ctv-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________________________________________________________________________

FORM 10-Q

____________________________________________________________________________________________________________________________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended September 30, 2024


¨			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)

N/A

(Former name, former address and former Fiscal Year, if changed since last report)

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 148,473,428 shares of common stock as of October 31, 2024

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TABLE OF CONTENTS


			Page
Part I
Item 1. Financial Statements			5
Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023			6
Condensed Consolidated Statements of Operations for the three and nine months ended S e ptember 30, 2024 and 2023			7
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended Septe m ber 30, 2024 and 2023			8
Condensed Consolidated Statements of Cash Flows for the nine months ended S e ptember 30, 2024 and 2023			9
Notes to the Condensed Consolidated Financial Statements			10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			35
Item 4. Controls and Procedures			35

Part II
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 3. Defaults Upon Senior Securities			36
Item 4. Mine Safety Disclosures			36
Item 5. Other Information			36
Item 6. Exhibits			37
Signatures			38

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) 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 and the stock repurchase program. 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 Quarterly Report, 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;

• actual or potential impacts of international conflicts and humanitarian crises on global markets;

• 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; and

• other risks and uncertainties indicated in this report, including those set forth under the section titled “Risk Factors” and those included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report on Form 10-K”), which was filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024.

These forward-looking statements are based on information available as of the date of this Quarterly Report 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.

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.

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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 X (formerly Twitter), as a means of disclosing information about us and our business to our colleagues, customers, investors and the public. While not all 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.

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Part I

Item 1. Financial Statements

INNOVID CORP. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except share and per share data)


	September 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	34,564	$	49,585
Trade receivables, net of allowance for credit losses of $292 and $321 at September 30, 2024, and December 31, 2023, respectively	44,365		46,420
Prepaid expenses and other current assets	4,475		5,615
Total current assets	83,404		101,620
Long-term restricted deposits	423		412
Property and equipment, net	21,006		18,419
Goodwill	102,473		102,473
Intangible assets, net	21,305		24,318
Operating lease right of use asset	10,894		1,435
Other non-current assets	903		1,278
Total assets	$	240,408	$	249,955

Liabilities and Stockholders’ Equity
Current liabilities:
Trade payables	$	3,793	$	2,810
Employee and payroll accruals	9,140		14,060
Lease liabilities—current portion	1,388		1,200
Accrued expenses and other current liabilities	9,397		7,426
Total current liabilities	23,718		25,496
Long-term debt	—		20,000
Lease liabilities—non-current portion	9,835		634
Other non-current liabilities	6,927		7,528
Warrants liability	411		307
Commitments and contingencies (Note 6)
Stockholders’ equity:
Common stock: $0.0001 par value - Authorized: 500,000,000 at September 30, 2024, and December 31, 2023; Issued and outstanding: 147,773,651 and 141,194,179 at September 30, 2024, and December 31, 2023, respectively	15		13
Additional paid-in capital	394,410		378,774
Accumulated deficit	(194,908)		(182,797)
Total stockholders’ equity	199,517		195,990
Total liabilities and stockholders’ equity	$	240,408	$	249,955

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

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INNOVID CORP. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except share and per share data)


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Revenue	$	38,251	$	36,234	$	112,940	$	101,265
Cost of revenue (1)	8,917		8,428		26,746		25,284
Research and development (1)	7,021		6,486		20,646		20,479
Sales and marketing (1)	11,682		11,175		35,523		34,272
General and administrative (1)	9,238		9,753		29,070		28,327
Depreciation, amortization and long-lived assets impairment	2,836		4,714		8,291		8,808
Goodwill impairment	—		—		—		14,503
Operating loss	(1,443)		(4,322)		(7,336)		(30,408)
Finance income, net	(285)		(290)		(405)		(3,013)
Loss before taxes	(1,158)		(4,032)		(6,931)		(27,395)
Taxes on (income) loss	(5,823)		(1,301)		5,180		2,858
Net income (loss)	$	4,665	$	(2,731)	$	(12,111)	$	(30,253)

Net income (loss) per share common share—basic	$	0.03	$	(0.02)	$	(0.08)	$	(0.22)
Net income (loss) per share common share—diluted	$	0.03	$	(0.02)	$	(0.08)	$	(0.22)
Weighted-average number of shares used in computing net income (loss) per share:
Basic	146,822,073		139,607,389		144,664,912		137,826,099
Diluted	152,504,240		139,607,389		144,664,912		137,826,099

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

(1) Exclusive of depreciation, amortization, long-lived assets and goodwill impairment presented separately.

