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What changed in PubMatic, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PubMatic, Inc.'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.

+498 added−531 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in PubMatic, Inc.'s 2023 10-K

498 paragraphs added · 531 removed · 363 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

78 edited+28 added−87 removed31 unchanged
Biggest changeWe have developed a multi-pronged strategy to create a high-quality marketplace beginning with high quality publisher selection, supported by proprietary and third-party fraud detection software, manual review, timely fraud investigations, and a fraud-free program in which buyers are credited for any fraudulent inventory they may have purchased on our platform.
Biggest changeThe hundreds of billions of ad impressions and trillion advertiser bids that we process every day generate enormous volumes of data that we harness to drive higher revenue for our publishers and increased ROI for our buyers. • Transparency: We provide log-level data to buyers and provide transparency on every ad impression, which gives buyers full control over which publishers, ad formats, and specific ad impressions on which they would like to bid. • Built in Quality Controls: We have developed a multi-pronged strategy to create a high-quality marketplace beginning with high quality publisher selection, supported by proprietary and third-party fraud detection software, manual review, timely fraud investigations, and a fraud-free program in which buyers are credited for any fraudulent inventory they may have purchased on our platform. 8 Table of Contents • Data Driven Decisions: We leverage our artificial intelligence and machine learning capabilities to record, aggregate, analyze, and act on vast amounts of data in a matter of milliseconds to help our customers optimize their digital advertising businesses in real-time.
Our Customer Success team is organized and specialized by type of ad format and device and is trained to both maximize the number of integrations with each publisher, and deploy our value added solutions that we provide. Similarly, we have teams focused on new business acquisition and existing partner retention and expansion for advertisers, agencies, and DSPs.
Our Customer Success team is organized and specialized by type of ad format and device and is trained to both maximize the number of integrations with each publisher and deploy the value-added solutions that we provide. Similarly, we have teams focused on new business acquisition and existing partner retention and expansion for advertisers, agencies, and DSPs.
As a result, our technology platform and business practices must be assessed regularly against a continuously evolving legal and regulatory landscape, and we have adopted strong data minimization practices that mitigate our compliance risks. There are also a number of specific laws and regulations governing the collection and use of certain types of consumer data relevant to our business.
As a result, our technology platform and business practices must be assessed regularly against a continuously evolving legal and regulatory landscape, and we have adopted data minimization practices that mitigate our compliance risks. There are also a number of specific laws and regulations governing the collection and use of certain types of consumer data relevant to our business.
As consumers increasingly engage with digital media, and as advertisers bid on a growing array of ad formats and impressions, an immense amount of data is generated. The data includes anonymized consumer information about interests and intent, log files of winning and losing advertiser bids, and transaction records for billing and payment reconciliation.
As consumers increasingly engage with digital media, and as advertisers bid on a growing array of ad formats and impressions, an immense amount of data is generated. This data includes anonymized consumer information about interests and intent, log files of winning and losing advertiser bids, and transaction records for billing and payment reconciliation.
Website addresses referred to in this Annual Report on Form 10-K are not intended to function as hyperlinks, and the information contained on or available through our website is not incorporated into, and does not form a part of this Annual Report on Form 10-K or any other report or documents we file with or furnish to the SEC. 17 Table of Contents
Website addresses referred to in this Annual Report on Form 10-K are not intended to function as hyperlinks, and the information contained on or available through our website is not incorporated into, and does not form a part of this Annual Report on Form 10-K or any other report or documents we file with or furnish to the SEC. 13 Table of Contents
In addition, we believe that new market entrants would find it difficult to gain direct access to publishers and ad buyers given their limited scale and would face significant costs to integrate with publishers and ad buyers and comply with growing regulatory requirements around the world.
In addition, we believe that new market entrants would find it difficult to gain direct access to publishers and ad buyers given their limited scale and face significant costs to integrate with publishers and ad buyers and comply with evolving regulatory requirements around the world.
We have also demonstrated an ability to extend our header bidding infrastructure into a variety of higher-growth ad formats such as mobile web, mobile app, digital video, and most recently OTT/CTV. We believe that our specialized cloud infrastructure enables us to compete favorably on the factors described above.
We have also demonstrated an ability to extend our header bidding infrastructure into a variety of higher-growth ad formats such as mobile web, mobile app, digital video, and most recently OTT/CTV. We believe that our specialized platform and cloud infrastructure enable us to compete favorably on the factors described above.
At the same time, our direct publisher relationships, omnichannel header bidding capabilities, global scale, and access to incremental advertiser demand through direct relationships with buyers drive superior yield for publishers.
At the same time, we believe our direct publisher relationships, omnichannel header bidding capabilities, global scale, and access to incremental advertiser demand through direct relationships with buyers drive superior yield for publishers.
It has always been our goal to attract and retain the best talent in the industry and our inclusive interview process includes finding those candidates that best add to our company mission, values, and cultural principles.
It has always been our goal to attract and retain the best talent in the industry and our inclusive recruiting process includes finding those candidates that best add to our company mission, values, and cultural principles.
We believe the “Open Internet” outside the “walled gardens” (a colloquial term that refers to closed advertising platforms including Google and Facebook) will shift from targeting by anonymized and invisible third-party cookies or identifiers to known identities based on consumer choice and opt-in.
We believe the “Open Internet” outside the “walled gardens” (a colloquial term that refers to closed advertising platforms such as Google and Facebook) will shift from targeting by anonymized and invisible third-party cookies or identifiers to known identities based on consumer choice and opt-in.
Interest-based advertising, or the use of data to draw inferences about a consumer’s interests and deliver relevant advertising to that consumer, has come under increasing scrutiny by legislative, regulatory, and self-regulatory bodies, privacy advocates, academics, and commercial interests in the United States and abroad that focus on data protection and consumer privacy.
Interest-based advertising, or the use of data to draw inferences about a consumer’s interests and deliver relevant advertising to that consumer, has come under increasing scrutiny by legislatures, regulatory agencies, and self-regulatory bodies, privacy advocates, academics, and commercial interests in the United States and abroad that focus on data protection and consumer privacy.
Publishers are able to review performance, monitor key performance indicators (“KPIs”), and make adjustments to their set up and optimization. Buyers have access to campaign insight data to facilitate testing and adaptation toward maximizing ROI. Detailed performance by ad format, channels, and ad sizes allows for optimization to achieve maximum performance.
Publishers are able to review performance, monitor key performance indicators (“KPIs”), and make adjustments to their set up and optimization in real time. Buyers have access to campaign insight data to facilitate testing and adaptation toward maximizing ROI. Detailed performance by ad format, channels, and ad sizes allows for optimization to achieve maximum ROI.
These laws also sets forth high potential liabilities for data privacy violations on a per-record basis, and the industry faces an uncertain compliance burden as our partners and publishers work to become compliant with these laws in the future.
These laws also set forth high potential liabilities for data privacy violations, including on a per-record basis, and the industry faces an uncertain compliance burden as our partners and publishers work to become compliant with these laws in the future.
We had relied on the EU-U.S. Privacy Shield framework (Privacy Shield framework), to transfer personal data of EU subjects to the United States, but the Privacy Shield framework was recently declared invalid by Court of Justice of the European Union. (“CJEU”) on July 16, 2020.
We had relied on the EU-U.S. Privacy Shield framework (“Privacy Shield Framework”), to transfer personal data of EU subjects to the United States, but the Privacy Shield Framework was declared invalid by the Court of Justice of the European Union (“CJEU”) on July 16, 2020.
We seek to control access to our proprietary technology by entering into non-disclosure agreements with third parties and disclosure and invention assignment agreements with our employees and contractors. We consider our trademarks, patents, copyrights, trade secrets, and other intellectual property rights to be, in the aggregate, material to our business.
We seek to control access to our proprietary technology by entering into non-disclosure agreements with third parties and disclosure and invention assignment agreements with our employees and contractors. 9 Table of Contents We consider our trademarks, patents, copyrights, trade secrets, and other intellectual property rights to be, in the aggregate, material to our business.
We do not own media and therefore do not have a vested interest in driving ad revenue to specific media properties. We do not take a position in media or arbitrage media. We operate with a fundamental principle of transparency and provide detailed insights into fees to our customers.
We do not own media and therefore do not have a vested interest in driving ad revenue to specific media properties. We do not take a position in media or arbitrage media. Transparency is a fundamental principle of our business and we provide detailed insights into fees to our customers.
In its July 16, 2020 decision, while the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield framework), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances and cast doubt on their future use.
Related to cross-border transfers, in its July 16, 2020 decision, while the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved and promulgated by the European Commission as an adequate personal data transfer mechanism and potential alternative to the then-invalidated Privacy Shield Framework), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances and cast doubt on their future use.
We believe that improved matching will lead to growth of our platform and greater publisher and buyer retention. Develop New Products : As we grow our customer base and process increasing volumes of ad impressions and data, we gain insights into new challenges we can solve on behalf of our customers.
We believe that improved matching will lead to the growth of our platform and greater publisher and buyer retention. Accelerate New Revenue Streams: As we grow our customer base and process increasing volumes of ad impressions and data, we gain insights into new challenges we can solve on behalf of our customers.
Through the TCF and other frameworks, we can identify and pass user consent parameters, and opt-in or opt-out as applicable, in a bid request. We are also able to evaluate whether such consents apply to our various demand partners, such as DSPs and agencies. Some of the specific measures we have taken include: • User Consent.
Through the TCF and other frameworks, we can identify and pass user consent parameters, and opt-in or opt-out as applicable, in a bid request. We are also able to evaluate whether such consents apply to our various demand partners, such as DSPs and agencies.
To address these issues at scale for both publishers and buyers, we provide specialized software and hardware infrastructure to optimally power technology-driven transactions. We compete with SSPs like Magnite, smaller private SSPs in markets around the world, as well as divisions of larger companies like Google.
To address these issues at scale for both publishers and buyers, we provide specialized software and hardware infrastructure to optimally power technology-driven transactions. We compete with other large SSPs, smaller private SSPs in markets around the world, and divisions of larger technology companies.
We provide notice through our privacy policies and notices, which can be found on our website at www.pubmatic.com. As stated in our privacy policy, we do not collect information, such as names, addresses or telephone phone numbers, for providing our advertising services that can be used directly to reveal the identity of the underlying individual.
We provide notice through our privacy policies and notices, which can be found on our website at www.pubmatic.com. We do not collect information, such as names, addresses or telephone phone numbers, for providing our advertising services that are directly identifying of the underlying individual.
The advertising industry has developed a number of the technical and policy solutions to create standards for compliance, such as IAB TCF. We have implemented a number of technology innovations, process enhancements, and industry solutions in response to our publishers’ increased obligations.
The advertising industry has developed a number of the technical and policy solutions to create standards for compliance, such as the Interactive Advertising Bureau (the “IAB”) Transparency Consent Framework (“TCF”). We have implemented a number of technology innovations, process enhancements, and industry solutions in response to our publishers’ increased obligations.
While programmatic header bidding has enabled the purchasing and selling of vast amounts of digital advertising inventory, there now exist significant challenges related to the proliferation of media across platforms, transaction speed, increased costs, transparency, and regulatory requirements.
Our Competition The digital advertising ecosystem is competitive and complex due to a variety of factors. While programmatic header bidding has enabled the purchasing and selling of vast amounts of digital advertising inventory, there now exist significant challenges related to the proliferation of media across platforms, transaction speed, increased costs, transparency, and regulatory requirements.
Likewise, Virginia enacted the Consumer Data Protection Act (“CDPA”), Connecticut enacted the Connecticut Data Privacy Act (“CTDPA”), Colorado enacted the Colorado Privacy Act (“CPA”), and Utah enacted the Utah Consumer Privacy Act (“UCPA”), which impose consumer rights processes and requires user consent for certain types of sensitive data.
Likewise, several U.S. state laws took effect in 2023: Virginia enacted the Consumer Data Protection Act (“CDPA”), Connecticut enacted the Connecticut Data Privacy Act (“CTDPA”), Colorado enacted the Colorado Privacy Act (“CPA”), and Utah enacted the Utah Consumer Privacy Act (“UCPA”), which impose consumer rights processes and requires user consent for certain types of sensitive data.
Some jurisdictions, including Russia and China, have in recent years enacted data localization laws, which require any personal information of citizens of those jurisdictions to be stored and processed on servers located in those jurisdictions.
Some jurisdictions, including Russia and China, have in recent years enacted data localization laws, which require any personal information of citizens of those jurisdictions to be stored and processed on servers located in those jurisdictions. Such laws are gaining momentum and are being enforced by local authorities.
