ad pepper media International N.V.

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ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 52990050T51W55KK4X45 2023-12-31 ifrs-full:MiscellaneousOtherReservesMember 52990050T51W55KK4X45 2022-12-31 ifrs-full:MiscellaneousOtherReservesMember 52990050T51W55KK4X45 2022-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember 52990050T51W55KK4X45 2023-12-31 ifrs-full:ReserveOfSharebasedPaymentsMember 52990050T51W55KK4X45 2023-12-31 adpepper:ReservesMember 52990050T51W55KK4X45 2022-12-31 adpepper:ReservesMember 52990050T51W55KK4X45 2022-12-31 ifrs-full:SharePremiumMember 52990050T51W55KK4X45 2023-12-31 ifrs-full:SharePremiumMember 52990050T51W55KK4X45 2023-01-01 2023-12-31 iso4217:EUR iso4217:EUR xbrli:shares xbrli:pure iso4217:EUR xbrli:shares ANNUAL REPORT 20 « 23 CONTENT 01 Letter from the Board of Directors 8 02 Report of the Supervisory Board 12 03 Remuneration Report 18 04 Report of the Board of Directors 24 04.1 Governance 26 Our Governance Structure 27 Comply or Explain 32 Decree Article 10 Takeover Directive (Besluit Artikel 10 Overnamerichtlijn) 34 04.2 The ad pepper Share 38 04.3 Business Activity 42 Disclaimer regarding Forward-looking Statements 43 The ad pepper Group 43 Segments of the ad pepper Group 45 Employees and Values 48 04.4 Economic Development 50 Macroeconomic Framework 51 Presentation of Earnings Position 52 Presentation of Financial and Net Asset Position 52 04.5 Risk Report 56 Foreword 57 Risk Classiﬁcation 57 Operational risk 57 Strategic risk 60 Financial risk 61 Compliance risk 64 Risk Appetite 65 Evaluation of Risk Management System Effectiveness 67 Opportunities and Outlook 68 04.6 Responsibility Statement 70 05 Consolidated Financial Statements 74 06 Notes to the Consolidated Financial Statements 86 07 Statutory Financial 130 08 Other Information 146 09 At a Glance 160 10 Glossary 166 KEY FIGURES AT A GLANCE 2023 2022 Gross sales¹ (kEUR) 85,988 98,229 Revenue 21,749 24,868 Gross proﬁt (kEUR) 20,876 23,704 Gross margin (percent) in relation to gross sales 24.3 24.1 Gross margin (percent) in relation to revenue 96.0 95.3 EBITDA² (kEUR) 24 1,275 EBIT³ (Operating proﬁt) (kEUR) -994 187 EBT4 (Income before taxes) (kEUR) -631 56 Net income (kEUR) -699 -250 Earnings per share (basic, EUR) -0.05 -0.04 Total assets (kEUR) 42,941 43,954 Shareholders‘ equity (kEUR) 18,881 15,666 Equity ratio5 (percent) 44.0 35.6 Liquid funds6 (kEUR) 23,365 23,084 Number of employees (as at 31 December) 217 249 2023 2022 2023 2022 2023 2022 Gross sales EBITDA Liquid funds 1 Gross sales represent the total amount billed and billable to clients by the Group, net 3 EBIT (earnings before interest and taxes) is an alternative performance measure and of discounts, VAT and other sales-related taxes. Disclosure of gross sales information serves to present a Company’s performance while eliminating the effects of differences is not required under IFRS; however, it is voluntarily disclosed from 1 January 2018 among local taxation systems and different ﬁnancing activities. onwards in the Consolidated Income Statement since management has concluded that the information is useful for users of the ﬁnancial statements. Please refer to Note [6]. 4 Earnings before Tax. 2 EBITDA is an alternative performance measure. It is deﬁned as earnings before 5 Shareholders’ Equity/Total Assets. interest, taxes, depreciation and impairment losses/loss reversals on property, plant and equipment, impairment losses on goodwill, and amortisation and impairment 6 Liquid funds is an alternative performance measure and includes cash & cash losses/loss reversals on other intangible assets. This performance measure neutralises equivalents and listed debt and marketable securities and securities and deposits with the effects of the ﬁnancial result along with distortions of operational performance maturity over three months. that result from divergent depreciation and amortisation methods and the exercise of measurement discretion. EBITDA is EBIT plus the amortisation of intangible assets and the depreciation of property, plant and equipment, plus impairment losses and minus impairment loss reversals, recognised in proﬁt or loss during the reporting period. 2023 2022 Cash and cash equivalents 19,842 17,008 2023 2022 Listed debt and marketable securities 3,523 6,076 Liquid funds 23,365 23,084 EBIT -994 187 Depreciation & Amortisation 1,018 1,088 EBITDA 24 1,275 « 01 LETTER FROM THE BOARD OF DIRECTORS 01 01 LETTER FROM BOARD OF DIRECTORS LETTER FROM BOARD OF DIRECTORS DEAR STAKEHOLDERS, Strong balance sheet and ﬁnancial resources Our balance sheet is strong, and our ﬁnancial resources are substantial: our cash balances are at a comfortable level and even exceed last year’s level. Our equity ratio is at a solid 44 percent, and the Company continues to have no external loans. This sets us apart from many of our peers. We As we reﬂect on the ﬁnancial year 2023, we ﬁnd ourselves once again navigating through turbulent times. Our Group, along with the broader market, plan to continue ﬁnancing our growth from our cash reserves and operating cash ﬂow in the next ﬁnancial year. Based on the strong balance sheet has been subject to the ongoing effects of macroeconomic change, persistent inﬂationary pressures and geopolitical complexities. Rising inﬂation and the ﬁnancial expectations for 2024, we therefore believe it is justiﬁed to assume that the Company’s continued existence as a going concern is and high interest rates have continued to dampen consumer conﬁdence and spending across Europe. Higher costs in key areas such as energy and assured. We carefully review acquisitions and are more inclined to pursue them if they offer potential synergies. food carried over from the previous year further impacted consumer behaviour. Supply chain disruptions remained a challenge, although less severe than during the peak of the COVID-19 pandemic, but still contributing to an atmosphere of unpredictability and economic constraint. At the end of ﬁnancial year 2023, the Group’s headcount stood at 217 employees, which is 32 fewer than at the end of 2022, reﬂecting the adjustments in our operating expenses which where necessary in light of the results achieved, especially during the ﬁrst six month of the past ﬁnancial year. In facing these challenges, our strategic focus has been twofold: investing in new and emerging themes and simultaneously undertaking signiﬁcant cost-saving and restructuring measures. This balanced yet bold approach is integral to our ambition of transforming our Group into a stronghold of The ﬁnancial year behind us has not been an easy one. We would therefore like to take this opportunity to thank you, our stakeholders and innovation and sustainability for the future. shareholders, for your perseverance and patience. A very special thank you goes to our employees and their families who have actively supported us and are highly motivated in their commitment to the future of the ad pepper Group. Our thanks also go to the Supervisory Board for its constant and Such strategic decisions include, for example, our 2023 investment in solute Holding GmbH & Co. KG. The ad pepper Group has successfully acquired constructive support. And despite signiﬁcantly lower proﬁtability levels compared to the previous year, we can be proud of what we have achieved, a 25.64 percent stake in the Germany-based solute GmbH, a pioneer in the e-commerce sector and operator of the renowned price comparison portal and this would not have been possible without our many long-standing and new clients, for whom we give our best every day. Thank you for the trust “billiger.de”. The synergy between our companies extends to complementary business models, technological capabilities, customer relations, and you have placed in us and for our excellent working relationships. geographic orientation. This acquisition is a pivotal step in collaborating with the solute GmbH to forge a dynamic, innovative, and ﬁnancially robust publicly listed leader in performance marketing and digital marketplaces. Yours faithfully, Despite ongoing challenges, our company has maintained its resilience and agility. Although not all ﬁnancial targets were met, we have strengthened our standing as a preeminent force in performance marketing across Europe, continually adapting our strategies to meet the dynamic The Board of Directors shifts in market dynamics. ad pepper media International N.V. Throughout the year we were able to show ongoing progress of our ﬁnancial results, demonstrating a positive trend of improvement over consecutive quarters. Overall, we managed to generate revenues of EUR 21,749k (2022: EUR 24,868k) for the full year 2023 with an EBITDA of EUR 24k (2022: EUR 1,275k), which – despite the improvement in the second half of the past ﬁnancial year – unfortunately fell short of our own expectations. Dr Jens Körner, CEO The development of the three operating segments in detail Nuremberg, 10 April 2024 If we look at the performance of the individual segments, we see a similar pattern: for the reasons stated above, all three segments showed revenues below previous year level. The Webgains segment generated revenues of EUR 11,968k, which represents a year-on-year decline of 9.5 percent. The ad pepper segment showed revenues of EUR 2,292k and ad agents segment of EUR 7,489k, which represents a decline of 21.6 and 14.1 percent versus 2022 respectively. However, in the last two quarters of the 2023 ﬁnancial year, the Group was able to improve its ﬁnancial results in all segments compared to H1 2023, which makes us conﬁdent for the ﬁnancial year ahead. 9 « 02 REPORT OF THE SUPERVISORY BOARD 02 02 REPORT OF THE SUPERVISORY BOARD REPORT OF THE SUPERVISORY BOARD DEAR SHAREHOLDERS, as of 1 January of the respective year. The variable compensation component is pegged to previously agreed, measurable and controllable targets. The target is the consolidated EBITDA budgeted for the following year. Members of the Board of Directors do not receive any guaranteed minimum bonus payments. Variable bonuses are usually paid during the ﬁrst quarter following publication of the consolidated annual results. In the 2023 ﬁnancial year, the Supervisory Board performed its duties pursuant to the law and the Articles of Association. It advised the Board of Directors In 2000, the ad pepper Group introduced a long-term incentive model in the form of stock option plans for employees in key positions, including on a regular basis, monitored the Board of Directors in its management of the business, and was involved in decisions of key importance for the Company members of the Board of Directors. Company stock options become exercisable once ad pepper’s share price exceeds a certain threshold, but only vest and the Group. one year after issue. Option plan tranches were issued to members of the Board of Directors in 2000, 2001, 2002, 2003, 2008, 2013, 2017, 2020 and 2023. The ad pepper Group has no pension obligations to members of the Board of Directors. Meetings in 2023 The total sum and structure of the Board of Directors’ compensation are designed to enable the Company to attract and retain suitably qualiﬁed executives. The compensation structure, pension scheme payments, and other ﬁnancial obligations are designed to promote the Company’s medium The Supervisory Board held four meetings in 2023. Moreover, we collectively and individually interacted with the CEO and with the senior management to long-term interests. The details of the compensation structure disclosed in this Annual Report reﬂect the size of the Company and take into outside the formal Supervisory Board meetings. The Chairman of the Supervisory Board and the CEO met regularly for bilateral discussions virtually consideration the fact that the Board of Directors currently consists of only one member (see Note 39). Consequently, the Supervisory Board did not and in person about the progress of the Company on a variety of matters. The Supervisory Board meetings were well attended in 2023 with an conduct a scenario analysis whereby different performance assumptions and corporate actions were examined. The compensation policy is expected attendance rate of 100 percent of each Supervisory Board member. On 5 December 2023 the audit committee reported to the Supervisory Board on to remain largely unchanged in 2024. the functioning, and the development of, the relationship with the external auditor. The Board of Directors kept the Supervisory Board informed about the status of discussions around the development and implementation of the strategy for 2023 and beyond. The Supervisory Board discussed the status of the implementation with the Board of Directors in its meetings and also discussed it with the senior management on a regular basis, e.g. Composition of the Supervisory Board after a meeting of the Supervisory Board. The Supervisory Board discussed the manner in which the Board of Directors implemented the long-term value creation strategy, i.e. improving our ﬁnancial performance, and the principal risks associated with it and hence complied with 1.1.3 of the Dutch The proﬁle and composition of the Supervisory Board as a whole must be aligned with the proﬁle and strategy of the Company. The Supervisory Corporate Governance Code (“Code”). The Supervisory Board approved the ﬁnancial planning for 2023 and discussed (potential) acquisitions with the Board strives for a balanced distribution of speciﬁc expertise in relation to the business activities, strategy and long-term goals of the Company. Board of Directors, e.g. the acquisition of a minority stake in solute Holding GmbH & Co KG. Topics discussed included annual and interim results, Each member of the Supervisory Board must be capable of assessing the broad outline of the Supervisory Board’s overall policy objectives. Given the the prolongation of the service agreement with the CEO, technological developments, the organisation of sales and marketing activities, Corporate size of the Company, the proﬁle of the Supervisory Board provides, that the Supervisory Board, shall at least have three members. Since the General Governance, investor relations, compensation and human resources. The Supervisory Board also met and engaged Ernst & Young Accountants LLP, Meeting of Shareholders held on 19 May 2020, at which Mrs Dagmar Bottenbruch was elected as an additional member of the Supervisory Board, appointed as independent auditor for the ﬁnancial year 2023 by the Annual General Meeting of Shareholders (the “General Meeting”) held on 13 the Supervisory Board has consisted of four members. One Supervisory Board member holds long-term share positions. The current composition of June 2023 and discussed the outcome of the 2022 audit procedures on 30 March 2023. the Supervisory Board is as follows: In addition, the Supervisory Board discussed the general and ﬁnancial risks of the business and the ﬁndings of an assessment of the internal risk • Michael Oschmann (male, born 1969; German citizen) management and control systems. Consistent with the requirements of the Dutch Corporate Governance Code, the work of the Supervisory Board and Supervisory Board Chairman throughout the entire ﬁnancial year up to and including 31 December 2023 of the Board of Directors, as well as the work of the individual members of both boards, was discussed in the absence of the members of the Board Graduate in Business Administration, Managing Director of Telefonbuchverlag Hans Müller GmbH & Co. KG, Nuremberg of Directors. Supervisory Board member since 10 January 2000; appointed until General Meeting 2025 The evaluation of the Supervisory Board is carried out by following a detailed questionnaire. The review and discussion included reviews of the • Thomas Bauer (male, born 1963; German citizen) composition and expertise of the Supervisory Board, its time management, its effectiveness, its dynamics and succession planning, as well as its Supervisory Board member throughout the entire ﬁnancial year up to and including 31 December 2023 organisation and meeting procedures, provision of information and performance of the Chairman and the individual members. The evaluation has CEO of Apotheker Walter Bouhon GmbH, Managing Director of Thomas Bauer GmbH, Nuremberg shown that the Supervisory Board is functioning well and will continue to also regularly discuss its own effectiveness and value for the Company. The Supervisory Board member since 20 March 2013; appointed until General Meeting 2027 evaluation of the Board of Directors is based on an individual evaluation and discussion of its strength and weaknesses among the members of the Supervisory Board, including core abilities, risk assessment, business culture and human resources management. • Dr Stephan Roppel (male, born 1964; German citizen) Supervisory Board member throughout the entire ﬁnancial year up to and including 31 December 2023 As in previous years, the Supervisory Board decided to be informed in greater detail by the management of each business unit (who attended the Managing Director of baby-walz GmbH, Munich meetings of the Supervisory Board in rotating order) – among other things – about technical matters, clients, market trends and, once a year, by a Supervisory Board member since 20 March 2013; appointed until General Meeting 2024 Dutch law ﬁrm about the requirements of the Dutch Corporate Governance Code. • Dagmar Bottenbruch (female, born 1960; German and US citizen) Supervisory Board throughout the entire ﬁnancial year up to and including 31 December 2023 Remuneration of the Board of Directors (see also Remuneration Report) Managing Director of Silicon Valley Bank AG Frankfurt/Main Supervisory Board member since 19 May 2020; appointed until General Meeting 2024 In accordance with the Company’s Articles of Association in their current version, the compensation paid to members of the Board of Directors is determined by the General Meeting following submission of corresponding proposals by the Supervisory Board. The Board of Directors’ compensation The required Dutch gender diversity quota of 30 percent within the Supervisory Board is currently not met. In case of new appointments, the required consists of ﬁxed and variable components. Variable compensation consists of annual performance-based payments (bonus), as well as long-term quota will be taken into consideration. incentives such as stock options. The ﬁxed compensation component is regularly determined in January/February of each year with retrospective effect 13 14 02 02 REPORT OF THE SUPERVISORY BOARD REPORT OF THE SUPERVISORY BOARD Corporate Governance The Supervisory Board is a separate corporate body that is independent of the Board of Directors. Its independent character is also reﬂected in the requirement that members of the Supervisory Board can be neither a member of the Board of Directors nor an employee of the Company. In accordance with best practice provision 2.1.10 of the Dutch Corporate Governance Code, the Supervisory Board declares that the independence ad pepper media International N.V. is a Company under Dutch law with subsidiaries in various countries. All business activities are performed in requirements in best practice provisions 2.1.7 to 2.1.9 have been fulﬁlled, except that one of its members, Michael Oschmann, is not independent accordance with Dutch company law and German capital market law, in particular the German Securities Trading Act (WpHG). Common shares are pursuant to best practice provision 2.1.8 vii. because he is Director of EMA Electronic Media Advertising International B.V., which holds more than admitted to trading on the Prime Standard of Frankfurt Stock Exchange. The Supervisory Board is committed to increasing shareholder value in the 10 percent of the Company’s share capital. On 30 March 2018, the Supervisory Board formed an audit committee currently consisting of Michael interests of all shareholders and has always set the highest standards for the Company’s Corporate Governance principles. Although, consistent Oschmann, Dr Stephan Roppel and Thomas Bauer (Chairman). The Supervisory Board is aware of the fact that the ad pepper Group does not have with its proprietary guidelines, the Company generally applies the requirements laid down in the Dutch Corporate Governance Code, deviations may an internal audit function and has discussed this with the Board of Directors. The Supervisory Board came to the conclusion that due to the size of nevertheless occur on account of the legal requirements applicable to the ad pepper Group. In the Governance section of this Annual Report, the ad the Company and the size of the Supervisory Board, the Company currently does not need an internal audit function, which may change in the future, pepper Group reports in detail on compliance with the Dutch Corporate Governance Code. however, depending on further Company growth. The Supervisory Board reviews annually the need to establish an internal audit function. The Supervisory Board has played a key role in supporting ad pepper Group’s growth strategy during the year, as deﬁned by the Board of Directors. We have assisted in evaluating acquisitions and reﬁning the long-term value creation strategy. On behalf of the Supervisory Board, I would like to Unqualiﬁed independent auditor’s report on the Financial Statements express our appreciation to all ad pepper employees for their efforts and achievements throughout 2023. The independent auditor Ernst & Young Accountants LLP audited the Consolidated Financial Statements of ad pepper media International N.V. for the For the Supervisory Board 2023 ﬁnancial year and issued an unqualiﬁed independent auditor’s report. Michael Oschmann, The Consolidated Financial Statements, the Report of the Board of Directors and the independent auditor’s report were made available to the Supervisory Board Chairman Supervisory Board for review. Meetings were held between the Company’s audit committee and the auditor, who presented their audit plan, key ﬁndings of their audit and answered related questions. The Supervisory Board acknowledged and approved the ﬁndings of the audit. The Supervisory Nuremberg, 10 April 2024 Board acknowledged and approved the audit results. On 10 April 2024, the Supervisory Board discussed and approved the Consolidated Financial Statements prepared by the Board of Directors for the 2023 ﬁnancial year. 15 « 03 REMUNERATION REPORT 03 03 REMUNERATION REPORT REMUNERATION REPORT General Severance payment The remuneration system is based on three pillars: ﬁrstly, a periodically The performance-based variable remuneration consists of two parts; paid remuneration designed to attract, retain and motivate the members a lump-sum part in the range of EUR 70k – EUR 110k based on the The Supervisory Board carefully studied the Dutch Act aimed to of the Board of Directors as top-tier managers of an international Company reaching the pre-set EBITDA target and a variable part, If the current CEO‘s service agreement is terminated by the Company implement the Shareholder Rights Directive, as adopted by the company in a fast-moving commercial environment. Secondly, a clear which is a percentage of EBITDA (starting from the ﬁrst EUR). The pre- without cause, the CEO is entitled to receive 75 percent of the base Dutch Senate in November 2019, to identify any potential gap in performance-based remuneration and a highly detailed assessment set EBITDA target for 2023 was missed and, as a result, based on the salary (i.e. without any performance-related components to which our remuneration policy. The current remuneration policy has been based on ambitious internal ﬁnancial targets ensure the focus is on performance in 2023, no variable part was awarded. he would be entitled for the remainder of the term of his service accepted during the 2020 General Meeting. the Company’s goal of proﬁtable growth on a long-term basis. Thirdly, agreement). No severance payment shall be made if the service a stock option-based remuneration system that promotes a strong, The remuneration of the Board of Directors complied with the agreement is terminated early at the initiative of the CEO, or in the event The Supervisory Board is also mindful of the recommended changes long-term equity culture and, in this way, helps align the interests of remuneration policy. of seriously culpable or negligent behaviour on the part of the CEO. to remuneration disclosure that form part of the Guidelines to the shareholders, management and other stakeholders. Shareholder Rights Directive. These changes are intended to drive In line with the Dutch Corporate Governance Code, the members of the Medium- and long-term performance-related greater transparency and consistency of reporting regarding executive The present remuneration policy also takes account of the identity, Board of Directors are appointed for a period of four years. The CEO’s variable remuneration (stock options) remuneration and may result in further updates to our remuneration mission and values of the Company and public support, by designing current term ends on 31 December 2026. disclosure in the Remuneration Report once the Guidelines are the policy and its implementation in such a way that the members of ﬁnalised. During the 2023 General Meeting, the Remuneration Report the Board of Directors receive a remuneration that is in accordance with The Company aims for a business policy which takes into account the Change of control received a positive advisory vote of 100 percent. No questions were the identity of the Company, with the main focus being the creation of interests of the shareholders and its other stakeholders. The Company raised concerning its contents and none of our shareholders expressed long-term value for all stakeholders involved in the Company. In doing wishes to promote commitment of the members of the Board of any concern about the clarity or transparency of the Remuneration so, an explicit focus is placed on the social context and the society Directors to build the shareholders’ value on a long-term basis. The In the event of a change of control, the CEO has the option of Report. Based on the positive advisory vote and the absence of any of which the Company is a part, taking into account the required Company may therefore introduce one or more stock option plans extraordinary termination of his employment contract for a period of shareholder feedback, we have not proposed any changes to the competitiveness of the Company. for the members of the Board of Directors, which may or may not be 12 months after the change of control takes effect. In the event of structure and contents of the Remuneration Report this year. linked to the performance of the Company. The exercise price of the extraordinary termination of his contract, the CEO is entitled to receive stock options, the number of stock options and the other terms and payment of compensation amounting to his respective annual target Periodically paid ﬁxed remuneration (base salary) The 2023 remuneration report will be submitted to the 2024 General conditions shall be laid down in the stock option plans. Three new income through to the end of the contractually agreed term, amounting Meeting for their advisory vote. stock option plan were granted in 2023 for Supervisory Board and key to a minimum of 150 percent of his current annual target income. A The members of the Board of Directors receive a ﬁxed base salary, staff members as well as the CEO. The number of options granted to change of control in this respect arises when a shareholder gains In the absence of a remuneration committee, the Supervisory Board which is payable in twelve equal monthly instalments. The ﬁxed the CEO under the 2023 plan amounts to 187,500. control over the Company as deﬁned by Paragraph 29 of the German in its entirety evaluates the remuneration policy on a routine basis to remuneration is determined by the Supervisory Board, usually within Securities Acquisition and Takeover Act (WpÜG), i.e. acquisition of at review its efﬁciency and effectiveness in supporting ad pepper’s long- the ﬁrst three months of each calendar year and with retrospective least 30 percent of the voting rights in the Company. Other beneﬁts term strategy compared to relevant market practices and adjusts if and effect as of 1 January of that year. The ﬁxed remuneration is typically where appropriate. On an annual basis, the Supervisory Board sets the increased in line with the inﬂation rate, but the Supervisory Board may Loans performance targets for the members of the Board of Directors, reviews decide otherwise. The Company shall indemnify each (former) member of the Board of their performance against these predetermined targets and determines Directors who was or is involved, or threatens to become involved, in the remuneration and beneﬁts in line with contractual terms. The his/her capacity as (former) member of the Board of Directors, as a Members of the Board of Directors and Supervisory Board have not Performance-based variable remuneration (bonus) structure of the remuneration package for the Board members is party to any past, present or anticipated future actions or proceedings been granted any loans. designed to balance incentives for short-term operating performance of any nature whatsoever, against all conceivable ﬁnancial loss or harm with incentives for long-term sustainable value creation while taking The bonus payment for the members of the Board of Directors is that he/she has in fact and in all reasonableness suffered in connection Clawback Provisions into account the interests of shareholders and other stakeholders. determined by the Supervisory Board. Consistent with the Board of with the actions or proceedings. In addition, the Company has taken The remuneration policy is clear and understandable, focuses on long- Directors remuneration policy, the Supervisory Board can choose from a out insurance cover for them, such as personal accident insurance and term value creation for the Group, and takes into account the internal number of ﬁnancial as well as non-ﬁnancial targets to use as measure directors and ofﬁcers (D&O) insurance. Performance-based variable remuneration is subject to claw back pay ratios within the Company. The full policy can be found on the for performance-based variable remuneration. For 2023, in-line with provisions pursuant to Dutch law. Company’s website. the service agreement entered into with the Board of Directors, the Other beneﬁts may include but are not limited to life insurance, Supervisory Board decided to use earnings before interest, taxation, disability insurance, long-term health care insurance, company vehicle depreciation and amortisation (EBITDA) as sole measure. By using (with the tax on the pecuniary beneﬁt from personal use being payable EBITDA, the Supervisory Board has now opted for a key performance by the member concerned), cell phone usage and contributions to indicator (KPI) that more closely reﬂects the Company’s ability to private pensions. The ad pepper Group has no pension obligations generate operating cash ﬂows. towards members of the Board of Directors. 19 20 03 03 REMUNERATION REPORT REMUNERATION REPORT Total Director’s remuneration, Five-Year Comparison Remuneration in Share Options to Board of Directors and members of Supervisory Board broken down into its various components The main conditions of stock option plans Information regarding the reported ﬁnancial year Annual change J. Körner, J. Körner, Plan Grant date Share Exercise Number Number Number Number Number 2019 2020 2021 2022 2023 2023 CEO (2023) CEO (2022) options price (EUR) of options of options of options of options of options vs vs vs vs vs granted outstanding awarded forfeited exercised outstanding 2018 2019 2020 2021 2022 kEUR kEUR kEUR Fixed remuneration 01/01/2023 2023 2023 2023 31/12/2023 Director’s Board of Base salary 299 291 remuneration Directors Fees 0 0 J. Körner, J. Körner BoD 2023 01/2023 187,500 1.86 0 187,500 0 0 187,500 CEO +226% +29% -18% -48% 32% 387 Other benefits¹ 20 17 Remuneration Variable remuneration Supervisory of the On-year variable 0 25 Board Supervisory Multi-year variable² 68 0 Board 0% -8.33% +9.10% +0% +0% 24 S. Roppel SB 2017 04/2017 10,000 1.9751 5,000 0 0 0 5,000 Extraordinary items 0 0 Company's SB 2023 01/2023 18,000 1.86 0 18,000 0 0 18,000 performance Pension expenses 0 0 T. Bauer SB 2023 01/2023 18,000 1.86 0 18,000 0 0 18,000 EBITDA +158% +87% -33% -71% -98% 22 Total remuneration 387 333 D. Bottenbruch SB 2023 01/2023 18,000 1.86 0 18,000 0 0 18,000 Proportion of ﬁxed and variable remuneration3 82%/18% 92%/8% The options granted under the SB 2017 plan expire 7 years after granting. The options grant the right to purchase shares at the exercise price (EUR Year 1.9751). These options may be exercised over a period of four years at 25 percent each year, but at the earliest one year after being granted. The 1 Contributions to private pension plan and health insurance. options forfeit, if the holder terminates his employment contract with the Company for whatever reason, or if the employment contract is expiring 2 Board of Directors holds SOP which are measured at the end of each reporting period at 2018 2019 2020 2021 2022 2023 and will not be prolonged by the parties. The options also forfeit, if the Company terminates the employment contract for an important reason or if a the fair value, see also Note [38]. member of the Supervisory Board resigns. The options granted under the SB 2023 and BoD 2023 plan expire 7 years after granting. The options grant 3 Lower share of 2023 variable remuneration is driven by the signiﬁcantly lower EBITDA Average achieved in 2023, see also table “Five-Year comparison”. the right to purchase shares at the exercise price (EUR 1.86). These options may be exercised over a period of four years at 25 percent each year, but employee at the earliest one year after being granted. The options forfeit, if the Company terminates the employment contract for an important reason. The amounts shown in the tables are those recognised in proﬁt or loss remuneration 56 69 66 55 54 72 during the reporting period. Income resulting from the share-based Ratio CEO In the ﬁnancial year 2023 0 shares (2022: 0 shares) have been issued in relation to exercise of the aforementioned rights. payments is due to the decreased fair value of the cash-settled stock and average option plan and the corresponding adjustment of the liability through employee 3.3 8.6 11.7 11.8 6.2 5.4 proﬁt or loss. Supervisory Board Compensation Employees of 2023 2022 the company 11 11 13 12 15 14 EUR EUR Michael Oschmann 6,000 6,000 Pay ratios peaked during the pandemic (relatively high EBITDAs/pay-outs to CEO) and are Thomas Bauer 6,000 6,000 back to pre-pandemic levels since 2022. ad pepper media International N.V. Dr Stephan Roppel 6,000 6,000 Dagmar Bottenbruch 6,000 6,000 The average employee remuneration is obtained by dividing the total personnel expenses as stated in the notes of the respective Company’s Annual Report (after subtracting the CEO’s remuneration) by the Total remuneration for members of the Supervisory Board amounted to EUR 24k in the past ﬁnancial year (2022: EUR 24k). The annual amount paid to reported average number of Full Time Equivalents (“FTE”) (minus one). Supervisory Board members is unchanged for at least ﬁve years. 