Full Year Results
20 March 2017
Taptica International Ltd
("Taptica" or the "Company")
Full Year 2016 Results
Taptica (AIM: TAP), a global end-to-end mobile advertising platform for advertising agencies and brands, announces its full year results for the twelve months ended 31 December 2016.
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Positioned for sustained organic and inorganic expansion
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· Strong performance from first full-year period as mobile-focused business · Significant increase in revenue and improvement in gross margin resulting in high level of cash generation · Broadened global footprint with establishment of international offices and partnerships · Mobile app advertiser customer revenue retention rate of 193% and addition of new customers |
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Financial Highlights
Highly cash generative with strong growth in revenue and significant improvement in margin
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· Revenues increased by 66% to $125.9 million (2015: $75.8 million) · Gross profit more than doubled to $46.0 million (2015: $21.1 million), with improvement in gross margin to 36.5% (2015: 27.8%) · Adjusted EBITDA* of $25.7 million (2015: $7.4 million) · Net cash inflow from operating activities of $20.3 million (2015: $6.2 million) · Final dividend for 2016 of $0.0432 per share, making a total dividend for the year of $0.1011 (total dividend for 2015: $0.00784) · Cash and bank deposits as at 31 December 2016 were $21.5 million (30 June 2016: $9.5 million) after making a total cash payment of $16.5 million for three main items: full consideration of AreaOne's acquisition ($7.0 million); share buyback ($5.5 million); and dividend payment ($4.0 million) *Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortisation and share-based payment expenses. |
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Operational Highlights
Technology improvement and increasing brand recognition delivering better campaigns for larger client base
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· Mobile business accounted for 86% of revenues (2015: 61%) as Company continued to gain traction with existing household-name clients and added new customers · US continued to be the largest geography by revenue generation, but also received first meaningful contribution from Asia-Pacific region · Increased its international presence with the establishment of an office in Seoul, South Korea and a partnership with Adways Korea; and, post period end, a partnership with Adinnovation in Japan and an office in London, UK |
Hagai Tal, Chief Executive Officer, stated: "This year we have significantly increased revenue, improved margins and remained highly cash generative. We increased the number of advertisers on mobile to over 600, which included household names such as Amazon, Disney, Expedia. Cartoon Network and others. We have also established strong foundations in the Asia-Pacific region, which is a key growth market.
"Taptica entered 2017 at a run rate significantly higher than at the equivalent period last year as it continues to benefit from the investment being made into mobile advertising by corporates and advertising agencies. The strength of our offer lies in our proprietary platform and ability to collect accurate data which enables us to deliver efficient and effective campaigns, which we will continue to do for all our clients. With consumers continuing to increase their use of apps and accessing the internet on their mobile most of the time, we anticipate existing clients growing their ad spend with Taptica as well as new advertisers entering this market. We also expect to receive increasing demand from the Asia-Pacific region with demand from US and Europe set to continue. As a result, the Board remains confident of delivering strong year-on-year revenue growth in the year ahead."
Enquiries
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Taptica |
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Hagai Tal, Chief Executive Officer |
+972 3 545 3900 |
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Investec Bank plc |
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Dominic Emery, Henry Reast, Junya Iwamoto |
+44 207 597 4000 |
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Luther Pendragon |
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Harry Chathli, Claire Norbury |
+44 207 618 9100 |
Analyst presentation
Hagai Tal, Chief Executive Officer, and Yaniv Carmi, Chief Financial Officer, will be holding a presentation to analysts at 9.30am GMT today at the office of Luther Pendragon, 48 Gracechurch Street, London, EC3V 0EJ.
About Taptica
Taptica is a global end-to-end mobile 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. Its proprietary technology leverages big data and, combined with state-of-the-art machine learning, enables quality media targeting at scale. Taptica creates a single arena in which brands can scale and engage more relevantly with mobile audiences, staying ahead of the competition. It works with more than 600 advertisers including Amazon, Disney, Facebook, Twitter, OpenTable, Expedia, Lyft and Zynga. Taptica is headquartered in Israel with offices in San Francisco, New York, Beijing, Seoul and London. Taptica is traded on the London Stock Exchange (AIM: TAP).
Operational Review
This has been the first full twelve-month period following the completion of Taptica's transition to a mobile-focused business. During the period, Taptica continued to build on these strong foundations increasing revenue by 66% to $125.9 million compared with $75.8 million for 2015, with the mobile business accounting for 86% of overall sales compared with 61% in 2015. Significantly, this included growth amongst existing clients as well as the addition of new clients.
In addition, due to the sustained development of the Company's technology as well as the greater proportion of revenue generated by Tier 1 clients, gross margin improved to 36.5% (2015: 27.8%) with gross profit more than doubling to $46.0 million (2015: $21.1 million). As a result, Taptica remained highly cash generative with net cash inflow from operations increasing to $20.3 million from $6.2 million in the prior year.
Taptica entered 2016 as a mobile-focused business with a platform that optimises marketing campaigns for advertisers across mobile and social media channels based on its ability to leverage data, which is key to enabling successful mobile targeting for the Company's clients. During the period, the Company benefited from these strong foundations and its early transition to being mobile focused ahead of many of its competitors. In addition, Taptica continued to enhance its offering through R&D into database and machine learning to further enhance its ability to leverage data, as well as through the continual development of user data to enable ever-more accurate user targeting.
The Company further strengthened its foundations with the strategic decision, executed during the period, to focus its resources on developing its demand-side platform ("DSP"). As a result of the strengthening of its mobile capabilities and focus on its DSP, the Company's offering to Tier 1 advertisers has been significantly enhanced. This enabled sustained growth with its existing household-name clients and increasing new customer demand.
Mobile app customer revenue retention rate for 2016 over 2015 was 193%.
International expansion
During the year, Taptica completed the integration of its office in China, acquired with AreaOne, and succeeded in growing its business in the region with clients such as Locojoy, a major Chinese mobile game developer, which appointed Taptica to increase downloads of its latest app, the role-playing game Chrono Heroes. This followed Taptica's successful campaign on a previous Locojoy game.
Taptica also increased its presence in the Asia-Pacific region with the establishment of an office in Seoul, South Korea to advance its sales initiatives in this key growth market, and subsequently entered into a partnership with Adways Korea ("Adways"), a leader in mobile marketing leveraging its strong Asia network and part of the TSE-listed Adways Inc. group (TSE: 2489). The aim of the partnership is to facilitate global mobile app developers and other clients of Taptica to run effective and efficient mobile marketing campaigns in Asia through access to Adways' extensive network and coverage, combined with the Company's ever-growing database. The strategic partnership will initially target the mobile games industry.
As a result, during the period the Company earned its first meaningful revenues from the Asia-Pacific region, the largest and fastest growing digital retail market in the world, with approximately 10% of mobile revenues being generated in this geography.
Post period, Taptica entered into a partnership with Adinnovation Inc. ("Adinnovation"), a specialised marketing company headquartered in Japan providing comprehensive services for monetisation of apps. Under the terms of the agreement, Taptica and Adinnovation will target the mobile games industry, which is one of the key areas of focus for Adinnovation. Taptica expects the partnership to accelerate the Company's brand awareness in Japan and help it to lead the local market expansion.
In addition, Taptica opened, post period, an office in the UK - becoming the fifth international market to have a Taptica presence after the US, China, South Korea and Japan. In the UK, Taptica will work with advertising agencies to bring brands into the digital and mobile world, with a primary focus on the entertainment, e-commerce, retail, digital banking, travel and gaming sectors. The Company intends to leverage its relationship with two of Europe's largest advertising agencies with headquarters in UK to penetrate these sectors. Opening an office in UK will enable Taptica to better serve its existing client base in the UK and Europe as well as to target new customers and further expand its addressable market.
Financial Review
Revenues for the twelve months ended 31 December 2016 increased by 66% to $125.9 million compared with $75.8 million for 2015.
Gross profit more than doubled to $46.0 million (2015: $21.1 million) representing the growth in overall revenue. Cost of sales, which consists primarily of traffic acquisition costs that are directly attributable to revenue generated by the Company and based on the revenue share arrangements with audience and content partners, decreased as a proportion of revenue compared with the prior year due to increased technology efficiency gains resulting from improved use of big data collected thereby significantly improving the gross margins. Consequently, total gross margin was 36.5% (2015: 27.8%).