Our Industry As the digital advertising ecosystem continues to evolve, some of the key industry trends are: Rapid Proliferation of Digital Media Across Multiple Platforms : Consumers have dramatically increased the amount of time that they spend online and on mobile devices and numerous activities that historically occurred offline continue to shift online.
Our Industry As the digital advertising ecosystem continues to evolve, some key industry trends include: Continued Growth of Digital Media Across Multiple Platforms: Consumers have dramatically increased the amount of time they spend online, on mobile devices, or watching content through connected television. Numerous activities that historically occurred offline continue to shift online.
Global, Omnichannel Reach : We are a global business with distributed critical infrastructure and a go-to-market presence in every major advertising market in the world outside of China.
We believe the following strengths provide us with long-term competitive advantages: Global, Omnichannel Reach: We are a global business with distributed critical infrastructure and a go-to-market presence in every major advertising market in the world outside of China.
The initial term of the agreement ended in November 2013, and it automatically renews for successive one-year terms. Either party may terminate for convenience upon providing at least 30 days’ prior written notice.
The initial one-year term of the current agreement ended in May 2019, and it automatically renews for successive one-year terms unless either party provides written notice at least 60 days’ prior to the end of the initial term or such successive terms. Either party may terminate for convenience upon providing at least 30 days’ prior written notice.
Such laws are gaining momentum and are being enforced by local authorities. 16 Table of Contents Beyond laws and regulations, we are also members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data, including the IAB, the Digital Advertising Alliance, and the NAI.
Beyond laws and regulations, we are also members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data, including the IAB, the Digital Advertising Alliance, and the NAI.
We primarily work with publishers and app developers who allow us direct access to their ad inventory, as well as select channel partners that meet our quality and scale thresholds. We refer to our publishers, app developers, and channel partners collectively as our publishers.
We primarily work with publishers and app developers who allow us direct access to their ad inventory, as well as select channel partners that meet our quality and scale thresholds. Our channel partners aggregate and provide further access to thousands of sites and apps from smaller publishers.
While there is direct competition, our cloud infrastructure is interoperable with the major header bidding software frameworks including open source Prebid, Google’s Open Bidding, Amazon’s Transparent Ad Marketplace, and others. As a result, we are able to gain access to competitors’ ad impressions.
While there is direct competition, our cloud infrastructure is interoperable with the major header bidding software frameworks including open source Prebid, Google’s Open Bidding, Amazon’s Transparent Ad Marketplace, and others.
These teams focus on onboarding new partners and increasing spend across a variety of ad formats, devices, and geographies. 14 Table of Contents Our marketing team is focused on achieving thought leadership, educating customers on how to harness programmatic advertising to improve their business, guiding buyers on how to maximize ROI via the PubMatic cloud infrastructure, supporting our sales team, generating new leads and increasing awareness for our brand.
Our marketing team is focused on achieving thought leadership, educating customers on how to harness programmatic advertising to improve their business, guiding buyers on how to maximize ROI via the PubMatic cloud infrastructure, supporting our sales team, generating new leads, and increasing awareness for our brand.
This desire for transparency and control has led to a growing trend for advertisers to establish direct relationships with vendors in the digital advertising ecosystem that have transparent business practices and technical capabilities to meet their objectives. This has resulted in a larger portion of media spend consolidating onto fewer, more transparent technology platforms.
This desire for efficiency and control has led to a growing trend among advertisers to establish direct relationships with vendors in the digital advertising ecosystem that have transparent business practices and technical capabilities to meet their objectives.
We offer our solution as a complete, unified offering for publishers who want a simple, efficient and comprehensive solution. We also offer modular access to our platform via rich application programming interfaces and a mobile SDK, for publishers who wish to integrate with or extend the platform, or develop new business models and custom advertising solutions.
We also offer modular access to our platform via rich application programming interfaces and a mobile software developer kit for mobile applications (“SDK”), for publishers who wish to integrate with or extend the platform or develop new business models and custom advertising solutions.
These IAB frameworks are designed to facilitate compliance with the CCPA although the California Attorney General’s office has not yet approved such frameworks. The CCPA and CPRA set forth high potential liabilities for data privacy violations on a per-record basis, and the industry faces an uncertain compliance burden as our partners and publishers work to become compliant with the law.
The CCPA and CPRA set forth high potential liabilities for data privacy violations on a per-record basis, and the industry faces an uncertain compliance burden as our partners and publishers work to become compliant with the law.
This approach saves significant costs compared to companies that rely on public cloud alternatives due to the data-intensive nature of digital advertising and the immense volume of ad impressions created by header bidding. As a result, our cost of revenue per impression processed decreased by 19% in 2022 compared to 2021, and decreased by 28% in 2021 compared to 2020.
This approach saves significant costs compared to companies that rely on public cloud alternatives due to the data-intensive nature of digital advertising and the immense volume of ad impressions created by header bidding.
We own and operate our software and hardware infrastructure globally, which saves significant infrastructure expenditures as compared to public cloud alternatives. We designed our platform using a flexible, service-oriented architecture in order to facilitate rapid development of new solutions, to meet evolving industry demands, and to support new use cases and new ad formats.
We designed our platform using a flexible, service-oriented architecture in order to facilitate rapid development of new solutions, to meet evolving industry demands, and to support new use cases and new ad formats.
These three guiding elements form a social contract between employees as well as set expectations for the common behaviors we can expect from each other and inform how we treat our customers.
These three guiding elements form a social contract between employees as well as set expectations for the common behaviors we can expect from each other and inform how we treat our customers. They are infused in every aspect of our business, from employee experience and workplace culture to marketing strategies and customer success.
Our Strengths Publishers are actively seeking to maximize the value of their ad inventory, and buyers are seeking to increase advertising ROI. We believe that our specialized cloud infrastructure, rapid innovation, and transparent business model provide incentives to ad buyers to consolidate an increasing share of their total digital spend on our platform.
We believe that our specialized cloud platform, supported by rapid innovation, and transparent business model provide incentives to buyers to consolidate an increasing share of their total digital spend on our platform.
Our Inclusion Action Plan consists of five areas that focus on listening, learning, hiring, socio-economic support, and activism. This plan will be executed in part by our newly established Diversity & Inclusion Committee. The plan has a global focus that takes into consideration regional cultural differences to provide interactive employee experiences that drive continuous support for inclusion throughout our organization.
Execution of this plan is overseen in part by our Diversity & Inclusion Committee. The plan has a global focus that takes into consideration regional cultural differences to provide interactive employee experiences that drive continuous support for inclusion throughout our organization.
We believe that our specialized cloud infrastructure provides a number of advantages: Real-time Ad Transaction Processing : Our specialized cloud infrastructure is designed for the rapid and efficient processing of real-time, programmatic ad transactions and the aggregation and analysis of the significant data accompanying each transaction.
Some key benefits of our platform to publishers and buyers include: • Scalability: Our specialized cloud infrastructure is designed for the rapid and efficient processing of real-time, programmatic ad transactions and the aggregation and analysis of the significant data accompanying each transaction.
Our UK subsidiary has been certified by Great Place to Work (2020-2022) and recognized with an Excellence in Wellbeing certification in 2020-2021 and our Germany subsidiary has been certified by Great Place to Work (2022). We have achieved these results by delivering custom learning programs and creating opportunities for advancement that align with the dynamic needs of our business.
Our workplaces have been recognized as a Great Place to Work in the United States, India, Asia, and Europe. We have achieved these results by delivering custom learning programs and creating opportunities for advancement that align with the dynamic needs of our business.
Further, the EU is currently in discussions to replace the ePrivacy Directive (commonly called the “Cookie Directive”) with the ePrivacy Regulation that governs the use of technologies that collect, access, and store consumer information and may create additional compliance burdens for us in Europe.
Further, the EU is currently in discussions to replace the ePrivacy Directive (commonly called the “Cookie Directive”) with the ePrivacy Regulation that governs the use of technologies that collect, access, and store consumer information and may create additional compliance burdens for us in Europe. 11 Table of Contents Other jurisdictions have enacted legislation that closely tracks the concepts, obligations, and consumer rights described in the GDPR, including Brazil’s General Data Protection law and Thailand’s Personal Data Protection Act.
Our solution allows for the use of many of the leading identifiers in a scaled and privacy-compliant fashion resulting in increased publisher revenue and buyer ROI. 8 Table of Contents Scalable, Self-service Platform : Our cloud infrastructure solutions are available via self-serve, including an easy-to-use customer user interface and a set of application programming interfaces that allow our publisher customers to configure new inventory, extend into new geographies or ad formats, review reporting insights, and manage and track payments and billing cycles.
These capabilities improve long term marketplace liquidity resulting in increased publisher revenue and higher advertiser ROI. • Self-Serve: Our cloud infrastructure solutions are available via self-serve to publishers and buyers, including an easy-to-use customer user interface and a set of application programming interfaces that allow our publisher customers to configure new inventory, extend into new geographies or ad formats, review reporting insights, and manage and track payments and billing cycles. • Reporting: Our technology platform provides extensive reporting capabilities to both buyers and publishers via application programming interfaces for direct integration into a customer’s reporting systems.
We believe we are thought leaders in the header bidding space and are represented on the boards of Prebid and the IAB Tech Lab. Regulatory Compliance A growing set of privacy regulations have introduced complexity regarding the collection, use, and transmission of consumer data to the digital advertising ecosystem.
Regulatory Compliance: A growing set of privacy regulations have introduced complexity regarding the collection, use, and transmission of consumer data to the digital advertising ecosystem.
As advertisers and agencies increasingly consolidate their spending with fewer larger technology platforms, we seek to increase the proportion of their digital ad spending on our platform through direct relationships. We have entered into SPO agreements directly with both advertisers and agencies through various arrangements ranging from custom data and workflow integrations, product features, and volume-based business terms.
Expansion of SPO Agreements and Activate : As advertisers and agencies increasingly consolidate their spending with fewer larger technology platforms, we seek to increase the proportion of their digital ad spending on our platform through direct relationships.
ITEM 1. BUSINESS Overview We are an independent technology company seeking to maximize customer value by delivering digital advertising’s supply chain of the future.
ITEM 1. BUSINESS Overview PubMatic, Inc. (“we”, or “us) is an independent technology company seeking to maximize customer value by delivering digital advertising’s supply chain of the future. Our mission is to fuel the endless potential of Internet content creators.
In October 2022, the Biden administration negotiated new privacy shield terms with EU regulators, and signed an Executive Order in October 2022 directing the steps the United States will take to implement its commitments to the EU/US data privacy framework. The new proposed Privacy Shield terms are subject to further review by the European Commission or EC and member states.
In October 2022, the Biden administration negotiated new privacy transfer terms with EU regulators, and signed an Executive Order directing the steps the United States would take to implement its commitments to an EU/U.S. Data Privacy Framework. On July 10, 2023, the European Commission adopted an adequacy decision for the EU-U.S.
Our Specialized Cloud Infrastructure Platform Our specialized cloud infrastructure enables real-time programmatic advertising transactions in a market characterized by significant data and impression volumes, regulatory complexity, and increased focus on transparency and privacy. We have built, enhanced and deployed our technology infrastructure to address these market conditions and provide superior outcomes for both publishers and buyers.
Our ability to meet the demands of both buyers and inventory sellers enables us to produce superior outcomes for all industry participants. Sustained Innovation of our Cloud Platform: Our specialized cloud platform enables real-time programmatic advertising transactions in a market characterized by significant data and impression volumes, regulatory complexity, and increased focus on transparency and privacy.
When websites are flagged, or we receive notice of such websites, we do not collect personal information, as defined by COPPA, including cookie identifiers that can recognize the same consumer across multiple sites over time, or location information more specific than street and city, on such websites or online services. 15 Table of Contents Additionally, our compliance with our privacy policy and our general consumer data privacy and security practices are subject to review by the Federal Trade Commission, which may bring enforcement actions to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations or material omissions therein.
When websites are flagged, or we receive notice of such websites, we do not collect personal information, as defined by COPPA, including cookie identifiers that can recognize the same consumer across multiple sites over time, or location information more specific than street and city, on such websites or online services.
We are party to an agreement with Google LLC, under which Google is a buyer on our platform. The initial one-year term of the current agreement ended in May 2019, and it automatically renews for successive one-year terms unless either party provides written notice at least 60 days’ prior to the end of the initial term or such successive terms.
We signed a prior similar agreement with a Google subsidiary in 2012. We are also party to an agreement with The Trade Desk, Inc., under which The Trade Desk is a buyer on our platform. The initial term of the agreement ended in November 2013, and it automatically renews for successive one-year terms.
