Exhibit 99.1
TABOOLA.COM LTD.
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2022
UNAUDITED
INDEX
- - - - - - - - - - - - - - - - -
CONSOLIDATED INTERIM BALANCE SHEETS |
| U.S. dollars in thousands, except share and per share data |
| | | September 30, 2022 | | | December 31, 2021 | |
| | | Unaudited | | | | |
| ASSETS | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 188,477 | | | $ | 319,319 | |
| Short-term investments | | | 119,840 | | | | — | |
| Restricted deposits | | | 750 | | | | 1,000 | |
| Trade receivables (net of allowance for credit losses of $4,947 and $3,895 as of September 30, 2022, and December 31, 2021, respectively) | | | 184,794 | | | | 245,235 | |
| Prepaid expenses and other current assets | | | 70,743 | | | | 63,394 | |
| Total current assets | | | 564,604 | | | | 628,948 | |
| NON-CURRENT ASSETS | | | | | | | | |
| Long-term prepaid expenses | | | 40,652 | | | | 32,926 | |
| Restricted deposits | | | 4,052 | | | | 3,897 | |
| Deferred tax assets, net | | | 2,909 | | | | 1,876 | |
| Operating lease right of use assets | | | 65,217 | | | | 65,105 | |
| Property and equipment, net | | | 73,758 | | | | 63,259 | |
| Intangible assets, net | | | 205,122 | | | | 250,923 | |
| Goodwill | | | 557,559 | | | | 550,380 | |
| Total non-current assets | | | 949,269 | | | | 968,366 | |
| Total assets | | $ | 1,513,873 | | | $ | 1,597,314 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Trade payables | | $ | 207,775 | | | $ | 259,941 | |
| Short-term operating lease liabilities | | | 13,456 | | | | 12,958 | |
| Accrued expenses and other current liabilities | | | 100,978 | | | | 124,662 | |
| Current portion of long-term loan | | | 3,000 | | | | 3,000 | |
| Total current liabilities | | | 325,209 | | | | 400,561 | |
| LONG-TERM LIABILITIES | | | | | | | | |
| Deferred tax liabilities, net | | | 42,563 | | | | 51,027 | |
| Warrants liability | | | 4,239 | | | | 31,227 | |
| Long-term loan, net of current portion | | | 284,270 | | | | 285,402 | |
| Long-term operating lease liabilities | | | 56,075 | | | | 61,526 | |
| Total long-term liabilities | | | 387,147 | | | | 429,182 | |
| COMMITMENTS AND CONTINGENCIES (Note 13) | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | |
| Ordinary shares with no par value- Authorized: 700,000,000 as of September 30, 2022 and December 31, 2021; 247,348,424 and 234,031,749 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively. | | | — | | | | — | |
| Additional paid-in capital | | | 887,845 | | | | 824,016 | |
| Accumulated other comprehensive loss | | | (2,724 | ) | | | — | |
| Accumulated deficit | | | (83,604 | ) | | | (56,445 | ) |
| Total shareholders' equity | | | 801,517 | | | | 767,571 | |
| Total liabilities and shareholders' equity | | $ | 1,513,873 | | | $ | 1,597,314 | |
The accompanying notes are an integral part of these unaudited consolidated interim financial statements.
CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS) |
| U.S. dollars in thousands, except share and per share data |
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | Unaudited | |
| | | | | | | | | | | | | |
| Revenues | | $ | 332,462 | | | $ | 338,768 | | | $ | 1,029,883 | | | $ | 970,790 | |
| Cost of revenues: | | | | | | | | | | | | | | | | |
| Traffic acquisition cost | | | 203,125 | | | | 211,899 | | | | 619,109 | | | | 621,137 | |
| Other cost of revenues | | | 26,649 | | | | 19,184 | | | | 79,695 | | | | 52,224 | |
| Total cost of revenues | | | 229,774 | | | | 231,083 | | | | 698,804 | | | | 673,361 | |
| Gross profit | | | 102,688 | | | | 107,685 | | | | 331,079 | | | | 297,429 | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Research and development | | | 36,237 | | | | 29,946 | | | | 100,728 | | | | 83,889 | |
| Sales and marketing | | | 63,216 | | | | 43,518 | | | | 190,989 | | | | 146,962 | |
| General and administrative | | | 24,685 | | | | 34,345 | | | | 78,062 | | | | 98,489 | |
| Total operating expenses | | | 124,138 | | | | 107,809 | | | | 369,779 | | | | 329,340 | |
| Operating loss | | | (21,450 | ) | | | (124 | ) | | | (38,700 | ) | | | (31,911 | ) |
| Finance income (expenses), net | | | (3,570 | ) | | | 13,960 | | | | 12,389 | | | | 13,077 | |
| Income (loss) before income taxes | | | (25,020 | ) | | | 13,836 | | | | (26,311 | ) | | | (18,834 | ) |
| Income tax benefit (expenses) | | | (1,006 | ) | | | 3,460 | | | | (848 | ) | | | (6,699 | ) |
| Net income (loss) | | $ | (26,026 | ) | | $ | 17,296 | | | $ | (27,159 | ) | | $ | (25,533 | ) |
| Less: Undistributed earnings allocated to participating securities | | | — | | | | — | | | | — | | | | (11,944 | ) |
| Net income (loss) attributable to Ordinary shares – basic and diluted | | | (26,026 | ) | | | 17,296 | | | | (27,159 | ) | | | (37,477 | ) |
| Net income (loss) per share attributable to Ordinary shareholders, basic | | $ | (0.10 | ) | | $ | 0.08 | | | $ | (0.11 | ) | | $ | (0.35 | ) |
| Weighted-average shares used in computing net income (loss) per share attributable to Ordinary shareholders, basic | | | 255,160,597 | | | | 229,024,803 | | | | 251,865,831 | | | | 107,884,927 | |
| Net income (loss) per share attributable to Ordinary shareholders, diluted | | $ | (0.10 | ) | | $ | 0.07 | | | $ | (0.11 | ) | | $ | (0.35 | ) |
| Weighted-average shares used in computing net income (loss) per share attributable to Ordinary shareholders, diluted | | | 255,160,597 | | | | 259,262,529 | | | | 251,865,831 | | | | 107,884,927 | |
The accompanying notes are an integral part of the unaudited consolidated interim financial statements.
