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| | 72,617 | | | 64,118 | |
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| 196,850 | | | $ | 171,364 | | | $ | 178,790 | |
Adjusted EBITDA increased by $25.5 million during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to increases in revenue, described above, which were partially offset by increases in expenses to support this revenue growth. Refer to discussion in section "Comparison of the Years Ended December 31, 2024, 2023, and 2022."
Adjusted EBITDA decreased by $7.4 million during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to increases in expenses being greater than increases in revenue. Refer to discussion in section "Comparison of the Years Ended December 31, 2024, 2023, and 2022."
Liquidity and Capital Resources
Liquidity
At December 31, 2024, we had cash and cash equivalents of $483.2 million, of which $54.4 million was held in foreign currency denominated cash accounts, and an aggregate gross principal amount of $568.2 million of indebtedness outstanding under our 2024 Term Loan B Facility (as defined below) and our Convertible Senior Notes (as defined below). In addition, we were party to a $175.0 million 2024 Revolving Credit Facility (as defined below), of which approximately $5.2 million was assigned to outstanding but undrawn letters of credit. See "Capital Resources" below for further information about our outstanding debt.
Our principal cash requirements for the twelve-month period following this report primarily consists of personnel costs, contractual payment obligations, including office leases, data center costs and cloud hosting costs, capital expenditures, payment of interest and required principal payments on our Convertible Senior Notes and our 2024 Term Loan B Facility, cash outlays for income taxes, and cash requirements to fund working capital. In the longer term, we would expect to have similar cash requirements, with increases in absolute dollars associated with the continued growth of our business and expansion of operations. See "Contractual Obligations and Known Future Cash Requirements" for a further discussion of our known material contractual obligations.
On February 1, 2024, the Board of Directors approved a new repurchase plan (the "February 2024 Repurchase Plan"), which fully replaced the prior repurchase plan, pursuant to which we are authorized to repurchase common stock or Convertible Senior Notes, with an aggregate market value of up to $125.0 million, through February 1, 2026. During the year ended December 31, 2024, we repurchased 1,160,496 shares of the Company's common stock for an aggregate amount of $14.6 million. As of December 31, 2024, $110.4 million remains available under the February 2024 Repurchase Plan.
Our working capital needs and cash conversion cycle, which is influenced by seasonality and by the mix of terms among our buyers and sellers and which may be negatively impacted as a result of pandemics, inflationary, recessionary and other macroeconomic challenges, can have large fluctuations due to the timing of receipts from buyers and timing of disbursements to sellers. In addition, in the event a buyer defaults on payment, we may still be required to pay sellers for the inventory purchased. The impacts from changes in working capital and capital expenditures can significantly impact our cash flows and therefore, our liquidity during any period presented.
We have historically relied upon cash and cash equivalents, cash generated from operations, borrowings under credit facilities and issuance of debt for our liquidity needs. Our ability to meet our cash requirements depends on, among other things, our operating performance, competitive developments, and financial market conditions, all of which are significantly affected by business, financial, economic, political, global health-related and other factors, many of which we may not be able to control or influence.
We believe our existing cash and cash equivalents, cash generated from operating activities, and amounts available to borrow under our 2024 Revolving Credit Facility will be sufficient to meet our liquidity requirements for at least the next twelve months from the issuance of our financial statements. However, there are multiple factors that could impact our cash balances in the future, including the factors described above with respect to working capital and cash conversion cycles, as well as the duration and severity of events beyond our control, macroeconomic factors and other factors set forth in Part I, Item 1A: "Risk Factors" of this Annual Report on Form 10-K.
Capital Resources
In March 2021, we sold convertible senior notes ("Convertible Senior Notes") for gross proceeds of $400.0 million. The Convertible Senior Notes are senior, unsecured obligations with interest payable semi-annually in cash at a rate of 0.25% per annum in arrears on March 15 and September 15. The Convertible Senior Notes will mature on March 15, 2026, unless earlier converted, redeemed, or repurchased. The initial conversion rate is 15.6539 shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $63.88 per share of the Company’s common stock and is subject to adjustment as described in the Offering Memorandum. At December 31, 2024, the balance of the Convertible Senior Notes was $203.6 million, net of unamortized debt issuance costs of $1.4 million.
In conjunction with the issuance of the Convertible Senior Notes, we entered into capped call transactions to reduce the Company's exposure to additional cash payments above principal balances in the event of a cash conversion of the Convertible Senior Notes. The Company may owe additional cash or shares to the holders of the Convertible Senior Notes upon early conversion if our stock price exceeds $91.260 per share, which is subject to certain adjustments.
On February 6, 2024, we entered into a credit agreement (the “2024 Credit Agreement”) with Morgan Stanley Senior Funding, Inc. as our term loan administrative agent and Citibank, N.A. as our revolving facility administrative agent and collateral agent, and other lender parties thereto. The 2024 Credit Agreement provided for a $365.0 million seven-year senior secured term loan facility (the "2024 Term Loan B Facility") and a $175.0 million five-year senior secured revolving credit facility (the "2024 Revolving Credit Facility"). The proceeds from the 2024 Term Loan B Facility were used, among other things, to terminate and to repay in full the outstanding facilities under the prior credit agreement entered into in April 2021 (the "2021 Credit Agreement"), which included a term loan facility (the "2021 Term Loan B Facility") and a revolving facility (the "2021 Revolving Credit Facility").
On September 18, 2024, we entered into Amendment No. 1 to the 2024 Credit Agreement ("Amendment No. 1"), which reduced the interest rate of the 2024 Term Loan B Facility by 75 basis points to Term SOFR plus a margin of 3.75% from the previous rate of Term SOFR plus a margin of 4.50%. The remaining terms of the 2024 Term Loan B Facility and the 2024 Revolving Credit Facility were substantially unchanged.
At December 31, 2024, the balance of the 2024 Term Loan B Facility was $350.1 million, net of unamortized debt discount and debt issuance costs of $13.1 million, and amounts available under the 2024 Revolving Credit Facility were $169.8 million, net of letters of credit outstanding in the amount of $5.2 million.
In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders may be diluted. If we raise additional financing by incurring indebtedness, we will be subject to increased fixed payment obligations and could also be subject to financial maintenance covenants, or restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. An inability to raise additional capital could adversely affect our ability to achieve our business objectives.
Our cash and cash equivalents balance is affected by our results of operations, the timing of capital expenditures, and by changes in our working capital, particularly changes in accounts receivable and accounts payable. The timing of cash receipts from buyers and payments to sellers can significantly impact our cash flows from operating activities and our liquidity for, and within, any period presented. Our collection and payment cycle can vary from period to period depending upon various circumstances,
including seasonality, and may be negatively impacted by certain macroeconomic challenges, such as capital market disruptions and instability of financial institutions.
Cash Flows
The following table summarizes our cash flows for the periods presented:
| | | | | | | | | | | | | | | | | |
| Year Ended |
| December 31, 2024 | | December 31, 2023 | | December 31, 2022 |
| (in thousands) |
| Cash flows provided by operating activities | $ | 235,201 | | | $ | 214,367 | | | $ | 192,550 | |
| Cash flows used in investing activities | (47,502) | | | (37,383) | | | (65,152) | |
Cash flows used in financing activities | (28,904) | | | (177,842) | | | (30,172) | |
| Effects of exchange rate changes on cash, cash equivalents and restricted cash | (1,794) | | | 575 | | | (1,417) | |
| Change in cash, cash equivalents and restricted cash | $ | 157,001 | | | $ | (283) | | | $ | 95,809 | |
Operating Activities
Our cash flows from operating activities are primarily driven by revenue generated by our business, offset by the cash costs of operations, and are significantly influenced by the timing of and fluctuations in receipts from buyers and related payments to sellers. Our future cash flows will be diminished if we cannot increase our revenue levels and manage costs appropriately.
During the year ended December 31, 2024, net cash provided by operating activities was $235.2 million, compared to net cash provided by operating activities of $214.4 million and $192.6 million during the years ended December 31, 2023 and 2022, respectively. Our operating activities included net income of $22.8 million, net loss of $159.2 million, and net loss of $130.3 million for the years ended December 31, 2024, 2023, and 2022, respectively. Non-cash adjustments of $135.8 million, $298.1 million, and $282.4 million increased cash provided by operating activities in 2024, 2023, and 2022 respectively. Net changes in our working capital also resulted in increases of $76.6 million, $75.5 million, and $40.4 million in cash provided by operating activities in 2024, 2023, and 2022 respectively. The net changes in working capital for all periods presented are primarily due to the timing of cash receipts from buyers and the timing of payments to sellers.
Investing Activities
Our primary investing activities have consisted of acquisitions of businesses, purchases of property and equipment, and capital expenditures in support of creating and enhancing our technology infrastructure. Purchases of property and equipment and investments in internal use software development may vary from period-to-period due to the timing of the expansion of our operations, changes to headcount, and the cycles of our internal use software development.
During the year ended December 31, 2024, net cash used in investing activities was $47.5 million, compared to net cash used in investing activities of $37.4 million and $65.2 million during the years ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2024, 2023, and 2022, we used cash for purchases of property and equipment of $32.8 million, $26.8 million, and $30.8 million, respectively, and used cash for investments in our internally developed software of $14.3 million, $10.6 million, and $13.6 million, respectively. During the year ended December 31, 2022, we used net cash of $20.8 million to acquire Carbon.
Financing Activities
Our financing activities consisted of our debt refinancing and repricing activities, Convertible Senior Notes transactions, repayment of amounts borrowed under our 2024 Term Loan B Facility and our 2021 Term Loan B Facility, and transactions related to our share repurchases and equity plans.
