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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Matomy Media Group Ltd. | LSE:MTMY | London | Ordinary Share | IL0011316978 | ORD NIS0.01 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 4.50 | 3.60 | 5.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMTMY
RNS Number : 0641S
Matomy Media Group Ltd
28 September 2017
HOLD FOR RELEASE
28 September 2017
Matomy Media Group | 2017 Interim Results
Interim results for six-month period ended 30 June 2017
Matomy's core growth engines, programmatic mobile in-app (Mobfox), and domain monetisation (Team Internet) recorded strong revenue growth of 104% and 69%, respectively. Group Adjusted EBITDA and revenue for the first half-year increased by 59% and 13%, respectively, outperforming expectations.
Matomy Media Group Ltd., a global media company with a portfolio of data-driven platforms for mobile, domain, video, and email advertising announces its interim results for the six-month period ended 30 June 2017.
Non-GAAP Financial Highlights
($ millions) H1 2017 H1 2016 Change ================== ======== ======== ======= Revenue 141.0 124.4 13% ------------------ -------- -------- ------- Adjusted gross profit 43.1 34.6 25% ------------------ -------- -------- ------- Adjusted gross margin 30.6% 27.8% 9.9% ------------------ -------- -------- ------- Adjusted EBITDA 9.2 5.8 59% ------------------ -------- -------- ------- Adjusted net income / (loss) (2.0) (4.0) 50% ------------------ -------- -------- -------
Non-GAAP Financial Highlights, excluding the exited activities on a pro-forma basis
($ millions) H1 2017 H1 2016 Change ================= ======== ======== ======= Revenue 119.3 101.1 18.3% ----------------- -------- -------- ------- Adjusted gross profit 37.2 29.4 26% ----------------- -------- -------- ------- Adjusted gross margin 31.1% 29.1% 7% ----------------- -------- -------- ------- Adjusted EBITDA 10.9 6.3 73% ----------------- -------- -------- -------
GAAP Financial Highlights
Hot Features
Premium
($ millions) H1 2017 H1 2016 Change
GAAP GAAP
======================== ======== ======== =======
Revenue 141.0 124.4 13%
------------------------ -------- -------- -------
Gross profit 30.2 24.9 21%
------------------------ -------- -------- -------
Operating income
/ (loss)** (8.1) (4.3) (88%)
------------------------ -------- -------- -------
Pre-tax income
/ (loss)** (9.3) (5.1) (82%)
------------------------ -------- -------- -------
Net income / (loss)*** (6.5) (5.3) (23%)
------------------------ -------- -------- -------
Earnings / (loss)
per share*** (0.15) (0.06) (161%)
------------------------ -------- -------- -------
** The H1 2017 and H1 2016 results include non-recurring charges of $8.4 and $0.3 million, respectively. See 'exceptional items' below for further details.
*** The H1 2017 and H1 2016 results include non-recurring charges, including tax effect of $3.6 and $0.3 million, respectively. See 'exceptional items' below for further details.
Adjusted gross profit / margin
Adjusted gross profit is a non--GAAP financial measure that Matomy defines as revenues less direct media costs, which are the direct costs associated with the purchase of digital media. These costs include: payments for digital media based on the revenues Matomy generates from its customers on a revenue--sharing basis, payments for digital media on a non--revenue--sharing basis (CPC or CPM), and serving fees for third--party platforms.
Matomy believes that adjusted gross profit is a meaningful measure of operating performance because it is frequently used for internal management purposes, indicates the performance of Matomy's solutions in balancing the goals of delivering results to its customers whilst meeting margin objectives, and facilitates a more complete understanding of factors and trends affecting Matomy's underlying revenues performance.
Adjusted EBITDA
Adjusted EBITDA is a non--GAAP financial measure that Matomy defines as net income before taxes on income, financial expenses (income), net, equity losses of affiliated companies, net, depreciation and amortisation, share--based compensation expenses and exceptional items (as described below). Adjusted EBITDA is a key measure Matomy uses to understand and evaluate its core operating performance and trends, to prepare and approve its annual budget, to develop short-- and long--term operating plans and to determine bonus payments to management. In particular, Matomy believes that by excluding share--based compensation expenses, adjusted EBITDA provides a useful measure for period--to--period comparisons of Matomy's core business.
Adjusted net income
Adjusted net income is a non GAAP financial measure that Matomy defines as net income before share-based compensation expenses and any exceptional items.
Business and Operating Highlights
-- Revenues increased by 13% to $141.0 million (H1 2016: $124.4 million)
o Programmatic mobile in-app (Mobfox) revenue increased 104% to $25.0 million (H1 2016: $12.3 million)
o Domain monetisation (Team Internet) revenue increased 69% to $51.7 million (H1 2016: $30.6 million)
-- Adjusted EBITDA increased by 59% to $9.2 million (H1 2016: $5.8 million) resulting in higher level of cash generation. The improvement in adjusted EBITDA would be notably higher if the effects of exchange rate fluctuations and the decreased level of R&D capitalization are neutralized.
-- Adjusted gross profit grew by 25% to $43.1 million (H1 2016: $34.6 million), with improvement in adjusted gross margin to 30.6% (H1 2016: 27.8%)
-- Adjusted net loss reduced by 50% to $2.0 million loss (H1 2016: $4.0 million loss)
-- The company announced on 8 May 2017 a restructuring to focus on its core activities of programmatic mobile, domain monetisation, and video, while significantly reducing operational costs moving forward.
o The company exited non-core activities, such as legacy web display, social, search, and virtual currency media channels
o The financial effects of the divestiture will positively impact H2 2017, with the full effect showing in 2018
o Matomy now has a smaller corporate team, resulting in lower operational overhead
o R&D and technical employees now amount to approximately 45% of the staff overall, reflecting the stronger focus on proprietary technology and product development
-- US continued to be the largest geography by revenue generation, accounting for $95.1 million (H1 2016: $80.0 million)
Sagi Niri, Chief Executive Officer of Matomy, said:
"At Matomy, one of our primary values is to constantly challenge ourselves, set high goals, and embrace change when necessary, and we realized these values as we embarked on the strategic restructuring this year. The financial results reported here reflect our proactive strategic decisions and strong performance in the core growth activities of Mobfox and Team Internet. We are looking forward to continued growth following the operational changes we have made and constantly monitor the best way to create long-term value for all stakeholders."
Harel Beit-On, Matomy Non-Executive Chairman of the Board, commented:
"Matomy made great strides in the first half of 2017, realizing its new focus on core growth areas, such as mobile in-app advertising technology and domain monetisation. Today, Matomy is well-positioned to be a leading innovative force in the in-app, mobile, and domain monetisation advertising marketplaces."
Matomy Media Group
Pamela Becker, VP Global Marketing
pamela.b@matomy.com
+972-74-7161971
Press Contact Information:
Justine Rosin
justine@headline-media.com
UK: +44 20 3769 5656 | USA: +1 (917) 724-2176
Investor Relations:
Daniel Polad
danielp@pr-ir.co.il
+972-505560216
A copy of this announcement will be available on the Matomy website: http://investors.matomy.com/rns.aspx.
Matomy will host an analyst conference call at 10:00am BST / 12:00pm IST Tuesday 19 September 2017 to discuss these results. Matomy CEO Sagi Niri, and CFO Keren Farag Krygier will host the call. The conference call can be accessed at +44 (0) 808 238 9856 (UK), +1 (866) 868-1282 (US) or +972 1809 212 583 (Israel), Audience Passcode: 6705 305.
