SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Exact Name of Registrant as specified in its charter)
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
Holon, Israel 5885849
(Address of principal executive offices)
Tel: +972-73-3981582; Fax: +972-3-644-5502
26 HaRokmim Street
Holon, Israel 5885849
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on which Registered |
Ordinary shares, par value NIS 0.03 per share | PERI | Nasdaq Global Select Market |
(Title of Class)
(Title of Class)
Large accelerated filer ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ |
Emerging growth company ☐ |
U.S. GAAP ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
• | Our search advertising solution depends heavily upon revenue generated from our agreement with Microsoft Bing, and any adverse change in that agreement could adversely affect our business, financial condition and results of operations. |
• | The generation of search advertising revenue through publishers is subject to competition. If we cannot compete effectively in this market, our revenue is likely to decline. |
• | Should the methods used for the distribution of our search solution, be blocked, constrained, limited, materially changed, based on a change of policies, technology or otherwise (as has happened in the past), or made redundant by any of our search engine providers, our ability to generate revenue from our users’ search activity could be significantly reduced. |
• | Should the providers of platforms, particularly browsers, further block, constrain or limit our ability to offer or change search properties, or materially change their policies, technology or the way they operate, our ability to generate revenue from our users’ search activity could be significantly reduced. |
• | Our advertising customers, comprised of brands, advertising agencies, demand side platforms (“DSPs”) and supply side platforms (“SSPs”), may reduce or terminate their business relationship with us at any time which could have a material adverse effect on our business, financial condition and results of operation. |
• | Large and established internet and technology companies, such as Google, Meta and Amazon, play a substantial role in the digital advertising market and may significantly harm our ability to operate in this industry. |
• | We depend on supply sources to provide us with advertising inventory in order for us to deliver advertising campaigns in a cost-effective manner. |
• | Non-compliance with industry self-regulation could negatively impact our Display Advertising business, brand and reputation. |
• | The advertising industry is highly competitive. If we cannot compete effectively and overcome the technological gaps in this market, our revenue is likely to decline. |
• | If our campaigns are not able to reach certain performance goals or we are unable to measure certain metrics proving achievement of those goals, this could have a material adverse effect on our business. |
• | Increased availability of advertisement-blocking technologies could limit or block the delivery or display of advertisements by our solutions, which could undermine the viability of our business financial condition and results of operations. |
• | Our Advertising business depends on our ability to collect and use data, and any limitation on the collection to use of this data could significantly diminish the value of our solutions and cause us to lose customers, revenue and profit. |
• | If we do not continue to innovate and provide high-quality advertising solutions and services, we may not remain competitive, and our business and results of operations could be materially adversely affected. |
• | Our growth depends in part on the success of our relationships with advertising agencies, DSPs and SSPs. |
• | Our products are dependent on the platform terms of use and policies that are subject to changes out of our control. |
• | Global economic and market conditions and actions taken by our customers, suppliers and other business partners in markets in which we operate might materially adversely impact us. |
• | A loss of the services of our senior management and other key personnel could adversely affect execution of our business strategy. |
• | We have acquired and may continue to acquire other businesses. These acquisitions divert a substantial part of our resources and management attention and could in the future, adversely affect our financial results. |
• | Our share price has fluctuated significantly and could continue to fluctuate significantly. |
• | Our business and financial performance may be materially adversely affected by information technology issues, data breaches, cyber-attacks and other similar incidents, and other business disruptions. |
• | If we fail to detect or prevent suspicious traffic or other invalid traffic or engagement with our ads, or otherwise prevent against malware intrusions, we could lose the confidence of our advertisers, damage our reputation and be responsible to make-good or refund demands, which would cause our business to suffer. |
• | We depend on third party internet, telecommunication and hosting providers to operate our platforms, websites and services. |
• | Regulations, legislation or self-regulation relating to privacy, data collection and protection, e-commerce and internet advertising and uncertainties regarding the application or interpretation of existing or newly adopted laws and regulations could harm our business and subject us to significant legal liability for non-compliance. |
• | Our proprietary information and intellectual property may not be adequately protected and thus our technology may be unlawfully copied by or disclosed to other third parties. |
• | Our business is significantly reliant on the North American market. Any material adverse change in that market could have a material adverse effect on our results of operations and share price. |
• | Our business may be materially affected by changes to fiscal and tax policies. Potentially negative or unexpected tax consequences of these policies, or the uncertainty surrounding their potential effects, could adversely affect our results of operations. |
• | Political, economic and military instability in the Middle East and specifically in Israel may impede our ability to operate and harm our financial results. |
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Item 19. Exhibits | 92 |
Signatures | 93 |
Index | F - 2 |
A. | SELECTED FINANCIAL DATA |
B. | CAPITALIZATION AND INDEBTEDNESS |
C. | REASONS FOR OFFER AND USE OF PROCEEDS |
D. | RISK FACTORS |
• | Supply sources may impose significant restrictions on the advertising inventory they sell or may impose other unfavorable terms and conditions on the advertisers using their sites or platforms. For example, these restrictions may include frequency caps, prohibitions on advertisements from specific advertisers or specific industries, or restrictions on the use of specific creative content or advertising formats as well as content adjacent restrictions, which would restrain our supply of available inventory. |
• | Supply sources that offer online content and mobile applications may shift from an advertising-based monetization method to a pay for content/services model, thereby reducing available inventory. |
• | Social media platforms may be successful in keeping users within their sites via products such as Facebook’s, which may be competitive to our offerings and solutions. If, as a result, users are not on the open web, advertising inventory outside of such platforms (including our publishers’ and our owned and operated sites) may be reduced or may become less attractive to our advertising customers. |
• | Supply sources may be reluctant or unable to adopt certain of our proprietary and unique high-impact, CTV, iCTV and video ad formats for a variety of reasons (such as changes in user preference making such ad formats less desirable, or technological limitations, such as connection with header bidding or the ability to transact programmatically), resulting in limited advertising inventory supply for such formats and inhibiting our ability to scale such formats. |
