e.g., demographics, intent, location, etc.). Winning bids
create advertising, or paid impressions, for the publisher to present to the
buyers.
The Group generates revenue from its Programmatic and Performance activities.
Programmatic revenue is derived from the end-to-end platform of programmatic
advertising, which uses software and algorithms to match buyers and sellers of
digital advertising in a technology-driven marketplace. Performance revenue is
derived from non-core activities, consisting of mobile-based activities that
help brands reach their users.
The Company concluded that its Programmatic activity (i) does not have manual
control over the process, (ii) the Company is not primarily responsible for
fulfillment, (iii) the Company has no inventory risk and (iv) the Company
obtains only momentary a title to the advertising space offered via the
end-to-end platform.
As a result, the Group reports its Programmatic business, tech stack,
features, business models and activity as an agent and therefore presented
revenue from Programmatic on a net basis.
For the Performance activity the Company is the primary obligor to provide the
services and, as such, revenue is presented on a gross basis.
Management is focused on driving growth with the Programmatic activity through
the end-to-end platform, while the Performance activity is declining over
time.
The Group estimates and records reduction to revenue for volume discounts
based on expected volume during the incentive term.
The Group generally invoices buyers at the end of each month for the full
purchase price of ad impressions monetized in that month. Accounts receivables
are recorded at the amount of gross billings for the amount it is responsible
to collect and accounts payable are recorded at the net amount payable to
publishers. Accordingly, both accounts receivable and accounts payable appear
large in relation to revenue reported on a net basis.
g. Classification of expenses
Cost of revenue
Cost of revenues (exclusive of depreciation and amortization) primarily
consists of hosting fees and data costs for both Programmatic and Performance
activities, as well as media costs for Performance activities that are
directly attributable to revenue generated by the Company and generally based
on the revenue share arrangements with audience and content partners. See Note
13.
Research and development
Research and development expenses consist primarily of compensation and
related costs for personnel responsible for the research and development of
new and existing products and services. Where required, development
expenditures are capitalized in accordance with the Company's standard
internal capitalized development policy in accordance with IAS 38 (also see
Note 3c(1)). All research costs are expensed when incurred.
Selling and marketing
Selling and marketing expenses consist primarily of compensation and related
costs for personnel engaged in customer service, sales, and sales support
functions, as well as advertising and promotional expenditures.
General and administrative
General and administrative expenses consist primarily of compensation and
related costs for personnel, and include costs related to the Company's
facilities, finance, human resources, information technology, legal
organizations and fees for professional services. Professional services are
principally comprised of external legal, and information technology consulting
and outsourcing services that are not directly related to other operational
expenses.
h. Financing income and expenses:
Generally, foreign currency differences from a monetary item receivable from
or payable to a foreign operation, including foreign operations that are
subsidiaries, are recognized in profit or loss in the consolidated financial
statements.
Foreign exchange gains and losses arising from a monetary item receivable from
or payable to a foreign operation, the settlement of which is neither planned
nor likely in the foreseeable future, are considered to form part of a net
investment in a foreign operation and are recognized in other comprehensive
income (loss), and are presented within equity as part of the currency
translation reserve.
Financing income mainly comprises foreign currency gains and interest income.
Financing expense primarily includes exchange rate differences, interest and
bank fees.
Foreign currency gains and losses on financial assets and financial
liabilities are reported on a net basis as either financing income or
financing expenses depending on whether foreign currency movements are in a
net gain or net loss position.
i. Taxes on income
The Company operates in multiple tax jurisdictions.
Offset of deferred tax assets and liabilities
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and they
relate to income taxes levied by the same tax authority.
Uncertain tax positions
A provision for uncertain tax positions, including additional tax and interest
expenses, is recognized when it is more likely than not that the Group will
have to use its economic resources to pay the obligation.
j. Leases:
Leased assets and lease liabilities
Contracts that award the Group control over the use of a leased asset for a
period of time in exchange for consideration, are accounted for as leases.
Upon initial recognition, the Group recognizes a liability at the present
value of the balance of future lease payments (these payments do not include
certain variable lease payments), and concurrently recognizes a right-of-use
asset at the same amount of the lease liability, adjusted for any prepaid or
accrued lease payments or provision for impairment, plus initial direct costs
incurred in respect of the lease.
Since the interest rate implicit in the Group's leases is not readily
determinable, the incremental borrowing rate of the lessee is used. Subsequent
to initial recognition, the right-
of-use asset is accounted for using the cost model and depreciated over the
shorter of the lease term or useful life of the asset.
Variable lease payments
Variable lease payments that depend on an index or a rate, are initially
measured using the index or rate existing at the commencement of the lease and
are included in the measurement of the lease liability. When the cash flows of
future lease payments change as the result of a change in an index or a rate,
the balance of the liability is adjusted against the right-of-use asset.
Depreciation of right-of-use asset
After lease commencement, a right-of-use asset is measured on a cost basis
less accumulated depreciation and accumulated impairment losses and is
adjusted for re-measurements of the lease liability. Depreciation is
calculated on a straight-line basis over the useful life or contractual lease
period, whichever earlier, as follows:
□ Buildings 1-8.5 years
□ Data centers 1-5.5 years
k. Initial application of new standards, amendments to standards and
interpretations
Amendment to IAS 1, Presentation of Financial Statements: "Disclosure of
Accounting Policies.
As a result of applying the Amendment, the extent of the accounting policy
disclosure provided in the financial statements for 2023 was reduced and
adjusted according to the Company's specific circumstances.
l. New standards, amendments to standards and interpretations not yet
adopted:
Amendment to IAS 1, Presentation of Financial Statements: Classification of
Liabilities as Current or Non-Current and subsequent amendment: Non-Current
Liabilities with Covenants.