About Matomy Media Group Ltd.
Matomy Media Group Ltd. (LSE: MTMY, TASE: MTMY.TA) is a global media company with a portfolio of superior data-driven platforms for mobile, video, domain, and email advertising. By providing customized performance and programmatic solutions supported by internal media capabilities, data analytics, and optimization technology, Matomy empowers advertising and media partners to meet their evolving growth-driven goals. Matomy's programmatic platforms include the MobFox SSP, the mobile demand side platform myDSP, and the video advertising platform Optimatic. Founded in 2007 with headquarters in Tel Aviv and 7 offices around the world, Matomy is dual-listed on the London and Tel Aviv Stock Exchanges.
For more information:
Website: http://investors.matomy.com
LinkedIn: www.linkedin.com/company/matomy-media-group
Twitter: @MatomyGroup
Facebook: www.facebook.com/MatomyMediaGroup
CHAIRMAN and CHIEF EXECUTIVE OFFICER's STATEMENT
Introduction
2017 is a year of transition for Matomy. The company announced on 8 May 2017 a restructuring to focus on core activities while significantly reducing operational costs moving forward. The sale of non-core activities was completed, and the company has started seeing results that validate the strategic decision-making, including significant improvement in its financial results with our expectation that this positive trend will continue and grow.
Market Overview
Matomy is a global media company with a portfolio of data-driven platforms for programmatic mobile, domain monetisation, video and email advertising.
Programmatic ad spending is rising, particularly in the United States, a key market for Matomy. Growth in the digital marketing space continues to be driven by the growing proliferation of mobile devices as the leading and preferred digital channel for online distribution. The trend of increasing mobile app use, supports huge potential for cross platform advertising. Continuous improvements around consumer-targeting and sophisticated measurement techniques support the ever-growing number of advertisers who incorporate digital advertising into their advertising budgets and view the digital space as the key environment for interacting with consumers.
Operating Performance
In the first half of 2017, Matomy has seen a 13% rise in revenue, a 59% increase in adjusted EBITDA, and a 25% improvement in adjusted gross margin, resulting in higher level of cash generation for H1 2017 compared to H1 2016. Net loss (non-GAAP) decreased dramatically by 50% to ($ 2million). Matomy believes this positive trend to continue as the reduction of operating costs that begun in May continue to be realized till the end of the year and onwards.
The company's core activities in programmatic mobile advertising and domain monetisation have demonstrated particularly strong financial and operational growth. Programmatic mobile (Mobfox) revenue increased 104% to $25.0 million (H1 2016: $12.3 million) and domain monetisation (Team Internet) revenue increased 69% to $51.7 million (H1 2016: $30.6 million).
Outlook
The first half of 2017 was a period of strong performance by the core activities, and a period of transition as the company exited non-core activities and reduced operational costs. Traditionally, Matomy's first half results are more moderate than the second half results, and the Board and Management are confident of growth prospects through the end of 2017 and beyond.
Harel Beit-On Sagi Niri
Non-Executive Chairman Chief Executive Officer
OPERATING REVIEW
Revenues by Media Channel
The following table sets out Matomy's revenues by media channel for the six-month period ended 30 June 2017 and 2016.
Six-Month Period Ended 30 June
----------------------- -----------------------------------
($ millions) 2017 2016 Change
----------------------- ---------- ---------- -----------
Mobile in-app 25.0 12.3 104%
----------------------- ---------- ---------- -----------
Domain monetisation 51.7 30.6 69%
----------------------- ---------- ---------- -----------
Email 7.5 9 (17%)
----------------------- ---------- ---------- -----------
Video 35.1 49.2 (29%)
----------------------- ---------- ---------- -----------
Exited media channels 21.7 23.3 (7%)
----------------------- ---------- ---------- -----------
Total 141.0 124.4 13%
----------------------- ---------- ---------- -----------
Mobile In-App
Mobile in-app (Mobfox) media channel revenues increased 104% to $25.0 million for the six-month period ended 30 June 2017 from $12.3 million in the same period last year. This increase was driven by strong growth in the recruitment and retention of new media suppliers and buyers with a low churn rate, as well as improvements to Mobfox's auction mechanism with the establishment of new methodologies for its demand-side platform and supply-side platform. We also saw compelling growth in the in-app video activity, and positive response to our investment in APAC as a new business region for the product.
Domain Monetisation
Domain monetisation revenues increased by $21.1 million, or 69%, to $51.7 million for the six-month period ended 30 June 2017 from $30.6 million in the same period last year. The introduction of a suite of technological improvements across Team Internet's various platforms resulted in enhanced performance in comparison to peers and led to increased recruitment of new clients and higher market share.
Email media channel revenues decreased by $1.5 million, or 17%, to $7.5 million for the six-month period ended 30 June 2017 from $9 million in the same period last year. This decrease was mainly attributable to two temporary processes. The first was the temporary diversion in resource allocation during the restructure and consolidation of Matomy's two email platforms into one comprehensive platform - a process that is now completed. The second was the integration of several new features and tools intended to ensure compliance with the periodic new requirements by certain ISPs that the company uses in its email activity. Email revenues for the same period last year, have been reclassified to exclude revenues in the sum of $4.3 million from cross affiliate activity which was included as part of the exited activities
Video
Video media channel revenues decreased by $14.1 million, or 29%, to $35.1 million for the six-month period ended 30 June 2017 from $49.2 million in the same period last year. The decrease in the video channel was driven by changes across the entire video industry reducing the amount and price of available video advertising inventory from sellers together with much stricter quality requirements by video advertisers.
Exited Media Channels
Revenues from the exited media channels decreased by $1.6 million, or 7%, to $21.7 million for the six-month period ended 30 June 2017 from $23.3 million in the same period last year. The exited media channels include legacy display, social and search and virtual currency media channels and represent activities that have a continued downward trend.
These media channels are no longer part of Matomy's activity and will not be included in results for the periods going forward.
Revenues by Geography
The following table sets out Matomy's revenues by geographical location for the six-month period ended 30 June 2017 and 2016.
Six-month period ended 30 June
---------------------------------------
($ millions) 2017 2016 Change
--------------- ------ ------ -------
Americas 107.7 86.4 25%
--------------- ------ ------ -------
Europe 14.3 22.5 (36%)
--------------- ------ ------ -------
Asia 12.8 5.1 151%
--------------- ------ ------ -------
Israel 0.1 0.1 -
--------------- ------ ------ -------
Other 6.1 10.3 (41%)
--------------- ------ ------ -------
Total 141.0 124.4
--------------- ------ ------ -------
Americas
Revenues generated in the Americas increased by $21.3 million, or 25%, to $107.7 million for the six-month period ended 30 June 2017 from $86.4 million in the same period last year, due to continued growth focused particularly in the mobile and programmatic-based activities, which are strongly centered on the US market.
Europe
Revenues generated in the European market decreased by $8.2 million, or 36%, to $14.3 million for the six-month period ended 30 June 2017 from $22.5 million in the same period last year due to the continuing shift of client focus to the Americas.
Asia
Revenues generated in Asian markets increased by $7.7 million, or 151%, to $12.8 million for the six-month period ended 30 June 2017 from $5.1 million in the same period last year due to the penetration in our key growth market of China, which also reflects activity which was sold as part of the exited activity.
