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Taptica International Ltd  -  TAP   

Interim Results

Released 07:00 04-Sep-2018

RNS Number : 6434Z
Taptica International Ltd
04 September 2018
 

4 September 2018

 

Taptica International Ltd

("Taptica" or the "Company")

 

 

Interim Results

 

Taptica (AIM: TAP), a global leader in advertising technologies for performance-based mobile marketing and brand advertisingannounces its interim results for the six months ended 30 June 2018.

 

 

Sustained execution on strategy

 

·    Significant revenue growth driven by expanded international presence and successful acquisitions

·    Increasing operational efficiency across all business units

·    Raised $30 million of equity to reduce the level of debt under the Company's existing debt facility, which has better positioned the Company to capitalise on M&A opportunities

·    The Company has been presented with acquisition opportunities of a larger magnitude than initially expected: Taptica remains in constructive conversations with potential targets and any acquisitions will be funded through its existing resources

 

Financial Highlights

 

 

Significant growth and remained highly cash generative with strong balance sheet

 

·    Revenue increased by 119.4% to $144.0 million (H1 2017: $65.6 million)

·    Gross profit increased by 126.4% to $58.5 million (H1 2017: $25.8 million), with improvement in gross margin to 40.6% (H1 2017: 39.4%)

·    Adjusted EBITDA* of $21.6 million (H1 2017: $13.1 million)

·    Net cash inflow from operating activities of $21.5 million (H1 2017: $13.7 million)

·    Interim dividend of $0.0398 per share (interim dividend 2017: nil)

·    Cash and bank deposits as at 30 June 2018 were $57.7 million (31 December 2017: $27.0 million)

·    Net cash as at 30 June 2018 of $42.1 million (31 December 2017: net debt of $4.0 million)

*Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortisation and share-based payment expenses.

 

Operational Highlights

 

 

Strengthened foundations of performance-based marketing and brand advertising businesses

 

·    Performance-based marketing (50.1% of total revenue):

§ Strong growth in core mobile business more-than offset the anticipated decline in display activity

§ Increased contribution from Asia-Pacific, particularly Japan and China

§ Expanding into new segments, especially ecommerce and video-on-demand

·    Brand advertising (49.9% of total revenue):

§ Established key partnerships to enhance the Tremor Video DSP offer

§ New household-name brands added as customers, such as GlaxoSmithKline and Whole Foods

§ Increase in operational efficiency

 

Hagai Tal, Chief Executive Officer of Taptica, said: "Following the major acquisition of Tremor Video DSP in the second half of last year, our main focus for H1 2018 was improving the financial performance of the Tremor unit. We added household brands to our list of Tier 1 clients at Tremor and established key partnerships. These results also demonstrate good growth in our performance-based business unit reflecting the successful execution on our strategy to expand into new geographies.

 

"Looking ahead, we entered the second half with increased momentum in both the Tremor Video DSP and performance-based businesses, which continue to execute on their strategies of expanding their reach and winning new customers. We expect sustained improvement in margins through increased operational efficiencies, economies of scale and technology enhancements. As a result, we expect EBITDA for full year 2018 to be ahead of market expectations."

 

 

For further details:

 

Taptica

Hagai Tal, Chief Executive Officer                                

 

finnCap (Nomad and Joint Broker)

Jonny Franklin-Adams, James Thompson

 

Berenberg (Joint Broker)

Chris Bowman, Mark Whitmore

 

Luther Pendragon (Financial PR Adviser)

Harry Chathli, Claire Norbury               

 

+972 3 545 3900

 

 

+44 20 7220 0500

 

 

+44 20 3207 7800

 

 

+44 20 7618 9100

 

 

Hagai Tal, Chief Executive Officer, and Yaniv Carmi, Chief Financial Officer, will be hosting a presentation to analysts at 9.00am BST today at the offices of Luther Pendragon, 48 Gracechurch Street, London, EC3V 0EJ.

 

 

About Taptica

 

Taptica International Ltd is a global leader in advertising technologies that operates in more than 70 countries. It has two revenue streams: performance-based marketing, provided by its Taptica business, and brand advertising, provided by its Tremor Video DSP business.

 

The Taptica business is an end-to-end mobile technology advertising platform that helps the world's top brands reach their most valuable users with the widest range of traffic sources available today. Its proprietary technology leverages big data and, combined with state-of-the-art machine learning, enables quality media targeting at scale. It works with more than 600 advertisers including Amazon, Disney, Twitter, OpenTable, Expedia and Zynga.

 

Tremor Video DSP is the leading programmatic video platform, matching advertisers with audiences -wherever they may be. Delivering custom video experiences across all screens, Tremor Video DSP helps advertisers tell captivating brand stories to create meaningful, personalised moments with prospective customers. Tremor Video DSP works with the top agencies and advertisers in the US.

