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What changed in Zeta Global Holdings Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Zeta Global Holdings Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+340 added−325 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-24)

Top changes in Zeta Global Holdings Corp.'s 2023 10-K

340 paragraphs added · 325 removed · 274 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCDP+ As part of our platform, customers can use the CDP+ as their system of record for all consumer information. The CDP+ delivers a single, actionable view of customers and prospects that include real-time identifiers and attributes. Customers can consolidate multiple databases and internal and external data feeds and organize their data based on their unique needs and performance metrics.
Biggest changeOur customers benefit from an account team committed to their success and backed by experts in strategy, content creation, data and analytics. Data Management – CDP 2 Our customers can use Zeta CDP as their system of record for all consumer information. Zeta CDP delivers a single, actionable view of customers and prospects that include real-time identifiers and attributes.
For additional information, see the section titled “Risk Factors—Risks Related to Our Business and Industry—Our industry is intensely competitive, and if we do not effectively compete against current and future competitors, our business, results of operations and financial condition could be harmed” and “Risk Factors— Risks Related to Data Collection and Security, Intellectual Property and Technology Industry Regulations— Our intellectual property rights may be difficult to enforce and protect, which could enable others to copy or use aspects of our technology without compensating us, thereby eroding our competitive advantages and having an adverse effect on our business, results of operations and financial condition.” Seasonality In general, the marketing industry experiences seasonal trends that affect the vast majority of participants in the digital marketing ecosystem.
For additional information, see the section titled “Risk Factors—Risks Related to Our Business and Industry—Our industry is intensely competitive, and if we do not effectively compete against current and future competitors, our business, results of operations and financial condition could be harmed” and “Risk Factors— Risks Related to Data Collection and Security, Intellectual Property and Technology Industry Regulations— Our intellectual property rights may be difficult to enforce and protect, which could enable others to copy or use aspects of our technology without compensating us, thereby eroding our competitive advantages and having an adverse effect on our business, results of operations and financial condition.” 5 Seasonality In general, the marketing industry experiences seasonal trends that affect the vast majority of participants in the digital marketing ecosystem.
We anticipate that, as with the CCPA/CPRA, new laws in the U.S. at either the state or federal level will generally allow personal information 5 collection by businesses as the default, so long as data use practices are made transparent to consumers and consumer rights are honored when requested (opt-out model), with the exception of select classes of “sensitive data.” To date, despite significant legislative activity around privacy in the states and at the federal level, there have been no significant or credible efforts at legislation that would require prior consent before data is used (opt-in model), apart from sensitive data.
We anticipate that, as with the CCPA/CPRA, new laws in the U.S. at either the state or federal level will generally allow personal information collection by businesses as the default, so long as data use practices are made transparent to consumers and consumer rights are honored when requested (opt-out model), with the exception of select classes of “sensitive data.” To date, despite significant legislative activity around privacy in the states and at the federal level, there have been no significant or credible efforts at legislation that would require prior consent before data is used (opt-in model), apart from sensitive data.
On average, we ingest more than 1 trillion content consumption signals per month on a global basis and synthesize this information into hundreds of intent-based audiences, which can then be used to create marketing programs. All this data is managed through a proprietary database structure that has patented flexibility, speed and scalability. 1 2.
On average, we ingest more than one trillion content consumption signals per month on a global basis and synthesize this information into hundreds of intent-based audiences, which can then be used to create marketing programs. All this data is managed through a proprietary database structure that has patented flexibility, speed and scalability. 1 2.
Patented AI Engine We believe our proprietary data is key to our AI engine. We analyze this data through extensive application of AI technologies, including machine learning and natural language processing.
Patented AI Engine We believe our proprietary data is key to our AI engine. We analyze this data through extensive application of AI technologies, including machine learning, natural language processing, and generative AI.
We have customers spanning a wide spectrum of industry verticals and we believe we can achieve significant organic growth by cross-selling our existing solutions, making full use of our data capabilities and insights and by capturing increased share of our scaled customers’ marketing spend by introducing new features and functionalities within the ZMP. Acquire new scaled customers .
We have customers spanning a wide spectrum of industry verticals and we believe we can achieve significant organic growth by cross-selling our existing solutions, making full use of our data capabilities and insights and by capturing an increased share of our scaled customers’ marketing spend by introducing new features and functionalities within the ZMP. 3 Acquire new scaled customers .
The Opportunity Explorer is woven into the fabric of the ZMP and is accessible through five product modules: MarketPulse, CustomerPulse, DMAPulse, AudiencePulse and CompetitorPulse. • MarketPulse provides marketers with real-time notifications and longitudinal visualizations representing changes in consumer sentiment and interest. • CustomerPulse provides marketers with real-time, actionable insights across acquisition, retention and growth opportunities derived by enriching a customer’s data with Zeta data. • DMAPulse provides marketers with real-time, actionable insights on designated market areas that should receive increased or decreased investments to optimize market share and customer acquisition efficiency. 2 • AudiencePulse provides marketers with real-time, actionable insights on more than 900 Zeta audiences predicting consumer intent and interest. • CompetitorPulse providers marketers with actionable insights on the business’s competitive set and opportunities to capture market share and prevent customer attrition.
The Agile Intelligence suite is woven into the fabric of the ZMP and is accessible through five product modules: MarketPulse, CustomerPulse, DMAPulse, AudiencePulse and CompetitorPulse. • MarketPulse provides marketers with real-time notifications and longitudinal visualizations representing changes in consumer sentiment and interest. • CustomerPulse provides marketers with real-time, actionable insights across acquisition, retention and growth opportunities derived by enriching a customer’s data with Zeta data. • DMAPulse provides marketers with real-time, actionable insights on designated market areas that should receive increased or decreased investments to optimize market share and customer acquisition efficiency. • AudiencePulse provides marketers with real-time, actionable insights on more than 900 Zeta audiences predicting consumer intent and interest. • CompetitorPulse providers marketers with actionable insights on the business’s competitive set and opportunities to capture market share and prevent customer attrition.
Our customers can use all five of the modules or choose any individual module to obtain data-cloud based insights on their existing consumers and prospects. We offer Opportunity Explorer for a licensing fee and / or an incremental fee based on customers’ utilization of the ZMP. The terms of our subscription agreements are typically quarterly or annual.
Our customers can use all five of the modules or choose any individual module to obtain data-cloud based insights on their existing consumers and prospects. We offer Agile Intelligence suite for a licensing fee and/or an incremental fee based on customers’ utilization of the ZMP. The terms of our subscription agreements are typically quarterly or annual.
We intend to aggressively pursue new scaled customers by investing in our sales and customer service teams while driving increased efficiencies in our go-to-market approach. We also intend to focus on converting our scaled customers into new super-scaled customers. The Opportunity Explorer also serves as a sales accelerator to help acquire and grow new customers.
We intend to aggressively pursue new scaled customers by investing in our sales and customer service teams while driving increased efficiencies in our go-to-market approach. We also intend to focus on converting our scaled customers into new super-scaled customers. The Agile Intelligence suite also serves as a sales accelerator to help acquire and grow new customers.
Actionable Insights Our customers can use the Opportunity Explorer module in the ZMP to obtain and take action on high-value consumer insights in real-time. The ZMP monitors, aggregates and synthesizes the behaviors of individuals globally across multiple points of interactions to predict interest and intent.
Actionable Insights Our customers can use the Agile Intelligence suite module in the ZMP to obtain and take action on high-value consumer insights in real-time. The ZMP monitors, aggregates and synthesizes the behaviors of individuals globally across multiple points of interactions to predict interest and intent.
As of December 31, 2022, we had 1,604 employees, including 848 employees located outside of the U.S. None of our U.S. employees are represented by a labor union with respect to their employment. We consider our relations with our employees to be good and have not experienced interruptions of operations or work stoppages due to labor disagreements.
As of December 31, 2023, we had 1,783 employees, including 955 employees located outside of the U.S. None of our U.S. employees are represented by a labor union with respect to their employment. We consider our relations with our employees to be good and have not experienced interruptions of operations or work stoppages due to labor disagreements.
A closed-loop cycle from insight to activation ensures that our AI engine can quickly learn from the available data, identify the best data signals and create accurate and up-to-date Zeta Identity Graphs ™ .
A closed-loop cycle from insight to activation enables our AI engine to quickly learn from the available data, identify the best data signals and create accurate and up-to-date Zeta Identity Graphs™.
Our Opportunity Explorer synthesizes Zeta’s proprietary data and data generated by our customers to uncover consumer insights that are translated into marketing programs designed for highly targeted audiences across digital channels, including email, SMS, websites, applications, social media, CTV and chat.
Our Agile Intelligence suite (formerly known as Opportunity Explorer) synthesizes Zeta’s proprietary data and data generated by our customers to uncover consumer insights that are translated into marketing programs designed for highly targeted audiences across digital channels, including email, SMS, websites, applications, social media, CTV and chat.
Based on our proprietary data and uniquely modeled intender scores, the Opportunity Explorer can present immediate and actionable opportunities within the ZMP that our customers can then use to generate growth.
Based on our proprietary data and uniquely modeled intender scores, our Agile Intelligence suite can present immediate and actionable opportunities within the ZMP that our customers can then use to generate growth.
Our AI engineers continuously update the machine learning algorithms to improve the overall ROI for our customers. Our Products Our product suites are powered by the ZMP and are designed to enable enterprises to acquire, grow and retain consumer relationships more efficiently and effectively than alternative solutions available in the market.
Our AI engineers continuously update the machine learning algorithms to improve the overall ROI for our customers. Our Platform and Products The ZMP is a single platform designed to enable enterprises to acquire, grow and retain consumer relationships more efficiently and effectively than alternative solutions available in the market.
We leverage our AI technologies and data within the ZMP to: • Seamlessly collect and ingest structured and unstructured data into the ZMP; • Quickly and reliably analyze key consumer attributes and signals; • Identify consumer intent by running sophisticated algorithms to analyze data; • Cluster related concepts and prioritize actionable insights to create intent-based graphs; • Create audiences comprised of individuals or affinity-driven clusters scored based on intent; • Personalize content to make experiences more relevant for the consumer and profitable for the enterprises; and • Create channel and content recommendations to optimize marketing performance. 3.
We leverage our AI technologies and data within the ZMP to: • Seamlessly collect and ingest structured and unstructured data into the ZMP; • Detect PII and apply data governance in accordance with business, state, and federal rules and regulations; • Quickly and reliably analyze key consumer attributes and signals; • Identify consumer intent by running sophisticated algorithms to analyze data; • Cluster related concepts and prioritize actionable insights to create intent-based graphs; • Create audiences comprised of individuals or affinity-driven clusters scored based on intent; • Forecast experience-based outcomes at an individual and audience level; • Personalize content to make experiences more relevant for the consumer and profitable for the enterprises; and • Create channel and content recommendations to optimize marketing performance. 3.
Our Customers We work with some of the largest and most well-known enterprises across a wide spectrum of industry verticals including financial services, consumer & retail, telecommunications, business services and insurance, which contributed 13%, 12%, 12%, 11% and 8% of our revenues for the year ended December 31, 2022 and 12%, 13%, 12%, 7% and 12% of our revenues for the year ended December 31, 2021, respectively. 98% of our revenue for the year ended December 31, 2022 was derived from scaled customers, which we define as customers from which we have generated trailing-12-month revenue of at least $100,000.
Our architecture also enables us to segment access privileges across our user base. 4 Our Customers We work with some of the largest and most well-known enterprises across a wide spectrum of industry verticals including consumer & retail, telecommunications, financial services, business services and insurance, which contributed 17%, 15%, 10%, 10% and 6% of our revenues for the year ended December 31, 2023 and 12%, 12%, 13%, 11% and 8% of our revenues for the year ended December 31, 2022, respectively. 97% of our revenue for the year ended December 31, 2023 was derived from scaled customers, which we define as customers from which we have generated trailing-12-month revenue of at least $100,000.
As a subset of scaled customers, we define super-scaled customers as customers from which we have generated trailing-12-month revenue of atleast $1,000,000. We had 1,155 and 1,035 total customers, and 403 and 355 scaled customers, including 103 and 97 super-scaled customers, as of December 31, 2022 and 2021, respectively.
As a subset of scaled customers, we define super-scaled customers as customers from which we have generated trailing-12-month revenue of at least $1,000,000. We had 1,242 and 1,155 total customers, and 452 and 403 scaled customers, including 131 and 103 super-scaled customers, as of December 31, 2023 and 2022, respectively.
Compensation, Benefits, and Employee Wellness We aim to provide market-competitive compensation and benefit programs for our employees. To recruit and retain the best talent in a highly competitive marketplace, we routinely examine and refresh our compensation packages that may include salary, bonuses, sales commissions and equity.
To recruit and retain the best talent in a highly competitive marketplace, we routinely examine and refresh our compensation packages that may include salary, bonuses, sales commissions and equity.
Our future success will depend on our ability to enhance and better integrate our existing products, introduce new products on a timely and cost-effective basis, meet changing customer needs, provide best-in-class data security to maintain customer confidence and combat cyber-attacks, extend our core technology into new applications and anticipate emerging standards, business models, software delivery methods and other technological changes. 4 We believe no single company has offerings that match the comprehensive capabilities of the ZMP and CDP+, but we face collective competition from a variety of companies.
Our future success will depend on our ability to enhance and better integrate our existing products, introduce new products on a timely and cost-effective basis, meet changing customer needs, provide best-in-class data security to maintain customer confidence and combat cyber-attacks, extend our core technology into new applications and anticipate emerging standards, business models, software delivery methods and other technological changes.
The terms of our subscription agreements are typically annual or multi-year. Our Growth Strategies Our data and AI-powered platform enables our customers to transform their digital marketing strategy, accelerate their revenue growth and enhance business returns. In turn, our customers’ success motivates them to increase their use of our platform, thereby accelerating our revenue and growth.
Our Growth Strategies Our data and AI-powered platform enables our customers to transform their digital marketing strategy, accelerate their revenue growth and enhance business returns. In turn, our customers’ success motivates them to increase their use of our platform, thereby accelerating our revenue and growth. Key elements of our long-term growth strategy include: Further penetrate our existing customer base .
We believe these new capabilities will allow us to further strengthen our relationships with our existing customers and gain global market share. 3 Our Key Strengths Zeta’s competitive strengths historically have included the following: Omnichannel Engagement Through the ZMP, our customers are able to identify and target consumers across a wide range of digital channels.