During the year ended December 31, 2024, net cash used in financing activities was $28.9 million, compared to net cash used in financing activities of $177.8 million and $30.2 million for the years ended December 31, 2023 and 2022, respectively. Cash outflows from financing activities for the year ended December 31, 2024 primarily included $403.1 million of payments related to paying off our 2021 Term Loan B Facility in February 2024 and repricing our 2024 Term Loan B Facility in September 2024, $22.5 million for taxes paid related to net share settlement of stock-based awards, $14.6 million of payments related to share repurchases, and $4.5 million of payments related to debt issuance costs related to the issuance of our 2024 Term Loan B Facility and 2024 Revolver Facility in February 2024. The outflows were partially offset by cash proceeds primarily consisting of $413.5 million from the issuance of our 2024 Term Loan B Facility, net of debt discount, and the repricing of our 2024 Term Loan B Facility in September 2024, and cash proceeds from the employee stock purchase plan of $3.6 million. In connection with the September 2024 repricing, most lenders decided to roll their loan balances over from the original 2024 Term Loan B Facility to the amended 2024 Term Loan B Facility, while some decided to cash out and reassign their loan balances. On September 18, 2024, $312.0 million of the 2024 Term Loan B Facility principal balance was rolled over as part of non-cash financing activities while the remaining lenders who were repaid and then had their loans reissued were included in the $403.1 million cash outflows and the $413.5 million cash proceeds mentioned above.
Cash outflows from financing activities for the year ended December 31, 2023 primarily included $165.5 million of payments related to repurchasing our Convertible Senior Notes, $11.8 million for taxes paid related to net share settlement of stock-based awards, $3.6 million for repayment of our 2021 Term Loan B Facility, and $2.3 million for payment of our indemnification claims holdback related to a historical acquisition. These outflows for the year ended December 31, 2023 were partially offset by cash proceeds from issuance of common stock under our employee stock purchase plan of $3.5 million and from stock options exercised of $2.2 million. Cash outflows from financing activities for the year ended December 31, 2022 included $15.7 million for payments related to share repurchases, $14.5 million for taxes paid related to net share settlement of stock-based awards, and $3.6 million for repayment of our 2021 Term Loan B Facility. These outflows for the year ended December 31, 2022 were partially offset by cash proceeds from issuance of common stock under our employee stock purchase plan of $3.7 million and from stock options exercised of $2.2 million.
Contractual Obligations and Known Future Cash Requirements
Our principal commitments as of December 31, 2024 consist of obligations under our Convertible Senior Notes, 2024 Term Loan B Facility, 2024 Revolving Credit Facility, leases for our various office facilities, including our corporate headquarters in New York, New York and offices in Los Angeles, California, and operating lease agreements, including data centers and cloud hosting services that expire at various times through 2033. In certain cases, the terms of the lease agreements provide for rental payments on a graduated basis.
The following table summarizes our future lease obligations, payments of principal and interest under our debt agreements and other future payments due under non-cancelable agreements at December 31, 2024:
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| 2025 | | 2026 | | 2027 | | 2028 | | 2029 | | Thereafter | | Total |
| (in thousands) |
Lease liabilities associated with leases included right-of-use assets as of December 31, 2024 | $ | 18,722 | | | $ | 14,650 | | | $ | 9,024 | | | $ | 6,648 | | | $ | 6,434 | | | $ | 7,331 | | | $ | 62,809 | |
Obligations for leases not included in lease liabilities as of December 31, 2024 | 3,926 | | | 4,817 | | | 4,888 | | | 5,526 | | | 5,748 | | | 964 | | | 25,869 | |
| Convertible Senior Notes | — | | | 205,067 | | | — | | | — | | | — | | | — | | | 205,067 | |
| Interest, Convertible Senior Notes | 513 | | | 256 | | | — | | | — | | | — | | | — | | | 769 | |
2024 Term Loan B Facility (1) | 3,641 | | | 3,641 | | | 3,641 | | | 3,641 | | | 3,641 | | | 344,972 | | | 363,177 | |
Interest, 2024 Term Loan B Facility (2) | 29,738 | | | 29,440 | | | 29,140 | | | 28,920 | | | 28,542 | | | 31,087 | | | 176,867 | |
Contractual fees related to the 2024 Term Loan B Facility and the 2024 Revolving Credit Facility (3) | 687 | | | 687 | | | 687 | | | 687 | | | 102 | | | 38 | | | 2,888 | |
| Other non-cancelable obligations | 6,585 | | | 5,198 | | | 4,315 | | | 241 | | | — | | | — | | | 16,339 | |
| Total | $ | 63,812 | | | $ | 263,756 | | | $ | 51,695 | | | $ | 45,663 | | | $ | 44,467 | | | $ | 384,392 | | | $ | 853,785 | |
(1) Includes only customary scheduled loan amortization payments and excludes currently unknown prepayment amounts that may be required, per terms of the 2024 Credit Agreement after the end of each fiscal year. |
(2) Interest payments are based on an assumed rate of 8.11%, which was the rate as of December 31, 2024 for the associated 2024 Term Loan B Facility. |
(3) Includes estimated fees based on current available amounts under our 2024 Revolving Credit Facility and using the current commitment rate as of December 31, 2024, fees based on outstanding but undrawn letters of credit as of December 31, 2024, and fees owed to our administrative agents for both facilities under the 2024 Credit Agreement. |
Obligations for leases not included in the lease liabilities as of December 31, 2024 include commitments under agreements for office space and data centers that have not commenced as of December 31, 2024.
Payments associated with our Convertible Senior Notes, 2024 Term Loan B, and 2024 Revolving Credit Facility are based on contractual terms and intended timing of repayments of long-term debt and associated interest and required fees.
Other non-cancelable obligations above consist of agreements in the normal course of business that are in excess of one year as of December 31, 2024.
In addition, the amounts above exclude commitments due within a year for a cloud-managed services agreement, under which the Company has a remaining non-cancelable minimum spend commitment from January 2025 to June 2025 of $15.9 million.
In the ordinary course of business, we enter into agreements with sellers, buyers, and other third parties pursuant to which we agree to indemnify buyers, sellers, vendors, lessors, business partners, lenders, stockholders, and other parties with respect to certain matters, including, but not limited to, losses resulting from claims of intellectual property infringement, damages to property or persons, business losses, or other liabilities. Generally, these indemnity and defense obligations relate to our own business operations, obligations, and acts or omissions. However, under some circumstances, we agree to indemnify and defend contract counterparties against losses resulting from their own business operations, obligations, and acts or omissions, or the business operations, obligations, and acts or omissions of third parties. These indemnity provisions generally survive termination or expiration of the agreements in which they appear. In addition, we have entered into indemnification agreements with our directors, executive officers and certain other officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No demands for indemnification have been made as of December 31, 2024.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the following assumptions and estimates have the greatest potential impact on our consolidated financial statements: (i) the determination of revenue recognition as net versus gross in our revenue arrangements and (ii) the determination of amounts to capitalize and the estimated useful lives of internal-use software development costs. There have been no significant changes in our accounting policies or estimates from those disclosed in our audited consolidated financial statements and notes thereto for the years ended December 31, 2024, 2023 and 2022.
We believe that the accounting policies disclosed below include estimates and assumptions critical to our business and their application could have a material impact on our consolidated financial statements. In addition to these critical policies, our significant accounting policies are included within Note 2 of our "Notes to Consolidated Financial Statements" within this Annual Report on Form 10-K.
Revenue Recognition
We generate revenue from transactions where we provide a platform for the purchase and sale of digital advertising inventory. Generally, our revenue is based on a percentage of the ad spend that runs through our platform, although for certain clients, services, or transaction types we may receive a fixed CPM for each impression sold, and for advertising campaigns that are transacted through insertion orders, we earn revenue based on the full amount of ad spend that runs through our platform. In addition, we may receive certain fixed monthly fees for the use of our platform or products. Our platform dynamically connects sellers and buyers of advertising inventory in a digital marketplace. Our solution incorporates proprietary machine-learning algorithms, sophisticated data processing, high-volume storage, detailed analytics capabilities, and a distributed infrastructure. Digital advertising inventory is created when consumers access sellers’ content. Sellers provide digital advertising inventory to our platform in the form of advertising requests, or ad requests. When we receive ad requests from sellers, we send bid requests to buyers, which enable buyers to bid on sellers’ digital advertising inventory. Winning bids can create advertising, or paid impressions, for the seller to present to the consumer.
The total volume of spending between buyers and sellers on our platform is referred to as advertising spend. We keep a percentage of that advertising spend as a fee, and remit the remainder to the seller. The fee that we retain from the gross advertising spend on our platform is recognized as revenue. The fee earned on each transaction is based on the pre-existing agreement we have with the seller and the clearing price of the winning bid. We recognize revenue upon fulfillment of our performance obligation to a client, which occurs at the point in time an ad renders and is counted as a paid impression, subject to a contract existing with the client and a fixed or determinable transaction price. Performance obligations for all transactions are satisfied, and the corresponding revenue is recognized, at a distinct point in time. We consider the following when determining if a contract exists (i) contract approval by all parties, (ii) identification of each party’s rights regarding the goods or services to be transferred, (iii) specified payment terms, (iv) commercial substance of the contract, and (v) collectability of substantially all of the consideration is probable.
The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in the transaction. In determining whether we are acting as the principal or an agent, we followed the accounting guidance for principal-agent considerations. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative.
For the majority of transactions on our platform, we report revenue on a net basis as we do not act as the principal in the purchase and sale of digital advertising inventory because we do not have control of the digital advertising inventory and do not set prices agreed upon within the auction marketplace. However, with respect to certain revenue streams for managed advertising campaigns that are transacted through insertion orders, we report revenue on a gross basis, based primarily on our determination that we act as the primary obligor in the delivery of advertising campaigns for buyers with respect to such transactions.
Internal Use Software Development Costs
We capitalize certain internal use software development costs associated with creating and enhancing internally developed software related to our technology infrastructure. These costs include personnel and related employee benefits expenses for employees who are directly associated with and who devote time to software projects, and external direct costs of materials and services consumed in developing or obtaining the software. Software development costs that do not meet the qualification for capitalization, as further discussed below, are expensed as incurred and recorded in technology and development expenses in the results of operations.