• | Historically, in most cases our advertising business experienced the lowest revenue levels in the first quarter and the highest revenue levels in the fourth quarter, with the second and third quarters being slightly stronger than the first quarter (except for 2020 as a result of the initial effect of COVID-19); |
• | Product and service revenue are influenced by political advertising in the US, which generally occurs every two years; |
• | In any single period, product and service revenue and delivery costs are subject to significant variation based on changes in the volume and mix of deliveries performed during such period; |
• | Revenue is subject to the changes of brand marketing trends, including when and where brands choose to spend their money in a given year; |
• | Advertising customers generally retain the right to supplement, extend, or cancel existing advertising orders at any time prior to their delivery, and we have no control over the timing or magnitude of these revenue changes; and |
• | Relative complexity of individual advertising formats, and the length of the creative design process. |
• | negative fluctuations in our quarterly revenue and earnings or those of our competitors; |
• | pending sales into the market due to the sale of large blocks of shares, due to, among other reasons, the expiration of any tax-related or contractual lock–ups with respect to significant amounts of our ordinary shares; |
• | shortfalls in our operating results compared to levels forecast by us or securities analysts; |
• | changes in our senior management; |
• | changes in regulations or in policies of search engine companies or other industry conditions; |
• | mergers and acquisitions by us or our competitors; |
• | technological innovations; |
• | the introduction of new products; |
• | the conditions of the securities markets, particularly in the internet and Israeli sectors; and |
• | political, economic and other developments in Israel and worldwide. |
• | potential loss of proprietary information due to piracy, misappropriation or laws that may be less protective of our intellectual property rights than those of the United States; |
• | costs and delays associated with translating and supporting our products in multiple languages; |
• | foreign exchange rate fluctuations and economic instability, such as higher interest rates and inflation, which could make our products more expensive in those countries; |
• | costs of compliance with a variety of laws and regulations; |
• | restrictive governmental actions such as trade restrictions and potential trade wars; |
• | limitations on the transfer and repatriation of funds and foreign currency exchange restrictions; |
• | compliance with different consumer, privacy and data collection and protection laws and regulations, and restrictions on pricing or discounts; |
• | lower levels of adoption or use of the internet and other technologies vital to our business and the lack of appropriate infrastructure to support widespread internet usage; |
• | lower levels of consumer spending on a per capita basis and fewer opportunities for growth in certain foreign market segments compared to the United States; |
• | lower levels of credit card usage and increased payment risk; |
• | changes in domestic and international tax regulations; and |
• | geopolitical events, including war and terrorism. |
• | subject to limited exceptions, the judgment is final and non-appealable; |
• | the judgment was given by a court competent under the laws of the state of the court and is otherwise enforceable in such state; |
• | the judgment was rendered by a court competent under the rules of private international law applicable in Israel; |
• | the laws of the state in which the judgment was given provide for the enforcement of judgments of Israeli courts; |
• | adequate service of process has been effected and the defendant has had a reasonable opportunity to present his arguments and evidence; |
• | the judgment and its enforcement are not contrary to the law, public policy, security or sovereignty of the State of Israel; |
• | the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties; and |
• | an action between the same parties in the same matter was not pending in any Israeli court at the time the lawsuit was instituted in the U.S. court. |
• | we may be unable to meet the requirements for continuing to qualify for some programs; |
• | these programs and tax benefits may be unavailable at their current levels; or |
• | we may be required to refund previously recognized tax benefits if we are found to be in violation of the stipulated conditions. |
1. | The ability to monetize search traffic through our partnership with Microsoft Advertising (Bing), the effectiveness of which is reflected in the consistent growth of our publisher network. This is particularly important given the growing shift to Direct Response units marketing, as search represents the highest intent customers; |
2. | The ability to meet advertiser demand for higher sustained user engagement with our high-impact Ad suite; |
3. | The ability to monetize the fast-growing retail media segment; |
4. | The ability to innovate in sectors that matter most to brands; this is manifest in SORT® which is an effective and successful response to advertiser recognition of privacy matters and the upcoming deprecation of cookies by Google; |
5. | The ability to acquire and execute with strategic and operational discipline; and |
6. | SORT®, Perion’s alternative to third party cookies, is first and foremost the result of our ability to analyze the complex data signals that are derived from our assets that flow through our iHUB. |
1. | Operational Savings – Shared Resources |
2. | Traffic Acquisition Costs (TAC) Optimization |
3. | Increased Customer Value |
4. | Market Agility and Creative Firepower |
1. | Intelligent High-Impact Solutions that Win the War for Attention |
2. | Search monetization solution - Transforming Search into Revenue |
3. | Video Monetization & Revenue Management |
4. | Content optimization Solution – Creating Opportunities for Publishers Seeking Growth |
5. | Paragone’s The Cross-Channel Digital Advertising SaaS platform: Maximize Reach, Optimize Revenue and Improve Efficiency |
• | Compensation Framework: we have implemented a comprehensive framework which guides our pay decisions. We use an objective job and compensation evaluation methodology to reduce subjectivity and bias in pay decisions, leading to greater equity and alignment with the market in employee compensation. |
• | Community Outreach: We believe that improving life quality of our employees as well as the communities in which they live, is of great value. We encourage our employees to participate in volunteering programs. We allow our employees to volunteer for 40 hours per year during working hours. We make donations to nonprofit organization such as Black Girls Code, “Cracking the glass ceiling”, holocaust survivors, youth organizations and many more around our communities. |
Name of Subsidiary | Place of Incorporation |
Codefuel Ltd. | Israel |
IncrediMail, Inc. | Delaware |
Intercept Interactive, Inc. | Delaware |
Vidazoo Ltd. | Israel |
Content IQ LLC | New York |
Pub Ocean Media UK Limited | England and Wales |
Pub Ocean Inc. | Delaware |
BT Media LLC | Nevada |
Make Me Reach SAS, dba Paragone | France |
Smilebox Inc. | Washington |
2021 | 2022 | |||||||||||||||
Search Advertising Revenue | Display Advertising Revenue | Search Advertising Revenue | Display Advertising Revenue | |||||||||||||
North America (Mainly U.S.) | 80 | % | 95 | % | 86 | % | 89 | % | ||||||||
Europe | 18 | % | 4 | % | 13 | % | 10 | % | ||||||||
Other | 2 | % | 1 | % | 1 | % | 1 | % | ||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % |
Year ended December 31, | ||||||||||||||||
2021 | 2022 | |||||||||||||||
Amount | % of Revenue | Amount | % of Revenue | |||||||||||||
Revenue: | ||||||||||||||||
Display advertising | $ | 265,323 | 55 | % | $ | 360,690 | 56 | % | ||||||||
Search advertising | 213,175 | 45 | 279,566 | 44 | ||||||||||||
Total Revenue | 478,498 | 100 | 640,256 | 100 | ||||||||||||
Costs and Expenses: | ||||||||||||||||
Cost of revenue | 25,197 | 5 | 30,404 | 5 | ||||||||||||
Traffic acquisition costs and media buy | 288,018 | 60 | 372,601 | 58 | ||||||||||||
Research and development | 35,348 | 8 | 34,424 | 5 | ||||||||||||