As we expand relationships with our existing customers in the U.S., we are also investing in select regions in Europe. Our Key Strengths Zeta’s competitive strengths historically have included the following: Omnichannel Engagement Through the ZMP, our customers are able to identify and target consumers across a wide range of digital channels.
Opted-in Data Set Our data set is an amalgamation of our private proprietary data, publicly available data and data provided by our partner ecosystem. Our data set contains more than 235 million opted-in individuals in the U.S. and more than 535 million opted-in individuals globally with an average of more than 2,500 demographic and behavioral attributes per individual.
Our data set contains more than 240 million opted-in individuals in the U.S. and more than 535 million opted-in individuals globally with an average of more than 2,500 attributes per individual, which may be demographic, behavioral, psychographic, transactional, or indicative of preference.
Secure, Scalable and Reliable Platform The ZMP has been designed to provide our customers with high levels of reliability, data integrity, performance and security. We built and maintain a multi-tenant application architecture that has been designed to enable our service to scale securely, reliably and cost-effectively to tens of thousands of customers and millions of users.
We built and maintain a multi-tenant application architecture that has been designed to enable our service to scale securely, reliably and cost-effectively to tens of thousands of customers and millions of users. Our multi-tenant application architecture maintains the integrity and separation of customer data while still permitting all customers to use the same application functionality simultaneously.
Since we view data as one of our key competitive advantages, we will also continue to invest resources to expand our data offerings, both from third-party providers, as well as our proprietary data sources. Expand into international markets . As we expand relationships with our existing customers in the U.S., we are also investing in select regions in Europe.
Since we view data as one of our key competitive advantages, we will also continue to invest resources to expand our data offerings, both from third-party providers, as well as our proprietary data sources. Continue to strengthen our partnership ecosystem and expand sales capacity .
Our key patents also include secure data encryption technology enabling us to leverage our CDP+ to enhance our customers’ proprietary data while maintaining separation between the data sets. We also currently own trademark registrations and applications for the ZETA and DISQUS names and variants thereof and other product-related marks in the United States and certain foreign countries.
Our key patents in these areas enhance the transferability and integrity of our data assets and the interoperability and scalability of our data platforms. We also currently own trademark registrations and applications for the ZETA and DISQUS names and variants thereof and other product-related marks in the United States and certain foreign countries.
Our competitive market is highly fragmented with most competitors focused on specific use cases, end markets and/or types of data sets and point solutions.
We believe no single company has offerings that match the comprehensive capabilities of the ZMP and CDP+, but we face collective competition from a variety of companies. Our competitive market is highly fragmented with most competitors focused on specific use cases, end markets and/or types of data sets and point solutions.
We have also registered numerous internet domain names related to our business. We also rely on copyright laws to protect computer programs related to our platform and our proprietary technologies. In addition, we enter into confidentiality agreements and invention or work product assignment agreements with employees and contractors involved in the development of our proprietary intellectual property.
We have also registered numerous internet domain names related to our business. We also rely on copyright laws to protect creative aspects of our website and computer programs related to our platform and our proprietary technologies.
Continue to strengthen our partnership ecosystem and expand sales capacity . With a focus on growing our sales capacity, we are building a sophisticated sales operation to focus on opportunity creation and progression.
With a focus on growing our sales capacity, we are building a sophisticated sales operation to focus on opportunity creation and progression. We believe these new capabilities will allow us to further strengthen our relationships with our existing customers and gain global market share. Expand into international markets .
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.
In addition, we enter into confidentiality agreements and invention or work product assignment agreements with employees and contractors involved in the development of our proprietary intellectual property. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.
Enriched with intent-based scoring from Zeta’s Data Cloud, CDP+ makes it possible to identify anonymous website visitors and engage them across channels with meaningful, individualized experiences. The CDP+ has extensive technical flexibility and can adjust to our customers’ custom data schemas with limited or no pre-configuration required.
Customers can consolidate multiple databases and internal and external data feeds, and organize their data based on their unique needs and performance metrics. Enriched with intent-based scoring from our proprietary data, Zeta CDP makes it possible to identify anonymous website visitors and engage them across multiple channels with meaningful, individualized experiences.
Zeta is focused on ensuring equitable processes, standards, and policies. We also create awareness around different backgrounds, cultures and communities through global panel discussions, volunteering and mentoring opportunities, as well as providing comprehensive trainings to all employees.
We also create awareness around different backgrounds, cultures and communities through global panel discussions, volunteering and mentoring opportunities, as well as providing comprehensive trainings to all employees. 6 We currently have five Employee Resource Groups (ERGs) with strong engagement and participation: Bridge Builders (Black Community), WING (Women’s Community), PRIDE (LGBTQIA+ community), LiT (Latinx Community) and MOSIAC (AAPI Community).
We currently have five Employee Resource Groups (ERGs) with strong engagement and participation: Bridge Builders (Black Community), WING (Women’s Community), PRIDE (LGBTQIA+ community), LiT (Latinx Community) and MOSIAC (AAPI Community). Each ERG also welcomes allies as we believe that creating meaningful change can only be achieved by working collectively as a united team.
Each ERG also welcomes allies as we believe that creating meaningful change can only be achieved by working collectively as a united team. Compensation, Benefits, and Employee Wellness We aim to provide market-competitive compensation and benefit programs for our employees.
As a result, our customers are incentivized to allocate an increasing percentage of their marketing budgets to our platform and to enter into long-term contractual commitments with us. Opportunity Explorer As our keystone product suite, the Opportunity Explorer detects and surfaces new marketing opportunities for our customers to achieve their business goals.
We also offer various technical upgrades, consulting services, additional integrations, and access to ad-hoc data sources, services, and channels. As a result, our customers are incentivized to allocate an increasing percentage of their marketing budgets to our platform and to enter long-term contractual commitments. Messaging – ESP Zeta Messaging, our ESP offering, provides our customers with end-to-end omnichannel messaging capabilities.
Furthermore, we provide the following programs, which vary by country/region: generous paid time off, family leave, flexible work schedules, and 401(k) matching. 6 COVID-19 Response To continue to support the well-being of our employees during the COVID-19 pandemic, we have created new resources for our employees to assist with the transition to a remote work environment.
Furthermore, we provide the following programs, which vary by country/region: generous paid time off, family leave, flexible work schedules, and 401(k) matching. Intellectual Property We have a patent portfolio of more than 125 U.S. and international patents and applications which include 21 granted patents and 33 pending patent applications covering machine learning and artificial intelligence (AI).
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Our customers can purchase our products individually or in combination to obtain a 360-degree view of the consumer and our products can scale based on the needs of the customer. We also offer various technical upgrades, consulting services, additional integrations and access to ad-hoc data sources, services or channels.
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Opted-in Data Set Our data set is an amalgamation of our private proprietary data, publicly available data and data provided by our partner ecosystem.
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If necessary, we can also engineer a deeper level of data integration between the CDP+ and our customers’ marketing infrastructure. As part of our standard offering, we provide our customers with service-level agreements (“SLAs”) that guarantee high-levels of reliability, performance and security. Customers pay Zeta a design and development fee and a licensing fee for the CDP+.
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The platform consists of three core products (CDP, ESP, DSP) with modules that can be “turned on” to meet our customers’ specific business needs. Artificial intelligence is native to the ZMP, unlocking new capabilities for creativity, automation, optimization, forecasting, planning, and onboarding. Our customers can purchase our products individually or in combination based on their evolving needs.
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Key elements of our long-term growth strategy include: Further penetrate our existing customer base .
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From segmentation to automation of campaigns, we deliver rich, individualized experiences that drive engagement through email, mobile, social and other channels. Using access to our intelligence tools, our ESP customers can expand their knowledge of their customers with past purchase behavior, channel preferences, real-time interests, and predictive intent.
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Our multi-tenant application architecture maintains the integrity and separation of customer data while still permitting all customers to use the same application functionality simultaneously. Our architecture also enables us to segment access privileges across our user base.
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Our built-in artificial intelligence not only selects audiences and automates campaigns, but it can also optimize content and recommendations dynamically, based on our intelligence-driven understanding of customer needs, interests, and forecasted behavior. As a component of the ZMP, Zeta Messaging offers integrated data management, enterprise-scale delivery and support, and sophisticated omnichannel orchestration.
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We have maintained an engaged and productive workforce without sacrificing our commitment to keeping our team members safe. Intellectual Property We have a patent portfolio of more than 120 U.S. and international patents and applications which include 18 granted patents and 32 pending patent applications covering artificial intelligence, automation for predictive personalization and consumer identity resolution.
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Zeta CDP has extensive technical flexibility and can adjust to custom data schemas with limited or no pre-configuration required. If necessary, we can also engineer a deeper level of data integration between Zeta CDP and a customer’s unique marketing infrastructure.
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Activation - DSP Zeta Activation aims to help our customers to maximize the power of paid media to engage the right audiences where and how they want to be reached, with personalized messages determined by billions of real-time signals and predictive insights. Zeta Activation delivers highly personalized, targeted experiences via desktop, mobile, CTV and social, among other channels.
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It operates on one of the industry’s most durable and persistent identity graphs, anchored by people-based identifiers with minimal reliance on third-party cookies. In turn, Zeta Activation provides more precise analytics and attribution, with zero-to-minimal data loss across channels, and can be used to intelligently optimize media spend.
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Through our single-platform approach, we can integrate paid media and multichannel campaigns to deliver true cross-channel marketing across desktop, mobile, display and video, CTV, search, email, and web, among other channels. We offer one of the largest proprietary data sets in the U.S., informing the campaigns that our customers launch with rich, actionable insights.
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Our superior integrated data management capabilities can update individual profiles with new data instantaneously. Intelligence - Agile Actionable intelligence is the foundation of the ZMP and our products. We showcase our differentiated capability to synthesize trillions of behavioral signals into intent-based scores tied to a unique individual through our Agile Intelligence product suite.
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In addition, in 2023, we were named as a Leader in IDC’s MarketScape for Worldwide Omni-Channel Marketing Platforms for B2C Enterprises. Secure, Scalable and Reliable Platform The ZMP has been designed to provide our customers with high levels of reliability, data integrity, performance and security.
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Zeta is focused on ensuring equitable processes, standards, and policies.
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Our AI patents focus on integrating predictive personalization, outcome forecasting, and generative AI holistically throughout our products to increase efficiency, enhance user experience, and deliver better customer outcomes. Other aspects of our patent portfolio cover data governance, security, and management technology.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeNew consumer tools, regulatory restrictions and potential changes to web browsers and mobile operating systems all threaten our ability to collect such data, which could harm our operating results and financial condition and adversely affect the demand for our products and solutions. • The standards that private entities and inbox service providers adopt in the future to regulate the use and delivery of email may interfere with the effectiveness of our platform and our ability to conduct business. • A significant inadvertent disclosure or breach of confidential and/or personal information we process, or a security breach of our or our customers’, suppliers’ or other partners’ computer systems could be detrimental to our business, reputation, financial performance and results of operations. • Our infrastructure depends on third-party data centers, systems and technologies to operate our business, the disruption of which could adversely affect our business, results of operations and financial condition. 7 • Catastrophic events such as pandemics, earthquakes, flooding, droughts, fire and power outages, and business and operational interruption by man-made problems such as terrorism.
Biggest changeNew consumer tools, regulatory restrictions and potential changes to web browsers and mobile operating systems all threaten our ability to collect such data, which could harm our operating results and financial condition and adversely affect the demand for our products and solutions. • Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations and financial condition. • Any unfavorable publicity or negative public perception of current data collection practices could result in additional regulations which may impact the effectiveness of our data cloud and platform. • A significant inadvertent disclosure or breach of confidential and/or personal information we process, or a security breach of our or our customers’, suppliers’ or other partners’ IT Systems could be detrimental to our business, reputation, financial performance and results of operations. • We depend on third-party data centers, systems and technologies to operate our business, the disruption of which could adversely affect our business, operating results and financial condition. • If we fail to detect or prevent fraud or malware intrusion on our platform, devices, or systems, or into the systems or devices of our customers and their consumers, publishers could lose confidence in our platform, and we could face legal claims and regulatory investigations, any of which could adversely affect our business, operating results and financial condition. • The standards that private entities and inbox service providers adopt in the future to regulate the use and delivery of email may interfere with the effectiveness of our platform and our ability to conduct business. • Any actual or perceived failure to comply with evolving regulatory frameworks around the development and use of artificial intelligence could adversely affect our business, results of operations, and financial condition. • Catastrophic events such as pandemics, earthquakes, flooding, droughts, fire and power outages, and business and operational interruption by man-made problems such as war, conflicts and acts of terrorism.
The risks and uncertainties described in this Annual Report on Form 10-K may not be the only ones we face. If any of the risks actually occur, our business, financial condition, operating results, cash flows and prospects could be materially and adversely affected.
The risks and uncertainties described in this Annual Report on Form 10-K may not be the only ones we face. If any of the risks actually occur, our business, operating results, financial condition, cash flows and prospects could be materially and adversely affected.
In addition to damaging our reputation, actual or alleged misconduct could affect the confidence of our stockholders, regulators and other parties and could have a material adverse effect on our business, financial condition and operating results.
In addition to damaging our reputation, actual or alleged misconduct could affect the confidence of our stockholders, regulators and other parties and could have a material adverse effect on our business, operating results and financial condition.
In light of the complex and evolving nature of EU, EU Member State and UK privacy laws on cookies and tracking technologies, there can be no assurances that we will be successful in our efforts to comply with such laws; violations of such laws could result in regulatory investigations, fines, orders to cease / change our use of such technologies, as well as civil claims including class actions, and reputational damage.
In light of the complex and evolving nature of EU, EU Member State and UK privacy laws on cookies and tracking technologies, there can be no assurances that we will be successful in our efforts to comply with such laws and violations of such laws could result in regulatory investigations, fines, orders to cease / change our use of such technologies, as well as civil claims including class actions, and reputational damage.
