Annual Report and Accounts
For the year ended 31 December 2019
Tremor International Ltd. is a global leader in advertising
technologies with operations in more than 60 countries.
Tremor is traded on the London Stock Exchange (AIM: TRMR).
Tremor has three core divisions: Tremor Video, which helps advertisers deliver
impactful brand stories across all screens through the power of innovative video
technology combined with advanced audience data; RhythmOne, our media division
which drives real business outcomes in multiscreen advertising; and Unruly, a strong
video marketplace with more than 2,000 direct integrations with publishers and
unique demand relationships with the world's biggest advertisers.
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
Financial and Operational Highlights
Our Business
Chairman’s Statement
The Market Opportunity
Chief Executive Officer’s Review
Our Strategy
Case Studies
Chief Financial Officer’s Review
Revenue Mix
01
02
04
06
08
12
14
16
17
Board of Directors
Corporate Governance Report
The Board and Committees
Takeovers & Mergers
Directors’ Report
Remuneration Report
18
20
23
27
28
30
Independent Auditors' Report
Consolidated Statements
of Financial Position
Consolidated Statements
of Comprehensive Income
Consolidated Statements of
Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the Consolidated
Financial Statements
Directors, Secretary
& Advisers
32
33
34
35
36
37
68
Tremor International Ltd. STRATEGIC REPORT
/ 01
Financial Highlights
A strong performance from Tremor’s brand advertising activities continued to drive profitability. The business
remains highly cash-generative with a strong balance sheet.
■
Revenues of $325.8 million,
up 18% (2018: $276.9 million)
– Revenue split by division:
Branding: $248.5 million;
Performance: $77.3 million
(2018: Branding $146.0
million, Performance
$130.8 million)
– Revenue from Connected
TV (“CTV”) grew from
$2.2 million in Q1 2019, to
$18.1 million in Q4 2019,
total for the year
of $31.9 million
■
■
■
■
■
Gross profit increased
by 24% to $138.5 million
(2018: $111.4 million)
Gross margin of 42.5%
(2018: 40.3%)
Adjusted EBITDA* increased
37% to $60.4 million (2018:
$44.1 million)
Reported EPS of 5.6 cents
(2018: 32.81 cents)
Adjusted Diluted EPS
of 37.05 cents (2018:
52.36 cents)
■
Net cash inflow from
operating activities of $45.1
million (2018: $37.5 million)
■
Net cash as at 31 December
2019 of $76.9 million***
*Adjusted EBITDA is defined as earnings before interest,
taxes, depreciation and amortisation, non-recurring
income/expenses and share-based payment expenses.
**Net cash is defined as cash and cash equivalents less
short and long-term interest-bearing debt including
capital and finance leases
Operational Highlights
Tremor is now an established digital video advertising technologies business of real scale with an end-to-end
technology stack. We completed the integration of RhythmOne, delivering $40 million of annualised cost savings
as a result of operational synergies.
■
Launched a number of
combined product
offerings, including:
advertising solution
industry experts
– RhythmOne’s
– Private Marketplace
Packages: provide high-
quality video supply,
auction-based
marketplaces
– A combined CTV solution
programmatic advertising
marketplace in Europe
■
– Introduction of a number
of self-service
enhancements to the
Company’s existing DSP
– The Creative Studio:
dedicated team of video
■
Added a number of new
clients including Estée
Lauder, Honda Powersports,
Pinterest, Remy Martin,
Symantec, Takeda, TikTok
and Twitch
Renewed global data
partnership with Alphonso,
the TV data and
measurement business, for a
further two years, with data
continuing to drive Tremor’s
ongoing success
Post-period End/Outlook
■
■
In January 2020, Tremor
announced the acquisition
of Unruly Holdings Limited
and Unruly Media Inc. and a
global partnership with News
Corp, strengthening the
Company’s focus on video
It is too early in the outbreak
of COVID-19 to fully assess
the impact on Tremor’s
performance and overall
outlook for 2020, but the
■
Company will keep
shareholders informed as
to market guidance as
appropriate
Despite the current
uncertainty in the global
economy, the Company’s
business model remains
strong and management is
confident Tremor’s talent
and market position will
be maintained
■
The Company has a strong
balance sheet with net
cash of $76.9 million as
at 31 December 2019, which
allows it to undertake a share
buy-back of $10 million and
be confident of trading
through the coming period
of uncertainty
Annual Report and Accounts For the year ended 31 December 2019
Our Business
A truly global video advertising company
One of the largest and most
innovative video advertising
companies with market-
leading Connected TV and
second-screen device
solutions. We help
advertisers deliver the most
engaging brand stories in a
complex video landscape by
empowering them with
creative video intelligence—
advanced technology
combined with precision
audiences and captivating
creativity.
Unruly is a data-driven
marketplace with more than
2,000 direct integrations with
publishers, unique demand
relationships with the world’s
biggest advertisers and
privileged access to News
Corp inventory. Unruly uses
emotional data to deliver
brand-safe advertising to
1.2bn people. By combining
our proprietary EQ data and
audience intelligence, we
optimise content for different
formats, build effective
custom audiences and deliver
better campaign ROI at scale.
RhythmOne drives real
business outcomes in
multiscreen advertising. Our
highly-ranked programmatic
platform efficiently and
effectively delivers
performance, quality, and
actionable data to demand-
and supply-focused clients
and partners and our
influencer marketing offering
fosters action and awareness
by connecting brands with
influencers who create and
distribute branded content
to engaged consumers.
WHO WE ARE...
Tremor is a global leader in digital
video advertising technologies
WHAT WE DO...
we help advertisers deliver impactful
stories and connect to their
target audiences
Tremor International Ltd. 02 03
WHY WE DO IT...
a significant market opportunity
exists within video advertising as the
sector continues to expand
OUR VISION...
to create one of the largest unified
programmatic marketplaces
specialized in video
722
Employees
As at March 2020
139
R&D (19%)
60
Countries
150
Sales &
Marketing (21%)
Tremor office
/Annual Report and Accounts For the year ended 31 December 2019STRATEGIC REPORT
Chairman’s Statement
" Tremor has entered 2020 in a strong and
unique position following a year in which
management fundamentally repositioned
the business.
"
Tim Weller
Chairman
Tremor's transformation was largely
driven by the merger with RhythmOne
plc (the “Merger”) and its subsequent
integration and consolidation into the
group, enabling us to undergo a
strategic pivot to focus on video as
our key digital advertising medium.
Clearly, the COVID-19 pandemic is
having a significant global impact.
Tremor has put in place the initiatives
necessary to protect our workforce and
we are taking measures to ensure the
capabilities of the Company are
maintained. We will, of course, continue
to monitor the situation closely.
Tremor traded strongly throughout
2019 achieving a 18% increase in
revenues to $325.8 million (2018: $276.9
million), and a 36% increase in adjusted
EBITDA to $60.4 million (2018: $44.1
million), with our brand advertising
segment performing particularly well as
our focus on video began to come into
fruition. Tremor remains highly cash-
generative, and at the year ended 31
December 2019, had a net cash position
of $76.9 million. this strong cash
position was delivered post the $25
million share buyback programme
during 2019 and $5 million of data
pre-payments for 2020. We are
consistent in our approach of deploying
capital in the best interests of our
shareholders and we will continue to
review options as a Board. Today,
we have also announced the
commencement of a $10 million
buyback program. In addition, our
strong cash position gives us the
flexibility to continue to evaluate
select strategic acquisitions which
continues to form an important part
of our growth strategy.
One such example, is the acquisition of
Unruly Group Ltd (“Unruly”), which we
announced in January 2020 alongside
the exclusive partnership with News
Corp. This highly strategic transaction
further augments our expert focus on
video, and through the alliance with
News Corp gives us access to a roster
of premium titles globally. In addition, it
provides us with a very well-regarded
brand in Unruly, from which to drive
our international growth outside
North America, which is key to our
ongoing success.
During 2019 and post-period end, we
announced a number of appointments
to the board and senior management in
order to bolster our leadership team.
This included Ofer Druker’s
appointment as Chief Executive Officer
in April 2019 and Christopher Stibbs’
appointment as Non-executive Director
in May 2019. In addition, post period-
end, in January 2020, we announced
the addition of Rebekah Brooks to the
board as Non-executive Director (who
joins the Board as of today) as well as
the appointments of Norm Johnston as
Non-Executive Director and Sagi Niri as
Chief Financial Officer who will both join
the Board, subject to shareholder
approval, after the upcoming Annual
General Meeting. Once completed, we
will have a market-leading team with an
unrivalled breadth and depth of
experience both across traditional
and evolving media channels to drive
Tremor forward on our exciting
growth trajectory.
Whilst we had aptly positioned the
business for an exciting 2020, the
COVID-19 pandemic is affecting the
global economy including business
sentiment, and we anticipate it will have
an effect on our performance at least in
the short-term, although it is too early
to tell the extent of this impact, however
we feel assured in the Company’s
capabilities, fundamentals and scale
and therefore its resilience amidst the
current global uncertainty.
I would like to thank the whole Tremor
team for their contribution to-date in
what has been a significant period of
change and adjustment. The board
remains confident in delivering year-on-
year growth and we look forward to
further updating our shareholders as
we continue to deliver on our strategy.
Tim Weller
Non-executive Chairman
30 March 2020
Tremor International Ltd. 04 05
/Annual Report and Accounts For the year ended 31 December 2019STRATEGIC REPORT The Market Opportunity
Video ad spending worldwide 2018 – 2024 (billions)
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
2018
2019
2020
2021
2022
2023 2024
■ Mobile Video ■ Desktop video
Source: Cowen and Company, Jan 10, 2019
US TV* and digital** ad spending 2019 – 2023 (billions)
$70.83
$71.18
$70.47
$69.76
$69.07
$53.99
$58.39
$49.02
$36.01
$42.58
2019
2020
2021
2022
2023
■ TV* ■ Digital video**
Note: *excludes digital; **includes in-stream video such as those appearing before, during or
after digital video content in a video player (pre-roll, mid-roll, post-roll video ads) and video
overlays; includes social network in-stream video advertising in platforms such as Facebook
Watch and Snapchat Shows; includes outstream video ads such as native, in-feed (including
video ads in Facebook’s News Feed and Twitter’s Promoted Tweets), in-article, in-banner
and interstitial video ads; appears on desktop and laptop computers as well as mobile
phones, tablets and other internet-connected devices; data for 2008-2016 excludes
outstream video ads
Source: eMarketer, Feb 2019
US connected TV ad spending, 2019 – 2023 (billions)
% change and % of total media ad spending
$14.12
$12.49
$10.81
$6.94
$37.6%
$8.88
28.0%
21.8%
15.5%
13.0%
2.9%
3.4%
3.9%
4.3%
4.7%
2021
2019
2020
2022
■ Connected TV ad spending ■ % change
■ % of total digital ad spending
Note: digital advertising that appears on connected TV (CTV) devices; includes display ads
that appear on home screens and in-stream video ads that appear on CTVs from platforms
like Hulu, Roku and YouTube; excludes network-sold inventory from traditional linear TV
and addressable TV advertising
2023
Source: eMarketer, Oct 2019
Tremor International Ltd. 06 07
Growth in the video
advertising market is
showing no signs of
abating. Video ad
spending worldwide
is expected to grow to
over $100 billion in 2024.
There is an increasing
shift towards digital
video ad spend, with
this expected to continue
given the proliferation
of connected devices.
Digital ad spend in the
US is expected to grow to
over $58 billion in 2023.
Advertising spend within
ConnectedTV in the US
is also demonstrating
robust growth, which is
important for Tremor as
CTV is a core future
growth engine for
our business.
/Annual Report and Accounts For the year ended 31 December 2019STRATEGIC REPORT Chief Executive Officer’s Review
" 2019 was a year in which the Company
established the infrastructure and technology
stack, from which to deliver material growth.
Looking forward, we are focused on aggressively
expanding our global customer base alongside
continuing to develop our product offering.
"
Ofer Druker
Chief Executive Officer
$325.8m
Revenues
increased by 18%
$60.4m
Adjusted EBITDA*
increased by 37%
$76.9m
Net cash as at
31 December 2019
Introduction
2019 was a milestone year for Tremor,
as we established ourselves as a global
leader in the digital video advertising
technologies space. The merger with
RhythmOne in April provided Tremor
with end to end technology capabilities,
including a Media platform with
knowledge and deep business
relationships in Connected TV (“CTV”),
one of the most exciting and high-
growth segments in video advertising,
and Tremor is already benefitting from
this trend below. In addition, TV
retargeting, which has become core to
Tremor in the past four years, is gaining
strong validation in the market.
We have succeeded in building a
company of significant scale with a
comprehensive end-to-end technology
solution, which includes Tremor Video’s
demand-side platform (“DSP”),
RhythmOne’s exchange and supply-
side platform (“SSP”), that is CTV rich.
This end-to-end solution, puts our
business at the vanguard of the space,
providing a substantial opportunity
for further growth.
The acquisition of RhythmOne brought
a number of strong components and
capabilities to the Company, including:
1) The RhythmOne Exchange, with
a strong specialism and focus
in video
2) A CTV component with a significant
track-record rooted in YuMe, a CTV
focused company that was
acquired by RhythmOne a year
prior to the Merger
3) A sales team and client base
focused on using CTV as a medium
to reach their target audiences.
4) A media business which has
enabled Tremor to offer Private
Marketplaces (“PMP”) to our
top-tier clients who choose to
work with their preferred DSP
CTV has fast become an important
element in video advertising and today
it’s the driving force in the growth of the
segment. In the USA alone, the size of
CTV market is growing rapidly with
advertising spend of c. $8.8 billion
expected in 20201.
After integrating the RhythmOne teams
into Tremor and merging the
technology stack, CTV revenues grew
from c. $2.2 million in Q1 2019, to $18.1
million in Q4 2019, and we expect our
CTV capabilities to form the bedrock of
Tremor’s growth in the short to
medium-term. In addition, RhythmOne’s
processes, such as accounting policies,
have been brought in-line with Tremor’s.
We released our PMP product at the
end of 2019 and this product, along with
the practices which are central to
Unruly, which we acquired in January
2020, will provide us with an important
growth engine in the coming years. In
addition, Tremor is now able to offer an
end-to-end self-serve platform, focused
primarily on CTV, we expect to see
growth in this business unit in the
second half of 2020, and that it will
become a key growth platform for
Tremor going forward.
The Company traded strongly in 2019,
generating a 18% increase in revenues
to $325.8 million (2018: $276.9 million),
and a 36% increase in adjusted EBITDA
to $60.4 million (2018: $44.1 million).
This is impressive growth, as the Taptica
performance revenues decreased, with
revenues from video and branding
Tremor International Ltd. 08 09
Our proposition
Tremor’s proposition is all about video,
and our robust end-to-end solutions,
which is the new model for companies
in this field, enables us to offer a diverse
suite of products to generate a number
of revenue streams. These include:
Media
Tremor’s media platform is one of the
most robust when it comes to video and
specifically CTV. We host thousands of
direct premium publishers and also
connect to the leading SSPs in the
market to grow our reach.
• Direct/managed – our sales force
offers two main products, which are
CTV and retargeting solutions, as
well as a combination of both
• Private Marketplaces – we enable
leading agencies that only work
with preferred marketplaces, the
ability to run, including on CTV
media, and use TV retargeting
segments that are connected to our
Exchange
• Self-Serve – we offer second tier
agencies a full platform to run their
video campaigns and we offer a
DSP with connectivity to our
exchange and a rich CTV portfolio,
as well as offering TV retargeting
and other data segments
Operational Review
Brand Advertising
Tremor’s video advertising business
continued to trade well in 2019,
benefitting from the incorporation of
RhythmOne’s video assets into the
Company. The division achieved record
revenues in 2019 of $248.6 million
(2018: $146 million), driven by the shift
of advertising spend to digital video, as
outlined above. The division added a
number of key clients during the period,
including Estee Lauder, Honda
Powersports, Pinterest, Remy Martin,
Symantec, Takeda, TikTok and Twitch.
In December 2019, we renewed our
partnership with Alphonso, the leading
TV re-targeting enabler in the US and
Canada, for a further two years. Tremor
leverages the data collected by
Alphonso to identify and target select
audiences in real time on an exclusive
basis. When combined with
RhythmOne’s YuMe offering, Alphonso’s
data allows Tremor to maintain a
leadership position in the TV retargeting
market. This also goes beyond the TV
screen, as advertising campaigns can
be delivered across platforms such as
mobile, CTV, laptop and tablet, which
deliver maximum impact.
Our media platform received further
reinforcement following the acquisition
of Unruly in January 2020. Unruly is
home to over 2,000 publishers, further
increasing the reach of our platform. In
addition, in Q4 2020, we launched a
self-serve platform for publishers to
manage their own media with
advertisers.
Introducing RhythmOne’s Exchange
into international markets began in
mid-2019 and was further bolstered
through the acquisition of Unruly, which
has strong presence in key markets
including the UK, Germany, Australia,
Japan and Singapore.
Unruly
Post period-end, in January 2020,
Tremor acquired Unruly and entered
into a global partnership with News
Corp. Tremor now has the exclusive
right to sell outstream video to more
than 50 News Corp titles in the UK, US
and Australia.
In addition, the transaction has:
• Transformed the Company into a
global business;
• Bolstered Tremor’s supply-side
platform adding 2,000 direct
premium publishers;
• Expanded Tremor’s customer base,
adding leading blue-chip
customers; including U7 council
members with tier 1 brands
including P&G, Unilever, Nestle,
American Express and others;
• Deepened Tremor’s data and
insight capabilities through Unruly's
pioneering testing and targeting
solution UnrulyEQ; and
• Added individuals from Unruly’s
management that contribute
significant knowledge and
experience, with Rebekah Brooks,
CEO of News UK, joining the board
from today.
The integration of Unruly into the
enlarged group is already underway,
and significant progress has been made
in the consolidation of operations as
well as the incorporation of its
mitigating this well-flagged decline.
Tremor also remains highly cash-
generative, with a net cash position at
31 December 2019 of over $76.9 million.
Our growth strategy continues to be
underpinned by three core components:
1) Video – the highest growth medium
in digital advertising, with this trend
expected to continue
• Tremor has a sharp focus on video,
which was further enhanced
through the acquisition of Unruly
2) Data – Tremor’s commercial edge is
bedded-in TV retargeting
• The Company has had a leading
position in this segment for over
four years and encompasses unique
data sources
3) Media with an emphasis on
Connected TV – our end-to-end
position is providing us with an
advantage in the marketplace and
CTV is the engine of growth within
the exchange
• Tremor’s presence within CTV
through its now combined
RhythmOne assets is well ahead of
much of the market with its solution
gaining significant traction
Video advertising
market growth
The global market for digital video
advertising both in the US – a key
market for Tremor – and worldwide is
expected to continue to grow markedly.
Video advertising spend in the US alone
is anticipated to be c. $42.6 billion in
20202. However, all forecasts pre-date
the outbreak of the COVID-19
pandemic.
These overarching market trends
underpinned the Company’s strategic
shift to focus wholly on video
advertising and more specifically key
areas like CTV, which given the
proliferation of smart TVs and the
ever-increasing number of streaming
providers, will remain an exciting
growth segment. In addition, the
increase in video advertising spend
globally is showing no signs of abating,
with the market anticipated to grow to
over $110 billion by 20243, and
importantly the shift from desktop
video to mobile video spend is also
expected to continue. International
expansion is central to Tremor’s
strategy and we believe we are well-
placed to do so following the
acquisition of Unruly.
