Tremor
Annual Report 2020

Plain-text annual report

T R E M O R I I N T E R N A T O N A L L T D . A n n u a l R e p o r t a n d A c c o u n t s Annual Report and Accounts For the year ended 31 December 2020 Tremor International Ltd. 82 Yigal Alon st. (13th floor) Tel-Aviv Israel 6789124 www.tremorinternational.com A Global Leader in All-Screen Video Advertising Technologies   DIRECTORS, SECRETARY & ADVISERS DIRECTORS: Christopher John Stibbs – Non-Executive Chairman Ofer Israel Druker – Chief Executive Officer and Executive Director Yaniv Carmi – Chief Operating Officer and Executive Director Sagi Niri – Chief Financial Officer and Executive Director Joanna Rachael Parnell – Non-Executive Director Neil Garth Jones – Non-Executive Director Rebekah Mary Brooks – Non-Executive Director Norman Thomas Johnston – Non-Executive Director Lisa Klinger – Non-Executive Director COMPANY SECRETARY: Yaniv Carmi REGISTERED OFFICE: 82 Yigal Alon St, 13th Floor, Tel Aviv, 6789124, Israel NOMINATED ADVISER AND JOINT BROKER finnCap Ltd, 60 New Broad Street, London EC2M 1JJ JOINT BROKER Stifel Nicolaus Europe Limited, 150 Cheapside, London EC2V 6ET 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 Consulting, 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 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) A Global Leader in All-Screen Video Advertising Technologies CORPORATE GOVERNANCE Board of Directors Corporate Governance Report The Board and Committees Takeovers & Mergers Directors’ Report Remuneration Report STRATEGIC REPORT Our “End-to-End” Technology Platform Chairman’s Statement Tremor is Well-Positioned to Capitalise on a Significant Opportunity Key Ecosystem Trends Driving Growth Chief Executive Officer’s Review Our “End-to-End” Technology Platform DSP: Optimize Advertising Campaigns & Improve Roi DMP: Real-Time, Intelligent Decision making Through Data-Driven Insights SSP: Optimize Inventory Management & Revenue Yield Chief Financial Officer’s Review 02 04 06 07 08 11 12 12 13 14 16 18 21 25 26 29 FINANCIAL STATEMENTS Auditors' Report to the Shareholders of Tremor International Ltd. Consolidated Statements of Financial Position Statement of Operation and Other Comprehensive Income Consolidated Statements of Changes in Shareholder's Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors, Secretary & Advisers 31 32 33 34 35 36 IBC 01 TREMOR INTERNATIONAL LTD.STRATEGIC REPORTANNUAL REPORT 2020OUR “END-TO-END” TECHNOLOGY PLATFORM Significant benefits for both advertisers & publishers Benefits to advertisers ✔  Optimizing & increasing audience reach & engagement ✔ Robust data assets ✔  Omni-channel connectivity, optimizing campaign impact ✔  Creative capabilities S R E S I T R E V D A DSP Our Clients: Top-Tier Global Brands and Agencies Launched and maintained by Unruly, the U7 Council represents influential decision-makers from the world’s biggest brands & media agencies, who actively partner with us to shape the future of the industry 02 TREMOR INTERNATIONAL LTD. ANNUAL REPORT 2020 Benefits for publishers ✔  Premium, high-value campaigns representing a wide range of advertisers ✔  First and third-party data, maximizes revenue generation ✔  Flexibility via wide breadth of ad formats ✔  UnrulyX CTRL, a proprietary insights & reporting dashboard, facilitating Direct, Preferred, and Open Auction programmatic deals E M O R D M P R T P U B L I S H E R S SSP Audiences Significant Premium Global Media Reach CTV PARTNERS ADS ON GLOBAL SITES THAT CONSUMERS TRUST Exclusive Access to 50+ World Renowned Publications TREMOR INTERNATIONAL LTD. ANNUAL REPORT 2020 0303 TREMOR INTERNATIONAL LTD.STRATEGIC REPORTANNUAL REPORT 2020CHAIRMAN’S STATEMENT " Tremor ultimately performed strongly and achieved significant strategic progress during 2020. " Christopher Stibbs Chairman Chairman Statement Issued on 10 March 2021 In my first final results statement as Chairman of Tremor, there is no question that the Covid-19 pandemic, which is still influencing our daily lives, has had a significant impact on the global economy. Despite these challenges, Tremor ultimately performed strongly and achieved significant strategic progress during 2020. This momentum has continued into Q1 2021, providing a further endorsement of Tremor’s strategy and that the Company has solid foundations in place to deliver future growth. Despite starting 2020 well, our core digital advertising markets were adversely impacted as a result of the pandemic, however the team’s rapid action, which included the accelerated integration of Unruly – which the Company acquired in January 2020 – and the implementation of a number of cost-saving initiatives, ensured the Company’s robustness. This meant that Tremor was aptly placed to benefit from the recovery of these markets in the second half, which began in Q3 2020 and was further reinforced in the final quarter of the year. Tremor’s strategic focus on video, and specifically CTV and self-serve proved particularly effective, as Covid-19 has highlighted the value of on-screen in-home advertising globally. The Company traded strongly during 2020 as a whole, achieving a 12% increase in 1contribution ex-TAC to 184.3 million (2019: $164.0 million), primarily driven by the performance of our Programmatic activities generating an increase of 30% to $161.6 million (2019: $124.2 million) as a result of our strategic shift to focus on our Programmatic activities as a key growth driver. This led to Adjusted EBITDA of $60.5 million in 2020 (2019: $60.4 million), with our Adjusted EBITDA outturn impacted by the adverse impacts of Covid-19 in H1 2020. Overall, this is particularly impressive given the global macroeconomic uncertainty during the year, with certain sectors including the hospitality and leisure industries yet to recover to pre-pandemic levels. Pleasingly, significant momentum was achieved in Q4 2020, not only in Tremor’s topline performance – with the Company achieving record revenues – but also across all strategic areas such as CTV and self-serve. In March 2020, the Company strengthened its management team and board of directors as a result of Tremor’s continued operational progress, with Yaniv Carmi, previously the Company’s Chief Financial Officer appointed Chief Operating Officer, and Sagi Niri joining the Company as Chief Financial Officer. In addition, as part of the acquisition of Unruly, Rebekah Brooks and Norman Johnston were also appointed to the board as non-executive directors in the first half of the year. In August 2020, Tim Weller stepped down as Non-executive Chairman having held the position for six years, during which time he oversaw the acquisitions that have enabled the re-shaping of the Company’s platform, and I took up the position of Non- executive Chairman in September 2020. On behalf of the board and management team, I would like to thank Tim for his significant contribution and dedication to the Company during his tenure. Tremor continues to be a highly cash generative business, maintaining a strong balance sheet, which enabled us to complete $10 million in share buybacks in the year at an average price of 148.05 pence per share, and commence a further $10 million share buyback programme in December 2020. The board continues to evaluate the best use of the Company’s capital to create value for its stakeholders. As ever, the Board continues to assess strategic acquisitions alongside continued investment in Tremor’s existing infrastructure and workforce. 1Contribution ex-TAC is defined as our gross profit plus depreciation and amortization attributable to cost of revenues and cost of revenues (exclusive of depreciation and amortization) minus both the Programmatic media cost and the Performance media cost (collectively, “traffic acquisition costs” or “TAC”) 04 TREMOR INTERNATIONAL LTD. ANNUAL REPORT 2020 STRATEGIC REPORT We do believe that the realization of the significant value that exists within Tremor’s platform, technology and teams supplemented by the recent share buybacks has resulted in a re-rating of the business, which is beginning to create significant value for all our key stakeholders. significant strides that the Company undertook during 2020 to augment Tremor’s platform coupled with its sharp focus on the high growth digital video advertising markets, the board believes positions the Company for strong future growth, building on the momentum achieved in the second half of 2020. and performance in guiding the business during this time. I believe that the significant work undertaken in 2020 has resulted in Tremor being in the strongest position in its history, and we look to the future with real confidence in delivering material growth. ■ The Company has entered 2021 in a very strong position and continues to see significant ongoing traction for its solutions as a further reinforcement of its strategy. Whilst clearly the ongoing Covid-19 pandemic continues to cast uncertainty across the wider macroeconomic backdrop, the Finally, on behalf of the board and management team, I would like to thank the entire Tremor team worldwide for their commitment and hard work during what has been a particularly challenging period for every individual. In addition, I would like to thank Tremor’s senior management team for their dedication Christopher Stibbs Non-executive Chairman 10 March 2021 TREMOR INTERNATIONAL LTD. ANNUAL REPORT 2020 05 TREMOR IS WELL-POSITIONED TO CAPITALIZE ON NEXT-GENERATION OPPORTUNITIES DIGITAL AD SPENDING WORLDWIDE US$ in billions CAGR 11% $646 $700 $524 $586 $455 Source: eMarketer, March 2021 2021E 2022E 2023E 2024E 2025E 2021 AD SPEND $748bn Total Digital $455bn Total Digital $13bn U.S. CTV $55bn U.S. VIDEO 06 TREMOR INTERNATIONAL LTD. ANNUAL REPORT 2020 KEY ECOSYSTEM TRENDS DRIVING OUR GROWTH STRATEGIC REPORT Video CTV & Mobile 78% of contribution ex-TAC is generated through the video ad format growing at 31% in the past year 75% of programmatic revenue is generated through Mobile & CTV, growing at 34% in the past year BY FORMATS U.S. ad spend 2021-2025 CAGR BY DEVICES U.S. ad spend 2021-2025 CAGR 16% 12% 13% 20% 12% 10% 0% Linear TV Search Display Video Desktop Mobile Conneted TV The CTV Opportunity CTV ad spend is in the early innings with outsized growth potential, as it follows consumers’ shift in video consumption U.S. CTV AD SPENDING US in billions PAY TV vs CTV IN THE U.S. % of U.S. in billions CAGR 20% $28 Pay TV CTV 74% 72% 77% 65% $13 81% 83% 84% 61% 58% 54% 2021E 2025E 2018A 2019A 2020A 2021E 2022E CHIEF EXECUTIVE OFFICER’S REVIEW " The record performance that Tremor achieved during the second half of 2020 and the strong start of 2021 is a clear endorsement of our strategy, the Company’s platform and our ability to generate sustainable organic growth. " Ofer Druker Chief Executive Officer Chief Executive Officer's Statement Issued on 10 March 2021 INTRODUCTION 2020 was a great year for Tremor despite the effects of Covid-19 that mainly impacted the Company in the second quarter of the year. Like many other global businesses, we were impacted by the fact that many of our clients halted their activity and changed their strategy as a result of the uncertainty that Covid-19 created globally. It is important to mention that some of our clients in sectors such as hospitality and travel, are still not back to pre-pandemic levels. The success of our strategy was emphasized and accelerated in 2020, with real evidence that we have the right foundations in place. This is demonstrated by the following: 1. Connected TV (“CTV”) – with average consumer CTV usage time surging in 2020, this resulted in advertisers shifting their budgets to CTV to engage with their potential clients. Tremor delivered a significant growth in CTV net revenues in the year, with CTV representing 20% of net revenues, and we strongly believe that this trend will continue 2. Data – Tremor’s ‘bread and butter’ is data usage and we continue to leverage our advantage as one of the only companies that owns and operates a Data Management Platform (“DMP”) 3. Video – Tremor is primarily focused on video, the fastest growing format in online advertising and is unique in that it has a technology stack created around video, with video accounting for 70% of revenues in 2020 and 82% in Q4 2020 4. End-to-end platform – our platform continues to offer a number of advantages to advertisers and publishers including deliverability, prices, simplicity and reach 5. M&A capabilities – in January 2020 we acquired Unruly, and we integrated it into the Company despite limitations brought about by Covid-19. We have driven significant results from the Unruly assets as demonstrated by our strong growth in H2 2020. We believe this is another unique and fundamental capability for Tremor and will underpin our growth both organically and via acquisition The Company traded strongly during 2020 as a whole, achieving a 12% increase in contribution ex-TAC to $184.3 million (2019: $164.0 million), primarily driven by the 30% increase in contribution ex-TAC from our Programmatic activities to $161.6 million (2019: $124.2 million). The Group generated Adjusted EBITDA of $60.5 million (2019: $60.4 million). Tremor achieved this performance despite the industry-wide headwinds relating to the Covid-19 pandemic which adversely impacted trading in the first half of the year, in addition to the integration of Unruly in the first six months of the year requiring resources and management attention. Tremor continues to be highly cash- generative. Our strong cash position leaves us well-placed to consider further share buybacks, and selectively evaluate additional strategic acquisitions. OPERATIONAL REVIEW Key Performance Indicators In 2020, we introduced three revenue KPIs to monitor our performance across our key strategic growth drivers of CTV, Private Marketplaces and Self-serve. Despite the unprecedented operating environment that we experienced through much of the year, we performed extremely well against each of these three metrics. Net Revenues generated from CTV increased by 164% in the full year when compared to 2019. In addition, our growth within Tremor’s programmatic activities, Self-serve and Private Marketplaces, delivered increases of 415% and 1,637% respectively in the full year 2020. Net Revenue KPIs Connected TV PMPs Self-serve Platform 08 TREMOR INTERNATIONAL LTD. ANNUAL REPORT 2020 2019 ($m) 14.0 1.2 0.7 2020 ($m) 36.8 21.1 3.6 % growth 164% 1,637% 415% CONNECTED TV CTV is the most exciting and highest growth segment within video, and we have continued to see rapid adoption of CTV advertising throughout the year. In 2020, more than 300 clients executed CTV campaigns with Tremor Video, which marks a 71% increase year-on- year. Adoption of CTV continues unabated with over 100 million households using CTV in the United States alone, with that number set to grow to c. 113 million by 20243, representing nearly 86% of all US households. This has led to an increase in CTV advertising spend, which is expected to grow to over $11 billion in the US alone in 2021. Through Tremor Video’s unique end-to-end technology stack – including its managed and self-service demand side platform (DSP), premium supply footprint strengthened by the integration of Unruly, and its centralised data management platform (DMP)—a wide breadth and depth of audience data can be layered across all CTV media to provide advertisers with precision-based targeting across premium scale. Throughout the year, Tremor continued to deepen its relationships with leading CTV publishers, adding 101 new publishers to our network in the last quarter of the year, a c. 90% increase compared to Q4 2019, highlighting our clients’ confidence in our unique end-to-end technology stack. There also continues to be meaningful tailwinds in CTV, which the industry anticipates will enhance future growth, with a disproportionately low amount of advertising spend in CTV versus number of viewing hours, of 9% and 26% respectively. PMP ACTIVITY Our PMP offering has seen a 1,637% increase in net revenue year-on-year, as we continue to build relationships with tier one agency customers by providing high-quality video and CTV media, enhanced by our targeting capabilities. The Unruly brand contributed to the strength of our offering and assisted us in establishing strong relationships with the leading global advertisers. In addition, our self-serve platform has also seen a significant 415% increase in net revenue year-on-year. This growth demonstrates the strength of our technology stack offering in the market, which is being adopted by an increasing number of partners in the USA. We will maintain innovation around data usage which is integrated into our self-serve capabilities and we anticipate these will become more effective during the second half of 2021. TV INTELLIGENCE SOLUTIONS The Company’s ongoing strategy relating to connected TV (CTV) and addressable TV retargeting continues to evolve, with clear value now attributed to Tremor’s end-to-end platform further strengthened by the upcoming introduction of our enhanced suite of TV intelligence solutions which was accelerated by LG’s acquisition of Alphonso and the winding down of Alphonso as