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
| U.S. dollars in thousands |
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | Unaudited | |
| | | | | | | | | | | | | |
| Net income (loss) | | $ | (26,026 | ) | | $ | 17,296 | | | $ | (27,159 | ) | | $ | (25,533 | ) |
| Other comprehensive income (loss): | | | | | | | | | | | | | | | | |
| Unrealized losses on available-for-sale marketable securities | | | (445 | ) | | | — | | | | (704 | ) | | | — | |
| Unrealized gains (losses) on derivative instruments, net | | | 1,504 | | | | — | | | | (2,020 | ) | | | — | |
| Other comprehensive income (loss) | | | 1,059 | | | | — | | | | (2,724 | ) | | | — | |
| Comprehensive income (loss) | | $ | (24,967 | ) | | $ | 17,296 | | | $ | (29,883 | ) | | $ | (25,533 | ) |
The accompanying notes are an integral part of the unaudited consolidated interim financial statements.
CONSOLIDATED INTERIM STATEMENTS OF CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY |
| U.S. dollars in thousands, except share and per share data |
| | | Ordinary shares | | | Additional paid-in | | | Accumulated | | | Accumulated Other Comprehensive | | | Total shareholders’ | |
| | | Number | | | Amount | | | capital | | | deficit | | | income (loss) | | | equity | |
| | | | | | | | | | | | | | | | | | | |
| Balance as of June 30, 2022 (unaudited) | | | 240,679,908 | | | $ | — | | | $ | 869,201 | | | $ | (57,578 | ) | | $ | (3,783 | ) | | $ | 807,840 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Share-based compensation expenses | | | — | | | | — | | | | 19,150 | | | | — | | | | — | | | | 19,150 | |
| Exercise of options and vested RSUs | | | 5,441,506 | | | | — | | | | 1,419 | | | | — | | | | — | | | | 1,419 | |
| Connexity issuance of Holdback | | | 1,227,010 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Payments of tax withholding for share-based compensation | | | — | | | | — | | | | (1,925 | ) | | | — | | | | — | | | | (1,925 | ) |
| Other comprehensive income | | | — | | | | — | | | | — | | | | — | | | | 1,059 | | | | 1,059 | |
| Net loss | | | — | | | | — | | | | — | | | | (26,026 | ) | | | — | | | | (26,026 | ) |
| Balance as of September 30, 2022 (unaudited) | | | 247,348,424 | | | $ | — | | | $ | 887,845 | | | $ | (83,604 | ) | | $ | (2,724 | ) | | $ | 801,517 | |
| | | Convertible Preferred shares | | | Ordinary shares | | | | | | | | | | |
| | | Number | | | Amount | | | Number | | | Amount | | | Additional paid-in capital | | | Accumulated deficit | | | Total shareholders’ equity | |
| | | | | | | | | | | | | | | | | | | | | | |
| Balance as of June 30, 2021 (unaudited) | | | — | | | $ | — | | | | 211,198,259 | | | $ | — | | | $ | 621,664 | | | $ | (74,326 | ) | | $ | 547,338 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance of Ordinary shares | | | — | | | | — | | | | 17,328,049 | | | | — | | | | 157,689 | | | | — | | | | 157,689 | |
| Share-based compensation expenses | | | — | | | | — | | | | — | | | | — | | | | 20,075 | | | | — | | | | 20,075 | |
| Exercise of options and vested RSUs | | | — | | | | — | | | | 3,114,238 | | | | — | | | | 2,560 | | | | — | | | | 2,560 | |
| Net income | | | — | | | | — | | | | — | | | | — | | | | — | | | | 17,296 | | | | 17,296 | |
| Balance as of September 30, 2021 (unaudited) | | | — | | | $ | — | | | | 231,640,546 | | | $ | — | | | $ | 801,988 | | | $ | (57,030 | ) | | $ | 744,958 | |
The accompanying notes are an integral part of the unaudited consolidated interim financial statements.
CONSOLIDATED INTERIM STATEMENTS OF CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY |
| U.S. dollars in thousands, except share and per share data |
| | | Ordinary shares | | | | | | | | | Accumulated Other | | | Total | |
| | | Number | | | Amount | | | Additional paid-in capital | | | Accumulated deficit | | | Comprehensive loss | | | shareholders’ equity | |
| | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2021 | | | 234,031,749 | | | $ | — | | | $ | 824,016 | | | $ | (56,445 | ) | | $ | — | | | $ | 767,571 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Share-based compensation expenses | | | — | | | | — | | | | 60,431 | | | | — | | | | — | | | | 60,431 | |
| Exercise of options and vested RSUs | | | 12,089,665 | | | | — | | | | 7,508 | | | | — | | | | — | | | | 7,508 | |
| Connexity issuance of Holdback | | | 1,227,010 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Payments of tax withholding for share-based compensation | | | — | | | | — | | | | (4,110 | ) | | | — | | | | — | | | | (4,110 | ) |
| Other comprehensive loss | | | — | | | | — | | | | — | | | | — | | | | (2,724 | ) | | | (2,724 | ) |
| Net loss | | | — | | | | — | | | | — | | | | (27,159 | ) | | | — | | | | (27,159 | ) |
| Balance as of September 30, 2022 (unaudited) | | | 247,348,424 | | | $ | — | | | $ | 887,845 | | | $ | (83,604 | ) | | $ | (2,724 | ) | | $ | 801,517 | |
| | | Convertible Preferred shares | | | Ordinary shares | | | | | | | | | | |
| | | Number | | | Amount | | | Number | | | Amount | | | Additional paid-in capital | | | Accumulated deficit | | | Total shareholders’ equity | |
| | | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2020 | | | 121,472,152 | | | $ | 170,206 | | | | 41,357,049 | | | $ | — | | | $ | 78,137 | | | $ | (31,497 | ) | | $ | 46,640 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Conversion of Preferred shares to Ordinary shares | | | (121,472,152 | ) | | | (170,206 | ) | | | 121,472,152 | | | | — | | | | 170,206 | | | | — | | | | 170,206 | |
| Issuance of Ordinary shares | | | — | | | | — | | | | 61,299,565 | | | | — | | | | 442,171 | | | | — | | | | 442,171 | |
| Share-based compensation expenses | | | — | | | | — | | | | — | | | | — | | | | 103,995 | | | | — | | | | 103,995 | |
| Exercise of options and vested RSUs | | | — | | | | — | | | | 7,511,780 | | | | — | | | | 7,479 | | | | — | | | | 7,479 | |
| Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | (25,533 | ) | | | (25,533 | ) |
| Balance as of September 30, 2021 (unaudited) | | | — | | | $ | — | | | | 231,640,546 | | | $ | — | | | $ | 801,988 | | | $ | (57,030 | ) | | $ | 744,958 | |
The accompanying notes are an integral part of the unaudited consolidated interim financial statements.