21 22 « 04 REPORT OF THE BOARD OF DIRECTORS « 04.1 GOVERNANCE 04.1 04.1 GOVERNANCE GOVERNANCE OUR GOVERNANCE STRUCTURE Members of the Board of Directors are appointed by the General The Supervisory Board passes its resolutions, inside as well as outside Furthermore, General Meetings shall be held in the event referred to in Meeting, subject to the right of the Supervisory Board to make a binding meetings, with an absolute majority of the votes of all the members Article 2:108a of the Dutch Civil Code and as often as a member of the nomination to appoint a Board of Directors member in accordance with of the Supervisory Board in ofﬁce. In the event of an equal division of Board of Directors or a Supervisory Board member considers it necessary. the relevant best practice provisions of the Dutch Civil Code and the votes, the Chairman of the Supervisory Board has the casting vote. Corporate information articles of association (the “Articles of Association”). Since 28 February The resolutions proposed in the agenda were adopted at the General 2017, the Company’s Board of Directors consists of one “Director” The Chairman of the Supervisory Board determines the agenda and Meeting of ad pepper media International N.V. held in Amsterdam on ad pepper media International N.V. is a “naamloze vennootschap” (Chairman of the Board of Directors and CEO). The CEO has powers to chairs the meetings of the Supervisory Board, monitors the proper 13 June 2023. In all, 10,042,575 voting rights, or 46.71 percent of the (N.V.), a Dutch limited liability Company, and is the parent Company represent the Company. However, in addition to the cases that legally functioning of the Supervisory Board, arranges for the adequate issued share capital were represented at the General Meeting. of the ad pepper Group (the “Group”). The Company’s registered ofﬁce require the approval of the Supervisory Board, certain resolutions of provision of information to the members of the Supervisory Board and address is Frankenstrasse 150C, 90461 Nuremberg, Germany. Its the Board of Directors as laid out in the rules governing the internal acts on behalf of the Supervisory Board as the main contact for the Alongside the presentation of the annual ﬁnancial statements for the registration number with the Dutch trade register is 27182121. organisation of the Board of Directors also require approval of the Board of Directors. Important topics and upcoming decisions are also 2022 ﬁnancial year, key agenda items also included the discharge of the Supervisory Board. Resolutions of the Board of Directors that require dealt with in regular discussions and meetings between the Chairman members of management and the Supervisory Board, the re-election The Company’s Corporate Governance structure is based on the the approval of the Supervisory Board are only adopted after the of the Supervisory Board and the CEO. The Chairman of the Supervisory of Thomas Bauer as member of the Supervisory Board, the adoption requirements of Dutch corporate law, the Dutch Act on Financial Supervisory Board has given its approval to such proposed resolution. Board informs the other members of the Supervisory Board regularly of the amendments to the Company’s Articles of Association Board of Supervision and the Dutch Corporate Governance Code (the “Code”). on the outcome of his discussions and meetings. He also initiates the Directors, the approval of the SB 2023 and BoD 2023 stock option plan Dutch law provides that a member of the Board of Directors of a Dutch evaluation of the functioning of the Supervisory Board and the Board as well as the authorisation to buy back treasury stock. The Company has a two-tier board structure consisting of a Board of public limited liability Company may not participate in the adoption of Directors. All members have had sufﬁcient time available for their Directors and a Supervisory Board. It is in the interest of the Group and of resolutions (including deliberations in respect hereof) if he or she duties relating to their membership of the Supervisory Board. Their all of its stakeholders that there is a clear division of responsibilities Proposed appropriation of the has a direct or indirect personal interest conﬂicting with the interests availability for ad hoc calls, prompt response on emails and the fact between the Board of Directors, the Supervisory Board and the General result for the ﬁnancial year 2023 of that Company or its enterprise. Pursuant to the Board of Directors that the members prepared the meetings well, regardless of their Meeting in a well-functioning system of checks and balances. by-laws, each member of the Board of Directors must immediately attendance at the meetings, and actively participated in the meeting report any (potential) personal conﬂict of interest to the Supervisory discussions, demonstrate that they were all able to devote adequate The Board of Directors, with the approval of the Supervisory Board, In this section, we address our overall Corporate Governance, and Board and to the other members of the Board of Directors and must attention to the Company. proposes to allocate the result for the ﬁnancial year 2023 amounting to provide information on our compliance with the best practice provisions provide all information relevant to the conﬂict. The Board of Directors EUR -944k to the accumulated deﬁcit without payment of dividend. The of the Code. Occasional deviations from the Code are explained and by-laws provide detailed rules under which circumstances a conﬂict of On 10 December 2019, the Supervisory Board formed an audit committee ﬁnancial statements reﬂect this proposal. information on the reasons for any such deviations are provided at interest of a member of the Board of Directors exists and determines currently consisting of Michael Oschmann, Dr Stephan Roppel and the end of this section. In the event of any substantial changes to the that the Board of Directors member may not be present at the meeting Thomas Bauer (Chairman). No changes occurred in the year under review. Corporate Governance structure of the Company and its compliance with Long-term value creation and Sustainability discussing such matters. During 2023, no conﬂicts of interest were the Code, the shareholders shall be informed at the General Meeting. reported. There were furthermore no transactions as referred to in the General Meeting best practice provisions 2.7.4 and 2.7.5. By bringing together three individual, strong segments in the area of performance marketing – each focused on advising, supporting and Board of Directors At least one General Meeting shall be held each year, at the latest enabling its clients in their digital marketing strategy – and further Supervisory Board six months after the close of the ﬁnancial year. The agenda and the developing these assets into relevant players, the Company focuses The Board of Directors is entrusted with the management of the explanatory notes to the agenda are published in advance and posted on above-market-average organic growth of these existing business Company, which means that, among other responsibilities, it deﬁnes The Supervisory Board should supervise the policies carried out by on the Company’s corporate website. The explanatory notes to the lines and expanding the footprint of new services and products offered the strategic direction, establishes the policies, and manages the the Board of Directors and the general affairs of the Company and its agenda contain all relevant information with respect to the proposed by those segments. Our long-term strategy is to maximise value for Company’s day-to-day operations under the supervision of the afﬁliated enterprise. In doing so, the Supervisory Board should also focus resolutions. All resolutions are made on the basis of the “one share, our shareholders and other stakeholders and create a strong cash Supervisory Board. The members of the Board of Directors collectively on the effectiveness of the Company’s internal risk management and one vote” principle. The General Meeting reviews the Annual Report ﬂow generation by driving relative market share leadership with manage the Company and are accountable to the Supervisory Board control systems and the integrity and quality of the ﬁnancial reporting. and decides on adoption of the ﬁnancial statements and the dividend proﬁtable growth and exceeding customer expectations. We are and to the General Meeting. In performing its duties, the Board of It offers advice to the Board of Directors. In discharging its duties, the proposal, as well as on the discharge of the members of the Supervisory committed to innovating for a better tomorrow for our customers, Directors is guided by the interests of the Company and its enterprise. Supervisory Board has regard for the interests of the Company and the Board and the Board of Directors. The Board of Directors may add other employees, communities, and society as a whole. As mentioned above, The Board of Directors follows its own rules determined in the proﬁle business enterprise connected with it. The Supervisory Board meets at items to the agenda of the General Meeting. macroeconomic headwinds resulted in declining revenues and lower of the Board of Directors, which deﬁnes responsibilities, competencies least four times a year and whenever a majority of its board members proﬁtability in the past ﬁnancial year. However, we successfully navigated and decision-making processes. or its Chairman considers this to be necessary. Resolutions of the The Board of Directors shall be obliged to convene a General Meeting our Company through another unprecedented ﬁnancial year, and although Supervisory Board may, instead of at a meeting, be passed in writing if one or more of the persons with meeting rights who alone or jointly we did not meet our ﬁnancial targets, we successfully sharpened our The Board of Directors provides the Supervisory Board with information – including by telegram, facsimile or telex transmission, or in the form represent(s) at least 10 percent of the issued share capital request(s) proﬁle as one of the leading performance marketing companies in Europe in a timely manner and, if necessary, consults with the Supervisory of a message transmitted by any accepted means of communication this in writing, stating the issues to be discussed. An extraordinary and therefore believe that 2023 has also contributed to the Company´s Board on important matters and submits certain important decisions to and received or capable of being produced in writing – provided that General Meeting may be convened by the Supervisory Board or the long-term value target. the Supervisory Board for approval. all Supervisory Board members are familiar with the resolution to be Board of Directors if deemed necessary. passed and none of them objects to this decision-making process. 27 28 04.1 04.1 GOVERNANCE GOVERNANCE Insider trading policy Internal audit function During 2023, we continued to increase our focus on environmental, gender diversity into account for future appointments, as required by social and governance topics. We also set up a dedicated Environmental, law, without compromising our commitment to hiring the best qualiﬁed Social and Governance (ESG) reporting team as part of our Accounting individuals for positions. In any future vacancies that arise, however, The ad pepper Group has a strict Code of Conduct on insider trading. The Supervisory Board annually reviews the need to establish an and Reporting department. This team will improve ESG reporting gender diversity will subsist to be one of the criteria in the selection The insider trading policy with regard to inside information and internal audit function and following these discussions makes a going forward and implement the EU taxonomy and the EU Corporate process, and the Company shall continue to strive towards achieving a securities trading was adopted by the Board of Directors. This policy recommendation to the Board of Directors. Considering the current Sustainability Reporting Directive requirements (which will be reported diverse composition of its boards within the coming years. is publicly available on the Company’s website. In accordance with size of the operations of the Company and taking into account its risk from next year onwards). applicable law and regulations (including the EU Market Abuse proﬁle, the Supervisory Board advised to the Board of Directors that it In the Netherlands, an important milestone was reached on 1 January Regulation), the Company maintains insider lists and exercises controls does not deem it necessary to create an internal audit function. EU Taxonomy is a cornerstone of the EU’s sustainable ﬁnance framework 2022. With effect from this date, new legislation became effective around the dissemination and disclosure of potentially price-sensitive and an important market transparency tool. It helps direct investments to achieve a more balanced ratio of seats between men and women information. Transactions in the Company’s shares carried out by the Auditor to the economic activities most needed for the transition to a low- on the supervisory boards of publicly traded companies and large Board of Directors and the Supervisory Board members (including their carbon economy, in line with the European Green Deal objectives. The companies. While the obligations arising from the legislation applies closely associated persons) are as and when required notiﬁed to the Taxonomy is a classiﬁcation system that deﬁnes criteria for economic to large companies only (and the Company did not fall under the Dutch Authority for the Financial Markets (AFM), in accordance with The independent auditor is appointed by the General Meeting. The activities that are aligned with a net zero trajectory by 2050 and the respective criteria in the past ﬁnancial year) and the Supervisory Board the applicable provisions of the EU Market Abuse Regulation. Supervisory Board can nominate a candidate for this appointment, for broader environmental goals other than climate. It is a key part of the EU had only one female member in the ﬁnancial year under review, we which purpose the Board of Directors advises the Supervisory Board. Corporate Sustainable Reporting Directive (CSRD). take good note of the recent changes to the Code and aim for a higher The compensation of the independent auditor and any commissioning Substantial shareholdings share of female members in the Company’s key roles. For instance, the of the external auditor must be approved by the Supervisory Board Under the Taxonomy, economic activities that qualify as environmentally Company’s so-called Executive team, which consists of employees in following consultation with the Board of Directors. The independent sustainable are those that: (i) contribute substantially to any one of six key positions across all segments, already today consists of 40 percent Shareholders owning 3 percent or more of the issued share capital of auditor is required to attend the General Meeting and the Supervisory environmental objectives using science-based criteria; (ii) cause no female members and we aim to hold this threshold and strive to a listed company (a substantial shareholding or short position) must Board meeting at which the independent auditor’s report on its audit of signiﬁcant harm to any of the other environmental objectives; (iii) ensure increase it (e.g. to 50 percent) in the long-term. report this to the AFM as soon as this threshold is reached or exceeded. the ﬁnancial statements is discussed. compliance with minimum social safeguards and (iv) meet the technical Subsequently, notiﬁcations to the AFM must be made as soon as a eligibility screening criteria that have been set by the Commission. substantial shareholding or short position reaches, exceeds or falls Conﬂicts of interest Statement by the Board of Directors Companies must disclose speciﬁc KPIs – revenue, capital expenditure below set thresholds. The thresholds are 3 percent, 5 percent, 10 (Dutch Corporate Governance Code) (capex) and operating expenditure (opex) – which indicate the portion of percent, 15 percent, 20 percent, 25 percent, 30 percent, 40 percent, 50 their economic activities which are environmentally sustainable. Under the criteria set out in the Dutch Corporate Governance Code, percent, 60 percent, 75 percent and 95 percent of the company’s issued three of the four current members of the Company’s Supervisory Board share capital. Shareholder’s disclosures can be inspected in the register For the purpose of complying with best practice provision 1.4.3 of the We believe our commitment to conducting business in an environmentally count as independent. Michael Oschmann, Supervisory Board Chairman kept by the AFM, and for the ad pepper Group the shareholdings as at Code the Board of Directors believes that, to the best of its knowledge: sustainable way, as described in this section, enables the Group to make of the Group, is not counted as independent in this respect as he is 31 December 2023 are also disclosed on page 34 of this Annual Report. a broader contribution to the EU’s environmentally sustainable objectives. Managing Director of EMA Electronic Media Advertising International • the Company’s internal risk management and control organisation It should be noted that the Taxonomy is subject to periodic revisions, B.V., which holds more than 10 percent of the Company’s share capital. provides reasonable assurance that its ﬁnancial reporting does not Publication requirements under German law which in the future may deﬁne a separate category and speciﬁc technical contain any errors of material importance; qualiﬁcation criteria for performance-marketing activities. On 2 October 2023, ad pepper and seven shareholders of solute Holding • the internal risk management and control processes in relation to GmbH & Co. KG (“solute”), Hannover, signed a purchase agreement for In accordance with Section 26 (1) of the German Securities Trading Act ﬁnancial reporting functioned properly in 2023; 25.64 percent of the shares in solute. As consideration, 1,693,244 new (“Wertpapierhandelsgesetz”), the Company, in its capacity as a so- • the report provides sufﬁcient insights into failings, if any (no failings Diversity shares in ad pepper have been issued without subscription rights of called domestic issuer (“Inlandsemittent”) under the German Securities in 2023), in the effectiveness of the internal risk management and the current shareholders against contribution in kind. The purchase is Trading Act, must publish any shareholding notiﬁcations under Dutch control systems; We aim for diversity at every level. We do not see diversity as regarded as a so-called related party transaction according to Dutch law immediately, but no later than three trading days after receiving • the aforementioned systems provide reasonable assurance that the merely a matter of gender or ethnicity but also of personality, skills corporate law. Michael Oschmann, the Chairman of the Supervisory them, via qualiﬁed media outlets. The Company must also transmit the ﬁnancial reporting does not contain any material inaccuracies; and knowledge. We need men and women, people from different Board of ad pepper, held (i) an indirect interest of 46.71 percent in the notice to the German Federal Financial Supervisory Authority (BaFin) • based on the strong balance sheet it is justiﬁed that the ﬁnancial backgrounds and cultures. The ad pepper Group values this diversity share capital of ad pepper before the transaction and (ii) participating and to the German Company Register (“Unternehmensregister”). reporting is prepared on a going concern basis; and and believes it contributes positively to the way we evaluate situations interests in excess of 20 percent in each of the selling entities as • the report states those material risks and uncertainties that are and make decisions. The more we utilise the differences between regards to the 25.64 percent of the shares in solute. Therefore, Michael relevant to the expectation of the Company’s continuity for the us and the more we can cooperate and learn from each other, the Oschmann did not and will not participate in the decision-making in period of twelve months after the preparation of the report. stronger we will be as a company that serves a highly diverse society the Supervisory Board of ad pepper concerning the acquisition by ad and stakeholders. The Supervisory Board and the Board of Directors pepper of the interest in solute. This has been discussed and disclosed The Board of Directors is responsible for the establishment and are fully aware that both boards currently lack gender diversity; we during Supervisory Board meetings accordingly. adequate functioning of a system of governance, risk management and do not have an even distribution of seats between men and women internal controls in the Company. It reports on and is accountable for and we do not have a diversity policy. We will take greater board-level No other conﬂicts of interest were reported in the 2023 ﬁnancial year. internal risk management and control systems to the Supervisory Board and its Audit Committee. 29 30 04.1 04.1 GOVERNANCE GOVERNANCE The Company has implemented a risk management and internal Periodically paid ﬁxed remuneration (base salary) Other beneﬁts The following provides an overview of exceptions that we have controls designed to provide reasonable assurance that strategic identiﬁed: objectives are met by creating focus, integrating management control The base salary of the members of the Board of Directors is determined The Company shall indemnify each (former) member of the Board of over the Company’s operations, ensuring compliance with applicable on an annual basis by the Supervisory Board. The ﬁxed remuneration Directors who was or is involved, or threatens to become involved, in Principle 1.3 Internal audit function laws and regulations and by safeguarding its assets and the reliability is determined by the Supervisory Board, usually within the ﬁrst three his/her capacity as (former) member of the Board of Directors, as a of its ﬁnancial reporting and its disclosures. The Company’s risk months of each calendar year and with retrospective effect as of 1 party to any past, present or anticipated future actions or proceedings Given the size of the Company and its risk proﬁle, the Company does management approach is embedded in its periodic business planning January of that year. The ﬁxed remuneration is typically increased in line of any nature whatsoever, against all conceivable ﬁnancial loss or harm not have an internal audit function of its own. Nevertheless, the Board and review cycle and forms an integral part of business management. with the inﬂation rate, but the Supervisory Board may decide otherwise. that he/she has in fact and in all reasonableness suffered in connection of Directors and the Supervisory Board may implement internal audits with the actions or proceedings. on a case-by-case decision using internal and external resources. This With respect to ﬁnancial reporting a structured self-assessment and has not occurred during 2023. The Company thus does not fully comply monitoring process is used Company-wide to assess, document, review Short-term performance-related variable remuneration (bonus) Other beneﬁts may include but are not limited to life insurance, with best practice provisions 1.3.1, 1.3.2, 1.3.3, 1.3.4, 1.3.5, 1.3.6 and and monitor compliance with internal control over ﬁnancial reporting. disability insurance, long-term health care insurance, Company vehicle 2.6.4 of the Code. Due to the business environment of the Company, it is difﬁcult to link the and cell phone usage. It should be noted that the above does not imply that these variable remuneration to previously determined and inﬂuenceable long- systems and procedures provide certainty as to the realisation of term targets. The short-term variable remuneration for members of the In general, the Company, its subsidiaries and the companies whose Principle 2.1 Composition and size operational and ﬁnancial business objectives, nor can they prevent all Board of Directors should in principle consist of an annual performance- ﬁnancial details are consolidated by the Company shall not grant misstatements, inaccuracies, errors, fraud and non-compliance with related bonus. The bonus is determined by the Supervisory Board on the loans, advances or guarantees to members of the Board of Directors, Provision 2.1.1. states that the Supervisory Board should strive for a diverse rules and regulations. basis of measurable and controllable targets such as the Company’s but the Supervisory Board may resolve that the Company shall do so composition with respect to nationality, age, gender, and educational income before taxation (i.e. EBITDA to be more precise) or other ﬁnancial if the Supervisory Board deems that the granting of loans, advances or and work background and should deﬁne speciﬁc targets to achieve this. or operational targets, as determined by the Supervisory Board. guarantees is in the interest of the Company. The Supervisory Board believes that both the Board of Directors and the Remuneration Policy Supervisory Board are and will be composed in such a manner that the (see also chapter Remuneration Report) During 2023, the Company was in compliance with the remuneration combination of experience, expertise and independence of its members Medium- and long-term performance-related policy. satisﬁes the requirements set out in its proﬁle. We believe that the General variable remuneration (stock options) composition of our boards allows them to properly and effectively carry out their duties. Our focus for new board members is on experience and The remuneration and the contracts between the Company and the The Company aims for a business policy which takes into account the education instead of explicit gender, age or nationality diversity targets. members of its Board of Directors are determined by the Supervisory interests of the shareholders and its other stakeholders. The Company We therefore do not comply with best practice provision 2.1.1 of the Code. COMPLY OR EXPLAIN Board within the scope of the remuneration policy that has been wishes to promote commitment of the members of the Board of Finally, Michael Oschmann, Chairman of the Supervisory Board of the adopted by the General Meeting. Directors to build the shareholders’ value on a long-term basis. The Group, cannot be regarded as independent as he is Managing Director of Company may therefore introduce one or more stock option plans EMA Electronic Media Advertising International B.V. This company holds The objective of the remuneration policy is to attract, retain and for the members of the Board of Directors, which may or may not be more than 10 percent of the Company’s share capital. Introduction motivate the members of the Board of Directors as top-tier managers linked to the performance of the Company. The exercise price of the of an international Company in a fast-moving commercial environment, stock options, the number of stock options and the other terms and According to provision 2.1.5 and 2.1.6 the Company should have a The Corporate Governance structure and compliance with the Code is while protecting and promoting the objectives of the Company and conditions shall be laid down in the stock option plans. Diversity and Inclusion (D&I) policy for the enterprise and should explain the joint responsibility of the Board of Directors and the Supervisory shareholders’ value. the D&I policy and the way in which it is implemented in Practice. ad Board. They are accountable for this responsibility to the General pepper had 217 employees at the end of the business year under review Meeting. We continue to seek ways to improve our Corporate The remuneration for the members of the Board of Directors may Remuneration payable in instalments and may introduce such policies at a later stage, i.e. when the Group has Governance by measuring it against international best practice. The consist of the following items: grown big enough. Code was last amended on 20 December 2022. The new Code took The members of the Board of Directors have entered into part-time effect on 1 January 2023 and can be found at www.mccg.nl. • Periodically paid remuneration (ﬁxed base salary) employment contracts with the Company. Upon dismissal of a member • Short-term performance-related variable remuneration (bonus) of the Board of Directors, the Company is in principle obliged to pay Principle 2.2 Appointment, succession and evaluation Non-application of speciﬁc best practice provisions is not per se • Medium- and long-term performance-related his/her ﬁxed and variable salary and other beneﬁts for the remaining considered objectionable by the Code and may well be justiﬁed variable remuneration (stock options) term of the contract, but the Supervisory Board is authorised to deviate Members of the Supervisory Board are appointed for a term of four because of particular circumstances relevant to a company. In • Other beneﬁts from this principle. years and can be reappointed. The Company has adopted a policy of accordance with Dutch law, we disclose in our Report of the Board remaining open to the possibility that a Supervisory Board member will of Directors the application of the Code’s best practice provisions. To be reappointed after the maximum term contained in provision 2.2.2 the extent that we do not apply certain best practice provisions, we due to his or her great knowledge of the Company and high level of state the reasons. We take a positive view of the Code and apply involvement. In addition, the Supervisory Board will retire by rotation most of the best practice provisions. and may be reappointed in order to ensure that the lowest possible 31 32 04.1 04.1 GOVERNANCE GOVERNANCE number of Supervisory Board members retire from the Board at the Principle 3.1 Remuneration policy – Management Board Principle 3.4 Accountability for implementation to EUR 1,159,662 and is divided into 23,193,244 common bearer shares same time. The latter is not posted on the Company’s website. The of remuneration policy with a nominal value of EUR 0.05 each. Company therefore does not comply with best practice provisions 2.2.2 In deviation of best practice provision 3.1.2 of the Code, options granted and 2.2.4. The Company does not have a selection and appointment to members of the Board of Directors under stock option plan do not The existing contract with the Board of Directors does not contain any Obligation of shareholders to committee and does not comply with provision 2.2.5. As the Supervisory contain performance conditions and can be partly exercised after a extraordinary elements; the remuneration essentially consists of ﬁxed disclose share ownership Board currently has just four members, the number of committees must period of one year. Although deviating from the Code, the Company and variable remuneration. In the event of more complex contracts be reduced to the minimum required. believes that the structure of the stock option plans serves its purpose being concluded in the future, the Company will consider publishing a to retain members of the Board of Directors and to align the interests of disclosure on its website. The AFM has to be notiﬁed of major shareholdings in respect of the shareholders, management, Board of Directors and other stakeholders. Company in accordance with the Financial Market Supervision Act Principle 2.3 Organisation of the Supervisory Board and reports In addition, the Supervisory Board did not conduct scenario analyses (Wet op het ﬁnancieel toezicht) and the Ordinance to Disclose Major whereby the impact of different performance assumptions and Principle 4.2 Provision of information Shareholdings and Capital Investments in Institutions Issuing Securities If the Supervisory Board considers it necessary, it can, according to corporate actions on variable remuneration of the Board of Directors (Besluit melding zeggenschap en kapitaalbelang in uitgevende the Company’s Articles of Association, install committees from among was examined. The Supervisory Board concluded this is not necessary While the Company focusses on the corporate calendar that covers instellingen). its members, such as an audit committee, remuneration committee, due to the simple structure of variable compensation. all publication dates and planned conferences and will update and a selection and appointment committee and shall draw up a set investor presentations posted on the Company’s website whenever Due to the listing of the shares on the German Frankfurt Stock of regulations for each committee. The Supervisory Board consists new information is available so that no single investor can gain an Exchange, the Company must also in its capacity as a so-called of four members. The Company decided to not form a remuneration Principle 3.2.1 Remuneration committee proposal information advantage, due to the size of the Company and owing domestic issuer (“Inlandsemittent”) under the German Securities committee and a selection and appointment committee, and it is instead to the large number of meetings not every single meeting with or Trading Act publish any shareholding notiﬁcations under Dutch law the collegiate responsibility of the Supervisory Board to prepare the A remuneration policy has been implemented and approved by the presentation to analysts, investors and institutional investors can be immediately, but no later than three trading days after receiving them, decision-making of the Supervisory Board and perform the tasks of these General Meeting. However, given the size of the Company and the made available to follow in real time. The Company also does not post via qualiﬁed media outlets in accordance with Section 26 (1) of the committees as set out in the Code, unless stated otherwise herein. Supervisory Board, a remuneration committee has not been and is not a policy on bilateral contacts with the shareholders on its website. This German Securities Trading Act (“Wertpapierhandelsgesetz”). The intended to be established. is in deviation from best practice provisions 4.2.2 and 4.2.3. Company must also transmit the notice to the German Federal Financial The Company does therefore not fully comply with best practice Supervisory Authority (BaFin) and to the German Company Register provisions 2.3.2, 2.3.3, 2.3.4 and 2.3.5. The Supervisory Board, due to (“Unternehmensregister”). its size, did not nominate a vice-chairman and does therefore not fully Principle 3.2.3 Severance payments comply with best practice provisions 2.3.6 and 2.3.7. On 3 November 2023 Michael Oschmann informed us via a release DECREE ARTICLE 10 TAKEOVER The compensation paid in the event of dismissal of Mr Körner may according to art. 40, section 1 of the WpHG about a substantial exceed one year’s salary, however, severance pay will not be awarded if holding in the Company. According to this release, he indirectly holds DIRECTIVE (BESLUIT ARTIKEL 10 Principle 2.4 Decision-making and functioning the agreement is terminated early at the initiative of the Board member, 11,720,668 shares in ad pepper which is equivalent to 50.53 percent of OVERNAMERICHTLIJN) or in the event of seriously culpable or negligent behaviour on the part the total voting rights. Due to its size, the Supervisory Board did not nominate a vice-chairman of the member of the Board of Directors. In the event of his contract and does therefore not fully comply with best practice provision 2.4.3. being terminated without cause as deﬁned by the applicable law, the Share ownership as at 31 December 2023: Company would remain obliged to compensate such member for the Introduction remaining term of his employment agreement. The Company believes Principle 2.6 Misconduct and irregularities that the contractual arrangement is well justiﬁed due to the long tenure Shares Shares In accordance with Article 10 of the Takeover Directive (Dertiende of this board member. The Company does therefore not comply with Richtlijn), companies with securities that are admitted to trading on The Company has no plans to establish “whistleblower” guidelines best practice provision 3.2.3. See also page 35 “Payments to employees Number Percentage a regulated market are obliged to disclose certain information in their governing the reporting of misconduct by Company employees. Given on termination of employment in connection with a public takeover bid”. EMA Electronic Media board reports. This obligation has been implemented in Dutch law Advertising International B.V. 9,486,402 40.90 the Company’s small size, there are short lines of communication and through Decree Article 10 Takeover Directive. The Group must disclose the Board of Directors is highly involved in the day-to-day business Treasury stock 1,242,128 5.36 certain information that might be relevant for companies considering and employees already have the possibility of reporting suspected Principle 3.3 Remuneration Supervisory Board Euro Serve Media GmbH 1,641,786 7.08 making a public offer with respect to the Group. The information that irregularities at the Company on a general, operational and informal the Group is required to disclose, including a corresponding explanatory Free ﬂoat 10,822,928 46.66 level without jeopardising their legal position. The Company Supervisory Board members have been granted stock options, e.g. section, is presented below. therefore does not fully comply with best practice provision 2.6.1. under the newly issued 2023 plan. The Company does not comply with Total 23,193,244 100 However, a Code of Conduct, setting out business principles for our best practice provision 3.3.2 of the Code and deems this appropriate employees and rules of conduct, was adopted in 2007 which allows given the size of the Group and long-term involvement of the members Capital structure Table shows shareholders holding >3 percent in the Company’s share capital. for the possibility of anonymously reporting concerns about actual or of the Supervisory Board. Furthermore, the grant of 18,000 options for suspected non-compliance with the Company’s standards stipulated three Supervisory Board members (i.e. excluding the Chairman of the The Company has only one class of shares (ordinary shares) which carry in its Code of Conduct. Supervisory Board) in connection with the 2023 plan is regarded to be equal rights. As at 31 December 2023, the issued share capital amounts more symbolic rather than part of a regular remuneration. 33 34 04.1 04.1 GOVERNANCE GOVERNANCE Appointment and dismissal deﬁned in writing by the Supervisory Board and may be reappointed of members of the Board of Directors in line with the respective legal requirements. In principle, the lowest possible number of Supervisory Board members should retire from the The members of the Board of Directors are appointed on the basis Board at the same time. of a binding nomination by the Supervisory Board. Where no binding nominations have been made, the General Meeting is free to select. Amendments to Articles of Association The General Meeting may at any time resolve that the list of candidates is not binding by adopting a resolution passed with an absolute majority of the votes cast, representing more than one-third of the The Articles of Association may only be amended by a resolution of the issued capital. If at least an absolute majority of the valid votes cast General Meeting in response to a proposal submitted by the Board of supports the resolution to render the nomination non-binding, but the Directors with the approval of the Supervisory Board. Where the Board required quorum of one-third of the issued capital is not represented, of Directors has not submitted any such proposal, any resolution to then this resolution may nevertheless be adopted at a second meeting amend the Articles of Association may only be adopted with a majority to be convened. At such meeting, the resolution may then be adopted of at least two-thirds of the votes validly cast in a meeting in which at with at least an absolute majority of the valid votes cast, but without least three quarters of the issued share capital is represented. any quorum requirement. Buyback of treasury stock by the Company The General Meeting may at any time suspend or dismiss any member of the Board of Directors. The Supervisory Board is entitled to suspend any member of the Board of Directors and is obliged to notify the On 16 June 2023, the General Meeting authorised the Board of member of the Board of Directors in writing and without delay of Directors for a period of 18 months to buy back stock shares up to a this suspension, stating the reasons for such move. Furthermore, the maximum amount of 50 percent of the share capital outstanding at that Supervisory Board is then obliged to convene a General Meeting to time. The purchase price per share must amount to no less than 80 pass a resolution either on lifting the suspension of the member of the percent and no more than 120 percent of the opening share price on the Board of Directors or on the member’s dismissal. date of the respective buyback. No shares have been bought back in the ﬁnancial year 2023 (2022: Shareholders’ agreement on limitations 233,325 shares). on exercise of voting rights Payments to employees on termination Each share issued by the Company entitles its bearer to one vote. There of employment in connection with are no special statutory rights attached to the shares of the Company a public takeover bid and no restrictions on the voting rights of the Company’s shares exist. There is also no employee participation in capital that does not allow employees to directly exercise their controlling rights. As far as is In the event of a change of control, there is the option of extraordinary known to the Group, there is no agreement involving a shareholder of termination for Mr Körner 12 months after the change of control takes the Group that could lead to any restriction on the transferability of effect. In the event of extraordinary termination of his contract, Mr shares or of voting rights on shares. Körner is entitled to receive payment of compensation amounting to his respective annual target income through to the end of the contractually agreed term, amounting to a minimum of 150 percent of his current Appointment and suspension of annual target income. A change of control in this respect arises when Supervisory Board members a shareholder gains control over the Company as deﬁned by Paragraph 29 of the German Securities Acquisition and Takeover Act (WpÜG), i.e. The General Meeting appoints Supervisory Board members and acquisition of at least 30 percent of the voting rights in the Company. is entitled at any time to suspend or dismiss any Supervisory Board member. The appointment, dismissal, or suspension of a Supervisory In 2000, the ad pepper Group introduced a long-term incentive model in Board member is decided by the General Meeting by way of an absolute the form of stock option plans for employees in key positions, including majority of votes cast. The Supervisory Board consists of no fewer than members of the Board of Directors. three members, including a Chairman, who will retire by rotation as 35 36 « 04.2 THE AD PEPPER SHARE 04.2 04.2 THE AD PEPPER SHARE THE AD PEPPER SHARE THE AD PEPPER SHARE General Meeting On 2 October 2023 the Board of Directors made use of this authorisation The ad pepper share started the year with a share price of EUR 1.86 by issuing 1,693,244 new shares. As of 31 December 2023 the issued and reached an annual high of EUR 2.62 on 14 February 2023. The capital therefore amounts to 1,159,662 and is divided into 23,193,244 closing price at year end was EUR 2.44 and thus well above the annual The resolutions proposed in the agenda were adopted at the General common bearer shares with a nominal value of EUR 0.05 each. The low of EUR 1.84. All in all, the ad pepper share oscillated in a relative Meeting of ad pepper media International N.V. held in Amsterdam on Capital structure Board of Directors is therefore authorised to issue 16,806,756 new narrow band between EUR 2.00 and EUR 2.50. 