Software development activities generally consist of three stages, (i) the planning stage, (ii) the application and infrastructure development stage, and (iii) the post implementation stage. Costs incurred in the planning and post implementation stages of software development, including costs associated with the post-configuration training and repairs and maintenance of the developed technologies, are expensed as incurred. We capitalize costs associated with software developed for internal use when the planning stage is completed, management has authorized further funding for the completion of the project, and it is probable that the project will be completed and perform as intended. Costs incurred in the application and infrastructure development stages, including significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete and the software and technologies are ready for their intended purpose. There is judgment involved in estimating the stage of
development as well as estimating time allocated to a particular project. A significant change in the time spent on each project could have a material impact on the amount capitalized and related amortization expense in subsequent periods.
We amortize internal use software development costs using a straight-line method over a three year estimated useful life, commencing when the software is ready for its intended use. The straight-line recognition method approximates the manner in which the expected benefit will be derived. We determined the life of internal use software based on historical software upgrades and replacement.
On an ongoing basis, we assess if the estimated remaining useful lives of capitalized projects continue to be reasonable based on the remaining expected benefit and usage. If the remaining useful life of a capitalized project is revised, it is accounted for as a change in estimate and the remaining unamortized cost of the underlying asset is amortized prospectively over the updated remaining useful life. We also evaluate internal use software for abandonment and consider that along with other quantitative and qualitative factors as indicators for potential impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
Recently Issued Accounting Pronouncements
The information set forth under Note 2 to our "Notes to Consolidated Financial Statements" under the caption "Organization and Summary of Significant Accounting Policies" is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
We have operations both in the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks include primarily interest rate, foreign exchange, and inflation risks. The risks below may be further exacerbated by the effects of certain global macroeconomic challenges and market conditions.
Interest Rate Fluctuation Risk
Our cash and cash equivalents consist of cash and money market funds, but may from time to time also include other money market instruments such as commercial paper or U.S. treasury bills, with original maturities of three months or less. Our investments may consist of repurchase agreements, U.S. government agency debt, and U.S. treasury debt. The primary objective of our investment activities is to preserve the value of our cash without significantly increasing risk. Because our cash, cash equivalents, and investments have a short maturity, our portfolio’s fair value is relatively insensitive to interest rate changes, however, interest income earned will vary as interest rates change.
We do not have economic interest rate expense exposure on our Convertible Senior Notes due to their fixed interest rate nature. The amount paid upon redemption or maturity, before considering any potential additional amount owed due to increases in our underlying share price above the conversion price, is not based on changes in any interest rate index or underlying market interest rates. It is fixed at 100% of the principal amount of the Convertible Senior Notes plus unpaid interest. Since the Convertible Senior Notes bear a fixed interest rate, we are not exposed to interest rate risk on those notes, however, the fair value of those notes will change as market interest rates change.
Our 2024 Term Loan B Facility bears a floating rate of interest that resets periodically, subject to a 0% floor on that floating rate, according to the terms of the agreement (the "SOFR Floor"). Our financial results have been exposed to changes in the underlying base interest rate on that debt because the underlying base interest rate resets above the floor on such underlying interest rate. The fair value of the 2024 Term Loan B Facility may fluctuate when the underlying base interest rate fluctuates below the floor or when the rate of return demanded by our loan investors changes relative to when the loans were issued. As of December 31, 2024, the Company had no outstanding borrowings under the 2024 Revolving Credit Facility. Should the company borrow under the 2024 Revolving Credit Facility at any point in the future, any associated borrowings would have a floating underlying base rate of interest that would expose the Company to interest rate risk.
We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. The annualized impact to interest expense for each 100 basis points increase above the SOFR Floor on our 2024 Term Loan B Facility is approximately $3.6 million. The actual impact to our financial results of the same increase in interest rates is expected to be lower depending on the timing and magnitude of such rate changes relative to our SOFR Floor, and will be partially offset by higher interest income earned on our cash and cash equivalent balances over the same period. In future periods, we will continue to evaluate our investment opportunities and policy relative to our overall objectives.
With regard to all debt currently outstanding, the Company is potentially exposed to refinancing risk in the future, should the Company seek to refinance its debt or raise new debt. As such, the type, cost, and terms of any new debt potentially raised in the future may differ from that of our existing debt agreements.
Foreign Currency Exchange Risk
As a U.S. based company that does business around the globe, we have foreign currency risks related to our revenue and expenses denominated in currencies other than the U.S. Dollar, principally the Australian Dollar, British Pound, Canadian Dollar,
Euro, Japanese Yen, and New Zealand Dollar. Foreign exchange rate volatility is influenced by many factors that we cannot forecast with reliable accuracy. In the event our non-U.S. Dollar denominated revenue and expenses increase, or the volatility of the foreign currencies that we transact in increases, our operating results may be more greatly affected by fluctuations in the exchange rates of those foreign currencies. In addition, we have experienced and will continue to experience fluctuations in our net income (loss) as a result of transaction gains and losses related to translating certain cash balances, trade accounts receivable and payable balances and intercompany balances that are denominated in currencies other than the U.S. Dollar. The effect of an immediate 10% adverse change in foreign exchange rates on foreign currency-denominated monetary assets and liabilities at December 31, 2024 and December 31, 2023, including intercompany balances, would result in a foreign currency loss of approximately $10.8 million and $9.5 million, respectively. At this time we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk.
Inflation Risk
We do not believe that cost inflation has had a material effect on our business, financial condition, or results of operations. If our costs were to become subject to significant inflationary pressures, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations. This risk of cost inflation is distinct from the risk that inflation throughout the broader economy could lead to reduced ad spend and indirectly harm our business, financial condition, and results of operations. For a discussion of the indirect results of inflation on our business, see "Macroeconomic Developments."
Item 8. Financial Statements and Supplementary Data
MAGNITE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Report of Independent Registered Public Accounting Firm (PCAOB ID No. ) | |
| Consolidated Financial Statements: | |
| Consolidated Balance Sheets | |
| Consolidated Statements of Operations | |
Consolidated Statements of Comprehensive Income (Loss) | |
| Consolidated Statements of Stockholders' Equity | |
| Consolidated Statements of Cash Flows | |
| Notes to Consolidated Financial Statements | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Magnite, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Magnite, Inc. and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue — Refer to Notes 2 and 4 to the financial statements.
Critical Audit Matter Description
The Company generates revenue from transactions where it provides a platform for the purchase and sale of digital advertising inventory. The Company uses automated systems to process and record revenue based on contractual terms with buyers and publishers, and its revenue is comprised of a significant volume of low-dollar transactions.
We identified revenue as a critical audit matter because the Company’s systems to process and record revenue are highly automated. This required increased extent of effort, including the need for us to involve professionals with expertise in Information Technology (IT) to identify, test, and evaluate the Company’s systems, software applications, and automated controls.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s systems to process revenue transactions included the following, among others:
•With the assistance of our IT specialists, we:
◦Identified the significant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls.
◦Performed testing of system interface controls and automated controls within the relevant revenue streams, as well as controls designed to ensure the accuracy and completeness of revenue.
◦Independently created test transactions and traced such transactions through the systems to final output for financial reporting.
•We tested internal controls within the relevant revenue business processes, including those in place to reconcile the various systems to the Company’s general ledger.
•We evaluated recorded revenue and revenue trends and used data analytics to analyze transactional revenue data.
•We used technology-based data analysis tools to inspect journal entries to:
◦Identify significant relationships in the revenue population.
◦Sufficiently understand identified significant relationships and related accounts affecting revenue.
•We performed audit procedures on those related accounts determined to have a significant relationship with revenue. Such procedures included:
◦For a sample of accounts receivable balances, evaluating responses to confirmations sent to customers or other evidence such as cash receipts received after year end.
◦For a sample of accounts payable – seller balances, performing detail transaction testing by agreeing the amounts recognized to source documents.
◦For a sample of cash disbursements made after year end, evaluating whether the amounts were appropriately included in accounts payable – seller as of the balance sheet date.
◦Analytical procedures on the accounts payable – seller balance by developing an independent expectation for the recorded balance based on a historical relationship with revenue.
/s/
February 26, 2025
We have served as the Company's auditor since 2018.