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS |
| U.S. dollars in thousands |
| | | Nine months ended September 30, | |
| | | 2022 | | | 2021 | |
| | | Unaudited | |
Cash flows from operating activities | | | | | | |
| Net loss | | $ | (27,159 | ) | | $ | (25,533 | ) |
| Adjustments to reconcile net loss to net cash flows provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 68,711 | | | | 30,050 | |
| Share-based compensation expenses | | | 58,971 | | | | 103,594 | |
| Net loss (gain) from financing expenses | | | 7,733 | | | | (1,857 | ) |
| Revaluation of the Warrants liability | | | (26,988 | ) | | | (17,091 | ) |
| Amortization of loan issuance costs | | | 1,006 | | | | 119 | |
| Amortization of premium and accretion of discount on short-term investments, net | | | (322 | ) | | | — | |
Change in operating assets and liabilities: | | | | | | | | |
| Decrease in trade receivables | | | 60,672 | | | | 14,544 | |
| Increase in prepaid expenses and other current assets and long-term prepaid expenses | | | (13,921 | ) | | | (38,379 | ) |
| Decrease in trade payables | | | (54,659 | ) | | | (27,185 | ) |
| Increase (decrease) in accrued expenses and other current liabilities | | | (25,516 | ) | | | 1,380 | |
| Increase (decrease) in deferred taxes, net | | | (9,676 | ) | | | 2,716 | |
| Change in operating lease right of use assets | | | 11,536 | | | | 10,878 | |
| Change in operating lease liabilities | | | (16,962 | ) | | | (12,683 | ) |
| Net cash provided by operating activities | | | 33,426 | | | | 40,553 | |
| Cash flows from investing activities | | | | | | | | |
| Purchase of property and equipment, including capitalized internal-use software | | | (28,476 | ) | | | (28,774 | ) |
| Cash paid in connection with acquisitions, net of cash acquired | | | (7,981 | ) | | | (583,286 | ) |
| Proceeds from restricted deposits | | | 98 | | | | 2,325 | |
| Purchase of short-term investments | | | (126,382 | ) | | | — | |
| Proceeds from sales and maturities of short-term investments | | | 6,160 | | | | — | |
| Net cash used in investing activities | | | (156,581 | ) | | | (609,735 | ) |
Cash flows from financing activities | | | | | | | | |
| Exercise of options and vested RSUs | | | 7,467 | | | | 7,479 | |
| Issuance of Ordinary shares, net of offering costs | | | — | | | | 286,170 | |
| Payments of tax withholding for share-based compensation expenses | | | (4,110 | ) | | | — | |
| Proceeds from long-term loan, net of debt issuance costs | | | — | | | | 288,750 | |
| Repayment of current portion of long-term loan | | | (2,250 | ) | | | — | |
| Costs associated with entering into a revolving credit facility | | | (1,061 | ) | | | — | |
| Issuance of Warrants | | | — | | | | 53,883 | |
| Net cash provided by financing activities | | | 46 | | | | 636,282 | |
| Exchange differences on balances of cash and cash equivalents | | | (7,733 | ) | | | 1,857 | |
| Increase (decrease) in cash and cash equivalents | | | (130,842 | ) | | | 68,957 | |
| Cash and cash equivalents - at the beginning of the period | | | 319,319 | | | | 242,811 | |
| Cash and cash equivalents - at end of the period | | $ | 188,477 | | | $ | 311,768 | |
| | |
| Supplemental disclosures of cash flow information: | |
Cash paid during the year for: | | | | | | | | |
| Income taxes | | $ | 22,599 | | | $ | 7,647 | |
| Interest | | $ | 15,094 | | | $ | — | |
Non-cash investing and financing activities: | | | | | | | | |
| Purchase of property, plant and equipment and intangible assets | | $ | 2,764 | | | $ | 1,500 | |
| Share-based compensation included in capitalized internal-use software | | $ | 1,460 | | | $ | 401 | |
| Deferred offering costs incurred during the period included in long-term prepaid expenses | | $ | — | | | $ | 1,688 | |
| Creation of operating lease right-of-use assets | | $ | 11,648 | | | $ | 2,382 | |
The accompanying notes are an integral part of the unaudited consolidated interim financial statements.
| a. | Taboola.com Ltd. (together with its subsidiaries, the “Company” or “Taboola”) was incorporated under the laws of the state of Israel on September 3, 2006. |
Taboola is a technology company that powers recommendations across the Open Web with an artificial intelligence-based, algorithmic engine developed over the 14 years since the company began operations in 2007. Taboola partners with websites, devices, and mobile apps (collectively referred to as “digital properties”), to recommend editorial content and advertisements on the Open Web. Digital properties use Taboola’s technology platforms to achieve their business goals, such as driving new audiences to their sites and apps or increasing engagement with existing audiences. Taboola also provides monetization opportunities to digital properties by surfacing paid recommendations by advertisers. Taboola is a business-to-business company with no competing consumer interests. Taboola empowers advertisers to leverage its proprietary AI-powered recommendation platform to reach targeted audiences utilizing effective, native ad-formats across digital properties. As part of the Company e-Commerce offerings, it also syndicates its retailer advertisers’ monetized product listings and links (clickable advertisements) into commerce content-oriented consumer experiences on both the Open Web and within the dominant traditional ad platforms. Taboola generates revenues when people (consumers) click on, purchase from or, in some cases, view the ads that appear within its recommendation platform. The Company’s customers are the advertisers, merchants and affiliate networks that advertise on the Company's platform (“Advertisers”). Advertisers pay Taboola for those clicks, purchases or impressions, and Taboola shares a portion of the resulting revenue with the digital properties who display those ads.
| b. | On January 25, 2021, The Company entered into a merger agreement with ION Acquisition Corp. 1 Ltd. (“ION”) (the “Merger Agreement”). Under the Merger Agreement, one of Taboola's subsidiaries merged with and into ION, with ION continuing as the surviving company and becoming our direct, wholly-owned subsidiary which was accounted for as a recapitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. GAAP (the “Business Combination”). |
On June 29, 2021 (the “Transaction Date”), the Business Combination closed and the Company’s ordinary shares, no par value per share (the “Ordinary Shares”) and Public Warrants (as defined in our Annual Report on Form 20-F for the year ended December 31, 2021 filed with the SEC on March 24, 2022, and together with the Private Warrants, the “Warrants”) began trading on The Nasdaq Global Market LLC on June 30, 2021, among other things. .
