What changed in Perion Network Ltd.'s 20-F — 2022 vs 2023

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated Financial Statements.

In addition to historical financial information, the following discussion and analysis contains forward looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including, without limitation, statements regarding the Company’s expectations, beliefs, intentions, or future strategies that are signified by the words “expects,” “anticipates,” “intends,” “believes,” or similar language.

These forward looking statements involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward looking statements as a result of many factors, including those discussed under Item 3.D. “Risk Factors” and elsewhere in this annual report.

Certain information called for by this Item 5, including a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2022 has been reported previously in our annual report on March 15, 2023 under Item 5 “Operating and Financial Review and Prospects”.

Company Overview Perion is a global multi-channel advertising technology company that connects advertisers with consumers through technology across all major channels of digital advertising – including search advertising, social media, display, video, DOOH, digital audio and Connected TV (CTV) advertising. Our headquarters are located in Israel and our primary research and development facilities are located in Israel, Canada and Europe.

Our primary sales offices are located in the United States. We also have several sales and representative offices located in North America, APAC and EMEA. A.

OPERATING RESULTS Components of Statements of Operations The following describes the nature of our principal items of income and expense: Revenue We generate our revenue primarily from two major sources, display advertising and search advertising.

Display Advertising - we generate revenue from Display Advertising by delivering high-impact ad formats across different channels including display, social, CTV, digital audio, DOOH and Web Publisher Solutions. Our diverse, technology-focused multi-channel set of solutions is designed to drive consumer engagement and high ROI for advertisers through high-impact ad formats.

Our solutions also include a content monetization platform that provides publishers with monetization tools across different channels, and a social platform that supports campaign management and media buying capabilities across all major social channels. Search Advertising - we generate Search Advertising revenue from service agreements with our search partners.

Search Advertising revenue is generated primarily from monthly transaction volume-based fees earned by us for making our applications available to online publishers and app developers on a revenue share basis relative to the revenue generated by such search partners.

Geographic Breakdown of Revenue For the distribution of our total revenue, by geographic areas, see Note 16 to our consolidated financial statements. 59 Cost of Revenue Cost of revenue consists primarily of expenses associated with the operation of our server hosting, data verification and targeting, campaign creative, labor, as well as customer support.

Traffic Acquisition Costs and Media Buy Our traffic acquisition costs and media buy consist primarily of payments to publishers and developers who distribute our search properties together with their products, as well as the cost of distributing our own products. In addition, media buy costs consist of the costs of advertising inventory incurred to deliver ads.

Traffic acquisition costs are primarily based on revenue share agreements with our traffic sources and the media buy cost are primarily based on Cost Per Click (“CPC”) and Cost Per Mille (“CPM”). Research and Development Expenses (“R&D”) Our research and development expenses consist primarily of salaries and other personnel-related expenses, allocated facilities costs, subcontractors and consulting fees.

Research and development costs are charged to the statement of income as incurred. Selling and Marketing Expenses (“S&M”) Our selling and marketing expenses consist primarily of salaries and other personnel-related expenses, allocated facilities costs, as well as other outsourced selling and marketing activities.

General and Administrative Expenses (“G&A”) Our general and administrative expenses consist primarily of salaries and other personnel-related expenses, allocated facilities costs, professional fees and other general corporate expenses. Change in fair value of contingent consideration Our change in fair value of contingent consideration expenses consist of fair value adjustments of contingent considerations liabilities related to acquisitions.

Depreciation and Amortization Depreciation and amortization consist primarily of depreciation of our property and equipment and the amortization of our intangible assets as a result of our acquisitions. Financial Income (Expense), Net Financial income (expense), net consists of mainly interest income, foreign currency exchange gains or losses and foreign exchange forward transactions expenses.

Interest income consists of interest earned on our cash, cash equivalents, short -term bank deposits and marketable securities. We expect interest income to vary depending on our average investment balances and market interest rates during each reporting period. Foreign currency exchange changes reflect gains or losses related to transactions denominated in currencies other than the U.S. dollar.

Income Tax Expense A significant portion of our income is taxed in Israel and, as a result of previous acquisitions, in the United States. The standard corporate tax rate in Israel was 23% in 2022 and 2023.

For our Israeli operations, starting 2017 and through 2023, part of our subsidiaries elected to implement the “Preferred Technological Enterprise” benefits pursuant to an amendment to the taxation laws which went into effect in 2017, under which a tax rate of 12% is applied to a portion of our income which qualifies for the benefits.

Any other income which does not qualify for special benefits is subject to the standard corporate tax rate. With respect to U.S. tax, we continue to utilize accumulated losses and other tax attributes. The federal statutory income tax rate in the United States has been 21% in 2022 and 2023.