/Annual Report and Accounts For the year ended 31 December 2019STRATEGIC REPORT Chief Executive Officer’s Review
continued
$40
million
annualised cost-savings from
RhythmOne integration
2-year
data partnership renewal
with Alphonso
January
2020
completed acquisition
of Unruly
$10
million
share buy-back launched
technology. Crucially, the acquisition
of Unruly brought even greater scale
to the Company and strong brand
recognition, which is key as we look
to capitalise on the opportunity within
video advertising technologies
internationally.
The Company has a strong balance
sheet with net cash of over $76.9
million, which therefore allows it to
undertake a share buy-back of $10
million whilst being confident in
trading through the coming period
of uncertainty.
Growth strategy
2019 was a year in which the Company
established the infrastructure and
technology stack, from which to deliver
material growth. Looking forward, we
are focused on aggressively expanding
our global customer base alongside
continuing to develop our product
offering. Therefore, our growth strategy
priorities are to:
• Drive organic growth in the US
– leverage our technology stack
and business capabilities to grow
market share
• Leverage CTV expertise and
capabilities – use the strong
foundations which we have
established in CTV to further grow,
as evidenced by the strong growth
in CTV we demonstrated in 2019 in
this segment
• Continue to offer innovative
solutions – mainly focused on CTV,
generate growth through our PMPs
and self-serve solutions to agencies
and clients
• Expand international footprint
– further growing our presence
beyond the US by introducing
products into relevant markets in
Europe and Asia and leveraging
international operations and the
Unruly brand
• Target select acquisitions – evaluate
potential acquisition targets in
order to further broaden the user
base, leveraging Tremor’s position
as a consolidator in the market
Capital allocation
The Company ended 2019 with over
$76.9 million of net cash after
completing the $25 million share
buyback program and making a $5
million advance payment for the
extension of the Alphonso partnership.
The board constantly evaluates how
best to deploy the Company’s cash to
maximise shareholder value.
As referenced above, the board
continues to assess strategic
acquisitions alongside continued
organic investment in the business.
Outlook /
COVID-19 Update
Tremor has made a solid start to 2020,
however the COVID-19 pandemic will
continue to cause global uncertainty in
the short to medium-term. Management
is aware that the pandemic could
markedly affect a number of our
end-customers and continues to
monitor the situation closely.
Management are already undertaking
a number of initiatives to help mitigate
the potential impact of COVID-19 on
business performance, which include:
• Accelerating the integration of
Unruly into Tremor, which is due
to be completed faster than
anticipated
• Launching new capabilities
alongside enhanced existing
solutions to capture the wider
opportunities in the market
• Monitoring the cost structure of
the Company
Much of Tremor’s global workforce
are successfully working remotely as
a result of the current regulations.
The health and wellbeing of the
Company’s employees remains
of the utmost importance.
Ofer Druker
Chief Executive Officer
30 March 2020
1Source: eMarketer, October 2019
2Source: eMarketer, February 2019
3Source: Cowen and Company, Jan 10, 2019
Tremor International Ltd. 10
11
/Annual Report and Accounts For the year ended 31 December 2019STRATEGIC REPORT Our Strategy
Growth engines
CTV
SELF SERVE
• Demand/supply
• Leverage CTV expertise
• Knowledge
• Deep market relationships
• Effective and Friendly UI
• Unique data base
• Significant media reach
• Pricing leverage
• Innovative solutions
PMP
• Aimed at 1st
tier agencies
• Effective and
Friendly UI
• Unique data
segments
SELECT VIDEO CLIENTS
DATA AUDIENCES
E X C H
Tremor International Ltd. 12
13
PMP
• Aimed at 1st
tier agencies
• Effective and
Friendly UI
• Unique data
segments
GLOBAL EXPANSION (EXCHANGE)
M&A
• Significant
media reach
• Pricing leverage
• Innovative solutions
• International markets
beyond US
• Global advertisers
• Evaluate select opportunities
• Focused on adding demand
CTV
A N G E
/Annual Report and Accounts For the year ended 31 December 2019STRATEGIC REPORT Case Studies
Connected TV
Innovative TV retargeting sparks incremental sales
Objective
Drive incremental sales of Nutrish’s products.
Strategy
Nutrish leveraged Tremor Video's to 1:1 ReTarget
viewers exposed to the Nutrish TV spot and to its
competitors’ TV ads. Powered by Alphonso Television
Viewership data, audiences were retargeted in real
time on their mobile devices to extend the brand’s
messaging beyond the TV screen. Sales attributable
to the campaign were measured vs. a non-exposed
control group to quantify incremental conversion.
“At Nutrish, we’re always on the lookout for new and
creative ways to engage consumers in our increasingly
multi-screen world. Our work with Tremor Video DSP
and Alphonso has enabled us to connect the big
screen to the small screen to not only reach our
audience more effectively through video, but to also
drive meaningful, incremental impact for our brand.”
– Steve Joyce, VP Marketing,
Ainsworth Pet Nutrition
Results
$1.1m
Incremental sales
1.6 to 1
Return on Advertising
Spend
90%
Contribution of
previous brand buyers
to incremental sales
+10%
Sales lift per
exposed HH
Tremor International Ltd.
Mobile video retargeting
TV retargeting & custom video delivers lift in tune-in for FOX’s ‘The Masked Singer’
14
15
Drive TV Tune-In
Campaign details
Vertical: Entertainment
Ad Type: Mobile, Desktop, Tablet & CTV Video
Flight: 12/31/18 – 01/02/19
Objective
Drive incremental viewers to the premiere
of FOX’s reality singing competition,
The Masked Singer.
Strategy
Tremor Video utilized exclusive Alphonso TV data
to retarget TV audiences who would most likely be
interested in viewing The Masked Singer and delivered
those viewers customized, real-time video ads across
second-screen devices and CTV.
Results
14.6%
Overall Lift in Tune-in
(Live + 3 Days After
Premiere)*
80%
VCR
1.3%
CTR
1.4m
Unique views
*Lift determined by comparing the tune-in rates among the group exposed to the campaign vs a non-exposed control group from Alphonso TV Audience data
/Annual Report and Accounts For the year ended 31 December 2019STRATEGIC REPORT
Chief Financial Officer’s Review
" The Company continues to selectively invest
in areas that management believe should
drive better results and business performance
whilst focusing on driving efficiencies and
savings across its operations.
"
Sagi Niri
Chief Financial Officer
Revenues for the twelve months ended
31 December 2019 increased by 18% to
$325.8 million compared with $276.9
million for 2018. Revenue split by
division in 2019 was as follows: Branding
contributed $248.5 million; and
Performance: $77.3 million (2018:
Branding $146.0 million, Performance
$130.8 million), reflecting the
decreasing contribution from the
Performance division.
Gross profit increased by 24% to $138.5
million (2018: $111.4 million). Cost of
sales, which consists primarily of traffic
acquisition and data costs that are
directly attributable to revenue
generated by the Company and based
on the revenue share arrangements with
audience and content partners,
decreased as a proportion of revenue
compared with the prior year.
Operating profit for the year decreased
by 88% to $3.2 million (2018: $26.7
million), mainly due to the acquisition
and integration of RhythmOne,
increased in share based payments as
demonstrated below.
Adjusted EBITDA for full year 2019 was
$60.4 million compared with $44.1
million for 2018, which is comprised
as follows:
Operating profit
Depreciation
Amortization
Share-based payments
Restructuring cost
Acquisition-related cost
Other income
2019
$’m
2018
$’m
3.2
26.7
11.9*
1.2
20.5
15.8
5.5
2.8
0.7
9.6
8.0
–
0.2
(1.6)
Adjusted EBITDA
60.4
44.1
*Including 9.1 IFRS 16 influence
Net Profit for the year decreased by
72% to $6.4 million (2018: $22.5 million).
Operating costs for the year increased
by 60% as a result of the acquisition of
RhythmOne. The Company continues to
selectively invest in areas that
management believe should drive
better results and business performance
whilst focusing on driving efficiencies
and savings across its operations.
General & administrative expenses
increased to $40.2 million (2018: $19.9
million). The main increase is attributed
as follows; $5.5 million due to
RhythmOne consolidation, $7.8 million
from share based payments (mainly to
CEO and COO), $2.6 million due to
increase in doubtful debt allowance
and $2.6 million increase due to
acquisition cost.
The Company continued to be cash-
generative with cash generated from
operating activities of $45.1 million
(2018: $37.5 million).
As at 31 December 2019, cash and bank
deposits were c. $79.0 million after and
net cash as at 31 December 2019 of
$76.9 million* was delivered post the
$25.0 million share buyback
programme during 2019 and $5.0
million of data pre-payments for 2020.
Tremor has announced its intention to
launch a discretionary $10 million share
buy-back imminently. The share
buy-back commitment forms parts of
Tremor’s broader strategy to deliver
shareholder value.
R&D expenses increased to $33.1 million
in the year (2018: $20.2 million). The
main increase is attributed from $12.2
million due to RhythmOne
consolidation.
Sagi Niri
Chief Financial Officer
30 March 2020
Sales & Marketing expenses increased
to $62.1 million (2018: $44.7 million).
The main increase is attributed from
$20.4 million due to RhythmOne
consolidation, offset by cost saving
efficiency of $3.0 million.
*Net cash is defined as cash and cash equivalents less
short and long-term interest-bearing debt including
capital and finance leas
Tremor International Ltd.
Revenue Mix
Tremor made a pivotal change in 2019 from a hybrid company of performance marketing and branding to a leading branding
video company, with the performance of its video division offsetting any decline in performance marketing revenues.
Specifically, Connected TV and new product launches such as Tremor’s Self-serve and Private Marketplace solutions
are also providing growth engines and an increasing contribution to revenues.
16
17
Branding division offsetting decreasing revenue contribution from performance marketing
76%
78%
83%
55%
45%
55%
45%
53%
47%
59%
61%
41%
39%
Q1.18
Q2.18
Q3.18
Q4.18
Q1.19
Q2.19
Q3.19
Q4.19
24%
22%
17%
■ Performance % ■ Branding %
CTV revenue growth ('000s)
8
7
4
6
$
.
4
6
7
5
$
.
5
6
8
.
5
6 $
4
0
4
$
.
4
6
5
.
3
$
2
3
2
.
3
$
7
4
2
.
1
$
3
7
1
.
1
$
1
3
4
.
1
$
3
9
2
.
1
$
6
7
4
$
5
0
5
$
x8
$3,842
x10
$4,921
1.2 019
2.2 019
3.2 019
4.2 019
5.2 019
6.2 019
7.2 019
8.2 019
9.2 019
10.2 019
11.2 019
12.2 019
$476
$505
1.2019
1.2020
2.2019
2.2020
Growth in Self-Serve revenue ('000s)
Growth in Private Marketplaces revenue ('000s)
$3,576
63%
$2,190
$1,579
39%
4,000
3,000
2,000
1,000
0
4,000
3,000
2,000
1,000
0
$3,202
X10
$1,713
Unruly
$968
$326
$1,488
R1
Q1.2019
Q4.2019
Q1.2020
Feb 2019
Feb 2020
/Annual Report and Accounts For the year ended 31 December 2019STRATEGIC REPORT Board of Directors
Tim Weller
Non-Executive Director
and Chairman
Tim Weller is the founder of Incisive
Media and its Chairman. He successfully
floated the company on the Main
Market of the London Stock Exchange
in 2000 and in 2006 he led the £275m
management buyout which took the
company private again. Mr. Weller was
a non-executive director and Chairman
of RDF Media from 2005-2010 and was
also Non-Executive Chairman of
Polestar from 2009-2011 until its sale to
Sun European Partners LLP. Mr. Weller
was a member of the Shadow Cabinet
New Enterprise Council, which advised
the then Shadow Chancellor of the
Exchequer, George Osborne, on
business and enterprise prior to the
2010 General Election. Mr. Weller was
Chairman of InternetQ from April 2013
– April 2016. Tim is also Chairman of
Trustpilot, a leading provider of trusted
company reviews, and Superawesome,
a company with leading technology
that powers the global kids’ digital
media ecosystem.
Ofer Druker
Chief Executive Officer
Ofer Druker joined Tremor International
in November 2017 as Executive
Chairman of the Tremor Video division
and has been instrumental in the
successful integration of Tremor
Video since its acquisition by Tremor
International in August 2017. Mr Druker
was appointed Chief Executive Officer
in April 2019 following the completion
of the merger with RhythmOne plc.
Mr Druker was the founder and CEO
of Matomy Media Group Ltd until
April 2017, having built Matomy from
its inception in 2007 into a digital
media company with revenues of
$276.6 million for the full year ended
December 2016. 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.
Yaniv Carmi
Chief Operating Officer
Yaniv Carmi joined Tremor International
in 2010 and became Chief Financial
Officer of the Company in January 2011,
and then Chief Operating Officer in
March 2020. Mr. Carmi is an
experienced finance professional,
whose previous roles include tax and
audit senior at KPMG, Israel. At Tremor,
he was instrumental in the IPO of the
Company in 2014 and in the subsequent
global expansion in operations,
including through significant M&A.
Mr. Carmi is responsible for all elements
of financial operations, strategic and
tactical matters related to budget
management as well as directing key
corporate initiatives. Mr. Carmi is a
Certified Public Accountant and holds
a B.A. degree in Economics and
Accounting from Ben-Gurion University
and an MBA in Financial Management
from Tel Aviv University.
Tremor International Ltd. 18
19
Neil Jones
Senior Non-Executive Director
Neil Jones is currently Chief Operating
Officer and a director of Huntsworth
plc, the healthcare communications and
public relations group, which is listed on
the Main Market of the London Stock
Exchange. Prior to which, Neil held the
position of Chief Financial Officer at
Huntsworth between February 2016 to
October 2019. He joined Huntsworth
from ITE Group plc, the international
exhibitions group, where he held the
position of Chief Financial Officer from
2008. Between 2003 and 2008, Mr.
Jones was Group Finance Director at
Tarsus Group plc and prior to that, he
spent five years as Finance Director
(Europe) at Advanstar Communications.
Mr. Jones has a BA degree in Economics
from the University of Manchester and
completed the ACA in July 1990
with Price Waterhouse.
Christopher Stibbs
Non-Executive Director
Chris has over 25 years’ experience as
an executive in the media industry, most
recently up until August 2019 he was
Chief Executive of The Economist
Group. He previously held a number of
roles within the group including head
of the Economist Intelligence Unit (the
group’s B2B arm) and CFO. He is
credited with overseeing the group’s
resilience and transition through the
unprecedented disruption experienced
by the publishing industry over the last
15 years, and previously held positions
with Pearson and Incisive Media. Chris
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.
Joanna Parnell
Non-Executive Director
Joanna Parnell is the Co-Founder
of strategic marketing consultancy
Project50, designing commercial
growth strategies for C-suite business
leaders in the UK and US. Previously,
Joanna was Managing Partner at
Wavemaker (formerly MEC), one of the
world’s leading media agency networks
and owned by WPP plc, where she led
the paid digital and data team,
overseeing the agency’s focus on data
driven campaigns. Prior to moving to
MEC in March 2016, Ms. Parnell was
Director of Strategy and sat on the
management team at Unique Digital
(now a WPP company), with
responsibility for setting product and
business strategy, including leading the
multichannel planning strategy (cross-
device and cross-platform), managing
product heads and driving key
initiatives across data buying,
attribution modelling and biddable
media adaptation. Ms. Parnell has a
Masters in German and Business from
the University of Edinburgh and studied
as a postgraduate student at the
London School of Marketing between
2005 and 2006.
Rebekah Brooks
Non-Executive Director
Rebekah Brooks is Chief Executive of
British newspaper publisher News UK,
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, Rebekah
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 UK, 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 (PA).
/Annual Report and Accounts For the year ended 31 December 2019CORPORATE GOVERNANCE Corporate Governance Report
The Board is responsible to
shareholders for the effective direction
and control of the Company, with the
aim of generating long-term success for
Tremor. This report describes the
framework for corporate governance
and internal controls that the directors
have established to enable them to
carry out this responsibility.
The directors recognise the importance
of high standards of corporate
governance and have chosen to adopt
the Quoted Companies Alliance
Corporate Governance Code (the “QCA
Code”) as the basis of the Company’s
governance framework. This is in line
with the London Stock Exchange’s AIM
Rules requiring all AIM-listed companies
to adopt and comply with a recognised
corporate governance code. As an
Israeli company, the Company also
complies with the corporate governance
provisions of Israel’s Companies Law,
5759-1999 (the “Companies Law”).
The Board believes that good corporate
governance reduces risks within the
business, promotes confidence and
trust amongst its stakeholders and is an
important part of the effectiveness and
efficiency of the Company’s
management framework.
The QCA Code includes ten broad
principles that Tremor strives to
implement in order to deliver growth to
its shareholders in the medium and long
term. The following text references how
the Board complies with the principles
of the QCA Code. The QCA Code can
be found on the QCA’s website: www.
theqca.com.
The Board recognises the AGM as an
important opportunity to meet private
shareholders. Typically the Directors –
both non-executive and executive – are
also available to speak to shareholders
informally immediately after the AGM.
However, in light of current UK
Government measures relating to the
COVID-19 pandemic, including
restrictions on gatherings and non-
essential travel, the AGM will be
convened with the minimum quorum of
only one Director and one other
shareholder in attendance, which will be
facilitated by the Company, in order to
conduct the business of the meeting
and shareholders must not attend the
meeting in person.
All of Tremor’s five non-executive
directors are UK-based and available to
meet with shareholders as requested.
This includes the Chairman, who meets
regularly with shareholders
(independent of management) and
seeks to understand voting decisions/
intentions where appropriate. The
Chairman either directly, or indirectly
through Tremor’s broker, regularly
solicits feedback from the Company’s
investors. The Chairman also receives
questions from shareholders and looks
to address them in a timely manner.
Regular reports are provided to the
Board on meetings with shareholders
and any concerns are communicated.
Tremor also seeks to meet the needs of
shareholders on an ad hoc basis where
necessary, such as with the recent
publication of a Q&A document in
relation to the Unruly acquisition in
January 2020 and with webcasts and
separate presentations attended by
analysts and private investors.
Deliver growth
1. Establish a strategy and
business model which
promote long-term value
for shareholders
Tremor consistently reiterates its
strategy in its communications, which
include RNS announcements and
presentations to stakeholders, and
particularly at its financial results.
Tremor’s strategy is to grow the
business through a combination of
organic geographic expansion, and via
acquisition of companies providing
complementary technologies or those
which provide access to new markets.
The Company is also focused on the
continued improvement of its
technologies to increase efficiency as
well as implementing operational
efficiencies across its acquired
businesses to enable profitable growth.
The key challenges to the business and
how these are mitigated are detailed on
pages 28 and 29 of this report.
Tremor also provides stakeholders with
in-depth reviews of its strategy and how
it manages risks at Capital Markets
Days, with one due to be held in London
in April 2020, before being delayed due
to the COVID-19 pandemic.
2. Seek to understand and
meet shareholder needs
and expectations
Tremor encourages dialogue with both
its institutional and private
shareholders, responding quickly and
with transparency to all queries
received. The Company provides the
contact details for its IR advisers on its
website. Tremor also engages with
investors via its broker, finnCap.
Tremor’s CEO and CFO meet regularly
with institutional investors, usually in
relation to the issuance of financial
results, and both endeavour to
accommodate all meeting requests
from investors.
Tremor International Ltd. 20
21
3. Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success
Tremor’s management team
encourages employees to share their
feedback, ideas and thoughts by
promoting a transparent organisational
culture and an “open door” policy.
Employees share their feedback with
their managers on a regular basis
one-on-one. Those participating in the
leadership programmes are asked to
share their thoughts in group
discussions and provide any feedback
they might have in regard to
management, culture and the
Company’s actions. The Company also
introduced internal surveys to garner
employee feedback and satisfaction
and to receive suggestions. The
Company shares its list of core values
with all employees, which are the
foundation of its culture: “everything is
possible” (referring to endless and equal
opportunities for personal and
professional growth) and “work hard –
play hard” (which refers to the
importance of diligence and
collaboration).