Cultural Principles : • We will empower every individual team member and treat each other as partners. • We will make having fun a priority. • We will hire and retain the best talent. • We will communicate internally with honesty, transparency, and authenticity, including positive and negative information.
Values: • We put the customer first. • We are biased towards action. • We are leaders and innovators. • We are committed to integrity. • We celebrate teamwork. 12 Table of Contents Cultural Principles: • We will empower every individual team member and treat each other as partners. • We will make having fun a priority. • We will hire and retain the best talent. • We will communicate internally with honesty, transparency, and authenticity, including positive and negative information. • We will encourage diversity and inclusion of ideas and people, creating a high-trust and high-performance workplace.
In order to better reach consumers, every major media format has transitioned or is in the process of transitioning content from traditional or analog means of delivery to digital.
To better reach consumers, every major media format has transitioned or is in the process of transitioning content from traditional or analog means of delivery to digital across every media channel and device. In addition, digital advertising continues to evolve into new areas such as commerce media, which creates new opportunities for growth.
The GDPR sets out higher potential liabilities for certain data protection violations, which may result in fines up to the greater of €20 million or 4% of an enterprise’s global annual revenue. Additionally, the UK GDPR will also have the ability to fine up to the greater of £17.5 million or 4% of global turnover.
The GDPR, as originally implement by the respective EU members states and later adopted by the U.K. following Brexit (the “UK GDPR”), sets out higher potential liabilities for certain data protection violations, which may result in fines up to the greater of €20 million or 4% of an enterprise’s global annual revenue.
Most notably, the GDPR that took effect in May 2018, the CCPA that took effect in January 2020 and CRPA that took effect in January 2023, among other global privacy laws and regulations, have created a compliance burden for advertisers, publishers, and their partners to navigate.
The GDPR and the CCPA, as well as other global and U.S. state consumer privacy laws and regulations, have created a compliance burden for advertisers, publishers, and their partners to navigate.
Enabling Identity on the Open Internet: As advertising in the Open Internet shifts from targeting by anonymized and invisible third-party cookies that consumers must opt out of, and instead towards known first-party identity based on consumer choice and opt-in or other privacy compliant solutions, publishers and advertisers must transition to a new identity paradigm.
We focus on creating new products that we believe address our customers’ needs, at times before the customer is aware of such need. For example, the Open Internet continues to shift from targeting by anonymized and invisible third-party cookies that consumers must opt out of, towards known first-party identity based on consumer choice and opt-in or other privacy compliant solutions.
Examples of how we leverage our artificial intelligence and machine learning capabilities to improve outcomes for our customers are: • Identify valuable ad impressions and predict auction behavior: When our machine learning models predict that an impression will attract high bids, our algorithms adjust pricing guidance to bidders in real time, which can lead to significant inventory yield improvements for publishers and higher win rates for ad buyers. • Optimize impression selection: Our ability to accurately predict and monetize high value impressions allows us to operate more efficiently, due to the fact that the cost of processing low-value impressions and high-value impressions are approximately the same.
For example, when our machine learning models predict that an impression will attract high bids, our algorithms adjust pricing guidance to bidders in real time, which can lead to significant inventory yield improvements for publishers and higher win rates for ad buyers.
Our customers can therefore be confident that our algorithmic software decisions and our guidance are independent and in their best interests. Our trusted status has enabled us to build direct relationships with publishers, advertisers, agencies, and DSPs. Our ability to meet the demands of both buyers and inventory sellers enables us to produce superior outcomes for all industry participants.
Our customers can therefore be more confident that our algorithmic software decisions and our guidance are independent and unbiased. Our trusted status has enabled us to build direct relationships with publishers, advertisers, agencies, and DSPs. Leveraging these relationships, we create bespoke products that meet our customers’ needs.
By providing global, omnichannel reach of our infrastructure, we are well positioned to help publishers and ad buyers make their advertising businesses more efficient and effective.
Due to the global, omnichannel reach of our infrastructure, we believe we are well positioned to help publishers and ad buyers make their advertising businesses more efficient and effective. 6 Table of Contents Customer Control and Partnership: Due to our status as an independent infrastructure provider prioritizing transparency, we can be more closely aligned with both publishers and buyers.
As of December 31, 2022, we had 875 employees, of whom 275 were located in the United States, 481 in India, and 119 in our other offices around the world.
As of December 31, 2023, we had 948 employees, of whom 290 were located in the United States, 537 in India, and 121 in our other offices around the world. Corporate Information We were incorporated in the State of Delaware in 2006. Our internet address is www.pubmatic.com.
We are constantly evaluating new markets with a strategy to use our existing global infrastructure and adjacent sales office, or by expanding our infrastructure footprint and placing personnel directly in those markets. Our Technology Overview We have designed our technology to efficiently process real-time advertising transactions while leveraging data to optimize outcomes for publishers and buyers.
We utilize customer feedback to help address the demands of publishers and buyers in order to maintain and improve our relationships with those customers. We are constantly evaluating new markets with a strategy to use our existing global infrastructure and adjacent sales offices, or by expanding our infrastructure footprint and placing personnel directly in those markets.
Each of these trends created by header bidding can significantly increase costs for technology providers if not properly addressed with superior technology. Ad Spending Consolidating on Fewer Sell Side Platforms : As advertisers increase the percentage of their overall advertising budgets spent on digital formats, they are increasingly demanding improved transparency and control of their entire digital advertising supply chain.
Consolidation and Convergence of the Sell Side and Buy Side Technology Platforms: As advertisers increase the percentage of their overall advertising budgets spent on digital formats, they are increasingly demanding greater efficiency and control of their entire digital advertising supply chain.
Our agile development process and flexible, service-oriented architecture empower our development teams to routinely convert a requirement into working software within a typical time frame of two weeks or less. Our omnichannel platform supports a wide array of publishers, ad formats and devices, including mobile app, mobile web, desktop, display, video, OTT/CTV, and rich media.
Our agile development process and flexible, service-oriented architecture empower our development teams to routinely convert a requirement into working software within a typical time frame of two weeks or less. We offer our solution as a complete, unified offering for publishers who want a simple, efficient and comprehensive solution.
We have deployed our purpose-built infrastructure globally in order to serve our customers with the high-speed transaction capabilities required to provide a seamless digital ad experience for consumers. Our offering is omnichannel and targets a diverse set of publishers touching many ad formats, and digital device types, including mobile app, mobile web, desktop, display, video, OTT/CTV, and rich media.
Our offering is omnichannel and targets a diverse set of publishers touching many ad formats, and digital device types, including mobile app, mobile web, desktop, display, video, over-the-top video/connected TV (“OTT/CTV”), and rich media.
We expect to continue to invest in both software and hardware infrastructure to continue growing the number of valuable ad impressions we process on our platform. Improve Liquidity in Our Marketplace : We strive to continuously improve publisher revenue and advertiser ROI by investing in our technology and improving our machine learning capabilities.
We expect to continue to invest in both software and hardware infrastructure to continue growing the number of valuable ad impressions we process on our platform. Additionally, we analyze the data on our platform through extensive application of artificial intelligence technologies, including machine learning and natural language processing.
We believe these trends will continue locally and globally. There have also been a growing number of consumer-focused non-profit organizations and commercial entities advocating for privacy rights. These institutions are enabling Internet consumers to assert their rights over the use of their online data in advertising transactions, a trend which we support.
These laws and institutions enable Internet consumers to assert their rights over the use of their online data in advertising transactions, a trend which we support.
Protecting Consumer Privacy and Regulatory Challenges : There is an increasing awareness of how Internet user data is being leveraged to target ads, resulting in a growing number of privacy laws and regulations being established globally, including the General Data Protection Regulation (the “GDPR”) in the European Union, the California Consumer Privacy Act (the “CCPA”) and California Privacy Rights Act (the “CPRA”) in California, and the Video Privacy Protection Act in the United States.
Data Privacy and Regulatory Challenges: There is an increasing awareness of how Internet user data is being leveraged to target ads, resulting in a growing number of privacy laws and regulations. In addition to governmental actors, including legislatures and regulatory agencies, there have also been a growing number of consumer-focused non-profit organizations and commercial entities advocating for privacy rights.
This innovation has fundamentally transformed programmatic advertising by providing buyers with increased transparency and equal access to ad impressions, which results in greater demand for each ad impression and increased publisher revenue. 5 Table of Contents Massive Volumes of Data and Increased Costs : Header bidding has led to a significant increase in the number of ad impressions that need to be processed and analyzed in real-time by each participant in the digital advertising ecosystem.
With header bidding, which enables a single parallel auction by a publisher with multiple interested parties simultaneously, the industry has seen a significant increase in the number of ad impressions that need to be processed and analyzed in real-time by each participant in the digital advertising ecosystem.
The Rise of Programmatic Header Bidding : The challenges of scale and the complexity of the digital advertising ecosystem require an automated and efficient approach to purchasing ads online, known as programmatic advertising.
Automation and Data Processing: The challenges of scale and the complexity of the digital advertising ecosystem require an automated, fast, and efficient approach to purchasing ads online, known as programmatic advertising. Programmatic advertising, on an automated basis, enables buyers to purchase ad impressions on publisher supplied inventory within milliseconds in a sophisticated, technology-driven marketplace.
The effect of these SPO agreements is to increase the volume of ad spend on our platform without corresponding increases in technology costs.
We have entered into supply path optimization (“SPO”) agreements directly with both advertisers and agencies through various arrangements including custom data and workflow integrations, product features, and volume-based business terms. The effect of these SPO agreements is to increase the volume of ad spend on our platform without corresponding increases in technology costs.
Our people strategy revolves around creating employee experiences that foster deep employee engagement built upon personal development and achievement that is supported by continuous feedback, learning, and team building. Our workplaces in the United States have been certified by Great Place To Work (2017-2022) and recognized on Fortune’s list of Best Workplaces in the Bay Area 2020 and 2022.
We believe that strong and diverse customer teams deepen customer relationships, promote innovation, and increase productivity. Our people strategy revolves around creating employee experiences that foster deep employee engagement built upon personal development and achievement that is supported by continuous feedback, learning, and team building.
Technology infrastructure platforms must rapidly process this data while offering a seamless digital ad experience for consumers. Growing transaction volumes and increasingly complex data processing requirements can lead to rising overall costs for technology vendors.
Technology infrastructure platforms must rapidly process this data while offering a seamless digital ad experience for consumers. Companies must continue to innovate and find efficiencies in their data processing, including through the use of machine learning and artificial intelligence, to maintain pace with growing volumes of transactions to maintain profitability.
Max Schrems, who brought the lawsuit which resulted in the invalidation of Privacy Shield in 2020, has indicated that he will legally challenge these newly proposed Privacy Shield terms.
This new Data Privacy Framework could be subject to legal challenge in front of the CJEU, specifically by Max Schrems, who successfully litigated to invalidate the Privacy Shield in 2020 and has indicated that he will legally challenge these new frameworks.
In addition, transparency allows the advertiser to know the type of ad inventory being purchased and the content appearing adjacent to the advertiser’s ads to avoid purchasing fraudulent or fake inventory or appearing next to content that reflects poorly on the advertiser’s brand.
Efficiency includes reducing operational costs, increasing the simplicity of the buying process, and increasing the return on ad spend or investment. Control refers to the buyer determining which media, content, or consumer their ad spend is being invested with to avoid appearing next to content that reflects poorly on the advertiser’s brand or purchasing fraudulent or fake inventory.
This shift towards significantly more reliable and accurate consumer identity has the potential to significantly increase advertiser ROI and therefore publisher revenue. 6 Table of Contents Our Role in the Digital Advertising Ecosystem Our platform is a key component of powering the digital advertising ecosystem because of the role we play in meeting the needs of ad sellers and ad buyers.
We expect this shift towards significantly more reliable and accurate consumer identity will create short term disruption but could have the potential to significantly increase advertiser return on investment (“ROI”) and therefore publisher revenue in the long run. Our Digital Advertising Solutions We generate revenue from the use of our platform for the purchase and sale of digital advertising inventory.
Additionally, some of these bodies might refer violations of their requirements to the Federal Trade Commission or other regulators. Corporate Information We were incorporated in the State of Delaware in 2006. Our internet address is www.pubmatic.com.
Additionally, some of these bodies might refer violations of their requirements to the Federal Trade Commission or other regulators. Our Team and Culture Our culture and our team are our most important asset in building and expanding our business. Our team identifies new problems to solve, builds solutions, optimizes and extends our infrastructure, and acquires and serves our customers.
