MTMY.L Regulatory News (MTMY)

FOR IMMEDIATE RELEASE

10 March 2015

Matomy Media Group | 2014 Final Results 

Final results for the year ended 31 December 2014

Matomy Media Group Ltd., one of the world's leading digital performance-based advertising companies, announces its final results for the year ended 31 December 2014.

Strong operational and financial performance - poised for further growth

Non-GAAP Financial Highlights

*PF - Consolidated full Group numbers, including Team Internet, only on a full-year pro-forma basis, as if the acquisition of Team Internet had occurred on 1 January 2013.

GAAP Financial Highlights

Business highlights

· Strong revenue growth across the Group, increasing 19% on a pro-forma basis (19% organic), driven by identified strategic growth areas of mobile, video and social advertising.

· Aggregate mobile traffic across all media channels increased 195%, contributing approximately 20% of Group revenue on a pro-forma basis (including MobFox).

· Display and video activity increased 15% to $139.3 million.

· Adjusted EBITDA rose 40% at a 9.3% adjusted EBITDA margin, representing a 140 basis point improvement in margin.

· Good trading performance from Matomy US business due to enhanced integration with Group activity and strong demand for email marketing services.

· Strong balance sheet maintained, with net cash increasing to $28.9 million (FY2013: $2.4 million).

· Formed a strategic affiliation with Publicis Groupe.

· Acquired mobile advertising platform MobFox, bringing new programmatic and real-time bidding (RTB) capabilities to the Group; initial integration completed.

· Operating profit and pre-tax profit increased 81% and 53%, respectively, excluding: one-time IPO bonuses; increased amortisation following acquisitions of Team Internet and MobFox; and first-time public company-related expenses.

· Initiated a corporate restructuring that will sharpen focus of Matomy's business units as part of a plan to improve the Group's service offering, customer experience, efficiency and innovation in support of its overall growth strategy.

Ofer Druker, Chief Executive Officer of Matomy, said:

"I am pleased to report excellent progress across Matomy in 2014 with pro-forma Group revenues up 19% and adjusted EBITDA up 40%.

"During 2014 we made significant strides towards achieving our goal of becoming the recognised global leader in digital performance-based advertising. Through strategic acquisitions and partnerships, as well as investment in our core growth activities of mobile, social and video advertising, and in other areas of the business, we have laid a solid foundation to pursue this important goal.

"These business developments, together with the planned additional investments in 2015 in our media capabilities, partnerships and acquisitions, will strengthen our market position and drive our long-term profitability and sustainable growth."

Enquiries:

Matomy Media GroupKeith Trivitt, VP Global Marketing and Communicationsktrivitt@matomy.com+1 417 299 5996

Tulchan Communications Stephen MalthouseGiles Kernickmatomy@tulchangroup.com+44 (0) 207 353 4200A copy of this announcement will be available on the Matomy website, www.Matomy.com, today from 7.00am GMT.

Matomy will host an analyst presentation at 10.00am GMT Tuesday 10 March 2015 at the offices of Tulchan Communications, 85 Fleet Street, EC4 Y1AE.

Forthcoming dates

Annual Report to be published by 30 April 2015

CHAIRMAN and CHIEF EXECUTIVE OFFICER'S STATEMENT

Introduction

We are delighted to report that 2014 was another year of significant progress and growth for Matomy.

Throughout 2014 we made significant investments in all areas of our business, in particular within our strategic growth activities of mobile, social and video advertising. In doing so, we have laid a strong foundation for achieving our goal of becoming the recognised global leader in digital performance-based advertising.

We were delighted to announce the strategic affiliation we formed in October 2014 with Publicis Groupe. By working collaboratively with the Publicis Groupe management team and its digital advertising and media buying agencies, we aim to offer compelling performance-based advertising solutions to its stable of blue-chip international advertisers, thus increasing our geographic reach with budgets from those clients. We are already recognising benefits from this collaboration following the February 2015 election of Publicis Groupe Chief Strategist Rishad Tobaccowala to the Matomy Board of Directors.