Retention is a matter reported on to
the Board.
The Company communicates and builds
relationships with external stakeholders
via its marketing efforts, including social
media, events, PR, direct marketing,
online advertising among other
initiatives. The Company offers to meet
with stakeholders at regular events
globally, and occasionally directly
contacts investors to offer meetings.
Tremor has a ‘People & Culture’
programme, which includes providing
employees with opportunities for
volunteering in the community – with
a particular focus on education – such
as tutoring youth at risk and
collaborating with schools that
care for underprivileged children.
Tremor also regularly donates to
voluntary associations.
4.Embed effective risk
management, considering both
opportunities and threats,
throughout the organisation
The risks to the business and how these
are mitigated are detailed on pages 28
and 29 and its internal control measures
on pages 25 and 26 of this report.
Both the Executive Directors and senior
managers are responsible for reviewing
and evaluating risk on an ongoing basis
and the Board considers risks to the
business at its board meetings. The
Board also allocates certain meetings to
have a more in-depth review of strategy
and risk.
The Audit Committee of the Board
consults with external advisers
(including the internal auditor) as/when
needed to support execution on
strategy and risk mitigation, such as
holding executive sessions with KPMG
to discuss the audit process and the
manner in which the Company’s finance
team is expanding to address the
significant international growth of
the business.
Maintain a dynamic
management framework
5. Maintain the Board as a
well-functioning, balanced
team led by the chair
The composition, roles and
responsibilities of the Board and its
committees are set out on pages 23
to 26 of this report. The number of
meetings of the Board and the
committees are also detailed.
High level and in-depth analytic
materials, including the minutes from
the prior meeting, are sent in a timely
manner ahead of each committee or
Board meeting allowing Board
members adequate time to review
them. After each meeting, the minutes
are sent to the chair for review and
approval. All directors have direct
access to the advice and services of the
Company Secretary and are able to take
independent professional advice in the
furtherance of the duties, if necessary,
at the Company’s expense.
The composition of the Board
is outlined on pages 23 to 26 of
this report.
The time devoted by directors to their
duties varies depending on the activities
of the Company. In 2019, the Board held
15 meetings. Each year, the Board
endeavours to hold meetings to review
strategy and interact with senior
managers in various locations. All
executive directors work full-time for
Tremor and the non-executive Chairman
spends a minimum of three to four days
per month on Tremor business. This is
primarily via in-person meetings or
phone calls with management, brokers
and shareholders. The other non-
executive directors spend a minimum
of two days per month on their duties,
primarily through formal face-to-face
meetings and phone calls with
management and other board
members.
6. Ensure that between them the
directors have the necessary
up-to-date experience, skills and
capabilities
The composition of the Board and the
credentials of the individual directors
are outlined on pages 18 and 19 of this
report. All of the directors remain active
in the media and marketing industry –
working for public and private
companies – which ensures that their
skillsets remain up to date.
The Nomination Committee of the
Board oversees the hiring process and
makes recommendations to the Board
on new board appointments as well as
re-election of existing directors. Where
new board appointments are
considered the search for candidates
is conducted, and appointments are
made, on merit, against objective
criteria and with due regard for the
benefits of diversity on the Board,
including gender. The Nomination
Committee also considers succession
planning.
/Annual Report and Accounts For the year ended 31 December 2019CORPORATE GOVERNANCE Corporate Governance report
continued
7. Evaluate Board performance
based on clear and relevant
objectives, seeking continuous
improvement
The Board currently runs a self-
evaluation process on its effectiveness
and encourages open and transparent
communication.
All directors are subject to re-election
by the shareholders each year excluding
the non-executive directors, which
qualify as External Directors under
Israeli law.
The Executive Directors are subject
to an annual performance review
when they are measured against
pre-set criteria.
The Board constantly looks to ensure
that the executive management of the
Company evolves. The Company
conducts a leadership programme to
ensure talent can be promoted within
the business. If there are skills gaps, the
Company looks to fill those externally.
At present, the directors are confident
there is sufficient talent within the
Company to be able to appoint new
leadership from within.
8. Promote a corporate culture
that is based on ethical values
and behaviours
Tremor’s ‘People & Culture’ programme
is designed to preserve the culture of
the Company. It includes “lecture of the
month” which is used to present
different private and public social
initiatives that aim to encourage
employee volunteering and social
awareness. Tremor also offers
volunteering opportunities directly to
its employees.
The Company has a ‘Leadership
Programme’ that is designed to
facilitate career progression while
promoting leadership based on
Tremor’s core values and ethical
behaviour. Similarly, the Company’s
recruiting efforts and methods are
based on the notion of being the
culture’s gate keepers: aiming to recruit
people who are a cultural fit and share
a common ground of ethical values
and behaviours.
The Company’s senior management
team observes the culture of the
Company in operation at the local
business units (throughout its
geographies) through visits and
maintaining company culture is a matter
discussed by the Board. The Board also
maintains regular dialogue with
company management outside of the
Executive Directors to monitor the
disposition of the broader employee-
base and ensure the continuation of a
healthy, growth-oriented culture.
9. Maintain governance
structures and processes
that are fit for purpose and
support good decision-making
by the Board
The Corporate Governance Report on
pages 20 to 22 of this report details the
corporate governance structures and
processes for the Company.
Build trust
10.Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders
Tremor describes it communication
practices in its annual report under
‘Relationship with Shareholders’ (page
25 of this report).
Tremor International Ltd. The Board and Committees
22
23
Board of Directors
The Board is responsible for the overall
strategy and financial performance of
the Company and has a formal schedule
of matters reserved for its approval. In
order to lead the development of the
strategy of the Company and the
progress of financial performance, the
Board is provided with timely and
comprehensive information that enables
the Board to review and monitor the
performance of the Company and to
ensure the Company is able to achieve
its strategic goals.
Board composition
The Board is currently comprised of two
Executive Directors, Ofer Druker and
Yaniv Carmi, and five non-executive
directors, Tim Weller (Chairman of the
Board), Neil Jones, Joanna Parnell,
Christopher Stibbs and Rebekah
Brooks. The balance between executive
and non-executive directors does not
allow any group to dominate the
Board’s decision making. At the
upcoming Annual General Meeting, the
shareholders will be asked to increase
the size of the Board from seven to nine
directors, in order to appoint two new
directors, Sagi Niri, the Company's Chief
Financial Officer, as an Executive
Director, and Norm Johnston, an
industry expert, as a non-executive
director.
In accordance with the Companies Law,
the Board must always have at least two
external directors who meet certain
statutory requirements of
independence (the “External
Directors”). The Company’s External
Directors are currently Neil Jones and
Joanna Parnell. The term of office of an
External Director is three years, which
can be extended for two additional
three-year terms. Mr Jones' and Ms
Parnell's term of office expires at the
upcoming Annual General Meeting and
they are standing for re-election. Under
the Companies Law, External Directors
are elected by shareholders by a special
majority and may be removed from
office only in limited cases. Any
committee of the Board must include
at least one External Director and the
Audit Committee and Remuneration
Committee must each include all of the
External Directors (including one
External Director serving as the chair of
the Audit Committee and Remuneration
Committee), and a majority of the
members of each of the Audit
Committee and Remuneration
Committee must comply with the
director independence requirements
prescribed by the Companies Law.
Collectively, the non-executive directors
bring a valuable range of expertise in
assisting the Company to achieve its
strategic aims. The effectiveness of the
Board benefits from the following skills
and experience which the current Board
members possess: advertising, media,
finance and accounting, governance,
research and development and
technology expertise.
Operation of the Board
The Company Secretary, Yaniv Carmi,
together with Chief Financial Officer,
Sagi Niri, are responsible for ensuring
that the Company complies with the
statutory and regulatory requirements
and maintains high standards of
corporate governance. They support
and work closely with the Chairman of
the Board, the Chief Executive Officer
and the Board committee chairs in
setting agendas for meetings of the
Board and its committees and support
the transfer of timely and accurate
information flow from and to the Board
and the management of the Company.
The Board holds its meetings in
accordance with its scheduled calendar.
During 2019, the Board met on 15
occasions. The Board also holds regular
telephone calls to update the members
on operational and other business, and
the Board convenes occasionally for
additional updates and conversations
on ad-hoc emerging matters that arise
in-between the scheduled Board
meetings. A majority of the Board
members, which constitutes the legal
quorum for a board meeting, attended
each of the board meetings. Each board
meeting is preceded by a clear agenda
and any relevant information is provided
to directors in advance of the meeting.
An agreed procedure exists for
directors in the furtherance of their
duties to take independent professional
advice. Newly appointed directors are
to be made aware of their
responsibilities through the Company
Secretary. The Company provides the
directors with training sessions via
internal meetings, presentations and
conversations which are being
conducted by Company advisors,
management and other relevant
persons during the year in order to
enable greater awareness and
understanding of the Company’s
business and the environment in which
it operates.
The Board has established properly
constituted Audit, Remuneration,
Nomination and Disclosure Committees
of the Board with formally delegated
duties and responsibilities.
Audit Committee
Responsibilities
The Audit Committee has responsibility
for ensuring that the financial
performance of the Company is
properly reported on and reviewed, and
its role includes monitoring the integrity
of the financial statements of the
Company (including annual and interim
accounts and results announcements),
reviewing internal control and risk
management systems, reviewing any
changes to accounting policies,
reviewing and monitoring the extent of
the non-audit services undertaken by
external auditors and advising on the
appointment of external auditors.
In addition, under the Companies Law,
the Audit Committee is required to
monitor the effectiveness of the internal
control environment of the Company,
including consulting with the internal
auditor and independent accountants,
to review, classify and approve related
party transactions and extraordinary
transactions, to review taxation and
transfer pricing, to review the internal
auditor’s audit plan and to establish and
monitor whistle-blower procedures.
Audit Committee composition
The UK Corporate Governance Code
recommends that an audit committee
should comprise at least three members
who are independent non-executive
directors, and that at least one member
should have recent and relevant
financial experience.
The Audit Committee comprises Neil
Jones, Joanna Parnell and Christopher
Stibbs, and is chaired by Neil Jones.
Operation of the
Audit Committee
The Committee operates under written
terms of reference and meets at least
twice a year with the Company’s
external auditors, and with the
Chairman and the Chief Executive
Officer present by invitation only. The
Committee meets with the external
auditors without the Chairman and the
Chief Executive Officer present as it
considers appropriate.
/Annual Report and Accounts For the year ended 31 December 2019CORPORATE GOVERNANCE The Board and Committees
continued
During 2019, the Committee met on
three occasions. A majority of the
Committee members, which constitutes
the legal quorum for a Committee
meeting, attended each of the
Committee meetings. Each Committee
meeting is preceded by a clear agenda
and any relevant information is provided
to the Committee members in advance
of the meeting.
Among others, the Committee reviewed
the financial performance and approved
the interim and annual financial
statements of the Company, and hosted
an executive session with KPMG. In
addition, the reappointment of KPMG
as group auditors was also approved
at the Company’s 2019 Annual
General Meeting.
Remuneration Committee
Responsibilities
The Remuneration Committee has
responsibility for determining, within
the agreed terms of reference, the
Company’s policy on the remuneration
packages of the Company’s Chief
Executive Officer, the Chairman of the
Board, the executive and non-executive
directors, the Company Secretary and
other senior executives. The
Remuneration Committee also has
responsibility for: (i) recommending to
the Board a remuneration policy for
directors and executives and monitoring
its implementation; (ii) approving and
recommending to the Board and the
Company’s shareholders, the total
individual remuneration package of the
Chairman of the Board, each executive
and non-executive director and the
Chief Executive Officer (including
bonuses, incentive payments and share
options or other share awards); and (iii)
approving and recommending to the
Board the total individual remuneration
package of the Company Secretary and
all other senior executives (including
bonuses, incentive payments and share
options or other share awards), in each
case within the terms of the Company’s
policy and in consultation with the
Chairman of the Board and/or the Chief
Executive Officer. No Director or
manager may be involved in any
discussions as to their own
remuneration.
Remuneration Committee
composition
The UK Corporate Governance Code
recommends that a remuneration
committee should comprise at least
three members who are independent
non-executive directors. The
Remuneration Committee comprises
Joanna Parnell, Neil Jones and
Christopher Stibbs, and is chaired by
Joanna Parnell.
Operation of the
Remuneration Committee
The Committee operates under written
terms of reference.
During 2019, the Committee met on
three occasions. A majority of the
Committee members, which constitutes
the legal quorum for a Committee
meeting, attended each of the
Committee meetings. Each Committee
meeting is preceded by a clear agenda
and any relevant information is provided
to the Committee members in advance
of the meeting.
During these meetings the Committee
reviewed and recommended to the
Board the grant of equity incentive
awards to the Company’s management;
and increasing the pool of equity
incentive awards available for employee
grants under the Company’s equity
incentive plans. The Committee
reviewed and recommended to the
Board and shareholders, for their
approval, an amended incentive award
plan for the Company’s Chief Executive
Officer and Director, Ofer Druker, which
was approved at the Company’s 2019
Extraordinary General Meeting. The
Committee also reviewed and
recommended an amendment of the
remuneration relating to a relocation for
the Company’s former Chief Financial
Officer, current Chief Operating Officer
and Director, Yaniv Carmi, which were
approved at the Company’s 2019
Extraordinary General Meeting and
Annual General Meeting, and the
allotment of shares to a non-executive
director in lieu of a cash payment. The
Committee also reviewed and agreed a
separation agreement from the
Company’s former Chief Operating
Officer, Tal Feigel. The Committee also
determined and agreed with the Board
the Company’s remuneration
philosophy and the principles of its
remuneration policy for executives,
ensuring that these are in line with the
business strategy, objectives, values
and long-term interests of the Company
and comply with all regulatory
requirements.
Nomination Committee
Responsibilities
The Nomination Committee has
responsibility for reviewing the
structure, size and composition
(including the skills, knowledge and
experience) of the Board, and giving
full consideration to succession
planning. It also has responsibility for
recommending new appointments
to the Board.
Nomination Committee
composition
The UK Corporate Governance Code
recommends that a nomination
committee should comprise at least
three members who are independent
non-executive directors. The
Nomination Committee comprises
Christopher Stibbs, Neil Jones and
Joanna Parnell, and is chaired by
Christopher Stibbs.
Operation of the
Nomination Committee
The Committee operates under written
terms of reference. During 2019, the
Committee met on two occasions. A
majority of the Committee members,
which constitutes the legal quorum for a
Committee meeting, attended the
Committee meeting. Each Committee
meeting is preceded by a clear agenda
and any relevant information is provided
to the Committee members in advance
of the meeting.
During these meetings, the Committee
reviewed and recommended to the
Board the re-election of Ofer Druker,
Yaniv Carmi and Tim Weller, as well as
the standing down of Ronni Zehavi,
Non-executive Director, from the Board
and for him not stand for re-election,
Tremor International Ltd. 24
25
which was approved at the Company’s
2019 Annual General Meeting. The
Committee also recommended to the
Board the election of Christopher Stibbs
to the Board to fill a vacancy. Ofer
Druker, Yaniv Carmi and, non-executive
directors, Tim Weller, Christopher
Stibbs, Rebekah Brooks, Neil Jones and
Joanna Parnell will be standing for
re-election at the forthcoming Annual
General Meeting. The shareholders will
also be asked at the forthcoming
Annual General Meeting to increase the
size of the Board from seven to nine
directors, in order to appoint two new
directors, Sagi Niri, the Company's Chief
Financial Officer, as an Executive
Director, and Norm Johnston, an
industry expert, as a non-executive
director.
The Nomination Committee’s members
believe that the directors put forward
for re-election at the forthcoming
Annual General Meeting continue to be
effective and demonstrate commitment
to their role.
Disclosure Committee
Responsibilities
The Disclosure Committee has
responsibility for assisting the Board in
fulfilling its responsibilities in respect of
the requirement to make timely and
accurate disclosure of all information
that is required to be disclosed to meet
legal and regulatory obligations,
including compliance with MAR.
The Disclosure Committee comprises
Tim Weller, Neil Jones and Yaniv Carmi,
and is chaired by Tim Weller.
Operation of the
Disclosure Committee
The Committee operates under written
terms of reference. A majority of the
Committee members (including one
non-executive director) constitutes the
legal quorum for a Committee meeting.
Information is provided to the
Committee members in advance of the
meeting. During 2019, the Committee
met on one occasion, to review and
approve the 2018 annual results
announcement.
Board and Committees
evaluation
The performance of the Board, its
committees and individual members is
assessed on an evaluation of Board
performance survey conducted on an
annual basis via questionnaire and
detailed Board discussion. An
implementation plan is then actioned
for any matters arising.
ordinary resolution, is also required. The
authorisation of a conflict matter, and
the terms of authorisation, may be
reviewed at any time by the Board.
The Board considers that these
procedures are operating effectively.
There have been no matters of a
material nature arising requiring
assessment by the Board as a
potential conflict during the year.
Conflicts of interest
The Company has procedures for the
disclosure and review of any conflicts,
or potential conflicts, of interest in
compliance with the Companies Law,
which the directors may have and for
the authorization of such conflict
matters by the Board.
Under the Companies Law, any
transaction of the Company with a
director or any transaction of the
Company in which a director has a
personal interest requires the approval
of the Board. The transaction must not
be approved if it is not in the Company’s
best interest. If the transaction is an
extraordinary transaction (i.e. a
transaction that is not in the ordinary
course of business, that is not on market
terms or that is likely to have a material
impact on a company’s profitability,
assets or liabilities), then Audit
Committee approval is required in
addition to Board approval.
If the transaction concerns exculpation,
indemnification, insurance or
remuneration of the director, then the
approvals of the Remuneration
Committee, the Board and the
shareholders by way of ordinary
resolution are required (in that order).
A director who has a personal interest
in a matter that is considered at a
meeting of the Board, the Audit
Committee or the Remuneration
Committee may not attend that
meeting or vote on that matter, unless
a majority of the Board, the Audit
Committee or the Remuneration
Committee, as applicable, has a
personal interest in the matter. If a
majority of the Board, the Audit
Committee or the Remuneration
Committee, as applicable, has a
personal interest in the transaction,
then shareholder approval, by way of
Relationship with
shareholders
The Company encourages the
participation of both institutional and
private investors. The Chief Executive
Officer and Chief Financial Officer meet
regularly with institutional investors,
usually in regard to the issuance of half
and full year results. Communication
with private individuals is maintained
through the Annual General Meeting
and the Company’s annual and interim
reports. In addition, further details on
the strategy and performance of the
Company can be found on its website
(www.tremorinternational.com), which
includes copies of the Company’s
press releases.
Regular updates are provided to the
Board on meetings with shareholders
and analysts, and brokers’ opinions.
Non-executive directors are available to
meet major shareholders, if required.
Investors are also encouraged to
contact the Company’s Investor
Relations advisors at Vigo
Communications.
Internal controls
The Board maintains full control and
direction over appropriate strategic,
financial, organisational and compliance
issues. The Company’s organisational
structure has clearly defined lines of
authority, responsibility and
accountability, which is reviewed
regularly. The annual budget and
forecasts are reviewed by the Board
prior to approval being given. This
includes the identification and
assessment of the business risks
inherent in the Company and the digital
media industry as a whole along with
associated financial risks.
/Annual Report and Accounts For the year ended 31 December 2019CORPORATE GOVERNANCE The Board and Committees
continued
Audit and auditor
independence
An additional responsibility of the Audit
Committee is to keep under review the
scope and cost effectiveness of the
external audit. This includes
recommending to the Board the
appointment of the external auditors
and reviewing the scope of the audit,
approving the audit fee and, on an
annual basis, the Committee being
satisfied that the auditors are
independent.