 

Taptica International Ltd is headquartered in Israel with offices in San Francisco, New York, Tokyo (Adinnovation), Beijing, Seoul and London, and is traded on the London Stock Exchange (AIM: TAP).

 

 

Operational Review  

 

The sales momentum of 2017 was sustained into 2018 and both revenue streams - performance-based marketing, provided by the Company's Taptica business (which includes Adinnovation), and brand advertising, provided by its Tremor Video DSP business - have continued to grow with both units adding new Tier 1 customers in the reporting period. In particular, the growth in the Taptica performance-based business was driven by the contribution from the Asia-Pacific offices. In Tremor Video DSP, excluding the impact of seasonality, there was increase in run rate in the six-month period compared with the second half of 2017, and the Company continued to implement operational and cost efficiencies.

 

Revenue ($'000s)

H1 2018

H1 2017

Change

Mobile apps

68,754

55,617

+24%

Legacy display and video

3,394

10,025

-66%

Branding*

71,880

-

-

Total

144,028

65,642

+119%

* The comparative period was prior to the acquisition of the Tremor Video DSP brand advertising business

 

Performance-based marketing

 

Revenue generated by the performance-based marketing business increased by 9.9% over the first half of 2017 to $72.1 million. This reflects strong growth in the core mobile business, which, including social, increased in revenue by 23.6%.

 

By geography, the performance-based marketing growth was driven by the significant contribution to revenue from the Company's expanding international presence, particularly in Japan where Taptica operates through its majority-owned subsidiary, Adinnovation Inc. ("Adinnovation"), which was acquired in 2017.

 

During the period, the Adinnovation sales team that offers Taptica's services was expanded, which contributed to the growth in revenue in this geography. In addition, Adinnovation's agency business increased its media buying from Taptica. In Japan, the gaming segment continued to be the primary revenue generator, but the Company is receiving growing demand from the ecommerce and video-on-demand segments, which are increasingly becoming significant contributors to the Company's growth in this region. The Company also worked on implementing new management practices with an increased focus on efficiency, which is improving the operations and efficiency of the Adinnovation unit.

 

The Company generated higher revenue in China due to the addition of a number of new customers as well as a significant contribution from the continued growth in revenue from one of China's largest ecommerce companies that Taptica commenced working with in the second half of 2017. Taptica is experiencing particular demand in China from the ecommerce segment with an increasing number of companies in that region seeking to use Taptica's services to expand globally.

 

There was significant growth in revenue in the UK, where Taptica opened an office in 2017. The increase in revenue was primarily due to an increase in business with one of Europe's largest advertising agencies that is headquartered in the UK as well as through the Company's UK office expanding its focus to target business in Europe. 

 

The Company is experiencing a diversification of the segments serviced by the performance-based marketing business, with particular growth during the period in the ecommerce and video-on-demand verticals as noted above.

 

Brand advertising

 

The Tremor Video DSP business generated $71.9 million for the first half of 2018. This reflects an increased run-rate (excluding the impact of seasonality) of 14.8% since the Company acquired the unit in August 2017 due to an increase in average spend per advertiser. This includes adding new household-name brand customers during the period, such as GlaxoSmithKline, Guess, Procter & Gamble and Whole Foods.

 

Tremor Video DSP established several key partnerships during the first half of the year to significantly enhance its offering, including:

·     Dstillery, a leading applied data science company that provides predictive marketing intelligence, together delivering an exclusive audience targeting solution;

·     CUEBIQ, a leading location intelligence and measurement company, to exclusively offer the industry's first geo-behavioural targeting solution on connected TV; and

·     Grapeshot, a leading provider of contextual targeting and custom brand safety solutions, allowing advertisers to reach audiences that consume the most relevant content in-the-moment and prevents ads from being delivered in undesirable or irrelevant environments.

 

The Company also continued to work closely with the Tremor Video DSP team to implement operational and cost efficiencies and has been able to achieve further improvements in gross margin in that unit and a decrease in operating expenditure (excluding salaries).

 

Financial Review

 

Revenue for the six months ended 30 June 2018 increased by 119.4% to $144.0 million compared with $65.6 million for the first half of 2017. Performance-based marketing, which is provided by the Taptica business, accounted for 50.1% of total revenue and brand advertising, which is provided by the Tremor Video DSP business, contributed 49.9%. The growth in total revenue reflects the contribution from Tremor Video DSP, which was acquired in the second half of 2017, and a 9.9% growth in revenue in the performance-based marketing business.