Selling and marketing | 53,209 | 11 | 56,014 | 9 | ||||||||||||
General and administrative | 20,933 | 4 | 23,813 | 4 | ||||||||||||
Depreciation and amortization | 9,897 | 2 | 13,838 | 2 | ||||||||||||
Total Costs and Expenses | 432,602 | 90 | 531,094 | 83 | ||||||||||||
Income from Operations | 45,896 | 10 | 109,162 | 17 | ||||||||||||
Financial expense (income), net | 581 | * | ) | (4,502 | ) | (1 | ) | |||||||||
Income before Taxes on income | 45,315 | 10 | 113,664 | 18 | ||||||||||||
Taxes on income | 6,609 | 2 | 14,439 | 2 | ||||||||||||
Net Income | $ | 38,706 | 8 | % | $ | 99,225 | 16 | % |
Year ended December 31, | ||||||||
2021 | 2022 | |||||||
Net cash provided by operating activities | $ | 71,106 | $ | 122,119 | ||||
Net cash used in investing activities | (243,470 | ) | (46,816 | ) | ||||
Net cash provided by (used in) financing activities | 229,054 | (3,258 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (33 | ) | (59 | ) | ||||
Net increase in cash and cash equivalents and restricted cash | $ | 56,657 | $ | 71,986 |
Name | Age | Position |
Eyal Kaplan*(1)(2) | 63 | Chairman of the Board of Directors |
Doron Gerstel | 62 | Chief Executive Officer; Director |
Tal Jacobson | 48 | General Manager, CodeFuel |
Maoz Sigron | 45 | Chief Financial Officer |
Michal Drayman*(1)(4) | 50 | Director |
Amir Guy*(1)(3) | 53 | Director |
Rami Schwartz*(4) | 64 | Director |
Michael Vorhaus*(2)(3)(4) | 65 | Director |
Joy Marcus*(2)(3) | 61 | Director |
Daniel E. Aks | 62 | President, Undertone |
Daniel Slivkin | 39 | Chief Executive Officer, Vidazoo |
Gal Dagan | 38 | VP R&D, Vidazoo |
• | chairperson of our audit committee: $110,000; |
• | chairperson of our compensation committee: $107,500; |
• | chairperson of our nominating and governance committee: $105,000; and |
• | other non-executive directors: $97,500. |
Name and Principal Position (1) | Salary Cost (2) | Bonus (3) | Equity-Based Compensation (4) | Total | ||||||||||||
Doron Gerstel, Chief Executive Officer | 755 | 1,312 | 1,711 | 3,778 | ||||||||||||
Tal Jacobson, General Manager, CodeFuel Business Unit | 455 | 826 | 549 | 1,830 | ||||||||||||
Maoz Sigron, Chief Financial Officer | 368 | 560 | 837 | 1,765 | ||||||||||||
Daniel E. Aks, President, Undertone Business Unit | 540 | 625 | 459 | 1,624 | ||||||||||||
Gal Dagan, Co-Founder and VP R&D, Vidazoo Business Unit | 486 | 273 | 675 | 1,435 |
• | establishing our policies and overseeing the performance and activities of our chief executive officer; |
• | convening shareholders’ meetings; |
• | approving our financial statements; |
• | determining our plans of action, principles for funding them and the priorities among them, our organizational structure and examining our financial status; and |
• | issuing securities and distributing dividends. |
December 31, | ||||||||||||
2020 | 2021 | 2022 | ||||||||||
Cost of sales | 73 | 83 | 91 | |||||||||
Research and development | 135 | 115 | 121 | |||||||||
Selling and marketing | 146 | 154 | 150 | |||||||||
General and administration | 63 | 68 | 78 | |||||||||
Total | 417 | 420 | 440 |
Name | Number of Ordinary Shares Beneficially Owned | Percentage of Ordinary Shares Outstanding | ||||||
All directors and officers as a group (12 persons) (1) | 457,685 | 0.98 | % |
(1) | Includes 279,754 RSUs and options to purchase ordinary shares that are vested or will vest within 60 days of March 6, 2023. |
Name of Beneficial Owner | Shares Beneficially Owned | |||||||
Number | Percentage | |||||||
Harel Insurance Investments & Financial Services Ltd. (1) | 2,352,922 | 5.06 | % | |||||
● | A company's average R&D expenses in the three years prior to the current tax year must be greater than or equal to 7% of its total revenue or exceed NIS 75 million (approximately $22 million) per year; and |
● | A company must also satisfy one of the following conditions: (1) at least 20% of the workforce (or at least 200 employees) are employed in R&D; (2) a venture capital investment of an amount approximately equivalent to at least NIS 8 million was previously made in the company, and the company did not change its type of business after such investment; (3) growth in sales or workforce by an average of 25% over the three years preceding the tax year provided that the company's turnover in the tax year and in each of the previous three years was at least NIS 10 million; or (4) the number of the company’s employees increased by 25% (on average) or more in the course of three years, provided that the company employed at least 50 employees in the tax year and in each of the previous three years. |
● | Companies that do not meet one of the above two conditions may request preliminary approval from the National Authority for Technological Innovation regarding being companies that own an innovation-promoting enterprise. |
● | A company must qualify as a “Competitive Enterprise” as described under the Investment Law. |
• | Amortization of the cost of purchased know-how, patents, and right to use patent or know how, which are used for the development or promotion of the Industrial Enterprise, over an eight-year period; |
• | Under specified conditions, an election to file consolidated tax returns with additional related Israeli Industrial Companies; and |
• | Deduction of expenses related to a public offering in equal amounts over three years. |
• | certain financial institutions; |
• | dealers or traders in securities that use a mark-to-market method of tax accounting; |
• | persons holding ordinary shares as part of a straddle, integrated or similar transaction; |
• | persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; |
• | entities classified as partnerships for U.S. federal income tax purposes and their partners; |
• | tax-exempt entities, “individual retirement accounts” or “Roth IRAs”; |
• | persons who acquired our ordinary shares pursuant to the exercise of an employee stock option or otherwise as compensation; |
• | persons that own or are deemed to own 10% or more of our stock by voting power or value; or |
• | persons holding ordinary shares in connection with a trade or business outside the United States .If a partnership (or other entity that is classified as a partnership for U.S. federal income tax purposes) owns ordinary shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships owning ordinary shares and their partners should consult their tax advisers as to their particular U.S. federal income tax consequences of owning and disposing of ordinary shares. |
• | a citizen or individual resident of the United States; |
• | a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or |
• | an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. |
U.S. dollars | NIS | Other Currencies | Total | |||||||||||||
In thousands of U.S. dollars | ||||||||||||||||
Current assets | 589,485 | 9,013 | 4,960 | 603,458 | ||||||||||||
Long-term assets | 1,213 | 3,714 | 901 | 5,828 | ||||||||||||
Current liabilities | (210,074 | ) | (20,895 | ) | (1,262 | ) | (232,231 | ) | ||||||||
Long-term liabilities | (48,239 | ) | (3,757 | ) | (480 | ) | (52,476 | ) | ||||||||
Total | 332,385 | (11,925 | ) | 4,119 | 324,579 |
Year Ended December 31, | ||||||||||||
2020 | 2021 | 2022 | ||||||||||
Average rate for period | 3.437 | 3.231 | 3.359 | |||||||||
Rate at year-end | 3.215 | 3.110 | 3.519 |
(a) | Disclosure controls and procedures |
(b) | Management annual report on internal control over financial reporting |
(c) | Attestation Report of the Registered Public Accounting Firm |
(d) | Changes in internal control over financial reporting |
2021 | 2022 | |||||||
Audit Fees | $ | 568 | $ | 643 | ||||
Tax Fees | 181 | 109 | ||||||
Audit Related fees | 394 | 288 | ||||||
Total | $ | 1,143 | $ | 1,040 |
• | the securities issued amount to 20% or more of our outstanding voting rights before the issuance; |
• | some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and |
• | the transaction will increase the relative holdings of a shareholder that holds 5% or more of our outstanding share capital or voting rights or will cause any person to become, as a result of the issuance, a holder of more than 5% of our outstanding share capital or voting rights. |
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F-12 |
Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel | Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