MAGNITE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
| | | | | | | | | | | |
| December 31, 2024 | | December 31, 2023 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | | | | $ | | |
|
| Accounts receivable, net | | | |
| Prepaid expenses and other current assets | | | |
TOTAL CURRENT ASSETS | | | |
| Property and equipment, net | | | |
| Right-of-use lease assets | | | |
| Internal use software development costs, net | | | |
| Intangible assets, net | | | |
| Goodwill | | | | |
| Other assets, non-current | | | | | |
TOTAL ASSETS | $ | | | | $ | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | |
| Current liabilities: | | | |
Accounts payable and accrued expenses | $ | | | | $ | | |
Lease liabilities, current | | | |
| Debt, current | | | |
| Other current liabilities | | | |
TOTAL CURRENT LIABILITIES | | | |
| | | |
| Debt, non-current, net of debt issuance costs | | | |
| Lease liabilities, non-current | | | |
|
Other liabilities, non-current | | | |
TOTAL LIABILITIES | | | |
| Commitments and contingencies (Note 16) |
| |
|
| STOCKHOLDERS' EQUITY | | | |
Preferred stock, $ par value, shares authorized at December 31, 2024 and December 31, 2023; shares issued and outstanding at December 31, 2024 and December 31, 2023 | | | |
Common stock, $ par value; shares authorized at December 31, 2024 and December 31, 2023; and shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively | | | | | |
| Additional paid-in capital | | | |
| Accumulated other comprehensive loss | () | | | () | |
|
|
|
|
) )
|
|
|
| | | | | | |
))| | | | $ | () | | | $ | () | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
MAGNITE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional
Paid-In
Capital | | Accumulated Other
Comprehensive
Income (Loss) | | Accumulated
Deficit | | Treasury Stock | | Total
Stockholders’
Equity |
| Shares | | Amount | | | Shares | | Amount |
Balance at December 31, 2021 | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | () | | | $ | () | | | $ | | |
Exercise of common stock options | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| | | | | | | | | | | | |
| Issuance of common stock related to employee stock purchase plan | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| Issuance of common stock related to RSU vesting | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Shares withheld related to net share settlement | () | | | — | | | () | | | — | | | — | | | — | | | — | | | () | |
| Purchase of treasury stock | — | | | — | | | — | | | — | | | — | | | () | | | () | | | () | |
Retirement of common stock | () | | | — | | | () | | | — | | | — | | | | | | | | | | |
Stock-based compensation | — | | | — | | | | | | — | | | — | | | — | | | — | | | | |
Other comprehensive loss | — | | | — | | | — | | | () | | | — | | | — | | | — | | | () | |
Net loss | — | | | — | | | — | | | — | | | () | | | — | | | — | | | () | |
Balance at December 31, 2022 | | | | | | | | | | () | | | () | | | | | | | | | | |
Exercise of common stock options | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| | | | | | | | | | | | |
Issuance of common stock related to employee stock purchase plan | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
Issuance of common stock related to RSU and PSU vesting | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Shares withheld related to net share settlement | () | | | — | | | () | | | — | | | — | | | — | | | — | | | () | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Stock-based compensation | — | | | — | | | | | | — | | | — | | | — | | | — | | | | |
Other comprehensive income | — | | | — | | | — | | | | | | — | | | — | | | — | | | | |
Net loss | — | | | — | | | — | | | — | | | () | | | — | | | — | | | () | |
| Balance at December 31, 2023 | | | | | | | | | | () | | | () | | | | | | | | | | |
| Exercise of common stock options | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
| | | | | | | | | | | | |
| Issuance of common stock related to employee stock purchase plan | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
Issuance of common stock related to RSU vesting | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Shares withheld related to net share settlement | () | | | — | | | () | | | — | | | — | | | — | | | — | | | () | |
| Purchase of treasury stock | — | | | — | | | — | | | — | | | — | | | () | | | () | | | () | |
| Retirement of common stock | () | | | — | | | () | | | — | | | — | | | | | | | | | | |
| Stock-based compensation | — | | | — | | | | | | — | | | — | | | — | | | — | | | | |
Other comprehensive loss | — | | | — | | | — | | | () | | | — | | | — | | | — | | | () | |
Net income | — | | | — | | | — | | | — | | | | | | — | | | — | | | | |
| Balance at December 31, 2024 | |
| $ | | |
| $ | | |
| $ | () | |
| $ | () | | | $ | | | | $ | | |
| $ | | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
MAGNITE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | | | | | | | |
| Year Ended |
| December 31, 2024 | | December 31, 2023 | | December 31, 2022 |
| OPERATING ACTIVITIES: | | | | | |
| Net income (loss) | $ | | | | $ | () | | | $ | () | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | | | | | | | | |
| Stock-based compensation | | | | | | | | |
| Impairment of intangible assets | | | | | | | | |
| | |
(Gain) loss on extinguishment of debt | | | | () | | | | |
| | |
Provision for (recovery of) doubtful accounts | | | | | | | () | |
| Amortization of debt discount and issuance costs | | | | | | | | |
| | |
| Non-cash lease expense | () | | | () | | | | |
| Deferred income taxes | | | | () | | | () | |
Unrealized foreign currency (gain) loss, net | () | | | | | | () | |
| Other items, net | | | | | | | () | |
| Changes in operating assets and liabilities, net of effect of business acquisitions: | | | | | |
| Accounts receivable | () | | | () | | | () | |
| Prepaid expenses and other assets | | | | | | | () | |
| Accounts payable and accrued expenses | | | | | | | | |
| Other liabilities | | | | () | | | () | |
Net cash provided by operating activities | | | | | | | | |
| INVESTING ACTIVITIES: | | | | | |
| Purchases of property and equipment | () | | | () | | | () | |
| Capitalized internal use software development costs | () | | | () | | | () | |
Other investing activities | () | | | | | | | |
Mergers and acquisitions, net of indemnification claims holdback | | | | | | | () | |
| | |
| | |
| | |
Net cash used in investing activities | () | | | () | | | () | |
| FINANCING ACTIVITIES: | | | | | |
| | |
| Proceeds from the Term Loan B Facility refinancing and repricing activities, net of debt discount | | | | | | | | |
| Repayment of the Term Loan B Facility from refinancing and repricing activities | () | | | | | | | |
| | |
| Payment for debt issuance costs | () | | | | | | | |
Repayment of debt | () | | | () | | | () | |
Repurchase of Convertible Senior Notes | | | | () | | | | |
| Proceeds from exercise of stock options | | | | | | | | |
| Proceeds from issuance of common stock under employee stock purchase plan | | | | | | | | |
| Taxes paid related to net share settlement | () | | | () | | | () | |
| Purchase of treasury stock | () | | | | | | () | |
Repayment of finance leases | | | | () | | | () | |
| Payment of indemnification claims holdback | | | | () | | | () | |
Net cash used in financing activities | () | | | () | | | () | |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH | () | | | | | | () | |
| CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | | | | () | | | | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period | | | | | | | | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period | $ | | | | $ | | | | $ | | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
MAGNITE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)
(In thousands)
| | | | | | | | | | | | | | | | | |
| Year Ended |
| December 31, 2024 | | December 31, 2023 | | December 31, 2022 |
| RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO CONSOLIDATED BALANCE SHEETS: | | | | | |
| Cash and cash equivalents | $ | | | | $ | | | | $ | | |
| Restricted cash included in prepaid expenses and other current assets | | | | | | | | |
| | |
| Total cash, cash equivalents and restricted cash | $ | | | | $ | | | | $ | | |
| | | | | |
| SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: | | | | | |
| Cash paid for income taxes | $ | | | | $ | | | | $ | | |
| Cash paid for interest | $ | | | | $ | | | | $ | | |
Capitalized assets financed by accounts payable and accrued expenses and other liabilities | $ | | | | $ | | | | $ | | |
| Capitalized stock-based compensation | $ | | | | $ | | | | $ | | |
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | $ | | | | $ | | | | $ | | |
Operating lease right-of-use assets reduction and corresponding adjustment to operating lease liabilities from lease terminations | | | | $ | | | | $ | | |
| Purchase consideration - indemnification claims holdback | $ | | | | $ | | | | $ | | |
| Non-cash financing activity related to Amendment No. 1 to the 2024 Credit Agreement | $ | | | | $ | | | | $ | | |
| | |
| | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
MAGNITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—
Note 2—
operating segment and reportable segment. The Company’s chief operating decision maker is the Chief Executive Officer ("CEO"). The Company has one primary business activity, where it provides a platform to all of its customers, buyers and sellers, that automates the purchase and sale of digital advertising inventory globally, across all channels, formats, and auction types, as described above in Note 1—Nature of Operations. The Company’s chief operating decision maker reviews financial information on a consolidated basis, principally to make decisions about how to allocate resources and to measure the Company’s performance. The chief operating decision maker reviews consolidated net income (loss), which is the measure of financial profit and loss most closely aligned with generally accepted accounting principles. The chief operating decision maker considers budget-to-actual variances for this measure, predominantly in the annual budget, forecasting process, and quarterly results assessment. The chief operating decision maker does not review any balance sheet information at any other level than on a consolidated basis and does not review any income statement information at any other level than on a consolidated basis with the exception of revenue by geography and by channel. Refer to Note 4—Revenues. The significant expense information regularly provided to the chief operating decision maker is the same as that included in the face of the Company's consolidated income statement of operations.
to effective January 1, 2024. The change in estimated useful lives were due to actual and expected longer refresh cycles for these assets. Based on the carrying value of network hardware assets as of December 31, 2023 and those placed in service during the year ended December 31, 2024, the effect of this change in estimate was an increase in income from operations of $ million for the year ended December 31, 2024 and an increase in net income of $ million, or $ per basic and diluted share for the year ended December 31, 2024. The updated policy reflecting the change in estimated useful lives is below.
Expenses
The Company classifies its expenses into the following categories:
. The fair value of awards containing market conditions is estimated using a Monte-Carlo simulation model. For service condition awards, stock-based compensation expense is recognized on a straight-line basis over the requisite service periods of the awards, which is generally . For performance condition and market condition awards, stock-based compensation expense is recognized using a graded vesting model over the requisite service period of the awards. For market condition awards, expense recognized is not subsequently reversed if the market conditions are not achieved. The Company accounts for forfeitures when they occur.
The assumptions and estimates used in the Black-Scholes pricing model are as follows:
Fair Value of Common Stock. The fair value of common stock is based on the closing price of the Company's common stock as reported on the Nasdaq on the grant date.
Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes option-pricing model on the yields of U.S. Treasury securities with maturities appropriate for the term of stock option awards.
Expected Term. For employee stock options the expected term is determined based on historical trends. The expected term of employee stock options that contain performance conditions represents the weighted-average period that the stock options are estimated to remain outstanding.
Volatility. The computation of the expected volatility assumption is based on the historical volatility of the Company’s common stock.
Dividend Yield. The dividend yield assumption is based on the Company’s history and current expectations of dividend payouts. The Company has never declared or paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future, so the Company used an expected dividend yield of .
Determining the fair value of stock-based awards with performance and market conditions requires judgment. The Company's use of the Monte-Carlo simulation model requires the input of subjective assumptions, such as the expected term of the award, the expected volatility of the price of the Company’s common stock, risk-free interest rates, the expected dividend yield of the Company’s common stock, in addition for those awards containing market conditions, which also include expected volatilities of selected peer companies, and expected correlation coefficients of the Company and those of the selected peer companies. The assumptions used in the Company’s valuation model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future.
shares of common stock and shares of preferred stock. The Company has issued common stock, which is included in outstanding common stock on the Company's consolidated balance sheets. From time to time, the Company has repurchased shares of common stock, which has been recorded as treasury stock on the Company's consolidated balance sheets. All treasury stock has been subsequently retired. The Company has not issued any shares of its preferred stock subsequent to the Company's initial public offering ("IPO") and does not have any preferred stock outstanding. The Company is required to reserve and keep available out of its authorized but unissued shares of common stock such number of shares sufficient to affect the conversion of all shares granted and available for grant under the Company’s stock award plans. The number of shares of the Company's stock reserved for these purposes at December 31, 2024 was .
