Interim Results

3 August 2015

ADGORITHMS LTD

("Adgorithms" or the "Company")

Unaudited Interim Results for the six months ended 30 June 2015

Strong operational and financial performance

Adgorithms, a leading software company operating in the high growth online advertising market, is pleased to announce unaudited interim results for the six months ended 30 June 2015.

Non- GAAP Financial Highlights:

· Revenue increased 80% to $12.3m (H1 2014: $6.8m)

· Adjusted EBITDA* grew 5% to $2.6 million (H1 2014: $2.5 million)

· Adjusted EBITDA** grew 39% to $2.6m (H1 2014: $1.9m), when notional serving fees are added to COGS of H1 2014, to allow for a like-for-like comparison between H1 2014 and H1 2015

· Adjusted Pre-Tax Income** grew 73% to $3.2m (H1 2014: $1.9 m)

· Maintained significant investment in R&D in H1 2015 in line with strategy to further develop the business and its proprietary software, Albert.

· Reaffirms commitment to distribute a year-end dividend of 50% of net earnings, in accordance with the Company's dividend policy

* Excludes share base compensation expenses of $6,750,728 and $2,070,000 in H1 2015 and H1 2014, respectively, and IPO bonuses in 2015 in the amount of $1,220,000.

**Excludes share base compensation expenses of $6,750,728 and $2,070,000 in H1 2015 and H1 2014, respectively, IPO bonuses in 2015 in the amount of $1,220,000 and add back of serving fees in the amount of $611,119 added to COGS in H1 2014 to allow for like-for-like comparison.

Operating Highlights:

· Successful listing on AIM completed on 11 June 2015

o Raised approximately £27.0m before expenses, of which Primary Proceeds £22m to be used to accelerate investment and development of platform, to expand geographic reach and to fund selective acquisitions

· Maintained growth momentum seen in 2014 into the first half of 2015 and now capitalising on opportunities presented through Adgorithms' public company status

· Opening New York office to better serve increased U.S. customer demand and to capture significant North American market opportunity

· Board remains confident of continued growth in 2015 and beyond with the Company trading in line with market expectations

Or Shani, Chief Executive Officer of Adgorithms, commented:

"We are delighted to announce the first set of results since completing our successful IPO in June. Our business continues to grow and has shown strong momentum in the first half of the year.

"The IPO has been an extremely positive catalyst for the business and has generated increased inbound enquiries about the capability of our technology and has resulted in a number of new customers who are currently operating trials, which we expect to convert into retained clients in the near future. We also remain focused on exploring potential acquisition targets, particularly traditional online marketing businesses which lack technological exposure. Such acquisitions will enable Adgorithms to accelerate our growth through enlarging our client base.

"As a public company, we believe we have a far greater capacity to grow our business and exploit opportunities in the online advertising market and deliver shareholder value."

For further information, please contact:

Operational Review

Introduction

Following its admission to trading on AIM in June 2015, Adgorithms is pleased to report its unaudited interim results. The Company delivered a record half year performance for the results to 30 June 2015, with revenue up 80% in H1 2015 to $12.3 million, underpinned by high levels of organic growth driven by increasing demand from customers for Adgorithms software and services.

Company adjusted like-for-like EBITDA grew 39% in H1 2015, to $2.6 million, which included the increase in operating expenses which increased in the period as a result of the preparation and work required to undertake our successful AIM IPO.

The Company's recent admission to trading on AIM not only provided a strong endorsement for the business from institutional investors but has also helped to broaden the Company's profile internationally, which will aid in accelerating a number of organic growth opportunities, as well as providing further financial support as management evaluates selective bolt-on acquisitions.

Adgorithms is looking to acquire businesses to build the client base that can be exposed to its proprietary technology, Albert. The online advertising market is developing rapidly and market penetration and presence is of critical importance to Adgorithms. Albert has demonstrated superior performance in the online advertising field and hence M&A activity will focus on companies enabling the Company to accelerate direct sales penetration through access to clients. Adgorithms continues to evaluate potential acquisitions and will update the market as appropriate.