The Group is examining the effects of the Amendment on the financial
statements with no plans for early adoption.
NOTE 4: INCOME TAX
a. Details regarding the tax environment of the Israeli companies:
1) Corporate tax rate
Taxable income of the Israeli companies is subject to the Israeli corporate
tax at the rate of 23% in the years 2023, 2022 and 2021.
2) Benefits under the Law for the Encouragement of Capital
Investments (Investment Law)
The Investment Law provides tax benefits for Israeli companies meeting certain
requirements and criteria. According to the Investment Law, a flat rate tax
applies to companies eligible for the "Preferred Enterprise" status. In order
to be eligible for Preferred Enterprise status, a company must meet minimum
requirements to establish that it contributes to the country's economic growth
and is a competitive factor for the gross domestic product.
The Investment Law also added a new tax benefit tracks effective January 1,
2017 for a "preferred technological enterprise" and a "special preferred
technological enterprise" that awards reduced tax rates to a technological
industrial enterprise for the purpose of encouraging activity relating to the
development of qualifying intangible assets.
Preferred technological income that meets the conditions required in the law,
will be subject to a reduced corporate tax rate of 12%, and if the preferred
technological enterprise is located in Development Area A to a tax rate of
7.5%.
The Investment Law also provides that no tax will apply to a dividend
distributed out of preferred income to a shareholder that is an Israeli
resident company. A tax rate of 20% shall apply to a dividend distributed out
of preferred income and preferred technological income, to an individual
shareholder or foreign resident, subject to double taxation prevention
treaties.
On May 16, 2017, the Knesset Finance Committee approved Encouragement of
Capital Investment Regulations (Preferred Technological Income and Capital
Gain of Technological Enterprise) - 2017 (hereinafter: "the Regulations"),
which provides rules for applying the "preferred technological enterprise" and
"special preferred technological enterprise" tax benefit tracks including the
Nexus formula that provides the mechanism for allocating the technological
income eligible for the benefits.
The Company obtained tax rulings confirming that the Company is eligible for
the benefits under the Investment Law. The tax rulings which were obtained
applied for the years 2017-2021. The Company approached the Israeli Tax
Authority on December 28, 2023, for the renewal of the tax ruling, regarding
industrial enterprise and preferred technological enterprise, for the next
five years beginning in 2022. The tax ruling has not been accepted yet.
b. Details regarding the tax environment of the non-Israeli companies:
Non-Israeli subsidiaries are taxed according to the tax laws in their
countries of residence as reported in their statutory financial statement
prepared under local accounting regulations.
c. Carry forward losses
(1) Israel
As of December 31, 2023, the net operating loss carryforwards, or NOLs are
approximately USD 20.4 million (2022: nil), and the Capital Loss to carry
forward is approximately USD 3 million (2022: USD 0.1 million). The losses
carryforward do not expire under Israeli tax laws.
(2) US
The Group submit a US federal consolidated tax return.
Provisions enacted in the Tax Cuts and Jobs Act in 2017 related to the
capitalization for tax purposes of research and experimental expenditures
("R&E") became effective on January 1, 2022. These new R&E provisions
require us to capitalize certain research and experimental expenditures and
amortize them on the U.S. tax return over five or fifteen years, depending on
where these costs are conducted. The tax expense in the U.S. would increase as
a result, unless these provisions are modified through legislative processes
in the future. The Company applies the new enacted act in the current year tax
provision and the deferred tax asset.
The Group has several U.S. federal NOLs, following previous acquisitions:
1. Approximately USD 100.8 million, which will expire starting 2038. As of
December 31, 2023, the NOLs are approximately USD 56.7 million (2022: USD 65.7
million).
2. Approximately USD 315 million which can be utilized over the next 52
years.
As of December 31, 2023, the NOLs are approximately USD 307.2 million (2022:
USD 315 million).
In addition, the Group has USD 0.5 million NOLs from previous years.
In addition, the Capital Loss to carry forward is approximately USD 27.7
million (2022: nil). Capital losses can be carried back for three years, and
forward for five years.
Additionally, for tax years beginning after December 31, 2017, the Tax Cuts
and Jobs Act limits the NOL deduction to 80% of taxable income, repeals
carryback of all NOLs arising in a tax year ending after 2017 and permits
indefinite carryforwards for all such NOLs. NOL's arising in a tax year ending
on or before 2017 can offset 100% of taxable income, are available for
carryback, and expire 20 years after they
arise. It should be noted that the Coronavirus Aid, Relief and Economic
Security ("CARES") Act suspended the 80% limitation for tax years 2018, 2019
and 2020and allowed for a 5-year carryback for NOLs for tax years beginning
after December 31, 2017, and before January 1, 2021.
Pursuant to Section 382 of the Internal Revenue Code, the acquired companies
in the US underwent ownership changes for tax purposes (i.e., a change of more
than 50% in stock ownership involving 5% shareholders) on the acquisition
date. As a result, the use of the Company's total US NOL carryforwards and tax
credits generated prior to the ownership change is subject to annual use
limitations under Section 382 and potentially also under section 383 of the
Code and comparable state income tax laws.
(3) International
As of December 31, 2023, the NOLs are approximately USD 19.2 million (2022:
USD 22.3 million).