an exclusive technology partner of Tremor. These enhancements are intended to address the ever-dynamic needs of advertisers in four key areas: Audience Reach • Access to a blend of data across a nationally represented US TV viewing footprint comprised of 12 million+ households and 100 million+ addressable devices in the US, with plans to increase this scale via the integration of additional data sources • Partner-agnostic solution that will be able to aggregate multiple data sources and is not restricted to a single data provider, offering more turnkey audience activation for advertisers • Enhanced ability to scale audience reach at the regional level POWERFUL STRATEGIC GROWTH DRIVERS ORGANIC GROWTH DRIVERS • CTV, PMP (Private Market Place) and Self Serve TECH INNOVATION • Heavy investment in customized data segments • Self serve Demand and Supply platforms • CTV marketplace GLOBAL EXPANSION • International markets beyond US • Global advertisers M&A • Focused on Data tech, assets and partnerships • Evaluate selected opportunities, mainly on adding demand TREMOR INTERNATIONAL LTD. 09 STRATEGIC REPORTANNUAL REPORT 2020CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED GROWTH STRATEGY The second half of 2020 saw the Company’s broader strategy come into fruition as we delivered record growth. We believe Tremor remains well-placed to continue to deliver meaningful growth, by leveraging its key strategic priorities of: • Growth drivers: our Connected TV, Private Marketplace and Self-serve offerings • Technology innovation: continued significant investment including within the Company’s customized data segments, our self-self, demand and supply platforms and CTV marketplace • Global expansion: broadening our reach into international markets beyond the US and forging additional relationships with global advertisers as well as leveraging existing partnerships • M&A: continue to evaluate select acquisition targets with a focus on data technology, assets and partnerships, as well as the potential to add on the demand-side UBER SETTLEMENT In December 2020, we reached an agreement to settle the complaint brought by Uber Technologies, Inc. ("Uber") against Taptica, the Company's legacy performance marketing business. As we noted at the time of settlement, whilst there was no court finding as to wrongdoing by the Company or indeed the merits of the lawsuit, the Board elected to settle with Uber in order to resolve the matter in a timely manner and avoid any further expenses relating to a drawn-out litigation process, and paid $1.7 million, which resulted in the full dismissal of the case. OUTLOOK Tremor has made a very solid start to 2021, with the traction we experienced in the second half of 2020 continuing into the first quarter. While we are pleased to see the continued roll out of vaccination programmes worldwide, management continues to monitor the Covid-19 pandemic very closely. As a board, we believe that Tremor has all of the components to deliver significant and sustained growth through our technology offering, the dynamics of the markets within which we operate, and our team. The growth that we demonstrated in the second half of 2020, we believe marks an inflection point for our business, and is just the start of an exciting period. We are currently looking to the future with real confidence in delivering continued growth in the medium- to long-term. The Company continues to explore, from time to time, the possibility of transactions in the capital markets, including the potential for a dual-listing of shares in the United States. No assurance can be made that any such transaction will be completed in the near term or at all. If applicable, the Company will provide further information in due course. I would like to personally thank our workforce for their hard work and fortitude over the last year. The success Tremor has enjoyed this year is a testament to the talent and professionalism that all of our teams have displayed. ■ Ofer Druker Chief Executive Officer 10 March 2021 3Source: e-Marketer 4Source: e-Marketer Programmatic Execution • Managed service, self-service and hybrid platforms that will maximize the efficiency, speed and precision of campaign delivery across a robust supply network fueled by deep media relationships • Expansive breadth and depth of predictive, granular audience data via our DMP that can be coupled with TV viewing data – including program-level CTV data segments – to reach the most relevant and responsive consumers Analytics • Advanced and customizable measurement solutions that can be actively used to inform campaign optimization • Ability to track campaign performance across the full spectrum of priority KPIs, from top-funnel to bottom-funnel Client Service • Commitment to developing campaign strategies unique to the nuanced objectives and needs of each individual client, not a one- size-fits-all service model • Proactive, problem-solving approach to generating the most value for our clients Management believes that our enhanced TV intelligence offering, when launched, will further solidify our leadership position and allow us to cultivate even stronger client relationships in the future. COVID-19 RESPONSE Clearly much of 2020 was dominated by the global Covid-19 pandemic with the impact of lockdown on the global advertising industry affecting the Company’s trading in the first half of 2020. However, the Company introduced a number of measures intended to mitigate the impact in H1 2020 including cost-cutting initiatives, as well as accelerating the integration of Unruly, which was completed two months ahead of the initial schedule. The result of these measures was cost savings of c.$24 million in the year ended 31 December 2020 versus the yearly budget. Covid-19 continues to provide an uncertain backdrop to the global markets, however we believe our business and workforce has responded incredibly well to the restrictions the pandemic has brought about, as we continued to deliver growth in 2020. 10 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020OUR “END-TO-END” TECHNOLOGY PLATFORM DEMAND-SIDE DATA MANAGEMENT SUPPLY-SIDE E M O R D M P R T S R E S I T R E V D A DSP P U B L I S H E R S SSP Audiences VIDEO FOCUS TV RETARGET- TING SAAS & MANAGED OFFERING CREATIVE STUDIO MASSIVE REACH SAAS & MANAGED OFFERING OMNI- CHANNEL EXCLUSIVE SUPPLY 100 BILLION DAILY AD REQUESTS 250 MILLION OF DAILY AD IMPRESSIONS 500 TERABYTES OF DAILY DATA PROCESSED 100 MILLION DAILY UNIQUE SITES/APPS DSP: OPTIMIZE ADVERTISING CAMPAIGNS & IMPROVE ROI Access to wide-reaching and high-quality ad inventory, audience targeting and advanced reporting Designed to empower advertisers to optimize their video & CTV campaigns for efficiency & ROI using AI and ML/DLfor automation Self-service solution for advertisers and agencies enabling them more control over planinng and execution Managed-service optionality enables advertisers to benefit from the experience and guidance of our team of experts DEMAND-SIDE +1,200 BRANDS Managed and Self- Service DSP +400 AGENCIES VIDEO FOCUS SAAS & MANAGED OFFERING TV RETARGETING CREATIVE STUDIO DMP: REAL-TIME, INTELLIGENT DECISION- MAKING THROUGH DATA-DRIVEN INSIGHTS Fully integrated and flexible solution sitting at the center of the platform Provides real-time, device-agnostic, and data-driven marketing to maximize campaign performance & impact Leverages first- and third-party data to identify and reach curated audiences E M O R D M P R T DATA MANAGEMENT EMOTION-BASED INSIGHTS (EQ) ✔  AD VERIFICATION GEO/LOCATION-BASED TARGETING AUTOMATIC CONTENT RECOGNITION (ACR) AUDIENCE ATTRIBUTES & BEHAVIORS CONTEXTUALIZED TARGETING SSP: OPTIMIZE INVENTORY MANAGEMENT & REVENUE YIELD Self-service solution for advertisers and agencies, enabling them more control over planning and execution Access to large data sets, unique demand (Tremor DSP) and private marketplaces (PMPs) Direct relationships with omni-channel publishers & platforms facilitating supply path optimization process for all parties Model-driven KPI & yield automation increases publishers’ inventory value while delivering higher performance for advertisers SUPPLY SIDE ~1,450 PUBLISHERS WEB PUBLISHERS SSP MOBILE PUBLISHERS CTV PUBLISHERS DSP PMP Self- Service DSP OMP SAAS & MANAGED OFFERING MASSIVE REACH EXCLUSIVE SUPPLY CHIEF FINANCIAL OFFICER’S REVIEW " The second half of 2020 saw a significant resurgence of advertising spend. Adjusted EBITDA in H2 2020 increased c. 32 times vs H1 2020. " Chief Financial Officer Statement Issued on 10 March 2021 (in thousands) Total comprehensive income (loss) for the period Foreign currency translation differences for foreign operation Taxes on income Financial expense (income), net Depreciation and amortization Stock-based compensation Other expenses (income) Restructuring Acquisition-related cost Adjusted EBITDA Sagi Niri Chief Financial Officer Year Ended December 31, 2019 2020 $6,363 $4,975 (139) (2,636) 315 32,359 15,809 – 5,500 2,840 (2,836) (9,581) 1,417 45,187 14,490 1,700 4,637 524 $60,411 $60,513 Our adjusted EBITDA remained largely unchanged at $60.5 million for the year ended 31 December 31 2020, (2019: $60.4 million). This was primarily driven by the increase in our Programmatic activity, mainly attributable to the revenue growth in CTV, our self-serve platform and our DSP’s offering in private marketplaces. This was offset by the decrease in our Performance activity. In the first half of 2020, our business was negatively impacted by the COVID-19 pandemic, which resulted in a decrease in advertising demand globally. As client activity started to recover, the second half of 2020 saw a significant resurgence of advertising spend. Adjusted EBITDA in H2 2020 increased approximately 33 times vs H1 2020, which represented 51% year-over-year increase over our Adjusted EBITDA for H2 2019. Consequently, our full year adjusted EBITDA for 2020 remains intact, although some verticals have still not recovered, including travel, retail and hospitality. (in thousands, except for percentages) Revenues Cost of revenues (exclusive of depreciation and amortization shown separately below) Research and development Selling and marketing General and administrative Depreciation and amortization Other income (loss) Profit (loss) from operations 14 Year Ended Year Ended December 31, 2019(1) December 31, 2020 As reported As a % of revenue As reported As a % of revenue $325,760 100% $211,920 100% 187,246 16,168 52,351 34,433 32,359 (700) 3,903 57.5 5.0 16.1 10.6 9.9 (0.2) 1.2 59,807 13,260 68,765 29,678 45,187 1,248 (6,025) 28.2 6.3 32.4 14.0 21.3 0.6 (2.8) TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020 STRATEGIC REPORT Revenue decreased by $113.8 million, or 35%, to $211.9 million for the year ended 31 December 2020 (2019: $325.8 million). This decrease is primarily because effective from 1 January 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for 2019. If revenue for 2019 had been presented on a comparable basis to facilitate comparability, our revenue would have increased by $3.5 million, or 2%, to $211.9 million for the year ended 31 December 2020 (2019: $208.5 million). The increase was mainly attributable to the growth of $37.5 million in our Programmatic businesses, which includes multiple integrated growth initiatives such as CTV, our self-serve platform and the Private MarketPlace solutions. CTV serves as a robust growth driver for our core businesses, supported by an increasing number of industry leading CTV partners. However, this is largely offset by the decline of $34 million in our Performance activities, due to our strategic shift away from these activities. Cost of revenues (exclusive of depreciation and amortization) decreased by $127.4 million, or 68%, to $59.8 million for the year ended 31 December 2020 (2019: $187.2 million). This is primarily because effective January 1, 2020, we recognize revenue on a net basis for the Programmatic activity, which had been recognized on a gross basis historically, including for 2019. If revenue for 2019 had been presented on a comparable basis to facilitate comparability, cost of revenue (exclusive of depreciation and amortization) for the year ended December 31, 2019 would be $69,945 thousand. If revenue for 2019 had been presented on a comparable basis to facilitate comparability, our cost of revenue (exclusive of depreciation and amortization) would have decreased by $10.1 million, or 14%, to $59.8 million for the year ended 31 December 2020 (2019: $69.9 million). This decrease was primarily driven by lowered costs due to our strategic shift away from Performance activities, partially offset by the greater usage of hosting and data services in our core business. Research and development expenses decreased by $2.9 million for the year ended 31 December 2020 (2019: $16.2 million). This was primarily the result of decreases in (i) wages and salaries of $1.7 million attributable to the efficiencies and consolidation of our research and development efforts, (ii) the expense for research and development and engineering tools and services of $1.1 million and (iii) capitalized costs of $0.1 million. Selling and marketing expenses increased by $16.4 million, or 31.4%, to $68.8 million for the year ended December 31, 2020 (2019: $52.3 million). This increase was driven by (i) the wages, salaries and share-based payments of $13.9 million related to the Unruly acquisition, (ii) the share-based payment program of $3.3 million for our business managers and (iii) the salary increase of $1.3 million as a result of our business growth, which was partially offset by a decrease in marketing and other costs of $2.1 million driven by the efficiency improvements during the Covid-19 pandemic. General and administrative expenses decreased by $4.8 million, or 13.8%, to $29.7 million for the year ended December 31, 2020 (2019: $34.4 million). This decrease was primarily driven by the decrease in wages, salaries and share-based payments of $1.5 million, as well as the recovery in 2019 of $4.1 million doubtful debts provision as a result of higher collection rates and employee related and other administrative costs of $0.4 million. This was partially offset by the increase in professional services and acquisition costs of $1.2 million. As at 31 December 2020, our net cash* increased by 26%, from $76.9 million for the year ended December 31, 2019 to $96.8 million for the year ended 31 December 2020. This increase was primarily driven by (i) the net cash provided by operating activities of $35.2 million, mainly due to the increase in accounts receivable, and (ii) the net cash provided by investing activities of $4.9 million, including the net cash provided by the acquisition of Unruly, partially offset by the net cash used in financing activities of $22.4 million, primarily for leases repayment and acquisition of our own shares. ■ * Net cash is defined as cash and cash equivalents less short and long-term interest-bearing debt including capital leases Sagi Niri Chief Financial Officer 10 March 2021 TREMOR INTERNATIONAL LTD. ANNUAL REPORT 2020 15 BOARD OF DIRECTORS Christopher Stibbs Non-Executive Chairman Ofer Druker Chief Executive Officer Sagi Niri Chief Financial Officer Ofer Druker has served as our Chief Executive Officer and as a member of our board of directors since April 2019 following the completion of the merger with RhythmOne. From November 2017 to April 2019, Mr. Druker served as our Executive Chairman of the Tremor Video division and was instrumental in our successful integration of Tremor Video after its acquisition in August 2017. Previously, Mr. Druker was the founder and Chief Executive Officer of Matomy Media Group Ltd., a data-driven advertising company (“Matomy”) until April 2017, having built Matomy from its inception in 2007 into a digital media company. Mr. Druker was responsible for leading and integrating Matomy’s most important strategic transactions, including the acquisitions of Team Internet, Media Whiz, Mobfox and Optimatic. Sagi Niri has served as our Chief Financial Officer since March 2020 and as a member of our board of directors since June 2020. Mr. Niri has over 20 years of experience in finance and leadership roles in the technology and real estate sectors. Mr. Niri previously served as Chief Executive Officer of Labs (“Labs”), and Chief Financial Officer of LabTech Investments Ltd., Labs’ parent company, which owns and manages office, retail and residential real estate in London. In addition, Mr. Niri spent over nine years at Matomy, initially as Chief Operating Officer/Chief Financial Officer and more recently as Chief Executive Officer. Mr. Niri is a member of the Institute of Certified Public Accountants in Israel and holds an M.B.A. in Finance from Manchester University and a B.A. in Corporate Finance from the College of Management in Israel. Christopher Stibbs has served as a member of our board of directors since May 2019 and as our Non-Executive Chairperson since September 2020. Mr. Stibbs has over 25 years of experience as an executive in the media industry. Until August 2019, he served as Chief Executive of The Economist Group (the “Economist Group”). Previously, he held a number of roles within the group including head of the Economist Intelligence Unit (the group’s B2B arm) and Chief Financial Officer. He is credited with overseeing the Economist Group’s resilience and transition through the unprecedented disruption experienced by the publishing industry over the last 15 years. Prior to this, he held positions with Pearson and Incisive Media. Mr. Stibbs is a fellow of the Associations of Chartered Accountants and Corporate Treasurers, currently has a non-executive role at Oxford University Press and is Chairman of Times Higher Education. Yaniv Carmi Chief Operating Officer Yaniv Carmi has served as our Chief Operating Officer since March 2020 and as a member of our board of directors since 2014. Mr. Carmi previously served as our Chief Financial Officer from January 2010 to March 2020. He is currently responsible for the delivery of our business plan and driving our growth ambitions. Mr. Carmi was instrumental in our initial public offering of our ordinary shares on AIM in 2014 and in the subsequent global expansion in operations, including significant M&A activity. He is an experienced finance professional, whose previous roles include tax and audit senior at KPMG Israel. Mr. Carmi is also a Certified Public Accountant and holds a B.A. in Economics and Accounting from Ben-GurionUniversity and an M.B.A. in Financial Management from Tel Aviv University. 