Revenue Recognition Gross versus Net presentation | ||
Description of the Matter | As described in Note 2 to the consolidated financial statements, the Company’s revenue are comprised primarily of Search Advertising Revenue and Display Advertising Revenue. To determine whether Search Advertising and Display Advertising revenue should be presented on a gross or net basis, the Company considers whether it controls the promised good or service before transferring that good or service to the customer. Auditing the Company's gross or net basis evaluation was complex and required a high degree of auditor judgment due to the significant judgment and subjectivity used by the Company in determining whether revenue should be presented on a gross or net basis. The significant judgment was primarily due to the evaluation, for each contract, of whether the Company is the primary obligor in the arrangement. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s revenue recognition process, including controls over the review of contracts and assessment of principal versus agent, and controls over the completeness and accuracy of data. Our substantive audit procedures included, among others, reviewing, on a sample basis, the terms of contracts with publishers, evaluating management’s assessment on the principal versus agent analysis, discussing the terms of contracts with legal and finance personnel responsible for managing the contractual arrangements and evaluating the related disclosures in the consolidated financial statements. |
December 31, | ||||||||
2022 | 2021 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 176,226 | $ | 104,446 | ||||
Restricted cash | 1,295 | 1,089 | ||||||
Short-term bank deposits | 253,400 | 217,200 | ||||||
Accounts receivable (net of allowance of $2,134 and $891 at December 31, 2022 and 2021, respectively) | 160,488 | 115,361 | ||||||
Prepaid expenses and other current assets | 12,049 | 8,075 | ||||||
Total Current Assets | 603,458 | 446,171 | ||||||
Property and equipment, net | 3,611 | 4,211 | ||||||
Operating lease right-of-use assets | 10,130 | 11,578 | ||||||
Intangible assets, net | 51,664 | 56,700 | ||||||
Goodwill | 195,527 | 189,265 | ||||||
Deferred taxes | 5,779 | 5,228 | ||||||
Other assets | 49 | 79 | ||||||
Total Assets | $ | 870,218 | $ | 713,232 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 155,854 | $ | 107,730 | ||||
Accrued expenses and other liabilities | 37,869 | 40,331 | ||||||
Short-term operating lease liability | 3,900 | 3,615 | ||||||
Deferred revenue | 2,377 | 3,852 | ||||||
Short-term payment obligation related to acquisitions | 34,608 | 38,179 | ||||||
Total Current Liabilities | 234,608 | 193,707 | ||||||
Long-Term Liabilities: | ||||||||
Long-term operating lease liability | 7,580 | 9,774 | ||||||
Payment obligation related to acquisition | 33,113 | 33,250 | ||||||
Other long-term liabilities | 11,783 | 9,541 | ||||||
Total Liabilities | 287,084 | 246,272 | ||||||
Commitments and Contingencies | ||||||||
Shareholders' Equity: |
Ordinary shares of ILS 0.03 par value - Authorized: 60,000,000 shares at December 31, 2022 and 2021; Issued: 46,287,732 and 43,812,062 shares at December 31, 2022 and 2021, respectively; Outstanding: 46,172,393 and 43,696,723 shares at December 31, 2022 and 2021, respectively | 398 | 375 | ||||||
Additional paid-in capital | 513,534 | 496,154 | ||||||
Treasury shares at cost (115,339 shares at December 31, 2022 and 2021) | (1,002 | ) | (1,002 | ) | ||||
Accumulated other comprehensive loss | (582 | ) | (128 | ) | ||||
Retained earnings (Accumulated deficit) | 70,786 | (28,439 | ) | |||||
Total Shareholders' Equity | 583,134 | 466,960 | ||||||
Total Liabilities and Shareholders' Equity | $ | 870,218 | $ | 713,232 |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Revenue: | ||||||||||||
Display Advertising | $ | 360,690 | $ | 265,323 | $ | 148,698 | ||||||
Search Advertising | 279,566 | 213,175 | 179,365 | |||||||||
Total Revenue | 640,256 | 478,498 | 328,063 | |||||||||
Costs and Expenses: | ||||||||||||
Cost of revenue | 30,404 | 25,197 | 22,477 | |||||||||
Traffic acquisition costs and media buy | 372,601 | 288,018 | 197,626 | |||||||||
Research and development | 34,424 | 35,348 | 30,880 | |||||||||
Selling and marketing | 56,014 | 53,209 | 39,085 | |||||||||
General and administrative | 23,813 | 20,933 | 15,819 | |||||||||
Depreciation and amortization | 13,838 | 9,897 | 9,923 | |||||||||
Total Costs and Expenses | 531,094 | 432,602 | 315,810 | |||||||||
Income from Operations | 109,162 | 45,896 | 12,253 | |||||||||
Financial expenses (income), net | (4,502 | ) | 581 | 2,638 | ||||||||
Income before Taxes on Income | 113,664 | 45,315 | 9,615 | |||||||||
Taxes on income (benefit) | 14,439 | 6,609 | (610 | ) | ||||||||
Net Income | $ | 99,225 | $ | 38,706 | $ | 10,225 | ||||||
Net Earnings per Share - Basic: | $ | 2.21 | $ | 1.13 | $ | 0.38 | ||||||
Net Earnings per Share - Diluted: | $ | 2.06 | $ | 1.02 | $ | 0.36 | ||||||
Weighted average number of shares – Basic: | 44,871,149 | 34,397,134 | 26,687,145 | |||||||||
Weighted average number of shares – Diluted: | 48,071,638 | 37,829,725 | 28,797,747 |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Net income | $ | 99,225 | $ | 38,706 | $ | 10,225 | ||||||
Other comprehensive income (loss): | ||||||||||||
Change in foreign currency translation adjustment | (147 | ) | (315 | ) | 49 | |||||||
Cash Flow Hedge: | ||||||||||||
Unrealized gain (loss) from cash flow hedges | (1,255 | ) | 242 | 697 | ||||||||
Less: reclassification adjustment for net gain (loss) included in net income | 948 | (167 | ) | (764 | ) | |||||||
Net change | (307 | ) | 75 | (67 | ) | |||||||
Other comprehensive loss | (454 | ) | (240 | ) | (18 | ) | ||||||
Comprehensive income | $ | 98,771 | $ | 38,466 | $ | 10,207 |
Common shares | Additional paid-in capital | Accumulated Other Comprehensive income (loss) | Retained earnings (Accumulated deficit) | Treasury shares | Total shareholders’ equity | |||||||||||||||||||||||
Number of Shares | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Balance as of December 31, 2019 | 26,242,459 | 213 | 243,211 | 130 | (77,370 | ) | (1,002 | ) | 165,182 | |||||||||||||||||||
Stock-based compensation | - | - | 4,447 | - | - | - | 4,447 | |||||||||||||||||||||
Exercise of stock-based compensation | 1,109,515 | 11 | 4,275 | - | - | - | 4,286 | |||||||||||||||||||||
Other comprehensive loss | - | - | - | (18 | ) | - | - | (18 | ) | |||||||||||||||||||
Net income | - | - | - | - | 10,225 | - | 10,225 | |||||||||||||||||||||
Balance as of December 31, 2020 | 27,351,974 | 224 | 251,933 | 112 | (67,145 | ) | (1,002 | ) | 184,122 | |||||||||||||||||||
Issuance of shares - Offering | 14,110,592 | 133 | 230,356 | - | - | - | 230,489 | |||||||||||||||||||||
Stock-based compensation | - | - | 6,985 | - | - | - | 6,985 | |||||||||||||||||||||
Exercise of stock-based compensation | 2,234,157 | 18 | 6,880 | - | - | - | 6,898 | |||||||||||||||||||||
Other comprehensive loss | - | - | - | (240 | ) | - | - | (240 | ) | |||||||||||||||||||
Net income | - | - | - | - | 38,706 | - | 38,706 | |||||||||||||||||||||
Balance as of December 31, 2021 | 43,696,723 | 375 | 496,154 | (128 | ) | (28,439 | ) | (1,002 | ) | 466,960 | ||||||||||||||||||
Stock-based compensation | - | - | 11,570 | - | - | - | 11,570 | |||||||||||||||||||||
Exercise of stock-based compensation | 2,475,670 | 23 | 5,810 | - | - | - | 5,833 | |||||||||||||||||||||
Other comprehensive loss | - | - | - | (454 | ) | - | - | (454 | ) | |||||||||||||||||||
Net income | - | - | - | - | 99,225 | - | 99,225 | |||||||||||||||||||||
Balance as of December 31, 2022 | 46,172,393 | 398 | 513,534 | (582 | ) | 70,786 | (1,002 | ) | 583,134 |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Operating activities: | ||||||||||||
Net income | $ | 99,225 | $ | 38,706 | $ | 10,225 | ||||||
Adjustments required to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 13,838 | 9,897 | 9,923 | |||||||||
Stock-based compensation expense | 11,570 | 6,985 | 4,447 | |||||||||
Foreign currency translation | 20 | (223 | ) | 19 | ||||||||
Accrued interest, net | (3,646 | ) | (300 | ) | (125 | ) | ||||||
Deferred taxes, net | (1,428 | ) | (2,755 | ) | (3,093 | ) | ||||||
Accrued severance pay, net | (106 | ) | 663 | (23 | ) | |||||||