Following higher investment in our local mobile activity, the growth in Asia without the exited activity, increased by $1.1 million, or 61%, to $2.9 million for the six-month period ended 30 June 2017 from $1.8 million in the same period last year.
FINANCIAL REVIEW
Revenue
In the first half of 2017, Matomy's revenue increased by $16.6 million, or 13%, to $141.0 million (H1 2016: $124.4 million). The growth in revenue reflects the continued strength of the mobile media channel, a key growth engine for Matomy, together with a strong growth in domain monetisation revenue. Excluding the revenues from the exited activities, which will cease to be part of the reported activities going forward, the increase in revenues is even higher, representing 18% growth.
Cost of Revenue and Other Expenses
$ millions, except as otherwise indicated H1 2017 H1 2016
-------------------------------------------------------------------------------------------------- -------- --------
Direct media
costs................................................................................... 97.9 89.9
Other cost of
revenue.............................................................................. 12.9 9.6
-------- --------
Cost of
revenue....................................................................................... 110.8 99.5
======== ========
Gross margin
(%)..................................................................................... 21% 20%
======== ========
Adjusted gross margin (non-GAAP) (%) 31% 28%
======== ========
Cost of revenue for the Group increased by $11.3 million, or 11%, to $110.8 million (78.6% of total revenues) for the six-month period ended 30 June 2017 from $99.5 million (80.0% of total revenues) in the same period last year.
Adjusted gross margin, which reflects only direct media costs, increased by 3 percentage points. This change was driven by significant improvements in margins and scales of activities in Matomy's core growth engines - mobile and domain monetisation.
The exited activities reflect low margin with high operational costs, excluding the margin attributable to the exited activities, the increase in the gross margin would have been even higher.
Other cost of revenue, including allocated costs, server expenses, and amortisation of capitalised R&D and intangible assets, increased in part from higher server expenses on the fast growing mobile and domain monetisation activities.
Operating Expenses, excluding exceptional items
$ millions H1 2017 H1 2016
----------------------------------------------------------------------------------------------- -------- --------
Research and development............................................................... 6.7 5.0
Sales and marketing.......................................................................... 15.6 15.3
General and administrative............................................................... 7.8 8.9
-------- --------
Total operating expenses.................................................................. 30.1 29.2
Total operating expenses as a percentage of revenues...................... 21% 23%
======== ========
Operating expenses increased by $0.9 million, or 3%, to $30.1 million (H1 2016: $29.2 million). Operating expenses as a percentage of revenues were 21% (H1 2016: 23%).
The increase in operating expenses is mainly attributable to increased investment in R&D of $1.7 million, which were offset by a reduction in general and administrative costs of $1.1 million, reflecting the restructuring steps taken during 2017, which are expected to show their full effect in 2018.
Research and development expenses increased by $1.7 million, or 33%, to $6.7 million (H1 2016: $5.0 million), based on continued investment in R&D across the group, reflecting our commitment to strengthening our proprietary technological offerings, as well as reduction in capitalization of expenses.
Sales and marketing expenses increased 1.7% to $15.6 million (H1 2016: $15.3 million). This increase is mainly a result of investment in sales teams, especially in the mobile and APAC activities, which is partly offset by slightly decreased amortisation expenses recorded in sales and marketing (reduced in H1 2017 by $0.6 million).
General and administrative expenses decreased 12% to $7.8 million (H1 2016: $8.9 million), due to continued success in introducing efficiencies at corporate level, streamlining and reducing overheads. This change is aligned with the restructuring plan announced on 8 May, 2017 and is expected to continue to show through the second half of 2017 and 2018.
Financial Expenses
Financial expenses, net increased by $0.5 million, or 72%, to $1.2 million (H1 2016: $0.7 million). This increase is mainly due to higher interest expenses due to additional outstanding loans and credit lines in H1 2017 compared to H1 2016, as well as higher expenses from foreign exchange rate fluctuations, net of hedging transactions, due to the weakening of the dollar vs. the shekel during H1 2017.
Taxes on Income
Taxes on income shifted to $2.9 million income for the six-month period ended 30 June 2017 (31% of loss before taxes), compared to $0.3 million expense in the same period last year (-5%). The change in effective tax rate was primarily due to reversal of deferred tax liability resulted from impairment of intangible assets.
Earnings per Share
Matomy's basic earnings per share decreased by $0.09 to $0.15 loss per share for the six-month period ended 30 June 2017 (H1 2016: $0.06 loss per share). This primarily reflected the increased GAAP net loss (which does not exclude the exceptional items), in particular the effect of the increase in redeemable non-controlling interest payable, due to the gain in value of the minority share of Team Internet. In addition, during H1 2017, Matomy's average share capital increased by 1.6% due to option exercises, resulting in a lower denominator for the earnings per share calculation, affecting the loss per share accordingly.
Amortisation of Intangible Assets
Amortisation expenses amounted to $7.5 million for the six-month period ended 30 June 2017, a decrease of $0.6 million from amortisation expenses of $8.1 million for the same period last year. This reflected an increase in amortisation of capitalized R&D assets, offset by the decreasing amortisation rate in connection with previous acquisitions.
Exceptional Items
Matomy views the following items, which were recorded in profit and loss, either as expense or income, as exceptional items which are material to the financial statements and non-recurring, and therefore were excluded from non-GAAP measures:
-- Impairments of intangible assets amounting to $14.2 million in H1 2017, as detailed herein below
-- Earnout adjustments income of $5.5 million in H1 2017, as detailed herein below -- Gain from sale of an activity of $0.9 million in H1 2017 -- Restructuring costs relating to the exited activities amounting to $0.6 million in H1 2017 -- Transaction costs associated with M&A activity amounting to $0.3 million in H1 2016
The company recorded an impairment of intangible assets and capitalised R&D of $14.2 million, out of which $2.0 million is due to consolidation of its email business units in order to gain efficiency and reduction of duplicate operational costs. Additional amount of $12.2 million is mainly due to changes in the quality requirements of video advertisers and as a result, a further adjustment of ($5.5 million) with relation to the post acquisition performance.
Liquidity and Cash Flows
The following table sets out selected cash flow information for Matomy for the six-month periods ended 30 June 2017 and 2016.
$ millions H1 2017 H1 2016
-------------------------------------------------------------------- -------- --------
Net cash provided by (used in) operating activities....... 6.6 (0.3)
Net cash used in investing activities............................. (2.9) (3.3)
Net cash (used in) provided by financing activities....... (4.5) 2.6
Effect of exchange rate differences on cash.................. (0.1) -*
-------- --------
Decrease in cash and cash equivalents.......................... (0.9) (1.0)
Cash and cash equivalents at beginning of period......... 21.7 27.3
Cash and cash equivalents at end of period.................. 20.8 26.3
======== ========
* *. Represents amounts less than $0.1 million.
Cash and cash equivalents decreased by $5.5 million, or 21%, to $20.8 million as at 30 June 2017, compared to $26.3 million as at 30 June 2016.
Cash flows provided by operating activities were $6.6 million in H1 2017 compared to a net outflow of $0.3 million in H1 2016. This was primarily influenced by improvements to underlying profitability of ongoing activities, and the resulting improvement to net income - after offsetting the effect of exceptional (non-cash) items, including impairment charges and adjustments to the fair value of contingent payments on net income.