16 May 2023. In all, 10,042,575 voting rights, or 46.71 percent of the ordinary shares with a nominal value of EUR 0.05 each. issued share capital were represented at the General Meeting. The Company’s shares are traded on the Prime Standard of the Frankfurt Stock Exchange under the symbol “APM” and the ISIN code Shareholder Engagement As of 31 December 2023, the Company held 1,242,128 own shares Alongside the presentation of the annual ﬁnancial statements for the NL0000238145. (2022: 1,242,128). 2022 ﬁnancial year, key agenda items also included the discharge of the The Board of Directors values the insight gained from shareholder members of management and the Supervisory Board, the re-election of The authorised share capital of the Company amounts to EUR 4,000,000, engagement and places signiﬁcant importance on maintaining close Thomas Bauer as member of the Supervisory Board, the adoption of the 2023 2022 divided into 80,000,000 shares, with a par value of EUR 0.05 each. Key share ﬁgures relationships with shareholders, taking account of and responding amendments to the Company’s Articles of Association, the approval of Article 28(1) of the Company’s articles of association (the “Articles to their views. The Group’s CEO and investor relations team the SB 2023 as well as the BoD 2023 stock option plan as well as the of Association”) provides that the Board of Directors, after approval Outstanding shares 23,193,244 20,257,872 communicate on a regular basis with shareholders and analysts and authorisation to buy back treasury stock. from the Company’s Supervisory Board, is authorised to issue ordinary Market capitalisation (in EUR) 56.59m 40.85m endeavour to facilitate open engagement. In 2023, frequent investor shares in the Company up to the point that the issued share capital of meetings were held. The Group has an investor relations website at Year end (in EUR) 2.44 1.90 the Company reaches EUR 2,000,000. At the beginning of the ﬁnancial www.adpeppergroup.com where all regulatory news as well as other year 2023 the issued share capital amounted to EUR 1,075,000, meaning Year high (in EUR) 2.62 5.94 information on the ad pepper Group is available. We aim to maintain the Board of Directors was authorised to issue up to 18,500,000 new Year low (in EUR) 1.84 1.53 strong dialogue with our shareholders and regularly collect feedback. ordinary shares with a nominal value of EUR 0.05 each. Please contact [email protected]. Total number of issued shares less own shares. Furthermore, article 28(2) of the Articles of Association provides that the Board of Directors, after approval from the Supervisory Board, is authorised to exclude or restrict pre-emption rights with regard to the issue of shares in the Company. Share price performance in past 12 months (Xetra) 4.0 4.0 3.5 3.5 3.0 3.0 2.62 2.5 2.5 2.0 2.0 1.84 1.5 1.5 1.0 1.0 January February March April May June July August September October November December January 39 40 « 04.3 BUSINESS ACTIVITY 04.3 04.3 BUSINESS ACTIVITY BUSINESS ACTIVITY DISCLAIMER REGARDING The ad pepper Group focuses on long-term value creation through organic growth in its existing businesses, while also evaluating FORWARD-LOOKING inorganic growth opportunities through value-accretive acquisitions. STATEMENTS The Group is divided into three reporting segments, which work in close cooperation with the holding company and operate independently in the marketplace: ad pepper (performance marketing company), ad agents (digital marketing agency) and Webgains (afﬁliate This report of the Board of Directors includes forward-looking marketing network). The holding company assumes responsibility for statements that are based on management estimations, which are the transfer of know-how between the segments, the strategic focus, valid at the time when this management report was prepared. Such as well as ﬁnancing and liquidity as part of the overall governance and statements relate to future periods, or are characterised by terms administration of the Group. The ad pepper Group’s overall strategy is such as “expect”, “forecast”, “predict”, “intend”, “plan”, “estimate” to support and strengthen each segment individually, as each business and “anticipate”. Forward-looking statements can entail risks and has its own distinctive culture, clients, product range and regional uncertainties. Many such risks and uncertainties are determined focus. All three business segments offer their clients performance- by factors that cannot be inﬂuenced by the ad pepper Group. As based solutions. This means that the advertiser only pays if there are a consequence, actual results may differ signiﬁcantly from those measurable results (completion of speciﬁc actions). The most common described below. models in performance-based marketing are: CPM (cost-per-mile), CPC (cost-per-click), CPL (cost-per-lead) and CPA (cost-per-acquisition). The ad pepper Group also offers a broad range of services, such as consulting and the development of strategies for the use of digital THE AD PEPPER GROUP Digital performance technologies, the design, implementation and execution of digital marketing marketing and communication solutions as well as consulting on digital media strategies and digital media technologies and tools. The ever- ad pepper media International N.V. is the holding company of one increasing importance of digital processes for businesses leads to an of Europe’s leading international performance marketing groups. increase in the corresponding budgets, and the vast amounts of data Founded in 1999, the ad pepper Group is one of the pioneers in the thus generated require thorough analysis (preferably in real time). To be online marketing business. With eleven ofﬁces in Germany, Italy, successful in the ﬁeld of digital marketing, companies therefore need to France, Spain, Switzerland, the United Kingdom and the Netherlands, develop competencies that go beyond an effective allocation of digital Lead generation Digital marketing agency the ad pepper Group develops performance marketing solutions for its media spend across multiple channels and managing the respective Audience targeting customers around the world. campaigns. And they need help to achieve this. It is therefore not Germany / Switzerland surprising that – in some areas of our business – the ad pepper Group is Germany / Spain The ad pepper Group operates in the highly dynamic digital commerce competing more and more with well-known strategy and IT consultancies Afﬁliate network market, which is characterised by dynamic growth in both consumer that offer consulting services in the digital marketing space. and advertising expenditure. Channels such as social media, search, UK / Germany / France / Spain / Italy / Netherlands video and mobile – to name just a few – continue to expand their market share. The ad pepper Group provides services to for large corporations and major SMEs based in Europe and abroad. Our clients operate primarily in the “Trade & Consumer Goods“, “Financial Services“, “Telecommunications & Technology“ and “Transport and Tourism“ sectors. The ad pepper Group strives for long-term client relationships and has been working with some of its clients for more than a decade. 43 44 04.3 04.3 BUSINESS ACTIVITY BUSINESS ACTIVITY SEGMENTS OF THE Webgains strategies for their budget. Taking local conditions into account, ad Furthermore, Webgains has recently launched the Afﬁliate Discovery pepper is able to optimise campaigns for the target markets. Whether product to create smarter connections, as well as The Tag for seamless AD PEPPER GROUP working with an agency or a direct client, the aim is always to deliver Webgains has been part of the ad pepper Group since 2006. Today, integration of technology partners. the best possible result. What sets ad pepper apart from its competitors? the registered and approved afﬁliate network serves over 1,800 Many years of experience – and iLead. This unique platform enables clients worldwide, from start-ups to global brands, in more than 170 The current strategy focuses on a service-oriented and performance- the agency to generate customised campaigns that are adapted to global markets. When it comes to designing local and international differentiated approach. By investing in talent and technology, ad pepper the speciﬁc markets of their clients in next to no time. And the iLead campaigns, Webgains not only beneﬁts from its strong publisher Webgains has created the optimum blend of human and artiﬁcial platform was developed in-house. With the help of iLead, over 30,000 network, but also from the extensive experience of over 100 highly intelligence. High-tech advances make it easy to quickly roll out The Group’s success story began with ad pepper in 1999. As a leading campaigns have been successfully launched and managed worldwide motivated experts with excellent market knowledge, which they scalable, international campaigns. Meanwhile, customers can count on performance marketing company, ad pepper specialises in lead and millions of qualiﬁed leads have been generated. continuously develop. Webgains became the world’s ﬁrst certiﬁed outstanding data security at all times and beneﬁt from near real-time generation and targeting speciﬁc audiences. ad pepper works with its B-corp afﬁliate Network in 2023, balancing globally aligned standards performance reporting. clients to develop online marketing strategies for over 50 countries Ofﬁces: Nuremberg / Madrid with hi-performance and proﬁts. worldwide and uses the latest technologies for each project. Whether at Ofﬁces: Nuremberg / Madrid /Bristol / the local, national or international level, ad pepper helps its customers Thanks to partnerships with over 250,000 publishers, Webgains’ London / Paris / Milan / Amsterdam meet their goals by developing the most efﬁcient online marketing clients have access to one of the world’s leading, performance afﬁliate marketing networks, offering the widest possible reach. Iñigo Abrisqueta Susanne Pilz Iñigo Abrisqueta Ami Spencer Samuel Rodman Chief Executive Ofﬁcer Managing Director Chief Executive Ofﬁcer Chief Operating Ofﬁcer Chief Technology Ofﬁcer ad pepper Spain ad pepper Germany Webgains Webgains Webgains 45 46 04.3 04.3 BUSINESS ACTIVITY BUSINESS ACTIVITY ad agents EMPLOYEES AND VALUES As a full-service performance marketing agency, ad agents has a sixth • Respect for people. We respect people, honour diversity, and treat sense for trends, extensive experience and transparent reporting each other fairly. These are the cornerstones of our culture and key ad agents joined the ad pepper Group in 2007. Today, it is one of structures. They advise and support national and international to our ability to work successfully as a global team. Germany’s most successful online and performance marketing companies from virtually every industry who partner with ad agents to • Integrity. We operate with the highest standards of honesty and A total of 217 employees work in the three business segments at agencies – and for a good reason. Their strategies are as unique create exceptional and successful performance marketing campaigns. responsibility – as individuals and as a corporation – to be a role December 2023 which is 32 less compared to the ﬁgure at the end of as their personalised consulting and support services, which are model through our business practices, community involvement and December 2022 (249). Given the prevailing revenue levels, we had to always optimised to suit the situation and the speciﬁc requirements Exceptional quality always pays off: ad agents is a certiﬁed Google environmental stewardship. adjust the headcount especially in the fourth quarter. While headcount of ad agents’ clients. ad agents maintains an overview of the entire Premier Partner, Microsoft Advertising Elite Agency as well as a • Our customers’ success. We ensure our customers’ continuous in the adminstration and ad pepper segment remained more or less digital advertising market and adapts its comprehensive service Meta (Platform) Business Partner and maintains strong partnerships success by forging deep relationships founded on our commitment stable, we had to adjust our workforce in the Webgains and ad agents portfolio accordingly, thus supporting its clients with planning with leading-edge technology providers. to meeting their diverse technology needs and a shared passion for segment respectively. and implementing efﬁcient and effective online and performance excellence. Ofﬁces: Herrenberg / Zurich marketing strategies. ad agents’ digital marketing experts always • Initiative and accountability. We deliver on our promises to our ﬁnd the perfect strategy to increase our clients’ brand awareness and customers, stakeholders, and to each other by taking risks, seeking Number of employees 31/12/23 31/12/22 sales – across all digital channels and on all devices. proactive solutions, and assuming ownership of the results. Number Number The Board of Directors promotes and applies these values thoroughly ad pepper 23 21 in all personnel related processes such as hiring, promotions and the Webgains 91 104 review of employee performance. ad agents 87 106 To the best of our knowledge, we have not identiﬁed any incidences of Administration 16 18 non-compliance to local law. ad pepper Group’s employees are the key to the Company’s success. ad pepper strives to attract, develop and retain qualiﬁed and motivated people in a professional, safe and healthy work environment. ad pepper complies with all local laws relating to working hours, vacation laws and occupational health laws, also taking into account the psychosocial work environment. Regular team activities as well as physical activity are encouraged. In our Code of Conduct, ad pepper deﬁned a set of joined, equally important values that best express our focus on service/product leadership through innovation, long-term value creation and the creation of a fair, inspiring work environment for all our employees: Dirk Lajosbanyai Wolfgang Schilling Managing Director Managing Director ad agents ad agents 47 48 « 04.4 ECONOMIC DEVELOPMENT 04.4 04.4 ECONOMIC DEVELOPMENT ECONOMIC DEVELOPMENT MACROECONOMIC Evolution of (Net) Advertising Expenditure PRESENTATION OF EBIT, EBITDA, and EBT at Global and National Levels (for deﬁnitions please see page 165) FRAMEWORK EARNINGS POSITION EBT, EBIT and especially EBITDA are widely used in our industry and are 2023f 2024f the most common ﬁnancial metric to measure ﬁnancial performance Development in gross sales, revenue and gross proﬁt According to a study published by the Organisation for Economic Co- within our peer group. The Group’s earnings before interest and taxes Percent Percent operation and Development (OECD) end of November 2023, the global (EBIT) amounted to EUR -994k in the past ﬁnancial year (2022: EUR Global 2.7 4.6 economy continues to confront the challenges of inﬂation and low The ad pepper Group achieved gross sales of EUR 85,988k in the 187k). Earnings before taxes (EBT) amounted to EUR -631k (2022: EUR Americas 2.5 5.8 growth prospects. GDP growth has been stronger than expected so far in 2023 ﬁnancial year (2022: EUR 98,229k), equivalent to year-on-year 56k). Earnings before interest, taxes, depreciation and amortisation 2023 but is now moderating on the back of tighter ﬁnancial conditions, North America 2.2 5.7 decline of -12.5 percent. Revenue amounted to EUR 21,749k in 2023 (EBITDA) at the Group came to EUR 24k in the past ﬁnancial year (2022: weak trade growth and lower business and consumer conﬁdence. Risks (2022: EUR 24,868k). Gross proﬁt – alongside revenue our second most EUR 1,275k). USA 2.2 5.8 to the near-term outlook remain tilted to the downside and include important key ﬁgure – showed a group-wide decline of -11.9 percent Canada 3.5 3.6 heightened geopolitical tensions, for example due to the evolving and amounted to EUR 20,876k in 2023 (2022: EUR 23,704k). Looking at the individual segment, ad agent’s EBITDA fell by 84.7 conﬂict following Hamas’ terrorist attacks on Israel; and a larger-than- EMEA 1.9 2.7 percent to EUR 209k (2022: EUR 1,358k), largely due to lower levels of expected impact of monetary policy tightening. On the upside, growth Webgains saw revenue decline of -9.5 percent to EUR 11,968k (2022: revenue / cautious spending on our client’s side as well as severance Western Europe 1.6 2.6 could also be stronger if households spend more of the excess savings EUR 13,227k) while this segments’ gross proﬁt came to EUR 11,477k payments at year end. accumulated during the pandemic. According to OECD, global growth UK 1.4 3.5 in the past ﬁnancial year (2022: EUR 12,496k), equivalent to a decline is projected to be 2.9 percent in 2023, and weaken to 2.7 percent in Germany 0.6 1.8 of -8.2 percent. Main reason for the decline was the reduced booking Moving on to the next segment, Webgains achieved an EBITDA of EUR 2024. As inﬂation abates further and real incomes strengthen, the world volume of big clients in 2023. 2,060k and thus signiﬁcantly higher than the previous year (2022: EUR France 2.1 2.4 economy is projected to grow by 3 percent in 2025. Global growth 871k). Strict cost discipline helped achieving this result despite overall remains highly dependent on fast-growing Asian economies. Italy 2.8 3.1 The ad pepper segment reported a decline in revenue to EUR 2,292k lower revenue ﬁgures in the business year under review. Spain 2.3 1.8 (2022: EUR 2,924k). Gross proﬁt was lower too compared to last year with EUR 2,056k (2022: EUR 2,592k). The reduced booking volume from The third operating segment, ad pepper, achieved an EBITDA of EUR Online advertising market Central & Eastern Europe 1.6 0.8 a number of clients and subdued booking behaviour in general during -483k (2022: EUR -108k). The EBITDA achieved in 2023 is a reﬂection of Asia-Paciﬁc 3.5 4.0 2023 is the main reason for this development. a business year which saw budget cuts and cautious booking behaviour The latest Dentsu Global Ad Spend Report projects a 4.6 percent increase Australia 0.5 2.3 mainly in the last quarter of 2023 especially in the German market. in worldwide advertising investments with a net investment ﬁgure of Revenue in the ad agents segment decreased by EUR 1,229k or 14.1 China 4.9 4.7 approximately USD 752.8 billion by the end of 2024. Further examination percent to EUR 7,489k (2022: EUR 8,718k). In terms of gross proﬁt EUR of the continued growth forecast reveals that these dynamics are India 8.6 9.0 7,157k for the 2023 ﬁnancial year is posted in the ad agents segment. facilitated by ongoing media price inﬂation. However, the main drivers Japan 2.2 2.5 This corresponds to a decrease of 14.5 percent compared with the behind the rise in global advertising spending in 2024 are major PRESENTATION OF FINANCIAL previous year (2022: EUR 8,375k). Latin America 6.1 7.9 sporting events like the UEFA European Championship as well as the US AND NET ASSET POSITION Presidential Election. Brazil 6.0 8.1 Development in operating expenses Dentsu anticipates growth across all regions of the global advertising (f) The percentage values are forecasts. market. In Germany, for instance, advertising spend is expected to further Ad Spend Forecast per Region Top Markets 2023-2024 by Dentsu. Cash ﬂow Operating expenses at the ad pepper Group decreased by 7 percent to recover from a modest 0.6 percent in 2023 to moderate growth of 1.8 EUR 21,870k (2022: EUR 23,517k). Operating cost at ad pepper Group percent in 2024. Compared to other major Western European markets, largely consist of employment cost typically amounting to around 75 The gross cash ﬂow amounted to EUR -790k (2022: EUR 545k) while Germany lags behind the UK (3.5 percent), France (2.4 percent), and Italy percent of total cost. Consequently, the costs decreased - in all three a ﬁgure of EUR 1,239k (2022: EUR 1,931k) was reported for cash ﬂow (3.1 percent) in terms of the growth forecasts for 2024. Overall, the EMEA operating segments - mainly due to reduced numbers of employees from operations. The gross outﬂow of funds is particularly due to the region is expected to experience growth of 2.7 percent in 2024, which is during 2023. The increased costs in the admin segment include EUR decrease in net income for the period. The net cash ﬂow from investing a signiﬁcant increase compared to 2023 with 0.8 percent. The Americas 460k one-off expenses in connection with the acquisition of a (minority) activities came to EUR 2,456k in the past ﬁnancial year (2022: EUR region is expected to outperform Asia/Paciﬁc (growth forecast of stake in solute Holding GmbH & Co. KG. -3,281k), mainly for sale of securities as well as investments in short 4 percent) in terms of advertising expenditures, with a projected growth term deposits. The cash ﬂow from ﬁnancing activities amounted to rate of 5.8 percent. EUR -893k in 2023, as against EUR -2,356k in the 2022 ﬁnancial year. It included outgoing cash of EUR -286k (2022: EUR -539k) occurred for Source: Dentsu Ad Spend Report 2024. Dentsu has published its Ad Spend Report for 2024 with forecasts on the development of net advertising investments, based on data from 58 dividends paid to non-controlling interests and lease payments of EUR markets in North and South America, Asia-Paciﬁc, and EMEA. -595k (2022: EUR -585k). 51 52 04.4 04.4 ECONOMIC DEVELOPMENT ECONOMIC DEVELOPMENT Balance sheet structure Total assets decreased by EUR 1,013k to EUR 42,941k (31 December 2022: EUR 43,954k). Current assets decreased by EUR 4,472k to EUR 37,297k (31 December 2022: EUR 41,769k) and non-current assets increased by EUR 3,459k to EUR 5,644k (31 December 2022: EUR 2,185k). Right-of-use assets for capitalised leasing contracts for ofﬁces and vehicles amount to EUR 1,184k (31 December 2022: EUR 1,318k). Cash and cash equivalents amount to EUR 19,842k (31 December 2022: EUR 17,008k) and securities and deposits amount to EUR 3,523k (31 December 2022: EUR 6,076k). Trade receivables decreased by EUR 4,444k to EUR 13,124k (31 December 2022: EUR 17,568k). On the equity and liabilities side, the Company’s equity showed an increase of EUR 3,215k to EUR 18,881k (31 December 2022: EUR 15,666k) which corresponds to an equity ratio of 44 percent (2022: 35.6 percent). Trade payables decreased by EUR 3,179k to EUR 17,657k (31 December 2022: EUR 20,836k). Long-term liabilities amount to EUR 822k (31 December 2022: EUR 840k) and consists mainly of lease liabilities for capitalised right-of-use asset. Current liabilities amount to EUR 23,238k (31 December 2022: EUR 27,448). Of these, EUR 1,996k (2022: EUR 2,495k) relate to the written put option over the non-controlling interest in ad pepper media Spain S.A. and Webgains S.A. Further EUR 536k (31 December 2022: EUR 523k) relate to the lease liability for capitalised right-of-use assets. The ad pepper Group was internally ﬁnanced as of the balance sheet date. Its liquid funds (including current securities and deposits) totalled EUR 23,365k at the end of December 2023 (31 December 2022: EUR 23,084k). The Company still has no external loans. 53 54 « 04.5 RISK REPORT 04.5 04.5 RISK REPORT RISK REPORT FOREWORD to successfully implement mitigation actions. The results of the risk This could lead to a loss of members in our advertising network as well Finally, our systems are extremely dependent upon power supply. In the assessment and any updates are reported to the Supervisory Board as advertising customers, and ultimately to increasing costs. This could case of major power outage (which cannot be excluded also in the light on a regular basis. A detailed review of all underlying business risks impair our ability to win new users and advertising customers and of the current energy crisis), we would have to resort to emergency is completed every year. At least once a year, the Supervisory Board thereby adversely affect our revenues and our growth. The availability power units. It may happen that such emergency power units do not The German Corporate Sector Supervision and Transparency Act and discusses the corporate strategy and business risks as well as the of our products and services is dependent on the uninterrupted work correctly and that they are insufﬁcient in the case of a major the Dutch Corporate Governance Code lay down key requirements and results of an assessment by the Board of Directors of the structure operation of our IT and communication systems. Any damage to or power outage. obligations regarding risk management and control systems. In line and operations of the internal risk management and control systems, failure in our systems could interrupt our services, which could reduce with these requirements applicable in Germany and the Netherlands, including any signiﬁcant changes. our revenues and proﬁts, and damage our brand. Our systems could the ad pepper Group operates a comprehensive and adequate risk Technology risk be damaged by ﬂood, ﬁre, power outage, telecommunication failure, management system. The regulations require the Board of Directors In addition to the dedicated risk management system outlined above, computer viruses, terrorist attacks, attacks from cybercriminals, to ensure that the Company complies with all applicable laws and the following elements also serve to identify risks within the Group: attacks preventing computers from accessing services, and other forms It is conceivable that technologies will be developed that block or requirements, and to report to the Supervisory Board regularly on the of attack on our systems. Our data centres could become the target suppress the display of our advertising on the internet. Most of our internal risk management and control systems. The risk management • Operational planning, including updated intra-year forecasts of intrusion, sabotage or wilful vandalism, or they could be affected revenues are generated in such a manner that advertising customers system at the ad pepper Group identiﬁes signiﬁcant risks which could • Quarterly ﬁnancial statements by faults occurring as a result of ﬁnancial difﬁculties on the part of pay for their advertising to appear on websites. Technologies designed have adverse implications for the Company. These risks are quantiﬁed • Monthly and quarterly reporting by subsidiaries operators of data centres. Not all our systems are fully redundant and to block or suppress internet advertising could thus have an adverse and evaluated in terms of their potential implications. Finally, suitable (comparing target and actual results) to the Group our natural disaster recovery plans cannot account for all eventualities. effect on our operating results. For instance, major players in the market measures are identiﬁed in order to counteract the identiﬁed risks. Natural disasters of this kind or operators of facilities we use deciding such as the mobile operators or the providers of application ecosystems to shut down for ﬁnancial reasons without reasonable notice and/or such as Apple and Google may decide to introduce ad blockers to their other unexpected problems at our data centres could lead to prolonged systems or to the mostly used internet surﬁng browsers. These could Internal risk management and control system interruptions to our services. seriously obstruct the delivery of advertisements to users and thus RISK CLASSIFICATION harm the business of the ad pepper Group. The ad pepper Group is managed by a Board of Directors and Supervisory In order to be successful, our network infrastructure must be efﬁcient Board appointed by the General Meeting. The Supervisory Board and reliable. The higher the user frequency and the complexity of our In general, the market for internet advertising is characterised by responsibility is the oversight of the risk management system. Consistent products and services, the more CPU performance we will need. We rapid technological change, developing industry standards, frequent with the requirements of the Dutch Corporate Governance Code, the Risks are classiﬁed as operational, strategic, ﬁnancial risks, compliance have invested heavily in acquiring and leasing data centres as well introduction of new products and services, and changing customer Company has established a procedure for reporting actual or suspected and assessed according to their probability of occurrence and their as cloud services and updating our technology and the infrastructure behaviour. The introduction of new products and services, and the irregularities within the Company and its afﬁliated enterprises. In addition, potential ﬁnancial impact. The major risks for each classiﬁcation are of our network in order to cope with growing trafﬁc and the launch of emergence of new industry standards can render existing products the Board of Directors has developed and implemented strategies, described below: new products and services, and we expect to continue doing so. These and services obsolete and impossible to sell or require unexpected controls and mitigation measures to identify current and developing risks investments are costly and complex and can lead to efﬁciency losses investment in new technology. Our success will depend on our ability as part of the risk management system. Risk management policies and or downtime. If we fail to expand successfully or if efﬁciency losses to adapt to rapid technological changes, to improve existing solutions, procedures are embodied in our Corporate Governance, Code of Conduct, or downtime occur, the quality of our products and services as well as and to develop and launch a host of new solutions in order to meet our and ﬁnancial reporting controls and procedures. A variety of functional customer satisfaction could suffer. This could damage our reputation customers’ and partners’ continuously changing demands. Advertising OPERATIONAL RISK experts evaluate these business risks and aim to mitigate and manage and result in a loss of existing and potential customers, advertising customers, for instance, are increasingly demanding online advertising these risks on an ongoing basis. clients, and members of our network. Cost increases, a lower frequency networks and advertising that go beyond pure stills, integrating “rich of use on the part of our partners in the advertising network, failure media”, such as audio and video, interactivity and methods for more Identiﬁed risks are divided into four types: Infrastructure risk to adapt to new technologies, or changed business requirements could accurately targeted consumer contacts and behaviours. adversely affect our revenue and ﬁnancial strength. • Catastrophic (loss of ability to achieve business objectives, e.g. Our products and services are dependent on users having access to the Our systems do not support all types of advertising formats. Equally, worst-case scenario) internet and in some cases also require substantial bandwidth. This We also use other IT suppliers, including data centres, cloud services certain website operators within our network do not accept all of • Major (reduced ability to achieve business objectives) access is at present made available by companies that have signiﬁcant and broadband providers. Any disturbance in network access or the advertising formats offered by us. Moreover, a further increase in • Moderate (disruption to normal planning with a limited effect on and growing inﬂuence on the market for broadband and internet colocation services by these providers, or their inability to process fast and powerful internet access could generate new products and achievement of business strategy and objectives) access, such as telephone companies, cable companies, and mobile current or larger data volumes could seriously damage our business. services which are only possible with increasing bandwidth. If we fail • Low (no material impact on the achievement of business strategy communication providers. Some of these providers could start adopting to successfully adapt to such developments, there is a risk that we and objectives) measures to interrupt or impair user access to certain products, or they Furthermore, ﬁnancial or other difﬁculties on the part of our providers could lose customers and/or parts of the advertising space marketed could increase the costs of user access to such products by limiting or could have an adverse impact on our business. We have witnessed by us. We procure most of the software used at our Company externally All identiﬁed risks are evaluated based on their likelihood of occurring forbidding the use of their infrastructure for our products and services, interruptions and delays in these services and in these the availability and we plan to continue buying technologies from third-party suppliers and their potential impact (estimated in monetary terms) in disrupting or they could charge us or our users higher fees. In addition, it cannot be of IT infrastructure and expect these in future, too. Faults, interruptions in future as well. We cannot deﬁnitively say whether such technologies our progress toward achieving our business objectives. The overall excluded that the side effects of the war in Ukraine could impair a proper or delays in conjunction with these technologies and information will continue to be available in future either at all or on commercially risk management goal is to identify risks that could signiﬁcantly functioning of the internet infrastructure in the European continent. services could harm our relations with users, adversely affect our reasonable terms. threaten our success and to allow management sufﬁcient opportunity brand, and expose us to liability risks. 57 58 04.5 04.5 RISK REPORT RISK REPORT Sustainability It is also possible that the trend towards marketing online advertising do not own content, we rely in part on publishers for controls with A lack of qualiﬁed and motivated personnel could negatively impact our space via automated so-called ad exchanges will intensify further. respect to such activities. If fraudulent or other malicious activity is development and growth, increase our costs and harm our reputation. By establishing and optimising artiﬁcial intelligence (AI) solution in perpetrated by others, and the Group fails to detect or prevent it, the There is a risk of failure to address the growing needs and expectations We face competition for qualiﬁed personnel, for example those in IT and combination with demand- side platforms (DSPs) and/or supply-side affected advertisers may experience or perceive a reduced return on from society if the Group does not meet its ESG goals, resulting in marketing positions. In addition, to attract or retain qualiﬁed personnel, platforms (SSPs), online networks such as the ad pepper Group may their investment resulting in dissatisfaction with the Group’s solution, reputational damage and potentially reduced customer demand for our we might have to offer more competitive compensation packages and in future lose further relevance or even lose the basis of their business refusal to pay, refund demands or loss of conﬁdence of advertisers or services. other beneﬁts, which could lead to higher personnel costs. operations. We may also encounter problems which delay or prevent publishers and ultimately withdrawal of future business. the successful design, development, introduction, or marketing of We take ESG matters seriously with a commitment to high standards. We try to mitigate this risk through personnel development programmes new solutions. Any solutions or improvements newly developed by For instance, we achieved a group-wide so-called “b corp certiﬁcate” in the respective segments as well as incentive systems. Supporting this Intellectual property rights risk us will have to fulﬁl the requirements of our present customers and for the Webgains segment. B Corp Certiﬁcation is a designation is an established, thorough annual review process from which we derive prospective clients, and there is a risk that these will not meet with that a business is meeting high standards of veriﬁed performance, individually tailored and future-variable qualiﬁcation programmes as the desired acceptance on the market. If we fail to keep pace with Our patents, trademarks, business secrets, copyrights, and other accountability, and transparency on factors from employee beneﬁts well as performance-related remuneration systems. technological developments and the launch of new industry standards intellectual property rights constitute important assets for us. Various and charitable giving to supply chain practices and input materials. In at a reasonable cost, there is a risk that our expenditure will increase events beyond our control constitute a potential risk for our intellectual order to achieve certiﬁcation, a company must demonstrate high social Market risk and that we will lose customers and advertising space. property rights. The same applies to our products and services. and environmental performance by achieving a B Impact Assessment score of 80 or above and passing our risk review. Multinational The number of people accessing the internet using devices other Effective protection of intellectual property may not be available in corporations must also meet baseline requirement standards, make a Our offering for advertisers and web publishers on the internet covers than PCs, including mobile phones, PDAs and e-mail assistants, as every country where our products and services are distributed or legal commitment by changing their Corporate Governance structure products and services where pricing is largely based on cost per well as TV receivers, has grown dramatically in recent years. If we do offered via the internet. Furthermore, the efforts which we have made to be accountable to all stakeholders, not just shareholders, and action (CPA), cost per lead (CPL), cost per download (CPD), cost per not succeed in future in securing an appropriate number of users of to protect our property rights may be insufﬁcient or ineffective. Any achieve beneﬁt corporation status if available in their jurisdiction, and thousand impressions (CPM), or cost per click (CPC). Every ﬁeld of our alternative devices and gaining the loyalty of these users through our signiﬁcant impairment of our intellectual property rights can adversely exhibit transparency by allowing information about their performance business is exposed to strong competition, mainly from large media products and services, or if we are too slow in developing products and affect our business or our competitiveness. Moreover, the protection measured against B Lab’s standards to be publicly available on their B and/or performance (digital) agencies or other advertising and afﬁliate technologies compatible with communication devices other than PCs, of our intellectual property rights is costly and time-consuming. Any Corp proﬁle on B Lab’s website. networks offering similar online services and products. Beside this we will miss out on an increasingly important share of the market for increase in the unauthorised use of our intellectual property could group of companies, we also compete with search engine providers, online services. lead to increased administrative costs and work, and adversely affect social media channels and marketplaces, such as Google, Facebook our results. Although we aim to obtain protection for our intellectual and Amazon, as well as large ad exchanges, i.e. marketplaces in property, it is conceivable that we may not be able to adequately which advertising space is auctioned in real time, similar to other Cybercrime, hacking, identity theft and risk of fraud STRATEGIC RISK protect some of our innovations. In view of the often-considerable market exchanges. Apart from this, we also compete with traditional costs of patent and/or intellectual property protection, we may refrain advertising channels, such as direct marketing, TV, radio, cable, and Increasing international networking and the related possibility of from protecting certain innovations and/or intellectual property which print media, which are all striving to win a share of the total advertising IT system abuse are resulting in cybercrime risks for the ad pepper could prove to be important at a later date. budget for themselves. Personnel risk Group, such as the failure of central IT systems, the disclosure or loss of the data integrity of conﬁdential data from business activities, the It is also possible that the scope of patent and/or intellectual property Many existing and potential advertisers have competitive advantages Our future success is to a signiﬁcant degree dependent on the manipulation of IT systems in process control, or an increased burden protection could turn out to be insufﬁcient or that a previously over our Company due to such factors as longer company histories, continued service of the (single) member of our Board of Directors or adverse impact on IT systems as a result of virus attacks. In addition, granted patent is deemed to be invalid or non-enforceable. As our higher public awareness levels, larger customer bases, better access and of the directors of our major segments. If we lose the service complications with the changeover of IT systems could negatively Company grows, there is a growing probability that lawsuits related to to popular websites and signiﬁcantly larger resources in terms of staff, of such persons, we may not be able to recruit suitable or qualiﬁed impact the earnings situation. intellectual property issues will be ﬁled against us. ﬁnance, equipment, sales and marketing. These companies use their replacements and may incur additional expenses to recruit and train experience and resources in competition with us in different ways, such new staff, which could severely disrupt our business and growth. Cyber incidents, in general, may cause disruption and impact business Our products, services, and technologies may fail to fulﬁl the demands as pursuing more active M&A strategies, investing more in research operations, potentially resulting in ﬁnancial losses, impediments of of third parties, and irrespective of their validity, defending such claims and development, or competing more aggressively for advertising In general, highly qualiﬁed employees and management staff form the trading, violations of applicable privacy and other laws, regulatory can be time-consuming and costly, whether in or out of court. In the customers and websites. If our competitors succeed in offering similar basis of any company’s long-term economic success. Retaining key- ﬁnes, penalties, reputational damage, reimbursement of other event that claims against us are successfully upheld, we may have to or better services or more relevant advertising, this could lead to a employees at the Company on a long-term basis is a factor of the utmost compensation costs, or additional compliance cost. pay signiﬁcant damages, or discontinue services or practices, which signiﬁcant loss of advertisers and web publishers and hence adversely importance for the ad pepper Group, as is attracting new, highly qualiﬁed may result in be violations of third-party rights. We may also need to affect our revenues. employees. Any departure of large numbers of these employees over a The Group may be subject to fraudulent and malicious activities obtain licenses to continue our existing business operations; this may short period and subsequent inability to ﬁnd adequate replacements may undertaken by persons seeking to use its platforms to divert or also involve considerable additional costs. Likewise, there is a risk to the Group’s business (or parts thereof) if any inhibit the Company’s business performance. Speciﬁcally, the Company artiﬁcially inﬂate the buyer purchases through its platform, mainly or all of Google, Amazon, Facebook, Apple and other relevant players cannot guarantee that it will be able to retain key top performers in the through fraudulently generated advertising impressions, leads, and (i) cease to be a market leader in the online advertising industry, (ii) event of any further intensiﬁcation in the competition for highly qualiﬁed other user behaviours overstating the actual performance. As we were subject to adverse publicity or action impeding its provision of employees, especially in the IT and internet sectors. 