Operating costs increased primarily due to greater sales & marketing expenses as well as R&D expenses and the contribution from AreaOne. Sales & marketing costs increased to $14.2 million (2015: $8.6 million) as investments were made to enhance brand recognition, expand the global customer base and invest in the expansion of global offices. R&D expenses were $6.1 million (2015: $4.1 million) due to investment in the technology platform enhancements and data base capabilities. General & administrative expenses were broadly similar to the prior year. Operating costs for 2016 include the AreaOne costs following the acquisition in September 2015 (compared to a partial year contribution for 2015).
Adjusted EBITDA for 2016 was $25.7 million compared with $7.4 million for 2015, which is comprised as follows:
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2016 $'m |
2015 $'m |
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Operating profit |
19.7 |
2.9 |
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Depreciation & Amortisation |
5.1 |
3.5 |
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Share-based payments |
0.5 |
0.6 |
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Acquisition-related costs |
0.4 |
0.4 |
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Adjusted EBITDA |
25.7 |
7.4 |
The Company continued to be cash generative with net cash provided by operating activities of $20.3 million (2015: $6.2 million).
As at 31 December 2016, cash and bank deposits were $21.5 million (30 June 2016: $9.5 million; 31 December 2015: $18.7 million) after making a total cash payment of $16.5 million for three main items: full consideration of AreaOne's acquisition ($7.0 million); share buyback ($5.5 million); and dividend payments ($4 million).
Dividend
The Company maintains its policy of distributing 25% of net profits in dividend payments. As such, the Board has resolved to declare a final dividend of $0.0432 per share, with an ex dividend date of 20 April 2017, a record date of 21 April 2017 and a payment date of 20 June 2017. This equates to a total dividend for the year, including the Special Dividend payment following the interim results, of $0.1011 per share (total dividend for 2015: $0.00784).
Outlook
Taptica entered 2017 at a run rate significantly higher than at the equivalent period last year as it continues to benefit from the investment being made into mobile advertising by corporates and advertising agencies. The strength of its offer lies in the Company's proprietary platform and ability to collect accurate data which enables the delivery of efficient and effective campaigns, which the Company will continue to do for all of its clients. With consumers continuing to increase the use of apps and accessing the internet on their mobile most of the time, the Company anticipates existing clients growing their ad spend with Taptica as well as new advertisers entering this market. The Company also expects to receive increasing demand from the Asia-Pacific region with demand from US and Europe set to continue. As a result, the Board remains confident of delivering strong year-on-year revenue growth ahead in the year ahead.
Consolidated Statements of Financial Position as at 31 December
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2016 |
2015 |
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Note |
USD thousands |
USD thousands |
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Assets |
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Cash and cash equivalents |
9 |
21,471 |
10,173 |
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Bank deposits |
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- |
8,516 |
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Trade receivables, net |
7 |
27,443 |
19,168 |
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Other receivables |
7 |
1,890 |
1,558 |
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Total current assets |
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50,804 |
39,415 |
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Fixed assets, net |
5 |
433 |
514 |
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Intangible assets, net |
6 |
33,046 |
* 36,620 |
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Deferred tax assets |
4 |
301 |
180 |
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Total non-current assets |
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33,780 |
37,314 |
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Total assets |
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84,584 |
76,729 |
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Liabilities |
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Trade payables |
8 |
22,501 |
20,366 |
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Other payables |
8 |
9,443 |
* 5,949 |
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Total current liabilities |
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31,944 |
26,315 |
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Employee benefits |
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176 |
182 |
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Contingent consideration commitment |
16 |
- |
* 2,277 |
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Deferred tax liabilities |
4 |
1,740 |
2,676 |
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Total non-current liabilities |
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1,916 |
5,135 |
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Total liabilities |
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33,860 |
31,450 |
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Equity |
11 |
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Share capital |
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175 |
190 |
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Share premium |
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29,759 |
35,566 |
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Capital reserves |
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1,238 |
2,450 |
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Retained earnings |
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19,552 |
7,073 |
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Total equity |
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50,724 |
45,279 |
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Total liabilities and equity |
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84,584 |
76,729 |
* Restated - see Note 16B
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Comprehensive Income for the Year Ended 31 December
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2016 |
2015 |
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Note |
USD thousands |
USD thousands |
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Revenues |
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125,861 |
75,829 |
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Cost of sales |
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(79,880) |
(54,716) |
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Gross profit |
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45,981 |
21,113 |
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Research and development expenses |
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6,127 |
4,092 |
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Selling and marketing expenses |
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14,202 |
8,634 |
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General and administrative expenses |
10 |
5,919 |
5,464 |
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26,248 |
18,190 |
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Profit from operations |
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19,733 |
2,923 |
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Profit from operations before amortization of purchased intangibles |
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and business combination related expenses* |
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22,910 |
5,688 |
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Financing income |
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355 |
75 |
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Financing expenses |
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(504) |
(207) |
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Financing expenses, net |
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(149) |
(132) |
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Profit before taxes on income |
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19,584 |
2,791 |
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Taxes on income |
4 |
(3,115) |
(642) |
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|
|
|
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Profit for the year |
|
16,469 |
2,149 |
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Profit for the year before amortization of purchased intangibles and |
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|
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business combination related expenses (net of tax)** |
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19,042 |
4,952 |
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Total comprehensive income for the year |
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16,469 |
2,149 |
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Earnings per share |
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Basic earnings per share (in USD) |
12 |
0.2627 |
0.033 |
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Diluted earnings per share (in USD) |
12 |
0.2592 |
0.033 |
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* Amounting to USD 3,177 thousand (2015: USD 2,765 thousand) of amortization of purchased intangibles acquired in business combination and related acquisition expenses.
** Amounting to USD 2,573 thousand (2015: USD 2,803 thousand) of amortization of purchased intangibles acquired in business combination and related acquisition expenses.
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Changes in Equity for the Year Ended 31 December
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Share |
Share |
Capital |
Retained |
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capital |
premium |
reserves** |
Earnings |
Total |
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USD thousands |
||||
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Balance as at |
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|
|
|
|
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1 January 2015 |
186 |
35,170 |
525 |
6,451 |
42,332 |
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Total comprehensive |
|
|
|
|
|
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income for the year |
|
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|
|
|
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Profit for the year |
- |
- |
- |
2,149 |
2,149 |
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Total comprehensive |
|
|
|
|
|
|
income for the year |
- |
- |
- |
2,149 |
2,149 |
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|
|
|
|
|
|
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Transactions with |
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|
|
|
|
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owners, recognized |
|
|
|
|
|
|
directly in equity |
|
|
|
|
|
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Business combination |
- |
- |
1,656 |
- |
1,656 |
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Share-based payments |
- |
- |
622 |
- |
622 |
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Exercise of options |
4 |
396 |
(353) |
- |
47 |
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Dividends to owners |
- |
- |
- |
(1,527) |
(1,527) |
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Balance as at |
|
|
|
|
|
|
31 December 2015 |
190 |
35,566 |
2,450 |
7,073 |
45,279 |
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|
|
|
|
|
|
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Total comprehensive |
|
|
|
|
|
|
income for the year |
|
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|
|
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Profit for the year |
- |
- |
- |
16,469 |
16,469 |
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Total comprehensive |
|
|
|
|
|
|
income for the year |
- |
- |
- |
16,469 |
16,469 |
|
|
|
|
|
|
|
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Transactions with |
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|
|
|
|
|
owners, recognized |
|
|
|
|
|
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directly in equity |
|
|
|
|
|
|
Business combination |
- |
(344) |
(1,656) |
- |
(2,000) |
|
Own shares acquired |
(15) |
(5,505) |
- |
- |
(5,520) |
|
Share based payments |
- |
27 |
453 |
- |
480 |
|
Exercise of share options |
* |
15 |
(9) |
- |
6 |
|
Dividends to owners |
- |
- |
- |
(3,990) |
(3,990) |
|
Balance as at |
|
|
|
|
|
|
31 December 2016 |
175 |
29,759 |
1,238 |
19,552 |
50,724 |
* Less than USD 1 thousand.
** Includes reserves for share-based payments and a commitment to issue shares under business combination (see Note 16) and other comprehensive income.
