Exhibit 99.2
WIX.COM LTD.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2020
INDEX
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Interim Condensed Consolidated Balance Sheets at June 30, 2020 (unaudited) and December 31, 2019 | F-2 – F-3 | |||
Interim Condensed Consolidated Comprehensive Loss (unaudited) for the six months ended June 30, 2020 and 2019 | F-4 | |||
Interim Condensed Consolidated Statements of Changes In Stockholders’ Equity (unaudited) for the six months ended June 30, 2019 and 2020 | F-5 | |||
Interim Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2019 and 2020 | F-6 – F-7 | |||
Notes to the Interim Condensed Consolidated Financial Statements | F-8 – F-26 |
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-1-
WIX.COM LTD.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data)
June 30, 2020 | December 31, 2019 | |||||||
ASSETS | (unaudited) | |||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 173,950 | $ | 268,103 | ||||
Short-term deposits | 406,033 | 294,096 | ||||||
Restricted deposit | 925 | 1,149 | ||||||
Marketable securities | 174,624 | 164,301 | ||||||
Trade receivables | 18,830 | 16,987 | ||||||
Prepaid expenses and other current assets | 49,888 | 19,211 | ||||||
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Total current assets | 824,250 | 763,847 | ||||||
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LONG-TERM ASSETS: | ||||||||
Prepaid expenses and other long-term assets | 13,243 | 9,926 | ||||||
Property and equipment, net | 32,926 | 31,706 | ||||||
Marketable securities | 245,211 | 177,298 | ||||||
Intangible assets, net | 18,710 | 19,841 | ||||||
Goodwill | 25,799 | 17,800 | ||||||
Operating lease right-of-use assets | 81,112 | 79,249 | ||||||
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Total long-term assets | 417,001 | 335,820 | ||||||
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TOTAL ASSETS | $ | 1,241,251 | $ | 1,099,667 | ||||
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The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
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WIX.COM LTD.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data)
June 30, 2020 | December 31, 2019 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | (unaudited) | |||||||
CURRENT LIABILITIES: | ||||||||
Trade payables | $ | 73,059 | $ | 37,687 | ||||
Employees and payroll accruals | 66,306 | 41,938 | ||||||
Deferred revenues | 344,515 | 289,148 | ||||||
Accrued expenses and other current liabilities | 65,036 | 56,464 | ||||||
Operating lease liabilities | 17,372 | 18,949 | ||||||
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Total current liabilities | 566,288 | 444,186 | ||||||
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LONG-TERM LIABILITIES: | ||||||||
Convertible notes | 369,664 | 358,715 | ||||||
Long-term deferred revenues | 29,265 | 21,969 | ||||||
Long-term deferred tax liabilities | 1,574 | 1,585 | ||||||
Long-term loan | 1,219 | 1,219 | ||||||
Long term operating lease liabilities | 68,402 | 64,244 | ||||||
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Total long-term liabilities | 470,124 | 447,732 | ||||||
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Total liabilities | 1,036,412 | 891,918 | ||||||
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SHAREHOLDERS’ EQUITY: | ||||||||
Ordinary shares of NIS 0.01 par value – Authorized: 500,000,000 shares as of December 31, 2019 and as of June 30, 2020; Issued and outstanding: 51,525,919 and 55,117,101 shares as of December 31, 2019 and June 30, 2020, respectively | 104 | 94 | ||||||
Additional paid-in capital | 695,412 | 611,083 | ||||||
Accumulated other comprehensive income | 10,997 | 1,357 | ||||||
Accumulated deficit | (501,674 | ) | (404,785 | ) | ||||
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Total shareholders’ equity | 204,839 | 207,749 | ||||||
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,241,251 | $ | 1,099,667 | ||||
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The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
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WIX.COM LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
Six Months Ended June 30 | ||||||||
2020 | 2019 | |||||||
Revenues | ||||||||
Creative Subscription | 366,715 | 308,376 | ||||||
Business Solutions | 85,331 | 51,333 | ||||||
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452,046 | 359,709 | |||||||
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Cost of Revenues | ||||||||
Creative Subscription | 73,836 | 55,943 | ||||||
Business Solutions | 58,716 | 30,434 | ||||||
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132,552 | 86,377 | |||||||
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Gross profit | 319,494 | 273,332 | ||||||
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Research and development | 146,180 | 119,669 | ||||||
Selling and marketing | 215,489 | 157,047 | ||||||
General and administrative | 49,967 | 38,569 | ||||||
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Total operating expenses | 411,636 | 315,285 | ||||||
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Operating loss | (92,142 | ) | (41,953 | ) | ||||
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Financial expenses, net | (2,194 | ) | (2,310 | ) | ||||
Other income | 59 | 32 | ||||||
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Loss before taxes on income | (94,277 | ) | (44,231 | ) | ||||
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Taxes on income | (2,612 | ) | (3,243 | ) | ||||
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Net loss | (96,889 | ) | (47,474 | ) | ||||
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Other comprehensive loss: | ||||||||
Unrealized gains from marketable securities | 3,696 | 985 | ||||||
Unrealized gains on cash flow hedge | 5,944 | 1,287 | ||||||
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Other comprehensive income for the period | 9,640 | 2,272 | ||||||
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Total comprehensive loss | (87,249 | ) | (45,202 | ) | ||||
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Basic and diluted net loss per ordinary share | (1.82 | ) | (0.95 | ) | ||||
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Basic and diluted weighted-average shares used to compute net loss per share | 53,266,895 | 49,917,692 | ||||||
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The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
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WIX.COM LTD.