Since the beginning of the year, positive momentum has continued and Adgorithms has seen strong year on year growth and expects this to continue into the second half of 2015. As a result, the Company remains confident of delivering a strong performance for the full year in line with market expectations.

Adgorithms has delivered a consistent track record since the Company was established in 2010, and continues to drive revenues through organic growth of the business. The Board reiterates its commitment to distribute a year-end dividend of 50% of net earnings, in accordance with the Company's stated dividend policy.

Business Summary

Adgorithms is a software company which operates in the high growth online advertising market. Over the past five years, Adgorithms has developed a proprietary, artificial intelligence based algorithmic technology, called Albert, which is one of the most efficient, cost effective and scalable software platforms in the online advertising market.

The market has experienced significant structural change in recent years. Traditionally, brands employed media agencies to create advertising campaigns and purchase advertising placement opportunities on publishers' websites. Agencies would liaise with publishers directly to acquire a predetermined amount of online placement opportunities or ''inventory'' for their clients.

The key challenge facing brands and agencies is selecting the inventory that will deliver the best ROI, given the quantum of advertising opportunities available.

The Company created an artificial intelligence based proprietary software solution to make the process more efficient for advertisers by maximising their ability to deliver an advertisement to the right user, at the right price and at the right time, delivering attractive ROIs. Furthermore, unlike labour-intensive campaign management, Albert can automate the management of hundreds of thousands of campaigns simultaneously, allowing the Company to significantly leverage its personnel and scale its business rapidly.

Using complex algorithms, historical data and artificial intelligence, Albert seeks to predict user intent and deliver advertisements that are likely to engage that particular user and result in higher engagement for the brand. It analyses the available advertising opportunities on the advertising exchanges, decides which one of them is most relevant and ultimately determines the right price to pay for a specific impression. The advert is then displayed on the screen of the user. This whole process occurs in under a second.

The power of the technology as a fully automated solution will enable brands to bring media buying capabilities in house, and in turn, deliver much greater control over their advertising budgets and better insights into campaign management. This evolution to in-house campaign management is fast establishing itself in the market at a critical time, when hundreds of leading global brands are re-evaluating the use of traditional agencies to buy online media on their behalf.

Albert™

The Company's technology solution, Albert, enables online advertisers to efficiently and effectively engage and convert customers. Albert uses its algorithmic software and data assets to access display, video, mobile and social advertising inventory through online advertising exchanges.

On a daily basis, the Company is presented with billions of opportunities to deliver an advertisement to users when advertising impressions become available through the various advertising exchanges. For each impression that becomes available, the Company's software commutes the likelihood and associated value of that impression for each campaign that it manages on behalf of it brand customers. Albert is designed to determine the most appropriate advertisement to show to each user and determines what price to pay for the advertising impression.

Adgorithms' technology has a number of strengths that differentiate it from other companies, enabling the Company to capitalise on the opportunities in the online advertising market, including:

· Automation of campaign management

Reducing the number of employees required to oversee a campaign and enabling them to focus more heavily on tasks requiring business and creative input, such as defining a marketing strategy, determining the accurate KPI's and ROI for a campaign and the design of creative materials (like banners and videos) for the campaigns

· Self-learning

With every campaign, Albert is able to analyse data and the success of previous campaigns. It can then adapt subsequent campaigns for greater return on investment for customers, whilst also filtering out non-effective inventory, including fraudulent activity

· Understanding of consumer behaviour patterns

Albert has insights into consumer behavioural patterns and offers clients targeted online advertising which it can tailor to specific characteristics including geographic, demographic and behavioural.

· Cost of media

Albert can accurately attribute value to each impression, thereby appraising opportunities and maximizing a client's advertising budget. It will therefore only place advertisements where appropriate to maximise the ROI. In the same way, Albert acquires undervalued opportunities as inventory and sells these through advertising exchanges for an immediate profit.

· Fraud reduction

Albert's self-developed pattern recognition techniques and ever evolving learning enable Adgorithms to identify fraudulent traffic and sites and reduces this activity for our clients.