Certain State Attorneys General in the United States may also bring enforcement actions based on comparable state laws or federal laws that permit state-level enforcement. In California, for example, the Attorney General may bring enforcement actions for violations of the CCPA, as modified by the Attorney General’s recently approved enforcement guidelines.
Additionally, our compliance with our privacy policy and our general consumer data privacy and security practices are subject to review by the Federal Trade Commission, which may bring enforcement actions to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations or material omissions therein. 10 Table of Contents Certain State Attorneys General in the United States may also bring enforcement actions based on comparable state laws or federal laws that permit state-level enforcement.
Our growth strategy includes: Attract New Publishers and Expand our Relationship with Existing Publishers : We constantly seek to acquire new high-quality publishers around the world. New publishers may include major media companies, app developers, e-commerce providers, and OTT platforms– any company that monetizes its audience through digital advertising.
Our growth strategy includes: Attract New Customers and Expand our Relationship with Existing Customers Globally: We constantly seek to acquire new customers and retain our relationships with existing publishers and buyers around the world. We invest in continued innovation based on the ever-changing market.
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Our sell-side platform empowers the world’s leading digital content creators across the open internet to control access to their inventory and increase monetization by enabling marketers to drive return on investment (“ROI”) and reach addressable audiences across ad formats and devices. Since 2006, our infrastructure-driven approach has allowed for the efficient processing and utilization of data in real time.
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Our integrated technology platform empowers the world’s leading digital content creators (which we collectively refer to as “publishers”) across the open internet to maximize monetization of their advertising inventory.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Related to Data Collection and the Use of Collected Data The rejection of digital advertising by consumers, through opt-in, opt-out or ad-blocking technologies or other means or the restriction on the use of third party-cookies, mobile device identifiers or other tracking technologies, could adversely affect our business, results of operations, and financial condition.
Biggest changeAdditionally, even if publishers and buyers embrace our new or expanded offerings, the positive effect of these new or expanded offerings on our results of operations may be offset or negated if such adoption cannibalizes business from our existing solutions, if we are unable to scale our offerings to keep up with demand, if we are unable to hire or retain personnel with the requisite skills and experience related to our new or expanded offerings, if publishers and buyers prefer similar offerings from our competitors, or by other adverse developments. 16 Table of Contents Risk Related to Data Collection and the Use of Collected Data The rejection of digital advertising by consumers, through opt-in, opt-out or ad-blocking technologies or other means or the restriction on the use of third party-cookies, mobile device identifiers or other tracking technologies, could adversely affect our business, results of operations, and financial condition.
Many publishers and buyers are large consolidated organizations that may need to acquire other companies in order to grow. Smaller publishers and buyers may need to consolidate in order to compete effectively.
Many publishers and buyers are large, consolidated organizations that may need to acquire other companies in order to grow. Smaller publishers and buyers may need to consolidate to compete effectively.
For example, someone may attempt to divert or artificially inflate advertiser purchases through our platform, or to disrupt or divert the operation of the systems, and devices of our publishers, and their consumers in order to misappropriate information, generate fraudulent billings or stage cyberattacks, or for other illicit purposes.
For example, someone may attempt to divert or artificially inflate advertiser purchases through our platform, or to disrupt or divert the operation of our systems and the devices of our publishers and their consumers in order to misappropriate information, generate fraudulent billings, stage cyberattacks, or for other illicit purposes.
Our servers may also be vulnerable to computer viruses, break-ins, denial-of-service attacks, and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, loss of critical data. We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting California, New York, Virginia, or Pune, India.
Our servers may also be vulnerable to computer viruses, break-ins, denial-of-service attacks, and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, and loss of critical data. We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting California, New York, Virginia, or Pune, India.
Our security measures, and those of our third-party service providers, might not detect or prevent all attempts to breach our systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches, ransomware, credential stuffing attacks or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by our websites, networks and systems or that we or such third parties otherwise maintain, including payment card systems, which may subject us to fines or higher transaction fees or limit or terminate our access to certain payment methods.
Our security measures, and those of our third-party service providers, might not detect or prevent all attempts to breach our systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches, ransomware, credential stuffing attacks, or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by our websites, networks, and systems or that we or such third parties otherwise maintain, including payment card systems, which may subject us to fines, higher transaction fees, or limit or terminate our access to certain payment methods.
We expect to face challenges, risks, and difficulties frequently experienced by growing companies in rapidly developing industries, including those relating to: • changes in demand and pricing for ad impressions sold on our platform; • changes in our access to valuable ad impressions from publishers; • developing, maintaining, and expanding relationships with publishers, DSPs, agencies, and advertisers • seasonality in our business; • innovating and developing new solutions that are adopted by and meet the needs of publishers, DSPs, agencies, and advertisers; • competing against companies with a larger customer base or greater financial or technical resources; • changes in the structure of the buying and selling of ad impressions; • changes in the pricing policies of publishers and competitors; • responding to evolving industry standards and government regulations that impact our business, particularly in the areas of data protection and consumer privacy. • changes in demand due to changes in macroeconomic environment, including as a result of an economic downturn, recession, inflation, changes in interest rates or foreign exchange rates, disruptions to supply chains, or otherwise; • further expanding our business internationally; and • recruiting, integrating, and retaining qualified and motivated employees, particularly engineers.
We expect to face challenges, risks, and difficulties frequently experienced by growing companies in rapidly developing industries, including those relating to: • changes in demand and pricing for ad impressions sold on our platform; • changes in our access to valuable ad impressions from publishers; • responding to evolving industry standards and government regulations that impact our business, particularly in the areas of data protection and consumer privacy; • developing, maintaining, and expanding relationships with publishers, DSPs, agencies, advertisers, and buyers; • seasonality in our business; • innovating and developing new solutions that are adopted by and meet the needs of publishers, DSPs, agencies, advertisers, and buyers; • competing against companies with a larger customer base or greater financial or technical resources; • changes in the structure of the buying and selling of ad impressions; • changes in the pricing policies of publishers and competitors; • changes in demand due to changes in macroeconomic environment, including as a result of an economic downturn, recession, inflation, changes in interest rates or foreign exchange rates, disruptions to supply chains, or otherwise; • further expanding our business internationally; and • recruiting, integrating, and retaining qualified and motivated employees, particularly engineers.
These provisions include: • a provision that our board of directors will be classified into three classes of directors with staggered three-year terms at such time as the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, which could delay the ability of stockholders to change the membership of our board; • the ability of our board to issue shares of preferred stock without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • a prohibition on stockholder action by written consent effective upon such time as the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock; • the requirement that a special meeting of stockholders may be called only by the chairman of the board, our chief executive officer, our lead director, or a majority of our board; 40 Table of Contents • the requirement for the affirmative vote of holders of at least 66-2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend provisions of our restated certificate of incorporation or our restated bylaws; • the ability of our board to amend the bylaws, which may allow it to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer; • the requirement that stockholders submitting notice of a nomination or proposal to be considered at an annual meeting of our stockholders must have continuously beneficially owned at least 1% of our outstanding common stock for a period of one year before giving such notice; • advance notice procedures with which stockholders must comply to nominate candidates to our board or to propose matters to be acted upon at a stockholders’ meeting; and • the dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets.
These provisions include: • a provision that our board of directors will be classified into three classes of directors with staggered three-year terms at such time as the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, which could delay the ability of stockholders to change the membership of our board; • the ability of our board to issue shares of preferred stock without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • a prohibition on stockholder action by written consent effective upon such time as the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock; • the requirement that a special meeting of stockholders may be called only by the chairman of the board, our chief executive officer, our lead director, or a majority of our board; • the requirement for the affirmative vote of holders of at least 66-2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend provisions of our restated certificate of incorporation or our restated bylaws; • the ability of our board to amend the bylaws, which may allow it to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer; • the requirement that stockholders submitting notice of a nomination or proposal to be considered at an annual meeting of our stockholders must have continuously beneficially owned at least 1% of our outstanding common stock for a period of one year before giving such notice; 39 Table of Contents • advance notice procedures with which stockholders must comply to nominate candidates to our board or to propose matters to be acted upon at a stockholders’ meeting; and • the dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets.
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. Any acquisition or investment may divert the attention of management and require us to use significant amounts of cash, issue dilutive equity securities or incur debt.
As part of our growth strategy, we may acquire or invest in other businesses, assets, or technologies that we believe are complementary to and fit within our strategic goals. Any acquisition or investment may divert the attention of management and require us to use significant amounts of cash, issue dilutive equity securities, or incur debt.
If we combine 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 would allow our competitors to create similar solutions with lower development effort and time and ultimately put us at a competitive disadvantage.
If we combine 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 would allow our competitors to create similar solutions with lower development cost, effort, and time, and ultimately put us at a competitive disadvantage.
We must continue to adapt and improve our technology to compete effectively, and customers have not always embraced our offering due to various factors, including switching costs from moving away from pre-existing technology integrations, such as already implemented header bidding wrappers, and lack of awareness of our omnichannel offerings.
We must continue to adapt and improve our technology to compete effectively, and customers have not always embraced our offerings due to various factors, including switching costs from moving away from pre-existing technology integrations, such as already implemented header bidding wrappers, and lack of awareness of our omnichannel offerings.
The regulatory framework for data privacy issues worldwide is currently evolving and is likely to remain uncertain for the foreseeable future. The occurrence of unanticipated events often rapidly drives the adoption of legislation or regulation affecting the use, collection, or other processing of data and manners in which we conduct our business.
The regulatory framework for data privacy issues worldwide is evolving and is likely to remain uncertain for the foreseeable future. The occurrence of unanticipated events often rapidly drives the adoption of legislation or regulation affecting the use, collection, or other processing of data and manners in which we conduct our business.
The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use, and storage of data relating to individuals, including the use of contact information and other data for marketing, advertising and other communications with individuals and businesses.
The U.S. federal government and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use, and storage of data relating to individuals, including the use of contact information and other data for marketing, advertising and other communications with individuals and businesses.
We currently rely on copyright laws to protect computer programs related to our platform and our proprietary technologies, although to date we have not registered for statutory copyright protection. In order to bring a copyright infringement lawsuit in the United States, the copyright must be registered.
We rely on copyright laws to protect computer programs related to our platform and our proprietary technologies, although to date we have not registered for statutory copyright protection. In order to bring a copyright infringement lawsuit in the United States, the copyright must be registered.
However, the ruling requires that European organizations seeking to rely on the SCCs to export data out of the European Union ensure the data is protected to a standard that is “essentially equivalent” to that in the European Union including, where necessary, by taking “supplementary measures” to protect the data.
However, the ruling requires that European organizations seeking to rely on the SCCs to export data out of the European Union must ensure the data is protected to a standard that is “essentially equivalent” to that in the European Union, including, where necessary, by taking “supplementary measures” to protect the data.
In the event that use of the SCCs or New SSCs is subsequently invalidated as a solution for data transfers to the United States, or there are additional changes to the data protection regime in the European Union resulting in any inability to transfer personal data from the European Union to the United States in compliance with data protection laws, European customers may be more inclined to work with businesses that do not rely on such compliance mechanisms to ensure legal and regulatory compliance, such as EU-based companies or other competitors that do not need to transfer personal data to the United States in order to avoid the above-identified risks and legal issues.
In the event that use of the SCCs is subsequently invalidated as a solution for data transfers to the United States, or there are additional changes to the data protection regime in the European Union resulting in any inability to transfer personal data from the European Union to the United States in compliance with data protection laws, European customers may be more inclined to work with businesses that do not rely on such compliance mechanisms to ensure legal and regulatory compliance, such as EU-based companies or other competitors that do not need to transfer personal data to the United States in order to avoid the above-identified risks and legal issues.
Some of our competitors may also choose to sell products or services competitive to ours at lower prices by accepting lower margins and profitability, or may be able to sell products or services competitive to ours at lower prices given proprietary ownership of data, technical superiority, or economies of scale.
Some of our competitors may also choose to sell products or services competitive to ours at lower prices by accepting lower margins and profitability, or they may be able to sell competitive products or services at lower prices given proprietary ownership of data, technical superiority, or economies of scale.
If we fail to detect or prevent fraudulent or malicious activity of this sort, our reputation could be damaged, publishers may contest payment, demand refunds, or fail to give us future business, or we could face legal claims.
If we fail to timely detect or prevent fraudulent or malicious activity of this sort, our reputation could be damaged, publishers may contest payment, demand refunds, or fail to give us future business, or we could face legal claims.