 

Gross profit increased by 128.4% to $58.5 million (H1 2017: $25.8 million), primarily representing the growth in revenue, but also a slight increase in gross margin to 40.6% (H1 2017: 39.4%).

 

Cost of sales as a proportion of revenue was slightly lower overall as a decrease in the proportion for the Taptica business was largely offset by the contribution from the Tremor Video DSP business, due to the higher cost of sales associated with its business model, as well as Adinnovation.

 

Operating costs increased primarily due to the addition of costs from the Company's acquisitions. In particular, Tremor Video DSP made a significant contribution to the increase in R&D expenses to $10.1 million (H1 2017: $3.1 million) as it is a business that sustains a high level of R&D, while the Company also invested in R&D to support the growing scale of its Taptica technology platform and expansion in its offering. In addition to the contribution from the acquisitions, the Company also increased its investment in sales & marketing to enhance brand recognition, expand the global performance-based marketing customer base and invest in the expansion of global Taptica offices. Similarly, general & administrative expenses increased due to investment into growing the global operations, which was done with a high level of efficiency.

 

Operating profit for the period was $13.9 million (H1 2017: $10.3 million). Adjusted EBITDA for the period was $21.6 million compared with $13.1 million for the first half of 2017, which is comprised as follows:

 


H1 2018

$'000s

H1 2017

$'000s

Operating profit

13,904

10,344

Depreciation & Amortisation

5,404

2,078

Share-based payments

3,835

306

Other expenses

19

341

Extraordinary income

(1,598)

-

Adjusted EBITDA

21,564

13,069

 

The Company received extraordinary income of $1.60 million relating to the finalisation of a services agreement that was entered into as part of the acquisition of Tremor Video DSP.

 

The Company continued to be cash generative with net cash provided by operating activities of $21.5 million (H1 2017: $13.7 million).

 

As at 30 June 2018, cash and bank deposits were $57.7 million (31 December 2017: $27.0 million) after having raised $30.0 million in equity and repaying $15.3 million of the Company loans, $10.7 million in tax expenses and $2.9 million in dividend payments. Period-end net cash was $42.1 million compared with net debt of $4.0 million as at 31 December 2017.

 

Dividend

 

The Company maintains its policy of distributing 25% of net profits in dividend payments. As such, the Board has resolved to declare an interim dividend of $0.0398 per share, with an ex dividend date of 20 September 2018, a record date of 21 September 2018 and a payment date of 20 November 2018 (interim dividend for 2017: nil).

 

Outlook

 

In the second half of 2018, the Company continues to build on the successes achieved in the first half as it makes further progress with Tier 1 advertisers supported by strong industry trends as consumers increasingly access the internet on smartphones and video consumption continues to grow.

 

In its performance-based marketing business, the sales momentum of the first half of 2018 has been sustained into the second half of 2018 through the expansion of its international client base, primarily in the Asia-Pacific region. The international offices are expected to make a greater contribution to revenue in the second half compared with H1 2018.

 

Tremor Video DSP's performance continues to improve as it gains new Tier 1 customers and secures partnerships, and improves the margins from its campaigns by applying machine learning practices in order to perfect its audience matching capabilities.

 

As a result, the Board is confident of delivering significant year-on-year growth with EBITDA ahead of market expectations.

 

In January 2018, the Company raised $30 million of equity in order to reduce the level of debt under the Company's existing debt facility, which has better positioned the Company to capitalise on M&A opportunities. This has caught the attention of international companies and Taptica has been presented with acquisition opportunities of a larger magnitude than initially expected. The Company sees this as another opportunity to create a step change in its size as well as reach, and remains in constructive conversations with a number of acquisition targets. The Board hopes to update the market further in the coming months. Any acquisitions made will be primarily funded through the Company's existing resources.

 


Condensed Consolidated Interim Statements of Financial Position as at

 

 



30 June

31 December



2018

2017

2017



(Unaudited)

(Audited)



USD thousands

USD thousands

 

Assets





Cash and cash equivalents


 57,734 

 32,574 

 26,985 

Trade receivables, net


 64,817 

 20,993 

 78,554 

Other receivables


 5,106 

 1,111 

 3,831 

Total current assets


 127,657 

 54,678 

 109,370 




   


Fixed assets, net


 2,096 

 486 

 2,141 

Intangible assets, net


 57,540 

 31,596 

 61,560 

Deferred tax assets


 2,798 

 338 

 2,329 

Total non-current assets


 62,434 

 32,420 

 66,030 




   


Total assets


 190,091 

 87,098 

 175,400 




   





   


Liabilities



   


Credit and current maturities of loans


 5,870 

 - 

 5,930 

Trade payables


 42,553 

 20,405 

 46,232 

Other payables


 14,905 

 7,996 

 22,053 

Total current liabilities


 63,328 

 28,401 

 74,215 




   