INTERIM CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
U.S. dollars in thousands (except share data)
Ordinary shares | Additional paid-in | Other comprehensive | Accumulated | Total | ||||||||||||||||||||
Shares | Amount | capital | income (loss) | deficit | equity | |||||||||||||||||||
Balance as of December 31, 2018 | 49,269,626 | 88 | 472,239 | (1,691 | ) | (318,371 | ) | 152,265 | ||||||||||||||||
Exercise of share options and warrants | 1,323,211 | 5 | 13,004 | — | — | 13,009 | ||||||||||||||||||
Share-based compensation | — | — | 52,556 | — | — | 52,556 | ||||||||||||||||||
Other comprehensive income | — | — | — | 2,272 | — | 2,272 | ||||||||||||||||||
Net loss | — | — | — | — | (47,474 | ) | (47,474 | ) | ||||||||||||||||
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Balance as of June 30, 2019 | 50,592,837 | 93 | 537,799 | 581 | (365,845 | ) | 172,628 | |||||||||||||||||
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Balance as of December 31, 2019 | 51,525,919 | 94 | 611,083 | 1,357 | (404,785 | ) | 207,749 | |||||||||||||||||
Exercise of share options and warrants | 3,591,182 | 10 | 18,613 | — | — | 18,623 | ||||||||||||||||||
Share-based compensation | — | — | 65,716 | — | — | 65,716 | ||||||||||||||||||
Other comprehensive income | — | — | — | 9,640 | — | 9,640 | ||||||||||||||||||
Net loss | — | — | — | — | (96,889 | ) | (96,889 | ) | ||||||||||||||||
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Balance as of June 30, 2020 | 55,117,101 | 104 | 695,412 | 10,997 | (501,674 | ) | 204,839 | |||||||||||||||||
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The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
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WIX.COM LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S. dollars in thousands
Six Months Ended June 30 | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (96,889 | ) | (47,474 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation | 7,109 | 5,585 | ||||||
Amortization of intangible assets | 1,132 | 1,470 | ||||||
Share based compensation expenses | 65,685 | 52,472 | ||||||
Amortization of debt discount and debt issuance costs | 10,949 | 10,311 | ||||||
Increase in accrued interest and exchange rate on short-term and long-term deposits | 62 | 594 | ||||||
Amortization of premium and discount and accrued interest on marketable securities, net | 717 | 41 | ||||||
Deferred taxes, net | (1,721 | ) | 533 | |||||
Changes in operating lease right-of-use assets | 9,446 | 7,247 | ||||||
Changes in operating lease liabilities | (9,817 | ) | (6,532 | ) | ||||
Increase in trade receivables | (1,617 | ) | (4,532 | ) | ||||
Increase in prepaid expenses and other current and long-term assets | (21,605 | ) | (11,141 | ) | ||||
Increase in trade payables | 34,974 | 1,328 | ||||||
Increase in employees and payroll accruals | 23,694 | 12,235 | ||||||
Increase in short-term and long-term deferred revenues | 62,663 | 40,233 | ||||||
Increase in accrued expenses and other current liabilities | 10,203 | 9,884 | ||||||
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Net cash provided by operating activities | 94,985 | 72,254 | ||||||
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Cash flows from investing activities: | ||||||||
Proceeds from short-term and restricted deposits | 26,225 | 81,775 | ||||||
Investment in short-term and restricted deposits | (138,000 | ) | (26,000 | ) | ||||
Investment in marketable securities | (230,168 | ) | (136,616 | ) | ||||
Proceeds from marketable securities | 154,911 | 29,056 | ||||||
Purchase of property and equipment | (8,207 | ) | (11,065 | ) | ||||
Capitalization of software development costs | (132 | ) | (389 | ) | ||||
Payments for businesses acquired | (6,626 | ) | (2,800 | ) | ||||
Purchases of investments in privately-held companies | (785 | ) | — | |||||
Investment in other long-term assets | (5,643 | ) | — | |||||
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Net cash used in investing activities | (208,425 | ) | (66,039 | ) | ||||
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The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
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WIX.COM LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S. dollars in thousands
Six Months Ended June 30 | ||||||||
2020 | 2019 | |||||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of options and ESPP shares | 19,287 | 14,190 | ||||||
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Net cash provided by financing activities | 19,287 | 14,190 | ||||||
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Increase (decrease) in cash and cash equivalents | (94,153 | ) | 20,405 | |||||
Cash and cash equivalents at the beginning of the period | 268,103 | 331,057 | ||||||
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Cash and cash equivalents at the end of the period | 173,950 | 351,462 | ||||||
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Supplemental disclosure of cash flow activities: | ||||||||
Cash paid during the period for taxes | 3,103 | 1,402 | ||||||
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Supplemental information for non- cash transactions | ||||||||
Right-of-use asset recognized with corresponding lease liability | 12,398 | 12,187 | ||||||
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Non-cash purchase of property and equipment | 1,052 | 592 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
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WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 1:- | GENERAL |
Wix.com Ltd. was incorporated on October 5, 2006, under the laws of the State of Israel, and commenced operations on the same date.
