NEXXEN INTERNATIONAL LTD.
Form 20-F
For the Fiscal Year Ended December 31, 2024

 

TABLE OF CONTENTS

 

 

INTRODUCTION AND USE OF CERTAIN TERMS

 

We have prepared this annual report on Form 20-F (this “Form 20-F” or “Annual Report”) using a number of conventions, which you should consider when reading the information contained herein. In this Form 20-F, except where the context otherwise requires or where otherwise indicated, references to “Nexxen,” the “Company,” “we,” “us,” “our,” “our company,” “our business” and similar references refer to Nexxen International Ltd., together with its consolidated subsidiaries as a consolidated entity.

 

Nexxen is a flexible unified platform that helps empower durable growth across the media supply chain.  Our end-to-end, video-first platform facilitates and optimizes engaging advertising campaigns for brands, media groups and content creators worldwide—enabling powerful partnerships and delivering meaningful results. Our omni-channel capabilities deliver global advertising campaigns across all formats and channels, with an expertise in video format ads on all devices (“Video”) and Connected TV (“CTV”).

 

Trading Structure Changes

 

On February 14, 2025, the Company executed a reverse split of its Ordinary Shares such that every two Ordinary Shares, par value NIS 0.01 per share, held at the time of the reverse split consolidated into one new Ordinary Share, par value NIS 0.02 per share (the “New Ordinary Shares”) to facilitate a one-to-one American Depositary Receipt (“ADR”) exchange (the “Reverse Split”). Thereafter, the Company exchanged its Nasdaq-listed ADRs for Nasdaq-listed New Ordinary Shares and terminated its ADR facility.  On February 17, 2025, the Company’s AIM-listed depository interests representing the Company’s old Ordinary Shares were cancelled from admission to trading on the AIM Market of the London Stock Exchange, and on February 18, 2025, the Company’s New Ordinary Shares began trading on Nasdaq under the stock ticker “NEXN” (collectively, the “Trading Structure Changes”). All share figures as of December 31, 2024 set forth in this Annual Report are reported to reflect post-Reverse Split shares, unless otherwise provided herein.

 

Unless stated otherwise, all references in this Annual Report to “ordinary shares”, “Ordinary Shares”, “shares” or “Shares” refer to the New Ordinary Shares after giving effect to the Trading Structure Changes, including the Reverse Split completed on February 14, 2025.

 

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

 

We publish consolidated financial statements expressed in U.S. dollars. Our consolidated financial statements responsive to Item 17 of this Annual Report are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (the “IFRS”). We present our consolidated financial statements in U.S. dollars. All references in this Annual Report to “Israeli currency” and “NIS” refer to New Israeli Shekels, the terms “dollar,” “USD” or “$” refer to U.S. dollars.

 

 

Our fiscal year ends on December 31 of each year.

 

Throughout this Annual Report, we provide a number of key performance indicators used by our management and often used by others in our industry.

 

We define these key performance indicators as follows:

 

 

 

 

 

 

 

 

 

 

 

TRADEMARKS

 

We or our licensors have proprietary rights to trademarks, copyrights, trade names or service marks used in this Annual Report that are important to our business, many of which are registered under the applicable intellectual property laws. Solely for convenience, the trademarks, trade names and service marks referred to in this Annual Report may appear without the “®” or “™” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks, trade names and service marks. This Annual Report also contains trademarks, copyrights, tradenames and service marks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trademarks, copyrights, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Each trademark, copyright, trade name or service mark of any other company appearing in this Annual Report is the property of its respective holder.

 

MARKET INFORMATION

 

Unless otherwise indicated, information in this Annual Report concerning economic conditions, our industry, our markets and our competitive position is based on a variety of sources, including information from independent industry analysts and publications, as well as our own estimates and research.

 

Our estimates are derived from publicly available information released by third-party sources, as well as data from our internal research, which we believe to be reasonable. None of the independent industry publications used in this Annual Report were prepared on our behalf.

 

Certain estimates of market opportunity and forecasts of market growth included in this Annual Report may prove to be inaccurate. The estimates and forecasts in this Annual Report relating to the size of our target market, market demand and adoption, capacity to address this demand and pricing may prove to be inaccurate. The addressable market we estimate may not materialize for many years, if ever, and even if the markets in which we compete meet the size estimates in this Annual Report, our business could fail to grow at similar rates, if at all.

 

Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this Annual Report. See “Risk Factors” and “Special Note Regarding Forward-Looking Statements and Risk Factor Summary.”

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY

 

This Annual Report contains certain estimates and “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, the provisions of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements include financial projections, statements of plans and objectives for future operations, statements of future economic performance, and statements of assumptions relating thereto, including, but not limited to statements regarding: market opportunity; forecasts; market growth and growth strategy; capital deployment strategy; demand; dependence on third parties such as advertisers, publishers and third-party data providers; our technology investment decisions; industry conditions; changes in technology and regulation and the impact thereof; plans with respect to our intellectual property rights; our competition; global and local economic and geopolitical forces and unrest, including the war and hostilities involving Israel, Hamas, Hezbollah, Iran and Yemen and the Ukraine/Russia war; seasonality; dependence on our sales and support team; our positioning and strategy; digital advertising trends overall; our solutions and platform; customers; our dividend policy and our buyback program; the Trading Structure Changes we implemented, working capital and the sufficiency thereof; financial metrics such as revenue, costs and expenses, including capital expenditures; legal proceedings and tax. Forward-looking statements may appear throughout this report, including without limitation, in Item 3. “Key Information 3.D. Risk Factors,” Item 4. “Information on the Company,” and Item 5. “Operating and Financial Review and Prospects 5.A. Operating Results.” In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible” or the negative of these terms or similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other risks, assumptions and factors that could cause our actual results or conditions to differ materially from our forward-looking statements include, among others, the items in the following list, which also summarizes some of our most principal risks:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

•	we are a party to a credit agreement which contains a number of covenants that may restrict our current and future operations and could adversely affect our ability to execute business needs;

 

 

 

 

These risks factors are discussed in more detail in this Annual Report, including under Item 3. “Key Information – 3.D. Risk Factors.” The forward-looking statements in this Annual Report are only predictions. These statements are inherently uncertain, subject to risks and uncertainties, some of which cannot be predicted or quantified, and investors are cautioned not to unduly rely upon these statements. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

 

You should read this Annual Report and the documents that we reference in this Annual Report and have been filed as exhibits to this Annual Report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

The estimates and forward-looking statements contained in this Annual Report speak only as of the date of this Annual Report. Except as required by applicable law, we undertake no obligation to publicly update or revise any estimates or forward-looking statements whether as a result of new information, future events or otherwise, or to reflect the occurrence of unanticipated events.

 

 

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not applicable.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3. KEY INFORMATION

 

3.A. [RESERVED]

 

3.B. CAPITALIZATION AND INDEBTEDNESS

 

Not applicable.

 

3.C. REASONS FOR THE OFFER AND USE OF PROCEEDS

 

Not applicable.

 

3.D. RISK FACTORS

 

 

Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.

 

Risks Relating to Our Business

 

Our success and revenue growth are dependent on adding new advertisers and publishers, effectively educating and training our existing advertisers and publishers on how to make full use of our platform and increasing usage of our platform by advertisers and publishers.

 

Our success and sustainability are dependent on regularly adding new advertisers and publishers and increasing their usage of our platform. Our contracts and relationships with advertisers and publishers generally do not include long-term or exclusive obligations requiring them to use, maintain use or increase use of our platform. Advertisers and publishers typically have relationships with numerous providers and can use both our platform and those of our competitors without incurring significant costs or disruption. They may also choose to decrease their overall advertising spend for any reason, including if they do not believe they are receiving a sufficient return. Accordingly, we must continually work to add new advertisers and publishers to our customer base, retain our existing advertisers and publishers, increase their usage of our platform and capture a larger share of their advertising spend.

 

We may not be successful at educating and training advertisers and publishers, especially new ones, on how to use our platform for them to most benefit from our technology and increase their usage. If these efforts are unsuccessful or advertisers or publishers decide not to maintain or increase their usage of our platform for any other reason, or if we fail to attract new advertisers or publishers, our revenue could fail to grow or may decline, which would materially and adversely harm our business, operating results and financial condition.

 

Our business depends on our ability to maintain and expand access to advertising spend, including spend from a limited number of DSPs, agencies, and advertisers.

 

Our business depends on our ability to maintain and expand our access to advertising spend from advertisers through DSPs, as well as agencies and direct advertisers (that execute their purchases through DSPs), seeking to purchase impressions from our publishers. A limited number of large advertising customers may account for a significant portion of our revenue.

 

For the year ended December 31, 2024, one buyer represented 11.5% of the revenue. For the year ended December 31, 2023, no individual buyer accounted for more than 10% of the revenue. For the year ended December 31, 2022, one buyer represented 10.7% of the revenue. As of December 31, 2024, three buyers, respectively, accounted for 19.1%, 12.1% and 11.2% of trade receivables. As of December 31, 2023, two buyers, respectively, accounted for 16.2% and 16.5% of trade receivables. As of December 31, 2022, two buyers, respectively, accounted for 15.7% and 14.1% of trade receivables. As of December 31, 2024 and December 31, 2023, no individual vendor accounted for more than 10% of trade payables. As of December 31, 2022, one vendor accounted for 12.7% of trade payables.

 

Our master service agreements with most DSPs and other customers automatically renew each year for successive one-year terms. However, either party may generally terminate for convenience upon providing 30-day prior written notice. We expect to depend upon these few DSPs and advertising customers for a large percentage of impressions purchased for the foreseeable future. Any disruptions in our relationships with DSPs, agencies or advertisers could harm our business, results of operations and financial condition. To support our continued growth, we will seek to expand upon current levels of utilization with these DSPs, agencies, and advertisers.

 

In general, we have no minimum commitments from advertisers, agencies or DSPs to spend on our platform, so the amount of demand available to us can change at any time, and we cannot assure you that we will have access to a consistent volume or quality of advertising spend or demand. If an advertiser or DSP representing a significant portion of the demand in our platform decides to materially reduce use of our services, it could cause an immediate and significant decline in our revenue and profitability and adversely affect our business, results of operations and financial condition.

 

Our business depends on our ability to maintain and expand access to valuable inventory from publishers, including our largest publishers.

 

Our business depends on our access to valuable publisher inventory. We depend upon publishers, including channel partners, which aggregate large numbers of smaller publishers, to provide advertising inventory which we can offer to prospective advertisers. A relatively small number of publishers have historically accounted for a significant portion of the advertising inventory sold on our platform, as well as a significant portion of our revenue, including a relatively small number of channel partners. To support our continued growth, we will seek to add additional publishers to our platform and to expand current utilization with our existing publishers.

 

In general, our relationships with publishers do not contain minimum commitments. The amount, quality and cost of inventory available on our platform can change at any time, and we cannot assure you that we will have access to a consistent volume or quality of inventory at a reasonable cost, or at all. Any disruptions in our relationships with publishers or our largest channel partners could adversely affect our business, results of operations and financial condition. If we cannot retain or add individual publishers with valuable inventory, or if such publishers decide not to make their valuable inventory available on our platform, then advertisers may be less inclined to use our platform, which could adversely affect our business, results of operations and financial condition.

 

If we fail to make the right investment decisions in our platform, or if we fail to innovate and develop new solutions that are adopted by advertisers and publishers, we may not attract and retain advertisers and publishers, which could have an adverse effect on our business, results of operations and financial condition.

 

We face intense competition in the marketplace and are confronted by rapidly changing technology, evolving industry standards, consumer preferences, regulatory changes and the frequent introduction of new solutions by our competitors to which we must adapt and address. We need to continuously update our platform and the technology in which we invest and develop, including our machine learning, generative artificial intelligence and other proprietary algorithms, to attract publishers and advertisers and stay ahead of changes in technology, evolving industry standards and regulatory requirements. Our platform is complex and new solutions can require a significant investment of time and resources to develop, test, introduce, enhance, and maintain. These activities can take longer than we expect and we may not make the right decisions regarding our pursuit of these investments. New formats and channels, such as mobile header bidding and CTV, present unique challenges and our success in new formats and channels depends upon our ability to integrate them with our platform. If our mobile and video solutions or our CTV solutions are not widely adopted by advertisers and publishers, we may not retain advertisers and publishers. In addition, new demands from advertisers or publishers, superior offerings by competitors, changes in technology, or new industry standards or regulatory requirements could render our platform or our existing solutions less effective and require us to make unanticipated changes to our platform or business model. Furthermore, our focus on our end-to-end platform may decrease our responsiveness and agility to respond to changes or innovations specific to either our DSP or SSP solutions. Our failure to adapt to a rapidly changing market, anticipate changing demand, or attract and retain advertisers or publishers would cause our revenue or revenue growth rate to decline and adversely affect our business, results of operations and financial condition.

 

Significant parts of our business depend on relationships with data providers for data sets used to deliver targeted campaigns.

 

Our ability to deliver targeted advertising campaigns depends on our ability to acquire effective data sets, which we do through a combination of proprietary data sets as well as data sets that we purchase from third parties. If any third-party data providers decide not to make data sets available to us, decide to increase their price or place significant restrictions on the use of their data, we may not be able to replace this with our own proprietary data sets or those of other third-party providers that satisfy our requirements in a timely and cost-effective manner. In addition, some data set providers in the industry may enter into exclusivity arrangements with our competitors, which could limit our access to a meaningful supply of data and give them a competitive advantage. Any limitations on access to these third-party data sets could impair our ability to deliver effective solutions, which could adversely affect our business, results of operations and financial condition.

 

Our business depends on our ability to collect, use and disclose certain data, including CTV data, to deliver advertisements. Any limitation imposed on our collection, use or disclosure of this data could significantly diminish the value of our platform and cause us to lose publishers, advertisers and revenue. Consumer tools, regulatory restrictions, and technological limitations all threaten our ability to use and disclose data.

 

As we process transactions through our platform, we collect large amounts of data about advertisements and where they are placed, such as consumer, advertiser and publisher preferences for media and advertising content. We also collect automatic content recognition (“ACR”) data and data on ad specifications such as ad placement, size and format, ad pricing and auction activity such as price floors, bid response behavior and clearing prices. Further, we collect certain data from consumers that, while not identifying the individual, does include browser, device location and characteristics, online browsing behavior, exposure to and interaction with advertisements, and inferential data about purchase intentions and preferences. We collect this data through various means, including from our own systems, pixels that publishers allow us to place on their websites to track consumer visits, software development kits installed in mobile applications and smart TVs, cookies and other tracking technologies. Our publishers, advertisers and data providers may also choose to provide us with their proprietary data about consumers.

 

We aggregate this data and analyze to enhance our services, including the pricing, placement and delivery of advertisements. As part of our real-time analytics service offering, we also share the data, or analyses based on such data, with our publishers and advertisers. Our ability to collect, use and share data about advertising transactions and consumer behavior is critical to the value of our services. There are many technical challenges relating to our ability to collect, aggregate, use and store the data, and we cannot assure you that we will be able to do so effectively. Evolving regulatory standards, high profile investigations, and increased regulatory scrutiny of AdTech frameworks, cookies, and online consent mechanisms more broadly could place restrictions on the collection, aggregation, use and storage of information, which could result in a material increase in the cost of collecting or otherwise obtaining certain kinds of data and could limit the data we collect and the ways in which we may use or disclose information. There has been increased regulations and enforcement activity in the United States, United Kingdom and Europe involving the AdTech industry. For instance, a recent decision by the Belgium Data Protection Authority concerning the “Transparency and Consent Framework” (“TCF”) (a widely used mechanism to manage user preferences relating to targeted online advertising, developed by the Interactive Advertising Bureau (the “IAB”), an AdTech trade body), found that the TCF violates the General Data Protection Regulation 2016/679 (“GDPR”) and fined the IAB EUR 250,000. The IAB has submitted an action plan to bring the TCF into compliance with GDPR requirements and the Belgium Data Protection Authority has approved the remediation action plan. Because the TCF is the principal mechanism by which data subjects grant consent to AdTech providers, and because consent is in most cases generally considered to be necessarily for behavioral advertising to occur pursuant to the GDPR, these types of proceedings could impact the amount of information we (and others in the AdTech ecosystem) are able to collect and/or use on our platforms. Further, the application of similar consent standards to the CTV and mobile ecosystems continues to evolve and absent substantial adoption of the TCF or a similar cohesive standard for expression and storage of data subject preferences, the amount of information we can access and use for advertising through those channels may decrease. Similarly, consumers can, with increasing ease, implement practices or technologies that may limit our ability to collect and use data to deliver advertisements, or otherwise inhibit the effectiveness of our platform, including opt out capabilities offered by various mobile applications, CTV manufacturers and web browsers, as well as data deletion request mechanisms offered by us to consumers, following IDEA and GDPR protocols. Although our publishers and advertisers generally permit us to aggregate and use data from advertising placements, subject to certain restrictions, existing or future publishers or advertisers might decide to restrict our collection or use of their data or might determine that they cannot comply with legal requirements imposed on them in relation to the transfer or information or information rights to us. Any limitations could impair our ability to deliver effective solutions, which could adversely affect our business, results of operations and financial condition.

 

If the use of third-party “cookies,” mobile device IDs, CTV data collection or other tracking technologies is restricted without similar or better alternatives (and adoption of such alternatives), our platform’s effectiveness could be diminished and our business, results of operations and financial condition could be adversely affected.