Mobile has become a growth driver across all of Matomy's activities, particularly in the areas of search, social, email and domain monetisation. We believe that the company that leads mobile performance will lead the market. It is our intention to lead mobile performance-based advertising, and we are making strategic investments in this activity to achieve this goal.

Our acquisition in October 2014 of MobFox has enabled us to expand our capabilities in mobile, RTB and programmatic advertising. Importantly, we expect that MobFox's bespoke technology will enable us to set a goal of generating 50% of revenues from mobile activity within three years.

We are pleased with the progress we have made thus far as a public company. We look forward to further strengthening our global performance-based advertising capabilities as we seek additional growth and expansion, as well as a strong increase in shareholder value.

2014 Trading performanceOur core businesses have continued to deliver a strong performance and, in some cases, such as our mobile and video activity, have been exceptional, helping us grow our worldwide market share.

For 2014 we reported a 23% increase in revenue to $237.4 million on a GAAP basis (FY2013: $193.5 million), driven primarily by our identified strategic growth areas of mobile, social and video activity. On a pro-forma basis, revenue and adjusted EBITDA increased by 19% and 40%, respectively, delivering a 9.3% adjusted EBITDA margin, representing a 140 basis point improvement in margin. Earnings per share increased by 9% to $0.10 (FY2013: $0.09).

We gained significant market share in 2014 as measured by the growth of active customers, which reached 5,157 (FY2013: 1,557), mainly driven by the acquisitions of Team Internet and MobFox.

Geographically, Matomy is seeing the strongest growth in the Americas (including North and South America), with revenue in that region increasing 29% ($33.4 million) to $149.2 million (FY2013: $115.8 million). This was driven by a marked increase in video advertising revenues, most of which is generated in the United States; new capabilities added to the Group, including email marketing following the January 2013 acquisition of Matomy US; and from domain monetisation revenues following the June 2014 acquisition of a majority stake in Team Internet.

European revenues rebounded in the second half of 2014 to increase 7% from the year prior, to $67.2 million (FY2013: $62.6 million). This growth offset a challenging first half in European activity, particularly in Spain, where a change in user registration requirements for additional mobile media services by certain mobile operators affected our activity in that region for a period of time in the first half of 2014.

Matomy's display and video activity continued to contribute the largest share of overall Group revenue, growing 15.1% in 2014, to $139.3 million (FY2013: $121.0 million). The Group's mobile activity experienced the largest percentage revenue growth in 2014. Aggregate mobile traffic across all media channels increased 195%, contributing approximately 20% of Group revenue on a pro-forma basis (including MobFox). This increase was driven by strong organic growth in Matomy's mobile activity, as well as by the inclusion of $2.2 million of revenues from the acquired MobFox business during the last two months of 2014.

Group operating profit decreased 10.8% for the year due, in part, to one of Matomy's advertising customers in the United States, American Laser Centers LLC, filing for bankruptcy protection, as reported in a November 2014 trading update.

2015 PrioritiesOur key priorities for 2015 are as follows:

1. Leverage the MobFox acquisition, and Matomy's existing mobile activity, to become the global leader in mobile performance-based advertising. In order to achieve this, we intend to invest resources around our mobile activity in the following areas: mobile video, mobile performance, social and the expansion of our mobile offer wall service.

2. Gain wider access and build upon the affiliation with Publicis Groupe. We are working collaboratively towards establishing Matomy as a compelling performance-based advertising solution available to international advertising customers of Publicis Groupe.

3. Additional advancements in our proprietary performance-based advertising technology. We will maintain our technological focus on programmatic media buying for mobile and web with the integration of big data capabilities. We also intend to enhance the mobile programmatic advertising technology we acquired from MobFox by adding new capabilities, such as video and performance algorithms.

4. Expand into the Asia-Pacific market. The Asia-Pacific market represents one of the largest and fastest-growing sectors of digital advertising. We intends to strategically increase Matomy's presence in Asia, for example, by partnering with a local leader.

5. Continue to seek value-enhancing opportunities. We intend to seek more value-enhancing mergers or acquisitions in one or more of our strategic growth areas to further build the growth and value of our business.

6. Strengthen corporate structure and complete key employee retention plan. We intend to strengthen the corporate structure to reflect the needs of a publicly traded company and allow our CEO to concentrate on strategic value, enhancing new and existing activities and ensuring retention of our key operational and business leaders.