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and include the accounts of Taboola.com Ltd. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The consolidated balance sheet as of December 31, 2021, was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures, including certain notes required by GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Therefore, these unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2021, filed with the SEC on March 24, 2022.
In the opinion of the Company’s management, the unaudited consolidated interim financial statements have been prepared on a basis consistent with the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s unaudited consolidated interim financial statements. The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the full year ending December 31, 2022, or any other future interim or annual period.
Use of Estimates
The preparation of the consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the interim consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, the Company's management evaluates estimates, including those related to accounts receivable and allowance for credit losses, acquired intangible assets and goodwill, the useful life of intangible assets, capitalized internal-use software, property and equipment, the incremental borrowing rate for operating leases, share-based compensation including the determination of the fair value of the Company’s share-based awards, the fair value of financial assets and liabilities, including the fair value of marketable securities, the Private Warrants and derivative instruments, and the valuation of deferred taxes and uncertain tax positions. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates.
Significant Accounting Policies
The Company’s significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 20-F as of and for the year ended December 31, 2021, as filed with the SEC dated March 24, 2022. There have been no significant changes to these policies during the nine months ended September 30, 2022, except as noted below.
Cash and cash equivalents
Cash and cash equivalents consist of cash in banks and highly liquid marketable securities investments, money market account and funds, commercial paper and corporate debt securities, with an original maturity of three months or less at the date of purchase and are readily convertible to known amounts of cash.
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Derivative Financial Instruments
The Company accounts for derivatives and hedging based on ASC 815 (“Derivatives and Hedging”). ASC 815 requires the Company to recognize all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on their intended use and their designation.
Changes in the fair value of these derivatives are recorded in accumulated other comprehensive income (loss) as a component of shareholders’ equity in the consolidated balance sheets until the forecasted transaction occurs. Upon occurrence, the Company reclassifies the related gains or losses on the derivative to the same financial statement line item in the consolidated statements of income (loss) to which the derivative relates. In case the Company discontinues cash flow hedges, it records the related amount in finance income (expenses), net, on the consolidated statements of income (loss).
The Company accounts for its derivative financial instruments as either prepaid expenses and other current assets or accrued expenses and other current liabilities in the consolidated balance sheets at their fair value.
The Company classifies its marketable securities as available-for-sale at the time of purchase and reevaluates such classification at each balance sheet date. The Company may sell these securities at any time for use in current operations even if they have not yet reached maturity. As a result, the Company classifies its marketable securities, including those with maturities beyond 12 months, as current assets in the consolidated balance sheets.
The Company carries these securities at fair value and records unrealized gains and losses, net of taxes, in accumulated other comprehensive income (loss) as a component of shareholders’ equity, except for changes in allowance for expected credit losses, which are recorded in finance income (expenses), net.
The Company periodically evaluates its available-for-sale debt securities for impairment. If the amortized cost of an individual security exceeds its fair value, the Company considers its intent to sell the security or whether it is more likely than not that it will be required to sell the security before recovery of its amortized basis. If either of these criteria are met, the Company writes down the security to its fair value and records the impairment charge in finance income (expenses), net, in the consolidated statements of income (loss).
If neither of these criteria are met, the Company determines whether credit loss exists. Credit loss is estimated by considering changes to the rating of the security by a rating agency, any adverse conditions specifically related to the security, as well as other factors.
Realized gains and losses on available-for-sale marketable securities are included in the consolidated statements of income (loss).
| NOTE 3:- | CASH AND CASH EQUIVALENTS |
The following table presents for each reported period, the breakdown of cash and cash equivalents:
| | | September 30, | | | December 31, | |
| | | Unaudited | | | | |
| | | | | | | |
| Cash | | $ | 153,205 | | | $ | 137,050 | |
| Time deposits | | | 30,115 | | | | 57,205 | |
| Money market accounts and funds | | | 5,157 | | | | 125,064 | |
| | | | | | | | | |
| Total Cash and cash equivalents | | $ | 188,477 | | | $ | 319,319 | |
| NOTE 4:- | FAIR VALUE MEASUREMENTS |
The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. The Company did not have any transfers between fair value measurements levels in the nine months ended September 30, 2022.
The following table sets forth the Company’s assets and liabilities that were measured at fair value as of September 30, 2022 and December 31, 2021, by level within the fair value hierarchy:
| | | | | | Fair value measurements as of | |
| Description | | | Fair Value Hierarchy | | September 30, 2022 | | | December 31, 2021 | |
| | | | | | Unaudited | | | | |
| Assets: | | | | | | | | | |
Cash equivalents: | | | | | | | | | |
| Money market accounts and funds | | | Level 1 | | $ | 5,157 | | | $ | 125,064 | |
Short-term investments: | | | | | | | | | | | |
| U.S. government treasuries | | | Level 2 | | $ | 59,970 | | | $ | — | |
| Corporate debt securities | | | Level 2 | | $ | 23,618 | | | $ | — | |
| U.S. agency bonds | | | Level 2 | | $ | 20,769 | | | $ | — | |
| Commercial paper | | | Level 2 | | $ | 15,483 | | | $ | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | |
Warrants liability: | | | | | | | | | | | |
| Public Warrants | | | Level 1 | | $ | (2,328 | ) | | $ | (8,963 | ) |
| Private Warrants | | | Level 3 | | $ | (1,911 | ) | | $ | (22,264 | ) |
Derivative instruments liability: | | | | | | | | | | | |
| Derivative instruments designated as cash flow hedging instruments | | | Level 2 | | $ | (2,020 | ) | | $ | — | |
| NOTE 4:- | FAIR VALUE MEASUREMENTS (Cont.) |
The Company classifies its money market accounts and funds as Level 1 based on quoted market prices in active markets.
The Company classifies its U.S. government treasuries, corporate debt securities, commercial paper, U.S. agency bonds and derivative financial instruments within Level 2 as they are valued using inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded.
The Company measures the fair value for Warrants by using a quoted price for the Public Warrants, which are classified as Level 1, and a Black-Scholes simulation model for the Private Warrants, which are classified as Level 3, due to the use of unobservable inputs.