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Cash Flows for the Year Ended 31 December
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|
|
|
2016 |
2015 |
|
|
|
Note |
USD thousands |
USD thousands |
|
Cash flows from operating activities |
|
|
|
|
Profit for the year |
|
16,469 |
2,149 |
|
Adjustments for: |
|
|
|
|
Depreciation and amortization |
5,6 |
5,098 |
3,472 |
|
Net financing expense |
|
118 |
87 |
|
Loss on sale of fixed assets |
|
9 |
- |
|
Share-based payment |
13 |
480 |
574 |
|
Income tax expense |
4 |
3,115 |
642 |
|
|
|
|
|
|
Change in trade and other receivables |
|
(9,244) |
(6,017) |
|
Change in trade and other payables |
|
4,004 |
6,419 |
|
Change in employee benefits |
|
183 |
(34) |
|
|
|
|
|
|
Income taxes received |
|
748 |
105 |
|
Income taxes paid |
|
(790) |
(1,224) |
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Interest received |
|
104 |
18 |
|
Interest paid |
|
(9) |
(9) |
|
Net cash provided by operating activities |
|
20,285 |
6,182 |
|
Cash flows from investing activities |
|
|
|
|
Increase in pledged deposits |
|
(28) |
(78) |
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Acquisition of property, plant and equipment |
5 |
(124) |
(336) |
|
Acquisition and capitalization of intangible assets |
6 |
(1,332) |
(2,010) |
|
Proceeds from sale of property, plant and equipment |
5 |
4 |
74 |
|
Repayment (grant) of short-term loans |
|
527 |
(544) |
|
Proceeds from sale of investments on money market fund |
|
- |
482 |
|
Acquisition of subsidiaries, net of cash acquired |
16 |
(5,000) |
(8,099) |
|
Decrease (increase) in bank deposits, net |
|
8,500 |
(8,500) |
|
Net cash provided by (used in) investing activities |
|
2,547 |
(19,011) |
|
Cash flows from financing activities |
|
|
|
|
Repayment of loans from related parties |
|
- |
(111) |
|
Buy back of shares |
11A, 16B |
(7,520) |
- |
|
Proceeds from exercise of share options |
|
6 |
47 |
|
Dividends paid |
11B |
(3,990) |
(1,527) |
|
Net cash used in financing activities |
|
(11,504) |
(1,591) |
|
Net increase (decrease) in cash and cash equivalents |
|
11,328 |
(14,420) |
|
Cash and cash equivalents as at the beginning of the year |
|
10,173 |
24,664 |
|
Effect of exchange rate fluctuations on cash and cash equivalents |
|
(30) |
(71) |
|
|
|
|
|
|
Cash and cash equivalents as at the end of the year |
|
21,471 |
10,173 |
The accompanying notes are an integral part of these consolidated financial statements.
Notes to the Consolidated Financial Statements as at 31 December 2016
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. The address of the registered office is 121 Hahashmonaim Street Tel-Aviv, Israel.
Taptica International (AIM: TAP) is a global end-to-end mobile 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, and Seoul.
On 28 May 2014, the Company's shares began trading on the AIM Market of the London Stock Exchange following the Company's Initial Public Offering ("IPO"). As part of the IPO, the Company issued 11,672,001 ordinary shares, of NIS 0.01 par value in consideration for a gross amount of € 17,858,162 (approximately USD 30 million). The share issue costs amounted to USD 2.2 million (net of tax) and the net consideration amounted to approximately USD 27.5 million (€ 16.4 million).
On 1 August 2014, the Company purchased 100% of Taptica Ltd's ("Taptica") share capital for a total consideration of USD 13.84 million.
On 7 September 2015, the Company acquired 100% of share capital in Taptica Social Ltd., formerly named AreaOne Ltd. ("Taptica Social") for a total consideration of USD 15.6 million, see also Note 16B.
B. Definitions
In these financial statements -
(1) The Company - Taptica International Ltd. (former name: Marimedia 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".
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 2 - Basis of Preparation
A. Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
The consolidated financial statements were authorized for issue by the Company's Board of Directors on 17 March 2017.
B. Functional and presentation currency
These consolidated financial statements are presented in USD, which is the Company's functional currency, and have been rounded to the nearest thousands, except when otherwise indicated. The USD is the currency that represents the principal economic environment in which the Company operates.
C. Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis except for the following assets and liabilities:
• Deferred tax assets and liabilities
• Contingent consideration commitment
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 significant judgments (other than those involving estimates) made by the management while implementing Group accounting policies and which have the most significant effect on the amounts recognized in the financial statements is included in Note 6, on intangible assets, with respect to the accounting of software development, and Note 16, on subsidiaries, with respect to business combination.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 2 - Basis of Preparation (cont'd)
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 13, on share-based payments;
• Note 14, on financial instruments; and
• Note 16, on subsidiaries (regarding business combinations).
Note 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 Company. In addition, the consideration transferred includes the fair value of any contingent consideration. After the acquisition date, the Group recognizes changes in the fair value of contingent consideration classified as a financial liability in profit or loss, whereas contingent consideration classified as an equity instrument is not remeasured.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
A. Basis of consolidation (cont'd)
(1) Business combinations (cont'd)
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.
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. 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.
(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.
B. 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.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
C. Financial instruments
(1) Non-derivative financial assets
Initial recognition of financial assets
The Group initially recognizes loans and receivables on the date that they are created. All other financial assets acquired, are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument, meaning on the date the Group undertook to purchase or sell the asset. Non-derivative financial instruments comprise investments, inter alia, in money market funds, trade and other receivables and cash and cash equivalents.
Derecognition of financial assets
Financial assets are derecognized when the contractual rights of the Group to the cash flows from an asset expire, or the Group transfers the rights to receive the contractual cash flows on a financial asset in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred.
Ordinary course of business sales of financial assets are recognized on the trade date, meaning on the date the Group undertook to sell an asset.
Classification of financial assets into categories and the accounting for each category
The Group classifies its financial assets according to the following categories:
Financial assets at fair value through profit or loss
A financial asset is classified at fair value through profit or loss when it is held for trading purposes.
Receivables
Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition receivables are measured at amortized cost using the effective interest method, less any impairment losses. Receivables comprise cash and cash equivalents, trade and other receivables.
Cash and cash equivalents include cash balances available for immediate use and demand deposits. Cash equivalents include short-term highly liquid investments (with original maturities of three months or less) that are readily convertible into known amounts of cash and are exposed to insignificant risks of change in value.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
C. Financial instruments (cont'd)
(2) Non-derivative financial liabilities
Non-derivative financial liabilities include trade and other payables.
Initial recognition of financial liabilities
The Group initially recognizes all financial liabilities on the trade date on which the Group becomes a party to the contractual provisions of the instrument.
Financial liabilities are recognized initially at fair value minus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.
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.
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) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares are recognized as a deduction from equity, net of any tax effects.
Treasury shares
When share capital recognized as equity is repurchased by the Group, the amount of the consideration paid, which includes directly attributable costs is recognized as a deduction from share premium.
D. Fixed Assets
Fixed assets are measured at cost less accumulated depreciation. Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to its residual value (assumed to be nil), using the straight line method, over its expected useful life as follows:
|
|
Years |
|
Computers |
3 |
|
Office furniture and equipment |
6-17 |
|
Motor vehicles |
7 |
|
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.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
E. Intangible assets
(1) Software development
Costs that are directly associated with the development of identifiable and unique software products controlled by the Group are recognized as intangible assets when all the criteria in IAS 38 are met.
Development costs are capitalized only when it is probable that future economic benefit will result from the project and the following criteria are met:
• the technical feasibility of the product has been ascertained;
• adequate technical, financial and other resources are available to complete and sell or use the intangible asset;
• the Group can demonstrate how the intangible asset will generate future economic benefits and the ability to use or sell the intangible asset can be demonstrated;
• it is the intention of management to complete the intangible asset and use it or sell it; and
• the development costs can be measured reliably.
In subsequent periods, these costs are amortized over the useful economic life of the asset.
Where these criteria are not met development costs are charged to the statement of comprehensive income as incurred.
The estimated useful lives of developed software is 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 (3-5 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). As of 31 December 2016 and 2015, the CGU's recoverable amount was based on the fair value of the Company's quoted share price (level 1). 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.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
E. Intangible assets (cont'd)
(5) Amortization
Amortization is a systematic allocation of the amortizable amount of an intangible asset over its useful life. The amortizable amount is the cost of the asset less its accumulated residual value.
Internally generated intangible assets, such as software development costs, are not systematically amortized as long as they are not available for use, i.e. they are not yet on site or in working condition for their intended use. Goodwill is not systematically amortized as well, but is tested for impairment at least once a year.
The Group examines the amortization methods, useful life and accumulated residual values of its intangible assets at least once a year (usually at the end of each reporting period) in order to determine whether events and circumstances continue to support the decision that the intangible asset has an indefinite useful life.
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of the intangible assets from the date they are available for use, since this method most closely reflects the expected pattern of consumption of the future economic benefits embodied in each asset, such as development costs, are tested for impairment at least once a year until such date as they are available for use.