59 60 04.5 04.5 RISK REPORT RISK REPORT advertising services and infrastructure, (iii) were to cease to regard the ad pepper Group to a material adverse effect if one or more of our large • give priority to long-term goals over short-term results when support, research and development, buildings, information systems, Group as a preferred partner, (iv) were to expand their operations such customers were to signiﬁcantly reduce their business with us for any necessary accounting, human resources and other integration aspects, and may that it competed directly with the Group, or (v) otherwise cease to be reason, or to favour competitors or new entrants. Customers do not • adapt to technological changes designed to obfuscate or block delay or threaten the complete integration of the businesses acquired. available as a technology provider to the Group. make binding long-term commitments to the ad pepper Group regarding online advertising on desktop PCs or mobile devices booking volumes and could seek to materially change the terms of their • adapt to changes in the competitive environment Likewise, divestment of companies and/or businesses can lead to Moreover, since 2022 Google has blocked third party cookies in business relationship at any time. Any such change could signiﬁcantly • achieve sufﬁcient proﬁtability and reputation in the market on liability vis-à-vis the buyer, or additional expenses, for instance through Chrome. As a result, third-party cookies became sometimes unusable harm the ad pepper Group’s business and operating results. the basis of our investments in new technologies and related indemnity clauses and guarantee commitments or long-term supply for advertising measurement and many forms of third-party data products/services. contracts. already challenged by GDPR since May 2018, will cease to exist. Platform technology risk While we expect the vast majority of our services and products to be Should we fail to successfully handle these risks and uncertainties, this Currency risk unaffected, it can therefore not be excluded, that some of our business could have signiﬁcantly adverse consequences for our revenue as well activities will not work beyond the coming years. Unless we adapt to The Group’s revenue growth depends partly on the ability to develop a as our asset and ﬁnance position, see also Note [40]. these changes, these businesses will be negatively affected. reliable, scalable, secure, high-performance technology infrastructure that Since the ad pepper Group conducts a signiﬁcant share of its business can efﬁciently handle increased usage globally. The platforms are scalable outside the euro area, exchange rate ﬂuctuations can have a signiﬁcant Risks of our M&A strategy The possibility of in-house handling of advertising network functions can in principle. However, only the actual future expansion of the business impact on results. Currency risks from ﬁnancial instruments can impact represent a possible risk for the ad pepper Group both at the level of will prove whether there is enough business available and the platforms accounts receivable, accounts payable, as well as cash and cash the attractiveness of its offering vis-à-vis advertisers as well as to its scales well enough to cover the ﬁxed cost base that has been built. Historically, part of our Company’s growth has resulted from mergers equivalents in a currency other than a Company’s functional currency. negotiating power vis-à-vis the providers of online advertising inventory. Inability to develop a scalable platform may have signiﬁcantly adverse and acquisitions, and we will continue to consider acquisitions in For the ad pepper Group, the currency risk from ﬁnancial instruments is consequences for our revenue as well as our asset and ﬁnance position. future as well. Furthermore, we will continually review our portfolio particularly relevant for GBP and, to a lesser extent, USD. No ﬁnancial Online advertising markets are characterised by rapid technological of shareholdings to assess whether Company acquisitions might be instruments are used to hedge currency risks. change, the establishment of new industry standards, regular launches of appropriate. Every acquisition or sale can have material consequences new products and services, and rapidly changing customer requirements. for our revenue and ﬁnancial position. Furthermore, the integration of Tax risk The introduction of new products and services based on innovative an acquired business or technology can cause unforeseen operational FINANCIAL RISK technologies and the resultant establishment of new industry standards problems, expenditure, and risks. Areas in which we may face risks in could mean that our existing products and services become obsolete this context include: Our future income tax payments may be adversely affected by lower- and unsellable, thus forcing us to make unforeseen and unplanned than-expected proﬁts in jurisdictions with lower tax rates and higher investments. Insufﬁcient ﬂexibility in adapting to these changes can have • implementation or modiﬁcation of controls, processes, and proﬁts in jurisdictions with higher tax rates. If the valuation of our Low proﬁtability adverse effects on our revenue, ﬁnance and asset position. strategies of acquired businesses deferred tax receivables and payables changes this could also mean • diversion of management attention away from other business additional tax expenditure. We are exposed to risks that could prevent us from generating net In general, we expect our sales growth to decline over the course of matters proﬁts in the future. These risks depend on several factors, including time as a result of base effects and increasingly tough competition. We • overvaluation of businesses acquired, acceptance of the acquired The determination our tax provisions and other tax liabilities worldwide our ability to: also expect growing pressure on our operating margins as a result of business‘ products and services by our customers is a complex process, and in many instances the ﬁnal amount of tax increasingly tough competition and a general increase in expenditure • cultural problems associated with the integration of the staff of to be paid is uncertain. Although we consider our estimates to be • maintain and expand our existing advertising space on websites in other areas of our business. Furthermore, the margin could fall as a acquired businesses into our Group realistic, the actual tax result can differ from the amounts shown in of publishers and afﬁliates, owners of e-mail lists and newsletter result of our Company having to pay a higher share of our advertising • continued employment of staff companies which we acquire our ﬁnancial statements and signiﬁcantly inﬂuence our ﬁnancial results publishers revenue to our website partners within our website portfolio and/or • integration of the accounting, management, and information in the period or periods to which such tax assessment applies. Our tax • maintain and increase the number of advertising customers who afﬁliate network. systems as well as of the human resources administration and liability forecast can be examined by the responsible tax authorities use our products and services other administration systems of acquired businesses. at any time. Any negative outcome of such an examination can have • increase the number of products and services we offer an adverse effect on our ﬁnancial, revenue, and asset situation. All • adjust to changes in needs and habits of online advertising Dependency risk The integration of companies, products and personnel can constitute of our tax positions are subject to changes in tax laws, regulations, customers, also with a view to the technologies in demand on the a considerable burden to our management and our internal resources. jurisdiction as well as tax-related accounting standards and their market The ad pepper Group and its segments have signiﬁcant customer Acquisitions of foreign companies, in particular, are subject to interpretations. • respond to challenges resulting from the large and growing number concentration, in terms of both advertisers and publishers (website additional risks. These include risks associated with integrating of competitors in the industry owners), so economic difﬁculties or changes in the purchasing policies companies with different cultures and languages, exchange rate risks, • adapt to legal or regulatory changes with a view to the internet as or patterns of its key customers could have a signiﬁcant impact on and other country-speciﬁc economic, political and legal risks. In view of far as these concern data privacy, use, advertising, and trade the ad pepper Group’s business and operating results. While the the number of acquisitions which we have completed in past years, the • achieve sales targets for partners with whom we have agreed concentration of our business on a relatively small number of customers different customers and technological functionalities of the products minimum guarantees may provide certain beneﬁts to us, such as potentially more efﬁcient and services acquired, future acquisitions may pose signiﬁcantly • generate revenue from services in which we have invested handling/decreased cost of sales, this concentration may expose the bigger challenges with respect to products, sales, marketing, customer signiﬁcant time and resources 61 62 04.5 04.5 RISK REPORT RISK REPORT New accounting standards and trafﬁc, the Group’s platforms must be able to support increased ability to inﬂuence Company matters and affects the liquidity of the ad user’s data. Therefore, the effectiveness of our technology may be trafﬁc volumes and variety of advertising formats whilst maintaining pepper share traded on the stock exchange. In view of this, we may impaired by regulations limiting or prohibiting the use of cookies and The International Accounting Standards Board (IASB) or other a stable and effective infrastructure and reliable service to customers. implement measures that our shareholders do not deem expedient. cookie consent of data subjects. On the basis of the requirements set organisations may publish new or revised directives, interpretations, or This ﬂexibility and stability require signiﬁcant investments in both the This in turn may have a lasting negative impact on our share price. up by data privacy regulators, software manufacturers may provide other guidelines which could inﬂuence International Financial Reporting Company’s organisation and technology, which increase the cost base. new internet browsers bearing default settings where cookies are not Standards (IFRS). As a result, it may happen that an accounting rule is accepted and the user has to actively change such settings to accept adopted for which no rules previously existed, or that an accounting cookies (“privacy by default“). If the use or effect of cookies were Capital risk rule previously open for interpretation is declared to be generally restricted, we would have to switch to other technologies in order to COMPLIANCE RISK valid or is applied in a speciﬁc manner. It is also conceivable that valid collect geographic or behaviour-related information. methods may be replaced entirely. Such IFRS-related changes can The price of our share at times experienced considerable ﬂuctuation have a signiﬁcant impact on our ﬁnance, revenue and asset positions. since its initial listing and will continue to remain volatile in the future. Although such technologies exist, they are far less effective than Moreover, inability to adopt new accounting standards in time may The share price may move rapidly in response to factors beyond our cookies. We would have to develop or buy new technologies in order Governance risk severely damage our reputation. control, including: to prevent fraud in our networks. Replacing cookies could become time- consuming and requires considerable investment. Their development Besides operational and ﬁscal risks, our business activity harbours • ﬂuctuations in our quarterly results or in the results of our could turn out to be economically pointless or it may not be possible to a wide range of legal risks. Legal disputes, authority ﬁnes and other Liquidity and cash ﬂow risk competitors implement them early enough in order to prevent the loss of customers proceedings may cause considerable damage to our business, our • announcements of Company sales and takeovers, new products, or advertising space. The use of cookie technology or a comparable reputation or our brands, and entail high costs. We are subject to a All of the Company’s liquid funds and short-term marketable securities are major contracts, business relationships or provision of capital technology to collect information about internet usage patterns may variety of laws and regulations, many of which are not yet ﬁrmly essentially managed by ﬁnancial institutions. Based on the development • recommendations by equity analysts or changed proﬁt expectations lead to lawsuits or investigations in future. Many jurisdictions have established or are still developing. This includes wide-reaching of our business, the liquidity of ad pepper media International N.V. can • publication of proﬁts inconsistent with analysts’ expectations detailed provisions concerning both the collection of personal data and legislation covering consumer protection, data protection, e-commerce at present be regarded as secure and, despite future investment in new • number of shares outstanding the use of such data for direct marketing campaigns. and competition. Antitrust and competition claims or investigations companies, sufﬁcient to meet all future payment obligations. A decline • share sales by us or our shareholders may also require changes to our business operations. Any such risks in liquid funds may arise if further investments are required in the future. • short-selling, hedging or other derivative transactions with shares Since 1 December 2021 the Telecommunications Telemedia Data are counteracted by internal and external law experts who thoroughly The Company is dependent upon its customers’ payment discipline. Our Protection Act (Telekommunikation-Telemedien-Datenschutz-Gesetz, examine all contractual and regulatory matters. We endeavour to fulﬁl receivables are typically unsecured and result from sales which are The stock market in general and the market for technology companies TTDSG) is applicable replacing the data protection requirements in the our obligations through constant monitoring and by avoiding conﬂicts predominantly generated with customers based in Europe. The Company in particular have witnessed extreme share price and trading volume Telemedia Act. The TTDSG introduces a strict cookie opt-in requirement arising from the violation of third-party rights or breach of regulatory checks its customers’ creditworthiness on an ongoing basis and has ﬂuctuations often unrelated or disproportionate to the operational very much in line with the preconditions in the EU Privacy and Electronic provisions. No substantial litigation risks currently exist within the made provisions for potential cases of default. Negative developments performance of these companies. These general market and industry Communications Directive. Prior to this the German High Court has ad pepper Group. on the capital markets can restrict our ability to obtain ﬁnancing. Past factors can seriously damage the price of our share irrespective of our outlined in 2020 consent requirements for storing cookies on devices economic and ﬁnancial crisis led to certain restrictions on the availability actual performance. following a decision of the European Court of Justice on this issue. of corporate ﬁnance and created a scenario such as that outlined above. Data risk Looking ahead, it is not possible to completely exclude future restrictions Lower (or volatile) share prices may lead to an inability to attract strong According to these decisions, companies need consent for storing on our liquidity situation, especially in the case of a return to a scenario long-term investors and limit our ability to raise new equity and attract cookies on user devices irrespective whether this Cookie-ID is personal Websites usually install small ﬁles with an ID to identify a user, generally described above. Should one or more ﬁnancial institution go bankrupt in key personnel. data or not. These verdicts are the main reason why the German called “cookies”, on a device. Cookies usually collect information about such a scenario, this may have severe consequences for the Company’s legislator has introduced a strict consent requirement for storing data users so that websites can adapt their contents to user needs. assets and ﬁnancial position. In the past, lawsuits have been ﬁled against such companies after in an end-user’s device. All in all, this leads to stricter data protection times of high price ﬂuctuations on the overall market or in individual requirements that may have a negative impact on our business model. The internet user’s browser software forwards the cookie information shares. In the event that such lawsuits are ﬁled against us, this could Namely, the upcoming European ePrivacy-Regulation may introduce to the website. Our business depends on the use of cookies to track the Working capital risk lead to signiﬁcant costs and distract management time and resources. stricter requirements. If adopted, such regulations would have a trafﬁc of internet users on the websites of our advertising customers, thorough impact on our business model. and to monitor and prevent fraud in our networks. Most of the latest The Group’s operating results and cash ﬂow vary from quarter to As of 31 December 2023, Michael Oschmann, Chairman of the internet browsers enable internet users to change their browser quarter due to the seasonal nature of advertising spending. In contrast Supervisory Board, directly or indirectly owns shares representing In addition to this, the EU-Commission has started the so-called settings to prevent the storage of cookies on their hard disks. internet to the higher advertising budgets spent during the fourth quarter, the 50.53 percent of the share capital and typically more than 80 percent Cookie-Pledge initiative in order to better empower consumers to users can also remove cookies from their hard disks at any time. third quarter of the calendar year is typically the slowest in terms of the voting rights at the General Meeting. For the foreseeable make effective choices regarding tracking-based advertising models of advertising spend (summer quarter). This affects the Group’s future, Michael Oschmann will therefore continue to have signiﬁcant using cookies and/or similar techniques of getting access to end user’s According to the General Data Protection Regulation (“GDPR”), which operating results, cash ﬂow and cash requirements. In addition, digital inﬂuence on the management and on all matters requiring approval by devices. This covers to a certain extent the storing of cookies on end came into effect in May 2018 in Europe, and to the EU Privacy and advertising spend is volatile and unpredictable. In periods of lower the shareholders, including the election of board members, important user’s devices that are necessary for our business model. As the storing Electronic Communications Directive, consent of data subjects is advertising spending this may have a material adverse effect on the Company transactions, such as mergers or the sale of the Company as of cookies is not strictly necessary to deliver the service requested by a required for storing information like cookies for tracking or targeting Group’s revenue. Similarly, if faced with spikes in advertising spend a whole or in part. This concentration of control limits our shareholders’ data subject, consent of data subject is required. purposes on an end-user’s device and for further processing of end 63 64 04.5 04.5 RISK REPORT RISK REPORT It might be more difﬁcult to get consent of a data subject for storing enforcement proceedings, ﬁnes and/or criminal prosecution in one or Operational risks are managed through the ongoing budgeting, reach help to mitigate our exposure to any particular localised risk. We cookies due to this initiative. more jurisdictions. These monetary damages may not be subject to forecasting and reporting process as well as training activities to monitor proposed changes in taxation legislation and new accounting contractual limit of liability or exclusion of consequential or indirect constantly improve and update employees’ skills. Infrastructure risks standards to ensure these are taken into account when we consider We depend on an easy way to transfer personal data from the EU to damages and could be substantial. Our liability insurance may not are mitigated by regular backups, redundant server structures and our future business plans. We try to manage the working capital risk UK. At the end of June 2021, the European Commissions adopted an cover us against claims related to security breaches, cyber-attacks or moving to the cloud. To reduce fraud risk, anti-fraud teams are tasked by increasing and diversifying our client base in a way, which allows adequacy decision for the United Kingdom under GDPR. This decision other breaches. with identifying unusual patterns, ideally in the design phase of us to become less dependent on fourth quarter gross sales. While the facilitates a data transfer between EU and UK. Otherwise, our clients advertising campaigns. Group continues to be independent on external funding, the risk of not will have to agree on Standard Contractual Clauses to legalise a data ﬁnding these funds is not regarded as imminent. Matters of substantial Violations of other legal requirements transfer to UK. The duration of this decision is limited to four years. As The cost of these measures and control systems must be commensurate signiﬁcance are also reviewed with the Supervisory Board through the the UK-Government has already announced to review the UK-GDRP and with the beneﬁts achieved. Management generally considers the two-tier board structure. Management realises that the expansion to lower burdens for companies it is yet unclear whether this adequacy The aim of compliance is to ensure irreproachable business conduct likelihood of risks in the operational and technology area as moderate of the business does require some risk taking and evaluates its risk decision has a bright future. In 2024 the European Commission will at all times and in all respects. Any failure to fulﬁl legal requirements while evaluating the ﬁnancial impact of each event depending on appetite as medium. Management therefore estimates this overall start reviewing UK’s laws and systems for protecting personal data and and report obligations, any violation of the Corporate Governance the speciﬁc risk ﬁeld. Management’s risk appetite in this ﬁeld is ﬁnancial risk to be low. decide whether to extend the adequacy decision for another four years. Code or insufﬁcient management transparency may pose a risk to the moderate and we seek to mitigate risks through contracts, service level required compliance. For this reason, the ad pepper Group established agreements, insurance and cooperation with established partners. As far as compliance risks are concerned as the Group is growing in a Although we abide by the applicable laws in the different jurisdictions, a Group-wide Code of Conduct as well as an insider trading policy, complex and rapidly changing environment and is in an ongoing process we cannot rule out the possibility that changes in legislation may have which provides for the safety and support of employees in various As far as strategic risks are concerned, we try to mitigate the personnel of establishing and improving its processes, regulatory violations may signiﬁcant repercussions for our business models and revenues. Any professional situations. Despite comprehensive measures taken within risk by providing attractive remuneration package, creation of a positive occur. Management’s risk appetite is generally low and matters of litigation or governmental action against us could become costly and the realignment of the compliance programme and our compliance working environment and structured individual development plan. We substantial signiﬁcance are also reviewed with the Supervisory Board time-consuming, or compel us to change our business practice and organisation, it is impossible for us to protect us against all risks. try to manage the dependency risks and platform risks by building and through the two-tier board structure. The ad pepper Group is committed divert management attention away from other business ﬁelds. maintaining customer relationships. We develop online advertising to complying with the laws and regulations of the countries in which More generally, from time to time we are or may become involved in strategies and regularly monitor progress for existing clients and we operate. However, with the General Data Protection Regulation and The regulatory environment in Europe is ever changing. With the private actions, investigations and various other legal proceedings by identify and build relationships with new customers. ePrivacy Regulation, compliance obligations and ﬁnancial penalties for GDPR, which came into effect in May 2018 in Europe, as well as employees, suppliers, competitors, government agencies or others. noncompliance are increasing signiﬁcantly. Should the risk materialise, the EU e-commerce Directive, compliance obligations and ﬁnancial Failure to comply with laws and regulations can damage our reputation In general, management addresses market risks by actively monitoring it would have a very high, potentially critical impact. We mitigate the penalties for non-compliance are increasing signiﬁcantly and could and have negative ﬁnancial and operational consequences. the developments and evaluating the actual exposure to these risks. risk by working with well-established external partners such as tax, potentially harm our business. The ad pepper Group has set up working This includes participation in industry events, gaining information from legal and audit advisors in all countries we are operating, as well groups in close cooperation with its external data protection ofﬁcer analysts and research ﬁrms as well as creating business cases for new as building in-house capabilities through training and qualiﬁcation to continuously identify adjustment needs to ensure compliance with product developments. measures for existing staff. GDPR requirements. Nevertheless, the security measures which have RISK APPETITE been or will be implemented may not be effective, and ad pepper’s The ad pepper Group has a track record of identifying market changes systems may be vulnerable to theft, loss, damage or interruption from a early and investing into winning products and services ahead of time. number of potential sources or events, including unauthorised access or We will, however, not pursue growth at all costs and expect sufﬁcient security breaches, cyber-attacks, computer viruses, power loss, or other margins. We will primarily pursue organic growth strategies to meet This section highlights those risks that the Group is willing to take, disruptive events. The ad pepper Group may not have the resources or our growth objectives. We aim for sufﬁcient operating margins as well as those that are unacceptable. It includes a series of risk technical sophistication to anticipate or prevent rapidly evolving forms whilst protecting the long-term viability of the Group. In general, assertions which are aligned to our strategy, together with the risk of cyber-attacks. management’s risk appetite in this ﬁeld is moderate. parameters within which we expect to work. The Group operates in markets with high growth potential that are subject to volatility and Moreover, GDPR not only imposes new compliance obligations In the ﬁeld of ﬁnancial risks, management addresses the low intense competition. We will pursue ambitious growth targets and we regarding the handling of personal data, it has also signiﬁcantly proﬁtability risk mainly through transparency and the permanent are willing to accept certain levels of risk to increase the likelihood increased ﬁnancial penalties for non-compliance. Failure to comply review process in connection with monthly results, forecasting and of achieving or exceeding our strategic objectives, subject to the with GDPR may lead to regulatory enforcement proceedings, which budgeting. In the event of M&A, a dedicated programme management parameters below. can result in monetary penalties of up to 20 percent of worldwide team will be established for the accelerating shareholder value revenue, orders to discontinue certain data processing operations, creation transformation. Through strong due diligence processes The Board’s appetite for risk varies depending on the risk type. The private lawsuits, or reputational damage. If any person, including any and closely managed integration processes, we seek to reduce the Group measures risk by estimating the potential for loss of proﬁt, staff of our employees, negligently disregards or intentionally breaches probability of M&A-related risk. Currency risks, on the other hand, turnover and reputational damage. The Board has a low tolerance our established controls with respect to client or ad pepper data, are sought to be minimised through natural hedging by increasing the for ﬁnance- and compliance-related risk. Conversely, it has a higher or otherwise mismanages or misappropriates that data, we could Company’s cost base in EUR. As far as political instability, in general, tolerance for operational and strategic risk. be subject to signiﬁcant litigation, monetary damages, regulatory is concerned, the breadth of our service portfolio and our geographic 65 66 04.5 04.5 RISK REPORT RISK REPORT EVALUATION OF RISK The following overview table shows a summary of risk type and In the past ﬁnancial year, the ad pepper Group and its external data respective risk appetite: privacy ofﬁcer worked closely to ensure fulﬁlment of the obligations MANAGEMENT SYSTEM imposed by the European legislator through the GDPR. Regular EFFECTIVENESS meetings were held and results presented to the Board of Directors as well as the Supervisory Board. Risk category Risk Appetite The ad pepper Group operates an information protection management The ad pepper Group’s long-term strategy is focused on creating value Operational risk Infrastructure risk Moderate system based on ISO 27001 comprising security guidelines as well for our shareholders and stakeholders through proﬁtable growth. In as organisational and technical measures to prevent and address IT Technology risk Moderate implementing this strategy, the Company has evaluated the relevant security incidents. Also in 2023, ad pepper Group offers regular cyber Cybercrime, hacking, identity Low operational, strategic, ﬁnancial and compliance risks as well as the security awareness trainings for all Group staff due to higher frequency theft and risk of fraud risks and opportunities of future market trends for e-commerce in of so-called fake-president-fraud attempts. The Group repeatedly general and for digital advertising providers in particular. The Board Intellectual property rights risk Low pointed out that no employees, including Board of Directors members, of Directors is responsible for identifying and managing risks with are allowed to ask for payments/money transfers via email and nobody Sustainability Moderate appropriate measures. Signiﬁcant issues are also reviewed with in the Group is allowed to circumvent the four-eyes-principle. As Strategic risk Personnel risk Low the Supervisory Board through the two-tier board structure. Internal mistakes are always possible, the Company is aware that there is a controls have a high priority and are continuously assessed and further Market risk Low risk that an employee might execute a payment within the maximum improved. Separation between executive and controlling functions and available overdraft limit. Dependency risk Moderate compliance with directives and operating instructions are an integral Platform risk Moderate part of the internal control system and no risk with a signiﬁcant impact were identiﬁed. The risk management and internal control systems, Financial risk Low proﬁtability Low however, do not provide absolute assurance that errors, fraud losses, Risks of our M&A strategy Low or unlawful acts will not occur. During the 2023 ﬁnancial year, no OPPORTUNITIES AND OUTLOOK Energy supply risk Low signiﬁcant shortcomings were found in the internal risk management and control system, and no risk with a signiﬁcant impact were Currency risk Moderate identiﬁed. From a current perspective, we foresee no risks that, even in Tax risk Low conjunction with other risks, could threaten the continued existence of 2023 was a difﬁcult year impacted by volatile macro conditions and, New accounting standards Low the ad pepper Group. Please also refer to the disclosure on page 120 in consequently, cautious spending from clients, particularly those in the the Consolidated Financial Statements. ad agents and ad pepper business. While it is early in the year, we are Liquidity and cash ﬂow risks Low not expecting 2024 to show signiﬁcant macro-economic improvement, Working capital risk Moderate We are convinced that risk management has to be part of the mindset and client caution on marketing spend will likely persist, although not Capital risk Low and working methods of our staff, and retaining control is of prime at last year’s level given interest rates are likely to fall over time. At importance to us. The Company continued to work on optimising its risk the same time, initial indications are for an improvement in our client’s Compliance risk Governance risk Low management and internal control systems in 2023 while acknowledging appetite for booking campaigns with us and ﬁrst pitches could be won Data risk Low that such systems cannot offer absolute assurance against errors in our favour. In these unpredictable times, we are therefore focused on Violations of other legal Low of material importance. The Board of Directors is conscious that positioning the Company for medium term growth, improving our cost requirements the Company does not yet have an internal audit function and has structure and proﬁtability as well as fostering our relationships with discussed this with the Supervisory Board. After an in-depth discussion our clients. the Board of Directors and the Supervisory Board concluded that the Company does not currently require an internal audit function, although this may change in future depending on further Company growth. From its evaluations, the Board of Directors concludes that the risk management system as well as the control of the business processes and the internal control within the Company are sufﬁcient, professional, appropriate and effective. The Board of Directors is of the opinion that the risk management system with its controls and processes provides an adequate level of assurance on the reliability of ﬁnancial information and control information in accordance with relevant laws and regulations. 