The key inputs into the Black-Scholes model for the Private Warrants were as follows:
Input | | September 30, 2022 | | | December 31, 2021 | |
| | | | | | | |
| Risk-free interest rate | | | 4.09% - 4.16 | % | | | 1.07% - 1.18 | % |
| Expected term (years) | | | 3.01 - 3.75 | | | | 3.75 - 4.50 | |
| Expected volatility | | | 74.1% - 76.5 | % | | | 66.1% - 68.6 | % |
| Exercise price | | $ | 11.50 | | | $ | 11.50 | |
| Underlying Stock Price | | $ | 1.81 | | | $ | 7.78 | |
| | | | | | | | | |
The Company’s use of a Black-Scholes model required the use of subjective assumptions:
| ● | The risk-free interest rate assumption was interpolated based on constant maturity U.S. Treasury rates over a term commensurate with the expected term of the Warrants. |
| ● | The expected term was based on the maturity of the Warrants five years following June 29, 2021, the Merger Transaction date, and for certain Private Warrants the maturity was determined to be five years from the date of the October 1, 2020, ION initial public offering effective date. |
| ● | The expected share volatility assumption was based on the implied volatility from a set of comparable publicly-traded companies as determined based on size and proximity. |
The following table presents the changes in the fair value of Warrants liability:
Input | | Private Warrants | | | Public Warrants | | | Total Warrants | |
| | | | | | | | | | |
| Fair value as of December 31, 2021 | | $ | 22,264 | | | $ | 8,963 | | | $ | 31,227 | |
| Change in fair value | | | (20,353 | ) | | | (6,635 | ) | | | (26,988 | ) |
| Fair value as of September 30, 2022 (unaudited) | | $ | 1,911 | | | $ | 2,328 | | | $ | 4,239 | |
| NOTE 5:- | SHORT-TERM INVESTMENTS |
The following is a summary of available-for-sale marketable securities:
| | | September 30, 2022 | |
| | | Unaudited | |
| | | Amortized Cost | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Estimated Fair Value | |
| U.S. government treasuries | | $ | 60,335 | | | $ | — | | | $ | (365 | ) | | $ | 59,970 | |
| Corporate debt securities | | | 23,787 | | | | — | | | | (169 | ) | | | 23,618 | |
| U.S. agency bonds | | | 20,899 | | | | — | | | | (130 | ) | | | 20,769 | |
| Commercial paper | | | 15,523 | | | | — | | | | (40 | ) | | | 15,483 | |
| Total | | $ | 120,544 | | | $ | — | | | $ | (704 | ) | | $ | 119,840 | |
As of December 31, 2021 the Company did not have any available-for-sale marketable securities.
For the nine months ended September 30, 2022, the unrealized losses related to marketable securities (which were accumulated in a period of less than 12 months) were determined not due to credit related losses, therefore, the Company did not record an allowance for credit losses for its available-for-sale marketable securities.
As of September 30, 2022, all of the Company’s available-for-sale marketable securities were due within one year.
| NOTE 6:- | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
The Company enters into foreign currency forward and option contracts with financial institutions to protect itself against the foreign exchange risks, mainly exposure to changes in the exchange rate of the New Israeli Shekel (“NIS”) against the U.S. dollar that are associated with forecasted future cash flows for up to twelve months. The Company’s risk management strategy includes the use of derivative financial instruments to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates; these derivative instruments are designated as cash flow hedges. The Company does not enter into derivative transactions for trading or speculative purposes.
As of September 30, 2022, the notional amounts of the Company’s derivative instruments designated as cash flow hedging instruments outstanding in U.S. dollars, which are translated and calculated based on forward rates, amounted to $16,168.
The Company records all cash flow hedging instruments on the consolidated balance sheets at fair value. The fair value of cash flow hedging instruments recorded as liabilities as of September 30, 2022, was $2,020, which were recorded in accrued expenses and other current liabilities in the consolidated interim balance sheets.
| NOTE 6:- | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Cont.) |
The changes related to cash flow hedging instruments, recorded in the consolidated interim statements of income (loss), for the three and nine months ended September 30, 2022, were as follows:
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2022 | | | 2022 | |
| | | Unaudited | |
| Cost of revenues | | $ | 145 | | | $ | 290 | |
| Research and development | | | 992 | | | | 1,971 | |
| Sales and marketing | | | 190 | | | | 376 | |
| General and administrative | | | 165 | | | | 329 | |
| Total losses recognized in the consolidated interim statements of income (loss), net | | $ | 1,492 | | | $ | 2,966 | |
Effect of Foreign Currency Contracts on Accumulated Other Comprehensive Loss
Net unrealized losses of foreign currency contracts designated as cash flow hedging instruments are recorded in accumulated other comprehensive losses.
The changes in unrealized losses on the Company’s derivative instruments recorded in accumulated other comprehensive loss were as follows:
| | | Nine months ended September 30, 2022 | |
| | | Unaudited | |
| | | | |
| Unrealized losses on derivative instruments as of December 31, 2021 | | $ | — | |
| Changes in fair value of derivative instruments | | | (4,986 | ) |
| Reclassification of losses recognized in the consolidated interim statements of income (loss) from accumulated other comprehensive loss | | | 2,966 | |
| Unrealized losses on derivative instruments as of September 30, 2022 (unaudited) | | $ | (2,020 | ) |
As of December 31, 2021 the Company did not have any derivative instruments or hedging activities.
All net deferred losses in accumulated other comprehensive loss as of September 30, 2022, are expected to be recognized over the next twelve months as operating expenses in the same financial statement line item in the consolidated interim statements of income (loss) to which the derivative relates.
| NOTE 7:- | BUSINESS COMBINATION |
Connexity
On September 1, 2021, the Company completed the acquisition of Shop Holding Corporation (“Connexity”) (“Connexity Acquisition”), an independent e-Commerce media platform in the open web, from Shop Management, LLC (“Seller”). Connexity is a technology and data-driven integrated marketing services company focused on the e-commerce ecosystem. Through a focus on performance-based retail marketing, Connexity enables retailers and brands to understand their consumers better, acquire new customers at a lower cost, and increase sales from their target consumers. Connexity offers a comprehensive range of marketing services to online retailers and brands in the U.S. and Europe, including syndicated product listings, search marketing, and customer insights. Connexity corporate headquarters is in Santa Monica, California, and the Company also maintains an office in Karlsruhe, Germany.
In accordance with the acquisition method of accounting, the total purchase price for the Connexity Acquisition was $753,217, comprised of $593,894 in cash and $157,689 based on the fair value of 17,328,049 shares of the Company’s ordinary shares on the closing date and additional subsequent payment of $1,634 made during 2022 (of which $431 were accrued in December 2021) as final settlement for net working capital adjustments.