 

We use “cookies,” or small text files placed on consumer devices when an Internet browser is used, as well as mobile device identifiers and CTV data collection devices, to gather data that enables our platform to be more effective. Our cookies, mobile device IDs and CTV data collection devices do not identify consumers directly but rather record information, such as when a consumer views or clicks on an advertisement, when a consumer uses a mobile app, the consumer’s location and browser or other device information. Publishers and partners may also choose to share their information about consumers’ interests or give us permission to use their cookies and mobile device IDs. We use data from cookies, mobile device IDs, CTV data collection devices and other tracking technologies to help advertisers decide whether to bid on, and how to price, an ad impression in a certain location, at a given time, for a particular consumer. Without cookies, mobile device IDs, CTV data collection devices and other tracking technology data, transactions processed through our platform would be executed with less insight into consumer activity, reducing the precision of advertisers’ decisions about which impressions to purchase for an advertising campaign and limiting our reporting capabilities. This could make placement of advertising through our platform less valuable and harm our revenue. If our ability to use cookies, mobile device IDs, CTV data collection devices or other tracking technologies is limited, we may be required to develop or obtain additional applications and technologies to compensate for the lack of cookies, mobile device IDs, CTV data collection devices and other tracking technology data, which could be time consuming or costly to develop, less effective and subject to additional regulation.

 

Our failure to meet content and inventory standards and provide services that our advertisers and publishers trust could harm our brand and reputation and negatively impact our business, operating results, and financial condition.

 

We do not provide or control the content of advertisements or that of the digital media providing inventory. Advertisers provide the advertising content and publishers provide the inventory content. Both advertisers and publishers are concerned about being associated with content they consider inappropriate, competitive or inconsistent with their brands, or illegal, and they are hesitant to spend money or make inventory available without guaranteed brand and content security. Consequently, our reputation depends, in part, on providing services that our advertisers and publishers trust and we have contractual obligations to meet certain content and inventory standards. We use third party tools to review the inventory that our publishers provide to ensure that they meet our standards. These tools, however, have their own limitations and may not always provide sufficient protection. We also engage in efforts to contractually prohibit the misuse of our platform by agencies (and their marketer customers) and publishers; however, we are not always successful in achieving a fulsome level of protection. Despite such efforts, advertisers may inadvertently purchase inventory that proves to be unacceptable for their campaigns, in which case we may not be able to collect revenue or recoup the amounts paid to publishers. Furthermore, the standards by which an advertiser or a publisher may consider an advertising placement or inventory content offensive, objectionable or inappropriate are constantly changing and our contractual agreements are not always able to anticipate fully the preferences of our advertisers and publishers. Our advertisers could intentionally run campaigns that do not meet the standards of our publishers or attempt to use illegal or unethical targeting practices or seek to display advertising in jurisdictions that do not permit such advertising or in which the regulatory environment is uncertain, in which case our supply of ad inventory from such suppliers could be jeopardized.

 

We must grow rapidly to become a market leader and to accomplish our strategic objectives. If we fail to grow, or fail to manage our growth effectively, the value of our company may decline.

 

The advertising technology market is dynamic, and our success depends upon the continued adoption of programmatic advertising and our ability to develop innovative new technologies and solutions for the evolving needs of advertisers and digital media property owners. We need to grow significantly to develop the market reach and scale necessary to compete effectively with large competitors. This growth depends to a significant degree upon the quality of our strategic vision and planning. The advertising market is evolving rapidly, and if we make strategic errors, there is a significant risk that we will lose our competitive position and be unable to recover and achieve our objectives. Our ability to grow requires access to, and prudent deployment of, capital for hiring, expansion of physical infrastructure to run our platform, acquisition of companies or technologies, and development and integration of supporting sales, marketing, finance, administrative and managerial infrastructure. Further, the growth we are pursuing may strain our resources. If we are not able to innovate and grow successfully, the value of our business may be adversely affected.

 

Industry Consolidation and Increased Competition May Adversely Affect Our Business

 

The advertising technology market is highly competitive and has experienced, and may continue to experience, significant consolidation, with larger competitors acquiring smaller companies and expanding their capabilities. As a result, we may face greater pricing pressure as competitors offer bundled services or use their scale to negotiate better terms with advertisers and publishers. Consolidation may lead to stronger relationships between major advertisers and larger advertising technology companies, making it harder for us to retain or attract key customers. Larger competitors may control access to critical data, advanced AI-driven targeting, or proprietary ad-serving technologies, putting us at a disadvantage.  Barriers to entry and expansion: Increased competition from integrated players may limit our ability to enter new markets, invest in product innovation, or expand our service offerings.  If we are unable to effectively compete in this evolving landscape, our revenues, growth prospects, and profitability could be adversely affected.

 

The market for programmatic buying for advertising campaigns is evolving. If this market develops slower or differently than we expect, our business, operating results and financial condition could be adversely affected.

 

We derive revenue from programmatic advertising on our end-to-end platform. We expect that programmatic advertising will continue to be our primary source of revenue for the foreseeable future and that our revenue growth will largely depend on increasing our customers’ usage of our platform. While the market for programmatic advertising for desktop and mobile is relatively established, the market in other channels is still emerging, and our current and potential customers may not shift quickly enough to programmatic advertising from other buying methods, which would reduce our growth potential. If the market for programmatic advertising deteriorates or develops more slowly than we expect, it could reduce demand for our platform and our business, growth prospects and financial condition could be adversely affected.

 

If we fail to detect or prevent fraud on our platform, or malware intrusion into the systems or devices of our publishers and their consumers, publishers could lose confidence in our platform and we could face legal claims and other liability that could adversely affect our business, results of operations and financial condition.

 

We may be subject to fraudulent or malicious activities undertaken by individuals or organizations seeking to use our platform for improper purposes. For example, someone may attempt to divert or artificially inflate advertiser purchases through our platform, or to disrupt or divert the operation of the systems and devices of our publishers, and their consumers in order to misappropriate information, generate fraudulent billings or stage cyberattacks, or for other illicit purposes. We use our proprietary technology and third-party services to, and we participate in industry co-ops that work to, detect malware and other content issues as well as click fraud (whether by humans or software known as “bots”) and to block fraudulent inventory. Preventing and combating fraud is an industry-wide issue that requires constant vigilance, as well as a balancing of cost effectiveness and risk, and we cannot guarantee that we will be successful in our efforts to combat fraud. We may provide access to inventory that is objectionable to our advertisers, or we may serve advertising that contains malware or objectionable content to our publishers, which could harm our and our advertisers’ and publishers’ reputation, causing them to scale-back or terminate their relationship with us, or otherwise negatively impact our business, operating results and financial condition.

 

If the use of digital advertising is rejected by consumers, through opt-in, opt-out or ad-blocking technologies or other means, it could have an adverse effect on our business, results of operations and financial condition.

 

Consumers can, with increasing ease, implement technologies that limit our ability to collect and use data to deliver advertisements, or otherwise limit the effectiveness of our platform. Cookies may be and often are deleted or blocked by consumers. The most commonly used Internet browsers allow consumers to modify their browser settings to block first-party cookies (placed directly by the publisher or website owner that the consumer intends to interact with) or third-party cookies (placed by parties, like us, that have no direct relationship with the consumer), and some browsers block third-party cookies by default. Certain browsers (in addition to blocking cookies) do and may to an increasing degree obfuscate or prevent other browser or network-related information from flowing to third parties including our platforms.  Many applications and other devices allow consumers to avoid receiving advertisements by paying for subscriptions or other downloads. Mobile devices using Android and iOS operating systems limit the ability of cookies to track consumers while they are using applications other than their web browser on the device. As a consequence of all of the above, fewer of our cookies or publishers’ cookies may be set in browsers or be accessible in mobile devices, and less information may be collected from devices and networks, which could adversely affect our business.

 

Some consumers also download free or paid “ad-blocking” software on their computers or mobile devices, not only for privacy reasons but also to counteract the adverse effect advertisements can have on the consumer experience, including increased load times, data consumption and screen overcrowding. If more consumers adopt these measures, our business, results of operations and financial condition could be adversely affected. Ad-blocking technologies could have an adverse effect on our business, results of operations and financial condition if they reduce the volume or effectiveness and value of advertising. In addition, some adblocking technologies only block ads that are targeted through use of third-party data, while allowing ads based on first- party data (i.e., data owned by the publisher). These ad blockers could place us at a disadvantage because we rely heavily on third-party data, while some large competitors have troves of first-party data they use to direct advertising. Other technologies allow ads that are deemed “acceptable,” which could be defined in ways that place us or our publishers at a disadvantage, particularly if such technologies are controlled or influenced by our competitors. Even if ad blockers do not ultimately have an adverse effect on our business, investor concerns about ad blockers could cause our share price to decline.

 

We must scale our platform infrastructure to support anticipated growth and transaction volume. If we fail to do so, we may limit our ability to process inventory and we may lose revenue.

 

Our business depends on processing inventory in milliseconds, and we must handle an increasingly large volume of such transactions. The addition of new solutions, such as header bidding in mobile and CTV formats, support of evolving advertising formats, handling and use of increasing amounts of data, and overall growth in impressions place growing demands upon our platform infrastructure. If we are unable to grow our platform to support substantial increases in the number of transactions and in the amount of data we process, on a high-performance, cost-effective basis, our business, results of operations and financial condition could be adversely affected.

 

Disruptions to service from our third-party data center hosting facilities and cloud computing and hosting providers could impair the delivery of our services and harm our business.

 

A significant portion of our business relies upon hardware and services that are hosted, managed and controlled by third-party co-location providers for our data centers, and we are dependent on these third parties to provide continuous power, cooling, Internet connectivity and physical and technological security for our servers. In the event that these third-party providers experience any interruption in operations or cease business for any reason, or if we are unable to agree on satisfactory terms for continued hosting relationships, we would be forced to use other service providers or assume some hosting responsibilities ourselves which may come at a significant cost. Even a disruption as brief as a few minutes could have a negative impact on marketplace activities and could result in a loss of revenue. These facilities may be located in areas prone to natural disasters and may experience catastrophic events such as earthquakes, fires, floods, power loss, telecommunications failures, acts of war or terrorism, public health crises, such as the COVID-19 pandemic, and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism, cyber-attacks and similar misconduct. Such events could cause damage to, or failure of, our systems generally, or those of the third-party cloud computing and hosting providers, which could result in disruptions to our service and adversely affect our business.

 

We face potential liability and harm to our business based on the human factor of inputting information into our platform.

 

We or our customers set up campaigns on our platform using a number of available variables. While our platform includes several checks and balances, it is possible for human error to result in significant over-spending. We offer a number of protections such as daily or overall spending caps, but despite these protections, the ability for overspend exists. For example, campaigns which last for a period of time can be set to pace evenly or as quickly as possible. If a customer with a high credit limit enters an incorrect daily cap with a campaign set to a rapid pace, it is possible for a campaign to accidently go significantly over budget. While our customer contracts state that customers are responsible for media purchased through our platform, we are ultimately responsible for paying the inventory providers and we may be unable to collect when such issues occur.

 

We are subject to cybersecurity risks to operational systems, security systems, infrastructure and personal data processed by us or third-party vendors or suppliers and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent us from effectively operating our business.

 

We face ongoing risks related to actual and attempted cybersecurity threats and incidents on our IT networks, such as through phishing scams and ransomware. In July 2024, we experienced a cybersecurity incident in which unauthorized individuals gained access to certain systems. While we detected and contained the incident promptly, we cannot guarantee that similar incidents will not occur in the future, or that any new incidents will not have a more severe impact. Although the investigation confirmed that no customer data or financial information was compromised, we recognize the possibility that although not material, at the time, IT systems information may have been exposed. As of the date of this filing, we estimate the direct costs of responding to and remediating the cybersecurity incident to be minimal. Cybersecurity incidents put us at risk for interruptions, outages and breaches of: operational systems, including business, financial, accounting, product development, data processing, and production processes, owned by us or our third-party vendors or suppliers; facility security systems, owned by us or our third-party vendors or suppliers; in-product technology owned by us or our third-party vendors or suppliers; the integrated software in our solutions; or personal data that we process or our third-party vendors or suppliers process on our behalf. Such cyber incidents could materially disrupt operational systems; result in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information; compromise certain information of customers, employees, suppliers, drivers or others; jeopardize the security of our facilities; or affect the performance of in-product technology and the integrated software solutions. A cyber incident could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery or other forms of deception. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. Although we maintain information technology measures designed to protect us against intellectual property theft, data breaches and other cyber incidents, such measures require constant updates and improvements, and we cannot guarantee that such measures will be adequate to detect, prevent or mitigate cyber incidents. The implementation, maintenance, segregation and improvement of these systems requires significant management time, support and cost. Moreover, there are inherent risks associated with developing, improving, expanding and updating current systems, including the disruption of our data management, procurement, production execution, finance, supply chain and sales and service processes. These risks may affect our ability to manage our data and inventory, procure parts or supplies or produce, sell, deliver and service our solutions, adequately protect our intellectual property or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. We cannot be sure that the systems upon which we rely, including those of our third-party vendors or suppliers, will be effectively implemented, maintained or expanded as planned. If we do not successfully implement, maintain or expand these systems as planned, our operations may be disrupted, our ability to accurately and timely report our financial results could be impaired, and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results. Moreover, our proprietary information or intellectual property could be compromised or misappropriated, and our reputation may be adversely affected. If these systems do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

 

A significant cyber incident could impact production capability, harm our reputation, cause us to breach our contracts with other parties or subject us to regulatory actions or litigation, any of which could materially affect our business, prospects, financial condition and operating results. In addition, our insurance coverage for cyber-attacks may not be sufficient to cover all the losses we may experience as a result of a cyber incident. Any problems with our third-party cloud hosting providers, whether due to cyber security failures or other causes, could result in lengthy interruptions in our business.

 

Any failure to protect our intellectual property rights could negatively impact our business.

 

We regard the protection of our intellectual property, which includes trade secrets, copyrights, trademarks and domain names, as critical to our success. We rely on a combination of patent, trademark, copyright, trade secret laws, confidentiality procedures and contractual provisions to protect our proprietary methods and technologies and own more than 50 patents. We generally enter into confidentiality and invention assignment agreements with our employees and contractors and confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. However, we may not be successful in executing these agreements with every party who has access to our confidential information or contributes to the development of our intellectual property. Those agreements that we do execute may be breached, and we may not have adequate remedies for any such breach. These contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our intellectual property or deter independent development of similar intellectual property by others. Breaches of the security of our solutions, databases or other resources could expose us to a risk of loss or unauthorized disclosure of information collected, stored or transmitted for or on behalf of advertisers or publishers, or of cookies, data stored in cookies, other user information or other proprietary or confidential information.

 

In addition, we register certain domain names, trademarks and service marks in the United States and in certain locations outside the United States. We also rely upon common law protection for certain marks. Any of our patents, trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. We recently rebranded our Company’s various businesses under the name “Nexxen” and associated Nexxen logo, in order to further promote our unified service and product offerings and Company has invested resources in its rebranding. Our competitors and others could attempt to capitalize on our brand recognition by using domain names or business names similar to ours. Domain names and trademarks similar to ours have been registered in the United States and elsewhere. We may be unable to prevent third parties from acquiring or using domain names and other trademarks that infringe on, are similar to, or otherwise decrease the value of our brands, trademarks or service marks. Effective trade secrets, copyright, trademark, domain name and patent protection are expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. We may be required to protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or which we may not pursue in every location. We may, over time, increase our investment in protecting our intellectual property through additional filings that could be expensive and time-consuming.

 

Risks Relating to the Market in Which We Operate

 

If the non-proprietary technology, software, products and services that we use are unavailable, have future terms we cannot agree to or do not perform as we expect, our business, operating results and financial condition could be harmed.

 

We depend on data sets and various technology, software, products and services from third parties or available as open source, including for critical features and functionality of our platform to deliver targeted advertising campaigns. Our ability to obtain necessary data licenses on commercially reasonable terms is critical to the success of our platform and we could suffer material adverse consequences if we are unable to obtain data through our integrations with data suppliers or if the cost of obtaining such data materially increases. Identifying, negotiating, complying with and integrating with third-party terms and technology are complex, costly and time-consuming matters. Further, in the course of negotiations with third-party providers, we may be required to provide material upfront minimum purchase commitments in order to secure favorable contractual terms. Failure by third-party providers to acquire relevant data sets, or to maintain, support or secure their technology either generally or for our accounts specifically, or downtime, errors or defects in their products or services, could materially and adversely impact our platform, our administrative obligations or other areas of our business. Furthermore, changes in the costs of third-party services may result in us having to replace any third-party providers or their data sets, technology, products or services and could result in outages or difficulties in our ability to provide our services.

 

Our revenue and results of operations are highly dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns, inflation, supply constraints, geopolitical issues, and pandemics, can make it difficult to predict our revenue and could adversely affect our business, results of operations and financial condition.

 

Our business depends on the overall demand for advertising and on the economic health of our current and prospective advertisers. Recently, the economic health of advertisers has been impacted by macroeconomic headwinds including rising inflation, rising interest rates and global supply chain constraints. Our business has been and may be impacted in the future by several factors including international hostilities (such as the war and hostilities involving Israel, Hamas, Hezbollah, the Houthi movement in Yemen and Iran, and the Russia-Ukraine war), inflation, pandemics and the resulting economic uncertainty in the United States and global economy. Many advertisers also suffered and continue to do so as a result of economic downturn, global supply chain constraints which materially impacted certain verticals. Many marketing budgets decreased their advertising spending as a response to the economic uncertainty and decline in business activity due to macroeconomic conditions which have, and may continue to have, a negative impact on our revenue and results of operations. Various macroeconomic factors could cause advertisers to reduce their advertising budgets, and may include the following:

 

 

 

 

 

 

 

 

Reductions in overall advertising spending as a result of these factors could make it difficult to predict our revenue and could adversely affect our business, results of operations, and financial condition.