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INNOVID CORP. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited and in thousands, except share and per share data)


		Three months ended September 30, 2024
	Common stock		Additional paid-in capital			Accumulated deficit		Total stockholders’ equity
		Shares			Amount
Balance as of June 30, 2024		145,803,657	$	14		$	388,467	$	(199,573)	$	188,908
Stock-based compensation						5,710				5,710
Issuance of common stock:
—exercised options and RSUs vested		1,969,994	1			233				234
Net income								4,665		4,665
Balance as of September 30, 2024		147,773,651	$	15		$	394,410	$	(194,908)	$	199,517

		Three months ended September 30, 2023
		Common stock				Additional paid-in capital		Accumulated deficit		Total stockholders’ equity
		Shares	Amount
Balance as of June 30, 2023		138,737,104	$	13		$	367,970	$	(178,408)	$	189,575
Stock-based compensation						5,919				5,919
Issuance of common stock:
—exercised options and RSUs vested		1,399,801	—			158				158
Net loss								(2,731)		(2,731)
Balance as of September 30, 2023		140,136,905	$	13		$	374,047	$	(181,139)	$	192,921

		Nine months ended September 30, 2024
	Common stock		Additional paid-in capital			Accumulated deficit		Total stockholders’ equity
		Shares			Amount
Balance as of December 31, 2023		141,194,179	$	13		$	378,774	$	(182,797)	$	195,990
Stock-based compensation						15,324				15,324
Issuance of common stock:
—exercised options and RSUs vested		6,579,472	2			312				314
Net loss								(12,111)		(12,111)
Balance as of September 30, 2024		147,773,651	15			$	394,410	$	(194,908)	$	199,517

		Nine months ended September 30, 2023
		Common stock				Additional paid-in capital		Accumulated deficit		Total stockholders’ equity
		Shares	Amount
Balance as of December 31, 2022		133,882,414	$	13		$	356,801	$	(150,886)	$	205,928
Stock-based compensation						16,474				16,474
Issuance of common stock:
—exercised options and RSUs vested		6,254,491	—			772				772
Net loss								(30,253)		(30,253)
Balance as of September 30, 2023		140,136,905	$	13		$	374,047	$	(181,139)	$	192,921

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

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INNOVID CORP. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)


	Nine months ended September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(12,111)	$	(30,253)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and long-lived assets impairment	8,291		8,808
Loss on disposal of property and equipment	15		—
Goodwill impairment	—		14,503
Stock-based compensation	14,526		15,470
Change in fair value of warrants	104		(3,688)
Loss on foreign exchange, net	321		—
Changes in operating assets and liabilities:
Trade receivables, net	2,055		94
Prepaid expenses and other assets	1,349		(1,167)
Operating lease right of use assets	438		1,351
Trade payables	984		(36)
Employee and payroll accruals	(4,920)		1,770
Operating lease liabilities	(508)		(1,683)
Accrued expenses and other liabilities	1,371		2,268
Net cash provided by operating activities	11,915		7,437
Cash flows from investing activities:
Internal use software capitalization	(6,098)		(7,795)
Purchases of property and equipment	(983)		(395)
Withdrawal of short-term bank deposits	165		10,000
Decrease in deposits	—		77
Net cash (used in) provided by investing activities	(6,916)		1,887
Cash flows from financing activities:
Proceeds from loan	—		20,000
Payment on loan	(20,000)		(20,000)
Proceeds from exercise of options	312		772
Net cash (used in) provided by financing activities	(19,688)		772
Effect of exchange rates on cash, cash equivalents and restricted cash	(321)		—
(Decrease) increase in cash, cash equivalents, and restricted cash	(15,010)		10,096
Cash, cash equivalents, and restricted cash at the beginning of the period	49,997		37,971
Cash, cash equivalents, and restricted cash at the end of the period	$	34,987	$	48,067
Supplemental disclosures:
Income taxes paid	$	2,990	$	1,129
Interest paid	$	117	$	1,141
Non-cash transactions:
Right of use assets obtained in exchange for lease liability upon lease modification	$	9,897	$	—
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	34,564	$	47,680
Long-term restricted deposits	423		387
Total cash, cash equivalents, and restricted cash	$	34,987	$	48,067