Change in payment obligation related to acquisitions | (6,904 | ) | 350 | 4,646 | ||||||||
Loss (gain) from sale of property and equipment | (12 | ) | 121 | 10 | ||||||||
Net changes in operating assets and liabilities: | ||||||||||||
Accounts receivable, net | (45,236 | ) | (34,239 | ) | (32,049 | ) | ||||||
Prepaid expenses and other current assets | (434 | ) | (2,781 | ) | (1,185 | ) | ||||||
Operating lease right-of-use assets | 1,104 | 8,510 | 2,595 | |||||||||
Operating lease liabilities | (1,909 | ) | (8,643 | ) | (2,255 | ) | ||||||
Accounts payable | 48,191 | 35,222 | 24,742 | |||||||||
Accrued expenses and other liabilities | 9,320 | 21,446 | 2,776 | |||||||||
Deferred revenue | (1,474 | ) | (1,853 | ) | 1,506 | |||||||
Net cash provided by operating activities | $ | 122,119 | $ | 71,106 | $ | 22,159 | ||||||
Investing activities: | ||||||||||||
Purchases of property and equipment | $ | (1,058 | ) | $ | (627 | ) | $ | (459 | ) | |||
Proceeds from sale of property and equipment | 12 | 95 | 5 | |||||||||
Short-term deposits, inflows | 217,200 | 12,700 | 23,234 | |||||||||
Short-term deposits, outflows | (253,400 | ) | (217,200 | ) | (12,700 | ) | ||||||
Cash paid in connection with acquisitions, net of cash acquired | (9,570 | ) | (38,438 | ) | (19,000 | ) | ||||||
Net cash used in investing activities | $ | (46,816 | ) | $ | (243,470 | ) | $ | (8,920 | ) | |||
Financing activities: | ||||||||||||
Issuance of shares in private placement, net | $ | - | $ | 230,489 | $ | - | ||||||
Proceeds from exercise of stock-based compensation | 5,833 | 6,898 | 4,286 | |||||||||
Payments of contingent consideration | (9,091 | ) | - | - | ||||||||
Repayment of long-term loans | - | (8,333 | ) | (8,333 | ) | |||||||
Net cash provided by (used in) financing activities | $ | (3,258 | ) | $ | 229,054 | $ | (4,047 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (59 | ) | (33 | ) | 81 | |||||||
Net increase in cash and cash equivalents and restricted cash | $ | 71,986 | $ | 56,657 | $ | 9,273 | ||||||
Cash and cash equivalents and restricted cash at beginning of year | 105,535 | 48,878 | 39,605 | |||||||||
Cash and cash equivalents and restricted cash at end of year | $ | 177,521 | $ | 105,535 | $ | 48,878 |
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheet | ||||||||||||
Cash and cash equivalents | $ | 176,226 | $ | 104,446 | $ | 47,656 | ||||||
Restricted cash | 1,295 | 1,089 | 1,222 | |||||||||
Total cash, cash equivalents, and restricted cash | $ | 177,521 | $ | 105,535 | $ | 48,878 | ||||||
Supplemental Disclosure of Cash Flow Activities: | ||||||||||||
Cash paid during the year for: | ||||||||||||
Income taxes | $ | 7,689 | $ | 4,365 | $ | 3,180 | ||||||
Interest | $ | 5 | $ | 203 | $ | 1,097 | ||||||
Non-cash investing and financing activities: | ||||||||||||
Creation of new lease right-of-use assets arising from lease liability | $ | 2,085 | $ | - | $ | 1,671 | ||||||
Purchase of property and equipment on credit | $ | (47 | ) | $ | 45 | $ | 3 |
NOTE 1: | GENERAL |
NOTE 2: | SIGNIFICANT ACCOUNTING POLICIES |
F - 12
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2022 and 2021, the Company has recorded an allowance for credit losses in the amounts of $2,134 and $891, respectively.
% | ||||
Computers and peripheral equipment | 33 | |||
Office furniture and equipment | 6 - 15 |
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
F - 13
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company elected the practical expedient allowing not to separate the lease and non-lease components for its leases.
Following an impairment review of our long-lived assets for 2022, 2021 and 2020, it was concluded that no such impairment charges should be recorded.
F - 14
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Business combinations
The Company accounted for business combination in accordance with ASC 805, "Business Combinations". ASC 805 requires recognition of assets acquired, liabilities assumed, and any non-controlling interest at the acquisition date, measured at their fair values as of that date. Any excess of the fair value of net assets acquired over purchase price is allocated to goodwill. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill only for adjustments resulting from facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the consolidated statements of income.
Acquisition related costs are expensed to the statement of income in the period incurred.
Revenue recognition
The Company applies the provisions of Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606" or "Topic 606").
The Company applies the practical expedient for incremental costs of obtaining contracts when the associated revenue is recognized over less than one year.
F - 15
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Generally, in cases in which the Company controls the specified good or service before it is transferred to a customer, revenue is recorded on a gross basis.
The Company capitalized certain internal and external software development costs, consisting primarily of direct labor associated with creating the internally developed software. During 2021, 2020, depreciation expense for the related capitalized internally developed software in the consolidated statements of income amounted to $1,392, and $3,056, respectively. No expense related to internally developed software incurred in 2022.
Research and development costs are charged to the statement of income as incurred.
F - 16
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F - 17
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The allowance against gross trade receivables reflects the current expected credit loss inherent in the receivables portfolio determined based on the Company’s methodology. The Company’s methodology is based on historical collection experience, customer creditworthiness, current and future economic condition, and market condition. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Trade receivables are written off after all reasonable means to collect the full amount have been exhausted.
F - 18
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31 | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Risk-free interest rate | 1.92% - 4.29% | 0.94% - 1.52% | 0.29% - 1.60% | |||||||||
Expected volatility | *) - | 59% - 60% | 53% - 59% | |||||||||
Early exercise factor | 130% - 200% | 130% - 200% | 110% - 200% | |||||||||
Forfeiture rate post vesting | 1% - 28% | 1% - 27% | 0% - 34% | |||||||||
Dividend yield | 0% | 0% | 0% |
*) Only RSUs were granted
F - 19
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company follows the requirements of ASC No. 815, Derivatives and Hedging (“ASC 815”), which requires companies to recognize all of their derivative instruments as either assets or liabilities on the balance sheet at fair value. The accounting for changes in fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging transaction and further, on the type of hedging transaction. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.
The notional value of the Company’s derivative instruments designed as hedging instruments as of December 31, 2022 and 2021, amounted to $14,364 and $5,071, respectively.
The notional value of the Company’s derivative instruments not designed as hedging instruments as of December 31, 2022 and 2021, amounted to $3,576 and $2,876, respectively. Notional values in USD are translated and calculated based on the spot rates for options and swap. 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.
F - 20
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
• | Level 1 - Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets. | |
• | Level 2 - Other inputs that are directly or indirectly observable in the market place. | |
• | Level 3 - Unobservable inputs which are supported by little or no market activity, and unobservable inputs based on the Company's own assumptions used to measure liabilities at fair value. The inputs require significant management judgment or estimation. |
Recently Accounting Pronouncements - not yet adopted
In October 2021 the FASB ASU 2021-08, Topic 805 “Business Combinations” – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. The adoption of the new guidance will have an immaterial impact on its consolidated financial statements.
