Innovid (CTV) - 2023 Q1 - Quarterly Report

Financial Performance - Total revenue increased by 18% year-over-year, from $25.9 million in Q1 2022 to$30.5 million in Q1 2023, primarily due to the full inclusion of the TVS business [223]. - Adjusted EBITDA for Q1 2023 was $145,000, a significant improvement from a loss of$3,009,000 in Q1 2022, resulting in an Adjusted EBITDA margin of 0.5% compared to (11.6)% in the previous year [244]. - The company reported a net loss of $8,563,000 in Q1 2023, with a net loss margin of (28)$7,449,000 and a margin of (29)% in Q1 2022 [244]. - Net cash provided by operating activities was $368,000 in Q1 2023, a turnaround from net cash used of$7,213,000 in Q1 2022 [263]. Revenue Sources - CTV accounted for 54% of all video impressions served by Innovid in Q1 2023, representing a 13% year-over-year increase in CTV video impressions [205]. - Innovid's revenue from international customers was approximately 9% of total revenue in 2023 [207]. - The majority of the Company's revenues are derived from ad serving services, focusing on standard, interactive, and data-driven digital video advertising [301]. Expenses - Research and development costs were $7.1 million, representing 23$1.3 million, or 12%, from $10.4 million in Q1 2022 to$11.6 million in Q1 2023, driven by personnel costs following the TVS acquisition [251]. - General and administrative expenses decreased by $1.8 million, or (16)$11.5 million in Q1 2022 to $9.7 million in Q1 2023, mainly due to reduced professional and legal fees related to the TVS acquisition [252]. - Interest expenses for Q1 2023 were$0.4 million, up from $0.1 million in Q1 2022, impacting the finance income, net [262]. Cash and Liquidity - As of March 31, 2023, Innovid had cash, cash equivalents, and restricted cash of$45.4 million and net working capital of $66.8 million [229]. - Innovid utilized$20.0 million of its $50.0 million credit line as of March 31, 2023 [233]. - The company anticipates that existing cash and cash equivalents, along with expected net cash from operating activities, will be sufficient to meet cash needs for at least the next 12 months [258]. Tax and Compliance - The effective tax expense increased by$2.9 million from $(0.04) million in Q1 2022 to$2.8 million in Q1 2023, with effective tax rates of -47.97% and 0.5% for the respective periods [255]. - As of March 31, 2023, the company was in compliance with all covenants of its New Revolving Credit Facility, which requires maintaining an adjusted quick ratio of at least 1.30 to 1.00 [261]. Asset Management - The Company performed an annual impairment test for goodwill as of October 1, 2022, and determined that the fair value of the reporting unit exceeded its carrying amount, indicating no impairment [289]. - During the three-month period ended March 31, 2023, the Company tested its asset groups for recoverability and concluded that no impairment should be recognized [315]. - The Company evaluated its deferred tax assets and established a valuation allowance for portions not likely to be realized, considering cumulative losses and future taxable income expectations [292]. Accounting Policies - The Company recognizes revenues related to measurement services over time, as customers simultaneously receive and consume the benefits provided [305]. - The Company accounts for warrants based on specific terms and authoritative guidance, assessing whether they are equity-classified or liability-classified instruments [310]. - Acquisition-related expenses are expensed as incurred, reflecting costs associated with the acquisition of TVS [316]. - The Company capitalizes software development costs from the time the preliminary project stage is completed and amortizes these costs over an estimated useful life of three years [319]. - The Company applies the practical expedient in ASC 606, not adjusting the promised amount of consideration for significant financing components if the payment period is expected to be one year or less [307].