The estimated useful lives for the current and comparative periods are as follows:
- Trademarks 5 years
- Software (developed and acquired) 3-5 years
- Customer relationships 5-7 years
- Technology 5 years
- Distribution channel 5 years
F. Impairment of financial assets
A financial asset not carried at fair value through profit or loss is tested for impairment when objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
The Group considers evidence of trade receivables and other receivables at a specific asset level.
Losses are recognized in profit or loss and reflected in a provision for loss against the balance of the receivable.
G. Impairment of non-financial assets
Non-financial assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which an asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Non-financial assets that were subject to impairment are reviewed for possible reversal of the impairment recognized in respect thereof at each statement of financial position date.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
H. Employee benefits
(1) Post-employment benefits
The Group's main post-employment benefit plan is under section 14 to the Severance Pay Law ("Section 14"), which is accounted for as a defined contribution plan. In addition, for certain employees, the Group has an additional immaterial plan that is accounted for as a defined benefit plan. These plans are usually financed by deposits with insurance companies or with funds managed by a trustee.
(a) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an expense in the statement of comprehensive income in the periods during which related services are rendered by employees.
According to Section 14 the payment of monthly deposits by a company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to the employees that have entered into agreements with the company pursuant to such Section 14. The Company has entered into agreements with a majority of its employees in order to implement Section 14. Therefore, the payment of monthly deposits by the Company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to those employees that have entered into such agreements and therefore the Company incurs no additional liability with respect to such employees.
(b) Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset).
(2) Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided or upon the actual absence of the employee when the benefit is not accumulated (such as maternity leave).
A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
The employee benefits are classified, for measurement purposes, as short-term benefits or as other long-term benefits depending on when the Group expects the benefits to be wholly settled.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
H. Employee benefits (cont'd)
(3) Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognized as a salary expense with a corresponding increase in equity, over the period that an employee becomes unconditionally entitled to an award. The amount recognized as an expense in respect of share-based payment awards that are conditional upon meeting service vesting conditions, is adjusted to reflect the number of awards that are expected to vest.
I. Revenue recognition
The Group earns its revenue from providing user acquisition services by using technological tools and developments. The Company's business is based on optimizing real time trading of digital advertising between buyers and sellers.
The revenue is comprised of different pricing schemes such as Cost per Mil Impression (CPM) and performance based metrics that include Cost per Click (CPC) and Cost per Action (CPA) options.
Revenue from advertising services is recognized by multiplying an agreed amount per Mil Impression/click/ action with the volumes of these units delivered.
The Group acts as the principle in these arrangements and reports revenue earned and costs incurred on a gross basis.
J. Classification of expenses
Cost of revenues
Cost of revenues consists primarily of traffic acquisition costs that are directly attributable to revenue generated by the Company.
Research and development
Research and development expenses consist primarily of compensation and related costs for personnel responsible for the research and development of new and existing products and services and amortization of certain intangible assets (see also Note 6). Where required, development expenditures are capitalized in accordance with the Company's standard internal capitalized development policy in accordance with IAS 38 (also see Note 3E). All research costs are expensed when incurred.
Selling and marketing
Selling and marketing expenses consist primarily of compensation and related costs for personnel engaged in customer service, sales, and sales support functions, as well as advertising and promotional expenditures and amortization of certain intangible assets (see also Note 6).
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
J. Classification of expenses (cont'd)
General and administrative
General and administrative expenses consist primarily of compensation and related costs for personnel, and include costs related to the Company's facilities, finance, human resources, information technology, legal organizations and fees for professional services. Professional services are principally comprised of outside legal, and information technology consulting and outsourcing services that are not directly related to other operational expenses.
K. Financing income and expenses
Financing income comprises interest income on funds invested, changes in the fair value of financial assets held for trading and foreign currency gains. Interest income is recognized as it accrues using the effective interest method.
Changes in the fair value of financial assets at fair value through profit or loss also include income from interest.
Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either financing income or financing expenses depending on whether foreign currency movements are in a net gain or net loss position.
L. Income tax expense
Income tax comprises current and deferred tax. Current tax and deferred tax are recognized in the statement of comprehensive income except to the extent that they relate to a business combination.
Current taxes
Current tax is the expected tax payable (or receivable) on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date.
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.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
L. Income tax expense (cont'd)
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.
M. 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. Diluted EPS is determined by adjusting the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares, which mainly comprise of share options granted to employees and certain equity instruments resulting from business combination transactions.
N. Dividends
Dividend distribution to the Group's owners is recognized as a liability in the Group's consolidated statement of financial position on the date on which the dividends are approved by the Group's Board of Directors.
O. Leases
The Group's leases are classified as operating leases, and the leased assets are not recognized on the Group's statement of financial position. Payments made under operating leases, other than conditional lease payments, are recognized in profit or loss on a straight-line basis over the term of the lease. Minimum lease payments made under operating leases are recognized in profit or loss as incurred.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 3 - Significant Accounting Policies (cont'd)
P. New standards and interpretations not yet adopted
IFRS 9 (2014), Financial Instruments
IFRS 9 (2014) is a final version of the standard, and includes revised guidance on the classification and measurement of financial instruments, and a new model for measuring impairment of financial assets.
IFRS 9 (2014) is effective for annual periods beginning on or after 1 January 2018 with early adoption being permitted. It will be applied retrospectively with some exemptions.
The Group has examined the effects of applying IFRS 9 (2014), and in its opinion the effect on the financial statements will be immaterial.
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. IFRS 15 provides two approaches for recognizing revenue: at a point in time or over time. The model includes five steps for analyzing transactions so as to determine when to recognize revenue and at what amount. Furthermore, IFRS 15 provides new and more extensive disclosure requirements than those that exist under current guidance.
IFRS 15 is applicable for annual periods beginning on or after 1 January 2018 and earlier application is permitted.
The Group has examined the effects of applying IFRS 15, and in its opinion the effect on the financial statements will be immaterial.
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 has not yet commenced examining the effects of IFRS 16 on the financial statements.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 4 - Income Tax
A. Details regarding the tax environment of the Group
(1) Corporate tax rate
(a) Presented hereunder are the tax rates relevant to the group in the years 2015-2016:
2015 - 26.5%
2016 - 25%
On 4 January 2016 the Israeli Parliament passed the Law for Amendment of the Israeli Tax Ordinance (Amendment 216), by which, the corporate income tax rate would be reduced by 1.5% to 25% as of 2016 and thereafter.
Furthermore, on 22 December 2016 the Israeli Parliament passed the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) - 2016 ("The Economic Efficiency Law"), by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. The first step will be to a rate of 24% as from January 2017 and the second step will be to a rate of 23% as from January 2018.
As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at 31 December 2016 were calculated according to the new tax rate specified in the Economic Efficiency Law, at the tax rate expected to apply on the date of reversal.
The effect of the changes described above on the financial statements as at December 31, 2016 is reflected in a decrease in the deferred tax liabilities in the amount of USD 771 thousand and a decrease in the deferred tax assets in the amount of USD 158 thousand. The adjustment in deferred tax balances was recognized against deferred tax expenses/income in the amount of USD 613 thousand.
Current taxes for the reported periods are calculated according to the tax rates presented above.
(b) According to various amendments to the Income Tax Ordinance (New Version) - 1961 (hereinafter - "the Ordinance"), IFRS shall not apply when determining the taxable income for the 2007 through 2013 tax years even if IFRS was applied when preparing the financial statements.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 4 - Income Tax (cont'd)
A. Details regarding the tax environment of the Group (cont'd)
(2) Benefits under the Law for the Encouragement of Capital Investments
Amendment to the Law for the Encouragement of Capital Investments - 1959
On 29 December 2010 the Israeli Parliament approved the Economic Policy Law for 2011-2012, which includes an amendment to the Law for the Encouragement of Capital Investments - 1959 (the "Amendment"). The Amendment is effective from 1 January 2011 and its provisions apply to preferred income derived or accrued in 2011 and thereafter by a preferred company, per the definition of these terms in the Amendment.
A preferred enterprise track was introduced, which mainly provides a uniform and reduced tax rate for all the company's income entitled to benefits, such as: in the 2011-2012 tax years - a tax rate of 10% for Development Area A and of 15% for the rest of the country, in the 2013-2014 tax years - a tax rate of 7% for Development Area A and of 12.5% for the rest of the country, and as from the 2015 tax year - 6% for Development Area A and 12% for the rest of the country. On August 5, 2013 the Knesset passed the Law for Changes in National Priorities (Legislative Amendments for Achieving Budget Objectives in the Years 2013 and 2014) - 2013, which cancelled the planned tax reduction so that as from the 2014 tax year the tax rate on preferred income will be 9% for Development Area A and 16% for the rest of the country.