F - 21
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: | FAIR VALUE OF FINANCIAL INSTRUMENTS |
Fair value measurements using input type | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Derivative assets | $ | - | $ | 7 | $ | - | $ | 7 | ||||||||
Total financial assets | $ | - | $ | 7 | $ | - | $ | 7 | ||||||||
Liabilities: | ||||||||||||||||
Derivative liabilities | $ | - | $ | 239 | $ | - | $ | 239 | ||||||||
Contingent consideration in connection to the acquisitions *) | - | - | 63,695 | 63,695 | ||||||||||||
Total financial liabilities | $ | - | $ | 239 | $ | 63,695 | $ | 63,934 |
Fair value measurements using input type | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Derivative assets | $ | - | $ | 75 | $ | - | $ | 75 | ||||||||
Total financial assets | $ | - | $ | 75 | $ | - | $ | 75 | ||||||||
Liabilities: | ||||||||||||||||
Contingent consideration in connection to the acquisitions | $ | - | $ | - | $ | 63,550 | $ | 63,550 | ||||||||
Total financial liabilities | $ | - | $ | - | $ | 63,550 | $ | 63,550 |
F - 22
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: | ACQUISITIONS |
a. | Content IQ LLC |
b. | Pub Ocean |
c. | Vidazoo |
F - 23
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Initially Reported as of December 31, 2021 | Measurement Period Adjustment | December 31, 2022 | ||||||||||
Net Assets | $ | 6,291 | $ | - | $ | 6,291 | ||||||
Technology | 31,005 | 5,358 | 36,363 | |||||||||
Customer Relationship | 8,194 | 1,490 | 9,684 | |||||||||
Deferred Taxes | (4,704 | ) | (820 | ) | (5,524 | ) | ||||||
Goodwill | 36,962 | 6,262 | 43,224 | |||||||||
Net assets acquired | $ | 77,748 | $ | 12,290 | $ | 90,038 |
NOTE 5: | PROPERTY AND EQUIPMENT, NET |
December 31, | ||||||||
2022 | 2021 | |||||||
Cost: | ||||||||
Computers and peripheral equipment | $ | 5,941 | $ | 7,219 | ||||
Office furniture and equipment | 2,777 | 2,686 | ||||||
Leasehold improvements | 8,400 | 8,392 | ||||||
Capitalized software | 12,473 | 12,473 | ||||||
Total cost | 29,591 | 30,770 | ||||||
Less: accumulated depreciation and amortization | (25,980 | ) | (26,559 | ) | ||||
Property and equipment, net | $ | 3,611 | $ | 4,211 |
F - 24
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: | GOODWILL AND OTHER INTANGIBLE ASSETS, NET |
a. | Goodwill |
Balance as of January 1, 2021 | $ | 152,303 | ||
Acquisition of Vidazoo | $ | 36,962 | ||
Balance as of December 31, 2021 | $ | 189,265 | ||
Vidazoo measurement period adjustments | $ | 6,262 | ||
Balance as of December 31, 2022 | $ | 195,527 |
F - 25
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b. | Intangible assets, net |
December 31, 2021 | Vidazoo measurement period adjustments | Amortization | December 31, 2022 | |||||||||||||
Acquired technology | $ | 84,417 | $ | 5,358 | $ | - | $ | 89,775 | ||||||||
Accumulated amortization | (31,137 | ) | - | (9,886 | ) | (41,023 | ) | |||||||||
Impairment | (8,749 | ) | - | - | (8,749 | ) | ||||||||||
Acquired technology, net | 44,531 | 5,358 | (9,886 | ) | 40,003 | |||||||||||
Customer relationships | 45,054 | 1,490 | - | 46,544 | ||||||||||||
Accumulated amortization | (23,218 | ) | - | (1,758 | ) | (24,976 | ) | |||||||||
Impairment | (10,426 | ) | - | - | (10,426 | ) | ||||||||||
Customer relationships, net | 11,410 | 1,490 | (1,758 | ) | 11,142 | |||||||||||
Tradename and other | 18,503 | - | - | 18,503 | ||||||||||||
Accumulated amortization | (12,634 | ) | - | (240 | ) | (12,874 | ) | |||||||||
Impairment | (5,110 | ) | - | - | (5,110 | ) | ||||||||||
Tradename and other, net | 759 | - | (240 | ) | 519 | |||||||||||
Intangible assets, net | $ | 56,700 | $ | 6,848 | $ | (11,884 | ) | $ | 51,664 |
December 31, 2020 | Additions | Amortization | December 31, 2021 | |||||||||||||
Acquired technology | $ | 53,412 | $ | 31,005 | $ | - | $ | 84,417 | ||||||||
Accumulated amortization | (25,548 | ) | - | (5,589 | ) | (31,137 | ) | |||||||||
Impairment | (8,749 | ) | - | - | (8,749 | ) | ||||||||||
Acquired technology, net | 19,115 | 31,005 | (5,589 | ) | 44,531 | |||||||||||
Customer relationships | 36,860 | 8,194 | - | 45,054 | ||||||||||||
Accumulated amortization | (22,161 | ) | - | (1,057 | ) | (23,218 | ) | |||||||||
Impairment | (10,426 | ) | - | - | (10,426 | ) | ||||||||||
Customer relationships, net | 4,273 | 8,194 | (1,057 | ) | 11,410 | |||||||||||
Tradename and other | 18,503 | - | - | 18,503 | ||||||||||||
Accumulated amortization | (12,405 | ) | - | (229 | ) | (12,634 | ) | |||||||||
Impairment | (5,110 | ) | - | - | (5,110 | ) | ||||||||||
Tradename and other, net | 988 | - | (229 | ) | 759 | |||||||||||
Intangible assets, net | $ | 24,376 | $ | 39,199 | $ | (6,875 | ) | $ | 56,700 |
F - 26
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Estimated useful life | ||||
Acquired technology | 4-7 years | |||
Customer relationships | 5-8 years | |||
Tradename and other | 4-11 years |
Amortization of intangible assets, net, in each of the succeeding five years and thereafter is estimated as follows:
2023 | $ | 12,255 | ||
2024 | 11,718 | |||
2025 | 8,283 | |||
2026 | 6,834 | |||
2027 | 6,590 | |||
Thereafter | 5,984 | |||
$ | 51,664 |
NOTE 7: | ACCRUED EXPENSES AND OTHER LIABILITIES |
|
December 31, | ||||||||
2022 | 2021 | |||||||
Employees and payroll accruals | $ | 20,788 | $ | 19,597 | ||||
Obligation related to acquisitions | 331 | 8,725 | ||||||
Government authorities | 10,758 | 6,706 | ||||||
Accrued expenses | 5,185 | 4,560 | ||||||
Other short-term liabilities | 807 | 743 | ||||||
$ | 37,869 | $ | 40,331 |
F - 27
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: | DERIVATIVES AND HEDGING ACTIVITIES |
December 31, | ||||||||||
Balance sheet | 2022 | 2021 | ||||||||
Derivatives designate as hedging instruments: | ||||||||||
Foreign exchange forward contracts and other derivatives | ''Prepaid expenses and other current assets'' | $ | 7 | $ | 75 | |||||
''Accrued expenses and other liabilities'' | 239 | - | ||||||||
''Accumulated other comprehensive income'' | (232 | ) | 75 | |||||||
Derivatives not designated as hedging instruments: | ||||||||||
Foreign exchange forward contracts and other derivatives | ''Prepaid expenses and other current assets'' | 18 | 21 | |||||||
''Accrued expenses and other liabilities'' | $ | 31 | $ | 3 |
Gain recognized in Statements of Comprehensive Income | Gain (loss) recognized in consolidated statements of Income | ||||||||||||||||
Year ended December 31, | |||||||||||||||||
Statement of Income | Year ended December 31, | ||||||||||||||||
2022 | 2022 | 2021 | 2020 | ||||||||||||||
Derivatives designated as hedging instruments: | |||||||||||||||||
Foreign exchange options and forward contracts | $ | 307 | "Operating expenses" | $ | (948 | ) | $ | 167 | $ | 764 | |||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||
Foreign exchange options and forward contracts | - | "Financial expenses" | (75 | ) | 24 | (166 | ) | ||||||||||
Total | $ | 307 | $ | (1,023 | ) | $ | 191 | $ | 598 |
F - 28
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: | SHORT TERM AND LONG-TERM DEBT |
NOTE 10: | LEASES |
Year ended December 31, 2022 | ||
Weighted average remaining lease term | 2.94 Years | |
Weighted average discount rate | 5.23 % |
The discount rate was determined based on the estimated collateralized borrowing rate of the Company, adjusted to the specific lease term and location of each lease.
