ctv-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

____________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended June 30, 2023


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to

Commission file number 001-40048

____________________________

Innovid Corp.

(Exact name of registrant as specified in its charter)

____________________________


Delaware						87-3769599
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)
30 Irving Place, 12th Floor New York, New York						10003
(Address of Principal Executive Offices)						(Zip Code)

+1 (212) 966-7555

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	CTV	New York Stock Exchange
Warrants to purchase one share of Common stock, each at an exercise price of $11.50 per share	CTVWS	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large, accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The registrant had outstanding 139,303,254 shares of common stock as of August 4, 2023.

Table of Contents

TABLE OF CONTENTS


			Page
Part I
Item 1. Financial Statements			5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			38
Item 4. Controls and Procedures			38

Part II
Item 1. Legal Proceedings			39
Item 1A. Risk Factors			39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 3. Defaults Upon Senior Securities			39
Item 4. Mine Safety Disclosures			39
Item 5. Other Information			39
Item 6. Exhibits			39
Signatures			41

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements include, without limitation, statements relating to expectations for future financial performance, business strategies or expectations for our business. These statements are based on the beliefs and assumptions of the management of Innovid. Although Innovid believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, it cannot assure you that it will achieve or realize these plans, intentions or expectations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Form 10-Q, words such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “strive,” “target,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

Should one or more of a number of known and unknown risks and uncertainties materialize, or should any of our assumptions prove incorrect, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to:

• our public securities’ potential liquidity and trading;

• our ability to raise financing in the future;

• our success in retaining or recruiting, or changes required in, our officers, key employees or directors;

• changes in applicable laws or regulations;

• our ability to maintain and expand relationships with advertisers;

• decreases and/or changes in CTV audience viewership behavior;

• Innovid’s ability to make the right investment decisions and to innovate and develop new solutions;

• the accuracy of Innovid’s estimates of market opportunity, forecasts of market growth and projections of future financial performance;

• the extent of investment required in Innovid’s sales and marketing efforts;

• Innovid’s ability to effectively manage its growth;

• sustained overall demand for advertising;

• the impact of the COVID-19 pandemic;

• the continued acceptance of digital advertising by consumers and the impact of opt-in, opt-out or ad-blocking technologies;

• Innovid’s ability to scale its platform and infrastructure to support anticipated growth and transaction volume;

• the impact of increasing competition in the digital advertising space, including with competitors who have significantly more resources;

• other risks and uncertainties indicated in this report, including those set forth under the section titled “Risk Factors” and those incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report on Form 10-K”), which was filed with the Securities and Exchange Commission (“SEC”) on March 3, 2023.

These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Table of Contents

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

WHERE TO FIND MORE INFORMATION

Our website address is www.innovid.com. We may use our website as a means of disclosing material non-public information. Such disclosures will be included on our website in the “Investors” section or at investors.innovid.com. We may also use certain social media channels, such as LinkedIn, Facebook or Twitter, as a means of disclosing information about us and our business to our colleagues, customers, investors and the public. While not all of the information that the Company posts to the Innovid website or to social media accounts is of a material nature, some information could be deemed to be material. Accordingly, investors should monitor our website and certain of our social media channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. However, information contained on, or that can be accessed through, these communications channels do not constitute a part of this Quarterly Report and are not incorporated by reference herein. Our SEC filings are available to you on the SEC’s website at http://www.sec.gov. This site contains reports and other information regarding issuers that file electronically with the SEC. The information on that website is not part of this Quarterly Report and is not incorporated by reference herein.

Table of Contents

Part I

Item 1. Financial Statements

INNOVID, CORP. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except stock and per stock data)


	June 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Cash and cash equivalents	$	43,384	$	37,541
Short-term bank deposits	—		10,000
Trade receivables, net (allowance for credit losses of $330 and $65 at June 30, 2023, and December 31, 2022, respectively)	43,238		43,653
Prepaid expenses and other current assets	4,123		2,640
Total current assets	90,745		93,834
Long-term deposit	260		277
Long-term restricted deposits	396		430
Property and equipment, net	18,959		14,322
Goodwill	102,473		116,976
Intangible assets, net	27,659		29,918
Operating lease right of use asset	2,008		2,910
Other non-current assets	834		938
Total non-current assets	152,589		165,771
TOTAL ASSETS	$	243,334	$	259,605

LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade payables	4,421		3,361
Employees and payroll accruals	10,969		10,165
Lease liabilities - current portion	1,611		2,186
Accrued expenses and other current liabilities	5,194		5,474
Total current liabilities	22,195		21,186
Long-term debt	20,000		20,000
Lease liabilities - non-current portion	1,081		1,636
Other non-current liabilities	9,461		6,554
Warrants liability	1,022		4,301
Total non-current liabilities	31,564		32,491
TOTAL LIABILITIES	53,759		53,677
COMMITMENTS AND CONTINGENT LIABILITIES (Note 7)
Common stock: $0.0001 par value - Authorized: 500,000,000 at June 30, 2023, and December 31, 2022; Issued and outstanding: 138,737,104 and 133,882,414 at June 30, 2023, and December 31, 2022, respectively	13		13
Additional paid-in capital	367,970		356,801
Accumulated deficit	(178,408)		(150,886)
Total stockholders’ equity	189,575		205,928
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	243,334	$	259,605