Net cash used in investing activities of $2.9 million (H1 2016: $3.3 million) was mainly related to capitalisation of R&D costs and fixed asset investments, reflecting an aggregate decrease of $1.0 million compared to H1 2016. As well as purchasing of domains amounting to $1.0 million.
Cash flows used in financing activities increased to $4.5 million (H1 2016: $2.6 million inflow), primarily due to payments made in connection with acquiring additional shares in Team Internet ($10.4 million) and repayment of bank loans ($2.3 million net of new loans), funded by an increase of $14.5 million in short-term bank credit. As at 30 June 2017, Matomy had $11.5 million in term loans. Of those, $6.2 million were due within one year.
Financial Reporting
This financial information has been prepared under US GAAP principles and in accordance with Matomy's accounting policies. There have been no changes to Matomy's accounting policies and reporting during the six-month period ended 30 June 2017 except for the following:
(i) presenting the excess of the redemption amount over the non-controlling interest in the notes and not as part of the consolidated statements of operations below the net losses; and
(ii) reclassifying the domain from "held for sale" in the short term to part of the intangible assets in Long-term assets, in line with its long term strategy.
Going Concern -
The Directors confirm that, after making an assessment, they have reasonable expectation that the group has adequate resources to meet its obligations for the foreseeable future, based, inter alia, upon confirmations provided by the company's principal shareholders regarding their intention to provide appropriate funding, if necessary.
The group's business activities are set out in the Operational Review and the Financial Review. As set out in the Principal Risk Factors, a number of risks affect the group's results and financial position.
Principal Risks
The Directors assess and monitor the key risks of the business on an ongoing basis. The principal risks and uncertainties that could have a material effect on the Group's performance are set out in detail in the section entitled "Risk Factors" of the Group's IPO prospectus (the "Prospectus") dated 9 July 2014 and below. These include, among other things, the following:
-- Certain internet and technology companies may intentionally or unintentionally adversely affect Matomy's operations, mainly due to announced or unannounced changes and restrictions by such companies.
-- The delivery of digital ads and the recording of the performance of digital ads are subject to complex regulations, legal requirements and industry standards.
-- Matomy's revenue and operating results are highly dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns, particularly in the fourth quarter, can make it difficult to predict our revenue and could adversely affect our business.
-- Seasonal fluctuations in digital advertising activity, which may historically have been less apparent due to our historical core activities and growth, could adversely affect our cash flows and operating results.
-- In order to meet our growth objectives, we will need to rely upon our ability to innovate, the continued adoption of our solution by buyers and sellers for higher value advertising inventory, the extension of the reach of our solution into evolving digital media, and growth into new geographic markets.
-- Matomy operates in an intensely competitive market that includes companies that have greater financial, technical, and marketing resources than we do.
-- The digital advertising industry is highly competitive and fragmented and currently experiencing consolidation, resulting in increasing competition.
-- In order to meet our growth objectives, we may need to rely on our ability to raise debt or utilize credit lines, which may not be sufficiently available to meet our ongoing financial needs
-- Matomy is dependent on relationships with certain third parties with significant market positions.
-- Matomy relies on the continued compatibility of its technological platforms with third-party operating systems, software and content distribution channels, as well as newly-acquired systems.
-- Matomy may be subject to third-party claims brought against it.
-- Matomy has historically derived the majority of its revenues from customers that use its solutions for display marketing campaigns, which are now rapidly declining.
-- A key part of Matomy's strategy relates to acquisitions and the ability to effectively finance, integrate, and manage them.
-- The digital advertising industry remains susceptible to fraud.
-- Matomy is an Israeli-domiciled company and as such the rights and obligations of shareholders are governed by Israeli law and differ in some respects from English law.
-- As a result of the announcement of Brexit, the British government has begun negotiating the terms of the U.K.'s future relationship with the E.U. Although it is unknown what those terms will be, it is possible that these changes may affect our operations and financial results.
Forward-Looking Statements
Certain statements in this interim results report are forward looking. Although the company believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will be fulfilled. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Directors' Responsibility
The Directors confirm that to the best of their knowledge that the condensed set of reviewed financial statements, which has been prepared in accordance with US GAAP, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included in the consolidated financial statements as a whole as required by DTR 4.2.4.
By order of the Board:
Sagi Niri Keren Farag Krygier
Chief Executive Officer Chief Financial Officer
Reconciliation of GAAP Measures to Non-GAAP Measures
The following table presents a reconciliation of adjusted gross profit to gross profit and to revenues, the most directly comparable financial measures calculated in accordance with US GAAP, for the periods indicated:
$ million H1 2017 H1 2016
------------------------------------------------------------------------- -------- --------
Revenues ............................................................. 141.0 124.4
Direct media costs................................................. (97.9) (89.8)
-------- --------
Adjusted gross profit............................................. 43.1 34.6
Adjusted gross margin (%) 31% 28%
Other cost of revenues.......................................... (12.9) (9.7)
-------- --------
Gross profit........................................................... 30.2 24.9
======== ========
The following table presents a reconciliation of adjusted EBITDA to net income / (loss), the most directly comparable financial measure calculated in accordance with US GAAP, for the periods indicated:
$ million H1 2017 H1 2016
---------------------------------------------------------------------- -------- --------
Net income / (loss)................................................. (6.5) (5.3)
Tax benefit / (taxes on income).............................. 2.9 (0.3)
Financial expenses, net.......................................... 1.2 0.7
Depreciation and amortisation............................... 8.1 8.8
Share--based compensation expenses..................... 0.9 1.0
Exceptional items 8.4 0.3
-------- --------
Adjusted EBITDA.................................................... 9.2 5.8
======== ========
The following table presents a reconciliation of adjusted net income to net income / (loss), the most directly comparable financial measure calculated in accordance with US GAAP, for the periods indicated:
$ million H1 2017 H1 2016
-------------------------------------------------------------------- -------- --------
Net income / (loss)............................................... (6.5) (5.3)
Share--based compensation expenses................... 0.9 1.0
Exceptional items, including tax effect.................. 3.6 0.3
-------- --------
Adjusted net income / (loss)................................. (2.0) (4.0)
======== ========
Financial statements on following pages
INTERIM CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
30 June 31 December
2017 2016
--------- -----------
Unaudited
---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20,800 $ 21,671
Receivables on account of sale
of activity 5,642 -
Trade receivables, net 47,762 54,900
Domains held for sale - 9,965
Other receivables and prepaid
expenses 6,764 5,502
--------- -----------
Total current assets 80,968 92,038
--------- -----------
LONG-TERM ASSETS:
Property and equipment, net 8,718 9,032
Investment in affiliated companies 1,954 1,957
Domains 10,932 -
Other intangible assets, net 16,518 36,577
Goodwill 92,355 97,015
Other assets 206 398
--------- -----------
Total long-term assets 130,683 144,979
--------- -----------
Total assets $ 211,651 $ 237,017
========= ===========
The accompanying notes are an integral part of the interim consolidated financial statements.