 

Our global operations subject us to certain risks beyond our control and may adversely affect our financial results.

 

With operations in 193 countries and territories around the world, we are subject to numerous risks outside of our control, including risks arising from political unrest and other political events, including the war and hostilities involving Israel, Hamas, Hezbollah and Iran, the invasion of Ukraine by Russia, the terrorist groups in Yemen, which are threatening to limit the movement of marine shipments through the Red Sea, and increasing tensions between China and Taiwan, regional and international hostilities and international responses to these hostilities, strikes and other worker unrest, natural disasters, the impact of global climate change, acts of war, terrorism, international conflict, severe weather conditions, pandemics and other global health emergencies, disruptions of infrastructure and utilities, cyberattacks, and other events beyond our control. Although it is not possible to predict such events or their consequences, these events could materially adversely affect our reputation, business and financial results.

 

Our business and operations have been, and may in the future be, adversely affected by health epidemics, pandemics and other outbreaks of infectious disease, such as the global pandemic caused by COVID-19.

 

Our business and operations have been and could in the future be adversely affected by health epidemics, pandemics and other outbreaks of infectious disease, such as the global COVID-19 pandemic.

 

A recession, depression, excessive inflation or other sustained adverse market events resulting from health epidemics, pandemics and other outbreaks of infectious disease could materially and adversely affect our business and that of our customers or potential customers. Typically, we are contractually required to pay advertising inventory and data suppliers within a negotiated period of time, regardless of whether our customers pay us on time, or at all, and we may not be able to renegotiate better terms. As a result, our financial condition and results of operations may be adversely impacted if the business or financial condition of advertisers and marketers is negatively affected by an infectious disease. Our business depends on the overall demand for advertising and on the economic health of advertisers and publishers that benefit from our platform. As we experienced with the COVID-19 pandemic, economic downturns or unstable market conditions may cause advertisers to decrease their advertising budgets, and/or pause their advertising spending, which could reduce usage of our platform and adversely affect our business, operating results and financial condition.

 

There are risks related to the use and development of Generative Artificial Intelligence (“AI”)

 

The increasing adoption and regulatory scrutiny of generative AI technologies may present risks that could materially impact our business, operations, and reputation.  We utilize or may in the future integrate generative AI technologies into certain aspects of our business, including product development, customer service, content creation, or operational efficiencies. While generative AI offers significant potential benefits, it also presents several risks including regulatory and compliance, intellectual property, legal liability, data privacy and security concerns.  There is also risk of bias, ethical concerns and misinformation. If we are unable to effectively manage these risks, our business operations, regulatory compliance, financial results, and reputation may be materially and adversely affected.

 

Any decrease in the use of the advertising or publishing channels that we primarily depend on, or failure to expand into emerging channels, could adversely affect our business, results of operations and financial condition.

 

The future growth of our business could be constrained by the level of acceptance and expansion of emerging channels, as well as the continued use and growth of existing channels in which our capabilities are more established. Our revenue growth may depend on our ability to expand within mobile and, in particular, CTV, and we have been, and are continuing to, enhance such channels. We may not be able to accurately predict changes in overall advertiser demand for the channels in which we operate and cannot assure you that our investment in formats will correspond to any such trends. For example, we cannot predict whether the growth in demand for our CTV offering will continue. Any decrease in the use of existing channels, whether due to advertisers or publishers losing confidence in the value or effectiveness of such channels, regulatory restrictions or other causes, or any inability to further penetrate CTV or enter new and emerging advertising channels, could adversely affect our business, results of operations, and financial condition.

 

If CTV develops in ways that prevent advertisements from being delivered to consumers, our business, results of operations and financial condition may be adversely affected.

 

As online video advertising has continued to scale and evolve, the amount of online video advertising being bought and sold programmatically has increased dramatically; this market continues to grow with the increased popularity of CTV media. However, despite the opportunities created by programmatic advertising, programmatic solutions for CTV publishers are still nascent compared to desktop search and mobile video solutions. Many CTV publishers have backgrounds in cable or broadcast television and have limited experience with digital advertising, and in particular programmatic advertising. For these publishers, it is extremely important to protect the quality of the viewer experience to maintain brand goodwill and ensure that online advertising efforts do not create sales channel conflicts or otherwise detract from their direct sales force. In this regard, programmatic advertising presents a number of potential challenges, including the ability to ensure that ads are brand safe, comply with business rules around competitive separation, are not overly repetitive, are played at the appropriate volume and do not cause delays in load-time of content. We believe that our platform is well-positioned to allow publishers the opportunity to achieve these goals and also reliably achieve “ad podding,” or the placement of the desired number of advertisements in commercial breaks. In fact, we have invested significant time and resources cultivating relationships with CTV publishers to establish best practices and teach them about the benefits of programmatic CTV. While we believe that programmatic advertising will continue to grow as a percentage of overall CTV advertising, there can be no assurance as to the rate at which CTV publishers will adopt programmatic solutions such as ours, if at all, which could adversely affect our business, results of operations and financial condition.

 

The market in which we participate is intensely competitive, and we may not be able to compete successfully with our current or future competitors.

 

We operate in a highly competitive and rapidly changing industry. We expect competition to persist and intensify in the future, which could harm our ability to increase revenue and our market share and maintain profitability. New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants develop and offer new products and services, such as, products and services utilizing generative artificial intelligence, analytics, automated media buying and exchanges, aimed at capturing advertising spend or disrupting the digital marketing landscape. Further, our competitors have begun and will continue to offer similar products or services to those we currently offer, including our end-to-end platform, and our ability to compete effectively could be significantly compromised.

 

We may also face competition from new companies entering the market, including large established companies and companies that we do not yet know about or do not yet exist. If existing or new companies develop, market or resell competitive high-value products or services that result in additional competition for advertising spend or advertising inventory or if they acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our results of operations could be harmed.

 

Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we have, which may allow them to devote greater resources to the development, promotion, sale and support of their products and services. They may also have more extensive advertiser bases and broader publisher relationships than we have and may be better positioned to execute on advertising conducted over certain channels, such as social media, mobile and video. Some of our competitors may have a longer operating history and greater name recognition. As a result, these competitors may be better able to respond quickly to new technologies, develop deeper advertiser relationships or offer services at lower prices. Any of these developments would make it more difficult for us to sell our platform and could result in increased pricing pressure, increased sales and marketing expense, or the loss of market share.

 

Seasonal fluctuations or market changes in advertising activity could have a material impact on our revenue, cash flow and operating results.

 

Our revenue, cash flow, operating results and other key operating and performance metrics may vary from quarter to quarter due to the seasonal nature of our customers’ spending on advertising campaigns. For example, in prior years, customers tended to devote more of their advertising budgets to the fourth calendar quarter to coincide with consumer holiday spending. In contrast, the first quarter of the calendar year has typically been the slowest in terms of advertising spend. Political advertising could also cause our revenue to increase during election cycles and decrease during other periods, making it difficult to predict our revenue, cash flow and operating results, all of which could fall below our expectations. In addition, adverse economic conditions, inflation, changes in foreign exchange rates or interest rates, or general economic uncertainty may cause customers to decrease their advertising spend, adversely affecting our revenue, cash flow and operating results.

 

If we do not effectively grow and train our sales and support teams, we may be unable to add new customers or increase usage of our platform by our existing customers and our business will be adversely affected.

 

We are substantially dependent on our sales and support teams to obtain new customers and to increase usage of our platform by our existing customers. We believe that there is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve revenue growth will depend, in large part, on our success in recruiting, training, integrating and retaining sufficient numbers of sales personnel to support our growth. Due to the complexity of our platform, a significant time lag exists between the hiring date of sales and support personnel and the time when they become fully productive. Our recent and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. If we are unable to hire and train sufficient numbers of effective sales personnel, or the sales personnel are not successful in obtaining new customers or increasing our existing customers’ spend with us, our business may be adversely affected.

 

Risks Relating to Global Operations Including Location in Israel and Our Employees

 

Our long-term success depends on our ability to operate internationally making us susceptible to risks associated with cross-border sales and operations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

These factors may require significant management attention and financial resources. Any negative impact from our international business efforts could adversely affect our business, results of operations and financial condition.

 

We depend on our executive officers and other key employees, and the loss of one or more of these employees could harm our business.

 

Our success depends largely upon the continued services of our executive officers and other key employees. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. While we have some required notice periods with a limited number of executives, we do not, generally, have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time subject only to the notice periods prescribed by their respective executive agreements. The loss of one or more of our executive officers or key employees could harm our business.

 

Inability to attract and retain other highly skilled employees could harm our business.

 

To execute our growth plan, we must attract and retain highly qualified personnel. Competition where we maintain offices is intense, especially for engineers experienced in designing and developing software and experienced sales professionals. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have and may attempt to recruit our highly skilled employees. In addition, certain domestic immigration laws restrict or limit our ability to recruit internationally. Any changes to Israeli, United Kingdom, European or the U.S. immigration policies that restrain the flow of technical and professional talent may inhibit our ability to recruit and retain highly qualified employees. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may harm our ability to recruit and retain highly skilled employees.

 

Volatility or lack of appreciation in the price of our Shares may also affect our ability to attract and retain our key employees. Many of our senior personnel and other key employees have become, or will soon become, vested in a substantial amount of restricted share units (“RSUs”) and performance share units (“PSUs”). Employees may be more likely to leave us if the shares they own or the shares underlying their vested options, RSUs or PSUs have significantly decreased in value relative to the original purchase price of the shares or the exercise price of the options.

 

The impact of political, economic and military conditions in Israel, including the ongoing war in Israel and other conditions in Israel, and surrounding regions, could materially and adversely affect our business.

 

We are incorporated under Israeli law and our principal executive offices are located in Israel. Many of our employees, including certain management members, operate from our offices located in Tel Aviv, Israel. In addition, several of our officers and one of our directors, including our Chief Executive Officer and Chief Financial Officer, are residents of Israel. Accordingly, political, economic, and military conditions in Israel and the surrounding region may directly affect our business and operations.

 

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Following the attacks, Israel declared war against Hamas and a military campaign against the terrorist organization commenced by the Israel Defense Force (“IDF”). In addition, Hezbollah has also launched attacks against Israeli military sites and troops, and against Israeli towns, and in response to these attacks, the IDF has carried out a military operation in Lebanon, including raids on territories controlled by Hezbollah in Southern Lebanon and strikes on sites belonging to Hezbollah in Lebanon. On a separate border, Israel was required to take limited preemptive military actions in Southern Syria in light of the fall of the Assad regime and the takeover of Syria by the Syrian rebels.

 

Further, Israel faces threats from more distant neighbors, in particular, Iran which directly attacked Israel twice in 2024, has targeted cyber-attacks against Israeli entities and may be developing nuclear weapons; and the Houthi movement, which controls parts of Yemen and launched, among others, a number of attacks on Israel and marine vessels traversing the Red Sea. The Red Sea is a vital maritime route for international trade traveling to and from Israel. As a result of such disruptions, we may experience in the future delays in supplier deliveries, extended lead times, and increased cost of freight, increased insurance costs, increased purchased materials and manufacturing labor costs. The risk of ongoing supply disruptions may have adverse impact on economic conditions in Israel.

 

Further, many Israeli citizens are obligated to perform up to several weeks of annual military reserve duty each year. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Since October 7, 2023, the IDF has called up hundred thousands of its reserve forces to serve. A number of our employees are currently subject to military service in the IDF and many of them have been called to serve. In addition, the family members of certain of our Israeli team members are currently serving in the IDF. Such disruption could materially and adversely affect our business, prospects, financial condition, and results of operations.

 

The intensity and duration of Israel’s current military endeavors in multiple fronts are difficult to predict, as are the economic implications of the foregoing on our business and operations in particular and on Israel’s economy in general. These events may be intertwined with wider macroeconomic indications of a deterioration of Israel’s economic standing, that may involve an additional downgrade in Israel’s credit rating by rating agencies (such as the downgrades by Moody’s, S&P and Fitch Rating agencies of the credit rating of Israel), which may have a material adverse effect on our company and its ability to effectively conduct its operations.

 

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.

 

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our results of operations, financial condition or the expansion of our business. A campaign of boycotts, divestment, and sanctions has been undertaken against Israel, which could also adversely affect our business. Actual or perceived political instability in Israel or any negative changes in the political environment, may individually or in the aggregate adversely affect the Israeli economy and, in turn, our business, financial condition, results of operations, and prospects.

 

Finally, the current elected government in Israel is pursuing certain reforms to Israel’s judicial system. Certain financial, legal and commercial organizations and entities have claimed that such changes, if adopted, could adversely affect the macroeconomic condition in which we operate. At this stage, the proposed legislation has not become effective, and its scope has not been fully determined; we cannot assess the potential impacts of these changes and their likelihood on our business, prospects, financial condition, and results of operation.

 

Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.

 

We are incorporated under Israeli law. The rights and responsibilities of holders of our Shares are governed by our amended and restated articles of association and the Israeli Companies Law, 5759-1999 (the “Companies Law”). These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an Israeli company has to act in good faith and in a customary manner in exercising his, her or its rights and fulfilling his, her or its obligations toward the Company and other shareholders and to refrain from abusing his, her or its power in the Company, including, among other things, in voting at the general meeting of shareholders, on amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and certain transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or prevent the appointment of a director or officer in the Company, or has other powers toward the Company, has a duty of fairness toward the Company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior.

 

Provisions of Israeli law and our amended and restated articles of association may delay, prevent, or make undesirable an acquisition of all or a significant portion of our Shares or assets.

 

Provisions of Israeli law and our amended and restated articles of association could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our Shares. Among other things:

 

 

 

 

 

 

Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.

 

Our amended and restated articles of association provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any claims arising under the Securities Act of 1933, as amended (the “Securities Act”), which may limit the ability of our shareholders to initiate litigation against us or increase the cost thereof.

 

Our amended and restated articles of association provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions, and accordingly, both state and federal courts have jurisdiction to entertain such claims. While the federal forum provision in our amended and restated articles of association does not restrict the ability of our shareholders to bring claims under the Securities Act, we recognize that it may limit shareholders’ ability to bring a claim in the judicial forum that they find favorable and may increase certain litigation costs, which may discourage the filing of claims under the Securities Act against the Company, its directors and officers. However, the enforceability of similar forum provisions (including exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under the Securities Act) in other companies’ organizational documents has been challenged in legal proceedings, and there is uncertainty as to whether courts would enforce the exclusive forum provisions in our amended and restated articles of association. If a court were to find the choice of forum provision contained in our amended and restated articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and results of operations. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder may have the effect of discouraging lawsuits against our directors and officers.

 

It may be difficult to enforce a U.S. judgment against us, our officers and directors in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors.

 

Not all of our directors or officers are residents of the United States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.

 

Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought.

 

Risks Relating to Our Financial Position

 

Our operating history makes it difficult to evaluate our business and prospects and may increase the risk associated with your investment.

 

Our business has evolved over time, including through several successful acquisitions such as our acquisitions of RhythmOne plc (“RhythmOne”) in 2019, Unruly Holdings Limited and Unruly Media, Inc. (collectively, “Unruly”) in 2020, SpearAd in 2021 and Amobee in 2022, such that our operating history makes it difficult to evaluate our current business and future prospects. As a result of such acquisitions, our financial results across different periods may not be directly comparable. We expect to face challenges, risks and difficulties frequently experienced by growing companies in rapidly developing industries, including those relating to:

 

 

 

 

 

 

 

 

 

If we are not successful in addressing these and other issues, our business may suffer, our revenue may decline and we may not be able to achieve further growth or sustain profitability.

 

We often have long sales cycles, which can result in significant time and investment between initial contact with a prospect and execution of an agreement with an advertiser or publisher, making it difficult to project when, if at all, we will obtain new advertisers or publishers, and when we will generate revenue from them.

 

Our sales cycle, from initial contact to contract execution and implementation, can take significant time. As part of our sales cycle, we may incur significant expenses before we generate any revenue from a prospective advertiser or publisher, if at all. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in the marketplace, generally or with a specific prospective advertiser or publisher, change negatively, it is possible that we will be unable to recover any of these expenses. Our sales efforts involve educating advertisers and publishers about the use, technical capabilities and benefits of our platform. Some advertisers and publishers undertake an evaluation process that frequently involves not only our platform but also the offerings of our competitors. As a result, it is difficult to predict when we will obtain new advertisers or publishers and begin generating revenue from them. Even if our sales efforts result in obtaining a new advertiser or publisher, the advertiser or publisher controls when and to what extent it uses our platform and therefore the amount of revenue we generate, and it may not sufficiently justify the expenses incurred to acquire the advertiser or publisher and the related training support. As a result, we may not be able to add advertisers or publishers to our customer base, or generate revenue, as quickly as we may expect, which could harm our growth prospects.

 

We are subject to payment-related risks and, if our advertisers do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected.

