Form 424B4 Tremor International

June 21, 2021 3:32 PM EDT

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Filed Pursuant to Rule 424(b)(4)
Registration No. 333-256452

 

6,768,953 American Depositary Shares

 

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Representing 13,537,906 Ordinary Shares

 

 

This is the initial public offering of Tremor International Ltd. in the United States. We are offering 6,768,953 American Depositary Shares (“ADSs”) with each ADS representing the right to receive two ordinary shares. Our ADSs have been approved for listing on the Nasdaq Global Market (“Nasdaq”) under the symbol “TRMR.”

Our ordinary shares trade on AIM, a market of the London Stock Exchange, under the symbol “TRMR.” On June 17, 2021, the last reported sale price of our ordinary shares on AIM was £7.80 per ordinary shares.

We are both an “emerging growth company” and a “foreign private issuer” as defined under the U.S. federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements. See “Summary—Implications of Being an Emerging Growth Company and a Foreign Private Issuer.”

 

     Per ADS      Total  

Public offering price

   $ 19.00      $ 128,610,107  

Underwriting discounts and commissions(1)

   $ 1.33      $ 9,002,707  

Proceeds to us (before expenses)

   $ 17.67      $ 119,607,400  

 

 

 

(1)

We have agreed to reimburse the underwriters for certain expenses in connection with this offering. See “Underwriting” for additional information regarding underwriter compensation.

We have granted the underwriters an option to purchase up to 1,015,342 additional ADSs from us at the public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus.

 

 

 

Investing in our ADSs involves risks. See “Risk Factors” beginning on page 20 to read about factors you should consider before purchasing any of our ADSs.

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The underwriters expect to deliver the ADSs to purchasers on or about June 22, 2021.

 

RBC Capital Markets   Stifel
JMP Securities   Needham & Company   Raymond James

 

 

Prospectus dated June 17, 2021

 


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TREMOR INTERNATIONAL Ltd. A Global Leader in All-Screen Video Advertising Technologies


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TREMOR INTERNATIONAL Ltd. OUR MISSION To provide an automated marketplace for advertisers & publishers that leverages advanced data-driven technology to deliver impactful brand stories for audiences across the globe


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TREMOR INVESTMENT HIGHLIGHTS END-TO-END PLATFORM Proprietary, leading-edge solution comprised of our integrated DSP, DMP and SSP INDUSTRY LEADERSHIP IN VIDEO AND CTV Established expertise and customer adoption in video & CTV POISED FOR FUTURE GROWTH Via continued innovation and global expansion GLOBAL SCALE Ensures wide reach among global consumer audiences, advertisers and publishers ROBUST DATA SET ML/DL Fully integrated into our platform for accurate targeting and ROI MANAGEMENT TEAM Industry veterans with extensive global experience


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T R E M O R D M P DSP SSP Audiences OUR “END-TO-END” TECHNOLOGY PLATFORM 100 BILLION DAILY AD REQUESTS 500 TERABYTES OF DAILY DATA PROCESSED 250 MILLION OF DAILY AD IMPRESSIONS 100 MILLION DAILY UNIQUE SITES/APPS DEMAND-SIDE DATA MANAGEMENT SUPPLY-SIDE walgreens MAZDA DIAGEO MARS P& G Benefits to advertisers Optimizing & increasing audience reach & engagement Robust data assets Omni-channel connectivity, optimizing campaign impact Creative capabilities Benefits for publishers Premium, high-value campaigns representing a wide range of advertisers First and third-party data, maximizes revenue generation Flexibility via wide breadth of ad formats UnrulyX CTRL, a proprietary insights & reporting dashboard, facilitating Direct, Preferred, and Open Auction programmatic deals A D V E R T I S E R S P U B L I S H E R S VIDEO FOCUS MASSIVE REACH TV RETARGETTING SAAS & MANAGED OFFERING SAAS & MANAGED OFFERING OMNICHANNEL CREATIVE STUDIO EXCLUSIVE SUPPLY TREMOR INTERNATIONAL LTD.


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DSP: OPTIMIZE ADVERTISING & IMPROVE CAMPAIGNS ROI Access to wide-reaching and high-quality ad inventory, audience targeting and VIDEO FOCUS advanced reporting SAAS & MANAGED Designed to empower advertisers to OFFERING optimize their video & CTV campaigns for efficiency & ROI using AI and ML/DL TV RETARGETING for automation Self-service solution for advertisers and CREATIVE STUDIO agencies enabling them more control over control planinng and execution Managed-service optionality enables advertisers to benefit from the experience and guidance of our team of experts DEMAND-SIDE +1,200 BRANDS Managed and Self-Service DSP +400 AGENCIES


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DMP: REAL-TIME, THROUGH INTELLIGENT DATA-DRIVEN DECISION-MAKING INSIGHTS Fully integrated and flexible solution sitting at the center of the platform Provides real-time, device-agnostic, and data-driven marketing maximizing campaign performance & impact Leveraging first and third-party data to identify and reach curated audiences DATA MANAGEMENT EMOTION-BASED INSIGHTS (EQ) M O R E D ✔   AD VERIFICATION TR M P GEO/LOCATION-BASED TARGETING AUTOMATIC CONTENT RECOGNITION (ACR) AUDIENCE ATTRIBUTES & BEHAVIORS CONTEXTUALIZED TARGETING TREMOR INTERNATIONAL Ltd.


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SSP DSP DSP Self- Service PMP OMP WEB PUBLISHERS MOBILE PUBLISHERS CTV PUBLISHERS SSP: OPTIMIZE INVENTORY MANAGEMENT & REVENUE YIELD Self-service solution for advertisers and agencies, enabling them more control over planning and execution Access to large data sets, unique demand (Tremor DSP) and private marketplaces (PMPs) Direct relationships with omni-channel publishers & platforms facilitating supply path optimization process for all parties Model-driven KPI & yield automation increases publishers’ inventory value while delivering higher performance for advertisers SAAS & MANAGED OFFERING MASSIVE REACH EXCLUSIVE SUPPLY SUPPLY-SIDE ~1,450 PUBLISHERS


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Tremor International Ltd. 82 Yigal Alon st.    (13th floor)    Tel-Aviv     Israel    6789124 info@tremorinternational.com


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TABLE OF CONTENTS

 

     Page  

About This Prospectus

     ii  

Basis of Presentation

     ii  

Market and Industry Data

     iii  

Trademarks

     iv  

Summary Consolidated Financial and Other Data

     15  

Risk Factors

     20  

Special Note Regarding Forward-Looking Statements

     52  

Use Of Proceeds

     54  

Dividend Policy

     55  

Capitalization

     56  

Dilution

     57  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     59  

A Letter From Our CEO

     85  

Business

     86  

Management

     100  

Principal Shareholders

     116  

Certain Relationships and Related Party Transactions

     118  

Description of Share Capital and Articles of Association

     119  

Description of American Depositary Shares

     127  

Shares Eligible For Future Sale

     138  

Taxation

     140  

Underwriting

     148  

Expenses of the Offering

     154  

Legal Matters

     155  

Experts

     156  

Enforceability of Civil Liabilities

     157  

Where You Can Find Additional Information

     159  

Index to Condensed Consolidated Interim Financial Statements

     F-1  

Index to Consolidated Financial Statements

     F-14  

Neither we nor the underwriters have authorized anyone to provide any information or to make any representation other than those contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. Neither we nor the underwriters take any responsibility for, and neither we nor the underwriters can provide any assurance as to the reliability of, any information other than the information in this prospectus, any amendment or supplement to this prospectus and any free writing prospectus prepared by us or on our behalf. Neither the delivery of this prospectus nor the sale of our ADSs means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy these ADSs in any circumstances under which such offer or solicitation is unlawful.

The ADSs offered by this prospectus have not been approved or disapproved by the Israel Securities Authority (the “ISA”), nor have such ADSs been registered for sale in Israel. The ADSs may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus that has been approved by the ISA.

For investors outside the United States: Neither we nor any of the underwriters have taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

Through and including            , 2021 (the 25th day after the date of this prospectus), all dealers that effect transactions in the ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

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ABOUT THIS PROSPECTUS

As used in this prospectus, except where the context otherwise requires or where otherwise indicated, references to “Tremor,” the “Company,” “we,” “us,” “our,” “our company,” “our business” and similar references refer to Tremor International Ltd., together with its consolidated subsidiaries as a consolidated entity.

BASIS OF PRESENTATION

Our financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). We present our consolidated financial statements in U.S. dollars. This prospectus includes: (i) the audited consolidated financial statements of the Company as of and for the years ended December 31, 2020 and 2019 prepared in accordance with IFRS and audited by Somekh Chaikin, a member firm of KPMG International and (ii) the unaudited condensed consolidated interim financial statements of the Company as of and for the three months ended March 31, 2021 and 2020 prepared in accordance with International Accounting Standards 34, Interim Financial Reporting (“IAS 34”). The audited consolidated financial statements of the Company as of and for the year ended December 31, 2019 are not directly comparable with the audited consolidated financial statements of the Company as of and for the year ended December 31, 2020, and the unaudited condensed consolidated interim financial statements of the Company as of and for the three months ended March 31, 2021 and 2020. This is due to the integration of acquisitions over the course of 2019 and 2020 and the development of the Company’s platform over that time. In consideration of many indicators, we determined that through the year ended December 31, 2019, we acted as principal and beginning with the year ended December 31, 2020, we are now acting as agent under IFRS 15, and thus effective January 1, 2020, we recognize revenue on a net basis for our Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change. In order to improve comparability and provide a more meaningful basis for comparison of our financial results, this prospectus includes certain unaudited, as adjusted (non-IFRS) revenue information solely for the year ended December 31, 2019 that give effect to the revenue recognition changes noted above as if such changes were applied on January 1, 2019. This as adjusted (non-IFRS) revenue information will not be provided for any period subsequent to the year ended December 31, 2019.

Our fiscal year ends on December 31 of each year.

Certain monetary amounts, percentages and other figures included elsewhere in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

Throughout this prospectus, we provide a number of key performance indicators used by our management and often used by others in our industry. These and other key performance indicators are discussed in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Indicators and Other Operating Metrics.” We define these key performance indicators as follows:

 

   

CTV revenue is revenue derived from Connected TV devices.

 

   

Video revenue is revenue derived from video format ads on all devices.

 

   

Contribution ex-TAC is defined as our gross profit plus depreciation and amortization attributable to cost of revenues and cost of revenues (exclusive of depreciation and amortization) minus both the Programmatic media cost (as defined herein) and the Performance media cost (as defined herein).

 

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Adjusted EBITDA is defined as total comprehensive income (loss) for the period adjusted for foreign currency translation differences for foreign operations, financing expenses, net, tax benefit, depreciation and amortization, stock-based compensation, restructuring and acquisition-related costs and other expenses (income), net.

 

   

Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of revenue.

 

   

An active customer is defined as an advertiser, agency, trading desk or third-party DSP that has used our platform within a trailing 365 day period.

 

   

An active publisher is defined as a publisher or third-party SSP that has used our platform within a trailing 365 day period.

 

   

A unique user is defined as an unduplicated visitor to a publisher’s site connected to our platform from both direct and third-party sites in a one month period and “unique users” is the total number of unduplicated visitors to a publisher’s site connected to our platform from both direct and third-party sites in a one month period. When a user visits a publisher’s site that is connected to our platform, we receive the request along with a field that holds a unique ID number that identifies the source from which the request came, and as such “unique users” is a summation of unique ID numbers to produce a total of unduplicated visitors to publishers’ sites connected to our platform.

 

   

Contribution ex-TAC retention rate is defined as Contribution ex-TAC generated in the year ended December 31, 2020 from the customers who were existing customers as of December 31, 2019 as a percentage of the Contribution ex-TAC generated in the year ended December 31, 2019 from the same group of customers. We consider all of our revenue to be recurring.

MARKET AND INDUSTRY DATA

Unless otherwise indicated, information in this prospectus concerning economic conditions, our industry, our markets and our competitive position is based on a variety of sources, including information from independent industry analysts and publications, as well as our own estimates and research.

Our estimates are derived from publicly available information released by third-party sources, as well as data from our internal research, which we believe to be reasonable. None of the independent industry publications used in this prospectus were prepared on our behalf.

Certain estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate. The estimates and forecasts in this prospectus relating to the size of our target market, market demand and adoption, capacity to address this demand and pricing may prove to be inaccurate. The addressable market we estimate may not materialize for many years, if ever, and even if the markets in which we compete meet the size estimates in this prospectus, our business could fail to grow at similar rates, if at all.

Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this prospectus. See “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

 

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TRADEMARKS

We or our licensors have proprietary rights to trademarks, copyrights, trade names or service marks used in this prospectus that are important to our business, many of which are registered under the applicable intellectual property laws. Solely for convenience, the trademarks, trade names and service marks referred to in this prospectus may appear without the “®” or “” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks, trade names and service marks. This prospectus also contains trademarks, copyrights, tradenames and service marks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trademarks, copyrights, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Each trademark, copyright, trade name or service mark of any other company appearing in this prospectus is the property of its respective holder.

 

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PROSPECTUS SUMMARY

The following summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our ADSs. You should carefully read this prospectus in its entirety before investing in our ADSs, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.”

Our Mission

Our mission is to create an efficient automated marketplace for advertisers and publishers, utilizing advanced data driven technology, to enable the delivery of impactful brand stories to relevant audiences across the globe.

Overview

We are a global company offering an end-to-end software platform that enables advertisers to reach relevant audiences and publishers to maximize yield on their digital advertising inventory. We use our proprietary technology to deliver impactful brand stories to target audiences through digital ad technology and advanced audience data. Our omni-channel capabilities deliver global advertising campaigns across all formats and channels, with an expertise in video format ads on all devices (“Video”) and Connected TV (“CTV”).

We believe there is a significant market opportunity within the approximately $455 billion global digital advertising market that is expected to grow at a compound annual growth rate (“CAGR”) of 11.4% through 2025, according to eMarketer. Digital publishers rely on advertising to support their businesses and brands, and advertisers use this medium to capture uniquely targeted and viewable impressions. We believe the digital advertising market remains fragmented and that our full service end-to-end software platform and vast expertise within Video and CTV puts us in a strong position to continue to increase our market share from traditional ad sales channels.

We believe that we are positioned to benefit from several trends in the evolving advertising ecosystem, including the proliferation of digital media consumption, adoption of programmatic advertising, a growing focus on premium formats such as Video and CTV, and the increasing sophistication of the overall digital landscape. We address the broad and evolving digital advertising market through our three core offerings, including a proprietary demand-side platform (“DSP”) solution that advertisers leverage to manage digital advertising campaigns, a proprietary supply-side platform (“SSP”) solution that publishers leverage to optimally monetize digital inventory and a proprietary data management platform (“DMP”) solution which is integrated with both our DSP and SSP solutions. Our versatile DMP solution benefits from vast amounts of data and provides optimal campaign recommendations for audience sets by employing advanced machine learning algorithms. The contextualization of the data synthesized by our DMP solution provides our advertisers with a comprehensive, personalized view of audiences, enabling more effective targeting across formats and devices and optimizes the monetization of publisher inventory. By combining these three proprietary solutions as well as integrations with industry leading partners, we provide an end-to-end software platform that is dynamic and flexible to our customers’ needs, which enables us to address more digital ad spend.



 

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LOGO

Our customers are both ad buyers, including brands and agencies, and digital publishers. Our platform includes a diversified customer base of approximately 900 active customers and 1,450 active publishers as of March 31, 2021 with approximately 800 million unique users for the month ended March 31, 2021, which serves advertisements in over 100 countries.

We generate revenue through platform fees that are tailored to fit the customer’s specific utilization of our solutions and include (i) a percentage of spend, (ii) flat fees and (iii) fixed costs per mille (“CPM”). CPM refers to a payment option in which customers pay a price for every 1,000 impressions an ad receives.

The advertising industry was significantly impacted at the end of first quarter and throughout the second quarter of 2020 by the outbreak of the COVID-19 pandemic and the resulting economic uncertainty in the global economy, including in the United States (where the majority of our revenue is generated). As a result, advertising demand on our platform decreased significantly in the first half of 2020, as economic activity across most markets contracted and marketing budgets were reduced. However, as parts of the economy reopened at the end of the second quarter of 2020, the advertising industry and related spend responded with a robust recovery in the second half of 2020. Although certain industries, such as travel, retail and hospitality, continued to limit advertising spending over this period, other industries drove significant growth in advertising spending, particularly in Video (including CTV).

As a result, our Video revenue grew from $42.1 million in the six months ended June 30, 2020 to $101.3 million in the six months ended December 31, 2020. Our Video revenue growth included the rapid growth of CTV revenue over the same period, which grew from $11.0 million in the six months ended June 30, 2020 to $25.8 million in the six months ended December 31, 2020. This growth of Video (including CTV) revenue contributed to growth in Programmatic revenue of 30% for the year ended December 31, 2020 from the comparable as adjusted (non-IFRS) revenue basis for the year ended December 31, 2019.

Our total comprehensive income for the six months ended December 31, 2020 increased $64.1 million from the equivalent figure for the six months ended June 30, 2020 and represented a 219% year-over-year increase as compared to our total comprehensive income for the six months ended December 31, 2019. We generated $5.0 million and $6.4 million in total comprehensive income in the years ended December 31, 2020 and 2019, respectively. Our Adjusted EBITDA for the six months ended December 31, 2020 increased approximately



 

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33 times from the equivalent figure for the six months ended June 30, 2020 and represented a 51% year-over-year increase as compared to our Adjusted EBITDA for the six months ended December 31, 2019. Additionally, we generated $60.5 million and $60.4 million in Adjusted EBITDA in the years ended December 31, 2020 and 2019, respectively, resulting in a cash position of $97.5 million as of December 31, 2020.

Our Industry

We operate in the digital advertising industry, which is a core pillar of monetizing digital properties accessible by the Internet. We specialize in digital video advertising, which collectively comprises 68% of our revenue for the year ended December 31, 2020, across mobile video, desktop video and CTV.

We believe the key industry trends shaping the digital advertising market include:

Continued Growth of Digital Media Consumption

Audiences continue to spend an increasing amount of time online for social, business and purchasing needs. We believe that the COVID-19 pandemic and the subsequent work-from-home and shelter-in-place orders accelerated the adoption of numerous traditionally offline activities to be conducted online, including telehealth, fitness classes, food delivery and e-commerce. As consumers continue to spend more time online for everyday activities, we believe that brands and advertisers will increasingly allocate ad budgets to where the audiences are. According to eMarketer, more than a third of the day is expected to be spent on digital media consumption by 2022. This mass of digital consumption is happening across all devices, including mobile, desktop, tablet and CTV. These trends will further increase both the supply and demand of available ad impressions that can be monetized programmatically.

Shift to Programmatic Advertising

Programmatic advertising is the use of software and algorithms to match buyers and sellers of digital advertising in a technology-driven marketplace. The transactions are executed in milliseconds and do not require the manual labor of execution. It is becoming increasingly prominent in the digital advertising industry, as publishers and advertisers prefer that their bids/asks for digital ad inventory be completed in an easy, efficient, and automated manner. Additional advantages of programmatic advertising include enhanced audience targeting, attribution, measurement as well as improved customized campaign management workflow solutions. According to eMarketer, programmatic advertising is expected to increase from $106 billion in 2019 to $147 billion by 2021, at a CAGR of 18%.

Data Driven Decision Making

As the digital media industry grows, increased consumer engagement by audiences has created vast amounts of data and behavioral insights that can be harnessed to maximize return on investment (“ROI”) for advertisers and optimize the monetization of digital inventory for publishers. These insights include industry compliant anonymized data sets relating to consumer interests, preferences and intent, as well as auction data of advertising bid requests. Technology solutions must efficiently and effectively digest, analyze and process an ever increasing amount of data seamlessly while navigating the increased requirements of regulatory challenges and audience protection.

Consumer Privacy and Regulatory Concerns

Over the last few years, there has been increased scrutiny concerning consumer data and the ways in which that data is being used in connection with ad targeting. Globally and locally, new legislation has been introduced



 

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and enforced that requires new industry rules and standards. Some of these regulations include the General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act of 2018 (“CCPA”) and the forthcoming California Privacy Rights Act (the “CPRA”), and Apple’s Identifier for Advertisers (“IDFA”). Additionally, web browsers such as Safari and Firefox have also removed third-party cookies. These rules and regulations require all constituents within digital advertising to consistently adapt and evolve.

Our Market Opportunity

We believe that we are well positioned to capture the fastest growing and next wave of digital advertising, such as Video, including CTV, which reflects 68% of our revenue for the year ended December 31, 2020.

Global digital advertising spend is forecast to be $455 billion in 2021 and is expected to grow 11.4% per year to $700 billion by 2025, according to eMarketer. As advertisers follow audiences to next-generation mediums, digital advertising channels are expected to outpace growth of total global media ad spend. The increased Internet bandwidth in developing countries is acting as an additional tailwind, and the increasing proliferation of next-generation cellular technology in developed countries is driving video viewership. We believe these trends will amplify full-screen video usage, which has long been the preferred choice of advertisers. We expect these long-term, systemic shifts will enable us to grow at a faster rate compared to the broader digital advertising market.

Global Digital Advertising Spending1

(US$ bn)

 

 

LOGO

Digital Video and CTV Advertising

We are addressing the fastest growing areas within digital advertising, Video and CTV, which are expected to grow at an accelerated rate compared to other formats. In the United States, where the majority of our revenue is generated, the growth rates and adoption of Video and CTV are expected to be even higher. According to eMarketer, U.S. CTV ad spend is projected to grow at a CAGR of 19.6% from 2021 to 2025, reaching $27.5 billion. U.S. Video ad spend is projected to grow at a CAGR of 15.5% from 2021 to 2025, reaching

 

1 

eMarketer, March 2021.



 

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$98.5 billion. Additionally, the number of digital video viewers worldwide is expected to reach 3.47 billion people by 2024.

Linear TV budgets are also shifting towards digital video and CTV, further driving demand for these premium ad formats. These overarching market trends underpin our strategic shift to focus on these segments of digital advertising, which given the proliferation of smart TVs and the increasing number of streaming providers, will remain an exciting growth segment.

Mobile Advertising

The number of consumers with smart phones and high speed internet quality are expected to continue rising, which will make mobile advertising a prominent channel within digital. According to eMarketer, U.S. mobile ad spend is projected to grow at a CAGR of 12.4% from 2021 to 2025, reaching $208 billion.

Our Role in the Digital Advertising Ecosystem

Advertisers and Agencies

Spending begins with advertisers, who often engage advertising agencies to help plan and execute their advertising campaigns. To better control and optimize their advertising operations, advertisers and agencies are consolidating spend with fewer, larger technology platform providers who can deliver transparency and ensure the highest level of inventory quality and control. These advertisers and agencies access our platform through Tremor Video and third-party DSPs. We believe our end-to-end technology platform and direct relationships with advertisers and agencies will lead to significant consolidation of spend onto our platform.

Demand Side Platforms (“DSP”)

Advertisers and agencies often engage DSPs, which serve as advertising demand aggregators, to execute their digital marketing campaigns across various ad formats. We offer both full-service and self-managed options through our DSP, enabling highly customized and robust campaigns. We are also integrated with the leading DSPs globally, such as The Trade Desk and Google DV360, enabling customers to execute real-time transactions with our publisher clients.

Supply Side Platforms (“SSP”)

SSPs such as ours are designed to monetize digital inventory for publishers and app developers by enabling their content to have the necessary software code and requirements for programmatic integration. Buyers and sellers come together through our marketplace to monetize, target, and purchase available digital advertising inventory. Our platform rapidly and efficiently processes significant volumes of advertising bid information, providing a seamless digital experience for our customers. Traditionally, SSPs have focused exclusively on the needs of sellers in this process and have limited their interactions with buyers to the buyer’s agent, the DSP. As buyers have sought greater control of their advertising supply chains, we have extended the capabilities of our specialized software platform over the last several years to serve the needs of advertisers and agencies.

Publishers and Content Providers

Digital publishers and app developers create websites, digital content and applications that contain content/mediums for consumption for users, along with adjacent viewable space for digital advertisements. As consumers navigate these websites and apps, individual ad impressions are presented to them across different formats/channels. These impressions are typically sold to advertisers and agencies programmatically, in real-time via a



 

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third-party technology infrastructure platform or SSP solution. Publishers and app developers rely on advertising revenue as the key driver for their businesses and depend on the capabilities of these third parties in order to achieve optimal yield for their advertising inventory. As of December 31, 2020, we served approximately 1,450 active publishers worldwide on our platform, consisting of 21,000 active sites and apps that we have direct access to publish an ad for our customers.

Our Strengths

We believe the following attributes and capabilities provide us with long-term competitive advantages:

Established Expertise in Video and CTV

We believe Video, including CTV and mobile video are the fastest growing segments of digital advertising, and they constitute 68% of our total revenue for the year ended December 31, 2020 (72% for the three months ended March 31, 2021) and 89% of our revenue without mobile-based performance activity for the year ended December 31, 2020 (91% for the three months ended March 31, 2021). We were one of the first movers in the digital video advertising and CTV markets, giving us early traction and recognition as a leader in the space. Our platform was intentionally built as an end-to-end video campaign delivery solution.

End-to-End Platform with Proprietary Technology

We leverage our advanced technology stack to enable advertisers and publishers to maximize their ROI, while optimizing the path between audiences and brands by leveraging our proprietary data sets. We believe we have a competitive advantage by overseeing the entire ecosystem through our proprietary data, unique demand and supply sources and access to premium vendors. As a technology first solution, we have the flexibility of an agnostic platform capable of integrating with different third-party sources to service our customers.

Scale and Reach on the Audience, Advertiser and Publisher

Our platform currently accommodates over 100 billion daily ad requests, approximately 500 terabytes of daily data, approximately 250 million daily ad impressions and more than 100 million daily unique sites or apps. This gives us scale with publishers and provides access to direct and exclusive supply of premium advertising inventory, which allows for our advertising customers to avoid intermediaries and reduce costs. Operating an end-to-end platform enables us to minimize the loss of scale typically seen when two independent platforms are user-syncing with each other. This helps us maintain high scalability on buying strategies leveraging audience targeting.

Robust Data Set Fully Integrated Into and Generated by Our Platform

Our proprietary DMP is a flexible platform that can be easily integrated across various campaigns and formats. Our DMP leverages first-party data and third-party partnerships to identify and reach curated audiences, benefiting both our advertising and publisher customers. Our platform provides artificial intelligence in the form of machine learning algorithms and statistical models to aggregate and analyze vast amounts of data and contextualizes it into easily usable action items, which can be used across campaigns in real-time.

Our machine learning algorithms enable us to process millions of requests per second which supports several of the optimization and prediction models in our platform including invalid traffic monitoring, viewability, queries per second, bidding and pricing models. These machine learning capabilities help our customers achieve their key performance indicators, optimize cost of media and protect against invalid traffic. Additionally, our DMP utilizes machine learning algorithms to build and expand segments in real time.



 

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Management Team of Industry Veterans with Extensive Expertise

Our senior management has an extensive background in the advertising technology industry, which we believe gives us a competitive advantage. We have vast experience in acquiring synergistic businesses and a strong track record of integrating successful acquisitions, further driving growth and profitability.

Profitable Business Model

We have been Adjusted EBITDA and total comprehensive income profitable since 2014 and continue to improve our cost structure. As of the year ended December 31, 2020, our net profit margin was 2% and our Adjusted EBITDA margin was 29%. Our structural cost advantages enable us to continuously invest in driving innovation, while delivering both top line revenue growth and profitability.

Our Growth Strategy

We believe that programmatic advertising is still an underpenetrated market that will experience robust growth over the next decade as ad budgets continue to shift to digital and digital continues to shift towards programmatic execution. We intend to capitalize on these secular trends by pursuing growth opportunities that include:

Focus on Core Areas of Growth in Video and CTV

CTV is the fastest growth format within digital advertising, and this trend is expected to continue over the next several years according to eMarketer. In the United States, CTV ad spend is expected to grow at a CAGR of 19.6% from 2021 to 2025, and Video is expected to grow at a CAGR of 15.5%, reaching $98.5 billion by 2025. Digital video (including CTV) comprises 79% of our revenue without mobile-based performance activity for the year ended December 31, 2020, and has been a core focus for us since inception. We plan to leverage our existing expertise in Video (including CTV) to increase our market share and introduce new technologies and solutions.

Introduce New Products and Invest in our Technology Stack

As we grow our market share and add new customers, we continue to invest in our technology stack and develop new innovative products. We are continuously trying to introduce new innovative solutions and products to the rapidly evolving digital advertising market. Some potential areas of growth and investment include enhancing our proprietary data sets, enhancing our CTV solution capabilities and marketplace, audience targeting, expanding our alternative identifier solutions and enhancing our global platform coverage capabilities.

We are providing customers with creative alternatives to plan and execute their campaigns giving them complimentary scale and opportunities to enhance current audience targeting strategies. For example, we offer, and will continue to enhance, contextual targeting solutions from content data collected via our publisher partnerships as well as third-party solutions integrated into our ecosystem.

There is market movement away from cookie-based tracking which has created an increase in demand for alternate solutions. We have partnerships, and are integrating, with major alternative identifier solutions such as IdentityLink and Unified ID 2.0. We are committed to helping define and support new privacy requirements and identifier mechanisms as the industry standards evolve. We believe that not everyone in the industry will adopt a single solution alternative to cookie-based tracking and we are building our platform to support various identifier solutions.



 

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Strengthen Our Relationship with Existing Customers

We are constantly improving functionality on our platform to attract new customers and encourage our existing customer base to allocate more of their ad spend and ad inventory to our platform. We believe as programmatic gains more widespread adoption and brands and publishers continue to focus on Video (including CTV), we are strongly positioned to increase our customer base and generate additional revenue from existing customers.

Expand Our International Footprint and United States Market Share

We continue to acquire new publishers and advertisers globally and invest in expanding our global footprint, providing significant global demand and supply of digital ad impressions across all channels and formats. We will continue to invest in third-party integrations, maintaining and enhancing our platform’s flexibility. We are leveraging our existing technology stack to provide innovative solutions to new and existing customers regardless of location or platform. We consistently innovate and develop new tools and products that enable our customers to maximize their benefit from using our platform and services.

Continue to Bolster our Data Capabilities

We leverage real-time data, artificial intelligence and machine learning capabilities to synthesize, aggregate and contextualize vast amounts of data sets to help our advertisers and publishers optimize their digital ad spend/inventory. Our DMP solution was architected to be flexible, which allows us to deliver impactful and unique insights that are agnostic to format or device type. By owning our own proprietary DMP solution, we are able to provide robust analytics, insights, and better segmentation on a global basis. We believe this gives us a large competitive advantage and enables higher ROI to our advertisers and optimal yield on digital inventory to our publishers.