Wix.com Ltd. and its subsidiaries (the “Company”) develops and markets a cloud-based platform that enables anyone to create a website or web application.
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
a. Basis of Presentation
Unaudited Interim Financial Information
These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in our Annual Report on Form 20-F for the fiscal year ended December 31, 2019 filed with the SEC.
The interim condensed consolidated financial statements have been prepared according to U.S Generally Accepted Accounting Principles (“U.S. GAAP”).
In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2019, contained in the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 2, 2020, have been applied consistently in these unaudited interim condensed consolidated financial statements.
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WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
b. Revenue recognition:
The Company’s revenues are categorized and disaggregated as reflected in the statements of operation, as follow:
Creative Subscriptions
Revenues from premium subscriptions are recognized on a straight-line basis over the contract period, since the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs.
Revenues related to the purchase and registration of domain names is recognized at the full amount paid by the customer at a point in time upon the purchase and registration of the domain name, since that is when the Company satisfies the performance obligation.
Business Solutions
Revenues related to Google’s G-Suite application is recognized at a point in time upon the purchase, since that is when the Company satisfies the performance obligation.
Other subscriptions and software applications developed by the Company are recognized on a straight-line basis over the contract period, since the customer simultaneously receives and consumes the benefits provided by our performance as the Company performs.
Revenues related to third party software applications are recognized on a net basis at a point in time upon purchase of the application, since that is when the Company completes its obligation to facilitate the transfer between the customer and the third-party developer.
Revenue related to the sale of online advertising inventory (ad space) and other related advertising services to brands and advertising agencies are recognized at a point in time, when an ad space is provided to the customer.
Each of the Company’s goods and services are sold separately, therefore standalone selling prices (SSP) for each of them are observed, and allocation of the transaction price between the performance obligations in the contract are made relatively on that basis. Refunds are estimated at contract inception and updated at the end of each reporting period if additional information becomes available.
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WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Principal versus Agent Considerations
The Company sells its products directly to customers and also through a network of resellers. In certain cases, the Company acts as a reseller of products provided by others. The determination of gross or net revenue recognition is reviewed on a product-by-product basis and is dependent on the Company determination as to whether the Company acts as principal or agent in the transaction. Revenue associated with sales through the Company’s network of resellers, for certain aftermarket domain sales and for third-party offerings including Google’s G-Suite application is recorded on a gross basis as the Company has determined that the Company controls the product before transferring it to the end customers. Revenues related to third party software applications when the Company does not control the product or service before transferring it to the customers are recognized on a net basis.
The Company uses the practical expedient and does not assess the existence of a significant financing component when the difference between payment and revenue recognition is a year or less.
The Company charges from customers for the entire consideration at inception date, and accordingly the services are provided from that date for the agreed service period. The Company records contract liability when cash payments are received in advance of performance, and these revenues are recognized ratably over the service period. The balance of deferred revenues approximates the aggregate amount of the transaction price allocated to the unsatisfied performance obligations at the end of reporting period. The Company expects to recognize the short-term portion of deferred revenue, $344,515, over the next twelve months and the long-term portion of deferred revenue over the remaining service period of up to five years.
The Company offers a 14-day money back guaranty (“Guaranty Period”) on new premium subscription. The Company considers such amount collected from new premium subscriptions as customer deposits until the end of the 14-day trial period. Revenues are recognized once the Guaranty Period has expired.
Please refer to Note 8 - Segments, Customers and Geographic Information for further information, including presentation of disaggregated revenue by geography.