67 68 « 04.6 RESPONSIBILITY STATEMENT 04.6 04.6 RESPONSIBILITY STATEMENT RESPONSIBILITY STATEMENT RESPONSIBILITY STATEMENT In accordance with the EU Transparency Directive, as incorporated in Chapter 5.1A of the Dutch Financial Supervision Act (Wet op het ﬁnancieel toezicht), the Board of Directors declares that, to the best of its knowledge: • The Consolidated Financial Statements for the year ended 31 December 2023 give a true and fair view of the assets, liabilities, ﬁnancial position and proﬁt or loss of ad pepper media International N.V. and its consolidated Companies. • The report of the Board of Directors gives a true and fair view of the position as of the balance sheet date and the state of affairs during the 2023 ﬁnancial year of ad pepper media International N.V. and its afﬁliated companies, of which the data has been included in the Consolidated Financial Statements. • The report of the Board of Directors describes the principal risks that ad pepper media International N.V. faces. Board of Directors ad pepper media International N.V. Dr Jens Körner, CEO Nuremberg, 10 April 2024 71 72 « 05 CONSOLIDATED FINANCIAL STATEMENTS 05 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT 1ꢀ/ꢀ1 - 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2023 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Gross sales¹ 85,988 98,229 [6] Media cost² -64,239 -73,361 [8] Revenue 21,749 24,868 [5] Cost of sales -873 -1,164 [8] Gross profit 20,876 23,704 Selling and marketing expenses -14,867 -16,638 [9] General and administrative expenses -7,785 -7,164 [10] Other operating income 966 937 [11] Other operating expenses -184 -651 [12] Operating profit -994 187 Financial income 210 62 [13] 1ꢀ/ꢀ1 - 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2023 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Financial expenses -46 -192 [13] Share of profit of an associate 199 - [4] Income before taxes -631 56 Income taxes -68 -306 [14] Net income -699 -250 attributable to shareholders of the parent company -944 -893 attributable to non-controlling interests 245 643 Basic and diluted earnings per share on net income for the year attributable to shareholders of the parent company -0.05 -0.04 [15] Weighted average number of shares outstanding (basic and diluted) 20,676,531 20,278,249 [15] 1 Gross sales represent the total amount billed and billable to clients by the Group, net of discounts, VAT and other sales-related taxes. Disclosure of gross revenue information is not required under IFRS; however, it is voluntarily disclosed from 1 January 2018 onwards in the Consolidated Income Statement as management has concluded that the information is useful for users of the financial statements. Please refer to Note [6]. 2 Media cost relates to payments made to suppliers of ad inventory (commonly referred to as media buys and publishers). Disclosure of media cost information is not required under IFRS; however, it is voluntarily disclosed from 1 January 2018 onwards in the Consolidated Income Statement as management has concluded that the information is useful for users of the financial statements. Please refer to Note [8]. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2023 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2022 kEUR kEUR Net income -699 -250 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Currency translation differences 54 28 Revaluation of listed debt securities 5 -15 Other comprehensive income, net of tax 59 13 Total comprehensive income -640 -237 Attributable to non-controlling interests 266 662 Attributable to shareholders of the parent company -906 -899 CONSOLIDATED STATEMENT OF FINANCIAL POSITION – ASSETS 31ꢀ/ꢀ12ꢀ/ꢀ2023 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Non-current assets [16], Intangible assets 168 374 [17] Property, plant and equipment 173 230 [17] Right-of-use assets 1,184 1,318 [42] Investment in associate 3,687 0 [4] Other financial assets 249 184 [19] Deferred tax assets 183 79 Total non-current assets 5,644 2,185 Current assets Securities and deposits with maturity over three months 3,523 6,076 [20] 31ꢀ/ꢀ12ꢀ/ꢀ2023 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Trade receivables 13,124 17,568 [21] Other receivables 400 309 [22] Income tax receivables 310 549 [23] Other financial assets 98 258 [24] Cash and cash equivalents 19,842 17,008 [25] Total current assets 37,297 41,769 Total assets 42,941 43,954 CONSOLIDATED STATEMENT OF FINANCIAL POSITION – EQUITY AND LIABILITIES 31ꢀ/ꢀ12ꢀ/ꢀ2023 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Equity attributable to shareholders of the parent company Issued capital 1,160 1,075 [26] Share premium 67,173 63,782 [27] Reserves -50,669 -50,367 [28] Total 17,664 14,490 Non-controlling interests 1,217 1,176 [29] Total equity 18,881 15,666 Non-current liabilities Other liabilities 822 840 [30], [42] Total non-current liabilities 822 840 Current liabilities Trade payables 17,657 20,836 [31] Contract liabilities 382 465 [32] 31ꢀ/ꢀ12ꢀ/ꢀ2023 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Other liabilities 1,990 2,231 [33], [41] Other financial liabilities 3,006 3,551 [34], [42] Income tax liabilities 203 365 [14] Total current liabilities 23,238 27,448 Total liabilities 24,060 28,288 Total equity and liabilities 42,941 43,954 CONSOLIDATED STATEMENT OF CASH FLOWS 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2023 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Net income -699 -250 Adjustments for: Depreciation and amortisation 1,018 1,088 [16], [17], [42] Gainꢀ/ꢀloss on sale of fixed assets -6 54 [11], [12] Share-based compensation 235 -76 [39] Gainꢀ/ꢀloss on sale of securities and other investments (after bank charges) -2 120 [13], [18], [20] Other financial income and financial expenses -163 11 Share of profit of an associate -199 0 Income taxes 68 306 [14] Income from the release of accrued liabilities -1,016 -1,094 [11], [38] Other non-cash expenses and income -25 386 Gross cash flow -790 545 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2023 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Change in trade receivables 4,362 1,303 [12], [21] Change in other assets 7 -21 Change in trade payables -2,287 1,583 [31] Change in other liabilities -107 -391 Income taxes received 476 0 Income taxes paid -578 -1,073 Interest received 202 62 Interest paid -46 -77 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2023 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Net cash flow fromꢀ/ꢀused in operating activities 1,239 1,931 Purchase of intangible assets and property, plant and equipment -114 -219 [16], [17] Proceeds from sale of intangible assets and property, plant and equipment 6 3 Proceeds from sale of securities and maturing fixed deposits 6,085 1,935 Purchase of securities -3,521 -5,000 Net cash flow fromꢀ/ꢀused in investing activities 2,456 -3,281 Payment of lease liabilities -595 -585 [42] Purchase of treasury shares 0 -1,232 Dividends to non-controlling interests -286 -539 [29] Transaction costs on issue of shares -12 0 [27] Net cash flow fromꢀ/ꢀused in financing activities -893 -2,356 Net decreaseꢀ/ꢀincrease in cash and cash equivalents 2,802 -3,706 Cash and cash equivalents at beginning of period 17,008 20,704 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2023 1ꢀ/ꢀ1 - 31ꢀ/ꢀ12ꢀ/ꢀ2022 Note kEUR kEUR Effect of exchange rates on cash and cash equivalents 33 10 Cash and cash equivalents at end of period 19,842 17,008 [25] * in conjunction with the investment in solute Holding GmbH & Co. KG. For further information please refer to Note [4]. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 2023 Balance at Profit for the Other Total Share- Dividends Purchase of Issuance of NCI put Balance at Transaction 1ꢀ/ꢀ1ꢀ/ꢀ2023 31ꢀ/ꢀ12ꢀ/ꢀ2023 period comprehensi comprehensi -based treasury shares liability costs related ve income ve income payment shares to issue of share capital Note Issued capital (kEUR) [26] 1,075 0 0 0 0 0 0 85 0 0 1,160 Share premium (kEUR) [27] 63,782 0 0 0 0 0 0 3,403 -12 0 67,173 Reserves [28] Treasury reserve (kEUR) -6,138 0 0 0 0 0 0 0 0 0 -6,138 For employee stock [39] option plans (kEUR) 2,906 0 0 0 167 0 0 0 0 0 3,073 Accumulated deficit (kEUR) -43,910 -944 0 -944 0 0 0 0 0 0 -44,854 Currency translation basis of preparation differences (kEUR) -1,153 0 33 33 0 0 0 0 0 0 -1,120 Balance at Profit for the Other Total Share- Dividends Purchase of Issuance of NCI put Balance at Transaction 1ꢀ/ꢀ1ꢀ/ꢀ2023 31ꢀ/ꢀ12ꢀ/ꢀ2023 period comprehensi comprehensi -based treasury shares costs related liability ve income ve income payment shares to issue of share capital Note Revaluation of listed [20] debt securities (kEUR) -3 0 5 5 0 0 0 0 0 0 2 Other reserves (kEUR) -2,070 0 0 0 0 0 0 0 0 437 -1,633 Subtotal reserves (kEUR) -50,367 -944 38 -906 167 0 0 0 0 437 -50,669 Equity attributable to shareholders of the parent company (kEUR) 14,490 -944 38 -906 167 0 0 3,488 -12 437 17,664 Non-controlling interests [29] (kEUR) 1,176 245 21 266 0 -286 0 0 0 62 1,217 Total equity (kEUR) 15,666 -699 59 -640 167 -286 0 3,488 -12 499 18,881 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 2022 Balance at Profit for Other Total Share- Dividend Purchase Issuance NCI put Balance at 1ꢀ/ꢀ1ꢀ/ꢀ2022 the period comprehe comprehe liability 31ꢀ/ꢀ12ꢀ/ꢀ2022 -based s of of shares Transaction nsive nsive payment treasury costs related income income shares to issue of share capital Note Issued capital (kEUR) [26] 1,075 0 0 0 0 0 0 0 0 0 1,075 Share premium [27] (kEUR) 63,782 0 0 0 0 0 0 0 0 0 63,782 Reserves [28] Treasury reserve (kEUR) -4,906 0 0 0 0 0 -1,232 0 0 0 -6,138 For employee stock [39] option plans (kEUR) 2,827 0 0 0 79 0 0 0 0 0 2,906 Accumulated deficit -893 (kEUR) -43,017 0 -893 0 0 0 0 0 0 -43,910 Balance at Profit for Other Total Share- Dividend Purchase Issuance NCI put Balance at 1ꢀ/ꢀ1ꢀ/ꢀ2022 the period comprehe comprehe liability 31ꢀ/ꢀ12ꢀ/ꢀ2022 -based s of of shares Transaction nsive nsive payment treasury costs related income income shares to issue of share capital Note Currency translation basis of preparation differences (kEUR) -1,162 0 9 9 0 0 0 0 0 0 -1,153 Revaluation of listed debt [20] securities (kEUR) 12 0 -15 -15 0 0 0 0 0 0 -3 Other reserves (kEUR) -2,812 0 0 0 0 0 0 0 0 742 -2,070 Subtotal reserves (kEUR) -49,058 -893 -6 -899 79 0 -1,232 0 0 742 -50,367 Equity attributable to shareholders of the parent company (kEUR) 15,798 -893 -6 -899 79 0 -1,232 0 0 742 14,490 Balance at Profit for Other Total Share- Dividend Purchase Issuance NCI put Balance at 1ꢀ/ꢀ1ꢀ/ꢀ2022 the period comprehe comprehe liability 31ꢀ/ꢀ12ꢀ/ꢀ2022 -based s of of shares Transaction nsive nsive payment treasury costs related income income shares to issue of share capital Note Non-controlling [29] interests (kEUR) 958 643 19 662 0 -539 0 0 0 95 1,176 Total equity (kEUR) 16,756 -250 13 -237 79 -539 -1,232 0 0 837 15,666 06 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CORPORATE INFORMATION [1] The Consolidated Financial Statements of ad pepper media International N.V. (the “Company”) for the year ended 31 December 2023 were authorised for issue by the Board of Directors on 10 April 2024. ad pepper media International N.V. is a public Company incorporated in the Netherlands , domiciled at Frankenstrasse 150 C, 90461 Nuremberg, Germany and is the ultimate parent and controlling party of the ad pepper Group (the “Group”). The Company’s shares are publicly traded under WKN 940883 (ISIN NL0000238145) on the Prime Standard of the Frankfurt Stock Exchange. The business activities of ad pepper media International N.V. involve holding investments in other entities whose objective is to market advertising space on the internet and providing services for the subsidiaries. Since its formation, the Group has been geared towards acting flexibly to meet the requirements of a whole range of different markets as an international Group. The ad pepper Group is an international provider of interactive products and services for websites and advertisers. The Company currently markets campaigns and websites worldwide and operates from eleven offices in Europe. The ad pepper Group uses state-of-the-art technology to link thousands of small, medium, and large websites to form a top-quality advertising network with global reach and a precise focus on its target groups. In addition to a regional, national, and international marketing presence, website partners receive a large number of other important products and services such as traffic analysis and performance optimisation, provided by the ad pepper Group and its affiliated entities in a localised form. MATERIAL ACCOUNTING PRINCIPLES [2] Basis of preparation The Consolidated Financial Statements have been prepared on a historical cost basis, except for employee benefit liabilities and current investments in securities, which have been measured at fair value. The Consolidated Financial Statements are presented in EUR. All values are rounded up or down to the nearest thousand euro (kEUR) or million euro (mEUR) except where indicated otherwise. Due to rounding, individual figures may not add up exactly to the totals stated. Based on the requirements of the Dutch Civil Code, a full Annual Report comprises reports from the Board of Directors and the Supervisory Board, Consolidated Financial Statements, Company Financial Statements, and other information. This report includes the reports from the Board of Directors and the Supervisory Board, Consolidated Financial Statements, Company Financial Statements, and other information. Statement of compliance The Consolidated and Company Financial Statements of ad pepper media International N.V. and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), in conjunction with Part 9 of Book 2 of the Dutch Civil Code. The same accounting principles may be applied in the Company’s Financial Statement and the Consolidated Financial Statements. If the accounting principles of the Company’s Financial Statements differ from the accounting principles applied in the Consolidated Financial Statements, this is disclosed. Basis of consolidation The Consolidated Financial Statements comprise the financial statements of ad pepper media International N.V. and its subsidiaries as at 31 December each year. The financial statements of the subsidiaries are prepared for the same reporting year as those of the parent company, using consistent accounting policies. Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All business combinations are accounted for under the acquisition method. In accordance with this method, the purchase price has been allocated to the fair value of the interest held in the net assets of the consolidated subsidiaries at the time of acquisition. In doing so, all identifiable assets, liabilities and contingent liabilities are recognised at fair value and measured accordingly in the consolidated balance sheet. Following adjustments to the fair values of assets acquired and liabilities assumed, any resulting positive difference is capitalised in the balance sheet as goodwill. Situations in which the fair value of net assets is greater than the purchase price paid result in a negative difference. In the event that such difference remains following reassessment of the allocation of the purchase price or determining the fair value of acquired assets, liabilities, and contingent liabilities, this is recognised immediately as income. The proportion of assets, liabilities, and contingent liabilities of the subsidiary applicable to non- controlling interest is also recognised at fair value. All intra-group balances, transactions, income and expenses, and profits and losses resulting from intra-group transactions that are recognised in assets are eliminated in full. Consolidated Group The subsidiaries included in consolidation are as follows: Entity 31/ 12/ 2023 31/ 12/ 2022 Share in percent Share in percent ad pepper media GmbH, Nuremberg, Germany 100 100 ad pepper media France S.A.R.L., Paris, France 100 100 ad pepper media USA LLC, New York, USA 100 100 Entity 31/ 12/ 2023 31/ 12/ 2022 Share in percent Share in percent ad pepper media Spain S.A., Madrid, Spain 65 65 Webgains S.L., Madrid, Spain 65 65 Webgains Ltd., Bristol, United Kingdom 100 100 ad agents GmbH, Herrenberg, Germany 60 60 ad agents AG, Zürich, Switzerland 60 60 Webgains Italy S.r.L. SB, Milan, Italy 100 100 Webgains GmbH, Nuremberg, Germany 100 100 Webgains B.V., Amsterdam, Netherlands 100 100 Associate Since October 2023 the Group holds a 25.64 % share in solute Holding GmbH & Co. KG. For more details, refer to Note [4]. Summary of new accounting policies The accounting policies adopted in the preparation of the Group’s annual Consolidated Financial Statements are consistent with those followed in the preparation of the Group’s annual Consolidated Financial Statements for the year ended 31 December 2022 except for the adoption of new standards effective as of 1 January 2023. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2023, but do not have an impact on the Consolidated Financial Statements of the Group. The following amendments, improvements and interpretations to existing standards require first-time application in the financial year beginning 1 January 2023: • Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement: Disclosure of Disclosure of Accounting policies • Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors, Definition of Accounting Estimates • Amendments to IAS 12 International Tax Reform – Pillar Two Model Rules • Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction • Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information • IFRS 17 Insurance Contracts * Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the Group operates. However, this legislation does not apply to the Group as its consolidated revenue is lower than €750 million. New amendments and interpretations requiring application in financial years beginning 1 January 2024: • Amendment to IAS 1 Presentation of Financial Statements- Classification of Liabilities into current and non-current. This amendment should clarify the criteria for the classification of a liability as either current or non-current. The proposed amendments intend to a) Clarify that the classification is based on the entity’s rights at the end of the reporting period, and b) Make clear the link between the settlement of the liability and the outflow of resources from the entity. The amendment is not expected to have an impact on the Group. • Amendment to IFRS 16 Leases: Lease Liability in a Sale and Leaseback: The amendments specify how a seller-lessee measures the lease liability arising in a sale and leaseback transaction in a way that it does not recognise any amount of the gain or loss that relates to the right of use retained. The amendment is not expected to have an impact on the Group. • Amendment to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: These amendments require an entity to provide information about the impact of supplier finance arrangements on liabilities and cash flows. The amendment is not yet endorsed by EU and is not expected to have an impact on the Group. New amendments and interpretations requiring application in financial years beginning 1 January 2025: • Amendments to IAS 21: The effects of changes in Foreign Exchange Rate: Lack of Exchangeability. The amendments specify how an entity should assess whether a currency is exchangeable and how it should determine a spot exchange rate when exchangeability is lacking. The amendment is not yet endorsed by EU and is not expected to have an impact on the Group. Significant accounting judgements, estimates and assumptions In the application of the Group’s accounting policies, which are described below in Note [3], the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Judgements, estimates and assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date have been applied in particular to the assessment of revenue from contracts with customers (Note [5]), accrued liabilities for outstanding affiliate payments (Note [31]), incremental borrowing rates of right-of-use liabilities (Note [42]), the provision for expected credit losses of trade receivables (Note [41]), share based payments (Note [39]) and on the measurement of deferred tax assets on losses carried forward (Note [14]). A) Judgements Preparing the financial statements in accordance with the IFRS requires the Group management to make judgements in respect to the recognised amounts of revenue in all three operational segments. The Company assesses its revenue arrangement in its business units against specific criteria in order to determine if it is acting as principal or agent. The factors specified by IFRS 15 indicate that the Group does not control services before they are transferred to customers. Therefore, the Group determined that it is an agent in all its customer contracts and is recognising its revenue on a net basis, consequently excluding media cost owed to delivery partners from revenue and cost of sales respectively. B) Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Accrued liabilities In measuring accrued liabilities for affiliate credits not yet disbursed in the Webgains segment, reference has been made to assumptions determined with the assistance of various controlling and reporting tools. Based on various evaluations, the ad pepper Group assesses the disbursement of credits for confirmed transactions that have not been called up more than one year after the closure of the programme as well as of credits of inactive publishers as unlikely and has reduced the accrued liability by the resultant amounts. The provision for expected credit losses of trade receivables An impairment analysis is performed at each reporting date using a matrix to calculate expected credit losses (ECL) for trade receivables. The provision is initially based on the Group’s historical observed default rates and potentially adjusted with forward-looking information. At every reporting date, the historical observed default rates are updated, changes in the forward-looking estimates and evidence for impairment are analysed. Share based payments Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility and dividend yield, and assumptions about them. For the measurement of the fair value of equity-settled and cash settled transactions with employees at the grant date, the Group uses a Monte Carlo simulation model. For cash-settled share-based payment transactions the liability must be remeasured at the end of each reporting period up to the date of settlement, with any changes in fair value recognised in profit or loss. The assumptions and models used for estimating fair value for share-based payment and cash-settled transactions are disclosed in Note [39]. Deferred tax assets Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available, against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits together with future tax planning strategies. Further information is presented in the note on incomes taxes (Note [14]). Leases – Estimating the incremental borrowing rate The Group cannot readily determine the interest rate implicit in the lease contracts for offices and cars. Therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have to pay”, which requires estimation when no observable rates are available. The Group estimates the IBR using the market interest rate provided by its bank. SUMMARY OF MATERIAL ACCOUNTING POLICIES [3] Foreign currency translation The Consolidated Financial Statements are presented in EUR, which is the Company’s functional and presentation currency. Each entity in the Group determines its own functional currency, and items included in the financial statements of each entity are measured using that functional currency. Transactions of foreign currencies are initially recorded at the functional currency rate applicable at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange applicable at the balance sheet date. All differences are applied as either profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate applicable on the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate applicable on the date when the fair value was determined. As at the reporting date, the assets and liabilities of those subsidiaries that have a functional currency other than the EUR are translated into the presentation currency of ad pepper media International N.V. (EUR) at the rate of exchange applicable at the balance sheet date, and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising from the translation are applied directly to other comprehensive income (OCI). On disposal of a foreign entity, the deferred cumulative amount recognised in other comprehensive income relating to that particular foreign operation is recognised in the income statement. The significant foreign currency exchange rates developed as follows: Foreign currency Closing Closing Average Average per EUR 1 rate rate rate rate 31/ 12/ 31/ 12/ 2023 2022 2023 2022 USD 1.1114 1.0648 1.0647 1.0527 GBP 0.8706 0.8855 0.8877 0.8514 CHF 0.9302 0.9840 1.0441 1.1901 Property, plant and equipment Property, plant and equipment are stated at historical cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Subsequent costs are included in the asset’s carrying value or recognised as separate asset, as appropriate, only when it is probable that future economic benefits associated with the line item will flow to the Group and the cost of the item can be reliably measured. Depreciation is calculated on a straight-line basis over the useful life of the assets. The estimated useful lives of the assets are between three and ten years. An item recorded under property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. All intangible assets have finite lives and are amortised using the straight-line method over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset are reviewed at least at each financial year-end. Gains or losses arising from derecognising an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised. Leases The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows: • Office space 1 to 5 years • Cars 3 years If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Investment in associates The group holds an interest in an associate, solute Holding GmbH & Co. KG. The financial statement of solute Holding GmbH & Co. KG is prepared for the same reporting period as the Group. The accounting policies are aligned with those of the Group. Therefore, no adjustments are made when measuring and recognising the Group’s share of the profit or loss of the investee after the date of acquisition. An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. In general, significant influence can be assumed when the interest in an associate is higher than 20 percent and lower than 50 percent of the voting rights. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group’s investment in its associate is accounted for using the equity method. The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of profit or loss outside operating loss and represents profit or loss after tax and non- controlling interests in the subsidiaries of the associate. Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets or the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested separately. The statement of profit or loss reflects the Group’s share of the results of operations of the associate. Any changes in OCI are presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. Once a year, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and it’s carrying value and then recognises the loss, if any, within “Share of profit of an associate” in the statement of profit or loss. Upon gaining of control over the associate, the Group fully consolidates the subsidiary and accounts the business combination under the acquisition method. In accordance with this method, the purchase price is allocated to the fair value of the interest held in the net assets of the consolidated subsidiaries at the time of acquisition. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognized in profit or loss. Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. The Group’s lease liabilities are included in other long-term and short-term financial liabilities. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of office space and cars (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be of low value. Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line basis over the lease term. Research and development costs Research costs are expensed as incurred. An intangible asset resulting from the development of an individual project is only capitalised when it cumulatively meets the criteria for recognition stipulated in IAS 38. During the period of development, the asset is tested for impairment annually. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete, and the asset is available for use. Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that a non-monetary asset (property, plant and equipment; intangible assets, right-of-use assets) may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of the fair value of the asset or cash-generating unit less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. The valuation model is based on a discounted cash flow method. Impairment losses are recognised in the income statement in those expense categories consistent with the function of the impaired asset. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of the recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If this is the case, the carrying amount of the asset is increased to its recoverable amount. This increased amount shall not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised on the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. Impairment losses recognised for goodwill are not reversed for subsequent increases in its recoverable amount. Other receivables Other receivables consist mainly of advance payments. Upon initial recognition, other receivables are measured at fair value. Subsequently, they are measured at amortised cost, after deduction of any write-downs. A write-down is applied when objective indications suggest that the receivable may not be fully collectible. Investments and other financial assets Financial assets within the scope of IFRS 9 Financial Instruments are classified and subsequently measured at fair value through profit or loss, amortised cost, or fair value through OCI, as appropriate. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are “solely payments of principal and interest (SPPI)” on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at instrument level. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. For purposes of subsequent measurement, financial assets are classified in four categories: • Financial assets at amortised cost (debt instruments) • Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments) • Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) • Financial assets at fair value through profit or loss Currently the most relevant to the group categories are: • Financial assets at amortised cost (debt instrument), which includes trade receivables • Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments) Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. Financial assets at fair value through other comprehensive income are carried in the statement of financial position at fair value with net changes in fair value recognised in the other comprehensive income. This category includes listed debt investments. A financial asset is primarily derecognised (i.e., removed from the Group's consolidated statement of financial position) when: • The rights to receive cash flows from the asset have expired or • The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Fair value The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis or other valuation models. If the fair value of an unquoted equity instrument cannot be measured reliably, it is carried at cost. Impairment of financial assets carried at amortised cost The Group recognises an allowance for expected credit losses (ECL) for all debt instruments not held at fair value through profit or loss. For trade receivables and contract assets, the Group applies a simplified approach in calculating ECL in line with IFRS 9. A default on receivables expected over the respective term (stage 2 of the impairment model) is determined for trade accounts receivable based on historical default rates for a respective customer portfolio, adjusted for forward-looking factors specific to the debtors and the economic environment, based on segment and geographic allocation. When actions such as insolvency or comparable proceedings have been initiated or other substantial indications that receivables are impaired become apparent like a deterioration of the payment behaviour, the receivables are individually tested for impairment (stage 3 of the impairment model). All receivables more than 90 days overdue are tested for impairment. Impaired debts are written off when they are deemed uncollectable. In the reporting year, bad debt allowance on trade receivables was applied at a rate of 50 percent after 120 days overdue, 75 percent after 240 days overdue, and 100 percent after one year overdue. However, in certain cases the Group may also consider a financial asset to be uncollectable when external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full, before taking into account any credit enhancements held by the Group. The carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in profit or loss. If the amount of the impairment loss decreases in a subsequent period and the decrease can be related objectively to an event occurring after the recognition of impairment, the impairment loss previously recognised is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Treasury shares The Group’s own equity instruments that are repurchased (treasury shares) are deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue, or cancellation of the Group’s own equity instruments. Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand and short-term highly liquid deposits with a maturity of three months or less, that are held for the purpose of meeting short-term cash commitments and are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above. Provisions and accrued liabilities Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation although the respective due date or amount is still uncertain. If the effect of the time value of money is material, long-term provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Accrued liabilities are obligations to pay for goods or services received or delivered that have neither been paid, nor invoiced by the suppliers. Even though estimates are occasionally required to determine the amount or timing of accrued liabilities, the degree of uncertainty is generally much lower than for provisions. Accrued liabilities are recognised under trade payables. Contract liabilities A contract liability is recognised if a payment is received, or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue when the Group performs under the contract. Current financial liabilities Current financial liabilities are liabilities, that must be settled in cash or other financial assets. Based on their nature, financial liabilities are measured at amortised costs and are derecognised upon settlement or cancellation. The Company accounts for a written call / put option over the 35 percent non-controlling interest in ad pepper media Spain S.A. by considering a financial liability with the present value of the exercise price of the option. The Company assessed that the prerequisites for the transfer of the shares are fulfilled at the balance sheet date and therefore assumes the exercise of the put option by the holder in the exercise window during the coming financial year, classifying the liability as current. The attributable changes in the value of the financial liability are recognised in the equity component “other reserves”. Share-based payment transactions Equity-settled transactions Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (“equity-settled transactions”). The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value is determined using an appropriate pricing model, further details of which are given in Note [39]. The cost of equity-settled transactions (remuneration cost) is recognised, together with a corresponding increase in equity, over the period in which the performance and / or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the “vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share (further details are provided in Note [15]). Cash-settled transactions Board of Directors are granted share appreciation rights (SAR’s), settled in cash. The options may be exercised over a period of four years at 25 percent each year, but at the earliest one year after being granted. A liability is recognised and measured initially and at the end of each reporting period until settled, at the fair value of the share appreciation right, by applying an option price model, taking into account the terms and conditions on which the share appreciation rights were granted, and the extent to which the director has rendered services to date. Fair value changes are recognised in employee benefits expense included in the general & administrative costs. Revenue from contracts with customers The Group is in the business of providing performance marketing services, in which third parties provide services to its customers. When another party provides goods or services to its customers, the Group determines whether it is a principal or an agent in these transactions by evaluating the nature of its promise to the customer. The Company has concluded that it is acting as an agent in all of its revenue arrangements, as its role is restricted to arranging a third party that supplies ad inventory to deliver the ad to the end customer. Consequently, the Group records revenue at the net amount that it retains for its services, which is limited to campaign management, while media cost for ad inventory used is excluded from the revenue definition. For further explanations, please refer to Note [2]. Revenue from contracts with customers is recognised when the service is rendered. Depending on the requirements of the specific product, this usually occurs when successful transactions result from user action (CPA), ad impressions are generated (CPC) or personal data is provided (CPL). Gross sales represent the total amount billed and billable to clients by the Group, net of discounts, VAT and other sales-related taxes. Disclosure of gross sales information is not required under IFRS, however, it is voluntarily disclosed in the Consolidated Income Statement, as management has concluded that the information is useful for users of the financial statements. As all performance obligations have an original expected duration of less than one year and meet the requirement of the right to invoice practical expedient in IFRS 15.B16, the Company does not disclose the amount of the remaining performance obligations. Rendering of services Webgains Revenue in this segment is generated by placing the merchant’s advertising on publishers’ websites (affiliate marketing). By using the Webgains technology platform, appropriate publishers are selected for placement of the advertisements on websites likely to drive traffic back to the merchant’s website and consequently enhance the merchant’s transaction values. The merchant pays us on a cost-per-action basis (CPA), which means that the merchant only pays when successful transactions result from the traffic. The price billed to the merchant consists of an override and a commission. The override is considered the amount the Group is entitled to for its services. The commission is the amount paid to our publishers and is excluded under IFRS 15 from the revenue definition. Consequently, commission to publishers is also not included in the Group’s cost of sales. The contractual agreement provides the customer with a recall period, where every occurred transaction can be cancelled within a certain period. Depending on the industry the transaction occurred in, the recall periods range from 30 days in the fashion and beauty industry up to 360 days for insurance, travel and mobile sales. Based on historical data, the Group calculates at year-end the amount to be recognised as return assets and refund liabilities for transactions in the recall period. ad pepper Revenue in the ad pepper segment is generated by marketing internet advertising space. Advertising customers book units (ad impressions, ad clicks, registrations, mail-outs, transactions) via the Company, and these are then supplied over a period defined by the customer. ad pepper customers pay us on the basis of cost per click (CPC), cost per lead (CPL) or cost per impression (CPM). All of the three billing methods consist of media costs owed to ad pepper’s delivery partners and a service charge as an amount levied by the Group for its services. The media cost is the amount paid to the delivery partners and is excluded under IFRS 15 from the revenue definition. Consequently, media costs are also not included in the Group’s cost of sales. In cases in which the campaign starts before the balance sheet date and lasts beyond this date, revenue is accounted proportionately based on the stage of completion at the end of the reporting period. Stage of completion is determined as the proportion of the costs incurred until the end of the reporting period in the total costs of the campaign, which can be reliably estimated. ad agents Revenue in the ad agents segment is mainly generated by providing search engine advertising. In these contractual agreements with clients where search engine providers are contracted by ad agents, and on its behalf the amounts billed to customers consist of media costs owed by ad agents to the search engine providers and a fee as a percentage of the media cost, the Group levies for its services. In other contractual arrangements, the search engine provider enters a direct contractual agreement with ad agents’ client, so that media costs are not invoiced by ad agents but are charged from search engine provider to client directly. In this case, the amount billed to the customer consists only of the fee as a percentage of the media cost. In both cases, the Group is only entitled to the service charge as a percentage of the media budget. Media costs billed to clients and owed to search engine providers for indirect billing agreements do not constitute revenue according to IFRS 15 and are consequently excluded from cost of sales. Interest income Interest income is recognised as it accrues using the effective interest rate method. Current income tax Current taxes are determined on the basis of annual earnings with due reference to national tax rates and tax legislation in the various tax jurisdictions valid as of the balance sheet date. Current income tax relating to items recognised directly in other comprehensive income is only recognised there and not in the income statement. Deferred income tax Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences, except for goodwill, whereon the recognition is not permitted. Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred income tax relating to items recognised directly in other comprehensive income is only recognised there and not in the income statement. Deferred income tax assets and deferred income tax liabilities are offset if there is a legally enforceable right to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. BUSINESS COMBINATIONS & INVESTMENTS IN AN ASSOCIATE [4] As in 2022, no business combinations occurred in the 2023 financial year. On 2 October 2023 the Group signed a purchase agreement of a 25.64 percent interest in solute Holding GmbH & Co. KG, Hanover, Germany, which is the Holding Company of solute GmbH, an operator of price comparison portals in Germany. Significant influence over the associate was obtained on 30 October 2023, the registration day of ad pepper as shareholder. From this day onward ad pepper can actively participate in all shareholders meetings of solute Holding GmbH & Co.KG. ad pepper and solute operate complementary business models with adjacent technical capabilities, customer relationships and geographic footprints. The objective of the transaction is to create a dynamic, innovative and well-capitalized listed market leader in performance marketing and digital marketplaces (price comparison). Solute Holding GmbH & Co. KG is a private entity that is not listed on any public exchange. The Group’s interest in solute Holding GmbH & Co. KG is accounted for using the equity method in the consolidated financial statements. There are no restrictions arising from agreements, regulatory stipulations or contract amongst investors who exert significant influence on the associate. The following table illustrates the summarised financial information of the Group’s investment in solute Holding GmbH & Co. KG. The associate is not subject to any contingent liabilities or restrictions. 31 / 12 / 2023 kEUR Current assets 10,734 Non-current assets 8,975 Non-current liabilities 462 Current liabilities 4,438 Provisions 1,391 Equity 13,418 Groups Share in Equity (25.64 %) 3,440 Group’s carrying amount of the investment 3,687 1 / 1 - 31 / 12 / 2023 kEUR Revenue 35,537 Cost of Sales -25,893 Gross profit 9,644 1 / 1 - 31 / 12 / 2023 kEUR Selling and marketing expenses -2,277 General and administrative expenses -6,649 Other operating income 1,116 Other operating expenses -218 Finance income 90 Finance expense -79 Profit before tax 1,627 Income taxes -444 Profit of the period 1,183 Other comprehensive income 0 Total comprehensive income of the period 0 Group’s share of profit for the period 199 REVENUE FROM CONTRACTS WITH CUSTOMERS [5] Disaggregated revenue information The following is a breakdown of the Group’s revenue from contracts with customers, which is based on the invoicing country: For the year ended 31 December 2023 Segments ad pepper Webgains ad agents Total kEUR kEUR kEUR kEUR Geographical markets Germany 926 2,640 5,569 9,134 United Kingdom 0 6,135 0 6,135 Spain 1,366 1,992 0 3,359 Other 0 1,201 1,920 3,121 Revenue 2,292 11,968 7,489 21,749 For the year ended 31 December 2022 Segments ad pepper Webgains ad agents Total kEUR kEUR kEUR kEUR Geographical markets Germany 1,546 2,815 7,044 11,405 United Kingdom 0 7,824 0 7,824 Spain 1,378 1,714 0 3,092 Other 0 874 1,673 2,547 Revenue 2,924 13,227 8,717 24,868 includes Switzerland, France, Italy and the Netherlands. Contract balances 31 / 12 / 23 31 / 12 / 22 kEUR kEUR Contract liabilities 382 465 Contract liabilities include short-term advances received from customers during 2023 to render SEA (Search Engine Advertising) services in the ad agents segment. Performance obligations Information about the Group’s performance obligations is summarised below: ad pepper Service orders received from clients in accordance with framework agreements are generally short term in nature. The performance obligation is satisfied over time and usually occurs when the user provides personal data or when an impression is generated on the user’s device. Revenue therefore accrues each time the ad is displayed or personal data is entered by the user. Clients are invoiced monthly for the service delivered during the month based on the agreed transaction price multiplied by the delivered amounts. Payment is generally due within 14 days of invoicing. As all ads are placed on third-party ad inventory properties, the Group has no control over the advertising inventory before it is transferred to its customers, with the Group acting as an agent in all contractual arrangements. ad agents Service orders received from clients in accordance with annual framework agreements are generally short term in nature. The performance obligation resulting from each service order is satisfied over time and occurs when the user clicks on the phrase created and placed by ad agents on search engines. The customer pays on a CPC basis, which means that the customer pays ad agents only when a user clicks on the ad in the search engine. Clients are invoiced monthly for the services provided during the month as a percentage fee of the media budget used during the month or in case of indirect billing contracts as media budget used for third-party delivery partners plus a percentage fee of the media budget. The payments are due within 0 to 90 days from invoicing. As all ads are placed on third-party ad inventory properties, the Group has no control over the advertising inventory before it is transferred to our customers, with the Group acting as an agent in all contractual arrangements. Webgains The performance obligation is satisfied over time and occurs when successful transactions result from traffic. Contracts with clients are generally concluded for periods of 12 months or less. The invoicing is transaction-based and is carried out monthly. The contract provides the customer with a recall period, in which any transaction can be cancelled within a certain period. Depending on the industry, the recall periods range from 30 days in the fashion and beauty industry and up to 360 days for insurance, travel and mobile sales. Based on historical data, at year-end the Group calculates the amount to be recognised as return assets and refund liabilities for transactions in the recall period. As at 31 December 2023 and 31 December 2022, the Group’s calculation resulted in amounts that have no material impact on the revenue recognised in the financial year. As all performance obligations have an original expected duration of less than one year and meet the requirement of the right to invoice practical expedient in IFRS 15.B16, the Company does not disclose the amount of the remaining performance obligations. SEGMENT REPORTING [6] IFRS 8 requires entities to report financial and descriptive information on their reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specific criteria. Operating segments are components of an entity for which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. Generally, financial information must be reported on the same basis as it is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. Financial information reported to the Group’s chief operating decision-maker for the purposes of resource allocation and assessment of segment performance is focused on the category Segment profit, reflecting the EBIT (Earnings before interest and taxes) or EBITDA (Earnings before interest, taxes, depreciation and amortisation) earned by each segment as stipulated by the IFRS. This is the measure reported to the chief operating decision-maker for the purposes of resource allocation and assessment of segment performance. The basis of accounting for intersegment transactions is the “dealing at arm’s length” principle. Financial year 2023 ad pepper Webgains ad agents Admin Intersegm Group ent kEUR kEUR kEUR kEUR kEUR kEUR Gross sales 4,643 55,547 25,797 186 -186 85,988 Thereof external 4,643 55,547 25,797 0 0 85,988 Thereof intersegment 0 0 0 186 -186 0 Revenue 2,292 11,968 7,489 186 -186 21,749 Thereof external 2,292 11,968 7,489 0 0 21,749 Financial year 2023 ad pepper Webgains ad agents Admin Intersegm Group ent kEUR kEUR kEUR kEUR kEUR kEUR Thereof intersegment 0 0 0 186 -186 0 Gross profit 2,056 11,477 7,157 186 0 20,876 Expenses (including cost of sales) -2,886 -10,375 -7,516 -2,151 186 -22,743 Thereof amortisation and -111 -467 -236 -204 0 -1,018 Thereof other non-cash -162 0 0 -47 0 -209 Thereof other non-cash 91 1,137 19 4 0 1,251 EBITDA -483 2,060 209 -1,762 0 24 Operating profit -593 1,593 -27 -1,967 0 -994 Financial income 0 19 4 236 -48 210 Financial expenses -12 -55 -15 -11 48 -46 Share of profit of an associate 0 0 0 199 0 199 Income taxes -59 -95 86 0 0 -68 Net income for the year -665 1,461 47 -1,542 0 -699 Financial year 2022 ad pepper Webgains ad agents Admin Intersegment Group elimination kEUR kEUR kEUR kEUR kEUR kEUR Gross sales 6,066 64,009 28,155 243 -244 98,229 Thereof external 6,066 64,009 28,154 0 0 98,229 Thereof intersegment 0 0 1 243 -244 0 Revenue 2,924 13,227 8,718 243 -244 24,868 Thereof external 2,924 13,227 8,717 0 0 24,868 Thereof intersegment 0 0 1 243 -244 0 Gross profit 2,592 12,496 8,375 243 -1 23,704 Expenses (including cost of sales) and other income -3,172 -12,801 -7,634 -1,317 243 -24,681 Thereof amortisation and depreciation -140 -445 -273 -230 0 -1,088 Thereof other non-cash expenses -7 -483 0 -55 0 -545 Thereof other non-cash income 209 984 7 53 0 1,254 EBITDA -108 871 1,358 -845 -1 1,275 Operating profit -248 425 1,085 -1,074 -1 187 Financial income 0 16 0 60 -15 62 Financial expenses -7 -31 -17 -152 15 -192 Financial year 2022 ad pepper Webgains ad agents Admin Intersegment Group elimination kEUR kEUR kEUR kEUR kEUR kEUR Income taxes -99 -27 -180 0 0 -306 Net income for the year -355 383 888 -1,166 -1 -250 Gross sales represent the total amount billed and billable to clients by the Group, net of discounts, VAT and other sales-related taxes. Disclosure of gross revenue information is not required under IFRS; however, it is voluntarily disclosed from 1 January 2018 onwards in the Consolidated Income Statement since management has concluded that the information is useful for users of the financial statements. Geographical information The Group operates in three principal geographical areas – the United Kingdom, Germany and Spain. The Group also operates in Switzerland, France, Italy and the Netherlands, which are grouped in the table below under “other”. The Group’s revenue from continuing operations from external customers and information about its non-current assets by geographical locations are detailed below whereby non-current assets are shown exclusive of financial instruments and investments. Revenue from external Non-current assets Investment in an associate customers Year ended Year ended 2023 2022 2023 2022 2023 2022 kEUR kEUR kEUR kEUR kEUR kEUR Germany 9,134 11,405 420 775 3,687 0 United Kingdom 6,135 7,824 876 795 0 0 Spain 3,359 3,092 164 244 0 0 Revenue from external Non-current assets Investment in an associate customers Year ended Year ended 2023 2022 2023 2022 2023 2022 kEUR kEUR kEUR kEUR kEUR kEUR Other 3,121 2,547 64 108 0 0 Total 21,749 24,868 1,524 1,922 3,687 0 NOTES TO THE INCOME STATEMENT [7] The income statement was prepared using the function of expense method. The expenses include personnel expenses of EUR 16,423k (2022: EUR 17,533k) as well as depreciation and amortisation of EUR 1,018k (2022: EUR 1,088k), thereof EUR 638k (2022: EUR 570k) depreciation on right-of-use assets. Amortisation of intangible assets is included in selling expenses EUR 249k (2022: EUR 312k) and administration expenses EUR 22k (2022: EUR 35k). The personnel expenses include the employer’s contribution to state pension schemes amounting to EUR 716k (2022: EUR 1,003k), which must be disclosed as employer’s contribution to a defined contribution plan. MEDIA COST AND COST OF SALES [8] Media cost 2023 2022 kEUR kEUR ad pepper 2,351 3,142 ad agents 18,309 19,437 Webgains 43,579 50,782 Total media cost 64,239 73,361 COS 873 1,164 Total 65,112 74,525 Cost of sales predominantly comprises third-party data center services, professional fees, and other purchased services. SELLING AND MARKETING EXPENSES [9] This item comprises all costs associated with attracting customers and orders. The expenses are broken down as follows: 2023 2022 kEUR kEUR Personnel costs 12,008 13,165 Facility costs 80 96 Advertising and sales promotion 330 337 Professional and other services 927 1,236 General operating costs (communication, travel, other supplies) 1,248 1,475 Other 274 329 Total 14,867 16,638 GENERAL AND ADMINISTRATIVE EXPENSES [10] The expenses are broken down as follows: 2023 2022 kEUR kEUR Personnel costs 4,415 4,369 Depreciation on right-of-use assets 606 548 Other facility costs 570 559 Professional and other services 1,482 947 General operating costs (communication, travel, other supplies) 647 689 Other 65 52 Total 7,785 7,164 OTHER OPERATING INCOME [11] Other operating income consists of the following: 2023 2022 kEUR kEUR Gains on sale of property, plant and equipment 6 0 Income from the release of accrued liabilities 865 894 Other 95 42 Total 966 937 Income from the release of accrued liabilities includes an amount of EUR 706k (2022: EUR 735k) relating to reversals of non-disbursed affiliate credits in the Webgains segment that the ad pepper Group believes are unlikely to be paid out and reversals of EUR 159k in connection with time-barred claims (2022: EUR 159k). OTHER OPERATING EXPENSES [12] Other operating expenses consist of the following: 2023 2022 kEUR kEUR Losses on sale of property, plant and equipment 0 54 Foreign exchange losses 82 35 Expected credit losses on trade receivables 82 448 Other 20 114 Total 184 651 FINANCIAL RESULT, NET [13] Net financial result consists of the following: 2023 2022 kEUR kEUR Interest income 208 62 Realised gains from securities measured at ”fair value through other comprehensive income“ 2 0 Financial income 210 62 Interest expenses -6 -40 Interest on lease liabilities -40 -33 Losses from sale of securities 0 -115 Other 0 -4 Financial expenses -46 -192 Net financial result 164 -130 net of expenses related to the trade of securities amounting to EUR 4k INCOME TAXES [14] Income tax expenses 2023 2022 kEUR kEUR Current income tax expenses -172 -464 Deferred income tax income / (expense) 104 158 Total -68 -306 The current income taxes reported relate to the taxes paid or payable by individual local entities. The calculation of the deferred taxes was based on the country-specific tax rates. Due to the existing unused tax losses in ad pepper media International N.V., ad pepper media France S.A.R.L. and ad pepper media USA LLC, deferred tax assets of EUR 10,954k (2022: EUR 10,551k) were calculated on the basis of the unused tax losses of EUR 36,046k (2022: EUR 34,416k). Deferred tax assets from unused tax losses were recorded to the extent that it is probable that future taxable profit is available against which they can be utilised within a foreseeable planning period. Thus, an amount of deferred tax assets of EUR 165k (2022: EUR 76k) has been recognised for the tax loss carry forwards. All of the available tax loss carry forwards are non-expiring. The deferred tax asset for the tax loss carry forward is calculated with the local substantially enacted future tax rate on the budgeted taxable income for the following financial year. In addition to the unused tax losses, the following significant deferred tax liabilities result from temporary differences: Deferred tax liabilities 2023 2022 kEUR kEUR Other 0 0 Total 0 0 Changes in deferred tax liabilities on temporary differences recognised in profit or loss amount to EUR 0k (2022: EUR 79k). The change in deferred tax assets on temporary differences recognised in profit or loss amounts to EUR 18k (2022: EUR 3k). Deferred tax assets and liabilities are netted if the Company has the legally enforceable right to set off current tax assets against current tax liabilities and if they relate to the same tax authorities and the same taxable entity. As a result, deferred tax assets of EUR 183k (2022: EUR 79k) and deferred tax liabilities of EUR 0k (2022: EUR 0k) were recognised in the statement of financial position. Deferred tax assets and liabilities are classified as non-current. Deferred tax assets of EUR 0k (2022: EUR 0k) on tax losses are recognised for companies with a history of losses. No deferred tax liabilities were recognised as of 31 December 2023 (2022: EUR 0k) for taxes on non-distributed profits of subsidiaries. If deferred taxes were to be recognised for these temporary differences, only the source tax rates applicable in each case, where appropriate taking into account the German tax of 5 percent on the distributed dividends, would have to be applied for the computation. ad pepper media International N.V. has its tax domicile in Germany and forms a fiscal unity with ad pepper media GmbH and Webgains GmbH. The reconciliation between expected income tax expense and actual income tax expense based on the German statutory tax rate (combined corporate income tax and trade tax on income) of 32.17 percent (2022: 32.17 percent) is as follows: 2023 2022 kEUR kEUR Expected income tax 203 28 Effect of lower tax rate in other jurisdiction 150 184 Tax-free gains 1 4 Prior year income tax 58 -7 Gains on databases sold intercompany 0 -53 Amortisation on databases sold intercompany 0 18 2023 2022 kEUR kEUR Utilisation of previously unrecognised tax losses 5 48 Current year tax losses not recognised -525 -524 Non-deductible stock option income / (expense) -76 -27 Deferred taxes on losses prior year 69 76 Current taxes on investment in associates 64 - Non-tax-deductible expenses and other -17 -53 Actual income tax expenses -68 -306 EARNINGS PER SHARE [15] Basic earnings per share are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The income and share data used in the computations of basic and diluted earnings per share are as follows: 2023 2022 Net income / (loss) attributable to shareholders of the parent company in kEUR -944 -893 Number of shares at the beginning of the period 20,257,872 20,491,197 Number of shares at the end of the period 21,951,116 20,257,872 Weighted average number of shares outstanding (basic & diluted) 20,676,531 20,278,249 Earnings per share in EUR (basic & diluted) -0.05 -0.04 The weighted average number of shares outstanding in 2023 was calculated on a daily basis. In 2023 as in 2022, the options granted resulted in no dilution. 1,693,244 new shares in ad pepper media International N.V. have been issued in conjunction with the purchase of the 25.64 percent interest in solute Holding GmbH & Co. KG. and have been transferred as consideration of the purchase. The new issued shares are admitted for trading on the Frankfurt Stock Exchange (2022: no new shares have been issued). No treasury shares (2022: no shares) were sold in connection with the exercise of employee stock options. Diluted earnings per share are computed based on the weighted average number of ordinary shares outstanding, including the dilutive effect of shares to be issued in the future under certain arrangements such as option plans. NON-CURRENT ASSETS INTANGIBLE ASSETS [16] In 2023 and 2022, no software IT solutions were developed in-house for the Company’s own use, and therefore none were capitalised. Expenses were related to maintenance. Additions mainly relate to an amount of EUR 61k in connection with the purchase of additional software for operational and administrative purposes. Software and databases are amortised over a useful life of three to five years. MOVEMENT SCHEDULE OF INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT [17] Historical cost Accumulated depreciation / amortisation / impairment Book value Financial year 2023 Balance at Additions Disposals Exchange Balance Balance at Depreciation/ Disposals Exchange Balance Financial Previous 1/1/2023 differenc at 1/1/2023 amortisation differences at year year es 31/12/ 31/12/ 31/12/2023 31/12/2022 2023 2023 kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR Intangible assets Software 3,081 61 0 19 3,161 -2,709 -271 0 -14 -2,994 167 372 Brands and customer bases 644 0 0 0 644 -642 -1 0 0 -643 1 2 Total 3,725 61 0 19 3,805 -3,351 -272 0 -14 -3,637 168 374 Property, plant and equipment Other equipment, operational and office equipment 1,128 53 -93 3 1,091 -898 -108 90 -2 -918 173 230 Total 4,853 114 -93 22 4,896 -4,249 -380 90 -16 -4,555 341 604 Historical cost Accumulated depreciation / amortisation / impairment Book value Financial year 2022 Balance at Additions Disposals Exchange Balance Balance at Depreciation/ Disposals Exchange Balance -Financial Previous 1/1/2022 differenc at 1/1/2022 amortisation differenc at year year es 31/12/2022 es 31/12/ 31/12/2022 31/12/2021 2022 kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR Intangible assets Software 3,030 108 0 -57 3,081 -2,404 -347 0 42 -2,709 372 626 Brands and customer bases 644 0 0 0 644 -642 0 0 0 -642 2 2 Total 3,674 108 0 -57 3,725 -3,046 -347 0 42 -3,351 374 628 Property, plant and equipment Other equipment, operational and office equipment 1,562 111 -512 -33 1,128 -1,216 -168 459 27 -898 230 346 Total 5,236 219 -512 -90 4,853 -4,262 -515 459 69 -4,249 604 974 NON-CURRENT SECURITIES [18] Overview about debt and marketable securities: 2023 Debt Marketable Total securities securities kEUR kEUR kEUR Book value 1 / 1 0 0 0 Purchase 0 0 0 Realised gains 0 0 0 Reclassification into current securities 0 0 0 Book value 31 / 12 0 0 0 2022 Debt Marketable Total securities securities kEUR kEUR kEUR Book value 1 / 1 1,007 2,050 3,057 Reclassification into current securities -1,007 0 -1,007 Sale 0 -1,935 -1,935 Realised gains / losses (-) 0 -115 -115 Book value 31 / 12 0 0 0 Securities classified at “fair value through profit & loss” 2023 2022 kEUR kEUR Book value 1 / 1 0 2,050 Securities classified at “fair value through profit & loss” 2023 2022 kEUR kEUR Sale 0 -1,935 Realised gains / losses (-) recognised in profit or loss 0 -115 Book value 31 / 12 0 0 OTHER FINANCIAL ASSETS [19] Other financial assets consist of the following and are measured at amortised cost: 31/ 12/ 23 31/ 12/ 22 kEUR kEUR Deposits 249 184 Total 249 184 The maturities of the other financial assets as at the end of the period are as follows: 31/ 12/ 22 31/ 12/ 21 kEUR kEUR Due in between one and five years 249 184 Due in more than five years 0 0 Total 249 184 CURRENT ASSETS CURRENT SECURITIES [20] Overview about current securities: 2023 Debt Deposits Total securities kEUR kEUR kEUR Book value 1/1 991 5,085 6,076 Purchase 1,983 0 1,983 2023 Debt Deposits Total securities kEUR kEUR kEUR Investment in time deposits 0 2,538 2,538 Reclassification into cash & cash equivalents 0 -6,085 -6,085 Sale -1,000 0 -1,000 Realised gains / losses (-) 6 0 6 Unrealised gains / losses (-) 5 0 5 Book value 31/ 12 1,985 1,538 3,523 2022 Debt Deposits Total securities Book value 1 / 1 0 0 0 Reclassification into current securities 1,007 85 1,092 Purchase 0 5,000 5,000 Unrealised gains / losses (-) -16 0 -16 Book value 31 / 12 991 5,085 6,076 Securities classified at “fair value through other comprehensive income” 2023 2022 kEUR kEUR Book value 1 / 1 991 0 Securities classified at “fair value through other comprehensive income” 2023 2022 kEUR kEUR Reclassification into current securities 0 1,007 Purchase 1,983 0 Sale -1,000 0 Realised gains 6 Unrealised gains / losses (-) in other comprehensive income 5 -16 Book value 31/12 1,985 991 TRADE RECEIVABLES [21] Trade receivables are initially measured at fair value and subsequently carried at amortised cost. Trade receivables consist of the following: 31 / 12 /23 31 / 12 / 22 kEUR kEUR Trade receivables, gross 13,742 18,481 Provision -618 -913 Trade receivables, net 13,124 17,568 Trade receivables are only due from third-party customers, are non-interest bearing and generally have a term of 0 to 90 days. The provision is calculated based on all information available to the Company and includes all expected credit losses on receivables as of 31 December 2023. For further information, please refer to Notes [3] and [41]. As at 31 December 2023, all campaigns were billed to the extent that revenue was recognised. Consequently, the amount of contract assets is nil. OTHER RECEIVABLES [22] Other receivables consist of the following: 31 / 12 / 23 31 / 12 /22 kEUR kEUR Value-added tax receivables 53 67 31 / 12 / 23 31 / 12 / 22 kEUR kEUR Prepayments 347 242 Total 400 309 INCOME TAX RECEIVABLES [23] Income tax receivables include tax prepayments on capital gains of EUR 113k (2022: EUR 549k). OTHER CURRENT FINANCIAL ASSETS [24] Other current financial assets consist of the following: 31 / 12 / 23 31 / 12 / 22 kEUR kEUR Bonus payments from delivery partners 60 109 Rental deposits 0 98 Other 38 51 Total 98 258 Reclassified from non-current into current financial assets. CASH AND CASH EQUIVALENTS [25] This item includes cash at banks and cash in hand. For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash at banks and on hand of EUR 19,842k (2022: EUR 17,008k). EQUITY ISSUED CAPITAL [26] Ordinary Shares issued and fully paid Shares kEUR Nominal value per share in EUR At 1/1/ 2022 and 31/12/2022 21,500,000 1,075 0.05 Issued for acquisition of the investment in solute Holding GmbH & Co. KG 1,693,244 85 0.05 At 31/12/2023 23,193,244 1,160 0.05 The new shares in ad pepper media International N.V. were issued in 2023 and admitted for trading on the Frankfurt Stock Exchange on 6 February, 2024 (2022: 0 shares). SHARE PREMIUM [27] kEUR At 1/1/ 2022 and 31/12/2022 63,782 Issuance of share capital for the acquisition of the investment in solute Holding GmbH & Co. KG 3,403 Transaction costs for issued share capital -12 At 31/12/2023 67,173 The capital reserve mainly comprises the premium paid upon share issued. In 2023 EUR 2.01 per issued share has been paid into the share premium. RESERVES [28] Reserves include treasury reserves with a value of EUR -6,138k (2022: EUR -6,138k). By a shareholders’ resolution dated 13 June 2023, the Board of Directors was authorised to repurchase treasury stock of up to 50 percent of the issued capital within the following 18 months. There is currently no active share repurchase programme. As of 31 December 2023, the Company held 1,242,128 treasury shares (2022: 1,242,128) at a nominal value of EUR 0.05 each, which equals 5.36 percent (2022: 5.78 percent) of the share capital. According to a shareholder resolution, those shares can only be used for a stock option plan (“SOP”) or the cancellation of shares. No shares were sold under the employee stock option plan (2022: no shares), no cash settlements of equity settled stock option plans occurred (2022: no shares). The number of shares issued and outstanding as at 31 December 2023 totalled 21,951,116 (2022: 20,257,872). Each share has a nominal value of EUR 0.05. Reserves include also the expenses incurred for stock option plans amounting to EUR 3,073k (2022: EUR 2,906k) and the currency translation reserve amounting to EUR -1,120k (2022: EUR - 1,153k). Other reserves consist of the remaining amount of the revaluation of the financial liability for the written put option in ad pepper media Spain S.A., after reclassification of non-controlling interest considering ad pepper media Spain S.A. The authorised share capital of the Company amounts to EUR 4,000,000, divided into 80,000,000 shares with a par value of EUR 0.05 each. The Board of Directors is authorised, upon approval by the Supervisory Board, to issue shares until 16 May 2027, or to grant rights to subscribe for shares until the issued share capital amounts to EUR 2,000,000. Other comprehensive income The total other comprehensive income recognised directly in equity and the corresponding income taxes are as follows: 2023 Before Income After income taxes income taxes taxes Currency translation differences 54 0 54 Revaluation of listed debt securities 5 0 5 Total other comprehensive income 59 0 59 2022 Before Income After income taxes income taxes taxes Currency translation differences 28 0 28 Revaluation of listed debt securities -15 0 -15 Total other comprehensive income 13 0 13 NON-CONTROLLING INTERESTS [29] Non-controlling interests comprise non-controlling interests in the following subsidiaries as at 31 December 2023 and 2022: Location non-controlling interest in percent ad pepper media Spain S.A. Madrid / Spain 35 Webgains S.L. Madrid / Spain 35 Herrenberg / ad agents GmbH Germany 40 Zürich / ad agents AG Switzerland 40 These result from the acquisition of 60 percent of the shares in ad agents GmbH and from the sale of a 35 percent share in ad pepper media Spain S.A. in recent years. Webgains S.L. and ad agents AG has been incorporated in 2020. The net income/loss for the year is allocated proportionately to the non-controlling interests. In 2023, non-controlling interests in ad pepper media Spain S.A. received a dividend payment of EUR 286k (2022: EUR 379k), while no dividend was paid to non-controlling interests of ad agents GmbH in 2023 (2022: EUR 160k). Summarised financial information in respect of ad pepper media’s subsidiaries that have material non-controlling interest as at 31 December 2023, reflecting 100 percent of the underlying subsidiary’s relevant figures, is set out in the following table: ad agents GmbH ad agents AG ad pepper media Webgains S.L. Spain S.A. 31 / 12 / 23 31 / 12 /22 31 / 12 /23 31 / 12 / 22 31 / 12 / 23 31 / 12/22 31 / 12 / 23 31 / 12 /22 kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR Non-current assets 260 395 116 136 68 80 138 207 ad agents GmbH ad agents AG ad pepper media Webgains S.L. Spain S.A. 31/12/23 31/12/22 31/12/23 31/12/22 31/12/23 31/12/22 31/12/23 31/12/22 kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR Current assets 7,437 6,861 1,197 2,135 896 1,098 1,877 1,816 Total assets 7,697 7,255 1,313 2,271 964 1,178 2,015 2,023 Non-current liabilities 41 788 0 0 0 2 63 130 Current liabilities 5,367 5,095 559 703 464 542 1,425 1,313 Total liabilities 5,408 5,883 559 703 454 544 1,488 1,443 Net assets 2,289 1,372 754 1,567 510 635 527 579 Equity attributable to owners of the Company 1,373 823 452 940 510 635 527 579 ad agents GmbH ad agents AG ad pepper media Webgains S.L. Spain S.A. 31/12/23 31/12/22 31/12/23 31/12/22 31/12/23 31/12/22 31/12/23 31/12/22 kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR Non-controlling interests after reclassification into current liabilities in conjunction with put option 915 549 302 627 0 0 0 0 Non-controlling interests in percent 40 40 40 40 35 35 35 35 after reclassification into current financial liabilities. For further information on the written put option please refer to Note [2] and Note [34]. ad agents GmbH ad agents AG ad pepper media Webgains S.L. Spain S.A. 2023 2022 2023 2022 2023 2022 2023 2022 kEUR kEUR kEUR kEUR kEUR kEUR kEUR Revenue 5,569 7,046 1,920 1,673 1,366 1,378 1,281 1,175 Expenses 6,089 6,945 1,354 897 1,216 1,110 790 632 ad agents GmbH ad agents AG ad pepper media Webgains S.L. Spain S.A. 2023 2022 2023 2022 2023 2022 2023 2022 kEUR kEUR kEUR kEUR kEUR kEUR kEUR Net profit / (loss) for the year -520 101 566 776 150 268 491 543 Profit attributable to owners of the Company -312 61 340 465 98 175 319 353 Profit attributable to non-controlling interests -208 40 226 310 52 93 172 190 Other comprehensive income attributable to owners of the Company 0 0 0 0 0 0 0 0 Other comprehensive income attributable to non-controlling interests 0 0 21 0 0 0 0 0 Total comprehensive income / loss for the year -520 101 587 776 150 268 491 543 Net cash inflow / (outflow) from operating activities 978 1,731 401 1,023 329 328 525 508 Net cash inflow / (outflow) from investing activities -14 -50 -2 -2 -3 -40 0 0 ad agents GmbH ad agents AG ad pepper media Webgains S.L. Spain S.A. 2023 2022 2023 2022 2023 2022 2023 2022 kEUR kEUR kEUR kEUR kEUR kEUR kEUR Net cash inflow / (outflow) from financing activities 523 -561 -1,408 0 -286 -467 -613 -692 Total net cash inflow / (outflow) 1,487 1,120 -1,009 1,021 40 -179 -88 -184 NON-CURRENT LIABILITIES OTHER LONG-TERM LIABILITIES [30] Other long-term liabilities consist of the following: 31 / 12 / 23 31 / 12 / 22 kEUR kEUR Employee benefits liability 68 0 Lease liability 754 840 Total 822 840 The employee benefits liability relates to the obligation resulting from the cash-settled stock option plans. For further details on cash-settled stock option plans, please refer to Note [39]. During the year, lease liabilities including interests were paid for an amount of EUR 595k (2022: EUR 585k). The maturities of the other long-term liabilities as of the end of the period are as follows: 31 / 12 / 23 31 / 12 / 22 kEUR kEUR Due in between one and five years 822 840 Due in more than five years 0 0 Total 822 840 CURRENT LIABILITIES TRADE PAYABLES [31] Trade payables include accrued liabilities and are recognised at amortised cost. Accrued liabilities for affiliate credits not yet disbursed in the Webgains segment amount to EUR 11,883k (2022: EUR 15,207k). CONTRACT LIABILITIES [32] Contract liabilities consist of short-term advances for search engine advertising services from clients in the ad agents segment. 