Leverage our Industry Expertise and Target Select Acquisitions

We have been successful in past acquisitions and may direct our industry experience and focus to identify future complementary acquisitions to further broaden our scale and technology solutions. To the extent we identify attractive acquisition opportunities, we have the experience, leadership and track record to successfully execute strategic transactions and integrate acquired businesses into our platform.

Our Platform

Our end-to-end platform is a comprehensive software suite that supports a wide range of media types (e.g., Video, display, etc.) and devices (e.g., mobile, CTVs, streaming devices, desktop, etc.), creating an efficient marketplace where advertisers are able to purchase high quality advertising inventory from publishers at scale. Our solutions offer many advantages, including an advanced real-time bidding auction optimization engine, a quality and global marketplace, and flexibility to enact concurrent campaign strategies that drives strong returns for investments in digital ad real estate.

Our platform handles over 100 billion daily ad requests, approximately 500 terabytes of daily data and approximately 250 million daily ad impressions. Each transaction is processed in a fraction of a second (55ms on average) and powered by our real-time bidding engine, which leverages thousands of private servers and infrastructure in three strategically located data centers located in the United States, Europe and Asia Pacific.

Key Components of our platform include:

 

   

Demand Side Platform – We offer a self-service DSP solution for advertisers and their agencies to efficiently and intuitively manage omni-channel campaigns. We also offer a full-service option to



 

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agencies in addition to our self-service DSP solution. Our DSP solution provides access to wide reaching and high quality inventory, audience targeting and advanced reporting to optimize advertising campaigns, improve ROI and gain deep insights and analytics into brand engagement.

 

   

Data Management Platform – We offer a fully integrated DMP solution that sits at the center of our platform that unlocks the power of data flowing through our DSP and SSP solutions. Our DMP enables advertisers and publishers to use data from various sources in order to optimize results of their advertising campaigns. Our DMP provides insights and recommendations pertaining to geographic, behavioral and demographic data, among others in one unified solution. We believe an integrated DMP is a key component to the marketplace because it enables advertisers and publishers to use and activate data to target audiences with more accuracy across a number of different channels.

 

   

Supply Side Platform – We offer a self-service SSP solution for digital publishers to sell their online ad placements via a real-time bidding auction across all screens including mobile, CTVs, streaming devices and desktops. Our SSP provides access to significant amounts of data, unique demand and a comprehensive product suite to drive more effective inventory management and revenue optimization.

 

   

Analytics/Artificial Intelligence – We collect, synthesize and analyze the data sets across our platform through extensive artificial intelligence technologies and advanced machine learning capabilities. These recommendations ultimately provide key insights into valuable ad impressions and forecasts for auction behavior. We believe these technologies drive optimal results for our advertisers and publishers.



 

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RISK FACTORS

Investing in our ADSs involves substantial risks, and our ability to successfully operate our business and execute our growth plan is subject to numerous risks. You should carefully consider the risks described in “Risk Factors” before making a decision to invest in our ADSs. If any of these risks actually occurs, our business, financial condition or results of operations could be materially and adversely affected. In such case, the trading price of our ADSs would likely decline, and you may lose all or part of your investment. The following is a summary of some of the principal risks we face:

 

   

our success and revenue growth is dependent on adding new advertisers and publishers, effectively educating and training our existing advertisers and publishers on how to make full use of our platform and increasing usage of our platform by advertisers and publishers;

 

   

our business depends on our ability to maintain and expand access to advertising spend, including spend from a limited number of DSPs, agencies and advertisers;

 

   

our business depends on our ability to maintain and expand access to valuable inventory from publishers, including our largest publishers;

 

   

we may not attract and retain advertisers and publishers if we may fail to make the right investment decisions in our platform, or innovate and develop new solutions that are adopted by advertisers and publishers;

 

   

significant parts of our business depend on relationships with data providers for data sets used to deliver targeted campaigns;

 

   

our business depends on our ability to collect, use and disclose certain data, including CTV data, to deliver advertisements. Any limitation imposed on our collection, use or disclosure of this data could significantly diminish the value of our platform;

 

   

if the use of third-party “cookies,” mobile device IDs, CTV data collection or other tracking technologies is restricted without similar or better alternatives (and adoption of such alternatives), our platform’s effectiveness could be diminished;

 

   

our failure to meet content and inventory standards and provide services that our advertisers and publishers trust could harm our brand and reputation;

 

   

we must grow rapidly to remain a market leader and to accomplish our strategic objective;

 

   

the market for programmatic buying for advertising campaigns is relatively new and evolving;

 

   

if we fail to detect or prevent fraud on our platform, or malware intrusion into the systems or devices of our publishers and their consumers, publishers could lose confidence in our platform and we could face legal claims;

 

   

the rejection of digital advertising by consumers through opt-in, opt-out or ad-blocking technologies or other means could limit the effectiveness of our platform;

 

   

our ability to process inventory is dependent on our ability to scale our platform infrastructure to support anticipated growth and transaction volume;

 

   

disruptions to service from our third-party data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services;

 

   

we may face potential liability and harm to our business based on the human factor of inputting information into our platform; and

 

   

failure to protect our intellectual property rights could impact the success of our business.



 

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Corporate Information

We were incorporated as Marimedia Ltd. in 2007 in Israel under the Israeli Companies Law, 5759-1999 (the “Companies Law”). We changed our name to Taptica International Ltd. in September 2015 and then to Tremor International Ltd. in June 2019. Our principal executive offices are located at 82 Yigal Alon Street, Tel Aviv, 6789124, Israel. Our website address is www.tremorinternational.com, and our telephone number is +972-3-545-3900. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. We have included our website address in this prospectus solely for informational purposes.

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

We qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). An emerging growth company may take advantage of specified exemptions from various requirements that are otherwise applicable generally to U.S. public companies. These provisions include:

 

   

the ability to include only two years of audited financial statements and selected financial data and only two years of related disclosure in the registration statement on Form F-1 of which this prospectus is a part;

 

   

reduced executive compensation disclosure; and

 

   

an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) in the assessment of the emerging growth company’s internal control over financial reporting.

We may choose to take advantage of some but not all of these reduced reporting burdens.

We will remain an emerging growth company until the earliest of:

 

   

the last day of our fiscal year during which we have total annual revenue of at least $1.07 billion;

 

   

the last day of our fiscal year following the fifth anniversary of the closing of this offering;

 

   

the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or

 

   

the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our ordinary shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.

In addition, upon the closing of this offering, we will report under the Exchange Act as a “foreign private issuer.” As a foreign private issuer, we may take advantage of certain provisions under the Nasdaq rules that allow us to follow Israeli law for certain corporate governance matters. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

 

   

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

 

   

the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time;



 

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the rules under the Exchange Act requiring the filing with the U.S. Securities and Exchange Commission (the “SEC”) of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events; and

 

   

Regulation Fair Disclosure (“Regulation FD”), which regulates selective disclosures of material information by issuers.

Foreign private issuers, like emerging growth companies, also are exempt from certain more stringent executive compensation disclosure rules. Thus, if we remain a foreign private issuer, even if we no longer qualify as an emerging growth company, we will continue to be exempt from the more stringent compensation disclosures required of public companies that are neither an emerging growth company nor a foreign private issuer.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies:

 

   

the majority of our executive officers or directors are U.S. citizens or residents;

 

   

more than 50% of our assets are located in the United States; or

 

   

our business is administered principally in the United States.



 

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THE OFFERING

 

ADSs offered by us

6,768,953 ADSs, each representing two ordinary shares.

 

Option to purchase additional ADSs

We have granted the underwriters an option for a period of 30 days after the date of this prospectus to purchase up to 1,015,342 additional ADSs.

 

Ordinary shares to be outstanding after this offering

149,728,168 ordinary shares (or 151,758,852 ordinary shares if the underwriters exercise in full their option to purchase additional ADSs from us).

 

American Depositary Shares

Each ADS represents two ordinary shares, par value NIS 0.01 per ordinary share.

 

 

As an ADS holder, we will not treat you as one of our shareholders. The depositary, Citibank, N.A., will be the holder of the ordinary shares underlying your ADSs among us, the depositary and all holders and beneficial owners of ADSs thereunder. You will have rights as provided in the deposit agreement. You may surrender your ADSs and withdraw the underlying ordinary shares as provided, and pursuant to the limitations set forth, in the deposit agreement. The depositary will charge you fees for, among other items, any such surrender for the purpose of withdrawal. As described in the deposit agreement, we and the depositary may amend or terminate the deposit agreement without your consent. Any amendment that imposes or increases fees or charges or which materially prejudices any substantial existing right you have as an ADS holder will not become effective as to outstanding ADSs until 30 days after notice of the amendment is given to ADS holders. If you continue to hold your ADSs, you agree to be bound by the terms of the deposit agreement then in effect. To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is an exhibit to the registration statement of which this prospectus forms a part.

 
 

 

Depositary

Citibank, N.A.

 

Custodian

Citibank, N.A. (London)

 

Use of proceeds

We estimate that the net proceeds to us from this offering will be approximately $116.9 million (or $134.8 million if the underwriters exercise in full their option to purchase additional ADSs from us), based on the initial public offering price of $19.00 per ADS, after deducting underwriting discounts and commissions and estimated offering expenses.



 

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The principal purposes of this offering are to obtain additional working capital, to create a public market for our ADSs and to facilitate our future access to the public equity markets. We intend to use the net proceeds from this offering for working capital, general corporate purposes and to fund incremental growth, including for possible acquisitions. See “Use of Proceeds.”

 

Dividend policy

Our board of directors has sole discretion whether to pay dividends. Although we have paid dividends and conducted share buybacks in the past, we do not anticipate paying any dividends in the foreseeable future. See “Dividend Policy.”

 

Risk factors

Investing in our ADSs involves a high degree or risk. See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ADSs.

 

Listing

Our ADSs have been approved for listing on Nasdaq under the symbol “TRMR.” Our ordinary shares trade on AIM, a market of the London Stock Exchange, under the symbol “TRMR.”

The number of our ordinary shares to be outstanding immediately after this offering is based on 136,190,262 ordinary shares outstanding as of June 4, 2021 and excludes:

 

   

7,610,402 ordinary shares issuable upon (i) the exercise of options outstanding under our equity incentive plans as of June 11, 2021 at a weighted average exercise price of £1.61 per ordinary share and (ii) the vesting of restricted share units (“RSUs”) and performance share units (“PSUs”) outstanding under our equity incentive plans as of June 11, 2021; and

 

   

13,408,129 ordinary shares reserved for future issuance under our equity incentive plans as described in “Management—Equity Incentive Plans.”

Unless otherwise indicated, all information in this prospectus assumes or gives effect to:

 

   

no exercise by the underwriters of their option to purchase up to 1,015,342 additional ADSs;

 

   

no exercise of the outstanding options described above after June 11, 2021; and

 

   

no vesting of the outstanding RSUs and PSUs described above after June 11, 2021;



 

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables present our summary consolidated financial and other data. We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. The summary historical consolidated financial data for the years ended December 31, 2020 and 2019 has been derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The summary historical financial information as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 presented below has been derived from our unaudited condensed consolidated interim financial statements, prepared in accordance with IAS 34 and included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a consistent basis as our audited consolidated financial statements. In the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the financial information in those statements. Our historical results for any prior period are not necessarily indicative of results expected in any future period.

The financial data set forth below should be read in conjunction with, and is qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere in this prospectus.

Consolidated Statements of Operation and Other Comprehensive Income

 

     Year Ended
December 31,
     Three Months Ended
March 31,
 
     2019      2020      2020      2021  
(in thousands, other than per share
amounts)
          (unaudited)  

Revenues(1)

   $ 325,760      $ 211,920      $ 38,611      $ 71,009  

Cost of revenues (exclusive of depreciation and amortization shown separately below)(1)

     187,246        59,807        13,258        17,692  

Research and development expenses

     16,168        13,260        3,521        3,403  

Selling and marketing expenses

     52,351        68,765        18,169        18,050  

General and administrative expenses

     34,433        29,678        9,933        6,806  

Depreciation and amortization

     32,359        45,187        11,460        9,883  

Other expenses (income), net

     (700      1,248        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit (loss)

     3,903        (6,025      (17,730      15,175  

Financing income

     (773      (445      (1,104      (86

Financing expenses

     1,088        1,862        216        798  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financing expenses (income), net

     315        1,417        (888      712  
  

 

 

    

 

 

    

 

 

    

 

 

 

Profit (loss) before taxes on income

     3,588        (7,442      (16,842      14,463  

Tax benefit

     2,636        9,581        2,583        (1,589
  

 

 

    

 

 

    

 

 

    

 

 

 

Profit (loss) for the period

     6,224        2,139        (14,259      12,874  

Foreign currency translation differences for foreign operation

     139        2,836        (2,633      (836
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss) for the period

   $ 6,363      $ 4,975      $ (16,892    $ 12,038  
  

 

 

    

 

 

    

 

 

    

 

 

 


 

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     Year Ended
December 31,
     Three Months Ended
March 31,
 
     2019      2020      2020      2021  
(in thousands, other than per share amounts)                     

Earnings (Loss) per share

           

Basic earnings (loss) per share

     0.056        0.016        (0.107      0.096  

Diluted earnings (loss) per share

     0.054        0.015        (0.107      0.091  

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

 

Pro-forma Earning (loss) per share

 

     Year Ended
December 31,
 
(in thousands, other than per share amounts)    2020  

Profit for the year

   $ 2,139  

Special bonus upon completion of this offering to CEO, CFO and COO (1)

   $ (1,349
  

 

 

 

Profit for the year after special bonus

   $ 790  

Weighted average number of ordinary shares used to calculate basic earning per share as of December 31, 2020

     133,991,210  

Pro-forma basic earnings per share

     0.006  

Weighted average number of ordinary shares used to calculate basic earning per share as of December 31, 2020

     133,991,210  

Effect of share options on issue

     4,714,985  
  

 

 

 

Weighted average number of ordinary shares used to calculate diluted earning per share as of December 31, 2020

     138,706,195  

Pro-forma diluted earnings per share

     0.006  

 

(1)

For further information regarding the special bonus to be paid upon the completion of this offering, please see “Management—Aggregate Compensation of Office Holders—Executive Officers.



 

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Consolidated Statement of Financial Position Data

 

     As of
March 31, 2021
 
     Actual      Adjusted(1)  
(in thousands)    (unaudited)  

Cash and cash equivalents

   $ 103,486      $ 220,384  

Total assets

     534,543        651,441  

Total liabilities

     194,479        194,479  

Total equity

     340,064        456,962  

 

(1)    As

Adjusted to give effect to the sale by us of 6,768,953 ADSs at a public offering price of $19.00 per ADS, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

Other Financial Data

 

     Year Ended
December 31,
     Three Months Ended
March 31,
 
     2019(1)      2020      2020      2021  

IFRS measures

           

Revenue (in thousands)

   $ 325,760      $ 211,920      $ 38,611      $ 71,009  

Gross profit (in thousands)(4)

   $ 121,769      $ 132,517      $ 20,346      $ 49,130  

Total comprehensive income (loss) (in thousands)

   $ 6,363      $ 4,975      $ (16,892    $ 12,038  

Net profit margin(2)

     2%        2%        (44)%        17%  

Non-IFRS measures

           

As adjusted (non-IFRS) revenue (in thousands)(3)

   $ 208,459        —          —          —    

Contribution ex-TAC (in thousands)(4)

   $ 164,038      $ 184,282      $ 32,112      $ 62,988  

Adjusted EBITDA(5) (in thousands)

   $ 60,411      $ 60,513      $ 547      $ 27,519  

Adjusted EBITDA margin(6)

     19%        29%        1%        39%  

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

(2)

If revenue for 2019 had been presented on using as adjusted (non-IFRS) revenue to facilitate comparability, net profit margin for the year ended December 31, 2019 would be 3%.

(3)

For the year ended December 31, 2019, our audited revenue consists of (i) Programmatic revenue that is recognized on a gross basis (which includes the Programmatic media cost (as defined below)) and (ii) Performance revenue that is recognized on a gross basis (which includes the Performance media cost (as defined below)). For the year ended December 31, 2020, our audited revenue consists of (i) Programmatic revenue that is recognized on a net basis (which excludes the Programmatic media cost) and (ii) Performance revenue that is recognized on a gross basis. For information regarding the revenue recognition presentation change of our Programmatic revenue, see “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition”. We present as adjusted (non-IFRS) revenue to facilitate comparability solely for the year ended December 31, 2019, which excludes programmatic media cost.



 

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(4)

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 defined as our gross profit plus depreciation and amortization attributable to cost of revenues and cost of revenues (exclusive of depreciation and amortization) minus both the Programmatic media cost and the Performance media cost (collectively, “traffic acquisition costs” or “TAC”), since we arrange for the transfer of such costs from the supplier to the customer through the use of our platform and do not control such features prior to transfer to the customer. Contribution ex-TAC is included in this prospectus because it is a key metric used by management and our board of directors to assess our financial performance. Contribution ex-TAC or similar measures are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Management believes that Contribution ex-TAC is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate directly to the performance of the underlying business.

The following table reconciles Contribution ex-TAC to the most directly comparable IFRS financial performance measure, which is gross profit:

 

     Year Ended
December 31,
     Three Months Ended
March 31,
 
(in thousands)    2019      2020      2020      2021  

Revenues

   $ 325,760      $ 211,920      $ 38,611      $ 71,009  

Cost of revenues (exclusive of depreciation and amortization)

     (187,246      (59,807      (13,258      (17,692

Depreciation and amortization attributable to Cost of Revenues

     (16,745      (19,596      (5,007      (4,187

Gross profit (IFRS)

     121,769        132,517        20,346        49,130  

Depreciation and amortization attributable to Cost of Revenues

     16,745        19,596        5,007        4,187  

Cost of revenues (exclusive of depreciation and amortization)

     187,246        59,807        13,258        17,692  

Programmatic media costs(a)

     (117,301      —          —          —    

Performance media cost(b)

     (44,421      (27,638      (6,499      (8,021
  

 

 

    

 

 

    

 

 

    

 

 

 

Contribution ex-TAC (Non-IFRS)

   $ 164,038      $ 184,282      $ 32,112      $ 62,988  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a)

Represents the costs of acquiring publishers’ advertising space that is purchased by advertisers via our Programmatic end-to-end solution (“Programmatic media cost”).

  (b)

Represents the costs of purchases of impressions from publishers on a cost per thousand impression basis in our Performance activities (“Performance media cost”).

 

(5)

Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, IFRS. Adjusted EBITDA should not be considered as an alternative to total comprehensive income for the period as a measure of financial performance.

Adjusted EBITDA is defined as total comprehensive income for the period adjusted for foreign currency translation differences for foreign operations, financing expenses, net, tax benefit, depreciation and amortization, stock-based compensation, restructuring and acquisition-related costs and other expenses (income), net. Adjusted EBITDA is included in this prospectus 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.



 

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Adjusted EBITDA is not an IFRS measure of our financial performance or liquidity and should not be considered as an alternative to total comprehensive income for the period as a measure of financial performance, as an alternative to cash flows from operations as a measure of liquidity, or as an alternative to any other performance measure derived in accordance with IFRS. Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or other items. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect our tax payments and certain other cash costs that may recur in the future, including, among other things, cash requirements for costs to replace assets being depreciated and amortized. Management compensates for these limitations by relying on our IFRS results in addition to using Adjusted EBITDA as a supplemental measure. Our measure of Adjusted EBITDA is not necessarily comparable to similarly titled captions of other companies due to different methods of calculation.

The following table reconciles Adjusted EBITDA to the most directly comparable IFRS financial performance measure, which is total comprehensive income (loss) for the period:

 

     Year Ended
December 31,
     Three Months Ended
March 31,
 
     2019      2020      2020      2021  
(in thousands)                            

Total comprehensive income (loss) for the period

   $ 6,363      $ 4,975      $ (16,892    $ 12,038  

Foreign currency translation differences for foreign operation

     (139      (2,836      2,633        836  

Taxes on income

     (2,636      (9,581      (2,583      1,589  

Financial expense (income), net

     315        1,417        (888      712  

Depreciation and amortization

     32,359        45,187        11,460        9,883  

Stock-based compensation

     15,809        14,490        5,228        2,341  

Other expenses

     —        1,700        —          —    

Restructuring

     5,500        4,637        1,081        120  

Acquisition-related cost

     2,840        524        508        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 60,411      $ 60,513      $ 547      $ 27,519  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(6)

Adjusted EBITDA Margin means Adjusted EBITDA calculated as a percentage of revenue. If Adjusted EBITDA margin for 2019 had been presented using as adjusted (non-IFRS) revenue to facilitate comparability, Adjusted EBITDA margin for the year ended December 31, 2019 would be 29%.



 

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RISK FACTORS

You should carefully consider the risks described below before making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price and value of our ADSs could decline due to any of these risks, and you may lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this prospectus.

Risks Relating to Our Business

Our success and revenue growth is dependent on adding new advertisers and publishers, effectively educating and training our existing advertisers and publishers on how to make full use of our platform and increasing usage of our platform by advertisers and publishers.

Our success is dependent on regularly adding new advertisers and publishers and increasing their usage of our platform. Our contracts and relationships with advertisers and publishers generally do not include long-term or exclusive obligations requiring them to use our platform or maintain or increase their use of our platform. Advertisers and publishers typically have relationships with numerous providers and can use both our platform and those of our competitors without incurring significant costs or disruption. They may also choose to decrease their overall advertising spend for any reason, including if they do not believe they are receiving a sufficient return. Accordingly, we must continually work to add new advertisers and publishers to our customer base, retain our existing advertisers and publishers, increase their usage of our platform and capture a larger share of their advertising spend.

We may not be successful at educating and training advertisers and publishers, especially new ones, on how to use our platform in order for them to most benefit from our platform and increase their usage. If these efforts are unsuccessful or advertisers or publishers decide not to maintain or increase their usage of our platform for any other reason, or if we fail to attract new advertisers or publishers, our revenue could fail to grow or may decline, which would materially and adversely harm our business, operating results and financial condition.

Our business depends on our ability to maintain and expand access to advertising spend, including spend from a limited number of DSPs, agencies and advertisers.

Our business depends on our ability to maintain and expand our access to advertising spend from advertisers through DSPs, as well as agencies and direct advertisers (that execute their purchases through DSPs), to purchase impressions from our publishers. A limited number of large advertising customers account for a significant portion of our revenue, and in particular one DSP customer, which accounted for approximately 10% of our revenue for the year ended December 31, 2020. Our agreements with most DSPs automatically renew each year for successive one-year terms. However either party may generally terminate for convenience upon providing 30 day prior written notice. We expect to depend upon these few DSPs for a large percentage of impressions purchased for the foreseeable future. Any disruptions in our relationships with DSPs, agencies or advertisers could harm our business, results of operations and financial condition. To support our continued growth, we will seek to expand upon current levels of utilization with these DSPs, agencies and advertisers.

In general, we have no minimum commitments from advertisers, agencies or DSPs to spend on our platform, so the amount of demand available to us can change at any time, and we cannot assure you that we will have access to a consistent volume or quality of advertising spend or demand. If an advertiser or DSP representing a significant portion of the demand in our platform decides to materially reduce use of our services, it could cause an immediate and significant decline in our revenue and profitability and adversely affect our business, results of operations and financial condition.

 

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Our business depends on our ability to maintain and expand access to valuable inventory from publishers, including our largest publishers.

Our business depends on our access to valuable advertising inventory. We depend upon publishers, including channel partners, which aggregate large numbers of smaller publishers, to provide advertising inventory which we can offer to prospective advertisers. A relatively small number of publishers have historically accounted for a significant portion of the advertising inventory sold on our platform, as well as a significant portion of our revenue, including a relatively small number of channel partners. To support our continued growth, we will seek to add additional publishers to our platform and to expand current utilization with our existing publishers.

In general, our relationships with publishers do not contain minimum commitments, so the amount, quality and cost of inventory available on our platform can change at any time, and we cannot assure you that we will have access to a consistent volume or quality of inventory at a reasonable cost, or at all. Any disruptions in our relationships with publishers or our largest channel partners could adversely affect our business, results of operations and financial condition. If we cannot retain or add individual publishers with valuable inventory, or if such publishers decide not to make their valuable inventory available on our platform, then our advertisers may be less inclined to use our platform, which could adversely affect our business, results of operations and financial condition.

If we fail to make the right investment decisions in our platform, or if we fail to innovate and develop new solutions that are adopted by advertisers and publishers, we may not attract and retain advertisers and publishers, which could have an adverse effect on our business, results of operations and financial condition.

We face intense competition in the marketplace and are confronted by rapidly changing technology, evolving industry standards, consumer preferences, regulatory changes and the frequent introduction of new solutions by our competitors to which we must adapt and address. We need to continuously update our platform and the technology in which we invest and develop, including our machine learning and other proprietary algorithms, in order to attract publishers and advertisers and stay ahead of changes in technology, evolving industry standards and regulatory requirements. Our platform is complex and new solutions can require a significant investment of time and resources to develop, test, introduce and enhance. These activities can take longer than we expect and we may not make the right decisions regarding our pursuit of these investments. New formats and channels, such as mobile header bidding and CTV, present unique challenges and our success in new formats and channels depends upon our ability to integrate them with our platform. If our mobile and video solutions or our CTV solutions are not widely adopted by advertisers and publishers, we may not retain advertisers and publishers. In addition, new demands from advertisers or publishers, superior offerings by competitors, changes in technology, or new industry standards or regulatory requirements could render our platform or our existing solutions less effective and require us to make unanticipated changes to our platform or business model. Furthermore, our focus on our end-to-end platform may decrease our responsiveness and agility to respond to changes or innovations specific to either our DSP or SSP solutions. Our failure to adapt to a rapidly changing market, anticipate changing demand, or attract and retain advertisers or publishers would cause our revenue or revenue growth rate to decline and adversely affect our business, results of operations and financial condition.

Significant parts of our business depend on relationships with data providers for data sets used to deliver targeted campaigns.

Our ability to deliver targeted advertising campaigns depends on our ability to acquire effective data sets, which we do through a combination of proprietary data sets as well as data sets that we purchase from third parties. If any third-party data providers decide not to make data sets available to us, decide to increase their price or place significant restrictions on the use of their data, we may not be able to replace this with our own proprietary data sets or those of other third-party providers that satisfy our requirements in a timely and cost-

 

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effective manner. In addition, some data set providers in the industry may enter into exclusivity arrangements with our competitors, which could limit our access to a meaningful supply of data and give them a competitive advantage. Any limitations on access to these third-party data sets could impair our ability to deliver effective solutions, which could adversely affect our business, results of operations and financial condition.

Our business depends on our ability to collect, use and disclose certain data, including CTV data, to deliver advertisements. Any limitation imposed on our collection, use or disclosure of this data could significantly diminish the value of our platform and cause us to lose publishers, advertisers and revenue. Consumer tools, regulatory restrictions and technological limitations all threaten our ability to use and disclose data.

As we process transactions through our platform, we collect large amounts of data about advertisements and where they are placed, such as consumer, advertiser and publisher preferences for media and advertising content. We also collect data on ad specifications such as ad placement, size and format, ad pricing and auction activity such as price floors, bid response behavior and clearing prices. Further, we collect certain data from consumers that, while not identifying the individual, does include browser, device location and characteristics, online browsing behavior, exposure to and interaction with advertisements, and inferential data about purchase intentions and preferences. We collect this data through various means, including from our own systems, pixels that publishers allow us to place on their websites to track consumer visits, software development kits installed in mobile applications, cookies and other tracking technologies. Our publishers, advertisers and data providers may also choose to provide us with their proprietary data about consumers.

We aggregate this data and analyze it in order to enhance our services, including the pricing, placement and delivery of advertisements. As part of our real-time analytics service offering we also share the data, or analyses based on such data, with our publishers and advertisers. Our ability to collect, use and share data about advertising transactions and consumer behavior is critical to the value of our services. There are many technical challenges relating to our ability to collect, aggregate, use and store the data, and we cannot assure you that we will be able to do so effectively. Evolving regulatory standards could place restrictions on the collection, aggregation, use and storage of information, which could result in a material increase in the cost of collecting or otherwise obtaining certain kinds of data and could limit the ways in which we may use or disclose information. Consumers can, with increasing ease, implement practices or technologies that may limit our ability to collect and use data to deliver advertisements, or otherwise inhibit the effectiveness of our platform, including opt out capabilities offered by various mobile, CTV manufacturer and web browsers, as well as data deletion request mechanisms offered by us to consumers, following IDEA and GDPR protocols. Although our publishers and advertisers generally permit us to aggregate and use data from advertising placements, subject to certain restrictions, existing or future publishers or advertisers might decide to restrict our collection or use of their data. Any limitations could impair our ability to deliver effective solutions, which could adversely affect our business, results of operations and financial condition.

If the use of third-party “cookies,” mobile device IDs, CTV data collection or other tracking technologies is restricted without similar or better alternatives (and adoption of such alternatives), our platform’s effectiveness could be diminished and our business, results of operations and financial condition could be adversely affected.

We use “cookies,” or small text files placed on consumer devices when an Internet browser is used, as well as mobile device identifiers and CTV data collection devices, to gather data that enables our platform to be more effective. Our cookies, mobile device IDs and CTV data collection devices do not identify consumers directly but rather record information, such as when a consumer views or clicks on an advertisement, when a consumer uses a mobile app, the consumer’s location and browser or other device information. Publishers and partners may also choose to share their information about consumers’ interests or give us permission to use their cookies and mobile device IDs. We use data from cookies, mobile device IDs, CTV data collection devices and other tracking technologies to help advertisers decide whether to bid on, and how to price, an ad impression in a certain location, at a given time, for a particular consumer. Without cookies, mobile device IDs, CTV data collection

 

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devices and other tracking technology data, transactions processed through our platform would be executed with less insight into consumer activity, reducing the precision of advertisers’ decisions about which impressions to purchase for an advertising campaign and limiting our reporting capabilities. This could make placement of advertising through our platform less valuable and harm our revenue. If our ability to use cookies, mobile device IDs, CTV data collection devices or other tracking technologies is limited, we may be required to develop or obtain additional applications and technologies to compensate for the lack of cookies, mobile device IDs, CTV data collection devices and other tracking technology data, which could be time consuming or costly to develop, less effective and subject to additional regulation.

Our failure to meet content and inventory standards and provide services that our advertisers and publishers trust could harm our brand and reputation and negatively impact our business, operating results and financial condition.