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WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
c. Derivatives instruments:
ASC No. 815, “Derivative and Hedging” (“ASC No. 815”), requires companies to recognize all of their derivative instruments as either assets or liabilities in the statement of balance sheets at fair value.
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.
Derivative instruments designated as hedging instruments:
Gains and losses on the derivatives instruments that are designated and qualify as a cash flow hedge are recorded in accumulated other comprehensive income (loss) and reclassified into in the same accounting period in which the designated forecasted transaction or hedged item affects earnings.
The net fair value of derivative instruments balance as of December 31, 2019, totaled $888, and is presented on a gross basis as prepaid expenses and other current assets in the amount of $888 and as accrued expenses and other current liabilities in the amount of $0. The net fair value of derivative instruments balance as of June 30, 2020 totaled $6,868, and is presented on a gross basis as prepaid expenses and other current assets in the amount of $7,205 and as accrued expenses and other current liabilities in the amount of $337.
For the year ended December 31, 2019 and for the six months ended June 30, 2020, the Company recorded as operating income net from hedging transactions in the amount of $147 and $41, respectively.
To hedge against the risk of overall changes in cash flows resulting from foreign currency salary payments, rent and other overhead vendors during the year, the Company has instituted a foreign currency cash flow hedging program. The Company hedges portions of its forecasted salary, rent and other overhead cash flow denominated in NIS. These option contracts are designated as cash flow hedges, as defined by ASC No. 815, and are all effective.
For the six months ended June 30, 2020, the amount recorded in accumulated other comprehensive income from the Company’s currency option and forward transactions is $6,832. As of June 30, 2020, the notional amounts of foreign exchange forward contracts into which the Company entered were $49,629 and the options contracts were $108,672 . The foreign exchange forward and options contracts will expire through 2020 and 2021.
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WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Derivative instruments not designated as hedging instruments:
In addition to the derivatives that are designated as hedges as discussed above, the Company enters into certain foreign exchange forward and option transactions to economically hedge certain revenue transactions in Euros, British pounds, Brazilian Real, Mexican Pesos and Japanese Yen and expenses in NIS. Gains and losses related to such derivative instruments are recorded in financial expenses, net. At June 30, 2020, the notional amounts of foreign exchange option cotracts into which the Company entered were $35,381 and forward contracts were $54,708 . The foreign exchange forward and option transactions will expire through 2020.
The net fair value of derivative instruments balance as of December 31, 2019, totaled $119 and is presented on a gross basis as prepaid expenses and other current assets in the amount of $577 and as accrued expenses and other current liabilities in the amount of $696. The net fair value of derivative instruments liabilities balance as of June 30, 2020 totaled $1,132, and is presented on a gross basis as prepaid expenses and other current assets in the amount of $1,679 and as accrued expenses and other current liabilities in the amount of $547.
In the year ended December 31, 2019 and in the six months ended June 30, 2020, the Company recorded net financial income, net from hedging transactions in the amount of $963 and $665, respectively. Tax effect was de minimis.
d. Fair value of financial instruments:
The estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies. Considerable judgment is required in estimating fair values. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange.
The following methods and assumptions were used by the Company in estimating the fair value of their financial instruments:
The carrying values of cash and cash equivalents, short-term and restricted deposits, trade receivables, prepaid expenses and other current assets, trade payables, employees and payroll accruals and accrued expenses and other current liabilities approximate fair values due to the short-term maturities of these instruments.
The Company applies ASC No. 820, “Fair Value Measurements and Disclosures” (“ASC No. 820”), with respect to fair value measurements of all financial assets and liabilities.
In accordance with ASC No. 820, the Company measures its money market funds, marketable securities and foreign currency derivative contracts at fair value. Money market funds and marketable securities are classified within Level 1 or Level 2. This is because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Foreign currency derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.