16 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020Lisa Klinger Non-Executive Director Lisa Klinger has served as a member of our board of directors since April 2021. Ms. Klinger has nearly 30 years of experience in international finance. Most recently, Ms. Klinger was Chief Financial Officer at Ideal Image Development Corp, one of the largest cosmetic and aesthetic services providers in the United States, between 2018 and 2019, and prior to that she held the role of Chief Financial and Administrative Officer between 2016 and 2017 at Peloton Interactive Inc., the American exercise equipment and media company. Ms. Klinger has also held senior finance roles at Fresh Market Inc., where she was Executive and Vice President, Chief Financial Officer for three years, as well as at Michaels Stores Inc., where she was Senior Vice President, Finance and Treasurer for four years, and Acting Chief Financial Officer. Ms. Klinger is currently a member of the board of directors and the chair of the audit committee of Emerald Holding Inc. (NYSE:EEX), a leading operator of B2B trade shows in the United States, and a member of the board of directors of PartyCity HoldCo Inc. (NYSE:PRTY), a party goods retailer in North America. Ms. Klinger holds a B.S.B.A. in Finance from Bowling Green State University. Neil Jones Senior Non-Executive Director Neil Jones has served as a member of our board of directors since 2014. Mr. Jones is currently Chief Operating Officer and a member of the board of directors of Huntsworth plc, a healthcare communications and public relations group, which is listed on the Main Market of the London Stock Exchange. Between February 2016 and October 2019, Mr. Jones held the position of Chief Financial Officer at Huntsworth plc. He joined Huntsworth plc 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 B.A. in Economics from the University of Manchester and completed the ACA in July 1990 with Price Waterhouse. Joanna Parnell Non-Executive Director Joanna Parnell has served as a member of our board of directors since 2014. Ms. Parnell is the Co-Founder of strategic marketing consultancy Project50, designing commercial growth strategies for C-suite business leaders in the United Kingdom and the United States. Previously, Ms. Parnell 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 Wavemaker in March 2016, Ms. Parnell was Director of Strategy and sat on the management team at Unique Digital (now a WPP plc 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 at the London School of Marketing between 2005 and 2006. Rebekah Brooks Non-Executive Director Rebekah Brooks has served as a member of our board of directors since June 2020. Ms. Brooks is Chief Executive of British newspaper publisher News Corp UK and Ireland, part of News Corp, a position she has held since 2015, having first joined News Corp in 1989. Starting as a feature writer for the News of the World, Ms. Brooks became Editor of the Sun in 2003, a position she held until July 2009. From 2009 to 2011, she served as Chief Executive of News International, overseeing a period of significant growth in newspaper operating profit and paid-for digital subscriptions at The Times. Following her appointment as Chief Executive of News Corp UK and Ireland, Ms. Brooks restructured the Sun’s online strategy, driving significant audience growth. In 2016, she also oversaw the strategic acquisition of Wireless, the owner of national radio brands talkSPORT, talkRADIO and Virgin Radio. Ms. Brooks is a Director of News Group Newspapers and Times Newspapers, and a Non- Executive Director of PA Group, the parent company of the Press Association. Norm Johnston Non-Executive Director Norm Johnston has served as a member of our board of directors since June 2020. Mr. Johnston is a veteran employee of News Corp. Until recently, he was the Chief Executive Officer of Unruly, the digital advertising business we acquired in January 2020, a position he has held since April 2018. Mr. Johnston has been involved in digital marketing since joining the marketing industry’s first digital agency, Modem Media in 1995. In 1997, Mr. Johnston launched Modem Media UK (“Modem”), one of Britain’s first and most successful digital agencies. After Modem was acquired by Publicis in 2007, Mr. Johnston joined WPP and GroupM’s Mindshare, where he held a number of senior roles between 2007 and 2018, including Global Chief Digital Officer and Global Chief Executive Officer of its FAST business unit, a team of over 2,000 specialists in 115 cities working for global clients such as Unilever, Nestle and American Express. Mr. Johnston holds a B.A. in Economics and Political Science from Northwestern University and an M.B.A. in Marketing from Duke University’s Fuqua School of Business. 17 TREMOR INTERNATIONAL LTD.CORPORATE GOVERNANCEANNUAL REPORT 2020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. 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. 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”). In addition, the Company is subject to the corporate governance rules of the U.S. Securities and Exchange Commission (the “SEC”) and Nasdaq as described in the Company’s filings with the SEC. 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 the Board strives to implement in order to deliver on their responsibilities to the Company’s shareholders. The table below 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. Tremor believes that programmatic advertising is still an underpenetrated market that will experience robust growth over the next decade as ad budgets continue to shift to digital and digital continues to shift towards programmatic execution. Tremor intends to capitalize on these secular trends by pursuing growth opportunities that include: – – – – – – Focus on Core Areas of Growth in Video and CTV Introduce New Products and Invest in Tremor’s Technology Stack Strengthen Tremor’s Relationship with Existing Customers Expand Tremor’s International Footprint and United States Market Share Continue to Bolster Tremor’s Data Capabilities Leverage Tremor’s Industry Expertise and Target Select Acquisitions The key challenges to the business and how these are mitigated are detailed on pages 26 to 28 of this report. Tremor also provides stakeholders with in-depth reviews of its strategy and how it manages risks at Capital Markets Days and investor teach-ins. 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 brokers, finnCap and Stifel. Ofer Druker, Tremor’s CEO, and Sagi Niri, Tremor’s 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. The Board recognises the AGM as an important opportunity to meet private shareholders, however the Covid-19 pandemic meant that shareholders were unable to attend the 2020 AGM in person. The directors – both non- executive and executive – are typically also available to speak to shareholders informally immediately following the AGM. The Company’s executive directors also hosted an investor presentation in September 2020 specifically to engage with the private investor community. Five of Tremor’s six non-executive directors are UK-based and available to meet with shareholders as requested. This includes the Chairman, who liaises 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 webcasts and separate presentations attended by analysts and private investors. 18 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020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). Staff retention rate is a key consideration and is a factor in determining the bonus payment of the executive directors. Retention is also a matter reported on to the Board. Each year (with the exception of 2020 due to COVID-19), at least one board meeting is held at the Company’s headquarters in Israel, when the non-executive directors interact with the employees and present to them. 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 26 to 28 and its internal control measures on pages 23 to 24 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 every board meeting. 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 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 21 to 23 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 21 to 23 of this report. The time devoted by directors to their duties varies depending on the activities of the company. In 2020, the board held 21 meetings. Each year (with the exception of 2020 due to COVID-19), the Board typically holds at least one 3-day meeting to review strategy and interact with senior managers. 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 typically via in-person meetings – which in 2020 were hosted virtually – 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 typically formal face-to-face meetings, although these were also hosted virtually during 2020 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 21 to 23 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. 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 external non-executive directors, which are subject to re- election every three years, in accordance with Israeli law). 19 TREMOR INTERNATIONAL LTD.CORPORATE GOVERNANCEANNUAL REPORT 2020CORPORATE GOVERNANCE REPORT CONTINUED 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 18 to 20 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 23 of this report). 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. 20 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020THE BOARD AND COMMITTEES 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 three executive directors, Ofer Druker, Yaniv Carmi and Sagi Niri, and six non-executive directors, Christopher Stibbs (Chairman of the Board), Neil Jones, Joanna Parnell, Lisa Klinger, Rebekah Brooks and Norman Johnston. The balance between executive and non-executive directors does not allow any group to dominate the Board’s decision making. 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 2020, the Board met virtually on 21 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 Norman Johnston, and is chaired by Neil Jones. Following the appointment of Lisa Klinger to the Board in April 2021, Ms Klinger is expected to replace Norman Johnston as a member of the Audit Committee and subsequently succeed Mr Jones as the Chair of the Audit Committee. 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 Executive Directors present by invitation only. The Committee meets with the external auditors without the Executive Directors present as it considers appropriate. During 2020, the Committee met on two 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. 21 TREMOR INTERNATIONAL LTD.CORPORATE GOVERNANCEANNUAL REPORT 2020THE BOARD AND COMMITTEES CONTINUED Among others, the Committee reviewed the financial performance and approved the 2019 annual financial statements and the H1 2020 financial statements of the Company, recommended the reappointment of KPMG as group auditors, and hosted an executive session with KPMG. In addition, the reappointment of KPMG as group auditors was also approved at the Company’s 2020 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 Norman Johnston, and is chaired by Joanna Parnell. Following the appointment of Lisa Klinger to the Board in April 2021, Ms Klinger is expected to replace Norman Johnston as a member of the Remuneration Committee, and Mr Jones will succeed Ms Parnell as the Chair of the Remuneration Committee. Operation of the Remuneration Committee The Committee operates under written terms of reference. During 2020, the Committee met on five 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 remuneration package for Mr Niri, who was appointed Chief Financial Officer, and subsequently Executive Director, in 2020, and approved the 2019 KPI achievements and set the 2020 KPI goals for the executive directors and management. The Committee also reviewed and recommended to the Board grant of equity incentive awards to the Company’s management and employees, including Mr Niri, and the amendment to the vesting terms and exercise price of employee options. 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 2020, the Committee met on three 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 executive directors, Ofer Druker, Yaniv Carmi and Sagi Niri and non-executive directors, Tim Weller, Neil Jones, Joanna Parnell, Rebekah Brooks, and the election of executive director Sagi Niri and the non-executive director Norman Johnston, which was approved at the Company’s 2020 Annual General Meeting. Ofer Druker, Yaniv Carmi and Sagi Niri and, non-executive directors, Christopher Stibbs, Rebekah Brooks and Norman Johnston will be standing for re-election at the forthcoming Annual General Meeting. The Nomination Committee also recommended in 2020 the appointment of Christopher Stibbs as Tremor’s new non-executive chairman to replace Tim Weller who retired in 2020. 22 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020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 Christopher Stibbs, Neil Jones and Sagi Niri, and is chaired by Christopher Stibbs. 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 2020, the Committee met on one occasion, to review and approve the 2019 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. 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 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. 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, 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. 23 TREMOR INTERNATIONAL LTD.CORPORATE GOVERNANCEANNUAL REPORT 2020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). 24 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020TAKEOVERS & MERGERS 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. 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. 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 shareholders. 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. SPECIAL TENDER OFFER 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. 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. 25 TREMOR INTERNATIONAL LTD.CORPORATE GOVERNANCEANNUAL REPORT 2020DIRECTORS’ REPORT PRINCIPAL ACTIVITIES We are a global company offering an end-to-end software platform that enables advertisers to reach relevant audiences and publishers to maximize yield on their digital advertising inventory. We use our proprietary technology to deliver impactful brand stories to target audiences through digital ad technology and advanced audience data. Our omni-channel capabilities deliver global advertising campaigns across all formats and channels, with an expertise in video format ads on all devices (“Video”) and Connected TV (“CTV”). BUSINESS REVIEW The information that fulfils the requirements of the business review, including details of the 2020 results, principal risks and uncertainties are set out in the Chairman’s, Chief Executive Officer’s and Chief Financial Officer’s statements on pages 4 to 5, 8 to 10 and 14 to 15 as issued on 10 March 2021 and in this Directors’ Report. DIRECTORS The following Directors held office as indicated below for the year ended 31 December 2020 and up to the date of signing the consolidated financial statements except where otherwise shown. Christopher Stibbs – Non-Executive Chairman (Throughout 2020-present, appointed Chairman on 1 September 2020, previously Non-Executive Director) Ofer Druker – Chief Executive Officer (Throughout 2020-present) Yaniv Carmi – Chief Operating Officer (Throughout 2020-present) Sagi Niri – Chief Financial Officer (Appointed 18 June 2020-present) Joanna Parnell – Non-Executive Director (Throughout 2020-present) Neil Jones – Non-Executive Director (Throughout 2020-present) Rebekah Brooks – Non-Executive Director (Appointed 31 March 2020-present) Norman Johnston – Non-Executive Director (Appointed 18 June 2020-present) Lisa Klinger – Non-Executive Director (Appointed 30 April 2021-present) Tim Weller – Non-Executive Chairman (Resigned 31 August 2020) DIRECTORS’ REMUNERATION AND INTERESTS The Remuneration Report is set out on pages 29 to 30. 