F - 29
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Maturities of operating lease liabilities were as follows:
Year ending December 31, | ||||
2023 | $ | 4,578 | ||
2024 | 4,588 | |||
2025 | 2,798 | |||
2026 | 777 | |||
Total lease payments *) | $ | 12,741 | ||
Less – imputed interest | (1,261 | ) | ||
Present value of lease liabilities | $ | 11,480 |
Facilities leasing expenses (net) in the years 2022, 2021 and 2020 were $2,846, $4,441, and $3,493 respectively. Out of which, Sublease income amounted to $2,533, $2,838 and $2,682 in the years 2022, 2021 and 2020, respectively.
NOTE 11: | SHAREHOLDERS' EQUITY |
a. | Ordinary shares |
b. | Share Options, Restricted Share Units and Warrants |
F - 30
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Weighted average | ||||||||||||||||
|
| Number of options and RSUs |
|
| Exercise price |
|
| Remaining contractual term (in years) |
|
| Aggregate intrinsic value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Outstanding at January 1, 2022 |
|
| 3,574,401 |
|
| $ | 2.46 |
|
|
| 45.90 |
|
| $ | 77,173 |
|
Granted |
|
| 1,532,548 |
|
|
| 0.01 |
|
|
| - |
|
|
| - |
|
Exercised |
|
| (1,824,876 | ) |
|
| 2.19 |
|
|
| - |
|
|
| 35,811 |
|
Cancelled |
|
| (217,399 | ) |
|
| 2.53 |
|
|
| - |
|
|
| - |
|
Outstanding at December 31, 2022 |
|
| 3,064,674 |
|
| $ | 1.39 |
|
|
| 59.70 |
|
| $ | 73,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2022 |
|
| 618,230 |
|
| $ | 5.10 |
|
|
| 3.30 |
|
| $ | 12,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2022 |
|
| 3,264,763 |
|
| $ | 1.46 |
|
|
| 0.88 |
|
| $ | 138,673 |
|
Number of | Weighted average | |||||||||||||||
Performance based options and RSUs | Exercise price | Remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
Outstanding at January 1, 2022 | 903,900 | $ | 2.37 | 46.16 | $ | 19,599 | ||||||||||
Granted | 417,628 | 0.01 | - | - | ||||||||||||
Exercised | (650,794 | ) | 2.83 | - | 12,493 | |||||||||||
Cancelled | (78,223 | ) | 0.01 | - | - | |||||||||||
Outstanding at December 31, 2022 | 592,511 | $ | 0.51 | 70.64 | $ | 14,690 | ||||||||||
Exercisable at December 31, 2022 | 56,250 | $ | 5.35 | 4.58 | $ | 1,122 | ||||||||||
Vested and expected to vest at December 31, 2022 | 658,487 | $ | 0.46 | 0.39 | $ | 29,926 |
F - 31
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Outstanding | Exercisable | |||||||||||||||||||||||||
Range of exercise price | Number of options and RSUs | Weighted average remaining contractual life (years) | Weighted average exercise price | Number of options and RSUs | Weighted average remaining contractual life (years) | Weighted average exercise price | ||||||||||||||||||||
$ | 0.01 | 2,323,813 | 77.65 | $ | 0.01 | - | - | $ | - | |||||||||||||||||
2.52 – 3.38 | 237,699 | 2.39 | 3.19 | 237,699 | 2.39 | 3.19 | ||||||||||||||||||||
4.23 – 5.90 | 258,475 | 3.97 | 5.21 | 244,412 | 3.93 | 5.18 | ||||||||||||||||||||
6.23 – 8.34 | 180,932 | 3.18 | 6.73 | 105,834 | 3.32 | 6.80 | ||||||||||||||||||||
$ | 12.02 – 21.35 | 63,755 | 5.19 | 14.60 | 30,285 | 5.15 | 13.50 | |||||||||||||||||||
3,064,674 | 59.70 | $ | 1.39 | 618,230 | 3.30 | $ | 5.10 |
The following table summarizes additional information regarding outstanding and exercisable performance-based options and RSUs under the Company's share Option Plan as of December 31, 2022:
Outstanding | Exercisable | |||||||||||||||||||||||||
Range of exercise price | Number of options and RSUs | Weighted average remaining contractual life (years) | Weighted average exercise price | Number of options and RSUs | Weighted average remaining contractual life (years) | Weighted average exercise price | ||||||||||||||||||||
$ | 0.01 | 536,261 | 77.57 | $ | 0.01 | - | - | $ | - | |||||||||||||||||
$ | 5.35 | 56,250 | 4.58 | 5.35 | 56,250 | 4.58 | 5.35 | |||||||||||||||||||
592,511 | 70.64 | $ | 0.51 | 56,250 | 4.58 | $ | 5.35 |
F - 32
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company recognized share-based compensation expenses related to its share-based awards in the consolidated statements of operations as follows:
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Cost of revenue | $ | 446 | $ | 171 | $ | 102 | ||||||
Research and development | 2,129 | 946 | 887 | |||||||||
Selling and marketing | 4,528 | 3,248 | 1,898 | |||||||||
General and administrative | 4,467 | 2,620 | 1,560 | |||||||||
Total | $ | 11,570 | $ | 6,985 | $ | 4,447 |
c. | As part of the acquisition of Undertone, the Company granted warrants to purchase 66,666 ordinary shares, at a weighted average exercise price of $9.09 per share, to a third-party vendor that provides development services to Undertone. The warrants were exercisable until December 27, 2020 and wasn’t exercised by this date. No expense incurred in 2020. | |
F - 33
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: | FINANCIAL INCOME (EXPENSE), NET |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Financial income: | ||||||||||||
Interest income | $ | 4,993 | $ | 539 | $ | 287 | ||||||
Other | - | - | 45 | |||||||||
$ | 4,993 | $ | 539 | $ | 332 | |||||||
Financial expense: | ||||||||||||
Foreign currency translation losses | $ | (264 | ) | $ | (528 | ) | $ | (1,537 | ) | |||
Interest expense on debts | - | (119 | ) | (1,045 | ) | |||||||
Bank charges and other | (227 | ) | (473 | ) | (388 | ) | ||||||
$ | (491 | ) | $ | (1,120 | ) | $ | (2,970 | ) | ||||
Financial income (expense), net | $ | 4,502 | $ | (581 | ) | $ | (2,638 | ) |
NOTE 13: | INCOME TAXES |
a. | Income before taxes on income |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Domestic | $ | 106,634 | $ | 38,854 | $ | 12,175 | ||||||
Foreign | 7,030 | 6,461 | (2,560 | ) | ||||||||
Total | $ | 113,664 | $ | 45,315 | $ | 9,615 |
b. | Taxes on income |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Current taxes | $ | 16,758 | $ | 7,891 | $ | 2,498 | ||||||
Taxes in respect of previous years | (794 | ) | 1,476 | 6 | ||||||||
Deferred tax benefit | (1,525 | ) | (2,758 | ) | (3,114 | ) | ||||||
Total | $ | 14,439 | $ | 6,609 | $ | (610 | ) |
F - 34
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Domestic | $ | 14,378 | $ | 8,060 | $ | 1,031 | ||||||
Foreign | 61 | (1,451 | ) | (1,641 | ) | |||||||
Total | $ | 14,439 | $ | 6,609 | $ | (610 | ) | |||||
Domestic: | ||||||||||||
Current taxes | $ | 15,938 | $ | 7,447 | $ | 1,466 | ||||||
Deferred tax benefit | (860 | ) | (980 | ) | (984 | ) | ||||||
Taxes in respect of previous years | (700 | ) | 1,593 | 549 | ||||||||
Total - Domestic | $ | 14,378 | $ | 8,060 | $ | 1,031 | ||||||
Foreign: | ||||||||||||
Current taxes | $ | 820 | $ | 444 | $ | 1,032 | ||||||