We do not provide or control the content of advertisements or that of the digital media providing inventory. Advertisers provide the advertising content and publishers provide the inventory content. Both advertisers and publishers are concerned about being associated with content they consider inappropriate, competitive or inconsistent with their brands, or illegal, and they are hesitant to spend money or make inventory available without guaranteed brand and content security. Consequently, our reputation depends, in part, on providing services that our advertisers and publishers trust and we have contractual obligations to meet certain content and inventory standards. We use commercially reasonable efforts to contractually prohibit the misuse of our platform by agencies (and their marketer customers) and publishers; however we are not always successful in achieving a fulsome level of protection. Despite such efforts, advertisers may inadvertently purchase inventory that proves to be unacceptable for their campaigns, in which case we may not be able to collect revenue or recoup the amounts paid to publishers. Furthermore, the standards by which an advertiser or a publisher may consider an advertising placement or inventory content offensive or inappropriate are constantly changing and our contractual agreements are not always able to anticipate fully the preferences of our advertisers and publishers. Our advertisers could intentionally run campaigns that do not meet the standards of our publishers or attempt to use illegal or unethical targeting practices or seek to display advertising in jurisdictions that do not permit such advertising or in which the regulatory environment is uncertain, in which case our supply of ad inventory from such suppliers could be jeopardized.

We must grow rapidly to remain a market leader and to accomplish our strategic objectives. If we fail to grow, or fail to manage our growth effectively, the value of our company may decline.

The advertising technology market is dynamic, and our success depends upon the continued adoption of programmatic advertising and our ability to develop innovative new technologies and solutions for the evolving needs of advertisers and digital media property owners. We need to grow significantly to develop the market reach and scale necessary to compete effectively with large competitors. This growth depends to a significant degree upon the quality of our strategic vision and planning. The advertising market is evolving rapidly, and if we make strategic errors, there is a significant risk that we will lose our competitive position and be unable to recover and achieve our objectives. Our ability to grow requires access to, and prudent deployment of, capital for hiring, expansion of physical infrastructure to run our platform, acquisition of companies or technologies, and development and integration of supporting sales, marketing, finance, administrative and managerial infrastructure. Further, the growth we are pursuing may strain our resources. If we are not able to innovate and grow successfully, the value of our business may be adversely affected.

The market for programmatic buying for advertising campaigns is relatively new and evolving. If this market develops slower or differently than we expect, our business, operating results and financial condition could be adversely affected.

We derive revenue from the programmatic advertising on our end-to-end platform. We expect that programmatic advertising will continue to be our primary source of revenue for the foreseeable future and that

 

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our revenue growth will largely depend on increasing our customers’ usage of our platform. While the market for programmatic advertising for desktop and mobile is relatively established, the market in other channels is still emerging, and our current and potential customers may not shift quickly enough to programmatic advertising from other buying methods, which would reduce our growth potential. If the market for programmatic advertising deteriorates or develops more slowly than we expect, it could reduce demand for our platform and our business, growth prospects and financial condition could be adversely affected.

If we fail to detect or prevent fraud on our platform, or malware intrusion into the systems or devices of our publishers and their consumers, publishers could lose confidence in our platform and we could face legal claims that could adversely affect our business, results of operations and financial condition.

We may be subject to fraudulent or malicious activities undertaken by persons seeking to use our platform for improper purposes. For example, someone may attempt to divert or artificially inflate advertiser purchases through our platform, or to disrupt or divert the operation of the systems and devices of our publishers, and their consumers in order to misappropriate information, generate fraudulent billings or stage cyberattacks, or for other illicit purposes. We use our proprietary technology and third-party services to, and we participate in industry co-ops that work to, detect malware and other content issues as well as click fraud (whether by humans or software known as “bots”) and to block fraudulent inventory. Preventing and combating fraud is an industry-wide issue that requires constant vigilance, as well as a balancing of cost effectiveness and risk, and we cannot guarantee that we will be successful in our efforts to combat fraud. We may provide access to inventory that is objectionable to our advertisers or we may serve advertising that contains malware or objectionable content to our publishers, which could harm our and our advertisers’ and publishers’ reputation, causing them to scale-back or terminate their relationship with us, or otherwise negatively impact our business, operating results and financial condition.

If the use of digital advertising is rejected by consumers, through opt-in, opt-out or ad-blocking technologies or other means, it could have an adverse effect on our business, results of operations and financial condition.

Consumers can, with increasing ease, implement technologies that limit our ability to collect and use data to deliver advertisements, or otherwise limit the effectiveness of our platform. Cookies may be deleted or blocked by consumers. The most commonly used Internet browsers allow consumers to modify their browser settings to block first-party cookies (placed directly by the publisher or website owner that the consumer intends to interact with) or third-party cookies (placed by parties, like us, that have no direct relationship with the consumer), and some browsers block third-party cookies by default. For example, Apple recently moved to “opt-in” privacy models, requiring consumers to voluntarily choose to receive targeted ads, which may reduce the value of inventory on its iOS mobile application platform. Many applications and other devices allow consumers to avoid receiving advertisements by paying for subscriptions or other downloads. Mobile devices using Android and iOS operating systems limit the ability of cookies to track consumers while they are using applications other than their web browser on the device. As a consequence, fewer of our cookies or publishers’ cookies may be set in browsers or be accessible in mobile devices, which could adversely affect our business.

Some consumers also download free or paid “ad blocking” software on their computers or mobile devices, not only for privacy reasons but also to counteract the adverse effect advertisements can have on the consumer experience, including increased load times, data consumption and screen overcrowding. If more consumers adopt these measures, our business, results of operations and financial condition could be adversely affected. Ad-blocking technologies could have an adverse effect on our business, results of operations and financial condition if they reduce the volume or effectiveness and value of advertising. In addition, some ad blocking technologies only block ads that are targeted through use of third-party data, while allowing ads based on first-party data (i.e., data owned by the publisher). These ad blockers could place us at a disadvantage because we rely heavily on third-party data, while some large competitors have troves of first-party data they use to direct advertising. Other technologies allow ads that are deemed “acceptable,” which could be defined in ways that place us or our publishers at a disadvantage, particularly if such technologies are controlled or influenced by our

 

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competitors. Even if ad blockers do not ultimately have an adverse effect on our business, investor concerns about ad blockers could cause our stock price to decline.

We must scale our platform infrastructure to support anticipated growth and transaction volume. If we fail to do so, we may limit our ability to process inventory and we may lose revenue.

Our business depends on processing inventory in milliseconds, and we must handle an increasingly large volume of such transactions. The addition of new solutions, such as header bidding in mobile and CTV formats, support of evolving advertising formats, handling and use of increasing amounts of data, and overall growth in impressions place growing demands upon our platform infrastructure. If we are unable to grow our platform to support substantial increases in the number of transactions and in the amount of data we process, on a high-performance, cost-effective basis, our business, results of operations and financial condition could be adversely affected.

Disruptions to service from our third-party data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services and harm our business.

A significant portion of our business relies upon hardware and services that are hosted, managed and controlled by third-party co-location providers for our data centers, and we are dependent on these third-parties to provide continuous power, cooling, Internet connectivity and physical and technological security for our servers. In the event that these third-party providers experience any interruption in operations or cease business for any reason, or if we are unable to agree on satisfactory terms for continued hosting relationships, we would be forced to enter into a relationship with other service providers or assume some hosting responsibilities ourselves. Even a disruption as brief as a few minutes could have a negative impact on marketplace activities and could result in a loss of revenue. These facilities may be located in areas prone to natural disasters and may experience catastrophic events such as earthquakes, fires, floods, power loss, telecommunications failures, public health crises and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism, cyber-attacks and similar misconduct. Although we have made certain disaster recovery and business continuity arrangements, such events could cause damage to, or failure of, our systems generally, or those of the third-party cloud computing and hosting providers, which could result in disruptions to our service.

We face potential liability and harm to our business based on the human factor of inputting information into our platform.

We or our customers set up campaigns on our platform using a number of available variables. While our platform includes several checks and balances, it is possible for human error to result in significant over-spending. We offer a number of protections such as daily or overall spending caps, but despite these protections, the ability for overspend exists. For example, campaigns which last for a period of time can be set to pace evenly or as quickly as possible. If a customer with a high credit limit enters an incorrect daily cap with a campaign set to a rapid pace, it is possible for a campaign to accidently go significantly over budget. While our customer contracts state that customers are responsible for media purchased through our platform, we are ultimately responsible for paying the inventory providers and we may be unable to collect when such issues occur.

Any failure to protect our intellectual property rights could negatively impact our business.

We regard the protection of our intellectual property, which includes trade secrets, copyrights, trademarks and domain names, as critical to our success. We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We generally enter into confidentiality and invention assignment agreements with our employees and contractors and confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. However, we may not be successful in executing these agreements with every party who has access to our confidential information or contributes to the development of our intellectual property. Those agreements

 

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that we do execute may be breached, and we may not have adequate remedies for any such breach. These contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our intellectual property, or deter independent development of similar intellectual property by others. Breaches of the security of our solutions, databases or other resources could expose us to a risk of loss or unauthorized disclosure of information collected, stored or transmitted for or on behalf of advertisers or publishers, or of cookies, data stored in cookies, other user information or other proprietary or confidential information.

We register certain domain names, trademarks and service marks in the United States and in certain locations outside the United States. We also rely upon common law protection for certain marks, such as “Tremor Video.” Any of our patents, trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Our competitors and others could attempt to capitalize on our brand recognition by using domain names or business names similar to ours. Domain names and trademarks similar to ours have been registered in the United States and elsewhere. We may be unable to prevent third parties from acquiring or using domain names and other trademarks that infringe on, are similar to, or otherwise decrease the value of our brands, trademarks or service marks. Effective trade secret, copyright, trademark, domain name and patent protection are expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. We may be required to protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or which we may not pursue in every location. We may, over time, increase our investment in protecting our intellectual property through additional filings that could be expensive and time-consuming.

Risks Relating to the Market in Which We Operate

If the non-proprietary technology, software, products and services that we use are unavailable, have future terms we cannot agree to or do not perform as we expect, our business, operating results and financial condition could be harmed.

We depend on data sets and various technology, software, products and services from third parties or available as open source, including for critical features and functionality of our platform to deliver targeted advertising campaigns. Our ability to obtain necessary data licenses on commercially reasonable terms is critical to the success of our platform and we could suffer material adverse consequences if we are unable to obtain data through our integrations with data suppliers or if the cost of obtaining such data materially increases. Identifying, negotiating, complying with and integrating with third-party terms and technology are complex, costly and time-consuming matters. Further, in the course of negotiations with third-party providers, we may be required to provide material upfront minimum purchase commitments in order to secure favorable contractual terms. Failure by third-party providers to acquire relevant data sets, or to maintain, support or secure their technology either generally or for our accounts specifically, or downtime, errors or defects in their products or services, could materially and adversely impact our platform, our administrative obligations or other areas of our business. Furthermore, changes in the costs of third-party services may result in us having to replace any third-party providers or their data sets, technology, products or services and could result in outages or difficulties in our ability to provide our services.

Our revenue and results of operations are highly dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns and the COVID-19 pandemic, can make it difficult to predict our revenue and could adversely affect our business, results of operations and financial condition.

Our business depends on the overall demand for advertising and on the economic health of our current and prospective advertisers. Recently, the economic health of advertisers has been impacted by the COVID-19 pandemic and the resulting economic uncertainty in the United States and global economy beginning in the second quarter of 2020, and as a result advertising demand on our platform decreased in the first half of 2020,

 

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with recovery in the second half of 2020, although some verticals have still not recovered. Many marketing budgets, particularly those in travel, retail and hospitality, decreased or paused their advertising spending as a response to the economic uncertainty, decline in business activity and other COVID-19 related impacts which have, and may continue to have, a negative impact on our revenue and results of operations. Various macroeconomic factors could cause advertisers to reduce their advertising budgets, and may include the following:

 

   

adverse economic conditions and general uncertainty about economic recovery or growth, particularly in North America where we do most of our business;

 

   

changes in the pricing policies of publishers and competitors;

 

   

instability in political or market conditions generally;

 

   

any changes in tax treatment of advertising expenses and the deductibility thereof;

 

   

the seasonal nature of advertising spend on digital advertising campaigns; and

 

   

changes and uncertainty in the regulatory and business environment (for example, when Apple or Google change policies for their browsers and operating systems).

Reductions in overall advertising spending as a result of these factors could make it difficult to predict our revenue and could adversely affect our business, results of operations, and financial condition.

The extent to which the ongoing COVID-19 pandemic, including the resulting global economic uncertainty, and measures taken in response to the pandemic, could adversely affect our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

Our business and operations have been and could in the future be adversely affected by health epidemics, such as the global COVID-19 pandemic. The COVID-19 pandemic and efforts to control its spread have curtailed the movement of people, goods and services worldwide, including in the regions in which we and our customers operate, and are significantly impacting economic activity and financial markets. Many marketers, particularly those in the travel, retail and hospitality industries, have decreased or paused their advertising spending as a response to the economic uncertainty, decline in business activity, and other COVID-19-related impacts, which has negatively impacted, and may continue to negatively impact, our revenue and results of operations, the extent and duration of which we may not be able to accurately predict. The spread of an infectious disease may also result in, and, in the case of the COVID-19 pandemic has resulted in, regional quarantines, labor shortages or stoppages, changes in consumer purchasing patterns, disruptions to service providers’ ability to deliver data on a timely basis, or at all, and overall economic instability.

A recession, depression or other sustained adverse market events resulting from the spread of COVID-19 could materially and adversely affect our business and that of our customers or potential customers. Our customers’ and potential customers’ businesses or cash flows have been and may continue to be negatively impacted by the COVID-19 pandemic, which has led and may continue to lead them to reduce their advertising spending and delay their advertising initiatives or technology spending, or attempt to renegotiate contracts and obtain concessions, which may materially and negatively impact our business, operating results and financial condition. Advertisers may also seek adjustments to their payment terms, delay making payments or default on their payables, any of which may impact the timely receipt and/or collectability of our receivables. Typically, we are contractually required to pay advertising inventory and data suppliers within a negotiated period of time, regardless of whether our customers pay us on time, or at all, and we may not be able to renegotiate better terms. As a result, our financial condition and results of operations may be adversely impacted if the business or financial condition of advertisers and marketers is negatively affected by the pandemic.

Our operations are subject to a range of external factors related to the COVID-19 pandemic that are not within our control. We have taken precautionary measures intended to minimize the risk of the spread of the

 

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virus to our employees and the communities in which we operate. A wide range of governmental restrictions has also been imposed on our employees’ physical movement to limit the spread of COVID-19. There can be no assurance that precautionary measures, whether adopted by us or imposed by others, will be effective, and such measures could negatively affect our sales, marketing, and customer service efforts, delay and lengthen our sales cycles, decrease our employees’ productivity, or create operational or other challenges, any of which could harm our business, operating results and financial condition.

The economic uncertainty caused by the COVID-19 pandemic has made and may continue to make it difficult for us to forecast revenue and operating results and to make decisions regarding operational cost structures and investments. Our business depends on the overall demand for advertising and on the economic health of advertisers and publishers that benefit from our platform. Economic downturns or unstable market conditions may cause advertisers to decrease their advertising budgets, which could reduce usage of our platform and adversely affect our business, operating results and financial condition. We have committed, and we plan to continue to commit, resources to grow our business, including to expand our employee base and develop our platform, and such investments may not yield anticipated returns, particularly if global business activity continues to be impacted by the COVID-19 pandemic. The duration and extent of the impact from the COVID-19 pandemic depend on future developments that cannot be accurately predicted at this time, and if we are not able to respond to and manage the impact of such events effectively, our business may be harmed. Such future developments may include, among others, the duration and spread of the outbreak, new information that may emerge concerning the severity of COVID-19 and government actions to contain COVID-19 or treat its impact, the level of relief efforts designed to help businesses and consumers, including any declines in such levels, the impact on advertisers and our sales cycles, the impact on advertiser, industry or employee events and the effect on publishers.

Our results may also fluctuate unpredictably as and to the extent there is a recovery from the pandemic and a return to non-pandemic business conditions. We cannot predict the impact of a post-pandemic recovery on the economy, advertisers or consumer media consumption patterns or the degree to which certain trends, such as the growth in demand for CTV, will continue.

Any decrease in the use of the advertising or publishing channels that we primarily depend on, or failure to expand into emerging channels, could adversely affect our business, results of operations and financial condition.

The future growth of our business could be constrained by the level of acceptance and expansion of emerging channels, as well as the continued use and growth of existing channels in which our capabilities are more established. Our revenue growth may depend on our ability to expand within mobile and, in particular, CTV, and we have been, and are continuing to, enhance such channels. We may not be able to accurately predict changes in overall advertiser demand for the channels in which we operate and cannot assure you that our investment in formats will correspond to any such trends. For example, we cannot predict whether the growth in demand for our CTV offering will continue. Any decrease in the use of existing channels, whether due to advertisers or publishers losing confidence in the value or effectiveness of such channels, regulatory restrictions or other causes, or any inability to further penetrate CTV or enter new and emerging advertising channels, could adversely affect our business, results of operations, and financial condition.

If CTV develops in ways that prevent advertisements from being delivered to consumers, our business, results of operations and financial condition may be adversely affected.

As online video advertising has continued to scale and evolve, the amount of online video advertising being bought and sold programmatically has increased dramatically; this market continues to grow with the increased popularity of CTV media. However, despite the opportunities created by programmatic advertising, programmatic solutions for CTV publishers are still nascent compared to desktop search and mobile video solutions. Many CTV publishers have backgrounds in cable or broadcast television and have limited experience

 

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with digital advertising, and in particular programmatic advertising. For these publishers, it is extremely important to protect the quality of the viewer experience to maintain brand goodwill and ensure that online advertising efforts do not create sales channel conflicts or otherwise detract from their direct sales force. In this regard, programmatic advertising presents a number of potential challenges, including the ability to ensure that ads are brand safe, comply with business rules around competitive separation, are not overly repetitive, are played at the appropriate volume and do not cause delays in load-time of content. We believe that our platform is well-positioned to allow publishers the opportunity to achieve these goals and also reliably achieve “ad potting,” or the placement of the desired number of advertisements in commercial breaks. In fact, we have invested significant time and resources cultivating relationships with CTV publishers to establish best practices and teach them about the benefits of programmatic CTV. While we believe that programmatic advertising will continue to grow as a percentage of overall CTV advertising, there can be no assurance as to the rate at which CTV publishers will adopt programmatic solutions such as ours, if at all, which could adversely affect our business, results of operations and financial condition.

The market in which we participate is intensely competitive, and we may not be able to compete successfully with our current or future competitors.

We operate in a highly competitive and rapidly changing industry. We expect competition to persist and intensify in the future, which could harm our ability to increase revenue and our market share and maintain profitability. New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants develop and offer new products and services, such as analytics, automated media buying and exchanges, aimed at capturing advertising spend or disrupting the digital marketing landscape. Further, our competitors may begin offering similar products or services to those we currently offer, including our end-to-end platform, and our ability to compete effectively could be significantly compromised.

We may also face competition from new companies entering the market, including large established companies and companies that we do not yet know about or do not yet exist. If existing or new companies develop, market or resell competitive high-value products or services that result in additional competition for advertising spend or advertising inventory or if they acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our results of operations could be harmed.

Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we have, which may allow them to devote greater resources to the development, promotion, sale and support of their products and services. They may also have more extensive advertiser bases and broader publisher relationships than we have and may be better positioned to execute on advertising conducted over certain channels, such as social media, mobile and video. Some of our competitors may have a longer operating history and greater name recognition. As a result, these competitors may be better able to respond quickly to new technologies, develop deeper advertiser relationships or offer services at lower prices. Any of these developments would make it more difficult for us to sell our platform and could result in increased pricing pressure, increased sales and marketing expense, or the loss of market share.

Seasonal fluctuations in advertising activity could have a material impact on our revenue, cash flow and operating results.

Our revenue, cash flow, operating results and other key operating and performance metrics may vary from quarter to quarter due to the seasonal nature of our customers’ spending on advertising campaigns. For example, in prior years, customers tended to devote more of their advertising budgets to the fourth calendar quarter to coincide with consumer holiday spending. In contrast, the first quarter of the calendar year has typically been the slowest in terms of advertising spend. These patterns may or may not hold true during the COVID-19 pandemic. Political advertising could also cause our revenue to increase during election cycles and decrease during other periods, making it difficult to predict our revenue, cash flow and operating results, all of which could fall below our expectations.

 

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If we do not effectively grow and train our sales and support teams, we may be unable to add new customers or increase usage of our platform by our existing customers and our business will be adversely affected.

We are substantially dependent on our sales and support teams to obtain new customers and to increase usage of our platform by our existing customers. We believe that there is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve revenue growth will depend, in large part, on our success in recruiting, training, integrating and retaining sufficient numbers of sales personnel to support our growth. Due to the complexity of our platform, a significant time lag exists between the hiring date of sales and support personnel and the time when they become fully productive. Our recent and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. If we are unable to hire and train sufficient numbers of effective sales personnel, or the sales personnel are not successful in obtaining new customers or increasing our existing customers’ spend with us, our business may be adversely affected.

The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

Following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdom formally withdrew from the European Union on January 31, 2020 and ratified a trade and cooperation agreement governing its future relationship with the European Union. The agreement, which is being applied provisionally from January 1, 2021 until it is ratified by the European Parliament and the Council of the European Union, addresses trade, economic arrangements, law enforcement, judicial cooperation and a governance framework including procedures for dispute resolution, among other things. Because the agreement merely sets forth a framework in many respects and will require complex additional bilateral negotiations between the United Kingdom and the European Union as both parties continue to work on the rules for implementation, significant political and economic uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms before withdrawal.

These developments, or the perception that any related developments could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity, restrict the ability of key market participants to operate in certain financial markets or restrict our access to capital. Any of these factors could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our ADSs.

Risks Relating to Our Employees and Location in Israel

Our long-term success depends on our ability to operate internationally making us susceptible to risks associated with cross-border sales and operations.

We serve advertisements in more than 100 countries and maintain offices in North America, Europe, Asia and Australia. Our expansive global footprint subjects us to a variety of risks and burdens, including:

 

   

the need to localize our solutions, including product customizations and adaptation for local practices and regulatory requirements;

 

   

lack of familiarity and burdens of ongoing compliance with local laws, legal standards, regulatory requirements, tariffs, customs formalities and other barriers, including restrictions on advertising practices, regulations governing online services, restrictions on importation or shipping of specified or proscribed items, importation quotas, shopper protection laws, enforcement of intellectual property rights, laws dealing with shopper and data protection, privacy, encryption, denied parties and sanctions, and restrictions on pricing or discounts;

 

   

heightened exposure to fraud;

 

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legal uncertainty in foreign countries with less developed legal systems;

 

   

unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or customs formalities, embargoes, exchange controls, government controls or other trade restrictions;

 

   

differing technology standards;

 

   

difficulties in managing and staffing international operations and differing employer/employee relationships;

 

   

fluctuations in exchange rates that may increase our foreign exchange exposure;

 

   

potentially adverse tax consequences, including the complexities of foreign tax laws (including with respect to value added taxes) and restrictions on the repatriation of earnings;

 

   

increased likelihood of potential or actual violations of domestic and international anti-money laundering laws and anticorruption laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) and the U.K. Bribery Act 2010 (the “U.K. Bribery Act”), which correlates with the scope of our sales and operations in foreign jurisdictions and operations in certain industries, such that an increase in such operations would increase risk of non-compliance with the aforementioned laws;

 

   

uncertain political and economic climates in foreign markets;

 

   

managing and staffing operations over a broader geographic area with varying cultural norms and customs;

 

   

varying levels of Internet and mobile technology adoption and infrastructure;

 

   

reduced or varied protection for intellectual property rights in some countries; and

 

   

new and different sources of competition.

These factors may require significant management attention and financial resources. Any negative impact from our international business efforts could adversely affect our business, results of operations and financial condition.

We depend on our executive officers and other key employees, and the loss of one or more of these employees could harm our business.

Our success depends largely upon the continued services of our executive officers and other key employees. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time subject only to the notice periods prescribed by their respective executive agreements. The loss of one or more of our executive officers or key employees could harm our business.

Inability to attract and retain other highly skilled employees could harm our business.

To execute our growth plan, we must attract and retain highly qualified personnel. Competition where we maintain offices is intense, especially for engineers experienced in designing and developing software and experienced sales professionals. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have and may attempt to recruit our highly skilled employees. In addition, certain domestic immigration laws restrict or limit our ability to recruit internationally. Any changes to Israeli, United Kingdom, European or the U.S. immigration policies that restrain the flow of technical and professional talent may inhibit our ability to recruit and retain highly qualified employees.

 

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In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may harm our ability to recruit and retain highly skilled employees.

Volatility or lack of appreciation in the price of our ADSs may also affect our ability to attract and retain our key employees. Many of our senior personnel and other key employees have become, or will soon become, vested in a substantial amount of options. Employees may be more likely to leave us if the shares they own or the shares underlying their vested options or restricted share units have significantly appreciated in value relative to the original purchase price of the shares or the exercise price of the options, or conversely, if the exercise price of the options that they hold are significantly above the market price of our ADSs.

Conditions in Israel could materially and adversely affect our business.

Many of our employees, including certain management members, operate from our offices that are located in Tel Aviv, Israel. In addition, a number of our officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations. In recent years, Israel has been engaged in sporadic armed conflicts with certain terrorist organizations and with Iranian-backed military forces in Syria. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations.

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region could negatively affect our business conditions and harm our results of operations.

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.

In addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial condition and results of operations.

Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.

We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our amended and restated articles of association to be effective upon the closing of this offering and the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an

 

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Israeli company has to act in good faith and in a customary manner in exercising his, her or its rights and fulfilling his, her or its obligations toward the Company and other shareholders and to refrain from abusing his, her or its power in the Company, including, among other things, in voting at the general meeting of shareholders, on amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and certain transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or prevent the appointment of a director or officer in the Company, or has other powers toward the Company has a duty of fairness toward the Company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior.

Provisions of Israeli law and our amended and restated articles of association to be effective upon the closing of this offering may delay, prevent or make undesirable an acquisition of all or a significant portion of our ADSs or assets.

Provisions of Israeli law and our amended and restated articles of association to be effective upon the closing of this offering could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares. Among other things:

 

   

Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased;

 

   

Israeli corporate law requires special approvals for certain transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions;

 

   

Israeli corporate law does not provide for shareholder action by written consent for public companies, thereby requiring all shareholder actions to be taken at a general meeting of shareholders;

 

   

our amended and restated articles of association to be effective upon the closing of this offering generally require a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the provision dividing our directors into three classes, requires a vote of the holders of     % of our outstanding ordinary shares entitled to vote at a general meeting;

 

   

our amended and restated articles of association to be effective upon the closing of this offering do not permit a director to be removed except by a vote of the holders of at least     % of our outstanding shares entitled to vote at a general meeting of shareholders; and

 

   

our amended and restated articles of association to be effective upon the closing of this offering provide that director vacancies may be filled by our board of directors.

Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.

 

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Our amended and restated articles of association to be effective upon the closing of this offering provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any claims arising under the Securities Act of 1933, as amended (the “Securities Act”), which may limit the ability of our shareholders to initiate litigation against us or increase the cost thereof.

Our amended and restated articles of association to be effective upon the closing of this offering provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions, and accordingly, both state and federal courts have jurisdiction to entertain such claims. While the federal forum provision in our amended and restated articles of association does not restrict the ability of our shareholders to bring claims under the Securities Act, we recognize that it may limit shareholders’ ability to bring a claim in the judicial forum that they find favorable and may increase certain litigation costs, which may discourage the filing of claims under the Securities Act against the Company, its directors and officers. However, the enforceability of similar forum provisions (including exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under the Securities Act) in other companies’ organizational documents has been challenged in legal proceedings, and there is uncertainty as to whether courts would enforce the exclusive forum provisions in our amended and restated articles of association. If a court were to find the choice of forum provision contained in our amended and restated articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder may have the effect of discouraging lawsuits against our directors and officers.

It may be difficult to enforce a U.S. judgment against us, our officers and directors in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors.

Not all of our directors or officers are residents of the United States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.

Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought. For more information, see “Enforceability of Civil Liabilities.”

 

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Risks Relating to Our Financial Position

Our operating history makes it difficult to evaluate our business and prospects and may increase the risk associated with your investment.

Our business has evolved over time, including through transformative acquisitions such as our acquisitions of RhythmOne plc (“RhythmOne”) in 2019 and Unruly Holdings Limited and Unruly Media, Inc. (collectively, “Unruly”) in 2020, such that our operating history makes it difficult to evaluate our current business and future prospects. As a result of such acquisitions, our financial results across different periods may not be directly comparable. We expect to face challenges, risks and difficulties frequently experienced by growing companies in rapidly developing industries, including those relating to:

 

   

recruiting, integrating and retaining qualified and motivated employees, particularly engineers;

 

   

developing, maintaining and expanding relationships with publishers, agencies and advertisers;

 

   

innovating and developing new solutions that are adopted by and meet the needs of publishers, agencies and advertisers;

 

   

competing against companies with a larger customer base or greater financial or technical resources;

 

   

global economic disruption and technological changes driven by the COVID-19 pandemic;

 

   

further expanding our global footprint;

 

   

managing expenses as we invest in our infrastructure and platform technology to scale our business and operate as a U.S. listed public company; and

 

   

responding to evolving industry standards and government regulations that impact our business, particularly in the areas of data protection and consumer privacy.

If we are not successful in addressing these and other issues, our business may suffer, our revenue may decline and we may not be able to achieve further growth or sustain profitability.

We often have long sales cycles, which can result in significant time and investment between initial contact with a prospect and execution of an agreement with an advertiser or publisher, making it difficult to project when, if at all, we will obtain new advertisers or publisher and when we will generate revenue from them.

Our sales cycle, from initial contact to contract execution and implementation, can take significant time. As part of our sales cycle, we may incur significant expenses before we generate any revenue from a prospective advertiser or publisher. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in the marketplace, generally or with a specific prospective advertiser or publisher, change negatively, it is possible that we will be unable to recover any of these expenses. Our sales efforts involve educating advertisers and publishers about the use, technical capabilities and benefits of our platform. Some advertisers and publishers undertake an evaluation process that frequently involves not only our platform but also the offerings of our competitors. As a result, it is difficult to predict when we will obtain new advertisers or publishers and begin generating revenue from them. Even if our sales efforts result in obtaining a new advertiser or publisher, such advertiser or publisher controls when and to what extent it uses our platform and therefore the amount of revenue we generate, and it may not sufficiently justify the expenses incurred to acquire the advertiser or publisher and the related training support. As a result, we may not be able to add advertisers or publishers to our customer base, or generate revenue, as quickly as we may expect, which could harm our growth prospects.