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WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The following table represents the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2020:
June 30, 2020 | ||||||||||||||||
Unaudited | ||||||||||||||||
Fair value | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 97,229 | $ | — | $ | — | $ | 97,229 | ||||||||
Marketable securities: | ||||||||||||||||
Government and corporate debentures - fixed interest rate | — | 346,894 | — | 346,894 | ||||||||||||
Government-sponsored enterprises | — | 23,715 | — | 23,715 | ||||||||||||
Government and corporate debentures - floating interest rate | — | 49,226 | — | 49,226 | ||||||||||||
Foreign currency derivative contracts assets | — | 8,884 | — | 8,884 | ||||||||||||
Total financials assets | $ | 97,229 | $ | 428,719 | $ | — | $ | 525,948 | ||||||||
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Foreign currency derivative contracts liabilities | 884 | 884 | ||||||||||||||
Total financials liabilities | $ | — | $ | 884 | $ | — | $ | 884 | ||||||||
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WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
The following table represents the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019:
December 31, 2019 | ||||||||||||||||
Fair value | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 204,067 | $ | — | $ | — | $ | 204,067 | ||||||||
Marketable securities: | ||||||||||||||||
Government and corporate debentures - fixed interest rate | — | 284,321 | — | 284,321 | ||||||||||||
Government-sponsored enterprises | — | 30,132 | — | 30,132 | ||||||||||||
Government and corporate debentures - floating interest rate | — | 27,146 | — | 27,146 | ||||||||||||
Foreign currency derivative contracts assets | — | 1,465 | — | 1,465 | ||||||||||||
Total financials assets | $ | 204,067 | $ | 343,064 | $ | — | $ | 547,131 | ||||||||
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Foreign currency derivative contracts liabilities | 696 | 696 | ||||||||||||||
Total financials liabilities | $ | — | $ | 696 | $ | — | $ | 696 | ||||||||
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WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
e. | Recently Adopted Accounting Pronouncements |
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU clarifies the accounting treatment for implementation costs for cloud computing arrangements (hosting arrangements) that are service contracts. This standard becomes effective for the Company beginning January 1, 2020. The new guidance was adopted on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350). This standard eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted. This guidance must be applied on a prospective basis. The new guidance was adopted on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
In June 2016, FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses.. Topic 326 was adopted by the Company on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
f. | Newly issued accounting pronouncements |
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by eliminating certain separation models. Under ASU 2020-06, a convertible debt instrument will generally be reported as a single liability at its amortized cost with no separate accounting for embedded conversion features. In addition, ASU 2020-06 eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The guidance is effective for us beginning in the first quarter of 2022 with early adoption permitted. We are currently evaluating the impact of the remaining provisions on the Company’s consolidated financial statements.
- 15 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 3:- | MARKETABLE SECURITIES: |
At June 30, 2020 and at December 31, 2019, the Company held marketable securities classified as available-for-sale securities as follows:
June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||
LESS THAN A YEAR | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||||||||||||||
Government and corporate debentures - fixed interest rate | $ | 132,286 | $ | 761 | $ | (1 | ) | $ | 133,046 | $ | 148,437 | $ | 329 | $ | (15 | ) | $ | 148,751 | ||||||||||||||
Government-sponsored enterprises | 12,534 | 87 | — | 12,621 | 12,548 | — | (1 | ) | 12,547 | |||||||||||||||||||||||
Government and corporate debentures - floating interest rate | 28,978 | 5 | (26 | ) | 28,957 | 3,003 | 1 | (1 | ) | 3,003 | ||||||||||||||||||||||
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$ | 173,798 | $ | 853 | $ | (27 | ) | $ | 174,624 | $ | 163,988 | $ | 330 | $ | (17 | ) | $ | 164,301 | |||||||||||||||
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June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||
MORE THAN 1 YEAR THROUGH FIVE YEARS | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||||||||||||||
value | ||||||||||||||||||||||||||||||||
Government and corporate debentures - fixed interest rate | $ | 210,089 | $ | 3,774 | $ | (12 | ) | $ | 213,851 | $ | 135,040 | $ | 595 | $ | (65 | ) | $ | 135,570 | ||||||||||||||
Government-sponsored enterprises | 11,036 | 59 | (2 | ) | 11,093 | 17,579 | 9 | (3 | ) | 17,585 | ||||||||||||||||||||||
Government and corporate debentures - floating interest rate | 20,364 | — | (97 | ) | 20,267 | 24,141 | 8 | (6 | ) | 24,143 | ||||||||||||||||||||||
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$ | 241,490 | $ | 3,833 | $ | (111 | ) | $ | 245,211 | $ | 176,760 | $ | 612 | $ | (74 | ) | $ | 177,298 | |||||||||||||||
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As of June 30, 2020 and December 31, 2019, gross unrealized losses on investments that were in a gross unrealized loss position were immaterial. As of June 30, 2020 and December 31, 2019, the allowance for credit losses was not material.
- 16 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 4:- | CONVERTIBLE NOTES |
In June and July of 2018, The Company issued $442,750 aggregate principal amount, 0% coupon rate, of Convertible Senior Notes due in 2023 (the “Convertible Notes”). Subject to satisfaction of certain conditions and during certain periods, as defined in the indenture governing the notes, the holders will have the option to exchange the notes into cash or the Company’s ordinary shares, if any (subject to the Company right to pay cash in lieu of all or a portion of such shares).
The Company may provide additional shares upon conversion if there is a “Make-Whole Fundamental Change” in the business as defined in the indenture governing the notes.
