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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from________to________
Commission File Number: 001-39748
PUBMATIC, INC.
(Exact name of registrant as specified in its charter)
Delaware20-5863224
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
Not applicableNot applicable
(Address of principal executive offices)(Zip Code)
Not applicable
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A common stock, $0.0001 par value per sharePUBMThe Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 5, 2024, the registrant had 39,474,129 shares of Class A common stock outstanding and 8,292,615 shares of Class B common stock outstanding.

TABLE OF CONTENTS
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PUBMATIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
September 30,
2024		December 31,
2023
(unaudited)
ASSETS
Current assets
Cash and cash equivalents$78,914 $78,509 
Marketable securities61,463 96,835 
Accounts receivable, net 376,790 375,468 
Prepaid expenses and other current assets12,640 11,143 
Total current assets529,807 561,955 
Property, equipment and software, net63,247 60,729 
Operating lease right-of-use assets34,440 21,102 
Acquisition-related intangible assets, net4,679 5,864 
Goodwill29,577 29,577 
Deferred tax assets24,711 13,880 
Other assets, non-current2,683 2,136 
TOTAL ASSETS$689,144 $695,243 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable$360,696 $347,673 
Accrued liabilities25,697 25,684 
Operating lease liabilities, current6,376 6,236 
Total current liabilities392,769 379,593 
Operating lease liabilities, non-current28,978 15,607 
Other liabilities, non-current4,196 3,844 
TOTAL LIABILITIES425,943 399,044 
Commitments and contingencies (Note 8)
Stockholders' equity
Preferred stock, $0.0001 par value per share, 10,000 shares authorized as of September 30, 2024 and December 31, 2023; No shares issued and outstanding as of September 30, 2024 and December 31, 2023
— — 
Common stock, $0.0001 par value per share; 1,000,000 Class A shares authorized as of September 30, 2024 and December 31, 2023; 47,618 shares issued and 40,006 shares outstanding as of September 30, 2024; 45,542 shares issued and 41,502 shares outstanding as of December 31, 2023; 1,000,000 Class B shares authorized as of September 30, 2024 and December 31, 2023; 11,428 shares issued and 8,287 shares outstanding as of September 30, 2024; 11,884 shares issued and 8,744 shares outstanding as of December 31, 2023
6 6 
Treasury stock, at cost; 10,753 and 7,180 shares as of September 30, 2024 and December 31, 2023, respectively
(136,275)(71,103)
Additional paid-in capital264,013 230,419 
Accumulated other comprehensive loss(29)(4)
Retained earnings135,486 136,881 
TOTAL STOCKHOLDERS’ EQUITY263,201 296,199 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$689,144 $695,243 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
PUBMATIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Revenue$71,786 $63,677 $205,754 $182,414 
Cost of revenue25,508 26,091 76,092 75,021 
Gross profit46,278 37,586 129,662 107,393 
Operating expenses:
Technology and development8,813 6,634 25,432 19,881 
Sales and marketing23,696 19,513 71,606 62,450 
General and administrative(1)
15,134 12,010 43,499 43,439 
Total operating expenses47,643 38,157 140,537 125,770 
Operating loss(1,365)(571)(10,875)(18,377)
Interest income1,969 2,246 6,873 6,313 
Other income (expense), net(930)210 3,356 (476)
Income (loss) before income taxes(326)1,885 (646)(12,540)
Provision for (benefit from) income taxes586 111 749 (2,719)
Net income (loss)$(912)$1,774 $(1,395)$(9,821)
Basic net income (loss) per share of Class A and Class B stock
$(0.02)$0.03 $(0.03)$(0.19)
Diluted net income (loss) per share of Class A and Class B stock
$(0.02)$0.03 $(0.03)$(0.19)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic49,056 51,638 49,623 52,132 
Diluted49,056 55,979 49,623 52,132 
(1)Amounts for the nine months ended September 30, 2023 include a provision for bad debt of $5.7 million relating to a Demand Side Platform (“DSP”) buyer of our platform that filed for Chapter 11 bankruptcy.
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
PUBMATIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net income (loss)$(912)$1,774 $(1,395)$(9,821)
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities, net of tax85 20 56 (3)
Net change in foreign currency translation adjustment(81)— (81)— 
Comprehensive income (loss)$(908)$1,794 $(1,420)$(9,824)
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
PUBMATIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Common StockTreasury
Stock		Additional
Paid-In Capital		Accumulated Other
Comprehensive Loss		Retained
Earnings		Total
Stockholders’ Equity
SharesAmount
Balance as of December 31, 202350,246 $6 $(71,103)$230,419 $(4)$136,881 $296,199 
Stock-based compensation— — — 9,821 — — 9,821 
Exercise of stock options298 — — 939 — — 939 
Repurchase of shares(895)— (15,754)— — — (15,754)
Issuance of common stock related to RSU vesting230 — — — — — — 
Other comprehensive loss— — — — (21)— (21)
Net loss— — — — — (2,454)(2,454)
Balance as of March 31, 202449,879 6 (86,857)241,179 (25)134,427 288,730 
Stock-based compensation— — — 10,490 — — 10,490 
Exercise of stock options94 — — 335 — — 335 
Repurchase of shares(883)— (20,240)— — — (20,240)
Issuance of common stock related to employee stock purchase plan102 — — 1,451 — — 1,451 
Issuance of common stock related to RSU vesting394 — — — — — — 
Other comprehensive loss— — — — (8)— (8)
Net income— — — — — 1,971 1,971 
Balance as of June 30, 202449,586 6 (107,097)253,455 (33)136,398 282,729 
Stock-based compensation— — — 10,254 — — 10,254 
Exercise of stock options143 — — 304 — — 304 
Repurchase of shares(1,795)— (29,178)— — — (29,178)
Issuance of common stock related to RSU vesting359 — — — — — — 
Other comprehensive income— — — — 4 — 4 
Net loss— — — — — (912)(912)
Balance as of September 30, 202448,293 $6 $(136,275)$264,013 $(29)$135,486 $263,201 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Common StockTreasury
Stock		Additional
Paid-In Capital		Accumulated Other
Comprehensive Income (Loss)		Retained
Earnings		Total
Stockholders’ Equity
SharesAmount
Balance as of December 31, 202252,705 $6 $(11,486)$195,677 $(9)$128,000 $312,188 
Stock-based compensation— — — 7,606 — — 7,606 
Exercise of stock options109 — — 314 — — 314 
Repurchase of shares(587)— (7,898)— — — (7,898)
Issuance of common stock related to RSU vesting96 — — — — — — 
Other comprehensive income— — — — 17 — 17 
Net loss— — — — — (5,871)(5,871)
Balance as of March 31, 202352,323 6 (19,384)203,597 8 122,129 306,356 
Stock-based compensation— — — 7,924 — — 7,924 
Exercise of stock options281 — — 623 — — 623 
Repurchase of shares
(999)— (15,582)— — — (15,582)
Issuance of common stock related to employee stock purchase plan65 — — 971 — — 971 
Issuance of common stock related to RSU vesting272 — — — — — — 
Other comprehensive loss— — — — (40)— (40)
Net loss— — — — — (5,724)(5,724)
Balance as of June 30, 202351,942 6 (34,966)213,115 (32)116,405 294,528 
Stock-based compensation— — — 7,817 — — 7,817 
Exercise of stock options78 — — 273 — — 273 
Repurchase of shares
(1,062)— (15,838)— — — (15,838)
Issuance of common stock related to RSU vesting250 — — — — — — 
Other comprehensive income— — — — 20 — 20 
Net income— — — — — 1,774 1,774 
Balance as of September 30, 202351,208 $6 $(50,804)$221,205 $(12)$118,179 $288,574 



The accompanying notes are an integral part of these condensed consolidated financial statements.