Outlook

Matomy has good momentum behind it at the start of 2015 and is poised to take advantage of the continued growth in worldwide advertiser spend on performance-based advertising campaigns. Current trading in 2015 is in line with our expectations, with notable growth in our mobile video, social, email and domain monetisation activities.

We continue to increase our capabilities in mobile, RTB and programmatic advertising and expect further progress in these areas of our business, in line with our overall growth strategy. Our acquisition of MobFox has enabled us to enhance and expedite mobile integration across all of Matomy's global performance-based advertising capabilities.

We are also increasing collaboration with the Publicis Groupe management team and its companies, which will enable us to further strengthen our client base, expand into new verticals and geographies, further enhancing our revenue growth.

Our operations in the Americas, which now comprise 63%, in aggregate, of Group revenue, continue to benefit from increased advertiser demand for video and mobile advertising solutions. Also driving growth in the Americas is the resurgence of our Matomy US business, which is benefitting from deeper integration with the Group's global activities and is performing well at the start of 2015. Similarly, our European business is performing well at the start of 2015 benefiting among other from greater access to MobFox's and Team Internet's clients and media partners, which are based in Europe.

The Group made excellent progress throughout 2014, increasing revenue and profits whilst also investing in new capabilities and geographies. We would like to thank all of Matomy's employees for the substantial efforts they have made to deliver these results, in what was a very exciting and productive year. Looking ahead, Matomy will continue to build the business for the long term and remains confident of delivering its plan.

Ilan Shiloah Ofer DrukerChairman Chief Executive Officer

KEY PERFORMANCE INDICATORS

Non-GAAP measures (unaudited)

GAAP measures (audited)

Reconciliation of non-GAAP measures to GAAP measures

The following table presents a reconciliation of adjusted gross profit to gross profit and to revenues, the most directly comparable financial measures calculated in accordance with US GAAP, for the periods indicated:

The following table presents a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with US GAAP, for the periods indicated:

The following table presents a reconciliation of adjusted net income to net income, the most directly comparable financial measure calculated in accordance with US GAAP, for the periods indicated:

The following table presents a reconciliation of adjusted EBITDA less capex to adjusted EBITDA for the periods indicated:

OPERATIONAL REVIEW*

Revenues by media channel

The following table sets out Matomy's revenues by media channel for the years ended 31 December 2014 and 2013.

*Based on consolidated financials, not including the consolidation of Team Internet on a pro-forma basis.

(1) Aggregate mobile traffic across all media channels (including MobFox) increased 195% in FY2013, contributing approximately 20% of Group revenue on a pro-forma basis (FY2014: $53.0 million; FY2013: $18.0 million).

(2) Primarily comprised of revenues from the email media channel.

Display and video

Display and video media channel revenues increased by $18.3 million, or 15%, to $139.3 million for the year ended 31 December 2014 (FY2013: $121 million), primarily due to increased demand for video advertisements.

Search

Search media channel revenues decreased by $12.3 million, or 61%, to $7.8 million for the year ended 31 December 2014 (FY2013: $20.1 million), mainly due to the anticipated trend by advertisers to reduce outsourcing services related to search activity, as well as technological tracking adaptations required as a result of a shift by users in the gaming vertical from personal computers to mobile devices.

Social media and virtual currency

Social media and virtual currency media channel revenues increased by $0.3 million, or 1%, to $20.1 million for the year ended 31 December 2014 (FY2013: $19.8 million). This increase reflects the first full year of revenues contributed by the 2013 acquisition of Adotomi (now known as 'Matomy Social').

The increase in social media revenues reflected even stronger underlying revenue growth, which were accounted for on a net basis, due to the maturing social media advertising market driven by Facebook's agency policy, which encourages advertisers to increasingly make direct payment of media costs. The revenues which were accounted for on a net basis would have contributed a further $3.6 million to this media channel if they had been reported gross.

Mobile

Mobile media channel revenues increased by $12.5 million, or 94%, to $25.7 million for the year ended 31 December 2014 (FY2013: $13.2 million), mainly due to strong organic growth in Matomy's mobile activity, as well as the inclusion of $2.2 million of revenues from the acquired MobFox business in the last two months of 2014.