The Notes are not redeemable by the Company prior to the maturity date apart from certain cases as defined in the indenture governing the notes.
Conversion terms:
Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding January 1, 2023 only under the following circumstances:
1. | During any calendar quarter commencing after September 30, 2018 (and only during such calendar quarter), if the last reported sale price of the Company’s ordinary shares, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price on each applicable trading day. |
2. | During the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per USD 1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the ordinary shares and the conversion rate on each such trading day. |
3. | If the Company calls the notes for a tax redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the tax redemption date; or |
4. | Upon the occurrence of specified corporate events. On or after January 1, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, ordinary shares or a combination of cash and ordinary shares, at Company’s election. |
- 17 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 4:- | CONVERTIBLE NOTES (cont.) |
5. | The conversion rate was initially 7.0113 ordinary shares per USD 1,000 principal amount of notes (equivalent to an initial conversion price of approximately $142.63 per ordinary share). The conversion rate will be subject to adjustment in some events, but will not be adjusted for any accrued and unpaid special interest, if any. In addition, following certain corporate events that occur prior to the maturity date, or following Company’s delivery of a notice of tax redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert his notes in connection with such a corporate event or notice of tax redemption, as the case may be. |
During the calendar quarter which ended on June 30, 2020, the conditions allowing holders of the Convertible Notes early conversion were met. Subject to and in accordance with the requirements of the Convertible Notes’ indenture, the Convertible Notes are convertible by their holders during the calendar quarter commencing on July 1, 2020 (and only during such calendar quarter).
In accounting for the issuance of the Convertible Notes, the Company separated the Convertible Notes into liability and equity components. The carrying amount of the liability component was calculated by using the Jump-Diffusion model. The carrying amount of the equity component representing the conversion option was $105,375 and was determined by deducting the fair value of the liability component from the par value of the Convertible Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 6.20% over the contractual terms of the Convertible Notes.
Debt issuance costs related to the Convertible Notes comprised of commissions and payable to third party consultants of $11,511 and third party costs of $1,090. The Company allocated the total amount incurred to the liability and equity components of the Convertible Notes based on their relative carrying values. Issuance costs attributable to the liability component were $9,602 and will be amortized to interest expense using the effective interest method over the contractual term. Issuance costs attributable to the equity component were netted with the equity component in stockholders’ equity.
- 18 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 4:- | CONVERTIBLE NOTES (Cont.) |
Capped Call Transactions
In connection with the pricing of the Convertible Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the purchasers of the Convertible Notes. The Capped Call Transactions cover, collectively, the number of Company ordinary shares underlying the Convertible Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes. The cost of the Capped Call Transactions was $45,338. The transaction is expected generally to reduce the potential dilution to the ordinary shares upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of the Convertible Notes under certain events described in the Capped Call Transactions.
As the Capped Call Transactions are considered indexed to the Company’s share and are considered equity classified, they are recorded in shareholders’ equity on the consolidated balance sheet and are not accounted for as derivatives.
The cost of the Capped Call Transactions was recorded as a reduction to additional paid-in capital.
The net carrying amount of the Convertible Notes were as follows:
Principal outstanding | Unamortized debt discount | Unamortized debt issuance costs | Net carrying value | |||||||||||||
December 31, 2019: | ||||||||||||||||
Convertible Notes | $ | 442,750 | $ | (77,527 | ) | $ | (6,508 | ) | $ | 358,715 | ||||||
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June 30, 2020: | ||||||||||||||||
Convertible Notes | $ | 442,750 | $ | (67,673 | ) | $ | (5,413 | ) | $ | 369,664 | ||||||
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- 19 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 4:- | CONVERTIBLE NOTES (Cont.) |
The net carrying amount of the equity component of the Convertible Notes were as follows:
Amount allocated to conversion option | Less: allocated issuance costs and Capped call | Equity component, net | ||||||||||
June 30, 2020: | ||||||||||||
Convertible notes | $ | 105,375 | $ | (48,337 | ) | $ | 57,038 | |||||
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The Company recognized interest expense on the Convertible Notes as follows:
Six months ended June 30, 2020 | ||||||
Amortization of debt discount and issuance costs | $ 10,949 | |||||
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The effective interest rate of the liability component is 6.20% for the Convertible Notes.
Amount allocated to conversion option | Less: allocated issuance costs and Capped call | Equity component, net | ||||||||||
December 31, 2019: | ||||||||||||
Convertible notes | $ | 105,375 | $ | (48,337 | ) | $ | 57,038 | |||||
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Six months ended June 30, 2019 | ||||||
Amortization of debt discount and issuance costs | $ 10,311 | |||||
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- 20 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 5:- | COMMITMENTS AND CONTINGENT LIABILITIES |
Legal contingencies:
The Company reviews the status of each legal matter it is involved in, from time to time, in the ordinary course of business and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. These accruals are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. As of June 30, 2020, the Company is not involved in any claims or legal proceedings which require accrual of liability for the estimated loss.