Employee benefits


 946 

 184 

 976 

Long-term loans


 9,706 

 - 

 25,085 

Deferred tax liabilities


 1,304 

 1,251 

 1,587 

Liability for put option on non-controlling interests


 8,901 

 - 

 8,619 

Total non-current liabilities


 20,857 

 1,435 

 36,267 




   


Total liabilities


 84,185 

 29,836 

 110,482 




   


Equity



   


Share capital


 196 

 175 

 180 

Share premium


 63,056 

 29,987 

 32,886 

Capital reserves


 5,054 

 1,448 

 1,276 

Retained earnings


 37,600 

 25,652 

 30,576 

Total equity


 105,906 

 57,262 

 64,918 




   


Total liabilities and equity


 190,091 

 87,098 

 175,400 

 

 

 

 

Date of approval of the financial statements: 3 September 2018

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.



 

Condensed Consolidated Interim Statements of Comprehensive Income

 

 



Six months ended 30 June

Year ended





31 December



2018

2017

2017



(Unaudited)

(Audited)



USD thousands

USD thousands

 

Revenues

 144,027 

 65,642 

 210,925 

Cost of sales

(85,526)

(39,804)

 130,350 

Gross profit

 58,501 

 25,838 

 80,575 



   


Research and development expenses

 10,053 

 3,148 

 16,995 

Selling and marketing expenses

 24,054 

 8,868 

 31,460 

General and administrative expenses

 10,490 

 3,478 

 14,493 


 44,597 

 15,494 

 62,948 



   


Profit from operations

 13,904 

 10,344 

 17,627 



   


Profit from operations before amortization of purchased


   


 intangibles and business combination related expenses*

 18,330 

 12,288 

 30,609 



   


Financing income

 774 

 46 

 257 

Financing expenses

(445)

(44)

(564)

Financing income (expenses), net

 329 

 2 

(307)



   


Profit before taxes on income

 14,233 

 10,346 

 17,320 



   


Taxes on income

(3,431)

(1,634)

(3,561)

Profit for the period

 10,802 

 8,712 

 13,759 



   


Profit for the year before amortization of purchased intangibles


   


 and business combination related expenses (net of tax)**

 15,087 

 10,225 

 25,015 



   


Other comprehensive income items:


   


Foreign currency translation differences for foreign operation

 56 

 - 

(1)

Total other comprehensive income for the year

 56 

 - 

(1)





Total comprehensive income for the period

 10,858 

 8,712 

 13,758 





Earnings per share


   


Basic earnings per share (in USD)

 0.1612 

 0.1440 

 0.2249 

Basic earnings per share (in USD) before amortization




 of purchased Intangibles and business combination




 related expenses (net of tax)**

 0.2251 

 0.1690 

 0.4088 

Diluted earnings per share (in USD)

 0.1553 

 0.1360 

 0.2161 

Diluted earnings per share (in USD) before amortization




 of purchased Intangibles and business combination




 related expenses (net of tax)**

 0.2170 

 0.1596 

 0.3929 

 

*              Amounting to USD 4,426 thousand (31 December 2017: USD 12,982 thousand, 30 June 2017: USD 1,944 thousand) of amortization of purchased intangibles acquired in business combination and related acquisition expenses.

 

**           Amounting to USD 4,285 thousand (31 December 2017: USD 11,256 thousand, 30 June 2017: USD 1,513 thousand) of amortization of purchased intangibles acquired in business combination and related acquisition expenses.

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.


Condensed Consolidated Interim Statements of Changes in Shareholders' Equity

 


Share

Share

Capital

Retained



capital

premium

Reserves (**)

earnings

Total


US$ thousands

 

For the six months ended 30 June 2018






 (unaudited)






Balance as at 1 January 2018

 180 

 32,886 

 1,276 

 30,576 

 64,918 

Total comprehensive income for the period






Profit for the period

 - 

 - 

 - 

 10,802 

 10,802 

Other comprehensive income

 - 

 - 

 56 

 - 

 56 

Total comprehensive income for the period

 - 

 - 

 56 

 10,802 

 10,858 







Transactions with owners, recognized






 directly in equity






Revaluation of liability for put option on






 non-controlling interests

 - 

 - 

 - 

(127)

(127)

Issuance of shares (net of issuance cost)

 15 

 29,707 

 - 

 - 

 29,722 

Share based payments

 - 

 - 

 3,835 

 - 

 3,835 

Exercise of share options

 1 

 463 

(113)

 - 

 351 

Dividend to owners

 - 

 - 

 - 

(3,651)

(3,651)

Balance as at 30 June 2018

 196 

 63,056 

 5,054 

 37,600 

 105,906 

 