We cannot assure you that we will not experience bad debt in the future, and write-offs for bad debt could adversely affect our business, results of operations, or financial condition in the periods in which the write-offs occur.
We cannot assure you that we will not experience bad debt in the future, and write-offs for bad debt could adversely affect our business, results of operations, and financial condition in the periods in which the write-offs occur.
For the time being, we will rely on SCCs for EU-US transfers of EU personal data and explore what “supplementary measures” can implemented to protect EU personal data that is transferred to us in the United States.
For the time being, we will rely on the DPF and SCCs for EU-US transfers of EU personal data and explore what “supplementary measures” can implemented to protect EU personal data that is transferred to us in the United States.
Our revenue, net cash provided by operating activities, results of operations, and other key operating and performance metrics may vary from quarter to quarter due to the seasonal nature of digital advertising spending.
Our revenue, net cash provided by operating activities, results of operations, and other key operating and performance metrics vary from quarter to quarter due to the seasonal nature of digital advertising spending.
In the United States, the U.S. Congress and state legislatures, along with federal regulatory authorities have recently increased their attention on matters concerning the collection and use of consumer data.
In the United States, the U.S. Congress and state legislatures, along with federal regulatory authorities have increased their attention on matters concerning the collection and use of consumer data.
As regulators start to enforce the strict approach (which has already begun to occur in Germany, where data protection authorities have initiated a probe on third-party cookies), this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs, and subject us to additional liabilities.
As regulators start to enforce a stricter approach (which has already begun to occur in Germany, where data protection authorities have initiated a probe on third-party cookies), this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs, and subject us to additional liabilities.
Changes in our platform or future changes in export and import regulations may create delays in the introduction of our platform in international markets or prevent our customers with international operations from deploying our platform globally.
Changes in our platform or future changes in export and import regulations may create delays in the introduction of our platform in certain markets or prevent our customers with international operations from deploying our platform globally.
Any failure to accurately report and present our non-GAAP financial measures and key metrics could cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock. Our credit agreement contains operating and financial covenants that may restrict our business and financing activities.
Any failure to accurately report and present our non-GAAP financial measures and key metrics could cause investors to lose confidence in our reported financial and other information, which could have a negative effect on the trading price of our Class A common stock. Our credit agreement contains operating and financial covenants that may restrict our business and financing activities.
In addition, some competitors, particularly those with greater scale or a more diversified revenue base and a broader offering, have greater flexibility than we do to compete aggressively on the basis of price and other contract terms, or to compete with us by including in their product offerings services that we may not provide.
In addition, some competitors, particularly those with greater scale or a more diversified revenue base and a broader offering, have greater flexibility than we do to compete aggressively on the basis of price and other contract terms, or to compete with us by including in their product offerings services that we may not be able to provide.
Any disruptions in our relationships with premium publishers or largest channel partners could adversely affect our business, results of operations, and financial condition.
Any disruptions in our relationships with premium publishers, buyers, or our largest channel partners could adversely affect our business, results of operations, and financial condition.
For example, sophisticated bot-nets and other complex forms of click fraud might be used to generate fraudulent impressions and divert advertising revenue from legitimate websites of publishers. Those activities could also introduce malware through our platform in order to commandeer or gain access to information on consumers’ computers.
For example, sophisticated bot-nets and other complex forms of click fraud might be used to generate fraudulent impressions and divert advertising revenue from legitimate websites of publishers. Those activities could also introduce malware through our platform to commandeer or gain access to information on consumers’ computers.
We also cannot be sure that our existing cyber insurance coverage, general liability insurance coverage and coverage for errors or omissions will fully cover such incident, continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that insurers will not deny coverage as to any future claim.
We also cannot be sure that our existing cyber insurance coverage, general liability insurance coverage, and coverage for errors or omissions will fully cover such incidents, will continue to be available on acceptable terms, or will be available in sufficient amounts to cover one or more large claims, or that insurers will not deny coverage as to any future claim.
Any disruptions in our relationships with DSPs, agencies or advertisers could adversely affect our business, results of operations, and financial condition.
Any disruptions in our relationships with DSPs, agencies, advertisers, or buyers could adversely affect our business, results of operations, and financial condition.
There is a finite number of large publishers and buyers in our target markets, and any consolidation of publishers or buyers may give the resulting enterprises greater bargaining power or result in the loss of publishers and buyers that use our platform, reducing our potential base of publishers and buyers, each of which would lead to erosion of our revenue.
There is a finite number of large publishers and buyers in our target markets, and any consolidation of publishers or buyers may give the resulting enterprises greater bargaining power or result in the loss of publishers and buyers that use our platform, reducing our potential base of publishers and buyers, each of which would lead to erosion of our revenue and financial condition.
We could be subject to third parties claims if our publishers or buyers do not have sufficient rights to the content, technology, data, or other material associated with an ad impression that they provide, or if it infringes or is alleged to infringe the intellectual property rights of such parties.
We could be subject to third party claims if our publishers or buyers do not have sufficient rights to the content, technology, data, or other material associated with an ad impression that they provide, or if it infringes or is alleged to infringe the intellectual property rights of other parties.
Any such developments could adversely affect our business, results of operations, and financial condition. We depend on third-party data centers, the disruption of which could adversely affect our business, results of operations, and financial condition. We host our company-owned infrastructure at third-party data centers. Any damage to or failure of our systems generally would prevent us from operating our business.
We depend on third-party data centers, the disruption of which could adversely affect our business, results of operations, and financial condition. We host our company-owned infrastructure at third-party data centers. Any damage to or failure of our systems generally would prevent us from operating our business.
Risks Related to Intellectual Property 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.
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.
As of December 31, 2022, we had no outstanding borrowings under our Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank (“SVB”). Borrowings under the Credit Agreement are secured by substantially all of our assets, The Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants.
As of December 31, 2023, we had no outstanding borrowings under our Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank (“SVB”). Borrowings under the Credit Agreement are secured by substantially all of our assets. The Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants.
To the extent that our platform depends upon the successful operation of the open source software we use, any undetected errors or defects in this open source software could prevent the deployment or impair the functionality of our platform, delay new solutions introductions, result in a failure of our platform, and injure our reputation.
To the extent that our platform depends upon the successful operation of the open source software we use, any undetected errors or defects in this open source software could prevent the deployment or impair the functionality of our platform, delay new solutions introductions, result in a failure of our platform, and harm our reputation.
Additionally, privacy and data protection laws are evolving, and it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our safeguards and practices that could result in fines, lawsuits and other penalties, and significant changes to our publishers business practices and inventory.
Additionally, privacy and data protection laws are evolving, and it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our safeguards and practices that could result in fines, lawsuits, and other penalties, and significant changes to our publishers’ business practices and inventory.
We aggregate this data and analyze it in order to enhance our services, including the pricing, placement, and scheduling of advertisements. As part of our real-time analytics service offering we also share the data, or analyses based on it, with our publishers and buyers.
We collect this data and analyze it in order to enhance our services, including the pricing, placement, and scheduling of advertisements. As part of our real-time analytics service offering, we also share the data, or analyses based on it, with our publishers and buyers.
Errors or failures in our solution, even if caused by the implementation of changes by publishers or partners to their systems, could also result in negative publicity, damage to our reputation, loss of or delay in market acceptance of our solution, increased costs or loss of revenue, or loss of competitive position.
Errors or failures in our offerings, even if caused by the implementation of changes by publishers or partners to their systems, could also result in negative publicity, damage to our reputation, loss of or delay in market acceptance of our offerings, increased costs or loss of revenue, or loss of competitive position.
Our results of operations have fluctuated in the past, and future results of operations are likely to fluctuate as well. Although we have experienced substantial revenue growth, we may not be able to sustain this growth rate, current revenue levels or profitability.
Our results of operations have fluctuated in the past, and future results of operations are likely to fluctuate as well. Although we have experienced prolonged revenue growth, we may not be able to sustain this growth rate, current revenue levels, or profitability.
We rely upon a combination of trade secrets, third-party confidentiality and non-disclosure agreements, additional contractual restrictions on disclosure and use, and trademark, copyright, patent, and other intellectual property laws to establish and protect our proprietary technology and intellectual property rights.
We rely upon a combination of trade secrets protections, third-party confidentiality and non-disclosure agreements, contractual restrictions on disclosure and use, and trademark, copyright, patent, and other intellectual property laws to establish and protect our proprietary technology and intellectual property rights.
Further, perpetrators of fraudulent impressions and malware frequently change their tactics and may become more sophisticated over time, requiring both us and third parties to improve processes for assessing the quality of publisher inventory and controlling fraudulent activity.
Further, perpetrators of fraudulent impressions and malware frequently change their tactics and can become more sophisticated over time, requiring both us and third parties to improve processes for assessing the quality of publisher inventory and controlling fraudulent activity.
We use third-party tools and proprietary technology to identify non-human traffic and malware, and we may reduce or terminate relationships with publishers that we find to be engaging in such activities. Although we continuously assess the quality and performance of advertising on publishers’ digital media properties, it may be difficult to detect fraudulent or malicious activity.
We use third-party tools and proprietary technology to identify non-human traffic and malware, and we may reduce or terminate relationships with publishers that we find to be engaging in such activities. Although we continuously assess the quality and performance of advertising on publishers’ digital media properties, it may be difficult to detect fraudulent or malicious activity quickly or at all.
We may not be able to accurately predict changes in overall advertiser demand for the channels in which we operate and cannot assure you that our investment in formats will correspond to any such changes.
We may not be able to accurately predict changes in overall advertiser demand for the channels in which we operate and cannot assure you that our investment in formats will correspond to any such changes or shifts in demand.
In addition to government regulation, privacy advocates, and industry groups may propose new and different self-regulatory standards that may apply to us, and are constantly evolving in the United States, European Union, and other countries.
In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may apply to us, and are constantly evolving in the United States, European Union, and other jurisdictions.
We may also face allegations that our employees have misappropriated or divulged the intellectual property of their former employers or other third parties. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, the claims are time consuming, divert management attention and financial resources and are costly to evaluate and defend.
We may also face allegations that our employees have misappropriated or divulged the intellectual property of their former employers or other third parties. Regardless of whether claims that we are infringing on the intellectual property rights of others have any merit, the claims are time consuming, divert management attention and financial resources, and are costly to evaluate and defend.
Results of these litigation matters are difficult to predict and may require us to stop offering some features, purchase licenses, which may not be available on favorable terms or at all, or modify our technology or our platform while we develop non-infringing substitutes, or incur significant settlement costs.
Results of intellectual property litigation matters are difficult to predict and may require us to stop offering some features, purchase licenses, which may not be available on favorable terms or at all, or modify our technology or our platform while we develop non-infringing substitutes, or incur significant settlement costs.
If we fail to abide by or are perceived as not operating in accordance with applicable laws and regulations and industry best practices or any industry guidelines or codes with regard to privacy or the provision of Internet advertising, our reputation may suffer and we could lose relationships with our publishers or others.
If we fail to abide by or are perceived as not operating in accordance with applicable laws, regulations, and industry best practices, or any industry guidelines or codes with regard to privacy or the provision of Internet advertising, our reputation may suffer and we could lose market share or relationships with our publishers, buyers, or others.
Our failure to adapt to a rapidly changing market, anticipate publisher and buyer demand, or attract and retain publishers would cause our revenue or revenue growth rate to decline, and adversely affect our business, results of operations, and financial condition. We must scale our platform infrastructure to support anticipated growth and transaction volume.
Our failure to adapt to a rapidly changing market and regulatory environment, anticipate publisher and buyer demand, or attract and retain publishers and buyers would cause our revenue or revenue growth rate to decline, and adversely affect our business, results of operations, and financial condition. We must scale our platform infrastructure to support anticipated growth and transaction volume.
If our ability to use cookies, mobile device identifiers or other tracking technologies is limited, we may be required to develop or obtain additional applications and technologies to compensate for the lack of cookies, mobile device identifiers and other tracking technology data, which could be time consuming or costly to develop, less effective, and subject to additional regulation.
If our ability to use cookies, mobile device identifiers or other tracking technologies is limited, we may be required to develop or obtain additional applications and technologies to compensate for the lack of cookies, mobile device identifiers and other tracking technology data, which may not be available to us or could be time consuming or costly to develop, less effective, and subject to additional regulation.
We experience requests from publishers and buyers for discounts, fee concessions, rebates, or other forms of consideration, refunds, and greater levels of pricing transparency, in some cases as a condition to maintain the relationship or to increase the amount of advertising spend that the buyer sends to our platform.