NOTE 6:- | SHAREHOLDERS’ EQUITY |
a. | Share based compensation: |
In April 2007, the Company’s Board of Directors adopted an Employee Shares Incentive Plan (the “2007 Plan”). Under the 2007 Plan, options may be granted to employees, officers, non-employees consultants and directors of the Company and its Subsidiaries. The 2007 plan was terminated on October 15, 2013, although option awards outstanding as of that date will continue in full force in accordance with the terms under which they were granted. In October 2013, the Company’s Board of Directors adopted a new Employee Shares Incentive Plan (the “2013 Plan”). The 2013 Plan provides for the grant of options, restricted shares, RSUs, share appreciation rights, cash-based awards, dividend equivalents and other share-based awards to directors, employees, officers, consultants of the Company and its subsidiaries.
As of June 30, 2020, an aggregate of 2,251,774 shares were still available for future grant. Each option granted under the 2013 Plan expires no later than ten years from the date of grant. The vesting period of the options is generally four years, unless the Board of Directors or the Board’s Compensation Committee determines otherwise. Any option which is forfeited or cancelled before expiration becomes available for future grants.
- 21 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 6:- | SHAREHOLDERS’ EQUITY (Cont.) |
The total share-based compensation expense related to all of the Company’s equity-based awards, which include options, RSUs and employee stock purchase rights issued pursuant to the Company’s Employee Share Purchase Plan (“ESPP”) and recognized for the six months ended June 30, 2019 and 2020 was comprised as follows:
Six months ended June 30, | ||||||||
2020 | 2019 | |||||||
Cost of revenues | 3,500 | 2,747 | ||||||
Research and development | 34,401 | 26,375 | ||||||
Sales and marketing | 9,963 | 9,254 | ||||||
General and administrative | 17,821 | 14,096 | ||||||
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Total share-based compensation expense | 65,685 | 52,472 | ||||||
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Total unrecognized compensation cost amounted to $320,864 as of June 30, 2020, and is expected to be recognized over a weighted average period of approximately 2.9 years.
b. | Options granted to employees: |
A summary of the activity in options granted to employees for the six months ended June 30, 2020 is as follows:
Number of options | Weighted average exercise price | Weighted Average remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
Balance at December 31, 2019 | 7,438,119 | $ | 37.53 | 5.49 | $ | 631,994 | ||||||||||
Granted | 635,680 | 142.32 | ||||||||||||||
Exercised | (3,140,598 | ) | 9.55 | |||||||||||||
Forfeited | (31,111 | ) | 66.81 | |||||||||||||
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Balance at June 30, 2020 | 4,902,090 | $ | 68.86 | 7.06 | 918,474 | |||||||||||
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Exercisable at June 30, 2020 | 2,713,016 | $ | 43.40 | 5.89 | 577,377 | |||||||||||
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Vested and expected to vest at June 30, 2020 | 4,791,890 | $ | 68.17 | 7.02 | $ | 901,093 | ||||||||||
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- 22 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 6:- | SHAREHOLDERS’ EQUITY (Cont.) |
The Company estimates the fair value of share options granted using the Black-Scholes-Merton option-pricing model, which requires a number of assumptions: the expected volatility is based upon actual historical share price movements; the expected term of options granted is based upon historical experience and represents the period of time that options granted are expected to be outstanding; the risk-free interest rate is based on the yield from U.S. Federal Reserve zero-coupon bonds with an equivalent term; For restricted share units the fair value is based on the closing market value of the underlying shares at the date of grant. The Company has historically not paid dividends and has no foreseeable plans to pay dividends and, therefore, uses an expected dividend yield of zero in the option pricing model.