In July 2022, the Company completed the acquisition of Gravity R&D Zrt. ("Gravity R&D") a privately-held company based in Budapest, Hungary, which provides personalization recommendation services for a total consideration of $6,982, net of cash acquired. As part of a preliminary purchase price allocation , $1,790 was attributed to identified intangible assets, $5,976 to goodwill.
Total acquisition costs of $742 were incurred in relation to the acquisition, which were recognized as an expense and included in general and administrative expenses in the consolidated interim statements of income (loss).
The results of Gravity R&D operations were consolidated in the Company's consolidated interim financial statements commencing on the date of the acquisition and were immaterial to the Company’s results of operations for the three and nine months ended September 30, 2022.
| NOTE 8:- | GOODWILL AND INTANGIBLE ASSETS, NET |
Goodwill
The following table represents the changes in the carrying amounts of the Company’s total goodwill:
| | | Carrying Amount | |
| | | | |
| Balance as of December 31, 2021 | | $ | 550,380 | |
| Purchase accounting adjustment (1) | | | 1,203 | |
| Additions from acquisition (2) | | | 5,976 | |
| Balance as of September 30, 2022 (unaudited) | | $ | 557,559 | |
(1) Additional payment related to final settlement for net working capital adjustments for the Connexity Acquisition.
(2) Related to the Gravity R&D acquisition.
Intangible Assets, Net
Definite-lived intangible assets, net consist of the following:
| | | Gross Fair Value | | | Accumulated Amortization | | | Net Book Value | |
| September 30, 2022 (unaudited) | | | |
| Merchant/ Network affiliate relationships | | $ | 146,547 | | | $ | (35,279 | ) | | $ | 111,268 | |
| Technology | | | 74,193 | | | | (29,167 | ) | | | 45,026 | |
| Publisher relationships | | | 42,933 | | | | (11,628 | ) | | | 31,305 | |
| Tradenames | | | 24,097 | | | | (8,672 | ) | | | 15,425 | |
| Customer relationship | | | 13,156 | | | | (11,058 | ) | | | 2,098 | |
| Total | | $ | 300,926 | | | $ | (95,804 | ) | | $ | 205,122 | |
| December 31, 2021 | | Gross Fair Value | | | Accumulated Amortization | | | Net Book Value | |
| Merchant/ Network affiliate relationships | | $ | 146,547 | | | $ | (10,879 | ) | | $ | 135,668 | |
| Technology | | | 73,403 | | | | (20,616 | ) | | | 52,787 | |
| Publisher relationships | | | 42,933 | | | | (3,640 | ) | | | 39,293 | |
| Tradenames | | | 23,997 | | | | (2,711 | ) | | | 21,286 | |
| Customer relationship | | | 12,256 | | | | (10,367 | ) | | | 1,889 | |
| Total | | $ | 299,136 | | | $ | (48,213 | ) | | $ | 250,923 | |
| NOTE 8:- | GOODWILL AND INTANGIBLE ASSETS, NET (Cont.) |
Amortization expenses for intangible assets were $15,983 and $5,908, for the three months ended September 30, 2022 and 2021, respectively, and $47,591 and $7,186, for the nine months ended September 30, 2022 and 2021, respectively.
The estimated future amortization expense of definite-lived intangible assets as of September 30, 2022, is as follows (unaudited):
| Year Ending December 31, | | | |
| 2022 (Remainder) | | $ | 15,977 | |
| 2023 | | | 63,910 | |
| 2024 | | | 60,565 | |
| 2025 | | | 51,479 | |
| 2026 | | | 13,191 | |
| Total | | $ | 205,122 | |
| NOTE 9:- | FINANCING ARRANGEMENTS |
Long-term loan
Concurrently with the closing of the Connexity Acquisition, on September 1, 2021, the Company entered into a $300,000 senior secured term loan credit agreement (the “Credit Agreement”), among the Company, Taboola Inc., a wholly-owned Company’s subsidiary (the “Borrower”), the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for borrowings in an aggregate principal amount of up to $300,000 (the “Facility”).
The Facility was fully drawn at closing, net of issuance expenses of $11,250, and the proceeds were used by the Company to finance a portion of the Connexity Acquisition.
The Facility is subject to customary borrowing conditions and bears interest at a variable annual rate based on LIBOR or Base Rate plus a fixed margin. The Facility will mature on the seventh anniversary of the closing date and amortizes at a rate of 1.00% per annum payable in equal quarterly installments, with the remaining principal amount due at maturity.
The Facility is mandatorily prepayable with a portion of the net cash proceeds of certain dispositions of assets, a portion of Taboola’s excess cash flow and the proceeds of incurrences of indebtedness not permitted under the Credit Agreement.
The Credit Agreement also contains customary representations, covenants and events of default. Failure to meet the covenants beyond applicable grace periods could result in acceleration of outstanding borrowings and/or termination of the Facility. As of September 30, 2022, the Company was in compliance with the Facility covenants.
| NOTE 9:- | FINANCING ARRANGEMENTS (Cont.) |
As of September 30, 2022, the total future principal payments related to Facility loan are as follows (unaudited):
| | | Amount | |
| Year Ending December 31, | | | |
| 2022 (current maturities) | | $ | 750 | |
| 2023 | | | 3,000 | |
| 2024 | | | 3,000 | |
| 2025 | | | 3,000 | |
| 2026 | | | 3,000 | |
| 2027 | | | 3,000 | |
| 2028 | | | 281,250 | |
| Total | | $ | 297,000 | |
The Facility is guaranteed by the Company and all of its wholly-owned material subsidiaries, subject to certain exceptions set forth in the Credit Agreement (collectively, the “Guarantors”). The obligations of the Borrower and the Guarantors are secured by substantially all the assets of the Borrower and the Guarantors including stock of subsidiaries, subject to certain exceptions set forth in the Credit Agreement.
The total interest expenses recognized in connection with the long-term loan for the three and nine months ended September 30, 2022, were $5,028 and $12,700, respectively.
Revolving Credit Agreement
On August 9, 2022, the Company amended its Credit Agreement to provide for a five-year senior secured revolving credit facility (the “Revolving Credit Agreement”), among the Company, Taboola Inc., a wholly-owned Company’s subsidiary (the “Borrower”), and the lenders party thereto, with Citibank N.A., as lead arranger and JPMorgan Chase Bank, N.A., as administrative agent. The Revolving Credit Agreement provides for revolving loans in an aggregate committed principal amount of up to $90,000 (the “Revolving Loans”).