Other subsidiaries in Europe are taxed according to the tax laws in their respective countries of residence. 60 Comparison of Period to Period Results of Operations: The following table sets forth our results of operations in dollars amounts and as a percentage of revenue for the periods indicated (in thousands of U.S. dollars): Year ended December 31, 2022 2023 Amount % of Revenue Amount % of Revenue Revenue: Display Advertising $ 360,690 56 % $ 398,244 54 % Search Advertising 279,566 44 344,911 46 Total Revenue 640,256 100 743,155 100 Costs and Expenses: Cost of revenue 30,404 5 37,830 5 Traffic acquisition costs and media buy 372,601 58 432,943 58 Research and development 34,424 5 33,066 4 Selling and marketing 56,014 9 57,991 8 General and administrative 1 27,629 4 31,799 4 Change in fair value of contingent consideration 1 (3,816 ) (1 ) 18,694 3 Depreciation and amortization 13,838 2 14,092 2 Total Costs and Expenses 531,094 83 626,415 84 Income from Operations 109,162 17 116,740 16 Financial income, net 4,502 1 20,951 3 Income before Taxes on income 113,664 18 137,691 19 Taxes on income 14,439 2 20,278 3 Net Income $ 99,225 16 % $ 117,413 16 % 1 Reflects reclassification of $3.8 million of earnout expenses in 2022 that were incurred in connection with an acquisition from general and administrative to change in fair value of contingent consideration. 61 Year Ended December 31, 2023 Compared to December 31, 2022 Revenue.

Revenue increased by 16% from $640.3 million in 2022 to $743.2 million in 2023. Display Advertising revenue . Display Advertising revenue increased by 10%, from $360.7 in 2022 to $398.2 in 2023, accounting for 54% of revenue in 2023.

This increase was mainly driven by a 114% increase in Retail Media revenue to $49.7 million and a 56% increase in CTV to $33.5 million, partially offset by 7% decrease in Video revenue to $143.2 million, due to shifting inventory from video to display to gain higher profit. Search Advertising revenue .

Search Advertising revenue increased by 23%, from $279.6 in 2022 to $344.9 in 2023, accounting for 46% of revenue in 2023. This increase was primarily due to a 57% increase in Average Daily Searches and an 18% increase in the average annual number of publishers to 160. Cost of revenue .

Cost of revenue increased by 24%, from $30.4 million in 2022 to $37.8 million in 2023 and remained stable at 5% of revenue in 2022 and 2023. The increase in cost of revenue expenses was primarily as a result of increased headcount, hosting and data verification and targeting software expenses which was aligned with the increase in the Company’s revenue.

Traffic acquisition costs and media buy . TAC amounted to $372.6 million in 2022, compared with $432.9 million in 2023 and remained stable at 58% of revenue in 2022 and 2023. Research and development expenses . R&D decreased by 4% from $34.4 million, or 5% of revenue in 2022 to $33.1 million, or 4% of revenue in 2023.

The decrease was primarily due to employee-related costs resulting from exchange rate fluctuations as well as decrease in our average headcount during the year as a result of process automation, offset by an increase in stock-based compensation expenses in 2023. Selling and marketing expenses .

S&M expenses increased by 4%, from $56.0 million, or 9% of revenue in 2022 to $58.0 million, or 8% of revenue in 2023. The increase was primarily due to higher commissions aligned with the increase in revenue, as well as an increase in our marketing expenses and stock-based compensation. General and administrative expenses .

G&A increased by 15%, from $27.6 million in 2022 to $31.8 million in 2023, and remained stable at 4% of revenue in 2022 and 2023. The increase was primarily due to Hivestack acquisition related expenses, as well as increase in our headcount and higher expenses in software and hardware, which were incurred to bolster our security initiatives.

Change in fair value of contingent consideration . Changes in fair value of contingent consideration in 2023 include a $18.7 million fair-value adjustment of the contingent consideration payable in respect to Vidazoo acquisition as a result of performance overachievement and an amendment to the share purchase agreement entered into effect on June 14, 2023. Depreciation and amortization .

Depreciation and amortization expenses increased by 2%, from $13.8 million in 2022 to $14.1 million in 2023. The increase is primarily attributable to the amortization of the acquired intangible assets derived from Vidazoo acquisition. Financial Income (Expense), Net. Finance income increased by $16.5 million from $4.5 million in 2022 to $21.0 million in 2023.

The increase was primarily due to interest income earned on increased cash balances invested in bank deposits and marketable securities which yielded a higher interest rate in 2023. Taxes on income. Taxes on income increased from $14.4 million, or 2% of revenue in 2022 to $20.3 million, or 3% of revenue in 2023.

The increase was primarily due to higher pretax income in 2023 and a one-time recognition of earnout contingent expenses which are non-deductible for tax purposes. B. LIQUIDITY AND CAPITAL RESOURCES To date, we have financed our general capital expenditures with cash generated from operations, debt and equity offerings.

To the extent we acquire new businesses, these acquisitions may be financed by any of, or a combination of, current cash on the balance sheet, cash generated from operations, debt or equity issuances. 62 As of December 31, 2023, we had $472.7 million in cash, cash equivalents, short-term deposits and marketable securities, compared to $429.6 million at December 31, 2022.

The $43.1 million increase is primarily result of $155.5 million net cash provided by operating activities offset by $101.9 million cash paid in connection with the Hivestack acquisition, net of cash acquired and $13.3 million cash paid with connection to Vidazoo’s contingent consideration.

In February 2024, our board of directors approved a shares repurchase plan for an aggregate amount of up to $50 million, which, as of the date of this report, was increased to a total of up to $75 million.

The program is subject to the filing of the Company’s audited annual financial report for the year 2023, which is part of this annual report.

We believe that our current working capital and cash flow from operation, in addition to proceeds from our 2021 public offerings, are sufficient to meet our operating cash requirements for at least the next twelve months. Our cash requirements have principally been for working capital, capital expenditures and acquisitions.