5
PUBMATIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
20242023
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss$(1,395)$(9,821)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization33,931 33,731 
Stock-based compensation28,267 21,525 
Provision for doubtful accounts— 5,675 
Deferred income taxes(10,831)(14,185)
Accretion of discount on marketable securities(3,552)(3,061)
Non-cash operating lease expense5,098 4,605 
Other(78)3 
Changes in operating assets and liabilities:
Accounts receivable(1,322)8,367 
Prepaid expenses and other assets(1,554)3,501 
Accounts payable8,841 4,141 
Accrued liabilities2,259 3,214 
Operating lease liabilities(4,741)(4,282)
Other liabilities, non-current 454 (966)
Net cash provided by operating activities55,377 52,447 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment(13,268)(5,424)
Capitalized software development costs(16,068)(13,725)
Purchases of marketable securities(117,977)(76,932)
Proceeds from sales of marketable securities— 18,873 
Proceeds from maturities of marketable securities156,958 69,500 
Net cash provided by (used in) investing activities9,645 (7,708)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of business combination indemnification claims holdback
(2,148)— 
Proceeds from issuance of common stock for employee stock purchase plan1,451 971 
Proceeds from exercise of stock options1,578 1,210 
Principal payments on finance lease obligations(98)(93)
Payments to acquire treasury stock(65,400)(41,479)
Net cash used in financing activities(64,617)(39,391)
NET INCREASE IN CASH AND CASH EQUIVALENTS405 5,348 
CASH AND CASH EQUIVALENTS - Beginning of period78,509 92,382 
CASH AND CASH EQUIVALENTS - End of period$78,914 $97,730 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid$10,332 $11,518 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Stock-based compensation capitalized as internal-use software costs$2,298 $1,822 
Property and equipment included in accounts payable and accrued liabilities$4,270 $1,229 
Capitalized software costs included in accounts payable and accrued liabilities$2,530 $2,287 
Business combination purchase consideration - indemnification claims holdback$— $2,148 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
PUBMATIC, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Organization and Description of Business
PubMatic, Inc. (together with its subsidiaries, the “Company” or “PubMatic”) was founded in 2006. The Company has offices worldwide. The Company provides a specialized cloud infrastructure platform that enables real-time programmatic advertising transactions. The purpose-built technology and infrastructure provides superior outcomes for both publishers and advertisers leveraging an efficient design, machine learning, and data processing capabilities, with customer alignment and global omnichannel reach.
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies
Fiscal Year
The Company’s fiscal year ends on December 31, and its fiscal quarters end on March 31, June 30, September 30, and December 31. References to fiscal year 2024, for example, refer to the fiscal year ending December 31, 2024.
Unaudited Interim Condensed Consolidated Financial Information
The unaudited condensed consolidated financial statements include the accounts of PubMatic, Inc. and its wholly owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2024 or for any other interim period or for any other future year. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on February 28, 2024 (the “Annual Report”).
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP. The accompanying condensed consolidated financial statements include the accounts of PubMatic, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses.
The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates and assumptions. Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after September 30, 2024 may result in actual outcomes that differ from those contemplated by the Company’s assumptions and estimates.
Concentration of Revenue and Accounts Receivable
The Company defines its revenue concentration based on revenue recognized from individual publishers. For the three months ended September 30, 2024 and 2023, no publisher represented more than 10% of the Company’s revenue. For the nine months ended September 30, 2024 and 2023, no publisher represented more than 10% of the Company’s revenue. As of September 30, 2024, two buyers accounted for 41% and 12%, respectively, of accounts receivable. As of December 31, 2023, three buyers accounted for 30%, 21%, and 14%, respectively, of accounts receivable.
7
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount, are unsecured, and do not bear interest. The allowance for credit losses is based on the best estimate of the amount of probable credit losses in existing accounts receivable. The allowance for credit losses is determined based on historical collection experience and the review in each period of the status of the then outstanding accounts receivable, while taking into consideration current customer information, collection history, and other relevant data. Account balances are written off against the allowance when the Company believes it is probable the receivable will not be recovered.