These provisions do the following: • permit our board of directors to issue up to 200,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate; • provide that the authorized number of directors may be changed only by resolution of our board of directors; • provide that our board of directors will be classified into three classes of directors; • limit the ability of stockholders to remove directors to permit removals only “for cause” once Class B common stock ceases to hold more than 50% of all our outstanding common stock; • provide that all vacancies, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; • prohibit stockholder action by written consent, subject to the terms of any series of preferred stock, if the holders of shares of Class B common stock no longer hold at least a majority of the voting power of the outstanding shares of our common stock; • require advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; • provide certain limitations on convening special stockholder meetings; • so long as any shares of Class B common stock remain outstanding, require the prior affirmative vote of the holders of a majority of the outstanding shares of Class B common stock, voting as a separate class to consummate a Change of Control Transaction (as defined in our amended and restated certificate of incorporation); • provide that the restrictions set forth in Section 203 of the Delaware General Corporation Law (“DGCL”) shall be applicable to us in the event that no holder of Class B common stock owns shares of our capital stock representing at least fifteen percent (15%) of the voting power of all the then outstanding shares of our capital stock; and • not provide for cumulative voting rights in election of directors.
These provisions do the following: • permit our board of directors to issue up to 200,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate; • provide that the authorized number of directors may be changed only by resolution of our board of directors; • provide that our board of directors will be classified into three classes of directors; • limit the ability of stockholders to remove directors to permit removals only “for cause” once Class B common stock ceases to hold more than 50% of all our outstanding common stock; • provide that all vacancies, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; • prohibit stockholder action by written consent, subject to the terms of any series of preferred stock, if the holders of shares of Class B common stock no longer hold at least a majority of the voting power of the outstanding shares of our common stock; • require advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; • provide certain limitations on convening special stockholder meetings; • so long as any shares of Class B common stock remain outstanding, require the prior affirmative vote of the holders of a majority of the outstanding shares of Class B common stock, voting as a separate class to consummate a Change of Control Transaction (as defined in our amended and restated certificate of incorporation); • provide that the restrictions set forth in Section 203 of the Delaware General Corporation Law (“DGCL”) shall be applicable to us in the event that no holder of Class B common stock owns shares of our capital stock representing at least fifteen percent of the voting power of all the then outstanding shares of our capital stock; and • not provide for cumulative voting rights in election of directors.
Office of Foreign Assets Control; • compliance with foreign data privacy laws, such as the EU ePrivacy Directive, GDPR, UK data protection laws, and Brazil’s General Data Protection Law (“LGPD”)which could materially diminish our ability to collect data and/or the effectiveness of our platform; • restrictions on the transfers of funds; • currency exchange rate fluctuations and foreign exchange controls; • economic and political instability in some countries; • compliance with the laws of numerous taxing jurisdictions where we conduct business, potential double taxation of our international earnings, and potentially adverse tax consequences due to changes in applicable U.S. and foreign tax laws; and • the complexity and potential adverse consequences of U.S. tax laws as they relate to our international operations.
Office of Foreign Assets Control; 13 • compliance with foreign data privacy laws, such as the EU ePrivacy Directive, GDPR, UK data protection laws, and Brazil’s General Data Protection Law (“LGPD”), which could materially diminish our ability to collect data and/or the effectiveness of our platform; • restrictions on the transfers of funds; • currency exchange rate fluctuations and foreign exchange controls; • economic and political instability in some countries; • compliance with the laws of numerous taxing jurisdictions where we conduct business, potential double taxation of our international earnings, and potentially adverse tax consequences due to changes in applicable U.S. and foreign tax laws; and • the complexity and potential adverse consequences of U.S. tax laws as they relate to our international operations.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is, to the fullest extent permitted by law, the sole and exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our current or former directors, officers, employees or our stockholders; • any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws (as either may be amended from time to time) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and • any action asserting a claim against us that is governed by the internal-affairs doctrine.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is, to the fullest extent permitted by law, the sole and exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our current or former directors, officers, employees or our stockholders; 28 • any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws (as either may be amended from time to time) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and • any action asserting a claim against us that is governed by the internal-affairs doctrine.
The anticipated benefits of any acquisition or investment may not be realized, and we may be exposed to unknown risks, any of which could adversely affect our business, results of operations and financial condition, including risks arising from: • difficulties in integrating the operations, technologies, product or service offerings, administrative systems and personnel of acquired businesses, especially if those businesses operate outside of our core competency or geographies in which we currently operate; • ineffectiveness or incompatibility of acquired technologies or solutions; • potential loss of key employees of the acquired businesses; • inability to maintain key business relationships and reputations of the acquired businesses; • diversion of management attention from other business concerns; • litigation arising from the acquisition or the activities of the acquired businesses, including claims from terminated employees, customers, former stockholders or other third parties and intellectual property disputes; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights, or increase our risk of liability; • complications in the integration of acquired businesses or diminished prospects; • failure to generate the expected financial results related to an acquisition on a timely manner or at all; • weak, ineffective, or incomplete data privacy compliance strategies by the acquired company resulting in our inability to use acquired data assets; • failure to accurately forecast the financial or other business impacts of an acquisition; and • implementation or remediation of effective controls, procedures and policies for acquired businesses.
The anticipated benefits of any acquisition or investment may not be realized, and we may be exposed to unknown risks, any of which could adversely affect our business, operating results and financial condition, including risks arising from: • difficulties in integrating the operations, technologies, product or service offerings, administrative systems and personnel of acquired businesses, especially if those businesses operate outside of our core competency or geographies in which we currently operate; 12 • ineffectiveness or incompatibility of acquired technologies or solutions; • potential loss of key employees of the acquired businesses; • inability to maintain key business relationships and reputations of the acquired businesses; • diversion of management attention from other business concerns; • litigation arising from the acquisition or the activities of the acquired businesses, including claims from terminated employees, customers, former stockholders or other third parties and intellectual property disputes; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights, or increase our risk of liability; • complications in the integration of acquired businesses or diminished prospects; • failure to generate the expected financial results related to an acquisition on a timely manner or at all; • weak, ineffective, or incomplete data privacy compliance strategies by the acquired company resulting in our inability to use acquired data assets; • failure to accurately forecast the financial or other business impacts of an acquisition; and • implementation or remediation of effective controls, procedures and policies for acquired businesses.
Additionally, improving our platform’s infrastructure and expanding its capacity in anticipation of growth in new channels and formats, as well as implementing technological enhancements to our platform to improve its efficiency and cost-effectiveness are key components of our business strategy, and if our third-party data centers are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business.
Additionally, improving our platform’s infrastructure and expanding its capacity in anticipation of growth in new channels and formats, as well as implementing technological enhancements to our platform to improve its efficiency and 19 cost-effectiveness are key components of our business strategy, and if our third-party data centers are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government 19 investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
Changes proposed by providers of major browsers to eliminate or restrict the usage of third-party cookies to track user behaviors, and to allow users to limit the collection of certain data generally or from specified websites, could impair our ability to collect user information, including personal data and usage information, that helps us provide more targeted advertising to our current and prospective consumers.
Changes proposed by providers of major browsers to eliminate or restrict the usage of third-party cookies to track user behaviors, and to allow users to limit the collection of certain data generally or from specified websites, could impair our ability to collect user information, 17 including personal data and usage information, that helps us provide more targeted advertising to our current and prospective consumers.
Because we fulfill email delivery on behalf of our customers, blacklisting of this type could undermine the effectiveness of our customers’ transactional email, email marketing programs and other email communications, all of which could have a material negative impact on our business, financial condition and results of operations. Inbox service providers can also block emails from reaching their users.
Because we fulfill email delivery on behalf of our customers, blacklisting of this type could undermine the effectiveness of our customers’ transactional email, email marketing programs and other email communications, all of which could have a material negative impact on our business, financial condition and results of operations. 20 Inbox service providers can also block emails from reaching their users.
Additionally, changes in the laws or regulations that limit our ability to send such communications or impose additional requirements upon us in connection with sending such communications would also materially adversely impact our business. For example, Canada’s Anti-Spam Legislation (“CASL”) prohibits email marketing without the recipient’s consent, with limited 17 exceptions.
Additionally, changes in the laws or regulations that limit our ability to send such communications or impose additional requirements upon us in connection with sending such communications would also materially adversely impact our business. For example, Canada’s Anti-Spam Legislation (“CASL”) prohibits email marketing without the recipient’s consent, with limited exceptions.
The proposed regulation would impose additional restrictions and obligations on providers of artificial intelligence systems, including increasing 21 transparency so consumers know they are interacting with an artificial intelligence system, requiring human oversight in artificial intelligence, and prohibiting certain practices of artificial intelligence that could lead to physical or psychological harm.
The proposed regulation would impose additional restrictions and obligations on providers of artificial intelligence systems, including increasing transparency so consumers know they are interacting with an artificial intelligence system, requiring human oversight in artificial intelligence, and prohibiting certain practices of artificial intelligence that could lead to physical or psychological harm.
The enforcement of intellectual property rights and confidentiality protections in India may not be as effective as in the U.S. or other countries. Policing unauthorized use of proprietary technology is difficult and expensive and we might need to resort to litigation to protect our trade secrets and confidential information.
The enforcement of intellectual property rights and confidentiality protections in India may not be as effective as in the U.S. or other countries. Policing unauthorized use of proprietary technology is difficult and expensive and we might need to resort to 11 litigation to protect our trade secrets and confidential information.
As part of our growth strategy, we may acquire or invest in other businesses, assets or technologies that are complementary to and fit within our strategic goals. Acquisitions are inherently risky and if they fail, they can result in necessary costly remediating steps such as litigation and divesture.
As part of our growth strategy, we may acquire or invest in other businesses, assets or technologies that are complementary to and fit within our strategic goals. Acquisitions are inherently risky and if they fail, they can result in costly remediating steps such as litigation and divesture.
It is yet to be determined if there will be an industry-wide framework for targeting consumers in a digital environment. Furthermore, regulatory and legislative actions may influence which data 16 collection tools are permitted in various jurisdictions and may further restrict our data collection efforts.
It is yet to be determined if there will be an industry-wide framework for targeting consumers in a digital environment. Furthermore, regulatory and legislative actions may influence which data collection tools are permitted in various jurisdictions and may further restrict our data collection efforts.
Any future negative publicity about the digital marketing industry as a whole or about an individual actor 23 could result in government agencies playing a more active role in regulating and enforcing rules that relate to the collection, use, sharing and disclosure of data.
Any future negative publicity about the digital marketing industry as a whole or about an individual actor could result in government agencies playing a more active role in regulating and enforcing rules that relate to the collection, use, sharing and disclosure of data.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Such estimates and assumptions are, by their nature, subject to substantial risks and uncertainties and factors may arise over time that lead us to change our methods, estimates, and judgments.
We base our estimates on historical experience and on various other assumptions that we believe to 26 be reasonable under the circumstances. Such estimates and assumptions are, by their nature, subject to substantial risks and uncertainties and factors may arise over time that lead us to change our methods, estimates, and judgments.
Our future growth will also depend in part on our ability to establish sales teams that effectively solve problems and efficiently execute our objectives. We will need to establish teams that are well versed in complex and 10 varied systems of distribution across national, regional and international markets.
Our future growth will also depend in part on our ability to establish sales teams that effectively solve problems and efficiently execute our objectives. We will need to establish teams that are well versed in complex and varied systems of distribution across national, regional and international markets.
If we combine, link or distribute our proprietary software with open source software in a specific manner, we could, under some open source licenses, be required to release the source code of our proprietary software to the public. This could also preclude us from charging license fees.
If we 23 combine, link or distribute our proprietary software with open source software in a specific manner, we could, under some open source licenses, be required to release the source code of our proprietary software to the public. This could also preclude us from charging license fees.
Any one of the factors referred to above or the cumulative effect of any combination of factors referred to above may result in our operating results being below our expectations and the expectations of securities analysts and investors, or may result in significant fluctuations in our quarterly and annual operating results, including fluctuations in our key performance indicators ("KPIs").
Any one of the factors referred to above or herein or the cumulative effect of any combination of factors referred to above or herein may result in our operating results being below our expectations and the expectations of securities analysts and investors, or may result in significant fluctuations in our quarterly and annual operating results, including fluctuations in our key performance indicators ("KPIs").
Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
Inflation has the potential to adversely affect our liquidity, business, operating results and financial condition of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security of personal information.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security of personal 15 information.
We may not be successful at educating and training our new and existing customers on how to use our platform, in particular our advanced reporting tools, in order for them to benefit from it and generate revenues.
Further, we may not be successful at educating and training our new and existing customers on how to use our platform, in particular our advanced reporting tools, in order for them to benefit from it and generate revenues.
The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources. Our failure to manage these risks successfully could adversely affect our business, results of operations and financial condition.
The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources. Our failure to manage these risks successfully could adversely affect our business, operating results and financial condition.
We believe our corporate culture has been critical to our success and we plan to invest substantial time and resources to continue building it. In particular, Diversity, Equity and Inclusion (“DEI”) is a strategic imperative at Zeta.
We believe our corporate culture has been critical to our success and we plan to continue to invest time and resources to continue building it. In particular, Diversity, Equity and Inclusion (“DEI”) is a strategic imperative at Zeta.
Lawmakers also have proposed new laws and regulations, and modifications to existing laws and regulations, that affect the activities of technology companies such as the recent efforts to eliminate or modify Section 230 of the Communications Decency Act.
Lawmakers also have proposed new laws and regulations, and modifications to existing laws and regulations, that affect the activities of technology 14 companies such as the recent efforts to eliminate or modify Section 230 of the Communications Decency Act.
Since we are subject to the supervision of relevant data protection authorities under both the EU GDPR and the UK GDPR, we could be fined under each of these regimes independently, 20 in respect of the same breach.
Since we are subject to the supervision of relevant data protection authorities under both the EU GDPR and the UK GDPR, we could be fined under each of these regimes independently, in respect of the same breach.
If not waived, future defaults could cause all of the outstanding indebtedness under the Senior Secured Credit Facility to become immediately due and payable and our access to further credit under the Senior Secured Credit Facility may terminate.
If not 24 waived, future defaults could cause all of the outstanding indebtedness under the Senior Secured Credit Facility to become immediately due and payable and our access to further credit under the Senior Secured Credit Facility may terminate.
Given the unpredictability of the timing, nature and scope of cybersecurity attacks and other security-related incidents, our technology may fail to adequately secure the data, including confidential information and personal information we maintain, and we cannot 18 entirely eliminate the risk of improper or unauthorized access to or disclosure of such data, other security events that impact the integrity or availability of such data, or our systems and operations and any data contained in such systems and operations.
Given the unpredictability of the timing, nature and scope of cybersecurity attacks and other security-related incidents, our technology may fail to adequately secure the data, including confidential information and personal information we maintain, and we cannot entirely eliminate the risk of improper or unauthorized access to or disclosure of such data, other security events that impact the integrity or availability of such data, or our IT Systems and operations and any data contained in such systems and operations.
Our loan agreement contains operating and financial covenants that may restrict our business and financing activities. As of the date hereof, we had $185.0 million outstanding under our loan and security agreement (“Senior Secured Credit Facility”) with Bank of America, N.A., dated February 3, 2021. Borrowings under this agreement are secured by substantially all of our assets.
Our loan agreement contains operating and financial covenants that may restrict our business and financing activities. As of the date hereof, we have $185.0 million outstanding under our loan and security agreement (“Senior Secured Credit Facility”) with Bank of America, N.A., dated February 3, 2021. Borrowings under this agreement are secured by substantially all of our assets.
We are subject to payment-related risks if customers dispute, do not pay their invoices, or decrease their amount of spend due to unforeseen downturns in their financial condition. Any decreases or significant delays in payments could have a material adverse effect on our business, results of operations and financial condition.
We are subject to payment-related risks if customers dispute, do not pay their invoices, or decrease their amount of spend due to unforeseen downturns in their financial condition. Any decreases or significant delays in payments could have a material adverse effect on our business, operating results and financial condition.
These bodies investigate non-compliance and report significant instances of non-compliance to regulatory authorities such as the FTC 24 or data protection authorities in Europe. As new legislation comes into effect, such as the CPRA, self-regulatory programs may change their requirements based on such new legislation, which adds complexity and costs for companies to maintain compliance.
These bodies investigate non-compliance and report significant instances of non-compliance to regulatory authorities such as the FTC or data protection authorities in Europe. As new legislation comes into effect, self-regulatory programs may change their requirements based on such legislation, which adds complexity and costs for companies to maintain compliance.
We are currently unable to predict the ultimate impact of the Inflation Reduction Act on our business, results of operations and financial condition. Moreover, the determination of our provision for income taxes and other tax liabilities requires significant estimates and judgment by management, and the tax treatment of certain transactions is uncertain.
We are currently unable to predict the ultimate impact of the Inflation Reduction Act and OECD requirements on our business, results of operations and financial condition. Moreover, the determination of our provision for income taxes and other tax liabilities requires significant estimates and judgment by management, and the tax treatment of certain transactions is uncertain.
As a result of these and other factors, there can be no assurance that we will be successful in making a sale to a potential customer. If our sales efforts to a potential customer do not result in sufficient revenue to justify our investments, our business, financial condition and results of operations could be adversely affected.
As a result of these and other factors, there can be no assurance that we will be successful in making a sale to a potential customer. If our sales efforts to a potential customer do not result in sufficient revenue to justify our investments, our business, operating results and financial condition could be adversely affected.
In addition, regulations such as the GDPR permit data protection authorities to impose penalties for violations. Any new and unforeseen regulatory limitations on our operations could impair our ability to deliver effective solutions to our customers, which could adversely affect our business, results of operations and financial condition.
In addition, regulations such as the GDPR permit data protection authorities to impose penalties for violations. Any new and unforeseen regulatory limitations on our operations could impair our ability to deliver effective solutions to our customers, which could adversely affect our business, operating results and financial condition.
Our intellectual property rights may be difficult to enforce and protect, which could enable others to copy or use aspects of our technology without compensating us, thereby eroding our competitive advantage and having an adverse effect on our business, results of operations and financial condition.
Our intellectual property rights may be difficult to enforce and protect, which could enable others to copy or use aspects of our technology without compensating us, thereby eroding our competitive advantage and having an adverse effect on our business, operating results and financial condition.
Any resurgences or variants of the virus or other epidemics, pandemics or health crises could have a material negative impact on economic and market conditions around the world, which could have a significant negative impact on our and our customers, suppliers’ or other partners’ business, results of operations and financial condition.
Any resurgences or variants of the virus or other epidemics, pandemics or health crises could have a material negative impact on economic and market conditions around the world, which could have a significant negative impact on our and our customers, suppliers’ or other partners’ business, operating results, and financial condition.
In the event of damage or interruption, it is unlikely that we would be appropriately compensated for the reputational harm that such an interruption would create regardless of any damages we may recover from such third parties or any insurance policy in place.
In the event of damage or interruption to IT Systems, it is unlikely that we would be appropriately compensated for the reputational harm that such an interruption would create regardless of any damages we may recover from such third parties or any insurance policy in place.
The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches suffered as a result of the business’s violation of the duty to implement and maintain reasonable security procedures and practices, and this may increase data breach litigation.
The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches suffered as a result of the business’s violation of the duty to implement and maintain reasonable security procedures and practices, and this may lead to breach litigation.
Additionally, we may be obligated to indemnify our customers or inventory and data suppliers in connection with any such litigation. Any of these events could have an adverse effect on our business, results of operations and financial condition.
Additionally, we may be obligated to indemnify our customers or inventory and data suppliers in connection with any such litigation. Any of these events could have an adverse effect on our business, operating results and financial condition.
The experience and capabilities of Indian courts in handling intellectual property litigation vary, and outcomes are unpredictable. Further, such litigation may require significant expenditure of cash and management efforts and could harm our business, financial condition and results of operations.
The experience and capabilities of Indian courts in handling intellectual property litigation vary, and outcomes are unpredictable. Further, such litigation may require significant expenditure of cash and management efforts and could harm our business, operating results and financial condition.
A significant inadvertent disclosure or breach of confidential and/or personal information we process, or a security breach of our or our customers’, suppliers’, or other partners’ computer systems could be detrimental to our business, reputation, financial performance and results of operations.
A significant inadvertent disclosure or breach of confidential and/or personal information we process, or a security breach of our or our customers’, suppliers’, or other partners’ IT Systems could be detrimental to our business, reputation, financial performance and results of operations.
On June 10, 2022, the lock-up agreements that previously restricted certain holders of our capital stock from transferring or selling our shares expired. Additionally, our directors, executive officers, employees and, in certain instances, service providers, hold shares of common stock subject to outstanding options, restricted stock awards and restricted stock units under our equity incentive plans.
On June 10, 2022, the lock-up agreements that previously restricted certain holders of our capital stock from transferring or selling our shares expired. Additionally, our directors, executive officers, employees and, in certain instances, service providers, hold shares of common stock subject to outstanding options, time-based and performance-based restricted stock awards and restricted stock units under our equity incentive plans.
Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected.
Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, operating results, financial condition and liquidity could be materially adversely affected.
Future acquisitions or strategic investments could be difficult to identify and integrate, divert the attention of management and disrupt our business, dilute stockholder value and adversely affect our business, results of operations and financial condition.
Future acquisitions or strategic investments could be difficult to identify and integrate, divert the attention of management and disrupt our business, dilute stockholder value and adversely affect our business, operating results and financial condition.
The FTC also has initiated a rulemaking regarding “Commercial Surveillance and Data Security,” and even though that rule is not expected to come into effect soon, it has resulted in increased regulatory attention and scrutiny regarding the collection and processing of personal information and online advertising, marketing and analytics services.
The FTC also has initiated a rulemaking regarding “Commercial Surveillance and Data Security,” and although that rule is not expected to come into effect soon, it has resulted in increased regulatory attention and scrutiny regarding the collection and processing of personal information and online advertising, marketing and analytics services.
Further, we collect data on consumers that does not directly identify the individual (although considered personal information under the CCPA and other US laws, GDPR, and other laws), including browser, device location and characteristics, online browsing behavior, exposure to and interaction with advertisements, and inferential data about purchase intentions and preferences.
Further, we collect data on consumers that does not directly identify the individual (although considered personal information under the CCPA and other U.S. laws, GDPR, and other laws), including browser, device location and characteristics, online browsing behavior, exposure to and interaction with advertisements, and inferential data about purchase intentions and preferences.
Our results of operations also depend on sales to enterprise customers, which make product purchasing decisions based in part or entirely on factors, or perceived factors, not directly related to the features of our platform, including, among others, a customer’s projections of business growth, uncertainty about economic conditions (including as a result of the COVID-19 pandemic), capital budgets, anticipated cost savings from the implementation of our platform, potential preference for such customer’s internally-developed software solutions, perceptions about our business and platform, more favorable terms offered by potential competitors, and previous technology investments.
Our results of operations also depend on sales to enterprise customers, which make product purchasing decisions based in part or entirely on factors, or perceived factors, not directly related to the features of our platform, including, among others, a customer’s projections of business growth, uncertainty about economic conditions, capital budgets, anticipated cost savings from the implementation of our platform, potential preference for such customer’s internally-developed software solutions, perceptions about our business and platform, more favorable terms offered by potential competitors, and previous technology investments.
Item 1A. Risk Factors. In addition to the other information set forth in this Annual Report on Form 10-K, you should carefully consider the risks and uncertainties described below, which could materially adversely affect our business, financial condition, results of operations and cash flow.
Item 1A. Risk Factors. In addition to the other information set forth in this Annual Report on Form 10-K, you should carefully consider the risks and uncertainties described below, which could materially adversely affect our business, operating results, financial condition, and cash flow.
Third parties and malicious actors also may attempt to extort us through a ransomware or other similar form of attack by encrypting information systems, rendering our information systems inoperable, or stealing intellectual property, confidential information, personal information, or other sensitive data, and demanding payment in return.
Third parties and threat actors also may attempt to extort us through a ransomware or other similar form of attack by encrypting information IT Systems, rendering our IT Systems inoperable, or stealing intellectual property, confidential information, personal information, or other sensitive data, and demanding payment in return.
Any changes in the service levels at our third-party data centers or any errors, service interruptions, defects, disruptions, or other performance problems could adversely affect our reputation, expose us to liability, cause us to lose customers, or otherwise adversely affect our business, results of operations and financial condition.
Any changes in the service levels at our third-party data centers or any errors, service interruptions, defects, disruptions, or other performance problems could adversely affect our reputation, expose us to liability, cause us to lose customers, or otherwise adversely affect our business, operating results and financial condition.
In August 2022, our board of directors authorized a share repurchase program to repurchase up to $50 million of our outstanding Class A common stock through December 31, 2024. Although our board of directors has authorized this repurchase program, the program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.
In August 2022, our board of directors authorized a share repurchase program to repurchase shares of our outstanding Class A common stock through December 31, 2024. Although our board of directors has authorized this repurchase program, the program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.
As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these risks. These factors and others could harm our ability to increase international revenues and, consequently, could adversely affect our business, results of operations and financial condition.
As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these risks. These factors and others could harm our ability to increase international revenues and, consequently, could adversely affect our business, operating results and financial condition.
A significant natural disaster could have a material adverse effect on our business, results of operations and financial condition, and our insurance coverage may be insufficient to compensate us for losses that we may incur.
A significant natural disaster could have a material adverse effect on our business, operating results, and financial condition, and our insurance coverage may be insufficient to compensate us for losses that we may incur.
In particular, we, like other organizations, especially in the digital marketing industry and marketing technology industry, are routinely subject to attempts by such malicious actors (e.g., cybersecurity threats, attempted data privacy breaches, or other incidents), which if successful, may result in either threatened or actual exposure leading to unauthorized access, disclosure and misuse of confidential information, personal information or other information regarding customers, suppliers, partners, vendors, employees, or our company and business..
In particular, we (and certain of our third-party providers), like other organizations, especially in the digital marketing industry and marketing technology industry, are routinely subject to attempts by such threat actors (e.g., cybersecurity threats, attempted data privacy breaches, or other incidents), which if successful, may result in either threatened or actual exposure leading to unauthorized access, disclosure and misuse of confidential information, personal information or other information regarding customers, suppliers, partners, vendors, employees, or our company and business.
If we fail to detect or prevent fraud or malware intrusion on our platform, devices, or systems, or into the systems or devices of our customers and their consumers, publishers could lose confidence in our platform, and we could face legal claims, any of which could adversely affect our business, results of operations and financial condition.
If we fail to detect or prevent fraud or malware intrusion on our platform, devices, or systems, or into the systems or devices of our customers and their consumers, publishers could lose confidence in our platform, and we could face legal claims and regulatory investigations, any of which could adversely affect our business, operating results and financial condition.
As we rely heavily on our data center facilities, computer and communications systems and the Internet to conduct our business and provide high-quality customer service, these disruptions could negatively impact our ability to run our business and either directly or indirectly disrupt publishers’ and partners’ businesses, which could have an adverse effect on our business, results of operations and financial condition.
As we rely heavily on our data center facilities, computer and communications systems and the Internet to conduct our business and provide high-quality customer service, any disruptions of the foregoing could negatively impact our ability to run our business and either directly or indirectly disrupt publishers’ and partners’ businesses, which could have an adverse effect on our business, operating results, and financial condition.
Such parties could attempt to gain entry to our systems (including by gaining employment at Zeta) for the purpose of stealing data, including confidential information or personal information, or breaching our security systems.
Such parties could attempt to gain entry to our or our vendor’s IT Systems (including by gaining employment at Zeta) for the purpose of stealing data, including confidential information or personal information, or breaching our security systems or other IT Systems.
In addition, the following factors may cause our operating results to fluctuate: • Our usage-based pricing model makes it difficult to forecast revenues from our current customers and future prospects; • our ability to attract scaled customers and retain and increase sales to existing customers; • changes in our pricing policies, the pricing policies of our competitors and the pricing or availability of data or other third-party services; 9 • the seasonal budgeting cycles and internal marketing budgeting and strategic purchasing priorities of our customers; • our ability to continue to develop and offer products and solutions that are superior to those of our competitors; • our ability to develop our existing platform and introduce new solutions on our platform; • our ability to retain and attract top talent; • our ability to anticipate or respond to changes in the competitive landscape, or improvements in the functionality of competing solutions that reduce or eliminate one or more of our competitive advantages; • our ability to maintain and expand our relationships with data centers and strategic third-party technology vendors, who provide floor space, bandwidth, cooling and physical security services on which our platform operates; • our ability to successfully expand our business internationally; • the emergence of significant privacy, data protection, security or other threats, regulations or requirements applicable to our business and shifting views and behaviors of consumers concerning use of data and data privacy; • extraordinary expenses, such as litigation or other dispute-related settlement payments; and • future accounting pronouncements or changes in our accounting policies.
In addition, the following factors may cause our operating results to fluctuate: • Our usage-based pricing model makes it difficult to forecast revenues from our current customers and future prospects; • changes in our pricing policies, the pricing policies of our competitors and the pricing or availability of data or other third-party services; • the seasonal budgeting cycles and internal marketing budgeting and strategic purchasing priorities of our customers; • our ability to retain and attract top talent; • our ability to anticipate or respond to changes in the competitive landscape, or improvements in the functionality of competing solutions that reduce or eliminate one or more of our competitive advantages; • our ability to maintain and expand our relationships with data centers and strategic third-party technology vendors, who provide floor space, bandwidth, cooling and physical security services on which our platform operates; • our ability to successfully expand our business internationally; • the emergence of significant privacy, data protection, security or other threats, regulations or requirements applicable to our business and shifting views and behaviors of consumers concerning use of data and data privacy; • extraordinary expenses, such as litigation or other dispute-related settlement payments; and • future accounting pronouncements or changes in our accounting policies.
As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
As supervisory authorities issue further guidance on personal data export mechanisms, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
Further, our operations in India involve significant risks, including: • difficulty hiring and retaining engineering and management resources due to intense competition for such resources and resulting wage inflation; • heightened exposure to changes in economic, security and political conditions; • different standards of protection for intellectual property rights and confidentiality protection; • the effects of the COVID-19 pandemic or any other pandemics, epidemics or other health crises on general health and economic conditions; and • fluctuations in currency exchange rates and tax compliance.
Further, our operations in India involve significant risks, including: • difficulty hiring and retaining engineering and management resources due to intense competition for such resources and resulting wage inflation; • heightened exposure to changes in economic, security and political conditions, war, conflicts and acts of terrorism; • different standards of protection for intellectual property rights and confidentiality protection; • the effects of pandemics, epidemics or other health crises on general health and economic conditions; and • fluctuations in currency exchange rates and tax compliance.
Substantial future sales of shares of our Class A common stock could cause the market price of our Class A common stock to decline and we may also expend substantial funds to satisfy a portion of our tax withholding and remittance obligations that arise 25 upon the vesting and/or settlement of certain of our restricted stock awards, which may have an adverse effect on our financial condition and results of operations.
Risks Related to Public Reporting Matters and An Investment in Our Class A Common Stock 25 Substantial future sales of shares of our Class A common stock could cause the market price of our Class A common stock to decline and we may also expend substantial funds to satisfy a portion of our tax withholding and remittance obligations that arise upon the vesting and/or settlement of certain of our restricted stock awards, which may have an adverse effect on our financial condition and results of operations.
An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, results of operations and financial condition.
An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, operating results and financial condition.
In particular, the COVID-19 pandemic, including the reactions of governments, markets and the general public, has resulted in a number of adverse consequences for our business, results of operations and financial condition, many of which are beyond our control.
In particular, the COVID-19 pandemic, including the reactions of governments, markets and the general public, resulted in a number of adverse consequences for our business, operating results, and financial condition, many of which were beyond our control.
The effectiveness of our platform relies in part on our ability to collect and use online data, so these changes could adversely affect our business, given our use of cookies and similar technologies.
The effectiveness of our platform relies in part on our ability to collect and use online data, so these changes could adversely affect our business.
If we do not have or are unable to generate sufficient cash to repay our debt obligations when they become due and payable, either upon maturity or in the event of a default, we would be required to obtain additional debt or equity financing, which may not be available on favorable terms, or at all, which may negatively impact our ability to operate and continue our business as a going concern. 15 Risks Related to Certain Tax Matters Our tax liabilities may be greater than anticipated.
If we do not have or are unable to generate sufficient cash to repay our debt obligations when they become due and payable, either upon maturity or in the event of a default, we would be required to obtain additional debt or equity financing, which may not be available on favorable terms, or at all, which may negatively impact our ability to operate and continue our business as a going concern.
If we are unable to collect customers’ fees on a timely basis or at all, we could incur write-offs for bad debt, which could have a material adverse effect on our results of operations for the periods in which the write-offs occur.
If we are unable to collect customers’ fees on a timely basis or at all, we could incur write-offs for bad debt, which could have a material adverse effect on our business, operating results and financial condition for the periods in which the write-offs occur.
Among other requirements, the GDPR also regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the U.S.; in July 2020, the Court of Justice of the EU (“CJEU”) limited how organizations could lawfully transfer personal data from the EU/European Economic Area (“EEA”)to the U.S. by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“SCCs”).
Among other requirements, the GDPR also regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the U.S.; in July 2020, the Court of Justice of the EU (“CJEU”) limited how organizations could lawfully transfer personal data from the EU/European Economic Area (“EEA”) to the U.S. by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“SCCs”) by stating reliance on SCCs alone may not be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.
Policing unauthorized use of our technology is difficult and costly. In addition, the laws of some foreign countries may not be as protective of intellectual property rights as those of the U.S., and mechanisms for enforcement of our proprietary rights in such countries may be inadequate.
In addition, the laws of some foreign countries may not be as protective of intellectual property rights as those of the U.S., and mechanisms for enforcement of our proprietary rights in such countries may be inadequate.
Interest rates were at historic lows during 2020 and 2021, when the United States Federal Reserve took several steps to protect the economy from the impact of the COVID-19 pandemic, including reducing interest rates to new historic lows. In 2022, the United States Federal Reserve raised interest rates and signaled that further increases are expected in the near future.
Interest rates were at historic lows during 2020 and 2021, when the United States Federal Reserve took several steps to protect the economy from the impact of the COVID-19 pandemic, including reducing interest rates to new historic lows. In 2022 and 2023, the United States Federal Reserve raised interest rates.
There is a risk that our business, platform and solutions may infringe or be alleged to infringe the trademarks, copyrights, patents and other intellectual property rights of third parties, including patents held by our competitors or by non-practicing entities.
We operate in an industry with an extensive history of intellectual property litigation. There is a risk that our business, platform and solutions may infringe or be alleged to infringe the trademarks, copyrights, patents and other intellectual property rights of third parties, including patents held by our competitors or by non-practicing entities.
We may incur significant costs in protecting against or remediating such events, including cyber-attacks. Any security breach could result in operational disruptions that impair our ability to meet our customers’ requirements, which could result in decreased revenue. We carry insurance comparable to our industry. However, we cannot guarantee that our insurance coverage will be sufficient to cover all losses.
We may incur significant costs in protecting against or remediating such events, including cyber-attacks. Any security breach could result in operational disruptions that impair our ability to meet our customers’ requirements, which could result in decreased revenue. We carry insurance comparable to our industry.
The technology industry is subject to increasing scrutiny that could result in U.S. government actions that could negatively affect our business. We may face claims relating to the information or content that is made available through our platform.
Risks Related to Data Collection and Security, Intellectual Property and Technology Industry Regulations The technology industry is subject to increasing scrutiny that could result in U.S. government actions that could negatively affect our business. We may face claims relating to the information or content that is made available through our platform.
We may have experienced ownership changes in the past and could experience one or more ownership changes in the future as a result of future changes in our stock ownership, some of which changes may be outside our control. Similar provisions of state tax law may also apply to our state NOLs.
We may experience ownership changes in the future as a result of future changes in our stock ownership, some of which changes may be outside our control. Similar provisions of state tax law may also apply to our state NOLs.
In the U.S., numerous state laws impose standards relating to the privacy, security, transmission and breach reporting of personal information. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us, our customers and our strategic partners.
In the U.S., numerous state laws impose standards relating to the privacy, security, transmission and breach reporting of personal information. Such laws and regulations are subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us, our customers and our strategic partners. For example, the CCPA went into effect on January 1, 2020.
Further, the CPRA passed in California and significantly amends the CCPA and imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.
Further, the CPRA, effective January 1, 2023, significantly amended the CCPA and imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.
We host our company-owned infrastructure at third-party data centers. We are also dependent on third-party providers to provide industry standard protection against potential damages such as cyber intrusions, natural disasters, criminal acts and technical maintenance.
We are also dependent on third-party providers to provide industry standard protection against potential damages such as cyber intrusions, natural disasters, criminal acts and technical maintenance.
Our liquidity and revenue can fluctuate quarter to quarter as certain of our customers have seasonal marketing activity. Historically, marketing activity is higher in the fourth quarter of the calendar year to coincide with the holiday shopping season as compared to the first quarter. As a result, the subsequent first quarter tends to reflect lower activity levels and lower performance.
Historically, marketing activity is higher in the fourth quarter of the calendar year to coincide with the holiday shopping season as compared to the first quarter. As a result, the subsequent first quarter tends to reflect lower activity levels and lower performance.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor a description of our legal proceedings, see Note 8 to our audited consolidated financial statements in the “Financial Statements and Supplementary Data” section of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures. Not Applicable. 29 Part II
Biggest changeThe amount of business that we conducted with Kubient was quantitively insignificant to Zeta and we have not worked with Kubient since 2020. We are cooperating with the investigation. For a description of our legal proceedings, see Note 8 to our audited consolidated financial statements in the “Financial Statements and Supplementary Data” section of this Annual Report on Form 10-K.
We are not currently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows, or financial condition. Defending any such proceedings is costly and can impose a significant burden on management and employees.
We are not currently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or 30 taken together have a material adverse effect on our business, operating results, cash flows, or financial condition. Defending any such proceedings is costly and can impose a significant burden on management and employees.
Added
We and members of our senior executive team have received subpoenas from the SEC in connection with an investigation into Kubient, Inc., a company we worked with prior to our initial public offering, and from the United States Attorney’s Office for the Southern District of New York, which is conducting a parallel investigation.
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Item 4. Mine Safety Disclosures. Not Applicable. 31 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRecent Sales of Unregistered Securities None. 30 Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Biggest changeEach acquirer of our securities in such transactions confirmed that it was an accredited investor and acknowledged that the securities must be acquired and held for investment. 32 Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
The graph assumes an initial investment of $100.00 at the close of trading on June 10, 2021 and that all dividends paid by companies included in these indices have been reinvested. The performance shown in the graph below is not intended to forecast or be indicative of future stock price performance. Item 6. Reserved. 31
The graph assumes an initial investment of $100.00 at the close of trading on June 10, 2021 and that all dividends paid by companies included in these indices have been reinvested. The performance shown in the graph below is not intended to forecast or be indicative of future stock price performance. Item 6. Reserved. 33
The following graph depicts the total cumulative stockholder return of our Class A common stock from June 10, 2021, the first day of trading of our Class A common stock on the NYSE, through December 31, 2022, relative to the performance of the Nasdaq Composite and the Russell 2000 indices.
The following graph depicts the total cumulative stockholder return of our Class A common stock from June 10, 2021, the first day of trading of our Class A common stock on the NYSE, through December 31, 2023, relative to the performance of the Nasdaq Composite and the Russell 2000 indices.
Purchases of Equity Securities by the Issuer or Affiliated Purchaser Common stock repurchases during the quarter ended December 31, 2022 were as follows . : Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (in millions) (1) October 1, 2022 – October 31, 2022 191,089 $ 6.72 191,089 $ 44.4 November 1, 2022 – November 30, 2022 208,643 $ 8.88 208,643 $ 42.6 December 1, 2022 – December 31, 2022 239,330 $ 9.03 239,330 $ 40.4 Total 639,062 639,062 (1) On August 3, 2022, the Company’s Board of Directors authorized a stock repurchase and withholding program of up to $50 million in the aggregate for (i) repurchases of the Company’s outstanding Class A common stock through December 31, 2024 and (ii) the withholding of shares as an alternative to market sales by certain executives to satisfy tax withholding requirements upon vesting of restricted stock awards.
Purchases of Equity Securities by the Issuer or Affiliated Purchaser Common stock repurchases during the quarter ended December 31, 2023 were as follows . : Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (in millions) (1) October 1, 2023 – October 31, 2023 — — — $ 28.9 November 1, 2023 – November 30, 2023 50,000 $ 8.66 50,000 $ 28.5 December 1, 2023 – December 31, 2023 399,033 $ 8.76 399,033 $ 25.0 Total 449,033 449,033 (1) On August 3, 2022, the Company’s Board of Directors authorized a stock repurchase and withholding program of up to $50 million in the aggregate for (i) repurchases of the Company’s outstanding Class A common stock through December 31, 2024 and (ii) the withholding of shares as an alternative to market sales by certain executives to satisfy tax withholding requirements upon vesting of restricted stock awards.
There is no established public trading market for our Class B common stock. Stockholders As of January 31, 2023, there were 131 holders of record of our Class A common stock and 7 holders of record of our Class B common stock.
There is no established public trading market for our Class B common stock. Stockholders As of February 16, 2024, there were 108 holders of record of our Class A common stock and 10 holders of record of our Class B common stock.
Added
Recent Sales of Unregistered Securities On October 11, 2023, the Company issued 40,274 shares of Class A common stock valued at $8.07 per share, for an aggregate value of $0.3 million, to certain individuals who provided services to the Company or their designated charitable organizations. We did not receive any proceeds from such issuance.
Added
The securities described above were issued in reliance on the exemption from registration provided in Section 4(a)(2) of the Securities Act for transactions by an issuer not involving a public offering.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear ended December 31, 2022 2021 2020 Revenues $ 590,961 $ 458,338 $ 368,120 Operating expenses: Cost of revenues (excluding depreciation and amortization) 215,466 174,720 148,878 General and administrative expenses 213,615 189,606 70,849 Selling and marketing expenses 299,238 229,343 77,140 Research and development expenses 69,454 64,474 31,772 Depreciation and amortization 51,878 45,922 40,064 Acquisition- related expenses 344 1,953 5,402 Restructuring expenses — 727 2,090 Total operating expenses $ 849,995 $ 706,745 $ 376,195 Loss from operations (259,034 ) (248,407 ) (8,075 ) Interest expense 7,303 7,033 16,257 Other expenses / (income) 13,983 (279 ) (126 ) Gain on extinguishment of debt — (10,000 ) — Change in fair value of warrants and derivative liabilities 410 5,000 28,100 Total other expenses $ 21,696 $ 1,754 $ 44,231 Loss before income taxes (280,730 ) (250,161 ) (52,306 ) Income tax (benefit) / provision (1,491 ) $ (598 ) 919 Net loss $ (279,239 ) $ (249,563 ) $ (53,225 ) Comparison of the Years Ended December 31, 2022 and 2021 Revenues Year Ended December 31, Change 2022 2021 Amount % Revenues $ 590,961 $ 458,338 $ 132,623 28.9 % Revenues increased by $132.6 million, or 28.9%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Biggest changeYear ended December 31, 2023 2022 Revenues $ 728,723 $ 590,961 Operating expenses: Cost of revenues (excluding depreciation and amortization) 274,482 215,466 General and administrative expenses 205,419 213,615 Selling and marketing expenses 288,441 299,238 Research and development expenses 73,869 69,454 Depreciation and amortization 51,149 51,878 Acquisition- related expenses 203 344 Restructuring expenses 2,845 — Total operating expenses $ 896,408 $ 849,995 Loss from operations (167,685 ) (259,034 ) Interest expense 10,939 7,303 Other expenses 7,820 13,983 Change in fair value of warrants and derivative liabilities — 410 Total other expenses $ 18,759 $ 21,696 Loss before income taxes (186,444 ) (280,730 ) Income tax provision/(benefit) 1,037 $ (1,491 ) Net loss $ (187,481 ) $ (279,239 ) Comparison of the Years Ended December 31, 2023 and 2022 Revenues Year Ended December 31, Change 2023 2022 Amount % Revenues $ 728,723 $ 590,961 $ 137,762 23.3 % Revenues increased by $137.8 million, or 23.3%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Future changes in the fair value of warrants and derivative liabilities depends on the Company entering into transactions that contain warrants or derivative features. Income tax (benefit) / provision We account for income taxes in accordance with ASC 740, Income Taxes, which requires an asset and liability approach for the financial accounting and reporting of income taxes.
Future changes in the fair value of warrants and derivative liabilities depends on the Company entering into transactions that contain warrants or derivative features. Income tax provision / (benefit) We account for income taxes in accordance with ASC 740, Income Taxes, which requires an asset and liability approach for the financial accounting and reporting of income taxes.
We assess whether an enhancement creates additional functionality to the software, and qualifies the costs incurred for capitalization. Once a project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization using the straight-line method. 44 We annually assess whether triggering events are present to review internal-use software for impairment.
We assess whether an enhancement creates additional functionality to the software, and qualifies the costs incurred for capitalization. Once a project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization using the straight-line method. We annually assess whether triggering events are present to review internal-use software for impairment.
A significant change in the time spent on each project could have a material impact on the amount capitalized and the related amortization expense in subsequent periods. Intangible assets, net We record intangible assets at cost less accumulated amortization. Cost of intangible assets acquired through business combinations represents their fair market value at the date of acquisition.
A significant change in the time spent on each project could have a material impact on the amount capitalized and the related amortization expense in subsequent periods. 46 Intangible assets, net We record intangible assets at cost less accumulated amortization. Cost of intangible assets acquired through business combinations represents their fair market value at the date of acquisition.
Our estimates and assumptions used in assessing fair value are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of these tangible and intangible assets 45 acquired and liabilities assumed, with the corresponding offset to goodwill.
Our estimates and assumptions used in assessing fair value are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill.
Key Performance Metrics We review several key performance metrics, discussed below, to evaluate our business, track performance, identify trends, formulate plans and make strategic decisions. We believe that the presentation of such metrics provides investors with effective ways to measure and model the performance of companies such as ours, with recurring revenue streams.
Key Performance Metrics We review key performance metrics, discussed below, to evaluate our business, track performance, identify trends, formulate plans and make strategic decisions. We believe that the presentation of such metrics provides investors with effective ways to measure and model the performance of companies such as ours, with recurring revenue streams.
We intend to continue to invest in marketing initiatives and as a result we expect selling and marketing expenses to increase in absolute dollars in future periods. Selling and marketing expense as a percentage of revenue may fluctuate from period to period based on revenue levels and the timing of our investments in these functions over the long term.
We intend to continue to invest in marketing initiatives and as a result we expect selling and marketing expenses to increase in absolute dollars in future periods. Selling and marketing expenses as a percentage of revenue may fluctuate from period to period based on revenue levels and the timing of our investments in these functions over the long term.
Changes in working capital were primarily driven by an increase in accounts receivable of $19.8 million and a decrease in deferred revenue of $4.6 million, partially offset by an increase in accounts payable of $13.5 million and accrued expenses and other current liabilities of $8.0 million.
Changes in working capital were primarily driven by an increase in accounts receivable of $19.8 million and a decrease in deferred revenue of $4.6 million, partially offset by increases in accounts payable of $13.5 million and accrued expenses and other current liabilities of $8.0 million.
Scaled customer ARPU We believe that our ability to increase scaled customer ARPU is an indicator of our ability to grow the long-term value of existing customer relationships. We calculate the scaled customer ARPU as revenue for the corresponding period divided by the average number of scaled customers during that period.
Scaled customer ARPU We believe that our ability to increase scaled customer ARPU is an indicator of our ability to grow the long-term value of existing customer relationships. We calculate the scaled customer ARPU as revenue for the corresponding period divided by the number of scaled customers during that period.
While it is difficult to predict adoption rates and future product demand, we are focused on continuing to innovate and create marketing automation products that address the business requirements of our customers better than alternative solutions. 33 Investment in Innovation We intend to invest in our business in order to drive long-term growth in an expanding market and capture economies of scale derived from a larger business base.
While it is difficult to predict adoption rates and future product demand, we are focused on continuing to innovate and create marketing automation products that address the business requirements of our customers better than alternative solutions. 35 Investment in Innovation We intend to invest in our business in order to drive long-term growth in an expanding market and capture economies of scale derived from a larger business base.
Change in fair value of warrants and derivative liabilities Change in fair value of warrants and derivative liabilities primarily relates to warrants to purchase shares of our common stock that we issued in connection with previous financing rounds, these warrants were converted into our Class A Common Stock upon IPO and as such there is no revaluation impact of warrant liabilities during the year ended on December 31, 2022.
Change in fair value of warrants and derivative liabilities Change in fair value of warrants and derivative liabilities primarily relates to warrants to purchase shares of our common stock that we issued in connection with previous financing rounds, these warrants were converted into our Class A Common Stock upon IPO and as such there is no revaluation impact of warrant liabilities during the year ended on December 31, 2023.
Net cash used in investing activities During the year ended December 31, 2022, we used $48.4 million of cash in investing activities, primarily consisting of capital expenditures of $22.2 million (including a $18.6 million investment in data and partnership agreements), website and software development costs of $17.0 million and business and asset acquisitions of $9.2 million (net of cash acquired).
During the year ended December 31, 2022, we used $48.4 million of cash in investing activities, primarily consisting of capital expenditures of $22.2 million (including a $18.6 million investment in data and partnership agreements), website and software development costs of $17.0 million and business and asset acquisitions and other investments of $9.2 million (net of cash acquired).
Contracts with customers may include multiple services. We determine whether those services are distinct from each other, and therefore performance obligations are to be accounted for separately, or not distinct from each other, and therefore part of a single performance obligation. We determine the standalone selling price for various performance obligations in the customer contracts that require significant judgement.
Contracts with customers may include multiple services. We determine whether those services are distinct from each other, and therefore performance obligations are to be accounted for separately, or not distinct from each other, and therefore part of a single performance obligation. We determine the standalone selling price for various performance obligations in the customer contracts that require significant judgment.
Depreciation and amortization Depreciation and amortization relate to property and equipment, website and software development costs as well as acquisition-related and other acquired intangible assets. We record depreciation and amortization using straight-line method over the estimated useful life of the assets. 35 Acquisition-related expenses Acquisition-related expenses primarily consists of legal fees associated with certain business combinations.
Depreciation and amortization Depreciation and amortization relate to property and equipment, website and software development costs as well as acquisition-related and other acquired intangible assets. We record depreciation and amortization using straight-line method over the estimated useful life of the assets. 37 Acquisition-related expenses Acquisition-related expenses primarily consists of legal fees associated with certain business combinations.
Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. Our management’s discussion and analysis of financial condition and results of operations included in this document generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. Our management’s discussion and analysis of financial condition and results of operations included in this document generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
For the years ended December 31, 2022 and 2021, annual goodwill impairment test, we elected to bypass the qualitative assessment for the four reporting units and proceeded directly to the quantitative impairment test using a discounted cash flow method to estimate the fair value of the reporting units.
For the years ended December 31, 2023 and 2022, annual goodwill impairment test, we elected to bypass the qualitative assessment for the four reporting units and proceeded directly to the quantitative impairment test using a discounted cash flow method to estimate the fair value of the reporting units.
We expect to continue to invest in research and development in order to develop our technology platform to drive incremental value and growth and as a result we expect that research and development expenses will fluctuate from period to period as a percentage of revenue over the long term.
We expect to continue to invest in research and development in order to develop our technology platform to drive incremental value and growth and as a result we expect that research and development expenses may fluctuate from period to period as a percentage of revenue over the long term.
The ZMP can analyze billions of structured and unstructured data points to predict consumer intent by leveraging sophisticated machine learning algorithms and the industry’s largest opted-in data set for omnichannel marketing. The ZMP acts on these insights by connecting with consumers through native integration of marketing channels and API integration with third parties.
The ZMP can analyze billions of structured and unstructured data points to predict consumer intent by leveraging sophisticated machine learning algorithms and the industry’s largest opted-in data set for omnichannel marketing. The ZMP acts on these insights by connecting with consumers through native integration of marketing channels and application programming interface ("API") integration with third parties.
Marketing programs are created and orchestrated by our customers through automated workflows and sophisticated dashboards. Our Consumer Data Platform (“CDP+”) ingests, analyzes and distills disparate data points to generate a single view of a consumer, encompassing identity, profile characteristics, behaviors and purchase intent, which is then made accessible through a single console.
Marketing programs are created and orchestrated by our customers through automated workflows and sophisticated dashboards. Our Consumer Data Platform ("CDP+") ingests, analyzes and distills disparate data points to generate a single view of a consumer, encompassing identity, profile characteristics, behaviors and purchase intent, which is then made accessible through a single console.
We perform an annual goodwill impairment test on October 1 every year based on financial statements as of September 30. Goodwill impairment is assessed based on a comparison of the fair value of our reporting units to the underlying carrying value of the reporting unit’s net assets, including goodwill. As of December 31, 2022, we have four reporting units.
We perform an annual goodwill impairment test on October 1 every year based on financial statements as of September 30. Goodwill impairment is assessed based on a comparison of the fair value of our reporting units to the underlying carrying value of 47 the reporting unit’s net assets, including goodwill. As of December 31, 2023, we have four reporting units.
We exclude political and advocacy customers, which represented 6.3% and 1.5% of revenue for 2022 and 2021, respectively, from our calculation of annual NRR rate because of the biennial nature of these customers. Our customer loyalty is also reflected in the table below, which breaks down the tenure of our scaled customers for the year ended December 31, 2022.
We exclude political and advocacy customers, which represented 1.8% and 6.3% of revenue for 2023 and 2022, respectively, from our calculation of annual NRR rate because of the biennial nature of these customers. Our customer loyalty is also reflected in the table below, which breaks down the tenure of our scaled customers for the year ended December 31, 2023.
Between January 1, 2022 and December 31, 2022, our sales team increased by approximately 23 sales employees, and we expect to continue to invest in our go-to-market efforts in 2023. We have significantly enhanced our sales techniques in order to build a collaborative environment that encourages cross-selling and implemented a new learning and development program for our sales team.
Between January 1, 2023 and December 31, 2023, our sales team increased by approximately 13 sales employees, and we expect to continue to invest in our go-to-market efforts in 2024. We have significantly enhanced our sales techniques in order to build a collaborative environment that encourages cross-selling and implemented a new learning and development program for our sales team.
Expenses related to “internet traffic” associated with the viewing of available impressions or queries per second and costs of providing support to our customers are also included in the cost of revenues.
Expenses related to “internet traffic” associated with the viewing of available impressions or queries per second and costs of providing support to our customers are also included in the cost of revenues (excluding depreciation and amortization).
Stock-based compensation The measurement of stock-based compensation for all stock-based payment awards, including restricted stock, employee’s stock purchase plan (“ESPP”), performance stock units (“PSUs”) and stock options granted to employees, consultants or advisors and non-employee directors, is based on the estimated fair value of the awards on the date of grant or date of modification of such grants.
Stock-based compensation The measurement of stock-based compensation for all stock-based payment awards, including restricted stock, performance stock units (“PSUs”) and stock options granted to employees, consultants or advisors and non-employee directors, and shares purchased under the Company’s employee stock purchase plan (“ESPP”), is based on the estimated fair value of the awards on the date of grant or date of modification of such grants.
Our sales team productivity increases with tenure and our current management system gives us confidence that we are well positioned for sustainable growth. Our Opportunity Explorer is a module that provides actionable insights to our customers and serves as an entry point into the ZMP.
Our sales team productivity increases with tenure and our current management system gives us confidence that we are well positioned for sustainable growth. Our Agile Intelligence suite is a module that provides actionable insights to our customers and serves as an entry point into the ZMP.
We plan to incur additional general and administrative expenses to support our growth. Even as cost of revenue and other expenses fluctuate over time and may be negatively impacted by factors beyond our control, we plan to remain focused on making necessary investments to drive long-term growth.
We plan to incur additional general and administrative expenses to support our growth. Even as cost of revenues (excluding depreciation and amortization) and other expenses fluctuate over time and may be negatively impacted by factors beyond our control, we plan to remain focused on making necessary investments to drive long-term growth.
Scaled customers We measure and track the number of scaled customers on an annual basis because our ability to attract new scaled customers, grow our scaled customer base and retain or expand our business with existing scaled customers is both an important contributor to our revenue growth and an indicator to investors of our measurable success.
Scaled customers We measure and track the number of scaled customers on a trailing twelve months basis because our ability to attract new scaled customers, grow our scaled customer base and retain or expand our business with existing scaled customers is both an important contributor to our revenue growth and an indicator to investors of our measurable success.
Our Opportunity Explorer synthesizes Zeta’s proprietary data and data generated by our customers to uncover consumer insights that are translated into marketing programs designed for highly targeted audiences across digital channels, including email, SMS, websites, applications, social media, CTV and chat.