In addition, the Capital Loss to carry forward is approximately USD 0.9
million (2022: nil). The ability to carry losses forward (or backwards)
depends on the specific jurisdiction which the Company operates in.
d. Composition of income tax benefit:
Year ended
December 31
2023 2022 2021
USD thousands
Current tax expense (income)
Current year (2,331) 14,378 7,220
Deferred tax expense (income)
Creation and reversal of temporary differences 4,834 5,310 (8,168)
Tax expenses (benefit) 2,503 19,688 (948)
The following are the domestic and foreign components of the Group's income
taxes:
Year ended
December 31
2023 2022 2021
USD thousands
Domestic (5,352) 5,766 4,995
US 8,712 11,578 (961)
International (857) 2,344 (4,982)
Tax expenses (benefit) 2,503 19,688 (948)
e. Reconciliation between the theoretical tax on the pre-tax
profit and the tax expense:
Year ended
December 31
2023 2022 2021
USD thousands
Profit (Loss) before taxes on income (18,984) 42,425 72,275
Primary tax rate of the Company 23% 23% 23%
Tax calculated according to the Company's primary tax rate (4,366) 9,758 16,623
Additional tax (tax saving) in respect of:
Non-deductible expenses net of tax exempt income (*) 3,329 11,642 (3,364)
Difference between measurement basis of income/expenses for tax purposes and - (654) -
measurement basis of income/expenses for financial reporting purposes
Effect of reduced tax rate on preferred loss (income) 4,963 (4,625) (7,226)
Utilization of tax losses from prior years for which deferred taxes were not (90) (2,539) (1,117)
created
Effect on deferred taxes at a rate different from the primary tax rate 892 2,697 (3,329)
Recognition of deferred taxes for tax losses and benefits from previous years (4,852) (1,104) (4,586)
for which deferred taxes were not created in the past
Recognition in temporary differences for which deferred taxes are not 656 35 -
recognized
Foreign tax rate differential 1,971 4,478 2,051
Tax (benefit) expenses 2,503 19,688 (948)
Effective income tax rate (13%) 46% (1%)
(*) including non- deductible share-based compensation expenses.
f. Deferred tax assets and liabilities:
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
Intangible Assets and R&D expenses Employees Compensation Carryforward Losses Accrued Expenses Doubtful Debt Other Total
USD thousands
Balance of deferred tax asset (liability) as of January 1, 2022 (5,587) 12,074 9,835 2,939 3,099 676 23,036
Business combination (11,313) 1,502 7,857 1,322 973 2,158 2,499
Changes recognized in profit or Loss 5,019 (2,927) (2,486) (2,590) (1,332) (1,249) (5,565)
Effect of change in tax rate - 14 237 - - 4 255
Changes recognized in equity 187 (3,417) (24) 22 11 (5) (3,226)
Balance of deferred tax asset (liability) as of December 31, 2022 (11,694) 7,246 15,419 1,693 2,751 1,584 16,999
Discontinuance of Consolidation 168 (57) - (532) (99) (1) (521)
Changes recognized in profit or Loss (524) (3,837) 411 (960) 643 (597) (4,864)
Effect of change in tax rate - 30 - - - - 30
Changes recognized in equity (79) (34) 102 6 - - (5)
Balance of deferred tax asset (liability) as of December 31, 2023 (12,129) 3,348 15,932 207 3,295 986 11,639
As of each reporting date, the Company's management considers new evidence,
both positive and negative, that could impact management's view with regard to
future realization of deferred tax assets.
g. Uncertain tax positions:
As of December 31, 2023, and 2022, the Company has gross unrecognized tax
benefits of approximately USD 6,383 thousand and USD 7,188 thousand,
respectively. The Company classifies liabilities for unrecognized tax benefits
in current tax.
h. Tax assessment:
The Company considers tax year 2018 and 2019 for Israel and
the US federal group, respectively as closed for tax assessment.
NOTE 5: FIXED ASSETS, NET
Computers and Servers Office furniture and equipment Leasehold improvements Total
USD thousands
Cost
Balance as of January 1, 2022 8,839 445 770 10,054
Exchange rate differences 53 41 20 114
Additions * 8,375 5 5 8,385
Business combinations 22,256 351 647 23,254
Disposals (892) (28) (336) (1,256)
Balance as of December 31, 2022 38,631 814 1,106 40,551
Exchange rate differences (7) (13) (23) (43)
Additions * 3,783 63 779 4,625
Disposals (482) (114) (94) (690)
Balance as of December 31, 2023 41,925 750 1,768 44,443
Accumulated Depreciation
Balance as of January 1, 2022 5,698 269 623 6,590
Exchange rate differences 57 41 18 116
Disposals (890) (28) (336) (1,254)
Additions 4,957 61 207 5,225
Balance as of December 31, 2022 9,822 343 512 10,677
Exchange rate differences (9) (8) (1) (18)
Disposals (482) (111) (93) (686)
Additions 12,314 210 545 13,069
Balance as of December 31, 2023 21,645 434 963 23,042
Carrying amounts
As of December 31, 2023 20,280 316 805 21,401
As of December 31, 2022 28,809 471 594 29,874
* As of December 31, 2023, USD 2,030 thousand additions have not been paid
(2022: USD 1,900 thousand).
NOTE 6: LEASES
a. Leases in which the Group is the lessee:
The Group applies IFRS 16, Leases. The Group has lease agreements with respect
to the following items:
- Offices;
- Data center;
1) Information regarding material lease agreements:
a) The Group leases Offices mainly in the United States of America (US),
Israel, Canada and UK with contractual original lease periods ends between the
years 2024 and 2028 from several lessors.