The following table presents the major components of net cash flows for the periods presented (in thousands of U.S. dollars): Year ended December 31, 2022 2023 Net cash provided by operating activities $ 122,119 $ 155,463 Net cash used in investing activities (46,816 ) (133,354 ) Net cash used in financing activities (3,258 ) (10,823 ) Effect of exchange rate changes on cash and cash equivalents (59 ) 141 Net increase in cash and cash equivalents and restricted cash $ 71,986 $ 11,427 Net cash provided by operating activities In 2023, our operating activities provided cash in the amount of $155.5 million, primarily as result of income in the amount of $117.4 million, increased by non-cash expenses of change in payment obligation related to acquisitions of $19.3 million, stock-based compensation expenses of $15.6,depreciation and amortization of $14.1 million, offset by a net change of $3.2 million in operating assets and liabilities and $5.5 million change in accrued interest, net.

In 2022, our operating activities provided cash in the amount of $122.1 million, primarily as result of income in the amount of $99.2 million, decreased by non-cash expenses, depreciation and amortization of $13.8 million, stock-based compensation expenses of $11.6, and net change of $2.7 million in operating assets and liabilities offset by change in accrued interest, net of $3.6 million and change in deferred taxes of $1.4 million.

Net cash used in investing activities In 2023, we used in our investing activities $133.4 million cash, primarily due to $101.9 million cash paid for the acquisition of Hivestack, net of cash acquired, $76.6 million purchase of marketable securities, net of sales, and $0.8 million purchase of property plant and equipment, offset by $46.0 proceeds from short-term deposits, net.

In 2022, we used in our investing activities $46.8 million cash, primarily due to $36.2 million investment in short-term deposits, $9.6 million cash paid in connection to acquisitions and $1.1 million purchase of property plant and equipment.

Net cash used in financing activities In 2023, we used in our financing activities $10.8 million, primarily due to $13.3 million payment of contingent consideration, offset by $2.4 million proceeds from exercise of options.

In 2022, we used in our financing activities $3.3 million, primarily due to $9.1 million payment of contingent consideration, offset by $5.8 million proceeds from exercise of options.

Off Balance Sheet Arrangements We do not have off-balance sheet arrangements (as such term is defined by applicable SEC regulations) that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial conditions, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. 63 C.

RESEARCH, DEVELOPMENT, PATENTS AND LICENSES, ETC. We conduct our research and development activities primarily in Israel, Europe and starting December 2023, in Canada. As of December 31, 2023, our research and development department included 157 employees and the services of additional 13 contractors through a third-party service providers.

Research and development expenses were $34.4 million and $33.1 million in the years ended December 31, 2022 and 2023, respectively. We regard technology and innovation as core drivers of our culture and operations and are essential for our growth.

Hence, we invest substantial resources in research and development, both in-house and through sub-contractors and collaborations with third parties, to develop new products and platform solutions, applications and services, improve our core technologies and enhance our technology infrastructure and capabilities.

Our advanced technological solutions, which are applied throughout the consumer journey and marketing funnel, include capabilities that enabled us to achieve above industry average margins. In 2023, our efforts were focused on adapting, extending and maintaining compatibility with the ever-changing business landscapes and automation of our platforms and operating systems.

For a discussion of our intellectual property and how we protect it, see “Business Overview—Intellectual Property” under Item 4.B. above. D.

TREND INFORMATION Industry trends expected to affect our revenue, income from continuing operations, profitability and liquidity or capital resources: The digital advertising environment is very crowded and consumers suffer from over exposure to advertising, which in turn has resulted in a certain level of blindness to these campaigns, decreasing their effectiveness and value to advertisers.

To cut through the clutter, Perion is concentrating on offering unique, stand-out quality ad formats, including tremendous creative execution that grabs the attention of consumers, thereby increasing the effectiveness of the ad and ultimately the value to advertisers.

The macroeconomic environment during 2023 forced advertisers to reassess their digital advertising budgets, causing them to shift budgets from standard ad units to direct response platforms such as search advertising and high-impact ad units for video and display, including CTV and retail.

These actions were intended to increase customer engagement, thus enhancing their brand equity and increasing return on investment (ROI). Through its business diversification strategy, Perion operates across all major digital channels, and can rapidly react to those shifts in spending and capitalize on them by focusing its efforts and resources to where budgets are shifting.

Retail media is a fast-growing market segment, as retailers look to leverage the first-party data they manage to create advertising opportunities both on their consumer-facing websites and the open web.

According to eMarketer, Retail media accounted for $46.7 billion in 2023, 17.3% of all digital ad spending in the U.S., and is expected to increase by 136% to $110.4 billion by 2027, or 26% of the U.S. digital ad spending.

Perion’s Retail Media solutions provide a unique solution through advertising “Ads-as-a-platform” that enable personalized, dynamic solutions in Perion’s signature high-impact approach, which are highly coveted as grocers and other retailers shift from print advertising to digital solutions.

Perion also offers retailers an “always on” solution, ensuring retailers consistent advertising that drives high brand awareness along ongoing performance campaigns on one hand, and generates a steady revenue stream for Perion along the year.

Advertisers and consumers are increasingly aware of online privacy matters, recognizing the need to protect user privacy ahead of the expected depreciation of cookies by Google.