The Company and Taptica Social obtained a tax ruling (the "Ruling") from the Israeli Tax Authorities (the "ITA"), effective for years 2012 - 2016 and 2013-2017, respectively, which determines that the Company owns an industrial enterprise as defined in the Law for the Encouragement of Capital Investments - 1959.
Based on the Ruling, income derived from the industrial enterprise, which is considered "Preferred Income", should be eligible for tax benefits during the aforementioned period (Non A development area), subject to the limitations set forth in the Ruling. However, the Ruling has determined that income which is not considered part of the Company's "Preferred Income" shall not be entitled to the "Preferred Income" tax benefits and will be subject to the standard Israeli corporate tax rate.
In June 2016, Taptica appealed for a tax ruling, similar to those that have been obtained as stated above. Based on several discussions that took place during 2016 with the Israeli Tax Authorities, the Company believes that it is probable that the ruling will be obtained. Subsequent to the balance sheet date, a draft of the tax ruling was obtained by the Company.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 4 - Income Tax (cont'd)
B. Composition of income tax expense
|
|
|
|
Year ended 31 December |
|
|
|
|
|
2016 |
2015 |
|
|
|
|
USD thousands |
USD thousands |
|
Current tax expense |
|
|
|
Current year |
4,172 |
624 |
|
Adjustment for prior years, net |
- |
37 |
|
|
4,172 |
661 |
|
Deferred tax expense (income) |
|
|
|
Creation and reversal of temporary differences |
(444) |
(20) |
|
Change in tax rate |
(613) |
1 |
|
|
(1,057) |
(19) |
|
|
|
|
|
Income tax expense |
3,115 |
642 |
C. Reconciliation between the theoretical tax on the pre-tax profit and the tax expense:
|
|
|
|
Year ended 31 December |
|
|
|
|
|
2016 |
2015 |
|
|
|
|
USD thousands |
USD thousands |
|
Profit before taxes on income |
19,584 |
2,791 |
|
Primary tax rate of the Company |
25% |
26.5% |
|
Tax calculated according to the Company's primary tax rate |
4,896 |
740 |
|
|
|
|
|
Additional tax (tax saving) in respect of: |
|
|
|
Non-deductible expenses |
242 |
156 |
|
Effect of reduced tax rate on preferred income |
|
|
|
according to the Law for the Encouragement of |
|
|
|
Capital Investments - 1959 |
(1,492) |
(134) |
|
Utilization of tax losses from prior years for which |
|
|
|
deferred taxes were not created |
(6) |
(302) |
|
Effect on deferred taxes at a rate different from the |
|
|
|
primary tax rate |
(506) |
(4) |
|
Foreign tax rate differential |
161 |
111 |
|
Other differences |
(180) |
75 |
|
Income tax expenses |
3,115 |
642 |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 4 - Income Tax (cont'd)
D. 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:
|
|
|
Carry-forward |
Initial public |
|
|
|
|
Intangible |
tax deductions |
offering |
|
|
|
|
Assets |
and losses |
costs |
Other |
Total |
|
|
USD thousands |
USD thousands |
USD thousands |
USD thousands |
USD thousands |
|
Balance of deferred tax asset |
|
|
|
|
|
|
(liability) as at 1 January 2015 |
(2,269) |
770 |
284 |
66 |
(1,149) |
|
|
|
|
|
|
|
|
Changes recognized in profit or loss |
683 |
(618) |
(158) |
113 |
20 |
|
|
|
|
|
|
|
|
Recognized in respect of |
|
|
|
|
|
|
business combination |
(1,477) |
56 |
- |
21 |
(1,400) |
|
|
|
|
|
|
|
|
Effect of change in tax rate |
1 |
- |
(2) |
- |
(1) |
|
|
|
|
|
|
|
|
Effect of change due to transition |
|
|
|
|
|
|
to Dollar Regulations |
- |
- |
34 |
- |
34 |
|
|
|
|
|
|
|
|
Balance of deferred tax asset |
|
|
|
|
|
|
(liability) as at 31 December 2015 |
(3,062) |
208 |
158 |
200 |
(2,496) |
|
|
|
Carry-forward |
Initial public |
|
|
|
|
Intangible |
tax deductions |
offering |
|
|
|
|
Assets |
and losses |
costs |
Other |
Total |
|
|
USD thousands |
USD thousands |
USD thousands |
USD thousands |
USD thousands |
|
Balance of deferred tax asset |
|
|
|
|
|
|
(liability) as at 1 January 2016 |
(3,062) |
208 |
158 |
200 |
(2,496) |
|
|
|
|
|
|
|
|
Changes recognized in profit or loss |
599 |
(162) |
(146) |
153 |
444 |
|
|
|
|
|
|
|
|
Effect of change in tax rate |
700 |
(46) |
(12) |
(29) |
613 |
|
|
|
|
|
|
|
|
Balance of deferred tax asset |
|
|
|
|
|
|
(liability) as at 31 December 2016 |
(1,763) |
- |
- |
324 |
(1,439) |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 5 - Fixed Assets, net
|
|
|
|
Office |
|
|
|
|
|
Motor |
furniture and |
Leasehold |
|
|
|
Computers |
vehicles |
equipment |
improvements |
Total |
|
|
USD thousands |
||||
|
Cost |
|
|
|
|
|
|
|
|
Balance as at 1 January 2015 |
388 |
117 |
97 |
319 |
921 |
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
42 |
- |
27 |
267 |
336 |
|
|
|
Business combination |
23 |
- |
34 |
24 |
81 |
|
|
|
Disposals |
- |
(117) |
- |
- |
(117) |
|
|
|
Balance as at 31 December 2015 |
453 |
- |
158 |
610 |
1,221 |
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
76 |
- |
15 |
33 |
124 |
|
|
|
Disposals |
(2) |
- |
(15) |
- |
(17) |
|
|
|
Balance as at 31 December 2016 |
527 |
- |
158 |
643 |
1,328 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
Balance as at 1 January 2015 |
227 |
29 |
14 |
82 |
352 |
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
95 |
14 |
10 |
279 |
398 |
|
|
|
Disposals |
- |
(43) |
- |
- |
(43) |
|
|
|
Balance as at 31 December 2015 |
322 |
- |
24 |
361 |
707 |
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
99 |
- |
34 |
59 |
192 |
|
|
|
Disposals |
(1) |
- |
(3) |
- |
(4) |
|
|
|
Balance as at 31 December 2016 |
420 |
- |
55 |
420 |
895 |
|
|
|
|
|
|
|
|
|
||
|
Carrying amounts |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
As at 1 January 2015 |
161 |
88 |
83 |
237 |
569 |
||
|
|
|
|
|
|
|
||
|
As at 31 December 2015 |
131 |
- |
134 |
249 |
514 |
||
|
|
|
|
|
|
|
||
|
As at 31 December 2016 |
107 |
- |
103 |
223 |
433 |
||
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 6 - Intangible Assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer |
|
Distribution |
Residual |
|
|
|
Software |
Trademarks |
relationships |
Technology |
channel |
Goodwill |
Total |
|
|
USD thousands |
||||||
|
Cost |
|
|
|
|
|
|
|
|
Balance as at |
|
|
|
|
|
|
|
|
1 January 2015 |
2,140 |
2,907 |
539 |
5,622 |
- |
10,719 |
21,927 |
|
|
|
|
|
|
|
|
|
|
Additions |
1,794 |
- |
- |
- |
- |
- |
1,794 |
|
Business combination |
- |
2,100 |
361 |
4,851 |
1,044 |
8,881 |
17,237 |
|
|
|
|
|
|
|
|
|
|
Balance as at |
|
|
|
|
|
|
|
|
31 December 2015 |
3,934 |
5,007 |
900 |
10,473 |
1,044 |
19,600 |
40,958 |
|
|
|
|
|
|
|
|
|
|
Additions |
1,332 |
- |
- |
- |
- |
- |
1,332 |
|
|
|
|
|
|
|
|
|
|
Balance as at |
|
|
|
|
|
|
|
|
31 December 2016 |
5,266 |
5,007 |
900 |
10,473 |
1,044 |
19,600 |
42,290 |
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
|
Balance as at |
|
|
|
|
|
|
|
|
1 January 2015 |
543 |
234 |
43 |
444 |
- |
- |
1,264 |
|
|
|
|
|
|
|
|
|
|
Additions |
731 |
730 |
128 |
1,415 |
70 |
- |
3,074 |
|
|
|
|
|
|
|
|
|
|
Balance as at |
|
|
|
|
|
|
|
|
31 December 2015 |
1,274 |
964 |
171 |
1,859 |
70 |
- |
4,338 |
|
|
|
|
|
|
|
|
|
|
Additions |
1,729 |
1,001 |
186 |
1,782 |
208 |
- |
4,906 |
|
|
|
|
|
|
|
|
|
|
Balance as at |
|
|
|
|
|
|
|
|
31 December 2016 |
3,003 |
1,965 |
357 |
3,641 |
278 |
- |
9,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts |
|
|
|
|
|
|
|
|
As at 1 January 2015 |
1,597 |
2,673 |
496 |
5,178 |
- |
10,719 |
20,663 |
|
|
|
|
|
|
|
|
|
|
As at 31 December 2015 |
2,660 |
4,043 |
729 |
8,614 |
974 |
19,600 |
36,620 |
|
|
|
|
|
|
|
|
|
|
As at 31 December 2016 |
2,263 |
3,042 |
543 |
6,832 |
766 |
19,600 |
33,046 |
A. Amortization
The amortization of technology and software is allocated to research and development expenses and amortization of trademarks, distribution channel and customer relationships is allocated to selling and marketing expenses.