 

Many of our contracts with advertising agencies provide that if the advertiser does not pay the agency, the agency is not liable to us, and we must seek payment solely from the advertiser, a type of arrangement called sequential liability. Contracting with these agencies, which in some cases have or may develop higher-risk credit profiles, may subject us to greater credit risk than if we were to contract directly with advertisers. This credit risk may vary depending on the nature of an advertising agency’s aggregated advertiser base. We may also be involved in disputes with agencies and their marketers over the operation of our platform, the terms of our agreements or our billings for purchases made by them through our platform. When we are unable to collect or make adjustments to our bills to advertisers, we incur write-offs for bad debt, which could have a material adverse effect on our results of operations for the periods in which the write-offs occur. In the future, bad debt may exceed reserves for such contingencies and our bad debt exposure may increase over time. Any increase in write-offs for bad debt could have a materially negative effect on our business, operating results and financial condition.

 

Furthermore, we are generally contractually required to pay suppliers of advertising inventory and data within a negotiated period of time, regardless of whether our advertisers or publishers pay us on time, or at all. While we attempt to negotiate long payment periods with our suppliers and shorter periods with our advertisers and publishers, we are not always successful. As a result, our accounts payable are often due on shorter cycles than our accounts receivables, requiring us to remit payments from our own funds, and accept the risk of bad debt.

 

 

Any future acquisitions or strategic investments could be difficult to integrate, divert the attention of management, and could disrupt our business, dilute shareholder value and adversely affect our business, results of operations and financial condition.

 

As part of our growth strategy, we have pursued strategic acquisitions, such as our acquisitions of RhythmOne in 2019, Unruly in 2020, SpearAd in 2021 and Amobee in 2022, and our investment in Hisense’s VIDAA platform in 2022 and we may acquire or invest in other businesses, assets or technologies that are complementary to our business and align with our strategic goals. Any acquisition or investment may divert the attention of management and require us to use significant amounts of cash, issue dilutive equity securities or incur debt. In addition, the anticipated benefits of any acquisition or investment may not be realized, and we may be exposed to unknown risks, any of which could adversely affect our business, results of operations and financial condition, including risks arising from:

 

 

 

 

 

 

 

 

 

 

 

 

To fund future acquisitions, we may obtain additional debt financing, pay cash or issue additional Shares, which could dilute our shareholders’ value or diminish our cash reserves. Borrowing to fund the Amobee acquisition resulted in increased fixed obligations and subjected us to covenants or other restrictions that can potentially limit the ability to run our business.

 

Our use of borrowings under our revolving credit facility could adversely affect our financial condition, liquidity, and ability to meet our obligations.

 

In September 2022, Nexxen Group US Holdings Inc. entered into a $90 million senior secured term loan facility (the “Term Loan Facility”) and a $90 million senior secured revolving credit facility (the “Revolving Credit Facility”). The Company used the net proceeds of the Term Loan Facility and $10 million of net proceeds of the Revolving Credit Facility to fund a portion of the purchase price of the Amobee acquisition in 2022. The loan period was 3 years from the date it was obtained.  On April 9, 2024, the Company repaid its outstanding Term Loan Facility in full, together with its then outstanding Revolving Credit Facility borrowings, in the total amount of $100 million. No early termination penalties were incurred. Following the repayment, a $90 million Revolving Credit Facility remains available, with $0 drawn as of December 31, 2024.

 

The Company must pay a commitment fee on the undrawn amounts and we may draw upon from time to time to finance our operations, capital expenditures, or other corporate purposes. Our use of this Revolving Credit Facility presents several risks that could adversely impact our financial condition, liquidity, and ability to meet our obligations. First, increased borrowings under our Revolving Credit Facility could result in higher leverage, increasing our debt service obligations and reducing financial flexibility. As we draw down funds, our interest expense will rise, potentially reducing our profitability and ability to invest in growth initiatives. If interest rates increase, our cost of borrowing could rise significantly, particularly if our facility has variable interest rate provisions.  Second, utilizing our Revolving Credit Facility may impact our liquidity and financial stability. If we fully utilize available credit and are unable to generate sufficient cash flow from operations, we may face liquidity constraints that could impair our ability to meet short-term obligations, repay debt, or fund necessary expenditures. Additionally, if we require further financing beyond our Revolving Credit Facility, there is no guarantee that additional funding will be available on favorable terms or at all. Third, our ability to borrow under the Revolving Credit Facility is subject to covenant compliance and lender discretion. Our credit agreement may impose financial covenants, including leverage ratios, interest coverage ratios, or other restrictions on our operations. If we fail to meet these covenants, we may be required to seek amendments or waivers from our lenders, which may not be granted. In the event of non-compliance, our lenders could accelerate repayment obligations, restrict further borrowing, or impose additional conditions, any of which could materially impact our financial position. Lastly, adverse market or economic conditions, changes in lender risk assessments, or broader disruptions in the credit markets could reduce our access to the Revolving Credit Facility. If our lenders become unwilling or unable to provide funding, we may not be able to draw down necessary funds when needed, which could negatively affect our operations and strategic initiatives.

 

If any of these risks materialize, our financial condition, cash flows, and ability to meet our obligations could be materially and adversely affected.

 

Risks Relating to Legal or Regulatory Constraints

 

We are subject to regulation with respect to political advertising, which lacks clarity and uniformity.

 

We are subject to regulation with respect to political advertising activities, which are governed by various federal and state laws in the United States and national and provincial laws worldwide. Online political advertising laws are rapidly evolving and our publishers may impose restrictions on receiving political advertising. The lack of uniformity and increasing compliance requirements around political advertising may adversely impact the amount of political advertising spent through our platform, increase our operating and compliance costs and subject us to potential liability from regulatory agencies.

 

We are subject to laws and regulations related to data privacy, data protection and information security and consumer protection across different markets where we conduct our business, including in the United States, the European Economic Area (“EEA”) and the United Kingdom and industry requirements and such laws, regulations and industry requirements are constantly evolving and changing.

 

We receive, store and process data about or related to consumers in addition to advertisers, publishers, employees and services providers. Our handling of this data is subject to a variety of federal, state and foreign laws and regulations and is subject to regulation by various government authorities and other regulatory bodies. Our data handling is also subject to contractual obligations (some of which are statutorily required) and may be deemed to be subject to industry standards.

 

Numerous U.S. federal and various state governments as well as foreign governments have adopted or proposed limitations on the collection, distribution, use, transfer and storage of data relating to individuals, including the use of contact information, web and device-based identifiers, and other data for marketing, advertising and other communications with individuals and businesses. In the United States, various laws and regulations apply to the collection, processing, disclosure and security of certain types of data. these and other types of data. Many aspects of these laws, and regulations underlying them, have not been interpreted by the applicable courts, and the full nature and scope of their application is therefore uncertain. Likewise, these laws impose particular obligations regarding the collection, use and transfer of certain categories of “sensitive” information, but the precise application of these laws to inferenced audience segments often used by advertising platforms remains unclear. Therefore, it is possible that standards of data usage, disclosure, collection or transfer may be interpreted or redefined in a manner that restricts us from how we collect or use information that is important to our platforms and services. Additionally, the U.S. Federal Trade Commission (“FTC”) and many state attorneys general are interpreting federal and state consumer protection laws as imposing certain “fairness” standards for the online collection, use, dissemination and security of data, but the precise scope and impact of these standards are presently unclear. If we fail to comply with any such laws or regulations, or if they are defined in a manner that imposes onerous restrictions on targeted advertising, we may be subject to enforcement actions that may not only expose us to litigation, fines and civil and/or criminal penalties but may also require us to change our business practices as well as have an adverse effect on our business, results of operations and financial condition. More generally, the regulatory framework for and enforcement of data privacy issues worldwide is currently evolving and is likely to remain uncertain for the foreseeable future. The occurrence of unanticipated events often rapidly drives the adoption of legislation or regulation affecting the use, collection or other processing of data and manners in which we conduct our business. Restrictions could be placed upon the collection, management, aggregation and use of information, which could result in a material increase in the cost of collecting or otherwise obtaining certain kinds of data and could limit the ways in which we may use or disclose information. In particular, interest-based advertising, or the use of data to draw inferences about a user’s interests and deliver relevant advertising to that user, and similar or related practices (sometimes referred to as behavioral advertising or personalized advertising), such as cross-device data collection and aggregation, steps taken to de-identify personal data, and to use and distribute the resulting data, including for purposes of personalization and the targeting of advertisements, have come under increasing scrutiny by legislative, regulatory and self-regulatory bodies in the United States, the European Union and in other jurisdictions that focus on consumer protection or data privacy. Much of this scrutiny has focused on the use of cookies and other technology to collect information about consumers’ online browsing activity on web browsers, mobile devices and other devices, to associate such data with user or device identifiers or de-identified identities across devices and channels.lIn addition, from time to time, providers of Internet browsers, app stores or platforms such as Apple or Google have engaged in efforts to provide increased visibility into, and certain controls over, cookies and similar technologies and the data collected using such technologies. For example, in January 2020, Google announced that the Chrome browser will block third-party cookies at some point during the subsequent 24 months. However, just before the time when Google’s restriction on third party cookies was to be effected, Google changed its position and continues to permit third party cookies. Such providers could also change their technical requirements, guidelines or policies, including through their default settings, in other ways that adversely impact the way in which we or our customers collect, use and share data from user devices, including restricting our ability to use or read device identifiers, other tracking features or other device data. Because we, our advertisers and our publishers, rely upon large volumes of such data collected primarily through cookies and similar technologies, it is possible that these efforts may have a substantial impact on our ability to collect and use data from consumers, and it is essential that we monitor developments in this area domestically and globally, and engage in responsible privacy practices, including providing consumers with notice of the types of data we collect, how we use that data to provide our services and the ability to opt out of such use. There also is the risk that a provider could limit or discontinue our access to its platform or app store if it establishes more favorable relationships with one or more of our competitors or it determines that it is in their business interests to do so, and we would have no recourse against any such provider, which could have a material adverse effect on our business.lIn the United States, the U.S. Congress and state legislatures, along with federal regulatory authorities have recently increased their attention on matters concerning the collection and use of consumer data, including by digital advertisers. For example, the FTC regulates digital advertising through the Federal Trade Commission Act, which prohibits “unfair” or “deceptive” trade practices, including misrepresentations regarding the collection and use of consumer data. States have also begun to introduce more comprehensive privacy legislation. California enacted the California Consumer Privacy Act of 2018 (the “CCPA”) that took effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of sale of their personal information, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches, which is expected to increase the volume and success of class action data breach litigation. In addition to increasing our compliance costs and potential liability, the CCPA created restrictions on “sales” of personal information that may restrict the disclosure of personal information for advertising purposes. Our advertising business relies, in part, on such disclosure, and decreased availability and increased costs of information could adversely affect our ability to meet advertisers’ and publishers’ requirements and could have an adverse effect on our business, results of operations and financial condition.lWe are also subject to the California Privacy Rights Act (“CPRA”), which was passed into law on November 3, 2020, and took substantial effect on January 1, 2023. The CPRA modifies and supplements the CCPA, including by imposing additional regulation on online advertising and particularly cross-context behavioral advertising, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. The effects of the CCPA and CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.

 

The CCPA and CPRA have encouraged “copycat” laws and in other states across the country, including (but not limited to) in Colorado, Connecticut, Delaware, Indiana, Iowa, Kentucky, Maryland, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, Oregon, Rhode Island, Tennessee, Texas, Utah, and Virginia. In addition, new privacy laws and regulations and developing in most states. This legislative and regulatory activity will add additional complexity, variation in requirements, restrictions, and potential legal risk, require additional investment in resources to compliance programs and could impact strategies and availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.  In addition, several states, including California, Oregon, Texas, Vermont, have passed laws directing “Data Brokers” to register, make certain disclosures, or take certain other steps regarding consumer choice.  While several of these laws may exempt pseudonymous information (and thus may not apply to us), we have registered as a “Data Broker” under California’s data broker law, which in turn subjects us to the California “Delete Act.”  California’s regulators are in turn implementing a set of “opt out” and consumer choice protocols that are likely to increase the number of individuals that “opt out” or remove their information (i.e., information associated with their devices or browsers) from our dataset.  This in turn may reduce the amount of information that we, our publishers and our business partners possess.

 

In the EEA, we are subject to the General Data Protection Regulation 2016/679 (“GDPR”) and in the United Kingdom, we are subject to the United Kingdom data protection regime consisting primarily of the UK General Data Protection Regulation and the UK Data Protection Act 2018, in each case in relation to our collection, control, processing, sharing, disclosure and other use of data relating to an identifiable living individual (personal data). The GDPR, and national implementing legislation in EEA member states and the United Kingdom, impose a strict data protection compliance regime including: providing detailed disclosures about how personal data is collected and processed (in a concise, intelligible and easily accessible form); demonstrating that an appropriate legal basis is in place or otherwise exists to justify data processing activities; granting new rights for data subjects in regard to their personal data (including the right to be “forgotten” and the right to data portability), as well as enhancing current rights (e.g., data subject access requests); introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; defining for the first time pseudonymized (i.e., key-coded) data; imposing limitations on retention of personal data; maintaining a record of data processing; and complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit. Fines for certain breaches of the GDPR and the UK data protection regime are significant (e.g., fines for certain breaches of the GDPR are up to the greater of 20 million Euros or 4% of total global annual turnover). In addition to the foregoing, a breach of the GDPR or UK GDPR could result in regulatory investigations, reputational damage, orders to cease/change our processing of our data, enforcement notices and/ or assessment notices (for a compulsory audit). We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources and reputational harm.

 

Further, in the European Union and the United Kingdom, we are subject to evolving EU and UK privacy laws on cookies and e-marketing. Regulators in these countries are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly likely to be replaced by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance. While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies and tracking technologies. As regulators start to enforce the strict approach, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel and subject us to additional liabilities. This strict approach to enforcement has already begun in a number of European jurisdictions. For instance, high profile investigations into the AdTech industry are underway in Germany and the United Kingdom. In a recent decision, the Belgium DPA found that a widely used mechanism to manage user preferences relating to targeted online advertising, the TCF, violated the GDPR and fined the industry body that developed it EUR 250,000.

 

We are also subject to laws and regulations that dictate whether, how and under what circumstances we can transfer, process and/or receive certain data that is critical to our operations, including data shared between countries or regions in which we operate and data shared among our products and services. Specifically, the GDPR, UK GDPR and other European and UK data protection laws generally prohibit the transfer of personal data from the EEA, UK and Switzerland to the United States and most other countries unless the transfer is to an entity established in a country deemed to be provide adequate protection (such as Israel) or the parties to the transfer have implemented certain safeguards to protect the transferred personal data. Where we transfer personal data outside the EEA to a country that is not deemed to be “adequate,” we strive to comply with applicable laws including where we can rely on derogations (e.g., where the transfer is necessary for the performance of a contract) or we may put in place standard contractual clauses. The Israeli Privacy Protection Law, 5741-1981, has also been recently amended and extended its reach over Israeli residents as well as personal information of EU residents transferred to Israel, each of which provide for potentially material penalties for non-compliance. 

 

In addition, some jurisdictions may impose data localization laws, which require personal information, or certain subcategories of personal information to be stored in the jurisdiction of origin. These regulations may inhibit our ability to expand into those markets or prohibit us from continuing to offer our products in those markets without significant additional costs.

 

We also depend on a number of third parties in relation to the operation of our business, a number of which process personal data on our behalf. We attempt to mitigate the associated risks of using third parties through various means which may include due diligence, entering into contractual arrangements containing representations, warranties, and procedures to enforce those third parties follow legal requirements and maintain appropriate technical and organizational security measures. Where we transfer personal data outside the EEA or the United Kingdom to such third parties, we do so in compliance with the relevant data export requirements, as described above. There is no assurance that these contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any violation of data or security laws by our third-party processors could have a material adverse effect on our business and result in the fines and penalties outlined above. In addition to government regulation, privacy advocacy and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us, our advertisers or our publishers. We are members of or participants in the industry measures provided by self-regulatory bodies such as Digital Advertising Alliance, European Digital Advertising Alliance, Digital Advertising Alliance of Canada, National Advertising Initiative and Interactive Advertising Bureau (“IAB”), among others, that impose additional requirements related to the collection, use and disclosure of consumer data.  We in turn provide consumers with notice about our use of cookies and other technologies to collect consumer data and of our collection and use of consumer data for certain purposes, and provide consumers with certain choices relating to the use of consumer data. Some of these self-regulatory bodies may have the ability to discipline members or participants, which could result in fines, penalties and/or public censure (which could in turn cause reputational harm). Additionally, some of these self-regulatory bodies might refer violations of their requirements to the FTC or other regulatory bodies. If we were to be found responsible for such a violation, it could adversely affect our reputation, as well as our business, results of operations and financial condition.

 

Any failure to achieve the required data protection standards (which are sometimes unclear when applied to the online advertising ecosystem) may result in lawsuits, regulatory fines or other actions or liability, all of which may harm our results of operations. Because the interpretation and application of privacy and data protection laws such as the CCPA and GDPR, and the related regulations and standards, are uncertain, it is possible that these laws, regulations and standards may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our data management practices or the technological features of our solutions.

 

If publishers, buyers, and data providers do not obtain necessary and requisite consents from consumers for us to process their personal data, we could be subject to fines and liability.

 

Because we do not have direct relationships with consumers, we rely on publishers, buyers, and data providers, as applicable, to obtain legally sufficient consent of the consumer on our behalf to process their personal data and deliver interest-based advertisements, and to implement any notice or choice mechanisms required under applicable laws, but if publishers, buyers, or data providers do not follow this process (and in any event as the legal requirements in this area continue to evolve and develop), we could be subject to fines and liability. We may not have adequate insurance or contractual indemnity arrangements to protect us against any such claims and losses.

 

We generally do not have a direct relationship with consumers who view advertisements placed through our platform, so we may not be able to disclaim liabilities from such consumers through terms of use on our platform.