We experience requests from publishers and buyers for discounts, fee concessions, rebates, refunds, and greater levels of pricing transparency, in some cases as a condition to maintain the relationship or to increase the amount of advertising spend that the buyer sends to our platform.
Significant portions of our development and advertising operations work is located in Pune, India, which is susceptible to earthquakes and flooding. In addition, economic or political instability caused by the conflict in Ukraine, or international responses thereto, could adversely affect our business, results of operations, and financial condition.
Significant portions of our development and advertising operations work is located in Pune, India, which is susceptible to earthquakes and flooding. In addition, economic or political instability caused by the conflicts in Ukraine, or Israel or international responses thereto, could adversely affect our business, results of operations, and financial condition.
We also believe that our revenue growth may depend on our ability to expand within mobile, video, and in particular, CTV, and we have been, and are continuing to, enhance such channels.
We also believe that our revenue growth may depend on our ability to expand within mobile, video, and in particular, CTV, and we are continuing to enhance such channels.
We may not have adequate insurance or contractual indemnity arrangements to protect us against any such claims and losses. 22 Table of Contents Risk Related to the Advertising Industry and Competition The digital advertising 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 adversely affected.
We may not have adequate insurance or contractual indemnity arrangements to protect us against any such fines, penalties, claims, and losses. 18 Table of Contents Risk Related to the Advertising Industry and Competition The digital advertising 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 adversely affected.
Other proposed legislation may add additional complexity, variation in requirements, restrictions, and potential legal risk, require additional investment in resources to compliance programs, and could impact strategies and availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
This new proposed legislation may add additional complexity, variation in requirements, restrictions, and potential legal risk, require additional investment in resources to compliance programs, and could impact strategies and availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
The resulting process friction could result in substantial inefficiency and loss of inventory and demand, as well as increased burdens upon our organization as we seek to assist customers and adapt our own technology and processes as necessary to comply with the law and adapt to industry practice.
The resulting process friction could result in substantial inefficiency and loss of inventory and demand, as well as increased burdens upon our organization as we seek to assist customers and adapt our own technology and processes as necessary to comply with laws and regulations and adapt to industry practice.
If so, in addition to the possibility of fines, lawsuits, and other claims, we could be required to fundamentally change our business activities and practices or modify our software, which could have an adverse effect on our business, results of operations, and financial condition.
If so, in addition to the possibility of fines, lawsuits, and other claims, we could be required to change our offerings or business activities and practices or modify our software, any of which could have an adverse effect on our business, results of operations, and financial condition.
Some of our competitors are also able or willing to agree to contract terms that expose them to risks that might be more appropriately allocated to publishers or buyers of advertising (including inventory risk and the risk of having to pay publishers for unsold advertising impressions), and in order to compete effectively we might need to accommodate risks that could be difficult to manage or insure against.
Some of our competitors are also able or willing to agree to contract terms that expose them to risks that might be more appropriately allocated to publishers or buyers (including inventory risk and the risk of having to pay publishers for unsold advertising impressions, among others), and in order to compete effectively we might need to accommodate risks that could be costly to manage or insure against.
Outages and disruptions of our platform, including any caused by cyberattacks, may harm our reputation and adversely affect our business, results of operations, and financial condition. Our software platform could be susceptible to errors, defects, or unintended performance problems that could adversely affect our business, results of operations, and financial condition.
Outages and disruptions of our platform, including any caused by cyberattacks, may harm our reputation and adversely affect our business, results of operations, and financial condition. 23 Table of Contents Our software platform could be susceptible to errors, defects, or unintended performance problems that could adversely affect our business, results of operations, and financial condition.
We have no minimum commitments from buyers to spend on our platform, so the amount of demand available to us can change at any time, and we cannot assure you that we will have access to a consistent volume or quality of ad campaigns or demand for our ad impressions at a reasonable price, or at all.
We have no minimum commitments from buyers to spend on our platform, so the amount of demand available to us can change at any time with little or no prior notice, and we cannot assure you that we will have access to a consistent volume or quality of ad campaigns or demand for our ad impressions at a reasonable price, or at all.
Although we believe we will make reasonable estimates and judgments, the ultimate outcome of any particular issue may differ from the amounts previously recorded in our financial statements and any such occurrence could adversely affect our business, results of operations, and financial condition. Tax changes could affect our effective tax rate and future profitability.
Although we believe we have made and will continue to make reasonable estimates and judgments, the ultimate outcome of any particular issue may differ from the amounts previously recorded in our financial statements and any such occurrence could adversely affect our business, results of operations, and financial condition. Tax changes could affect our effective tax rate and future profitability.
Some of these self-regulatory bodies have the ability to discipline members or participants, which could result in fines, penalties, and/or public censure (which could in turn cause reputational harm). Additionally, some of these self-regulatory bodies might refer violations of their requirements to the U.S. Federal Trade Commission or other regulatory bodies.
Some of these self-regulatory bodies have the ability to discipline members or participants, which could result in fines, penalties, and/or public censure (which could in turn cause reputational harm) being imposed on us. Additionally, some of these self-regulatory bodies might refer violations of their requirements to the U.S. Federal Trade Commission or other regulatory bodies.
We and such third parties might not anticipate or prevent all types of attacks until after they have already been launched. Further, techniques used to obtain unauthorized access to or sabotage systems change frequently and might not be known until launched against us or our third-party service providers.
We and such third parties might not anticipate, prevent, or detect attacks until after they have already been launched. Further, techniques used to obtain unauthorized access to, or sabotage, systems change frequently and might not be known until launched against us or our third-party service providers.
Such introduction of competent, competitive products, pricing strategies, or other technologies by our competitors that are superior to or that achieve greater market acceptance than our products and services could adversely affect our business.
The introduction of competitive products, pricing strategies, or other technologies by our competitors that are superior to or that achieve greater market acceptance than our products and services could adversely affect our business.
In doing so, we compete for both supply and demand with larger, well-established companies that may have technological advantages stemming from their experience in the market.
In doing so, we compete for both supply and demand with larger, well-established companies that may have technological or other advantages stemming from their broader experience in the market.
Some of our competitors have longer operating histories, greater name recognition, and greater financial, technical, sales, and marketing resources than we have.
Some of our competitors have greater financial, technical, sales, and marketing resources, longer operating histories, and greater name recognition.
If we cannot retain or add individual publishers with valuable ad impressions, or if such publishers decide not to make their valuable ad impressions available to us, then our buyers may be less inclined to use our platform, which could adversely affect our business, results of operations, and financial condition. 18 Table of Contents A limited number of large DSPs – The Trade Desk and Google DV360 in particular – account for a significant portion of the ad impressions purchased on our platform.
If we cannot retain or add individual publishers with valuable ad impressions, or if such publishers decide not to make their valuable ad impressions available to us, then our buyers may be less inclined to use our platform, which could adversely affect our business, results of operations, and financial condition. 14 Table of Contents A limited number of large demand side platforms (“DSPs”) – The Trade Desk and Google DV360 in particular – account for a significant portion of the ad impressions purchased on our platform.
Because the interpretation and application of privacy and data protection laws such as the CCPA and GDPR, and the related regulations and standards, are uncertain, it is possible that these laws, regulations and standards may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our data management practices or the technological features of our solutions.
Because the interpretation and application of privacy and data protection laws, such as the CCPA and GDPR, and their related regulations and standards, are uncertain and sometimes contradictory across jurisdictions, it is possible that these laws, regulations and standards may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our data management practices or the technological features of our solutions.
Even if the market for these solutions develops as we anticipate, publishers and buyers might not embrace our offerings to the degree we expect due to various factors such as inertia from moving off of existing implementations of competitive products.
Even if the market for these offerings develops as we anticipate, publishers and buyers might not embrace our offerings to the degree we expect due to various factors such as inertia from usage of existing implementations of competitive products.
In addition, cyberattack techniques are constantly evolving and becoming increasingly diverse, growing increasingly more sophisticated and could involve denial-of-service attacks or other maneuvers that have the effect of disrupting the availability of services on our platform. 26 Table of Contents Other types of cyberattacks could harm us even if our platform operations are left undisturbed.
In addition, cyberattack techniques are constantly evolving and becoming increasingly diverse and sophisticated, and could involve denial-of-service attacks or other maneuvers that have the effect of disrupting the availability of services on our platform. Other types of cyberattacks could harm us even if our platform operations are left undisturbed.
Furthermore, protecting our intellectual property is particularly challenging after our employees or our contractors end their relationship with us, and, in some cases, decide to work for our competitors. Enforceability of the non-compete agreements that we have in place is not guaranteed, and contractual restrictions could be breached without discovery or adequate remedies.
Furthermore, protecting our intellectual property is particularly challenging after our employees or contractors end their relationship with us, and, in some cases, decide to work for our competitors. Enforceability of the non-compete agreements that we have in place is not guaranteed, and contractual restrictions could be breached without us becoming aware of such breach or adequate remedies available to us.
Although we believe we provide superior transparency and accountability to such competitors, certain customers may place technological or financial demands that we are unable to meet.
Although we believe we provide superior transparency and accountability to such competitors, certain customers may make technological or financial demands that we are unable or unwilling to meet.
Although we monitor our use of open source software to avoid subjecting our platform to conditions we do not intend, we cannot assure you that our processes for controlling our use of open source software in our platform will be effective.
Although we monitor our use of open source software to avoid subjecting our platform to conditions we do not intend or requirements to disclose source code, we cannot assure you that our processes for controlling our use of open source software in our platform will be effective.
Market pressure may reduce our revenue per impression. Our revenue may be affected by market changes, new demands by publishers and buyers, new solutions, and competitive pressure. Our solutions may be priced too high or too low, or our pricing approaches may not be accepted, any of which may carry adverse consequences.
Market pressure may reduce our revenue per impression. Our revenue can be affected by market changes, new demands by publishers and buyers, new solutions, and competitive pressure. Our solutions may be priced too high or too low, or our pricing approaches may not be accepted, any of which may carry adverse consequences to our business and results of operations.
Our business suffers to the extent that publishers and buyers purchase and sell advertising inventory directly from one another or through other intermediaries other than us, reducing the amount of advertising spend on our platform.
Our business suffers when publishers and buyers purchase and sell advertising inventory directly from one another or through other intermediaries other than us, reducing the amount of advertising spend on our platform.
On July 16, 2020, in a case known as Schrems II, the Court of Justice of the European Union (the “CJEU”) ruled on the validity of two of the primary data transfer solutions. The first method, EU-US Privacy Shield operated by the U.S.
On July 16, 2020, in a case known as Schrems II, the Court of Justice of the European Union (the “CJEU”) ruled on the validity of two of the primary data transfer mechanisms. The first mechanism called the EU-US Privacy Shield operated by the U.S.
We expect to depend upon a relatively small number of premium publishers and channel partners for the foreseeable future. To support our continued growth, we will seek to add additional publishers to our platform, and to expand current utilization with our existing publishers.
We depend upon a relatively small number of premium publishers and channel partners and expect to continue to do so for the foreseeable future. To support our continued growth, we seek to add additional publishers and buyers to our platform and to expand current utilization with our existing publishers and buyers.
This may result in additional costs and cause us to forgo or defer other more productive uses of that working capital. Our international operations subject us to additional costs and risks, and our continued international expansion may not be successful. We have entered into several international markets and we expect to continue to expand our international operations.
This may result in additional costs and cause us to forgo or defer more strategic uses of that working capital. 21 Table of Contents Our international operations subject us to additional costs and risks, and our continued international expansion may not be successful. We have entered into several international markets and we expect to continue to expand our international operations.
We need to continuously update our platform and the technology we invest in and develop, including our machine learning and other proprietary algorithms, in order to attract publishers and buyers and keep ahead of changes in technology, evolving industry standards and regulatory requirements.
We need to continuously update our platform and the technology we invest in and develop, including our machine learning and other proprietary algorithms, in order to attract publishers and buyers and keep ahead of changes in technology, evolving industry standards and a rapidly changing regulatory environment.
If we are unable to grow our platform to support substantial increases in the number of transactions and in the amount of data we process, on a high-performance, cost-effective basis, our business, results of operations, and financial condition could be adversely affected.
If we are unable to grow our platform to support substantial increases in the number of transactions and in the amount of data we process, on a high-performance, cost-effective basis, or we are slow in growing our infrastructure compared to demand, our business, results of operations, and financial condition could be adversely affected.
Unauthorized parties may also attempt to copy or obtain and use our technology to develop applications with the same functionality as our solutions, and policing unauthorized use of our technology and intellectual property rights is difficult and may not be effective.