We are subject to payment-related risks and, if our advertisers do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected.

Many of our contracts with advertising agencies provide that if the advertiser does not pay the agency, the agency is not liable to us, and we must seek payment solely from the advertiser, a type of arrangement called

 

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sequential liability. Contracting with these agencies, which in some cases have or may develop higher-risk credit profiles, may subject us to greater credit risk than if we were to contract directly with advertisers. This credit risk may vary depending on the nature of an advertising agency’s aggregated advertiser base. We may also be involved in disputes with agencies and their marketers over the operation of our platform, the terms of our agreements or our billings for purchases made by them through our platform. When we are unable to collect or make adjustments to our bills to advertisers, we incur write-offs for bad debt, which could have a material adverse effect on our results of operations for the periods in which the write-offs occur. In the future, bad debt may exceed reserves for such contingencies and our bad debt exposure may increase over time. Any increase in write-offs for bad debt could have a materially negative effect on our business, operating results and financial condition.

Furthermore, we are generally contractually required to pay suppliers of advertising inventory and data within a negotiated period of time, regardless of whether our advertisers or publishers pay us on time, or at all. While we attempt to negotiate long payment periods with our suppliers and shorter periods with our advertisers and publishers, we are not always successful. As a result, our accounts payable are often due on shorter cycles than our accounts receivables, requiring us to remit payments from our own funds, and accept the risk of bad debt.

This payment process will increasingly consume working capital if we continue to be successful in growing our business. In addition, like many companies in our industry, we often experience slow payment by advertising agencies. In this regard, we had average days sales outstanding (“DSO”) of 113 days and average days payable outstanding (“DPO”) of 77 days for the year ended December 31, 2020. We compute our average DSO as of a given month end based on a weighted average of outstanding accounts receivable. Specifically, the DSO is calculated by multiplying the percentage of accounts receivable outstanding for each monthly billing period by the number of days outstanding related to each billing period and then summing the weighted days outstanding. We compute our DPO as of a given month end by dividing our trade payables (including accrued liabilities) by the average daily cost of media, data, other direct costs and certain operating expenses over the prior four months. Historically, our DSOs have fluctuated. If our DSOs increase significantly, and we are unable to borrow against these receivables on commercially acceptable terms, our working capital availability could be reduced, and as a consequence our results of operations and financial condition would be adversely impacted. We cannot assure you that as we continue to grow, our business will generate sufficient cash flow from operations to fund our working capital needs. If our cash flows are insufficient to fund our working capital requirements, we may not be able to grow at the rate we currently expect or at all.

Future acquisitions or strategic investments could be difficult to identify and integrate, divert the attention of management, and could disrupt our business, dilute shareholder value and adversely affect our business, results of operations and financial condition.

As part of our growth strategy we have pursued in the past transformative acquisitions, such as our recent acquisitions of RhythmOne in 2019 and Unruly in 2020, and we may acquire or invest in other businesses, assets or technologies that are complementary to our business and align with our strategic goals. Any acquisition or investment may divert the attention of management and require us to use significant amounts of cash, issue dilutive equity securities or incur debt. In addition, the anticipated benefits of any acquisition or investment may not be realized, and we may be exposed to unknown risks, any of which could adversely affect our business, results of operations and financial condition, including risks arising from:

 

   

difficulties in integrating the operations, technologies, product or service offerings, administrative systems and personnel of acquired businesses, especially if those businesses operate outside of our core competency or geographies in which we currently operate;

 

   

ineffectiveness or incompatibility of acquired technologies or solutions;

 

   

potential loss of key employees of the acquired business;

 

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inability to maintain key business relationships and reputation of the acquired business;

 

   

diversion of management attention from other business concerns;

 

   

litigation arising from the acquisition or the activities of the acquired business, including claims from terminated employees, customers, former shareholders or other third parties;

 

   

assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights, or increase our risk of liability;

 

   

complications in the integration of acquired businesses or diminished prospects, including as a result of the COVID-19 pandemic and its global economic effects;

 

   

failure to generate the expected financial results related to an acquisition on a timely manner or at all;

 

   

failure to accurately forecast the impact of an acquisition transaction; and

 

   

implementation or remediation of effective controls, procedures and policies for acquired businesses.

To fund future acquisitions, we may pay cash or issue additional ADSs, which could dilute our shareholders’ value or diminish our cash reserves. Borrowing to fund an acquisition would result in increased fixed obligations and could also subject us to covenants or other restrictions that could limit our ability to effectively run our business.

Risks Relating to Legal or Regulatory Constraints

We are subject to regulation with respect to political advertising, which lacks clarity and uniformity.

We are subject to regulation with respect to political advertising activities, which are governed by various federal and state laws in the United States and national and provincial laws worldwide. Online political advertising laws are rapidly evolving and our publishers may impose restrictions on receiving political advertising. The lack of uniformity and increasing compliance requirements around political advertising may adversely impact the amount of political advertising spent through our platform, increase our operating and compliance costs and subject us to potential liability from regulatory agencies.

We are subject to laws and regulations related to data privacy, data protection and information security and consumer protection across different markets where we conduct our business, including in the United States, the European Economic Area (“EEA”) and the United Kingdom and industry requirements and such laws, regulations and industry requirements are constantly evolving and changing.

We receive, store and process data about or related to consumers in addition to advertisers, publishers, employees and services providers. Our handling of this data is subject to a variety of federal, state and foreign laws and regulations and is subject to regulation by various government authorities and other regulatory bodies. Our data handling is also subject to contractual obligations and may be deemed to be subject to industry standards.

The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use and storage of data relating to individuals, including the use of contact information and other data for marketing, advertising and other communications with individuals and businesses. In the United States, various laws and regulations apply to the collection, processing, disclosure and security of certain types of data. Additionally, the U.S. Federal Trade Commission (“FTC”) and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination and security of data. If we fail to comply with any such laws or regulations, we may be subject to enforcement actions that may not only expose us to litigation, fines and civil and/or criminal penalties but may also require us to change our business practices as well as have an adverse effect on our business, results of operations and financial condition.

 

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The regulatory framework for and enforcement of data privacy issues worldwide is currently evolving and is likely to remain uncertain for the foreseeable future. The occurrence of unanticipated events often rapidly drives the adoption of legislation or regulation affecting the use, collection or other processing of data and manners in which we conduct our business. Restrictions could be placed upon the collection, management, aggregation and use of information, which could result in a material increase in the cost of collecting or otherwise obtaining certain kinds of data and could limit the ways in which we may use or disclose information. In particular, interest-based advertising, or the use of data to draw inferences about a user’s interests and deliver relevant advertising to that user, and similar or related practices (sometimes referred to as behavioral advertising or personalized advertising), such as cross-device data collection and aggregation, steps taken to de-identify personal data, and to use and distribute the resulting data, including for purposes of personalization and the targeting of advertisements, have come under increasing scrutiny by legislative, regulatory and self-regulatory bodies in the United States and abroad that focus on consumer protection or data privacy. Much of this scrutiny has focused on the use of cookies and other technology to collect information about consumers’ online browsing activity on web browsers, mobile devices and other devices, to associate such data with user or device identifiers or de-identified identities across devices and channels.

In addition, providers of Internet browsers, app stores or platforms such as Apple or Google have engaged in, or announced plans to continue or expand, efforts to provide increased visibility into, and certain controls over, cookies and similar technologies and the data collected using such technologies, as further described above in the section “—Risks Relating to our Business— If the use of digital advertising is rejected by consumers, through opt-in, opt-out or ad-blocking technologies or other means, it could have an adverse effect on our business, results of operations and financial condition.” For example, in January 2020, Google announced that the Chrome browser will block third-party cookies at some point during the subsequent 24 months. Such providers could also change their technical requirements, guidelines or policies in other ways that adversely impact the way in which we or our customers collect, use and share data from user devices, including restricting our ability to use or read device identifiers, other tracking features or other device data. Because we, our advertisers and our publishers, rely upon large volumes of such data collected primarily through cookies and similar technologies, it is possible that these efforts may have a substantial impact on our ability to collect and use data from consumers, and it is essential that we monitor developments in this area domestically and globally, and engage in responsible privacy practices, including providing consumers with notice of the types of data we collect, how we use that data to provide our services and the ability to opt out of such use. There also is the risk that a provider could limit or discontinue our access to its platform or app store if it establishes more favorable relationships with one or more of our competitors or it determines that it is in their business interests to do so, and we would have no recourse against any such provider, which could have a material adverse effect on our business.

In the United States, the U.S. Congress and state legislatures, along with federal regulatory authorities have recently increased their attention on matters concerning the collection and use of consumer data, including by digital advertisers. For example, the FTC regulates digital advertising through the Federal Trade Commission Act, which prohibits “unfair” or “deceptive” trade practices, including misrepresentations regarding the collection and use of consumer data. States have also begun to introduce more comprehensive privacy legislation. California enacted the California Consumer Privacy Act of 2018 (the “CCPA”) that took effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of sale of their personal information, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches, which is expected to increase the volume and success of class action data breach litigation. In addition to increasing our compliance costs and potential liability, the CCPA created restrictions on “sales” of personal information that may restrict the disclosure of personal information for advertising purposes. Our advertising business relies, in part, on such disclosure, and decreased availability and increased costs of information could adversely affect our ability to meet advertisers’ and publishers’ requirements and could have an adverse effect on our business, results of operations and financial condition.

 

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We will also be subject to the forthcoming California Privacy Rights Act (“CPRA”), which was passed into law on November 3, 2020, but will not take substantial effect until January 1, 2023. The CPRA will significantly modify the CCPA, including increasing regulation on online advertising and particularly cross-context behavioral advertising, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. The effects of the CCPA and CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.

The CCPA has encouraged “copycat” laws and in other states across the country, such as in Virginia and Washington. This legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment in resources to compliance programs and could impact strategies and availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.

In the EEA, we are subject to the General Data Protection Regulation 2016/679 (“GDPR”) and in the United Kingdom, we are subject to the United Kingdom data protection regime consisting primarily of the UK General Data Protection Regulation and the UK Data Protection Act 2018, in each case in relation to our collection, control, processing, sharing, disclosure and other use of data relating to an identifiable living individual (personal data). The GDPR, and national implementing legislation in EEA member states and the United Kingdom, impose a strict data protection compliance regime including: providing detailed disclosures about how personal data is collected and processed (in a concise, intelligible and easily accessible form); demonstrating that an appropriate legal basis is in place or otherwise exists to justify data processing activities; granting new rights for data subjects in regard to their personal data (including the right to be “forgotten” and the right to data portability), as well as enhancing current rights (e.g., data subject access requests); introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; defining for the first time pseudonymized (i.e., key-coded) data; imposing limitations on retention of personal data; maintaining a record of data processing; and complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit. Fines for certain breaches of the GDPR and the UK data protection regime are significant (e.g., fines for certain breaches of the GDPR are up to the greater of 20 million Euros or 4% of total global annual turnover). In addition to the foregoing, a breach of the GDPR or UK GDPR could result in regulatory investigations, reputational damage, orders to cease/ change our processing of our data, enforcement notices and/ or assessment notices (for a compulsory audit). We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources and reputational harm.

Further, in the European Union and the United Kingdom, we are subject to evolving EU and UK privacy laws on cookies and e-marketing. Regulators in these countries are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly likely to be replaced by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance. While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies and tracking technologies. As regulators start to enforce the strict approach (which has already begun to occur in Germany, where data protection authorities have initiated a probe on third-party cookies), this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel and subject us to additional liabilities.

We are also subject to laws and regulations that dictate whether, how and under what circumstances we can transfer, process and/or receive certain data that is critical to our operations, including data shared between countries or regions in which we operate and data shared among our products and services. Specifically, the GDPR, UK GDPR and other European and UK data protection laws generally prohibit the transfer of personal data from the EEA, UK and Switzerland, to the United States and most other countries unless the transfer is to an

 

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entity established in a country deemed to be provide adequate protection (such as Israel) or the parties to the transfer have implemented specific safeguards to protect the transferred personal data. Where we transfer personal data outside the EEA to a country that is not deemed to be “adequate,” we ensure we comply with applicable laws including where we can rely on derogations (e.g., where the transfer is necessary for the performance of a contract) or we may put in place standard contractual clauses.

In addition, some jurisdictions may impose data localization laws, which require personal information, or certain subcategories of personal information to be stored in the jurisdiction of origin. These regulations may inhibit our ability to expand into those markets or prohibit us from continuing to offer our products in those markets without significant additional costs.

We also depend on a number of third-parties in relation to the operation of our business, a number of which process personal data on our behalf. With each such provider we attempt to mitigate the associated risks of using third parties by conducting due diligence, entering into contractual arrangements to require that providers only process personal data in accordance with the applicable laws, and that they have appropriate technical and organizational security measures in place. Where we transfer personal data outside the EEA or the United Kingdom to such third parties, we do so in compliance with the relevant data export requirements, as described above. There is no assurance that these contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any violation of data or security laws by our third-party processors could have a material adverse effect on our business and result in the fines and penalties outlined above. In addition to government regulation, privacy advocacy and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us, our advertisers or our publishers. We are members of self-regulatory bodies such as Data Advertising Alliance, European Digital Advertising Alliance, Digital Advertising Alliance of Canada, National Advertising Initiative and Interactive Advertising Bureau (“IAB”), among others, that impose additional requirements related to the collection, use and disclosure of consumer data. Under the requirements of these self-regulatory bodies, in addition to other compliance obligations, we are obligated to provide consumers with notice about our use of cookies and other technologies to collect consumer data and of our collection and use of consumer data for certain purposes, and to provide consumers with certain choices relating to the use of consumer data. Some of these self-regulatory bodies have the ability to discipline members or participants, which could result in fines, penalties and/or public censure (which could in turn cause reputational harm). Additionally, some of these self-regulatory bodies might refer violations of their requirements to the FTC or other regulatory bodies. If we were to be found responsible for such a violation, it could adversely affect our reputation, as well as our business, results of operations and financial condition.

Any failure to achieve the required data protection standards (which are sometimes unclear when applied to the online advertising ecosystem) may result in lawsuits, regulatory fines or other actions or liability, all of which may harm our results of operations. Because the interpretation and application of privacy and data protection laws such as the CCPA and GDPR, and the related regulations and standards, are uncertain, it is possible that these laws, regulations and standards may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our data management practices or the technological features of our solutions.

We face potential liability and harm to our business based on the nature of our business and the content on our platform and we are, and may be in the future, involved in commercial disputes with counterparties with whom we do business.

Advertising often results in litigation relating to misleading or deceptive claims, copyright or trademark infringement, public performance royalties or other claims based on the nature and content of advertising that is distributed through our platform. Though we contractually require advertisers to generally represent to us that their advertisements comply with our ad standards and our inventory providers’ ad standards and that they have the rights necessary to serve advertisements through our platform, we do not independently verify whether we are permitted to deliver, or review the content of, such advertisements. If any of these representations are untrue, we may be exposed to potential liability and our reputation may be damaged. While our advertisers are typically

 

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obligated to indemnify us, such indemnification may not fully cover us, or we may not be able to collect. In addition to settlement costs, we may be responsible for our own litigation costs, which can be expensive.

Further, operating in the advertising industry involves numerous commercial relationships, uncertain intellectual property rights and other aspects that create heightened risks of disputes, claims, lawsuits and investigations. In particular, we may face claims related to intellectual property matters, commercial disputes and sales and marketing practices. On May 18, 2021, we filed a complaint against Alphonso, Inc. (“Alphonso”) in the Supreme Court of the State of New York, County of New York (the “Court”), asserting claims for breach of contract, tortious interference with business relations, intentional interference with contractual relations, unjust enrichment, and conversion. The 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 related misconduct. We are seeking damages and other relief, including an order foreclosing on Alphonso’s collateral under the Security Agreement, from the Court. See “Business—Legal Proceedings” for futher information. Any commercial dispute, claim, counterclaim, lawsuit or investigation, including our commercial dispute with Alphonso, may divert our management’s attention away from our business, we may incur significant expenses in addressing or defending any commercial dispute, claim, counterclaim or lawsuit or responding to any investigation, and we may be required to pay damage awards or settlements.

We are subject to anti-bribery, anti-corruption and similar laws and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.

We may be subject to certain economic and trade sanctions laws and regulations, export control and import laws and regulations, including those that are administered by the U.S. Department of Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council and other relevant governmental authorities.

We are also subject to the FCPA, the U.K. Bribery Act, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 5737-1977, the Israeli Prohibition on Money Laundering Law, 5760-2000 and other anti-bribery laws in countries in which we conduct our activities. These laws generally prohibit companies, their employees and third-party intermediaries from authorizing, promising, offering, providing, soliciting or accepting, directly or indirectly, improper payments or benefits to or from any person whether in the public or private sector. In addition, the FCPA’s accounting provisions require us to maintain accurate books and records and a system of internal accounting controls. We have policies, procedures, systems and controls designed to promote compliance with applicable anti-corruption laws.

As we increase our global sales and business, we may engage with business partners and third-party intermediaries to market our solutions and obtain necessary permits, licenses and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not authorize such activities.

Our advertisers or publishers may have consumers in countries that are subject to U.S. economic sanctions laws and regulations administered by the Office of Foreign Assets Control (“OFAC”), the Israeli Trade with the Enemy Ordinance, 1939 and sanction laws of the EU and other applicable jurisdictions, which prohibit the sale of products to embargoed jurisdictions or sanctioned parties (“Sanctioned Countries”). We have taken steps to avoid serving advertisements to consumers located in Sanctioned Countries and are implementing various control mechanisms designed to prevent unauthorized dealings with Sanctioned Countries going forward. Although we have taken precautions to prevent our solutions from being provided, deployed or used in violation of sanctions laws, due to the remote nature of our solutions and the potential for manipulation using VPNs, we cannot assure you that our policies and procedures relating to sanctions compliance will prevent any violations in the future. If we are found to be in violation of any applicable sanctions regulations, it can result in significant fines or penalties and possible incarceration for responsible employees and managers, as well as reputational harm and loss of business.

 

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Despite our compliance efforts and activities, there can be no assurance that our employees or representatives will comply with the relevant laws and we may be held responsible. Noncompliance with anti-corruption, anti-money laundering, export control, economic and trade sanctions and other trade laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are initiated, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, financial condition and results of operations could be materially harmed. Responding to any action could result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In addition, regulatory authorities may seek to hold us liable for successor liability for violations committed by companies in which we invest or that we acquire. As a general matter, enforcement actions and sanctions could harm our business, financial condition and results of operations.

Risks Relating to Our ADSs and the Offering

The price of our ADSs may be volatile, and you may lose all or part of your investment.

The initial public offering price for the ADSs sold in this offering will be determined by negotiation between us and representatives of the underwriters. This price may not reflect the market price of our ADSs following this offering and the price of our ADSs may decline. In addition, the market price of our ADSs could be highly volatile and may fluctuate substantially as a result of many factors, including:

 

   

actual or anticipated fluctuations in our results of operations;

 

   

variance in our financial performance from the expectations of market analysts;

 

   

announcements by us or our direct or indirect competition of significant business developments, changes in service provider relationships, acquisitions or expansion plans;

 

   

the impact of the COVID-19 pandemic on our management, employees, partners, merchants and operating results;

 

   

changes or proposed changes in laws or regulations or differing interpretations or enforcement of laws or regulations affecting our business;

 

   

changes in our pricing model;

 

   

our involvement in litigation or regulatory actions;

 

   

our sale of ADSs or other securities in the future;

 

   

the implementation of a buyback program for our ADSs or ordinary shares;

 

   

market conditions in our industry;

 

   

changes in key personnel;

 

   

the duel listing and the trading of our ordinary shares on the AIM;

 

   

the trading volume of our ADSs;

 

   

publication of research reports or news stories about us, our competition or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;

 

   

changes in the estimation of the future size and growth rate of our markets; and

 

   

general economic and market conditions.

 

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In addition, the stock markets have experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our ADSs, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation we could incur substantial costs and our management’s attention and resources could be diverted.

There has been no prior public market for our ADSs prior to this offering, and an active trading market may not develop in which investors can resell our ADSs.

Prior to this offering, there has been no public market for our ADSs, although our ordinary shares have traded on AIM. An active trading market for our ADSs may not develop following the closing of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your ADSs at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling ADSs and may impair our ability to acquire other companies by using our ADSs as consideration.

If we do not meet the expectations of equity research analysts, if they do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our ADSs, the price of our ADSs could decline.

The trading market for our ADSs will rely in part on the research and reports that equity research analysts publish about us and our business. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If our results of operations are below the estimates or expectations of public market analysts and investors, the price of our ADSs could decline. Moreover, the price of our ADSs could decline if one or more securities analysts downgrade our ADSs or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.

The dual listing of our ordinary shares and our ADSs following this offering may adversely affect the liquidity and value of our ordinary shares and ADSs.

Following this offering and after our ADSs begin trading on Nasdaq, our ordinary shares will continue to be admitted to trading on AIM in a different currency (U.S. dollars on Nasdaq, and £ on the AIM), and at different times (resulting from different time zones and different public holidays in the United States and the U.K.). We cannot predict the effect of this dual listing on the value of our ADSs and ordinary shares. However, the dual listing of our ADSs and ordinary shares may dilute the liquidity of these securities in one or both markets and may adversely affect the development of an active trading market for our ADSs in the United States. The price of our ADSs could also be adversely affected by trading in our ordinary shares on AIM. Although our ordinary shares are currently admitted to trading on AIM, we may decide to cancel the admission of our ordinary shares to trading on AIM. Cancellation of the admission of our ordinary shares to trading on AIM would require the requisite consent of shareholders in a general meeting prescribed by AIM Rules for Companies, unless the London Stock Exchange agrees otherwise. We cannot predict the effect such cancellation would have on the market price of our ADSs or ordinary shares.

We are eligible to be treated as an emerging growth company, as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our ADSs less attractive to investors because we may rely on these reduced disclosure requirements.

We are eligible to be treated as an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including presenting only limited selected financial data and not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.

 

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As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total annual revenue exceeds $1.07 billion, if we issue more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time we are a “large accelerated filer” under U.S. securities laws. We cannot predict if investors will find our ADSs less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

We will be a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

Upon the closing of this offering, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act. We are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, although we are subject to Israeli laws and regulations with regard to certain of these matters and intend to furnish comparable quarterly information on Form 6-K. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.

We may lose our “foreign private issuer” status in the future, which could result in significant additional costs and expenses.

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2021. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.

 

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As we are a “foreign private issuer” and intend to follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

As a foreign private issuer, we have the option to follow certain home country corporate governance practices rather than those of Nasdaq, provided that we disclose the requirements we are not following and describe the home country practices we are following. We intend to rely on this “foreign private issuer exemption” with respect to Nasdaq rules for shareholder meeting quorums and Nasdaq rules requiring shareholder approval. We may in the future elect to follow home country practices with regard to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

The market price of our ADSs could be negatively affected by future issuances and sales of our ADSs or ordinary shares.

After this offering, there will be 149,728,168 ordinary shares outstanding. Sales by us or our shareholders of a substantial number of ADSs or ordinary shares in the public market following this offering, or the perception that these sales might occur, could cause the market price of our ADSs to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities. Of our issued and outstanding shares, all the ADSs sold in this offering will be freely transferable, except for any shares acquired by our “affiliates,” as that term is defined in Rule 144 under the Securities Act.

There can be no assurance that we will not be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to United States Holders of our ADSs.

We would be classified as a passive foreign investment company (“PFIC”) for any taxable year if, after the application of certain look-through rules, either: (i) 75% or more of our gross income for such year is “passive income” (as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended), or (ii) 50% or more of the value of our assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. For these purposes, cash and other assets readily convertible into cash or that do or could generate passive income are categorized as passive assets, and the value of goodwill and other unbooked intangible assets is generally taken into account. Passive income generally includes, among other things, rents, dividends, interest, royalties, gains from the disposition of passive assets and gains from commodities and securities transactions. For purposes of this test, we will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation of which we own, directly or indirectly, 25% or more (by value) of the stock. Based on the current and anticipated composition of our income, assets and operations, and the expected price of the ADSs in this offering, we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable future. However, whether we are a PFIC is a factual determination that must be made annually after the close of each taxable year. Moreover, the value of our assets for purposes of the PFIC determination may be determined by reference to the public price of our ADSs at this initial public offering and future prices, which could fluctuate significantly. In addition, it is possible that the Internal Revenue Service (the “IRS”) may take a contrary position with respect to our determination in any particular year, and therefore, there can be no assurance that we will not be classified as a PFIC in the current taxable year or in the future. Certain adverse U.S. federal income tax consequences could apply to a United States Holder (as defined in “Taxation—U.S. Federal Income Tax Considerations”) if we are treated as a PFIC for any taxable year during which such United States Holder holds our ADSs. United States Holders should consult their tax advisors about the potential application of the PFIC rules to their investment in our ADSs. For further discussion, see “Taxation—Passive Foreign Investment Company.”

 

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If a United States person is treated as owning at least 10% of our ADSs, such holder may be subject to adverse U.S. federal income tax consequences.

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our ADSs, such person may be treated as a “United States shareholder” with respect to each controlled foreign corporation (“CFC”) in our group (if any). Because our group includes U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as CFCs (regardless of whether or not we are treated as a CFC). A United States shareholder of a CFC may be required to report annually and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income,” and investments in U.S. property by CFCs, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Failure to comply with these reporting obligations may subject a United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such shareholder’s U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether we are or any of our non-U.S. subsidiaries is treated as a CFC or whether any investor is treated as a United States shareholder with respect to any such CFC or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. The IRS has provided limited guidance on situations in which investors may rely on publicly available information to comply with their reporting and tax paying obligations with respect to foreign-controlled CFCs. A United States investor should consult its advisors regarding the potential application of these rules to an investment in our ADSs.

If you purchase ADSs in this offering, you will suffer immediate dilution of your investment.

We expect the initial public offering price of our ADSs in this offering to be substantially higher than the net tangible book value per ADS prior to this offering. Therefore, if you purchase ADSs in this offering, you will pay a price per ADS that substantially exceeds our net tangible book value per ADS after this offering. To the extent additional ordinary shares are issued upon the exercise of outstanding options or the vesting of outstanding RSUs, you may experience further dilution. Based on the initial public offering price of $19.00 per ADS, you will experience immediate dilution of $15.80 per ADS, representing the difference between our net tangible book value per ADS and per ordinary share after giving effect to this offering. See “Dilution.”

We have broad discretion over the use of proceeds we receive in this offering and may not apply the proceeds in ways that increase the value of your investment.

We intend to use the net proceeds from this offering for working capital, general corporate purposes and to fund incremental growth, including for possible acquisitions. However, we do not currently have any definitive or preliminary plans with respect to the use of proceeds for such purposes. Consequently, our management will have broad discretion over the specific use of these net proceeds and may do so in a way with which our investors disagree. The failure by our management to apply and invest these funds effectively may not yield a favorable return to our investors and may adversely affect our business and financial condition. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. If we do not use the net proceeds that we receive in this offering effectively, our business, results of operations and financial condition could be adversely affected.

We will incur increased costs as a result of operating as a U.S. listed public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a U.S. listed public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur previously. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and the Consumer Protection Act, the listing requirements of Nasdaq and their applicable securities rules and regulations impose various requirements on non-U.S. reporting

 

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companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and make it more difficult for us to attract and retain qualified members of our board of directors.

We are evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Because we may not pay any cash dividends on our ADSs in the future, capital appreciation, if any, may be your sole source of gains and you may never receive a return on your investment.

Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency, and amount will depend upon our future, operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. The Israeli Companies Law, 5759-1999, or the Companies Law, imposes restrictions on our ability to declare and pay dividends. See “Description of Share Capital and Articles of Association” for additional information. Payment of dividends may also be subject to Israeli withholding taxes. See “Taxation” for additional information. As a result, capital appreciation, if any, on our ADSs may be your sole source of gains, and you will suffer a loss on your investment if you are unable to sell your ADSs at or above the offering price. See “Dividend Policy.”

Securities traded on AIM may carry a higher risk than securities traded on other exchanges, which may impact the value of your investment.

Our ordinary shares are currently traded on AIM. Investment in equities traded on AIM is sometimes perceived to carry a higher risk than an investment in equities quoted on exchanges with more stringent listing requirements, such as the main market of the London Stock Exchange, New York Stock Exchange or the Nasdaq Stock Market. This is because AIM is less heavily regulated and imposes less stringent corporate governance and ongoing reporting requirements than those other exchanges. In addition, AIM requires only half-yearly, rather than quarterly (which would apply to us in the U.S., if we are no longer classified as a foreign private issuer), financial reporting. You should be aware that the value of our ordinary shares may be influenced by many factors, some of which may be specific to us and some of which may affect AIM-quoted companies generally, including the depth and liquidity of the market, our performance, a large or small volume of trading in our ordinary shares, legislative changes and general economic, political or regulatory conditions, and that the prices may be volatile and subject to extensive fluctuations. Therefore, the market price of our ordinary shares, our ADSs or the ordinary shares underlying our ADSs, may not reflect the underlying value of our company.

You may not be able to exercise your right to vote the ordinary shares underlying your ADSs.

ADS holders may only exercise voting rights with respect to the ordinary shares underlying their respective ADSs in accordance with the provisions of the deposit agreement, which provides that a holder may vote the ordinary shares underlying any ADSs for any particular matter to be voted on by our shareholders either by withdrawing the ordinary shares underlying the ADSs or, to the extent permitted by applicable law and as permitted by the depositary, by requesting a temporary registration as shareholder and authorizing the depositary

 

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to act as proxy. However, you may not know about the meeting far enough in advance to withdraw those ordinary shares, and after such a withdrawal you would no longer hold ADSs, but rather you would directly hold the underlying ordinary shares. You also may not know about the meeting far enough in advance to request a temporary registration.

The depositary will try, as far as practical, to vote the ordinary shares underlying the ADSs as instructed by the ADS holders. In such an instance, if we ask for your instructions, the depositary, upon timely notice from us, will notify you of the upcoming vote and arrange to deliver our voting materials to you. We cannot guarantee that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ordinary shares or to withdraw your ordinary shares so that you can vote them yourself. If the depositary does not receive timely voting instructions from you, it may give a discretionary proxy to a person designated by us to vote the ordinary shares underlying your ADSs; provided, however, that no such discretionary proxy shall be given with respect to any matter to be voted upon as to which we inform the depositary that (i) we do not wish such proxy to be given, (ii) substantial opposition exists, or (iii) the rights of holders of ordinary shares may be adversely affected. Voting instructions may be given only in respect of a number of ADSs representing an integral number of ordinary shares or other deposited securities. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise any right to vote that you may have with respect to the underlying ordinary shares, and there may be nothing you can do if the ordinary shares underlying your ADSs are not voted as you requested. In addition, the depositary is only required to notify you of any particular vote if it receives notice from us in advance of the scheduled meeting.