B. Capitalized development costs
Development costs capitalized in the period amounted to USD 1,172 thousand (2015: USD 1,313 thousand) and were classified under software.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 7 - Trade and Other Receivables
|
|
|
31 December |
|
|
|
|
2016 |
2015 |
|
|
|
USD thousands |
USD thousands |
|
Trade receivables, net (1) |
27,443 |
19,168 |
|
|
|
|
|
Other receivables |
|
|
|
Prepaid expenses |
391 |
156 |
|
Institutions |
1,314 |
653 |
|
Related parties (see Note 15) |
4 |
55 |
|
Pledged deposits |
181 |
150 |
|
Short-term loan |
- |
544 |
|
|
1,890 |
1,558 |
|
|
|
|
|
|
29,333 |
20,726 |
(1) Including trade receivables due from related parties in the amount of USD 12 thousand and USD 7 thousand, as at 31 December 2016 and 2015, respectively. (See also Note 15).
Note 8 - Trade and Other Payables
|
|
31 December |
||
|
|
|
2016 |
2015 |
|
|
|
USD thousands |
USD thousands |
|
Trade payables (1) |
22,501 |
20,366 |
|
|
|
|
|
Other payables |
|
|
|
Advances from customers |
1,297 |
1,360 |
|
Wages and salaries |
3,217 |
1,461 |
|
Provision for vacation |
517 |
321 |
|
Institutions |
4,071 |
215 |
|
Related parties (see Note 15) |
17 |
27 |
|
Contingent consideration commitment (see Note 16B) |
200 |
2,495 |
|
Others |
124 |
70 |
|
|
9,443 |
5,949 |
|
|
|
|
|
|
31,944 |
26,315 |
(1) Including trade payables due to related parties in the amount of USD 13 thousand and USD 46 thousand, as at 31 December 2016 and 2015, respectively. (See also Note 15).
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 9 - Cash and Cash Equivalents
|
|
|
31 December |
|
|
|
|
2016 |
2015 |
|
|
|
USD thousands |
USD thousands |
|
Cash |
|
20,571 |
10,111 |
|
Bank deposits |
|
900 |
62 |
|
Cash and cash equivalents |
|
21,471 |
10,173 |
The Group's exposure to credit, and currency risks are disclosed in Note 14 on financial instruments.
Note 10 - General and Administrative Expenses
|
|
|
Year ended 31 December |
|
|
|
2016 |
2015 |
|
|
|
USD thousands |
USD thousands |
|
|
Payroll and related expenses |
2,627 |
1,967 |
|
Rent and office maintenance |
675 |
1,139 |
|
Professional expenses |
1,044 |
871 |
|
Doubtful debts |
589 |
300 |
|
Other expenses |
984 |
1,187 |
|
|
|
|
|
|
5,919 |
5,464 |
Note 11 - Equity
A. Share capital (in thousands of shares of NIS 0.01 par value)
|
|
|
Ordinary shares |
|
|
|
2016 |
2015 |
|
|
Issued and paid-in share capital as at 31 December |
60,447 |
66,405 |
|
|
|
|
|
Authorized share capital |
300,000 |
300,000 |
(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.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 11 - Equity (cont'd)
A. Share capital (in thousands of shares of NIS 0.01 par value) (cont'd)
(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. On May 2016, the commitment to issue shares was terminated and the consideration was replaced to cash payments. In the year ended 31 December 2016, the Company issued 25,442 ordinary shares of a par value of NIS 0.01 based on the share price on the date of the issuance. The total expenses recognized in the statement of Comprehensive Income in the year ended 31 December 2016 with respect to the director share allotment amounted to USD 27 thousand.
(3) Own share acquisition
On 26 March 2016 the Company acquired 6 million Ordinary Shares of NIS 0.01 ("Ordinary Shares") at a price of GBP 0.65 per share for a total consideration of GBP 3,900 thousand (USD 5,520 thousand) from Cababie Holdings Limited and Dooi Holdings Limited (together the "Vendors"). The shares purchased represent approximately 8.76% of the total voting rights of the Company as of the acquisition date.
On 20 June 2016, the Board of the Company resolved to exercise its option to finalize the acquisition of Taptica Social in cash consideration, which includes purchasing 2,088,337 ordinary shares of the Company that had been issued to the shareholders of Taptica Social and held in escrow ("Escrow Shares"). The acquisition of the Escrow Shares took place on 30 June 2016 and the purchased shares were reclassified as Treasury Shares. (see Note 16B)
B. Dividends
Details on dividends (in USD thousand):
|
|
For the year |
For the year |
|
|
ended |
ended |
|
|
31 December 2016 |
31 December, 2015 |
|
|
USD thousands |
USD thousands |
|
Declared and paid |
3,990 |
1,527 |
A dividend in the amount of USD 1,527 thousand (USD 0.023 per ordinary share) that was declared in March 2015 was paid in June 2015.
A dividend in the amount of USD 490 thousand (USD 0.00784 per ordinary share) that was declared in March 2016, was paid in June 2016.
A dividend in the amount of USD 3,500 thousand (USD 0.0579 per ordinary share) that was declared in August 2016, was paid in November 2016.
For a dividend that was declared subsequent to the balance sheet date- see Note 18.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 12 - Earnings per Share
Basic earnings per share
The calculation of basic earnings per share as at 31 December 2016 and 2015 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
|
|
|
|
Year ended 31 December |
|
|
|
|
|
2016 |
2015 |
|
|
|
|
USD thousands |
|
|
Profit for the year |
16,469 |
2,149 |
Weighted average number of ordinary shares:
|
|
|
|
Year ended 31 December |
|
|
|
|
|
2016 |
2015 |
|
|
|
|
Shares of NIS 1 |
Shares of NIS 1 |
|
|
|
|
0.01 par value |
0.01 par value |
|
Weighted average number of ordinary shares used to |
|
|
|
calculate basic earnings per share as at 31 December |
62,682,253 |
65,990,349 |
|
|
|
|
|
Basic earnings per share |
0.2627 |
0.033 |
Diluted earnings per share
The calculation of diluted earnings per share as at 31 December 2016 and 2015 was based on profit for the year divided by a weighted average number of shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:
Weighted average number of ordinary shares (diluted):
|
|
|
Year ended 31 December |
|
|
|
|
2016 |
2015 |
|
|
|
Shares of NIS |
Shares of NIS |
|
|
|
0.01 par value |
0.01 par value |
|
Weighted average number of ordinary shares used to |
|
|
|
|
calculate basic earnings per share |
|
62,682,253 |
65,990,349 |
|
Effect of share options on issue |
|
856,519 |
11,360 |
|
Weighted average number of ordinary shares used to |
|
|
|
|
calculate diluted earnings per share |
|
63,538,772 |
66,001,709 |
|
|
|
|
|
|
Diluted earnings per share |
|
0.2592 |
0.033 |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 13 - Share-Based Payment Arrangements
(1) Expense recognized in the statement of comprehensive income is as follows:
|
|
|
|
Year ended 31 December |
|
|
|
|
|
2016 |
2015 |
|
|
|
|
USD thousands |
|
|
Selling and marketing |
|
|
303 |
407 |
|
Research and development |
|
|
95 |
84 |
|
General and administrative |
|
|
55 |
83 |
|
|
|
|
453 |
574 |
(2) Share-based compensation plan
The terms and conditions related to the grants of the share option 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 3-5 years.