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 18 to 20. 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. Following are the principal risks and uncertainties that could have a material effect on the Company’s performance: Risks Relating to Tremor’s Business • Our success and revenue growth is dependent on adding new advertisers and publishers, effectively educating and training our existing advertisers and publishers on how to make full use of our platform and increasing usage of our platform by advertisers and publishers. • Our business depends on our ability to maintain and expand access to advertising spend, including spend from a limited number of DSPs, agencies and advertisers. • Our business depends on our ability to maintain and expand access to valuable inventory from publishers, including our largest publishers. • If we fail to make the right investment decisions in our platform, or if we fail to innovate and develop new solutions that are adopted by advertisers and publishers, we may not attract and retain advertisers and publishers, which could have an adverse effect on our business, results of operations and financial condition. • Significant parts of our business depend on relationships with data providers for data sets used to deliver targeted campaigns. • Our business depends on our ability to collect, use and disclose certain data, including CTV data, to deliver advertisements. Any limitation imposed on our collection, use or disclosure of this data could significantly diminish the value of our platform and cause us to lose publishers, advertisers and revenue. Consumer tools, regulatory restrictions and technological limitations all threaten our ability to use and disclose data. • If the use of third-party “cookies,” mobile device IDs, CTV data collection or other tracking technologies is restricted without similar or better alternatives (and adoption of such alternatives), our platform’s effectiveness could be diminished and our business, results of operations and financial condition could be adversely affected. • Our failure to meet content and inventory standards and provide services that our advertisers and publishers trust could harm our brand and reputation and negatively impact our business, operating results and financial condition. • We must grow rapidly to remain a market leader and to accomplish our strategic objectives. If we fail to grow, or fail to manage our growth effectively, the value of our company may decline. • The market for programmatic buying for advertising campaigns is relatively new and evolving. If this market develops slower or differently than we expect, our business, operating results and financial condition could be adversely affected. 26 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020• The extent to which the ongoing COVID-19 pandemic, including the resulting global economic uncertainty, and measures taken in response to the pandemic, could adversely affect our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict. • Any decrease in the use of the advertising or publishing channels that we primarily depend on, or failure to expand into emerging channels, could adversely affect our business, results of operations and financial condition. • If CTV develops in ways that prevent advertisements from being delivered to consumers, our business, results of operations and financial condition may be adversely affected. • The market in which we participate is intensely competitive, and we may not be able to compete successfully with our current or future competitors. • Seasonal fluctuations in advertising activity could have a material impact on our revenue, cash flow and operating results. • If we do not effectively grow and train our sales and support teams, we may be unable to add new customers or increase usage of our platform by our existing customers and our business will be adversely affected. • The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business. • If we fail to detect or prevent fraud on our platform, or malware intrusion into the systems or devices of our publishers and their consumers, publishers could lose confidence in our platform and we could face legal claims that could adversely affect our business, results of operations and financial condition. • If the use of digital advertising is rejected by consumers, through opt-in, opt-out or ad-blocking technologies or other means, it could have an adverse effect on our business, results of operations and financial condition. • We must scale our platform infrastructure to support anticipated growth and transaction volume. If we fail to do so, we may limit our ability to process inventory and we may lose revenue. • Disruptions to service from our third-party data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services and harm our business. • We face potential liability and harm to our business based on the human factor of inputting information into our platform. • Any failure to protect our intellectual property rights could negatively impact our business. Risks Relating to the Market in Which We Operate • If the non-proprietary technology, software, products and services that we use are unavailable, have future terms we cannot agree to or do not perform as we expect, our business, operating results and financial condition could be harmed. • Our revenue and results of operations are highly dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns and the COVID-19 pandemic, can make it difficult to predict our revenue and could adversely affect our business, results of operations and financial condition. Risks Relating to Our Employees and Location in Israel • Our long-term success depends on our ability to operate internationally making us susceptible to risks associated with cross-border sales and operations. • We depend on our executive officers and other key employees, and the loss of one or more of these employees could harm our business. • Inability to attract and retain other highly skilled employees could harm our business. • Conditions in Israel could materially and adversely affect our business. • Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.K. companies. • It may be difficult to enforce a U.K. judgment against us, our officers and directors in Israel or the U.K., or to assert U.K. securities laws claims in Israel or serve process on our officers and directors. Risks Relating to Our Financial Position • Our operating history makes it difficult to evaluate our business and prospects and may increase the risk associated with your investment. • We often have long sales cycles, which can result in significant time and investment between initial contact with a prospect and execution of an agreement with an advertiser or publisher, making it difficult to project when, if at all, we will obtain new advertisers or publisher and when we will generate revenue from them. • We are subject to payment-related risks and, if our advertisers do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected. • Future acquisitions or strategic investments could be difficult to identify and integrate, divert the attention of management, and could disrupt our business, dilute shareholder value and adversely affect our business, results of operations and financial condition. 27 TREMOR INTERNATIONAL LTD.CORPORATE GOVERNANCEANNUAL REPORT 2020DIRECTORS’ REPORT CONTINUED 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. Research and development expenses during the year were $33.1 million (2019: $33.1 million). SHARE CAPITAL AND SUBSTANTIAL SHAREHOLDINGS Details of the share capital of the Company as at 31 December 2020 are set out in Note 3 to the consolidated financial statements. 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 2020 audit. The total fee paid to the Company’s auditors for audit services rendered to the Company during that year was $555,000. SHAREHOLDERS At 18 June 2021, the total issued and outstanding number of Ordinary Shares were 149,728,168 and 28,891,296 Ordinary Shares were held in treasury as dormant shares. The following held 3% or more of the ordinary share capital of Tremor: Shareholders Mithaq Capital SPC Toscafund Asset Management Schroder Investment Management News Corp JB Capital Partners Hargreaves Lansdown Asset Management Interactive Investor River & Mercantile Asset Management Amount 31,500,000 21,712,529 19,884,735 8,525,323 5,561,531 5,209,121 4,938,252 4,918,920 % 21.0% 14.5% 13.3% 5.7% 3.7% 3.5% 3.3% 3.3% Please Note: Any of the new shareholders in the IPO is holding over 3% of the ordinary share capital of Tremor Risks Relating to Legal or Regulatory Constraints • We are subject to regulation with respect to political advertising, which lacks clarity and uniformity. • We are subject to laws and regulations related to data privacy, data protection and information security and consumer protection across different markets where we conduct our business, including in the United States, the European Economic Area (“EEA”) and the United Kingdom and industry requirements and such laws, regulations and industry requirements are constantly evolving and changing. • We face potential liability and harm to our business based on the nature of our business and the content on our platform. • We are subject to anti-bribery, anti-corruption and similar laws and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation. 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 DSP 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. 28 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020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 2020 was as follows (all amounts in GBP – NIS 4.413: GBP 1, USD 1.285: GBP): Christopher Stibbs* 89,949 Ofer Druker Yaniv Carmi Sagi Niri** Neil Jones Joanna Parnell Rebekah Brooks*** Norman Johnston**** Tim Weller***** ‘4,409,816 2,252,540 917,863 58,248 53,156 33,648 22,396 102,160 * Appointed Chairman of the Board on 1 September 2020, previously Non-executive Director ** Appointed to the Board on 18 June 2020 ***Appointed Non-executive Director 31 March 2020 **** Appointed Non-executive Director 18 June 2020 ***** Resigned 31 August 2020 29 TREMOR INTERNATIONAL LTD.CORPORATE GOVERNANCEANNUAL REPORT 2020REMUNERATION REPORT CONTINUED REMUNERATION OF EXECUTIVES AND OTHER MANAGERS The remuneration of the Company’s five most highly compensated executives and managers (including two of its executive directors) in 2020 was as follows (all amounts in GBP): Ofer Druker Yaniv Carmi Assaf Suprasky Anthony Flaccavento Sagi Niri NEW GRANTS DURING THE PERIOD As of 28 May 2021: Base salary Bonus Share- based Total 481,276 481,276 3,447,265 4,409,816 409,048 327,238 1,516,254 2,252,540 270,244 282,817 1,010,133 1,563,193 298,596 186,588 441,476 926,660 257,073 98,294 562,496 917,863 During 2020, the Group granted 1,801 thousand share options and 8,701 thousand Restricted Share Units (RSUs) and Performance Stok Units (PSUs) to its executive officers and employees from outstanding awards under Tremor’s equity incentive plans. Number of Restricted Share Units (RSUs) and Performance stock units (PSUs) granted Total number of Restricted Share Units (RSUs) and Performance stock units (PSUs) held Nil Nil 959,680 490,538 600,000 420,000 Number of ordinary shares under option, RSUs and PSUs Number of ordinary shares 2,751,805 959,680 1,210,661 490,538 176,400 420,000 Nil 5,000 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Percentage holding of Total Voting Rights Percentage holding on a fully diluted basis 1.84% 0.81% 0.12% Nil 2.36% 1.08% 0.38% Nil 0.00% 0.00% Nil Nil Nil Nil Nil Nil Nil Nil Director Ofer Druker* Yaniv Carmi** Sagi Niri *Ofer Druker exercised 2,867,232 RSU/PSU during 2020 ** Yaniv Carmi exercised 1,177,293 RSU/PSU during 2020 DIRECTORS’ AND RELATED PARTIES INTERESTS As of 18 June 2021: Ofer Druker Yaniv Carmi Sagi Niri Joanna Parnell Neil Jones Christopher Stibbs Rebekah Brooks*** Norman Johnston**** Lisa Klinger ***Appointed Non-executive Director 31 March 2020 **** Appointed Non-executive Director 18 June 2020 30 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020AUDITORS' REPORT TO THE SHAREHOLDERS OF TREMOR INTERNATIONAL LTD. FINANCIAL STATEMENTS In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2020 and 2019 and their results of operations, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, in accordance with International Financial Reporting Standards (IFRS). Somekh Chaikin Certified Public Accountants (Isr.) Member Firm of KPMG International March 10, 2021 We have audited the accompanying consolidated statements of financial position of Tremor International Ltd. and its subsidiaries (hereinafter – “the Company”) as of December 31, 2020 and 2019 and the related consolidated statements of operation and other comprehensive income, statements of changes in shareholders’ equity and statements of cash flows, for each of the two years in the period ended December 31, 2020. 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. 31 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020CONSOLIDATED STATEMENTS OF FINANCIAL POSITION as at 31 December 2020 Assets: Cash and cash equivalents Trade receivables, net Other receivables Current tax assets 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 and shareholders’ equity Liabilities: Current maturities of lease liabilities Trade payables Other payables Current tax liabilities Total current liabilities Employee benefits Long-term lease liabilities Deferred tax liabilities Other long term liabilities Total non-current liabilities Total liabilities Shareholders’ equity: Share capital Share premium Other comprehensive income Retained earnings Total shareholders’ equity Note 10 8 8 5 6 7 4 6 9 9 6 4 19(b) 14 Total liabilities and shareholders’ equity Date of approval of the financial statements: March 10, 2021 The accompanying notes are an integral part of these consolidated financial statements. 32 December 31 2020 USD thousands 2019 USD thousands 97,463 153,544 17,615 2,029 79,047 96,829 9,729 3,611 270,651 189,216 3,292 18,657 3,132 21,003 224,500 210,285 31,717 1,834 17,606 1,332 280,000 253,358 550,651 442,574 9,047 125,863 47,122 3,162 9,637 70,428 25,049 3,973 185,194 109,087 495 12,162 15,963 7,824 36,444 221,638 556 14,632 17,687 – 32,875 141,962 380 351 264,831 240,989 3,330 494 60,472 58,778 329,013 300,612 550,651 442,574 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020STATEMENT OF OPERATION AND OTHER COMPREHENSIVE INCOME for the Year Ended 31 December 2020 Revenues Expenses Cost of Revenues (Exclusive of Depreciation and Amortization shown separately below) Research and development expenses Selling and marketing expenses General and administrative expenses Depreciation and amortization Other expenses (income), net Total expenses Operating Profit (Loss) Financing income Financing expenses Financing expenses, net Profit (Loss) before taxes on income Tax benefit Profit for the year 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) Diluted earnings per share (in USD) Note 11a 11b 12 13 4 15 15 The accompanying notes are an integral part of these consolidated financial statements. Year ended December 31 2020 USD thousands 2019 USD thousands 211,920 325,760 59,807 187,246 13,260 68,765 29,678 45,187 1,248 16,168 52,351 34,433 32,359 (700) 217,945 321,857 (6,025) 3,903 (445) 1,862 1,417 (7,442) 9,581 2,139 2,836 2,836 4,975 0.016 0.015 (773) 1,088 315 3,588 2,636 6,224 139 139 6,363 0.056 0.054 33 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY for the Year Ended 31 December 2020 Balance as of January 1, 2019 Total Comprehensive income for the year 198 72,663 355 51,053 124,269 Share capital Share premium Other com- prehensive income USD thousands Retained Earnings Total Profit for the year Other comprehensive Income: Foreign currency translation Total comprehensive income for the year Transactions with owners, recognized directly in shareholders’ equity Revaluation of liability for put option on non- controlling interests Issuance of shares (net of issuance cost) Own shares acquired Share based payments Exercise of share options – – – – 184 – – – – 175,166 (41) (24,696) – 10 16,042 1,814 – 6,224 6,224 139 139 – 6,224 139 6,363 – – – – – 1,501 1,501 – – – – 175,350 (24,737) 16,042 1,824 Balance as of December 31, 2019 351 240,989 494 58,778 300,612 Total Comprehensive Income for the year Profit for the year Other comprehensive Income: Foreign Currency Translation Total comprehensive Income for the year Transactions with owners, recognized directly in shareholders’ equity Issuance of shares in a Business Combination Revaluation of liability for put option on non– controlling interests Own shares acquired Share based payments Exercise of share options – – – 25 – – – – 14,092 – (15) (9,950) – 19 18,770 930 – 2,139 2,139 2,836 – 2,836 2,836 2,139 4,975 – – – – – – 14,117 (445) (445) – – – (9,965) 18,770 949 Balance as of December 31, 2020 380 264,831 3,330 60,472 329,013 The accompanying notes are an integral part of these consolidated financial statements. 