Domain monetisation

Domain monetisation media channel revenues commenced only in H2 2014, following the Team Internet acquisition.

Other media channels

Other media channel revenues increased by $2.7 million, or 14%, to $22.1 million for the year ended 31 December 2014 (FY2013: $19.4 million). This increase reflects a 26% increase in revenues from the email media channel, offset by a decrease mainly in other media channels that were not in line with Matomy's core business.

Revenues by geography

The following table sets out Matomy's revenues by geographical region for the years ended 31 December 2014 and 2013.

Americas

Americas revenues increased by $33.4 million, or 29%, to $149.2 million for the year ended 31 December 2014 (FY2013: $115.8 million). This increase primarily reflects the increase in video advertising revenues, and also due to domain monetisation revenues following the June 2014 acquisition of a majority stake in Team Internet.

Europe

Europe revenues increased by $4.6 million, or 7%, to $67.2 million for the year ended 31 December 2014 (FY2013: $62.6 million), mainly due to organic growth in existing markets, as well as new markets Matomy entered via the Team Internet and MobFox acquisitions.

FINANCIAL REVIEW

Revenue

Matomy had a strong 2014, with revenue improving by 23%, to $237.4 million (FY2013: $193.5 million). This growth was driven by increased activity in Matomy's identified strategic growth drivers of mobile, social and video advertising, as well as organic growth driven by an increase in active customers and average spend per active customer. In addition, $24.8 million of revenues were contributed by Team Internet and MobFox.

Cost of revenues

Cost of revenues increased by $36.4 million, or 26%, to $178.4 million (75% of total revenues) for the year ended 31 December 2014 from $142 million (73% of total revenues) the year prior. Since Matomy's cost of revenues primarily consists of direct media costs, the majority of the growth in cost of revenues in 2014 was driven by revenue growth, but also reflected an increase in allocated costs, which led to a decrease in gross margin. Increased activity in social media advertising, which is a highly competitive and regulated media channel, also resulted in higher direct media costs and lower gross margin than Matomy's historical average.

Operating expenses

Operating expenses increased by $8.5 million, or 20%, to $50.3 million for the year ended 31 December 2014 (FY2013: $41.8 million). Operating expenses as a percentage of revenues were 21% (FY2013: 22%). Excluding Matomy's 2013 acquisitions, operating expenses as a percentage of revenues for the year ended 31 December 2013 would have decreased to 17.3%.

Research and development expenses increased by $0.2 million, or 3%, to $7.8 million (FY2013: $7.6 million). This increase primarily reflects the additional costs of the R&D team acquired in the Team Internet acquisition.

Sales and marketing expenses increased by $5.5 million, or 30%, to $23.4 million (FY2013: $17.9 million).  This increase represents additional investment in headcount, both organic and from the Team Internet and MobFox acquisitions, leading to increased salary costs and related allocated costs; increased sales commissions payable attributable to the growth in revenues; and increased amortisation costs from the acquisitions made in 2013 and 2014.

General and administrative expenses increased by $2.8 million, or 17%, to $19.1 million (FY2013: $16.3 million), due to several factors, including:

· One-time IPO bonuses of $3.1 million paid during 2014;

· Increased costs attributable to Matomy becoming a publicly traded company, including non-executive directors' remuneration, key advisors' and corporate brokers' engagements, corporate governance compliance costs and investor relations costs; and

· An increase in salary and allocated costs following Matomy's 2013 and 2014 acquisitions.

These incremental expenses were offset by cost savings and efficiencies made, in particular from the Matomy US business.

Financial expenses

Financial expenses, net, increased by $3.2 million to $4.1 million for the year ended 31 December 2014 (FY2013: $0.9 million). This increase reflects revaluations recorded on assets and liabilities not denominated in dollars, caused by significant movements in foreign exchange rates, in particular the USD-ILS and USD-EUR rates. In relation to these movements, Matomy recorded an increase in financial expenses of $2.1 million arising from the use of hedging instruments. These expenses arose due to the average hedge rate being significantly lower than the actual exchange rate on 31 December 2014.