· Reaction to market change

Given Albert's ability to recalibrate due to its constant reaction to the evolving market place in which it operates, Albert is able to maintain its performance in the volatile markets and react to maintain performance despite fluctuations.

Growth strategy

The online advertising market is a rapidly developing market and there is a continued trend toward programmatic buying and campaign management. The Company's strategy is in line with this trend, and Adgorithms aims to become the leading automated platform through which brands and agencies optimise online advertising campaigns to deliver user engagement and conversion.

The Company's key strategic focus is to bring Albert to the mainstream of the online advertising campaign management through both its in-house and SaaS offerings.

The Company currently provides services to brands and media agencies on both a direct and indirect level and Adgorithms is continuing to bolster both these routes to market.

SaaS:

Adgorithms launched an online platform of Albert for brands and agencies to license under a SaaS revenue model. This enables them to run campaigns in house, reducing unnecessary costs and facilitating the capture of all data generated during the campaign for use by the client to assess effectiveness of the campaign and to implement potential changes for future marketing strategy. This represents a significant step forward for the Company, enabling it to potentially generate significant levels of recurring revenue at a high double digit gross margin.

Direct model:

Adgorithms works directly with the businesses looking to run campaigns in the online advertising market. The Company establishes a budget and KPIs with the client before inputting the creative materials into Albert and letting the platform optimise the performance of the campaign until all KPIs have been hit. Once up and running, the campaign is fully automated, resulting in greater efficiency of the campaign as well as reduced costs for the client, particularly important for media agencies.

Indirect model:

Albert is also able to identify when significant brands are purchasing inventory on the advertising exchanges and then tailors specific campaigns for those advertisers. In this way, Adgorithms can bring value at scale to many new customers. Every indirect customer then becomes a direct customer opportunity. During H1/2015 three new activities have been added to the indirect model.

Acquisition strategy

The Company believes that mainstream adoption of the technology will be accelerated following successful acquisitions by the Company and management of larger online advertising budgets by Albert.

Adgorithms has two key strategies to grow its direct client network. Firstly, to increase footprint in the US and Europe. The Company is opening an office in New York and expects to soon open offices in San Francisco and London and to recruit a sales team to drive account wins with direct clients, including brands and media agencies.

Secondly, to increase the scale of the opportunity presented to Adgorithms by exploring acquisitions to accelerate direct sales penetration, thereby building market share and capitalising on the market opportunity in the rapidly evolving online advertising market.

Current Trading & Outlook

Adgorithms experienced strong growth in 2014 and this trend is expected to continue into the second half of 2015.

The Company remains well placed to deliver a strong performance in the second half when, in line with previous years and customary to the online advertising industry, a significant portion of client activity takes place. Historically, the last quarter of the year represents the strongest quarter, driven by the holiday and shopping season across the U.S and Europe, as well as the tendency for brands to spend the remainder of their advertising budget prior to the year end. In contrast the first quarter tends to be significantly weaker than average as many brands use this time to evaluate last year's performance and adjust strategies for the coming year.

Financial Review

Non‐GAAP Adjusted - Unaudited Financial Highlights 

*Excludes share base compensation expenses of $6,750,728 and $2,070,000 in H1 2015 and H1 2014, respectively, and IPO bonuses in 2015 in the amount of $1,220,000.

* *Excludes share base compensation expenses of $6,750,728 and $2,070,000 in H1 2015 and H1 2014, respectively, IPO bonuses in 2015 in the amount of $1,220,000 (includes in operating expenses) and add back of serving fees in the amount of $611,119 added to COGS in H1 2014 to allow for like-for-like comparison.

Unaudited GAAP Financial Highlights

The six months ended 30 June 2015 represented another strong period of trading for Adgorithms. The Company saw an improved level of clients billing, driven by new business momentum, while increasing profitability and strengthening the balance sheet. This excellent performance was achieved through a combination of increased expenditure by existing customers but also by a number of new customers moving from testing to full deployment of Albert. As Albert becomes more integrated with existing customers, we expect both revenue and profits to increase accordingly.