This is evident in the continuous increase in customer adoption of Perion’s cookieless SORT® solution, as over 80% of our SORT®-eligible campaigns adopted our SORT® solution in Q4 2023. 64 Another trend we are seeing is a shift from linear TV to digital Connected TV (CTV).

Even though traditional linear TV ad spending dominates the market, CTV advertising is growing at a much faster rate. According to eMarketer, CTV ad spending is expected to increase from $24.6 billion in 2023 to $42.4 billion in 2027, while linear TV ad spending is expected to decrease by 9.3% from $60.4 billion to $54.7 billion during the same period.

Perion’s CTV business continued to gain traction in 2023, growing by 56% year-over-year and representing 8% of its total display advertising revenue. The digital advertising environment is complex and fragmented, making it increasingly difficult for advertisers, including brands and agencies, to determine the difference between offerings. This is driving advertisers to look for comprehensive and holistic solution and service providers.

In addition, advertisers are looking for clean, safe and transparent solutions. Perion is working diligently to address these needs in our various revenue streams by providing robust, scalable and differentiated products across multiple platforms.

Our solution offers a full suite of services for advertising brands and agencies, from creative all the way through to analytic data collection and processing, which is also utilized through its in-demand programmatic capabilities. Through Content IQ, we provide advertisers the ability to serve advertisements which are targeted to the end-user’s interests alongside relevant optimized content and page-level reader engagement.

Our solution includes a technology platform for buying media on social and mobile platforms which helps optimize the money spent by agencies and advertisers. In turn, we also provide the publisher a solution for creating new advertising inventory and increasing their revenue. Our search monetization revenue is predominantly within the desktop computer environment.

The transition in recent years of consumer consumption of applications, services and content from desktop towards mobile platforms has accelerated and, as a result, an increasing share of advertising campaigns are channeled towards mobile platforms resulting in fewer consumer software downloadable products being developed.

To address this trend, we have shifted the growth focus of all parts of this business away from downloadable desktop software towards the monetization of other search assets. In the first quarter of 2024, we experienced a decline in our search advertising activity, attributable to changes in advertising pricing and mechanisms implemented by Microsoft in its search distribution marketplace.

These adjustments led to a reduction in Revenue Per Thousand Impressions (RPM) for both Perion and other Microsoft distribution partners. These changes contributed to decreased search volume. Our results of operations were negatively impacted as a result in the first quarter of 2024 and we expect an adverse impact on our results of operations in the future.

For additional information see also the Risk Factor titled - “Our search advertising solution depends heavily upon revenue generated from our agreement with Microsoft, and any adverse change in that agreement could adversely affect our business, financial condition and results of operations.” Another trend that is shaking up the Internet, and specifically search advertising, is generative AI and Microsoft’s Bing integration of the AI-driven ChatGPT.

Even though generative AI is expected to change the way we consume content on the Internet, ChatGPT quickly gained traction, reaching 1 million users in the first days after being launched in late 2022. In fact, the new AI-powered Bing search engine reached 100 million daily active users during March 2023, with roughly one-third of users new to Bing.

It is expected that ChatGPT will revolutionize Bing search capabilities by providing more advanced and intuitive search experiences for its users, better meeting their needs and expectations. Since the launch of Microsoft’s ChatGPT, other companies were quick to introduce their own Generative AI platforms such as Gemini (formerly known as Bard) by Google, Claude by Anthropic and Grok by X.

This is likely to result in the creation of tools that could increase competition in the advertising technology industry and lower barriers to entry.

In the past few years, browser companies, particularly Google and Microsoft, as well as others, have been instituting policy changes, regulations and technologies that are making it increasingly difficult to change a browser’s settings, even with user consent, including the ability to change a browser’s default search settings.

Changing these settings has been a major part of the Company’s monetization model and until now we have been successful in dealing with these measures, within the framework allowed by these companies.

We continue to believe, as supported by the level of revenue over the last couple of years, that as the market continues to consolidate around accepted marketing practices, there remains sufficient business to generate significant revenue and profits.

For more information on uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our business, see Item 3.D “Key Information—Risk Factors.” For additional trend information, see the discussion in Item 5.A. “Operating and Financial Review and Prospects—Operating Results.” 65 E.

CRITICAL ACCOUNTING ESTIMATES We have provided a summary of our significant accounting policies, estimates and judgments in Note 2 to our consolidated financial statements, which are included elsewhere in this Annual Report.

The following critical accounting discussion pertains to accounting policies management believes are most critical to the portrayal of our historical financial condition and results of operations and that require significant, difficult, subjective or complex judgments.

Other companies in similar businesses may use different estimation policies and methodologies, which may impact the comparability of our financial condition, results of operations and cash flows to those of other companies. Revenue recognition The Company applies the provisions of Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606” or “Topic 606”).

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A.

DIRECTORS AND SENIOR MANAGEMENT The following table sets forth information regarding our executive officers and directors as of March 27, 2024: Name Age Position Eyal Kaplan* (1)(2) 64 Chairman of the Board of Directors Tal Jacobson 49 Chief Executive Officer; Director Maoz Sigron 46 Chief Financial Officer Michal Drayman* (1)(4) 51 Director Amir Guy* (1)(3) 54 Director Rami Schwartz* (4) 66 Director Michael Vorhaus* (2)(3) 66 Director Joy Marcus* (2)(3)(4) 62 Director Daniel E.