34 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020CONSOLIDATED STATEMENTS OF CASH FLOWS for the Year Ended 31 December 2020 Cash flows from operating activities: Profit for the year Adjustments for: Depreciation and amortization Net financing expense (income) Loss on sale of fixed assets Gain on leases change contracts Gain on sale of business unit Share-based payment Tax benefit 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 Change in pledged deposits Leases Receipt Repayment of long-term loans Acquisition of fixed assets Acquisition and capitalization of intangible assets Proceeds from sale of intangible assets Proceeds from sale of business unit Increase in bank deposit, net Acquisition of subsidiaries, net of cash acquired Net cash provided by investing activities Cash flows from financing activities Repayment of loans Acquisition of own shares Proceeds from exercise of share options Leases repayment Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents as of the beginning of year Effect of exchange rate fluctuations on cash and cash equivalents Cash and cash equivalents as of the end of year The accompanying notes are an integral part of these consolidated financial statements. Year ended December 31 2020 USD thousands 2019 USD thousands 2,139 45,187 1,310 3 6,224 32,359 (19) 11 (2,103) (2,705) (503) (700) 14,490 15,809 (9,581) (2,636) (39,351) 36,466 25,882 (34,203) (23) 1,168 (290) 3,184 (2,855) (8,089) 517 (1,117) 604 (942) 35,163 45,073 229 2,885 817 (594) (4,858) – 232 – 6,208 4,919 841 1,669 – (1,063) (5,672) 6 – (57) 23,714 19,438 – (17,273) (9,965) (24,737) 949 1,824 (13,351) (12,607) (22,367) (52,793) 17,715 79,047 701 11,718 67,073 256 97,463 79,047 35 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2020 1 GENERAL a Reporting entity: Tremor International Ltd. (the “Company” or “Tremor International”), formerly known as Taptica International Ltd., was incorporated in Israel under the laws of the State of Israel on March 20, 2007. The ordinary shares of the Company are listed on the AIM Market of the London Stock Exchange. The address of the registered office is 121 Hahashmonaim Street Tel-Aviv, Israel. Tremor International is a global Company offering an end-to-end software platform that supports a wide range of media types (e.g., video, display, etc.) and devices (e.g., mobile, Connected TVs, streaming devices, desktop, etc.), creating an efficient marketplace where advertisers (buyers) are able to purchase high quality advertising inventory from publishers (sellers) at scale. Tremor Video Inc. (“Tremor Video’’), a wholly owned subsidiary, is the Company’s Demand Side Platform (“DSP”) providing full-service and self-managed marketplace access to advertisers and agencies in order to execute their digital marketing campaigns in real time across various ad formats. RhythmOne PLC (“RhythmOne’’) and Unruly Holding Ltd (“Unruly”), both wholly owned subsidiaries, provide access to the Sell Side Platform (“SSP”) which is designed to monetize digital inventory for publishers and app developers by enabling their content to have the necessary code and requirements for programmatic advertising integration. The SSP provides access to significant amounts of data, unique demand and a comprehensive product suite to drive more effective inventory management and revenue optimization. The Company also provides a Data Management Platform (“DMP”) solution which integrates both DSP and SSP solutions enabling advertisers and publishers to use data from various sources in order to optimize results of their advertising campaigns. Tremor International Ltd. is headquartered in Israel and maintains offices throughout the US, Canada, EMEA and Asia-Pacific. On April 1, 2019, the Company completed an acquisition transaction with RhythmOne and on January 4, 2020 the Company completed an acquisition transaction with Unruly, see Note 19b. Following the acquisition of RhythmOne and Unruly, the Company invested and developed capabilities both in the DSP and SSP solutions which launched in 2020 to offer an end-to-end platform that provides customers access to an advertising marketplace in an efficient and scalable manner utilizing machine learning, artificial intelligence and advanced algorithms. As a result of those acquisitions and their influence on the Company’s operation and other changes in the industry practice, the Company has changed revenue presentation as of 2020 to a net basis with respect to its programmatic activity (see Note 3k). The global spread of COVID-19, which was declared a global pandemic by the World Health Organization in March 2020, has created significant volatility, global macro-economic uncertainty and disruption in the business and financial markets. The COVID-19 pandemic and efforts to control its spread have curtailed the movement of people, goods, and services worldwide, including in the regions in which we and our customers and partners operate, and are impacting economic activity and financial markets. The spread of the COVID-19 pandemic has resulted in, regional quarantines, labor shortages or stoppages, changes in consumer purchasing patterns, and overall economic instability. The COVID-19 pandemic has negatively impacted the first half of the year 2020, and may continue to negatively impact, our revenue and results of operations, the extent and duration of which we may not be able to accurately predict. The Company has introduced a number of measures to mitigate the impact of COVID-19, including cost-cutting initiatives with respect to reducing operating expenses, reducing headcount, freezing new hires, as well as accelerating the integration of Unruly which has been completed two months ahead of schedule. The Company continues to monitor and assess the impact of the COVID-19 pandemic on its operation, its customers and potential customers. b Definitions: In these financial statements – The Company – Tremor International Ltd. The Group – Tremor International Ltd. and its subsidiaries. Subsidiaries – Companies, the financial statements of which are fully consolidated, directly or indirectly, with the financial statements of the Company such as RhythmOne PLC, Unruly Holding Ltd, Tremor Video Inc. Related party – As defined by IAS 24, “Related Party Disclosures”. 36 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20202 BASIS OF PREPARATION a Statement of compliance: The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board ("IASB"). The consolidated financial statements were authorized for issue by the Company’s Board of Directors on March 10, 2021. b Functional and presentation currency: These consolidated financial statements are presented in US Dollars (USD), which is the Company’s functional currency, and have been rounded to the nearest 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 and current tax assets and liabilities • Put option to non-controlling interests • Provisions • Derivatives 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 capitalization, in Note 4, on Income Tax, with respect to uncertain tax position and Note 19, on subsidiaries, with respect to business combinations. 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 16, share-based payments; • Note 17, financial instruments; and • Note 19, subsidiaries (regarding business combinations). f Change in classification During the current year the Company reclassified the share-based compensation to share premium and reclassified other expenses (income) to operating expenses. Furthermore, there was a correction of immaterial error in accrual for credit presented net of accounts receivables to other payables. This classification did not have any effect on the profit of year ended in December 31, 2019. 37 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 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. 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. Issuance of put option to non-controlling interests: 4 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 shareholders’ equity (see also Note 17(e)). 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. 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 shareholders’ equity. 38 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20203 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 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 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. 39 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Offset of financial instruments Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. 3 Derivative financial instruments: Economic hedges Hedge accounting is not applied to derivative instruments that economically hedge financial assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognized in profit or loss under financing income or expenses. 4 Share capital: Ordinary shares Ordinary shares are classified as shareholders’ equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognized as a deduction from shareholders’ 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 shareholders’ 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 shareholders’ 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 shareholders’ equity, and the resulting surplus on the transaction is carried to share premium, whereas a deficit on the transaction is deducted from retained earnings. d. Fixed Assets: Fixed assets are measured at cost less accumulated depreciation. The cost of fixed assets includes expenditure that is directly attributable to the acquisition of the asset. Depreciation is provided on all property and equipment at rates calculated to write each asset down to its residual value (assumed to be nil), using the straight line method, over its expected useful life as follows: 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: Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss when incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group has the intention and sufficient resources to complete development and to use or sell the asset. The expenditure capitalized in respect of development activities includes the cost of materials, direct labor and overhead costs that are directly attributable to preparing the asset for its intended use, and capitalized borrowing costs. Other development expenditure is recognized in profit or loss as incurred. In subsequent periods, capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses. Where these criteria are not met development costs are charged to the statement of operation and other comprehensive income as incurred. 40 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20203 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 the statements of other comprehensive income 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 • Others 1.75-5 years 3 years 3-5.75 years 1-5 years 1-3 years Amortization methods, useful lives and residual values are reviewed at the end of each reporting year and adjusted if appropriate. In the reporting period the Company changed the expected useful life of intangible asset items. For further information see Note 7 regarding the basis of preparation of the financial statements. Impairment: f 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. 41 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. With respect to other debt assets, the Group measures the provision for expected credit losses at an amount equal to the full lifetime expected credit losses, other than the provisions hereunder that are measured at an amount equal to the 12-month expected credit losses: – Debt instruments that are determined to have low credit risk at the reporting date; and – Other debt instruments and deposits, for which credit risk has not increased significantly since initial recognition. 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. Impairment of non-financial assets: g 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 financial reporting date. h Restricted Deposit: The Company classifies certain restricted deposit balances within prepaid expenses and other current assets on the consolidated balance sheets based upon the term of the remaining restrictions. At December 31, 2020 and 2019 the Company had restricted deposit of USD 49 thousand and USD 119 thousand, respectively. i Share Based Compensation: Compensation expense related to stock options, restricted stock units and performance stock units. The Company’s employee stock purchase plan is measured and recognized in the consolidated financial statements based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. Stock-based compensation expense related to stock options and restricted stock is recognized over the requisite service periods of the awards. Determining the fair value of stock options awards requires judgment. The Company’s use of the Black-Scholes option pricing model requires the input of subjective assumptions. The assumptions used in the Company’s option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. These assumptions and estimates are as follows: Risk-Free Interest Rate. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities approximating the expected term of the awards. Expected Term. The expected term of an award is calculated based on the vesting date and the expiration date of the award. Volatility. The Company determined the price volatility based on daily price observations over a period equivalent to the expected term of the award. 42 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20203 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Dividend Yield. The dividend yield assumption is based on the Company’s history and current expectations of dividend payouts. Fair Value of Common Stock. The fair value of common stock is based on the closing price of the Company's common stock on the grant date j 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 and as such, no additional liability with respect to such employees exist. 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. Share-based payment arrangements in which equity instruments are granted by the parent Company to the employees of the Company are accounted for by the Company as equity-settled share-based payment transactions. k Revenue recognition: The Company recognizes revenue through the following five-step model: (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 Company generates revenue from transactions where it provides access to a platform for the purchase and sale of digital advertising inventory. Its customers are both ad buyers, including brands and agencies, and digital publishers. The Company generates revenue through platform fees that are tailored to fit the customer’s specific utilization of our solutions and include: (i) a percentage of spend, (ii) flat fees and (iii) fixed costs per mile (“CPM”). CPM refers to a payment option in which customers pay a price for every 1,000 impressions an advertisement receives. 43 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Company maintains agreements with each publisher and buyer in the form of written service agreements, which set out the terms of the relationship, including payment terms and access to the Company’s platform. Publishers provide digital advertising inventory to the Company’s platform in the form of advertising requests, or ad request. When the Company receives ad requests from a publisher, it send bid requests to buyers, which enable buyers to bid on sellers’ digital advertising inventory according to a predefined set of parameters (e.g., demographics, intent, location, etc.). Winning bids create advertising, or paid impressions, for the publisher to present to the buyers. The Company generates revenue from its Programmatic and Performance activities. Programmatic revenue is derived from the end-to-end platform of programmatic advertising, which uses software and algorithms to match buyers and sellers of digital advertising in a technology-driven marketplace. Performance revenue is derived from non-core activities, consisting of mobile- based activities that help brands reach their users. Till the acquisitions of RhythmOne and its integration into the Company and the acquisition of Unruly in the beginning of 2020 (i.e. for the year ended December 31, 2019), the Company determined that it operated as a principal with respect to its Programmatic activity and therefore presented revenue on a gross basis mainly as: (i) the Company operated predominantly through a DSP platform prior to the acquisition and full integration of RhythmOne, (ii) the Company was highly involved in execution of the process, which required certain manual operations by Company employees and (iii) the Company determined that it had an implicit obligation to provide credits and inducements to customers to encourage use of the platform. That is, the Company determined, on this basis, that it had an implicit obligation to provide advertising space to customers, even though the contractual terms and conditions (including its Master Service Agreements (MSA) and Insertion Order (I/O)) do not explicitly state that the Company is obliged to deliver customers an applicable advertising space or to provide inducements to the customer. Consequently, the Company concluded that it was the primarily responsible for fulfillment of the contract. Following the full integration with RhythmOne and the acquisition of Unruly in 2020, the Company positions itself as a stronger digital advertising platform in the marketplace with an integrated, end-to-end platform connecting the DSP and SSP sides of the business in a unified platform. As a result, the Company has changed its Programmatic business, tech stack, features, business models and activity as follow: (i) The Company implemented a material change in its tech stack and operations, offering new services and features that increased automation across the platform, significantly decreasing the need for Company employees to manually operate the platform; and (ii) The Company decreased significantly the level of credits and inducements offered to its customers. The Company further concluded that as a result of such change in its Programmatic activity (i) it does not have manual control over the process, (ii) the Company is not primarily responsible for fulfillment, (iii) the Company has no inventory risk and (iv) the Company obtains only momentary a title to the advertising space offered via the end-to-end platform. The Performance activity has not changed and the Company is still the primary obligor to provide the services and, as such, revenue is presented on a gross basis for the Performance activity. Management is focused on driving growth with the Programmatic activity through the end-to-end platform, while the Performance activity is declining over time. The Company estimates and records reduction to revenues for volume discounts based on expected volume during the incentive term. The Company generally invoices buyers at the end of each month for the full purchase price of ad impressions monetized in that month. Accounts receivable are recorded at the amount of gross billings for the amount it is responsible to collect and accounts payable are recorded at the net amount payable to publishers. Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis. l Classification of expenses: Cost of revenue Cost of revenue includes expenses related to third-party hosting fees and the cost of data purchased from third parties, traffic acquisition costs, data and hosting that are directly attributable to revenue generated by the Company (see Note 11b). Research and development Research and development expenses consist primarily of compensation and related costs for personnel responsible for the research and development of new and existing products and services. Where required, development expenditures are capitalized in accordance with the Company's standard internal capitalized development policy in accordance with IAS 38 (also see Note 3e(1)). All research costs are expensed when incurred. Selling and marketing Selling and marketing expenses consist primarily of compensation and related costs for personnel engaged in customer service, sales, and sales support functions, as well as advertising and promotional expenditures. 44 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20203 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. m 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. Income tax expense: n 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. 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. Uncertain tax positions A provision for uncertain tax positions, including additional tax and interest expenses, is recognized when it is more probable than not that the Group will have to use its economic resources to pay the obligation. o Leases: 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. 45 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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. 46 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20203 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) p Earnings per share: The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for treasury shares. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding, after adjustment for treasury shares, for the effects of all dilutive potential ordinary shares, which comprise restricted stock. q New standards, amendments to standards and interpretations not yet adopted: Amendment to IFRS 3, Business Combinations The Amendment adds an exception to the principle for recognizing liabilities in IFRS 3. According to the exception, contingent liabilities are to be recognized according to the requirements of IAS 37 and IFRIC 21 and not according to the conceptual framework. The Amendment prevents differences in the timing of recognizing liabilities that could have led to the recognition of gains and losses immediately after the business combination (day 2 gain or loss). The Amendment also clarifies that contingent assets are not to be recognized on the date of the business combination. The Amendment is effective for annual periods beginning on or after January 1, 2022. The Group has not yet commenced examining the effects of the Amendment on the financial statements. Amendments to IFRS 9 The Amendments include practical expedients regarding the accounting treatment of modifications in contractual terms that are a result of the interest rate benchmark reform (a reform that in the future will lead to the replacement of interest rates such as the Libor and Euribor). Thus for example: – – – When certain modifications are made in the terms of financial assets or financial liabilities as a result of the reform, the entity shall update the effective interest rate of the financial instrument instead of recognizing a gain or loss. Certain modifications in lease terms that are a result of the reform shall be accounted for as an update to lease payments that depend on an index or rate. Certain modifications in terms of the hedging instrument or hedged item that are a result of the reform shall not lead to the discontinuance of hedge accounting. The Amendments are applicable retrospectively as from January 1, 2021 with early application permitted. In the opinion of the Group, application of the Amendments is not expected to have a material effect on the financial statements. 4 INCOME TAX a 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% in 2020 and 2019. 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. 47 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 4 INCOME TAX (CONTINUED) 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, a wholly owned subsidiary, 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 28 December 2016, Taptica Social, a wholly owned subsidiary, together with Taptica appealed for a tax ruling for a restructuring, whereby Taptica Social will be merged with and into Taptica in such a manner that Taptica Social will transfer to Taptica all its assets and liabilities for no consideration and thereafter will be liquidated. Accordingly, on 6 June 2017 the merger between the companies was approved by the Israeli Tax Authority and the effective merge date was determined as December 31 2016. As a result of the merger, the ruling previously obtained by Taptica regarding the preferred income required re-validation from the Israeli tax authority. Therefore Taptica appealed and received on December 2018 re-validation from the Israeli tax authority for the ruling which determines that Taptica owns an industrial enterprise and Preferred Technological Enterprise as defined in the Law for the Encouragement of Capital Investments – 1959. In addition, as a part of the re-validation of the ruling, Taptica also obtained an amendment that includes the acquisition and absorption of Tremor’s operation in the rulings and apply the Law for the Encouragement of Capital Investments to this purchased activity as well. The tax rulings which was obtained on December 2018 will apply for the years 2017-2021. On December 3, 2018, the Company together with Taptica submitted a request to the Israeli tax authorities for a tax ruling regarding to restructuring, whereby Taptica will be merged with and into the Company in such a manner that Taptica will transfer to the Company all its assets and liabilities for no consideration and thereafter will be liquidated. As of May 08, 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. b Details regarding the tax environment of the non-Israeli companies: Non Israeli subsidiaries are taxed according to the tax laws in their countries of residence as reported in their statutory financial statement prepared under local accounting regulations. 1 US As of the acquisition date of RhythmOne, RhythmOne had U.S. federal net operating loss carryforwards, or NOLs, of approximately USD 100.8 million as for the acquisition date, which will expire starting 2038. As of December 31, 2020 the NOLs are approximately USD 102 million. Additionally, for tax years beginning after December 31, 2017, the Tax Cuts and Jobs Act limits the NOL deduction to 80% of taxable income, repeals carryback of all NOLs arising in a tax year ending after 2017 and permits indefinite carryforward for all such NOLs. NOL’s arising in a tax year ending in or before 2017 can offset 100% of taxable income, are available for carryback, and expire 20 years after they arise. It should be noted that the Coronavirus Aid, Relief and Economic Security (“CARES”) Act suspended the 80% limitation for tax years 2018, 2019 and 2020 and allowed for a 5 year carryback for NOLs for tax years beginning after December 31, 2017 and before January 1, 2021. Pursuant to Section 382 of the Internal Revenue Code, RhythmOne underwent ownership changes for tax purposes (i.e. a more than 50% change in stock ownership in aggregated 5% shareholders) on April 2, 2019. As a result, the use of the Company’s total US NOL carryforwards and tax credits generated prior to the ownership change will be subject to annual use limitations under Section 382 and may under section 383 of the Code and comparable state income tax laws. International 2 As of the acquisition date of Unruly, Unruly had an International NOLs of approximately USD 24 million. As of December 31, 2020 the NOLs are approximately USD 10.8 million. 48 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20204 INCOME TAX (CONTINUED) c Composition of income tax expense: Current tax expense Current year Deferred tax (income) Creation and reversal of temporary differences Tax benefit The following are the domestic and foreign components of the Company’s income taxes (in thousands): Domestic US International Tax Benefit d Reconciliation between the theoretical tax on the pre-tax profit and the tax expense: Profit (Loss) 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 Tax benefit Effective income tax rate (*) including non-deductible share based payment expenses. Year ended 31 December 2020 USD thousands 2019 USD thousands 3,022 4,571 (12,603) (7,207) (9,581) (2,636) Year ended 31 December 2020 USD thousands 2019 USD thousands 1,661 (5,646) (5,596) (639) (416) (1,581) (9,581) (2,636) Year ended 31 December 2020 USD thousands 2019 USD thousands (7,442) 3,588 23% (1,712) 23% 825 (2,509) 170 3,584 (1,433) (5,887) (5,050) (768) (873) 947 178 311 – (9,581) (2,636) 129% (73%) 49 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 4 INCOME TAX (CONTINUED) e Deferred tax assets and liabilities: The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below: Intangible Assets and R&D expenses Employees Com- pensation Carry- forward Losses Accrued Expenses Doubtful Debt Other Total USD thousands Balance of deferred tax asset (liability) as of January 1, 2019 Business combinations (74) (20,720) Changes recognized in profit or Loss 3,704 Effect of change in tax rate Changes recognized in Shareholders’ equity Balance of deferred tax asset (liability) as of December 31, 2019 Business combinations Changes recognized in profit or Loss Effect of change in tax rate Changes recognized in shareholders’ equity Balance of deferred tax asset (liability) as of December 31, 2020 838 – 2,631 – 215 – 8,000 435 – – 59 98 2,326 – – 379 3,729 800 – – 190 1,392 (2) (8,895) (2,689) 7,207 – – – 215 – – (17,090) 3,684 8,435 2,483 4,908 (2,501) (81) (4,409) 4,626 – 85 1,190 – (162) 4,280 2,330 3,380 – – 250 1,723 – – 168 530 (1,046) (1,352) 3,036 12,603 – – – – 160 4,278 (17,035) 9,239 14,145 4,456 3,724 1,225 15,754 As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. As of December 31, 2020 and 2019, the Company had gross unrecognized tax benefits of approximately USD 4,471 thousand and USD 3,946 thousand, respectively. The Company classifies liabilities for unrecognized tax benefits in Current tax liabilities. 50 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20205 FIXED ASSETS, NET Cost Balance as of January 1, 2019 Exchange rate differences Classification due to implementation of IFRS16 Additions Business combinations (See Note 19) Disposals Computers And Servers Office furniture and equipment Leasehold improve- ments Total USD thousands 3,733 605 1,284 5,622 – (945) 869 2,023 (106) – – 16 109 (6) 2 – 178 271 – 2 (945) 1,063 2,403 (112) Balance as of December 31, 2019 5,574 724 1,735 8,033 Exchange rate differences Additions Business combinations (See Note 19) Disposals 13 1,768 346 14 15 411 4 77 73 (18) (32) (19) 31 1,860 830 (69) Balance as of December 31, 2020 7,683 1,132 1,870 10,685 Depreciation Balance as of January 1, 2019 1,912 196 635 2,743 Classification due to implementation of IFRS16 Disposals Additions Balance as of December 31, 2019 Exchange rate differences Disposals Additions (527) (95) 2,149 3,439 35 (16) 1,523 – (1) – – 185 447 (527) (96) 2,781 380 2 (31) 472 1,082 4,901 18 (19) 55 (66) 508 2,503 Balance as of December 31, 2020 4,981 823 1,589 7,393 Carrying amounts As of December 31, 2019 As of December 31, 2020 2,135 2,702 344 309 653 281 3,132 3,292 51 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 6 LEASES a Leases in which the Group is the lessee: The Group applies IFRS 16, Leases, as from January 1, 2019. The Group has lease agreements with respect to the following items: – Offices; – Data center; 1 a) Information regarding material lease agreements: The Group leases Offices mainly in the United States of America (US), Israel, Canada and UK with contractual original lease periods ends between the years 2021 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 16,121 thousand and USD 5,925 thousand, and USD 21,105 thousand and USD 13,155 thousand respectively, have been recognized in the statement of financial position as of December 31, 2020 and December 31, 2019 in respect of leases of offices. b) The Group leases data center and related network infrastructure with contractual original lease periods ends between the years 2021 and 2023. The Group did not assume renewals in determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. A lease liability in the amount of USD 5,088 thousand and USD 3,164 thousand as of December 31, 2020 and December 31, 2019, respectively and right-of-use asset in the amount of USD 4,897 thousand and USD 3,560 thousand as of December 31, 2020 and December 31, 2019, respectively have been recognized in the statement of financial position in respect of data centers. 