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

Table of Contents

INNOVID, CORP. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except stock and per stock data)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues	$	34,546	$	33,088	$	65,031	$	58,950
Cost of revenues (1)	8,591		7,351		16,856		13,277
Research and development (1)	6,876		9,710		13,993		16,964
Sales and marketing (1)	11,460		14,320		23,097		24,671
General and administrative (1)	8,924		9,955		18,574		21,410
Depreciation and amortization	2,064		926		4,094		1,599
Goodwill impairment	14,503		—		14,503		—
Operating loss	(17,872)		(9,174)		(26,086)		(18,971)
Finance income, net	(248)		(13,306)		(2,723)		(15,617)
Loss before taxes	(17,624)		4,132		(23,363)		(3,354)
Taxes on income	1,335		(168)		4,159		(205)
Net (loss) income	(18,959)		4,300		(27,522)		(3,149)

Net (loss) income attributable to common stockholders	$	(18,959)	$	4,300	$	(27,522)	$	(3,149)
Net (loss) income per stock attributable to common stockholders
Basic	$	(0.14)	$	0.03	$	(0.20)	$	(0.02)
Diluted	$	(0.14)	$	0.03	$	(0.20)	$	(0.02)
Weighted-average number of stock used in computing net (loss) income per stock attributable to common stockholders
Basic	137,643,910		132,152,652		134,296,569		128,220,893
Diluted	137,643,910		139,988,123		134,296,569		128,220,893

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

(1) Exclusive of depreciation, amortization and goodwill impairment presented separately.

Table of Contents

INNOVID, CORP. AND ITS SUBSIDIARIES CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except stock data)


	Common stock		Additional paid-in capital		Accumulated deficit	Total stockholders’ equity
		Number					Amount
Balance as of December 31, 2021		119,017,380	$	12			$	293,719	$	(132,476)	$	161,255
Common stock and equity awards issued for acquisition of TVS		11,549,465	1				47,151		—		47,152
Stock-based compensation		—	—				1,496		—		1,496
Stock options exercised		1,521,927	—				462		—		462
Net loss		—	—				—		(7,449)		(7,449)
Balance as of March 31, 2022 (unaudited)		132,088,772	$	13			$	342,828	$	(139,925)	$	202,916
Stock-based compensation		—	—				4,628		—		4,628
Stock options exercised		322,943	—				174		—		174
Net income		—	—				—		4,300		4,300
Balance as of June 30, 2022 (unaudited)		132,411,715	$	13			$	347,630	$	(135,625)	$	212,018

	Common stock		Additional paid-in capital		Accumulated deficit	Total stockholders’ equity
		Number					Amount
Balance as of December 31, 2022		133,882,414	$	13			$	356,801	$	(150,886)	$	205,928
Stock-based compensation		—	—				4,897		—		4,897
Stock options exercised and RSUs vested		2,734,320	—				250		—		250
Net loss		—	—				—		(8,563)		(8,563)
Balance as of March 31, 2023 (unaudited)		136,616,734	$	13			$	361,948	$	(159,449)	$	202,512
Stock-based compensation		—	—				5,658		—		5,658
Stock options exercised and RSUs vested		2,120,370	—				364		—		364
Net loss		—	—				—		(18,959)		(18,959)
Balance as of June 30, 2023 (unaudited)		138,737,104	$	13			$	367,970	$	(178,408)	$	189,575

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

Table of Contents

INNOVID, CORP. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except stock and per stock data)


	Six Months Ended June 30, 2023
	2023		2022
Cash flows from operating activities:	(Unaudited)		(Unaudited)
Net loss	$	(27,522)	$	(3,149)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4,094		1,599
Goodwill impairment	14,503		—
Stock-based compensation	9,865		5,634
Change in fair value of warrants	(3,279)		(15,946)
Changes in operating assets and liabilities
Decrease / (increase) in trade receivables, net	415		(4,624)
Increase in prepaid expenses and other current assets	(1,390)		(747)
Decrease in operating lease right of use assets	902		872
Increase / (decrease) in trade payables	1,060		(321)
Increase in employees and payroll accruals	804		1,044
Decrease in operating lease liabilities	(1,130)		(1,208)
Increase in accrued expenses and other current liabilities	2,626		945
Net cash provided by / (used in) operating activities	948		(15,901)
Cash flows from investing activities:
Acquisition of business, net of cash acquired	—		(99,568)
Internal use software capitalization	(5,591)		(3,516)
Purchase of property and equipment	(189)		(221)
Withdrawal of short-term bank deposits	10,000		—
Increase in deposits	27		32
Net cash provided by / (used in) investing activities	4,247		(103,273)
Cash flows from financing activities:
Proceeds from loans	10,000		9,000
Repayment of loans	(10,000)		—
Payment of SPAC merger transaction costs	—		(3,185)
Proceeds from exercise of options	614		636
Net cash provided by financing activities	614		6,451
Increase (decrease) in cash, cash equivalents, and restricted cash	5,809		(112,723)
Cash, cash equivalents, and restricted cash at the beginning of the period	37,971		157,158
Cash, cash equivalents, and restricted cash at the end of the period	$	43,780	$	44,435
Supplemental disclosure of cash flows activities:
(1) Cash paid during the period for:
Income taxes paid, net of tax refunds	$	879	$	363
Interest	$	782	$	137
(2) Non-cash transactions:
Business combination consideration paid in stock	$	—	$	47,152
Reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets
Cash and cash equivalents	43,384		44,024
Long-term restricted deposits	396		411
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	43,780	$	44,435