Somekh Chaikin, member firm of KPMG
International, is retained to perform
audit and audit-related work on the
Company and its subsidiaries. The Audit
Committee monitors the nature and
extent of non- audit work undertaken
by the auditors. It is satisfied that there
are adequate controls in place to ensure
auditor independence and objectivity.
Periodically, the Audit Committee
monitors the cost of non- audit work
undertaken by the auditors. The Audit
Committee considers that it is in a
position to take action if at any time it
believes that there is a risk of the
auditors’ independence being
undermined through the award
of this work.
The Board has overall responsibility
for the Company’s systems of internal
control and for monitoring their
effectiveness. Although no system
of internal control can provide
absolute assurance against material
misstatement or loss, the Company’s
systems are designed to provide the
directors with reasonable assurance
that issues are identified on a timely
basis and dealt with appropriately.
The Company’s key internal financial
control procedures include:
• a review by the Board of actual
results compared with budget and
forecasts;
• reviews by the Board of year-end
forecasts;
• the establishing of procedures for
acquisitions, capital expenditure
and expenditure incurred in the
ordinary course of business;
• the appraisal and approval of
proposed acquisitions; and
• the appointing of experienced and
suitably qualified staff to take
responsibility for key business
functions to ensure maintenance
of high standards of performance.
The external auditors are engaged to
express an opinion on the financial
statements. They discuss with
management the reporting of
operational results and the financial
condition of the Company, to the extent
necessary to express their audit opinion.
In accordance with Companies Law, the
Board must appoint an internal auditor
nominated following the
recommendation of the Audit
Committee. The primary role of the
internal auditor is to examine whether a
company’s actions comply with the law
and proper business procedure. The
internal auditor may be an employee of
the Company but may not be an
interested party or office holder, or a
relative of any interested party or office
holder and may not be a member of the
Company’s independent accounting
firm or its representative. The
Company’s internal auditor is
Yisrael Gewirtz (Fahn Kanne
Control Management Ltd., Grant
Thornton Israel).
Tremor International Ltd. Takeovers & Mergers
26
27
As the Company is incorporated in Israel,
it is subject to Israeli law and the City
Code on Takeovers and Mergers does
not apply to the Company, except to
the extent share control limits are
incorporated into the Company’s Articles
of Association, as described below.
Mergers
The Companies Law permits merger
transactions, provided that each party to
the transaction obtains the approval of
its board of directors and shareholders
(excluding certain merger transactions
which do not require the approval of the
shareholders, as set forth in the
Companies Law).
Pursuant to the Company’s Articles of
Association, the shareholders of the
Company are required to approve the
merger by the affirmative vote of a
majority of the Ordinary Shares of the
Company represented at the
shareholders meeting in person or by
proxy and voting thereon. In addition, for
purposes of the shareholder vote of each
party, the merger will not be deemed
approved if a majority of the shares not
held by the other party, or by any person
who holds 25 per cent. or more of the
shares or the right to appoint 25 per cent.
or more of the directors of the other
party, has voted against the merger.
The Companies Law requires the parties
to a proposed merger to file a merger
proposal with the Israeli Registrar of
Companies, specifying certain terms of
the transaction. Each merging company’s
board of directors and shareholders must
approve the merger. Shares in one of the
merging companies held by the other
merging company or certain of its
affiliates are disenfranchised for
purposes of voting on the merger. A
merging company must inform its
creditors of the proposed merger. Any
creditor of a party to the merger may
seek a court order blocking the merger, if
there is a reasonable concern that the
surviving company will not be able to
satisfy all of the obligations of the parties
to the merger. Moreover, a merger may
not be completed until at least 50 days
have passed from the time that the
merger proposal was filed with the Israeli
Registrar of Companies and at least
30 days have passed from the approval
of the shareholders of each of the
merging companies.
In addition, the provisions of the
Companies Law that deal with
‘‘arrangements’’ between a company and
its shareholders may be used to effect
squeeze-out transactions in which the
target company becomes a wholly-
owned subsidiary of the acquirer. These
provisions generally require that the
merger be approved by a majority of the
participating shareholders holding at
least 75 per cent. of the shares voted on
the matter, as well as 75 per cent. of each
class of creditors. In addition to
shareholder approval, court approval of
the transaction is required.
Under the Companies Law, in the event
the Company enters into a merger or an
“arrangement” under the Companies
Law (as described above), the provisions
of the Companies Law and the Articles of
Association rules with respect to tender
offers (as described below) do not apply.
Articles of Association and
special tender offer
The Company’s Articles of Association
contain a prohibition on a person
acquiring shares, whether by himself or in
concert, which, when aggregated with
shares held by his concert parties, carry
25 per cent. or more of the voting rights
attributable to the shares of the
Company except as a result of a
“permitted acquisition”. An acquisition is
a “permitted acquisition” if (i) the
acquisition is made in compliance with
any applicable tender offer rules under
the Companies Law as may be in effect
at such time and (ii) the acquisition is
made in circumstances which the
Takeover Code, if applied to the
Company, would require an offer to be
made as a consequence and such offer is
made in accordance with Rule 9 of the
Takeover Code, as if such rule applied.
The Companies Law provides that an
acquisition of shares of a public Israeli
company must be made by means of a
special tender offer if, as a result of the
acquisition, the purchaser could become
a holder of 25 per cent. or more of the
voting rights in the Company. This rule
does not apply if there is already another
holder of at least 25 per cent. of the
voting rights in the Company.
Similarly, the Companies Law provides
that an acquisition of shares in a public
company must be made by means of a
tender offer if, as a result of the
acquisition, the purchaser could become
a holder of more than 45 per cent. of the
voting rights in the company, if there is
no other shareholder of the company
who holds more than 45 per cent. of the
voting rights in the company.
A special tender offer must be extended
to all shareholders of a company, but the
offeror is not required to purchase shares
representing more than 5 per cent. of the
voting power attached to the company’s
outstanding shares, regardless of how
many shares are tendered by share-
holders. A special tender offer may be
consummated only if (i) at least 5 per
cent. of the voting power attached to the
company’s outstanding shares will be
acquired by the offeror and (ii) the
number of shares tendered in the offer
exceeds the number of shares whose
holders objected to the offer.
If a special tender offer is accepted, then
the purchaser or any person or entity
controlling it or under common control
with the purchaser or such controlling
person or entity may not make a
subsequent tender offer for the purchase
of shares of the target company and may
not enter into a merger with the target
company for a period of one year from
the date of the offer, unless the purchaser
or such person or entity undertook to
effect such an offer or merger in the
initial special tender offer. Shares that are
acquired in violation of this requirement
to make a tender offer will be deemed
Dormant Shares (as defined in the
Companies Law) and will have no rights
whatsoever for so long as they are held
by the acquirer.
Full tender offer
Under the Companies Law, a person may
not purchase shares of a public company
if, following the purchase, the purchaser
would hold more than 90 per cent. of the
company’s shares or of any class of
shares, unless the purchaser makes a
tender offer to purchase all of the target
company’s shares or all the shares of the
particular class, as applicable. If, as a
result of the tender offer, either:
• the purchaser acquires more than 95
per cent. of the company’s shares or
a particular class of shares and a
majority of the shareholders that did
not have a Personal Interest
accepted the offer; or the appointing
of experienced and suitably qualified
staff to take responsibility for key
business functions to ensure
maintenance of high standards of
performance.
• the purchaser acquires more than 98
per cent. of the company’s shares or
a particular class of shares;
then, the Companies Law provides that
the purchaser automatically acquires
ownership of the remaining shares.
However, if the purchaser is unable to
purchase more than 95 per cent. or 98
per cent., as applicable, of the company’s
shares or class of shares, the purchaser
may not own more than 90 per cent.
of the shares or class of shares of the
target company.
/Annual Report and Accounts For the year ended 31 December 2019CORPORATE GOVERNANCE Directors’ Report
for the Year Ended 31 December 2019
Principal activities
Tremor International Ltd is a global
leader in advertising technologies, it has
multiple core divisions: Tremor Video,
RhythmOne and Unruly.
Tremor Video helps advertisers deliver
impactful brand stories across all
screens through the power of innovative
video technology combined with
advanced audience data and
captivating creative. Tremor Video is
one of the largest and most innovative
video advertising companies in North
America, with offerings in CTV, in
stream, and in-app.
The media side of Tremor, RhythmOne,
drives real business outcomes in
multiscreen advertising. Its highly
ranked programmatic platform
efficiently and effectively delivers
performance, quality, and actionable
data to demand and supply-focused
clients and partners.
Unruly is a strong video marketplace
with more than 2,000 direct
integrations with publishers, unique
demand relationships with the world's
largests advertisers and privileged
access to News Corp inventory. Unruly
works with 95% of the AdAge 100 and
over 60% of global video views are
delivered across Comscore 1,000 sites.
Tremor International Ltd is
headquartered in Israel and maintains
offices throughout the US and Canada,
Europe, Asia-Pacific and Australia and is
traded on the London Stock Exchange
(AIM: TRMR).
Business review
The information that fulfils the
requirements of the business review,
including details of the 2019 results,
principal risks and uncertainties and the
outlook for future years, are set out in
the Chairman’s, Chief Executive
Officer’s and Chief Financial Officer’s
statements on pages 4 to 16, and in this
Directors’ Report.
Directors
The following Directors held office as
indicated below for the year ended 31
December 2019 and up to the date of
signing the consolidated financial
statements except where otherwise
shown.
Tim Weller – Non-Executive Chairman
(Throughout 2019-present)
Ofer Druker – Chief Executive Officer
(Appointed 2 April 2019-present)
Yaniv Carmi – Chief Operating Officer
(Throughout 2019-present)
Joanna Parnell – Non-Executive
Director (Throughout 2019-present)
Neil Jones – Non-Executive Director
(Throughout 2019-present)
Christopher Stibbs – Non-Executive
Director (Appointed 23 May
2019-present)
Rebekah Brooks – Non-Executive
Director (Appointed 31 March
2020-present)
Ronni Zehavi – Former Non-Executive
Director (Resigned 13 June 2019)
Directors’ remuneration
and Interests
The Remuneration Report is set out on
pages 30 and 31. It includes details of
Directors’ remuneration, interests in the
Ordinary Shares of the Company and
share options.
Corporate governance
The Board’s Corporate Governance
Report is set out on pages 20 to 22.
Directors’ responsibilities
The Companies Law requires the
Directors to prepare financial
statements for each financial year which
give a true and fair view of the state of
affairs of the Company as at the end of
the relevant financial year pursuant to
applicable accounting standards.
The Directors, after considering the
risks and uncertainties and after
reviewing the Company’s operating
budgets, investment plans and
financing arrangements, consider that
the Company has sufficient resources
at their disposal to continue their
operations for the foreseeable future.
Accordingly, the financial statements
have been prepared on a going
concern basis.
Principle risks and
uncertainties
The Directors assess and monitor the
key risks of the business on an ongoing
basis. The following are the principal
risks and uncertainties that could have
a material effect on the Company’s
performance:
• Large and established internet and
technology companies, such as
Facebook and Google, play a
substantial role in the mobile
advertising market and may
implement changes that
significantly impair the Company’s
ability to operate in this industry.
• The Company depends on
publishers to supply it with
advertising inventory in order for it
to deliver advertising campaigns in
a cost-effective manner.
• The advertising industry is highly
competitive and fragmented and
currently experiencing
consolidation, resulting in
increasing competition.
• The recent spread of the COVID-19
pandemic has affected businesses
globally as governments take
certain emergency measures to
combat its spread, including
implementation of travel bans and
closures of businesses, factories
and public buildings. While the full
impact of this outbreak is not yet
known, the business and operations
of the Company have been, and are
likely to continue to be affected by
conditions caused by COVID-19
• A key part of the Company’s
strategy relates to acquisitions and
the ability to effectively finance,
integrate and manage them.
• Regulatory, legislative, or self-
regulatory developments relating
to e-commerce, internet
advertising, privacy and data
collection and protection, and
uncertainties regarding the
application or interpretation of
existing laws and regulations, such
as the EU General Data Protection
Regulation (GDPR), which became
effective in May 2018, could harm
the Company’s business.
• The Company is required to
continue to innovate and provide
high-quality advertising solutions
and services in order to remain
competitive.
Tremor International Ltd. 28
29
Independent Auditors
The Audit Committee of the Board of
Directors reviews annually the quality
and cost effectiveness of the external
audit and the independence and
objectivity of the external auditors.
KPMG Somekh Chaikin was engaged to
perform the 2019 audit. The total fee
paid to the Company’s auditors for
audit services rendered to the Company
during that year was $275,000 in
addition to $150,000, which was paid
for the Opening Balance of RhythmOne
following its acquisition by Tremor.
Events after the
reporting period
For significant events after the
reporting period please refer to
Note 21 on page 67.
• The Company’s growth depends
in part on the success of its
relationships with advertising
agencies.
• The Company’s revenue and
operating results are highly
dependent on the overall demand
for advertising.
• The Company’s brand advertising
division depends on relationships
with data providers to supply it with
data sets in order for it to deliver
targeted campaigns and this may
involve material upfront guaranteed
minimum purchase commitments.
• The mobile advertising industry
remains susceptible to fraud.
• The Company’s software could be
susceptible to errors, defects or
unintended performance problems
that could result in loss of
reputation, lost inventory or liability.
• Interruptions of services from our
bandwidth providers, data centers,
electricity providers and service
providers may disrupt the
Company’s operations.
• Increased availability of
advertisement-blocking
technologies could limit or block the
delivery or display of advertisements
by the Company’s solutions.
The Company’s risk management
methods rely on a combination of
internally-developed controls and
monitoring and observation of market
behaviour. Commercial risks are
managed through Tremor’s
technological lead as well as through
establishing partnerships with key
publishers, and Tremor Video is also
focused on establishing and maintaining
exclusive relationships with key data
providers. The Company invests
significant resources in research to
continually develop its technology to
enhance its offer and algorithms. Its
ability to address and align to industry
changes with speed and flexibility has
been demonstrated, particularly with
the successful transition to become a
mobile-focused business.
Regarding data protection regulation,
and GDPR specifically, Tremor is
committed to data protection
compliance throughout its offering and
is taking all steps necessary to ensure a
structured approach to managing its
business. The relevant aspects have
been reviewed, and necessary actions
have been taken. Tremor will continue
to update and implement ongoing
review, processes and policies in order
to meet industry developments and
ensure Tremor satisfies the
requirements under the applicable law.
Research and development
All three of the Company’s revenue
streams rely on the use of technological
tools and in particular, machine learning
that leverages data for real-time
bidding. In the opinion of the Directors,
continuity of investment in this area is
essential for the maintenance of the
Company’s market position and for
future growth. Tremor’s research and
development team is predominantly
based at the Company’s headquarters
in Israel and in the US. In Tel Aviv,
Tremor has c. 33 R&D staff and in the
US, Tremor has c.54 R&D personnel
across a number of locations including
New York. Following the acquisition of
Unruly, the Company added 46
personnel to the research and
development team. Research and
development expenses during 2019
were $33.1.m (2018: $20.0m).
Share capital and
substantial Shareholdings
Details of the share capital of the
Company as at 31 December 2019 are
set out in Note 13 to the consolidated
financial statements.
At 4 May 2020, the total issued and
outstanding number of Ordinary Shares
were 135,648,572 and 23,342,648
Ordinary Shares were held in treasury
as dormant shares. The following held
3% or more of the ordinary share capital
of Tremor:
Shareholder
Toscafund Asset Management
Schroder Investment
Management Limited
Mithaq Capital
News Corp
Ibex Investors LLC
Hargreaves Lansdown Asset
Management
Interactive Investor
River & Mercantile Asset
Management
%
21.6
14.8
13.6
6.3
4.0
3.8
3.6
3.6
/Annual Report and Accounts For the year ended 31 December 2019CORPORATE GOVERNANCE Remuneration Report
Directors’ Remuneration
The Board recognises that Directors’
remuneration is of legitimate interest
to the shareholders. The Company
operates within a competitive
environment, performance depends
on the individual contributions of the
Directors and employees and it believes
in rewarding vision and innovation. As
an Israeli company listed on the AIM
market of the London Stock Exchange,
the Company is not required to comply
with the requirements of Schedule 8 to
the Large and Medium-sized Companies
and Groups (Accounts and Reports)
Regulations 2008.
Policy on Directors’
Remuneration
The policy of the Board is to provide
executive remuneration packages
designed to attract, motivate and retain
Directors of the calibre necessary to
maintain the Company’s position. It
aims to provide sufficient levels of
remuneration to do this, but to avoid
paying more than is necessary. The
remuneration will also reflect the
Director’s responsibilities.
Remuneration
The remuneration of the Directors in
2019 (including former directors) was
as follows (all amounts in GBP – NIS
4.55: GBP 1 and US 1.28: GBP 1).
Includes annual bonus and share
based compensation for the
Executive Directors – Ofer Druker
and Yaniv Carmi:
Tim Weller
Ofer Druker*
Yaniv Carmi
Neil Jones
Joanna Parnell
Christopher Stibbs**
Hagai Tal***
Ronni Zehavi****
151,173
8,453,047
3,655,218
57,100
52,864
30,382
159,430
14,970
*Appointed CEO and Executive Director 2 April 2019
**Appointed Non-executive Director 23 May 2019
***Resigned as CEO and Executive Director
5 December 2018
****Resigned as Non-executive Director 13 June 2019
and the amount includes share-based payments
The Remuneration Committee is
formally required to meet not less than
twice a year and at such other times
as necessary. The Remuneration
Committee has responsibility for
determining, within the agreed terms
of reference, the Company’s policy on
the remuneration packages of the
Company’s Chief Executive Officer, the
Chairman of the Board, the executive
and non-executive Directors, the
Company Secretary and other senior
executives. The Remuneration
Committee also has responsibility for:
(i) recommending to the Board a
compensation policy for Directors
and executives and monitoring its
implementation; (ii) approving and
recommending to the Board and the
Company’s shareholders, the total
individual remuneration package of the
Chairman of the Board, each executive
and non-executive director and the
Chief Executive Officer (including
bonuses, incentive payments and share
options or other share awards); and (iii)
approving and recommending to the
Board the total individual remuneration
package of the Company Secretary and
all other senior executives (including
bonuses, incentive payments and share
options or other share awards), in each
case within the terms of the Company’s
policy and in consultation with the
Chairman of the Board and/or the
Chief Executive Officer. No Director
or manager may be involved in
any discussions as to their own
remuneration. The Remuneration
Committee comprises Neil Jones,
Joanna Parnell and Christopher Stibbs
and is chaired by Joanna Parnell
and operates under written terms
of reference.
Tremor International Ltd. 30
31
Remuneration of Executives and Other Managers
The remuneration of the Company’s five most highly compensated executives and managers (including its two Executive
Directors) in 2019 was as follows (all amounts in GBP – NIS 4.55: GBP 1 and US 1.28: GBP 1):
Ofer Druker
Yaniv Carmi
Anthony Flaccavento
Jason Baum
Tal Mor
Base
salary
517,010
419,709
293,576
307,262
256,677
Bonus
Share-based*
Total
517,010
7,419,028
8,453,047
338,777
2,896,733
3,655,218
221,638
176,621
238,601
101,473
101,473
69,661
616,687
585,356
564,939
*Reflects the equity-based compensation expenses recorded in the Company's financial statements for the year ended 31 December 2019
New grants during the period
During 2019, the Group granted 1,328,909 share options and 8,701,315 Restricted Share Units (RSUs) to its Executive Directors,
officers and employees pursuant to the Company's equity incentive plans. During 2019 the Board of Directors and the Company's
shareholders approved changes in terms to Ofer Druker’s 2018 Options and RSUs grants.