Deferred tax benefit | (665 | ) | (1,778 | ) | (2,130 | ) | ||||||
Taxes in respect of previous years | (94 | ) | (117 | ) | (543 | ) | ||||||
Total - Foreign | $ | 61 | $ | (1,451 | ) | $ | (1,641 | ) | ||||
Total income tax expense (benefit) (benefit) | $ | 14,439 | $ | 6,609 | $ | (610 | ) |
F - 35
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
c. | Deferred Taxes |
December 31, | ||||||||
2022 | 2021 | |||||||
Deferred tax assets: | ||||||||
Net operating loss and other losses carry forwards | $ | 5,912 | $ | 4,955 | ||||
Research and development | 3,278 | 3,629 | ||||||
Intangible assets | (3,895 | ) | (3,251 | ) | ||||
Other temporary differences mainly relating to reserve and allowances | 2,943 | 2,539 | ||||||
Deferred tax assets, before valuation allowance | $ | 8,238 | $ | 7,872 | ||||
Valuation allowance | 2,459 | 2,644 | ||||||
Total deferred tax assets, net | $ | 5,779 | $ | 5,228 | ||||
Domestic: | ||||||||
Long term deferred tax liability, net | $ | (791 | ) | $ | (732 | ) | ||
$ | (791 | ) | $ | (732 | ) | |||
Foreign: | ||||||||
Long term deferred tax asset, net | $ | 6,570 | $ | 5,960 | ||||
$ | 6,570 | $ | 5,960 | |||||
Total deferred tax asset, net | $ | 5,779 | $ | 5,228 |
F - 36
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
d. | Reconciliation of the Company’s effective tax rate to the statutory tax rate in Israel |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Income before taxes on income | $ | 113,664 | $ | 45,315 | $ | 9,615 | ||||||
Statutory tax rate in Israel | 23.0 | % | 23.0 | % | 23.0 | % | ||||||
Theoretical tax expense | $ | 26,143 | $ | 10,422 | $ | 2,211 | ||||||
Increase (decrease) in tax expenses resulting from: | ||||||||||||
"Preferred Enterprise" benefits * | (11,255 | ) | (5,610 | ) | (1,701 | ) | ||||||
Non-deductible expenses | (229 | ) | 710 | 2,409 | ||||||||
Tax adjustment in respect of different tax rate of foreign subsidiaries | 313 | 226 | 228 | |||||||||
Deferred taxes related to prior years | (55 | ) | (922 | ) | (1,576 | ) | ||||||
Previous years taxes | (136 | ) | 1,476 | (147 | ) | |||||||
Change in valuation allowance | (185 | ) | 390 | (2,097 | ) | |||||||
Other | (157 | ) | (83 | ) | 63 | |||||||
Taxes on income | $ | 14,439 | $ | 6,609 | $ | (610 | ) | |||||
* Benefit per ordinary share from "Preferred Enterprise" status: | ||||||||||||
Basic | $ | 0.25 | $ | 0.16 | $ | 0.06 | ||||||
Diluted | $ | 0.23 | $ | 0.15 | $ | 0.06 |
e. | Income tax rates |
F - 37
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
f. | Law for the Encouragement of Capital Investments, 1959 |
g. | Technological Enterprise Incentives Regime (Amendment 73 to the Investment Law) |
F - 38
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
h. | Uncertain tax positions |
December 31, | ||||||||
2022 | 2021 | |||||||
Balance at the beginning of the year | $ | 6,928 | $ | 4,525 | ||||
Increase (decrease) related to prior year tax positions, net | (590 | ) | 1,285 | |||||
Increase related to current year tax positions, net | 3,062 | 1,118 | ||||||
Balance at the end of the year | $ | 9,400 | $ | 6,928 |
In 2022, the Company recognizes interest accrued related to unrecognized tax benefits and penalties in tax expenses. The Company had $975 and $834 for the payment of interest and penalties accrued at December 31, 2022, and 2021, respectively which are included in the balance at the end of the year.
i. | Tax loss carry-forwards |
F - 39
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
j. | US Tax: |
NOTE 14: | EARNINGS PER SHARE |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Numerator: | ||||||||||||
Net income attributable to ordinary shares – basic and diluted | $ | 99,225 | $ | 38,706 | $ | 10,225 | ||||||
Denominator: | ||||||||||||
Number of ordinary shares outstanding during the year | 44,871,149 | 34,397,134 | 26,687,145 | |||||||||
Weighted average effect of dilutive securities: | ||||||||||||
Employee options and restricted share units | 3,200,489 | 3,432,591 | 2,110,602 | |||||||||
Diluted number of ordinary shares outstanding | 48,071,638 | 37,829,725 | 28,797,747 | |||||||||
Basic net earnings per ordinary share | $ | 2.21 | $ | 1.13 | $ | 0.38 | ||||||
Diluted net earnings per ordinary share | $ | 2.06 | $ | 1.02 | $ | 0.36 | ||||||
Potential ordinary shares equivalents excluded because their effect would have been anti-dilutive | 456,696 | 1,035,307 | 3,178,024 |
F - 40
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15: | MAJOR CUSTOMERS |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Customer A | 35 | % | 37 | % | 51 | % |
NOTE 16: | GEOGRAPHIC INFORMATION |
Year ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
North America (mainly U.S.) | $ | 561,959 | $ | 423,571 | $ | 272,220 | ||||||
Europe | 69,019 | 48,109 | 49,222 | |||||||||
Other | 9,278 | 6,818 | 6,621 | |||||||||
$ | 640,256 | $ | 478,498 | $ | 328,063 |
The total revenue are attributed to geographic areas based on the location of the end-users.
December 31, | |||||||
2022 | 2021 | ||||||
Israel | $ | 6,176 | $ | 8,049 | |||
U.S. | 7,427 | 7,524 | |||||
Europe | 138 | 216 | |||||
$ | 13,741 | $ | 15,789 |
F - 41
Incorporation by Reference | ||||||
Exhibit No. | Description | Form | File No. | Exhibit No. | Filing Date | Filed / Furnished |
20-F | 000-51694 | 1.1 | March 16, 2022 | |||
20-F | 000-51694 | 1.2 | March 16, 2022 | |||
* | ||||||
20-F | 000-51694 | 4.1 | April 29, 2013 | |||
* | ||||||
* | ||||||
20-F | 000-51694 | 4.16 | March 19, 2019 | |||
20-F | 000-51694 | 4.17 | March 27, 2018 | |||
20-F | 000-51694 | 4.6 | March 25, 2021 | |||
20-F | 000-51694 | 4.7 | March 25, 2021 | |||
20-F | 000-51694 | 4.8 | March 16, 2020 | |||
* | ||||||
* | ||||||
* | ||||||
** | ||||||
** | ||||||
* | ||||||
101.INS | Inline XBRL Instance Document | |||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||
101.DEF | Inline XBRL Taxonomy Definition Linkbase Document | |||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||
104** | Inline XBRL for the cover page of this Annual Report on Form 20-F (embedded within the Inline XBRL document) |
* | Filed herewith. |
** | Furnished herewith. |
*** | Certain confidential information contained in this document, marked by brackets, was omitted because it is both (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. “[***]” indicates where the information has been omitted from this exhibit. |
† | Indicates management contract or compensatory plan or arrangement. |
PERION NETWORK LTD. | |||
By: | /s/ Doron Gerstel | ||
Name: Doron Gerstel | |||
Title: Chief Executive Officer | |||
By: | /s/ Maoz Sigron | ||
Name: Maoz Sigron | |||
Title: Chief Financial Officer |