The following table presents the changes in the allowance for credit losses (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Allowance for credit losses, beginning balance$933 $14,845 $770 $1,765 
Increase in provision for expected credit losses———14,547
Write-offs——163(1,467)
Allowance for credit losses, ending balance$933 $14,845 $933 $14,845 
During the nine months ended September 30, 2023, the provision for expected credit losses associated with accounts receivable increased by $14.5 million relating to uncollectible receivables for a DSP buyer of the Company’s platform that filed for Chapter 11 bankruptcy on June 30, 2023. Of the total uncollectible receivables from the DSP buyer of $14.5 million, $8.8 million was subject to chargeback to publishers of the Company and recorded as contra payable to publishers related to expected recoveries. The result was $5.7 million of bad debt expense for the nine months ended September 30, 2023.
Recent Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 requires additional disclosures for segment reporting, including disclosure of the title and position of the Chief Operating Decision Maker and requires a public entity that has a single reportable segment to provide all the disclosures required by the amendments in ASU 2023-07, and all existing segment disclosures in Topic 280. ASU 2023-07 is effective for fiscal periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company plans to adopt ASU 2023-07 effective for the annual report on Form 10-K for the year ended December 31, 2024 and subsequent interim periods. Since ASU 2023-07 addresses only disclosures, the adoption of ASU 2023-07 is not expected to have a significant impact on the Company’s consolidated financial statements.
In December 2023, FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
8
Note 3 – Fair Value Measurements
The following tables set forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy (in thousands):
September 30, 2024
Level 1Level 2Level 3Total
Financial Assets
Money market funds$38,797 $— $— $38,797 
Certificates of deposit— 11,241 — 11,241 
Cash equivalents38,797 11,241 — 50,038 
Commercial paper— 41,520 — 41,520 
U.S. Treasury and government debt securities— 19,943 — 19,943 
Marketable securities— 61,463 — 61,463 
Total financial assets$38,797 $72,704 $— $111,501 
December 31, 2023
Level 1Level 2Level 3Total
Financial Assets
Money market funds$42,126 $— $— $42,126 
Certificates of deposit— 12,528 — 12,528 
Cash equivalents42,126 12,528 — 54,654 
Commercial paper— 50,962 — 50,962 
Agency debt securities— 2,995 — 2,995 
U.S. Treasury and government debt securities— 42,878 — 42,878 
Marketable securities— 96,835 — 96,835 
Total financial assets$42,126 $109,363 $— $151,489 
The Company’s financial assets consist of Level 1 and 2 assets. The Company had no Level 3 assets or liabilities for the periods presented. The Company classifies its cash equivalents and marketable securities within Level 1 or Level 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. The Company’s fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers. The valuation techniques used to measure the fair value of the Company’s marketable securities were derived from non-binding market consensus prices that are corroborated by observable market data and quoted market prices for similar instruments.
Note 4 – Balance Sheet Components
Marketable Securities
The following tables summarize the Company’s marketable securities by significant investment categories (in thousands):
September 30, 2024
Amortized CostUnrealized GainUnrealized LossFair Value
Commercial paper$41,474 $46 $— $41,520 
U.S. Treasury and government debt securities19,937 6 — 19,943 
Total$61,411 $52 $— $61,463 
December 31, 2023
Amortized CostUnrealized GainUnrealized LossFair Value
Commercial paper$50,975 $3 $(16)$50,962 
Agency debt securities2,997 — (2)2,995 
U.S. Treasury and government debt securities42,867 12 (1)42,878 
Total$96,839 $15 $(19)$96,835 
9
The remaining contractual maturity of all marketable securities was within one year as of September 30, 2024 and December 31, 2023. Realized gains and losses were not material for the nine months ended September 30, 2024 and 2023. As of September 30, 2024 and 2023, there were no securities that were in an unrealized loss position for more than twelve months.
Property, Equipment and Software, Net
Property, equipment and software, net consisted of the following (in thousands):
September 30,
2024		December 31,
2023
Internal-use software$74,186 $56,257 
Network hardware, computer equipment and software153,389 137,709 
Leasehold improvements5,526 5,173 
Furniture and fixtures2,339 2,304 
Property, equipment and software, gross235,440 201,443 
Less: accumulated depreciation and amortization(172,193)(140,714)
Total property, equipment and software, net$63,247 $60,729 
Depreciation and amortization expense related to property, equipment, and software (excluding amortization of internal-use software) was $6.1 million and $7.2 million for the three months ended September 30, 2024 and 2023, respectively, and $19.1 million and $21.8 million for the nine months ended September 30, 2024 and 2023, respectively.
The Company capitalized $6.1 million and $5.0 million in software development costs during the three months ended September 30, 2024 and 2023, respectively, and $17.9 million and $15.9 million for the nine months ended September 30, 2024 and 2023, respectively. Amortization expense of internal-use software was $4.9 million and $3.8 million during the three months ended September 30, 2024 and 2023, respectively, and $13.7 million and $9.9 million for the nine months ended September 30, 2024 and 2023, respectively. These costs are included within cost of revenue in the condensed consolidated statements of operations.
The Company did not recognize any impairment charges on its long-lived assets during the nine months ended September 30, 2024 and 2023, respectively.
Accounts Payable
Accounts payable consisted of the following (in thousands):
September 30,
2024		December 31,
2023
Payable to publishers$337,858 $335,061 
Trade and other payables22,838 12,612 
Total accounts payable$360,696 $347,673 
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
September 30,
2024		December 31,
2023
Accrued compensation$19,140 $18,784 
Accrued and other current liabilities6,557 6,900 
Total accrued liabilities$25,697 $25,684 
10
Note 5 – Senior Secured Credit Facilities Agreement
On October 17, 2022, the Company entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with the several lenders parties thereto (the “Lenders”), and Silicon Valley Bank (“SVB”), as administrative agent, lead arranger, issuing lender, and swingline lender. The Credit Agreement matures on October 17, 2027.
The Credit Agreement provides a revolving credit facility in an aggregate principal amount of $110.0 million (“the Revolving Credit Facility”), including a $25.0 million letter of credit sub-facility and a $25.0 million swingline sub-facility. The Company’s obligations under the Revolving Credit Facility and the letter of credit sub-facility (described in Note 8) with SVB are secured by substantially all of its assets excluding its intellectual property. The Company may, subject to certain customary conditions, on one or more occasions increase commitments under the Revolving Credit Facility in an amount not to exceed $90.0 million in the aggregate (the “Incremental Facility”). Each Lender will have discretion to determine whether it will participate in any Incremental Facility.