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

INNOVID, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except stock and per stock data)

1. DESCRIPTION OF BUSINESS

Innovid Corp. together with its consolidated subsidiaries, the “Company” or “Innovid”, is a leading independent software platform that provides an ad serving and creative personalization platform for the creation, delivery, and measurement of TV ads across connected TV (“CTV”), mobile TV and desktop TV environments to advertisers, publishers and media agencies.

Innovid Corp. was originally incorporated as ION Acquisition Corp. 2 Ltd. (“ION”), a special purpose acquisition company, on November 23, 2020 and Innovid Corp. was the surviving entity following the completion of its merger with ION on November 30, 2021 (the “ION Transaction”).

On February 28, 2022, the Company completed the acquisition of TV Squared Limited (“TVS”, together with ION’s Transaction, the “Transactions”) by way of stock purchase agreement (“Stock Purchase Agreement”). The Company acquired all of the equity of TVSquared for an aggregate amount of $100,000 in cash, 11,549,465 shares of the Company common stock at fair value of $3.80 per share and the issuance of 949,893 fully vested stock options of the Company at a weighted average fair value of $3.49, subject to certain adjustments as defined in the Stock Purchase Agreement.

Innovid Corp.’s common stock and warrants are trading on the NYSE under the symbols “CTV” and “CTV.WS,” respectively, since December 1, 2021.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with US GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative US GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation. The Company’s interim period results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.

The condensed consolidated balance sheet as of December 31, 2022, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s 2022 Annual Report on Form 10-K.

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2022, have been applied consistently in these unaudited interim condensed consolidated financial statements, unless otherwise stated.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates, judgments, and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

INNOVID, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except stock and per stock data)

Accounting Policies

Software development costs

Software development costs, which are included in property and equipment, net, consists of capitalized costs related to the purchase and development of internal-use software. The Company uses such software to provide services to its customers. The costs to purchase and develop internal-use software are capitalized from the time that the preliminary project stage is completed, and it is considered probable that the software will be used to perform the function intended. These costs include personnel and personnel-related employee benefits for employees directly associated with the software development and external costs of the materials or services consumed in developing or obtaining the software.

Any costs incurred for upgrades and functionality enhancements of the software are also capitalized. Once this software is ready for use in providing the Company's services, these costs are amortized on a straight-line basis over the estimated useful life of the software, which is three years. The amortization is presented within depreciation and amortization in the condensed consolidated statements of operations. During the three and six months ended June 30, 2023 (unaudited), the Company capitalized $2,825 and $6,281, respectively, and during the three and six months ended June 30, 2022 (unaudited), the Company capitalized $2,335 and $4,006, respectively, related to internal-use software cost.

Impairment of long-lived assets

Long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances either internally or externally may indicate that the carrying value of an asset may not be recoverable. If there are indications of an impairment, the Company tests for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss. During the three and six months ended June 30, 2023 (unaudited), the Company tested its long-lived assets for recoverability and concluded that no impairment should be recognized.

Goodwill and acquired intangible assets

Goodwill and acquired intangible assets have been recorded in the Company's financial statements resulting from various business combinations. Goodwill represents the excess of the purchase price in a business combination over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed. Goodwill is subject to an annual impairment test.

Reporting units are evaluated when changes in the Company’s operating structure occur, and if necessary, goodwill is reassigned using a relative fair value allocation approach. The Company currently has one reporting unit.

ASC 350, Intangibles—Goodwill and other (“ASC 350”) requires goodwill to be tested for impairment at least annually and, in certain circumstances, between annual tests. The accounting guidance gives the option to perform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment considers events and circumstances that might indicate that a reporting unit's fair value is less than its carrying amount. If it is determined, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative test is performed. The Company elects to perform an annual impairment test of goodwill as of October 1 of each year, or more frequently if impairment indicators are present. During the three months ended June 30, 2023, the Company recorded Goodwill impairment in the amount of $14,503. Refer to Note 3 for further details.

Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured at fair value at the acquisition date.

Customer relationships, acquired technology and trade name are being amortized over the estimated useful life of approximately 11 years, 6 years, and 4 years, respectively, using the straight-line amortization method.

The amortization of customer relationships, acquired technology and trade names, is presented within depreciation and amortization in the condensed consolidated statements of operations.

INNOVID, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except stock and per stock data)

Fair value of financial instruments

The Company applies a fair value framework to measure and disclose its financial assets and liabilities. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjus

SEC Form 10-Q filed by Innovid Corp.