INTERIM CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
30 June 31 December
2017 2016
--------- -----------
Unaudited
---------
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Redeemable non-controlling interest $ - $ 13,776
Short-term bank credit and current
maturities of bank loans 22,770 8,960
Trade payables 38,380 43,982
Contingent payment obligation
related to acquisitions 2,852 7,166
Employees and payroll accrual 5,711 4,953
Accrued expenses and other liabilities 8,490 4,964
--------- -----------
Total current liabilities 78,203 83,801
--------- -----------
LONG-TERM LIABILITIES:
Deferred tax liabilities 4,720 11,148
Contingent payment obligation
related to acquisitions 3,735 10,192
Bank loans, net of current maturities 5,351 6,661
Other liabilities 1,096 821
--------- -----------
Total long-term liabilities 14,902 28,822
--------- -----------
REDEEMABLE NON-CONTROLLING INTEREST 31,219 23,691
--------- -----------
EQUITY:
Matomy Media Group Ltd. shareholders'
equity:
Ordinary shares 249 247
Additional paid-in capital 96,479 101,066
Accumulated other comprehensive
loss (3,170) (3,174)
Retained earnings - 8,795
Treasury shares (6,231) (6,231)
--------- -----------
Total equity 87,327 100,703
--------- -----------
Total liabilities and equity $ 211,651 $ 237,017
========= ===========
The accompanying notes are an integral part of the interim consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands except per share data
Six months ended
30 June,
--------------------
2017 2016
--------- ---------
Unaudited
--------------------
Revenues $ 141,020 $ 124,442
Cost of revenues 110,828 99,540
--------- ---------
Gross profit 30,192 24,902
--------- ---------
Operating expenses:
Research and development 6,637 4,997
Selling and marketing 15,581 15,321
General and administrative 7,751 8,947
Impairment, net of change in fair
value of contingent consideration 8,705 -
Restructuring costs (see Note
14) 574 -
Gain from sale of activity (see
Note 1b) (913) -
--------- ---------
Total operating expenses 38,335 29,265
--------- ---------
Operating loss (8,143) (4,363)
Financial expenses, net 1,188 692
--------- ---------
Loss before taxes on income (9,331) (5,055)
Tax benefit (taxes on income) 2,885 (256)
Equity losses of affiliated companies 3 12
--------- ---------
Net loss (6,449) (5,323)
Net income attributable to redeemable
non-controlling interests in subsidiaries (337) (201)
Net loss attributable to Matomy Media
Group Ltd, before accretion of redeemable
non-controlling interest (see Note
8) $ (6,786) $ (5,524)
========= =========
Basic and diluted loss per ordinary
share $ (0.15) $ (0.06)
========= =========
The accompanying notes are an integral part of the interim consolidated financial statement
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
U.S. dollars in thousands, except share data
Ordinary shares
------------------ ---------- ------------------ --------- --------- ---------
Accumulated
Additional other
paid-in comprehensive Retained Treasury Total
Number Amount capital loss earnings shares equity
---------- ------ ---------- ------------------ --------- --------- ---------
Balance as of 1
January 2017
(audited) 94,576,458 $ 247 $ 101,066 $ (3,174) $ 8,795 $ (6,231) $ 100,703
Stock-based
compensation - - 852 - - - 852
Cumulative-effect
adjustment
from adoption of
ASU 2016-09 - - 68 - (68) -
Exercise of options
and vesting
of restricted
share units 605,609 2 452 - - - 454
Other comprehensive
income - - - 4 - - 4
Net loss - - - (6,786) - (6,786)
Accretion of
redeemable
non-controlling
interest - - (5,959) - (1,941) - (7,900)
Balance as of 30
June 2017
(unaudited) 95,182,067 $ 249 $ 96,479 $ (3,170) $ - $ (6,231) $ 87,327
========== ====== ========== ================== ========= ========= =========
The accompanying notes are an integral part of the interim consolidated financial statements.
Six months ended
30 June
--------------------
2017 2016
--------- ---------
Unaudited
--------------------
Cash flows from operating activities:
Net loss $ (6,449) $ (5,323)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Depreciation and amortization 8,064 8,824
Impairment of intangible assets
and capitalized research and development 14,238 -
Stock-based compensation 852 974
Change in deferred tax, net (6,428) (2,234)
Decrease in trade receivables 7,382 14,544
Increase in domains held for sale - (3,442)
Increase in other receivables and
prepaid expenses (1,081) (791)
Change in accrued interest and effect
of foreign exchange differences
on long term loans 330 (47)
Equity losses of affiliated companies,
net 3 12
Decrease in trade payables (5,602) (12,440)
Changes in fair value of contingent
payment obligation related to acquisitions
recognized in earnings (5,533) (58)
Increase (decrease) in accrued expenses
and other liabilities 992 (899)
Accretion of contingent payment
obligation related to acquisitions 232 231
Increase in employees and payroll
accruals 758 318
Gain from sale of activity (913) -
Gain from sale of domains (79) -
Loss from disposal of property and
equipment 75 -
Other (232) 19
--------- ---------
Net cash provided by (used in) operating
activities 6,609 (312)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (167) (599)
Capitalization of research and development
costs (1,858) (2,510)
Purchase of domains (1,002) -
Proceeds from sale of domains 114 -
Purchase of technology and database - (149)
Bank deposits - 7
Net cash used in investing activities (2,913) (3,251)
--------- ---------
Cash flows from financing activities:
Receipt of bank loans 2,000 3,021
Repayment of bank loans (4,335) (3,159)
Dividend paid to redeemable non-controlling
interest (3,491) (736)
Exercise of options 454 423
Payment of contingent consideration
with respect to acquisitions, net (2,660) (692)
Acquisition of redeemable non-controlling
interests (10,994) -
Short term bank credit, net 14,505 3,711
Net cash (used in) provided by financing
activities (4,521) 2,568
--------- ---------
Effect of exchange rate differences
on cash (46) 6
--------- ---------
Decrease in cash and cash equivalents (871) (989)
Cash and cash equivalents at the
beginning of the period 21,671 27,271
--------- ---------
Cash and cash equivalents at the
end of the period $ 20,800 $ 26,282
========= =========
The accompanying notes are an integral part of the interim consolidated financial statements.
Six months ended
30 June,
------------------
2017 2016
-------- --------
Unaudited
------------------
(a) Supplemental disclosure of cash
flows activities:
Cash paid during the period for:
Income taxes, net $ 2,775 $ 4,024
======== ========
Interest paid $ 555 $ 299
======== ========
(b) Supplemental information and disclosures
of non-cash investing
Proceeds from sale of an activity
recorded as receivable (see Note
1b) $ 5,642 $ -
======== ========
The accompanying notes are an integral part of the interim consolidated financial statements.
NOTE 1:- GENERAL
a. Matomy Media Group Ltd together with its subsidiaries (collectively - "the Company") offers and provides a portfolio of proprietary programmatic data-driven platforms for mobile, video, domain and email digital advertising to advertisers, advertising agencies, Apps developers, domain owners through access to digital media, via a vast chain of direct and indirect media partners, such as websites, mobile apps and video.
The Company through its proprietary programmatic technological platforms provides its customers with access to a wide range of digital media channels, and enables customized performance and programmatic solutions supported by big data analytics, optimization technology, business intelligence, programmatic media buying and Real-Time-Bidding (RTB) on mobile, video and web, empowering advertising and media partners to meet their digital goals, which include user acquisition and revenue results for both advertisers and media partners. The Company also provides a media management platform (SSP) and demand management platform (DSP) offering publishers or advertisers end to end solutions.
Matomy Media Group Ltd. was incorporated in 2006. The Company's markets are located primarily in the United States and Europe.