Borrowings under the Revolving Credit Facility will accrue interest at rates equal, at the Company’s election, to (i) the applicable secured overnight financing rate (“SOFR”), plus the applicable margin for such loans, or (ii) the alternate base rate (“ABR”), which is defined as the highest of (a) the prime rate in effect from time to time, (b) the federal funds effective rate in effect from time to time plus 0.50%, and (c) the adjusted term SOFR for a one (1) month tenor in effect from time to time plus 1.00%, plus the applicable margin for such loans. The applicable margin for borrowings bearing interest on the SOFR ranges from 2.00% to 2.75%, and the applicable margin for borrowings bearing interest based on the ABR ranges from 1.00% to 1.75%. As of September 30, 2024, the applicable interest rate under the revolving credit facility was 9.00%. The Company will pay a quarterly commitment fee during the term of the Credit Agreement for the non-use of available funds ranging from 0.25% to 0.35%. In addition, the Credit Agreement provides a mechanism to determine a successor reference rate to the applicable reference rate if, among other things, the applicable reference rate becomes unavailable or is generally replaced as a benchmark interest rate.
The Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants. Negative covenants include, among others, limitations on incurrence of indebtedness, liens, disposition of property and investments by the Company and its subsidiaries. In addition, the Credit Agreement requires the Company to maintain certain interest coverage, leverage and senior leverage ratios. To date, the Company is in compliance with the affirmative and negative covenants.
The Credit Agreement contains customary events of default. Upon the occurrence and during the continuance of an event of default, the Lenders may declare the outstanding advances and all other obligations under the Credit Agreement immediately due and payable.
The Company may use amounts borrowed under the Credit Agreement for general corporate purposes or working capital financing. The Company may borrow additional amounts under the Credit Agreement from time to time as opportunities and needs arise. As of September 30, 2024, the Company has not drawn down on the credit facility.
Following the SVB closure by the California Department of Financial Protection and Innovation on March 10, 2023, and its subsequent receivership by the Federal Deposit Insurance Corporation (“FDIC”), the FDIC announced that all of SVB’s deposits and substantially all of its assets had been transferred to a newly created, full-service FDIC-operated bridge bank, Silicon Valley Bridge Bank, N.A. (“SVBB”). On March 27, 2023, First Citizens Bank & Trust Company (“First Citizens”) acquired substantially all of the loans and certain other assets of the former SVB, and assumed all customer deposits and certain other liabilities of the former SVB. As such, First Citizen assumed SVB’s obligations under the Credit Agreement.
11
Note 6 – Leases
Operating lease cost is recognized on a straight-line basis over the lease term. Finance lease cost is recognized as a combination of the amortization expense for the right-of-use assets and interest expense for the outstanding lease liabilities, and results in a front-loaded expense pattern over the lease term. Short-term and variable lease costs are not material to the Company’s condensed consolidated financial statements.
In July 2024, the Company entered into an agreement to continue to lease approximately 30,000 square feet of office space located in New York City, New York (“July 2024 Lease”), which was previously subleased. The original sublease agreement for the space was set to expire in January 2025. The July 2024 Lease extends the lease term through January 2036 and grants the Company the right to use an additional floor in the building, also comprised of approximately 30,000 square feet, which has yet to commence. The Company will use the aggregate space to support its general and administrative functions, sales and marketing, technology and development, engineering and customer support. The Company has the option to exercise an early termination at either of two different points during the lease term, neither of which has been reflected in the lease term. The Company has provided an irrevocable letter of credit in the amount of approximately $1.5 million, pursuant to the terms of the July 2024 Lease.
During the nine months ended September 30, 2024, operating right-of-use assets obtained in exchange for new lease obligations was $18.3 million.
The components of lease cost were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Operating lease cost$2,115 $1,882 $6,162 $5,550 
Finance lease cost47 47 140 142 
Total lease cost$2,162 $1,929 $6,302 $5,692 
As of September 30, 2024, a weighted average discount rate of 4.38% and 2.24% has been applied to the remaining operating and finance lease payments, respectively, to calculate the lease liabilities included within the condensed consolidated balance sheets. The weighted average remaining lease term of operating and finance leases is 6.7 and 3.5 years, respectively, as of September 30, 2024.
As of September 30, 2024, the maturities of lease liabilities under operating and finance leases were as follows (in thousands):
Operating LeasesFinance LeasesTotal
Remainder of 2024$2,032 $36 $2,068 
20256,479 149 6,628 
20268,449 153 8,602 
20277,228 158 7,386 
20283,798 41 3,839 
Thereafter15,153 — 15,153 
Total minimum lease payments43,139 537 43,676 
Less: imputed interest(7,785)(20)(7,805)
Total present value of lease liabilities$35,354 $517 $35,871 

As of September 30, 2024, the Company has additional operating lease liabilities of $17.2 million from the July 2024 Lease that have not yet commenced, which are not reflected in the condensed consolidated balance sheets or the tables above.
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Note 7 - Acquisition-related Intangible Assets, Net
Acquisition-related Intangible Assets, Net
Acquisition-related intangible assets, net consisted of the following (in thousands):
September 30, 2024
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Developed technology$7,900 $3,221 $4,679 
Total acquisition-related intangible assets$7,900 $3,221 $4,679 
December 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Developed technology$7,900 $2,036 $5,864 
Customer relationships1,000 1,000 — 
Total acquisition-related intangible assets$8,900 $3,036 $5,864 
The weighted average remaining useful life of developed technology was 3 years as of September 30, 2024. Amortization expense related to acquisition-related intangibles was $0.4 million for the three months ended September 30, 2024 and 2023, and $1.2 million and $2.0 million for the nine months ended September 30, 2024 and 2023, respectively.