 

Advertisements on websites, applications and other digital media properties of publishers purchased through our platform are viewed by consumers visiting the publishers’ digital media properties. Those publishers often have terms of use in place with their consumers that disclaim or limit their potential liabilities to consumers, or pursuant to which consumers waive rights to bring class actions against the publishers. We generally do not have terms of use in place with such consumers, so we cannot disclaim or limit potential liabilities to them through terms of use, which may expose us to greater liabilities than certain of our competitors.

 

We face potential liability and harm to our business based on the nature of our business and the content on our platform and we are, and may be in the future, involved in commercial disputes with counterparties with whom we do business.

 

Advertising often results in litigation relating to misleading or deceptive claims, copyright or trademark infringement, public performance royalties or other claims based on the nature and content of advertising that is distributed through our platform. Though we aim to contractually require advertisers to represent to us that their advertisements comply with our ad standards and our publishers’ ad standards and that they have the rights necessary to serve advertisements through our platform, we do not independently verify whether we are permitted to deliver, or review the content of, such advertisements. Likewise, while we aim to contractually require publishers to represent to us that their content comply with our publisher standards and does not infringe on any third-party rights, we do not independently verify whether we are permitted to deliver, or review the content of such inventory. If any of these representations are untrue, we may be exposed to potential liability and our reputation may be damaged. While our advertisers and publishers are typically obligated to indemnify us, such indemnification may not fully cover us, or we may not be able to collect. In addition to settlement costs, we may be responsible for our own litigation costs, which can be expensive.

 

 

On June 21, 2022, Alphonso filed a complaint against the Company in the United States District Court for the Northern District of California, asserting claims for misappropriation of trade secrets under federal and state law. On October 11, 2023, Alphonso dismissed its claims in the lawsuit with prejudice.

 

See Item 8.A. “Consolidated Statements and Other Financial Information Legal Proceedings” for further information. Any commercial dispute, claim, counterclaim, lawsuit or investigation, including our commercial dispute with Alphonso, has and may divert our management’s attention away from our business, we have and may continue to incur significant expenses in addressing or defending any commercial dispute, claim, counterclaim or lawsuit or responding to any investigation, and we may be required to pay damage awards or settlements.

 

We are subject to anti-bribery, anti-corruption and similar laws and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.

 

We may be subject to certain economic and trade sanctions laws and regulations, export control and import laws and regulations, including those that are administered by the U.S. Department of Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council and other relevant governmental authorities.

 

We are also subject to the FCPA, the U.K. Bribery Act, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 5737-1977, the Israeli Prohibition on Money Laundering Law, 5760-2000 and other anti-bribery laws in countries in which we conduct our activities. These laws generally prohibit companies, their employees and third-party intermediaries from authorizing, promising, offering, providing, soliciting or accepting, directly or indirectly, improper payments or benefits to or from any person whether in the public or private sector. In addition, the FCPA’s accounting provisions require us to maintain accurate books and records and a system of internal accounting controls. We have policies, procedures, systems and controls designed to promote compliance with applicable anti-corruption laws.

 

As we increase our global sales and business, we may engage with business partners and third-party intermediaries to market our solutions and obtain necessary permits, licenses and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not authorize such activities.

 

Our advertisers or publishers may have consumers in countries that are subject to U.S. economic sanctions laws and regulations administered by the Office of Foreign Assets Control (“OFAC”), the Israeli Trade with the Enemy Ordinance, 1939 and sanction laws of the EU and other applicable jurisdictions, which prohibit the sale of products to embargoed jurisdictions or sanctioned parties (“Sanctioned Countries”). We have taken steps to avoid serving advertisements to consumers located in Sanctioned Countries and are implementing various control mechanisms designed to prevent unauthorized dealings with Sanctioned Countries going forward. Although we have taken precautions to prevent our solutions from being provided, deployed or used in violation of sanctions laws, due to the remote nature of our solutions and the potential for manipulation using VPNs, we cannot assure you that our policies and procedures relating to sanctions compliance will prevent any violations in the future. If we are found to be in violation of any applicable sanctions regulations, it can result in significant fines or penalties and possible incarceration for responsible employees and managers, as well as reputational harm and loss of business.

 

Despite our compliance efforts and activities, there can be no assurance that our employees or representatives will comply with the relevant laws and we may be held responsible. Noncompliance with anti-corruption, anti-money laundering, export control, economic and trade sanctions and other trade laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are initiated, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, financial condition and results of operations could be materially harmed. Responding to any action could result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In addition, regulatory authorities may seek to hold us liable for successor liability for violations committed by companies in which we invest or that we acquire. As a general matter, enforcement actions and sanctions could harm our business, financial condition and results of operations.

 

Risks Relating to Our Shares

 

Our recent voluntary termination of our ADS facility and delisting from AIM may adversely affect the liquidity of our shares and expose us to additional risks associated with a single listing on Nasdaq.

 

On February 14, 2025, we voluntarily terminated our American Depositary Share ("ADS") facility. On February 17, 2025 we delisted our Shares underlying depositary interests from trading on the AIM market of the London Stock Exchange, consolidating our listing of our Shares solely on the Nasdaq Global Market. On February 18, 2025, our Shares began trading on the Nasdaq Global Market under the stock ticker “NEXN”. While this decision was made to simplify our capital structure, streamline our regulatory compliance, reduce costs, and improve trading efficiency, we may not realize the anticipated benefits of the termination and delisting and it may negatively impact the liquidity of our shares and our investor base (See Note 1a to our audited consolidated financial statements).

 

Prior to the termination and delisting, our securities were available for trading on both AIM and Nasdaq, providing investors with multiple trading venues. The termination of the ADS facility and delisting from AIM may result in temporary or long-term reduced trading volume and increased share price volatility on Nasdaq, particularly if former AIM investors are unable or unwilling to trade on Nasdaq. Additionally, certain institutional or retail investors who previously held our shares on AIM may have been restricted from holding or acquiring shares listed solely on Nasdaq due to internal investment policies or regulatory constraints, which could reduce demand for our shares. Please see Item 8.B. “Significant Changes” for a discussion about our current trading structure and changes that occurred as of February 14, 2025.

 

The price of our Shares and the trading volume of our Shares may be volatile, and you may lose all or part of your investment.

 

Technology stocks have historically experienced high level of price and volume fluctuation. The market prices of our Shares and volume trading have fluctuated substantially and may continue to do so as a result of many factors, including:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Although our Shares are traded on Nasdaq, the trading volume is low. Given the lower trading volume of our Shares, any sale of our Shares could cause our market price to fall. Due to the nature of our compensation program, our executive officers can sell our Shares, often pursuant to trading plans established under Rule 10b5-1 of the Exchange Act, and certain of our executive officers currently have 10b5-1 trading plans in place. As a result, sales of Shares by our executive officers may not be indicative of their respective opinions of our performance at the time of sale or of our potential future performance. Nonetheless, the market price of our Shares may be affected by sales of shares by our executive officers. In addition, the stock markets have experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our Shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation, we could incur substantial costs and our management’s attention, and resources could be diverted.

 

If we do not meet the expectations of equity research analysts, if they do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our Shares, the price of our Shares and trading volume could decline.

 

The trading market for our Shares rely in part on the research and reports that equity research analysts publish about us and our business. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If our results of operations are below the estimates or expectations of public market analysts and investors, the price of our Shares could decline. Moreover, the price and trading volume of our Shares could decline if one or more securities analysts downgrade our Shares or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.

 

We qualify as an emerging growth company, as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Shares less attractive to investors because we may rely on these reduced disclosure requirements.

 

We qualify as an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act (“JOBS Act”). For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including presenting only limited selected financial data and not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total annual revenue equals or exceeds $1.235 billion, if we issue more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time we are a “large accelerated filer” under U.S. securities laws. We cannot predict if investors will find our Shares less attractive because we may rely on these exemptions. If some investors find our Shares less attractive as a result, there may be a less active trading market for our Shares and our share price may be more volatile. We current expect to cease to be an emerging growth company as of December 31, 2026, the last day of the fiscal year following the fifth anniversary of our initial public offering (which is June 17, 2026). Accordingly, we will likely become subject to additional disclosure and reporting requirements and related increased compliance costs.

 

We are foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

 

We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, although we are subject to Israeli laws and regulations with regard to certain of these matters and intend to furnish comparable quarterly information on Form 6-K. In addition, foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.

 

We may lose our “foreign private issuer” status in the future, which could result in significant additional costs and expenses.

 

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2025. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, more than fifty percent (50%) of our assets are located in the United States, or our business is administered principally in the United States. The termination of our ADS facility and delisting from the AIM may increase the interest in our shares in the U.S. thereby impacting our foreign private issuer status in the future.  If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.

 

As we are a “foreign private issuer” and follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

 

As a foreign private issuer, we have the option to follow certain home country corporate governance practices rather than those of Nasdaq, provided that we disclose the requirements we are not following and describe the home country practices we are following. We may in the future elect to follow home country practices with regard to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

 

The market price of our Shares could be negatively affected by future issuances and sales of our Shares.

 

As of February 28, 2025, 63,416,997 Shares were outstanding.  This amount represents our outstanding shares following the Reverse Split which occurred on February 14, 2025. See Item 8.B. “Significant Changes” for more information. Sales by us or our shareholders of a substantial number of Shares in the public market, or the perception that these sales might occur, could cause the market price of our Shares to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities.

 

We cannot guarantee that we will repurchase any of our Shares pursuant to our announced repurchase plan or that our repurchase plan will enhance long-term shareholder value.

 

 

Until the AIM-delisting on February 14, 2025, our share repurchases were effected on the AIM Market, and beginning February 18, 2025 the share repurchases are effected on Nasdaq. All share repurchases are made in accordance with all applicable securities laws and regulations.

 

 

Repurchases of our Shares pursuant to our repurchase plan could affect the market price of our Shares or increase the volatility. Additionally, our repurchase plan could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. There is no assurance that our repurchase plan will enhance long-term shareholder value, and short-term share price fluctuations could reduce the repurchase plan’s effectiveness.

 

There can be no assurance that we will not be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to United States Holders of our Shares.

 

We would be classified as a passive foreign investment company (“PFIC”) for any taxable year if, after the application of certain look-through rules, either: (i) 75% or more of our gross income for such year is “passive income” (as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended), or (ii) 50% or more of the value of our assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. For these purposes, cash and other assets readily convertible into cash or that do or could generate passive income are categorized as passive assets, and the value of goodwill and other unbooked intangible assets is generally taken into account. Passive income generally includes, among other things, rents, dividends, interest, royalties, gains from the disposition of passive assets and gains from commodities and securities transactions. For purposes of this test, we will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation of which we own, directly or indirectly, 25% or more (by value) of the stock. Based on the current and anticipated composition of our income, assets and operations, and the current price of the Shares, we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable future. However, whether we are a PFIC is a factual determination that must be made annually after the close of each taxable year. Moreover, the value of our assets for purposes of the PFIC determination may be determined by reference to the public price of our Shares, which could fluctuate significantly. In addition, it is possible that the Internal Revenue Service (the “IRS”) may take a contrary position with respect to our determination in any particular year, and therefore, there can be no assurance that we will not be classified as a PFIC in the current taxable year or in the future. Certain adverse U.S. federal income tax consequences could apply to a United States Holder (as defined in Item 10.E. “Taxation—U.S. Federal Income Tax Considerations”) if we are treated as a PFIC for any taxable year during which such United States Holder holds our Shares. United States Holders should consult their tax advisors about the potential application of the PFIC rules to their investment in our Shares. For further discussion, see Item 10.E. “Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company.”

 

If a United States person is treated as owning at least 10% of our shares (by vote or value), such holder may be subject to adverse U.S. federal income tax consequences.

 

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our outstanding shares, such person may be treated as a “United States shareholder” with respect to each controlled foreign corporation (“CFC”) in our group (if any). Because our group includes U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as CFCs (regardless of whether we are treated as a CFC). A United States shareholder of a CFC may be required to report annually and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income,” and investments in U.S. property by CFCs, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Failure to comply with the associated reporting obligations may subject a United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such shareholder’s U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether we are or any of our non-U.S. subsidiaries is treated as a CFC or whether any investor is treated as a United States shareholder with respect to any such CFC or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. The IRS has provided limited guidance on situations in which investors may rely on publicly available information to comply with their reporting and tax paying obligations with respect to foreign-controlled CFCs. A United States investor should consult its advisors regarding the potential application of these rules to an investment in our Shares.

 

We incur increased costs as a result of operating as a public company listed in the U.S., and our management is required to devote substantial time to new compliance initiatives and corporate governance practices.

 

As a public company listed in the U.S., and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and the Consumer Protection Act, the listing requirements of Nasdaq and their applicable securities rules and regulations impose various requirements on non-U.S. reporting companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance and make it more difficult for us to attract and retain qualified members of our board of directors.

 

In addition, the applicable rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

 

Because we may not pay any cash dividends on our Shares in the future, capital appreciation, if any, may be holders of Shares sole source of gains and they may never receive a return on their investment.

 

Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency, and amount will depend upon our future, operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. In addition, the Companies Law, imposes restrictions on our ability to declare and pay dividends. See Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources” for additional information. Payment of dividends may also be subject to Israeli withholding taxes. See Item 10.E. “Taxation” for additional information. As a result, capital appreciation, if any, on our Shares may be your sole source of gains, and you will suffer a loss on your investment if you are unable to sell your Shares at or above the price at which you purchased the Shares. See Item 8.A. “Consolidated Statements and Other Financial Information—Policy on Dividend Distributions.”

 

Exposure to foreign currency exchange rate fluctuations could negatively impact our results of operations.

 

While the majority of the transactions through our platform are denominated in U.S. dollars, we have transacted in foreign currencies, both for inventory and for payments by advertisers or publishers from use of our platform. We also have expenses denominated in currencies other than the U.S. dollar. Given our anticipated international growth, we expect the number of transactions in a variety of foreign currencies to continue to grow in the future. Although we currently have a program to hedge exposure to foreign currency fluctuations, the use of hedging instruments may not be available for all currencies or may not always offset losses resulting from foreign currency exchange rate fluctuations. Moreover, the use of hedging instruments can itself result in losses if we are unable to structure effective hedges with such instruments.

 

A small number of significant beneficial owners of our shares have significant influence over matters requiring shareholder approval, which could delay or prevent a change of control.

 

The four largest beneficial owners of our Shares, entities and individuals affiliated with Mithaq Capital SPC, Toscafund Asset Management LLP, News Corporation and Lombard Odier Asset Management (Europe) Limited, each of which beneficially owns more than 5% of our outstanding Shares as of February 28, 2025 and in the aggregate 48.6% of our Shares. As a result, these shareholders could exercise significant influence over our operations and business strategy and, acting together, would have sufficient voting power to influence the outcome of matters requiring shareholder approval. These matters may include:

 

 

•

approving or rejecting a merger, consolidation or other business combination;

This concentration of ownership of our Shares could delay or prevent proxy contests, mergers, tender offers, open-market purchase programs or other purchases of our Shares might otherwise give you the opportunity to realize a premium over the then-prevailing market price of our Shares. This concentration of ownership may also adversely affect our share price.

 

 

ITEM 4. INFORMATION ON THE COMPANY

 

4.A. HISTORY AND DEVELOPMENT OF THE COMPANY

 

General Corporate Information

 

We were incorporated as Marimedia Ltd. in 2007 in Israel under the Companies Law. We changed our name to Taptica International Ltd. in September 2015, then to Tremor International Ltd. in June 2019, and to Nexxen International Ltd., in January 2024. Our principal executive offices are located at 82 Yigal Alon Street, Tel Aviv, 6789124, Israel. Our website address is www.nexxen.com, and our telephone number is +972-3-545-3900. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report and is not incorporated by reference herein. We have included our website address in this Annual Report solely for informational purposes.

 

The effective date of the registration statement (Commission File No. 333-256452) for our initial public offering of our ADSs on the Nasdaq Global Market was June 17, 2021. The offering commenced on June 17, 2021 and was closed on July 15, 2021.

 

On February 14, 2025, we executed the Reverse Split and voluntarily terminated our ADS facility in connection with the Trading Structure Changes. Please see Item 8.B. “Significant Changes” of the Annual Report for a discussion about our current trading structure and changes that occurred as of February 14, 2025.

 

Our SEC filings are available to you on the SEC’s website at www.sec.gov.com, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The information on that website is not part of this Annual Report and is not incorporated by reference herein.

 

Nexxen, Inc., which currently maintains an office at 100 Redwood Shores Parkway, 3^rd Floor, Redwood City, California 94065, United States of America, is our agent to receive service of process or other legal summons for purposes of any such suit, action or proceeding that may be instituted in any state or federal court in the Borough of Manhattan in the City of New York.

 

For information on our capital expenditures, see Item 5.B. “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Expenditures”.

 

4.B. BUSINESS OVERVIEW

 

Our Mission

 

Our mission is to empower advertisers, agencies, publishers and broadcasters around the world to utilize data and advanced TV in the ways that are most meaningful to them.

 

Overview

 

Nexxen is a global flexible advertising technology platform with deep expertise in data and advanced TV that helps empower advertisers, agencies, digital publishers and broadcasters to achieve desired outcomes, including increased efficiency and returns, across the media supply chain. Our unified end-to-end, video-first platform facilitates and optimizes engaging advertising campaigns for brands, agencies, media groups and content creators worldwide—enabling powerful partnerships and delivering meaningful results. A leader in CTV, Video and data, Nexxen’s footprint is expanding across some of the industry’s fastest-growing activities, driven by a global team of seasoned technologists, industry experts and digital natives.