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

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INNOVID CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2024

1. Description of Business

Innovid Corp. together with its consolidated subsidiaries, the “Company” or “Innovid”, is an enterprise software platform for the creation, delivery, measurement, and optimization of advertising across connected TV (“CTV”), mobile TV and desktop environments. We provide critical technology infrastructure for many of the world’s largest brands, agencies, and publishers, and empower them to create ad-supported TV experiences that people love. Our cloud-based platform tightly integrates with the highly fragmented advertising technology and media ecosystems, and includes three key solutions: ad serving, creative personalization, and measurement.

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 “Transaction”).

On February 28, 2022, the Company completed the acquisition of all the outstanding shares of TV Squared Limited (“TVS”) an independent global measurement and attribution platform for converged TV and a private company limited by shares incorporated under the laws of the Scotland in a combination of cash and stock and stock options issuances.

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X. 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”). Accordingly, such financial statements do not include all the information and footnotes required by US GAAP for complete financial statements. In management’s opinion, these unaudited condensed consolidated interim financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements for the interim period presented.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023, as reported in the Company’s 2023 Annual Report on Form 10-K. The Company’s significant accounting policies and practices are as described in the Annual Report.

Use of Estimates

The preparation of the condensed consolidated interim financial statements in conformity with US GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in the financial statements. The results for interim periods are not necessarily indicative of results to be expected for the year or for any future periods. In management’s opinion, these unaudited condensed consolidated interim financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements for the interim period presented based upon information available at the time they are made. Actual results could differ from those estimates.

Prior Period Reclassification

Certain amounts in prior year’s condensed consolidated balance sheet have been reclassified to conform to current year’s presentation.

Accounting Policies

Trade receivable, net

The Company records trade receivables for amounts invoiced and yet unbilled. The Company’s expected loss allowance methodology for trade receivables is based upon its assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable

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INNOVID CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2024

forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. The estimated credit loss allowance is recorded as general and administrative expenses on the Company's condensed consolidated statements of operations.

Concentrations of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, deposits and trade receivables, net. The majority of the Company’s cash and cash equivalents are invested in deposits with major banks in the US, Israel and the UK. The Company is exposed to credit risk in the event of default by the financial institutions to the extent that amounts recorded on the accompanying consolidated balance sheets exceed insured limits. Generally, these investments may be redeemed upon demand and, therefore, bear minimal risk.

The Company’s trade receivables, net is mainly derived from sales to customers located in the US, APAC, EMEA, and LATAM. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions. The Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.

During the three and nine months ended September 30, 2024 and 2023, one customer accounted for more than 10% of the Company’s total revenue as presented below:


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Customer A	15	%	16	%	16	%	16	%

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 months ended September 30, 2024 and 2023, the Company capitalized internal-use software cost of $2.0 million and $2.5 million, respectively. During the nine months ended September 30, 2024 and 2023, the Company capitalized internal-use software cost of $6.9 million and $8.8 million, respectively, which represents labor costs including stock based compensation.

Cloud computing arrangements

During nine months ended September 30, 2024, the Company capitalized certain application development phase costs related to hosting arrangements that are service contracts (cloud computing arrangements). Capitalized costs are included in prepaid expenses and other assets in the condensed consolidated balance sheets and will be amortized on a straight-line basis over the estimated useful life, once the modules or components are ready for its intended use. The amount capitalized at September 30, 2024 was immaterial. This amortization will be recorded to software subscription expense within general and administrative expense in the condensed consolidated statements of operations. Cash outflows from cloud computing arrangement implementation costs are classified within operating activities in the consolidated statements of cash flows.