Executive Director
Ofer Druker
Yaniv Carmi
*Ofer Druker exercised 1,359,761 RSUs in 2019
**Yaniv Carmi exercised 367,906 RSUs and 250,000 options – a total of 617,906 Options and Shares in 2019
Directors’ and Related Parties' Interests
As of 4 May 2020:
Restricted
Share Units
(“RSUs”)
Total number
of RSUs held
as of 4 May
2020
5,758,082*
3,838,881
2,943,233**
1,716,885
Tim Weller
Ofer Druker
Yaniv Carmi
Joanna Parnell
Neil Jones
Christopher Stibbs
Number of
ordinary
shares
163,595
1,970,632
512,098
Nil
5,000
Nil
Percentage
holding of
Total Voting
Rights
0.12%
1.45%
Number of
ordinary
shares under
option and
RSUs
Nil
3,838,881
0.38%
1,716,885
Nil
0.00%
Nil
Nil
Nil
Nil
Percentage
holding on a
fully diluted
basis
0.11%
3.92%
1.50%
Nil
0.00%
Nil
/CORPORATE GOVERNANCEAnnual Report and Accounts For the year ended 31 December 2019 Independent Auditors’ Report
Auditors' Report to the Shareholders of Tremor
In our opinion, the consolidated
financial statements referred to above
present fairly, in all material respects,
the consolidated financial position of
the Company and its consolidated
subsidiaries as of 31 December 2019
and 2018 and their results of operations,
changes in equity and cash flows for
each of the two years in the period
ended 31 December 2019, in accordance
with International Financial Reporting
Standards (IFRS).
Somekh Chaikin
Certified Public Accountants (Isr.)
Member Firm of KPMG International
March 30, 2020
We have audited the accompanying
consolidated statements of financial
position of Tremor International Ltd.
(hereinafter – “the Company”) as at
31 December 2019 and 2018 and the
consolidated statements of
comprehensive income, statements
of changes in equity and statements
of cash flows, for each of the two years
in the period ended 31 December 2019.
These financial statements are the
responsibility of the Company's Board
of Director and of its Management. Our
responsibility is to express an opinion
on these financial statements based on
our audit.
We conducted our audit in accordance
with generally accepted auditing
standards in Israel, including standards
prescribed by the Auditors Regulations
(Manner of Auditor’s Performance) –
1973. Such standards require that we
plan and perform the audit to obtain
reasonable assurance that the financial
statements are free of material
misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures
in the financial statements. An audit
also includes assessing the accounting
principles used and significant
estimates made by Management, as well
as evaluating the overall financial
statements presentation. We believe
that our audit provides a reasonable
basis for our opinion.
Tremor International Ltd. Consolidated Statements of Financial Position
as at 31 December 2019
32
33
Assets
Cash and cash equivalents
Trade receivables, net
Other receivables
Total current assets
Fixed assets, net
Right-of-use assets
Intangible assets, net
Deferred tax assets
Other long term assets
Total non-current assets
Total assets
Liabilities
Current maturities of bank loans
Current maturities of lease liabilities
Trade payables
Other payables
Total current liabilities
Employee benefits
Long-term lease liabilities
Deferred tax liabilities
Liability for put option on non-controlling interests
Total non-current liabilities
Total liabilities
Equity
Share capital
Share premium
Capital reserves
Retained earnings
Total equity
Total liabilities and equity
Note
2019
USD
thousands
2018
USD
thousands
10
8
8
5
6
7
4
6
9
9
6
4
16(C)
13
79,047
95,278
13,340
67,073
64,329
6,990
187,665
138,392
3,132
21,003
2,879
–
210,285
53,605
17,606
1,332
2,383
–
253,358
58,867
441,023
197,259
–
12,273
9,637
399
70,428
39,630
27,471
14,920
107,536
67,222
556
14,632
17,687
–
32,875
836
–
991
3,941
5,768
140,411
72,990
351
198
224,692
65,305
16,791
58,778
7,713
51,053
300,612
124,269
441,023
197,259
*See Note 6 regarding initial application of IFRS 16, Leases. According to the transitional method that was chosen, comparative data were not restated.
Date of approval of the financial statements: March 30, 2020
The accompanying notes are an integral part of these consolidated financial statements.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income
for the Year Ended 31 December 2019
Revenues
Cost of sales
Gross profit
Research and development expenses
Selling and marketing expenses
General and administrative expenses
Profit from operations
Profit from operations before amortization of purchased intangibles
and business combination related expenses*
Financing income
Financing expenses
Financing income (expenses), net
Other income
Profit before taxes on income
Taxes on income
Profit for the year
Profit for the year before amortization of purchased intangibles and
business combination related expenses (net of tax)**
Other comprehensive income items:
Foreign currency translation differences for foreign operation
Total other comprehensive income for the year
Total comprehensive income for the year
Earnings per share
Basic earnings per share (in USD)
Basic earnings per share (in USD) before amortization of purchased
Intangibles and business combination related expenses (net of tax)**
Diluted earnings per share (in USD)
Diluted earnings per share (in USD) before amortization of purchased
2019
USD
thousands
2018
USD
thousands
325,760
276,872
187,246
165,440
138,514
111,432
33,042
62,025
20,187
44,702
40,244
19,847
135,311
84,736
3,203
26,696
23,148
35,642
773
(1,088)
(315)
700
3,588
2,636
6,224
1,251
(778)
473
–
27,169
(5,015)
22,154
22,452
30,960
139
139
361
361
6,363
22,515
0.0560
0.3281
0.2018
0.4585
0.0542
0.3179
Note
11
12
4
14
14
14
14
Intangibles and business combination related expenses (net of tax)**
0.1956
0.4442
*Amounting to USD 19,945 thousand (2018: USD 8,946 thousand) of amortization of purchased intangibles acquired in business combination and related acquisition expenses.
**Amounting to USD 16,228 thousand (2018: USD 8,806 thousand) of amortization of purchased intangibles acquired in business combination and related acquisition expenses,
net of tax.
***See Note 6 regarding initial application of IFRS 16, Leases. According to the transitional method that was chosen, comparative data were not restated.
The accompanying notes are an integral part of these consolidated financial statements.
Tremor International Ltd. Consolidated Statements of Changes in Equity
for the Year Ended 31 December 2019
34
35
Balance as at 1 January 2018
USD thousands
Total comprehensive income for the year
180
32,886
1,276
30,576
64,918
Share
capital
Share
premium
Capital
reserves*
Retained
Earnings
Total
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recognized directly in equity
Revaluation of liability for put option on
non-controlling interests
Issuance of shares (net of issuance cost)
Buy Back shares
Share based payments
Exercise of share options
Dividends to owners
–
–
–
–
15
–
–
3
–
–
–
–
–
22,154
22,154
361
361
–
361
22,154
22,515
–
29,707
(135)
25
–
–
–
8,012
2,822
(1,936)
4,678
4,678
–
–
–
–
29,722
(135)
8,037
889
–
–
(6,355)
(6,355)
Balance as at 31 December 2018
198
65,305
7,713
51,053
124,269
Comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recognized directly in equity
Revaluation of liability for put option on
non-controlling interests
Issuance of shares (net of issuance cost)
Buy Back shares
Share based payments
Exercise of share options
–
–
–
184
–
–
–
175,166
(41)
(24,696)
–
139
139
–
–
–
–
10
26
16,016
8,891
(7,077)
6,224
–
6,224
6,224
139
6,363
1,501
1,501
–
–
–
–
175,350
(24,737)
16,042
1,824
Balance as at 31 December 2019
351
224,692
16,791
58,778
300,612
*Includes reserves for share-based payments and other comprehensive income.
**See Note 6 regarding initial application of IFRS 16, Leases. According to the transitional method that was chosen, comparative data were not restated.
The accompanying notes are an integral part of these consolidated financial statements.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
for the Year Ended 31 December 2019
Cash flows from operating activities
Profit for the year
Adjustments for: Depreciation and amortization
Net financing income
Loss (gain) on sale of fixed assets
Loss (gain) on IFRS 16 change contracts
Loss (gain) on sale of business unit
Share-based payment
Income tax expense
Change in trade and other receivables
Change in trade and other payables
Change in employee benefits
Income taxes received
Income taxes paid
Interest received
Interest paid
Net cash provided by operating activities
Cash flows from investing activities
Decrease (increase) in pledged deposits
IFRS 16 Receipt
Payment of earn-out
Acquisition of fixed assets
Acquisition and capitalization of intangible assets
Proceeds from sale of intangible assets
Grant of short-term loans
Decrease (Increase) in bank deposit, net
Acquisition of subsidiaries, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Issuance of shares
Repayment of loans
Buy back of shares
Proceeds from exercise of share options
IFRS 16 repayment
Dividends paid
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents as at the beginning of the year
Effect of exchange rate fluctuations on cash and cash equivalents
Cash and cash equivalents as at the end of the year
2019
USD
thousands
2018
USD
thousands
6,224
22,154
32,359
10,808
(19)
11
(2,705)
(700)
15,809
(2,636)
(505)
–
–
–
8,037
5,015
38,017
15,557
(35,754)
(10,580)
(290)
3,184
(73)
217
(8,089)
(12,774)
604
(942)
381
(693)
45,073
37,544
532
1,669
–
(1,063)
(5,672)
6
309
(57)
23,714
19,438
51
–
(1,218)
(1,461)
(1,444)
118
–
–
–
(3,954)
–
29,539
(17,273)
(18,195)
(24,737)
1,824
(12,607)
–
(52,793)
(135)
889
–
(6,355)
5,743
11,718
39,333
67,073
26,985
256
755
79,047
67,073
* See Note 6 regarding initial application of IFRS 16, Leases. According to the transitional method that was chosen, comparative data were not restated.
The accompanying notes are an integral part of these consolidated financial statements.
Tremor International Ltd.
Notes to the Consolidated Financial Statements
as at 31 December 2019
36
37
1 – General
A. Reporting entity
Tremor International Ltd. (the “Company” or “Tremor International”) formerly named Taptica International Ltd. was incorporated
in Israel under the laws of the State of Israel on 20 March 2007, and is listed on the AIM Market of the London Stock Exchange.
The address of the registered office is 121 Hahashmonaim Street Tel-Aviv, Israel.
Tremor International Ltd is a global leader in advertising technologies, it has multiple core divisions: Tremor Video, RhythmOne
and Unruly. Tremor International Ltd is headquartered in Israel and maintains offices throughout the US and Canada, Europe,
Asia-Pacific and Australia and is traded on the London Stock Exchange (AIM: TRMR).
On April 1, 2019, the Company completed an Acquisition Transaction (hereinafter-"Acquisition") with RhythmOne Plc, a
company incorporated under the laws of England and Wales, whereby the Company acquired the entire issued ordinary shares
of RhythmOne and each RhythmOne shareholder received 28 new shares of the Company for every 33 RhythmOne shares held,
so that following the completion of the Acquisition, the Company's current shareholders held 50.1% and, RhythmOne
Shareholders held 49.9% of the merged Group. In addition, as part of the Acquisition, the RhythmOne options and RhythmOne
RSUs holders rolled over the equivalent options and RSUs over Tremor shares, see also Note 15 (3).
The consideration of the Acquisition amounted to USD 176 million (including consideration allocated to issuance of ordinary
shares and Replacement Award).
See also Note 18B (1).
Following the completion of the Acquisition the Company executed share buy-back program, see also Note 13A (4).
With respect to an acquisition announced by the Company subsequent to the balance sheet date, see note 21.
Since January 2020, the Coronavirus outbreak has dramatically expanded into a worldwide pandemic creating macro-economic
uncertainty and disruption in the business and financial markets. Many countries around the world, including Israel, have been
taking measures designated to limit the continued spread of the Coronavirus, including the closure of workplaces, restricting
travel, prohibiting assembling, closing international borders and quarantining populated areas. Such measures present concerns
that may dramatically affect the Company’s ability to conduct its business effectively, including, but not limited to, adverse
effect relating to employees’ welfare, slowdown of commerce, travel and other activities which are essential and critical for
maintaining on-going business activities. Given the uncertainty around the extent and timing of the future spread or mitigation
of COVID-19 and around the imposition or relaxation of protective measures, the Company cannot reasonably estimate the
impact to its future results of operations, cash flows or financial condition; infections may become more widespread and the
limitation on the ability to work, travel, as well as any closures or supply disruptions, may be extended for longer periods of time
and to other locations, all of which would have a negative impact on the Company’s business, financial condition and operating
results. In addition, the unknown scale and duration of these developments have macro and micro negative effects on the
financial markets and global economy which could result in an economic downturn that could affect demand for the Company’s
products and have a adverse effect on its operations and financial results, earnings, cash flow and financial condition.
B. Definitions
In these financial statements –
(1) The Company – Tremor International Ltd. (former name: Taptica International Ltd.)
(2) The Group – Tremor International Ltd. and its subsidiaries.
(3) Subsidiaries – Companies, the financial statements of which are fully consolidated, directly or indirectly, with the financial
statements of the Company.
(4) Related party – As defined by IAS 24, “Related Party Disclosures”.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
2 – Basis of Preparation
A. Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS).
The consolidated financial statements were authorized for issue by the Company’s Board of Directors on March 30, 2020.
B. Functional and presentation currency
These consolidated financial statements are presented in USD, which is the Company’s functional currency, and have been
rounded to the nearest thousands, except when otherwise indicated. The USD is the currency that represents the principal
economic environment in which the Company operates.
C. Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis except for the following assets
and liabilities:
• Deferred tax assets and liabilities
• Put option to non-controlling interests
• Provisions
For further information regarding the measurement of these assets and liabilities see Note 3 regarding significant
accounting policies.
D. Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires management of the Group to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
The preparation of accounting estimates used in the preparation of the Group’s financial statements requires management of
the Group to make assumptions regarding circumstances and events that involve considerable uncertainty. Management of the
Group prepares estimates on the basis of past experience, various facts, external circumstances, and reasonable assumptions
according to the pertinent circumstances of each estimate.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimates are revised and in any future periods affected.
Information about assumptions made by the Group with respect to the future and other reasons for uncertainty with respect to
estimates that have a significant risk of resulting in a material adjustment to carrying amounts of assets and liabilities in the next
financial year are included in Note 6, on leases, with respect to determining the lease term and determining the discount rate of
a lease liability, in Note 7, on intangible assets, with respect to the accounting of software development, and Note 18, on
subsidiaries, with respect to business combination
E. Determination of fair value
Preparation of the financial statements requires the Group to determine the fair value of certain assets and liabilities. When
determining the fair value of an asset or liability, the Group uses observable market data as much as possible. There are three
levels of fair value measurements in the fair value hierarchy that are based on the data used in the measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly
• Level 3: inputs that are not based on observable market data (unobservable inputs).
Further information about the assumptions that were used to determine fair value is included in the following notes:
• Note 15, on share-based payments;
• Note 16, on financial instruments; and
• Note 18, on subsidiaries (regarding business combinations).
Tremor International Ltd. 38
39
2 – Basis of Preparation (continued)
F. Initial application of new standards, amendments to standards and interpretations
(1) IFRS 16, Leases
As from January 1, 2019 (hereinafter: “the date of initial application”) the Group applies International Financial Reporting
Standard 16, Leases (hereinafter: “IFRS 16” or “the standard”), which replaced International Accounting Standard 17, Leases
(hereinafter: "IAS 17" or "the previous standard").
The main effect of the standard’s application is reflected in annulment of the existing requirement from lessees to classify leases
as operating (off-balance sheet) or finance leases and the presentation of a unified model for lessees to account for all leases
similarly to the accounting treatment of finance leases in the previous standard. Until the date of application, the Group
classified most of the leases in which it is the lessee as operating leases, since it did not substantially bear all the risks and
rewards from the assets.
In accordance with IFRS 16, for agreements in which the Group is the lessee, the Group recognizes a right-of-use asset and a
lease liability at the inception of the lease contract for all the leases in which the Group has a right to control identified assets for
a specified period of time, other than exceptions specified in the standard. Accordingly, the Group recognizes depreciation and
amortization expenses in respect of a right-of-use asset, tests a right-of-use asset for impairment in accordance with IAS 36 and
recognizes financing expenses on a lease liability. Therefore, as from the date of initial application, lease payments relating to
assets leased under an operating lease, which were presented as part of general and administrative expenses in the income
statement, are capitalized to assets and written down as depreciation and amortization expenses. Furthermore, leased assets,
which were classified as finance leases at inception of the lease and were recognized in the statement of financial position as
fixed assets, were reclassified as right-of-use assets.
The Group elected to apply the modified retrospective approach upon the initial adoption of the new Lease Standard by
measuring the right-of-use asset at an amount equal to the lease liability, as measured on the transition date.
In respect of all the leases, the Group elected to apply the transitional provisions such that on the date of initial application it
recognized a liability at the present value of the balance of future lease payments discounted at its incremental borrowing rate
at that date calculated according to the average duration of the remaining lease period as from the date of initial application,
and concurrently recognized a right-of-use asset at the same amount of the liability, adjusted for any prepaid or accrued lease
payments that were recognized as an asset or liability before the date of initial application. Therefore, application of the
standard did not have an effect on the Group’s equity at the date of initial application.
Furthermore, as part of the initial application of the standard, the Group has chosen to apply the following expedients:
(1) Not separating non-lease components from lease components and instead accounting for all the components as a single
lease component;
(2) Relying on a previous definition and/or assessment of whether an arrangement is a lease in accordance with the accounting
principles that existed before IFRS 16 with respect to agreements that exist at the date of initial application;
(3) Applying a single discount rate to a portfolio of leases with reasonably similar characteristics;
(4) Assessing whether a contract is onerous in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets
(hereinafter: "IAS 37") immediately before the date of initial application instead of assessing impairment of right-of-use
assets.
(5) Using hindsight when determining the lease term if the contract includes an extension or termination option.
The table below presents the cumulative effects of the items affected by the initial application on the statement of financial
position as at January 1, 2019:
Fixed assets, net
Right-of-use assets
Deferred rent liability
Lease liabilities
According
to IAS 17
The change
According
to IFRS 16
USD
thousands
USD
thousands
USD
thousands
2,879
–
185
399
(418)
11,244
(185)
2,461
11,244
–
10,917
11,316
In measurement of the lease liabilities, the Group discounted lease payments using the nominal incremental borrowing rate at
January 1, 2019. The discount rates used to measure the lease liability range between 2.322% and 3.128%. This range is affected
by differences in the lease term, differences between asset groups, and so forth.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
2 – Basis of Preparation (continued)
(2) IFRIC 23, Uncertainty Over Income Tax Treatments
IFRIC 23 clarifies how to apply the recognition and measurement requirements of IAS 12 for uncertainties in income taxes.
According to IFRIC 23, when determining the taxable profit (loss), tax bases, unused tax losses, unused tax credits and tax rates
when there is uncertainty over income tax treatments, the entity should assess whether it is probable that the tax authority will
accept its tax position. Insofar as it is probable that the tax authority will accept the entity’s tax position, the entity will
recognize the tax effects on the financial statements according to that tax position. On the other hand, if it is not probable that
the tax authority will accept the entity’s tax position, the entity is required to reflect the uncertainty in its accounts by using one
of the following methods: the most likely outcome or the expected value. IFRIC 23 clarifies that when the entity examines
whether or not it is probable that the tax authority will accept the entity’s position, it is assumed that the tax authority with the
right to examine any amounts reported to it will examine those amounts and that it has full knowledge of all relevant information
when doing so. Furthermore, according to IFRIC 23 an entity has to consider changes in circumstances and new information
that may change its assessment. IFRIC 23 also emphasizes the need to provide disclosures of the judgments and assumptions
made by the entity regarding uncertain tax positions.