As of September 30, 2024, estimated future amortization expense for acquisition-related intangible assets was as follows (in thousands):
Remainder of 2024$395 
20251,580 
20261,580 
20271,124 
     Total estimated future amortization expense for acquisition-related intangible assets$4,679 
Note 8 – Commitments and Contingencies
Purchase Obligations
The Company’s purchase obligations primarily relate to minimum contractual payments due to data center providers. During the nine months ended September 30, 2024, there were no material changes to the Company’s non-cancelable purchase obligations disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Letters of Credit
Pursuant to the July 2024 Lease, the Company has provided an irrevocable letter of credit in the amount of approximately $1.5 million, and concurrently terminated the previous irrevocable line of credit related to the sublease of the premises of $0.5 million. Therefore, as of September 30, 2024, the Company had two irrevocable letters of credit outstanding related to non-cancelable facilities leases in the amounts of $3.5 million and $1.5 million, with annual automatic renewal and final expiration dates in July 2028 and April 2036, respectively. The letter of credit of $3.5 million was also outstanding as of December 31, 2023.
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Legal Matters
From time to time, the Company is or may be involved in various claims and other legal matters arising in the normal course of business. The Company records an accrual for a liability relating to claims and other legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Any such accruals are reviewed at least quarterly and adjusted for the impacts of negotiations, rulings, settlements, and other information or events pertaining to a particular matter, or on the advice of legal counsel. To date, the Company has not incurred a material loss, or a material loss in excess of a recorded accrual, with respect to any claims and other legal matters arising in the normal course of business. However, the outcomes of claims and other legal matters are inherently unpredictable and subject to significant uncertainties. If the Company subsequently concludes that there is a reasonable possibility that a loss exceeding amounts already recognized may be incurred, and the amount of such additional loss would be material, the Company will either disclose the estimated additional loss or state that such an estimate cannot be made.
Indemnification
In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves future claims that may be made against the Company but have not yet been made. To date, the Company has not paid any material claims or been required to defend any actions related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. In addition, the Company has indemnification agreements with certain of its directors and executive officers that require it, among other things, to indemnify them against certain liabilities that may arise due to their status or service as directors or officers of the Company. The terms of such obligations may vary.
Note 9 – Stockholders’ Equity and Equity Incentive Plans
Share Repurchases
In February 2023, the Company’s board of directors authorized the Company to repurchase up to $75 million of its Class A common stock (“2023 Repurchase Program”). In February 2024, the Company’s board of directors authorized the Company to repurchase up to an additional $100 million of its Class A common stock (“2024 Repurchase Program”) in addition to the $75 million previously authorized under the 2023 Repurchase Program. As of September 30, 2024, $50.9 million remains available for repurchases. Shares are repurchased in a manner deemed in the best interest of the Company and its stockholders, dependent upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices and other considerations.
During the three and nine months ended September 30, 2024, the Company repurchased 1,794,717 and 3,572,563 aggregate shares of Class A common stock for $29.0 million and $64.8 million, respectively.
Repurchases are executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, in accordance with Rule 10b-18 and/or Rule 10b5-1 of the Exchange Act. The 2023 Repurchase Program is scheduled to terminate on December 31, 2024, while the 2024 Repurchase Program is scheduled to terminate on December 31, 2025.
Equity Incentive Plans
The Company maintains the 2020 Equity Incentive Plan (“2020 Plan”), pursuant to which the Company may grant stock options, restricted stock awards, stock appreciation rights, restricted stock units (“RSUs”), deferred stock units (“DSUs”), performance awards, and stock bonus awards. As of September 30, 2024, the Company has reserved 5,529,727 shares of Class A common stock for the issuance of awards under the 2020 Plan. These available shares will increase automatically on January 1 for each of the first ten calendar years during the term of the 2020 Plan by the number of shares equal to the lesser of five percent (5%) of the aggregate number of outstanding shares of all classes of the Company’s common stock outstanding as of the immediately preceding December 31, or a number as may be determined by the Company’s board of directors or compensation committee. No new awards were issued under the Company’s prior 2006 Plan or 2017 Plan (“Prior Plans”) after the effective date of the 2020 Plan. To the extent outstanding awards under the 2006 Plan and the 2017 Plan are forfeited, expire unexercised, or would otherwise have been returned to the share reserve under the Prior Plans, the shares of Class B common stock subject to such awards instead will be available for future issuance as Class A common stock under the 2020 Plan.
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Stock Options
The following table summarizes stock option activity and related information under the Company’s equity incentive plans:
Stock Options
Number of Shares Underlying Outstanding Options
(in thousands)		Weighted-Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 20237,079 $9.02 5.78$67,418 
Options granted1,544 15.46 
Options exercised(535)2.95 
Options canceled(52)1.16 
Options expired(33)32.94 
Outstanding as of September 30, 20248,003 $10.62 5.99$52,151 
Vested and exercisable as of September 30, 20245,774 $8.39 4.90$52,003 
As of September 30, 2024, unrecognized stock-based compensation of $19.8 million related to unvested stock options will be recognized on a straight-line basis over a weighted average period of 2.64 years.
Restricted Stock Units
The following table summarizes RSU activity and related information under the Company’s 2020 Plan:
RSUs
Number of Shares
(in thousands)		Weighted-Average Grant Date Fair Value per Share
Unvested as of December 31, 20232,934 $19.49 
Granted2,330 16.55 
Vested(983)19.46 
Canceled or forfeited(288)18.00 
Unvested as of September 30, 20243,993 $17.88 
As of September 30, 2024, unrecognized stock-based compensation of $63.4 million related to unvested RSUs will be recognized on a straight-line basis over a weighted average period of 2.63 years.
2020 Employee Stock Purchase Plan
In November 2020, the Company’s board of directors adopted, and its stockholders approved, the 2020 Employee Stock Purchase Plan (“ESPP”).
The aggregate number of shares reserved for issuance under the ESPP increases automatically on January 1st of each of the first ten calendar years during the term of the ESPP by the number of shares equal to the lesser of (a) 1% of the total outstanding shares of all classes of the Company’s common stock as of the immediately preceding December 31, and (b) such number of shares of common stock as determined by the Company’s board of directors. The aggregate number of shares issued over the term of the ESPP may not exceed 7,500,000 shares of Class A common stock. As of September 30, 2024, the Company had reserved 1,847,439 shares of its Class A common stock for issuance under the ESPP.