 

We believe there is a significant market opportunity within the approximately $690 billion global digital advertising market that is expected to grow at a CAGR of approximately 11% through 2028, according to eMarketer. Publishers rely on advertising to support their businesses and brands, and advertisers use digital mediums to capture uniquely targeted and viewable impressions. We believe the digital advertising market remains fragmented and that our full-service end-to-end platform, robust data footprint and vast expertise within Video and CTV puts us in a strong position to continue to increase our market share from traditional ad sales channels.

 

We believe that we are positioned to benefit from several trends in the evolving advertising ecosystem, including the proliferation of digital media consumption, adoption of programmatic advertising, a growing focus on premium formats such as Video and CTV, linear advertising budgets shifting towards, and converging with digital advertising budgets, live sports continuing to shift towards digital environments and CTV, an increased reliance on data and planning tools by advertisers, and the increasing sophistication of the overall digital landscape. We address the broad and evolving digital advertising market through our three core offerings, including a proprietary DSP solution that advertisers leverage to manage digital advertising campaigns, a proprietary SSP solution that publishers leverage to optimally monetize digital inventory and our proprietary Nexxen Data Platform that integrates directly with both our DSP and SSP solutions. Our versatile Data Platform benefits from vast amounts of data and provides optimal campaign recommendations for audience sets by employing advanced machine learning algorithms. The contextualization of the data synthesized by our Data Platform solution provides advertisers with a comprehensive, personalized view of audiences, enabling more effective targeting across formats and devices, oftentimes leading to enhanced returns on advertising spend, and optimizes the monetization of publisher inventory. By combining these three proprietary solutions as well as integrations with industry-leading partners, we provide an end-to-end platform that is dynamic and flexible to our customers’ needs, which enables us to address more digital ad spend.

 

Our customers are comprised of both ad buyers, including brands and agencies, and digital publishers. Our platform includes a diversified customer base of 653 active customers and 1,516 active publishers as of December 31, 2024, and serves advertisements in 193 countries. We generate revenue through platform fees that are tailored to fit the customer’s specific utilization of our solutions and include (i) a percentage of spend, (ii) flat fees and (iii) fixed CPM.

 

For the last several years, the advertising environment has been impacted by not only direct effects related to the COVID-19 pandemic, but also residual effects related to efforts to combat the pandemic and its effects on the global economy, as well as changes in global advertising and digital media consumption behaviours following the pandemic and subsequent global recovery. At the onset of the pandemic in 2020, uncertainty drove advertisers to immediately delay or cancel spending, with verticals such as travel, retail, hospitality, and automotive being disproportionately impacted by shelter-in-place orders, travel restrictions, and order fulfilment issues related to global supply chain constraints. While conditions related to the initial onset of the pandemic have largely abated, efforts to combat economic challenges associated with the pandemic led to other difficult conditions for advertisers and the broader economy in 2022 and 2023 including rising inflation and rising interest rates which (alongside challenges related to geopolitical hostilities) drove reduced budgets, reduced willingness to spend and in some cases, delayed or cancelled campaigns. In 2024, macroeconomic conditions improved from 2022 and 2023 amidst reduced interest rates and lower inflation, and the industry benefitted from the 2024 U.S. political election cycle, while geopolitical hostilities and uncertainty within the U.S. and global political landscape created challenges for customers. The Company expects geopolitical and macroeconomic uncertainty, as well as geopolitical hostilities which could impact advertising activity, to continue into 2025 and potentially beyond.

 

Our Video revenue and CTV revenue rose to $232.4 million and $113.8 million, respectively, in the year ended December 31, 2024 from $207.5 million and $85.5 million, respectively, in the year ended December 31, 2023. Video revenue growth in 2024 was driven by a variety of factors including stronger business execution following our completed integration of Amobee, sales team improvements and rebranding to Nexxen, improved macroeconomic and industry conditions which drove advertisers to premium video advertising formats including CTV, and benefits related to the 2024 U.S. political election cycle.

 

Our total comprehensive income for the year ended December 31, 2024 increased by $53.5 million from the equivalent figure for the year ended December 31, 2023, and represented a 295.3% year-over-year increase compared to our total comprehensive loss for the year ended December 31, 2023. We generated total comprehensive income of $35.4 million and total comprehensive loss of $18.1 million for the years ended December 31, 2024 and 2023, respectively. Our Adjusted EBITDA for the year ended December 31, 2024, increased by $31.3 million from the comparable figure for the year ended December 31, 2023 and represented a 37.7% year-over-year increase. We generated $114.6 million and $83.2 million of Adjusted EBITDA for the years ended December 31, 2024 and 2023, respectively. Further, we had cash and cash equivalents of $187.1 million as of December 31, 2024, and no principal long-term debt. We had a net cash position of $134.3 million as of December 31, 2023, which consisted of cash and cash equivalents of $234.3 million, offset by $100.0 million in principal long-term debt.

 

Our Industry

 

We operate in the digital advertising industry, which is a core pillar of monetizing digital properties accessible by the Internet. We specialize in digital video advertising, which collectively comprised 64% of our revenue for the year ended December 31, 2024, across mobile video, desktop video and CTV.

 

We believe the key industry trends shaping the digital advertising market include continued growth of digital media consumption, the shift to programmatic advertising, data-driven decision making, consumer privacy and regulatory concerns, supply path optimization, linear TV advertisers and budgets increasingly shifting towards digital media and CTV, customer desire to partner with strategic platforms that offer solutions, efficiency and better returns across the advertising supply chain, AI innovation, and seasonality.

 

Continued Growth of Digital Media Consumption

 

Audiences continue to spend an increasing amount of time online for social, business, and purchasing needs. We believe that the COVID-19 pandemic and corresponding work-from-home and shelter-in-place orders, as well as the subsequent changes in digital media consumption habits accelerated the adoption of numerous traditionally offline activities to be conducted online, including telehealth, food delivery and e-commerce. As consumers continue to spend more time online for everyday activities, we believe that brands and advertisers will increasingly allocate ad budgets to where the audiences are. According to eMarketer, in the United States, more than a third of the day is expected to be spent on digital media consumption during 2025. This digital consumption is happening across all devices, including mobile, desktop, tablet, gaming devices and CTV. We expect that these trends will further increase both the supply and demand of available ad impressions that can be monetized programmatically.

 

Shift to Programmatic Advertising

 

Programmatic advertising is the use of software and algorithms to match buyers and sellers of digital advertising in a technology-driven marketplace. The transactions are executed in milliseconds and do not require manual labor for execution. It is becoming increasingly prominent in the digital advertising industry, as publishers and advertisers prefer that their bids/asks for digital ad inventory be completed in an easy, efficient, and automated manner. Additional advantages of programmatic advertising include enhanced audience targeting, attribution, and measurement as well as improved customized campaign management workflow solutions. According to eMarketer, US programmatic digital video ad spending is expected to increase from approximately $99 billion in 2024 to roughly $134 billion in 2026, at a CAGR of approximately 16%.

 

Data Driven Decision Making

 

As the digital media industry grows, increased consumer engagement by audiences has created vast amounts of data and behavioral insights that can be harnessed to maximize return on investment (“ROI”) for advertisers through efficient audience targeting and optimize digital inventory monetization for publishers. These insights include industry compliant anonymized data sets relating to consumer interests, preferences and intent, as well as auction data of advertising bid requests. Technology solutions must efficiently and effectively digest, analyze and process an ever-increasing amount of data seamlessly while navigating the increased requirements of regulatory challenges and audience protection.

 

Consumer Privacy and Regulatory Concerns

 

Over the last few years, there has been increased scrutiny concerning consumer data and the ways in which that data is being used in connection with ad targeting. Globally and locally, new legislation has been introduced and enforced that requires new industry rules and standards. Some of these regulations include the GDPR, CCPA, Colorado Privacy Act, Connecticut Data Privacy Act, CPRA, Virginia Consumer Data Protection Act, Utah Consumer Privacy Act and Apple’s Identifier for Advertisers (IDFA). Additionally, web browsers such as Safari and Firefox have also removed third-party cookies while Google has shifted towards an opt-in approach to third party cookies. These rules and regulations require all constituents within digital advertising to consistently adapt and evolve.

 

Seasonality

 

In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, many marketers allocate the largest portion of their budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing. Historically, the fourth quarter of the year has reflected our highest level of advertising activity for the year. We generally expect to generate our lowest quarterly revenue during the first quarter of the calendar year due to seasonality. In addition, historical seasonality may not be predictive of future results given the potential for changes in advertising buying patterns and consumer activity as advertisers respond to changing macroeconomic conditions such as the 2024 U.S. election cycle and changes as a result thereof, uncertain macroeconomic and political conditions as well as ongoing geopolitical hostilities. Nevertheless, we expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.

 

Our Market Opportunity

 

We believe that we are well positioned to capitalize on some of the fastest-growing activities of digital advertising, such as Video, including CTV, which reflected 64% of our revenue for the year ended December 31, 2024.

 

Global digital advertising spend is forecasted to be $690 billion for 2024 and is expected to grow at an approximately 11% CAGR to over $1.0 trillion in 2028. As advertisers follow audiences to next-generation mediums, digital advertising channels are expected to outpace growth of total global media ad spend. Increased internet bandwidth in developing countries is acting as an additional tailwind, and the increasing proliferation of next-generation mobile, CTV, and on-the-go technology devices in developed countries, alongside changes in consumer content viewing habits, is driving growing video viewership. We believe these trends will amplify full-screen video usage, which has long been the preferred choice of advertisers. We expect these long-term systemic shifts will enable us to grow at a faster rate than the broader digital advertising market.

 

Digital Video and CTV Advertising

 

We address some of the fastest growing areas within digital advertising, Video and CTV, which are expected to grow at an accelerated rate compared to other formats. In the United States, where we generate the majority of our revenue, the growth rates and adoption of Video and CTV are expected to be even higher. According to eMarketer, U.S. CTV ad spend is projected to grow at a CAGR of approximately 13% from 2024 to 2028, reaching roughly $46.9 billion. U.S. Video ad spend is projected to grow at a CAGR of approximately 14% from 2024 to 2028, reaching roughly $188.5 billion. Additionally, the number of digital video viewers worldwide is expected to reach approximately 4.1 billion people by 2028.

 

Linear TV budgets are also shifting towards digital video and CTV, driving further demand for these premium ad formats. These overarching market trends underpin our strategic shift to focus on these activities within digital advertising, which given the proliferation of smart TVs, increasing number of streaming providers, as well as live sports increasingly being viewed across digital environments, will remain an exciting growth opportunity. Additionally, as linear TV and CTV continue to converge, with many linear TV broadcasters now opportunistically launching, or expanding, their CTV footprints through digital assets such as FAST channels, we believe customers will continue to seek platforms such as ours that can assist advertisers, digital publishers and broadcasters with cross-planning capabilities between linear TV and CTV, which we anticipate can drive even higher levels of CTV demand to our end-to-end platform over time as well. Finally, our robust advanced TV data sources offered through Nexxen Data Platform, which are available for use by customers leveraging our CTV advertising technology solutions, in many instances enable more efficient targeting for advertisers across the TV landscape and oftentimes improved returns on CTV advertising spending, which we anticipate can help further accelerate our CTV revenue growth opportunity.

 

Mobile Advertising

 

The number of consumers with smart phones and high-speed internet is expected to continue rising, which will continue to make mobile advertising a prominent channel within digital. According to eMarketer, U.S. mobile ad spend is projected to grow at a CAGR of approximately 11% from 2024 to 2028, reaching approximately $305.7 billion.

 

 

Our Role in the Digital Advertising Ecosystem

 

Advertisers and Agencies

 

Spending begins with advertisers, who often engage advertising agencies to help plan and execute their advertising campaigns. To better control and optimize their advertising operations, advertisers and agencies are consolidating spend with fewer, larger technology platform providers who can deliver transparency, ensure the highest level of inventory quality and control, offer efficient campaign planning and activation solutions and help generate better returns on advertising spend compared to competitors. These advertisers and agencies access our platform through both Nexxen DSP and other third-party DSPs. We believe our end-to-end technology platform and direct relationships with advertisers and agencies will lead to increasing consolidation of spend on our platform over time.

 

Demand Side Platforms (“DSP”)

 

Advertisers and agencies often engage DSPs, which serve as advertising demand aggregators, to execute their digital marketing campaigns across various ad formats. We offer both self-service and managed-service options through our DSP, enabling highly customized and robust campaigns. We are also integrated with other leading DSPs globally, such as The Trade Desk, Inc. and Google DV360, enabling customers to execute real-time transactions with our publisher clients.

 

Supply Side Platforms (“SSP”)

 

SSPs such as ours are designed to monetize digital inventory for publishers and app developers by enabling their content to have the necessary software code and requirements for programmatic integration. Buyers and sellers come together through our marketplace to monetize, target, and purchase available digital advertising inventory. Our platform rapidly and efficiently processes significant volumes of advertising bid information, providing a seamless digital experience for our customers. Traditionally, SSPs have focused exclusively on the needs of sellers in this process and have limited their interactions with buyers to the buyer’s agent, the DSP. As buyers have sought greater control of their advertising supply chains, we have extended the capabilities of our specialized platform over the last several years to serve the needs of advertisers and agencies. In addition to operating Nexxen SSP, we are integrated with other leading SSPs globally, such as Magnite, Inc. and Pubmatic, Inc., enabling customers to execute real-time transactions with our advertiser and agency clients.

 

Publishers and Content Providers

 

 

Our Strengths

 

We believe the following attributes and capabilities provide us with long-term competitive advantages.

 

Established Expertise in Video and CTV

 

We believe Video, including CTV and mobile video, are amongst the fastest growing activities of digital advertising, and exposure to these activities constituted 64% of our total revenue for the year ended December 31, 2024 and approximately 72% of our revenue without performance activity for the year ended December 31, 2024. We were one of the first movers in the digital video advertising and CTV markets, which gave us early traction, strong customer adoption, and recognition as a leading technology within such markets. Our platform was intentionally built as an end-to-end video campaign delivery solution and over time, both through organic investment and acquisitions, we have further enhanced our platform’s Video- and CTV-centric technology and data capabilities.

 

End-to-End Platform with Proprietary Technology

 

We leverage our advanced technology stack and fully unified platform to enable advertisers and publishers to maximize their ROI, while optimizing the path between audiences and brands by leveraging our proprietary data sets. We believe we have a competitive advantage by accessing the entire ecosystem through our proprietary data, unique demand and supply sources, partnerships with premium vendors, and robust solutions across the advertising technology supply chain. As a technology-first solution, we have the flexibility of an agnostic platform capable of transacting end-to-end or integrating with different third-party sources to service our customers.

 

Scale and Reach on the Audience, Advertiser and Publisher

 

Our platform currently accommodates over 388 billion daily ad requests and approximately 625 million daily ad impressions on average. These figures reflect daily ad requests and ad impressions accommodated by Nexxen. Our significant daily volume of ad requests, data, and ad impressions gives us scale with publishers and provides access to direct and in some cases exclusive supply of premium advertising inventory, enabling our advertising customers to avoid intermediaries and reduce costs. Operating an end-to-end platform strongly positions us to minimize loss of scale typically associated with two independent platforms user-syncing with each other. This advantage positions us to maintain efficiency and high scalability on buying strategies that leverage audience targeting.

 

Robust Data Set Fully Integrated into and Generated by Our Platform

 

Our proprietary Nexxen Data Platform is a flexible platform that can be easily integrated across various campaigns and formats. Our Data Platform leverages first-party data and third-party partnerships to identify and reach curated audiences, benefiting both our advertising and publisher customers. Our platform provides artificial intelligence in the form of machine learning algorithms and statistical models to aggregate and analyze vast amounts of data and contextualizes it into easily usable action items, which can be used across campaigns in real-time.

 

Our machine learning algorithms enable us to process millions of requests per second which supports several of the optimization and prediction models in our platform including invalid traffic monitoring, viewability, queries per second, bidding and pricing models. These machine learning capabilities help our customers achieve their key performance indicators, optimize cost of media and protect against invalid traffic. Additionally, our Data Platform utilizes machine learning algorithms to build and expand activities in real time.

 

Management Team of Industry Veterans with Extensive Expertise

 

Our senior management team has an extensive background in the advertising technology industry, which we believe gives us a competitive advantage. We have vast experience in acquiring synergistic businesses and a strong track record of successfully integrating acquisitions in addition to driving organic growth, the combination of which fuels our ability to drive further growth and profitability expansion.

 

 Profitability

 

 

Our Growth Strategy

 

We believe that programmatic advertising is still an underpenetrated market that will experience robust growth over the next decade as ad budgets continue to shift to digital and as digital continues to shift towards programmatic execution. We intend to capitalize on these secular trends by pursuing growth opportunities that include:

 

Focus on Core Areas of Growth in Video and CTV

 

CTV is one of the fastest growth formats within digital advertising, and this trend is expected to continue over the next several years according to eMarketer. In the United States, CTV ad spend is expected to grow at a CAGR of approximately 13% from 2024 to 2028, and Video is expected to grow at a CAGR of approximately 14%, reaching roughly $188.5 billion by 2028. Digital video and CTV comprise approximately 72% of our revenue without performance activity for the year ended December 31, 2024, and are core focuses for us. We plan to leverage our existing expertise in Video and CTV to increase our market share and introduce new technologies and solutions.