2023 2022 kEUR kEUR At 1/1 465 446 Deferred during the year 1,266 519 Recognised as revenue during the year -1,358 -509 Exchange differences 9 9 At 31/12 382 465 OTHER LIABILITIES [33] Other liabilities consist of the following: 31 / 12 / 23 31 / 12 / 22 kEUR kEUR Value-added tax liabilities 1,349 1,416 31 / 12 / 23 31 / 12 / 22 kEUR kEUR Liabilities for payroll tax and social security contributions 369 377 Employee holiday accrual 198 178 Other 74 260 Total 1,990 2,231 OTHER FINANCIAL LIABILITIES [34] Other financial liabilities consist of the following: 31 / 12 / 23 31 / 12 / 22 kEUR kEUR Liability for written put option 1,996 2,495 Bonuses and commissions 176 317 Accrued liabilities for outstanding invoices 297 213 31 / 12 / 23 31 / 12 / 22 kEUR kEUR Current lease liabilities 536 523 Other 1 3 Total 3,006 3,551 RELATED PARTY DISCLOSURES [35] Pursuant to the IAS 24 definition, the Board of Directors and members of the Supervisory Board have been identified as related parties. The compensation paid to all members of these boards is based exclusively on their functions as individuals in key positions. Further information about the compensation paid to these individuals can be found in Note [40]. All entities over which the Supervisory Board Chairman Michael Oschmann has significant influence are considered as related parties to the Company. The purchase by ad pepper of 25.64 percent of the shares in solute GmbH & Co. KG is regarded as a so-called related party transaction. Michael Oschmann, the chairman of the Supervisory Board of ad pepper, held prior to the acquisition (i) an indirect interest of 46.71 percent in the share capital of ad pepper; and (ii) participating interests in excess of 20 percent in each of the selling entities as regards to the 25.64 percent of the shares in solute GmbH & Co. KG. Therefore, Michael Oschmann did not participate in the decision-making in the Supervisory Board of ad pepper concerning the acquisition by ad pepper of the interest in solute GmbH & Co. KG. The following consideration has been transferred to selling entities, where Michael Oschmann has directly or indirectly control over: Selling entity Shares Value transferred Amount kEUR Euro Serve Media GmbH 1,085,623 2,236 Josef Keller GmbH & Co. 336,463 693 BFB BestMedia4Berlin GmbH 133,476 275 Adolf Christ Verlag GmbH & Co. 101,787 210 KELMAR Telefonbuchverlag 11,615 24 KELSTA Telefonbuchverlag 9,139 19 Total 1,678,103 3,457 The following table provides the amount of operating transactions that have been entered into with related parties for the relevant financial year: Sales to Amounts owed related parties by related parties Entity with significant 2023 2022 2023 2022 influence over the Group: Sellwerk GmbH & Co. 324 144 107 79 The amounts are classified as trade receivables (Note [21]). Terms and conditions of transactions with related parties The sales to related parties are made on terms equivalent to those that prevail in at arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free, and settlement occurs in cash. As at 31 December 2023, the Group recognised no provision for expected credit losses in respect of amounts owed by related parties. LITIGATION AND CLAIMS [36] Neither the ultimate parent nor any of its subsidiaries are involved in any material litigation with third parties. CONTINGENT LIABILITIES AND OTHER FINANCIAL OBLIGATIONS [37] ad pepper media International N.V. has provided guarantees for all outstanding liabilities of its subsidiary, ad pepper media GmbH (register number: HRB 16494) as at 31 December 2023, until these are satisfied in full. As a result, the individual local statutory accounts of ad pepper media GmbH are exempt from audit under the requirements of Section 264 para. 3 of the German Commercial Code (HGB). As at 31 December 2023, ad pepper media GmbH’s outstanding liabilities amounted to EUR 407k (2022: EUR 613k). ad pepper media International N.V. has provided guarantees for all outstanding liabilities of its subsidiary, ad agents GmbH (register number: HRB 16494) as at 31 December 2023, until these are satisfied in full. As a result, the individual local statutory accounts of ad agents GmbH are exempt from audit under the requirements of Section 264 para. 3 of the German Commercial Code (HGB). As at 31 December 2023, ad agents GmbH’s outstanding liabilities amounted to EUR 5,750k (2022: EUR 6,432k). ad pepper media International N.V. has provided guarantees for all outstanding liabilities of its subsidiary Webgains GmbH (registered number: HRB 37198) that existed as at 31 December 2023, until these are satisfied in full. As a result, the individual local statutory accounts of Webgains GmbH are exempt from audit under the requirements of Section 264 para. 3 German Commercial Code (HGB). As at 31 December 2023, the outstanding liabilities of Webgains GmbH amount to EUR 3,639k (2022: EUR 4,261k). Other financial obligations mainly result from short-term office leases and office equipment. The future minimum payment obligations resulting from the contracts in place as at 31 December 2023 are as follows: < 1 year > 1 year > 5 years Total to 5 kEUR kEUR kEUR kEUR Other financial obligations 205 17 0 222 ADDITIONAL CASH FLOW INFORMATION [38] The following information is provided to supplement the statement of cash flows: Other non-cash expenses and income comprises expenses for allocation to and income from the release of valuation allowances on trade receivables and expenses from writing down receivables. This item also includes write-downs of affiliate credits not yet disbursed and reversals of time-barred claims. STOCK OPTION PROGRAMMES [39] Options granted under the Ongoing SOP’s are subject to the following provisions: An employee equity-participation program involving 440,000 options was launched for executive employees in 2020 (“SOP 2020 MD”). In January 2023 remaining options have been forfeited due to termination of employment of one of the participants, the other remaining options have been waived by the holders for no consideration. The Group accounted for the forfeited options using the forfeiture accounting acc. to IFRS 2 (i.e. reversal of expense previously recognized). For the waived options the Group considered an acceleration of vesting. An employee equity participation program involving 600,000 options was granted for executive employees in January 2023 (“SOP 2023 MD”). The options may be exercised over a period of four years at 25 percent each year, but at the earliest one year after being granted. The valuation was carried out by simulation (Monte Carlo method). The volatility was calculated from the development of the Company's share price between 3 January 2017 and 2 January 2023. The fair value of the individual tranches at the time of granting is between EUR 0.369 and EUR 0.613 per issued option. The maximum cost of the program over the entire time is EUR 302k. An employee equity participation program involving 54,000 options was granted for Supervisory Board members in January 2023. The plan retains the Company the right to fulfil its commitment to transfer shares by paying to the beneficiary a cash amount equal to the difference between the issue price and the average closing price on Xetra during the last ten trading days before exercising the option limited to EUR 7. The options may be exercised over a period of four years at 25 percent each year, but at the earliest one year after being granted. The valuation was carried out by simulation (Monte Carlo method). The volatility was calculated from the development of the Company’s share price between 3 January 2017 and 2 January 2023. The fair value of the individual tranches at the time of granting is between EUR 0.355 and EUR 0.564 per issued option. The maximum cost of the program over the entire time is EUR 26k. A share appreciation rights program involving 187,500 options and settled in cash was granted for Board of Directors in January 2023. The options may be exercised over a period of four years at 25 percent each year, but at the earliest one year after being granted. The fair value of the individual tranches at the time of granting was between EUR 0.355 and EUR 0.564 per issued option. The fair value of the individual tranches as at 31 December 2023 is between EUR 0.581 and EUR 0.881. An employee equity-participation programme involving 30,000 options was granted for Supervisory Board members (“Executive SOP 2017 SB”). The plan retains the Company the right to fulfil its commitment to transfer shares by paying to the beneficiary a cash amount equal to the difference between the issue price and the average closing price on Xetra during the last ten trading days before exercising the option. The valuation was carried out by simulation (Monte Carlo method). The volatility was calculated from the development of the Company’s share price between 1 February 2011 and 28 February 2017. The shares may be exercised over a period of four years, but at the earliest one year after being granted. The fair value of the individual tranches at the time of granting is between EUR 0.390 and EUR 0.654 per issued option. The maximum cost of the programme over the entire period is EUR 16k. SOP 2017 SOP 2023 (SB) (BoD, MD, SB) Share price when granted, in EUR 1.94 1.86 Date of grant 11 / 4 / 17 3/1/23 Exercise price, in EUR 1.9751 1.86 Risk-free interest rate, in percent -0.36 2.42 SOP 2017 SOP 2023 (SB) (BoD, MD, SB) Estimated term, in years 7 7 Future dividend, in EUR 0.05 0.05 Estimated volatility, in percent 51 42.85 The average share price during 2023 was EUR 2.31 (2022: EUR 2.90). The personnel expense recognised for employee services received during the year is shown in the following table: 2023 2022 Expense arising from equity-settled share- based payment transactions 167 174 Expense / (income) arising from the measurement of the liability for cash-settled share-based payment transactions 68 -250 Total expense / (income) arising from share- based payment transactions 235 -76 The following table shows the changes in the options during the financial year 2023: 2023 2022 Weighted Weighted average average exercise price exercise price 2023 2022 Options outstanding at the beginning of the financial year 430,000 617,500 Options granted during the financial year 841,500 0 Options exercised during the financial year 0 0 Options forfeited during the financial year -100,000 0 Options cancelled during the financial year -325,000 -187,500 Options outstanding at the end of the financial year 846,500 430,000 1.86 3.48 Exercisable options as of 31 December 5,000 0 Range of exercise prices of outstanding options as of 31 December 1.86-1.94 1.9751-3.50 The weighted exercise price of stock options exercised during 2023 amounts to EUR 0 (2022: EUR 0). All outstanding stock option programmes have an expiration date with an average remaining contractual life of 6 years. TOTAL REMUNERATION OF KEY MANAGEMENT [40] 2023 2022 kEUR kEUR Short-term employee benefits 299 316 Post-employment benefits (pensions and health insurance) 20 17 Stock options 68 0 Total remuneration of key management 387 333 The amounts shown in the table above are recognised as expenses during the reporting period. Income resulting from the share-based payments is due to the decreased fair value of the cash- settled stock option plan and the corresponding adjustment of the liability through profit or loss. Share appreciation rights held by the members of the Board of Directors have the following expiration dates and exercise prices: Expiration Exercise 31 / 12 / 23 31 / 12 / 22 price EUR Number Number SOP 2023 (Share Appreciation Rights) 2/1/2030 1.86 187,500 0 FINANCIAL INSTRUMENTS [41] The classes of financial instruments within the meaning of IFRS 7.6 are defined in accordance with the categories of financial instruments in IFRS 9. IFRS 9 contains three categories for classifying financial assets: “measured at amortised cost”, “measured at fair value through profit or loss” and “measured at fair value through other comprehensive income.” 1. Capital risk management The Group manages its capital with the aim of optimising returns on investments in business entities by optimising the debt equity ratio and maximising its shareholder value by maintaining a high credit rating and a good equity ratio. At the same time, the Group ensures that entities can operate under the going concern assumption. The capital structure of the Group consists of liabilities other than borrowings, cash and cash equivalents, securities measured at fair value through other comprehensive income and the equity attributable to the parent company’s shareholders, consisting of issued shares in circulation, the capital reserve, retained earnings brought forward and other equity items. Net indebtedness The Group manages its capital structure and makes adjustments to it that take into account changes in the general economic environment. In order to maintain or adjust the capital structure, the Group can make dividend payments or pay back capital to the shareholders, issue new shares or buy back its own shares. No changes in the objectives, guidelines and procedures were made as at 31 December 2023 compared to 31 December 2022. Negative net indebtedness means that the Group is debt-free. Net indebtedness at the end of the year was as follows: 31/12/23 31/12/22 kEUR kEUR Current and non-current financial liabilities 21,485 25,227 Cash and cash equivalents -19,842 -17,008 Listed debt and marketable securities -3,523 -6,076 Net liabilities -1,880 2,144 Equity per balance sheet including non- controlling interest 18,881 15,666 31 / 12 / 23 31 / 12 /22 kEUR kEUR Net indebtedness, in percent -10 14 2. Material accounting policies The rent and similar deposits referred to in Note [19], carried at their nominal amount of EUR 80k (2022: EUR 80k), are pledged as collateral for bank guarantees. The Group does not hold any collateral for credit facilities. Detailed information on the main accounting policies applied, including the recognition criteria, the measurement bases and the bases for the recognition of income and expenses, are presented separately for each category of financial assets, financial liabilities and equity instruments in the following section 3. 3. Categories of financial instruments Carrying amount per category of financial instruments: Financial assets 31 / 12 / 23 31 / 12 /22 kEUR kEUR Debt instruments at amortised cost 35,298 40,102 Debt instruments at fair value through other comprehensive income 1,538 991 Total 36,836 41,093 Debt instruments at amortised cost include trade receivables (Note [21]), other non-current financial assets (Note [19]), deposits presented in current financial assets (Note [24]), cash deposits (Note [24]) and cash and cash equivalents (Note [25]). Debt instruments at fair value through other comprehensive income include current investments in listed debt instruments (Note [20]). Fair values of these instruments were determined by reference to published price quotations in an active market. Financial liabilities 31 / 12 / 23 31 / 12 /22 kEUR kEUR Other financial liabilities measured at amortised cost 21,417 25,227 Other financial liabilities measured at fair value 68 0 Total 21,485 25,227 Other financial liabilities measured at amortised cost include lease liabilities (Note [42]), trade payables (Note [31]) and other financial liabilities (Note [34]). Other financial liabilities measured at fair value include employee liabilities resulting from share appreciation rights granted to the Board of Directors (Note [39]). Due to the short-term maturities of cash and cash equivalents, trade receivables and payables, current financial assets and liabilities, their respective fair values approximate their carrying amounts. The fair values of non-current financial liabilities relating to lease liabilities are based on carrying amounts, which are a reasonable approximation of fair value. The fair value of non- current financial liabilities relating to employee benefits for share appreciation rights are based on fair value as of December 31, 2023 (Note [39]). Hierarchical classification of fair values of financial instruments pursuant to IFRS 7 as at 31 December 2023: Fair Value Level 1 Level 2 Level 3 31 / 12 / 23 Financial assets at fair value through other comprehensive income 1,538 1,538 0 0 Net gains and losses per category of financial instruments (IFRS 7.20 (a)): Financial assets 31/12/23 31/12/22 kEUR kEUR At fair value through profit and loss Unrealised gains 0 0 Realised losses 0 -115 Total 0 -115 At fair value through other comprehensive income Unrealised gains / losses (-) 5 -16 Realised gains / losses (-) 6 0 Total 11 -16 Unrealised losses result from the fair value changes of debt securities classified at fair value through other comprehensive income and realised losses result from the maturity of debt securities classified at fair value through other comprehensive income. Interest income and expenses per category of financial instruments (IFRS 7.20 (b)): Financial assets 31/12/23 31/12/22 kEUR kEUR Measured at amortised cost 162 1 Measured at fair value through other comprehensive income 40 3 Measured at fair value through profit or loss 0 18 4. Objectives of financial risk management The main financial liabilities used by the Group comprise trade payables and lease liabilities. The primary purpose of these financial liabilities is to finance the Group’s business activities. The Group has various financial assets, such as trade receivables, cash and securities. Group management monitors and manages the financial risks of the Group. These risks include the market risk (including exchange rate risks, interest rate-related fair value risks and price risks), the credit risk, the liquidity risk and interest rate-related cash flow risks. In addition, the management decides on the utilisation of derivative and non-derivative financial transactions and the investment of surplus liquidity in securities and deposits. The Group does not enter into any contracts with or deal in financial instruments, including derivative financial instruments, for speculative purposes. 5. Market risk The Group’s activities expose it primarily to financial risks from changes in exchange rates (see 6. below) and interest rates (see 7. below). Market risk positions are determined by means of sensitivity analysis. As no further investments in listed debt instruments are held by the Group, the market risk exposure in conjunction with interest rate risk of the Group decreased significantly. The nature and means of risk management and assessment, however, remain unchanged. 6. Foreign currency risk management Certain transactions in the Group are denominated in foreign currencies. This can result in risk from fluctuations in exchange rate. The carrying amounts of the monetary assets and liabilities of the Group denominated in foreign currencies are as follows: Financial assets 31 / 12 / 23 31 / 12 / 22 kEUR kEUR USD 303 326 GBP 8,174 10,599 CHF 1,307 2,135 Total 9,784 13,060 Financial liabilities 31 / 12 / 23 31 / 12 / 22 kEUR kEUR USD 6 0 GBP 7,704 1,835 Financial liabilities 31 / 12 / 23 31 / 12 / 22 kEUR kEUR CHF 74 882 Total 7,784 2,717 Foreign currency sensitivity analysis The Group is primarily exposed to exchange rate risk from the currencies USD and GBP. The following table shows the sensitivity from the point of view of the Group, assuming a 10 percent rise or fall in the EUR against the respective foreign currency. The 10 percent shift represents management’s assessment with regards to a reasonable possible change in the exchange rate. The sensitivity analysis only includes outstanding monetary positions denominated in foreign currency and adjusts their translation at the end of the period to reflect a 10 percent change in the exchange rates. Effect of USD Effect of USD Effect of GBP Effect of GBP Total Total +10% +10% +10% +10% 31 / 12 / 23 31 / 12 / 22 31 / 12 / 23 31 / 12 / 22 31 / 12 / 23 31 / 12 / 22 kEUR kEUR kEUR kEUR kEUR kEUR Net income for the year -58 -98 -2 0 -60 -98 Effect of USD - Effect of USD - Effect of GBP Effect of GBP Total Total -10% -10% -10% -10% 31 / 12 / 23 31 / 12 / 22 31 / 12 / 23 31 / 12 / 22 31 / 12 / 23 31 / 12 / 22 kEUR kEUR kEUR kEUR kEUR kEUR Net income for the year 71 119 -2 0 73 119 7. Interest rate risk management Interest rate sensitivity analysis The sensitivity analyses described below were determined on the basis of the interest rate risk exposure for non-derivative financial instruments on the balance sheet date. In 2023, an increase or decrease in the interest rate of 50 basis points, which was assumed by the management for the interest rate risk, would have increased / decreased the other comprehensive income of the Group by EUR 11k/EUR -8k (2022: EUR 2k). 8. Credit risk management Credit risk is the risk of loss for the Group should contractual parties not meet their contractual obligations. Business relationships are only entered into with creditworthy counterparties, and, where appropriate, the Group obtains collateral to reduce the risk of loss due to the non-fulfilment of obligations. The Group only enters into business relationships with entities that are rated “investment grade” or above. If such information is not available, the Group makes use of other available financial information and its own trading records to evaluate its major customers. The risk exposure of the Group and the credit ratings are continuously monitored. The Group has trade receivables with a large number of customers spread over various sectors and geographical territories. Continuous credit assessments are carried out with regard to the financial condition of the receivables. An impairment analysis is performed at each reporting date to measure expected credit losses. The provision rates are based on days past due for every single customer, reflecting reasonable and supportable information that is available at the reporting date about past events and current conditions and customer-specific, forward-looking information from the client-facing account manager. If a customer defaults, all outstanding amounts relating to that counterparty are subject to an allowance calculation. The default is primarily determined based on individual assessment – prompted by noticeable changes in payment behaviour, or application for bankruptcy. Individual assessment is generally supported by the information provided by the client-facing account manager. Generally, trade receivables are considered at 100 percent in the credit loss allowance if they are past due for more than one year. Trade receivables are written off and derecognised if there is good reason to assume that the outstanding amount is unrecoverable in part or in whole, for example after completion of insolvency proceedings. The Group is not exposed to any significant credit risks relating to a single contractual party or group of contractual parties with similar characteristics. The reported carrying amount reflects the maximum credit risk of the Group. The Group defines contractual parties as those with similar characteristics if they are related parties. The concentration of credit risk from customer relationships did not exceed 5.7 percent (2022: 6.3 percent) of the financial gross asset values at any time during the reporting period. The carrying amount of the financial assets included in the Consolidated Financial Statements less any impairment losses represent the Group’s maximum credit risk. Any collateral is ignored. There are no credit derivatives for hedging outstanding amounts from customers, nor have there been. The expected loss rates (stage 2 of the impairment model) amount to 0 percent for the segments ad agents and ad pepper media. The expected loss rate for the Webgains segment is 0.5 percent. The Company abstains from disclosing an ECL table, as the application of the expected loss rates results in immaterial amounts for the Group. The Company tests for impairment (stage 3 of the impairment model) if there are substantial indications that receivables may be uncollectable, e.g. deterioration of payment behaviour or initiation of insolvency proceedings. An account of individual value adjustments is only maintained for trade receivables. The reconciliation of changes in the loss allowance is as follows: Loss allowance 2023 2022 kEUR kEUR Balance at beginning of year 913 532 Allowances in the period Additions 691 764 Reversals -600 -349 Consumption -386 -34 Balance at end of period 618 913 The analysis shows that allowances were set up on a gross receivables amount of EUR 782k (2022: EUR 1,127k). For all other financial assets, no material credit losses are anticipated despite trade receivables that are subject to the impairment model according to IFRS 9.5.5. 9. Liquidity risk management The Group monitors the risk of liquidity shortage on a continuous basis with the help of a liquidity planning tool. This tool takes into account the maturities of financial investments and financial assets (e.g., receivables, other financial assets) and expected cash flow from operating activities. The Group’s aim is to maintain a balance between continuous coverage of funding needs and the necessity of flexibility. The maturities of the financial liabilities of the Group as at 31 December 2023 are presented below. The information is based on contractual, undiscounted payments. Financial liabilities 31/ 12/ 23 < 1 mth. > 1 mth. 3 mth. to 1 1 to 5 years > 5 years Total < 3 mth. year kEUR kEUR kEUR kEUR kEUR kEUR Lease liabilities 51 92 393 754 0 1,290 Trade payables 17,290 367 0 0 0 17,657 Other financial liabilities measured at amortised cost 411 37 2,022 0 0 2,470 Other financial liabilities measured at fair value 0 0 0 68 0 68 Total 17,752 496 2,415 822 0 21,485 The lease liabilities disclosed in the above table are the gross amounts. Financial liabilities 31/ 12/ 22 < 1 mth. > 1 mth., 3 mth. to 1 1 to 5 years > 5 years Total < 3 mth. year kEUR kEUR kEUR kEUR kEUR kEUR Lease payables 45 83 395 720 0 1,243 Trade payables 20,570 267 0 0 0 20,836 Other financial liabilities measured at amortised cost 299 157 2,571 0 0 3,028 Total 20,914 507 2,966 720 0 25,107 LEASES [42] The Group has lease contracts for office space (lease terms between 1 and 5 years) and cars (3 years). The Group’s obligations under its leases are secured by the lessor’s title to the leased assets. There are several lease contracts that include extension and termination options, which are further discussed below. The Group also has certain leases with terms of 12 months or less. The Group applies the “short-term lease” recognition exemptions. Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period: Right-of-use assets Lease liabilities Office Cars Total space kEUR kEUR kEUR kEUR As at 1 January 2023 2,166 252 2,418 -1,361 Additions 426 66 492 -492 Disposal -17 -72 -89 0 Exchange rate difference 12 0 12 9 Subtotal 2,587 247 2,834 -1,844 Depreciation expense as at 1 January 2023 -962 -138 -1,101 0 Depreciation expense -557 -81 -638 Disposal 16 76 92 Exchange rate difference -3 0 -3 Right-of-use assets Lease liabilities Office Cars Total space kEUR kEUR kEUR kEUR Depreciation expense as at 31 December 2023 -1,506 -144 -1,650 Payments 595 Interest -40 As at 31 December 2023 1,081 103 1,184 -1,290 The amounts recognised in profit or loss, are as follows: 2023 2022 kEUR kEUR Depreciation expenses of right-of-use assets 638 570 Interest expense on lease liabilities 40 33 Expense relating to short-term leases (included in administrative expense) 113 263 Total amount recognised in profit or loss 791 866 Rental agreements for the office leases in Nuremberg, Herrenberg and Madrid contain extension options on automatic annual renewal terms. Due to uncertainties, these options have not been executed so far. Therefore, these options are not considered in the valuation process. There are no purchase options or restrictions imposed by lease arrangements. EVENTS AFTER THE BALANCE SHEET DATE [43] Up until the day of authorisation for issuance, there were no events that would have exerted substantial influence on the net assets, financial position or results of operations as at 31 December 2023. APPLICATION OF SEC. 264 PARA. 3 OF GERMAN COMMERCIAL CODE (HBG) [44] The following German subsidiaries in the legal form of capital corporation as defined in Section. 264a made use of the exemption clause included in Section 264 para. 3 of the German Commercial Code: • ad pepper media GmbH, Nuremberg • Webgains GmbH, Nuremberg • ad agents GmbH, Herrenberg Nuremberg, 10 April 2024 The Board of Directors of ad pepper media International N.V. comprised the following members in the financial year 2023: Dr Jens Körner, CEO Nuremberg, Germany The Supervisory Board of ad pepper media International N.V. in the financial year 2023 consisted of: Michael Oschmann (Chairman) Thomas Bauer Dr Stephan Roppel Dagmar Bottenbruch « 07 STATUTORY FINANCIAL 07 07 STATUTORY FINANCIAL STATUTORY FINANCIAL STATEMENTS AND NOTES OF THE HOLDING COMPANY AD PEPPER MEDIA INTERNATIONAL N.V. (THE “HOLDING COMPANY”) BALANCE SHEET OF THE HOLDING COMPANY BALANCE SHEET OF THE HOLDING COMPANY (AFTER PROFIT APPRIOPRIATION) – ASSETS (AFTER PROFIT APPRIOPRIATION) – EQUITY AND LIABILITIES 31/12/23 31/12/22 31/12/23 31/12/22 Note kEUR kEUR Note kEUR kEUR Non-current assets Equity attributable to shareholders of the parent company Intangible ﬁxed assets 42 67 Issued capital 1,160 1,075 [3] [10] Tangible ﬁxed assets 178 289 Share premium 67,174 63,782 [4] [10] Financial ﬁxed assets 9,442 6,588 Other reserves -50,670 -50,368 [5] [10] Total non-current assets 9,662 6,944 Total equity 17,664 14,490 Current assets Non-current liabilities 73 120 [11] Marketable securities 1,985 991 Provisions 544 315 [6] [12] Receivables due from subsidiaries 948 1,107 Current liabilities 2,498 3,114 [7] [13] Prepaid expenses and other current assets 273 305 Total liabilities 3,115 3,549 [8] Cash and cash equivalents 7,911 8,691 Total equity and liabilities 20,779 18,038 [9] Total current assets 11,117 11,094 Total assets 20,779 18,038 131 132 07 07 STATUTORY FINANCIAL STATUTORY FINANCIAL PROFIT OR LOSS ACCOUNT OF THE HOLDING COMPANY NOTES TO THE STATUTORY Current ﬁnancial liabilities have been accounted for a written put option over the non-controlling interest in ad pepper media Spain FINANCIAL STATEMENTS OF S.A. and reﬂect in analogy to the consolidated ﬁnancial statements an THE HOLDING COMPANY increase of the net asset value of the subsidiary to 100 percent. 1/1 - 31/12/23 1/1 - 31/12/22 Unrealised gains on transactions between the Holding Company and its investments in consolidated subsidiaries are eliminated in full, based on Note kEUR kEUR [1] Basis of preparation and the consolidation principles. The Holding Company Financial Statements Revenue 186 243 material accounting policies are presented in EUR, which is the Holding Company’s functional Other operating income 1,240 1,013 [15] currency. The amounts are in thousands of EUR (rounded to the nearest The Company Financial Statements for ad pepper media International thousand), unless otherwise stated. There have been no changes to the Selling and marketing expenses -806 -787 N.V. (Commercial Register No. 27182121) have been prepared in accounting policies of the Holding Company. Due to rounding up or down, General and administrative expenses -2,436 -1,682 accordance with the statutory provisions of Part 9, Book 2 of the Dutch individual ﬁgures may not add up exactly to the totals stated. Civil Code. In accordance with subsection 8 of section 362, Book 2 of Other operating expenses -10 -20 the Dutch Civil Code, the same accounting principles may be applied Earnings before interest and tax (EBIT) -1,826 -1,233 in the Company’s ﬁnancial statement and the consolidated ﬁnancial [2] Changes in Accounting policies Interest income 435 60 statements. The Holding Company’s ﬁnancial data is included in the Consolidated Financial Statements. The notes to the Company’s Interest expenses -11 -152 In 2023 no changes in accounting policies applied. balance sheet and income statement are limited to items that differ Loss before taxes -1,403 -1,325 from the corresponding items in the Consolidated Financial Statements Share in result of subsidiaries and participations 458 432 and that are of material signiﬁcance. [3] Intangible ﬁxed assets Net result for the year -944 -893 The Holding Company applies the acquisition method to account for Trade- Software Total acquiring subsidiaries, consistent with the approach identiﬁed in the *Revenue relates solely to license fee charged to subsidiaries. marks Consolidated Financial Statements. The consideration transferred for the acquisition of a subsidiary is the fair value of assets transferred kEUR kEUR kEUR to the Holding Company, liabilities incurred to the former owners of Book value at 1/1/22 3 133 136 the acquired company, and the equity interests issued by the Holding Additions 0 12 12 Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Disposals 0 0 0 Identiﬁable assets acquired and liabilities and contingent liabilities Amortisation -1 -80 -81 assumed in an acquisition are measured initially at their fair values at Book value at 31/12/22 2 65 67 the acquisition date and are subsumed in the net asset value of the investment in consolidated subsidiaries. Acquisition-related costs are Purchase value 643 1,738 2,381 expensed as incurred. Accumulated amortisation -641 -1,673 -2,314 Book value at 31/12/22 2 65 67 Investments in consolidated subsidiaries are measured at net asset value. Net asset value is based on the measurement of assets, provisions Additions 0 31 31 and liabilities, and determination of proﬁt based on the principles applied Disposals 0 0 0 in the Consolidated Financial Statements. If the valuation of a subsidiary Amortisation -1 -55 -56 based on the net asset value is negative, it will be stated at nil. If and insofar as the Holding Company has the ﬁrm intention of enabling the Book value at 31/12/23 1 41 42 participation to settle its debts, a provision is recognised for this. When Purchase value 643 1,771 2,414 the Holding Company ceases to have control over a subsidiary, any Accumulated amortisation -642 -1,730 -2,372 retained interest is remeasured to fair value, with the change in carrying amount to be accounted for in the income statement. When parts of Book value at 31/12/23 1 41 42 investments in consolidated subsidiaries are bought or sold, and such transaction does not result in the loss of control, the difference between Intangible assets are amortised over a useful life of three years. the consideration paid or received and the carrying amount of the net assets acquired or sold is directly recognised in equity. 133 134 07 07 STATUTORY FINANCIAL STATUTORY FINANCIAL [4] Tangible ﬁxed assets The Group recognises right-of-use assets at the commencement date of The movements during the year are as follows: On 2 October 2023 the Group signed a purchase agreement of a 25.64 the lease (i.e., the date the underlying asset is available for use). Right- percent interest in solute Holding GmbH & Co. KG, Hanover, Germany, Tangible ﬁxed assets can be speciﬁed as follows: of-use assets are measured at cost, less any accumulated depreciation Subsidiary companies which is the Holding Company of solute GmbH, an operator of price and impairment losses, and adjusted for any re-measurement of lease comparison portals in Germany. Signiﬁcant inﬂuence over the associate liabilities. The cost of right-of-use assets includes the amount of lease Invest- Loans Financial Total was obtained on 30 October 2023, the registration day of ad pepper as 31/12/23 31/12/22 ments assets liabilities recognised, initial direct costs incurred and lease payments shareholder. From this day onward ad pepper can actively participate in including invest- made at or before the commencement date, less any lease incentives all shareholders meetings of solute Holding GmbH & Co. KG. kEUR kEUR ments received. Unless the Group is reasonably certain to obtain ownership of Tangible ﬁxed assets 46 52 the leased asset at the end of the lease term, the capitalised right-of- For further information on the investment made please refer to Note [4] kEUR kEUR kEUR kEUR Right-of-use assets 132 237 use assets are depreciated on a straight-line basis over the shorter of of the Consolidated Financial Statements. Book value their estimated useful lives and the lease term. Right-of-use assets are Total 178 289 at 1/1/22 5,645 500 119 6,264 subject to impairment. Additions 0 1,000 0 1,000 The depreciation percentages used for tangible assets range from 12.5 Written put option percent to 33.3 percent. over the 35 % Tangible ﬁxed assets 2023 2022 non-controlling in- terest in ad pepper kEUR kEUR [5] Financial ﬁxed assets media Spain S.A. Book value at 1/1 52 60 and Webgains S.L. -95 0 0 -95 Additions 10 13 Dividends and 31/12/23 31/12/22 repayments -949 -290 -85 -1,324 Disposals 0 0 kEUR kEUR Share of net proﬁt 116 0 0 116 Depreciation -16 -21 Subsidiaries at net asset value 5,011 5,344 Investments in Book value at 31/12 46 52 subsidiaries 296 0 0 296 Loans 710 1,210 Purchase value 256 293 Other 3,721 34 Translation Accumulated depreciation -210 -241 adjustments 16 0 0 16 Total 9,442 6,588 Book value at 31/12 46 52 Book value at 1/1/23 5,029 1,210 34 6,273 Written put option Investments in subsidiary companies consist of the following: over the 35 % non- controlling interest Right-of-use assets 2023 2022 31/12/23 31/12/22 in ad pepper kEUR kEUR media Spain and kEUR kEUR Book value at 1/1 237 313 Webgains S.L. -62 0 0 -62 Subsidiaries at net asset value 5,011 5,344 Additions 25 198 Additions 0 250 3,487 3,737 Provisions for subsidiaries -544 -315 Disposals - -158 Repayments 0 -750 0 -750 Total 4,467 5,029 Dividends and Depreciation -130 -116 repayments -1,032 0 0 -1,032 Book value at 31/12 132 237 Share of net proﬁt 459 0 200 659 Purchase value 360 342 Investments in Accumulated depreciation -228 -105 subsidiaries 104 0 0 104 Book value at 31/12 132 237 Translation adjustments -29 0 0 -29 Book value at 31/12/23 4,467 710 3,721 8,898 135 136 07 07 STATUTORY FINANCIAL STATUTORY FINANCIAL [6] Marketable securities [7] Group companies The receivables from Group companies mature within one year. 31/12/23 31/12/22 kEUR kEUR [8] Prepaid expenses and other current assets Due within one year 1,985 991 Due within one and ﬁve years 0 0 31/12/23 31/12/22 Due in more than ﬁve years 0 0 Total 1,985 991 kEUR kEUR Income tax receivables 163 192 Other receivables 110 113 Securities measured at fair value Total 273 305 through other comprehensive income In the reporting period, securities measured at fair value through other comprehensive income were acquired for EUR 1,983k (2022: EUR 0k) [9] Cash and cash equivalents and sold for EUR 1,000k (2022: EUR 0k). Unrealised gains of EUR 5k were recognised in other comprehensive income (2022: unrealised losses of EUR 15k). Realised gains of EUR 6k were recognised in No restrictions on cash exist at balance sheet date. ﬁnancial income (2022: EUR 0k). Securities measured at fair value through proﬁt or loss In the reporting period, securities measured at fair value through proﬁt or loss were acquired for EUR 0k (2022: sale EUR 1,935k) and sold for EUR 0k. Realised losses of EUR 0k (2022: realised losses EUR 115k) were recognised in proﬁt or loss. For further information on investments made please refer to Note [20] of the Consolidated Financial Statements. 