You will not be directly holding our ordinary shares. Holders of the ADSs will not be able to exercise the preemptive subscription rights related to the ordinary shares that they represent and may suffer dilution of their equity holding in the event of future issuances of our ordinary shares.

As an AIM-quoted company, our articles of association currently in effect follow English law which generally provides shareholders with preemptive rights when new shares are issued for cash. Shareholders’ preemptive subscription rights, in the event of issuances of ordinary shares against cash payment, may be disapplied by a special resolution of the shareholders at a general meeting of our shareholders. The absence of preemptive rights for existing equity holders may cause dilution to such holders.

Furthermore, the ADS holders would not be entitled, even if such rights accrued to our shareholders in any given instance, to receive such preemptive subscription rights related to the ordinary shares that they represent. Rather, the depositary is required to endeavor to sell any such subscription rights that may accrue to the ordinary shares underlying the ADSs and to remit the net proceeds therefrom to the ADS holders pro rata. In addition, if the depositary is unable to sell rights, the depositary will allow the rights to lapse, in which case you will receive no value for these rights. Further, if we offer holders of our ordinary shares the option to receive dividends in either cash or ordinary shares, under the deposit agreement, ADS holders will not be permitted to elect to receive dividends in ordinary shares or cash, but will receive whichever option we provide as a default to shareholders who fail to make such an election.

Purchasers of ADSs in this offering may not receive distributions on our ordinary shares in the form of ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.

The depositary for our ADSs has agreed to pay to purchasers of ADSs in this offering the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. Purchasers of our ADSs will receive these distributions in proportion to the number of our ordinary shares their ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that purchasers of ADSs in this offering may not receive the distributions we

 

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make on our ordinary shares or any value from them if it is unlawful or impractical to make them available to them. These restrictions may have a material adverse effect on the value of a purchaser’s ADSs.

ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing our ordinary shares provides that, to the fullest extent permitted by applicable law, holders and beneficial owners of ADSs irrevocably waive the right to a jury trial of any claim that they may have against us or the depositary arising from or relating to our ordinary shares, our ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. The waiver continues to apply to claims that arise during the period when a holder holds the ADSs, even if the ADS holder subsequently withdraws the underlying ordinary shares.

However, you will not be deemed, by agreeing to the terms of the deposit agreement, to have waived our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. In fact, you cannot waive our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. If we or the depositary opposed a demand for jury trial relying on above-mentioned jury trial waiver, it is up to the court to determine whether such waiver was enforceable considering the facts and circumstances of that case in accordance with the applicable state and federal law.

If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court or by the United States Supreme Court. Nonetheless, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York. In determining whether to enforce a jury trial waiver provision, New York courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim, none of which we believe are applicable in the case of the deposit agreement or the ADSs. If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary relating to the matters arising under the deposit agreement or our ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not have the right to a jury trial regarding such claims, which may limit and discourage lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary according to the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may have different outcomes compared to that of a jury trial, including results that could be less favorable to the plaintiff(s) in any such action.

Moreover, as the jury trial waiver relates to claims arising out of or relating to the ADSs or the deposit agreement, we believe that, as a matter of construction of the clause, the waiver would likely continue to apply to ADS holders who withdraw the ordinary shares from the ADS facility with respect to claims arising before the cancellation of the ADSs and the withdrawal of the ordinary shares, and the waiver would most likely not apply to ADS holders who subsequently withdraw the ordinary shares represented by ADSs from the ADS facility with respect to claims arising after the withdrawal. However, to our knowledge, there has been no case law on the applicability of the jury trial waiver to ADS holders who withdraw the ordinary shares represented by the ADSs from the ADS facility.

 

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Holders of our ADSs or ordinary shares have limited choice of forum, which could limit your ability to obtain a favorable judicial forum for complaints against us, the depositary or our respective directors, officers or employees.

The deposit agreement governing our ADSs provides that, (i) the deposit agreement and the ADSs will be interpreted in accordance with the laws of the State of New York, and (ii) as an owner of ADSs, you irrevocably agree that any legal action arising out of the deposit agreement and the ADSs involving us or the depositary may only be instituted in a state or federal court in the city of New York. Any person or entity purchasing or otherwise acquiring any our ADSs, whether by transfer, sale, operation of law or otherwise, shall be deemed to have notice of and have irrevocably agreed and consented to these provisions.

This choice of forum provision may increase your cost and limit your ability to bring a claim in a judicial forum that you find favorable for disputes with us, the depositary or our and the depositary’s respective directors, officers or employees, which may discourage such lawsuits against us, the depositary and our and the depositary’s respective directors, officers or employees. However, it is possible that a court could find either choice of forum provision to be inapplicable or unenforceable. The enforceability of similar choice of forum provisions has been challenged in legal proceedings. It is possible that a court could find this type of provisions to be inapplicable or unenforceable.

To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, actions by holders of our ADSs or ordinary shares to enforce any duty or liability created by the Exchange Act, the Securities Act or the respective rules and regulations thereunder must be brought in a federal court in the city of New York. Holders of our ADSs or ordinary shares will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.

Purchasers of ADSs in this offering may be subject to limitations on transfer of their ADSs.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.

Exposure to foreign currency exchange rate fluctuations could negatively impact our results of operations.

While the majority of the transactions through our platform are denominated in U.S. dollars, we have transacted in foreign currencies, both for inventory and for payments by advertisers or publishers from use of our platform. We also have expenses denominated in currencies other than the U.S. dollar. Given our anticipated international growth, we expect the number of transactions in a variety of foreign currencies to continue to grow in the future. While we generally require a fee from advertisers or publishers that pay in non-U.S. currency, this fee may not always cover foreign currency exchange rate fluctuations. Although we currently have a program to hedge exposure to foreign currency fluctuations, the use of hedging instruments may not be available for all currencies or may not always offset losses resulting from foreign currency exchange rate fluctuations. Moreover, the use of hedging instruments can itself result in losses if we are unable to structure effective hedges with such instruments.

 

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A small number of significant beneficial owners of our shares acting together have significant influence over matters requiring shareholder approval, which could delay or prevent a change of control.

The three largest beneficial owners of our ordinary shares, entities and individuals affiliated with Mithaq Capital SPC, Toscafund Asset Management LLP and Schroder Investment Management, each of which currently beneficially owns more than 10.0% of our outstanding ordinary shares, and in the aggregate 54.3% of our ordinary shares, are expected to beneficially own in the aggregate 49.4% of our ordinary shares after this offering, or 48.7% if the underwriters exercise in full their option to purchase additional ADSs in this offering. As a result, these shareholders, acting together, could exercise significant influence over our operations and business strategy and will have sufficient voting power to influence the outcome of matters requiring shareholder approval. These matters may include:

 

   

the composition of our board of directors which has the authority to direct our business and to appoint and remove our officers;

 

   

approving or rejecting a merger, consolidation or other business combination;

 

   

raising future capital; and

 

   

amending our articles of association which govern the rights attached to our ordinary shares.

This concentration of ownership of our ADSs or ordinary shares could delay or prevent proxy contests, mergers, tender offers, open-market purchase programs or other purchases of our ADSs or ordinary shares that might otherwise give you the opportunity to realize a premium over the then-prevailing market price of our ADSs. This concentration of ownership may also adversely affect our share price.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains estimates and forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible” or the negative of these terms or similar expressions. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

 

   

our success and revenue growth is dependent on adding new advertisers and publishers, effectively educating and training our existing advertisers and publishers on how to make full use of our platform and increasing usage of our platform by advertisers and publishers;

 

   

our business depends on our ability to maintain and expand access to advertising spend, including spend from a limited number of DSPs, agencies and advertisers;

 

   

our business depends on our ability to maintain and expand access to valuable inventory from publishers, including our largest publishers;

 

   

we may not attract and retain advertisers and publishers if we may fail to make the right investment decisions in our platform, or innovate and develop new solutions that are adopted by advertisers and publishers;

 

   

significant parts of our business depend on relationships with data providers for data sets used to deliver targeted campaigns;

 

   

our business depends on our ability to collect, use and disclose certain data, including CTV data, to deliver advertisements. Any limitation imposed on our collection, use or disclosure of this data could significantly diminish the value of our platform;

 

   

if the use of third-party “cookies,” mobile device IDs, CTV data collection or other tracking technologies is restricted without similar or better alternatives (and adoption of such alternatives), our platform’s effectiveness could be diminished;

 

   

our failure to meet content and inventory standards and provide services that our advertisers and publishers trust could harm our brand and reputation;

 

   

we must grow rapidly to remain a market leader and to accomplish our strategic objective;

 

   

the market for programmatic buying for advertising campaigns is relatively new and evolving;

 

   

if we fail to detect or prevent fraud on our platform, or malware intrusion into the systems or devices of our publishers and their consumers, publishers could lose confidence in our platform and we could face legal claims;

 

   

the rejection of digital advertising by consumers through opt-in, opt-out or ad-blocking technologies or other means;

 

   

our ability to scale our platform infrastructure to support anticipated growth and transaction volume;

 

   

disruptions to service from our third-party data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services;

 

   

potential liability and harm to our business based on the human factor of inputting information into our platform;

 

   

any failure to protect our intellectual property rights;

 

   

if non-proprietary technology, software, products and services that we use are unavailable, have future terms we cannot agree to or do not perform as we expect;

 

   

the overall demand for advertising;

 

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the ongoing COVID-19 pandemic;

 

   

any decrease in the use of the advertising or publishing channels that we primarily depend on, or failure to expand into emerging channels;

 

   

if CTV develops in ways that prevent advertisements from being delivered to consumers;

 

   

the competitive nature of the market in which we participate;

 

   

seasonal fluctuations in advertising activity;

 

   

the effective growth and training of our sales and support teams;

 

   

other risks relating to our employees or our location in Israel;

 

   

other risks relating to legal or regulatory issues;

 

   

other risks associated with our financial profile, our ADSs and the Offering; and

 

   

other statements described in this prospectus under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.”

The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these factors include, but are not limited to the factors set forth under “Risk Factors.” Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus forms a part with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

The estimates and forward-looking statements contained in this prospectus speak only as of the date of this prospectus. Except as required by applicable law, we undertake no obligation to publicly update or revise any estimates or forward-looking statements whether as a result of new information, future events or otherwise, or to reflect the occurrence of unanticipated events.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $116.9 million (or approximately $134.8 million if the underwriters exercise their option to purchase additional ADSs from us in full), after deducting underwriting discounts and commissions and estimated offering expenses, based on an initial public offering price of $19.00 per ADS.

 

The principal purposes of this offering are to create a public market for our ADSs, facilitate greater access to the public equity markets, increase our visibility in the marketplace, as well as to obtain additional capital. We intend to use the net proceeds from this offering for working capital, general corporate purposes and to fund incremental growth, including for possible acquisitions. However, we do not currently have any definitive or preliminary plans with respect to the use of proceeds for such purposes.

We will have broad discretion in the way that we use the net proceeds from this offering. Our use of the net proceeds from this offering will depend on a number of factors, including our future revenue and cash generated by operations and the other factors described in “Risk Factors.”

 

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DIVIDEND POLICY

Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. Although we have paid dividends and conducted share buybacks in the past, we do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and expand our business.

The Companies Law imposes restrictions on our ability to declare and pay dividends. See “Description of Share Capital and Articles of Association—Dividend and Liquidation Rights” for additional information. See also “Risk Factors—Risks Related to Our ADSs and the Offering—Because we may not pay any cash dividends on our ADSs in the future, capital appreciation, if any, may be your sole source of gains and you may never receive a return on your investment.”

Payment of dividends may be subject to Israeli withholding taxes. See “Taxation and Government Programs—Israeli Tax Considerations” for additional information.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and total capitalization as of March 31, 2021, as follows:

 

   

on an actual basis; and

 

   

on an as adjusted basis to reflect the issuance and sale of 6,768,953 ADSs in this offering at the initial public offering price of $19.00 per ADS, after deducting underwriting discounts and commissions and estimated offering expenses.

You should read this information in conjunction with our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.

 

     As of March 31, 2021  
     Actual      As
Adjusted
 
     unaudited         
     (in thousands, except
share and per share
amounts)
 

Cash and cash equivalents

   $ 103,486      $ 220,384  
  

 

 

    

 

 

 

Debt and lease liabilities, including current portion:

     

Lease liabilities

     18,411        18,411  

Other long-term liabilities

     6,447        6,447  
  

 

 

    

 

 

 

Total debt

     24,858        24,858  

Shareholders’ equity:

     

Share capital

     385        427  

Share premium

     263,775        380,631  

Other comprehensive income

     2,494        2,494  

Retained earnings

     73,410        73,410  
  

 

 

    

 

 

 

Total shareholders’ equity

     340,064        456,962  
  

 

 

    

 

 

 

Total capitalization

   $ 364,922      $ 481,820  
  

 

 

    

 

 

 

 

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DILUTION

If you invest in our ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and the as adjusted net tangible book value per share immediately following the consummation of this offering.

At March 31, 2021, we had a historical net tangible book value of $122.6 million, corresponding to a net tangible book value of $0.90 per ordinary share or $1.80 per ADS based on an ordinary share to ADS ratio of two to one. Net tangible book value per share represents the amount of our total assets less our total liabilities, excluding goodwill and other intangible assets, divided by the total number of our ordinary shares outstanding.

After giving effect to the sale by us of 6,768,953 ADSs (representing an aggregate of 13,537,906 ordinary shares) in this offering at the initial public offering price of $19.00 per ADS, after deducting the estimated underwriting discounts and commissions and estimated offering expenses, our as adjusted net tangible book value at March 31, 2021 would have been approximately $239.5 million, representing $1.60 per ordinary share or $3.20 per ADS. This represents an immediate increase in net tangible book value of $0.70 per ordinary share or $1.40 per ADS to existing shareholders and an immediate dilution in net tangible book value of $7.90 per ordinary share or $15.80 per ADS to new investors purchasing ADSs in this offering at the initial public offering price. Dilution in net tangible book value per ADS to new investors is determined by subtracting as adjusted net tangible book value per ADS after this offering from the initial public offering price per ADS paid by new investors.

The following table illustrates this dilution to new investors purchasing ADSs in the offering.

 

Initial public offering price per ADS

      $ 19.00  

Historical net tangible book value per ADS as of March 31, 2021

   $ 1.80     

Increase in net tangible book value per ADS attributable to this offering

     1.40     
  

 

 

    

As adjusted net tangible book value per ADS after this offering

        3.20  
     

 

 

 

Dilution per ADS to new investors in this offering

      $ 15.80  

If the underwriters exercise their option to purchase additional ADSs from us in full, our as adjusted net tangible book value per ADS after this offering would be $3.39 per ADS, representing an immediate increase in as adjusted net tangible book value of $1.59 per ADS to existing shareholders and immediate dilution of $15.61 per ADS in as adjusted net tangible book value per ADS to new investors based on an initial public offering price of $19.00 per ADS, after deducting underwriting discounts and commissions and estimated offering expenses.

The following table summarizes, on an as adjusted basis described above as of March 31, 2021, the differences between the number of ordinary shares purchased from us, the total consideration paid to us in cash and the average price per ordinary share paid, in each case by existing shareholders, on the one hand, and new investors in this offering, on the other hand.

 

     ADSs Purchased      Ordinary Shares
Purchased
     Total
Consideration
     Average
Price
Per
Share
     Average
Price
Per
ADS
 
     Number      Percent      Number      Percent      Amount      Percent     

 

    

 

 
                                 (millions)                       

Existing shareholders

     —          0%        136,190,262        100%      $ 264.2        67%      $ 1.94     

New investors

     6,768,953        100%        —          0%        128.6        33%                      $ 19.00  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

Total

     6,768,953        100%        136,190,262        100%      $ 392.8        100%        

 

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To the extent any of our outstanding options is exercised or any our outstanding RSUs or PSUs is vested, there will be further dilution to new investors.

If the underwriters exercise their option to purchase additional ADSs from us in full:

 

   

the percentage of ordinary shares held by existing shareholders will decrease to approximately 89.7% of the total number of our ordinary shares outstanding after this offering; and

 

   

the number of ordinary shares held by new investors will increase to approximately 10.3% of the total number of our ordinary shares outstanding after this offering.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with “Selected Consolidated Financial Data” and the consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements regarding industry outlook and our expectations regarding our future performance, liquidity and capital resources, as well as other non-historical statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Following the acquisition of Unruly in 2020, we changed our Programmatic business, tech stack, features, business models and activity, requiring an analysis of whether we act as a principal or an agent, which led us to determine that we act as an agent, and not as principal. Therefore, effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. Our results of operations for the years ended December 31, 2020 and 2019 are not directly comparable as a result of recognizing revenue on a net basis for the Programmatic revenue for the year ended December 31, 2020. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

Overview

We are a global company offering an end-to-end software platform that enables advertisers to reach relevant audiences and publishers to maximize yield on their digital advertising inventory. We use our proprietary technology to deliver impactful brand stories to target audiences through digital ad technology and advanced audience data. Our omni-channel capabilities deliver global advertising campaigns across all formats and channels, with an expertise in Video and CTV.

We believe there is a significant market opportunity within the approximately $455 billion global digital advertising market that is expected to grow at a CAGR of 11.4% through 2025, according to eMarketer. Digital publishers rely on advertising to support their businesses and brands, and advertisers use this medium to capture uniquely targeted and viewable impressions. We believe the digital advertising market remains fragmented and that our full service end-to-end software platform and vast expertise within Video and CTV puts us in a strong position to continue to increase our market share from traditional ad sales channels.

We believe that we are positioned to benefit from several trends in the evolving advertising ecosystem, including the proliferation of digital media consumption, adoption of programmatic advertising, a growing focus on premium formats such as Video and CTV, and the increasing sophistication of the overall digital landscape. We address the broad and evolving digital advertising market through our three core offerings, including a proprietary DSP solution that advertisers leverage to manage digital advertising campaigns, a proprietary SSP solution that publishers leverage to optimally monetize digital inventory and a proprietary DMP solution which is integrated with both our DSP and SSP solutions. Our versatile DMP solution benefits from vast amounts of data and provides optimal campaign recommendations for audience sets by employing advanced machine learning algorithms. The contextualization of the data synthesized by our DMP solution provides our advertisers with a comprehensive, personalized view of audiences, enabling more effective targeting across formats and devices and optimizes the monetization of publisher inventory. By combining these three proprietary solutions as well as integrations with industry leading partners, we provide an end-to-end software platform that is dynamic and flexible to our customers’ needs, which enables us to address more digital ad spend.

 

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LOGO

Our customers are both ad buyers, including brands and agencies, and digital publishers. Our platform included a diversified customer base of approximately 900 active customers and 1,450 active publishers as of March 31, 2021 with approximately 800 million unique users for the month ended March 31, 2021, which serves advertisements in over 100 countries.

We generate revenue through platform fees that are tailored to fit the customer’s specific utilization of our solutions and include (i) a percentage of spend, (ii) flat fees and (iii) fixed CPM.

The advertising industry was significantly impacted at the end of first quarter and throughout the second quarter of 2020 by the outbreak of the COVID-19 pandemic and the resulting economic uncertainty in the global economy, including in the United States (where the majority of our revenue is generated). As a result, advertising demand on our platform decreased significantly in the first half of 2020, as economic activity across most markets contracted and marketing budgets were reduced. However, as parts of the economy reopened at the end of the second quarter of 2020, the advertising industry and related spend responded with a robust recovery in the second half of 2020. Although certain industries, such as travel, retail and hospitality, continued to limit advertising spending over this period, other industries drove significant growth in advertising spending, particularly in Video (including CTV).

As a result, our Video revenue grew from $42.1 million in the six months ended June 30, 2020 to $101.3 million in the six months ended December 31, 2020. Our Video revenue growth included the rapid growth of CTV revenue over the same period, which grew from $11.0 million in the six months ended June 30, 2020 to $25.8 million in the six months ended December 31, 2020. This growth of Video (including CTV) revenue contributed to growth in Programmatic revenue of 30% for the year ended December 31, 2020 from the comparable as adjusted (non-IFRS) revenue basis for the year ended December 31, 2019.

Our total comprehensive income for the six months ended December 31, 2020 increased $64.1 million from the equivalent figure for the six months ended June 30, 2020 and represented a 219% year-over-year increase as compared to our total comprehensive income for the six months ended December 31, 2019. We generated $5.0 million and $6.4 million in total comprehensive income in the years ended December 31, 2020 and 2019, respectively. Our Adjusted EBITDA for the six months ended December 31, 2020 increased approximately 33 times from the equivalent figure for the six months ended June 30, 2020 and represented a 51% year-over-year increase as compared to our Adjusted EBITDA for the six months ended December 31, 2019. Additionally, we generated $60.5 million and $60.4 million in Adjusted EBITDA in the years ended December 31, 2020 and 2019, respectively, resulting in a cash position of $97.5 million as of December 31, 2020.

 

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Our Business Model

Our end-to-end platform is a comprehensive software suite that supports a wide range of media types (e.g., Video, display, etc.) and devices (e.g., mobile, CTVs, streaming devices, desktop, etc.), creating an efficient marketplace where advertisers are able to purchase high quality advertising inventory from publishers at scale. Our solutions offer many advantages, including an advanced real-time bidding auction optimization engine, a quality and global marketplace, and flexibility to enact concurrent campaign strategies that drives strong returns for investments in digital ad real estate.

Our platform handles over 100 billion daily ad requests, approximately 500 terabytes of daily data and approximately 250 million daily ad impressions. Each transaction is processed in a fraction of a second (55ms on average) and powered by our real-time bidding engine, which leverages thousands of private servers and infrastructure in three strategically located data centers located in the United States, Europe and Asia Pacific.

Key Components of our platform include:

 

   

Demand Side Platform – We offer a self-service DSP solution for advertisers and their agencies to efficiently and intuitively manage omni-channel campaigns. We also offer a full-service option to agencies in addition to our self-service DSP solution. Our DSP solution provides access to wide reaching and high quality inventory, audience targeting and advanced reporting to optimize advertising campaigns, improve ROI and gain deep insights and analytics into brand engagement.

 

   

Data Management Platform – We offer a fully integrated DMP solution that sits at the center of our platform that unlocks the power of data flowing through our DSP and SSP solutions. Our DMP enables advertisers and publishers to use data from various sources in order to optimize results of their advertising campaigns. Our DMP provides insights and recommendations pertaining to geographic, behavioral and demographic data, among others in one unified solution. We believe an integrated DMP is a key component to the marketplace because it enables advertisers and publishers to use and activate data to target audiences with more accuracy across a number of different channels.

 

   

Supply Side Platform – We offer a self-service SSP solution for digital publishers to sell their online ad placements via a real-time bidding auction across all screens including mobile, CTVs, streaming devices and desktops. Our SSP provides access to significant amounts of data, unique demand and a comprehensive product suite to drive more effective inventory management and revenue optimization.

 

   

Analytics/Artificial Intelligence – We collect, synthesize and analyze the data sets across our platform through extensive artificial intelligence technologies and advanced machine learning capabilities. These recommendations ultimately provide key insights into valuable ad impressions and forecasts for auction behavior. We believe these technologies drive optimal results for our advertisers and publishers.

Key Factors Affecting Our Results of Operations

We believe our results of operations is influenced by several factors, including the following:

Attract, Retain and Grow our Customer Base: Our recent growth has been driven by expanding the usage of our platform by our existing advertisers and publishers as well as by adding new advertisers and publishers. As a result, our revenue growth depends upon our ability to retain our existing advertisers and publishers and to capture a larger amount of their advertising spend through our platform. For the three months ended March 31, 2021, we achieved gross profit per active customer (calculated as our gross profit for the period divided by our active customers for the period) of $54 thousand, Contribution ex-TAC per active customer (calculated as our Contribution ex-TAC for the period divided by our active customers for the period) of $69 thousand and generated total revenue of $71.0 million. In comparison, for the three months ended March 31, 2020, we achieved gross profit per active customer of $20 thousand, Contribution ex-TAC per active customer of $31 thousand and generated total revenue of $38.6 million.

 

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For the year ended December 31, 2020, we achieved gross profit per active customer of $149 thousand and Contribution ex-TAC per active customer of $207 thousand. Despite a negative COVID-19 impact on the number of active customers for the year ended December 31, 2020, we generated total revenue of $211.9 million for the year ended December 31, 2020. In particular, in the first half of 2020, our business was negatively impacted by the COVID-19 pandemic, which resulted in a decrease in advertising demand globally. As business promotion activities started to recover, the second half of 2020 saw a significant resurgence of advertising spend, except for certain verticals such as travel, retail and hospitality.

We have demonstrated our ability to retain existing advertisers and publishers, including during 2020, which presented unique challenges due to the COVID-19 pandemic. For the year ended December 31, 2020, 83% of our customers were active customers for a period of more than two years. Meanwhile, 10% of our customers became active customers during the year ended December 31, 2020, with the remaining 7% of our customer base being active customers for between one and two years.

We continue to add functionality to our platform to encourage existing advertisers or publishers to increase their usage of our platform. As a result of this and other similar engagement initiatives, we achieved a Contribution ex-TAC retention rate of 112% for the year ended December 31, 2020.

Investment in Growth: We believe that the advertising market is in the early stages of a secular shift towards digital video advertising. We have been specializing in digital video advertising, which collectively accounts for 89% of our Programmatic revenue for the year ended December 31, 2020 and 91% of our Programmatic revenue for the three months ended March 31, 2021. We plan to invest in long-term growth by focusing on the main drivers of digital advertising growth – Video and CTV. We anticipate that our operating expenses will increase in the foreseeable future as we invest in platform operations and technology and development to enhance our product capabilities including deployment of more self-serve capabilities both to our advertisers and publishers, expediting data relationships and technology, adding more ad formats to our platform (e.g., audio, display, etc.). We believe that these investments will contribute to our long-term growth, although it is uncertain whether they may impact our profitability in the near-term.

Growth of the Digital Advertising Market and Macroeconomics Factors: We expect to continue to benefit from overall adoption of digital video advertising by both advertisers and publishers. Any material change in the growth rate of digital video advertising or the rate of adoption could affect our performance. Recent trends have indicated that advertising spend is closely tied to advertisers’ financial performance and economic conditions, either generally or in one or more of the industries in which our advertisers operate or our publishers focus. An economic downturn could adversely impact the digital advertising market and our operating results. For example, the challenges posed by the COVID-19 pandemic on the global economy increased significantly as the first quarter of 2020 progressed and continued throughout 2020 and into 2021. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. Certain marketers in industries such as travel and tourism, hospitality and automotive, decreased or paused their advertising spend as a response to the economic uncertainty. In the first half of 2020, our business was negatively impacted by the COVID-19 pandemic.

As the overall economic environment improved during the second half of 2020, our Video revenue and CTV revenue grew from $42.1 million and $11.0 million, respectively, in the six months ended June 30, 2020 to $101.3 million and $25.8 million, respectively, in the six months ended December 31, 2020. This growth of Video (including CTV) contributed to growth in Programmatic revenue of 30% for the year ended December 31, 2020 from the comparable as adjusted (non-IFRS) revenue basis for the year ended December 31, 2019.

In addition, the economic uncertainty caused by the COVID-19 pandemic has made and may continue to make it difficult for us to forecast revenue and operating results and to make decisions regarding operational cost structures and investments. The ultimate impact of COVID-19 on the Company’s results of operations, financial

 

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condition and cash flows is dependent on future developments, including the duration of the COVID-19 pandemic and its impact on the global economy, which are uncertain and cannot be predicted at this time. For further discussion of the potential impacts of the COVID-19 pandemic on our business, see “Risk Factors—Our revenue and results of operations are highly dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns and the COVID-19 pandemic, can make it difficult to predict our revenue and could adversely affect our business, results of operations, and financial condition.

Seasonality: In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, many marketers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing. Historically, the fourth quarter of the year has reflected our highest level of advertising activity for the year. We generally expect the subsequent first quarter to reflect lower activity levels. In addition, historical seasonality may not be predictive of future results given the potential for changes in advertising buying patterns and consumer activity due to the COVID-19 pandemic. For example, in 2020, advertising activities were less associated with the holiday spending patterns. Instead, as business activities adapt into the new environment amid the COVID-19 pandemic, in the second half of 2020, we saw a significant resurgence in advertising demand on our platform. Nevertheless, as countries recover from the COVID-19 pandemic and return to pre-pandemic business conditions, we expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.

Critical Accounting Policies, Judgments and Estimates

We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. In preparing our audited consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported in our consolidated financial statements. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We regularly re-evaluate our assumptions, judgments and estimates. Our critical accounting estimates and judgments are described in Note 2 to our audited consolidated financial statements included elsewhere in this prospectus.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We consider the following to be our critical accounting policies and estimates.

In this section, we use the following terms:

Programmatic” means our end-to-end platform of programmatic advertising, which uses software and algorithms to match buyers and sellers of digital advertising in a technology-driven marketplace; transactions in our Programmatic activities are executed in milliseconds and beginning in 2020, human intervention or discretion for execution has significantly decreased.

Performance” means our non-core performance activities consisting primarily of mobile-based solutions that help brands reach their users; revenue generated in the Performance activities is contingent on the occurrence of performance-based metrics, such as app downloads and installations.

Revenue Recognition

We generate revenue from transactions where we provide access to our platform for the purchase and sale of digital advertising inventory. Our customers are both ad buyers, including brands and agencies, and digital publishers. We generate revenue through platform fees that are tailored to fit our customer’s specific utilization of our solutions and include: (i) a percentage of spend, (ii) flat fees and (iii) fixed CPM.

 

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We maintain written service agreement with each publisher and buyer, which set out the terms of the relationship, including payment terms and access to our platform.

Publishers provide digital advertising inventory to our platform in the form of advertising requests, or ad requests. When we receive ad requests from a publisher, we 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.

We generate revenue from our 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.

Prior to the acquisitions of RhythmOne and its integration into us and the acquisition of Unruly in the beginning of 2020 (i.e. for the year ended December 31, 2019), we determined that we operated as a principal with respect to its Programmatic activity and therefore presented revenue on a gross basis mainly as: (i) we operated predominantly through a DSP platform prior to the acquisition and full integration of RhythmOne, (ii) we were highly involved in execution of the process, which required certain manual operations by our employees and (iii) we determined that we had an implicit obligation to provide credits and inducements to customers to encourage use of the platform. That is, we determined, on this basis, that we had an implicit obligation to provide advertising space to customers, even though the contractual terms and conditions (including our Master Service Agreements (“MSAs”) and insertion order do not explicitly state that we are obliged to deliver customers an applicable advertising space or to provide inducements to the customer. Consequently, we concluded that we were primarily responsible for fulfillment of the contract.