Aks 64 President, Undertone * “Independent director” under the Nasdaq Listing Rules. (1) Member of our investment committee. (2) Member of our nominating and governance committee. (3) Member of our compensation committee. (4) Member of our audit committee. 68 On August 1, 2023 Tal Jacobson was promoted to Chief Executive Officer, replacing Doron Gerstel. Following Mr. Jacobson’s promotion, Mr.

Gerstel stepped down from the executive team and later, in November 2023, Mr. Jacobson also replaced Mr. Gerstel as a member of our board of directors. There are no arrangements or understandings between any of our directors or executive officers and any other person pursuant to which our directors or executive officers were selected.

Eyal Kaplan has served as the chairperson of the board of directors of the Company since May 2018. He is also the chairperson of Medial Earlysign, a privately held company in the healthcare technology field, since 2020 and as board member at CUBEC Investment Corporation, owned by the University of Colorado Boulder since 2021. Mr.

Kaplan is also engaged in advisory and consulting, focusing on growth-through-innovation and corporate strategies. Prior to that, he was Managing General Partner with Walden Israel, a venture capital firm, during which time he was Director and chairperson of numerous portfolio companies.

In 1990 he co-founded Geotek Communications, an international wireless communications company, and served as senior vice president with broad strategic, managerial and operational responsibilities until 1995. Mr.

Kaplan was a member of the Technion (Israel Institute of Technology) Council (executive board) from January 2014 until September 2023, serving the maximum allowed term., where he chaired the Finance and Budget Committee, and is currently the chairman of the Technion’s Endowment Investment Committee.

Since 2012 he has been a member of the Technion Board of Governors, a body of some 300 high-profile visionaries and decision makers with outstanding achievements in the fields of science, technology, economy, industry, culture and society. From 2007 to 2012, Mr.

Kaplan was a member of the Advisory Committee of Caesarea Center for Capital Markets & Risk Management, and from 2005 to 2014, he was a member of the Advisory Committee of the Global Consulting Practicum at the Wharton School of the University of Pennsylvania. Mr.

Kaplan holds an MBA from the Wharton School of the University of Pennsylvania, a Master of Arts in International Studies from the Lauder Institute of the University of Pennsylvania, and a Bachelor of Science degree (with Honors) in economics and management from the Technion - Israel Institute of Technology.

Tal Jacobson has been a leader and executive in the ad-tech industry for more than two decades. Prior to his appointment as Perion's CEO in 2023, Tal served as General Manager of CodeFuel, Perion's Search Advertising unit, since 2018. During his tenure, he turned CodeFuel into a significant driver of Perion's market share and valuation.

He also cemented a strategic relationship with Microsoft for which the company won the Microsoft Advertising Global supply partner award. Tal's success is rooted in his extensive experience in all facets of the tech industry. As Chief Revenue Officer of SimilarWeb, he was paramount to the Israeli unicorn growth spurt in its early days.

Prior to that, he held the position of VP of Business at McCann Erickson, the role of CEO at the video collaboration platform Watchitoo, and Director of Business Development at AOL (as part of the IM division - ICQ). Maoz Sigron has served as the Chief Financial Officer of the Company since February 2018.

Prior to that, from September 2017 until February 2018, Mr. Sigron served as our VP Finance. Previously, he served in various finance leadership and senior accounting positions at Tnuva Dairy Corporation, Allot Communications Ltd. (Nasdaq:ALLT) and Stratasys Ltd. (Nasdaq:SSYS) and prior to that he served as a CPA with PwC. Mr.

Sigron holds a B.A in accounting and Economics from the College of Management, Israel. Michal Drayman has served as a director of the Company since June 2022. Ms. Drayman serves as a director and member of the audit and compensation committee of Ree Automotive Ltd.

(Nasdaq:Ree) and serves on the boards of several privately held companies including aVISI Ltd. and MetzerPlast. A long standing investor who served as a partner in Jerusalem Venture Partners VC since 2014 to sept 2023 and a CFO and VP business development at European High Tech Capital, a privately held investment firm which is focused on healthcare investments.

Prior to that from 2001 to 2004 Ms. Drayman served as the VP Finance America of Lumenis Inc. From 1994 to 2001, Ms. Drayman served in different financial positions in Lumenis Ltd. (previously, Nasdaq:LMNS). Ms.

Drayman holds a BA in Economics and Accounting from Haifa University and an MBA in excellence from The College of Management, Rishon Letzion, Israel, Biomedical Management Track. 69 Amir Guy has served as a director of the Company since June 2022. Mr.

Guy spent most of his career, more than 26 years, in the advertising industry, both in corporate and entrepreneurial settings. Mr. Guy is the founder of Moonshoot since October 2023. Mr. Guy was the founder of togetherr (a Fiverr company) since March 2021 through 2022. Mr. Guy served as a director of Adler-Chomski Group / Grey Israel until July 2023.

Prior to joining Adler-Chomski Group, Mr. Guy served in various accounting roles, including Wunderman Thompson LLC and other private advertising companies. Mr. Guy holds a B.B.A in marketing and finance from the College of Management in Israel and an MBA from the Kellog School of Management at Northwestern University.

Rami Schwartz has served as a director of the Company since January 2019. Mr. Schwartz joined The Portland Trust as Managing Director of the Tel Aviv office in April 2018. Mr. Schwartz also serves as a director of Radcom (NASDAQ: RDCM) and an advisory board member of Algosec. Previously, Mr.