Since July 2014 the Company's shares are traded in the "London Stock Exchange". On July 2016, the Company's shares commenced trading also on the Tel Aviv Stock Exchange ("TASE") in accordance with the Company's TASE Dual Listing Application pursuant to the Israeli Dual-Listing Law.
b. Sale of an activity:
On 29 June 2017 the Company entered into an agreement for the sale of its intangible assets and transfer of all employees related to its non-core business, for a total consideration of up to $ 10,892, comprised of $5,642 in cash (included in "receivables on account of sale of activity" as of 30 June 2017) and a contingent consideration up to $5,250 based on future business performance. Additional cash consideration of $358 is paid for certain post-closing transitional services to be provided by the Company, all as defined in the selling agreement. The cash considerations were received in July 2017.
The sale resulted in a gain of $913, which is included in operating results for the 6 months ended in 30 June 2017.
Following the consummation of this transaction, the Company has exited from the legacy web display, social and search and virtual currency media channels, which are deemed non-core activities. Going forward these media channels will cease to be part of the Company's activity.
The Company elected to recognize the future proceeds when the contingency is resolved and therefore the contingent consideration amount was not accounted for as part of the gain.
Gain from sale of activity:
Goodwill (4,660)
Other intangible assets, net (69)
Consideration- presented in receivables on account
of sale of activity 5,642
------------
Gain from sale of activity $ 913
------------
NOTE 1:- GENERAL (Cont.)
c. The Company may require additional capital in order to fund future liabilities (such liabilities include, among others, bank loans, contingent payment obligation related to acquisitions and redeemable non-controlling interest). In September 2017, major shareholders of the Company agreed to provide funding, to the extent needed. The Company and the Board expects that its existing capital resources and other future measures that may be implemented, to the extent required, will be adequate to satisfy the expected liquidity needs of the Company, in the foreseeable future. Clearly, there is no assurance regarding raising additional capital in the future, if needed.
d. During the six-month period ended 30 June 2017, the Company changed its long-term strategy regarding the manner it relates to domains for sale and accordingly reclassified the domains from current assets to non-current assets with indefinite useful lives. As of the date of reclassification, no impairment losses were recorded in accordance with ASC 350, "Intangibles - Goodwill and other".
Since the domains have no expiry date, management believes that these intangible assets have indefinite useful lives.
Intangible assets with indefinite useful lives are not amortized and are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES a. Unaudited interim financial statements
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") for interim financial information. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results for the six-month period ended 30 June 2017 are not necessarily indicative of the results that may be expected for the year ended 31 December 2017.
In the preparation of the consolidated financial information, it applied the significant accounting policies, on a consistent basis to the annual financial statements of the Company as of 31 December 2016, except for the change in accounting policy regarding the presentation of the redeemable non-controlling interest accretion and the initial application of ASU 2016-09 (see Note 2b).
The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's financial statements ("the Annual Report") for the year ended 31 December 2016.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) b. Change in accounting policies:
1. The Company changed its accounting policy regarding the presentation of the adjustment to the net income attributable to Matomy Media Group Ltd as a result of accretion of redeemable non-controlling interest. According to the new accounting policy, the Company presents the accretion amount in the calculation of the loss per share in the notes of the financial statements, compared to the previous presentation on the face of the consolidated statements of operations, since Company's management believes that reflecting the effects of the accretion as an adjustment to income available to Matomy Media Group Ltd in the loss per share note is a more appropriate presentation. The presentation of prior years was changed to conform to current year's presentation. The reclassification had no effect on previously reported net loss or shareholders' equity.
2. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016- 09"). The update simplifies several aspects of accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The ASU is effective for annual reporting periods beginning after 15 December 2016, including interim periods within those annual reporting periods, early adoption is permitted. The Company adopted the standard commencing 1 January 2017. The impact of the adoption was to reduce retained earnings and to increase additional paid-in capital by $ 68 as of 1 January 2017.
c. Use of estimates:
The preparation of the consolidated financial information in conformity with US GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions it uses are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial information, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
On an ongoing basis, the Company's management evaluates estimates, including those related to accounts receivable, fair values of financial instruments, fair values and useful lives of intangible assets, fair values of stock-based awards, deferred taxes and income tax uncertainties and contingent liabilities. Such estimates are based on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) d. Impairment of long-lived assets and intangible assets subject to amortization:
Property and equipment and intangible assets subject to amortization are reviewed for impairment in accordance with ASC 360, "Accounting for the Impairment or Disposal of Long-Lived Assets", and ASC 350, "Intangibles - Goodwill and other" whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The recoverability of these assets is measured by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If property and equipment and intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value.
In determining the fair values of long-lived assets for purpose of measuring impairment, the Company's assumptions include those that market participants will consider in valuations of similar assets.
In June 2017, following the recent strategic restructuring, consolidation of certain business units and adjustment to current market terms, including adequacy of certain technological products, the Company performed an impairment review of intangible assets that were recognized in connection with the acquisition of Optimatic and Avenlo, which resulted in impairments of $13,793 (see Note 6). The impairment amount is included in impairment, net of change in fair value of contingent consideration, in the statement of operations for the six months ended 30 June 2017. The related deferred tax liability in the amount of $4,800 has also been written off and is included in taxes on income, as tax benefit, for the six months ended 30 June 2017.
e. Goodwill and other intangible assets:
Goodwill reflects the excess of the purchase price of business acquired over the fair value of net assets acquired. Goodwill and indefinite intangible assets are not amortized but instead are tested for impairment, in accordance with ASC 350, at least annually at December 31 each year, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. Following the sale of the non-core activity and the restructuring to focus on the Company's core activity, the Company conducted a goodwill impairment review and determined that no impairment is required.
Following the acquisition of Team Internet, the Company operates in one operating segment, comprised of two reporting units - Matomy and Domain Monetisation.
Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives. Customer relationships and trade name are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in accelerated amortization of such intangible assets as compared to the straight-line method. Technology and database are amortised over their useful lives on a straight-line basis.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) f. Allowance for doubtful accounts:
The Company evaluates specific accounts where information indicates the Company's customers may have an inability to meet financial obligations. Allowance for doubtful accounts amounted to $ 3,005 and $ 1,704 as of 30 June 2017 and 31 December 2016, respectively.
g. Internal-use Software Development:
Costs incurred to develop software for internal use are capitalized and amortized over the estimated useful life of the software. Costs related to design or maintenance of internal-use software are expensed as incurred. For the six months ended June 30 2017 and 2016, the Company capitalized $1,858 and $2,510, respectively. In June 2017, following the recent strategic restructuring, consolidation of certain business units and adjustment to current market terms, including adequacy of certain technological products, the Company abandon certain projects, which resulted in impairments of $445. The impairment amount is included in impairment, net of change in fair value of contingent consideration, in the statement of operations for the six months ended 30 June 2017.
h. Standards issued but not yet effective:
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09) "Revenue from Contracts with Customers." ASU 2014-09 supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)", and requires entities to recognize revenue when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. As currently issued and amended, ASU 2014-09 is effective for annual reporting periods beginning after 15 December 2017, including interim periods within that reporting period, though early adoption is permitted for annual reporting periods beginning after 15 December 2016. We are currently in the process of evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements, and considering additional disclosure requirements.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) which amends the FASB Accounting Standards Codification and created Topic 842, "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provides for enhanced disclosures. Leases will continue to be classified as either finance or operating. ASU 2016-02 is effective for annual reporting periods, and interim periods within those years beginning after 15 December 2018. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.