Following the full integration with RhythmOne and the acquisition of Unruly in 2020, we positioned our self as a stronger digital advertising platform in the marketplace with an integrated, end-to-end platform connecting the DSP and SSP sides of the business in a unified platform. As a result, we have changed its Programmatic business, tech stack, features, business models and activity as follows:

 

  1.

We implemented a material change in its tech stack and operations, offering new services and features that increased automation across the platform, significantly decreasing the need for our employees to manually operate the platform; and

 

  2.

We decreased significantly the level of credits and inducements offered to our customers.

We further concluded that as a result of such change in its Programmatic activity (i) we do not have manual control over the process, (ii) we are not primarily responsible for fulfillment, (iii) we have no inventory risk and (iv) we obtain only momentary title to the advertising space offered via the end-to-end platform. As a consequence, beginning with the year ended December 31, 2020, we determined that we operate as agent with respect to our Programmatic activity and therefore beginning with the year ended December 31, 2020, we present Programmatic revenue on a net basis.

Our Performance activity has not changed and we are still the primary obligor to provide these services. As such, revenue is presented on a gross basis for our Performance activity. We are strategically focused on driving growth with our Programmatic activity through the end-to-end platform, while our Performance activities are declining over time.

Our results of operations for the years ended December 31, 2020 and 2019 are not directly comparable as a result of presenting revenue on a net basis for the Programmatic revenue for the year ended December 31, 2020. In order to improve comparability and provide a more meaningful basis for comparison of our financial results, we have included certain unaudited, as adjusted (non-IFRS) revenue information solely for the year ended

 

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December 31, 2019 that give effect to the revenue recognition changes noted above as if such changes were applied on January 1, 2019. This as adjusted (non-IFRS) revenue information will not be provided for any period subsequent to the year ended December 31, 2019. The following table sets forth our results of operations for the years ended December 31, 2020 and 2019 on an as reported basis for 2020 and, to facilitate comparability, on an as reported and a comparable basis for 2019.

 

     Year Ended
December 31, 2019
     Year Ended
December 31,
2020
     % Change
     As reported      Programmatic
media cost(1)
    As adjusted
(non-IFRS)
     As reported      2020 vs. 2019
as reported
   2020 vs. 2019
adjusted
(non-IFRS)
(in thousands, except for
percentages)
           

Revenues

  

Programmatic

   $ 241,464      $ (117,301   $ 124,163      $ 161,625      (33%)    30%

Performance

     84,296        —         84,296        50,295      (40%)    (40%)
  

 

 

    

 

 

   

 

 

    

 

 

    

 

  

 

Total

     325,760        (117,301     208,459        211,920      (35%)    2%

Cost of revenues (exclusive of depreciation and amortization)

                

Programmatic

     142,676        (117,301     25,375        31,918      (78%)    26%

Performance

     44,570        —         44,570        27,889      (37%)    (37%)
  

 

 

    

 

 

   

 

 

    

 

 

    

 

  

 

Total

     187,246        (117,301     69,945        59,807      (68%)    (14%)

 

 

(1)

In order to facilitate comparability of our results of operations, we excluded Programmatic media cost for 2019. Programmatic media cost represents costs of acquiring publishers’ advertising space that is purchased by advertisers via our Programmatic end-to-end solution.

Components of Our Results of Operations

Revenue. Our revenue is generated from transactions where we provide a platform for the purchase and sale of digital adverting inventory. Our end-to-end platform is a comprehensive software suite that supports a wide range of media types (e.g., Video, display, etc.) and devices (e.g., mobile, CTVs, streaming devices, desktop, etc.), creating an efficient marketplace where advertisers (buyers) are able to purchase high quality advertising inventory from publishers (sellers) at scale.

We generate revenue through fees that we charge, based on customer type, to utilize our solutions and services and upon usage and delivery. Often, advertisers use our DSP solution to access our DMP for optimizing media buys from our SSP solution.

Effective January 1, 2020, we present revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change. Our Performance revenue is recognized on a gross basis for the years ended December 31, 2020 and 2019.

Cost of revenues (exclusive of depreciation and amortization). Cost of revenues (exclusive of depreciation and amortization) primarily consists of hosting fees and data costs for both Programmatic and Performance activities, as well as media costs for Performance activities that are directly attributable to revenue generated by the Company and based on the revenue share arrangements with audience and content partners. Our cost of revenues (exclusive of depreciation and amortization) for the years ended December 31, 2020 and 2019 are not

 

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directly comparable as a result of the revenue recognition presentation change. Effective January 1, 2020, we no longer include the costs of acquiring publishers’ advertising space that is purchased by advertisers via our Programmatic end-to-end solution in our cost of revenue, which is consistent with our change in revenue recognition. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

Research and development expenses. Research and development expenses consist primarily of compensation and related costs for personnel responsible for the research and development of new and existing products and services. Where required, development expenditures are capitalized in accordance with the Company’s standard internal capitalized development policy in accordance with IAS 38. All research costs are expensed when incurred.

Selling and marketing expenses. Selling and marketing expenses primarily consist of compensation and related costs for personnel engaged in customer service, sales and sales support functions, as well as advertising and promotional expenditures.

General and administrative expenses. General and administrative expenses primarily consist of compensation and related costs for personnel and include costs related to the Company’s facilities, finance, human resources, information technology, legal organizations and fees for professional services. Professional services are principally comprised of external legal, information technology consulting and outsourcing services that are not directly related to other operational expenses.

Depreciation and amortization. Depreciation and amortization primarily consist of depreciation of fixed assets and amortization of intangible assets, as well as depreciation and amortization of right of use assets and provision for impairment.

Financing income. Financing income primarily consists of foreign currency gains and interest income.

Financing expense. Financing expense primarily includes exchange rate differences, interest and bank fees and other expenses.

Other income (expense). Other income (expense) includes gain on sale of business unit offset by a settlement agreement.

Taxation. Taxation consists primarily of income taxes related to the jurisdictions in which we conduct business. Our effective tax rate is affected by non-deductible expenses net of tax exempt income, utilization of tax losses from prior years for which deferred taxes is recognized, effect on deferred taxes at a rate different from the primary tax rate, effect of reduced tax rate on preferred income and differences in previous tax assessments. As of December 31, 2020, we do not have tax loss carry forwards for Israeli tax purposes.

 

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Results of Operations

The following tables set forth our results of operations in U.S. dollars and as a percentage of revenue for the periods indicated:

 

    Year Ended
December 31, 2019(1)
    Year Ended
December 31, 2020
    Three Months Ended
March 31, 2020
    Three Months Ended
March 31, 2021
 
    As reported     As a % of
revenue
    As reported     As a % of
revenue
    As reported
(unaudited)
    As a % of
revenue
    As reported
(unaudited)
    As a % of
revenue
 
(in thousands, except for
percentages)
                       

Revenues

  $ 325,760       100.0%     $ 211,920       100.0%     $ 38,611       100.0%     $ 71,009       100.0%  

Cost of revenues (exclusive of depreciation and amortization shown separately below)

    187,246       57.5       59,807       28.2       13,258       34.3       17,692       24.9  

Research and development

    16,168       5.0       13,260       6.3       3,521       9.1       3,403       4.8  

Selling and marketing

    52,351       16.1       68,765       32.4       18,169       47.1       18,050       25.4  

General and administrative

    34,433       10.6       29,678       14.0       9,933       25.7       6,806       9.6  

Depreciation and amortization

    32,359       9.9       45,187       21.3       11,460       29.7       9,883       13.9  

Other expenses (income), net

    (700     (0.2     1,248       0.6       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) from operations

    3,903       1.2       (6,025     (2.8     (17,730     (45.9     15,175       21.4  

Financing income

    (773     (0.2     (445     (0.2     (1,104     (2.9     (86     (0.1

Financing expenses

    1,088       0.3       1,862       0.9       216       0.6       798       1.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing expenses (income), net

    315       0.1       1,417       0.7       (888     2.3       712       (1.0

Profit (loss) before taxes on income

    3,588       1.1       (7,442     (3.5     (16,842     (43.6     14,463       20.4  

Tax benefit (expenses)

    2,636       0.8       9,581       4.5       2,583       6.7       (1,589     (2.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the year

    6,224       1.9       2,139       1.0       (14,259     (36.9     12,874       18.1  

Foreign currency translation differences for foreign operation

    139       0.0       2,836       1.3       (2,633     (6.8     (836     (1.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

  $ 6,363       2.0%     $ 4,975       2.3%     $ (16,892     (43.7)%     $ 12,038       17.0%  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

Three months ended March 31, 2021 compared to three months ended March 31, 2020

Revenue

 

     Three Months Ended
March 31,
     Change
     2020
(as reported)
     2021
(as reported)
     $              %        
(in thousands, except for percentages)            

Revenue

   $ 38,611      $ 71,009      $ 32,398      83.9%

 

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Revenue increased by $32.4 million, or 83.9%, to $71.0 million for the three months ended March 31, 2021 from $38.6 million for the three months ended March 31, 2020. The increase was mainly attributable to the growth of $28.5 million in our Programmatic business, which includes multiple integrated growth initiatives following full integration of Unruly’s offering and relations, including CTV, our self-serve platform and the Private Market Place solutions. CTV serves as a robust growth driver for our core businesses, supported by an increasing number of industry leading CTV partners. In addition, we experienced growth of $3.9 million in our Performance business.

Cost of revenues

 

     Three Months Ended
March 31,
     Change
     2020
(as reported)
     2021
(as reported)
     $              %        
(in thousands, except for percentages)            

Cost of revenues (Exclusive of Depreciation and Amortization)

   $ 13,258      $ 17,692      $ 4,434      33.4%

Cost of revenues (exclusive of depreciation and amortization) increased by $4.4 million, or 33.4%, to $17.7 million for the three months ended March 31, 2021 from $13.3 million for the three months ended March 31, 2020. The increase was primarily driven by the increased revenue in our Performance activities and the greater usage of hosting and data services in our core business.

Research and development expenses

 

     Three Months Ended
March 31,
     Change
    

2020

(as reported)


 

    

2021

(as reported)

 

 

     $              %        
(in thousands, except for percentages)      

Research and development

   $ 3,521      $ 3,403      $ (118    (3.4)%

Research and development expenses decreased by $0.1 million, or 3.4%, to $3.4 million for the three months ended March 31, 2021 from $3.5 million for the three months ended March 31, 2020. The decrease was primarily driven by the decrease in the expense for research and development and engineering tools and services of $0.2 million. This was partially offset by the increase in share-based payments of $0.1 million.

Selling and marketing expenses

 

     Three Months Ended
March 31,
     Change
    

2020

(as reported)


 

    

2021

(as reported)

 

 

     $              %        
(in thousands, except for percentages)      

Selling and marketing

   $ 18,169      $ 18,050      $ (119    (0.7)%

Selling and marketing expenses decreased by $0.1 million, or 0.7%, to $18.1 million for the three months ended March 31, 2021, from $18.2 million for the three months ended March 31, 2020. This decrease was driven by (i) the share-based payment program of $1.2 million for our business managers and (ii) decrease in marketing and other costs of $0.7 million driven by the efficiency improvements during the COVID-19 pandemic. This decrease was partially offset by salary increase of $1.9 million as a result of our business growth.

 

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General and administrative expenses

 

     Three Months Ended
March 31,
     Change
    

2020

(as reported)


 

    

2021

(as reported)

 

 

     $              %        
(in thousands, except for percentages)      

General and administrative

   $ 9,933      $ 6,806      $ (3,127    (31.5)%

General and administrative expenses decreased by $3.1 million, or 31.5%, to $6.8 million for the three months ended March 31, 2021 from $9.9 million for the three months ended March 31, 2020. The decrease was primarily driven by (i) the decrease in share-based payments program of $1.8 million for the executives of the Company, (ii) the recovery in 2021 of $2.8 million doubtful debts provision as a result of higher collection rates, (iii) the decrease of $0.5 million in the acquisitions cost due to Unruly’s acquisition in the three months ended March 31, 2020 and (iv) employee related and other administrative costs of $0.8 million. This was partially offset by the increase in professional services of $0.3 million due to the dual listing process in the three months ended March 31, 2021 and a gain on sublease of vacant offices in the three months ended March 31, 2020 of $2.5 million.

Depreciation and amortization expenses

 

     Three Months Ended
March 31,
     Change
    

2020

(as reported)


 

    

2021

(as reported)

 

 

     $              %        
(in thousands, except for percentages)      

Depreciation and amortization

   $ 11,460      $ 9,883      $ (1,577    (13.8)%

Depreciation and amortization expenses decreased by $1.6 million, or 13.8%, to $9.9 million for the three months ended March 31, 2021 from $11.5 million for the three months ended March 31, 2020. The decrease was primarily driven by a decrease of $1.2 million in the depreciation of the lease assets of data centers and offices attributable to the optimization of our assets.

Net financial expenses (income)

 

     Three Months Ended
March 31,
     Change
     2020
(as reported)
     2021
(as reported)
     $              %        
(in thousands, except for percentages)            

Financial income

   $ (1,104    $ (86    $ 1,018      (92.2)%

Financial expenses

     216        798        582      269.4%
  

 

 

    

 

 

    

 

 

    

 

Financial expenses (income), net

   $ (888    $ 712      $ 1,600      180.2%

Net financial expenses increased by $1.6 million, or 180.2%, to $0.7 million for the three months ended March 31, 2021 from an income of $0.9 million for the three months ended March 31, 2020, primarily resulting from (i) the increase in the interest on ad spend liability of $0.5 million, (ii) currency exchange fluctuations of $1 million and (iii) bank fees of $0.1 million. This was partially offset by the income related to lease liabilities of $0.1 million.

 

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Tax benefit (expenses)

 

     Three Months Ended
March 31,
     Change
    

2020

(as reported)


 

    

2021

(as reported)

 

 

     $              %        
(in thousands, except for percentages)      

Tax benefit (expenses)

   $ 2,583      $ (1,589    $ (4,172    (161.5)%

Tax benefit amounted to $2.6 million in the three months ended March 31, 2020 as compared to a tax expense of $1.6 million in the three months ended March 31, 2021, which reflects a change of $4.2 million, or 161.5%. The change is primarily attributable to the profitable three months period ended March 31, 2021 and a decrease in the effective tax rate from 15% to 11% contributed by an increase in (i) deductible tax expenses mainly due to share based payments and (ii) utilization of carried forward losses for which no deferred tax assets was recognized in previous period.

Profit (loss) for the period

 

     Three Months Ended
March 31,
     Change
    

2020

(as reported)


 

    

2021

(as reported)

 

 

     $              %        
(in thousands, except for percentages)      

Profit (loss) for the period

   $ (14,259    $ 12,874      $ 27,133      190.3%

Profit for the period increased by $27.1 million, or 190.3%, to $12.9 million for the three months ended March 31, 2021 from a loss of $14.3 million for the three months ended March 31, 2020, primarily attributable to an increase of $32.4 million in revenue whereas there was a slight increase of $4.4 million in cost of revenue (exclusive of depreciation and amortization), as well as a decrease of $4.9 million in operational expenses. This was partially offset by an increase of $1.6 million in financing expenses, net, and a $4.2 million decrease in tax benefits.

Total comprehensive income (loss) for the period

 

     Three Months Ended
March 31,
    Change  
     2020
(as reported)
    2021
(as reported)
    $              %          
(in thousands, except for percentages)                          

Total comprehensive income (loss) for the period

   $ (16,892   $ 12,038     $ 28,930        171.3%  

Net profit margin

     (43.7 )%      17.0     

Total comprehensive income (loss) for the period increased by $28.9 million, or 171.3%, to $12.0 million for the three months ended March 31, 2021 from a total comprehensive loss of $16.9 million for the three months ended March 31, 2020, primarily attributable to the increase in the profit for the period of $27.1 as well as fluctuation in foreign currency translation differences for foreign operation income of $1.8 million, primarily due to translation from the British pound sterling and the Japanese yen to U.S. dollars.

Net profit margin increased to 17.0% for the three months ended March 31, 2021 from a negative margin of 43.7% for the three months ended March 31, 2020. This increase primarily resulted from an increase of 83.9% in revenues whereas there was a slight increase in cost of revenues (exclusive of depreciation and amortization) of 33.4%, as well as decrease of 11.5% in the operational expenses partially offset by an increase in tax expenses.

 

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Year ended December 31, 2020 compared to year ended December 31, 2019

Revenue

 

     Year Ended
December 31,
     Change
     2019(1)
(as reported)
     2020
(as reported)
     $              %        
(in thousands, except for percentages)            

Revenue

   $ 325,760      $ 211,920      $ (113,840    (35%)

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. If revenue for 2019 had been presented on a comparable basis to facilitate comparability, total revenue for the year ended December 31, 2019 would be $208,459 thousand. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

Revenue decreased by $113.8 million, or 35%, to $211.9 million for the year ended December 31, 2020 from $325.8 million for the year ended December 31, 2019. The decrease is primarily because effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

If revenue for 2019 had been presented on an as adjusted (non-IFRS) comparable basis to facilitate comparability, our revenue would have increased by $3.5 million, or 2%, to $211.9 million for the year ended December 31, 2020 from $208.5 million for the year ended December 31, 2019. The increase was mainly attributable to the growth of $37.5 million in our Programmatic business, which include multiple integrated growth initiatives such as CTV, our self-serve platform and the Private MarketPlace solutions. CTV serves as a robust growth driver for our core businesses, supported by an increasing number of industry leading CTV partners. However, this is largely offset by the decline of $34 million in our Performance activities, due to our strategic shift away from the Performance activities.

The table below sets forth the breakdown of our revenue based on geographical location of customers for the periods indicated.

 

Revenue by region    Year Ended
December 31,
     Change
     2019(1)
(as reported)
     2020
(as reported)
     $             %        
(in thousands, except for percentages)            

America

   $ 261,534      $ 180,515      $ (81,019   (31%)

APAC

     33,052        20,804        (12,248   (37%)

EMEA

     31,174        10,601        (20,573   (66%)
  

 

 

    

 

 

    

 

 

   

 

Total

   $ 325,760      $ 211,920      $ (113,840   (35%)
  

 

 

    

 

 

    

 

 

   

 

 

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. If revenue for 2019 had been presented on a comparable basis to facilitate comparability, revenue generated from America for the year ended December 31, 2019 would be $148,283 thousand, revenue generated from APAC for the year ended December 31, 2019 would be $32,165 thousand and revenue generated from EMEA for the year ended December 31, 2019 would be $28,011 thousand. See “—Critical Accounting

 

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Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

Revenue generated from America decreased by $81.0 million, or 31%, to $180.5 million for the year ended December 31, 2020 from $261.5 million for the year ended December 31, 2019. The decrease was primarily because effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

If revenue for 2019 had been presented on an as adjusted (non-IFRS) comparable basis to facilitate comparability, our revenue generated from America would have increased by $32.2 million, or 22%, to $180.5 million for the year ended December 31, 2020 from $148.3 million for the year ended December 31, 2019. The increase was partially attributable to the overarching market trend of digital advertising, especially in the fastest growing areas where we have a strong focus, such as Video and CTV. The increase was also driven by the expedited ramp-up of our self-serve platform and services that are available to both our advertisers and publishers.

Revenue generated from Asia Pacific decreased by $12.3 million, or 37%, to $20.8 million for the year ended December 31, 2020 from $33.1 million for the year ended December 31, 2019. If revenue for 2019 had been presented on an as adjusted (non-IFRS) comparable basis to facilitate comparability, our revenue generated from APAC would have decreased by $11.4 million, or 35%, to $20.8 million for the year ended December 31, 2020 from $32.2 million for the year ended December 31, 2019. The decrease was mainly due to our strategic shift away from the Performance activities, partially offset by the launch of our end-to-end technology offering enabled by the acquisition of Unruly in 2020.

Revenue generated from Europe, the Middle East and Africa decreased by $20.6 million, or 66%, to $10.6 million for the year ended December 31, 2020 from $31.2 million for the year ended December 31, 2019. If revenue for 2019 had been presented on an as adjusted (non-IFRS) comparable basis to facilitate comparability, our revenue generated from EMEA would have decreased by $17.4 million, or 62%, to $10.6 million for the year ended December 31, 2020 from $28.0 million for the year ended December 31, 2019. The decrease was mainly due to our strategic shift away from the Performance activities, partially offset by the launch of our end-to-end technology offering enabled by the acquisition of Unruly in 2020.

Cost of revenues

 

     Year Ended
December 31,
     Change
     2019(1)
(as reported)
     2020
(as reported)
     $              %        
(in thousands, except for percentages)            

Cost of revenues (Exclusive of Depreciation and Amortization)

   $ 187,246      $ 59,807      $ (127,439    (68%)

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. If revenue for 2019 had been presented on a comparable basis to facilitate comparability, cost of revenues (exclusive of depreciation and amortization) for the year ended December 31, 2019 would be $69,945 thousand. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

Cost of revenues (exclusive of depreciation and amortization) decreased by $127.4 million, or 68%, to $59.8 million for the year ended December 31, 2020 from $187.2 million for the year ended December 31, 2019.

 

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This is primarily because effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

If revenue for 2019 had been presented on an as adjusted (non-IFRS) comparable basis to facilitate comparability, our cost of revenue (exclusive of depreciation and amortization) would have decreased by $10.1 million, or 14%, to $59.8 million for the year ended December 31, 2020 from $69.9 million for the year ended December 31, 2019. This decrease was primarily driven by lowered costs due to our strategic shift away from the Performance activities, partially offset by the greater usage of hosting and data services in our core business.

Research and development expenses

 

     Year Ended
December 31,
     Change  
     2019
(as reported)
     2020
(as reported)
     $              %          
(in thousands, except for percentages)              

Research and development

   $ 16,168      $ 13,260      $ (2,908      (18.0 )% 

Research and development expenses decreased by $2.9 million, or 18.0%, to $13.3 million for the year ended December 31, 2020, compared to $16.2 million for the year ended December 31, 2019. This decrease was primarily the result of decreases in (i) wages and salaries of $1.7 million attributable to the efficiencies and consolidation of our research and development efforts, (ii) the expense for research and development and engineering tools and services of $1.1 million and (iii) capitalized costs of $0.1 million.

Selling and marketing expenses

 

     Year Ended
December 31,
     Change
     2019
(as reported)
     2020
(as reported)
     $              %        
(in thousands, except for percentages)            

Selling and marketing

   $ 52,351      $ 68,765      $ 16,414      31.4%

Selling and marketing expenses increased by $16.4 million, or 31.4%, to $68.8 million for the year ended December 31, 2020 from $52.3 million for the year ended December 31, 2019. This increase was driven by (i) the wages, salaries and share-based payments of $13.9 million related to the Unruly acquisition, (ii) the share-based payment program of $3.3 million for our business managers and (iii) the salary increase of $1.3 million as a result of our business growth, which was partially offset by a decrease in marketing and other costs of $2.1 million driven by the efficiency improvements during the COVID-19 pandemic.

General and administrative expenses

 

     Year Ended
December 31,
     Change
     2019
(as reported)
     2020
(as reported)
     $              %        
(in thousands, except for percentages)            

General and administrative

   $ 34,433      $ 29,678      $ (4,755    (13.8%)

General and administrative expenses decreased by $4.8 million, or 13.8%, to $29.7 million for the year ended December 31, 2020 from $34.4 million for the year ended December 31, 2019. This decrease was

 

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primarily driven by the decrease in (i) wages, salaries and share-based payments of $1.5 million, (ii) the recovery in 2019 of $4.1 million doubtful debts provision as a result of higher collection rates and (iii) employee related and other administrative costs of $0.4 million. This was partially offset by the increase in professional services and acquisition costs of $1.2 million.

Depreciation and amortization expenses

 

     Year Ended
December 31,
     Change
     2019
(as reported)
     2020
(as reported)
     $              %        
(in thousands, except for percentages)            

Depreciation and amortization

   $ 32,359      $ 45,187      $ 12,828      39.6%

Depreciation and amortization increased by $12.8 million, or 39.6%, to $45.2 million for the year ended December 31, 2020 from $32.4 million for the year ended December 31, 2019. This increase was primarily driven by an increase of (i) $7.5 million in amortization of the brand and domain name, customer relations and technology as a result of the acquisition of Unruly at the beginning of 2020, and (ii) $5.1 million in further amortization of the brand and domain name, customer relations and technology as a result of the acquisition of RhythmOne in the second quarter of 2019.

Net financial expenses

 

     Year Ended
December 31,
     Change
     2019
(as reported)
     2020
(as reported)
     $              %        
(in thousands, except for percentages)            

Financial income

   $ (773    $ (445    $ 328      42%

Financial expenses

     1,088        1,862        774      71%
  

 

 

    

 

 

    

 

 

    

 

Financial expenses, net

   $ 315      $ 1,417      $ 1,102      350%

Net financial expenses increased by $1.1 million, or 350%, to $1.4 million for the year ended December 31, 2020 from $0.3 million for the year ended December 31, 2019, primarily resulting from (i) the increase in the interest on ad spend liability of $2 million, (ii) the finance expenses of $0.7 million related to lease liabilities, (iii) bank fees of $0.2 million and (iv) currency exchange fluctuations of $0.4 million. This was partially offset by the income from derivative instruments of $2.2 million.

Tax benefit

 

     Year Ended
December 31,
     Change
     2019
(as reported)
     2020
(as reported)
     $              %        
(in thousands, except for percentages)            

Tax benefit

   $ 2,636      $ 9,581      $ 6,945      263%

Tax benefit increased by $6.9 million to $9.6 million for the year ended December 31, 2020 from $2.6 million for the year ended December 31, 2019, attributable to an increase in current tax benefit of $1.5 million and an increase in deferred tax benefit of $5.4 million, mainly relating to (i) intangible assets and research and development expenses of $1 million, (ii) carry-forward losses of $3 million, (iii) accrued expenses and deferred revenue of $5.0 million, and partially offset by (iv) employee compensation of $1.4 million and (v) doubtful debt provision of $2.2 million.

 

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Profit for the year

 

     Year Ended
December 31,
     Change
     2019
(as reported)
     2020
(as reported)
     $              %        
(in thousands, except for percentages)                          

Profit for the year

   $ 6,224      $ 2,139      $ (4,085    (66)%

Profit for the year decreased by $4.1 million to $2.1 million for the year ended December 31, 2020 from $6.2 million for the year ended December 31, 2019, attributable to an increase in operational expenses of $23.5 million (mainly due to the increase of $16.4 million in selling and marketing expenses) and an increase in financing expenses, net of $1.1 million, offset by an increase of $13.6 million in revenue after subtracting cost of revenues (exclusive of depreciation and amortization) and tax benefits of $6.9 million.

Total comprehensive income for the year

 

     Year Ended
December 31,
    Change  
     2019(1)
(as reported)
    2020
(as reported)
    $              %          
(in thousands, except for percentages)                          

Total comprehensive income for the year

   $ 6,363     $ 4,975     $ (1,388      (22 %) 

Net profit margin

     2     2     

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. If revenue for 2019 had been presented on an as adjusted (non-IFRS) comparable basis to facilitate comparability, net profit margin for the year ended December 31, 2019 would be 3%. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

Total comprehensive income for the year (net profit) decreased by $1.4 million to $5.0 million for the year ended December 31, 2020 from $6.4 million for the year ended December 31, 2019, attributable to the decrease in the profit for the year of $4.1 million, offset by the increase in foreign currency translation differences for foreign operation income of $2.7 million due to Unruly acquisition.

Net profit margin was stable at 2% of gross revenue for each of the years ended December 31, 2020 and 2019. If revenue for 2019 had been presented on an as adjusted (non-IFRS) comparable basis to facilitate comparability, our net profit margin would have decreased by 1%, to 2% for the year ended December 31, 2020 from 3% for the year ended December 31, 2019. This decrease primarily resulted from a decrease in total comprehensive income of 22% while revenues, as presented on a comparable basis, remained relatively stable.

Key Performance Indicators and Other Operating Metrics

We review the following indicators to measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Increases or decreases in our key performance indicators may not correspond with increases or decreases in our revenue. In this section, we use the following terms:

Programmatic” means our end-to-end platform of programmatic advertising, which uses software and algorithms to match buyers and sellers of digital advertising in a technology-driven marketplace; transactions in our Programmatic activities are executed in milliseconds and beginning in 2020, human intervention or discretion for execution has significantly decreased.

 

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Performance” means our non-core performance activities consisting primarily of mobile-based solutions that help brands reach their users; revenue generated in the Performance activities is contingent on the occurrence of performance-based metrics, such as app downloads and installations.

The following tables summarize the key performance indicators that we use to evaluate our business for the periods presented.

Programmatic and Performance Revenue by Media Type and Device

The following table summarizes the Programmatic and Performance revenue by selected media type and device for the years ended December 31, 2020 and 2019.

 

     2019 As Adjusted (Non-IFRS) Revenue     2020 Revenue  

Yearly revenue matrix

(unaudited, in thousands)

   Programmatic     Performance      Group     Programmatic     Performance      Group  

Video

     $109,636       $0        $109,636       $143,390       $0        $143,390  

CTV(1)

     13        13 %      26        26

Mobile(1)

     60        60 %      49        49

Desktop(1)

     27        27 %      25        25

Display

     $14,527       $84,296        $98,823       $18,235       $50,295        $68,530  

Total Group

     $124,163       $84,296        $208,459       $161,625       $50,295        $211,920  

 

(1)

Percent of total Video revenue

The following table summarizes the Programmatic and Performance revenue by selected media type and device for the three months ended March 31, 2021 and 2020.

 

     Three Months Ended March 31, 2020     Three Months Ended March 31, 2021  

Quarterly revenue matrix

(unaudited, in thousands)

   Programmatic     Performance      Group     Programmatic     Performance      Group  

Video

     $21,869       $0        $21,869       $50,854       $0        $50,854  

CTV(1)

     25        25 %      35        35

Mobile(1)

     50        50 %      40        40

Desktop(1)

     25        25 %      25        25

Display

     $5,336       $11,407        $16,742       $4,834       $15,321        $20,155  

Total Group

     $27,204       $11,407        $38,611       $55,689       $15,321        $71,009  

 

(1)

Percent of total Video revenue

Selected Device – CTV

 

     Three Months
Ended March 31,
2020
    Three Months
Ended March 31,
2021
    % Change  

Revenue (in thousands)

   $ 5,512     $ 17,606       219

% of Programmatic revenue

     20%       32%       —    

 

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CTV revenue increased by $12.1 million, or 219%, to $17.6 million for the three months ended March 31, 2021 from $5.5 million for the three months ended March 31, 2020. The increase was mainly attributable to the increase in our CTV partners’ utilization of our end-to-end platform.