A lease liability in the amount of USD 21,381 thousand and USD 18,513
thousand as of December 31, 2023, and December 31, 2022, respectively, and
right-of-use asset in the amount of USD 11,027 thousand and USD 7,753 thousand
as of December 31, 2023, and December 31, 2022, respectively have been
recognized in the statement of financial position in respect of leases of
offices.
b) The Group leases data center and related network infrastructure with
contractual original lease periods ends between the years 2024 and 2028. The
Group did not assume renewals in determination of the lease term unless the
renewals are deemed to be reasonably assured at lease commencement.
A lease liability in the amount of USD 15,680 thousand and USD 10,825 thousand
as of December 31, 2023, and December 31, 2022, respectively, and right-of-use
asset in the amount of USD 14,888 thousand and USD 10,520 thousand as of
December 31, 2023, and December 31, 2022, respectively have been recognized in
the statement of financial position in respect of data centers.
2) Lease liability:
Maturity analysis of the Group's lease liabilities:
December 31
2023 2022
USD thousands
Less than one year (0-1) 12,106 14,104
One to five years (1-5) 24,955 15,234
Total 37,061 29,338
Current maturities of lease liability 12,106 14,104
Long-term lease liability 24,955 15,234
3) Right-of-use assets - Composition:
Offices Data center Total
USD thousands
Balance as of January 1, 2022 5,424 2,849 8,273
Business Combinations 6,103 10,633 16,736
Depreciation and amortization on right-of-use assets (4,533) (4,693) (9,226)
Additions 1,113 1,783 2,896
Lease modifications (74) - (74)
Disposals (205) (52) (257)
Exchange rate differences (75) - (75)
Balance as of December 31, 2022 7,753 10,520 18,273
Discontinuance of consolidation (64) - (64)
Depreciation and amortization on right-of-use assets (4,422) (10,579) (15,001)
Net additions 7,871 14,969 22,840
Lease modifications 20 20
Disposals (119) (22) (141)
Exchange rate differences (12) - (12)
Balance as of December 31, 2023 11,027 14,888 25,915
4) Amounts recognized in statement of operation:
Year ended
December 31
2023 2022 2021
USD thousands
Interest expenses on lease liability (1,885) (587) (570)
Depreciation and amortization of right-of-use assets (15,001) (9,226) (6,334)
Gain (loss) recognized in profit or loss (119) (74) 7
Total (17,005) (9,887) (6,897)
5) Amounts recognized in the statement of cash flows:
Year ended
December 31
2023 2022 2021
USD thousands
Cash outflow for leases (19,147) (12,605) (10,579)
b. Leases in which the Group is a lessor:
1) Information regarding material lease agreements:
The Group subleases offices at the US for periods expiring in 2027.
2) Net investment in the lease:
Presented hereunder is the movement in the net investment in the lease:
Offices
Year ended
December 31
2023 2022
USD thousands
Balance as of January 1, 4,849 5,682
Sublease receipts (1,112) (1,306)
Additions 2,248 310
Business combinations - 163
Balance as of December 31, 5,985 4,849
3) Maturity analysis of net investment in finance leases:
Year ended
December 31
2023 2022
USD thousands
Less than one year (0-1) 1,772 1,084
One to five years (1-5) 4,213 3,765
Total net investment in the lease as of December 31, 5,985 4,849
4) Amounts recognized in statement of operation:
Offices
Year ended
December 31
2023 2022 2021
USD thousands
Gain from finance subleases - - 301
Financing income on the net investment in the lease 221 199 245
Total 221 199 546
NOTE 7: INTANGIBLE ASSETS, NET
Software Trademarks Customer relationships Technology Goodwill Total
USD thousands
Cost
Balance as of January 1, 2022 24,687 36,367 50,108 53,192 156,712 321,066
Exchange rate differences (50) (1,262) (1,455) (548) (3,216) (6,531)
Additions 8,750 - - - - 8,750
Disposals (1,199) (19,570) (2,393) (4,851) - (28,013)
Business combinations - 7,654 29,169 85,684 92,244 214,751
Balance as of December 31, 2022 32,188 23,189 75,429 133,477 245,740 510,023
Exchange rate differences 25 485 455 272 874 2,111
Additions 15,187 - - - - 15,187
Disposals (12) (23,674) (1,845) - (262) (25,793)
Balance as of December 31, 2023 47,388 - 74,039 133,749 246,352 501,528
Amortization
Balance as of January 1, 2022 14,876 29,786 28,223 39,961 - 112,846
Exchange rate differences 2 (585) (914) (198) - (1,695)
Additions 6,189 2,514 9,289 10,257 - 28,249
Disposals (659) (19,570) (2,393) (4,851) - (27,473)
Balance as of December 31, 2022 20,408 12,145 34,205 45,169 - 111,927
Exchange rate differences 15 355 353 157 - 880
Additions 7,172 11,174 12,407 21,499 -- 52,252
Disposals (12) (23,674) (1,845) - - (25,531)
Balance as of December 31, 2023 27,583 - 45,120 66,825 - 139,528
Carrying amounts
As of December 31, 2023 19,805 - 28,919 66,924 246,352 362,000
As of December 31, 2022 11,780 11,044 41,224 88,308 245,740 398,096
Capitalized development costs
Development costs capitalized in the period amounted to USD 14,222 thousand
(2022: USD 8,743 thousand) and were classified under software.
Acceleration of Trademarks
As detailed in Note 1, following the decision to rebrand to Nexxen, the Group
accelerated the amortization of its trademark assets, whose useful life ended
on December 31, 2023.
Impairment testing for intangible assets
The Company's qualitative assessment during the years ended December 31, 2023,
and December 31, 2022, did not indicate that it is more likely than not that
the recoverable amount of its intangible assets, and other long-lived assets
is less than their aggregate carrying amount.