Equity gains

Equity gains (losses) of affiliated companies, net, changed to a gain of $7.0 million for the year ended 31 December 2014 from a loss of $0.1 million the year prior. This change primarily reflects the one-off gain of $7.3 million resulting from revaluing the prior equity interest in Team Internet held before Matomy acquired a controlling 70% stake in June 2014. In addition, an impairment of $0.5 million in the Uppsite investment was recorded due to Uppsite's intention to enter liquidation, as well as various smaller gains and losses from the other affiliated companies. Other than acquiring the controlling shareholding in Team Internet, there were no other changes to Matomy's shareholdings in affiliated companies.

Taxes on income

Taxes on income increased by $0.3 million to $1.8 million for the year ended 31 December 2014 (FY2013: $1.5 million), reflecting the increased effective corporate tax rate.

Matomy is subject to corporation tax on its income, principally in Israel, the United States and Germany, as well as other jurisdictions in which Matomy has operations. Matomy's effective corporate tax rate was 38.9% in the year ended 31 December 2014, and 16.9% in the year ended 31 December 2013.

Matomy's effective corporate tax rate was significantly higher in 2014 compared to 2013 due to exchange rate movements between the Israeli shekel and other currencies, which increased finance expenses and reduced pre-tax income in the consolidated results when presented in the Group reporting currency of US dollars. Matomy's results in Israeli shekels were not affected by these currency movements, and since the tax expenses of Israeli companies are calculated in Israeli shekels as required by local regulations, the consolidated tax expenses and effective corporate tax rate increased accordingly. The effective corporate tax rate without taking account of these finance expenses would have been 17.7%.

The Israeli statutory corporate tax rate was 26.5% in 2014 and 25% in 2013. Matomy's effective corporate tax rate is lower than the Israeli statutory corporate tax rate because Matomy benefits from a reduced corporate tax rate under the Israeli privileged enterprise programme. Under this programme, a portion of Matomy's income is subject to reduced corporate tax rates in Israel as long as Matomy continues to meet various conditions.

Matomy's US operations are subject to US federal, state and foreign income taxes. To date, Matomy has not been required to pay US federal income taxes because its US operations have current and accumulated net operating losses. Matomy's US operations incurred minimal state and foreign income tax liabilities for the years ended 31 December 2014 and 2013. However, Matomy expects to be required to pay US federal, state and foreign income taxes as its US operations grow in the mid- to long-term, which is likely to increase Matomy's effective corporate tax rate in the future.

Team Internet is subject to German corporate and trade taxes. The effective tax rate of Team Internet on a standalone basis was 33.0% in 2014.

Net income

Net income increased by $2.6 million to $9.8 million for the year ended 31 December 2014 (FY2013: $7.2 million).

Revaluation of redeemable non-controlling interests

As of 31 December 2014, Matomy's $34.1 million in redeemable non‑controlling interests consisted of:

• $1.7 million relating to Matomy Social; and

• $32.4 million relating to Team Internet.

The statements of income for the years ended 31 December 2014 and 31 December 2013 also reflect previously existing non-controlling interests in Matomy Mexico, Intermedia Sheva and Matomy Latam.

Amortisation of intangible assets

Amortisation expenses amounted to $5.8 million for the year ended 31 December 2014, an increase of $4.6 million from amortisation expenses of $1.2 million for the year ended 31 December 2013. Of this increase, $3.1 million was due to amortisation of the intangible assets Matomy acquired in the Team Internet acquisition, whilst the rest of the increase reflected the first full year of amortisation of the Matomy US and Adotomi acquisitions.

Exceptional items

The following exceptional items were recorded in profit and loss in 2014. Matomy views these items as exceptional as they are material to the financial statements and non-recurring and therefore were excluded from non-GAAP measures:

· IPO-related bonuses amounting to $3.1 million; and

· Transaction costs associated with M&A activity amounting to $165 thousand.

Liquidity and cash flows

The following table sets out selected cash flow information for Matomy for the years ended 31 December 2014 and 2013.

* Represents amounts less than $0.1 million.

(A) Net cash provided by (used in) operating activities

Matomy's net cash provided by (used in) operating activities decreased by $6.9 million to a $0.4 million outflow for the year ended 31 December 2014 (FY2013: $6.5 million inflow).

Net cash used in operating activities consisted of $9.8 million in net income, less $1.0 million relating to non‑cash expenses, less $9.2 million used to fund net changes in working capital. Non‑cash expenses were primarily depreciation and amortisation of $6.9 million, significantly higher from prior years due to the 2013 and 2014 acquisitions, stock‑based compensation expense of $1.4 million, less decreases in deferred taxes of $2.4 million, as well as the gain on achieving a controlling stake in Team Internet of $7.3 million.

Net changes in working capital in 2014 were mainly driven by increases of $10.6 million in trade receivables and $1.0 million in other receivables, in addition to a decrease of $2.2 million in accrued expenses, less an increase of $4.5 million in trade payables. The remaining amount consisted of smaller movements in various other assets and liabilities.

Several key factors contributed to the negative cash flow from operating activities in 2014, including: the one-time IPO bonuses of $3.1 million; investments in working capital relating to the acquisitions of Team Internet and MobFox ($1.5 million and $2.6 million, respectively); and the significant increase in video activity, which typically has longer payment terms for customers, causing trade receivables to increase. Excluding the effect of these items, Matomy continued to generate positive cash flow from its operations.

For the year ended 31 December 2013, Matomy's net cash provided by operating activities consisted of $7.2 million in net income, $1.9 million relating to non‑cash expenses, less $2.6 million used to fund net changes in working capital. Non‑cash expenses were primarily depreciation and amortisation of $2.1 million, stock‑based compensation expense of $1.2 million, less decreases in deferred taxes of $1.8 million.

Net changes in working capital in 2013 were mainly driven by increases of $6.3 million in trade receivables and $0.7 million in other receivables, less increases of $3.2 million in trade payables and $1.9 million increase in accrued expenses and other liabilities. The remaining $0.7 million cash outflows consisted of smaller movements in various other assets and liabilities.

(B) Net cash used in investing activities

Net cash used in investing activities increased by $19.3 million to $34.4 million for the year ended 31 December 2014 (FY2013: $15.1 million). This included a $22.4 million investment in Team Internet, a $10.0 million investment in MobFox, $0.5 million payment of the deferred consideration for Adotomi and a $1.4 million investment in property and equipment.

For the year ended 31 December 2013, net cash used in investing activities included a $10.0 million investment in Matomy US, a $0.8 million investment in MobAff, a $2.9 million investment in Adotomi and a $1.0 million investment in property and equipment.

(C) Net cash provided by financing activities

As of 31 December 2014, Matomy had $19.1 million in term loans. Of those, $6.7 million are due within one year.

Net cash provided by financing activities increased by $64.1 million to $71.8 million for the year ended 31 December 2014 (FY2013: $7.7 million). This related primarily to $61.5 million IPO proceeds, net of expenses, a $10.0 million net increase in outstanding term loans, and $1.7 million proceeds from sale of treasury shares, less $1.7 million of short-term bank credit repaid during the year.

For the year ended 31 December 2013, net cash used in financing activities related primarily to $1.1 million of short-term bank credit received, a $9.0 million term loan, less $1.0 million repaid during the year, and $1.0 million relating to purchase of additional shares in a subsidiary.

 (D) Effect of exchange rate differences in cash

Effect of exchange rate differences derive from the differences between Matomy's functional currency of US dollars, and the functional foreign currency of euro used by certain of Matomy's affiliated companies. For the period under review, exchange rate differences did not have a material effect on Matomy's cash flow, but this may not remain the case in the future.

NOTES TO FINANCIAL STATEMENTS

Goodwill

Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired.

Matomy's goodwill was acquired mainly through the 2013 and 2014 acquisitions.

Matomy performs an annual impairment test during the fourth quarter of each fiscal year, or more frequently if indicators of potential impairment exist, to determine whether the net book value of a reporting unit exceeds its estimated fair value. During the years ended 31 December 2014 and 2013, no impairment losses were identified.

Segments

Our chief operating decision-maker is our Chief Executive Officer. On a monthly basis, the CEO reviews revenue and adjusted EBITDA at Group level, as well as revenue at the level of media channels, for the purposes of allocating resources and evaluating financial performance.

As a result, Matomy operates in a single reportable segment as a provider of marketing services.

Acquisitions

Matomy acquired an additional 50% of the issued and outstanding shares of Team Internet AG ('Team Internet') on 19 June 2014 for a consideration of €19.7 million ($26.8 million). Team Internet is a direct search navigation and domain monetisation company based in Munich, Germany. Following the acquisition, Matomy holds 70% of the issued and outstanding shares of Team Internet.

On 31 October 2014, Matomy completed the acquisition of the assets and liabilities of MobFox Mobile Advertising GmbH ('MobFox') for a total consideration of $19.7 million. MobFox offers a one-stop, integrated mobile programmatic advertising solution for publishers and advertisers through its technology platform which facilitates online trading of advertising in multiple formats for mobile devices.

Earnings per share

Matomy's basic earnings per share increased by $0.01, or 9%, to $0.10 for the year ended 31 December 2014 (FY2013: $0.09 EPS). This change was influenced by a 22% increase in after-tax profit and a 12% increase in the weighted average number of outstanding shares, mainly due to Matomy's July 2014 IPO and the issuance of shares related to the MobFox acquisition.

Treasury shares

As part of the acquisition of Team Internet in July 2014, 1,625,659 ordinary shares of Matomy, which were owned by Team Internet and acquired through the transaction, were reclassified as treasury shares and valued at $6.9 million. Team Internet's minority shareholders are entitled to an 80% share in gains derived from these shares, amounting to $3.2 million, which is classified as a redeemable non-controlling interest.

In October 2014, 414,423 of these treasury shares were sold and 80% of the gain was allocated to Team Internet's minority shareholders.

Financial obligations and covenantsMatomy's financial obligations and commitments as at 31 December 2014 were as follows:

To date, Matomy has primarily financed its operations from cash flows from operating activities, the private sale of preferred shares to Viola Group (one of Matomy's shareholders), term loans, lines of credit and IPO proceeds.

The line of credit and the term loans are secured by a fixed charge over the unpaid equity of Matomy and its 100%-owned subsidiary Matomy Media Ltd. and a floating charge on all of the assets of Matomy and Matomy Media Ltd. In June 2014, Matomy entered into a further $21.6 million term loan. The term loans are also subject to certain restrictive covenants, including restrictions on dividends and the transfer of Ordinary Shares.

In June 2014, Matomy opened a further $4.0 million line of credit, which is secured by a floating charge over all of the assets of Matomy USA Inc. and an unlimited guarantee by Matomy.

As of 31 December 2014, Matomy complied with all of its financial covenants, except for a minor noncompliance with the net income covenant due to the accounting treatment of the one-time exceptional IPO bonuses and accounting treatment of redeemable non-controlling interest, for which it received a written waiver from the lending bank until 31 December 2015.

Financial reporting

This financial information has been prepared under US GAAP principles and in accordance with Matomy's accounting policies. There have been no changes to Matomy's accounting policies during the year ended 31 December 2014.

Sagi NiriChief Financial Officer

DEFINITIONS

Active customers

Matomy defines an 'active customer' as a customer from whom Matomy has recognised revenues during the previous 12 months. Matomy defines a customer as a legal entity and/or an entity that has a unique invoicing relationship with Matomy, expressly excluding direct with advertising exchanges. Where Matomy has separate invoicing relationships with multiple brands, branches or divisions within an organisation, Matomy typically counts all such entities as a single customer. Matomy also counts a customer who runs campaigns in multiple media channels or geographic regions as a single customer. Matomy considers each advertising agency as a single customer, although such agency may have multiple clients for whom Matomy manages digital marketing campaigns. Matomy believes these criteria best identify customers that are actively using its solutions. Matomy believes that the growth of its active customers is an important indicator of its ability to grow its business overall, and that reporting its active customers based on the previous twelve‑month period is more representative of its business because it takes into account seasonality.

Adjusted gross profit

Adjusted gross profit is a non‑GAAP financial measure that Matomy defines as revenues less direct media costs, which are the direct costs associated with the purchase of digital media. These costs include: payments for digital media based on the revenues Matomy generates from its customers on a revenue‑sharing basis; payments for digital media on a non‑revenue‑sharing basis (CPC or CPM); and serving fees for third‑party platforms.

Matomy believes that adjusted gross profit is a meaningful measure of operating performance because it is frequently used for internal management purposes, indicates the performance of Matomy's solutions in balancing the goals of delivering results to its customers whilst meeting margin objectives, and facilitates a more complete understanding of factors and trends affecting Matomy's underlying revenues performance.

Adjusted EBITDA

Adjusted EBITDA is a non‑GAAP financial measure that Matomy defines as net income before taxes on income, financial expenses (income), net, equity losses of affiliated companies, net, depreciation and amortization, share‑based compensation expenses and exceptional items. Adjusted EBITDA is a key measure Matomy uses to understand and evaluate its core operating performance and trends, to prepare and approve its annual budget, to develop short‑ and long‑term operating plans and to determine bonus payments to management. In particular, Matomy believes that by excluding share‑based compensation expenses, adjusted EBITDA provides a useful measure for period‑to‑period comparisons of Matomy's core business.

Adjusted net income

Adjusted net income is a non‑GAAP financial measure that Matomy defines as net income before share based compensation expenses and any non-recurring items.

Going concern

The Group continues to meet its day-to-day working capital and other funding requirements through a combination of long-term funding and cash deposits.

After making due enquiry, the Directors fully expect Matomy and its subsidiaries have adequate resources to continue operational existence for the foreseeable future and therefore adopt the going concern principle.

Principal risks

The Directors assess and monitor the key risks of the business on an ongoing basis. The principal risks and uncertainties that could have a material effect on the Group's performance have not changed from those which are set out in detail in the section entitled 'Risk Factors' of the Group's IPO prospectus (the 'Prospectus') dated 9 July 2014. These include, inter alia, the following:

· certain internet and technology companies may intentionally or unintentionally adversely affect Matomy's operations, mainly, due to announced or unannounced changes and restrictions by such companies

· the delivery of digital ads and the recording of the performance of digital ads are subject to complex regulations, legal requirements and industry standards

· Matomy relies largely on performance-based revenues

· the digital advertising industry is highly competitive and fragmented and currently experiencing consolidation, resulting in increasing competition

· Matomy is dependent on relationships with certain third parties with significant market positions

· Matomy relies on the continued compatibility of the Matomy Performance Platform with third-party operating systems, software and content distribution channels, as well as newly-acquired systems

· Matomy may be subject to third-party claims brought against it

· Matomy has historically derived the majority of its revenues from customers that use its solutions for display marketing campaigns

· a key part of Matomy's growth strategy relates to acquisitions and the ability to effectively integrate and manage them

· the digital advertising industry, particularly display and virtual currency media channels, remains susceptible to fraud

· Matomy is an Israeli-domiciled company and as such the rights and obligations of shareholders are governed by Israeli law and differ in some respects from English law

Forward-looking statementsCertain statements in this full-year report are forward looking. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, we can give no assurance that these expectations will be fulfilled. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Directors' responsibility

The Directors confirm that to the best of their knowledge that the condensed set of final audited financial statements, which has been prepared in accordance with US GAAP principles, gives a true and fair view of the assets, liabilities, financial position and profit of the undertakings included in the consolidation as a whole as required by DTR 4.2.4.

US dollars in thousands

The accompanying notes are an integral part of the consolidated financial statements.

US dollars in thousands

The accompanying notes are an integral part of the consolidated financial statements.

US dollars in thousands except earnings per share data

The accompanying notes are an integral part of the consolidated financial statements.

US dollars in thousands

The accompanying notes are an integral part of the consolidated financial statements.

US dollars in thousands, except share data

*) Represents an amount lower than $ 1 thousand.

The accompanying notes are an integral part of the consolidated financial statements.

US dollars in thousands, except share data

*) Represents an amount lower than $ 1 thousand.

The accompanying notes are an integral part of the consolidated financial statements.

US dollars in thousands

The accompanying notes are an integral part of the consolidated financial statements.

US dollars in thousands