 

For the six months ended 30 June 2017






 (unaudited)






Balance as at 1 January 2017

 175 

 29,759 

 1,238 

 19,552 

 50,724 

Total comprehensive income for the period






Profit for the period

 - 

 - 

 - 

 8,712 

 8,712 

Total comprehensive income for the period

 - 

 - 

 - 

 8,712 

 8,712 







Transactions with owners, recognized






 directly in equity






Share based payments

* - 

 8 

 298 

 - 

 306 

Exercise of share options

* - 

 220 

(88)

 - 

 132 

Dividend to owners

 - 

 - 

 - 

(2,612)

(2,612)

Balance as at 30 June 2017

 175 

 29,987 

 1,448 

 25,652 

 57,262 

 

 

For the year ended 31 December 2017






 (Audited)






Balance as at 1 January 2017

 175 

 29,759 

 1,238 

 19,552 

 50,724 







Total comprehensive income for the year






Profit for the year

 - 

 - 

 - 

 13,759 

 13,759 

Other comprehensive income

 - 

 - 

(1)

 - 

(1)

Total comprehensive income for the year

 - 

 - 

(1)

 13,759 

 13,758 







Transactions with owners, recognized






 directly in equity






Revaluation of liability for put option






 on non-controlling interests

(123)

(123)

Share-based payments

 - 

 24 

 860 

 - 

 884 

Exercise of share options

 5 

 3,103 

(821)

 - 

 2,287 

Dividends to owners

 - 

 - 

 - 

(2,612)

(2,612)







Balance as at 31 December 2017

 180 

 32,886 

 1,276 

 30,576 

 64,918 

 

(*)   Less than 1 thousand USD

(**) Includes reserves for share-based payments and a commitment to issue shares under business combination and other comprehensive income.

The accompanying notes are an integral part of these condensed consolidated interim financial statements.


Condensed Consolidated Interim Statements of Cash Flows

 



Six months ended 30 June

Year ended





31 December



2018

2017

2017



(Unaudited)

(Audited)



USD thousands

USD thousands

 

Cash flows from operating activities




Profit for the period

 10,802 

 8,712 

 13,759 

Adjustments for:


   


Depreciation and amortization

 5,404 

 2,078 

 13,499 

Net financing (income) expense

(329)

(18)

 349 

Share-based payments

 3,835 

 306 

 884 

Income tax expense

 3,431 

 1,634 

 3,561 



   


Change in trade and other receivables

 16,564 

 7,469 

 2,745 

Change in trade and other payables

(7,025)

(2,050)

 647 

Change in employee benefits

 131 

 170 

 533 

Income taxes received

 - 

 82 

 83 

Income taxes paid

(11,097)

(4,728)

(5,094)

Interest received

 178 

 39 

 58 

Interest paid

(388)

   

(267)

Net cash provided by operating activities

 21,506 

 13,694 

 30,757 





Cash flows from investing activities


   


Increase in pledged deposits

(755)

(29)

(72)

Payment of earn-out

(1,218)

 - 

 - 

Acquisition of property, plant and equipment

(567)

(126)

(233)

Acquisition and capitalization of intangible assets

(679)

(555)

(1,471)

Proceeds from sale of intangible assets

 118 

 - 

 - 

Acquisition of subsidiaries, net of cash acquired

 - 

 - 

(53,010)

Net cash provided by investing activities

(3,101)

(710)

(54,786)



   


Cash flows from financing activities


   


Issuance of shares

 29,539 

 - 

 - 

Loan received from shareholders

 - 

 - 

 10,000 

Repayment of loan from shareholders

 - 

 - 

(10,000)

Repayment of loans

(15,328)

 - 

(174)

Proceeds from exercise of share options

 351 

 132 

 2,287 

Loans received from bank

 - 

 - 

 30,000 

Dividends paid

(2,921)

(2,073)

(2,612)

Net cash provided by (used in) financing activities

 11,641 

(1,941)

 29,501 



   


Net increase in cash and cash equivalents

 30,046 

 11,043 

 5,472 

Cash and cash equivalents as at the


   


 beginning of the period

 26,985 

 21,471 

 21,471 

Effect of exchange rate fluctuations on


   


 cash and cash equivalents

 703 

 60 

 42 



   


Cash and cash equivalents as at the end of the period

 57,734 

 32,574 

 26,985 

 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 


Notes to the Condensed Consolidated Interim Financial Statements as at 30 June 2018

 

 

Note 1 - General

 

A.        Reporting entity

 

Taptica International Ltd. (the "Company" or "Taptica International") formerly named Marimedia Ltd. was incorporated in Israel under the laws of the state of Israel on 20 March 2007, listed on AIM Market of the London Stock Exchange. The address of the registered office is 121 Hahashmonaim Street Tel-Aviv, Israel.