The board of directors is authorized to establish, from time to time, the number of shares to be included in each series of preferred stock, and to fix the designation, powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each series of preferred stock, and any of its qualifications, limitations or restrictions.
to | Furniture, fixtures and office equipment | to |
| Leasehold improvements | Shorter of useful life or life of lease |
Purchased software | |
Repair and maintenance costs are charged to expense as incurred, while renewals and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the Company’s results of operations.
, commencing when the software is ready for its intended use. The straight-line recognition method approximates the manner in which the expected benefit will be derived. On an ongoing basis, the Company assesses the remaining estimated useful lives of internal use software projects. If remaining useful lives are revised, the change is accounted for as a change in estimate. The Company does not transfer ownership of its software, or lease its software, to third parties.
| In-process research and development | to |
| Customer relationships | to |
| Non-compete agreements | to |
| Other intangible assets | to |
At December 31, 2024, two buyers accounted for % and %, respectively, of consolidated accounts receivable, net. At December 31, 2023, two buyers accounted for % and %, respectively, of accounts receivable, net.
The Company recognizes revenue from its contracts with sellers. No seller of advertising inventory accounted for 10% or more of revenue during the years ended December 31, 2024, 2023, and 2022.
At December 31, 2024, one seller of advertising inventory accounted for % of accounts payable and accrued expenses and at December 31, 2023, one seller of advertising inventory accounted for % of accounts payable and accrued expenses.
Note 3—
| | $ | () | | | $ | () | | | | | |
| | | |
Weighted-average common shares outstanding used to compute basic net income (loss) per share | | | | | | |
| Basic net income (loss) per share | | $ | | | | $ | () | | | $ | () | |
| | | | | | |
| Diluted Income (Loss) Per Share: | | | | | | |
| | | |
| | | |
| | | |
Net income (loss) used to calculate diluted income (loss) per share | | $ | | | | $ | () | | | $ | () | |
| | | | | | |
Denominator: | | | | | | |
Weighted-average common shares used to compute basic net income (loss) per share | | | | | | | | | |
| Dilutive effect of weighted-average restricted stock units | | | | | | | | | |
| Dilutive effect of weighted-average common stock options | | | | | | | | | |
| Dilutive effect of weighted-average performance stock units | | | | | | | | | |
| Dilutive effect of weighted-average ESPP shares | | | | | | | | | |
| | | |
| Weighted-average shares used to compute diluted net income (loss) per share | | | | | | | | | |
| Diluted net income (loss) per share | | $ | | | | $ | () | | | $ | () | |
| | | | | | | |
| | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | |
|
|
|
During the year ended December 31, 2024, the Company wrote off $ million of allowance for doubtful accounts, of which $ million was attributable to the outstanding accounts receivable from a buyer that filed for bankruptcy during 2023.
million was partially offset by increases of contra seller payables related to recoveries of uncollected buyer receivables, which resulted in an immaterial amount of bad debt expense. During the year ended December 31, 2023, the increase in the provision for expected credit losses associated with accounts receivable of $ million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $ million, which resulted in $ million of bad debt expense. The increase in the provision for expected credit losses was primarily attributed to one buyer filing for bankruptcy, resulting in $ million of bad debt expense during the year ended December 31, 2023. During the year ended December 31, 2022, the decrease in the provision for expected credit losses associated with accounts receivable of $ million was offset by decreases of contra seller payables related to recoveries of uncollected buyer receivables of $ million, which resulted in an immaterial amount of bad debt recoveries.
Note 5—
| | $ | | | | $ | | | | $ | | |
| | | | |
| | | | | The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Total | | Quoted Prices in
Active Markets for
Identical Assets
(Level 1) | | Significant Other
Observable Inputs
(Level 2) | | Significant
Unobservable Inputs
(Level 3) |
| (in thousands) |
Cash equivalents | $ | | | | $ | | | | $ | | | | $ | | |
| | | | |
| | | | |
At December 31, 2024 and 2023, cash equivalents of $ million and $ million, respectively, consisted of money market funds, with original maturities of three months or less. The carrying amounts of cash equivalents are classified as Level 1 or Level 2 depending on whether or not their fair values are based on quoted market prices for identical securities that are traded in an active market.
At December 31, 2024, the Company had debt outstanding under its Convertible Senior Notes and loans under its 2024 Term Loan B Facility (as defined in Note 17) and at December 31, 2023, had debt outstanding under its Convertible Senior Notes and loans under its 2021 Term Loan B Facility (as defined in Note 17) included in its balance sheets. The estimated fair value of the Company's Convertible Senior Notes was $ million and $ million, as of December 31, 2024 and 2023, respectively. The estimated fair value of Convertible Senior Notes is based on market rates and the closing trading price of the Convertible Senior Notes as of December 31, 2024 and 2023 and is classified as Level 2 in the fair value hierarchy. At December 31, 2024 and 2023, the estimated fair value of the Company's 2024 Term Loan B Facility and of the Company's 2021 Term Loan B Facility was $ million and $ million, respectively. The estimated fair value is based on borrowing rates currently available to the Company for financing with similar terms and is classified as Level 2 in the fair value hierarchy.
Note 6—
| | $ | | |
| Furniture, fixtures and office equipment | | | | | |
| Leasehold improvements | | | | | |
Purchased software | | | | | |
| Gross property and equipment | | | | | |
| Accumulated depreciation | () | | | () | |
| Net property and equipment | $ | | | | $ | | |
Depreciation expense related to property and equipment totaled $ million, $ million, and $ million for the years ended December 31, 2024, 2023, and 2022, respectively. See Note 2 for information related to the change in estimated useful lives of network hardware assets.
| | $ | | | | International | | | | | |
| Total | $ | | | | $ | | |
Note 7—
| | $ | | | | Accumulated amortization | | () | | | () | |
| Internal use software development costs, net | | $ | | | | $ | | |
During the years ended December 31, 2024, 2023, and 2022, the Company capitalized $ million, $ million, and $ million, respectively, of internal use software development costs. Amortization expense was $ million, $ million, and $ million for the years ended December 31, 2024, 2023, and 2022, respectively.
Based on the Company’s internal use software development costs at December 31, 2024, excluding projects that are not ready for their intended use with a value of $ million, estimated amortization expense of $ million, $ million, and $ million is expected to be recognized in 2025, 2026, and 2027, respectively.
Note 8—
million. The Company's qualitative assessment for impairment in the fourth quarter of 2024 did not indicate that it is more likely than not that the fair value of its goodwill is less than the aggregate carrying amount.
| | $ | | | Customer relationships | | | | | |
| In-process research and development | | | | | |
|
Other intangible assets | | | | | |
Non-compete agreements | | | | | |
|
Total identifiable intangible assets, gross | | | | | |
Accumulated amortization—intangible assets: | | | |
Developed technology | () | | | () | |
Customer relationships | () | | | () | |
| In-process research and development | () | | | () | |
|
Other intangible assets | () | | | () | |
Non-compete agreements | | | | () | |
|
Total accumulated amortization—intangible assets | () | | | () | |
Total identifiable intangible assets, net | $ | | | | $ | | |
Amortization of intangible assets for the years ended December 31, 2024, 2023, and 2022 was $ million, $ million, and $ million, respectively. During the year ended December 31, 2022, the Company abandoned certain in-process research and development projects and technology intangible assets. The abandonment resulted in $ million of impairment costs, which was included in merger, acquisition, and restructuring costs in the consolidated statements of operations.
| | 2026 | | |
| 2027 | | |
| 2028 | | |
| 2029 | | |
| Thereafter | | |
| Total | $ | | |
Note 9—
million in cash. Approximately $ million of the purchase price was held back to cover possible indemnification claims, which was subsequently paid out in February 2023. The Company acquired Carbon as part of its strategy to further invest in the development and enhancement of industry leading identity and audience solutions. The allocation of purchase consideration resulted in an estimated $ million of developed technology intangible assets with an estimated useful life of , $ million non-compete intangible assets with an estimated useful life of , $ million of customer relationships with an estimated useful life of , and goodwill of $ million, which is attributable to the workforce of Carbon and
Note 10—
| | $ | | | | Accounts payable—trade | | | | | |
| Accrued employee-related payables | | | | | |
|
|
|
)) ))| () | |
Note 12—
from issuance with % vesting after of service and the remainder vesting monthly thereafter. RSAs and RSUs vest at varying rates, typically approximately % vesting after approximately of service and the remainder vesting annually, semi-annually, or quarterly thereafter. In addition, each Director of the Company's Board of Directors
shares remained available for future grants, assuming target number of PSUs, under the Amended and Restated 2014 Equity Incentive Plan.
Stock Options
| | $ | | | | | | | | Granted | | | | $ | | | | | | |
| | | | |
| Exercised | () | | | $ | | | | | | |
| Expired | () | | | $ | | | | | | |
| | | | |
| Outstanding at December 31, 2024 | | | | $ | | | | years | | $ | | |
| Exercisable at December 31, 2024 | | | | $ | | | | years | | $ | | |
The total intrinsic value of options exercised during the years ended December 31, 2024, 2023, and 2022 was $ million, $ million, and $ million, respectively, based on their respective exercise dates. At December 31, 2024, the Company had unrecognized stock-based compensation expense relating to unvested stock options of approximately $ million, which is expected to be recognized over a weighted-average period of years.
The Company estimates the fair value of stock options that contain service conditions using the Black-Scholes option pricing model. The grant date fair value of options granted during the years ended December 31, 2024, 2023, and 2022 was $, $, and $, respectively, per share.
| | | | | Risk-free interest rate | | | % | | | % | | | % |
| Expected volatility | | | % | | | % | | | % |
| Dividend yield | | | % | | | % | | | % |
Restricted Stock Units
| | $ | | | | Granted | | | | $ | | |
|
| Canceled | () | | | $ | | |
| Vested and released | () | | | $ | | |
| Restricted stock units outstanding at December 31, 2024 | | | | $ | | |
| The weighted-average grant date fair value per share of restricted stock units granted during the years ended December 31, 2024, 2023, and 2022 was $, $, and $, respectively.