 

     Year Ended
December 31, 2019
     Year Ended
December 31,
2020
     % Change  
     Gross      Programmatic
media cost(1)
    As
adjusted
     Net      2020 vs. 2019
gross
     2020 vs. 2019
adjusted - net
 

Revenue (in thousands)

   $ 35,074      $ (21,108   $ 13,966      $ 36,820        5%        164%  

% of Programmatic revenue

     15%        —         11%        23%        —          —    

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. In order to facilitate comparability of our results of operations, we excluded Programmatic media cost for 2019 to present 2019 revenue on a comparable basis. Programmatic media cost represents costs of acquiring publishers’ advertising space that is purchased by advertisers via our Programmatic end-to-end solution. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

CTV revenue increased by $1.7 million, or 5%, to $36.8 million for the year ended December 31, 2020 from $35.1 million for the year ended December 31, 2019. If revenue for 2019 had been presented on an as adjusted (non-IFRS) comparable basis to facilitate comparability, our CTV revenue would have increased by $22.9 million, or 164%, to $36.8 million for the year ended December 31, 2020 from $14.0 million for the year ended December 31, 2019. The increase was mainly attributable to the increase in our CTV partners’ utilization of our end-to-end platform.

Selected Media Type – Video

 

     Three Months
Ended March 31,
2020
    Three Months
Ended March 31,
2021
    % Change  

Revenue (in thousands)

   $ 21,869     $ 50,854       133

% of Programmatic revenue

     80%       91%       —    

Video revenue increased by $29.0 million, or 133%, to $50.9 million for the three months ended March 31, 2021 from $21.9 million for the three months ended March 31, 2020. The increase was mainly attributable to the increased spending on our DSP platform driven by our strong expertise in digital video advertising.

 

     Year Ended
December 31, 2019
     Year Ended
December 31,
2020
     % Change  
     Gross      Programmatic
media cost(1)
    As
adjusted
(non-IFRS)
     Net      2020 vs. 2019
gross
     2020 vs. 2019
adjusted - net
(non-IFRS)
 

Revenue (in thousands)

   $ 191,604      $ (81,968   $ 109,636      $ 143,390        (25%)        31%  

% of Programmatic revenue

     79%        —         88%        89%        —          —    

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. In order to facilitate comparability of our results of operations, we excluded Programmatic media cost for 2019 to present 2019 revenue on a comparable basis. Programmatic media cost represents costs of acquiring publishers’ advertising space that is purchased by advertisers via our Programmatic end-to-end solution. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

 

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Video revenue decreased by $48.2 million, or 25%, to $143.4 million for the year ended December 31, 2020 from $191.6 million for the year ended December 31, 2019. The decrease is primarily because effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019.

If revenue for 2019 had been presented on an as adjusted (non-IFRS) comparable basis to facilitate comparability, our Video revenue would have increased by $33.8 million, or 31%, to $143.4 million for the year ended December 31, 2020 from $109.6 million for the year ended December 31, 2019. The increase was mainly attributable to the increased spending on our DSP platform driven by our strong expertise in digital video advertising.

Other Key Financial Metrics

 

     Year Ended
December 31,
    Three Months Ended
March 31,
 
     2019(1)     2020     2020     2021  

IFRS measures

        

Revenue (in thousands)

   $ 325,760     $ 211,920     $ 38,611     $ 71,009  

Gross profit (in thousands)(4)

   $ 121,769     $ 132,517     $ 20,346     $ 49,130  

Total comprehensive income (loss)

   $ 6,363     $ 4,975     $ (16,892   $ 12,038  

Net profit margin(2)

     2%       2%       (44)%       17%  

Non-IFRS measures

        

As adjusted (non-IFRS) revenue (in thousands)(3)

   $ 208,459       —         —         —    

Contribution ex-TAC (in thousands)(4)

   $ 164,038     $ 184,282     $ 32,112     $ 62,988  

Adjusted EBITDA(5) (in thousands)

   $ 60,411     $ 60,513     $ 547     $ 27,519  

Adjusted EBITDA margin(5)

     19%       29%       1%       39%  

 

(1)

Effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for the year ended December 31, 2019. See “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition” for information regarding the revenue recognition presentation change.

(2)

If revenue for 2019 had been presented on an as adjusted (non-IFRS) basis to facilitate comparability, net profit margin for the year ended December 31, 2019 would be 3%.

(3)

For the year ended December 31, 2019, our audited revenue consists of (i) Programmatic revenue that is recognized on a gross basis (which includes the Programmatic media cost as defined below) and (ii) Performance revenue that is recognized on a gross basis (which includes the Performance media cost as defined below). For the year ended December 31, 2020, our audited revenue consists of (i) Programmatic revenue that is recognized on a net basis (which excludes the Programmatic media cost as defined below) and (ii) Performance revenue that is recognized on a gross basis. For information regarding the revenue recognition presentation change of our Programmatic revenue, see “—Critical Accounting Policies, Judgments and Estimates—Revenue Recognition”. We present as adjusted (non-IFRS) revenue to facilitate comparability solely for the year ended December 31, 2019, which excludes programmatic media cost.

(4)

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 defined as our gross profit plus depreciation and amortization attributable to cost of revenues and cost of revenues (exclusive of depreciation and amortization) minus both the Programmatic media cost (as defined below) and the Performance media cost (as defined below) (collectively, “traffic acquisition costs” or “TAC”), since we arrange for the transfer of such costs from the supplier to the customer through the use of our platform and do not control such features prior to transfer to the customer.

 

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Contribution ex-TAC is included in this prospectus because it is a key metric used by management and our board of directors to assess our financial performance. Contribution ex-TAC or similar measures is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Management believes that Contribution ex-TAC is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate directly to the performance of the underlying business.

The following table reconciles Contribution ex-TAC to the most directly comparable IFRS financial performance measure, which is gross profit:

 

     Year Ended
December 31,
    Three Months Ended
March 31,
 
(in thousands)    2019     2020     2020     2021  

Revenues

   $ 325,760     $ 211,920     $ 38,611     $ 71,009  

Cost of revenues (exclusive of depreciation and amortization)

     (187,246     (59,807     (13,258     (17,692

Depreciation and amortization attributable to Cost of Revenues

     (16,745     (19,596     (5,007     (4,187

Gross profit (IFRS)

     121,769       132,517       20,346       49,130  

Depreciation and amortization attributable to Cost of Revenues

     16,745       19,596       5,007       4,187  

Cost of revenues (exclusive of depreciation and amortization)

     187,246       59,807       13,258       17,692  

Programmatic media costs(a)

     (117,301     —         —         —    

Performance media cost(b)

     (44,421     (27,638     (6,499     (8,021
  

 

 

   

 

 

   

 

 

   

 

 

 

Contribution ex-TAC (Non-IFRS)

   $ 164,038     $ 184,282     $ 32,112     $ 62,988  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

  (a)

Represents the costs of acquiring publishers’ advertising space that is purchased by advertisers via our Programmatic end-to-end solution.

  (b)

Represents the costs of purchases of impressions from publishers on a cost per thousand impression basis in our Performance activities.

(5)

Adjusted EBITDA is defined as total comprehensive income (loss) for the period adjusted for foreign currency translation differences for foreign operations, financing expenses, net, tax benefit (expenses), depreciation and amortization, stock-based compensation, restructuring and acquisition-related costs and other expenses (income), net. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of revenue. Adjusted EBITDA is a non-IFRS financial metric. See “Prospectus Summary—Summary Consolidated Financial and Other Data” for information regarding the limitations of using Adjusted EBITDA as a financial measure.

 

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The following table reconciles Adjusted EBITDA to the most directly comparable IFRS financial performance measure, which is total comprehensive income (loss) for the period:

 

     Year Ended
December 31,
     Three Months Ended
March 31,
 
     2019      2020      2020      2021  
(in thousands)                            

Total comprehensive income (loss) for the period

   $ 6,363      $ 4,975      $ (16,892    $ 12,038  

Foreign currency translation differences for foreign operation

     (139      (2,836      2,633        836  

Taxes on income

     (2,636      (9,581      (2,583      1,589  

Financial expense (income), net

     315        1,417        (888      712  

Depreciation and amortization

     32,359        45,187        11,460        9,883  

Stock-based compensation

     15,809        14,490        5,228        2,341  

Other expenses

     —        1,700        —        —  

Restructuring

     5,500        4,637        1,081        120  

Acquisition-related cost

     2,840        524        508        —  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 60,411      $ 60,513      $ 547      $ 27,519  
  

 

 

    

 

 

    

 

 

    

 

 

 

Contribution ex-TAC

Our contribution ex-TAC increased by $30.9 million, or 96%, to $63.0 million for the three months ended March 31, 2021 from $32.1 million for the three months ended March 31, 2020. The increase was mainly attributable to 105% increase in our Programmatic activities, from $27.2 million for the three months ended March 31, 2020 to $55.7 million for the three months ended March 31, 2021, which was mainly attributable to the continued growth trend in CTV, our self-serve platform as well as the DSP’s offerings in private marketplaces in the second half of 2020 as well as relatively lower increase in our Performance activities, from $4.9 million for the three months ended March 31, 2020 to $7.3 million for the three months ended March 31, 2021, which resulted from our strategic shift towards the Programmatic activities as the main growth driver.

Our contribution ex-TAC increased by 12% from $164.0 million for the year ended December 31, 2019 to $184.3 million for the year ended December 31, 2020. This was primarily driven by the 30% increase in our Programmatic activities, from $124.2 million for the year ended December 31, 2019 to $161.6 million for the year ended December 31, 2020, mainly attributable to the growth in CTV, our self-serve platform as well as the DSP’s offerings in private marketplaces in the second half of 2020. This was partially offset by the 43% decrease in our Performance activities, from $39.9 million for the year ended December 31, 2019 to $22.7 million for the year ended December 31, 2020, which resulted from our strategic shift towards the Programmatic activities as the main growth driver.

Adjusted EBITDA

Our Adjusted EBITDA increased by $27.0 million from $0.5 million for the three months ended March 31, 2020 to $27.5 million for the three months ended March 31, 2021. The increase was primarily driven by the full integration of Unruly’s offering and relations and the continued trend in the second half of 2020. In addition, our economy of scale and efficiencies translated most of the revenue increase directly into adjusted EBITDA.

Our Adjusted EBITDA remained largely unchanged at $60.5 million for the year ended December 31, 2020, compared to $60.4 million for the year ended December 31, 2019. This was primarily driven by the increase in our Programmatic activity, mainly attributable to the revenue growth in CTV, our self-serve platform as well as the DSP’s offerings in private marketplaces. This was offset by the decrease in our Performance activity. In particular, in the first half of 2020, our business was negatively impacted by the COVID-19 pandemic, which resulted in a decrease in advertising demand globally. As business promotion activities started to recover, the

 

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second half of 2020 saw a significant resurgence of advertising spend. Our Adjusted EBITDA for the six months ended December 31, 2020 increased approximately 33 times from the equivalent figure for the six months ended June 30, 2020, which represented a 51% year-over-year increase over our Adjusted EBITDA for the six months ended December 31, 2019. Consequently, our full year Adjusted EBITDA for 2020 remains intact, although some verticals have still not recovered, including travel, retail and hospitality. Adjusted EBITDA is a non-IFRS financial metric. For a discussion of the most directly comparable measure calculated in accordance with IFRS, see “—Results of Operations—Total comprehensive income for the year.

Key Operating Metrics

 

     Year Ended
December 31,
     Three Months Ended
March 31
 
     2019      2020      2020      2021  

Active customers

           

Number of active customers(1)

     931        889        1,021        914  

Gross profit per active customer (in thousands)

   $ 131      $ 149      $ 20      $ 54  

Contribution ex-TAC(2) per active customer (in thousands)

   $ 176      $ 207      $ 31      $ 69  

Contribution ex-TAC retention rate(3)

     —          112%        —          —    

Active publishers

           

Number of active publishers(4)

     877        1,444        952        1,553  

Ad impressions

           

Number of ad impressions(5) (in millions)

     45,175        53,839        7,868        19,052  

 

 

(1)

An active customer is defined as an advertiser, agency, trading desk or third party DSP that has used our platform within a trailing 365 day period.

(2)

Contribution ex-TAC is defined as our gross profit plus depreciation and amortization attributable to cost of revenues and cost of revenues (exclusive of depreciation and amortization) minus traffic acquisition costs, since we arrange for the transfer of such costs from the supplier to the customer through the use of our platform and do not control such features prior to transfer to the customer. Contribution ex-TAC is a non-IFRS financial metric. See “Prospectus Summary—Summary Consolidated Financial and Other Data” for information regarding the limitations of using Contribution ex-TAC as a financial measure. See “—Other Key Financial Metrics” for reconciliation of Contribution ex-TAC to the most directly comparable IFRS financial performance measure, which is gross profit.

(3)

Contribution ex-TAC retention rate is defined as contribution ex-TAC generated in the year ended December 31, 2020 from the customers who were existing customers as of December 31, 2019 as a percentage of the contribution ex-TAC generated in the year ended December 31, 2019 from the same group of customers. Contribution ex-TAC retention rate is intended to provide an aggregated view of positive and negative changes for the same group of customers over a 12-month period, including customer attrition, customer renewal, service upgrades and service downgrades. We consider all of our revenue to be recurring. Information on contribution ex-TAC retention rate for the year ended December 31, 2019 is not provided as it is not comparable due to the acquisition of RhythmOne in 2019. Information on Contribution ex-TAC retention rate is not provided on a quarterly basis.

(4)

An active publisher is defined as a publisher or third-party SSP that has used our platform within a trailing 365 day period.

(5)

An ad impression is defined as each time an ad is displayed within our platform.

 

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Liquidity and Capital Resources

As of March 31, 2021, we had cash of $103.5 million and a working capital, consisting of current operating assets less current operating liabilities, of $101.0 million. As of December 31, 2020, we had cash of $97.5 million and a working capital, consisting of current operating assets less current operating liabilities, of $85.5 million. We believe our existing cash and cash flow from operations will be sufficient to meet our working capital requirements for at least the next 12 months.

The following table presents the summary consolidated cash flow information for the periods presented.

 

     Year Ended December 31,     Three Months Ended March 31,  
(in thousands)    2019
(as reported)
    2020
(as reported)
    2020
(as reported)
    2021
(as reported)
 

Net cash provided by operating activities

   $ 45,073     $ 35,163     $ 10     $ 19,299  

Net cash provided (used) by investing activities

     19,438       4,919       6,302       (2,176

Net cash used in financing activities

     (52,793     (22,367     (3,804     (10,548

Net cash provided by operating activities

Net cash provided by operating activities was nil million for the three months ended March 31, 2020, which is derived from our loss for the period of $14.3 million, adjusted for non-cash adjustments of $10.4 million, including depreciation and amortization of $11.5 million and stock-based compensation of $5.2 million, and offset by gain on leases of $2.8 million, finance income of $0.9 million and tax benefit of $2.6 million. There was an additional $3.9 million cash provided, which includes a decrease in accounts receivable of $36.7 million, a decrease in accounts payable of $33.2 million, income taxes received, net of $0.5 million and interest paid, net of $0.1 million.

Net cash provided by operating activities was $19.3 million for the three months ended March 31, 2021, which is derived from our profit for the period of $12.9 million, adjusted for non-cash adjustments of $14.3 million, including depreciation and amortization of $9.9 million, stock-based compensation of $2.3 million and finance expense of $0.7 million and tax expense of $1.6 million, and offset by gain on leases of $0.3 million. In addition, there was $7.8 million cash used, which includes a decrease in accounts receivable of $11.1 million, a decrease in accounts payable of $19.7 million, income taxes received, net of $0.9 million and interest paid, net of $0.1 million.

Net cash provided by operating activities was $45.1 million for the year ended December 31, 2019, which is derived from our profit for the year of $6.2 million, adjusted for non-cash expenses of $42.1 million, including depreciation and amortization of $32.3 million, and stock-based compensation of $15.8 million, and offset by gain on leases of $2.7 million, gain on sale of business unit of $0.7 million and income tax of $2.6 million. There was an additional $3.3 million cash used, which includes a decrease in accounts receivable of $36.5 million, a decrease in accounts payable of $34.2 million, a decrease in employee benefit of $0.3 million, income taxes paid, net of $4.9 million and interest paid, net of $0.3 million.

Net cash provided by operating activities was $35.2 million for the year ended December 31, 2020, which is derived from our profit for the year of $2.1 million, adjusted for non-cash adjustments of $48.8 million, including depreciation and amortization of $45.2 million, finance expenses of $1.3 million, stock-based compensation of $14.5 million, income tax of $9.6 million, gain on lease contract change of $2.1 million, gain on sale of business unit of $0.5 million as well as a cash adjustment primarily attributable to an increase in accounts payable of $25.9 million, an increase in accounts receivable of $39.4 million, income taxes paid, net of $1.7 million and interest paid, net of $0.6 million.

 

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Net cash provided by investing activities

Net cash provided by investing activities was $6.3 million for the three months ended March 31, 2020, which was primarily comprised of the acquisition of Unruly, net of cash acquired of $6.2 million, lease payment receipt of $0.6 million, repayment of loan of $0.8 million, and a change in pledged deposits of $0.1 million, partially offset by the acquisition and development of intangible assets of $1.2 million and the acquisition of fixed assets of $0.3 million.

Net cash used in investing activities was $2.2 million for the three months ended March 31, 2021, which is derived from acquisition and development of intangible assets of $1.3 million and the acquisition of fixed assets of $1.5 million, as well as a change in pledged deposits of $0.3 million, partially offset by lease payment receipt of $0.8 million and proceeds from sale of business unit of $0.1 million.

Net cash provided by investing activities was $19.4 million for the year ended December 31, 2019, and was primarily comprised of the acquisition of RhythmOne, net of cash acquired of $23.7 million, lease payment receipt of $1.7 million and a net decrease in pledged deposits of $0.8 million, partially offset by the acquisition and development of intangible assets of $5.7 million and the acquisition of fixed assets of $1.1 million.

Net cash provided by investing activities was $4.9 million for the year ended December 31, 2020 and was primarily comprised of the acquisition of Unruly, net of cash acquired of $6.2 million, lease payment receipt of $2.9 million, repayment of loan of $0.8 million, proceeds from sale of business unit of $0.2 million, and a net decrease in pledged deposits of $0.2 million, partially offset by the acquisition and development of intangible assets of $4.9 million and the acquisition of fixed assets of $0.6 million.

Net cash used in financing activities

Net cash used in financing activities was $3.8 million for the three months ended March 31, 2020, which is derived from leases repayment of $4.3 million, partially offset by proceeds from exercise of share options $0.5 million.

Net cash used in financing activities was $10.5 million for the three months ended March 31, 2021, which is derived from acquisition of own shares of $6.6 million and leases repayment of $2.8 million, as well as payment of call option liability of $1.3 million, partially offset by proceeds from exercise of share options of $0.2 million.

Net cash used in financing activities was $52.8 million for the year ended December 31, 2019, comprised of repayment of loan of $17.3 million, leases repayment of $12.6 million and buy back of shares of $24.7 million, partially offset by proceeds from exercise of share options of $1.8 million.

Net cash used in financing activities was $22.4 million for the year ended December 31, 2020, and was primarily comprised of leases repayment of $13.4 million and buy back of shares of $10 million, partially offset by proceeds from exercise of share options of $1.0 million.

Capital Expenditures

Our capital expenditures consist primarily of purchase of hardware and software. Our capital expenditures during the year ended December 31, 2020 were $1.8 million, a $0.1 million decrease compared to the year ended December 31, 2019. Our capital expenditures during the three months ended March 31, 2021 and March 31, 2020 were $0.3 million. We will continue to make capital expenditures to meet the expected growth of our business.

Contractual Obligations

Our significant contractual obligations as of December 31, 2020 are summarized in the following table:

 

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Our significant contractual obligations as of March 31, 2021 are summarized in the following table:

 

     Payments Due by Period  
     Total      Less than
1 Year
     1 to 3 years      3 to 5
Years
     Thereafter  
(in thousands)  

Lease liabilities

   $ 18,411      $ 7,764      $ 5,294      $ 3,700      $ 1,653  

Off-Balance Sheet Arrangements

During the periods presented, we did not engage in any off-balance sheet financing activities other than those disclosed in Note 19b to our audited consolidated financial statements included elsewhere in this prospectus.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 3 to our audited consolidated financial statements included elsewhere in this prospectus.

Quantitative and Qualitative Disclosure about Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of foreign currency exchange rates and interest rates, which are discussed in detail below.

Interest rate risk

We believe that we have no significant exposure to interest rate risk as we have no significant long-term loans. However, our future interest income may fall short of expectations due to changes in market interest rates.

Foreign currency exchange risk

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of us and our subsidiaries at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated in to the functional currency at the exchange rate on that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate as of the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate on the date that the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate on the date of the transaction.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to U.S. dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to U.S. dollars at exchange rates at the dates of the transactions.

Foreign currency differences are recognized in other comprehensive income and are presented in equity.

 

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A LETTER FROM OUR CEO

From Vision to Reality

When I joined Tremor almost four years ago, we were at a cross-road, both in our business and in our target markets. It was time to reexamine our vision and rethink our market position, focusing on the future growth drivers of digital advertising where we have a competitive advantage – Video and CTV.

At its core, this vision included the assembly of a full end-to-end technology platform to transform us into a market leader. We strategically hand-picked companies and invested in building out our platform, connecting each of the components together and watched our vision come to life.

Three years and three major acquisitions later, we have managed to create one of the best end-to-end technology and business platforms in digital advertising. Our user-friendly and unique approach empowers customers to achieve their goals, and positions us at the technological forefront of the industry. Now that we have concluded the integration of our end-to-end platform, we are embarking on our next stage of strong organic growth and impressive profitability.

We have built a great company that is utilizing the strong tailwinds in our industry, which we believe will continue to support our success and provide additional growth opportunities in the years to come.

Our Team

The realization of our vision wouldn’t be possible without the talented, dedicated and thoughtful work of our team. We are led by a global and professional team with many years of experience in the adtech industry. We have worked together on a global scale for many years, fostering a culture that rewards innovation, collaboration and diversity. Our collaborative nature is strengthened by the fact that many of our team members have previously worked together, helping to boost our ability to work together as one strong team.

We welcome you to join us in this journey. We strongly believe that we have a lot of room to grow.

Ofer

 

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BUSINESS

Our Mission

Our mission is to create an efficient automated marketplace for advertisers and publishers, utilizing advanced data driven technology, to enable the delivery of impactful brand stories to relevant audiences across the globe.

Overview

We are a global company offering an end-to-end software platform that enables advertisers to reach relevant audiences and publishers to maximize yield on their digital advertising inventory. We use our proprietary technology to deliver impactful brand stories to target audiences through digital ad technology and advanced audience data. Our omni-channel capabilities deliver global advertising campaigns across all formats and channels, with an expertise in Video and CTV.

We believe there is a significant market opportunity within the approximately $455 billion global digital advertising market that is expected to grow at a CAGR of 11.4% through 2025, according to eMarketer. Digital publishers rely on advertising to support their businesses and brands, and advertisers use this medium to capture uniquely targeted and viewable impressions. We believe the digital advertising market remains fragmented and that our full service end-to-end software platform and vast expertise within Video and CTV puts us in a strong position to continue to increase our market share from traditional ad sales channels.

We believe that we are positioned to benefit from several trends in the evolving advertising ecosystem, including the proliferation of digital media consumption, adoption of programmatic advertising, a growing focus on premium formats such as Video and CTV, and the increasing sophistication of the overall digital landscape. We address the broad and evolving digital advertising market through our three core offerings, including a proprietary DSP solution that advertisers leverage to manage digital advertising campaigns, a proprietary SSP solution that publishers leverage to optimally monetize digital inventory and a proprietary DMP solution which is integrated with both our DSP and SSP solutions. Our versatile DMP solution benefits from vast amounts of data and provides optimal campaign recommendations for audience sets by employing advanced machine learning algorithms. The contextualization of the data synthesized by our DMP solution provides our advertisers with a comprehensive, personalized view of audiences, enabling more effective targeting across formats and devices and optimizes the monetization of publisher inventory. By combining these three proprietary solutions as well as integrations with industry leading partners, we provide an end-to-end software platform that is dynamic and flexible to our customers’ needs, which enables us to address more digital ad spend.

 

 

LOGO

 

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Our customers are both ad buyers, including brands and agencies, and digital publishers. Our platform included as of March 31, 2021, a diversified customer base of approximately 900 active customers and 1,450 active publishers with approximately 800 million unique users for the month ended March 31, 2021, which serves advertisements in over 100 countries.

We generate revenue through platform fees that are tailored to fit the customer’s specific utilization of our solutions and include (i) a percentage of spend, (ii) flat fees and (iii) fixed CPM.

The advertising industry was significantly impacted at the end of first quarter and throughout the second quarter of 2020 by the outbreak of the COVID-19 pandemic and the resulting economic uncertainty in the global economy, including in the United States (where the majority of our revenue is generated). As a result, advertising demand on our platform decreased significantly in the first half of 2020, as economic activity across most markets contracted and marketing budgets were reduced. However, as parts of the economy reopened at the end of the second quarter of 2020, the advertising industry and related spend responded with a robust recovery in the second half of 2020. Although certain industries, such as travel, retail and hospitality, continued to limit advertising spending over this period, other industries drove significant growth in advertising spending, particularly in Video (including CTV).

As a result, our Video revenue grew from $42.1 million in the six months ended June 30, 2020 to $101.3 million in the six months ended December 31, 2020. Our Video revenue growth included the rapid growth of CTV revenue over the same period, which grew from $11.0 million in the six months ended June 30, 2020 to $25.8 million in the six months ended December 31, 2020. This growth of Video (including CTV) revenue contributed to growth in Programmatic revenue of 30% for the year ended December 31, 2020 from the comparable as adjusted (non-IFRS) revenue basis for the year ended December 31, 2019.

Our total comprehensive income for the six months ended December 31, 2020 increased $64.1 million from the equivalent figure for the six months ended June 30, 2020 and represented a 219% year-over-year increase as compared to our total comprehensive income for the six months ended December 31, 2019. We generated $5.0 million and $6.4 million in total comprehensive income in the years ended December 31, 2020 and 2019, respectively. Our Adjusted EBITDA for the six months ended December 31, 2020 increased approximately 33 times from the equivalent figure for the six months ended June 30, 2020 and represented a 51% year-over-year increase as compared to our Adjusted EBITDA for the six months ended December 31, 2019. Additionally, we generated $60.5 million and $60.4 million in Adjusted EBITDA in the years ended December 31, 2020 and 2019, respectively, resulting in a cash position of $97.5 million as of December 31, 2020.

Our Industry

We operate in the digital advertising industry, which is a core pillar of monetizing digital properties accessible by the Internet. We specialize in digital video advertising, which collectively comprises 68% of our revenue for the year ended December 31, 2020, across mobile video, desktop video and CTV.

We believe the key industry trends shaping the digital advertising market include:

Continued Growth of Digital Media Consumption

Audiences continue to spend an increasing amount of time online for social, business and purchasing needs. We believe that the COVID-19 pandemic and the subsequent work-from-home and shelter-in-place orders accelerated the adoption of numerous traditionally offline activities to be conducted online, including telehealth, fitness classes, food delivery and e-commerce. As consumers continue to spend more time online for everyday activities, we believe that brands and advertisers will increasingly allocate ad budgets to where the audiences are. According to eMarketer, more than a third of the day is expected to be spent on digital media consumption by 2022. This mass of digital consumption is happening across all devices, including mobile, desktop, tablet and CTV. These trends will further increase both the supply and demand of available ad impressions that can be monetized programmatically.

 

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Shift to Programmatic Advertising

Programmatic advertising is the use of software and algorithms to match buyers and sellers of digital advertising in a technology-driven marketplace. The transactions are executed in milliseconds and do not require the manual labor of execution. It is becoming increasingly prominent in the digital advertising industry, as publishers and advertisers prefer that their bids/asks for digital ad inventory be completed in an easy, efficient, and automated manner. Additional advantages of programmatic advertising include enhanced audience targeting, attribution, measurement as well as improved customized campaign management workflow solutions. According to eMarketer, programmatic advertising is expected to increase from $106 billion in 2019 to $147 billion by 2021, at a CAGR of 18%.

Data Driven Decision Making

As the digital media industry grows, increased consumer engagement by audiences has created vast amounts of data and behavioral insights that can be harnessed to maximize ROI for advertisers and optimize the monetization of digital inventory for publishers. These insights include industry compliant anonymized data sets relating to consumer interests, preferences and intent, as well as auction data of advertising bid requests. Technology solutions must efficiently and effectively digest, analyze and process an ever increasing amount of data seamlessly while navigating the increased requirements of regulatory challenges and audience protection.

Consumer Privacy and Regulatory Concerns

Over the last few years, there has been increased scrutiny concerning consumer data and the ways in which that data is being used in connection with ad targeting. Globally and locally, new legislation has been introduced and enforced that requires new industry rules and standards. Some of these regulations include the GDPR, the California CCPA and the forthcoming CPRA, and IDFA. Additionally, web browsers such as Safari and Firefox have also removed third-party cookies. These rules and regulations require all constituents within digital advertising to consistently adapt and evolve.

Our Market Opportunity

We believe that we are well positioned to capture the fastest growing and next wave of digital advertising, such as Video, including CTV, which reflects 68% of our revenue for the year ended December 31, 2020.

Global digital advertising spend is forecast to be $455 billion in 2021 and is expected to grow 11.4% per year to $700 billion by 2025, according to eMarketer. As advertisers follow audiences to next-generation mediums, digital advertising channels are expected to outpace growth of total global media ad spend. The increased Internet bandwidth in developing countries is acting as an additional tailwind, and the increasing proliferation of next-generation cellular technology in developed countries is driving video viewership. We believe these trends will amplify full-screen video usage, which has long been the preferred choice of advertisers. We expect these long-term, systemic shifts will enable us to grow at a faster rate compared to the broader digital advertising market.

 

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Global Digital Advertising Spending2

(US$ bn)

 

 

LOGO

Digital Video and CTV Advertising

We are addressing the fastest growing areas within digital advertising, Video and CTV, which are expected to grow at an accelerated rate compared to other formats. In the United States, where the majority of our revenue is generated, the growth rates and adoption of Video and CTV are expected to be even higher. According to eMarketer, U.S. CTV ad spend is projected to grow at a CAGR of 19.6% from 2021 to 2025, reaching $27.5 billion. U.S. Video ad spend is projected to grow at a CAGR of 15.5% from 2021 to 2025, reaching $98.5 billion. Additionally, the number of digital video viewers worldwide is expected to reach 3.47 billion people by 2024.