Schwartz was the President of the Amdocs Products and Amdocs Delivery groups for 7 years. Prior to joining Amdocs, Mr. Schwartz was the chairperson of Olive Software (acquired by ESW Capital), and Comply (acquired by Qualitest), the co-founder and CEO of Zizio and DigiHOO, and an EIR at Cedar Fund. Mr.

Schwartz was CEO and director of Exanet (acquired by Dell) and General Manager of Precise Software (acquired by Veritas software). Mr. Schwartz holds a B.Sc. in excellence, in Mathematics and Computer Science from the Hebrew University in Jerusalem.Exanet (acquired by Dell) and General Manager of Precise Software (acquired by Veritas software). Mr.

Schwartz holds a B.Sc. in excellence, in Mathematics and Computer Science from the Hebrew University in Jerusalem. Michael Vorhaus has served as a director of the Company since April 2015. Mr. Vorhaus also serves as a Director of Ionik (formerly known as Popreach) (TSE:INIKIF). Starting December of 2018, Mr. Vorhaus founded Vorhaus Advisors and is CEO of the firm.

From 1994 to November 2018, he was in a variety of positions at of Frank N. Magid Associates, Inc., a research-based strategic consulting firm. From 1994 to 2008, he served as its Senior Vice President and Managing Director and from 2008 to 2018 he served as the President of Magid Advisor, a unit of Magid Associates.

From 2013 to 2014, Mr. Vorhaus served as a director of Grow Mobile. In 1987, he founded Vorhaus Investments. Vorhaus advises a number of start-ups and venture capital firms. He also has a wide variety of early stage investments primarily in media and related areas. Mr. Vorhaus formerly served as a director of Altimar Acquisitions Corporation I, II and III.

Mr. Vorhaus holds a B.A. in Psychology from Wesleyan University and completed the Management Development Program at the University of California, Berkeley’s Haas School of Business. Joy Marcus has served as a director of the Company since November 2019. Ms.

Marcus has a wealth of experience in the media industry, including EVP and GM Digital Video at Condé Nast Entertainment, CEO of Bloglovin’ (acquired by Impact), SVP Global Marketing Solutions at Time Warner (now WarnerMedia), VP International at MTV Networks, a division of Viacom (now Paramount) and GM North America of DailyMotion (acquired by Orange/France Telecom) and VP Business Development at B&N.com (IPO).

She sits on the Boards of digital media companies BBC Maestro, Muso and Qwire, and the nonprofits New York Tech Alliance and MOUSE. Joy is the Co-Founder and Managing Director of The 98, a venture fund that invests in women led tech enabled businesses.

She is a full time Lecturer on Entrepreneurship at Princeton University where she was the James Wei Visiting Professor in Entrepreneurship in 2014 and is a Venture Fellow at Jerusalem Venture Partners.

Joy graduated Magna Cum Laude, Phi Beta Kappa, from Princeton University and has a JD from NYU Law School and completed the management course in Finance & Accounting at Columbia University Graduate School of Business. Daniel E. Aks has served as President of Undertone since August 2019 and an external director of the Company from August 2018 until August 2019.

Since December 2017, Mr. Aks is the Chief Executive Officer of Antenna International, a story-maker and creative technology company devoted to cultural, iconic site and commercial attractions.

Prior to Antenna, from December 2010 to December 2017, he was the owner of C3 Multimedia LLC., a consulting firm in the fields of information, education K-16 and media and during his term with C3 was, inter-alia, the Acting Chief Operating Officer for the Educational Records Bureau (ERB), a K-12 assessment organization serving private education and high performing public institutions (from March 2015 until December 2017).

From January 2014 until December 2017, Mr. Aks was the Co-Founder of The EdTech Fund, an investment vehicle for seed capital investments in educational technologies. He also served as the Senior Vice President and Chief of Staff for McGraw-Hill Education (MHE) from September 2008 until November 2010 .

From July 2007 until April 2008 he served as the Chief Operating Officer and Executive Vice President at The Greenspun Companies. Prior to that from January 2006 to July 2007, he held positions with MTV Networks (MTVN) as a Senior Vice President of both Operations and Consumer Products. Prior to MTVN, from August 1999 to June 2004, Mr.

Ask served PRIMEDIA’s Consumer Magazine Group as Chief Operating Officern. He was also President of PRIMEDIA Consumer Magazine Internet Group during that term. Prior to joining PRIMEDIA, Mr. Aks was a partner with the Booz Allen Hamilton consulting firm. Mr.

Aks holds a BS in Manufacturing/Industrial Engineering and a B.A. in Business Administration from Rutgers University and earned an MBA from the Harvard University Graduate School of Business Administration, where he graduated with second-year honors. There are no family relationships between any of our directors or executive officers. 70 B.

COMPENSATION The aggregate direct compensation we paid to our directors and officers as a group (13 persons) for the year ended December 31, 2023, was approximately $12.8 million, which included approximately $0.5 million that was set aside or accrued to provide for pension, retirement, severance or similar benefits.

This amount includes bonuses paid to our officers pursuant to our executive bonus plan based on company performance measures, in accordance with our Compensation Policy for Directors and Officers.

This amount does not include expenses we incurred for other payments, including dues for professional and business associations, business travel and other expenses, and other benefits commonly reimbursed or paid by companies in Israel. In addition, our directors are reimbursed for expenses incurred in order to attend board of directors or committee meetings.