 

Taptica International (AIM: TAP) is a global end-to-end performance-based mobile marketing and brand advertising platform that helps the world's top brands reach their most valuable users with the widest range of traffic sources available today, including social. Taptica International's proprietary technology leverages big data, and combined with state-of-the-art machine learning, enables quality media targeting at scale. Taptica International works with leading brands and companies in a variety of domains, all over the world. The Company is headquartered in Tel Aviv with offices in San Francisco, New York, Beijing, Seoul, London, Tokyo, Jakarta, Berlin and New Delhi.

 

On 6 June 2017, the Israeli tax authority was approved the restructuring whereby Taptica Social Ltd. (hereinafter-"Taptica Social", fully owned subsidiary, Israeli-based company) will be merged with and into Taptica Ltd. (hereinafter-"Taptica", fully owned subsidiary, Israeli-based company) in such a manner that Taptica Social will transfer to Taptica all its assets and liabilities for no consideration and thereafter will be liquidated. The effective merge date was determined as 31 December 2016.

 

On 17 July 2017, Taptica Japan (fully owned subsidiary) purchased 57% of Adinnovation Inc. (hereinafter - "ADI") share capital for a total consideration of up to USD 5.7 million.

 

On 7 August 2017, Taptica entered into an assets purchase agreement (APA) with US-based company Tremor Video Inc.'s (hereinafter - "Tremor") to purchase their demand-side advertising platform for a total consideration of USD 50 million with a positive net working capital balance of USD 22.5 million.

 

 

B.        Definitions

 

In these financial statements -

 

(1)        The Company - Taptica International Ltd.

 

(2)        The Group -     Taptica International Ltd. and its subsidiaries.

 

(3)        Subsidiaries - Companies, the financial statements of which are fully consolidated, directly or indirectly, with the financial statements of the Company.

 

(4)        Related party - As defined by IAS 24, "Related Party Disclosures".

 

 

 


Note 2 - Basis of Preparation

 

A.        Statement of compliance

 

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and do not include all of the information required for full annual financial statements. They should be read in conjunction with the financial statements as at and for the year ended 31 December, 2017 (hereinafter - "the annual financial statements").

 

These condensed consolidated interim financial statements were authorized for issue by the Company's board of directors on 3 September 2018.

 

 

B.        Use of estimates and judgments

 

The preparation of financial statements in conformity with IFRS requires management 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 significant judgments made by management in applying the Group's accounting policies and the principal assumptions used in the estimation of uncertainty were the same as those that applied to the annual financial statements.

 

 

 

Note 3 - Significant Accounting Policies

 

Except as described below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its annual financial statements.

Presented hereunder is a description of the changes in accounting policies applied in these condensed consolidated interim financial statements and their effect:

 

A.        Initial application of new standards, amendments to standards and interpretations

 

As from 1 January 2018 the Group applies the new standards and amendments to standards described below:

 

(1)        IFRS 9 (2014), Financial Instruments

 

As from the first quarter of 2018 the Group applies IFRS 9 (2014), Financial Instruments (in this item: "the standard" or "IFRS 9"), which replaces IAS 39, Financial Instruments: Recognition and Measurement (in this item "IAS 39"). Furthermore, as from that date the Group applies the amendment to IFRS 9, Financial Instruments: Prepayment Features with "Negative Compensation". The Group has chosen to apply the standard and the amendment to the standard as from 1 January 2018 (in this item: "date of initial application") without amendment of the comparative data. The effect of applying IFRS 9 (2014), on the financial statements for the period ended 30 June 2018, is immaterial.



 

Note 3 - Significant Accounting Policies (cont'd)

 

A.        Initial application of new standards, amendments to standards and interpretations (cont'd)

 

(1)        IFRS 9 (2014), Financial Instruments (cont'd)

 

Classification and measurement of financial assets and financial liabilities

 

Initial recognition and measurement

The Group initially recognizes trade receivables and debt instruments issued on the date that they are created. All other financial assets and financial liabilities are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. Generally, a financial asset or financial liability are initially measured at fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issuance of the financial asset or financial liability. 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.

 

Financial assets - classification and subsequent measurement

 

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.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated at fair value through profit or loss:

-           It is held within a business model whose objective is to hold assets so as to collect contractual cash flows; and

-           The contractual terms of the financial asset give rise on specified dates to cash flows representing solely payments of principal and interest on the principal amount outstanding.

 

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.

 

Financial assets - 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.