Linear TV budgets are also shifting towards digital video and CTV, further driving demand for these premium ad formats. These overarching market trends underpin our strategic shift to focus on these segments of digital advertising, which given the proliferation of smart TVs and the increasing number of streaming providers, will remain an exciting growth segment.

Mobile Advertising

The number of consumers with smart phones and high speed internet quality are expected to continue rising, which will make mobile advertising a prominent channel within digital. According to eMarketer, U.S. mobile ad spend is projected to grow at a CAGR of 12.4% from 2021 to 2025, reaching $208 billion.

Our Role in the Digital Advertising Ecosystem

Advertisers and Agencies

Spending begins with advertisers, who often engage advertising agencies to help plan and execute their advertising campaigns. To better control and optimize their advertising operations, advertisers and agencies are consolidating spend with fewer, larger technology platform providers who can deliver transparency and ensure the highest level of inventory quality and control. These advertisers and agencies access our platform through Tremor Video and third-party DSPs. We believe our end-to-end technology platform and direct relationships with advertisers and agencies will lead to significant consolidation of spend onto our platform.

 

2 

eMarketer, March 2021.

 

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Demand Side Platforms (“DSP”)

Advertisers and agencies often engage DSPs, which serve as advertising demand aggregators, to execute their digital marketing campaigns across various ad formats. We offer both full-service and self-managed options through our DSP, enabling highly customized and robust campaigns. We are also integrated with the leading DSPs globally, such as The Trade Desk and Google DV360, enabling customers to execute real-time transactions with our publisher clients.

Supply Side Platforms (“SSP”)

SSPs such as ours are designed to monetize digital inventory for publishers and app developers by enabling their content to have the necessary software code and requirements for programmatic integration. Buyers and sellers come together through our marketplace to monetize, target, and purchase available digital advertising inventory. Our platform rapidly and efficiently processes significant volumes of advertising bid information, providing a seamless digital experience for our customers. Traditionally, SSPs have focused exclusively on the needs of sellers in this process and have limited their interactions with buyers to the buyer’s agent, the DSP. As buyers have sought greater control of their advertising supply chains, we have extended the capabilities of our specialized software platform over the last several years to serve the needs of advertisers and agencies.

Publishers and Content Providers

Digital publishers and app developers create websites, digital content and applications that contain content/mediums for consumption for users, along with adjacent viewable space for digital advertisements. As consumers navigate these websites and apps, individual ad impressions are presented to them across different formats/channels. These impressions are typically sold to advertisers and agencies programmatically, in real-time via a third-party technology infrastructure platform or SSP solution. Publishers and app developers rely on advertising revenue as the key driver for their businesses and depend on the capabilities of these third parties in order to achieve optimal yield for their advertising inventory. As of December 31, 2020, we served approximately 1,450 active publishers worldwide on our platform, consisting of 21,000 active sites and apps that we have direct access to publish an ad for our customers.

Our Strengths

We believe the following attributes and capabilities provide us with long-term competitive advantages:

Established Expertise in Video and CTV

We believe Video, including CTV and mobile video are the fastest growing segments of digital advertising, and they constitute 68% of our total revenue for the year ended December 31, 2020 (72% for the three months ended March 31, 2021) and 89% of our revenue without performance activity for the year ended December 31, 2020 (91% for the three months ended March 31, 2021). We were one of the first movers in the digital video advertising and CTV markets, giving us early traction and recognition as a leader in the space. Our platform was intentionally built as an end-to-end video campaign delivery solution.

End-to-End Platform with Proprietary Technology

We leverage our advanced technology stack to enable advertisers and publishers to maximize their ROI, while optimizing the path between audiences and brands by leveraging our proprietary data sets. We believe we have a competitive advantage by overseeing the entire ecosystem through our proprietary data, unique demand and supply sources and access to premium vendors. As a technology first solution, we have the flexibility of an agnostic platform capable of integrating with different third-party sources to service our customers.

 

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Scale and Reach on the Audience, Advertiser and Publisher

Our platform currently accommodates over 100 billion daily ad requests, approximately 500 terabytes of daily data, approximately 250 million daily ad impressions and more than 100 million daily unique sites or apps. This gives us scale with publishers and provides access to direct and exclusive supply of premium advertising inventory, which allows for our advertising customers to avoid intermediaries and reduce costs. Operating an end-to-end platform enables us to minimize the loss of scale typically seen when two independent platforms are user-syncing with each other. This helps us maintain high scalability on buying strategies leveraging audience targeting.

Robust Data Set Fully Integrated Into and Generated by Our Platform

Our proprietary DMP is a flexible platform that can be easily integrated across various campaigns and formats. Our DMP leverages first-party data and third-party partnerships to identify and reach curated audiences, benefiting both our advertising and publisher customers. Our platform provides artificial intelligence in the form of machine learning algorithms and statistical models to aggregate and analyze vast amounts of data and contextualizes it into easily usable action items, which can be used across campaigns in real-time.

Our machine learning algorithms enable us to process millions of requests per second which supports several of the optimization and prediction models in our platform including invalid traffic monitoring, viewability, queries per second, bidding and pricing models. These machine learning capabilities help our customers achieve their key performance indicators, optimize cost of media and protect against invalid traffic. Additionally, our DMP utilizes machine learning algorithms to build and expand segments in real time.

Management Team of Industry Veterans with Extensive Expertise

Our senior management has an extensive background in the advertising technology industry, which we believe gives us a competitive advantage. We have vast experience in acquiring synergistic businesses and a strong track record of integrating successful acquisitions, further driving growth and profitability.

Profitable Business Model

We have been Adjusted EBITDA and total comprehensive income profitable since 2014 and continue to improve our cost structure. As of the year ended December 31, 2020, our net profit margin was 2% and our Adjusted EBITDA margin was 29%. Our structural cost advantages enable us to continuously invest in driving innovation, while delivering both top line revenue growth and profitability.

Our Growth Strategy

We believe that programmatic advertising is still an underpenetrated market that will experience robust growth over the next decade as ad budgets continue to shift to digital and digital continues to shift towards programmatic execution. We intend to capitalize on these secular trends by pursuing growth opportunities that include:

Focus on Core Areas of Growth in Video and CTV

CTV is the fastest growth format within digital advertising, and this trend is expected to continue over the next several years according to eMarketer. In the United States, CTV ad spend is expected to grow at a CAGR of 19.6% from 2021 to 2025, and Video is expected to grow at a CAGR of 15.5%, reaching $98.5 billion by 2025. Digital video (including CTV) comprises 79% of our revenue without performance activity for the year ended December 31, 2020, and has been a core focus for us since inception. We plan to leverage our existing expertise in Video (including CTV) to increase our market share and introduce new technologies and solutions.

 

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Introduce New Products and Invest in our Technology Stack

As we grow our market share and add new customers, we continue to invest in our technology stack and develop new innovative products. We are continuously trying to introduce new innovative solutions and products to the rapidly evolving digital advertising market. Some potential areas of growth and investment include enhancing our proprietary data sets, enhancing our CTV solution capabilities and marketplace, audience targeting, expanding our alternative identifier solutions and enhancing our global platform coverage capabilities.

We are providing customers with creative alternatives to plan and execute their campaigns giving them complimentary scale and opportunities to enhance current audience targeting strategies. For example, we offer, and will continue to enhance, contextual targeting solutions from content data collected via our publisher partnerships as well as third-party solutions integrated into our ecosystem.

There is market movement away from cookie-based tracking which has created an increase in demand for alternate solutions. We have partnerships, and are integrating, with major alternative identifier solutions such as IdentityLink and Unified ID 2.0. We are committed to helping define and support new privacy requirements and identifier mechanisms as the industry standards evolve. We believe that not everyone in the industry will adopt a single solution alternative to cookie-based tracking and we are building our platform to support various identifier solutions.

Strengthen Our Relationship with Existing Customers

We are constantly improving functionality on our platform to attract new customers and encourage our existing customer base to allocate more of their ad spend and ad inventory to our platform. We believe as programmatic gains more widespread adoption and brands and publishers continue to focus on Video (including CTV), we are strongly positioned to increase our customer base and generate additional revenue from existing customers.

Expand Our International Footprint and United States Market Share

We continue to acquire new publishers and advertisers globally and invest in expanding our global footprint, providing significant global demand and supply of digital ad impressions across all channels and formats. We will continue to invest in third-party integrations, maintaining and enhancing our platform’s flexibility. We are leveraging our existing technology stack to provide innovative solutions to new and existing customers regardless of location or platform. We consistently innovate and develop new tools and products that enable our customers to maximize their benefit from using our platform and services.

Continue to Bolster our Data Capabilities

We leverage real-time data, artificial intelligence and machine learning capabilities to synthesize, aggregate and contextualize vast amounts of data sets to help our advertisers and publishers optimize their digital ad spend/inventory. Our DMP solution was architected to be flexible, which allows us to deliver impactful and unique insights that are agnostic to format or device type. By owning our own proprietary DMP solution, we are able to provide robust analytics, insights, and better segmentation on a global basis. We believe this gives us a large competitive advantage and enables higher ROI to our advertisers and optimal yield on digital inventory to our publishers.

Leverage our Industry Expertise and Target Select Acquisitions

We have been successful in past acquisitions and may direct our industry experience and focus to identify future complementary acquisitions to further broaden our scale and technology solutions. To the extent we identify attractive acquisition opportunities, we have the experience, leadership and track record to successfully execute strategic transactions and integrate acquired businesses into our platform.

 

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Our Solution and End-to-End Technology Platform

Our Solution

Our end-to-end platform is a comprehensive software suite that supports a wide range of media types (e.g., Video, display, etc.) and devices (e.g., mobile, CTVs, streaming devices, desktop, etc.), creating an efficient marketplace where advertisers are able to purchase high quality advertising inventory from publishers at scale. Our solutions offer many advantages, including an advanced real-time bidding auction optimization engine, a quality and global marketplace, and flexibility to enact concurrent campaign strategies that drives strong returns for investments in digital ad real estate.

Our platform handles over 100 billion daily ad requests, approximately 500 terabytes of daily data and approximately 250 million daily ad impressions. Each transaction is processed in a fraction of a second (55ms on average) and powered by our real-time bidding engine, which leverages thousands of private servers and infrastructure in three strategically located data centers located in the United States, Europe and Asia Pacific.

Key Components of our platform include:

 

   

Demand Side Platform – We offer a self-service DSP solution for advertisers and their agencies to efficiently and intuitively manage omni-channel campaigns. We also offer a full-service option to agencies in addition to our self-service DSP solution. Our DSP solution provides access to wide reaching and high quality inventory, audience targeting and advanced reporting to optimize advertising campaigns, improve ROI and gain deep insights and analytics into brand engagement.

 

   

Data Management Platform – We offer a fully integrated DMP solution that sits at the center of our platform that unlocks the power of data flowing through our DSP and SSP solutions. Our DMP enables advertisers and publishers to use data from various sources in order to optimize results of their advertising campaigns. Our DMP provides insights and recommendations pertaining to geographic, behavioral and demographic data, among others in one unified solution. We believe an integrated DMP is a key component to the marketplace because it enables advertisers and publishers to use and activate data to target audiences with more accuracy across a number of different channels.

 

   

Supply Side Platform – We offer a self-service SSP solution for digital publishers to sell their online ad placements via a real-time bidding auction across all screens including mobile, CTVs, streaming devices and desktops. Our SSP provides access to significant amounts of data, unique demand and a comprehensive product suite to drive more effective inventory management and revenue optimization.

 

   

Analytics/Artificial Intelligence - We collect, synthesize and analyze the data sets across our platform through extensive artificial intelligence technologies and advanced machine learning capabilities. These recommendations ultimately provide key insights into valuable ad impressions and forecasts for auction behavior. We believe these technologies drive optimal results for our advertisers and publishers.

Demand-Side Platform (“DSP”)

Key features of our DSP include:

 

   

Comprehensive, insightful and modern self-service interface that intuitively supports the needs of advertisers and enables them to operate and implement strategies effectively and independently.

 

   

Superior artificial intelligence-based real-time bidding models, to drive efficient buying and meet our customers’ key performance indicators.

 

   

Enables seamless access to and integration of an advertisers’ own first-party data, our proprietary data and a wide list of premium third party data segments.

 

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Meaningful forecasting and reporting tools, our DSP can accurately measure how many households and unique users an advertising campaign are able to reach through any targeting initiatives to ensure campaign strategies are achievable.

 

   

Robust omni-channel reporting which enables advertisers to analyze across device and channel campaign effectiveness against various key performance indicators with the ability to compare their statistics through various comprehensive benchmarks.

 

   

Access to our creative studio (tr.ly) with deep expertise to support a variety of creative needs and ideas to enrich messaging and consumer engagements.

 

   

Data and Brand Surveys that provide meaningful information for advertisers to evaluate brand lift and behavioral and emotional engagement.

 

   

Our proprietary brand safety technology uses a combination of machine-learning and propriety algorithms as well as data ingestion from industry-leading verification providers to develop and maintain dynamic block lists and a scoring mechanism to grade our traffic before, during and after ad requests are made.

Supply-Side Platform (“SSP”)

Key features of our SSP include:

 

   

Comprehensive and highly intuitive self-service platform which enables publishers to easily integrate into our ecosystem, manage their digital inventory, access reporting and insights and transact with their programmatic buyers through private marketplace deals. Once integrated with our SSP solution, publishers also benefit from our unique and differentiated demand available through our proprietary DSP solution and additionally through demand facilitation initiatives driven by our global sales force.

 

   

Connection to the world’s largest DSPs and compatibility with most AdAge top 100 brands. Our SSP solution delivers over 6 billion advertisements to viewers every month and optimizes content for different formats, builds effective custom audiences and delivers impressive ROI at scale.

 

   

Omni-channel marketplace with access to approximately 1,450 active publishers across the globe and exclusive access to News Corp digital advertising inventory.

 

   

Industry-leading forecasting analytics and data-driven yield optimization tools to maximize inventory monetization and delivers impressive ROI at scale.

 

   

Enables publishers to customize their experience through the ability to opt out of certain ad verticals or specific advertisers in order to customize demand for their media and manage channel conflicts.

 

   

Support for all major integration types, including open real-time bidding, header-bidding solutions, as well as our proprietary client-side solutions, including our video player, giving publishers the flexibility of choosing the methods through which they want to offer their ad inventory to advertisers.

Data and Data Management Platform (“DMP”)

Key features of our DMP include:

 

   

Audience segments that are generated directly within our platform, leveraging a collection of first and third party data sets, including strategic data partnerships. Our platform also enables advertisers and publishers to connect and leverage their own first party data for activation across our ecosystem. Based on our platform’s statistical models, we are able to uncover deep insights from behavioral data, feeding into a machine learning platform that allows us to achieve our advertisers’ and publishers’ performance metrics.

 

   

Ability for advertisers and publishers to layer custom data segments against their campaigns and private marketplace deals.

 

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Includes unique data driven insights available through our self-service user interfaces or custom built and curated by our team, along with the ability for advertisers and publishers to forecast scale, reach and media cost against the audiences they are looking to target.

 

   

Provides for audience driven creative optimization, combining the power of the DMP with our proprietary creative platform (tr.ly).

 

   

Specific focus and expertise around contextualizing linear TV retargeting data activation and repurposing for digital insights, providing advertisers strong content retargeting, insight and attribution capabilities on digital formats.

 

   

Our EQ product, fully integrated into our DMP, is a proprietary emotional analytics tool that provides advertisers the data they need to maximize the emotional, social and business impact of their advertising.

 

   

Our EQ product compiles surveys along with facial recognition of users to see how those individuals responds to questions or advertising, which further engages targeting for our advertisers’ campaigns.

Our Customers

Our customers consist of blue-chip global brands and advertising agencies on the demand side and high quality publishers on the supply side across several industries, including retail, entertainment, consumer, financial services, healthcare and more. We had approximately 900 active customers for the year ended December 31, 2020 including prominent members of the U7 Council such as American Express, GSK, P&G, Unilever and others.

On our demand side, we have brands and agencies using our self-service offering, our own managed services offering and third-party DSP integrations. Buyers and advertisers transact through these tools. On the supply side, we service digital publishers, app developers and subscribers to our self-serve platform.

We enter into contracts with our customers either through MSAs or insertion orders. An insertion order is an agreement entered into by an advertiser and publisher to govern the terms of running a campaign. Our customers typically enter into MSAs with us that give users access to our platform. These MSAs typically have one year terms that renew automatically, unless earlier terminated. We benefit from stable relationships, with approximately 80% of our revenue for the year ended December 31, 2020 derived from clients who have been with us for more than two years.

We have long standing relationships with our customer base. Our customers repeatedly use our platform, illustrated by our Contribution ex-TAC retention rate of 112% in the year ended December 31, 2020. In addition, our customers typically grow their use of our platform over time.

Our Competition

We have a number of competitors that operate in segments of our business, but few of our competitors provide the full end-to-end technology solution that we offer.

We believe that our long track record and expertise in the digital advertising industry gives us significant advantages with regards to platform development and expertise, as well as a long development lead ahead of new entrants. We also believe that we compete primarily based on the performance of campaigns running on our platform, capabilities of our platform, our identity resolution capabilities, our omni-channel capabilities and our advance reporting and measurement capabilities.

On the demand side, companies such as Roku Inc., Viant Technology, Inc., Samsung, Inc. and MediaMath are some of our key competitors

On the supply side, companies such as Magnite, Inc. and PubMatic, Inc. are our main competitors, all of which compete to provide publisher inventory to advertisers.

 

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We believe the principal competitive factors in our industry include the following:

 

   

proven technology, software-as-a-service offering and optimization capabilities;

 

   

omni-channel execution;

 

   

quality and scale of digital inventory and demand;

 

   

depth and breadth of relationships with brand advertisers, premium publishers and agencies;

 

   

full suite of viewability, measurement, verification and brand safety offerings;

 

   

flexible pricing; and

 

   

transparency in the ecosystem.

We believe that we compete favorably with respect to all of these factors and are well positioned as a full service end-to-end platform catering to both advertisers and publishers.

Technology and Development

Our business model enables us to invest into our research and development efforts, which have helped grow our business. Our platform is extremely efficient at managing large amounts of complex data and is leveraged by both our advertisers and publishers in real time. We are committed to innovative technologies and rapid introduction of enhanced functionalities to support the dynamic needs of our advertisers and publishers. We therefore expect technology and development expense to increase as we continue to invest in our platform to support increased volume of advertising spend and our international expansion. Our technology and development team is based in the United States and Israel. As of December 31, 2020, research and development expenses accounted for 21% of our operating expenses.

Sales and Marketing

As an end-to-end platform, we have highly qualified teams dedicated to acquiring new premium advertising and publisher customers. These teams focus on selling access to our platform through self-serve and managed service offerings. Our global sales and marketing team consists of approximately 180 employees as of December 31, 2020 and takes a hands-on approach to both new and existing advertiser and publisher relationships.

We have dedicated teams focused on post-sale customer support. Our client success team onboards advertisers and liaises directly with the customer on a regular basis to optimize delivery against key performance indicators and help meet their goals throughout the campaign life-cycle. Our publisher operations team onboards publishers and engages directly with the customer to support their needs and effectively monetize inventory. We expect to continue to expand our sales and marketing and customer support teams as we expand into new industry verticals and geographical markets.

Our Team and Culture

As part of our track record of successfully integrating acquisitions, we pride ourselves on bringing together new teams under one culture, which is based on the ideal that “everything is possible.”

Our management team encourages employees to share their feedback, ideas and thoughts by promoting a transparent organizational culture and an open door policy. We also introduced internal surveys to garner employee feedback and satisfaction and to receive suggestions.

We communicate and build relationships with external stakeholders via our marketing efforts, including social media, events, public relations, direct marketing and online advertising among other initiatives. We have a

 

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“People & Culture” program, which provides employees with volunteer opportunities in the community, particularly focused on education, such as tutoring at risk youth and collaborating with schools serving underprivileged communities. We as a company also regularly donate to voluntary associations.

Our employees tend to be long tenured for our industry, with an average tenure of the leadership team of approximately four years and more than three years across all employees. We believe we attract talented employees to our company and sophisticated customers to our platform in large part because of our vision and unwavering commitment to using cutting-edge technologies to create products that help advance the advertising industry.

As of December 31, 2020, we had 564 employees globally.

Intellectual Property

Our success depends, in part, on our ability to protect the proprietary methods and technologies that we develop or otherwise acquire. We rely on copyright, trade secret laws, confidentiality procedures and contractual provisions to protect our proprietary methods and technologies, and own more than 50 patents. We rely upon common law protection for certain marks, such as “Tremor” and “Tremor Video.”

We generally enter into confidentiality and/or license agreements with our employees, consultants, vendors and advertisers, and we generally limit access to, and distribution of, our proprietary information. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.

Privacy and Data

Modern consumers use multiple platforms to learn about and purchase products and services, and consumers have come to expect a seamless experience across all channels. This challenges marketing organizations to balance the demands of consumers and the most effective advertising techniques with responsible, privacy-compliant methods of managing data internally and with advertising technology intermediaries.

In the United States, both state and federal legislation govern activities such as the collection and use of data by companies that engage in digital advertising like us. Also, because our platform reaches users throughout the world, some of our activities may also be subject to foreign legislation. As we continue to expand internationally, we will be subject to additional legislation and regulation, and these laws may affect how we conduct business.

The U.S. Congress and state legislatures, along with federal regulatory authorities, have increased their attention on matters concerning the collection and use of consumer data, including relating to internet-based advertising. Data privacy legislation has been introduced in the U.S. Congress, and California has enacted the CCPA and the forthcoming CPRA. State legislatures outside of California have proposed, and in certain cases enacted, a variety of types of data privacy legislation. Many non-U.S. jurisdictions have also enacted or are developing laws and regulations governing the collection and use of personal data.

Additionally, U.S. and foreign governments have enacted or are considering enacting legislation that could significantly restrict our ability to collect, augment, analyze, use and share data collected through cookies and similar technologies, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tools to track people online. In the United States, the FTC has commenced the examination of privacy issues that arise when marketers track consumers across multiple devices, otherwise known as cross-device tracking. In addition to the requirements relating to cookies or similar technologies described in the section “Risk Factors—Risks Relating to Legal or Regulatory Constraints—We are subject to laws and regulations related to data privacy, data protection, and information security, and consumer protection across different markets where we conduct our business, including in the United States, the EEA and

 

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the United Kingdom and industry requirements and such laws, regulations, and industry requirements are constantly evolving and changing. Our actual or perceived failure to comply with such laws and regulations could have an adverse effect on our business, results of operations and financial condition”, in the European Union and the United Kingdom, informed consent is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing. The GDPR also imposes conditions on obtaining valid consent, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology.

Additionally, our compliance with our privacy policy and our general consumer data privacy and security practices are subject to review by regulatory bodies such as the FTC, which may bring enforcement actions to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations or material omissions therein.

Certain State Attorneys General in the United States may also bring enforcement actions based on comparable state laws or federal laws that permit state-level enforcement. In California, for example, the Attorney General may bring enforcement actions for violations of the CCPA, as modified by the Attorney General’s enforcement guidelines. When we receive bid requests that include an opt-out signal, we do not sell personal information, as defined by the CCPA. We have also adopted the DAA CCPA Compliance Framework, which includes a technical specification to identify consumer signals to opt-out of sale of their data, and have signed the IAB Limited Service Provider Agreement that imposes service provider obligations for certain opted-out bid requests. These IAB frameworks are designed to facilitate compliance with the CCPA although the California Attorney General’s office has not yet approved such frameworks. The CCPA sets forth high potential liabilities for data privacy violations on a per-incident basis, and the industry faces an uncertain compliance burden as our partners and publishers work to become compliant with the law. Also, the CPRA, once it takes effect in January 2023, will impose additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt-outs for certain uses of sensitive data and sharing of personal data.

Virginia recently enacted the Virginia Privacy Act, the second comprehensive state privacy law since California voters passed the CCPA (and the subsequent CPRA). We expect the trend of enacting new and comprehensive privacy legislation to continue not only in the US but also around the globe.

To protect against unlawful content (advertiser and publisher), we include restrictions on content in our terms and conditions. We also manually review the websites of new publisher partners and use third party software to screen impressions we acquire through advertising exchanges.

Legal Proceedings

We may from time to time, be party to legal or regulatory proceedings arising in the ordinary course of business. Defending any such legal proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

On May 18, 2021, our subsidiary Tremor Video, Inc. (“Tremor Video”) filed a complaint against Alphonso, Inc. (“Alphonso”) in the Supreme Court of the State of New York, County of New York. The action is captioned Tremor Video, Inc. v. Alphonso, Inc., Index No. 653266/2021, and asserts claims for breach of contract, tortious interference with business relations, intentional interference with contractual relations, unjust enrichment, and conversion. The lawsuit arises out of Alphonso’ breach of a Strategic Partnership Agreement and an Advance Payment Obligation and Security Agreement (“Security Agreement”) with Tremor Video, along with related misconduct. Tremor Video is seeking damages and other relief, including an order foreclosing on Alphonso’ collateral under the Security Agreement, from the Court. See “Risk Factors—Risks Relating to Legal or

 

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Regulatory Constraints—We face potential liability and harm to our business based on the nature of our business and the content on our platform and we are, and may be in the future, involved in commercial disputes with counterparties with whom we do business.”

Facilities

Our headquarters are located in Tel Aviv, Israel where we occupy facilities totaling approximately 11,800 square feet under a lease that expires in May 2024. In addition, we have key locations in New York, Los Angeles and Chicago in the United States, as well as international locations in the United Kingdom, Japan, Singapore and Australia. These locations support our key business functions including sales and marketing, customer support, business development, engineering, product development and infrastructure support. We believe that our current facilities are suitable to meet our existing needs.

 

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MANAGEMENT

Executive Officers and Directors

The following table sets forth the name and position of each of our executive officers and directors as of the date of this prospectus:

 

Name

  

Position

Executive Officers

  

Ofer Druker

  

Chief Executive Officer and Director

Sagi Niri

  

Chief Financial Officer and Director

Yaniv Carmi

  

Chief Operating Officer and Director

Directors

  

Christopher Stibbs

  

Non-Executive Chairperson

Rebekah Brooks

  

Non-Executive Director

Norm Johnston

  

Non-Executive Director

Neil Jones

  

Senior Non-Executive Director

Joanna Parnell

  

Non-Executive Director

Lisa Klinger

  

Non-Executive Director

Executive Officers

Ofer Druker. Ofer Druker has served as our Chief Executive Officer and as a member of our board of directors since April 2019 following the completion of the merger with RhythmOne. From November 2017 to April 2019, Mr. Druker served as our Executive Chairman of the Tremor Video division and was instrumental in our successful integration of Tremor Video after its acquisition in August 2017. Previously, Mr. Druker was the founder and Chief Executive Officer of Matomy Media Group Ltd., a data-driven advertising company (“Matomy”) until April 2017, having built Matomy from its inception in 2007 into a digital media company. Mr. Druker was responsible for leading and integrating Matomy’s most important strategic transactions, including the acquisitions of Team Internet, Media Whiz, Mobfox and Optimatic.

Sagi Niri. Sagi Niri has served as our Chief Financial Officer since March 2020 and as a member of our board of directors since June 2020. Mr. Niri has over 20 years of experience in finance and leadership roles in the technology and real estate sectors. Mr. Niri previously served as Chief Executive Officer of Labs (“Labs”), and Chief Financial Officer of LabTech Investments Ltd., Labs’ parent company, which owns and manages office, retail and residential real estate in London. In addition, Mr. Niri spent over nine years at Matomy, initially as Chief Operating Officer/Chief Financial Officer and more recently as Chief Executive Officer. Mr. Niri is a member of the Institute of Certified Public Accountants in Israel and holds an M.B.A. in Finance from Manchester University and a B.A. in Corporate Finance from the College of Management in Israel.

Yaniv Carmi. Yaniv Carmi has served as our Chief Operating Officer since March 2020 and as a member of our board of directors since 2014. Mr. Carmi previously served as our Chief Financial Officer from January 2010 to March 2020. He is currently responsible for the delivery of our business plan and driving our growth ambitions. Mr. Carmi was instrumental in our initial public offering of our ordinary shares on AIM in 2014 and in the subsequent global expansion in operations, including significant M&A activity. He is an experienced finance professional, whose previous roles include tax and audit senior at KPMG Israel. Mr. Carmi is also a Certified Public Accountant and holds a B.A. in Economics and Accounting from Ben-Gurion University and an M.B.A. in Financial Management from Tel Aviv University.

Directors

Christopher Stibbs. Christopher Stibbs has served as a member of our board of directors since May 2019 and as our Non-Executive Chairperson since September 2020. Mr. Stibbs has over 25 years of experience as an

 

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executive in the media industry. Until August 2019, he served as Chief Executive of The Economist Group (the “Economist Group”). Previously, he held a number of roles within the group including head of the Economist Intelligence Unit (the group’s B2B arm) and Chief Financial Officer. He is credited with overseeing the Economist Group’s resilience and transition through the unprecedented disruption experienced by the publishing industry over the last 15 years. Prior to this, he held positions with Pearson and Incisive Media. Mr. Stibbs is a fellow of the Associations of Chartered Accountants and Corporate Treasurers, currently has a non-executive role at Oxford University Press and is Chairman of Times Higher Education.

Rebekah Brooks. Rebekah Brooks has served as a member of our board of directors since June 2020. Ms. Brooks is Chief Executive of British newspaper publisher News Corp UK and Ireland, part of News Corp, a position she has held since 2015, having first joined News Corp in 1989. Starting as a feature writer for the News of the World, Ms. Brooks became Editor of the Sun in 2003, a position she held until July 2009. From 2009 to 2011, she served as Chief Executive of News International, overseeing a period of significant growth in newspaper operating profit and paid-for digital subscriptions at The Times. Following her appointment as Chief Executive of News Corp UK and Ireland, Ms. Brooks restructured the Sun’s online strategy, driving significant audience growth. In 2016, she also oversaw the strategic acquisition of Wireless, the owner of national radio brands talkSPORT, talkRADIO and Virgin Radio. Ms. Brooks is a Director of News Group Newspapers and Times Newspapers, and a Non-Executive Director of PA Group, the parent company of the Press Association.

Norm Johnston. Norm Johnston has served as a member of our board of directors since June 2020. Mr. Johnston is a veteran employee of News Corp. Until recently, he was the Chief Executive Officer of Unruly, the digital advertising business we acquired in January 2020, a position he has held since April 2018. Mr. Johnston has been involved in digital marketing since joining the marketing industry’s first digital agency, Modem Media in 1995. In 1997, Mr. J