Full retrospective application is prohibited and early adoption by public entities is permitted. We are currently in the process of evaluating the impact of the adoption of this standard on our consolidated financial statements.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. The Company is currently evaluating the impact that adopting this new accounting standard will have on its consolidated financial statements.
NOTE 3:- Fair value of financial instruments
The carrying amount of cash and cash equivalents, receivables, payables and short-term bank credit approximate their carrying amount.
The following table present liabilities measured at fair value on a recurring basis as of 30 June 2017:
30 June 2017
----------------------------------
Fair value measurements
using input type
----------------------------------
Level Level Level
1 2 3 Total
------ ------ ------- -------
Liabilities:
Payment obligation
in connection with
acquisitions $ - $ - $ 6,587 $ 6,587
Total financial liabilities $ - $ - $ 6,587 $ 6,587
======= ======= ======= =======
The following table summarizes the changes in the Company's liabilities measured at fair value using significant unobservable inputs (Level 3), during the six months ended 30 June 2017:
Total fair value as of 1 January 2017 $ 17,358
Accretion of contingent liability related
to acquisitions 232
Changes in fair value recognized in
earnings (5,533)
Payment of consideration during the
period (5,226)
Other adjustments (244)
--------
Total fair value as of 30 June 2017
(unaudited) $ 6,587
========
NOTE 4:- DERIVATIVE INSTRUMENTS
The Company uses derivative instruments to hedge foreign currency fluctuations and to hedge against the risk of overall changes in future cash flow from payments of payroll and related expenses denominated in new Israeli shekels.
These instruments do not qualify and were not designated as cash flow hedges as defined by ASC 815, "Derivative and Hedging", and therefore the Company recognises the changes in fair value of these instruments in the statements of operations as financial income or expense, as incurred.
The Company had forward and options contracts that do not qualify and was not designated as a cash flow hedge under ASC 815.
The notional value of the Company's derivative instruments as of 30 June 2017 and 2016, amounted to $ 2,228 and $ 7,321, respectively. Notional values in USD are translated and calculated based on the spot rates for options. Gross notional amounts do not quantify risk or represent assets or liabilities of the Company, however, they are used in the calculation of settlements under the contracts.
The net gains (losses) recognized in "financial expenses, net" during the six months period ended 30 June 2017 and 2016 were $ 342 and ($ 258), respectively.
NOTE 5:- DOMAINS
Changes in domains are as follows:
Six months
ended
30 June
2017
----------
Domains as of 1 January 2017 $ 9,965
Additions 1,002
Disposals (35)
Domains asset as of 30 June 2017 $ 10,932
==========
NOTE 6:- OTHER INTANGIBLE ASSETS, NET
a. Other intangible assets as of 30 June 2017:
Customer Trade
Technology relationships Database name Total
---------- -------------- -------- ------- --------
31 December
2016 $ 15,880 $ 13,498 $ 4,593 $ 2,606 $ 36,577
Amortisation (2,974) (2,569) (283) (371) (6,197)
Impairment (6,315) (4,146) (1,250) (2,082) (13,793)
Disposal
(Note 1b) - (69) - - (69)
---------- -------------- -------- ------- --------
30 June 2017 $ 6,591 $ 6,714 $ 3,060 $ 153 $ 16,518
========== ============== ======== ======= ========
NOTE 6:- OTHER INTANGIBLE ASSETS, NET (Cont.)
b. The estimated future amortisation expense of other intangible assets as of 30 June 2017 is as follows:
2017 $ 4,096
2018 5,864
2019 3,007
2020 2,337
2021 and after 1,214
--------------
$ 16,518
==============
NOTE 7:- GOODWILL
Changes in goodwill for the period ended 30 June 2017 are as follows:
Goodwill as of 1 January 2017 $ 97,015
Disposals (Note 1b) (4,660)
$ 92,355
========
NOTE 8:- NON CONTROLLING INTERESTS
a. Redeemable non-controlling interests are classified as mezzanine equity, separate from permanent equity, on the consolidated balance sheets and measured at each reporting period at the higher of their redemption amount or the non-controlling interest book value, in accordance with the requirements of Accounting Standards Codification ("ASC") 810 "Consolidation" and ASC 480-10-S99-3A, "Distinguishing Liabilities from Equity".
The following table summarises the movements in the redeemable non-controlling interests:
Six months ended
30 June
------------------
2017 2016
-------- --------
Redeemable non-controlling
interests at beginning of
period $ 37,467 $ 35,365
Revaluation of redeemable
non-controlling interest
in subsidiaries 7,900 17
Dividend distributed to redeemable
non-controlling interests (3,491) -
Acquisition of redeemable
non-controlling interests (10,994) -
Net income attributable to
redeemable non-controlling
interests 337 201
$ 31,219 $ 35,583
======== ========
NOTE 8:- REDEEMABLE NON CONTROLLING INTERESTS (Cont.)
b. The following table summarises the effect on the Company's shareholders:
Six months ended
30 June
------------------
2017 2016
--------- -------
Net loss attributable to
Matomy Media Group Ltd before
accretion of redeemable non-controlling
interest $ 6,786 $ 5,524
Accretion of redeemable non-controlling
interest 7,900 17
--------- -------
Net loss attributable to
Matomy Media Group Ltd. shareholders
after accretion of redeemable
non-controlling interest $ 14,686 $ 5,541
========= =======
Out of the closing balance as of 30 June 2017, an amount of $16,468 is exercisable during the twelve months ending 30 June 2018.
NOTE 9:- COMMITMENTS AND CONTINGENT LIABILITIES
The Company rents its facilities under operating lease agreements with an initial term expiring in 2021. As of 30 June 2017, the Company's total future minimum lease commitments under non-cancellable operating leases were $ 7,161.
Rent expenses for the six months period ended 30 June 2017 and 2016, were $ 1,244 and $ 1,011, respectively.
The Company leases its motor vehicles under cancellable operating lease agreements until February 2020. The minimum payment under these operating leases, upon cancellation of these lease agreements, was $ 8 as of 30 June 2017.
The Company has provided guarantees for rent expenses in the amount of $ 1,091.
NOTE 10:- BANK LOANS AND CREDIT LINE
a. On 16 June 2014, the Company signed a loan agreement with an Israeli bank in an amount of $21,600. The loan agreement requires repayment of 85% of the principal in 12 equal payments every three months commencing 16 September 2014, and 15% of the principal in 4 equal payments every three months commencing 16 September 2017. The loan bore an initial interest of three months USD LIBOR plus 4.5%, which was reduced to USD LIBOR plus 3.5% to be paid together with the relevant portion of the principal. In relation to this loan, the Company is required to comply with certain covenants, as defined in the loan agreement and its amendments. As of 30 June 2017, the Company was in full compliance with the financial covenants.
NOTE 10:- BANK LOANS AND CREDIT LINE (Cont.)
b. As of June 30, 2017, the Company has line of credit with Israeli banks for total borrowings of up to $13,000, out of which, it utilized $ 11,715. The Company presented the bank credit, net of cash deposits in the amount of $ 1,116, at the same bank account.