3 – Significant Accounting Policies
The accounting policies set out below have been applied consistently for all periods presented in these consolidated financial
statements, and have been applied consistently by Group entities.
A. Basis of consolidation
(1) Business combinations
The Group implements the acquisition method to all business combinations. The acquisition date is the date on which the
acquirer obtains control over the acquiree. Control exists when the Group is exposed, or has rights, to variable returns from its
involvement with the acquiree and it has the ability to affect those returns through its power over the acquiree. Substantive
rights held by the Group and others are taken into account when assessing control.
The Group recognizes goodwill on acquisition according to the fair value of the consideration transferred less the net amount of
the identifiable assets acquired and the liabilities assumed.
The consideration transferred includes the fair value of the assets transferred to the previous owners of the acquiree, the
liabilities incurred by the acquirer to the previous owners of the acquiree and equity instruments that were issued by the Group.
In addition, the consideration transferred includes the fair value of any contingent consideration. After the acquisition date, the
Group recognizes changes in the fair value of contingent consideration classified as a financial liability in profit or loss, whereas
contingent consideration classified as an equity instrument is not re-measured.
If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s
employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement
awards is included in measuring the consideration transferred in the business combination. This determination is based on the
market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent
to which the replacement awards relate to past and/or future service. The unvested portion of the replacement award that is
attributed to post-acquisition services is recognized as a compensation cost following the business combination.
Costs associated with the acquisitions that were incurred by the acquirer in the business combination such as: finder’s fees,
advisory, legal, valuation and other professional or consulting fees are expensed in the period the services are received.
(2) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of the subsidiaries are included in the consolidated
financial statements from the date that control commenced, until the date that control is lost.
(3) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
(4) Issuance of put option to non-controlling interests
A put option issued by the Company to non-controlling interests that is settled in cash is recognized as a liability at the present
value of the exercise price under the anticipated acquisition method. In subsequent periods, the Group elected to account for
the changes in the value of the liability in respect of put options in the Equity (see also note 16(C)).
Accordingly, the Group’s share of a subsidiary’s profits includes the share of the non-controlling interests to which the Group
issued a put option.
Tremor International Ltd. 40
41
3 – Significant Accounting Policies (continued)
B. Foreign currency
(1) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Group 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.
(2) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to USD at exchange rates at the reporting date. The income and expenses of foreign operations are translated to USD
at exchange rates at the dates of the transactions.
Foreign currency differences are recognized in other comprehensive income and are presented in equity in the capital reserve.
C. Financial instruments
(1) Non-derivative financial assets
Initial recognition and measurement of financial assets
The Group initially recognizes trade receivables and debt instruments issued on the date that they are created. All other
financial assets are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of
the instrument. A financial asset is initially measured at fair value plus transaction costs that are directly attributable to the
acquisition or issuance of the financial asset. A trade receivable without a significant financing component is initially measured
at the transaction price. Receivables originating from contract assets are initially measured at the carrying amount of the
contract assets on the date classification was changed from contract asset to receivables.
Derecognition of financial assets
Financial assets are derecognized when the contractual rights of the Group to the cash flows from the asset expire, or the Group
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks
and rewards of ownership of the financial asset are transferred. When the Group retains substantially all of the risks and rewards
of ownership of the financial asset, it continues to recognize the financial asset.
Classification of financial assets into categories and the accounting treatment of each category
Financial assets are classified at initial recognition to one of the following measurement categories: amortized cost; fair value
through other comprehensive income – investments in debt instruments; fair value through other comprehensive income –
investments in equity instruments; or fair value through profit or loss.
Financial assets are not reclassified in subsequent periods unless, and only if, the Group changes its business model for the
management of financial debt assets, in which case the affected financial debt assets are reclassified at the beginning of the
period following the change in the business model.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated at fair value
through profit or loss:
–
–
It is held within a business model whose objective is to hold assets so as to collect contractual cash flows; and
The contractual terms of the financial asset give rise to cash flows representing solely payments of principal and interest on
the principal amount outstanding on specified dates.
A debt instrument is measured at fair value through other comprehensive income if it meets both of the following conditions
and is not designated at fair value through profit or loss:
–
–
It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial
assets; and
The contractual terms of the debt instrument give rise to cash flows representing solely payments of principal and interest
on the principal amount outstanding on specified dates.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
3 – Significant Accounting Policies (continued)
All financial assets not classified as measured at amortized cost or fair value through other comprehensive income as described
above, as well as financial assets designated at fair value through profit or loss, are measured at fair value through profit or loss.
On initial recognition, the Group designates financial assets at fair value through profit or loss if doing so eliminates or
significantly reduces an accounting mismatch that would otherwise arise.
The Group has balances of trade and other receivables and deposits that are held within a business model whose objective is
collecting contractual cash flows. The contractual cash flows of these financial assets represent solely payments of principal and
interest that reflects consideration for the time value of money and the credit risk. Accordingly, these financial assets are
measured at amortized cost.
Subsequent measurement and gains and losses
Financial assets at fair value through profit or loss
These assets are subsequently measured at fair value. Net gains and losses, including any interest income or dividend income,
are recognized in profit or loss (other than certain derivatives designated as hedging instruments).
Financial assets at amortized cost
These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced
by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any
gain or loss on derecognition is recognized in profit or loss.
(2) Non-derivative financial liabilities
Non-derivative financial liabilities include bank overdrafts, loans and borrowings from banks, and trade and other payables.
Initial recognition of financial liabilities
The Group initially recognizes debt securities issued on the date that they originated. All other financial liabilities are recognized
initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
Subsequent measurement of financial liabilities
Financial liabilities (other than financial liabilities at fair value through profit or loss) are recognized initially at fair value less any
directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost
using the effective interest method. Financial liabilities are designated at fair value through profit or loss if the Group manages
such liabilities and their performance is assessed based on their fair value in accordance with the Group’s documented risk
management strategy, providing that the designation is intended to prevent an accounting mismatch, or the liability is a
combined instrument including an embedded derivative.
Transaction costs directly attributable to an expected issuance of an instrument that will be classified as a financial liability are
recognized as an asset in the framework of deferred expenses in the statement of financial position. These transaction costs are
deducted from the financial liability upon its initial recognition, or are amortized as financing expenses in the statement of
income when the issuance is no longer expected to occur.
Derecognition of financial liabilities
Financial liabilities are derecognized when the obligation of the Group, as specified in the agreement, expires or when it is
discharged or cancelled.
(3) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options
are recognized as a deduction from equity, net of any tax effects.
Incremental costs directly attributable to an expected issuance of an instrument that will be classified as an equity instrument
are recognized as an asset in deferred expenses in the statement of financial position. The costs are deducted from equity upon
the initial recognition of the equity instruments, or are amortized as financing expenses in the statement of income when the
issuance is no longer expected to take place.
Treasury shares
When share capital recognized as equity is repurchased by the Group, the amount of the consideration paid, which includes
directly attributable costs, net of any tax effects, is recognized as a deduction from equity. Repurchased shares are classified as
a deduction in Share Premium . When treasury shares are sold or reissued subsequently, the amount received is recognized as
an increase in equity, and the resulting surplus on the transaction is carried to share premium, whereas a deficit on the
transaction is deducted from retained earnings.
Tremor International Ltd. 42
43
3 – Significant Accounting Policies (continued)
D. Fixed Assets
Fixed assets are measured at cost less accumulated depreciation. Depreciation is provided on all property, plant and equipment
at rates calculated to write each asset down to its residual value (assumed to be nil), using the straight line method, over its
expected useful life as follows:
Computers and servers
Office furniture and equipment
Years
3
3-17
Leasehold improvements
The shorter of the lease term and the useful life
An asset is depreciated from the date it is ready for use, meaning the date it reaches the location and condition required for it to
operate in the manner intended by management.
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting year and adjusted if
appropriate.
E Intangible assets
(1) Software development
Costs that are directly associated with the development of identifiable and unique software products controlled by the Group
are recognized as intangible assets when all the criteria in IAS 38 are met.
Development costs are capitalized only when it is probable that future economic benefit will result from the project and the
following criteria are met:
• The technical feasibility of the product has been ascertained;
• Adequate technical, financial and other resources are available to complete and sell or use the intangible asset;
• The Group can demonstrate how the intangible asset will generate future economic benefits and the ability to use or sell
the intangible asset can be demonstrated;
• It is the intention of management to complete the intangible asset and use it or sell it; and
• The development costs can be measured reliably.
In subsequent periods, these costs are amortized over the useful economic life of the asset.
Where these criteria are not met development costs are charged to the statement of comprehensive income as incurred.
The estimated useful lives of developed software are three years.
Amortization methods, useful lives and residual values are reviewed at the end of each reporting year and adjusted
if appropriate.
(2) Acquired software
Acquired software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software
licenses. These costs are amortized over their estimated useful lives (3 years) using the straight line method. Costs associated
with maintaining software programs are recognized as an expense as incurred.
(3) Goodwill
Goodwill that arises upon the acquisition of subsidiaries is presented as part of intangible assets. For information on
measurement of goodwill at initial recognition, see Note 3A(1).
In subsequent periods goodwill is measured at cost less accumulated impairment losses. The Group has identified its entire
operation as a single cash generating unit (CGU). According to management assessment, no impairment in respect to goodwill
has been recorded.
(4) Other intangible assets
Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated
amortization and accumulated impairment losses.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
3 – Significant Accounting Policies (continued)
(5) Amortization
Amortization is a systematic allocation of the amortizable amount of an intangible asset over its useful life. The amortizable
amount is the cost of the asset less its accumulated residual value.
Internally generated intangible assets, such as software development costs, are not systematically amortized as long as they are
not available for use, i.e. they are not yet on site or in working condition for their intended use. Goodwill is not systematically
amortized as well, but is tested for impairment at least once a year.
The Group examines the amortization methods, useful life and accumulated residual values of its intangible assets at least once
a year (usually at the end of each reporting period) in order to determine whether events and circumstances continue to
support the decision that the intangible asset has an indefinite useful life.
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of the intangible assets from
the date they are available for use, since this method most closely reflects the expected pattern of consumption of the future
economic benefits embodied in each asset, such as development costs, are tested for impairment at least once a year until such
date as they are available for use.
The estimated useful lives for the current and comparative periods are as follows:
• Trademarks
• Software (developed and acquired)
• Customer relationships
• Technology
• Distribution channel
1.75 – 5 years
3 years
3 – 5.75 years
3.75 – 5 years
3 years
F. Impairment
Non-derivative financial assets
Financial assets, contract assets and lease receivables
The Group recognizes a provision for expected credit losses in respect of:
–
–
Financial assets at amortized cost;
Lease receivables.
The Group has elected to measure the provision for expected credit losses in respect of financial assets and lease receivables at
an amount equal to the full lifetime credit losses of the instrument.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition, and when
estimating expected credit losses, the Group considers reasonable and supportable information that is relevant and available.
Such information includes quantitative and qualitative information, and an analysis, based on the Group’s past experience and
informed credit assessment, and it includes forward looking information.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of
the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group
expects to receive.
Presentation of provision for expected credit losses in the statement of financial position
Provisions for expected credit losses of financial assets measured at amortized cost and are deducted from the gross carrying
amount of the financial assets.
Write-off
The gross carrying amount of a financial asset is written off when the Group does not have reasonable expectations of
recovering a financial asset at its entirety or a portion thereof. This is usually the case when the Group determines that the
debtor does not have assets or sources of income that may generate sufficient cash flows for paying the amounts being written
off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the
Group's procedures for recovery of amounts due. Write-off constitutes a de-recognition event.
Tremor International Ltd.
44
45
3 – Significant Accounting Policies (continued)
G. Impairment of non-financial assets
Non-financial assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which an asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units).
Non-financial assets that were subject to impairment are reviewed for possible reversal of the impairment recognized in respect
thereof at each statement of financial position date.
H. Employee benefits
(1) Post-employment benefits
The Group’s main post-employment benefit plan is under section 14 to the Severance Pay Law ("Section 14"), which is
accounted for as a defined contribution plan. In addition, for certain employees, the Group has an additional immaterial plan
that is accounted for as a defined benefit plan. These plans are usually financed by deposits with insurance companies or with
funds managed by a trustee.
(a) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution
pension plans are recognized as an expense in the statement of comprehensive income in the periods during which related
services are rendered by employees.
According to Section 14 the payment of monthly deposits by a company into recognized severance and pension funds or
insurance policies releases it from any additional severance obligation to the employees that have entered into agreements with
the company pursuant to such Section 14. The Company has entered into agreements with a majority of its employees in order
to implement Section 14. Therefore, the payment of monthly deposits by the Company into recognized severance and pension
funds or insurance policies releases it from any additional severance obligation to those employees that have entered into such
agreements and therefore the Company incurs no additional liability with respect to such employees.
(b) Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in
respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that
employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its
present value, and the fair value of any plan assets is deducted. The Group determines the net interest expense (income) on the
net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation
at the beginning of the annual period to the then-net defined benefit liability (asset).
(2) Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is
provided or upon the actual absence of the employee when the benefit is not accumulated (such as maternity leave).
A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has
a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the
obligation can be estimated reliably.
The employee benefits are classified, for measurement purposes, as short-term benefits or as other long-term benefits
depending on when the Group expects the benefits to be wholly settled.
(3) Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognized as a salary expense with a
corresponding increase in equity, over the period that an employee becomes unconditionally entitled to an award. The amount
recognized as an expense in respect of share-based payment awards that are conditional upon meeting service vesting
conditions, is adjusted to reflect the number of awards that are expected to vest.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
3 – Significant Accounting Policies (continued)
I. Revenue recognition
IFRS 15 replaces the current guidance regarding recognition of revenues and presents a new model for recognizing revenue
from contracts with customers. The model includes five steps for analyzing transactions so as to determine when to recognize
revenue and at what amount. Furthermore, IFRS 15 provides new and more extensive disclosure requirements than those that
exist under current guidance.
The standard introduces a new five-step model for recognizing revenue from contracts with customers:
(1) Identifying the contract with customer
(2) Identifying distinct performance obligations in the contract.
(3) Determining the transaction price.
(4) Allocating the transaction price to distinct performance obligations
(5) Recognizing revenue when the performance obligations are satisfied.
The Group earns its revenue from providing user acquisition services by using technological tools and developments. The
Company's business is based on optimizing real time trading of digital advertising between buyers and sellers.
The revenue is comprised of different pricing schemes such as Cost per Mil Impression (CPM), performance based metrics that
include Cost per Click (CPC) and Cost per Action (CPA) options.
Revenue from advertising services is recognized by multiplying an agreed amount per Mil Impression/click/ action/ ad call with
the volumes of these units delivered.
The Group acts as the principle in these arrangements and reports revenue earned and costs incurred on a gross basis.
As from 1 January 2018, the Group initially applies IFRS 15
J. Classification of expenses
Cost of revenues
Cost of revenues consists primarily of video advertising costs, traffic acquisition costs, data and hosting and research cost that
are directly attributable to revenue generated by the Company.
Research and development
Research and development expenses consist primarily of compensation and related costs for personnel responsible for the
research and development of new and existing products and services and amortization of certain intangible assets (see also
Note 7). Where required, development expenditures are capitalized in accordance with the Company's standard internal
capitalized development policy in accordance with IAS 38 (also see Note 3E). All research costs are expensed when incurred.
Selling and marketing
Selling and marketing expenses consist primarily of compensation and related costs for personnel engaged in customer service,
sales, and sales support functions, as well as advertising and promotional expenditures and amortization of certain intangible
assets (see also Note 7).
General and administrative
General and administrative expenses consist primarily of compensation and related costs for personnel, and include costs
related to the Company’s facilities, finance, human resources, information technology, legal organizations and fees for
professional services. Professional services are principally comprised of outside legal, and information technology consulting
and outsourcing services that are not directly related to other operational expenses.
K. Financing income and expenses
Financing income mainly comprises foreign currency gains and interest income.
Financing expenses comprises of exchange rate differences, interest and bank fees, interest on loans and other expenses.
Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either financing
income or financing expenses depending on whether foreign currency movements are in a net gain or net loss position.
L. Income tax expense
Income tax comprises current and deferred tax. Current tax and deferred tax are recognized in the statement of comprehensive
income except to the extent that they relate to a business combination.
Current taxes
Current tax is the expected tax payable (or receivable) on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date.
Tremor International Ltd. 46
47
3 – Significant Accounting Policies (continued)
Deferred taxes
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognized for the following temporary differences:
• The initial recognition of goodwill; and
• Differences relating to investments in subsidiaries to the extent it is probable that they will not reverse in the foreseeable
future, either by way of selling the investment or by way of distributing taxable dividends in respect of the investment.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at
the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at
the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date.
A deferred tax asset is recognized for tax benefits and deductible temporary differences, to the extent that it is probable that
future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Offset of deferred tax assets and liabilities
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority.
Determining whether an arrangement contains a lease
On the inception date of the lease, the Group determines whether the arrangement is a lease or contains a lease, while
examining if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In its
assessment of whether an arrangement conveys the right to control the use of an identified asset, the Group assesses whether it
has the following two rights throughout the lease term:
(a) The right to obtain substantially all the economic benefits from use of the identified asset; and
(b) The right to direct the identified asset’s use.
For lease contracts that contain non-lease components, such as services or maintenance, that are related to a lease component,
the Group elected to account for the contract as a single lease component without separating the components.
O. Leases – Policy applicable as from January 1, 2019
Leased assets and lease liabilities
Contracts that award the Group control over the use of a leased asset for a period of time in exchange for consideration, are
accounted for as leases. Upon initial recognition, the Group recognizes a liability at the present value of the balance of future
lease payments (these payments do not include certain variable lease payments), and concurrently recognizes a right-of-use
asset at the same amount of the lease liability, adjusted for any prepaid or accrued lease payments or provision for impairment,
plus initial direct costs incurred in respect of the lease.
Since the interest rate implicit in the Group's leases is not readily determinable, the incremental borrowing rate of the lessee is
used. Subsequent to initial recognition, the right-of-use asset is accounted for using the cost model, and depreciated over the
shorter of the lease term or useful life of the asset.
The lease term
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option if it is
reasonably certain that the lessee will or will not exercise the option, respectively.
Variable lease payments
Variable lease payments that depend on an index or a rate, are initially measured using the index or rate existing at the
commencement of the lease and are included in the measurement of the lease liability. When the cash flows of future
lease payments change as the result of a change in an index or a rate, the balance of the liability is adjusted against the
right-of-use asset.
Other variable lease payments that are not included in the measurement of the lease liability are recognized in profit or loss in
the period in which the event or condition that triggers payment occurs.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
3 – Significant Accounting Policies (continued)
Depreciation of right-of-use asset
After lease commencement, a right-of-use asset is measured on a cost basis less accumulated depreciation and accumulated
impairment losses and is adjusted for re-measurements of the lease liability. Depreciation is calculated on a straight-line basis
over the useful life or contractual lease period, whichever earlier, as follows:
• Buildings
• Data centers
1 – 8 years
1 – 3 years
Reassessment of lease liability
Upon the occurrence of a significant event or a significant change in circumstances that is under the control of the Group and
had an effect on the decision whether it is reasonably certain that the Group will exercise an option, which was not included
before in the lease term, or will not exercise an option, which was previously included in the lease term, the Group re-measures
the lease liability according to the revised leased payments using a new discount rate. The change in the carrying amount of the
liability is recognized against the right-of-use asset, or recognized in profit or loss if the carrying amount of the right-of-use
asset was reduced to zero.