Certain representations, events of default and covenants of the Revolving Credit Agreement are substantially the same as those in the Credit Agreement. However, the Revolving Credit Agreement contains a financial covenant requiring the Company to maintain a Total Net Leverage Ratio (as defined in the Credit Agreement) as at the last day of each fiscal quarter. Borrowings under the Revolving Credit Agreement are subject to customary conditions and will bear interest at a variable annual rate based on Term SOFR or Base Rate plus a fixed margin. The lenders under the Credit Agreement and the lenders under the Revolving Credit Agreement are secured by the same collateral, including substantially all the assets of the Borrower and the Guarantors (as defined in the Credit Agreement) including shares of subsidiaries, subject to certain exceptions in the governing documents.
The proceeds of any Revolving Loans may be used for the working capital, capital expenditures and other general corporate purposes of Taboola and its subsidiaries and may also be used for Restricted Payments, Investments (including permitted acquisitions) and Restricted Debt Payments (each, as defined in the Credit Agreement) to the extent permitted under the Credit Agreement.
| NOTE 9:- | FINANCING ARRANGEMENTS (Cont.) |
As of September 30, 2022, the Company was in compliance with the financial covenants and had no outstanding borrowings under the Revolving Credit Agreement.
As of September 30, 2022, deferred financing costs associated with entering into a Revolving Credit Agreement in the total amount of $1,061, were included in short and long-term prepaid expenses in the Company’s consolidated interim balance sheet.
The deferred financing costs are amortized on a straight-line basis over the term of the Revolving Credit Agreement. For the three and nine months ended September 30, 2022, deferred financing costs amortization amounted to $34.
In September 2022, the Company announced and implemented a cost restructuring program impacting approximately 6% of the Company’s global headcount. This strategic reduction was intended to manage the Company’s operating expenses in response to market conditions and ongoing business prioritization efforts.
The restructuring expenses recognized in the consolidated interim statements of income (loss) for the three and nine months ended September 30, 2022, primarily consisting of one-time incremental employee termination benefits and other costs related to Company’s business prioritization, were as follows:
| | | Three and nine months ended September 30, 2022 | |
| | | Unaudited | |
| | | | |
| Cost of revenues | | $ | 99 | |
| Research and development | | | 1,815 | |
| Sales and marketing | | | 1,176 | |
| General and administrative | | | 293 | |
| Total restructuring expenses recognized in the consolidated interim statements of income (loss) | | $ | 3,383 | |
As of September 30, 2022, $1,142 related to restructuring expenses were included in "Accrued expenses and other current liabilities" in the consolidated interim balance sheet.
| NOTE 11:- | SHAREHOLDERS' EQUITY AND SHARE INCENTIVE PLANS |
Share Incentive Plans
| a. | On May 19, 2022, the Company received the approval of the Israeli court for its motion to extend its former motion to allow the Company to utilize the net issuance mechanism to satisfy tax withholding obligations related to equity-based compensation on behalf of its directors, officers and other employees and possible future share repurchases (the “Program”) of up to $60,000. The Company’s board of directors will have the authority to determine the amount to be utilized for the Program. The Company intends to continue filing extension requests for the court approval on an ongoing basis as required. |
For the nine months ended September 30, 2022, the Company utilized the net issuance mechanism in connection with equity-based compensation for certain Office Holders, which resulted in a tax withholding payment by the Company of $4,110 which was recorded as a reduction of additional paid-in capital.
| b. | The following is a summary of share option activity and related information for the nine months ended September 30, 2022 (including employees, directors, officers and consultants of the Company): |
| | | Outstanding Share Options | | | Weighted Average Exercise Price | | | Weighted Average Remaining Contractual Life (Years) | | | Aggregate Intrinsic Value | |
| Balance as of December 31, 2021 | | | 47,532,923 | | | $ | 2.64 | | | | 5.73 | | | $ | 247,734 | |
| Granted | | | 20,000 | | | | 6.52 | | | | | | | | | |
| Exercised | | | (6,515,494 | ) | | | 1.11 | | | | | | | $ | 21,189 | |
| Forfeited | | | (1,290,684 | ) | | | 4.80 | | | | | | | | | |
| Balance as of September 30, 2022 (unaudited) | | | 39,746,745 | | | $ | 2.82 | | | | 6.37 | | | $ | 23,130 | |
| Exercisable as of September 30, 2022 (unaudited) | | | 36,116,645 | | | $ | 1.88 | | | | 5.74 | | | $ | 20,694 | |
The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the option holders had all option holders exercised their options on the last date of the period.
The weighted-average grant date fair value of options granted during the nine months ended September 30, 2022, was $3.80.
As of September 30, 2022, unrecognized share-based compensation cost related to unvested share options was $30,090, which is expected to be recognized over a weighted-average period of 1.5 years.
| NOTE 11:- | SHAREHOLDERS' EQUITY AND SHARE INCENTIVE PLANS (Cont.) |
| c. | The following is a summary of the RSU activity and related information for the nine months ended September 30, 2022: |
| | | Outstanding Restricted Shares Unit | | | Weighted Average Grant Date Fair Value | |
| | | | | | | |
| Balance as of December 31, 2021 | | | 21,613,189 | | | $ | 8.16 | |
| Granted | | | 14,717,795 | | | | 5.52 | |
| Vested (*) | | | (5,574,171 | ) | | | 6.98 | |
| Forfeited | | | (3,085,786 | ) | | | 6.90 | |
| Balance as of September 30, 2022 (unaudited) | | | 27,671,027 | | | $ | 6.60 | |
(*) A portion of the shares that vested were netted out to satisfy the tax obligations of the recipients. During the nine months ended September 30, 2022, a total of 1,213,643 RSUs were canceled to satisfy tax obligations, resulting in net issuance of 1,074,782 shares.
The total release date fair value of RSUs was $23,945, during the nine months ended September 30, 2022.
As of September 30, 2022, unrecognized share-based compensation cost related to unvested RSUs was $118,966, which is expected to be recognized over a weighted-average period of 2.92 years.