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

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INNOVID CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2024

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. No impairment was recognized during the three or nine months ended September 30, 2024. In September 2023, the Company identified an impairment indicator for its legacy measurement product and recorded an impairment charge of $2.4 million in the three and nine months ended September 30, 2023.

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 not amortized as it is estimated to have an indefinite life. As such, goodwill is subject to an annual impairment test.

The Company allocates goodwill to reporting units based on the expected benefit from the business combination. 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 operates in one operating segment and this segment is the only 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. In the second quarter of 2023, the Company experienced a decline in its stock price resulting in its market capitalization being less than the carrying value of its one reporting unit. Thus, the Company performed quantitative assessments of the Company’s reporting unit. The fair value was determined based on the market approach. The market approach utilizes the Company's market capitalization plus an appropriate control premium. Market capitalization is determined by multiplying the number of common stock outstanding by the market price of its common stock. The control premium is determined by utilizing publicly available data from studies for similar transactions of public companies. As a result of this assessment, the Company recorded a goodwill impairment of $14.5 million during the three months ended June 30, 2023. No impairment was recognized during the three or nine months ended September 30, 2024.

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 and acquired technology are amortized on a straight-line basis over the estimated useful life of the assets; approximately 11 years and 6 years, respectively. Amortization of customer relationships and acquired technology is presented within depreciation and amortization in the condensed consolidated statements of operations.

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 (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Includes other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs that are supported by little or no market activity.

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INNOVID CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2024

The Company’s financial instruments consist of cash and cash equivalents, restricted deposits, trade receivables, net, trade payables, employees, payroll accruals, accrued expenses and other current liabilities. Due to the short-term nature of these instruments, historical carrying amounts approximate fair value.

The Company’s investments in money market funds are classified as cash equivalents and measured at fair value. The Company measures its warrant liability at fair value.

The following tables present information about the Company’s financial instruments that are measured at fair value on a recurring basis:


	September 30, 2024
	Level 1		Level 2		Level 3
Assets:
Money market funds	$	18,919	$	—	$	—

Liabilities:
Warrants liability	411		—		—


	December 31, 2023
	Level 1		Level 2		Level 3
Assets:
Money market funds	$	32,264	$	—	$	—
Liabilities:
Warrants liability	307		—		—

As of September 30, 2024, the Company’s warrant liability represents the warrants (refer to Note 4), that were assumed in the Transaction, which were originally issued in connection with ION’s initial public offering. The Company’s warrants are recorded on the balance sheet at fair value with changes in fair value recognized through earnings. The Company’s warrants are within Level 1 of the fair value hierarchy. This valuation is subject to re-measurement at each balance sheet date. The Company determines the fair value of the warrants by using the closing warrant price.

Revenue recognition

Most of the Company’s revenue is derived from digital ad solutions, where the Company provides an ad serving platform for use by advertisers, media agencies and publishers. Standard, interactive and data driven digital video ads are delivered through this ad serving platform. Advertising impressions are served via the Company’s cloud-based ad serving platform to various digital publishers across CTV, mobile TV, desktop TV, display and other channels.

InnovidXP, the Company’s cloud-based cross-platform TV Ad measurement solution, measures the efficiency of CTV advertising and in-flight optimizations for TV marketers. The customers get insights into the effectiveness of their TV and digital advertising.

The Company also provides creative services for the design and development of interactive data-driven and dynamic ad formats by adding data, interactivity and dynamic features to standard ad units.

The Company recognizes revenue when its customer obtains control of promised services in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company recognizes revenue in accordance with ASC Topic 606, Revenue from contracts with customers (“ASC 606”) and determines revenue recognition through the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when a performance obligation is satisfied.

For arrangements with multiple performance obligations, which represent promises within an arrangement that are capable of being distinct and are separately identifiable, the Company allocates the contract consideration to all distinct performance obligations based on their relative standalone selling price (“SSP”). SSP is typically estimated based on observable transactions when these services are sold on a standalone basis.