The fair value of restricted stock units that vested and were released during the years ended December 31, 2024, 2023, and 2022 was $ million, $ million, and $ million, respectively, based on their respective vesting dates. At December 31, 2024, the intrinsic value of unvested restricted stock units was $ million. At December 31, 2024, the Company had unrecognized stock-based compensation expense relating to unvested restricted stock units of approximately $ million, which is expected to be recognized over a weighted-average period of years.
PSUs to the Company's CEO in August 2021, (the "August 2021 PSUs"), which are subject to both time-based and performance-based vesting conditions. The PSUs consist of equal tranches (each, a "Performance Tranche"), based on achievement of a share price condition if the Company achieves share price targets of $, $, and $, respectively, over consecutive trading days during a performance period commencing on August 26, 2022 and ending on August 26, 2026. The grant date fair value for such PSUs was estimated using a Monte-Carlo simulation model that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. To the extent any of the performance-based requirements are met, the Company's CEO must also provide continued service to the Company through at least August 26, 2024 to receive any shares of common stock underlying the grant and through August 26, 2026 to receive all of the shares of common stock underlying the performance units that have satisfied the applicable performance-based requirement.In 2022 and 2023, the Company granted PSUs to select executive employees that vest based on share price metrics tied to total shareholder return ("TSR") relative to a peer group over a period, assuming a performance measurement of %. These PSUs are also subject to a time-based service component. The grant date fair value for such PSUs was estimated using a Monte-Carlo simulation model that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. Between % and % of the performance stock units will vest at the end of the performance period, which is generally on the third anniversary of the PSU grant date.
In 2024, the Company additionally granted PSUs with an aggregate target of shares, assuming a performance measurement of %. The amount of shares that will ultimately vest will be determined based on the Company's TSR relative to the TSRs of a peer group for the period beginning January 1, 2024, as well as certain interim measurements based on relative TSR for the and periods beginning on January 1, 2024. At December 31, 2024, the first one-year interim performance measurement was %, subject to the remaining vesting criteria.
Stock-based compensation expense for PSUs is based on the grant date fair value and the number of shares assuming a performance measurement of %. The compensation expense will not be reversed if the performance metrics are not met.
| | $ | | |
| Granted | | | | $ | | |
|
|
|
|
|
|
| | | | $ | | |
Accrued restructuring costs related to mergers, acquisition, and restructuring activities were primarily related to the SpotX acquisition and the Telaria merger. Accrued restructuring costs associated with personnel costs are included in accounts payable and accrued expenses and accruals related to assumed loss contracts are included in other current liabilities and other liabilities, non-current on the Company's consolidated balance sheets.
| | | | | | | | | | | | | | | | | |
| Year Ended |
| December 31, 2024 | | December 31, 2023 | | December 31, 2022 |
| (in thousands) |
Accrued merger, acquisition, and restructuring costs at beginning of period | $ | | | | $ | | | | $ | | |
Personnel related and non-cash stock-based compensation | | | | | | | | |
Loss contracts (facility related) | | | | | | | | |
Exit costs | | | | | | | | |
Impairment of property and equipment, net | | | | | | | | |
Impairment costs of abandoned technology | | | | | | | | |
| Cash paid for restructuring costs | () | | | () | | | () | |
| Non-cash loss contracts (lease related) | | | | () | | | | |
| Non-cash impairments | | | | () | | | () | |
| Non-cash stock-based compensation | | | | () | | | () | |
| Accrued merger, acquisition, and restructuring costs at end of period | $ | | | | $ | | | | $ | | |
Note 14—
| | $ | () | | | $ | () | | | International | | | | | | | | |
Income (loss) before income taxes | $ | | | | $ | () | | | $ | () | |
| | $ | | | | $ | () | | | State | | | | | | | | |
| Foreign | | | | | | | | |
| Total current provision | | | | | | | | |
| Deferred: | | | | | |
| Federal | | | | | | | () | |
| State | () | | | () | | | () | |
| Foreign | | | | | | | () | |
Total deferred provision (benefit) | | | | () | | | () | |
| Total provision (benefit) for income taxes | $ | | | | $ | | | | $ | () | |
The Company recorded an income tax expense of $ million for the year ended December 31, 2024 compared to an income tax expense of $ million and an income tax benefit of $ million for the years ended December 31, 2023 and 2022, respectively. The income tax expense for the year ended December 31, 2024 was primarily the result of the domestic valuation allowance on the Company's deferred tax assets and the federal, state, and foreign income tax liabilities. The income tax expense for the year ended December 31, 2023 was primarily the result of the domestic valuation allowance on the Company's deferred tax assets and the federal, state, and foreign income tax liabilities. The income tax benefit for the year ended December 31, 2022 was primarily the result of recognizing the benefit of deferred tax assets previously subject to the domestic valuation allowance and the income tax liability associated with foreign subsidiaries. The net deferred tax liabilities recorded in connection with prior acquisitions and current taxable income for the year provided sources of taxable income to support the realization of pre-existing deferred tax assets.
% | | | % | | | % | | State income taxes, net of federal benefit | | % | | | % | | | % |
| Foreign income (loss) at other than U.S. rates | | % | | () | % | | () | % |
| Stock-based compensation expense | | % | | () | % | | () | % |
| Meals and entertainment | | % | | () | % | | () | % |
| | |
|
| Total | $ | | |
Guarantees and Indemnification
The Company’s agreements with sellers, buyers, and other third parties typically obligate the Company to provide indemnity and defense for losses resulting from claims of intellectual property infringement, damages to property or persons, business losses, or other liabilities. Generally, these indemnity and defense obligations relate to the Company’s own business operations, obligations, and acts or omissions. However, under some circumstances, the Company agrees to indemnify and defend contract counterparties against losses resulting from their own business operations, obligations, and acts or omissions, or the business operations, obligations, and acts or omissions of third parties. For example, because the Company’s business interposes the Company between buyers and sellers in various ways, buyers often require the Company to indemnify them against acts and omissions of sellers, and sellers often require the Company to indemnify them against acts and omissions of buyers. In addition, the Company’s agreements with sellers, buyers, and other third parties typically include provisions limiting the Company’s liability to the counterparty, and the counterparty’s liability to the Company. These limits sometimes do not apply to certain liabilities, including indemnity obligations. These indemnity and limitation of liability provisions generally survive termination or expiration of the agreements in which they appear. The Company has also entered into indemnification agreements with its directors, executive officers, and certain other officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No material demands have been made upon the Company to provide indemnification under such agreements and there are no claims that the Company is aware of that could have a material effect on the Company’s consolidated financial statements.
Litigation
The Company and its subsidiaries may from time to time be parties to legal or regulatory proceedings, lawsuits and other claims incident to their business activities and to the Company’s status as a public company. Such matters may include, among other things, assertions of contract breach or intellectual property infringement, claims for indemnity arising in the course of the Company’s business, regulatory investigations, audits by taxing authorities, or enforcement proceedings, and claims by persons whose employment has been terminated. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, management is unable to ascertain the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance or recoverable from third parties, or the financial impact with respect to such matters as of December 31, 2024. However, based on management’s knowledge as of December 31, 2024, management believes that the final resolution of these matters known at such date, individually and in the aggregate, will not have a material adverse effect upon the Company’s consolidated financial position, results of operations or cash flows.
Employment Contracts
Note 17—
| | $ | | | Less: Unamortized debt issuance costs | () | | | () | |
Net carrying value of Convertible Senior Notes | | | | | |
Term Loan B Facility* | | | | | |
Less: Unamortized discount and debt issuance costs | () | | | () | |
Net carrying value of Term Loan B Facility* | | | | | |
| | | |
Balance Sheet Presentation: | | | |
Debt, current | | | | | |
Debt, non-current, net of debt discount and debt issuance costs | | | | | |
Total debt | $ | | | | $ | | |
* Term Loan B Facility as of December 31, 2024 and December 31, 2023 reflect the balances under the 2024 Term Loan B Facility and the 2021 Term Loan B Facility, respectively. |
| | 2026 | | |
| 2027 | | |
| 2028 | | |
| 2029 | | |
Thereafter | | |
Total | $ | | |
Amortization of debt discount and debt issuance costs is computed using the effective interest method and is included in interest expense in the consolidated statement of operations. Amortization of the debt discount and debt issuance costs associated with the Company's indebtedness totaled $ million, $ million, and $ million for the years ended December 31, 2024, 2023, and 2022, respectively. In addition, amortization of deferred financing costs were an amount for each of the years ended December 31, 2024, 2023, and 2022, respectively. Deferred financing costs are included in other assets, non-current in the consolidated balance sheets.
million aggregate principal amount of % convertible senior notes in a private placement, including $ million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the initial purchasers (collectively, the "Convertible Senior Notes"). The Convertible Senior Notes will mature on March 15, 2026, unless earlier repurchased, redeemed or converted. The total net proceeds from the offering, after deducting debt issuance costs, paid by the Company, were approximately $ million. The Company used approximately $ million of the net proceeds from the offering to pay for the Capped Call Transactions (as described below). The Convertible Senior Notes are senior, unsecured obligations and are (i) equal in right of payment with the existing and future senior, unsecured indebtedness; (ii) senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated to the Convertible Senior Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness, including amounts outstanding under the Loan Agreement or the new Credit Agreement (see section below); and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries that do not guarantee the Convertible Senior Notes.
% per annum payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2021. The Convertible Senior Notes will mature on March 15, 2026 unless they are redeemed, repurchased or converted prior to such date. The Convertible Senior Notes are convertible at the option of holders only during certain periods and upon satisfaction of certain conditions. Holders have the right to convert their notes (or any portion of a note in an authorized denomination), in the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of the Company’s common stock exceeds % of the conversion price for each of at least trading days during the consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the consecutive business days immediately after any consecutive trading day period (such consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than % of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (iii) upon the occurrence of certain corporate events or distributions on the Company’s common stock; (iv) if the Company calls such Convertible Senior Notes for redemption; and (v) on or after September 15, 2025, until the close of business on the second scheduled trading day immediately before the maturity date, holders of the Convertible Senior Notes may, at their option, convert all or a portion of their Convertible Senior Notes regardless of the foregoing conditions at any time from, and including, September 15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date.