As of December 31, 2023, and as of December 31, 2022, the estimated
recoverable amount based on Company's market value was lower than the carrying
amount, and therefore the recoverable amount was estimated based on value in
use and was determined by discounting the future cash flows. The estimated
value in use was higher than the carrying amount, and therefore there was no
need for impairment.
Key assumptions used in the calculation of recoverable amounts are as of
December 31, 2023:
Post-tax discount
rate 14% (WACC)
Terminal value growth rate 3%
EBITDA growth rate
26%-42%
Key assumptions used in the calculation of recoverable amounts are as of
December 31, 2022:
Post-tax discount
rate 15% (WACC)
Terminal value growth rate 3%
EBITDA growth rate
21%-33%
The cash flow projections include specific estimates for four years and a
terminal value growth rate thereafter. EBITDA growth rate is expressed as
the annual growth rate in the initial five years of the plans used for
impairment testing and has been mainly based on past experience and management
expectations.
NOTE 8: TRADE AND OTHER RECEIVABLES
December 31
2023 2022
USD thousands
Trade receivables:
Trade receivables 219,396 229,975
Allowance for expected credit losses (17,423) (10,138)
Trade receivables, net 201,973 219,837
Other receivables:
Prepaid expenses 4,988 14,425
Loan to a third party 104 -
Institutions 1,309 1,281
Pledged deposits 1,569 3,036
Acquisition consideration adjustment - 4,673
Other 323 -
8,293 23,415
NOTE 9: TRADE AND OTHER PAYABLES
December 31
2023 2022
USD thousands
Trade payables 183,296 212,690
Other payables:
Contract liabilities 8,366 6,540
Wages, salaries and related expenses 13,319 24,539
Provision for vacation 1,922 1,869
Institutions 1,603 1,659
Interest to pay 1,757 1,504
Pledged deposits 284 362
Others 1,847 7,882
29,098 44,355
NOTE 10: CASH AND CASH EQUIVALENTS
December 31
2023 2022
USD thousands
Cash 105,997 173,568
Bank deposits 128,311 43,932
Cash and cash equivalents 234,308 217,500
The majority of cash and cash equivalents bear interest of 3% to 5.5%.
The Group's exposure to credit, and currency risks are disclosed in Note 18 on
financial instruments.
NOTE 11: LONG-TERM DEBT
In September 2022, Nexxen Group US Holdings Inc. (formerly known as Unruly
Group US Holding Inc.) entered into a USD 90 million senior secured term loan
facility (the Term Loan Facility) and a USD 90 million senior secured
revolving credit facility (the Revolving Credit Facility and, together with
the Term Loan Facility, collectively, the Credit Facilities). The Company used
the net proceeds of the Term Loan Facility and USD 10 million of net proceeds
of the Revolving Credit Facility to finance the acquisition of Nexxen Inc. The
loan period is 3 years from the date it was obtained.
The Company is obligated to pay a commitment fee on the undrawn amounts of the
Revolving Credit Facility at an annual rate, determined by the Company's total
net leverage ratio. The Credit Facilities require compliance with various
financial and non-financial covenants, including affirmative and negative
covenants. The financial covenants require that the total net leverage ratio
not exceed 3x and the interest coverage ratio not be less than 4x, in each
case measured as of the end of each fiscal quarter. As of December 31, 2023,
the Company is in compliance with all related covenants.
During the twelve-month periods ended December 31, 2023, the Company
recognized interest expenses in the amounts of USD 6,854 thousand. Total
interest paid during the twelve months ended December 31, 2023, was USD 6,601
thousand.
NOTE 12: REVENUES
Year ended
December 31
2023 2022 2021
USD thousands
Programmatic 299,005 274,355 266,616
Performance 32,988 60,895 75,329
331,993 335,250 341,945
For the year ended December 31, 2023, no individual buyer accounted for more
than 10% of revenue. For the year ended December 31, 2022 one buyer represents
10.7% of revenue. For the year ended December 31, 2021 one buyer represents
13.6% of revenue.
NOTE 13: COST OF REVENUE
Year ended
December 31
2023 2022 2021
USD thousands
Programmatic 44,385 35,110 31,572
Performance 17,885 25,635 40,079
Cost of Revenue 62,270 60,745 71,651
NOTE 14: GENERAL AND ADMINISTRATIVE EXPENSES
Year ended
December 31
2023 2022 2021
USD thousands
Wages, salaries and related expenses 21,835 18,933 17,755
Share base payments 12,121 31,878 32,250
Rent and office maintenance 2,432 319 549
Professional expenses 7,686 12,233 7,136
Doubtful debts 4,337 (3,167) 4,958
Acquisition costs 171 6,012 253
Other expenses 2,469 1,797 598
51,051 68,005 63,499
NOTE 15: SHAREHOLDERS' EQUITY
Issued and paid-in share capital:
Ordinary Shares
2023 2022
Number of shares
Balance as of January 1 144,477,962 154,501,629
Own shares held by the Group (2,729,597) (16,906,795)
Share based compensation 4,413,644 6,883,128
Issued and paid-in share capital as of December 31 146,162,009 144,477,962
Authorized share capital 500,000,000 500,000,000
Rights attached to share:
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at general meetings
of the Company. All shares rank equally with regard to the Company's residual
assets.
Own shares acquisition:
During 2022, the Board of Directors approved the share buyback programs of up
to USD 95 million of its ordinary shares out of which the Group repurchased
16,906,795 ordinary shares in aggregate amount of USD 86.3 million and during
2023, the Company repurchased 2,505,851 ordinary shares in aggregate amount of
USD 8.7 million which was financed by existing cash resources.