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INNOVID CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2024

Revenue related to ad serving is recognized when impressions are delivered via the Company’s ad serving platform. The Company recognizes revenue from the display of impression-based ads in the contracted period in which the impressions are delivered. Impressions are considered delivered when an ad is displayed to users.

Revenue related to the InnovidXP solution is recognized over time, since the customer simultaneously receives and consumes the benefits provided by the Company’s performance. Revenues for this measurement subscription is recognized over the service period.

Revenue related to creative projects is recognized when the Company delivers an ad unit. Creative services projects are usually delivered within a week.

The Company’s accounts receivable consists primarily of receivables related to products and services, for which the Company’s contracted performance obligations have been satisfied, the amount has been billed and the Company has an unconditional right to payment. The Company typically bills customers monthly based on actual delivery. Payment terms vary, mainly with terms of 60 days or less.

The typical contract term is twelve months or less for ASC 606 purposes. Most of the Company’s contracts can be cancelled without cause. The Company has the unconditional right to payment for the services provided as of the date of the termination of the contracts.

The Company applies the practical expedient in ASC 606 and does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Deferred revenue represents mostly unrecognized fees billed or collected for measurement platform services. Deferred revenue is recognized as (or when) the Company performs under the contract. Revenue recognized during the three and nine months ended September 30, 2024, from amounts included in deferred at the beginning of the period were $0.6 million and $1.7 million, respectively.

Revenue from ad serving solutions via Innovid’s ad serving platform was 74.8% and 73.3% of the Company’s revenue for the three months ended September 30, 2024 and 2023, respectively. Revenue from measurement subscriptions was 22.2% and 23.2% for the three months ended September 30, 2024 and 2023, respectively. Creative services were 3.0% and 3.5% of the Company’s revenue for the three months ended September 30, 2024, and 2023, respectively.

Revenue from ad serving solutions via Innovid’s ad serving platform was 75.2% and 73.4% of the Company’s revenue for the nine months ended September 30, 2024 and 2023, respectively. Revenue from measurement subscriptions was 21.8% and 22.9% for the nine months ended September 30, 2024 and 2023, respectively. Creative services were 3.0% and 3.7% of the Company’s revenue for the nine months ended September 30, 2024 and 2023, respectively.

Costs to obtain a contract

Contract costs include commission programs to compensate sales employees for generating sales orders with new customers or for new services with existing customers. The Company elected to apply the practical expedient and recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less. Most of the Company’s commissions are commensurate. If commissions are not eligible for the practical expedient, the commissions are capitalized and are amortized over three years. As of both September 30, 2024 and December 31, 2023, capitalized commissions were immaterial.

Recently issued accounting pronouncements not yet adopted

As an “emerging growth company,” the JOBS Act allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.

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INNOVID CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2024

Income taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to improve transparency of income tax disclosure by requiring income tax disclosures to contain consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid, disaggregated by jurisdiction. This standard affects the disclosure of income taxes, not the accounting for income taxes. This standard is effective for the Company for the annual period beginning after December 15, 2025, with early adoption permitted. The Company is evaluating the impact of the adoption of ASU 2023-09.

Segments

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public entities to disclose information about their reportable segments’ significant expense and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. This standard is effective for the Company for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is evaluating the impact of the adoption of ASU 2023-07.

3. Leases

Innovid's lease portfolio primarily consists of real estate properties. Short-term leases with a term of 12 months or less are not recorded on the balance sheet. Innovid does not separate lease components from non-lease components.

The Company is a lessee in all its lease agreements. The Company records lease liabilities based on the present value of lease payments over the applicable lease term. Innovid generally uses an incremental borrowing rate to discount its lease liabilities, as the rate implicit in the lease is typically not readily determinable. Certain lease agreements include renewal options that are under the Company's control. Optional renewal periods are included in the lease term when it is reasonably certain that the Company will exercise its option. On February 7, 2024, the Company amended its New York lease agreement extending the term to 2035. The lease contains an option to extend the lease for an additional five-year period and early termination, which are not reasonably certain to be exercised.

Variable lease payments are primarily related to payments to lessors for taxes, maintenance, insurance and other operating costs. The C