Upon conversion, the Convertible Senior Notes may be settled in shares of the Company’s common stock, cash or a combination of cash and shares of the Company’s common stock, at the Company’s election. All conversions with a conversion date that occurs on or after September 15, 2025 will be settled using the same settlement method, and the Company will send notice of such settlement method to noteholders no later than the open of business on September 15, 2025.
Subject to the terms of the indenture agreement, the Company has the right, at its election, to redeem all, or any portion (subject to the partial redemption limitation) in an authorized denomination, of the Convertible Senior Notes, at any time, and from time to time, on a redemption date on or after March 20, 2024 and on or before the th scheduled trading day immediately before the maturity date, for cash, but only if the "last reported sale price," as defined under the Offering Memorandum, per share of common stock exceeds % of the “conversion price” on (i) each of at least trading days, during the consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any note for redemption will constitute a "make-whole fundamental change" (as defined below) with respect to that note, in which case the conversion rate applicable to the conversion of that note will be increased in certain circumstances if it is converted after it is called for redemption. If the Company elects to redeem less than all of the outstanding notes, then the redemption will not constitute a make-whole fundamental change with respect to the notes not called for redemption, and holders of the notes not called for redemption will not be entitled to an increased conversion rate for such notes as described above on account of the redemption, except to the limited extent described further below. No sinking fund is provided for the Convertible Senior Notes, which means that the Company is not required to redeem or retire the Convertible Senior Notes periodically.
If a fundamental change occurs, then each noteholder will have the right to require the Company to repurchase its notes (or any portion thereof in an authorized denomination) for cash on a date (the "fundamental change repurchase date") of the Company’s choosing, which must be a business day that is no more than , nor less than , business days after the date the Company distributes the related fundamental change notice.
If an event of default, other than a reporting default remedied by special interest as defined in the indenture agreement, occurs with respect to the Company or any guarantor, then the principal amount of, and all accrued and unpaid interest on, all of the notes then outstanding will immediately become due and payable without any further action or notice by any person. If an event of default (other than a reporting event of default described above with respect to the Company or any guarantor and not solely with respect to a significant subsidiary of the Company’s or a guarantor, other than the Company or such guarantor) occurs and is continuing, then, the trustee, by notice to the Company, or noteholders of at least % of the aggregate principal amount of notes then outstanding, by written notice to the Company and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the notes then outstanding to become due and payable immediately.
The Convertible Senior Notes have an initial conversion rate of 15.6539 shares of common stock per $1,000 principal amount of the Convertible Senior Notes, which will be subject to customary anti-dilution adjustments in certain circumstances.
In connection with the pricing of the Convertible Senior Notes, the Company entered into privately negotiated capped call transactions with various financial institutions (the "Capped Call Transactions"). The Capped Call Transactions were entered into with third party broker-dealers to limit the potential dilution that would occur if the Company has to settle the conversion value in excess of the principal in shares. This exposure will be covered (i.e., the Company will receive as many shares as are required to be
and the maximum price of $). Any shares required to be issued by the Company over this amount would have net earnings per share dilution impact. By entering into the Capped Call Transactions, the Company expects to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price under the Convertible Senior Notes. The Company paid $ million for the Capped Call Transactions, which was recorded as additional paid-in capital, using a portion of the gross proceeds from the sale of the Convertible Senior Notes. The cost of the Capped Call Transactions is not expected to be tax deductible as the Company did not elect to integrate the capped call into the Convertible Senior Notes for tax purposes. The cost of the Capped Call Transaction was recorded as a reduction of the Company’s additional paid-in capital in the accompanying consolidated financial statements.The Company incurred debt issuance costs of $ million in March 2021. The Convertible Senior Notes are presented net of issuance costs on the Company's consolidated balance sheets. The debt issuance costs are amortized on an effective interest basis over the term of the Convertible Senior Notes and are included in interest expense and amortization of debt discount in the accompanying consolidated statements of operations.
During the year ended December 31, 2023, the Company repurchased its Convertible Senior Notes in the open market with cash on hand for $ million. The Company recognized a gain on extinguishment of debt of $ million related to the repurchase of $ million of principal balance of Convertible Senior Notes and $ million of unamortized debt issuance costs associated with the extinguished debt during the year ended December 31, 2023. The gain on extinguishment is included in other (income) expense in the Company's consolidated statement of operations.
| | $ | | | | $ | | | | Amortization of debt issuance costs | | | | | | | | |
| Total interest expense | $ | | | | $ | | | | $ | | |
| Effective interest rate | | % | | | % | | | % |
| | 2026 | | |
| Total | $ | | |
2021 and 2024
million senior secured term loan facility ("2021 Term Loan B Facility"), which had a maturity in April 2028, and a $ million senior secured revolving credit facility (as amended in June 2021, the "2021 Revolving Credit Facility"), which had a maturity in December 2025. In June 2023, the Company amended the 2021 Credit Agreement (the "Amended 2021 Credit Agreement") to transition away from a variable interest rate based on the Eurodollar Rate towards a similar variable interest rate based on Adjusted Term SOFR, as defined in the Amended 2021 Credit Agreement, which is based on the secured overnight financing rate ("SOFR").Amounts outstanding under the Amended 2021 Credit Agreement accrue interest at a rate equal to either, (1) for the 2021 Term Loan B Facility, at the Company’s election, the Adjusted Term SOFR plus a margin of % per annum, or ABR (as defined in the Amended 2021 Credit Agreement) plus a margin of %, and (2) for the 2021 Revolving Credit Facility, at the Company’s election, the Adjusted Term SOFR plus a margin of % to %, or ABR plus a margin of % to %, in each case, depending on the Company’s first lien net leverage ratio.
On February 6, 2024, the Company refinanced its credit agreement whereby it entered into a new credit agreement (the "2024 Credit Agreement") with Morgan Stanley Senior Funding, Inc. as the Company term loan administrative agent and Citibank,
million senior secured term loan facility (the "2024 Term Loan B Facility"), whose loans will mature in February 2031 and a $ million senior secured revolving credit facility (the "2024 Revolving Credit Facility"), which will mature in February 2029. The Company primarily used the proceeds from the 2024 Term Loan B Facility to repay in full all outstanding amounts owed under the Company's Amended 2021 Credit Agreement. Accordingly, the Amended 2021 Credit Agreement was terminated and replaced in its entirety. The obligations under the 2024 Credit Agreement are secured by substantially all of the assets of the Company.Amounts outstanding under the 2024 Credit Agreement accrue interest at a rate equal to either, (1) for the 2024 Term Loan B Facility, at the Company’s election, Term SOFR (as defined in the 2024 Credit Agreement) plus a margin of % per annum, or ABR (as defined in the 2024 Credit Agreement) plus a margin of %, and (2) for the 2024 Revolving Credit Facility, at the Company’s election, Term SOFR plus a margin of % to %, or ABR plus a margin of % to %, in each case, depending on the Company’s First Lien Net Leverage Ratio (as defined in the 2024 Credit Agreement).
On September 18, 2024, the Company entered into Amendment No. 1 to the 2024 Credit Agreement ("Amendment No. 1"), which reduced the interest rate of the 2024 Term Loan B Facility by basis points to Term SOFR plus a margin of %, from the previous rate of Term SOFR plus a margin of %. Amendment No. 1 also reduced the interest rate margin of any ABR Loans (as defined in Amendment No. 1) by basis points to ABR plus a margin of % from the previous rate of ABR plus a margin of %. The remaining terms of the 2024 Term Loan B Facility and 2024 Revolving Credit Facility were substantially unchanged.
As of December 31, 2024, the contractual interest rate related to the Term Loan B Facility was %. In addition to having to pay contractual interest on the 2024 Term Loan B Facility, the Company is also required to pay certain other fees, primarily to the lenders under the 2024 Revolving Credit Facility, in order to maintain their revolving facility commitments.
The covenants of the 2024 Credit Agreement include customary negative covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and restricted payments. In addition, the 2024 Credit Agreement contains a springing financial covenant that is tested on the last day of any fiscal quarter only if utilization of the 2024 Revolving Credit Facility exceeds % of the total revolving commitments, whereby the Company is required to maintain a First Lien Net Leverage Ratio below to 1.00. As of December 31, 2024, amounts were outstanding under the 2024 Revolving Credit Facility and the Company was in compliance with its debt covenants. At December 31, 2024, amounts available under the 2024 Revolving Credit Facility were $ million, net of letters of credit outstanding in the amount of $ million.
The 2024 Credit Agreement includes customary events of default, and customary rights and remedies upon the occurrence of any event of default thereunder, including rights to accelerate the loans, terminate the commitments thereunder and realize upon the collateral securing the obligations under the 2024 Credit Agreement. The 2024 Credit Agreement calls for customary scheduled loan amortization payments of % of the initial principal balance, which at the time of Amendment No. 1 was $ million, payable quarterly (i.e. % in aggregate per year) as well as a provision that requires the Company to prepay the 2024 Term Loan B Facility based on an annual calculation of free cash flow ("Excess Cash Flow") as defined by the 2024 Credit Agreement. The Company was not required to make any such mandatory prepayment required by the Excess Cash Flow provision for the period ended December 31, 2024.
| | $ | | | Unamortized debt discount | () | | | () | |
| Unamortized debt issuance costs | () | | | () | |
Debt, net of debt discount and debt issuance costs | $ | | | | $ | | |
* Term Loan B Facility as of December 31, 2024 and December 31, 2023 reflect the balances under the 2024 Term Loan B Facility and the 2021 Term Loan B Facility, respectively. |
February 6, 2024 Debt Refinance
As part of the debt refinance on February 6, 2024, where lenders under the 2021 Credit Agreement continued to be lenders under the 2024 Credit Agreement, certain of their loans and revolving facility commitments were deemed to have been modified
million and debt issuance costs of $ million from Modified Loans over the term of the new 2024 Term Loan B Facility. The Company continued to defer financing costs as of February 6, 2024 of an amount from Modified Commitments over the term of the new 2024 Revolver Facility.For lenders of the 2021 Credit Agreement that did not continue to participate in the 2024 Credit Agreement, their pro-rata portion of the unamortized debt discount of $ million, unamortized debt issuance costs of $ million, and an amount of unamortized deferred financing costs were deemed to be extinguished. The resulting loss on extinguishment of debt of $ million is included in other (income) expense in the Company's consolidated statement of operations for the year ended December 31, 2024.