On December 18, 2023, the Company has received approval from the Israeli court
for its motion to buy back an additional USD 20 million of its ordinary shares
from time-to-time through June 18, 2024. In 2023, the Company repurchased
221,506 ordinary shares in aggregate amount of USD 0.6 million which was
financed by existing cash resources.
In addition, in July 2023, the Group repurchased 2,240 restricted ordinary
shares that did not vest from one of its employees for no consideration.
NOTE 16: EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share
The calculation of basic earnings (loss) per share as for the year ending
December 31, 2023, 2022 and 2021 was based on the profit (loss) for the year
divided by a weighted average number of ordinary shares outstanding,
calculated as follows:
Profit (loss) for the year:
Year ended
December 31
2023 2022 2021
USD thousands
Profit (loss) for the year (21,487) 22,737 73,223
Weighted average number of ordinary shares:
Year ended
December 31
2023 2022 2021
Shares of NIS 0.01 par value
Weighted average number of ordinary shares used to calculate basic earnings 143,589,188 149,937,339 144,493,989
(loss) per share as at December 31
Basic earnings (loss) per share (in USD) (0.15) 0.15 0.51
Diluted earnings (loss) per share
The calculation of diluted earnings (loss) per share as of December 31, 2023,
2022 and 2021 was based on profit (loss) for the year divided by a weighted
average number of shares outstanding after adjustment for the effects of all
dilutive potential ordinary shares, calculated as follows:
Weighted average number of ordinary shares (diluted):
Year ended
December 31
2023 2022 2021
Shares of NIS 0.01 par value
Weighted average number of ordinary shares used to calculate basic earnings 143,589,188 149,937,339 144,493,989
per share
Effect of share options on issue - 3,120,304 8,212,903
Weighted average number of ordinary shares used to calculate diluted earnings 143,589,188 153,057,643 152,706,892
per share
Diluted earnings per share (in USD) (0.15) 0.15 0.48
At December 31, 2023 6,749 thousand share options, RSUs and PSUs (in 2022 and
2021: 8,851 thousand and 3,061 thousand, respectively) were excluded from the
diluted weighted average number of ordinary shares calculation as their effect
would have been anti-dilutive.
NOTE 17: SHARE-BASED COMPENSATION ARRANGEMENTS
a. Share-based compensation plan:
The terms and conditions related to the grants of the share options programs
are as follows:
· All the share options that were granted are non-marketable.
· All options are to be settled by physical delivery of ordinary shares
or ADSs.
· Vesting conditions are based on a service period of between 0.5-4
years.
b. Stock Options:
The number of share options is as follows:
Number of options Weighted average
exercise price
2023 2022 2023 2022
(Thousands) (USD)
Outstanding of 1 January 4,772 6,026 7.31 6.54
Forfeited during the year (721) (828) 6.33 7.61
Exercised during the year (346) (1,046) 0.67 1.96
Granted during the year - 620 - 7.22
Outstanding of December 31 3,705 4,772 7.91 7.31
Exercisable of December 31 2,086 1,814
The total expense recognized in the year ended December 31, 2023, with respect
to the options granted to employees, amounted to approximately USD 2,429
thousand (2022: USD 5,867 thousand).
c. Restricted Share Units:
During 2023 and 2022, the Group granted 352,800 and 777,448 Restricted Share
Units (RSUs) to its executive officers and employees, respectively.
The number of restricted share units is as follows:
Number of RSU's Weighted-Average Grant Date Fair Value
2023 2022 2023 2022
(Thousands)
Outstanding at 1 January 5,288 8,146 8.277 8.606
Forfeited during the year (254) (261) 6.275 9.948
Exercised during the year (3,295) (3,374) 8.208 8.091
Granted during the year 353 777 2.160 4.596
Outstanding at December 31 2,092 5,288 7.601 8.277
The total expense recognized in the year ended December 31, 2023, with respect
to the RSUs granted to employees, amounted to approximately USD 13,356
thousand (2022: USD 31,923 thousand).
d. Performance Stock Units:
During 2023 and 2022, the Group granted 143,700 and 168,048 Performance Stock
Units (PSUs) to its executive officers, respectively.
The number of performance stock units is as follows:
Number of PSU's Weighted-Average Grant Date Fair Value
2023 2022 2023 2022
(Thousands)
Outstanding at January 1 1,992 4,486 8.937 6.796
Forfeited during the year (254) (80) 6.328 9.952
Exercised during the year (930) (2,582) 9.320 4.891
Granted during the year 144 168 2.160 4.453
Outstanding at December 31 952 1,992 8.238 8.937
The vesting of the PSUs is subject to continuous employment and compliance
with the performance criteria determined by the Company's Remuneration
Committee and the Company's Board of Directors.
The total expense recognized in the year ended December 31, 2023, with respect
to the PSUs granted to employees, amounted to approximately USD 3,384 thousand
(2022: USD 12,715 thousand).
e. Expense recognized in the statement of operation and other
comprehensive income is as follows:
Year ended
December 31
2023 2022 2021
USD thousands
Selling and marketing 3,740 10,594 7,094
Research and development 3,308 8,034 3,474
General and administrative 12,121 31,877 32,250
19,169 50,505 42,818
NOTE 18: FINANCIAL INSTRUMENTS
a. Overview:
The Group has exposure to the following risks from its use of financial
instruments:
□ Credit risk
□ Liquidity risk
□ Market risk
This note presents quantitative and qualitative information about the Group's
exposure to each of the above risks, and the Group's objectives, policies and
processes for measuring and managing risk.