In June 2015, the Board of the Company approved a change in the exercise price and vesting terms relating to 2,861,000 options for ordinary shares held by certain employees under the Plan (the "Amended Options"). The Amended Options were originally granted as follows:
· 1,015,000 were granted on 1 February 2014 exercisable from 1 February 2016 at a price of USD 2.28 each with an expiry date of 1 February 2024
· 1,846,000 were granted on 24 February 2015 with an exercise price of GBP 1.3232, with the same gradual four-year vesting period as that described above for the New Options (with the exercise period commencing on the second anniversary of 24 February 2015) and an expiry date of 24 February 2020
The Amended Options are exercisable at a price of 90 pence each. The options granted on 1 February 2014 will now vest and become exercisable on 30 June 2017, while the expiration date remains on 1 February 2024. The vesting and exercise periods of the options granted on 24 February 2015 remain unchanged. The incremental fair value (amounting to USD 451 thousand) is recognized over the remaining vesting period.
(3) Option grants during 2016 and 2015
|
|
|
|
Number of |
|
|
|
|
|
options |
Exercise |
|
Grant date |
|
|
(thousands) |
Price |
|
Options granted on 24 February 2015 |
|
|
2,328 |
GBP 1.32 |
|
Options granted on 30 June 2015 |
|
|
1,509 |
GBP 0.90 |
|
Options granted on 1 November 2015 |
|
|
1,632 |
GBP 0.65 |
|
Options granted on 22 November 2015 |
|
|
157 |
GBP 0-0.24 |
|
Options granted on 14 December 2015 |
|
|
150 |
GBP 0.65 |
|
Options granted on 15 March 2016 |
|
|
160 |
GBP 0.8 |
|
Options granted on 31 May 2016 |
|
|
1,248 |
GBP 0.79 |
|
Options granted on 30 August 2016 |
|
|
350 |
GBP 1.19 |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 13 - Share-Based Payment Arrangements (cont'd)
(4) The number of share options is as follows:
|
|
Weighted average exercise price |
Number of options |
||
|
|
2016 |
2015 |
2016 |
2015 |
|
|
(USD) |
(Thousands) |
||
|
Outstanding at 1 January |
1.6 |
0.76 |
5,144 |
3,217 |
|
Forfeited during the year |
1.36 |
1.61 |
(1,360) |
(2,167) |
|
Exercised during the year |
0.33 |
0.03 |
(16) |
(1,682) |
|
Granted during the year |
1.23 |
1.26 |
1,758 |
5,776 |
|
|
|
|
|
|
|
Outstanding at 31 December |
|
|
5,526 |
5,144 |
|
|
|
|
|
|
|
Exercisable at 31 December |
|
|
- |
19 |
(5) Information on measurement of fair value of share-based payment plans
The fair value of employee share options is measured using the Black-Scholes formula. Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility, expected term of the instruments, expected dividends, and the risk-free interest rate (based on government debentures).
The parameters used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows:
|
|
|
|
|
The parameters used to calculate fair value: |
|
|
|
|
2016 |
2015 |
|
|
|
|
|
Grant date fair value in USD |
0.229-0.377 |
0.32-0.96 |
|
Share price (on grant date) (in GBP) |
0.8-1.28 |
0.63-1.32 |
|
Exercise price (in GBP) |
0.79-1.19 |
0.01-1.3232 |
|
Expected volatility (weighted average) |
40% |
35% |
|
Expected life (weighted average) |
5 |
5 |
|
Expected dividends |
4%-6% |
0% |
|
Risk-free interest rate |
1.18%-1.5% |
0.67-1.66% |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 14 - Financial Instruments
A. Overview
The Group has exposure to the following risks from its use of financial instruments:
- Credit risk
- Liquidity risk
- Market risk
This note presents quantitative and qualitative information about the Group's exposure to each of the above risks, and the Group's objectives, policies and processes for measuring and managing risk.
B. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's trade and other receivables and investment securities.
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:
|
|
|
31 December |
||
|
|
|
|
2016 |
2015 |
|
|
|
|
USD thousands |
USD thousands |
|
Cash and cash equivalents (1) |
|
21,471 |
10,173 |
|
Bank deposits (2) |
|
- |
8,516 |
|
Trade receivables, net (3) |
|
27,443 |
19,168 |
|
Other receivables |
|
185 |
749 |
|
|
|
|
|
|
|
|
49,099 |
38,606 |
(1) At 31 December 2016, USD 475 thousand are held in NIS, USD 160 thousand are held in GBP and USD 149 thousand are held in EUR, with the remainder held in USD. At 31 December 2015, USD 491 thousand are held in NIS, USD 372 thousand are held GBP, and USD 271 thousand are held in EUR, with the remainder held in USD.
(2) In 2015 bank deposits are held in USD at two large banks in Israel, for a duration of 6 months, carrying a weighted average interest rate of 0.6%.
(3) At 31 December 2016, the Group included provision to doubtful debts in the amount of USD 655 thousand (31 December 2015: USD 510 thousand) in respect of specific debtors that their collectability is in doubt.
C. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
As of December 31, 2016 and 2015, the Group's contractual obligation of financial liability is in respect of Trade and other payables in the amount of USD 22,842 thousand and USD 22,931 thousand, respectively. The contractual maturity of this financial liability is less than one year and in its carrying amount.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 14 - Financial Instruments (cont'd)
D. Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, the CPI, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
Linkage and foreign currency risks
Currency risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Group, the US dollar (USD). The principal currencies in which these transactions are denominated are NIS, Euro and GBP.
At any point in time, the Group aims to match the amounts of its assets and liabilities in the same currency in order to hedge the exposure to changes in currency.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.
E. Fair value
The Company's financial instruments consist mainly of cash and cash equivalents, bank deposits, marketable securities, trade and other receivables, trade and other payables and contingent consideration. The carrying amounts of these financial instruments, except for the contingent consideration, approximate their fair value because of the short maturity of these investments. The contingent consideration is classified as level 3 under IFRS 13. Such amounts have been recorded initially and subsequently at their fair value (see note 16).
The table hereunder presents reconciliation from the beginning balance to the ending balance of contingent consideration carried at fair value level 3 of the fair value hierarchy.
|
|
|
|
|
Contingent consideration |
|
Balance as at September 7, 2015 (see also Note 16B) |
|
|
4,602 |
|
|
|
|
|
|
Expenses recognized in profit and loss |
|
|
170 |
|
|
|
|
|
|
Balance as at December 31, 2015 |
|
|
4,772 |
|
|
|
|
|
|
Expenses recognized in profit and loss |
|
|
428 |
|
|
|
|
|
|
Settlement of partial contingent consideration |
|
|
(5,000) |
|
|
|
|
|
|
Balance as at December 31, 2016 |
|
|
200 |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 15 - 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 13 regarding share-based payments.
Compensation and benefits to key management personnel (including directors) that are employed by the Company:
|
|
|
Year ended 31 December |
||
|
|
|
|
2016 |
2015 |
|
|
|
|
USD thousands |
USD thousands |
|
Share-based payments |
|
|
30 |
- |
|
Other compensation |
|
|
|
|
|
and benefits (*) |
|
|
2,562 |
1,322 |
|
|
|
|
|
|
|
|
|
|
2,592 |
1,322 |
(*) Including management fees that were paid directly to key management personnel.
B. Transactions with related parties
Details of transactions with related and interested parties are presented below (all transactions are at market terms, unless otherwise indicated):
|
|
|
Year ended 31 December |
|
|
|
|
2016 |
2015 |
|
|
|
Value of transactions |
|
|
|
|
USD thousands |
|
|
Related party |
Nature of transaction |
|
|
|
Webisaba Ltd. |
Sale of media from the Company. |
17 |
51 |
|
|
Purchase of media by the Company |
(147) |
(48) |
C. See also Notes 7 and 8.
Note 16 - Subsidiaries
A. Details in respect of subsidiaries
Presented hereunder is a list of the Group's subsidiaries:
|
|
|
Principal |
The Group's ownership interest in |
|
|
|
|
location of the |
the subsidiary for the year ended |
|
|
|
|
company's |
December 31 |
|
|
Name of company |
|
activity |
2016 |
2015 |
|
Taptica LTD |
Israel |
100% |
100% |
|
Taptica INC |
USA |
100% |
100% |
|
Taptica Social LTD |
Israel |
100% |
100% |
|
SocialClicks INC |
USA |
100% |
100% |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 16 - Subsidiaries (cont'd)
B. Acquisition of subsidiaries
Business combination from a prior period - Taptica Social Ltd.