2 Lease liability: Maturity analysis of the Group's lease liabilities: December 31 2020 USD thousands 2019 USD thousands 9,047 10,241 1,921 9,637 12,088 2,544 21,209 24,269 9,047 9,637 12,162 14,632 Less than one year (0-1) One to five years (1-5) More than five years (5+) Total Current maturities of lease liability Long-term lease liability 52 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20206 LEASES (CONTINUED) 3 Right-of-use assets – Composition: Balance as of January 1, 2019 Business combinations (See Note 19) Depreciation on right-of-use assets Additions Provision for Impairment Lease modifications Disposals Offices Data center Total USD thousands 9,336 845 10,181 12,992 11,924 24,916 (5,644) (5,258) (10,902) 391 33 424 (2,994) (145) (3,139) (124) (802) (3,839) (3,963) – (802) Balance as of December 31, 2019 13,155 3,560 16,715 Business combinations (See Note 19) Depreciation on right-of-use assets Additions Provision for Impairment Lease modifications Disposals Exchange rate differences 1,026 – 1,026 (6,958) (4,422) (11,380) 1,629 1,808 (143) (4,570) (22) 5,680 145 – 7,309 1,953 (143) (77) (4,647) 11 (11) Balance as of December 31, 2020 5,925 4,897 10,822 4 Amounts recognized in statement of operation: Interest expenses on lease liability Depreciation and amortization of right-of-use assets, net Gains recognized in profit or loss Total 5 Amounts recognized in the statement of cash flows: Cash outflow for leases Year ended 31 December 2020 USD thousands 2019 USD thousands (1,117) (779) (8,855) (9,109) 1,829 1,749 (8,143) (8,139) Year ended 31 December 2020 USD thousands 2019 USD thousands (14,468) (13,386) 53 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 6 LEASES (CONTINUED) b. Leases in which the Group is a lessor: 1 The Group subleases offices at US, Canada and UK for periods expiring in 2027. Information regarding material lease agreements: 2 Net investment in the lease: Presented hereunder is the movement in the net investment in the lease: Balance as of January 1, Business combinations Sublease receipts Additions Disposals Balance as of December 31, 3 Maturity analysis of net investment in finance leases: Less than one year (0-1) One to five years (1-5) More than five years (5+) Offices Year ended 31 December 2020 USD thousands 2019 USD thousands 4,288 – 1,064 3,327 (3,246) (1,669) 7,094 (301) 1,566 – 7,835 4,288 Year ended 31 December 2020 USD thousands 2019 USD thousands 2,153 3,816 1,866 2,367 1,921 – Total net investment in the lease as of December 31, 7,835 4,288 4 Amounts recognized in statement of operation: Offices Year ended 31 December 2020 USD thousands 2019 USD thousands 274 361 956 71 635 1,027 Gain from subleases Financing income on the net investment in the lease Total 54 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20207 INTANGIBLE ASSETS, NET Cost Software Trade- marks Customer relation- ships Technology Others Goodwill Total USD thousands Balance as of January 1, 2019 8,187 8,201 7,414 27,458 1,044 32,985 85,289 Exchange rate differences Additions Business combinations (see Note 19) – 5,672 5,378 12 – 21 – – – 17,470 30,284 17,629 – – – 85 – 118 5,672 100,633 171,394 Balance as of December 31, 2019 19,237 25,683 37,719 45,087 1,044 133,703 262,473 Exchange rate differences Additions – 4,858 529 – 567 – 73 – 47 – 1,280 – 2,496 4,858 Business combinations (see Note 19) – 10,427 10,054 1,658 1,068 17,878 41,085 Balance as of December 31, 2020 24,095 36,639 48,340 46,818 2,159 152,861 310,912 Amortization Balance as of January 1, 2019 5,869 6,973 2,596 15,202 1,044 – 31,684 Exchange rate differences Additions Balance as of December 31, 2019 Exchange rate differences Additions – 3,363 9,232 – 5,214 13 4,472 11,458 202 8,976 23 5,238 7,857 285 9,053 – 7,395 22,597 (162) 9,598 – – 1,044 70 988 Balance as of December 31, 2020 14,446 20,636 17,195 32,033 2,102 – – – – – – 36 20,468 52,188 395 33,829 86,412 Carrying amounts As of December 31, 2019 As of December 31, 2020 10,005 9,649 14,225 16,003 29,862 22,490 31,145 14,785 – 57 133,703 210,285 152,861 224,500 Capitalized development costs Development costs capitalized in the period amounted to USD 4,816 thousand (2019: USD 4,651 thousand) and were classified under software.  Impairment testing for intangible assets The Company's qualitative assessment during the years ended December 31, 2020, and 2019, did not indicate that it is more likely than not that the fair value of its goodwill, intangible assets, and other long-lived assets is less than the aggregate carrying amount. As of December 31, 2020, the recoverable amount of goodwill was based on fair value less cost of disposal. The fair value less costs of disposals was estimated according to the quoted price of the Company’s ordinary shares. The estimated recoverable amount was higher than the carrying amount, and therefore there was no need for impairment. As of December 31, 2019, the fair value less cost of disposals based on the quoted price was lower than the carrying amount. As such, the recoverable amount was estimated based on value in use and was determined by discounting the future cash flows. The estimated recoverable amount was higher than the carrying amount, and therefore there was no need for impairment. 55 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 INTANGIBLE ASSETS, NET (CONTINUED) 7 Key assumptions used in the calculation of recoverable amounts are: Pre-tax discount rate Terminal value growth rates EBITDA growth rate 13% (WACC) 3% 12%-34% The cash flow projections includes specific estimates for five years and terminal value growth rates thereafter. EBITDA growth rate is expressed as the annual growth rate in the initial five years of the plans used for impairment testing and has been mainly based on past experience and management expectations. The estimated recoverable amount exceeds its carrying amount by approximately $91,953 thousand. Management has identified two key assumptions for which there reasonably could be a possible change that could cause the carrying amount to exceed the recoverable amount. The table below shows the amount that these two assumptions are required to change individually in order for the estimated recoverable amount to be equal to the carrying amount. Increase in Pre-tax discount rate Decrease in Terminal value growth rate 2019 % 27% 100% Following the acquisition of Unruly, the Company examined the useful life of intangible assets acquired in the past and determined to change the estimated economic life of part of the trademarks asset from 4.75 years to 2.75 years. The effects of the aforesaid change on amortization expenses for the year ended December 31, 2020, 2021, 2022 and 2023 is USD 1,512 thousands, USD 3,024 thousands, (USD 2,268) thousands and (USD 2,268) thousands, respectively. 8 TRADE AND OTHER RECEIVABLES December 31 2020 USD thousands 2019 USD thousands 162,580 119,205 (9,036) (22,376) 153,544 96,829 14,053 689 1,165 872 836 7,196 1,099 966 368 100 17,615 9,729 Trade receivables: Trade receivables Allowance for doubtful debts Trade receivables, net Other receivables: Prepaid expenses Loan to third party Institutions Pledged deposits Other 56 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 20209 TRADE AND OTHER PAYABLES Trade payables Other payables: Advances from customers Wages, salaries and related expenses Related Parties Provision for vacation Institutions Ad spend liability Liability for options on non-controlling interest Others 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 17 on financial instruments. 11A REVENUE Programmatic (1) Performance December 31 2020 USD thousands 2019 USD thousands 125,863 70,428 13,406 13,853 2,746 554 1,112 5,987 2,903 6,561 8,717 9,109 – 612 300 – 2,440 3,871 47,122 25,049 December 31 2020 USD thousands 2019 USD thousands 44,825 52,638 54,486 24,561 97,463 79,047 Year ended December 31 2020 USD thousands 2019 USD thousands 161,625 241,464 50,295 84,296 211,920 325,760 (1) In 2020 and 2019 programmatic revenue is reported on net basis and gross basis, respectively and performance revenue reported on gross basis for both years (see Note 3k). Media cost amounted to USD 117,301 thousand in the year ended December 31, 2019. 57 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 11B COST OF REVENUE Programmatic (1) Performance Cost of Revenue Year ended December 31 2020 USD thousands 2019 USD thousands 31,918 142,676 27,889 44,570 59,807 187,246 (1) In 2020 and 2019 programmatic revenue is reported on net basis and gross basis, respectively and performance revenue reported on gross basis for both years (see Note 3k). Media cost amounted to USD 117,301 thousand in the year ended December 31, 2019. 12 GENERAL AND ADMINISTRATIVE EXPENSES Wages, salaries and related expenses Share base payments Rent and office maintenance Professional expenses Doubtful debts Acquisition costs Other expenses Year ended December 31 2020 USD thousands 2019 USD thousands 15,274 9,420 (483) 4,766 (1,091) 524 1,268 11,973 14,100 232 1,282 3,003 2,840 1,003 29,678 34,433 13 OTHER EXPENSES (INCOME), NET On December 31, 2019, the Company entered into an Asset Purchase Agreement (as amended on February 14, 2020), with Netaktion LLC pursuant to which it sold to Netaktion LLC, RhythmOne’s, owned and operated websites business for a purchase price consisting of (i) USD 100 thousand in cash, (ii) USD 600 thousand payable in the form of promissory note payable in eighteen (18) installment payments from April 2021 through December, 2022, and (iii) up to USD 2,800 thousand payable under a profit sharing arrangement derived from the percentage of future profit. The Company recognized an immediate capital gain of USD 700 thousand. As of December 31, 2020, the outstanding balance of the promissory note was USD 618 thousand including interest. On October 5, 2020, the Company entered into an Asset Purchase Agreement pursuant to which it sold to Fols Media LLC certain ad exchange operations for a purchase price consisting of (i) USD 51.6 thousand in cash, (ii) USD 85 thousand payable in the form of a bearing interest promissory note payable in 2020 through 2022 and (iii) up to USD 1,200 thousand payable under a revenue sharing arrangement derived from a percentage of future revenue. The Company recognized an immediate capital gain of USD 502.6 thousand. As of December 31, 2020, the Company recognized USD 116 thousand in revenue sharing, and the outstanding balance of the promissory note was USD 71 thousand including interest. The Company recognized a total amount of USD 1,700 thousand paid to Uber, in relation to the full dismissal of the case against the Company (see Note 21a). 58 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 202014 SHAREHOLDERS’ EQUITY Issued and paid-in share capital: Balance as of January 1 Own shares held by the Group Share based compensation Shares issued in business combination Ordinary Shares 2020 Number of shares 2019 Number of shares 124,223,182 68,521,997 (5,277,220) (14,552,741) 6,444,944 3,517,441 8,525,323 66,736,485 Issued and paid-in share capital as of December 31 133,916,229 124,223,182 Authorized share capital 300,000,000 300,000,000 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 December 31, 2019, the Company issued 8,761 ordinary shares of a par value of NIS 0.01 based on the share price on the date of the issuance, only for the first quarter of 2019. The total expenses recognized in the statement of Operation and Other Comprehensive Income in the year ended December 31, 2019 with respect to the director share allotment amounted to USD 8 thousand. Issuing new public shares: 3 Following the acquisition of Unruly, as described in Note 19b, the Company issued 8,525,323 shares at a quoted price of GBP 1.51 (USD 1.98) per share to former Unruly shareholders which became admitted to trading on AIM on January 10, 2020 and are subject to a 18-months lock-up. In April 2019, following the acquisition of RhythmOne, as described in Note 19c, the Company issued 66,736,485 new shares 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. 4 Own shares acquisition: Following the Acquisition of RhythmOne, as described in Note 1, and as part of the Company’s Board of Director approvals in April 2019 and June 2019 for a share buyback program for a total consideration of USD 25,000 thousand, the Company purchased during the year ended December 31, 2019 14,552,741 shares (of which 5,743,731 were purchased from former related parties) for a total consideration of USD 24,737 thousands. In March 2020, following the Company's Board of Director approvals for a share buyback program for a total consideration of USD 10,000 thousand, the Company purchased during the twelve months period ended December 31, 2020 5,277,220 shares for a total consideration of USD 9,965 thousand. The Ordinary Shares acquired pursuant to the buyback programs reclassified as dormant shares under the Israeli Companies Law (without any rights attached thereon) and held in treasury. On December 17, 2020 the Company has received approval from the Israeli court authorizing the distribution of a dividend and the repurchase of up to USD 20,000 thousand of the Company's Ordinary Shares, if the Company elect to do so. On December 22, 2020, the Company's Board of Directors has approved another share buyback program for an aggregate purchase price of up to USD 10,000 thousand. Although the Company have paid dividends and share buybacks in the past, the Company does not anticipate paying any dividends in the foreseeable future. The Company currently intend to retain future earnings, if any, to finance operations and expand its business. 59 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 15 EARNINGS PER SHARE Basic earnings per share The calculation of basic earnings per share as of December 31, 2020 and 2019 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 December 31 Basic earnings per share (in USD) Year ended December 31 2020 USD thousands 2019 USD thousands 2,139 6,224 Year ended December 31 2020 Shares of NIS 0.01 par value 2019 Shares of NIS 0.01 par value 133,991,210 111,231,769 0.016 0.056 Diluted earnings per share: The calculation of diluted earnings per share as of December 31, 2020 and 2019 was based on profit or for the year divided by a weighted average number of shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows: Weighted average number of ordinary shares (diluted): Year ended December 31 2020 Shares of NIS 0.01 par value 2019 Shares of NIS 0.01 par value 133,991,210 111,231,769 4,714,985 3,576,114 138,706,195 114,807,883 0.015 0.054 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) 60 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 202016 SHARE-BASED PAYMENT ARRANGEMENTS a. Share-based compensation plan: The terms and conditions related to the grants of the share options programs are as follows: • All the share options that were granted are non-marketable. • All options are to be settled by physical delivery of shares. • Vesting conditions are based on a service period of between 0.5-4 years. 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. As part of the New Tremor International Ltd. Management Incentive Scheme, and following the acquisition of RhythmOne, the Company's shareholders approved a modification in the exercise price of 1,200,000 Company share options awarded to the CEO of the Group, out of which 1,080,000 share options will be vested subject to meet the performance-based metrics, and the remaining options will be vested over a shorter service periods. Furthermore, restricted stock units of 400,000 to the Group’s CEO were modified for a shorter vesting periods. As described in Note 1, part of the acquisition of RhythmOne, 849,325 RhythmOne's options and 1,058,776 RSU's were replaced by to 458,946 and 869,962 of the Company's options and RSU's, respectively. As part of the acquisition of Unruly, as described in Note 1, the Group granted 415,074 restricted share units (RSU’s) to Unruly executives and employees to replace the pre-acquisition equity incentive awards held by such Unruly executives and employees. b Stock Options: During 2020 and 2019, the Group granted 1,801,000 and 458,946 share options to its executive officers and employees, respectively. The number of share options is as follows: Outstanding at 1 January Forfeited during the year Exercised during the year Granted during the year Option assumed in Merger Outstanding at December 31 Exercisable at December 31 Number of options Weighted average exercise price 2020 2019 2020 2019 (Thousands) (GBP) 4,828 7,731 (1,621) (2,290) (1,227) (1,072) 1,801 – 3,781 51 – 459 4,828 2,054 2.89 2.86 0.53 1.62 – 1.60 3.10 3.22 0.57 – 4.38 2.89 In January 2020, the Company’s Board of Directors approved a change in the exercise price and vesting terms relating to 2,204,174 options for ordinary shares held by certain employees (the “Amended Options”), as follows: 61 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 16 SHARE-BASED PAYMENT ARRANGEMENTS (CONTINUED) Originally granted Amended Granted Grated date March 20, 2017 June 18, 2017 Number of options 217,000 116,000 November 5, 2017 391,000 January 23, 2018 1,163,000 June 20, 2018 April 2, 2019 (*) 52,000 265,174 Exercise price (GBP) 2.44 2.99 4.31 4.37 4.37 Exercisable date from March 20, 2019 June 18, 2019 November 5, 2019 January 23, 2020 June 20, 2020 2.06-18.27 April 2, 2019 (*) Granted as part of RhythmOne’s acquisition as listed above. Exercise price (GBP) Exercisable date from 1.60 1.60 1.60 1.60 1.60 1.60 July 28, 2021 July 28, 2021 July 28, 2021 July 31, 2021 July 31, 2021 July 28, 2021 The options that had a vesting date up to July 2021 will now vest and become exercisable on July 2021, while the vesting and exercise periods of the rest of the options remain unchanged. The incremental fair value (amounting to USD 1,282 thousand) is recognized over the remaining vesting period. The new expiration date is one year after the last exercise date. 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) (See Note 3i). The parameters used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows: 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 2020 2019 0.76-1.267 0.01-0.56 1.27-2.22 1.79 1.38-2.24 1.56-18.27 60% 3.5-3.75 0.00% 0.15%-1.46% 45% 0-3.38 1.35% 2.3% The total expense recognized in the year ended December 31, 2020 with respect to the options granted to employees, amounted to approximately USD 2,693 thousand. 