Revenues in the first half of 2015 totalled $12.3 million (H1 2014: $6.8 million), representing an increase of 80%. This growth was driven by the growth of video advertising and other indirect activity. Also, the strong growth achieved can be attributed to the growing number of direct customers using Albert which is testament to the effectiveness of our technology.

Adjusted COGS increased by $4.5 million to $8 million (65% of total revenues) for the six month ended 30 June 2015 from $3.5 million (52% of total revenues) in the same period last year.

The adjusted COGS in the first half of 2015 exclude non-cash share based compensation of $5,069. The adjusted COGS in the first half of 2014 included serving fees of approximately $611,119, which were added to COGS in H1 2014 to allow for a like for like comparison with H1 2015. The Company started paying such serving fees, associated with market needs that evolved with the growth of the video sector, only during the second half of 2014 and expects to continue paying such fees into the future.

The adjusted operating expenses in the first half of 2015 and the first half of 2014 exclude share base compensation of $6.7 million and $2 million respectively, and $1.2 million of IPO bonuses paid to management and employees following the Company's successful IPO in June 2015.

Adjusted operating expenses as a percentage of revenues were 13% in H1 2015 (H1 2014: 21%). The main decrease is associated with the scalability of the technology. Since Albert is fully automated, there is only a marginal growth in operating activities that is needed to support a large growth in revenue. Operating expenses grew by 16%, while revenue grew by 80%.

Adjusted like-for-like EBITDA in the first half of 2015 was $2.6 million (H1 2014: $1.9 million), an increase of 39%. Adjusted EBITDA without serving fees in 2014 grew 5% from $2.5 million in H1/2014 to $2.6 million in H1/2015. Results have benefited from the scalability of the Company's business model and the speed at which Albert can be deployed, from initial sign up to autonomously managing online campaigns.

As with the broader advertising industry, our business is significantly second half and particularly fourth quarter weighted and as such is expected to deliver a significant proportion of revenue in the fourth quarter.

Cash and cash equivalents increased by $32.8 million to $34.7 million as at 30 June 2015, compared to $1.9 million as of 31 December 2014. The increase in cash was a result of the net proceeds of the June 2015 IPO ($30.9 million), Positive cash flow from operations ($3.7 million) less dividend paid on account of 2014 ($1.8 million).

Cash flow from operating activities of $3.7 million was significantly higher in H1 2015 than in H1 2014 ($1 million). This was mainly due to an improvement in receivables achieved during the period, as a result of implementation of better account receivable management procedures implemented by the company during the period.

Forward looking statement

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements. Any forward-looking statements in this announcement reflect Adgorithms' view with respect to future events as at the date of this announcement. Save as required by law or by the AIM Rules for Companies, Adgorithms undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations or to reflect events or circumstances after the date of this announcement.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

U.S. dollars in thousands

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

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

U.S. dollars in thousands

*) Represents an amount lower than $ 1.

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

CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands (except per share data)

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

U.S. dollars in thousands

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

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

U.S. dollars in thousands

*) Represents an amount lower than $ 1.

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

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

NOTES TO CONSOLIDATED FINANCIAL INFORMATION

U.S. dollars in thousands, except share and per share data

NOTE 1:- GENERAL

a. Company description:

Adgorithms Ltd. ("the Company") was incorporated under the laws of Israel and commenced operations in September 2010. The Company's registered address is 20 Lincoln Street, Tel-Aviv, Israel.

The Company is engaged in the field of solutions for online advertising including the use of Artificial Intelligence ("AI"). The Company develops and deploys algorithmic solutions to maximize delivery to a specific audience suitable for the advertiser.

b. In June 2015 the Company completed an Initial Public Offering ("IPO") and was admitted to trading on the Alternative Investment Market in the "London Stock Exchange" and issued 16,541,353 ordinary shares at a price of 1.33 GBP per share, for a total consideration of $34,017 before underwriting and issuance expenses. Total net proceeds from the issuance amounted to $30,385.

c. In March 2014, the Company established a wholly-owned subsidiary in the United States, Adgorithms Inc. ("the Subsidiary"). Through 30 June 2015, the Subsidiary was inactive.