The following table set forth the parameters used in computation of the options compensation to employees for the six months ended June 30, 2019 and 2020:
Six Months ended June 30, | ||||
2019 | 2020 | |||
Expected volatility | 43.83%-45.25% | 42.26%-48.23% | ||
Expected dividends | 0% | 0% | ||
Expected term (in years) | 4.94-4.95 | 4.88-4.99 | ||
Risk free rate | 2.14%-2.47% | 0.33%-1.40% |
The following table set forth the parameters used in computation of the employee stock purchase plan for the six months ended June 30, 2019 and 2020:
Six Months ended June 30, | ||||
2019 | 2020 | |||
Expected volatility | 54.49% | 34.50% | ||
Expected dividends | 0% | 0% | ||
Expected term (in years) | 0.5 | 0.5 | ||
Risk free rate | 2.52% | 0.95% |
- 23 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 6:- | SHAREHOLDERS’ EQUITY (Cont.) |
c. | Options granted to non-employees consultants: |
The following tables summarizes information about the Company’s outstanding and exercisable options to purchase ordinary shares granted to non-employees consultants as of June 30, 2020 and as of December 31, 2019:
Grant Date | Options outstanding as of June 30, 2020 | Exercise price | Exercisable as of June 30, 2020 | Exercisable through | ||||||||||||
$ | ||||||||||||||||
January 25, 2011 | 1,000 | 0.67 | 1,000 | January 25, 2021 | ||||||||||||
January 9, 2013 | 3,400 | 2.34 | 3,400 | January 9, 2023 | ||||||||||||
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4,400 | 4,400 | |||||||||||||||
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Grant Date | Options outstanding as of December 31, 2019 | Exercise price | Exercisable as of December 31, 2019 | Exercisable through | ||||||||||||
$ | ||||||||||||||||
January 25, 2011 | 6,000 | 0.67 | 6,000 | January 25, 2021 | ||||||||||||
January 9, 2013 | 3,400 | 2.34 | 3,400 | January 9, 2023 | ||||||||||||
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9,400 | 9,400 | |||||||||||||||
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No options were granted to non-employees during the six months ended June 30, 2020 and for the year ended December 31, 2019.
d. | A summary of RSU activity for the six months ended June 30, 2020, is as follows: |
Number of shares | Weighted average grant date fair value per share | |||||||
$ | ||||||||
Unvested as of December 31, 2019 | 2,124,430 | $ | 98.50 | |||||
Granted | 636,699 | 159.00 | ||||||
Vested | (481,540 | ) | 86.44 | |||||
Forfeited | (88,963 | ) | 108.85 | |||||
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Unvested as of June 30, 2020 | 2,190,626 | $ | 118.33 | |||||
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- 24 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 7:- | BASIC AND DILUTED NET LOSS PER SHARE |
Basic net income (loss) per share is computed based on the weighted average number of shares of common share outstanding during each period. Diluted net income (loss) per share is computed based on the weighted average number of shares of common share outstanding during each period, plus dilutive potential shares of common share considered outstanding during the period, in accordance with FASB ASC No. 260, “Earnings Per Share.”
Six months ended June 30 | ||||||||
2020 | 2019 | |||||||
Net loss available to shareholders of ordinary shares | $ | (96,889 | ) | $ | (47,474 | ) | ||
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Denominator: | ||||||||
Shares used in computing net loss per ordinary shares, basic and diluted | 53,266,895 | 49,917,692 | ||||||
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Basic and diluted net loss per ordinary share | (1.82 | ) | (0.95 | ) | ||||
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The following table summarizes the reconciliation of the basic weighted average number of shares outstanding and the diluted weighted average number of shares outstanding.
Six months ended June 30 | ||||||||
2020 | 2019 | |||||||
Shares used in computing net loss per ordinary shares, basic and diluted | 53,266,895 | 49,917,692 | ||||||
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The following items have been excluded from the diluted weighted average number of shares outstanding because they are anti-dilutive: | ||||||||
Share options | 4,906,490 | 7,744,708 | ||||||
Restricted share units | 2,190,991 | 2,289,069 | ||||||
Convertible Notes (if-converted) | 3,104,251 | 3,104,251 | ||||||
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63,468,627 | 63,055,720 | |||||||
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- 25 -
WIX.COM LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8:- | SEGMENTS, CUSTOMERS AND GEOGRAPHIC INFORMATION |
a. | The Company applies ASC topic 280, “Segment Reporting”, (“ASC No. 280”). The Company operates in one reportable segment. Total revenues are attributed to geographic areas based on the location of the end customer. |
b. | The following tables present total revenues for the six months ended June 30, 2019 and 2020 and long-lived assets as of December 31, 2019 and as of June 30, 2020: |
Revenues:
Six months ended June 30 | ||||||||
2020 | 2019 | |||||||
North America (*) | 256,178 | 193,287 | ||||||
Europe | 113,978 | 93,633 | ||||||
Latin America | 24,893 | 25,164 | ||||||
Asia and others | 56,997 | 47,625 | ||||||
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452,046 | 359,709 | |||||||
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(*) | Include revenue from USA in amount of $170,989 and $232,252 for first six months of 2019 and 2020, respectively. |
Long-lived assets:
June 30 | December 31 | |||||||
2020 | 2019 | |||||||
Israel | $ | 19,277 | $ | 18,863 | ||||
Europe and Asia | 4,032 | 3,642 | ||||||
America | 9,617 | 9,201 | ||||||
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$ | 32,926 | $ | 31,706 | |||||
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- 26 -