 

Introduce New Products and Invest in our Technology Stack

 

As we grow our market share and add new customers, we continue to invest in our technology stack and develop new innovative products. We are continuously trying to introduce new innovative solutions and products to the rapidly evolving digital advertising market. Some potential areas of growth and investment include enhancing our proprietary data sets within Nexxen Data Platform through AI, machine learning and Generative AI, enhancing our CTV solution capabilities and marketplace, enhancing our audience targeting capabilities, expanding our alternative identifier solutions and enhancing our global platform coverage capabilities.

 

We are providing customers with creative alternatives to plan and execute their campaigns, giving them complimentary scale and opportunities to enhance current audience targeting strategies. For example, we offer, and will continue to enhance, contextual targeting solutions from content data collected via our publisher partnerships as well as third-party solutions integrated into our ecosystem.

 

There is market movement away from cookie-based tracking which has created an increase in demand for alternative solutions. We have partnerships, and are integrating, with major alternative identifier solutions such as IdentityLink and Unified ID 2.0. We are committed to helping define and support new privacy requirements and identifier mechanisms as industry standards evolve. We believe that not everyone in the industry will adopt a single solution alternative to cookie-based tracking and we are building our platform to agnostically support various identifier solutions.

 

Strengthen Our Relationship with Existing Customers

 

We are constantly improving functionality on our platform to attract new customers, encourage our existing customer base to allocate more of their ad spend and ad inventory to our platform and adopt an increasing number of the technology and data solutions available within our product ecosystem. We believe as programmatic gains more widespread adoption, and as brands and publishers continue to focus on Video and CTV, we are well-positioned to increase our customer base and generate additional revenue from existing customers.

 

Expand Our International Footprint and United States Market Share

 

We continue to acquire new publishers and advertisers globally and invest in expanding our global footprint, providing significant global demand and supply of digital ad impressions across all channels and formats. We will continue to invest in third-party integrations, maintaining and enhancing our platform’s flexibility. We are leveraging our existing technology and data stack to provide innovative solutions to new and existing customers regardless of location or platform. We consistently innovate and develop new tools and products that enable our customers to maximize their benefit from using our platform and services.

 

Continue to Bolster Nexxen Data Platform’s Capabilities

 

We leverage real-time data, artificial intelligence and machine learning capabilities to synthesize, aggregate and contextualize vast amounts of data sets to help our advertisers and publishers optimize their digital ad spend/inventory. Nexxen Data Platform was architected to be flexible, which allows us to deliver impactful and unique insights that are agnostic to format or device type. By owning our own proprietary Data Platform, we can provide robust analytics, insights, and better segmentation on a global basis. We believe this gives us a large competitive advantage and enables higher ROI for our advertiser customers and optimal yield on digital inventory to our publisher customers.

 

Leverage our Industry Expertise and Target Select Acquisitions

 

We have been successful in past acquisitions and may direct our industry experience and focus to identify future complementary acquisitions to further broaden our scale and technology solutions. To the extent we identify attractive acquisition opportunities, we have the experience, leadership and track record to successfully execute strategic transactions and integrate acquired businesses into our platform.

 

Our Solution and End-to-End Technology Platform

 

Our Solution

 

Our end-to-end platform is a comprehensive software suite that supports a wide range of media types (e.g., Video, display, etc.) and devices (e.g., mobile, CTVs, streaming devices, desktop, etc.), creating an efficient marketplace where advertisers can purchase high quality advertising inventory from publishers at scale. Our solutions offer many advantages, including an advanced real-time bidding auction optimization engine, a quality and global marketplace, and flexibility to enact concurrent campaign strategies that drive strong returns for investments in digital ad real estate. When customers leverage our platform end-to-end, they oftentimes experience cost benefits and enhanced returns on advertising spend.

 

Our platform handles approximately 388 billion daily ad requests on average. Each ad request is processed in a fraction of a second (55ms on average) and powered by our real-time bidding engine, which leverages private servers and infrastructure in four strategically placed data centers located in the United States, Europe and Asia Pacific as well as cloud resources.

 

Key Components of our end-to-end platform include:

 

 

 

 

 

 

 

DSP

 

Key features of our DSP include:

 

 

 

 

 

 

 

 

 

SSP

 

Key features of our SSP include:

 

 

 

 

 

 

 

 

 

Data and Nexxen Data Platform (formerly Data Management Platform)

 

Key features of the Nexxen Data Platform include:

 

 

 

 

 

Nexxen Discovery

 

Key features of Nexxen Discovery include:

 

 

 

 

 

 

 

Our Customers

 

Our customers consist of leading global brands and advertising agencies on the demand side, and high-quality publishers on the supply side, across several industries, including retail, entertainment, consumer, financial services, healthcare and more. We had 653 active customers for the year ended December 31, 2024, including prominent members of the U7 Council such as American Express Company, GSK plc, Proctor & Gamble Co, Unilever plc and others.

 

On our demand side, we have brands and agencies leveraging our self-service offerings, our own managed service offerings and third-party DSP integrations. Buyers and advertisers transact through these tools. On the supply side, we service digital publishers, app developers and subscribers to our self-service platform.

 

We generally enter into contracts with our customers either through master services agreements (“MSAs”) and/or insertion orders. An insertion order is an agreement entered into by an advertiser and publisher to govern the terms of running a particular campaign. Our customers typically enter into MSAs with us that give users access to our platform. These MSAs typically have one-year terms that renew automatically, unless earlier terminated.

 

We have long-standing relationships with our customer base. Our customers tend to repeatedly use our platform, as illustrated by our Contribution ex-TAC retention rate of 102% for the year ended December 31, 2024. In 2023, our Contribution ex-TAC retention rate was impacted by challenging macroeconomic and industry conditions, however, in 2024 our retention figure significantly improved amidst a combination of factors including better execution and strategic positioning following our completed integration of Amobee, sales organization improvements and rebranding to Nexxen, better macroeconomic and industry conditions, greater spend consolidation with several large customers, and greater multi-solution adoption by customers across our product ecosystem. Over time, we anticipate being able to improve our Contribution ex-TAC retention rate further given our ability to cater several solutions to customers across the advertising ecosystem.

 

Our Competition

 

We have a number of competitors that operate in portions of our business, but few of our competitors provide the full end-to-end technology solution that we offer.

 

We believe that our long track record and expertise in the digital advertising industry, alongside operating technology and data solutions across both sides of the advertising ecosystem, gives us significant advantages with regards to platform development and expertise, as well as a long development lead ahead of new entrants. We also believe that we compete primarily based on the performance of campaigns running on our platform, capabilities of our platform, our identity resolution capabilities, omni-channel capabilities, planning tools, data capabilities and assets, and our advanced reporting and measurement capabilities.

 

On the demand side, companies such as Roku Inc., Viant Technology, Inc., Samsung Electronics Co., Ltd. and The Trade Desk, Inc. are some of our key competitors.

 

On the supply side, companies such as Magnite, Inc., FreeWheel Media, Inc, and PubMatic, Inc. are our main competitors, all of which compete to provide publisher inventory to advertisers.

 

We believe the principal competitive factors in our industry include the following:

 

 

 

 

 

 

 

 

 

 

We believe that we compete favorably with respect to all these factors and are well positioned as a full-service end-to-end platform catering to both advertisers and publishers.

 

Technology and Development

 

Our business model enables us to invest in our research and development efforts, which have helped grow our business. Our platform is extremely efficient at managing large amounts of complex data and is leveraged by both advertisers and publishers in real time. We are committed to innovative technologies and the rapid introduction of enhanced functionalities to support the dynamic needs of our advertiser and publisher customers. We therefore expect technology and development expense to increase as we continue to invest in our platform, particularly in Generative AI, AI and machine learning, to support increased advertising spend volume, attracting new customers, platform differentiation and international expansion. Our technology and development team is based in the United States and Israel. As of December 31, 2024, research and development expenses accounted for 19.0% of our operating expenses.

 

Sales and Marketing

 

 

We have dedicated teams focused on post-sale support to ensure customer success as well. Our client success team onboards advertisers and liaises directly with the customer on a regular basis to optimize delivery against key performance indicators and help meet their goals throughout the campaign life cycle. Our publisher operations team onboards publishers and engages directly with the customer to support their needs and effectively monetize inventory. We expect to continue to expand our sales and marketing and customer support teams as we expand into new industry verticals and geographical markets and add additional products across our technology ecosystem.

 

Our Team and Culture

 

As part of our track record of successfully integrating acquisitions, we pride ourselves on bringing together new teams under one culture. Each day, we strive to be as innovative, committed, collaborative and authentic as possible.

 

Our management team encourages employees to share their feedback, ideas, and thoughts by promoting a transparent organizational culture and an open-door policy. We also introduced internal surveys to garner employee feedback and satisfaction and to receive suggestions.

 

We communicate and build relationships with external stakeholders via our marketing efforts, including digital and social media, events, public relations, direct marketing and online advertising among other initiatives. We have “People & Culture” programs, which provide employees with volunteer opportunities in many of our local communities, particularly focused on education and serving underprivileged communities. We as a company also regularly donate to volunteer associations.

 

Our employees tend to be long-tenured across our entities, with an average tenure of the leadership team being approximately six years, and more than four years across all employees.

 

We believe we attract talented employees to our company, and sophisticated customers to our platform, in large part because of our vision and unwavering commitment to using cutting-edge technologies to create solutions that help advance the digital advertising industry.

 

 

Intellectual Property

 

Our success depends, in part, on our ability to protect the proprietary methods and technologies that we develop or otherwise acquire. We rely on a combination of patent, trademark, copyright, trade secret laws, confidentiality procedures and contractual provisions to protect our proprietary methods and technologies and own more than 50 patents in the United States. In 2024, we successfully rebranded our Company’s various businesses under the name “Nexxen” and associated Nexxen logo, in order to further promote our unified service and product offerings. The Company has been working on this rebranding in its public facing assets. The Company has obtained international trademark registration for these trademarks. The Company has obtained trademark registrations in Australia, the European Market, Israel, Mexico, Japan, Singapore, the United Kingdom, and the United States. The Company is actively prosecuting similar trademark applications in Canada and China. The Company also uses and actively protects other trademarks in various jurisdictions and holds trademark registrations for the Perk mark in the United States and the Perk logo in Australia, New Zealand, United Kingdom, and WIPO.

 

We generally enter into confidentiality and/or license agreements with our employees, consultants, vendors and advertiser customers, and we generally limit access to, and distribution of, our proprietary information. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.

 

Privacy and Data

 

Modern consumers use multiple platforms to learn about and purchase products and services, and consumers have come to expect a seamless experience across all channels. This challenges marketing organizations to balance the demands of consumers and the most effective advertising techniques with responsible, privacy-compliant methods of managing data internally and with advertising technology intermediaries.

 

In the United States, both state and federal legislation govern activities such as the collection and use of data by companies that engage in digital advertising like us. Also, because our platform reaches users throughout the world, some of our activities may also be subject to foreign laws and regulations. As we continue to expand internationally, we will be subject to additional laws and regulations, and these requirements may affect how we conduct business.

 

The U.S. Congress and state legislatures, along with federal regulatory authorities, have increased their attention on matters concerning the collection and use of personal data, including relating to internet-based advertising. Data privacy legislation has been introduced in the U.S. Congress, and several states, including California, Colorado, Connecticut, Utah, and Virginia have enacted comprehensive privacy legislation granting rights to consumers to enable increased control over the use of their data. These laws include a consumer’s ability to restrict use of data for cross-context advertising purposes. Additional state legislatures have introduced data privacy legislation. Many non-U.S. jurisdictions have also enacted or are developing laws and regulations governing the collection and use of personal data. For example, the Israeli Privacy Protection Law, 5741-1981, has been recently amended and extended its reach over Israeli residents as well as personal information of EU residents transferred to Israel, each of which provide for potentially material penalties for non-compliance. 

 

Additionally, U.S. and foreign governments have enacted or are considering enacting legislation that could significantly restrict our ability to collect, augment, analyze, use and share data collected through cookies and similar technologies, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tools to track people online. In the United States, the FTC has commenced the examination of privacy issues that arise when marketers track consumers across multiple devices, otherwise known as cross-device tracking. In addition to the requirements relating to cookies or similar technologies described in the section “Risk Factors—Risks Relating to Legal or Regulatory Constraints—We are subject to laws and regulations related to data privacy, data protection, and information security, and consumer protection across different markets where we conduct our business, including in the United States, the EEA and the United Kingdom and industry requirements and such laws, regulations, and industry requirements are constantly evolving and changing. Our actual or perceived failure to comply with such laws and regulations could have an adverse effect on our business, results of operations and financial condition”, in the European Union and the United Kingdom, informed consent is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing. The GDPR also imposes conditions on obtaining valid consent, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. Detailed guidance relating to these requirements has been published by the European Data Protection Board (and its predecessor, the Article 29 Working Party) as well as various supervisory authorities in the European Union and the United Kingdom. While not legally binding, such guidance reflects the position and understanding of the regulators and their approach to enforcement. Supervisory authorities in the European Union and the United Kingdom are increasingly focusing on the AdTech industry and its compliance with these requirements. Several high-profile investigations are currently underway, and a number of fines have been issued against businesses for their failure to, amongst other things, properly notify individuals of how their data is being used and to collect informed consent.

 

Additionally, our compliance with our privacy policy and our general consumer data privacy and security practices are subject to review by regulatory bodies such as the FTC, which may bring enforcement actions to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations or material omissions therein.

 

Certain State Attorneys General in the United States may also bring enforcement actions based on comparable state laws or federal laws that permit state-level enforcement. In California, for example, the Attorney General may bring enforcement actions for violations of the CCPA. When we receive bid requests that include an opt-out signal, we do not sell personal information, as defined by the CCPA. We have also adopted the Digital Advertising Alliance CCPA Compliance Framework, which includes a technical specification to identify consumer signals to opt-out of sale of their data and have signed the IAB Limited Service Provider Agreement that imposes service provider obligations for certain opted-out bid requests. These IAB frameworks are designed to facilitate compliance with the CCPA although the California Attorney General’s office has not yet approved such frameworks. The CCPA sets forth high potential liabilities for data privacy violations on a per-incident basis, and the industry faces an uncertain compliance burden as our partners and publishers work to become compliant with the law. Also, the CPRA, which became effective on January 1, 2023, imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt-outs for certain uses of sensitive data and sharing of personal data.

 

Since California enacted the CCPA and CPRA, Colorado enacted the Colorado Privacy Act (effective July 1, 2023), Connecticut enacted the Connecticut Data Privacy Act (effective July 1, 2023), Virginia enacted the Virginia Consumer Data Protection Act (effective January 1, 2023), and Utah enacted the Utah Consumer Privacy Act (effective December 31, 2023). We expect the trend of enacting new and comprehensive privacy legislation to continue not only in the United States but also around the globe.

 

To protect against unlawful content (advertiser and publisher), we include restrictions on content in our terms and conditions. We also utilize various technologies and processes to review publisher properties and use third party software to screen impressions we acquire through advertising exchanges.

 

4.C. ORGANIZATIONAL STRUCTURE

 

The following table sets out details of the Company’s subsidiaries:

 

______________________

* Under these companies, there are eighteen (18) wholly owned subsidiaries that are inactive, liquidated or in liquidation process.

 

4.D. PROPERTY, PLANTS AND EQUIPMENT

 

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

You should read the following discussion and analysis of our financial condition and results of operations together with Item 4. “Information on the Company – 4B. Business Overview” and our audited consolidated financial statements and the related notes thereto appearing at the end of this Annual Report. We present our audited consolidated financial statements in USD and in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

 

You should carefully review and consider the information regarding our financial condition and results of operations set forth under Item 5. “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on March 6, 2024, for an understanding of our operating results and liquidity discussions and analysis comparing fiscal year 2023 to fiscal year 2022.

 

Some information included in this discussion and analysis, including statements regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other statements regarding our plans and strategy for our business and related financing, are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Please see “Special Note Regarding Forward-Looking Statements and Risk Factor Summary” in this Annual Report. You should read the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 

We maintain our books in USD, which is the Company’s functional currency, and which have been rounded to the nearest thousands, except when otherwise indicated. The USD is the currency that represents the principal economic environment in which the Company operates, and we prepare our financial statements in accordance with IFRS as issued by the IASB.

 

5.A. OPERATING RESULTS

 

Overview

 

We are a global company offering a flexible unified platform that helps empower durable growth across the media supply chain. Our end-to-end, video-first platform facilitates and optimizes engaging advertising campaigns for brands, media groups and content creators worldwide—enabling powerful partnerships and delivering meaningful results. A leader in CTV, data, and Video, our footprint is expanding across some of the industry’s fastest-growing activities, driven by a global team of seasoned technologists and digital natives.

 

We believe there is a significant market opportunity within the approximately $611 billion global digital advertising market that is expected to grow at a CAGR of approximately 11% through 2028, according to eMarketer. Digital publishers rely on advertising to support their businesses and brands, and advertisers use this medium to capture uniquely targeted and viewable impressions. We believe the digital advertising market remains fragmented and that our full-service end-to-end software platform and vast expertise within Video and CTV puts us in a strong position to continue to increase our market share from traditional ad sales channels.