The total share-based compensation expense related to all of the Company’s share-based awards recognized for the three and nine months ended September 30, 2022 and 2021, was comprised as follows:
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | Unaudited | |
| Cost of revenues | | $ | 673 | | | $ | 443 | | | $ | 2,227 | | | $ | 1,023 | |
| Research and development | | | 7,343 | | | | 7,749 | | | | 20,888 | | | | 20,134 | |
| Sales and marketing | | | 5,654 | | | | 3,997 | | | | 18,351 | | | | 40,168 | |
| General and administrative | | | 5,040 | | | | 7,751 | | | | 17,505 | | | | 42,269 | |
| Total share-based compensation expense | | $ | 18,710 | | | $ | 19,940 | | | $ | 58,971 | | | $ | 103,594 | |
| d. | On September 1, 2022, pursuant to Connexity three years holdback agreement with certain Connexity employees, the Company issued 1,227,010 Ordinary shares. |
The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses and tax regulations. The Company’s effective tax rates were (3.2%) and (35.5%) for the nine months ended September 30, 2022 and 2021, respectively. The difference between the Company’s effective tax rate and the 23% statutory rate in Israel for the nine months ended September 30, 2022, resulted primarily from valuation allowance in Israel, tax expenses in multiple jurisdictions which were offset against tax benefits derived from losses incurred in the U.S.
| NOTE 13:- | COMMITMENTS AND CONTINGENCIES |
Commercial Commitments
In the ordinary course of the business, the Company enters into agreements with certain digital properties, under which, in some cases it agrees to pay them a guaranteed amount, generally per thousand page views on a monthly basis. These agreements could cause a gross loss on digital property accounts in which the guarantee is higher than the actual revenue generated. These contracts generally range in duration from 2 to 5 years, though some can be shorter or longer.
Non-cancelable Purchase Obligations
In the normal course of business, the Company enters into non-cancelable purchase commitments with various parties to purchase primarily software and IT related-based services. As of September 30, 2022, the Company had outstanding non-cancelable purchase obligations in the amount of $21,840.
Legal Proceedings
| a. | In April 2021, the Company became aware that the Antitrust Division of the U.S. Department of Justice is conducting a criminal investigation of hiring activities in the Company’s industry, including the Company. The Company is cooperating with the Antitrust Division. While there can be no assurances as to the ultimate outcome, the Company does not believe that its conduct violated applicable law. |
| b. | In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims. The Company investigates these claims as they arise and record a provision, as necessary. Provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Although claims are inherently unpredictable, the Company is currently not aware of any matters that, it believes would individually, or in the aggregate, have a material adverse effect on its business, financial position, results of operations, or cash flows. |
| NOTE 14:- | GEOGRAPHIC INFORMATION |
The following table represents total revenue by geographic area based on the Advertisers’ billing address:
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | Unaudited | |
| | | |
| | | | | | |
| | | | |
| Israel | | $ | 48,157 | | | $ | 48,715 | | | $
| 147,953 | | | $ | 133,762 | |
| United Kingdom | | | 16,134 | | | | 16,344 | | | | 54,079 | | | | 49,080 | |
| United States | | | 129,616 | | | | 125,239 | | | | 393,833 | | | | 369,710 | |
| Germany | | | 25,073 | | | | 37,967 | | | | 92,558 | | | | 106,342 | |
| Rest of the world | | | 113,482 | | | | 110,503 | | | | 341,460 | | | | 311,896 | |
| Total | | $ | 332,462 | | | $ | 338,768 | | | $ | 1,029,883 | | | $ | 970,790 | |
| NOTE 15:- | NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS |
The following table sets forth the computation of basic and diluted net income (loss) per share attributable to Ordinary shareholders for the periods presented:
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | Unaudited | |
| Basic net income (loss) per share | | | | | | | | | | | | |
Numerator: | | | | | | | | | | | | |
| Net income (loss) | | $ | (26,026 | ) | | $ | 17,296 | | | $ | (27,159 | ) | | $ | (25,533 | ) |
| Less: Undistributed earnings allocated to participating securities | | | — | | | | — | | | | — | | | | (11,944 | ) |
| Net income (loss) attributable to Ordinary shares – basic | | $ | (26,026 | ) | | $ | 17,296 | | | $ | (27,159 | ) | | $ | (37,477 | ) |
| | | | | | | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | | | | | |
| Weighted-average shares used in computing net income (loss) per share attributable to Ordinary shareholders, basic | | | 255,160,597 | | | | 229,024,803 | | | | 251,865,831 | | | | 107,884,927 | |
| Net income (loss) per share attributable to Ordinary shareholders, basic | | $ | (0.10 | ) | | $ | 0.08 | | | $ | (0.11 | ) | | $ | (0.35 | ) |
| | | | | | | | | | | | | | | | | |
| Diluted net income (loss) per share | | | | | | | | | | | | | | | | |
Numerator: | | | | | | | | | | | | | | | | |
| Net income (loss) attributable to Ordinary shares – diluted | | $ | (26,026 | ) | | $ | 17,296 | | | $ | (27,159 | ) | | $ | (37,477 | ) |
| | | | | | | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | | | | | |
| Weighted-average shares used in computing net income (loss) per share attributable to Ordinary shareholders, basic | | | 255,160,597 | | | | 229,024,803 | | | | 251,865,831 | | | | 107,884,927 | |
| Weighted-average effect of dilutive securities - effect of share-based awards | | | — | | | | 30,237,726 | | | | — | | | | — | |
| Weighted-average shares used in computing net income (loss) per share attributable to Ordinary shareholders, diluted | | | 255,160,597 | | | | 259,262,529 | | | | 251,865,831 | | | | 107,884,927 | |
| Net income (loss) per share attributable to Ordinary shareholders, diluted | | $ | (0.10 | ) | | $ | 0.07 | | | $ | (0.11 | ) | | $ | (0.35 | ) |
| NOTE 15:- | NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS |
The potential number of Ordinary shares that were excluded from the computation of diluted net income (loss) per share attributable to Ordinary shareholders for the periods presented because including them would have been anti-dilutive is as follows:
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | Unaudited | |
| | | | | | | | | | | | | |
| Warrants | | | 12,349,990 | | | | 12,350,000 | | | | 12,349,990 | | | | 12,350,000 | |
| RSUs | | | 20,135,294 | | | | — | | | | 17,994,340 | | | | 8,825,040 | |
| Outstanding share options | | | 34,666,838 | | | | — | | | | 34,666,838 | | | | 46,705,718 | |
| Issuable Ordinary shares related to business combination under holdback arrangement | | | 2,454,020 | | | | — | | | | 2,454,020 | | | | — | |
| Total | | | 69,606,142 | | | | 12,350,000 | | | | 67,465,188 | | | | 67,880,758 | |