In order to manage these risks and as described hereunder, the Group executes
transactions in derivative financial instruments. Presented hereunder is the
composition of the derivatives:
December 31
2023 2022
USD thousands
Derivatives presented under current assets
Forward exchange contracts used for hedging 123 -
Derivatives presented under current liability
Forward exchange contracts used for hedging - (209)
Total 123 (209)
b. Risk management framework:
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. The Board is responsible
for developing and monitoring the Group's risk management policies.
The Group's risk management policies are established to identify and analyze
the risks faced by the Group, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities. The Group, through its training and management of standards and
procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations.
The Group Audit Committee oversees how management monitors compliance with the
Group's risk management policies and procedures and reviews the adequacy of
the risk management framework in relation to the risks faced by the Group. The
Group Audit Committee is assisted in its oversight role by Internal Audit.
Internal Audit undertakes both regular and ad hoc reviews of risk management
controls and procedures, the results of which are reported to the Audit
Committee.
c. Credit risk:
The Group's credit risk is arise from the risk of financial loss if a customer
or counterparty to a financial instrument fails to meet its contractual
obligations.
The carrying amount of financial assets represents the maximum credit
exposure.
The maximum exposure to credit risk at the reporting date was as follows:
December 31
2023 2022
USD thousands
Cash and cash equivalents 234,308 217,500
Trade receivables, net (a) 201,973 219,837
Other receivables 1,996 7,709
Long term deposit 525 406
438,802 445,452
(a) At December 31, 2023, the Group included provision for doubtful
debts in the amount of USD 17,423 thousand (December 31, 2022: USD 10,138
thousand) in respect of collective impairment provision and specific debtors
that their collectability is in doubt.
As of December 31, 2023, two buyers accounted for 16.2% and 16.5% of trade
receivables. As of December 31, 2022, two buyers accounted for 15.7% and
14.1% of trade receivables.
Allowance for Doubtful debts
2023 2022
USD thousands
Balance at January 1 10,138 13,870
Allowance for doubtful debts expenses (income) 7,622 (3,167)
Discontinuance of consolidation (275) -
Write-off (22) (542)
Exchange rate difference (40) (23)
Balance at December 31 17,423 10,138
d. Liquidity risk:
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset. The Group's approach to managing
liquidity is to ensure, as far as possible, that it has sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group's
reputation.
As of December 31, 2023, and December 31, 2022, the Group's contractual
obligation of financial liability is in respect of leases, trade, and other
payables in the amount of USD thousand and USD 332,782 thousand and USD
361,820 thousands, respectively.
The contractual maturity of the financial liability that is less than one year
is in the amount of USD 201,955 thousand and USD 239,240 thousand for December
31, 2023, and December 31, 2022, respectively.
e. Market risk:
Market risk is the risk that changes in market prices, such as foreign
exchange rates, the CPI, interest rates and equity prices will affect the
Group's income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimizing the return.
At December 31, 2023, USD 14,027 thousand are held in AUD, USD 5,653 thousand
are held in NIS, USD 4,571 thousand are held in EUR, USD 2,981 thousand are
held in SGD, USD 2,692 thousand are held in CAD, USD 2,665 thousand are held
in GBP, USD 2,040 thousand are held in JPY, USD 1,493 thousand are held in
other currencies and the remainder held in USD.
As of December 31, 2023, no individual vendor accounted for more than 10% of
trade payables. As of December 31, 2022, one vendor accounted for 12.7% of
trade payables.
f. Sensitivity analysis:
A change as of December 31 in the exchange rates of the following currencies
against the USD, as indicated below, would have affected the measurement of
financial instruments denominated in a foreign currency and would have
increased (decreased) profit or loss and equity by the amounts shown below
(after tax). This analysis is based on foreign currency exchange rate that the
Group considered to be reasonably possible at the end of the reporting period.
The analysis assumes that all other variables, in particular interest rates,
remain constant and ignores any impact of forecasted sales and purchases.
2023 2022
GBP/USD +10% -10% +10% -10%
USD thousands
Profit / (Loss) (1,832) 1,832 (2,893) 2,893
Increase / (Decrease) in Shareholders' Equity (9) 9 (94) 94
2023 2022
NIS/USD +10% -10% +10% -10%
USD thousands
Profit / (Loss) 353 (353) (139) 139
Increase / (Decrease) in Shareholders' Equity 384 (384) (107) 107
2023 2022
SGD/USD +10% -10% +10% -10%
USD thousands
Profit / (Loss) (2,348) 2,348 (2,615) 2,615
Increase / (Decrease) in Shareholders' Equity (6) 6 (320) 320
Linkage and foreign currency risks
Currency risk
The Group is not exposed to currency risk on sales and purchases that are
denominated in a currency other than the respective functional currency of the
Group, the USD. The principal currencies in which these transactions are
denominated are GBP, NIS, EURO, CAD, SGD, MXN, AUD and JPY.
At any point in time, the Group aims to match the amounts of its assets and
liabilities in the same currency in order to hedge the exposure to changes in
currency.
In respect of other monetary assets and liabilities denominated in foreign
currencies, the Group ensures that its net exposure is kept to an acceptable
level by buying or selling foreign currencies at spot rates when necessary to
address short-term imbalances.
Interest rate risk
The Group has a cash flow risk due to its variable-rate debt instruments.