Lease modifications
When a lease modification increases the scope of the lease by adding a right to use one or more underlying assets, and the
consideration for the lease increased by an amount commensurate with the stand-alone price for the increase in scope and any
appropriate adjustments to that stand-alone price to reflect the contract’s circumstances, the Group accounts for the
modification as a separate lease.
In all other cases, on the initial date of the lease modification, the Group allocates the consideration in the modified contract to
the contract components, determines the revised lease term and measures the lease liability by discounting the revised lease
payments using a revised discount rate.
For lease modifications that decrease the scope of the lease, the Group recognizes a decrease in the carrying amount of the
right-of-use asset in order to reflect the partial or full cancellation of the lease, and recognizes in profit or loss a profit (or loss)
that equals the difference between the decrease in the right-of-use asset and re-measurement of the lease liability.
For other lease modifications, the Group re-measures the lease liability against the right-of-use asset.
Subleases
In leases where the Group subleases the underlying asset, the Group examines whether the sublease is a finance lease or
operating lease with respect to the right-of-use received from the head lease. The Group examined the subleases existing on the
date of initial application based on the remaining contractual terms at that date.
Policy applicable before January 1, 2019
Finance Lease
Leases, where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon
initial recognition the leased assets are measured and a liability is recognized at an amount equal to the lower of its fair value
and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Minimum lease payments made under finance leases are apportioned between the financing expense and the reduction of the
outstanding liability. The financing expense is allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability.
Operating Lease
Leases that do not transfer substantially all the risks and rewards incidental to ownership of an underlying asset are classified as
operating leases, and the leased assets are not recognized on the Group’s statement of financial position.
Payments made under operating leases, other than conditional lease payments, are recognized in profit or loss on a straight-line
basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense on a
straight-line basis, over the term of the lease.
Tremor International Ltd.
48
49
4 – Income Tax
A. Tax under various laws
The Company and its subsidiaries are assessed for income tax purposes on a separate basis. Each of the subsidiaries is subject
to the tax rules prevailing in the country of incorporation.
B. Details regarding the tax environment of the Israeli companies
(1) Corporate tax rate
Taxable income of the Israeli parent is subject to the Israeli corporate tax at the rate of 23%.
(2) Benefits under the Law for the Encouragement of Capital Investments
The Investment Law provides tax benefits for Israeli companies meeting certain requirements and criteria. The Investment Law
has undergone certain amendments and reforms in recent years.
The Israeli parliament enacted a reform to the Investment Law, effective January 2011. According to the reform, a flat rate tax
applies to companies eligible for the “Preferred Enterprise” status. In order to be eligible for Preferred Enterprise status, a
company must meet minimum requirements to establish that it contributes to the country’s economic growth and is a
competitive factor for the gross domestic product.
On December 22, 2016 the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving
Budget Objectives in the Years 2017 and 2018) – 2016, by which the Encouragement Law was also amended (hereinafter: “the
Amendment”). The Amendment added new tax benefit tracks for a “preferred technological enterprise” and a “special
preferred technological enterprise” that awards reduced tax rates to a technological industrial enterprise for the purpose of
encouraging activity relating to the development of qualifying intangible assets.
Preferred technological income that meets the conditions required in the law, will be subject to a reduced corporate tax rate of
12%, and if the preferred technological enterprise is located in Development Area A to a tax rate of 7.5%. The Amendment is
effective as from January 1, 2017.
The Amendment also provides that no tax will apply to a dividend distributed out of preferred income to a shareholder that is
an Israeli resident company. A tax rate of 20% shall apply to a dividend distributed out of preferred income to an individual
shareholder or foreign resident, subject to double taxation prevention treaties
On May 16, 2017 the Knesset Finance Committee approved Encouragement of Capital Investment Regulations (Preferred
Technological Income and Capital Gain of Technological Enterprise) – 2017 (hereinafter: “the Regulations”), which provides rules
for applying the “preferred technological enterprise” and “special preferred technological enterprise” tax benefit tracks
including the Nexus formula that provides the mechanism for allocating the technological income eligible for the benefits.
In June 2016, Taptica appealed for a tax ruling to apply "the preferred enterprise" track, which was obtained on April 2017 and
will be apply for the years 2016-2020.
On December 3, 2018, the Company together with Taptica (fully owned subsidiary) submitted a request to the Israeli tax
authorities for a tax ruling regarding to restructuring, whereby Taptica will be merged with and into the Company in such a
manner that Taptica will transfer to the Company all its assets and liabilities for no consideration and thereafter will be
liquidated. On May 8, 2019 the merger between the companies approved by the Israeli Tax Authority and the effective merge
date was determined as December 31, 2018. Following the approval of the restructuring, the tax ruling regarding Taptica owns
an industrial enterprise and preferred technological enterprise which was obtained on December 2018 will apply on the merged
company for the years 2017-2021 with relative agreed changes.
C. Details regarding the tax environment of the non-Israeli companies
Non Israeli subsidiaries are taxed according to the tax laws in their countries of residence as reported in their statutory financial
statement prepared under local accounting regulations.
In May 2019 the Company submitted a request for a tax-exempt transfer of assets between its subsidiaries in accordance with
the provisions of Section 104A(a) of the Ordinance, by which the Company requests to carry out a restructuring that will unite
the subsidiaries companies of the Group (Taptica Inc. and Tremor Video DSP) under one American holding subsidiary. As at the
date of approval of the financial statements, The Company's aforesaid request was approved in March 2020.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
4 – Income Tax (continued)
D. Composition of income tax expense
Current tax expense
Current year
Deferred tax expense (income)
Creation and reversal of temporary differences
Change in tax rate
Income tax expense (income)
Year ended 31 December
2019
USD
thousands
2018
USD
thousands
4,571
4,571
5,494
5,494
(7,207)
–
(7,207)
(954)
475
(479)
(2,636)
5,015
E. Reconciliation between the theoretical tax on the pre-tax profit and the tax expense:
Profit before taxes on income
Primary tax rate of the Company
Tax calculated according to the Company’s primary tax rate
Additional tax (tax saving) in respect of:
Non-deductible expenses net of tax exempt income *
Effect of reduced tax rate on preferred income
and differences in previous tax assessments
Utilization of tax losses from prior years for which deferred taxes were not created
Effect on deferred taxes at a rate different from the primary tax rate
Foreign tax rate differential
Other differences
Income tax expenses
*including non-deductible share based compensation expenses
Year ended 31 December
2019
USD
thousands
2018
USD
thousands
3,588
27,169
23%
825
23%
6,249
3,584
2,665
(1,433)
(5,452)
(5,050)
(27)
(873)
1,109
311
–
447
24
(2,636)
5,015
Tremor International Ltd.
50
51
4 – Income Tax (continued)
F. Deferred tax assets and liabilities
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities
are presented below:
Balance of deferred tax asset (liability) as at 1 January 2018
Changes recognized in profit or loss
Effect of change in tax rate
Changes recognized in equity
Intangible
Assets and
R&D
expenses
Employees
Com-
pensation
Other
Total
USD
thousands
USD
thousands
USD
thousands
USD
thousands
(579)
697
(168)
(24)
697
151
(22)
12
624
106
(285)
183
742
954
(475)
171
Balance of deferred tax asset (liability) as at 31 December 2018
(74)
838
628
1,392
Balance of deferred tax asset (liability) as at 1 January 2019
Business combinations
Changes recognized in profit or loss
Effect of change in tax rate
Changes recognized in equity
Intangible
Assets and
R&D
expenses
Employees
Com-
pensation
Other
Total
USD
thousands
USD
thousands
USD
thousands
USD
thousands
(74)
(20,720)
1,176
–
–
838
–
2,631
–
215
628
11,825
3,400
–
–
1,392
(8,895)
7,207
–
215
Balance of deferred tax asset (liability) as at 31 December 2019
(19,618)
3,684
15,853
(81)
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
5 – Fixed Assets, net
Cost
Balance as at 1 January 2018
Additions
Computers
And
Servers
Office
furniture
and
equipment
Leasehold
improve-
ments
USD thousands
Total
2,531
369
799
3,699
1,202
236
485
1,923
Balance as at 31 December 2018
3,733
605
1,284
5,622
Exchange rate differences
Classification due to implementation of IFRS16 see note 6A(2)
Additions
–
(945)
869
–
–
16
2
–
2
(945)
178
1,063
Business combinations (See Note 17)
2,023
109
271
2,403
Additions
Disposals
(106)
(6)
–
(112)
Balance as at 31 December 2019
5,574
724
1,735
8,033
Depreciation
Balance as at 1 January 2018
Additions
932
129
497
1,558
980
67
138
1,185
Balance as at 31 December 2018
1,912
196
635
2,743
Classification due to implementation of IFRS16 see note 6A(2)
Disposals
Additions
Balance as at 31 December 2019
Carrying amounts
As at 1 January 2018
As at 31 December 2018
As at 31 December 2019
(527)
(95)
–
(1)
–
–
(527)
(96)
2,149
185
447
2,781
3,439
380
1,082
4,901
1,599
240
302
2,141
1,821
409
649
2,879
2,135
344
653
3,132
Tremor International Ltd. 52
53
6 – Leases
A. Leases in which the Group is the lessee
The Group applies IFRS 16, Leases, as from as from 1 January, 2019. The Group has lease agreements with respect to the
following items:
1. Offices;
2. Data center;
(1) Information regarding material lease agreements
(a) The Group leases Offices mainly at USA, Israel and Canada with original lease periods expiring between 2020 and 2027 from
several lessors. The Group did not assume renewals in determination of the lease term unless the renewals are deemed to be
reasonably assured at lease commencement.
A lease liability and right-of-use asset in the amount of USD 21,105 thousand and USD 13,155 thousand, respectively, have been
recognized in the statement of financial position as at December 31, 2019 in respect of leases of offices.
(b) The Group leases data center and related network infrastructure with original lease periods expiring between 2020 and
2022. The Group did not assume renewals in determination of the lease term unless the renewals are deemed to be
reasonably assured at lease commencement
A lease liability and right-of-use asset in the amount of USD 3,162 thousand and USD 3,560 thousand, respectively have been
recognized in the statement of financial position as at December 31, 2019 in respect of data centers.
(2) Right-of-use assets – Composition
Cost
Offices Data center
Total
USD thousands
Balance as at 1 January 2019 (first date of adoption)
9,336
1,372
10,708
Business combinations (See Note 18)
12,992
11,924
24,916
Additions
Lease modifications
Disposals
391
33
424
(473)
(6,223)
(6,696)
(951)
–
(951)
Balance as at 31 December 2019
21,295
7,106
28,401
Depreciation and impairment losses
Balance as at 1 January 2019
Business combinations (See Note 18)
Additions
–
–
527
527
–
–
5,644
5,258
10,902
Provision for Impairment (See Note 6A(3))
2,994
145
3,139
Lease modifications
Disposals
(349)
(2,384)
(2,733)
(149)
–
(149)
Balance as at 31 December 2019
8,140
3,546
11,686
Carrying amounts
As at 31 December 2019
13,155
3,560
16,715
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
6 – Leases (continued)
(3) Impairment loss
As of December 31, 2019 the company has impairment balance due to not in use offices and data centers following the
acquisition of Rhythmone in the amount of USD 3,139 thousands, See also Note 18.
(4) Lease liability
Maturity analysis of the Group's lease liabilities
Less than one year
One to five years
More than five years
Total
Current maturities of lease liability
Long-term lease liability
(a) Amounts recognized in profit or loss
Interest expenses on lease liability
Depreciation of right-of-use assets, net
Gains (losses) recognized in profit or loss
Total
(b) Amounts recognized in the statement of cash flows
Cash outflow for leases
December 31
2019
USD
thousands
9,637
12,088
2,544
24,269
9,637
14,632
Year ended
December 31
2019
USD
thousands
(779)
(9,109)
1,749
(8,139)
Year ended
December 31
2019
USD
thousands
(13,386)
Tremor International Ltd. 6 – Leases (continued)
B. Leases in which the Group is a lessor
(1) Information regarding material lease agreements
The Group subleases offices at USA and Canada for periods expiring in 2023.
(2) Finance leases
(a) Amounts recognized in profit or loss
For the year ended December 31, 2019
Gain (loss) from subleases
Financing income on the net investment in the lease
Total
(b) Net investment in the lease
Presented hereunder is the movement in the net investment in the lease for the year ended December 31, 2019:
For the year ended December 31, 2019
Balance as at 1 January 2019
(first date of adoption)
Business combinations
Additions
Disposals
Sublease receipts
Total
(c) Maturity analysis of net investment in finance leases
Less than one year
One to five years
More than five years
Total net investment in the lease as at December 31, 2019
54
55
Offices
USD
thousands
956
71
1,027
Offices
USD
thousands
1,064
3,327
1,566
–
(1,669)
4,288
December 31
2019
USD
thousands
2,367
1,921
–
4,288
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
7 – Intangible Assets, net
Software
Trade-
marks
Customer
relation-
ships
Distribution
channel
Residual
Goodwill
Total
Technology
USD thousands
Cost
Balance as at 1 January 2018
6,873
8,167
7,353
27,458
1,044
32,743
83,638
Exchange rate differences
Additions
Disposals
4
1,444
(134)
34
–
–
61
–
–
–
–
–
–
–
–
242
–
–
341
1,444
(134)
Balance as at 31 December 2018
8,187
8,201
7,414
27,458
1,044
32,985
85,289
Exchange rate differences
Additions
–
5,672
12
–
21
–
–
–
Business combinations (see Note 18)
5,378
17,470
30,284
17,629
–
–
–
85
118
–
5,672
100,633
171,394
Balance as at 31 December 2019
19,237
25,683
37,719
45,087
1,044
133,703
262,473
Amortization
Balance as at 1 January 2018
5,060
4,751
1,221
10,234
812
–
22,078
Exchange rate differences
Additions
Disposals
–
854
(45)
10
18
–
2,212
1,357
4,968
–
–
–
–
232
–
–
–
–
28
9,623
(45)
Balance as at 31 December 2018
5,869
6,973
2,596
15,202
1,044
–
31,684
Exchange rate differences
–
13
23
–
Additions
3,363
4,472
5,238
7,395
–
–
Balance as at 31 December 2019
9,232
11,458
7,857
22,597
1,044
–
–
–
36
20,468
52,188
Carrying amounts
As at 1 January 2018
1,813
3,416
6,132
17,224
232
32,743
61,560
As at 31 December 2018
2,318
1,228
4,818
12,256
–
32,985
53,605
As at 31 December 2019
10,005
14,225
29,862
22,490
–
133,703
210,285
Tremor International Ltd. 56
57
7 – Intangible Assets, net (continued)
Amortization
The amortization of technology and software is allocated to research and development expenses and amortization of
trademarks, distribution channel and customer relationships is allocated to selling and marketing expenses.
Capitalized development costs
Development costs capitalized in the period amounted to USD 4,651 thousand (2018: USD 1,093 thousand) and were classified
under software.
8 – Trade and Other Receivables
Trade receivables, net
Other receivables:
Prepaid expenses
Institutions
Pledged deposits
9 – Trade and Other Payables
Trade payables
Other payables:
Advances from customers
Wages, salaries and related expenses
Provision for vacation
Institutions
Liability for put option on non-controlling interests (see Note 16 (c))
Others
31 December
2019
2018
USD
thousands
USD
thousands
95,278
64,329
8,395
4,577
368
1,328
5,336
326
13,340
6,990
108,618
71,319
31 December
2019
2018
USD
thousands
USD
thousands
70,428
39,630
7,166
9,109
612
4,273
2,440
3,871
27,471
1,676
9,620
841
2,492
–
291
14,920
97,899
54,550
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
10 – Cash and Cash Equivalents
Cash
Bank deposits
Cash and cash equivalents
The Group’s exposure to credit, and currency risks are disclosed in Note 15 on financial instruments.
11 – Revenue
Branding
Performance
12 – General and Administrative Expenses
Wages, salaries and related expenses
Share base payments
Rent and office maintenance
Professional expenses
Depreciation and Amortization
Depreciation of right of use assets
Doubtful debts
Acquisition costs
Other expenses
31 December
2019
2018
USD
thousands
USD
thousands
54,486
24,561
79,047
40,941
26,132
67,073
Year ended 31 December
2019
2018
USD
thousands
USD
thousands
248,500
146,052
77,260
130,820
325,760
276,872
Year ended 31 December
2019
2018
USD
thousands
USD
thousands
11,973
14,100
232
1,282
855
4,956
3,003
2,840
1,003
8,693
3,879
3,763
1,527
555
–
507
177
746
40,244
19,847
Tremor International Ltd. 58
59
Ordinary shares – number
of shares
2019
2018
124,223,182
68,522
300,000
300,000
13 – Equity
A. Share capital
Issued and paid-in share capital as at 31 December
Authorized share capital
(1) Rights attached to share
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at general meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
(2) Director share allotment
According to Director's employment commitment letter, the Company is committed to issue shares worth of GBP 6,250 each
quarter in consideration of the director's services.
In the year ended 31 December 2019 and 2018, the Company issued 8,761 and 4,933 ordinary shares of a par value of NIS 0.01
based on the share price on the date of the issuance, respectively.
The total expenses recognized in the statement of Comprehensive Income in the year ended 31 December 2019 and 2018 with
respect to the director share allotment amounted to USD 8 and USD 33 thousand, respectively.
(3) Issuing new public shares
Following the Acquisition of RhythmOne, as described in Note 1, the Company issued 66,736,485 new shares at a quoted price of
the Company's share as at the business combination date to former RhythmOne shareholders which became admitted to trading
on AIM on April 2, 2019.
(4) Own shares acquisition
Following the Acquisition of RhythmOne, as described in Note 1, and as part of the Company's approvals in April 2019 and June
2019 for a share buyback program for a total consideration of USD 25 million, the Company purchased during the year ended
December 31, 2019 24,695,283 shares (of which 5,743,731 were purchased from former related parties) for a total consideration
of USD 24,735 thousands.
The Ordinary Shares acquired pursuant to the Buyback Program reclassified as dormant shares under the Israeli Companies Law
(without any rights attached thereon) and held in treasury.
B. Dividends
Details on dividends (in USD thousand):
Declared and paid
For the
year ended
31
December
2019
For the
year ended
31
December
2018
USD
thousands
USD
thousands
–
6,355
A dividend in the amount of USD 3,651 thousand (USD 0.054 per ordinary shares) was declared in March 2018, was paid in
June 2018.
A dividend in the amount of USD 2,704 thousand (USD 0.0398 per ordinary shares) was declared in September 2018, was paid
in November 2018.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
14 – Earning Per Share
Basic earnings per share
The calculation of basic earnings per share as at 31 December 2019 and 2018 was based on the profit for the year divided by a
weighted average number of ordinary shares outstanding, calculated as follows:
Profit for the year
Profit for the year
Weighted average number of ordinary shares:
Weighted average number of ordinary shares used to
calculate basic earnings per share as at 31 December
Basic earnings per share (in USD)
Basic earnings per share (in USD) before amortization of purchased
intangibles and business combination related expenses
Year ended 31 December
2019
2018
USD thousands
6,224
22,154
Year ended 31 December
2019
2018
Shares of
NIS 1
0.01 par
value
Shares of
NIS 1
0.01 par
value
111,231,769 67,520,554
0.0560
0.3281
0.2018
0.4585
Diluted earnings per share
The calculation of diluted earnings per share as at 31 December 2019 and 2018 was based on profit for the year divided by a
weighted average number of shares outstanding after adjustment for the effects of all dilutive potential ordinary shares,
calculated as follows:
Weighted average number of ordinary shares (diluted):
Weighted average number of ordinary shares used to
calculate basic earnings per share
Effect of share options on issue
Weighted average number of ordinary shares used to
calculate diluted earnings per share
Diluted earnings per share (in USD)
Diluted earnings per share (in USD) before amortization
of purchased intangibles and business combination related expenses
Year ended 31 December
2019
2018
Shares of
NIS
0.01 par
value
Shares of
NIS
0.01 par
value
111,231,769
67,250,554
3,576,114 2,446,429
114,807,883
69,696,983
0.0542
0.3179
0.1956
0.4442
Tremor International Ltd.