 

We believe that we are positioned to benefit from several trends in the evolving advertising ecosystem, including the proliferation of digital media consumption, adoption of programmatic advertising, a growing focus on premium formats such as Video and CTV, linear advertising budgets shifting towards, and converging with digital advertising budgets, an increased reliance on data and planning tools by advertisers, and the increasing sophistication of the overall digital landscape. We address the broad and evolving digital advertising market through our three core offerings, including a proprietary DSP solution that advertisers leverage to manage digital advertising campaigns, a proprietary SSP solution that publishers leverage to optimally monetize digital inventory and a proprietary Data Platform solution which is integrated with both our DSP and SSP solutions. Our versatile Data Platform solution benefits from vast amounts of data and provides optimal campaign recommendations for audience sets by employing advanced machine learning algorithms and now includes our Linear TV Planning and Cross-Platform Planning tools. The contextualization of the data synthesized by our Data Platform solution provides advertisers with a comprehensive, personalized view of audiences, enabling more effective targeting across formats and devices and optimizes the monetization of publisher inventory. These three solutions are enhanced by our Nexxen Discovery offering, helping our customers gain a comprehensive view of their audiences. By combining these proprietary solutions as well as integrations with industry-leading partners, we provide an end-to-end software platform that is dynamic and flexible to our customers’ needs, which enables us to address more digital ad spend.

 

Our customers are comprised of both ad buyers, including brands and agencies, and digital publishers. Our platform included a diversified customer base of 653 active customers and 1,516 active publishers as of December 31, 2024 and serves advertisements in 193 countries.

 

We generate revenue through platform fees that are tailored to fit the customer’s specific utilization of our solutions and include (i) a percentage of spend, (ii) flat fees and (iii) fixed CPM.

 

For the last several years, the advertising environment has been impacted by not only direct effects related to the COVID-19 pandemic, but also residual effects related to efforts to combat the pandemic and its effects on the global economy, as well as changes in global advertising and digital media consumption behaviours following the pandemic and subsequent global recovery. At the onset of the pandemic in 2020, uncertainty drove advertisers to immediately delay or cancel spending, with verticals such as travel, retail, hospitality, and automotive being disproportionately impacted by shelter-in-place orders, travel restrictions, and order fulfilment issues related to global supply chain constraints. While conditions related to the initial onset of the pandemic have largely abated, efforts to combat economic challenges associated with the pandemic led to other difficult conditions for advertisers and the broader economy in 2022 and 2023, including rising inflation and rising interest rates which (alongside challenges related to geopolitical hostilities) drove reduced budgets, reduced willingness to spend and, in some cases, delayed or cancelled campaigns. In 2024, macroeconomic conditions improved from 2022 and 2023 amidst reduced interest rates and lower inflation, and the industry benefitted from the 2024 U.S. political election cycle, while geopolitical hostilities and uncertainty within the U.S. and global political landscape created challenges for customers. The Company expects geopolitical and macroeconomic uncertainty to continue into 2025 and potentially beyond, as well as geopolitical hostilities which could impact advertising activity.

 

On August 18, 2022, the Company completed a $25 million investment in VIDAA, a smart TV operating system, streaming platform, and subsidiary of Hisense. Through its investment, the Company received a minority equity stake in VIDAA, a multi-year extension to exclusively share (including through licensing) VIDAA’s global ACR data for targeting and measurement across the Company’s end-to-end platform, and ad monetization exclusivity on VIDAA media in the U.S., U.K., Canada, and Australia. On September 12, 2022, the Company completed its acquisition of Amobee, a global advertising platform that optimizes outcomes for advertisers and media companies and improves cross channel performance across linear, CTV, and digital media, for $211.8 million, as adjusted. During 2023, the Company completed the integration of Amobee following the consolidation of Amobee’s employee base into the Nexxen employee base and after combining the Amobee DSP with the Tremor Video DSP, to create the significantly enhanced Nexxen DSP. The acquisition of Amobee, over the long-term, is expected to drive increased advertiser demand to the Company’s platform, as it added a number of brand and agency customers that were previously either not leveraging the Company’s technology products or were leveraging them very minimally, as well as a variety of differentiated planning, data, and technology features. The acquisition significantly enhanced Nexxen’s enterprise self-service DSP capabilities, performance media buying capabilities, and data-driven planning capabilities, highlighted by the creation of cross-planning capabilities for advertisers and broadcasters across linear TV and CTV simultaneously, and the addition of Nexxen Discovery, an advanced data-fueled BI tool that ingests audience consumption data from across web, mobile, social media, and TV to enhance audience knowledge and targeting. The acquisition consideration of $211.8 million, as adjusted, was funded through a combination of existing cash resources, and approximately $100 million from a $180 million secured credit facility. The credit facility consisted of a $90 million secured Term Loan A drawn at closing, and a $90 million Revolving Credit Facility, of which $10 million was drawn at closing. In 2024, the Company fully repaid its outstanding $90 million secured Term Loan A and the $10 million drawn on its Revolving Credit Facility. The Company currently has no principal long-term debt and $90 million capacity on its Revolving Credit Facility. The remaining $90 million capacity on the Revolving Credit Facility provides the Company with additional liquidity, which may be utilized for a variety of investments including future strategic investments and initiatives alongside existing surplus cash resources.

 

The Company’s results for the years ended December 31, 2023 and 2024 include consolidated full year results from Nexxen and Amobee.

 

Our Video revenue and CTV revenue rose to $232.4 million and $113.8 million, respectively, in the year ended December 31, 2024 from $207.5 million and $85.5 million, respectively, in the year ended December 31, 2023. Video revenue growth in 2024 was driven by a variety of factors including stronger business execution following our completed integration of Amobee, sales team improvements and rebranding to Nexxen, improved macroeconomic and industry conditions which drove advertisers to premium video advertising formats including CTV, and benefits related to the 2024 U.S. political election cycle.

 

Our total comprehensive income for the year ended December 31, 2024, increased by $53.5 million from the equivalent figure for the year ended December 31, 2023, and represented a 295.3% year-over-year increase compared to our total comprehensive loss for the year ended December 31, 2023. We generated total comprehensive income of $35.4 million and total comprehensive loss of $18.1 million for the years ended December 31, 2024 and 2023, respectively. Our Adjusted EBITDA for the year ended December 31, 2024, increased by $31.3 million from the comparable figure for the year ended December 31, 2023 and represented a 37.7% year-over-year increase. We generated $114.6 million and $83.2 million of Adjusted EBITDA for the years ended December 31, 2024 and 2023, respectively. Further, we had cash and cash equivalents of $187.1 million as of December 31, 2024, and no principal long-term debt.

 

Our Business Model

 

Nexxen is a global flexible advertising technology platform with deep expertise in data and advanced TV that helps empower advertisers, agencies, digital publishers and broadcasters to achieve desired outcomes, including increased efficiency and returns, across the media supply chain. Our unified end-to-end, video-first platform facilitates and optimizes engaging advertising campaigns for brands, agencies, media groups and content creators worldwide—enabling powerful partnerships and delivering meaningful results. A leader in CTV, Video and data, Nexxen’s footprint is expanding across some of the industry’s fastest-growing activities, driven by a global team of seasoned technologists, industry experts and digital natives.

 

Our end-to-end platform is a comprehensive software suite that supports a wide range of media types (e.g., Video, display, etc.) and devices (e.g., mobile, CTVs, streaming devices, desktop, etc.), creating an efficient marketplace where advertisers can purchase high quality advertising inventory from publishers at scale. Our solutions offer many advantages, including an advanced real-time bidding auction optimization engine, a quality and global marketplace, and flexibility to enact concurrent campaign strategies that drive strong returns for investments in digital ad real estate. When customers leverage our platform end-to-end, they may experience cost benefits and enhanced returns on advertising spend.

 

Our platform handles approximately 388 billion daily ad requests on average. Each ad request is processed in a fraction of a second (55ms on average) and powered by our real-time bidding engine, which leverages private servers and infrastructure in four strategically placed data centers located in the United States, Europe and Asia Pacific as well as cloud resources.

 

Key Components of our platform include:

 

 

 

 

 

 

 

Key Factors Affecting Our Results of Operations

 

We believe our results of operations is influenced by several factors, including the following:

 

 

For the year ended December 31, 2024, we achieved gross profit per active customer (calculated as our gross profit for the period divided by our active customers for the period) of $393,698 and Contribution ex-TAC per active customer (calculated as our Contribution ex-TAC for the period divided by our active customers for the period) of $526,035. In comparison, for the year ended December 31, 2023, we achieved gross profit per active customer of $217,161 and Contribution ex-TAC per active customer of $311,690. The increases for the year ended December 31, 2024 were driven by increased multi-solution adoption by customers across our end-to-end product ecosystem, increased spend consolidation by existing customers amidst stronger sales execution and improved macroeconomic and advertising conditions in 2024 compared to 2023, and the intentional discontinuation of relationships with lower revenue and profitability generating customers to focus on fostering stronger revenue relationships with larger customers. Notably, in 2024, our active customer count decreased amidst both the intentional discontinuation of relationships with lower revenue and profitability generating customers to focus on relationships with our larger customers, as well as a recategorization of customer count reporting related to several customer relationships being streamlined under applicable parent companies or agencies.

 

Our Contribution ex-TAC retention rate benefited in 2024 from the strengthening of our platform’s technology and data capabilities during the integration of Amobee in 2023, alongside the release of new products and platform enhancements in 2024, as well as stronger sales execution, an improved macroeconomic and advertising environment and enhanced brand recognition in 2024. This combination of factors led to increased customer usage, spending and product adoption across our end-to-end ecosystem in 2024 and, because of these factors and the intentional discontinuation of revenue relationships with smaller customers to focus on larger customers, we significantly expanded our Contribution ex-TAC retention rate to 102% for the year ended December 31, 2024. We believe we are strongly positioned to continue increasing our Contribution ex-TAC retention rate over the long-term.

 

 

 

Amidst improved macroeconomic, industry and advertising conditions in the year ended December 31, 2024, our Video revenue and CTV revenue rose to $232.4 million and $113.8 million, respectively, from $207.5 million and $85.5 million, respectively, in the year ended December 31, 2023. Video revenue growth in 2024 was driven by a variety of factors including stronger business execution following our completed integration of Amobee, sales team improvements and rebranding to Nexxen, improved macroeconomic and industry conditions which drove advertisers to premium video advertising formats including CTV, and benefits related to the 2024 U.S. political election cycle. However, uncertainty in the macroeconomic and U.S. and global political landscape remained in 2024 and is expected to continue in 2025 which could potentially impact advertising conditions and Nexxen’s future revenue growth, see “Risk Factors—Our revenue and results of operations are highly dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns, inflation, supply constraints, geopolitical issues, and pandemics, can make it difficult to predict our revenue and could adversely affect our business, results of operations and financial condition.”

 

 

Components of Our Results of Operations

 

In this section, we use the following terms:

 

“Programmatic” refers to our core end-to-end programmatic advertising platform, which uses software and algorithms to match buyers and sellers of digital advertising in a technology-driven marketplace; transactions in our Programmatic activities are executed in milliseconds.

 

“Performance” refers to our non-core performance activities consisting primarily of mobile-based solutions that help brands reach their users; revenue generated in the Performance activities is contingent on the occurrence of performance-based metrics, such as app downloads and installations.

 

 

We generate revenue through fees that we charge, based on customer type, to utilize our solutions and services and upon usage and delivery.

 

Often, advertisers use our DSP solution in connection with access to our Data Platform for optimizing media buys from our SSP solution.

 

 

 

 

 

 

 

 

 

Results of Operations

 

The following tables set forth our results of operations in U.S. dollars and as a percentage of revenue for the years indicated.

 

Year Ended December 31, 2024 compared to Year Ended

December 31, 2023

 

Revenue increased by $33.5 million, or 10.1%, to $365.5 million for the year ended December 31, 2024, from $332.0 million for the year ended December 31, 2023. The increase was driven by a combination of factors including stronger execution following the enhancements made to the Company’s platform, sales team, and branding, an improved macroeconomic and advertising environment compared to 2023, and benefits related to the 2024 U.S. election cycle, which drove increased political advertising spend in the second half of 2024.

 

Cost of revenue

 

Cost of revenue (exclusive of depreciation and amortization) decreased by $1.3 million, or 2.0%, to $61.0 million for the year ended December 31, 2024, from $62.3 million for the year ended December 31, 2023. The decrease was driven primarily by a $5.4 million decrease in data and hosting costs amidst successful efforts to optimize Nexxen’s programmatic revenue cost structure, partially offset by a $4.2 million increase largely in media costs related to the Company’s corresponding increase in performance revenue.

 

Research and development expenses

 

 

Research and development expenses increased by $0.3 million, or 0.6%, to $50.0 million for the year ended December 31, 2024, from $49.7 million for the year ended December 31, 2023. The increase was driven by a $2.0 million increase in expenses related to added investment in product services, targeted at enhancing the products and capabilities within Nexxen Data Platform by incorporating Generative AI, including within the Company’s Nexxen Discovery tool, and was largely offset by a $1.1 million increase in product innovation capitalization, $0.4 million decrease in share-based compensation expenses and $0.2 million decrease in salaries and wages.

 

Selling and marketing expenses

 

 

Selling and marketing expenses increased by $6.3 million, or 6.0%, to $112.2 million for the year ended December 31, 2024, from $105.9 million for the year ended December 31, 2023. The increase was attributable to a $3.0 million increase in sales and marketing tools, sponsorship and events, and client related expenses, a $2.7 million increase in salaries and wages tied to higher commission paid amidst stronger sales performance in 2024, and a $0.5 million increase in share-based compensation expenses.

 

General and administrative expenses

 

 

General and administrative expenses decreased by $9.8 million, or 19.2%, to $41.2 million for the year ended December 31, 2024, from $51.1 million for the year ended December 31, 2023. The decrease in general and administrative expenses was driven primarily by a $7.8 million decrease in share-based compensation expenses, $2.8 million decrease in doubtful debts expense, $0.7 million decrease in rent-associated expenses, and $0.7 million decrease in general and administrative tools expenses. This decrease was partially offset by a $2.0 million professional expenses increase in 2024 related to the Company’s Trading Structure Changes, as well as a $0.3 million increase in salaries and wages.

 

Depreciation and amortization expenses

 

 

 

Other expenses, net

 

 

Other expenses, net decreased by $0.3 million, or 14.8%, to $1.5 million for the year ended December 31, 2024, from $1.8 million for the year ended December 31, 2023. This decrease was attributable to a $1.8 million decrease in other expenses related to the sale of Adinnovation in 2023 but largely offset by a $1.5 million increase associated with a remeasurement of net investment in a finance lease in 2024.

 

 

Financial expenses, net

 

 

Net financial expenses increased by $0.3 million, or 14.0%, to $2.3 million for the year ended December 31, 2024, from $2.0 million for the year ended December 31, 2023. This increase was predominantly driven by a $2.3 million currency exchange rate fluctuation increase, $2.0 million in interest income related to court-ordered payments remitted by Alphonso, and a $0.1 million increase in financial expenses related to leases. The increase was largely offset by a $3.6 million decrease in interest expenses following the repayment of the loan associated with the acquisition of Amobee on April 9, 2024, and a $0.5 million interest income decrease from cash and cash equivalents.

 

Tax expenses

 

 

Tax expenses increased by $0.6 million or 23.7% to $3.1 million for the year ended December 31, 2024 from $2.5 million for the year ended December 31, 2023. The difference between the effective tax rate in 2024 of 8% and the Israeli corporate tax rate of 23% was primarily due to the impact of taxes in foreign and state jurisdictions, the difference between measurement basis for tax purposes and financial reporting purposes mainly related to share based compensation and research and development tax credits, temporary differences for depreciation income for which deferred taxes were not recognized and research and development tax credits eligible in the U.S. for previous years, partially offset by an assessment received in 2024 from the Israeli tax authorities for the tax years up to and including the year ended December 31, 2022, and non-deductible expenses.

 

The difference between the effective tax rate in 2023 of (13%) and the Israeli corporate tax rate of 23% was primarily due to non-deductible share-based compensation and capitalization for tax purposes of research and experimental expenditures, for which deferred taxes were not recognized, and was partially offset due to the Company’s increased expenses structure, the impact of taxes in foreign and state jurisdictions and the impact of excess tax benefits associated with stock-based awards.

 

Total comprehensive income (loss) for the year

 

 

Total comprehensive income (loss) increased by $53.5 million, or 295.3%, to a total comprehensive income of $35.4 million for the year ended December 31, 2024 from $18.1 million in total comprehensive loss for the year ended December 31, 2023. The increase was largely attributable to a $56.9 million increase in annual profit and offset by a $2.2 million fluctuation in foreign currency translation differences for foreign operations, as well as $1.2 million associated with foreign currency translation of subsidiaries sold reclassified to profit and loss in 2023. Total comprehensive profit margin increased to 9.7% for the year ended December 31, 2024 from a total comprehensive loss margin of 5.5% for the year ended December 31, 2023. This increase was driven primarily by a 19.2% decrease in general and administrative expenses and a 25.1% decrease in depreciation and amortization expenses.

 

Key Performance Indicators and Other Operating Metrics

 

We review the following indicators to measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Increases or decreases in our key performance indicators may not correspond with increases or decreases in our revenue. In this section, we use the following terms:

 

“Programmatic” means our end-to-end programmatic advertising platform, which uses software and algorithms to match buyers and sellers of digital advertising in a technology-driven marketplace. Transactions in our Programmatic activities are executed in milliseconds.

 

 “Performance” means our non-core performance activities consisting primarily of mobile-based solutions that help brands reach their users. Revenue generated in our Performance activities is contingent on the occurrence of performance-based metrics, such as app downloads and installations.

 

The following tables summarize the key performance indicators that we use to evaluate our business for the years presented.

 

Programmatic and Performance Revenue by Media Type and Device

 

The following table summarizes the Programmatic and Performance revenue by selected media type and device for the years ended December 31, 2024 and 2023.