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been applied consistently in the consolidated financial information for all periods presented, unless otherwise stated.

a. Unaudited interim financial information

The accompanying unaudited interim consolidated financial statements have been prepared in a condensed format in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS as adopted by the EU") for interim financial information. Accordingly, they do not include all the information and footnotes required by IFRS as adopted by the EU for complete financial statements. These financial statements should be read in conjunction with the Company's annual consolidated financial statements as of 31 December 2014 and for the year then ended. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended 30 June 2015 are not necessarily indicative of the results that may be expected for the year ended 31 December 2015.

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

b. Research and development expenses, net:

Research and development expenses of the Company are represented net from revenues generated as part of the Company's development of new features, activities and service lines.

NOTE 3:- EQUITY

a. On 3 June 2015, the Board of Directors approved issuing to each Ordinary shareholder 2,499 additional Ordinary shares (stock split), for each issued and outstanding Ordinary share held, so that following such issuance of the Ordinary Bonus Shares; each shareholder will hold 2,500 Ordinary shares for each ordinary share held prior to the stock split.

All Ordinary shares and per share data included in these financial statements for all periods presented have been retroactively adjusted to reflect the issuance of Bonus shares on 3 June 2015.

b. On 3 June 2015, the Board of Directors and the shareholders of the Company approved an increase in the authorised share capital of the Company of NIS 900,000, which shall be divided into 90,000,000 Ordinary Shares par value of NIS 0.01 each, such that following such increase, the Company's authorised share capital shall be NIS 1,000,000, divided into 100,000,000 Ordinary Shares.

c. On 4 June 2015, the Board of Directors approved the issuance to the Chief Executive Officer of warrants to purchase 6,837,500 Ordinary shares of the Company at a price equal to the par value of the Ordinary shares. The warrants were all exercised into Ordinary shares of the Company immediately.

In accordance with IFRS 2, this grant of warrants was accounted for as a cancellation on options previously granted to employees (treated as an in substance stock dividend) and as such, no expense was recorded with respect of this grant.

d. Dividend distribution:

In April 2015, the Company submitted to the court in Israel a request for a capital distribution in the amount of approximately $ 2,149. In May 2015 the request was approved by the court and the Company distributed the entire amount as dividend on 2 June 2015.

e. Share-based payments:

In October 2013, the Board of Directors of the Company adopted the Company's 2013 Share Option Plan ("Plan"). The Plan provides for the grant of options to

NOTE 3:- EQUITY (Cont.)

purchase ordinary shares of the Company to employees, officers, directors, consultants and advisors of the Company.

The share-based payment transactions that the Company granted to its employees and non-employees are described below. There have been no modifications or cancellations to any of the options during 2015, other than the acceleration mentioned below.

Options issued to employees:

Options issued under the Plan expire 10 years from the vesting commencing date. The options generally vest over three- four years (25% at each anniversary).

The following table lists the number of share options, granted to employees, the weighted average exercise prices of share options and movement in options during the year:

The weighted average grant date fair values of options granted during the six month period ended June 30 2015 was $0.928 and for the options granted during the year 2014 $0.32.

The weighted average remaining contractual life of the outstanding options as of 30 June 2015 is 9.92 years.

On 27 May 2015 and on 3 June 2015, the Board of Directors approved the acceleration of vesting of 5,755,000 options granted to certain employees.

NOTE 3:- EQUITY (Cont.)

Options issued to non-employees:

The Company's outstanding options to non-employees as of 30 Jun 2015 were as follows:

The cost of share based payments recognized in profit or loss for services received from employees and non-employees consultants is shown in the following table:

NOTE 4:- NET EARNINGS PER SHARE

a. Basic net earnings per share:

1. Details of the income used in the computation of basic and diluted net earnings per share:

2. Details of the number of shares used in the computation of basic and diluted net earnings per share:

b. Diluted net earnings per share

All of the options granted to employees were taken into account in calculating the diluted earnings per share.