In the year ended December 31, 2023, we granted our officers (i) 170,463 restricted share units (“RSUs”), which vest over a three-year period; and (ii) 160,000 performance-based share units (“PSUs”), linked to certain financial KPI’s. These awards were granted under our Equity Incentive Plan, as amended, formerly known as the 2003 Israeli Share Option Plan (the “Incentive Plan”).

In 2023, we paid each of our non-executive directors $62,500 (as approved by our shareholders on June 30, 2022).

At the annual general meeting of our shareholders held on December 23, 2020, an annual grant of RSUs to our non-executive directors has been approved, with a variable value based on the role held by each such member of the board of directors.

With respect to new appointed directors, such grant shall be made initially upon the initial election or appointment and on each anniversary of such date. With respect to our incumbent non-executive directors, the initial grant, was made on February 6, 2021, the date of the first anniversary of the most recent option grant.

The RSUs are subject to the terms and conditions of the Incentive Plan and the RSU agreement pursuant to the Incentive Plan. The RSUs vest on a quarterly basis, in equal tranches, during the year following the grant.

All unvested RSUs held by a director in office will automatically vest upon a change of control of the Company, which is defined for this purpose as (i) a merger, acquisition or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of all or substantially all of the assets of the Company, or (iii) a transaction or a series of related transactions as a result of which more than 50% of the outstanding shares or the voting rights of the Company are beneficially owned by one person or group (as defined in the SEC rules) (the “Change of Control”).

Accordingly, each non-executive director was granted with an annual RSU grant according to his/her role, with a value as follows: • chairperson of our audit committee: $110,000; • chairperson of our compensation committee: $107,500; • chairperson of our nominating and governance committee: $105,000; and • other non-executive directors: $97,500.

The compensation we paid to our chairman of the board of directors, Mr. Kaplan, for the year ended December 31, 2023 was $125,000, (as approved by our shareholders on June 30, 2022) paid in four quarterly payments and reimbursement of out-of-pocket expenses incurred in connection with Mr. Kaplan’s services as chairman. Mr.

Kaplan is also entitled to indemnification and liability insurance as provided to other members of the board of directors. Mr. Kaplan’s services agreement also includes customary non-disclosure, non-compete, and ownership assignment of intellectual property undertakings. Following the approval of the extraordinary general meeting of our shareholders held on August 2, 2018, Mr.

Kaplan was granted with a one-time grant of options to purchase 66,666 Ordinary Shares, with a 3-year vesting schedule, commencing on May 9, 2018 (the “August 2018 Grant”).

In addition, following the approval of the annual general meeting of our shareholders held on February 6, 2020, and subject to the continued engagement as our chairman of the board of directors, Mr.

Kaplan was granted with a one-time grant of options to purchase 90,000 Ordinary Shares with a 3-year vesting schedule (the options vest quarterly in equal tranches over a three-year period), commencing on May 9, 2021, at an exercise price per share equal to the average stock market price of the 90 days period preceding the date of the general meeting of our shareholders, as reported by the Nasdaq Stock Market (together with August 2018 Grant, the “Chairperson’s Previous Grants”).

The options granted are subject to the terms and conditions of the Incentive Plan and the option agreement pursuant to the Incentive Plan. Upon removal of Mr.

Kaplan from office either by a vote of the board of directors or by a vote of the Company’s shareholders, either (i) as a direct result of the negotiation of a Change of Control; or (ii) within six months following a Change of Control event (for the avoidance of doubt, in both (i) and (ii), other than for “cause” – as such term defined in the Incentive Plan) all unvested options shall automatically be accelerated and become fully vested on the effective date of any such event described in either (i) or (ii). 71 Following the approval of the annual general meeting of our shareholders held on December 23, 2020, the equity grant structure to Mr.

Kaplan, our chairperson of the board of directors, was changed as well, from a grant of options to grant of RSUs. Accordingly, Mr.

Kaplan was granted an annual grant of RSUs with a value of up to $200,000, such annual grant shall be equal to the difference between the fair market value per vesting annum of the Chairperson’s Previous Grants and the approved cap of $200,000. The initial grant was made on February 6, 2021.

With respect to new appointed chairperson of our board of directors, such grant shall be made initially upon the initial election or appointment and on each anniversary of such date. The RSUs granted are subject to the terms and conditions of the Incentive Plan and the RSU agreement pursuant to the Incentive Plan.

The RSUs shall vest on a quarterly basis, in equal tranches, during the year following the grant. All unvested RSUs held by a chairperson in office will automatically vest upon a Change of Control event. In addition, the Company’s shareholders approved a one-time special grant of 19,000 fully vested RSUs.

The grant date of this special grant was the date of our board of directors’ approval which occurred on October 27, 2020. The table below reflects the compensation granted to our five most highly compensated office holders during or with respect to the year ended December 31, 2023.

We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.” For purposes of the table below, “compensation” includes salary cost, bonuses, equity-based compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and any undertaking to provide such compensation.

All amounts reported in the table are in terms of cost to the Company, as recognized in our financial statements for the year ended December 31, 2023, including the compensation paid to such Covered Executive following the end of the year in respect of services provided during the year.