15 – Share-Based Payment Arrangements
(1) Expense recognized in the statement of comprehensive income is as follows:
Selling and marketing
Research and development
General and administrative
60
61
Year ended 31 December
2019
2018
USD thousands
1,257
452
14,100
15,809
2,738
1,420
3,879
8,037
(2) Share-based compensation plan
The terms and conditions related to the grants of the share options programs are as follows:
• All the share options that were granted are non-marketable.
• All options are to be settled by physical delivery of shares.
• Vesting conditions are based on a service period of between 0.75-4 years.
On December 4, 2017, the Company's shareholders adopted the Company’s 2017 Equity Incentive Plan (the "2017 Plan") to
provide for the grant of equity incentive awards to the executive officers and employees of Tremor Video DSP following the
acquisition in August 2017, and other U.S.-based employees of the Taptica Group.
Under the 2017 Plan, the Company may grant incentive stock options (ISOs that comply with U.S. tax requirements), nonstatutory
stock options, restricted shares, restricted share units (RSUs), performance bonus awards, performance units and performance
shared. The maximum number of Ordinary Shares of the Company that may be granted under the 2017 Plan is 7,700,000.
On April 2, 2019 the Company's shareholders adopted the New Tremor International Ltd Management Incentive Scheme to
provide for the grant of 11,772,932 equity incentive awards to executive officers. In addition, following the Acquisition of
RhythmOne the Company's shareholders adopted RhythmOne Plan to provide for the grant of 1,328,908 equity incentive award
to RhythmOne executives and employees.
(3) New grants during the year
During 2019, the Group granted 458,946 share options, and 9,571,276 Restricted Share Units (RSUs) to its executives officers and
employees from outstanding awards under 2017 Plan and 2014 Plan.
In addition, as part of the acquisition as described in Note 1, 849,325 RhythmOne's options and 1,058,776 RSU's were Rolled
over to 458,946 options and 869,962 of the Company's options and RSU's, respectively, see also Note 3H(3) regarding the
accounting treatment.
The total expense recognized in the year ended 31 December 2019 with respect to the options granted to employees, amounted
to approximately USD 15,801 thousand.
The grant date fair value of the share options granted was measured based on the Black-Scholes option pricing model.
(4) The number of share options is as follows:
Outstanding at 1 January
Forfeited during the year
Exercised during the year
Granted during the year
Weighted average
exercise price
Number of options
2019
2018
2019
2018
(GBP)
(Thousands)
2.44
2.97
0.32
0.21
1.82
2.79
0.55
2.83
9,835
(2,488)
(3,509)
10,030
6,733
(2,161)
(1,238)
6,501
Outstanding at 31 December
1.01
2.44
13,868
9,835
Exercisable at 31 December
2,054
1,559
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
15 – Share-Based Payment Arrangements (continued)
(5) Information on measurement of fair value of share-based payment plans
The fair value of employees share options is measured using the Black-Scholes formula. Measurement inputs include the share
price on the measurement date, the exercise price of the instrument, expected volatility, expected term of the instruments,
expected dividends, and the risk-free interest rate (based on government debentures).
The parameters used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were
as follows:
The parameters used to calculate fair value:
Grant date fair value in USD
Share price (on grant date) (in GBP)
Exercise price (in GBP)
Expected volatility (weighted average)
Expected life (weighted average)
Expected dividends
Risk-free interest rate
2019
0-0.56
1.79
1.56-18.27
45%
0-3.38
1.35%
2.3%
2018
0.83-5.92
3.00-4.46
0-4.37
42%
3.3-3.9
0.7%-1.35%
2.26%-2.73%
16 – Financial Instruments
A. Overview
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
This note presents quantitative and qualitative information about the Group’s exposure to each of the above risks, and the
Group’s objectives, policies and processes for measuring and managing risk.
B. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s trade and other receivables.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at the reporting date was as follows:
Cash and cash equivalents (1)
Trade receivables, net (2)
Other receivables
long term deposit
Long Term Receivables
31 December
2019
2018
USD
thousands
USD
thousands
79,047
95,278
368
965
367
67,073
64,329
326
–
–
176,025
131,728
(1) At 31 December 2019, USD 1,052 thousand are held in NIS, USD 4,004 thousand are held in GBP, USD 2,795 thousand are
held in EUR, USD 868 thousand are held in CAD, USD 6,352 thousand are held in JPY, USD 1,037 thousands are held in MXN,
USD 643 thousand are held in SGD, USD 118 thousand are held in KRW, USD 348 thousand are held in other currencies and
the remainder held in USD.
(2) At 31 December 2019, the Group included provision to doubtful debts in the amount of USD 22,376 thousand (31 December
2018: USD 2,822 thousand) in respect of collective impairment provision and specific debtors that their collectability is in doubt.
Tremor International Ltd. 62
63
16 – Financial Instruments (continued)
C. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as
possible, that it has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Group’s reputation.
As of December 31, 2019 and December 31, 2018, the Group’s contractual obligation of financial liability is in respect of leases,
trade and other payables in the amount of USD 83,936 thousand and USD 40,320 thousand, respectively. The contractual
maturity of this financial liability is less than one year and in its carrying amount.
The Company is also committed to comply with certain financial covenants as determined in the financing agreement.
In addition, in the framework of the acquisition of Adinnovation INC on July 17th, 2017, a mutual option was granted to the
Company to acquire the remaining 43% of the shares. As of 31 December, 2019, the amount of the liability inherent in the exercise
of the option is USD 2,440 thousand and can be exercise from the third year and for a period of six months.
The Company has a call option to purchase the remaining 43% of the issued share capital of ADI for a price of 8x net profit and
for a period of six months commencing three years after closing. Thereafter, ADI's minority shareholders have a put option for a
period of three months to sell at a price of 7x net profit. As a result of the aforesaid, the Company recognized the acquisition of
full control (100%) over ADI and recorded liability inherent in exercise of the option according to its discounted value. The
amount of the liability as at the acquisition date is estimated at USD 8,496 thousand and was estimated based on ADI's current
business results and forecasts of ADI for the third year capitalized with annual discount rate of 2.9%. The Company elected to
recognized changes in the value of the liability on every reporting date in the equity. In 2019 and 2018 the Company recorded a
revaluation to decrease the liability in the amount of USD 1,501 thousand and 4,678 thousand, respectively.
D. Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, the CPI, interest rates and equity prices will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimizing the return.
Linkage and foreign currency risks
Currency risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective
functional currency of the Group, the US dollar (USD). The principal currencies in which these transactions are denominated are
NIS, Euro, GBP, CAD, SGD, KRW, MXN and JPY.
At any point in time, the Group aims to match the amounts of its assets and liabilities in the same currency in order to hedge the
exposure to changes in currency.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is
kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term
imbalances.
E. Fair value
The Company's financial instruments consist mainly of cash and cash equivalents, bank deposits, trade and other receivables,
trade and other payables and contingent consideration. The carrying amounts of these financial instruments, except for the
contingent consideration, approximate their fair value because of the short maturity of these investments. The contingent
consideration is classified as level 3 under IFRS 13. Such amounts have been recorded initially and subsequently at their fair
value (see Note 17).
The table hereunder presents reconciliation from the beginning balance to the ending balance of contingent consideration
carried at fair value level 3 of the fair value hierarchy.
Balance as at December 31, 2017
Settlement of contingent consideration
Recognized in profit and loss
Balance as at December 31, 2018
Financial
Instruments
level 3
1,300
(1,218)
(82)
–
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
17 – Related Parties
A. Compensation and benefits to key management personnel
Executive officers also participate in the Company’s share option programs. For further information see Note 14 regarding
share-based payments.
Compensation and benefits to key management personnel (including directors) that are employed by the Company and
its subsidiaries:
Share-based payments
Other compensation and benefits
18 – Subsidiaries
A. Details in respect of subsidiaries
Presented hereunder is a list of the Group’s subsidiary:
Name of company
Taptica Ltd
Taptica INC
Tremor Video DSP
Tremor Video PTE Ltd
Adinnovation INC
Taptica Japan
Taptica UK
Taptica Korea
Taptica CN
RhythmOne PLC
YuMe Inc
Perk.com Inc
R1Demand LLC
RhythmOne LLC
Year ended 31 December
2019
2018
USD
thousands
USD
thousands
12,607
3,948
3,540
3,989
16,555
7,529
Principal location of
the Company’s activity
The Group’s ownership
interest in the subsidiary
for the year ended
December 31
ISR
USA
USA
SGP
Japan
Japan
United Kingdom
Korea
China
UK
USA
USA
USA
USA
2019
100%
100%
100%
100%
57%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2018
100%
100%
100%
100%
57%
100%
100%
100%
100%
–
–
–
–
–
Tremor International Ltd. 64
65
18 – Subsidiaries (continued)
B. Acquisition of subsidiaries and business combinations
(1) Acquisition of RhythmOne
On April 1, 2019, the Company completed Acquisition Transaction (hereinafter-"Acquisition") with RhythmOne Plc (hereinafter-
"RhythmOne"), a company incorporated under the laws of England and Wales, whereby the Company acquired the entire issued
ordinary shares of RhythmOne and each RhythmOne shareholder received 28 new shares of the Company (as such new
66,736,485 shares of the Company were issued , see also note 13A(3)) for every 33 RhythmOne shares held, so that following the
completion of the Acquisition, the Company's current shareholders held 50.1% and, RhythmOne Shareholders held 49.9% of the
merged Group. In addition, 849,325 options and 1,058,776 restricted shares units over RhythmOne share awarded were rolled
over to 458,946 the Company's options and to 869,962 the Company's restricted units. In order to determine the portion of the
replacement award that is part of the Acquisition consideration and the portion that is remuneration for post- combination
service, the Company measures both the replacement awards granted by Tremor and RhythmOne awards as of the acquisition
date in accordance with IFRS2. The portion of the replacement award attributable to Acquisition consideration is the fair-value of
RhythmOne award multiplied by the ratio of the portion of the vesting period completed to the greater of the total vesting period
or the original vesting period of RhythmOne award (hereinafter- "Replacement Award").
The consideration of the Acquisition amounted to USD 176.4 million (including consideration allocated to issuance of ordinary
shares and Replacement Award).
The purchase price was allocated to the acquired tangible assets, intangible assets and liabilities on the basis of their fair value at
the acquisition date. Presented hereunder are the assets and liabilities that were allocated to RhythmOne at the acquisition date:
Current assets
Non current assets (1)
Current liabilities
Non current liabilities
(1) Comprised as follow (included within the Non-current assets):
Purchased and capitalized Intangible assets
Brand and domain name
Technology
Customer relations
Residual goodwill
Deferred tax liabilities
USD
millions
106.9
187.6
(100.2)
(17.9)
176.4
Fair value
as at
March 31,
2019
USD
millions
5.4
17.5
17.6
30.3
100.6
171.4
(20.4)
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
as at 31 December 2019
continued
18 – Subsidiaries (continued)
The aggregate cash flow derived for the Group as a result of the RhythmOne acquisition in 2019:
Purchase price in ordinary shares
Purchase price according to Replacement Award
Total purchase price – Non cash
Less – Cash and cash equivalents of the RhythmOne
Add – acquisition costs*
Acquisition of subsidiary – Cash
USD
millions
175.4
1
176.4
28.1
4.4
23.7
152.7
*An amount of USD 130 thousand was paid to a related party due to his efforts related to the Acquisition of RhythmOne.
19 – Operating Segments
The Group has a single reportable segment as a provider of marketing services.
Geographical information
The Company is domiciled in Israel and it produces its income primarily in USA, Israel, China, Germany, Japan, India and UK.
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location
of customers.
America
Asia
Europe
Israel
Others
Consolidated
Year ended 31 December
2019
2018
USD
thousands
USD
thousands
261,534
182,067
33,052
25,504
5,446
224
72,061
18,867
3,483
394
325,760
276,872
Tremor International Ltd. 66
67
20 – Contingent Liability
(1) On June 11, 2019 the Company was informed that Uber Technologies, Inc. filed a complaint in the Superior Court of the
State of California (U.S.), County of San Francisco, against the Company. The complaint alleges fraud, negligence and unfair
competition. In October 2014, Taptica, alongside a number of other adtech vendors, was retained by Fetch Media Ltd.
("Fetch") to promote Uber's mobile app (the "Uber Campaign"). There was no direct engagement between Uber and the
Company or any of its subsidiaries. Overall, thousands of campaigns ran with Fetch directly liaising with Taptica on a daily
basis. As is standard in the Company's business, at the end of each month, reconciliation reports were sent by the Company
to Fetch and the final invoiced amounts were approved by Fetch. The revenue associated with the Uber Campaign directly
relating to the Company does not represent a material portion of Taptica's revenue.
On August 23, 2019, Taptica filed a demurrer relating to all causes of action asserted in the Complaint. On September 18,
2019, the Court issued an order transferring the case to the complex division of the Superior Court of California, County
of San Francisco, temporarily staying discovery and assigning the matter for all purposes to Judge Teri L. Jackson. The
defendants’ demurrers were taken off calendar in connection therewith, for possible re-setting at a future date. On October
8, 2019, following a peremptory challenge to Judge Jackson, the case was set for reassignment to a different judge. On
October 11, 2019, the case was reassigned to Judge Anne-Christine Massullo. After the defendants’ demurrers were fully
briefed, oral argument was heard on December 11, 2019, and continued to January 7, 2020.
On January 9, 2020, Judge Massullo issued an order sustaining in part and overruling in part Taptica’s demurrer, with leave
to amend. In particular, Judge Massullo sustained Taptica’s demurrer with respect to the fraudulent concealment and unfair
competition claims, but overruled the demurrer with respect to negligence. Uber filed its Amended Complaint on January
29, 2020, asserting the same three claims as in its original Complaint. Taptica demurred to all three claims on March 3,
2020. A hearing on Taptica’s demurrer is currently scheduled on May 27, 2020. The discovery stay has been partially lifted
relating to the negligence claims. The Company reiterates that it considers the claims to be without merit and, as such, will
continue to aggressively defend against these claims. The Company believes that the likelihood of a material loss is remote
but at this point it is too early to reasonably estimate potential loss any financial impact to the Company resulting from
this matter.
(2) RhythmOne litigation
(a)
Edenbrook Capital LLC (“Edenbrook”) sent a letter to RhythmOne asserting several allegations, including breach of
fiduciary duties and conversion (detention of property). Edenbrook alleged that the shareholders of YuMe that chose
not to tender their shares in the merger with RhythmOne were discriminated against, in that the tendering shareholders
received consideration in a more expedient manner than those who did not tender. The Company entered into a
settlement agreement with Edenbrook and on December 31, 2019, the claims were dismissed with prejudice.
(b)
In January 2018, AlmondNet, Inc. and its affiliates (Datonics LLC and Intent IQ) contacted RhythmOne asserting that
RhythmOne’s online advertising system infringes eleven U.S. Patents owned by the AlmondNet Group. RhythmOne’s
General Counsel informed that AlmondNet offered to execute a patent license agreement for $2,000,000, payable over
a two-year period. As of the date of this report, a claim was never filed and RhythmOne is currently in a commercial
agreement with AlmondNet’s affiliate. The Company believes that the likelihood of a material loss is remote but at this
point is unable to reasonably estimate any potential loss and financial impact to the Company resulting from this matter.
21 – Subsequent Events
On January 4, 2020, the Company entered into an agreement (the "Purchase Agreement") with News Corp UK & Ireland
Limited (the "UK Seller") and News Preferred Holdings, Inc. (the "US Seller, and collectively with the UK Seller, the "Sellers") to
purchase the entire issued share capital of Unruly Holdings Limited ("Unruly UK") and Unruly Media Inc. ("Unruly US" and
collectively with Unruly UK, "Unruly") from the Sellers.
Pursuant to the Purchase Agreement, the Company (i) allotted to UK Seller 7,960,111 new Ordinary Shares of the Company in
exchange for the sale to the Company of a GBP 12.0 million loan from Unruly Group Limited (as subsidiary of UK Target)(as
borrower) to UK Seller (as lender); (ii) paid GBP 1 to UK Seller in consideration for the sale of the entire issued share capital of
Unruly UK; and (iii) allotted to US Seller 565,212 new Ordinary Shares of the Company and paid US Seller US$1 in consideration
for the sale of the entire issued share capital of Unruly US.
The aggregate 8,525,323 new Ordinary Shares of the Company allotted to UK Seller and US Seller, as purchase price (as
detailed above), represented approximately 6.91% of the Company's issued voting share capital at such time. The Sellers agreed
not to sell, transfer or otherwise dispose of such Company Ordinary Shares for an 18-month period, subject to customary
exceptions. As part of the transaction, the Sellers also agreed to contribute cash towards the cost of integrating Unruly with the
Company.
In connection with the acquisition, Tremor Video, Inc., a subsidiary of the Company ("Tremor Video"), entered into a global
partnership with News Corp that will equip Tremor Video with the exclusive right to sell outstream video on various News Corp
titles in the UK, US and Australia, and Tremor Video has committed to an ad spend of £30 million with News Corp over a
three-year period.
/Annual Report and Accounts For the year ended 31 December 2019FINANCIAL STATEMENTS
Directors, Secretary & Advisers
68
Directors:
Timothy Grainger Weller – Non-Executive Director and Chairman
Ofer Israel Druker – Chief Executive Officer
Yaniv Carmi – Chief Operating Officer
Joanna Rachael Parnell – Non-Executive Director
Neil Garth Jones – Senior Non-Executive Director
Christopher John Stibbs – Non-Executive Director
Rebekah Mary Brooks – Non-Executive Director
Company Secretary:
Yaniv Carmi
Registered Office:
121 Hahashmonaim, Tel Aviv 6713328, Israel
Nominated Adviser and Joint Broker
finnCap Ltd, 60 New Broad Street, London EC2M 1JJ
Legal Advisers – English Law
Charles Russell Speechlys, LLP 5 Fleet Place, London EC4M 7RD
Legal Advisers – Israeli Law
Naschitz, Brandes, Amir & Co, Advocates 5 Tuval Street Tel Aviv 6789717, Israel
Reporting Accountants and Auditors
KPMG Somekh Chaikin KPMG Millennium Tower 17 Ha’arba’a Street P.O.B. 609 Tel Aviv 61006, Israel
KPMG UK 15 Canada Square Canary Wharf London E14 5GL
Financial Public Relations Adviser
Vigo Communications, Sackville House, 40 Piccadilly, London W1J 0DR
Registrar
Link Market Services (Guernsey) Limited, Mont Crevelt House, Bulwer Avenue, St Sampson, Guernsey GY2 4LH
Depositary:
Link Market Trustees Limited, The Registry 34 Beckenham Road, Beckenham, Kent BR3 4TU
Tremor International Ltd. This report is printed on paper certified in accordance with the FSC®
(Forest Stewardship Council®) and is recyclable and acid-free.
Pureprint Ltd is FSC certified and ISO 14001 certified showing that
it is committed to all roundexcellence and improving environmental
performance is an important part of this strategy.
Pureprint Ltd aims to reduce at source the effect its operations have on
the environment and is committed to continual improvement, prevention
of pollution and compliance with any legislationor industry standards.
Pureprint Ltd is a Carbon / Neutral® Printing Company.
Designed & Produced by KW Partners
(www.kwpartners.co.uk)
Tremor International Ltd.
Hashmonaim 121
2nd Floor
Tel Aviv, 6713328
Israel
www.tremorinternational.com