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Under the ESPP, Class A common stock will be purchased for the accounts of employees participating in the ESPP on each purchase date at a price per share equal to 85% of the lesser of: (a) the fair market value on the offering date or (b) the fair market value on the purchase date. The ESPP provides for, at maximum, 27 month offering periods and each offering period may consist of one or more six-month purchase periods, whereby the latest offering period commenced on June 1, 2024, and the offering periods thereafter consist of two six-month purchase periods ending May 31, 2025. In August 2024, the compensation committee of the Company’s board of directors approved an overlapping twelve-month offering period consisting of two six-month purchase periods to commence on December 1, 2024. As of September 30, 2024, $0.7 million has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions and is included in accrued liabilities. For the nine months ended September 30, 2024 and 2023, 102,145 and 65,092 shares of our Class A common stock were purchased under the ESPP, respectively.
As of September 30, 2024, unrecognized stock-based compensation expense related to the ESPP was $0.8 million, which is expected to be recognized over a weighted-average period of 0.67 years.
Stock-Based Compensation
Total stock-based compensation expense recognized in the condensed consolidated statements of operations was as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Cost of revenue$486 $387 $1,417 $1,089 
Technology and development1,603 1,112 4,688 3,209 
Sales and marketing3,450 2,550 10,160 7,873 
General and administrative3,918 3,151 12,002 9,354 
Total stock-based compensation expense9,457 7,200 28,267 21,525 
Tax benefit from stock-based compensation(1,978)(1,397)(5,863)(4,105)
Total stock-based compensation expense, net of tax effect$7,479 $5,803 $22,404 $17,420 
Note 10 – Net Income (Loss) Per Share
The Company has two classes of common stock, Class A and Class B. Basic and diluted earnings per share (“EPS”) attributable to common stockholders for Class A and Class B common stock were the same because they were entitled to the same liquidation and dividend rights.
The following table sets forth the computation of the Company’s basic and diluted net income (loss) per share (in thousands, except per share data):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Numerator:
Net income (loss)$(912)$1,774 $(1,395)$(9,821)
Denominator:
Weighted average shares outstanding – basic49,056 51,638 49,623 52,132 
Options to purchase common stock— 4,000 — — 
Restricted stock— 222 — — 
Employee stock purchase plan shares— 119 — — 
Weighted average shares outstanding – diluted
49,056 55,979 49,623 52,132 
Net income (loss) per share – diluted
$(0.02)$0.03 $(0.03)$(0.19)
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The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Options to purchase common stock
3,7712,2693,2242,134
Unvested restricted stock units177669721,337
ESPP———50
Total common stock equivalents excluded from net loss per share – diluted
3,9482,9383,2963,521
Note 11 – Income Taxes
The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate (“AETR”) for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The Company has determined that since small changes in estimated “ordinary” income would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the fiscal nine months ended September 30, 2024. Therefore, the discrete effective tax rate method has been used to calculate taxes for the fiscal nine months ended September 30, 2024.
The Company recorded a provision for income taxes of $0.6 million and $0.1 million for the three months ended September 30, 2024 and 2023, respectively, and a provision for income taxes of $0.7 million and income tax benefit of $2.7 million for the nine months ended September 30, 2024 and 2023, respectively.
The effective income tax rate was (180)% and 6% for the three months ended September 30, 2024 and 2023, respectively, and (116)% and 22% for the nine months ended September 30, 2024 and 2023, respectively. The provision for income taxes for the nine months ended September 30, 2024 is related to tax benefits from foreign-derived intangible income, research tax credits, deductions for equity awards, partially offset by nondeductible stock-based compensation and Section 162(m) limitation on the tax deductibility of officers’ compensation.
Realization of the Company’s deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance, the Company considers its historical, as well as future projected, taxable income along with other objectively verifiable evidence. Objectively verifiable evidence includes the Company’s realization of tax attributes, assessment of tax credits, and utilization of net operating loss carryforwards during the year.
Note 12 – Segment Information
The following table presents total revenue by geographic area based on the publisher’s billing address (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
United States$43,613 $38,077 $124,004 $108,608 
EMEA19,935 19,686 60,413 57,345 
APAC6,883 4,655 17,684 13,117 
Rest of the world1,355 1,259 3,653 3,344 
Total$71,786 $63,677 $205,754 $182,414 
The following table presents long-lived assets, net, which consist primarily of property and equipment and operating lease right-of-use assets, by geographic area (in thousands):
September 30,
2024		December 31,
2023
United States$81,646 $68,299 
Rest of the world16,041 13,532 
Total$97,687 $81,831 
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Note 13 – 401(k) Plan
The Company has a 401(k) Savings Plan (the “401(k) Plan”) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, participating employees may elect to contribute up to 100% of their eligible compensation, subject to certain limitations. The 401(k) Plan provides for a discretionary employer matching contribution. The Company made $1.2 million and $1.0 million in matching contributions to the 401(k) Plan for the nine months ended September 30, 2024 and 2023, respectively.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally are identified by the words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” and similar expressions. Examples of forward-looking statements include, but are not limited to, statements we make regarding our ability to maintain our growth and profitability, our ability to attract and retain publishers, and our expectations concerning the advertising industry.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”).
Overview
We are an independent technology company seeking to maximize customer value by delivering digital advertising’s supply chain of the future.
Our technology platform empowers the world’s leading digital content creators (which we refer to as “publishers”) across the open internet to maximize monetization of their advertising inventory. Our platform also provides control and transparency to buyers, which includes advertisers, agencies, agency trading desks, and demand side platforms (“DSPs”), (which we collectively refer to as “buyers”) and enables both publishers and buyers to drive better business outcomes. Our infrastructure-driven approach allows for the efficient processing and utilization of data in real time. By delivering scalable and flexible programmatic innovation, we believe we improve outcomes for our customers while championing a vibrant and transparent digital advertising supply chain.