Our Agile Intelligence suite synthesizes Zeta’s proprietary data and data generated by our customers to uncover consumer insights that are translated into marketing programs designed for highly targeted audiences across digital channels, including email, SMS, websites, applications, social media, CTV and chat.
The fair value of ESPP was determined using the Black-Sholes-Merton model and PSU was determined using the Monte-Carlo Simulation Method, and the related stock-based compensation is recognized over the expected vesting term.
The fair value of shares purchased under our ESPP was determined using the Black-Sholes-Merton model and PSU was determined using the Monte-Carlo Simulation Method, and the related stock-based compensation is recognized over the expected vesting term.
We calculate our annual NRR rate by dividing current year revenue earned from customers from which we also earned revenue in the prior year, by the prior year revenues. Our annual NRR rate was 111.5% and 113.3% for the years ended December 31, 2022 and 2021, respectively.
We calculate our annual NRR rate by dividing current year revenue earned from customers from which we also earned revenue in the prior year, by the prior year revenues. Our annual NRR rate was 110.9% and 111.5% for the years ended December 31, 2023 and 2022, respectively.
During the year ended December 31, 2022, we borrowed $5.6 million against the revolver facility and repaid the same amount against the term loan under the credit facility. We do not engage in off-balance sheet financing arrangements.
During the year ended December 31, 2023, we borrowed $11.3 million against the revolver facility and repaid the same amount against the term loan under the credit facility. We do not engage in off-balance sheet financing arrangements.
Discussions of 2020 and 2019 items and year-to-year comparisons between 2021 and 2020, and 2020 and 2019 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023.
Our transition to this hunter/farmer sales model has included focusing more of our sales team on growth of existing scaled customers and aligning scaled customers with sellers that have specific industry expertise.
Our transition to this hunter/farmer sales model has included focusing more of our sales team on growth of existing scaled customers and aligning scaled customers with sellers that have specific industry expertise. Expand Sales to Existing Customers We adhere to a “land, expand, extend” sales model.
Opportunity Explorer has been a proven way to land scaled customers, with minimal cost of implementation and high value adoption. 32 Drive Increase to Average Revenue Per User During the year ended December 31, 2022, we experienced an increase in our scaled customer Average Revenue Per User (“ARPU”), which resulted in our revenue increasing for the year compared to the prior-year period.
Agile Intelligence suite has been a proven way to land scaled customers, with minimal cost of implementation and high value adoption. 34 Drive Increase to Average Revenue Per User During the year ended December 31, 2023, we experienced an increase in our scaled customer Average Revenue Per User (“ARPU”), which resulted in our revenues increasing for the year compared to the prior-year period.
Key assumptions used to determine the fair value of stock options, ESPPs and PSUs were as follows: • Risk-free interest rate: The risk-free interest rate is based on the U.S.
Key assumptions used to determine the fair value of stock options, shares purchase under our ESPP and PSUs were as follows: • Risk-free interest rate: The risk-free interest rate is based on the U.S.
For the year ended December 31, 2022 and 2021, income tax benefit relates primarily to the partial release of our U.S. valuation allowance as a business combination consummated during 2022 and 2021 created a source of future taxable income, partially offset by an income tax provision for foreign taxes.
For the year ended December 31, 2022, we recorded an income tax benefit of $1,491, which primarily related to the partial release of our U.S. valuation allowance as a business combination consummated during 2022, which created a source of future taxable income, partially offset by an income tax provision for foreign taxes.
Year ended December 31, 2022 2021 Scaled customers 403 355 Scaled customers increased 14% for the year ended December 31, 2022, as compared to 2021, primarily due to growth in our customer base in the U.S. Of our scaled customers, 103 and 97 are super-scaled customers for the years ended December 31, 2022 and December 31, 2021, respectively.
Year ended December 31, 2023 2022 Scaled customers 452 403 Scaled customers increased 12% for the year ended December 31, 2023, as compared to 2022, primarily due to growth in our customer base in the U.S. Of our scaled customers, 131 and 103 are super-scaled customers for the years ended December 31, 2023 and December 31, 2022, respectively.
The increase in revenues is attributable to incremental revenues of $76.1 million from existing customers and $56.5 million from new customers (including approximately $1.6 million from the acquisitions made during the year ended December 31, 2022).
The increase in revenues is attributable to incremental revenues of $35.6 million from existing customers and $102.2 million from new customers (including approximately $5.5 million from the acquisitions made during the year ended December 31, 2023).
Year ended December 31, 2022 2021 Scaled customer ARPU $ 1,431 $ 1,242 Scaled customer ARPU increased 15% for the year ended December 31, 2022, as compared to 2021, primarily due to higher usage of our platform among scaled customers.
Year ended December 31, 2023 2022 Scaled customer ARPU (in thousands) $ 1,572 $ 1,431 Scaled customer ARPU increased 10% for the year ended December 31, 2023, as compared to 2022, primarily due to higher usage of our platform among scaled customers.
We define scaled customers as customers from which we generated at least $100,000 in revenues per year. As a subset of scaled customers, we define super-scaled customers as customers from which we generated at least $1.0 million in revenues per year.
We define scaled customers as customers from which we generated at least $100,000 in revenues during the trailing twelve months. As a subset of scaled customers, we define super-scaled customers as customers from which we generated at least $1.0 million in revenues during the trailing twelve months.
Repurchases during any given fiscal period under the 2022 SRP and withholding under the RSA withholding program (as described below) will reduce the number of weighted-average common shares outstanding for the period.
Repurchases and withholdings during any given fiscal period under the 2022 SRP will reduce the number of weighted-average common shares outstanding for the period.
We believe our existing cash and anticipated net cash provided by operating activities, together with available borrowings under our credit facility, will be sufficient to meet our working capital requirements for at least the next 12 months and thereafter for the foreseeable future.
As of December 31, 2023, we had an accumulated deficit of $958.5 million. 42 We believe our existing cash and anticipated net cash provided by operating activities, together with available borrowings under our credit facility, will be sufficient to meet our working capital requirements for at least the next 12 months and thereafter for the foreseeable future.
Acquisition-related expenses and restructuring expenses primarily consist of severance and other employee-related costs which we do not expect to incur in the future as acquisitions of businesses may distort the comparability of the results of operations.
Acquisition-related expenses primarily consist of legal fees associated with certain business combinations and restructuring expenses are severance and other employee-related costs which we do not expect to incur in the future, which may distort the comparability of the results of operations.
Our platform revenue comprised of a mix of direct platform revenue and integrated platform revenue, which leverages application programming interface (“API”) integrations with third parties. For 2022 and 2021, we derived 77% and 76% of our revenues from direct platform revenue, respectively, and 23% and 24% of our revenues from integrated platform revenue, respectively.
Our platform revenue comprised of a mix of direct platform revenue and integrated platform revenue, which leverages API integrations with third parties. For 2023 and 2022, we derived 72% and 77% of our revenues from direct platform revenue, respectively, and 28% and 23% of our revenues from integrated platform revenue, respectively.
This increase was primarily driven by higher interest rates in 2022, partially offset by the income earned on our money market accounts and other short term deposits.
This increase was partially offset by higher income earned on our money market accounts and short term deposits.
The fair value of each stock option granted to employees is estimated on the date of the grant using the Black-Scholes-Merton option pricing model, and the related stock-based compensation is recognized over the expected life of the option. We account for our Employee Stock Purchase Plan (“ESPP”) and Performance Stock Units (“PSU”) using a fair value-based method.
The fair value of each stock option granted to employees is estimated on the date of the grant using the Black-Scholes-Merton option pricing model, and the related stock-based compensation is recognized over the expected life of the option.
We calculate the number of scaled and super-scaled customers at the end of each quarter and on an annual basis as the number of customers billed during each applicable period. In 2022, we had 403 scaled customers that represented 98% of total revenue, compared to 355 scaled customers representing 96% of total revenue in 2021.
We calculate the number of scaled and super-scaled customers at the end of each reporting period as the number of customers billed during each applicable period. In 2023, we had 452 scaled customers that representing 97% of total revenue, compared to 403 scaled customers representing 98% of total revenue in 2022.
ARPU for our super-scaled customers was $4.5 million (across 103 customers) and $3.6 million (across 97 customers) for the years ended December 31, 2022 and December 31, 2021, respectively due to the significant additions to the number of scaled customers in this category. 34 Description of Certain Components of Financial Data Revenues Our revenue primarily arises from use of our technology platform via subscription fees, volume-based utilization fees and fees for professional services.
ARPU for our super-scaled customers was $4.5 million, across 131 customers for the year ended December 31, 2023 and was $4.5 million, across 103 customers for the year ended December 31, 2022. 36 Description of Certain Components of Financial Data Revenues Our revenue primarily arises from use of our technology platform via subscription fees, volume-based utilization fees and fees for professional services.
Other expenses / (income) Other expenses / (income) primarily consist of changes in fair value of acquisition-related liabilities, gains and losses on sale of assets and foreign exchange gains and losses.
We anticipate interest expense to be impacted by changes in variable interest rates. Other expenses / (income) Other expenses / (income) primarily consist of changes in fair value of acquisition-related liabilities, gains and losses on sale of assets and foreign exchange gains and losses.
See Note 13 to our consolidated financial statements for further details. 36 We estimate the recognition of unrecognized stock-based compensation as follows, subject to future forfeitures: Year ended December 31, 2023 2024 2025 2026 2027 Total $ 198,226 $ 101,214 $ 46,532 $ 13,243 $ 131 $ 359,346 Results of Operations We operate as a single reportable segment to reflect the way our Chief Operating Decision Maker (“CODM”) reviews and assesses the performance of the business.
See Note 13 to our consolidated financial statements for further details. 38 We estimate the recognition of unrecognized stock-based compensation (in thousands) as follows, subject to future forfeitures: Year ended December 31, 2024 2025 2026 2027 2028 Total $ 151,931 $ 66,024 $ 25,252 $ 7,556 $ — $ 250,763 Results of Operations We operate as a single reportable segment to reflect the way our Chief Operating Decision Maker (“CODM”) reviews and assesses the performance of the business.
Restructuring expenses Restructuring expenses consists primarily of employee termination costs due to internal restructuring. We expect that restructuring expenses will be correlated with future restructuring activities (if any), which could be greater than or less than our historic levels. We did not have any such restructuring activities during the year ended December 31, 2022.
We expect that acquisition-related expenses will be correlated with future acquisitions (if any), which could be greater than or less than our historic levels. Restructuring expenses Restructuring expenses consists primarily of employee termination costs due to internal restructuring.
While our significant accounting policies are described in more detail in Note 2 in our consolidated financial statements included in the “Financial Statements and Supplementary Data” section of this this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
While our significant accounting policies are described in more detail in Note 2 in our consolidated financial statements included in the “Financial Statements and Supplementary Data” section of this this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements. 45 Revenue recognition Revenue arises primarily from our technology platform via subscription fees, volume-based utilization fees and fees for professional services designed to increase our customers’ usage of our technology platform.
Research and development expenses Year Ended December 31, Change 2022 2021 Amount % Research and development expenses $ 69,454 $ 64,474 $ 4,980 7.7 % Research and development expenses increased by $5.0 million, or 7.7%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Research and development expenses Year Ended December 31, Change 2023 2022 Amount % Research and development expenses $ 73,869 $ 69,454 $ 4,415 6.4 % Research and development expenses increased by $4.4 million, or 6.4%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
During the year ended December 31, 2021, we used $46.8 million of cash in investing activities, primarily consisting of $20.1 million (net of cash acquired) of business and asset acquisitions, investments in website and software development costs of $17.3 million and other capital expenditures of $9.5 million. 41 Net cash provided by financing activities During the year ended December 31, 2022, we used $12.6 million of cash in financing activities, primarily due to the repurchase of $9.6 million of common stock repurchased under our repurchase and RSA withholdings program and payment of acquisition related liabilities of $6.0 million, partially offset by $2.7 million paid by certain employees under the Company's employee stock purchase plan.
During the year ended December 31, 2022, we used $12.6 million of cash in financing activities, primarily due to the repurchase of $9.6 million of common stock repurchased under our repurchase and RSA withholdings program and payment of 43 acquisition related liabilities of $6.0 million, partially offset by $2.7 million paid by certain employees under the Company's employee stock purchase plan.
During the year ended December 31, 2021, net cash provided by operating activities of $44.3 million resulted primarily from adjusted non-cash items of $297.7 million, more than offsetting our net loss of $249.6 million.
During the year ended December 31, 2022, net cash provided by operating activities of $78.5 million resulted primarily from adjusted non-cash items of $361.0 million, more than offsetting our net loss of $279.2 million.
We expect that our ability to increase adoption of our products within existing scaled customers increases our future opportunities through additional sales. As part of this strategy, we expect to drive expansion in the number of channels per scaled customer. During the year ended December 31, 2022 and 2021, our channels per scaled customer were 2.0 and 1.9, respectively.
As part of this strategy, we expect to drive expansion in the number of channels per scaled customer. During the year ended December 31, 2023 and 2022, our channels per scaled customer were 2.1 and 2.0, respectively.
Cash flows The following table summarizes our cash flows for the periods presented: For year ended December 31, 2022 2021 2020 Net cash provided by / (used for): Cash provided by operating activities $ 78,486 $ 44,292 $ 35,539 Cash used for investing activities (48,445 ) (46,849 ) (25,207 ) Cash (used for) / provided by financing activities (12,625 ) 55,732 2,783 Effect of exchange rate changes on cash and cash equivalents (165 ) (41 ) (208 ) Net increase in cash and cash equivalents, including restricted cash $ 17,251 $ 53,134 $ 12,907 Net cash provided by operating activities During the year ended December 31, 2022, net cash provided by operating activities of $78.5 million resulted primarily from adjusted non-cash items of $361.0 million, more than offsetting our net loss of $279.2 million.
Cash flows The following table summarizes our cash flows for the periods presented: For year ended December 31, 2023 2022 Net cash provided by / (used for): Cash provided by operating activities $ 90,523 $ 78,486 Cash used for investing activities (54,215 ) (48,445 ) Cash used for financing activities (25,652 ) (12,625 ) Effect of exchange rate changes on cash and cash equivalents (34 ) (165 ) Net increase in cash and cash equivalents, including restricted cash $ 10,622 $ 17,251 Net cash provided by operating activities During the year ended December 31, 2023, net cash provided by operating activities of $90.5 million resulted primarily from adjusted non-cash items of $303.3 million, more than offsetting our net loss of $187.5 million.
On February 3, 2021, we entered into a $222.5 million Senior Secured Credit Facility which was used to fully repay and terminate our previous credit agreement. Borrowings under the debt are $185 million and bear interest payable quarterly ranging from LIBOR plus 2.125% to LIBOR plus 2.625% based on our consolidated net leverage ratio stated in the credit agreement.
Borrowings under the debt were $185.0 million and bear interest payable quarterly ranging from SOFR plus 2.125% to SOFR plus 2.625% based on our consolidated net leverage ratio stated in the credit agreement. We are required to repay the principal balance and any unpaid accrued interest on the Senior Secured Credit Facility on February 3, 2026.
Factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the intangible assets are used, and the effects of obsolescence, demand, competition and other economic factors. Fair value We account for all stock options using a fair value-based method.
Factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the intangible assets are used, and the effects of obsolescence, demand, competition and other economic factors. Fair value We grant stock-based payment awards including restricted stock, Performance Stock Units (“PSU”) and stock options to employees, contractors or advisors and non-employee directors.
As of December 31, 2022, we had cash and cash equivalents of $121.1 million and net working capital, consisting of current assets less current liabilities, of $107.7 million. As of December 31, 2022, we had an accumulated deficit of $771.1 million.
As of December 31, 2023, we had cash and cash equivalents of $131.7 million and net working capital, consisting of current assets less current liabilities, of $133.4 million.
Cost of revenues (excluding depreciation and amortization) Year Ended December 31, Change 2022 2021 Amount % Cost of revenues (excluding depreciation and amortization) $ 215,466 $ 174,720 $ 40,746 23.3 % Cost of revenues (excluding depreciation and amortization) increased by $40.7 million, or 23.3%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Cost of revenues (excluding depreciation and amortization) Year Ended December 31, Change 2023 2022 Amount % Cost of revenues (excluding depreciation and amortization) $ 274,482 $ 215,466 $ 59,016 27.4 % Cost of revenues (excluding depreciation and amortization) increased by $59.0 million, or 27.4%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Tenure for All Scaled Customers for Year Ended December 31, 2022 Customer Tenure Number of Scaled Customers % of Scaled Customers % of Scaled Customer Revenue 3+ Years 214 53.1 % 63.6 % 1-3 Years 112 27.8 % 27.4 % Under 1 Year 77 19.1 % 9.0 % Total 403 100.0 % 100.0 % Additionally, of our 103 super-scaled customers who generate at least $1.0 million in revenue in the trailing twelve months, 71 have a tenure of 3+ years.
Tenure for All Scaled Customers for Year Ended December 31, 2023 Customer Tenure Number of Scaled Customers % of Scaled Customers % of Scaled Customer Revenue 3+ Years 236 52.2 % 68.9 % 1-3 Years 124 27.4 % 23.5 % Under 1 Year 92 20.4 % 7.6 % Total 452 100.0 % 100.0 % Additionally, of our 131 super-scaled customers who generate at least $1.0 million in revenue in the trailing twelve months, 87 have a tenure of 3+ years.
This increase was primarily driven by higher consulting expenses of $3.0 million, employee related costs of $2.3 million which was partially offset by lower stock-based compensation of $0.3 million.
This decrease was primarily driven by lower stock-based compensation of $27.6 million and other sales and marketing-related expenses of $0.6 million, which was partially offset by higher employee-related costs of $17.4 million.
Acquisition-related expenses Year Ended December 31, Change 2022 2021 Amount % Acquisition-related expenses $ 344 $ 1,953 $ (1,609 ) (82.4 )% Acquisition-related expenses decreased by $1.6 million, or 82.4%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily driven by lower professional fees.
Acquisition-related expenses Year Ended December 31, Change 2023 2022 Amount % Acquisition-related expenses $ 203 $ 344 $ (141 ) (41.0 )% Acquisition-related expenses decreased by $0.1 million, or 41%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily driven by lower legal and professional fees incurred for our business combinations.
Changes in working capital were primarily driven by a decrease in accounts payable of $22.2 million and an increase in prepaid expenses of $3.1 million, partially offset by an increase in accrued expenses and other current liabilities of $14.6 million, an increase in deferred revenue of $2.8 million and a decrease in other current assets of $5.7 million.
Changes in working capital were primarily driven by increases in accounts receivable of $64.1 million and other assets of $1.3 million, partially offset by increases in accounts payable of $26.3 million and accrued expenses and other current liabilities of $12.0 million and a decrease in prepaid expenses of $1.1 million.
RSA Withholding Program In August 2022, the Company’s Board of Directors authorized withholding as an alternative to market sales by executives to satisfy tax withholding requirements upon vesting of restricted stock awards ( “RSAs”).
Share Repurchase and RSA Withholding Program In August 2022, the Company's Board of Directors authorized a share repurchase and withholding program (the “2022 SRP”) authorizing the repurchase of up to $50.0 million of our outstanding Class A common stock through December 31, 2024 and authorizing withholding as an alternative to market sales by executives to satisfy tax withholding requirements upon vesting of restricted stock awards (“RSAs”).
During 2022, the net increase in our valuation allowance was $26.1 million primarily as a result of current year operating losses for which no tax benefit was recorded as we maintain a full valuation allowance against our U.S. net deferred tax assets based upon the weight of objective evidence. 39 Non-GAAP Financial Measures We use the following non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.
For both 2023 and 2022, our effective tax rates differ from the U.S. federal statutory rate of 21% primarily related to changes in our U.S valuation allowance as we maintain a full valuation allowance against our U.S. net deferred tax assets based upon the weight of objective evidence. 41 Non-GAAP Financial Measures We use the following non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.
Depreciation and amortization Year Ended December 31, Change 2022 2021 Amount % Depreciation and amortization $ 51,878 $ 45,922 $ 5,956 13.0 % Depreciation and amortization expense increased by $6.0 million, or 13.0%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Depreciation and amortization Year Ended December 31, Change 2023 2022 Amount % Depreciation and amortization $ 51,149 $ 51,878 $ (729 ) (1.4 )% Depreciation and amortization expense decreased by $0.7 million, or 1.4%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Revenue recognition Revenue arises primarily from our technology platform via subscription fees, volume-based utilization fees and fees for professional services designed to increase our customers’ usage of our technology platform. Sales and other taxes collected by us concurrent with revenue-producing activities are excluded from revenues. We may incur third-party costs on behalf of customers, including direct costs and incidental costs.
Sales and other taxes collected by us concurrent with revenue-producing activities are excluded from revenues. We may incur third-party costs on behalf of customers, including direct costs and incidental costs.
Year ended December 31, 2022 2021 2020 Net loss $ (279,239 ) $ (249,563 ) $ (53,225 ) Net loss margin (47.3 )% (54.4 )% (14.5 )% Add back: Depreciation and amortization 51,878 45,922 40,064 Restructuring expenses — 727 2,090 Acquisition-related expenses 344 1,953 5,402 Stock-based compensation 298,992 259,159 105 IPO related expenses — 2,705 — Gain on extinguishment of debt — (10,000 ) — Dispute settlement expense — 1,196 — Other expenses / (income) 13,983 (279 ) (126 ) Change in fair value of warrants and derivative liabilities 410 5,000 28,100 Interest expense 7,303 7,033 16,257 Income tax (benefit) / provision (1,491 ) (598 ) 919 Adjusted EBITDA $ 92,180 $ 63,255 $ 39,586 Adjusted EBITDA margin% 15.6 % 13.8 % 10.8 % 40 Liquidity and Capital Resources We have financed our operations and capital expenditures primarily through utilization of cash generated from operations, as well as borrowings under our credit facilities.
Year ended December 31, 2023 2022 Net loss $ (187,481 ) $ (279,239 ) Net loss margin (25.7 )% (47.3 )% Add back: Depreciation and amortization 51,149 51,878 Restructuring expenses 2,845 — Acquisition-related expenses 203 344 Stock-based compensation 242,881 298,992 Other expenses 7,820 13,983 Change in fair value of warrants and derivative liabilities — 410 Interest expense 10,939 7,303 Income tax provision/(benefit) 1,037 (1,491 ) Adjusted EBITDA $ 129,393 $ 92,180 Adjusted EBITDA margin% 17.8 % 15.6 % Liquidity and Capital Resources We have financed our operations and capital expenditures primarily through utilization of cash generated from operations, as well as borrowings under our credit facilities.
Income tax benefit Year Ended December 31, Change 2022 2021 Amount % Income tax benefit $ (1,491 ) $ (598 ) $ (893 ) 149.3 % Income tax benefit increased by $0.9 million, or 149.3%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Income tax Provision / (benefit) Year Ended December 31, Change 2023 2022 Amount % Income tax provision/(benefit) $ 1,037 $ (1,491 ) $ 2,528 169.6 % Income tax provision increased by $2.5 million, or 169.6%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Employee-related costs included in cost of revenues include salaries, bonuses, commissions, stock-based compensation and employee benefit costs primarily related to individuals directly associated with providing services to our customers. Our cost of revenues are dependent on the revenue mix and therefore can slightly increase or decrease in the future as a percentage of revenue over the long term.
Employee-related costs included in cost of revenues (excluding depreciation and amortization) include salaries, bonuses, commissions, stock-based compensation and employee benefit costs primarily related to individuals directly associated with providing services to our customers.
Non-cash items include stock-based compensation of $259.2 million, depreciation and amortization of $45.9 million, gain on extinguishment of debt of $10.0 million and a change in fair value of warrants and derivative liabilities of $5.0 million.
Non-cash items include stock-based compensation of $242.9 million, depreciation and amortization of $51.1 million and a change in fair value of acquisition related liabilities of $7.2 million.
Selling and marketing expenses Year Ended December 31, Change 2022 2021 Amount % Selling and marketing expenses $ 299,238 $ 229,343 $ 69,895 30.5 % Selling and marketing expenses increased by $69.9 million, or 30.5%, for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Selling and marketing expenses Year Ended December 31, Change 2023 2022 Amount % Selling and marketing expenses $ 288,441 $ 299,238 $ (10,797 ) (3.6 )% Selling and marketing expenses decreased by $10.8 million, or 3.6%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Interest expense Year Ended December 31, Change 2022 2021 Amount % Interest expense $ 7,303 $ 7,033 $ 270 3.8 % Interest expense increased by $0.3 million, or 3.8%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Interest expense Year Ended December 31, Change 2023 2022 Amount % Interest expense $ 10,939 $ 7,303 $ 3,636 49.8 % Interest expense increased by $3.6 million, or 49.8%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily as a result of increases in interest rates in recent periods.
This increase was primarily driven by higher employee-related costs of $36.1 million, stock-based compensation of $22.8 million and other sales and marketing-related expenses of $11.0 million.
This increase was primarily driven by an increase in employee related costs of $3.0 million, consulting fees of $0.8 million and stock-based compensation of $0.6 million.
For the year ended December 31, 2022, we recorded an income tax benefit of $1,491.
For the year ended December 31, 2023, we recorded an income tax provision of $1,037, which primarily relates to an income tax provision for foreign taxes.
See Item 5 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Purchases of Equity Securities by the Issuer or Affiliated Purchaser” for more information on the 2022 SRP.
See Item 5 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Purchases of Equity Securities by the Issuer or Affiliated Purchaser” for more information on the 2022 SRP. 44 Quarterly Financial Information (Unaudited) The following table sets forth the Company’s quarterly consolidated statement of operations data for each of the four quarters in the one-year period ended December 31, 2023.
We have certain revenue contracts with our vendors that involve both the purchase and sale of services with a single counterparty. We assess each contract to determine if the revenue and expense should be presented gross or net.
We have certain revenue contracts with our vendors that involve both the purchase and sale of services with a single counterparty. We perform an assessment of the services transferred to determine the independent nature of both the transactions and accordingly revenue and expense are based on the fair value of the services provided or received.
Other expenses / (income) Year Ended December 31, Change 2022 2021 Amount % Other expenses / (income) $ 13,983 $ (279 ) $ 14,262 NA Other expenses increased by $14.3 million, or more than 100% for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Other expenses Year Ended December 31, Change 2023 2022 Amount % Other expenses $ 7,820 $ 13,983 $ (6,163 ) (44.1 )% Other expenses decreased by $6.2 million, or 44.1%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased upon the principal balance owed on our long-term borrowings as of December 31, 2022, a hypothetical one percentage point increase or decrease in the rate of interest would result in an increase or decrease in our annual interest expenses by $1.9 million. There were no material changes in market risk exposures as of December 31, 2022.
Biggest changeBased upon the principal balance owed on our long-term borrowings as of December 31, 2023, a hypothetical one percentage point increase or decrease in the rate of interest would result in an increase or decrease in our annual interest expenses by $1.9 million. There were no material changes in market risk exposures as of December 31, 2023.
We do not believe that inflation had a material effect on our business, financial condition or results of operations.
We do not believe that inflation has had a material effect on our business, financial condition or results of operations.
However, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset higher costs through price increases and our inability or failure to do so could potentially harm our business, financial condition, and results of operations. 47
However, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset higher costs through price increases and our inability or failure to do so could potentially harm our business, financial condition, and results of operations. 48
We do not believe that a 10% change in the relative value of the U.S. dollar to other foreign currencies would have a material effect on our cash flows and operating results in currencies other than the U.S. dollar. 46 Inflation Risk In 2022, inflation increased significantly in the United States and overseas, resulting in rising wages and other costs.
We do not believe that a 10% change in the relative value of the U.S. dollar to other foreign currencies would have a material effect on our cash flows and operating results in currencies other than the U.S. dollar. Inflation Risk In 2023, inflation increased significantly in the United States and overseas, resulting in rising wages and other costs.
As of December 31, 2022, we have not entered into any derivative financial instrument contracts to mitigate the interest rate risk on our $185 million debt, and as a result, we are subject to the potential impact of rising interest rates, which could negatively impact our profitability and cash flows.
As of December 31, 2023, we have not entered into any derivative financial instrument contracts to mitigate the interest rate risk on our $185.0 million debt, and as a result, we are subject to the potential impact of rising interest rates, which could negatively impact our profitability and cash flows.

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