137 138 07 07 STATUTORY FINANCIAL STATUTORY FINANCIAL [10] Shareholders’ equity Balance at 1/1/2023 Proﬁt for the period Other comprehensive Total comprehensive Share-based Purchase of Cash settlement Issuance of shares Transaction costs NCI put liability Balance at income income payment treasury shares of SOP's related to issue of 31/12/2023 share capital kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR Issued capital 1,075 0 0 0 0 0 0 85 0 0 1,160 Share premium 63,782 0 0 0 0 0 0 3,403 -12 0 67,173 Reserves Treasury reserve -6,138 0 0 0 0 0 0 0 0 0 -6,138 For employee stock option plans 2,906 0 0 0 167 0 0 0 0 0 3,073 Accumulated deﬁcit -43,911 -944 0 -944 0 0 0 0 0 0 -44,854 Currency translation basis of preparation differences -1,153 0 33 33 0 0 0 0 0 0 -1,120 Revaluation of listed debt securities -3 0 5 5 0 0 0 0 0 0 2 Other reserves -2,070 0 0 0 0 0 0 0 0 437 -1,633 Subtotal reserves -50,368 -944 38 -906 167 0 0 0 0 437 -50,669 Total Equity 14,490 -944 38 -906 167 0 0 3,488 -12 437 17,664 Balance at 1/1/2022 Proﬁt for the period Other comprehensive Total comprehensive Share-based payment Purchase of treasury Cash settlement of SOP‘s Issuance of shares NCI put liability Balance at 31/12/2022 income income shares kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR kEUR Issued capital 1,075 0 0 0 0 0 0 0 0 1,075 Share premium 63,782 0 0 0 0 0 0 0 0 63,782 Reserves 0 0 0 0 0 0 0 0 0 0 Treasury reserve -4,906 0 0 0 0 -1,232 0 0 0 -6,138 For employee stock option plans 2,827 0 0 0 79 0 0 0 2,906 Accumulated deﬁcit -43,018 -893 0 -893 0 0 0 0 0 -43,911 Currency translation basis of preparation difference -1,162 0 9 9 0 0 0 0 0 -1,153 Revaluation of listed debt securities 12 0 -15 -15 0 0 0 0 0 -3 Other reserves -2,812 0 0 0 0 0 0 0 742 -2,070 Subtotal reserves -49,059 -893 -6 -899 79 -1,232 0 0 742 -50,367 Total Equity 15,798 -893 -6 -899 79 -1,232 0 0 742 14,490 139 140 07 07 STATUTORY FINANCIAL STATUTORY FINANCIAL Issued capital Authorised capital [13] Current liabilities ad pepper media International N.V. has provided guarantees for all outstanding liabilities of its subsidiary Webgains GmbH (registered The authorised share capital of the Holding Company amounts to EUR number: HRB 37198) that existed as at 31 December 2023, until these 4,000,000, divided into 80,000,000 shares, with a par value of EUR 31/12/23 31/12/22 are satisﬁed in full. As a result, the individual local statutory accounts Ordinary Shares issued and fully paid 0.05 each. The Board of Directors is authorised, upon approval by of Webgains GmbH are exempt from audit under the requirements kEUR kEUR the Supervisory Board, to issue shares until 16 May 2027, or to grant of Section 264 para. 3 German Commercial Code (HGB). As at 31 Shares kEUR Written put option 1,996 2,496 rights to subscribe for shares until the issued share capital amounts to December 2023, the outstanding liabilities of Webgains GmbH amount At 1/1/2022 and 31/12/2022 21,500,000 1,075 EUR 2,000,000. to EUR 3,639k (2022: EUR 4,261k). Accrued expenses 119 9 Issued for acquisition of the Other current liabilities 253 490 investment in solute Holding The future minimum payment obligations resulting from the contracts GmbH & Co. KG 1,693,244 85 Lease liabilities 130 119 Proposed appropriation of the result for the for short-term rent and other agreements in place as at 31 December ﬁnancial year 2023 2023 are as follows: At 31/12/2023 23,193,244 1,160 Total 2,498 3,114 The Board of Directors, with the approval of the Supervisory Board, 2023 2022 The new shares in ad pepper media International N.V. were issued and proposes to allocate the loss for the ﬁnancial year 2023 amounting to admitted for trading on the Frankfurt Stock Exchange in 2023 (2022: 0 EUR -944k to the accumulated deﬁcit. The ﬁnancial statements reﬂect The put option liability relates to the obligation resulting from the kEUR kEUR shares). this proposal. written put/call option over the 35 percent non-controlling interest No later than 1 year 138 92 in ad pepper media Spain S.A with no termination date. The amount Later than 1 year and no later of the ﬁnancial liability is the exercise price of the option based on a than 5 years 8 0 Additional paid-in capital [11] Non-current liabilities contractually agreed EBIT multiple. Later than 5 years 0 0 Proceeds from the issuance of shares increased the additional paid Other current liabilities comprise mainly VAT payables and bonus 31/12/23 31/12/22 in capital by the amount by which they exceeded the par value of accruals. the shares. Furthermore, it also includes expenses incurred for stock kEUR kEUR [15] Other operating income option plans. Employee beneﬁts liability 68 0 [14] Contingent liabilities Lease liability 5 120 Other operating income mainly includes management and shared Contingent liabilities mainly result from rented ofﬁces and ofﬁce services charged to subsidiaries of EUR 966k (2022: EUR 926k) and kEUR Total 73 120 equipment. The rent deposit for the ofﬁce facilities in Nuremberg, other income resulting from the proﬁt distribution agreement with the At 1/1/2022 and 31/12/2022 63,782 which is carried at its nominal value of EUR 33k (2022: EUR 33k), is subsidiary ad pepper media GmbH of EUR -815k (2022: EUR -631k) and Issuance of share capital for the acquisition of The employee beneﬁts liability relates to the obligation resulting from pledged as collateral for bank guarantees. Webgains GmbH of EUR 952k (2022: EUR 568k). the investment in solute Holding GmbH & Co. KG 3,403 the cash-settled option plan. For further details on cash-settled stock Transaction costs for issued share capital -12 option plans, please refer to Note [39] of the consolidated ﬁnancial ad pepper media International N.V. has provided guarantees for all At 31/12/2023 67,173 statements. outstanding liabilities of its subsidiary, ad pepper media GmbH (register number: HRB 16494) as at 31 December 2023, until these are satisﬁed in full. As a result, the individual local statutory accounts of ad pepper [12] Provisions media GmbH are exempt from audit under the requirements of Section Treasury reserves 264 para. 3 of the German Commercial Code (HGB). As at 31 December 2023, ad pepper media GmbH’s outstanding liabilities amounted to EUR 31/12/23 31/12/22 Purchase of treasury shares 407k (2022: EUR 614k). By a shareholders’ resolution dated 13 June 2023, the Board of kEUR kEUR Directors was authorised to repurchase treasury stock of up to 50 ad pepper media International N.V. has provided guarantees for all Subsidiaries 422 315 percent of the issued capital within the following 18 months. There is outstanding liabilities of its subsidiary, ad agents GmbH (register currently no active share repurchase programme. Total 422 315 number: HRB 16494) as at 31 December 2023, until these are satisﬁed in full. As a result, the individual local statutory accounts of ad agents Number of shares outstanding GmbH are exempt from audit under the requirements of Section 264 The number of shares issued and outstanding as at 31 December 2023 Provisions for subsidiaries relate to subsidiaries with a negative net para. 3 of the German Commercial Code (HGB). As at 31 December totalled 21,951,116 (2022: 20,257,872). Each share has a nominal value asset value. For further information please refer to Note [5]. 2023, ad agents GmbH’s outstanding liabilities amounted to EUR of EUR 0.05. 5,750k (2022: EUR 6,432k). 141 142 07 07 STATUTORY FINANCIAL STATUTORY FINANCIAL [16] Employee information [17] Information relating to the Board of Directors and Supervisory Board At the end of the ﬁnancial year, the Holding Company employed 17 people (2022: 19). All employees are employed outside the Netherlands. Associated Shares Stock Shares Stock 2023 2022 options options companies kEUR kEUR 2023 2022 2023 2022 Wages and salaries 1,295 1,094 EMA Electronic Media Advertising Stock option expenses/income 235 85 Int. B.V. 9,486,402 0 9,486,402 0 Social security costs 242 212 Euro Serve Media Other employment expenses 4 0 GmbH 1,641,786 0 556,163 0 Total 1,776 1,391 Josef Keller GmbH The Board & Co. Verlags-KG 336,463 0 0 0 BFB BestMedia- Dr Jens Körner These costs are included in the cost of sales, selling expenses, and 4Berlin GmbH 133,476 0 0 0 general and administrative expenses. Pension costs included in social (Chief Executive Ofﬁcer) security costs amount to EUR 85k (2022: EUR 73k). Adolf Christ Verlag Nuremberg, 10 April 2024 GmbH & Co. KG 101,787 0 0 0 The average number of personnel employed during the year was: KELMAR Telefon- buchverlag GmbH 11,615 0 0 0 KELSTA Telefon- 2023 2022 buchverlag GmbH 9,139 0 0 0 The Supervisory Board HC HC Total 11,720,668 0 10,042,565 0 IT 4 4 Michael Oschmann Marketing 1 1 Thomas Bauer The ultimate shareholders of both associated companies are Michael Administration 13 14 Dagmar Bottenbruch and Constanze Oschmann. Dr Stephan Roppel Total 18 19 [18] Independent auditor’s fees Fee Ernst & Young Accountants LLP 2023 2022 kEUR kEUR Audit of ﬁnancial statements 348 250 Other services 0 0 Total 348 250 [19] Events after the balance sheet date Up until the day of authorisation for issuance, there were no events that would have exerted substantial inﬂuence on the net assets, ﬁnancial position or results of operations as at 31 December 2023. 143 144 « 08 OTHER INFORMATION 08 08 OTHER INFORMATION OTHER INFORMATION OTHER INFORMATION Statutory arrangements for appropriation of results According to Article 15 of the Holding Company‘s articles of association, the Annual General Meeting of shareholders determines the appropriation of the Holding Company‘s net result for the year and the previous year. Independent auditor’s report The independent auditor’s report on these ﬁnancial statements is included on the following pages. 147 148 08 08 OTHER INFORMATION OTHER INFORMATION INDEPENDENT AUDITOR’S REPORT Information in support of our opinion We designed our audit procedures in the context of our audit of the ﬁnancial statements as a whole and in forming our opinion thereon. The following information in support of our opinion and any ﬁndings were addressed in this context, and we do not provide a separate opinion or To: the shareholders and supervisory board of ad pepper media International N.V. conclusion on these matters. Our understanding of the business REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS 2023 ad pepper media International N.V. with its head ofﬁce in Nürnberg, Germany, is the head of a group of companies that provides online marketing INCLUDED IN THE ANNUAL REPORT services. We paid speciﬁc attention in our audit to a number of areas driven by the operations of the group and our risk assessment. We determined materiality and identiﬁed and assessed the risks of material misstatement of the ﬁnancial statements, whether due to fraud or error in order to design audit procedures responsive to those risks and to obtain audit evidence that is sufﬁcient and appropriate to provide a Our opinion basis for our opinion. We have audited the ﬁnancial statements 2023 of ad pepper media International N.V. based in Amsterdam, The Netherlands. The ﬁnancial statements comprise the consolidated and statutory ﬁnancial statements. Materiality In our opinion: • The accompanying consolidated ﬁnancial statements give a true and fair view of the ﬁnancial position of ad pepper media International N.V. as at Materiality €210,000 (2022: €240,000) 31 December 2023 and of its result and its cash ﬂows for 2023 in accordance with International Financial Reporting Standards as adopted in the Benchmark applied Approximately 1% of revenue for 2023 European Union (EU-IFRSs) and with Part 9 of Book 2 of the Dutch Civil Code Explanation We have applied this benchmark based on our professional judgement and taking into account the expectations • The accompanying statutory ﬁnancial statements give a true and fair view of the ﬁnancial position of ad pepper media International N.V. of users of the ﬁnancial statements. Revenue was concluded to be the most appropriate measure as it is con- as at 31 December 2023 and of its result for 2023 in accordance with Part 9 of Book 2 of the Dutch Civil Code sidered to be reﬂective of the focus on growth in, and development of, the company’s activities. We determined materiality consistent with last year. The consolidated ﬁnancial statements comprise: • The consolidated statement of ﬁnancial position as at 31 December 2023 • The following statements for 2023: the consolidated income statement, the consolidated statements of comprehensive income, changes in We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the ﬁnancial equity and cash ﬂows statements for qualitative reasons. • The notes comprising material accounting policy information and other explanatory information We agreed with the supervisory board that misstatements in excess of €10,500, which are identiﬁed during the audit, would be reported to them, as The statutory ﬁnancial statements comprise: well as smaller misstatements that in our view must be reported on qualitative grounds. • The balance sheet of the holding company as at 31 December 2023 • The proﬁt or loss account of the holding company for 2023 • The notes comprising a summary of the accounting policies and other explanatory information Scope of the group audit ad pepper media International N.V. is at the head of a group of entities. The ﬁnancial information of this group is included in the consolidated Basis for our opinion ﬁnancial statements. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this further described in the Our responsibilities for the audit of the ﬁnancial statements section of our report. respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk proﬁle of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete We are independent of ad pepper media International N.V. (the company or the group) in accordance with the EU Regulation on speciﬁc requirements set of ﬁnancial information or speciﬁc items. regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit ﬁrms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect We have assigned all group entities a full scope audit and performed the required audit procedures ourselves. By performing these procedures, to independence) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the Verordening gedrags- en together with additional procedures at group level, we have been able to obtain sufﬁcient and appropriate audit evidence about the group’s ﬁnancial beroepsregels accountants (VGBA, Dutch Code of Ethics). statements to provide an opinion on the consolidated ﬁnancial statements. We believe the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our opinion. 149 150 08 08 OTHER INFORMATION OTHER INFORMATION Teaming and use of specialists Risk of the acquisition of the share in solute Holding GmbH & Co. KG not being at arms' length We ensured that the audit team included the appropriate skills and competences which are needed for the audit of a listed client. We included Fraud risk In 2023 the Company acquired an interest of 25.64% in solute Holding GmbH & Co. KG. As this is a related party specialists in the areas of IT audit, forensics, and income tax and have made use of our own experts in the areas of enterprise valuations and transaction, we identiﬁed a fraud risk of the transaction not being at arms’ length. share based payments. Our audit We refer to our key audit matter ‘Acquisition of the share in solute Holding GmbH & Co. KG’ that describes this fraud risk and approach our audit approach. Our focus on fraud and non-compliance with laws and regulations We considered available information and made enquiries of relevant executives, directors, legal, and the supervisory board. Our responsibility Although we are not responsible for preventing fraud or non-compliance and we cannot be expected to detect non-compliance with all laws The fraud risks we identiﬁed, enquiries and other available information did not lead to speciﬁc indications for fraud or suspected fraud potentially and regulations, it is our responsibility to obtain reasonable assurance that the ﬁnancial statements, taken as a whole, are free from material materially impacting the view of the ﬁnancial statements. misstatement, whether caused by fraud or error. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Our audit response related to risks of non-compliance with laws and regulations We performed appropriate audit procedures regarding compliance with the provisions of those laws and regulations that have a direct effect on Our audit response related to fraud risks the determination of material amounts and disclosures in the ﬁnancial statements. Furthermore, we assessed factors related to the risks of non- We identiﬁed and assessed the risks of material misstatements of the ﬁnancial statements due to fraud. During our audit we obtained an compliance with laws and regulations that could reasonably be expected to have a material effect on the ﬁnancial statements from our general understanding of the company and its environment and the components of the system of internal control, including the risk assessment process industry experience, through discussions with the board of directors, reading minutes, inspection of other relevant documents regarding compliance and the board of directors’ process for responding to the risks of fraud and monitoring the system of internal control and how the supervisory board with laws and regulations and performing substantive tests of details of classes of transactions, account balances or disclosures. exercises oversight, as well as the outcomes. We refer to Section “04.5 Risk report” of the report of the board of directors for the board of directors’ (fraud) risk assessment. We also inspected lawyers’ letters and correspondence with regulatory authorities and remained alert to any indication of (suspected) non- compliance throughout the audit. Finally we obtained written representations that all known instances of non-compliance with laws and regulations We evaluated the design and relevant aspects of the system of internal control and in particular the fraud risk assessment, as well as the code of have been disclosed to us. conduct and whistleblower guideline. We evaluated the design and the implementation of internal controls designed to mitigate fraud risks. Our audit response related to going concern As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to ﬁnancial reporting fraud, misappropriation of assets and bribery and corruption in close co-operation with our forensic specialists. We evaluated whether these factors indicate that a risk of material misstatement due to fraud is present. As disclosed in section “01 Letter from the board of directors” and in the management statements in section “04.1 Governance” to the ﬁnancial statements, the ﬁnancial statements have been prepared on a going concern basis. When preparing the ﬁnancial statements, the board of directors We incorporated elements of unpredictability in our audit. We also considered the outcome of our other audit procedures and evaluated whether any made a speciﬁc assessment of the company’s ability to continue as a going concern and to continue its operations for the foreseeable future. ﬁndings were indicative of fraud or non-compliance. We discussed and evaluated the speciﬁc assessment with the board of directors exercising professional judgment and maintaining professional We addressed the risks related to management override of controls, as this risk is present in all companies. For these risks we have performed skepticism. We considered whether the board of directors’ going concern assessment, based on our knowledge and understanding obtained through procedures among other things to evaluate key accounting estimates for management bias that may represent a risk of material misstatement our audit of the ﬁnancial statements or otherwise, contains all relevant events or conditions that may cast signiﬁcant doubt on the company’s ability due to fraud, in particular relating to important judgment areas and signiﬁcant accounting estimates as disclosed in section ‘Signiﬁcant accounting to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the judgements, estimates and assumptions’ of the notes to the consolidated ﬁnancial statements. We have also used data analysis to identify and related disclosures in the ﬁnancial statements or, if such disclosures are inadequate, to modify our opinion. address high-risk journal entries and evaluated the business rationale (or the lack thereof) of signiﬁcant extraordinary transactions, including those with related parties. Based on our procedures performed, we did not identify material uncertainties about going concern. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as The following fraud risks identiﬁed required signiﬁcant attention during our audit. a going concern. Presumed risks of fraud in revenue recognition Our key audit matters Fraud risk We presumed that there are risks of fraud in revenue recognition. We evaluated that revenue for the segments ad pepper, Key audit matters are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the ﬁnancial statements. We have ad agents and Webgains in particular give rise to such risks. communicated the key audit matters to the supervisory board. The key audit matters are not a comprehensive reﬂection of all matters discussed. Our audit We describe the audit procedures responsive to the presumed risk of fraud in revenue recognition in our key audit matter approach “Risk in revenue recognition”. Following the investment in an associate, a new key audit matter “Aquisition of the share in solute Holding GmbH & Co. KG” has been deﬁned. 151 152 08 08 OTHER INFORMATION OTHER INFORMATION Risks in revenue recognition Acquisition of the share in solute Holding GmbH & Co. KG Risk As disclosed in more detail in Note 5 “Revenue from contracts with customers” and section “Rendering of services” of the Risk As disclosed in note 4 “Business combinations & investments in an associate”, on 2 October 2023 the group signed a Summary of material accounting policies in the consolidated ﬁnancial statements, revenue from contracts with customers purchase agreement of a 25.64 percent interest in solute Holding GmbH & Co. KG, Hanover, Germany, which is the holding consist of Webgains, ad pepper and ad agents services. As the group concluded that it does not control these services company of solute GmbH, an operator of price comparison portals in Germany. Signiﬁcant inﬂuence over the associate was before they are transferred to customers, the group determined that it is an agent in all its customer contracts and records obtained on 30 October 2023, the registration day of ad pepper as shareholder. revenue at the net amount that it retains for its services. Incidentally, as disclosed the Related party disclosures (note 35), this transaction is regarded as a so-called related party Revenue recognition is a routine process in which high volume of transactions are being processed. Judgement is required transaction as the chairman of the supervisory board owns shares in each of the selling entities. As this is a related party to determine the amount to be recognized as return assets and refund liabilities for transactions in the recall period of transaction, we identiﬁed a fraud risk of the transaction not being at arms’ length and consider this a key audit matter. Webgains, as well as to determine the stage of completion for an advertisement campaign in the ad pepper segment. As Our audit Our audit procedures included obtaining an understanding and evaluating the company’s policies and procedures relating to revenue is considered a key performance indicator as well as a determinant of bonusses and share option value for the approach identifying related parties and mitigating the risks related to transactions with related parties. In relation to the acquisition, board of directors, the supervisory board well as to others, we assess that revenue is subject to a higher likelihood of as part of the required risk assessment procedures, we considered amongst others the background, nature of involvement, manipulation. As a result, we consider this a key audit matter. and the holding period of the prior interest held by the chairman of the supervisory board. Our audit Our audit procedures included an evaluation of the appropriateness of company’s revenue recognition policies in accordance approach with IFRS 15 “Revenue from Contracts with Customers” and understanding of the internal (IT) control environment includ- Furthermore, through discussions with the board of directors and the supervisory board, reading minutes, inspection of other ing the evaluation of design and implementation of control effectiveness in the area of automated revenue recognition of relevant documents and written conﬁrmation, we evaluated the statement that the chairman of the supervisory board did not Webgains in cooperation with our IT audit team members. participate in the decision-making concerning the acquisition. Moreover, we inspected the underlying contracts supporting the purchase price of the investment. We have reviewed the valuation report related to this transaction as prepared by a We discussed with and challenged the board of directors in their evaluation of revenue arrangements and the related management specialist and involved our own valuation specialists to assess the valuation and determine whether the trans- analysis of recognizing revenue as principal or agent. We validated the board of directors’ analysis based on inspection and action has been performed at arm’s length. interpretation of agreements with both customers and suppliers. Key observations Based on the audit procedures performed, we did not identify a reason to conclude that the acquisition was not an at arm’s length transaction. We applied a data-analytics driven audit approach to revenue in which we veriﬁed that revenue recognized during the year subsequently resulted in cash receipts. We also performed testing of revenue related accounts such as trade receivables and we tested whether revenue was recognized in the correct period (cut-off of revenue between 2023 and 2024). Furthermore, we used data analysis to identify and address high-risk journal entries. We performed procedures to evaluate key accounting estimates for management bias in respect of the judgment required in revenue recognition in the correct period related to REPORT ON OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT Webgains and the ad pepper segments. Key observations Based on the audit procedures performed, we did not identify any material misstatements in the revenue recognized in 2023. The annual report contains other information in addition to the ﬁnancial statements and our auditor’s report thereon. Based on the following procedures performed, we conclude that the other information: • Is consistent with the ﬁnancial statements and does not contain material misstatements • Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the management report and the other information as required by Part 9 of Book 2 of the Dutch Civil Code and as required by Sections 2:135b and 2:145 sub section 2 of the Dutch Civil Code for the remuneration report We have read the other information. Based on our knowledge and understanding obtained through our audit of the ﬁnancial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 and Section 2:135b sub-Section 7 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the ﬁnancial statements. The board of directors is responsible for the preparation of the other information, including the management report in accordance with Part 9 of Book 2 of the Dutch Civil Code and other information required by Part 9 of Book 2 of the Dutch Civil Code. The board of directors and the supervisory board are responsible for ensuring that the remuneration report is drawn up and published in accordance with Sections 2:135b and 2:145 sub section 2 of the Dutch Civil Code. 153 154 08 08 OTHER INFORMATION OTHER INFORMATION REPORT ON OTHER LEGAL AND DESCRIPTION OF RESPONSIBILITIES REGARDING REGULATORY REQUIREMENTS AND ESEF THE FINANCIAL STATEMENTS Engagement Responsibilities of the board of directors and the supervisory board for the ﬁnancial statements We were engaged by the supervisory board as auditor of ad pepper media International N.V. on 27 July 2018, as of the audit for the year 2018 and The board of directors is responsible for the preparation and fair presentation of the ﬁnancial statements in accordance with EU-IFRSs and Part 9 have operated as statutory auditor ever since that date. of Book 2 of the Dutch Civil Code. Furthermore, the board of directors is responsible for such internal control as the board of directors determines is necessary to enable the preparation of the ﬁnancial statements that are free from material misstatement, whether due to fraud or error. No prohibited non-audit services As part of the preparation of the ﬁnancial statements, the board of directors is responsible for assessing the company’s ability to continue as a going concern. Based on the ﬁnancial reporting framework mentioned, the board of directors should prepare the ﬁnancial statements using the We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on speciﬁc requirements regarding statutory going concern basis of accounting unless the board of directors either intends to liquidate the company or to cease operations, or has no realistic audit of public-interest entities. alternative but to do so. The board of directors should disclose events and circumstances that may cast signiﬁcant doubt on the company’s ability to continue as a going concern in the ﬁnancial statements. European Single Electronic Reporting Format (ESEF) The supervisory board is responsible for overseeing the company’s ﬁnancial reporting process. ad pepper media International N.V. has prepared the annual report in ESEF. The requirements for this are set out in the Delegated Regulation (EU) Our responsibilities for the audit of the ﬁnancial statements 2019/815 with regard to regulatory technical standards on the speciﬁcation of a single electronic reporting format (hereinafter: the RTS on ESEF). In our opinion the annual report prepared in the XHTML format, including the (partially) marked-up consolidated ﬁnancial statements as included in Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufﬁcient and appropriate audit evidence for our opinion. the reporting package by ad pepper media International N.V., complies in all material respects with the RTS on ESEF. Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during The board of directors is responsible for preparing the annual report, including the ﬁnancial statements, in accordance with the RTS on ESEF, whereby our audit. the board of directors combines the various components into a single reporting package. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to Our responsibility is to obtain reasonable assurance for our opinion whether the annual report in this reporting package complies with the RTS on inﬂuence the economic decisions of users taken on the basis of these ﬁnancial statements. The materiality affects the nature, timing and extent of our ESEF. audit procedures and the evaluation of the effect of identiﬁed misstatements on our opinion. We performed our examination in accordance with Dutch law, including Dutch Standard 3950N, ”Assurance-opdrachten inzake het voldoen aan We have exercised professional judgment and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on de criteria voor het opstellen van een digitaal verantwoordingsdocument” (assurance engagements relating to compliance with criteria for digital Auditing, ethical requirements and independence requirements. The Information in support of our opinion section above includes an informative summary reporting). Our examination included amongst others: of our responsibilities and the work performed as the basis for our opinion. • Obtaining an understanding of the company’s ﬁnancial reporting process, including the preparation of the reporting package Our audit further included among others: • Identifying and assessing the risks that the annual report does not comply in all material respects with the RTS on ESEF and designing and • Performing audit procedures responsive to the risks identiﬁed, and obtaining audit evidence that is sufﬁcient and appropriate to provide a basis for performing further assurance procedures responsive to those risks to provide a basis for our opinion, including: our opinion • Obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL instance • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, document and the XBRL extension taxonomy ﬁles, has been prepared in accordance with the technical speciﬁcations as included in the RTS on ESEF but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control • Examining the information related to the consolidated ﬁnancial statements in the reporting package to determine whether all required mark- • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the ups have been applied and whether these are in accordance with the RTS on ESEF board of directors • Evaluating the overall presentation, structure and content of the ﬁnancial statements, including the disclosures • Evaluating whether the ﬁnancial statements represent the underlying transactions and events in a manner that achieves fair presentation 155 156 08 08 OTHER INFORMATION OTHER INFORMATION Communication We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and signiﬁcant audit ﬁndings, including any signiﬁcant ﬁndings in internal control that we identify during our audit. In this respect we also submit an additional report to the audit committee of the supervisory board in accordance with Article 11 of the EU Regulation on speciﬁc requirements regarding statutory audit of public- interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report. We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the supervisory board, we determine the key audit matters: those matters that were of most signiﬁcance in the audit of the ﬁnancial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest. Amsterdam, 10 April 2024 Ernst & Young Accountants LLP signed by A.N.A. Drost 157 158 « 09 AT A GLANCE 09 09 AT A GLANCE AT A GLANCE ADDRESSES The ad pepper Group subsidiaries operate in the following countries: ad pepper media International N.V. France Spain Netherlands Group headquarters Nuremberg Webgains France SARL ad pepper media Spain S.A. Webgains B.V. Frankenstrasse 150 C 21 Boulevard Haussmann Avenida Alberto Alcocer 46A, 1ºA Concertgebouwplein 15 H, 90461 Nuremberg 75009 Paris 28016 Madrid 1071LL GERMANY FRANCE SPAIN Amsterdam NETHERLANDS Phone +49 (0) 911 929057-0 Webgains, S.L. Germany Avenida Alberto Alcocer 46A, 4ºB UK 28016 Madrid ad pepper media GmbH SPAIN Frankenstrasse 150 D Webgains Ltd 90461 Nuremberg 70 Colombo Street Italy GERMANY London SE1 8DP UNITED KINGDOM ad agents GmbH Webgains Italy S.r.l. Am Joachimsberg 10-12 Via San Giovanni Sul Muro, 18 Webgains Ltd 71083 Herrenberg 20121 Milan The Quorum GERMANY ITALY Bond Street South Bristol BS1 3AE Webgains GmbH UNITED KINGDOM Switzerland Frankenstrasse 150 C 90461 Nuremberg GERMANY ad agents AG Europaallee 41 Webgains GmbH 8021 Zürich Frauenstraße 17 SWITZERLAND 80469 München GERMANY ad agents AG Via Maistra 100 7504 Pontresina SWITZERLAND 161 162 09 09 AT A GLANCE AT A GLANCE DATES AND CONTACTS Contact for investors Disclaimer Dr Jens Körner (CEO) This Annual Report contains forward-looking statements which are ad pepper media International N.V. Company calendar based on current assumptions and assessments made by the manage- Frankenstrasse 150 C ment of ad pepper media International N.V. These statements are not 90461 Nuremberg All ﬁnancial and press data relevant for the capital market at a glance: to be understood as a guarantee that such expectations will in fact GERMANY materialise. Future developments and the results actually achieved by Phone: +49 (0) 911 929057-0 ad pepper media International N.V. and its afﬁliated companies depend Annual Report 2023 10 April 2024 Fax: +49 (0) 911 929057-157 upon a number of risks and uncertainties and may therefore deviate E-mail: [email protected] signiﬁcantly from the forward-looking statements. Several of these Annual General Meeting factors are beyond ad pepper media’s control and cannot be precisely (Amsterdam, The Netherlands) 18 June 2024 www.adpeppergroup.com estimated in advance, such as the future economic environment and Quarterly Report I/2024 24 May 2024 the actions of competitors and other market players. There are no plans Quarterly Report II/2024 16 August 2024 to update the forward-looking statements nor does ad pepper media Imprint International N.V. undertake any separate obligation to do so. Quarterly Report III/2024 19 November 2024 Editorial responsibility: Headquarters Nuremberg, Germany ad pepper media International N.V. Frankenstrasse 150 C 90461 Nuremberg GERMANY Phone: +49 (0) 911 929057-0 Fax: +49 (0) 911 929057-157 E-mail: [email protected] www.adpeppergroup.com Prime Standard, Frankfurt Stock Exchange Our 2023 Annual Report as well as the Interim Financial Reports for 2023 are available at www.adpeppergroup.com under: ISIN: NL0000238145 HRB Nuremberg 17591 Investor relations / Publications / Financial reports. VAT-ID-No.: DE 210757424 Board of Directors: Dr Jens Körner, CEO 163 164 « 10 GLOSSARY 10 10 GLOSSARY GLOSSARY GLOSSARY Afﬁliate: Display advertising: Website that adds banners/buttons/text links that link through to Delivery of ads to the target group, avoidance of waste coverage, and merchant sites, in order to earn commission based on leads/sales the efﬁcient management of digital advertising activities in accordance generated. with customer-deﬁned KPIs. Non-IFRS ﬁnancial measures Afﬁliate marketing: e-commerce: EBIT: Afﬁliate marketing is a form of internet advertising where-by online The electronic commerce describes every type of transaction on the Income before Interest and Tax. vendors (merchants) place advertising banners on partner websites internet. The most well-known type of e-commerce is online shopping, (afﬁliates) in order to reach more customers. Whenever a user clicks although it is much more than marketing and sales online; various EBITDA: on the banner and buys the product or carries out a pre-deﬁned action, online services, service and management of business transaction Income before Interest, Tax, Depreciation and Amortisation. the website operator who displayed the ad receives a commission. This processes are also part of e-commerce. commission is based on the sales rate of the products and services EBT: referred by the afﬁliate. Lead: Income before Tax. A successfully established contact between a product or service Afﬁliate network: provider and a potential customer. Equity ratio: Afﬁliate networks facilitate cooperation between merchants and Shareholders’ Equity/Total Assets. afﬁliates, act as providers of technological and/or other services who Lead generation: take over tracking and invoicing on behalf of afﬁliates and merchants. A successfully established contact between a product or service Gross sales: Also frequently known as afﬁliate platform. provider and a potential customer. A ‘qualiﬁed lead’ signiﬁes that the Gross sales represent the total amount billed and billable to clients customer has conﬁrmed interest, for example through registering for a by the Group, net of discounts, VAT and other sales-related taxes. Audience targeting: newsletter or submitting a contact form. Disclosure of gross sales information is not required under IFRS; Audience targeting is the ability to take your full audience of prospective however, it is voluntarily disclosed from 1 January 2018 onwards in the customers and segment it into groups based on different criteria, Performance marketing: Consolidated Income Statement since management has concluded that including online behavioural characteristics, demographics, interests, and Online marketing tools used to calculate success rates. Search engine the information is useful for users of the ﬁnancial statements. intent. Audience targeting helps more effectively deliver personalised marketing, afﬁliate marketing, and e-mail marketing all fall under and optimised experiences based on customer needs and interests. the category of performance marketing, as do banner ads, which are Liquid funds: delivered in a targeted manner with fees based on success rates (‘cost Cash & cash equivalents including listed debt securities. Cookie: per click,’ ‘cost per sale,’ ‘cost per lead’). Small text ﬁle used to enhance the user experience of websites by Media cost: Publisher: storing settings entered on site, for instance a country selection on an Media cost relate to payments made to suppliers of ad inventory entry page. Used on most programmes for tracking sales. Website operators are generally known as publishers. They play a (commonly referred to as media buys and publishers). Disclosure particular role in afﬁliate marketing. This is where the publishers take of media cost information is not required under IFRS; however, it is CPA: on the functions of distribution partners (afﬁliates). voluntarily disclosed from 1 January 2018 onwards in the Consolidated Cost per acquisition – a billing method whereby the advertising ganisation being subject to fraudulent activity. Income Statement as management has concluded that the information customer only pays for their online ad when a user carries out a is useful for users of the ﬁnancial statements. SEA: particular action that has been pre-deﬁned by the advertiser (user makes purchase or registers for a newsletter, for example). Also known Search Engine Advertising – Search engine marketing covers all as pay per action. marketing activities related to search engines. This includes paid Business terms keyword advertising, improved ranking within the search results, and CPC: afﬁliate marketing. Ad: Cost per click – billing unit for online advertising. Costs are calculated Short for advertisement in print or on TV or otherwise. SEO: according to the number of times a user clicks on an ad (website banner). Also known as pay per click. Includes all measures designed to feature websites as high as possible Ad spending: on the result pages of search engines. The amount of money spent on advertising for a product or activity. CPL: Cost per lead – fee per dataset. Also known as PPL (pay per lead). Advertiser: Advertisers/Merchants (providers and operators of the programme) CPM: advertise their products and services on the afﬁliates’ websites and Cost per mile – shows the costs per 1,000 ad views (see ad impression) pay them a commission on sales generated. for an advertising booking. 167 168 ad pepper media International N.V. Frankenstrasse 150 C 90461 Nuremberg GERMANY www.adpeppergroup.com www.adpeppergroup.com

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