 

Financial liabilities - classification, subsequent measurement and gains and losses

 

Financial liabilities are classified as measured at amortized cost or fair value through profit or loss. A financial liability is measured at fair value through profit or loss if it is classified as held for trading, is a derivative instrument or is designated for measurement as such at initial recognition. Financial liabilities at fair value through profit or loss are measured at fair value, with the net gains and losses, including any interest expenses, being recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expenses and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

Note 3 - Significant Accounting Policies (cont'd)

 

A.        Initial application of new standards, amendments to standards and interpretations (cont'd)

 

Derecognition of financial liabilities

 

Financial liabilities are derecognized when the contractual obligation of the Group expires or is discharged or cancelled. Furthermore, a substantial modification of the terms of an existing financial liability, or an exchange between an existing borrower and existing lender of debt instruments with substantially different terms, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability at fair value.

 

Impairment

 

Financial assets, contract assets and lease receivables

 

The Group recognizes a provision for expected credit losses in respect of financial assets at amortized cost.

 

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 debts instruments and deposits, for which credit risk has not increased significantly since initial recognition.

 

The Group has elected to measure the provision for expected credit losses in respect of receivables at an amount equal to the full lifetime credit losses of the instrument.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition, and when estimating expected credit losses, the Group considers reasonable and supportable information that is relevant and available with no undue cost or effort. 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.

 

The Group considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Group in full, with no recourse by the Group to actions such as realizing security (if any is held).

 

Lifetime expected credit losses are expected credit losses that result from all possible default events over the expected life of the financial asset.

 

12-month expected credit losses are the expected credit losses that result from possible default events within the 12 months after the reporting date.

 

The maximum period considered when assessing expected credit losses is the maximum contractual period over which the Group is exposed to credit risk.



 

Note 3 - Significant Accounting Policies (cont'd)

 

A.        Initial application of new standards, amendments to standards and interpretations (cont'd)

 

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.

 

Credit-impaired financial assets

 

At each reporting date, the Group assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

Presentation of impairment

 

Provisions for expected credit losses of financial assets measured at amortized cost are deducted from the gross carrying amount of the financial assets.

 

Impairment losses related to trade and other receivables, are presented separately in the statement of profit or loss and other comprehensive income. Impairment losses on other financial assets are presented under financing expenses.

 

(2)        IFRS 15, Revenue from Contracts with Customers

 

IFRS 15 replaces the current guidance regarding recognition of revenues and presents a new model for recognizing revenue from contracts with customers. The model includes five steps for analyzing transactions so as to determine when to recognize revenue and at what amount. Furthermore, IFRS 15 provides new and more extensive disclosure requirements that those that exist under current guidance.

 

The standard introduces a new five-step model for recognizing revenue from contracts with customers:

(1)        Identifying the contract with customer

(2)        Identifying distinct performance obligations in the contract.

(3)        Determining the transaction price.

(4)        Allocating the transaction price to distinct performance obligations

(5)        Recognizing revenue when the performance obligations are satisfied.

 

As regards the breakdown of revenues from contracts with customers into groups that describe how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors, the Group has revenues from several areas of activity as follows:

 




30 June 2018




Unaudited




USD thousands

 

Revenues




Branding



 71,880 

Performance



 72,147 




 144,027 

 

 

As from 1 January 2018, the Group initially applies IFRS 15. The effect of applying IFRS 15 on the financial statements for the period ended 30 June 2018, is immaterial.



 

Note 3 - Significant Accounting Policies (cont'd)

 

B.        New standard and interpretation not yet adopted

 

IFRIC 23, Uncertainty Over Income Tax Treatments

 

IFRIC 23 clarifies how to apply the recognition and measurement requirements of IAS 12 for uncertainties in income taxes. According to IFRIC 23, when determining the taxable profit (loss), tax bases, unused tax losses, unused tax credits and tax rates when there is uncertainty over income tax treatments, the entity should assess whether it is probable that the tax authority will accept its tax position. Insofar as it is probable that the tax authority will accept the entity's tax position, the entity will recognize the tax effects on the financial statements according to that tax position. On the other hand, if it is not probable that the tax authority will accept the entity's tax position, the entity is required to reflect the uncertainty in its accounts by using one of the following methods: the most likely outcome or the expected value. IFRIC 23 emphasizes the need to provide disclosures of the judgments and assumptions made by the entity regarding uncertain tax positions.

 

IFRIC 23 is effective for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted.

 

The Group has not yet commenced examining the effects of IFRIC 23 on the financial statements.

 

IFRS 16, Leases

The standard replaces International Accounting Standard 17 - Leases (IAS 17) and its related interpretations. The standard's instructions annul the existing requirement from lessees to classify leases as operating or finance leases. Instead of this, for lessees, the new standard presents a unified model for the accounting treatment of all leases according to which the lessee has to recognize an asset and liability in respect of the lease in its financial statements. Similarly, the standard determines new and expanded disclosure requirements from those required at present.