62 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 202016 SHARE-BASED PAYMENT ARRANGEMENTS (CONTINUED) c Restricted Share Units: During 2020 and 2019, the Group granted 3,334,074 and 5,220,480 Restricted Share Units (RSU’s) to its executive officers and employees, respectively. The number of restricted share units is as follows: Outstanding at 1 January Forfeited during the year Exercised during the year Granted during the year Restricted stock units assumed in acquisition during the year Outstanding at December 31 Number of RSU’s Weighted-Average Grant Date Fair Value 2020 2019 2020 2019 (Thousands) 3,969 (46) 1,024 (198) (3,480) (2,077) 2,919 415 3,777 4,350 870 3,969 2.372 2.511 2.296 2.538 2.786 2.364 4.673 3.744 2.574 2.035 2.347 2.372 The total expense recognized in the year ended December 31, 2020 with respect to the options granted to employees, amounted to approximately USD 7,443 thousand. d Performance Stock Units: During 2020 and 2019, the Group granted 725,000 and 4,350,796 Performance Stock Units (PSU’s) to its executive officers, respectively. The number of performance stock units is as follows: Outstanding at January 1 Forfeited during the year Exercised during the year Granted during the year Number of PSU’s Weighted-Average Grant Date Fair Value 2020 2019 2020 2019 (Thousands) 5,071 (206) (1,738) 725 1,080 – (360) 4,351 2.105 2.211 2.185 2.592 2.904 – 2.904 1.973 Outstanding at December 31 3,852 5,071 2.155 2.105 The vesting of the PSU’s is subject to continues employment and compliance with the performance criteria determined by the Company’s Remuneration Committee and the Company’s Board of Directors. The total expense recognized in the year ended December 31, 2020 with respect to the options granted to employees, amounted to approximately USD 4,354 thousand. 63 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 16 SHARE-BASED PAYMENT ARRANGEMENTS (CONTINUED) e Expense recognized in the statement of operation and other comprehensive income is as follows: Selling and marketing Research and development General and administrative Year ended December 31 2020 USD thousands 2019 USD thousands 4,515 555 9,420 1,257 452 14,100 14,490 15,809 17 FINANCIAL INSTRUMENTS a Overview: The Group has exposure to the following risks from its use of financial instruments: • Credit risk • Liquidity risk • Market risk This note presents quantitative and qualitative information about the Group’s exposure to each of the above risks, and the Group’s objectives, policies and processes for measuring and managing risk. In order to manage these risks and as described hereunder, the Group executes transactions in derivative financial instruments. Presented hereunder is the composition of the derivatives: Derivatives presented under current assets Forward exchange contracts used for hedging Derivatives presented under non-current assets Forward exchange contracts used for hedging Total December 31 2020 USD thousands 2019 USD thousands 836 1,335 2,171 – – – b Risk management framework: The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board is responsible for developing and monitoring the Group’s risk management policies. The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management of standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. 64 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 202017 FINANCIAL INSTRUMENTS (CONTINUED) c Credit risk: The Group’s credit risk is arise from the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. d 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 Trade receivables, net (a) Other receivables long term deposit Long Term Receivables December 31 2020 USD thousands 2019 USD thousands 97,463 79,047 153,544 96,829 2,379 499 1,335 1,567 965 367 255,220 178,775 (a) At December 31, 2020, the Group included provision for doubtful debts in the amount of USD 9,036 thousand (December 31, 2019: USD 22,376 thousand) in respect of collective impairment provision and specific debtors that their collectability is in doubt. Balance at January 1 Business combination Allowance for doubtful debts expenses Write-off bad debt Exchange rate difference Balance at December 31 Allowance for Doubtful debts 2020 USD thousands 2019 USD thousands 22,376 1,201 (1,091) (13,397) (53) 2,822 16,417 3,394 (303) 46 9,036 22,376 65 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 17 FINANCIAL INSTRUMENTS (CONTINUED) e 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, 2020 and December 31, 2019, the Group’s contractual obligation of financial liability is in respect of leases, trade and other payables in the amount of USD 161,875 thousand and USD 101,008 thousand, respectively. The contractual maturity of the financial liability that is less than one year is in the amount of USD 147,243 thousand and USD 86,376 thousand for December 31, 2020 and December 31, 2019, respectively. As part of the framework of the acquisition of Adinnovation INC (ADI) on July 17, 2017, 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 shareholders’ equity. In 2019, the Company recorded a revaluation to decrease the liability by USD 1,501 thousand, and in 2020, it was increased by USD 445 thousand. In accordance with the terms of the framework acquisition, the Company exercised part of the call option on December 5, 2020, which will increase the Company’s share in ADI to 82%, following the closing, for total consideration of USD 1,734 thousand which was not paid as of December 31, 2020. The remaining value of the option liability as of December 31, 2020 is USD 1,169 thousand (see Note 22). f Market risk: Market risk is the risk that changes in market prices, such as foreign exchange rates, the CPM, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. At December 31, 2020, USD 371 thousand are held in NIS, USD 7,369 thousand are held in GBP, USD 2,061 thousand are held in EUR, USD 1,369 thousand are held in CAD, USD 6,591 thousand are held in JPY, USD 512 thousands are held in MXN, USD 1,120 thousand are held in SGD, USD 110 thousand are held in KRW, USD 1,835 thousands are held in AUD and USD 700 thousand are held in other currencies and the remainder held in USD. g Sensitivity analysis: A change as of December 31 in the exchange rates of the following currencies against the USD, as indicated below would have affected the measurement of financial instruments denominated in a foreign currency and would have increased (decreased) profit or loss and shareholders’ equity by the amounts shown below (after tax). This analysis is based on foreign currency exchange rate that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis for 2019. 2020 +10% USD thousands 2020 -10% USD thousands 2019 +10% USD thousands 2019 -10% USD thousands 85 (1,139) (85) 1,139 – 479 – (479) 2020 +10% USD thousands 2020 -10% USD thousands 2019 +10% USD thousands 2019 -10% USD thousands (798) 835 798 (835) (790) 906 790 (906) GBP/USD Profit / (Loss) Increase / (Decrease) in Shareholders’ Equity NIS/USD Profit / (Loss) Increase / (Decrease) in Shareholders’ Equity 66 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020Linkage and foreign currency risks Currency risk The Group is not exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Group, the USD. The principal currencies in which these transactions are denominated are GBP, NIS, Euro, CAD, SGD, KRW, MXN, AUD and JPY. At any point in time, the Group aims to match the amounts of its assets and liabilities in the same currency in order to hedge the exposure to changes in currency. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. 18 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 16 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 Year ended December 31 2020 USD thousands 2019 USD thousands 7,061 3,932 12,607 3,948 10,993 16,555 b c As of December 31, 2020, an amount of USD 2,746 thousand was due to a related party for proceeds due to sale of shares (See Note 9). In 2019, an amount of USD 130 thousand was paid to a related party due to its efforts in the acquisition of RhythmOne. 67 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 19 SUBSIDIARIES a Details in respect of subsidiaries: Presented hereunder is a list of the Group’s subsidiary: Name of company Taptica Inc Tremor Video Inc Adinnovation Inc Taptica Japan Taptica UK RhythmOne PLC RhythmOne Holding Inc YuMe Inc * Perk.com US Inc * Perk.com Canada Inc R1Demand LLC * RhythmOne LLC Unruly holdings Ltd* Unruly Group Ltd Unruly Media GmbH Unruly Media Pte Ltd* Unruly Media Pty Ltd Unruly Media KK Unmedia Video Distribution Sdn Bhd Unruly Media Inc Principal location of the Company’s activity The Group’s ownership interest in the subsidiary for the year ended December 31 USA USA Japan Japan United Kingdom UK USA USA USA Canada USA USA UK UK Germany Singapore Australia Japan Malaysia USA 2020 100% 100% 57% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2019 100% 100% 57% 100% 100% 100% 100% 100% 100% 100% 100% 100% 0% 0% 0% 0% 0% 0% 0% 0% *Under these companies, there are twenty five (25) wholly owned subsidiaries that are inactive and in liquidation process. 68 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 202019 SUBSIDIARIES (CONTINUED) b Acquisition of subsidiaries and business combinations during the current period: Acquisition of Unruly: On January 4, 2020, the Company completed the acquisition of Unruly Holdings Limited and Unruly Media Inc. from News Corp UK & Ireland Limited (UK Seller) and News Preferred Holdings Inc. (US Seller) for total consideration of: (i) issuance of 7,960,111 Ordinary Shares of the Company to the UK Seller in exchange for a loan in the amount of GBP 12,020 thousand (USD 15,729 thousand) between UK Seller (as lender) and Unruly Group Limited (as borrower); (ii) GBP 1 to UK Seller for 100% of the issued share capital of Unruly Holdings Limited; and (iii) issuance of 565,212 Ordinary Shares of the Company to the US Seller and USD 1 for 100% of the issued share capital of Unruly Media Inc. The issuance of an aggregate 8,525,323 Ordinary Shares of the Company to UK Seller and US Seller 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. At the same time, Tremor Video entered into a Master Service Agreement (MSA) with the UK seller for an exclusive right to sell outstream video on various News Corp titles world-wide on a committed ad spend of GBP 30,000 thousand over a three-year period with an option to extend the MSA by two quarters at the discretion of UK seller. The obligation for the net discounted future payments exceeding market fair value aggregated to USD 14,073 thousand and is recognized according to the actual consumption. As of December 31, 2020, the ad spend liability balance aggregated to USD 13,811 thousand. The following summarizes the major classes of consideration transferred, and the recognized amounts of assets acquired and liabilities assumed at the acquisition date: Equity instruments issued (1) Ad spend liability (2) UK debt (3) Total purchase price USD thousands 936 14,073 13,181 28,190 (1) The fair value of the Ordinary shares issued was based on the quoted price of GBP 1.51 per share considering the restrictions on sell of the shares as detail above. (2) The Ad spend liability fair value was determined based on the unfavorable aspect of the contract to the Company relative to market prices. The Ad spend liability is included in other payables and other long term liabilities. (3) The fair value of the UK debt was based on the quoted price of GBP 1.51 per share considering the restrictions on sell of the shares as detail above. 69 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 19 SUBSIDIARIES (CONTINUED) Identifiable assets acquired and liabilities assumed: Cash and Cash equivalents Accounts Receivables Other receivables Institutions-Tax income Fixed Assets Deferred tax assets Long term lease assets Intangible assets Current maturities of lease liabilities Trade payables Other Payables Long-term lease liabilities Deferred tax liabilities Net identifiable assets USD thousands 7,095 19,383 1,761 211 830 3,363 1,026 23,207 (2,403) (24,564) (11,343) (3,845) (4,409) 10,312 Measurement of fair values: The fair value of the brand and the technology is based on the discounted estimated royalty payments that have been generated if as a result of the trademark being licensed. The fair value of the non-compete is based on the differences between two discounted estimated cash flow models, with and without the asset in place. The fair value of customer relationships and backlog is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows. The following table summarizes the components of the acquired intangible assets and estimated useful lives (in thousands, except for estimated useful life) as of the acquisition date: Amount USD thousands Estimated Useful Life 1 1.5 1 5 5 162 906 1,658 10,054 10,427 23,207 Backlog Non Compete Technology Customer relations Brand 70 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 202019 SUBSIDIARIES (CONTINUED) The aggregate cash flow derived for the Company as a result of the Unruly acquisition: Cash and cash equivalents at Unruly Acquisition costs Acquisition of subsidiary – Cash Goodwill Goodwill was recognized as a result of the acquisition as follows: Consideration transferred Less fair value of identifiable net assets Goodwill USD thousands 7,095 (887) 6,208 USD thousands 28,190 10,312 17,878 The goodwill is attributable mainly to the increase offering to customers, enhanced opportunities for growth and the synergies expected to be achieved from integration into the Company’s digital advertising platforms (see also Note 7 on intangible assets). None of the goodwill recognized is expected to be deductible for tax purposes. Acquisition-related costs The Company incurred acquisition-related costs of USD 887 thousand related to finders’ fees, legal fees and due diligence costs. These costs have been included in general and administrative expenses in the statement of operation. c Acquisition of business combination in prior periods Acquisition of RhythmOne: On April 1, 2019, the Company completed Acquisition Transaction (hereinafter- "Acquisition") with RhythmOne Plc, a Company incorporated under the laws of England and Wales, whereby the Company acquired the entire issued ordinary shares of RhythmOne and each RhythmOne shareholder received 28 new shares of the Company (as such new 66,736,485 shares of the Company were issued , see also Note 14(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 (hereinafter- "Replacement Award"). The consideration of the Acquisition amounted to USD 176,421 thousand (including consideration allocated to issuance of ordinary shares and Replacement Award). 71 TREMOR INTERNATIONAL LTD.FINANCIAL STATEMENTSANNUAL REPORT 2020NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED as at 31 December 2020 20 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 APAC EMEA Total (1) Year ended December 31 2020 USD thousands 2019 USD thousands 180,515 261,534 20,804 33,052 10,601 31,174 211,920 325,760 (1) In the year ended December 31, 2020 and 2019 programmatic revenue is reported on a net basis and gross basis, respectively and performance revenue reported on gross basis in both years (see Note 3k). In 2019, media cost amounted to USD 113,251 thousand in America, USD 887 thousand in APAC and USD 3,163 thousand in EMEA. 21 CONTINGENT LIABILITY a On December 10, 2020, Taptica entered into a settlement agreement with Uber. There was no court finding as to wrongdoing by the Company or on the merits of the lawsuit. The Company made no admission of any liability or wrongdoing. In the settlement it was agreed that Taptica will pay a total amount of USD 1,700 thousand to Uber, which resulted in the full dismissal of the case against Taptica. 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. 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. 22 SUBSEQUENT EVENTS D.A. Consortium, Inc., a minority shareholder of ADI, exercised, effective March 5, 2021, its put option pursuant to the Shareholders Agreement dated July 17, 2016, as amended November 20, 2020, to sell to Taptica Japan GK, a wholly owned subsidiary, its entire shareholding in ADI, reflecting 2,120 Class B Shares of ADI, for a purchase price equal to seven times the actual net profit of ADI for the last fiscal year, see Note 17 (e), reflecting approximately USD 1,169 thousand. Following the closing of the put option exercise, the Company will own through its subsidiary 100% of the share capital of ADI. 72 TREMOR INTERNATIONAL LTD.ANNUAL REPORT 2020DIRECTORS, SECRETARY & ADVISERS DIRECTORS: Christopher John Stibbs – Non-Executive Chairman Ofer Israel Druker – Chief Executive Officer and Executive Director Yaniv Carmi – Chief Operating Officer and Executive Director Sagi Niri – Chief Financial Officer and Executive Director Joanna Rachael Parnell – Non-Executive Director Neil Garth Jones – Non-Executive Director Rebekah Mary Brooks – Non-Executive Director Norman Thomas Johnston – Non-Executive Director Lisa Klinger – Non-Executive Director COMPANY SECRETARY: Yaniv Carmi REGISTERED OFFICE: 82 Yigal Alon St, 13th Floor, Tel Aviv, 6789124, Israel NOMINATED ADVISER AND JOINT BROKER finnCap Ltd, 60 New Broad Street, London EC2M 1JJ JOINT BROKER Stifel Nicolaus Europe Limited, 150 Cheapside, London EC2V 6ET 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 Consulting, 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 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) T R E M O R I I N T E R N A T O N A L L T D . A n n u a l R e p o r t a n d A c c o u n t s Annual Report and Accounts For the year ended 31 December 2020 Tremor International Ltd. 82 Yigal Alon st. (13th floor) Tel-Aviv Israel 6789124 www.tremorinternational.com A Global Leader in All-Screen Video Advertising Technologies   

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