Each of the Covered Executives was covered by our D&O liability insurance policy and was entitled to indemnification and exculpation in accordance with applicable law and our articles of association. All numbers below are in US Dollars in thousands.

Name and Principal Position (1) Salary Cost (2) Bonus (3) Equity-Based Compensation (4) Total Tal Jacobson, Chief Executive Officer 651 853 1,916 3,420 Doron Gerstel, Former Chief Executive Officer 166 822 1,577 2,565 Maoz Sigron, Chief Financial Officer 416 616 691 1,723 Daniel E.

Aks, President, Undertone Business Unit 585 228 546 1,359 Gal Dagan, Co-Founder and Former VP R&D, Vidazoo Business Unit 303 - 675 978 (1) Unless otherwise indicated herein, all Covered Executives are employed on a full-time (100%) basis. On August 1, 2023, Doron Gerstel stepped down from his role as Company’s CEO and later, in November 2023, Mr.

Gerstel also stepped down from his role as a member of our board of directors. Gal Dagan’s role as VP R&D of Vidazoo Business ended on December 31, 2023. (2) Salary cost includes the Covered Executive’s gross salary plus payment of social benefits made by the Company on behalf of such Covered Executive.

Such benefits may include, to the extent applicable to the Covered Executive, payments, contributions and/or allocations for savings funds ( e.g ., Managers’ Life Insurance Policy), education funds (referred to in Hebrew as “ keren hishtalmut ”), pension, severance, risk insurances ( e.g ., life, or work disability insurance), payments for social security and tax gross-up payments, vacation, medical insurances and benefits, phone, convalescence or recreation pay and other benefits and perquisites consistent with the Company’s policies.

(3) Annual bonuses granted to the Covered Executives based on formulas set forth in the annual compensation plan and/or special bonus approved by compensation committee of the board and the board of directors pursuant to the terms of our Compensation Policy for Directors and Officers.

(4) Represents the equity-based compensation expenses recorded in our consolidated financial statements for the year ended December 31, 2023.

Such numbers are based on the RSU grant date fair value in accordance with accounting guidance for equity-based compensation and does not necessarily reflect the cash proceeds to be received by the applicable officer upon the vesting and sale of the underlying shares.

For a discussion of the assumptions used in reaching this valuation, see Note 2 to our Financial Statements. 72 Compensation Terms of our Chief Executive Officer Tal Jacobson was appointed as our Chief Executive Officer effective August 1, 2023.

His compensation terms as Chief Executive Officer were approved by the shareholders at the Annual General Meeting held on June 21, 2023. The following is a summary of his compensation terms, which are consistent with the Company's Compensation Policy. Mr. Jacobson's annual base salary was set at NIS 1,440,000 (equivalent to approximately 397,022 USD) effective February 7, 2023.

He is eligible for a target annual cash bonus of up to 100% of his annual base salary, or 150% in case of overachievement, based on a performance matrix pre-approved annually by the Company's Compensation Committee and board of directors. The bonus also includes a discretionary component, not based on measurable performance indexes.

In addition, our Compensation Committee and the board of directors shall be authorized to grant Mr. Jacobson, from time to time, a special bonus as set out in, and subject to the terms of, our Compensation Policy. In addition, Mr. Jacobson was granted 90,000 RSU and 90,000 PSUs as of February 7, 2023.

The RSUs shall vest over three years with a 12-month cliff; one-third vests on the first anniversary of the grant date, and the balance vests quarterly over the next eight quarters. The PSUs are subject to the Company meeting at least 80% of revenue and Adjusted EBITDA targets for fiscal years 2023, 2024, and 2025.

No PSUs vest if either revenue or Adjusted EBITDA targets are below 80%. The vesting of the PSUs is calculated based on the average performance levels of actual revenue and Adjusted EBITDA. The maximum vesting of the PSUs is capped at 100%. The PSUs will not vest before the first anniversary of the grant date.

The RSUs and PSUs are subject to vesting acceleration provisions in the event of a change in control of the Company, provided that the Mr. Jacobson is still employed by the Company or any of its subsidiaries, as the case may be.

The PSUs and RSUs will become fully vested upon the closing of an M&A Event, which shall mean in essence (A) any consolidation, merger or reorganization (“Transaction”) of the Company, in which the shareholders of the Company, immediately prior to such Transaction, own less than 50% of the voting power of the surviving entity (or its affiliated company, as the case may be) immediately after such Transaction; or (B) any transaction or series of related transactions to which the Company is a party, in which all or substantially all of the Company’s outstanding share capital is transferred to any entity or person (excluding a public offering in a stock exchange, or any consolidation, merger or reorganization effected exclusively to change the domicile of the Company, or a transaction or series of related transactions, in which the shareholders of the Company prior to such transaction, hold more than 50% of the voting and economic rights of the Company or surviving entity, as applicable, immediately following such transaction), or (C) the sale, lease, exclusive license, transfer or other disposition, in a single transaction or series of related transactions of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, or any exclusive license of material intellectual property of the Company, other than when any such transfer is to a wholly owned subsidiary of the Company.

Mr. Jacobson's employment agreement includes non-solicitation, confidentiality, intellectual property assignment, insurance plan participation, expense reimbursement and 28 annual vacation days. The employment agreement is for an indefinite period. and may be terminated by either party with a 6-month advance notice. Mr. Jacobson performance-based compensation is subject to our clawback policy. We also have employment agreements with our other executive officers.