$6,000 of the line of credit is secured, and the remaining $7,000 is unsecured and available to the Company based on meeting certain account receivable conditions. Interest rate of the credit line is USD LIBOR plus 3.25% as of 30 June 2017. The Company is in full compliance with the agreed account receivable conditions. In July 2017, the Company repaid $5,642 out of the utilized balance, and the line of credit was amended to $8,700.
The line of credit and the loan describes in (a) above secured by way of: (i) a fixed charge over the unpaid equity of the Company; and (ii) a floating charge over all the assets of the Company; and (iii) mutual guarantees between the Israeli companies.
c. On 20 August 2015, the Company's subsidiary Team Internet signed a term loan agreement with a German bank in an amount of $1,360 (EUR 1,192 thousand). In accordance with the loan agreement, repayment of the principal shall be made in 54 equal monthly payments, commencing 31 March 2016. The loan is indexed to the Euro and bears an interest of 1.8% to be paid on a monthly basis, commencing 31 August 2015.
d. On 28 April 2016, Team Internet signed a loan agreement with a German bank in an amount of $ 3,036 (EUR 2,660 thousand). In accordance with the loan agreement, repayment of the principal shall be made in 20 equal quarterly payments, commencing 30 September 2016. The loan is indexed to the Euro and bears an interest of 1.1% to be paid on a quarterly basis, commencing 30 June 2016.
e. On 28 September 2016, the Company's subsidiary in the US ("Matomy US") signed a loan agreement with a bank in the US in an amount of $ 4,000, and an unsecured line of credit in the amount of $ 1,000. During March 2017 the Company updated its credit line facility agreement with the bank in the US, securing the $ 1,000 credit line. The line of credit bears an unused credit line interest rate of 0.35%. The term loan agreement requires repayment of principal and interest every 3 months commencing 28 December 2016. The loan bears an initial interest of three months USD LIBOR plus 3.65% and the line of credit bears a monthly interest of LIBOR plus 3.25%. As security, Matomy US and its subsidiary have granted a first priority lien on and security interest in all of the assets of Matomy US, and provided cross guaranties.
f. On 10 January 2017, the Company's subsidiary ("Optimatic") signed a secured line of credit in the amount of $ 5,000, all is utilized with a bank in the USA. The line of credit bears an interest rate of LIBOR plus 3.25%, and an interest of 0.35% on the unused credit line.
Matomy US and Optimatic, are required to comply with certain covenants, as defined in the term loan and line of credit agreement and its amendments. As of 30 June 2017, the Company was not in full compliance with the financial covenants, but obtained the bank's waiver in respect of the non-compliance.
NOTE 10:- BANK LOANS AND CREDIT LINE (Cont.)
g. On 3 January 2017, the Company signed a term loan agreement with an Israeli bank in an amount of $ 2,000. In accordance with the loan agreement, repayment of the principal and the interest shall be made in 12 equal quarterly payments, commencing 10 April 2017. The loan bears an annual initial interest of three months USD LIBOR plus 4.6%.
NOTE 11:- EQUITY
a. A summary of the activity in options granted to employees and directors in the six months period ended 30 June 2017 is as follows:
Weighted-
Weighted-average average
exercise remaining
price contractual Aggregate
Number (in US term (in intrinsic
of options dollars) years) value
----------- ---------------- ------------ ----------
Outstanding at
1 January 2017 7,409,845 $ 1.46 5.1 1,480
Granted 168,000 1.29
Exercised (383,109) 1.14
Forfeited (470,767) 1.91
Outstanding at
30 June 2017 6,723,969 1.44 4.81 600
=========== ================ ============ ==========
Exercisable at
30 June 2017 3,946,532 1.36 2.22 580
----------- ---------------- ------------ ----------
As of 30 June 2017, the Company's total compensation cost relating to options granted to employees and directors and not yet recognised amounted to $ 749.
The weighted average grant date fair values of options granted for the six months period ended 30 June 2017 was $ 0.57.
b. Options issued to non-employees:
The Company's outstanding options to non-employees as of 30 June 2017 were as follows:
Exercise
price
Options per share
Issuance for Ordinary (in US Options Exercisable
date shares dollars) exercisable through
------------- ------------- ---------- ------------ -----------
December
January 2010 32,044 0.21 32,044 2017
NOTE 11:- EQUITY (Cont.)
c. Restricted Stock Units ("RSU") issued to employees and directors:
The following table summarizes RSU activity in the six months period ended 30 June 2017:
Number of
RSU
---------
Outstanding at
1 January 2017 1,472,500
Granted -
Vested (222,500)
Forfeited (75,000)
Outstanding at
30 June 2017 1,175,000
------------------ =========
As of 30 June 2017, the total compensation cost related to RSUs granted to employees, not yet recognized amounted to $ 564.
NOTE 12:- TAXES ON INCOME
Taxable income of Israeli companies is generally subject to corporate tax at the rate of 24% in 2017 (2016 - 25%).
Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.
For the six month period ended 30 June 2017 the Company had tax benefit mainly due to reversal of deferred tax liability resulted from impairment of intangible assets. The Company's effective tax rate in the future will depend on the portion of our profits earned in Israel and outside of Israel.
Taxes on income (tax benefit) are comprised as follows:
Six months ended
30 June
-------------------
2017 2016
--------- --------
Current
Domestic $ 36 $ 5
Foreign 3,502 2,475
--------- --------
3,538 2,480
--------- --------
Deferred
Domestic (109) (1,011)
Foreign (6,314) (1,213)
---------
(6,423) (2,224)
$ (2,885) $ 256
========= ========
NOTE 13:- LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per share:
Six months ended
30 June
---------------------
2017 2016
---------- ---------
Unaudited
---------------------
Basic and diluted net loss attributable to Matomy
Media Group Ltd. (Note 8b) $ (14,686) $ (5,541)
========== =========
Weighted average number of shares used in computing
basic and diluted net loss per share (in thousands) 94,771 93,307
========== =========
Basic and diluted loss per ordinary shares (in
dollars) $ (0.15) $ (0.06)
========== =========
The total weighted average number of shares related to the outstanding options excluded from the calculations of diluted earnings per share, since they would have an anti-dilutive effect, was 9,170,748 and 9,485,495 for the six months period ended 30 June 2017 and 30 June 2016, respectively.
NOTE 14:- RESTRUCTURING COSTS
During May 2017, the Company initiated a restructuring plan in order to focus on core activities of programmatic mobile, video and domain monetization, while significantly reducing operational costs moving forward, as well as other cost saving measures.
Pursuant to the restructuring plan, the Company has incurred cumulative charges of $ 574 (net of expense reimbursement of $358), as follows:
Payroll and related expenses $ 515
Lease facilities and related
expenses 162
Other expenses 255
Expense reimbursement (see note
1b) (358)
$ 574
========
NOTE 15:- SUBSEQUENT EVENTS
On 11 July 2017, Team Internet acquired an additional 26% of the issued and outstanding shares of InterNexum GmbH ("InterNexum") for a consideration of $148 (EUR 125 thousand). Following the acquisition, the Company's subsidiary holds 51% from the issued and outstanding shares of InterNexum.
- - - - - - - - - - - - - - - - -
This information is provided by RNS
The company news service from the London Stock Exchange
END
NORDMGZLKRNGNZG
(END) Dow Jones Newswires
September 28, 2017 02:02 ET (06:02 GMT)
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