A 5% increase in the interest rate would result in a loss and a decrease in
shareholders' equity of USD 3.7 million. However, it will be offset by a gain
and shareholders' increase of USD 2.8 million due to available cash and cash
equivalents. As a result, there would be a net effect of USD 0.9 million.
g. Level 3 financial instruments carried at fair value
On August 18, 2022, the Company completed a USD 25 million investment in
VIDAA, a smart TV operating system, streaming platform, and subsidiary of
Hisense. Through its investment, the Company received a 2.5% equity stake in
VIDAA, a multi-year extension to exclusively share of VIDAA's global ACR data
for targeting and measurement across the Company's platform, and ad
monetization exclusivity on VIDAA media in the U.S., U.K., Canada, and
Australia
The investment in shares is a financial asset measured at fair value through
profit or loss under level 3.
December 31, 2023 December 31, 2022
Level 3 Level 3
USD thousands USD thousands
Financial assets measured at fair value
through profit or loss:
Investment in shares 25,000 25,000
Valuation processes used by the Company
The fair value of non-marketable shares is determined by external valuer on an
annual basis.
The principal unobservable inputs are as follows:
· The estimated royalties from App share and remote-control button
which is based on the expected increase in market share.
· The average operating profit margin which is based on the stage of
research and development.
· The discount rate, which is based on the risk-free rate for 10-year
debentures issued by the government in the relevant market, adjusted for a
risk premium to reflect both the risk of investing in equities, the systematic
risk of company and entity specific risk to the extent not already reflected
in the cash flows.
h. Financial instruments measured at fair value for disclosure purposes
only.
The fair value of the long term debt is estimated by discounting future
principal and interest cash flows by the market interest rate of 7.064% on the
date of measurement which is USD 97,291 thousands.
NOTE 19: RELATED PARTIES
Compensation and benefits to key management personnel
Executive officers also participate in the Company's share option programs.
For further information see Note 17 regarding share-based compensation.
Compensation and benefits to key management personnel (including directors)
that are employed by the Company and its subsidiaries:
Year ended
December 31
2023 2022 2021
USD thousands
Share-based compensation 11,527 30,914 31,283
Other compensation and benefits 3,988 4,433 6,752
Total 15,515 35,347 38,035
NOTE 20: SUBSIDIARIES
Details in respect of subsidiaries:
Presented hereunder is a list of the Group's subsidiary:
Principal The Group's ownership interest
location of in the subsidiary for the
the year ended
Company's December 31
Name of company activity 2023 2022
Taptica Inc USA 100% 100%
Tremor Video Inc USA 100% 100%
Adinnovation Inc Japan - 100%
Taptica UK UK 100% 100%
YuMe Inc* USA 100% 100%
Perk.com Canada Inc Canada 100% 100%
R1Demand LLC* USA 100% 100%
Nexxen Group LLC (f/k/a Unruly Group LLC) USA 100% 100%
Nexxen Group US Holdings Inc. (f/k/a Unruly Group US Holding Inc)* USA 100% 100%
Nexxen Holdings Ltd (f/k/a Unruly Holdings Limited)* UK 100% 100%
Nexxen Group Ltd (f/k/a Unruly Group Limited)* UK 100% 100%
Unruly Media GmbH Germany 100% 100%
Unruly Media Pte Ltd* Singapore 100% 100%
Nexxen Pty Ltd (f/k/a Unruly Media Pty Ltd) Australia 100% 100%
Unruly Media KK Japan 100% 100%
Unmedia Video Distribution Sdn Bhd Malaysia 100% 100%
SpearAd GmbH Germany 100% 100%
Nexxen Inc. (f/k/a Amobee Inc)* USA 100% 100%
Amobee EMEA Limited UK 100% 100%
Amobee International Inc USA 100% 100%
Amobee Ltd Israel 100% 100%
Amobee Asia Pte Ltd* Singapore 100% 100%
Amobee ANZ Pty Ltd Australia 100% 100%
* Under these companies, there are seventeen (17) wholly
owned subsidiaries that are inactive and in liquidation process.
NOTE 21: OPERATING SEGMENTS
The Group has a single reportable segment as a provider of marketing services.
Geographical information
In presenting information on the basis of geographical segments, segment
revenue is based on the geographical location of consumers.
Year ended
December 31
2023 2022 2021
USD thousands
America 311,780 303,106 304,686
APAC 6,537 20,031 20,931
EMEA 13,676 12,113 16,328
Total 331,993 335,250 341,945
NOTE 22: CONTINGENT LIABILITY
On May 18, 2021, the Company filed a complaint against Alphonso, Inc.
("Alphonso") in the Supreme Court of the State of New York, County of New York
(the "Court"), asserting claims for breach of contract, tortious interference
with business relations, intentional interference with contractual relations,
unjust enrichment, and conversion.
The lawsuit arose out of Alphonso's breach of a Strategic Partnership
Agreement and an Advance Payment Obligation and Security Agreement (the
"Security Agreement") with us, and LG Electronics Inc.'s ("LG") tortious
interference with the Company's contractual relationships and business
relations and related misconduct. On February 23, 2024, the Company entered
into a settlement and release agreement with Alphonso and LG and the parties
have agreed to dismiss the Alphonso Lawsuit.
In March 2023, Alphonso remitted USD 11.3 million to the Company, comprising
USD 7.25 million related to a secured advance repayment and USD 4.1 million
related to additional interest, penalties and fees including reimbursement of
certain legal fees.
On June 21, 2022, Alphonso filed a complaint against the Company in the United
States District Court for the Northern District of California, asserting
claims for misappropriation of trade secrets under federal and state law. On
October 11, 2023, Alphonso dismissed its claims in the lawsuit with prejudice.
On October 25, 2023, the Company filed a bill of costs to recover allowable
legal costs from Alphonso. The Company's request for tax costs is pending with
the Court.
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