We continue to focus on the strengths that we believe provide us with long-term competitive advantages. These strengths include our global, omnichannel reach which targets a diverse set of publishers touching many ad formats and digital device types, including mobile app, mobile web, desktop, display, video, over-the-top video/connected TV (“OTT/CTV”), and rich media. Additionally, as an independent infrastructure provider prioritizing transparency, we can be more closely aligned with both publishers and buyers which has enabled us to build direct relationships with publishers, advertisers, agencies, and DSPs and create bespoke products that meet our customers’ needs. We have also maintained a demonstrated track record of stability and agility to address these market conditions and provide superior outcomes for both publishers and buyers. Finally, we have designed our technology to efficiently process real-time advertising transactions while leveraging data to optimize outcomes for publishers and buyers. We own and operate our software and hardware infrastructure globally, which saves significant infrastructure expenditures as compared to public cloud alternatives.
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Industry Trends and Macroeconomic Factors
The digital advertising ecosystem continues to evolve and adapt at a rapid pace. Some noted trends include the continued growth of digital media across multiple platforms, a continued increase in the number of ad impressions processed and analyzed in real-time by each participant in the digital advertising ecosystem, and a desire for transparency and control throughout the supply chain from both the buyers and publishers. Additionally, rapidly evolving data and privacy regulations and industry standards continue to impact our business. For example, in July 2024, Google announced it will no longer deprecate its use of third-party cookies in Chrome and instead ask users to opt-in or opt-out of cookies in Chrome, which may impact the industry’s anticipated shift to alternative identity solutions.
Additionally, recent interest rate increases, foreign currency fluctuation and persistent inflation in the U.S. and other markets globally continue to create economic volatility and dislocation in the capital and credit markets in the U.S. and globally. To date, we have not observed material impacts in our business or outlook, but we intend to continue to monitor macroeconomic conditions closely and may determine to take certain financial or operational actions in response to such conditions to the extent our business begins to be adversely impacted.
We believe we are positioned to benefit from tailwinds in the advertising industry, including the rapid proliferation of digital media, the need for purpose-built infrastructure to address the increasing complexity in the digital advertising landscape, and increasing consumer time spent online.
See “Risk Factors” in this report and in our Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion of the risks related to inflation, rising interest rates, foreign currency fluctuations and public health crises on our business.
Business Highlights
The table below summarizes the financial highlights of our business performance:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)
Revenue$71,786 $63,677 $205,754 $182,414 
Operating loss(2)
$(1,365)$(571)$(10,875)$(18,377)
Net income (loss)(2)
$(912)$1,774 $(1,395)$(9,821)
Adjusted EBITDA(1)(2)
$18,546 $18,240 $54,679 $36,403 
Net cash provided by operating activities(2)
$19,139 $23,845 $55,377 $52,447 
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(1)For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure, and a reconciliation of Adjusted EBITDA to net income, see “Non-GAAP Financial Measure.”
(2)Amounts for the nine months ended September 30, 2023 include a provision for bad debt of $5.7 million relating to a Demand Side Platform (“DSP”) buyer of our platform that filed for Chapter 11 bankruptcy.
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Our Strategy and Performance
We believe our growth and financial performance are dependent on many factors, including those described below.
Attract New Customers and Expand our Relationship with Existing Customers Globally
We leverage our extensive platform capabilities and the subject matter expertise of our team members to grow revenue from our publishers and increase advertising spending from our buyers. Our sales and marketing team includes customer success pods to enhance customer knowledge and implementation of best practices. Once we onboard a new customer, we seek to expand our relationship with existing publishers by establishing multiple header bidding integrations by leveraging our omnichannel capabilities to maximize our access to publishers’ ad formats and devices, and expanding into the various properties that a publisher may own around the world. We may also up-sell additional products to publisher customers including our header bidding management, identity, and audience solutions. We automate workflow processes whenever feasible to drive predictable and value-added outcomes for our customers and increase productivity of our organization.
Net dollar-based retention rate is an important indicator of publisher satisfaction and usage of our platform, as well as potential revenue for future periods. We calculate our net dollar-based retention rate at the end of each quarter for a cumulative twelve months. We calculate our net dollar-based retention rate by starting with the revenue from publishers in the prior trailing twelve-month period (“Prior Period Revenue”). We then calculate the revenue from these same publishers in the current trailing twelve-month period (“Current Period Revenue”). Current Period Revenue includes any upsells and is net of contraction or attrition, but excludes revenue from new publishers.
Our net dollar-based retention rate equals the Current Period Revenue divided by Prior Period Revenue. Our net dollar-based retention rate was 112% for the trailing twelve months ended September 30, 2024 and 97% for the trailing twelve months ended September 30, 2023. Our revenue growth in the period ended September 30, 2024 and 2023 was primarily attributable to an increase in the number of ad impressions processed from our publishers, upselling additional products, penetration of header bidding for mobile app and digital video, and increased demand from the growth of our buyer relationships primarily through SPO agreements.
Further, we work with DSPs to help them reduce their costs and improve advertiser ROI, which in turn makes us the specialized cloud infrastructure platform of choice for many of our buying partners. We depend upon a limited number of large DSPs for a large percentage of impressions purchased and our business results, including revenues, may be impacted by changes in their pricing strategies, bidding algorithms or go-to market efforts. As buyers increasingly consolidate their spending with fewer larger technology platforms, we seek to bring an increased proportion of their digital ad spending to our platform through direct deals. Supply Path Optimization (“SPO”) continues to be a major growth driver for us as we add new SPO relationships and expand existing ones. We have been investing in SPO technology and partnerships for five years and SPO represented over 50% of total activity for the three months ended September 30, 2024.
Monetization Excellence
We focus on monetizing digital impressions by coordinating over a hundred billion real-time auctions and nearly a trillion bids globally on a daily basis, using our specialized cloud software, machine learning algorithms, and scaled transaction infrastructure. Valuable ad impressions are transparent and data rich, viewable by humans, and verifiable. Each ad impression we auction consists of 631 independent data parameters, which can yield valuable insights if recorded and analyzed properly. This processing of voluminous data for each ad impression must occur in less than half a second as consumers expect a seamless digital ad experience. We continually assess impressions from new and existing publishers through a rigorous validation process. We add or remove impressions from our platform based on an assessment of the projected value of the impressions, which is influenced by the type of publisher and its related consumers, as well as the potential volume of monetizable impressions and ad format types, such as digital video. We continuously create and iterate algorithms that leverage vast datasets flowing through our infrastructure to improve the liquidity in our marketplace. Our ability to drive successful outcomes in the real-time auction process on behalf of our publishers and buyers will affect our operating results.