 

The standard will become effective for annual periods as of 1 January 2019, with the possibility of early adoption, so long as the company has also early adopted IFRS 15 - Revenue from contracts with customers. The standard includes a number of alternatives for the implementation of transitional provisions, so that companies can choose one of the following alternatives at the implementation date: full retrospective implementation or implementation from the effective date while adjusting the balance of retained earnings at that date.

 

The Group is in the advanced stages of examining the effects of IFRS 16 on the financial statements, including the early adoption on the financial statements for the year ended 31 December 2018.

 

 

Note 4 - Share-Based Payment

 

A.        New grants during the period

 

During the six months period ended June 30, 2018, the Group granted 3,756 thousand share options, 1,380 thousand Performance Share Units (PSUs) and 1,365 thousand Restricted Share Units (RSUs) to its executives officers and employees from outstanding awards under 2017 Plan and 2014 Plan (see also Note 13 to the Company's financial statement for 31 December 2017).

 

B.        The total expense recognized in the condensed consolidated interim statement of Comprehensive Income in the six-month period ended 30 June 2018 with respect to the options granted to employees, amounted to approximately USD 3,818 thousand.

 

The grant date fair value of the share options granted was measured based on the Black-Scholes option pricing model.



 

Note 4 - Share-Based Payment (cont'd)

 

C.        The number of share options (in thousands) is as follows:




Weighted





average exercise

Number of




price

options




GBP

(Unaudited)

 

Outstanding at 1 January 2018



1.82

 6,733 

Exercised during the period



0.71

(366)

Granted during the period



3.14

 6,501 

Forfeited during the period



2.37

(1,228)






Outstanding at 30 June 2018



2.54

 11,640 

 

Note 5 - Capital and Reserves

 

A.        Share capital (in thousands of shares of NIS 0.01 par value)










30 June 2018





(Unaudited)

 

Issued and paid-in ordinary share capital



 67,700 





Authorized share capital



 300,000 

 

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. All shares rank equally with regard to the Company's residual assets.

 

B.        Issuing new shares

 

On 22 January 2018, the Company completed the issuing of 4,850,000 new ordinary shares NIS 0.01 par value at a price of 450 pence per ordinary share for a total consideration of US$30 million (US$29.2 net of issuance costs). The issued shares represent approximately 7.7% of the Company's current issued ordinary share capital.

 

C.        Dividends

 

Details on dividends (in USD thousand):





For the six





months ended





30 June 2018





(Audited)

 

Declared



 3,651 

 

 

A dividend in the amount of USD 3,651 thousand (USD 0.054 per ordinary share) was declared in April 2018. An amount of USD 2,921 thousand was paid in June 2018.



 

Note 6 - Income Tax

 

On 28 December 2016, Taptica Social together with Taptica appealed for a tax ruling for a restructuring, as described in Note 1A, 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 31 December 2016. As a result of the merger, the ruling previously obtained by Taptica regarding the preferred income will require re-validation from the Israeli tax authority. In addition, as a part of the re-validation which is required, Taptica also intends to request an amendment to include the acquisition and absorption of Tremor's operation in the rulings mentioned above and request that the Law for the Encouragement of Capital Investments will apply to this purchased activity as well. The Company believes that its current tax position with that respect is probable of being obtained.

 

 

Note 7 - Subsidiaries

 

A.        Business combination from a prior period that was measured at provisional amounts

Adinnovation INC

 

As described in the Company's financial statement for 31 December 2017 Note 16B(1), on 17 July, 2017 the Company completed the acquisition of a majority shareholdings in Adinnovation Inc. (ADI) a leader in Japan's mobile advertising industry.

 

The financial statements of the Company for the year ended 31 December 2017 included provisional amounts in respect of the subsidiary's intangible assets. Upon completion of the independent valuation of the business combination the amounts reported remain the same.

 

In addition, in March 2018 the Company paid the earn-out payment for ADI acquisition in the amount of USD 1.2 million.

 

 

Tremor Video DSP, Inc.

 

As described in the Company's financial statement for 31 December 2017 Note 16B(2), on 7 August 2017, the Company acquired Demand-Side Platform activity (Tremor Video DSP, Inc.).

 

The financial statements of the Company for the year ended 31 December 2017 included provisional amounts in respect of the subsidiary's intangible assets. Upon completion of the independent valuation of the business combination the amounts reported remain the same.

 

In addition, in March 2018, the Company repaid USD 15 million out of the loan balance that was taken for the purpose of financing Tremor Video DSP Video, Inc. acquisition.

 

 


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Interim Results - RNS