Unauthorized parties may also attempt to copy or obtain and use our technology to develop applications with the same functionality as our offerings, and policing unauthorized use of our technology and intellectual property rights is difficult, time-consuming, and costly, and may not be effective.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+2 added−0 removed8 unchanged
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers None. 42 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of ours under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Biggest changeUnregistered Sales of Equity Securities None. 43 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of ours under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item will be included in our proxy statement relating to our 2023 annual meeting of stockholders to be filed by us with the SEC no later than 120 days after the close of our fiscal year ended December 31, 2022 (the “Proxy Statement”) and is incorporated herein by reference.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item will be included in our proxy statement relating to our 2024 annual meeting of stockholders to be filed by us with the SEC no later than 120 days after the close of our fiscal year ended December 31, 2023 (the “Proxy Statement”) and is incorporated herein by reference.
The following graph compares the cumulative total stockholder return on an initial investment of $100 in our Class A common stock between December 9, 2020 (the date our Class A common stock commenced trading on the Nasdaq Global Market) through December 31, 2022, with the comparative cumulative total returns of the Nasdaq Composite Index, the Nasdaq US Benchmark Software and Computer Services TR Index and the Nasdaq CTA Internet Total Return Index over the same period.
The following graph compares the cumulative total stockholder return on an initial investment of $100 in our Class A common stock between December 9, 2020 (the date our Class A common stock commenced trading on the Nasdaq Global Market) through December 31, 2023, with the comparative cumulative total returns of the Nasdaq Composite Index, the Nasdaq US Benchmark Software and Computer Services TR Index and the Nasdaq CTA Internet Total Return Index over the same period.
There is no public trading market for our Class B common stock. Holders of Record As of January 31, 2023, there were 107 holders of record of our Class A common stock and 84 holders of record of our Class B common stock.
There is no public trading market for our Class B common stock. Holders of Record As of January 31, 2024, there were 99 holders of record of our Class A common stock and 78 holders of record of our Class B common stock.
Added
Issuer Purchases of Equity Securities The following table provides information about our repurchases of our Class A common stock during the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1, 2023 - October 31, 2023 616,300 $ 12.06 616,300 $ 28,465,793 November 1, 2023 - November 30, 2023 461,271 $ 15.93 461,271 $ 21,118,403 December 1, 2023 - December 31, 2023 314,600 $ 17.12 314,600 $ 15,732,751 Total 1,392,171 1,392,171 The amounts above do not include the 1% excise tax on stock repurchases enacted by the Inflation Reduction Act of 2022. _______________ (1) On February 28, 2023, we announced the authorization of a share repurchase program for the repurchase of shares of our Class A common stock in an aggregate amount of up to $75 million through December 31, 2024.
Added
On February 26, 2024, we announced an increase to the aggregate amount available for repurchases to $175 million through December 31, 2025. As of December 31, 2023, we had purchased approximately $59.3 million of our Class A common stock. (2) Average price paid per share includes costs associated with the repurchases.

Item 7. Management's Discussion & Analysis

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

74 edited+20 added−46 removed52 unchanged
Biggest changeThe difference between the effective tax rate in 2021 of 13% and the federal statutory income tax rate of 21% was primarily due deductible stock-based compensation, federal research and development credit, and a decrease in transfer pricing reserve due to expiration of statute of limitation, partially offset by Section 162(m) limitation and state taxes.
Biggest changeTotal Other Income (Expense), net Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Total other income (expense), net $ (359) $ (5,267) $ 4,908 (93) % Total other income (expense), net increased for the year ended December 31, 2023, compared to the prior year period, primarily driven by impairment of our equity investment in 2022. 51 Table of Contents Provision for Income Taxes Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Provision for income taxes $ 1,624 $ 8,762 $ (7,138) (81) % The difference between the effective tax rate in 2023 of 15% and the federal statutory income tax rate of 21% was primarily due to federal research and development credit and foreign derived intangible income (FDII) deduction partially offset by state taxes, stock-based compensation, and Section 162(m) limitation.
We believe that this non-GAAP financial measure is useful to investors for period to period comparisons of our business and in understanding and evaluating our operating results for the following reasons: • Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as stock-based compensation expense, depreciation and amortization, interest expense, provision for income taxes, and certain one-time items such as impairments of long-lived assets, that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired; • Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of operating performance and the effectiveness of our business strategies and in communications with our board of directors concerning our financial performance; and 49 Table of Contents • Adjusted EBITDA provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
We believe that this non-GAAP financial measure is useful to investors for period to period comparisons of our business and in understanding and evaluating our operating results for the following reasons: • Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as stock-based compensation expense, depreciation and amortization, interest expense, provision for income taxes, and certain one-time items such as impairments of long-lived assets, that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired; 52 Table of Contents • Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of operating performance and the effectiveness of our business strategies and in communications with our board of directors concerning our financial performance; and • Adjusted EBITDA provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
We may also up-sell additional products to publisher customers including our header bidding management, identity, and audience solutions. We automate workflow processes whenever feasible to drive predictable and value-added outcomes for our customers and increase productivity of our organization.
We may also sell additional products to publisher customers including our header bidding management, identity, and audience solutions. We automate workflow processes whenever feasible to drive predictable and value-added outcomes for our customers and increase productivity of our organization.
Financing Activities For the year ended December 31, 2022, net cash provided by financing activities of $4.0 million was primarily due to $1.2 million proceeds from stock option exercises and $3.0 million proceeds from the employee stock purchase plan.
For the year ended December 31, 2022, net cash provided by financing activities of $4.0 million was primarily due to $1.2 million in proceeds from stock option exercises and $3.0 million in proceeds from the employee stock purchase plan.
Borrowings under the Revolving Credit Facility accrues interest at rates equal, at our election, to (i) the adjusted term secured overnight financing rate (“SOFR”), which is defined as (a) the applicable term SOFR plus (b) a term SOFR adjustment equal to 0.20% per annum, plus the applicable margin for such loans, or (ii) the alternate base rate (“ABR”), which is defined as the highest of (a) the prime rate in effect from time to time, (b) the federal funds effective rate in effect from time to time plus 0.50%, and (c) the adjusted term SOFR for a one (1) month tenor in effect from time to time plus 1.0%, plus the applicable margin for such loans.
Borrowings under the Revolving Credit Facility accrue interest at rates equal, at our election, to (i) the adjusted term secured overnight financing rate (“SOFR”), which is defined as (a) the applicable term SOFR plus (b) a term SOFR adjustment equal to 0.20% per annum, plus the applicable margin for such loans, or (ii) the alternate base rate (“ABR”), which is defined as the highest of (a) the prime rate in effect from time to time, (b) the federal funds effective rate in effect from time to time plus 0.50%, and (c) the adjusted term SOFR for a one (1) month tenor in effect from time to time plus 1.0%, plus the applicable margin for such loans.
Valuable ad impressions are transparent and data rich, viewable by humans, and verifiable. Each ad impression we auction consists of 493 independent data parameters, which can yield valuable insights if recorded and analyzed properly. This processing of voluminous data for each ad impression must occur in less than half a second as consumers expect a seamless digital ad experience.
Valuable ad impressions are transparent and data rich, viewable by humans, and verifiable. Each ad impression we auction consists of 573 independent data parameters, which can yield valuable insights if recorded and analyzed properly. This processing of voluminous data for each ad impression must occur in less than half a second as consumers expect a seamless digital ad experience.
Our income tax provision may be significantly affected by changes to our estimates for tax in jurisdictions in which we operate and other estimates utilized in determining the global effective tax rate. Actual results may also differ from our estimates based on changes in economic conditions. Such changes could have a substantial impact on the income tax provision.
Income Taxes Our income tax provision may be significantly affected by changes to our estimates for tax in jurisdictions in which we operate and other estimates utilized in determining the global effective tax rate. Actual results may also differ from our estimate based on changes in economic conditions. Such changes could have a substantial impact on the income tax provision.
For purposes of our publisher count, we aggregate multiple business accounts from separate divisions, segments or subsidiaries into a single “master” publisher based on our assessment of the related nature of the group. In addition, in 2022 we completed a number of SPO initiatives which increased buyer spend on our platform.
For purposes of our publisher count, we aggregate multiple business accounts from separate divisions, segments or subsidiaries into a single “master” publisher based on our assessment of the related nature of the group. In addition, in 2023 we completed a number of SPO initiatives which increased buyer spend on our platform.
For discussion on comparison of the fiscal years ended December 31, 2021 and December 31, 2020, please refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
For discussion on comparison of the fiscal years ended December 31, 2022 and December 31, 2021, please refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Investing Activities Our investing activities primarily included acquisition of Martin, investments in marketable securities, purchases of equipment as we expanded the infrastructure in our third-party data centers, and capitalized internal-use software costs in support of enhancing our platform.
Investing Activities Our investing activities primarily included investments in marketable securities, purchases of equipment as we expanded the infrastructure in our third-party data centers, and capitalized internal-use software costs in support of enhancing our platform.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K, for recently issued accounting pronouncements not yet adopted. 58 Table of Contents
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K, for recently issued accounting pronouncements not yet adopted. 57 Table of Contents
Our revenue recognition policies are discussed in more detail under “Critical Accounting Policies and Estimates.” Cost of Revenue Cost of revenue consists of data center co-location costs, depreciation expense related to hardware supporting our platform, amortization expense related to capitalized internal use software development costs, personnel costs, and allocated facilities costs.
Our revenue recognition policies are discussed in more detail under “Critical Accounting Policies and Estimates.” 47 Table of Contents Cost of Revenue Cost of revenue consists of data center co-location costs, depreciation expense related to hardware supporting our platform, amortization expense related to capitalized internal use software development costs, personnel costs, and allocated facilities costs.
We expect revenue to continue to increase in 2023, with mobile and omnichannel video, which is the combination of short form video and OTT/CTV, as our primary growth drivers.
We expect revenue to continue to increase in 2024, with mobile and omnichannel video, which is the combination of short form video and OTT/CTV, as our primary growth drivers.
Actual results may also differ from our estimate based on changes in economic conditions. Such changes could have a substantial impact on the income tax provision. We evaluate the judgments surrounding our estimates and make adjustments, as appropriate, each reporting period.
Actual results may also differ from our estimates based on changes in economic conditions. Such changes could have a substantial impact on the income tax provision. We reevaluate the judgments surrounding our estimates and make adjustments, as appropriate, each reporting period.
Therefore, we consider these to be our critical accounting policies and estimates. Revenue Recognition We refer to our publishers, app developers, and channel partners collectively as our publishers. We generate revenue through the monetization of publisher ad impressions processed on our platform.
Therefore, we consider these to be our critical accounting policies and estimates. 55 Table of Contents Revenue Recognition We refer to our publishers, app developers, and channel partners collectively as our publishers. We generate revenue through the monetization of publisher ad impressions processed on our platform.
We expect sales and marketing expenses to increase in 2023 compared to 2022 in absolute dollars primarily due to additional headcount investment and marketing programs.
We expect sales and marketing expenses to increase in 2024 compared to 2023 in absolute dollars primarily due to additional headcount investment and marketing programs.
We expect general and administrative expenses to increase in 2023 compared to 2022 in absolute dollars primarily due to increases in expenses relating to our personnel.
We expect general and administrative expenses to increase in 2024 compared to 2023 in absolute dollars primarily due to increases in expenses relating to our personnel.
As of December 31, 2022, we had $4.3 million of long-term income tax liabilities, including interest, related to uncertain tax positions. Because of the high degree of uncertainty regarding the settlement of these liabilities, we are unable to estimate the years in which future cash outflows may occur.
As of December 31, 2023, we had $4.5 million of long-term income tax liabilities, including interest, related to uncertain tax positions. Because of the high degree of uncertainty regarding the settlement of these liabilities, we are unable to estimate the years in which future cash outflows may occur.
Personnel costs include salaries, bonuses, stock-based compensation, and employee benefit costs, and are primarily attributable to our cloud operations group, which maintains our servers, and our client operations group, which is responsible for the integration of new publishers and buyers and providing customer support for existing customers.
Personnel costs include salaries, bonuses, stock-based compensation, and employee benefit costs, and are primarily attributable to our cloud operations group, which maintains our servers, and our client operations group, which is responsible for the integration of new publishers and buyers and providing customer support for existing customers. Operating Expenses Technology and Development.
Our gross margin of 68% in 2022 decreased compared to 2021 of 74% due to increases in depreciation and amortization expense from significant data center capacity expansion, as well as an increase in hosting expenses as a result of an increase in volume of impressions.