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Infrastructure Platform Efficiency
We have a track record of expanding the capacity of our infrastructure platform, while maintaining or reducing the corresponding costs related to processing impressions transacted on our platform on a per impression basis. We expect to continue to invest in both software and hardware infrastructure to continue growing the number of valuable ad impressions we process on our platform.
Our recent growth has been driven by a variety of factors including increased access to mobile web (display and video) and mobile app (display and video) impressions and desktop video impressions. Our performance is affected by our ability to maintain and grow our access to valuable ad impressions from current publishers as well as through new relationships with publishers. In September 2024, our platform processed approximately 781 billion ad impressions daily, each in a fraction of a second.
Key Components of Our Results of Operations
Revenue
We generate revenue from publishers who use our platform. We generate revenue primarily through fees charged to our publishers, which are generally a percentage of the value of the advertising impressions that publishers monetize on the platform. We also generate revenues from our other products such as OpenWrap, our header bidding solution, and Connect, our solution that provides additional data and insights to buyers, which are sold separate from or in conjunction with use of our platform. In 2023, we launched Activate, which allows buyers to execute direct deals on our platform with publisher inventory, and Convert, our commerce media solution.
We report revenue on a net basis. This represents gross billings to buyers, net of amounts we pay publishers. We record our accounts receivable at the amount of gross billings to buyers, net of allowances, for the amounts we are responsible to collect, and we record our accounts payable at the net amount payable to publishers. Accordingly, both accounts receivable and accounts payable appear large in relation to revenue, which is reported on a net basis.
Cost of Revenue
Cost of revenue consists of data center co-location costs, depreciation expense related to hardware supporting our platform, amortization expense related to capitalized internal-use software development costs, personnel costs, and allocated facilities costs. Personnel costs include salaries, bonuses, stock-based compensation, and employee benefit costs, and are primarily attributable to our cloud operations group, which maintains our servers, and our client operations group, which is responsible for the integration of new publishers and buyers and providing customer support for existing customers.
Operating Expenses
Technology and Development. Technology and development expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs, allocated facilities costs, and professional services. These expenses include costs incurred in the development, implementation and maintenance of internal-use software, including platform and related infrastructure. We expend technology and development costs as incurred, except to the extent that such costs are associated with internal-use software development that qualifies for capitalization. We expect technology and development expenses to generally increase in absolute dollars in future periods.
Sales and Marketing. Sales and marketing expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs, for our employees engaged in sales, sales support, marketing, business development, and customer relationship functions. Sales and marketing expenses also include expenses related to promotional, advertising and marketing activities, allocated facilities costs, travel, and entertainment primarily related to sales activity and professional services. We expect sales and marketing expenses to increase in absolute dollars in future periods.
General and Administrative. General and administrative expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs for our executive, finance, legal, human resources, information technology, and other administrative employees. General and administrative expenses also include outside consulting, legal and accounting services, allocated facilities costs, and travel and entertainment primarily related to inter-office travel and conferences.
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Total Other Income (expense), Net
Total other income (expense), net consists of interest income and other income (expense), net. Interest income is generated by investing excess cash into money market accounts and marketable securities. Other income (expense), net consists primarily of gains and losses from foreign currency exchange transactions.
We believe that investment gains and losses, whether realized from dispositions or unrealized from changes in market prices of equity securities, are generally meaningless in understanding our reported results or evaluating the economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.
Provision for (benefit from) Income Taxes
The provision for (benefit from) income taxes consists primarily of federal, state, and foreign income taxes. Our provision for income taxes or income tax benefit may be significantly affected by changes to our estimates for tax in jurisdictions in which we operate and other estimates utilized in determining the global effective tax rate. Actual results may also differ from our estimates based on changes in economic conditions. Such changes could have a substantial impact on the income tax provision. We reevaluate the judgments surrounding our estimates and make adjustments, as appropriate, each reporting period.
Our effective tax rate differs from the U.S. federal statutory income tax rate due to state taxes, foreign tax rate differences, research tax credits, and stock-based compensation.
Realization of our deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance, we consider our historical, as well as future projected, taxable income along with other objectively verifiable evidence. Objectively verifiable evidence includes our realization of tax attributes, assessment of tax credits, and utilization of net operating loss carryforwards during the year.
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Results of Operations
The following tables set forth our condensed consolidated results of operations data and such data as a percentage of revenue for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)(in thousands)
Revenue$71,786 $63,677 $205,754 $182,414 
Cost of revenue(2)
25,508 26,091 76,092 75,021 
Gross profit46,278 37,586 129,662 107,393 
Operating expenses(2):
 
Technology and development8,813 6,634 25,432 19,881 
Sales and marketing23,696 19,513 71,606 62,450 
General and administrative(1)
15,134 12,010 43,499 43,439 
Total operating expenses47,643 38,157 140,537 125,770 
Operating loss(1,365)(571)(10,875)(18,377)
Interest income1,969 2,246 6,873 6,313 
Other income (expense), net(930)210 3,356 (476)
Income (loss) before income taxes(326)1,885 (646)(12,540)
Provision for (benefit from) income taxes586 111 749 (2,719)
Net income (loss)$(912)$1,774 $(1,395)$(9,821)
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(1)Amounts for the nine months ended September 30, 2023 include a provision for bad debt of $5.7 million relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy.
(2)Amounts include stock-based compensation expense before tax benefit as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)(in thousands)
Cost of revenue$486 $387 $1,417 $1,089 
Technology and development1,603 1,112 4,688 3,209 
Sales and marketing3,450 2,550 10,160 7,873 
General and administrative3,918 3,151 12,002 9,354 
Total stock-based compensation expense$9,457 $7,200 $28,267 $21,525 
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Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(as percentage of revenue)(as percentage of revenue)
Revenue100 %100 %100 %100 %
Cost of revenue36 41 37 41 
Gross profit64 59 63 59 
Operating expenses: