BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2023

NOTE 7:-

BUSINESS COMBINATION

Connexity

On September 1, 2021, the Company completed the acquisition of Shop Holding Corporation (“Connexity”) (the “Connexity Acquisition”), an independent e-Commerce media platform in the open web, from Shop Management, LLC (“Seller”). Connexity is a technology and data-driven integrated marketing services company focused on the e-commerce ecosystem. Through a focus on performance-based retail marketing, Connexity enables retailers and brands to understand their consumers better, acquire new customers at a lower cost, and increase sales from their target consumers. Connexity offers a comprehensive range of marketing services to online retailers and brands in the U.S. and Europe, including syndicated product listings, search marketing, and customer insights. Connexity corporate headquarters is in Santa Monica, California, and the Company also maintains an office in Karlsruhe, Germany.

In accordance with the acquisition method of accounting, the total purchase price for the Connexity Acquisition was $753,217, comprised of $593,894 in cash and $157,689 based on the fair value of 17,328,049 shares of the Company’s Ordinary shares on the closing date and additional subsequent payment of $1,634 made during 2022 (of which $431 were accrued in December 2021).

During the year ended December 31, 2022, the Company performed final settlement of net working capital transactions that resulted in a net decrease of $374 in Goodwill.

The Company incurred acquisition-related transaction costs of $6,432 during the year ended December 31, 2021, which were included in general and administrative expenses in the consolidated statements of loss.

The Company also committed to issue 3,681,030 of the Company’s Ordinary shares to certain Connexity employees (the “Holdback agreement”), to be released to those employees over the period of three years after the acquisition date, subject to their continued service and expensed over the applicable service periods.

In the years ended December 31, 2023 and 2022, pursuant to the Holdback agreement, the Company issued 1,162,800 Ordinary shares and 1,227,010 Ordinary shares, respectively.

In addition, pursuant to the purchase agreement, the Company issued approximately $40,000 of RSUs to Connexity employees in accordance with the terms of the Company’s equity plan. These RSUs are expected to vest and be expensed over a 4-5 year service period.

The following table summarizes the final fair value of assets acquired and liabilities assumed:

Cash and cash equivalents	$	10,437
Other current assets		50,785
Intangible assets		270,025
Goodwill		530,800
Other noncurrent assets		8,432
Total assets acquired		870,479

Current liabilities		66,769
Deferred tax liability, net		50,493
Total liabilities assumed		117,262
Total purchase consideration	$	753,217

Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired, and is attributable primarily to expected synergies, economies of scale and the assembled workforce of Connexity. Goodwill is not deductible for income tax purposes.

The following table presents components of the identified intangible assets acquired and their estimated useful lives as of date of acquisition:

			Useful life
	Fair value		(In years)
Merchant/Network affiliate relationships (1)	$	146,547		4.5
Technology (1)		56,548		5.0
Publisher relationships (2)		42,933		4.0
Tradenames (2)		23,997		3.0
Total Intangible assets acquired	$	270,025

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(1)	Fair value was determined by using the income approach.
(2)	Fair value was determined by using the cost approach.

The results of operations of Connexity have been included in the consolidated financial statements since the acquisition date of September 1, 2021. Connexity revenue included in the Company’s consolidated statement of operations from September 1, 2021, through December 31, 2021, was $37,692. There is no practical way to determine net income attributable to Connexity due to integration.

The following unaudited pro forma combined financial information table presents the results of operations of the Company and Connexity as if the acquisition of Connexity have been completed on January 1, 2020. The unaudited pro forma financial information includes adjustments primarily related to amortization of the acquired intangible assets, recognition of transaction costs and bonuses, recognition of share-based compensation associated with RSU grants to Connexity employees and the holdback consideration, as noted above.

The unaudited pro forma results have been prepared for illustrative purposes only and are not necessarily indicative of what the actual results of operations of the Company and Connexity, combined, would have been due to any synergies, economies of scale and the assembled workforce of Connexity.

	Year ended December 31,
	Unaudited
	2021			2020
Revenues	$	1,433,555		$	1,258,214
Net income (loss)	$	(50,312	)	$	(144,146	)

Gravity R&D Zrt.

In July 2022, the Company completed the acquisition of Gravity R&D Zrt. (“Gravity R&D”) a privately-held company based in Budapest, Hungary, which provides personalization recommendation services, for a total consideration of $7,035, net of cash acquired. As part of a purchase price allocation, $1,780 was attributed to identified intangible assets and $5,925 to goodwill. Goodwill is not deductible for income tax purposes.

In 2022, total acquisition-related transaction costs of $742 were incurred in relation to the acquisition, which were recognized as an expense and included in general and administrative expenses in the consolidated statements of loss.

The results of Gravity R&D operations were consolidated in the Company’s consolidated financial statements commencing on the date of the acquisition and were immaterial to the Company’s results of operations for the year ended December 31, 2022. Pro forma information has not been provided, since the impact of Gravity R&D’s financial results were immaterial to the revenue and net loss of the Company.