On 7 September 2015 (hereinafter - the Acquisition Date) the Company acquired 100% of the outstanding share capital of Taptica Social. Taptica Social is a leading mobile user acquisition platform for brands and applications' developers to engage valuable mobile users through social media networks.
Upon the closing of the transaction, the Company paid USD 9,288 thousand in cash and USD 2 million, satisfied by the allotment of 2,088,337 newly issued ordinary shares of the Company, calculated based on 61 pence per share, following the receipt by Taptica Social of a tax ruling from the Israeli tax authority (see Note 18). Those shares were held in escrow, in the name of ESOP Management & Trust Services Ltd., the escrow agent, for 30 months. In addition, the consideration included two contingent deferred payments - payable at 12 months and 24 months after the closing of the transaction - each consist of up to USD 1 million in cash and up to USD 1.5 million satisfied by the allotment of 3,132,504 New Ordinary Shares calculated based on 61 pence per share, that were payable subject to compliance with certain performance criteria. The Company had an option through 30 June 2016 to substitute the 2,088,337 ordinary shares held in escrow with a USD 2 million cash payment, and to substitute the ordinary shares included in the contingent deferred payments with cash.
During 2016, the Company has exercised the option and in total the Company has paid in 2016 an amount of USD 7 million and in doing so has settled its obligations with respect to the acquisition of Taptica Social, except for the cash deferred payment in the amount of USD 200 thousand related to the estimated fair value of the usable tax loss.
The aggregate cash flow derived for the Group as a result of the acquisition in 2015:
|
|
|
|
|
USD thousands |
|
Cash and cash equivalents paid |
|
|
|
9,288 |
|
Cash and cash equivalents of the subsidiaries |
|
|
|
(1,189) |
|
|
|
|
|
|
|
|
|
|
|
8,099 |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 16 - Subsidiaries (cont'd)
B. Acquisition of subsidiaries (cont'd)
Business combination from a prior period - Taptica Social Ltd. (cont'd)
Adjustment of provisional amounts presented in 31 December 2015 financial statement:
The financial statements of the Company for December 31, 2015 included provisional amounts in respect of the subsidiary's intangible assets. During 2016 upon the completion of the independent valuation of the business combination the amounts reported were adjusted as follows:
December 31, 2015
|
|
|
As presented |
|
|
|
|
|
in Note 16 of the |
|
|
|
|
|
annual financial |
|
As adjusted |
|
|
|
statements |
Effect of |
in these |
|
|
|
as of |
retrospective |
financial |
|
|
|
31 December 2015 |
adjustment |
statements |
|
|
|
USD thousands |
USD thousands |
USD thousands |
|
Intangible assets |
|
6,918 |
944 |
7,862 |
|
Deferred tax liabilities |
|
(1,276) |
(304) |
(1,580) |
|
Goodwill |
|
9,328 |
(447) |
8,881 |
|
Contingent consideration commitment |
|
(2,302) |
(193) |
(2,495) |
The effect of the adjustment on the Statement of Comprehensive Income for the year ended 31 December 2015 is immaterial.
Consideration transferred:
The following summarizes the major classes of consideration transferred, and the recognized amounts of assets acquired and liabilities adjusted upon completion of the independent valuation:
|
|
|
|
2015 |
|
|
|
|
USD thousand |
|
Cash |
|
|
9,288 |
|
Equity instruments (2,088,337 ordinary shares) (i) |
|
|
1,656 |
|
Replacement share-based awards (ii) |
|
|
48 |
|
Contingent consideration (iii) |
|
|
4,602 |
|
|
|
|
|
|
|
|
|
15,594 |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 16 - Subsidiaries (cont'd)
B. Acquisition of subsidiaries (cont'd)
Business combination from a prior period - Taptica Social Ltd. (cont'd)
(i) Equity instruments
The fair value of the equity instrument was based on the quoted price of the Company's share on the Acquisition Date, deducted by the value of the embedded share repurchase option, measured based on Black & Scholes model (exercise price and share value - $0.96, risk-free interest rate - 0.48%, volatility - 40%).
(ii) Replacement of share-based payment awards
The terms of the acquisition agreement required the Group to exchange share-based payment awards held by employees of the acquiree (hereinafter - the acquiree's awards) for share-based payment awards of the Group (hereinafter - the replacement awards). Details of the acquiree's awards and replacement awards are as follows:
· The acquiree's awards were granted before the acquisition of Taptica Social.
· The vesting date of the replacement awards is the same as the acquiree's awards.
|
|
Acquiree's award |
Replacement awards |
|
|
|
|
|
Market-based value at |
USD 176 thousand |
USD 176 thousand |
|
acquisition date |
|
|
In 2015, the Group recognized USD 48 thousand as part of the cost of the business combination on the basis of the portion of the replacement awards that can be attributed to services provided before the business combination. An amount of USD 128 thousand will be recognized as post-acquisition compensation cost.
(iii) Contingent consideration
The contingent consideration, as discussed above with respect to 3,132,504 shares, had been recorded as a financial liability at fair value. The fair value had then been measured based on the price per share, the probability of achievement of the performance criteria and the value of the option to settle in cash. Accordingly as of 31 December 2015, the Group had included USD 4,602 thousand (adjusted amount upon completion of the valuation) thousand as contingent consideration as part of the purchase price. Such contingent consideration is subsequently measured at fair value with result in differences recognized in profit or loss. See also Note 14E.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 16 - Subsidiaries (cont'd)
B. Acquisition of subsidiaries (cont'd)
Business combination from a prior period - Taptica Social Ltd. (cont'd)
Identifiable assets acquired and liabilities:
|
|
|
|
|
|
USD thousands |
|
Cash and cash equivalents |
|
|
|
1,189 |
|
Trade receivables |
|
|
|
1,231 |
|
Other receivables |
|
|
|
341 |
|
Property, plant and equipment |
|
|
|
81 |
|
Intangible assets(1) |
|
|
|
8,356 |
|
Other payables |
|
|
|
(772) |
|
Trade payables |
|
|
|
(2,311) |
|
Deferred tax liabilities, net |
|
|
|
(1,402) |
|
Net identifiable assets |
|
|
|
6,713 |
(1) Comprised from trade name, technology and customer relationships.
Goodwill:
Goodwill was recognized as a result of the acquisition as follows:
|
|
|
|
|
USD thousands |
|
Consideration transferred |
|
15,594 |
|
Less fair value of identifiable net assets |
|
(6,713) |
|
|
|
|
|
Goodwill |
|
8,881 |
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 16 - Subsidiaries (cont'd)
B. Acquisition of subsidiaries (cont'd)
Business combination from a prior period - Taptica Social Ltd. (cont'd)
Measurement of fair values
Presented hereunder is information regarding the techniques the Group used to measure the fair value of the assets and liabilities recognized as a result of the business combination:
a. Trade name and Technology
The fair value of technology and trade name is based on the relief from royalty rate method, which considers both the market approach (compare to similar businesses or intangible assets that have been sold) and the income approach (convert anticipated benefits into a present single amount).
b. Customer Relationships
The fair value of customer relationships is based on the income approach specifically the multi-period excess earnings method.
Notes to the Consolidated Financial Statements as at 31 December 2016 continued
Note 17 - Operating Segments
The Group has a single reportable segment as a provider of marketing services.
A. Revenue from media channels
Total revenues from external customers divided on the basis of Company's media channels are as follows:
|
|
|
Year ended 31 December |
|
|
|
|
2016 |
2015 |
|
|
|
USD thousands |
USD thousands |
|
Mobile |
|
107,889 |
46,448 |
|
Non-mobile |
|
17,972 |
29,381 |
|
|
|
125,861 |
75,829 |
B. Entity level disclosures
Information on geographical segments
The Company is domiciled in Israel and it produces its income primarily in USA, Israel, China, Germany and UK.
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers.
|
|
|
Year ended 31 December |
|
|
|
|
2016 |
2015 |
|
|
|
USD thousands |
USD thousands |
|
External revenues |
|
|
|
|
|
|
|
|
|
America |
|
56,902 |
45,137 |
|
Europe |
|
35,697 |
13,444 |
|
Asia |
|
22,784 |
6,664 |
|
Israel |
|
5,868 |
5,211 |
|
Others |
|
4,610 |
5,373 |
|
Consolidated |
|
125,861 |
75,829 |
Note 18 - Subsequent events
Subsequent to the balance sheet date, the board has resolved to declare a dividend of $0.0432 per share, with a payment date of 20 June 2017.
This information is provided by RNS
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