The Company paid $ million in third-party fees related to the closing of the 2024 Credit Agreement. Third-party fees attributed to new lenders of $ million were capitalized as part of the debt issuance costs and will be amortized over the term of the 2024 Term Loan B Facility while third-party fees attributed to Modified Loans of $ million were included in general and administrative expenses in the Company's consolidated statement of operations for the year ended December 31, 2024. In addition, third-party fees of $ million attributed to new revolving lenders and Modified Commitments were capitalized as part of deferred financing costs and will be amortized over the term of the 2024 Revolving Facility. The Company also capitalized additional debt discount costs of $ million associated with the closing of the 2024 Term Loan B Facility, which will be amortized over the term of the 2024 Term Loan B Facility.
September 18, 2024 Debt Repricing
The Company analyzed the changes of Amendment No. 1 on a lender-by-lender basis and determined that the transaction would primarily be accounted for as a modification, with a portion of it accounted for as debt extinguishment and new debt issuance. As a result, the Company recognized an loss on extinguishment related to unamortized debt discount and unamortized debt issuance costs related to the portion of the 2024 Term Loan B Facility that was extinguished. The Company paid $ million in third-party fees related to Amendment No. 1 of which an amount was capitalized as debt issuance costs and $ million was included in general and administrative expenses in the Company's consolidated statement of operations for the year ended December 31, 2024. As part of Amendment No. 1, most lenders decided to roll their loan balances over from the original 2024 Term Loan B Facility to the amended 2024 Term Loan B Facility, while some decided to cash out and reassign their loan balances. On September 18, 2024, $ million of the 2024 Term Loan B Facility principal balance was rolled over as part of non-cash financing activities while $ million of the 2024 Term Loan B Facility principal balance was repaid and then reissued.
| | $ | | | | $ | | | | Amortization of debt discount | | | | | | | | |
| Amortization of debt issuance costs | | | | | | | | |
| Total interest expense | $ | | | | $ | | | | $ | | |
| Effective interest rate | | % | | | % | | | % |
| $ | | | | 2026 | | | | |
| 2027 | | | | |
| 2028 | | | | |
| 2029 | | | | |
Thereafter | | | | |
| Total | $ | | | $ | | |
| | $ | | | | $ | | | Interest income | () | | | () | | | () | |
Interest expense, net | $ | | | | $ | | | | $ | | |
Note 18—
million, through February 1, 2026. Under the February 2024 Repurchase Plan, shares were purchased in open market purchases through December 31, 2024 for a total of approximately $ million at an average of $ per share. The average price paid per share purchased under the Program includes broker commission costs. As of December 31, 2024, $ million remains available under the February 2024 Repurchase Plan. For accounting purposes, common stock repurchases under the Company's repurchase programs are recorded based upon the purchase date of the applicable trade. Repurchased shares are accounted for as treasury stock in the consolidated balance sheets and have all been subsequently retired.
Note 19—
Note 20—
restricted stock units, performance stock units, and stock options to the Company's employees. The RSUs granted will vest over from issuance with approximately % after , and the remainder vesting quarterly thereafter. The options granted will vest over from grant date, with % vesting after and the remainder vesting monthly thereafter. The PSUs will vest on the anniversary of the grant date based on certain stock price performance metrics to be measured on December 31, 2025, December 31, 2026 and December 31, 2027. The award is eligible to vest as to % to % of the target number of PSUs.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. There is no assurance that our disclosure controls and procedures will operate effectively under all circumstances. Based upon the evaluation described above, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the three months ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act).
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in "Internal Control - Integrated Framework" (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2024. Deloitte & Touche LLP has independently assessed the effectiveness of our internal control over financial reporting and its report is included herein.
Inherent Limitations on Effectiveness of Controls
Management recognizes that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Magnite, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Magnite, Inc. and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 26, 2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Los Angeles, California
February 26, 2025
Item 9B. Other Information
or by our Section 16 officers or directors: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Officer Name | | Officer Title | | Date Plan Adopted/Terminated | | Duration of Plan | | Shares to be Purchased or Sold | | Intended to Satisfy Rule 10b5-1(c)? |
| |
| |
| | March 3, 2025 - | | Sell up to *, subject to certain conditions | | Yes |
*Represents a combination of previously vested shares and gross amounts of shares that will vest over the duration of the plan (net shares that will actually be sold under the plan are net of tax withholding).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 will be included in our Proxy Statement for the 2025 Annual Meeting of Stockholders (the "2025 Proxy Statement") to be filed with the SEC within 120 days of the fiscal year ended December 31, 2024, or the 2025 Proxy Statement, under the headings "Proposal 1—Election of Directors," "Delinquent Section 16(a) Reports," (if applicable) and "Corporate Governance" and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by Item 11 will be included in the 2025 Proxy Statement under the headings "Executive Officers" and "Executive Compensation" and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 will be included in the 2025 Proxy Statement under the heading "Common Stock Ownership of Certain Beneficial Owners and Management" and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 will be included in the 2025 Proxy Statement under the headings "Certain Relationships and Related Person Transactions" and "Director Independence" and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by Item 14 will be included in the 2025 Proxy Statement under the heading "Proposal 2—Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm" and is incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) We have filed the following documents as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements
| | | | | |
| Report of Independent Registered Public Accounting Firm | |
| Consolidated Balance Sheets | |
| Consolidated Statements of Operations | |
| Consolidated Statements of Comprehensive Loss | |
| Consolidated Statements of Stockholders' Equity | |
| Consolidated Statements of Cash Flows | |
| Notes to Consolidated Financial Statements | |
2. Financial Statement Schedules
No financial statement schedules are provided because the information called for is not required or is shown in the financial statements of the notes thereto.
3. Exhibits
EXHIBIT INDEX
| | | | | | | | |
| Number | | Description |
| 2.1 | | |
| 2.2 | | |
| 2.3 | | |
| 3.1 | | |
| 3.2 | | |
| 3.3 | | |
| 4.1 | | |
| 4.2 | | |
| 4.3 | | |
10.1+ | | |
| | | | | | | | |
10.2+ | | |
10.3+ | | |
10.4+ | | |
10.5+ | | |
10.6+ | | |
10.7+ | | |
10.8+ | | |
10.9+ | | |
10.10+ | | |
10.11+ | | |
10.12+ | | |
10.13+ | | |
10.14+ | | |
10.15+ | | |
10.16+ | | |
10.17+ | | |
10.18+ | | |
10.19+ | | |
10.20 | | |
| | | | | | | | |
10.21 | | |
10.22 | | |
10.23 | | |
10.24 | | Incremental Assumption Agreement dated as of June 28, 2021, relating to the Credit Agreement dated as of April 30, 2021, among Magnite, Inc., each Issuing Bank, the Swingline Lender, the other Lenders party thereto and Goldman Sachs Bank USA, as administrative agent and as collateral agent for the Lenders (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Commission on July 2, 2021). |
10.25 | | |
10.26 | | Amendment No. 1, dated as of September 18, 2024 among Magnite, Inc., as the borrower, Morgan Stanley Senior Funding, Inc., as the term facility administrative agent, and Citibank, N.A., as revolving facility administrative agent, collateral agent and swingline lender and each Issuing Bank and Lender party thereto (each as defined therein), which amended that certain Credit Agreement, dated as of February 6, 2024 (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the Commission on September 18, 2024). |
19* | | |
| 21.1* | | |
| 23.1* | | |
| 31.1* | | |
| 31.2* | | |
| 32*(1) | | |
97 | | |
| 101.ins * | | XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.sch * | | XBRL Taxonomy Schema Linkbase Document |
| 101.cal * | | XBRL Taxonomy Calculation Linkbase Document |
| 101.def * | | XBRL Taxonomy Definition Linkbase Document |
| 101.lab * | | XBRL Taxonomy Label Linkbase Document |
| 101.pre * | | XBRL Taxonomy Presentation Linkbase Document |
| 104 | | Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith
+ Indicates a management contract or compensatory plan or arrangement
(1) The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of Section 18 of the Exchange Act of 1934, as amended (the "Exchange Act"), and is not to be incorporated by reference into any filing of Magnite, Inc. under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | |
| MAGNITE, INC.
(Registrant) |
|
/s/ David Day
|
| David Day |
| Chief Financial Officer (Principal Financial Officer) |
| Date February 26, 2025 | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| | | | | | | | |
| Name | Title | Date |
| /s/ Michael Barrett | Chief Executive Officer and Director (Principal Executive Officer) | February 26, 2025 |
| Michael Barrett |
| /s/ David Day | Chief Financial Officer
(Principal Financial Officer) | February 26, 2025 |
| David Day |
| /s/ Brian Gephart | Chief Accounting Officer
(Principal Accounting Officer) | February 26, 2025 |
| Brian Gephart |
| /s/ Paul Caine | Director | February 26, 2025 |
| Paul Caine |
| /s/ Sarah P. Harden | Director | February 26, 2025 |
| Sarah P. Harden |
| /s/ Doug Knopper | Director | February 26, 2025 |
| Doug Knopper |
| /s/ Rachel Lam | Director | February 26, 2025 |
| Rachel Lam |
| /s/ David Pearson | Director | February 26, 2025 |
| David Pearson |
| /s/ James Rossman | Director | February 26, 2025 |
| James Rossman |
| /s/ Robert F. Spillane | Director | February 26, 2025 |
| Robert F. Spillane |
| /s/ Diane Yu | Director | February 26, 2025 |
| Diane Yu |
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