Our gross margin of 63% in 2023 decreased compared to 2022 of 68% due to increases in depreciation and amortization expense from significant data center capacity expansion, as well as an increase in hosting expenses as a result of an increase in volume of impressions.
We report revenue on a net basis. This represents gross billings to buyers, net of amounts we pay publishers. We record our accounts receivable at the amount of gross billings to buyers, net of allowances, for the amounts we are responsible to collect, and we record our accounts payable at the net amount payable to publishers.
This represents gross billings to buyers, net of amounts we pay publishers. We record our accounts receivable at the amount of gross billings to buyers, net of allowances, for the amounts we are responsible to collect, and we record our accounts payable at the net amount payable to publishers.
As of December 31, 2022, the applicable interest rate under the Revolving Credit Facility was 6.55%. We had no amounts outstanding under the Revolving Credit Facility as of December 31, 2022. The Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants.
As of December 31, 2023, the applicable interest rate under the Revolving Credit Facility was 9.50%. We had no amounts outstanding under the Revolving Credit Facility as of December 31, 2023. The Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants.
Cost of revenue increased $23.2 million, primarily due to a $7.4 million increase in depreciation of data center equipment, a $2.6 million increase in amortization of internal use software, a $7.1 million increase in data centers expansion and upgrades, a $1.6 million increase in personnel costs as headcount increased by 15% in order to support our growing business, a $3.4 million increase in IT support expenses, a $0.6 million increase in professional services to support growth, and a $0.5 million increase in amortization for acquisition-related intangible assets.
Cost of revenue increased $17.7 million, primarily due to a $4.0 million increase in depreciation of data center equipment, a $3.8 million increase in amortization of internal use software, a $6.2 million increase in data centers expansion and upgrades, a $2.0 million increase in personnel costs as headcount increased by 12% in order to support our growing business, and a $1.1 million increase in amortization for acquisition-related intangible assets.
Our net dollar-based retention rate was 108% for the year ended December 31, 2022, and 149% for the year ended December 31, 2021.
Our net dollar-based retention rate was 101% for the year ended December 31, 2023, and 108% for the year ended December 31, 2022.
The following table presents a reconciliation of Adjusted EBITDA to net income for each of the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands) Net income $ 28,705 $ 56,604 $ 26,613 Add back (deduct): Stock-based compensation 20,646 14,107 3,563 Depreciation and amortization 34,249 23,073 15,743 Unrealized (gain), loss and impairment of equity investment 5,948 (5,433) — Interest income (2,214) (300) (537) Acquisition-related and other expenses (1) 1,882 — — Provision for income taxes 8,762 8,199 4,967 Adjusted EBITDA $ 97,978 $ 96,250 $ 50,349 _______________ (1) We exclude acquisition-related and other expenses incurred in connection with our acquisition of Martin from Adjusted EBITDA because we do not believe such expenses are reflective of our ongoing core operations.
The following table presents a reconciliation of Adjusted EBITDA to net income for each of the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands) Net income $ 8,881 $ 28,705 $ 56,604 Add back (deduct): Stock-based compensation 28,862 20,646 14,107 Depreciation and amortization 44,770 34,249 23,073 Unrealized (gain), loss and impairment of equity investment — 5,948 (5,433) Interest income (8,828) (2,214) (300) Acquisition-related and other expenses (1) — 918 — Provision for income taxes 1,624 8,762 8,199 Adjusted EBITDA $ 75,309 $ 97,014 $ 96,250 _______________ (1) We exclude acquisition-related and other expenses incurred in connection with our acquisition of Martin from Adjusted EBITDA because we do not believe such expenses are reflective of our ongoing core operations.
Overall, our cost of revenue per impression processed in 2022 declined by 19% compared to 2021.
Overall, our cost of revenue per impression processed in 2023 declined by 8% compared to 2022.
We estimate and record reductions to revenue for volume discounts based on expected volumes during the incentive term The determination as to whether revenue should be reported gross of amounts billed to buyers (gross basis) or net of payments to publishers (net basis) requires significant judgment, and is based on our assessment of whether we are acting as the principal or an agent in the transaction.
The determination as to whether revenue should be reported gross of amounts billed to buyers (gross basis) or net of payments to publishers (net basis) requires significant judgment, and is based on our assessment of whether we are acting as the principal or an agent in the transaction.
On October 17, 2022, we entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with the several lenders parties thereto, and Silicon Valley Bank, as administrative agent, lead arranger, issuing lender, and swingline lender.
As a result, this amount is not included in the contractual obligations table above. Credit Facilities On October 17, 2022, we entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with the several lenders parties thereto, and Silicon Valley Bank, as administrative agent, lead arranger, issuing lender, and swingline lender.
We believe that investment gains and losses, whether realized from dispositions or unrealized from changes in market prices of equity securities, are generally meaningless in understanding our reported results or evaluating the economic performance of our businesses.
We believe that investment gains and losses, whether realized from dispositions or unrealized from changes in market prices of equity securities, are generally meaningless in understanding our reported results or evaluating the economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.
Technology and Development Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Technology and development $ 20,846 $ 15,885 $ 4,961 31 % Percent of revenue 8 % 7 % The increase in technology and development costs was primarily due to an increase of $6.6 million in personnel costs associated with a headcount increase by 39% and higher stock-based compensation costs, an increase of $1.9 million in facilities costs associated with new offices, offset by a $4.2 million increase in the capitalization of internal use software.
Technology and Development Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Technology and development $ 26,727 $ 20,846 $ 5,881 28 % Percent of revenue 10 % 8 % The increase in technology and development costs was primarily due to an increase of $11.1 million in personnel costs associated with a headcount increase by 11% and higher stock-based compensation costs, an increase of $1.0 million in facilities costs associated with new offices, offset by a $6.7 million increase in the capitalization of internal use software.
For discussion on operating, investing, and financing activities of the fiscal year ended December 31, 2020, see the Liquidity and Capital Resources section disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K, which was filed with the SEC on March 26, 2021 and hereby incorporated by reference herein and considered part of this Annual Report on Form 10-K only to the extent referenced. 55 Table of Contents Contractual Obligations and Future Cash Requirements Our principal contractual obligations consist of non-cancelable leases for our various facilities.
For discussion on operating, investing, and financing activities of the fiscal year ended December 31, 2021, see the Liquidity and Capital Resources section disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K, which was filed with the SEC on March 1, 2022 and hereby incorporated by reference herein and considered part of this Annual Report on Form 10-K only to the extent referenced.
Year Ended December 31, 2022 2021 2020 Consolidated Statements of Operations: Revenue $ 256,380 $ 226,908 $ 148,748 Cost of revenue (1) 81,512 58,313 41,186 Gross profit 174,868 168,595 107,562 Operating expenses (1) : Technology and development 20,846 15,885 12,250 Sales and marketing 68,562 58,160 43,297 General and administrative 44,940 35,761 20,260 Total operating expenses 134,348 109,806 75,807 Operating income 40,520 58,789 31,755 Total other income (expense), net (3,053) 6,014 (175) Income before provision for income taxes 37,467 64,803 31,580 Provision for income taxes 8,762 8,199 4,967 Net income $ 28,705 $ 56,604 $ 26,613 _______________ (1) Amounts include stock-based compensation expense before tax benefit as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue $ 1,135 $ 825 $ 86 Technology and development 3,225 2,232 599 Sales and marketing 7,645 5,176 1,101 General and administrative 8,641 5,874 1,777 Total stock-based compensation expense $ 20,646 $ 14,107 $ 3,563 Year Ended December 31, 2022 2021 2020 (as percentage of revenue) Revenue 100 % 100 % 100 % Cost of revenue 32 26 28 Gross profit 68 74 72 Operating expenses: Technology and development 8 7 8 Sales and marketing 27 26 29 General and administrative 17 16 14 Total operating expenses 52 49 51 Operating income 16 25 21 Total other income (expense), net (2) 4 — Income before provision for income taxes 14 29 21 Provision for income taxes 3 4 3 Net income 11 % 25 % 18 % 51 Table of Contents Comparison of the Years Ended December 31, 2022 and 2021 Revenue, Cost of Revenue and Gross Profit Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Revenue $ 256,380 $ 226,908 $ 29,472 13 % Cost of revenue 81,512 58,313 23,199 40 % Gross profit $ 174,868 $ 168,595 $ 6,273 4 % Gross profit margin 68 % 74 % Revenue increased $29.5 million, or 13%, in 2022 driven by growth in impressions processed on our platform from both existing and new publishers.
Year Ended December 31, 2023 2022 2021 Consolidated Statements of Operations: Revenue $ 267,014 $ 256,380 $ 226,908 Cost of revenue (1) 99,229 81,512 58,313 Gross profit 167,785 174,868 168,595 Operating expenses (1) : Technology and development 26,727 20,846 15,885 Sales and marketing 82,803 68,562 58,160 General and administrative 56,219 44,940 35,761 Total operating expenses 165,749 134,348 109,806 Operating income 2,036 40,520 58,789 Total other income (expense), net 8,469 (3,053) 6,014 Income before income taxes 10,505 37,467 64,803 Provision for income taxes 1,624 8,762 8,199 Net income $ 8,881 $ 28,705 $ 56,604 _______________ (1) Amounts include stock-based compensation expense before tax benefit as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue $ 1,472 $ 1,135 $ 825 Technology and development 4,346 3,225 2,232 Sales and marketing 10,462 7,645 5,176 General and administrative 12,582 8,641 5,874 Total stock-based compensation expense $ 28,862 $ 20,646 $ 14,107 Year Ended December 31, 2023 2022 2021 (as percentage of revenue) Revenue 100 % 100 % 100 % Cost of revenue 37 32 26 Gross profit 63 68 74 Operating expenses: Technology and development 10 8 7 Sales and marketing 31 27 26 General and administrative 21 17 16 Total operating expenses 62 52 49 Operating income 1 16 25 Total other income (expense), net 3 (2) 4 Income before income taxes 4 14 29 Provision for income taxes 1 3 4 Net income 3 % 11 % 25 % 49 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 Revenue, Cost of Revenue and Gross Profit Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Revenue $ 267,014 $ 256,380 $ 10,634 4 % Cost of revenue 99,229 81,512 17,717 22 % Gross profit $ 167,785 $ 174,868 $ (7,083) (4) % Gross profit margin 63 % 68 % Revenue increased $10.6 million, or 4%, in 2023 driven by growth in impressions processed on our platform from both existing and new publishers.
As of December 31, 2022, we had retained earnings of $128.0 million. 53 Table of Contents We believe our existing cash, cash equivalents, marketable securities 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.
We believe our existing cash, cash equivalents, marketable securities 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.
Provision for Income Taxes Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Provision for income taxes $ 8,762 $ 8,199 $ 563 7 % The difference between the effective tax rate in 2022 of 23.4% and the federal statutory income tax rate of 21% was primarily due to state taxes, stock-based compensation, and Section 162(m) limitation partially offset by federal research and development credit, and a foreign derived intangible income deduction.
The difference between the effective tax rate in 2022 of 23% and the federal statutory income tax rate of 21% was primarily due to state taxes, stock-based compensation, and Section 162(m) limitation partially offset by federal research and development credit, and a foreign derived intangible income deduction.
Realization of our deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance, we consider our historical, as well as future projected, taxable income along with other objectively verifiable evidence.
In considering the need for a valuation allowance, we consider our historical, as well as future projected, taxable income along with other objectively verifiable evidence.
For the year ended December 31, 2021, net cash provided by operating activities of $88.7 million resulted primarily from net income of $56.6 million, adjustments for non-cash expenses of $38.5 million, including $23.1 million for depreciation and amortization, $4.8 million for deferred income taxes and $14.1 million for stock-based compensation, and an increase in accounts receivable of $67.4 million, partially offset by an increase in accounts payable of $68.3 million.
For the year ended December 31, 2023, net cash provided by operating activities of $81.1 million resulted primarily from net income of $8.9 million, adjustments for non-cash expenses of $68.0 million, including $44.8 million for depreciation and amortization, $28.9 million for stock-based compensation, and $13.4 million for deferred income taxes, and an increase in accounts receivable of $75.7 million, partially offset by an increase in accounts payable of $79.7 million.
Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company’s use of the acquired assets, or the strategy for the Company’s overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations. 57 Table of Contents Income Taxes Our income tax provision may be significantly affected by changes to our estimates for tax in jurisdictions in which we operate and other estimates utilized in determining the global effective tax rate.
Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company’s use of the acquired assets, or the strategy for the Company’s overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.
We expect the cost of revenue to be higher in 2023 compared to 2022 in absolute dollars primarily due to increases in depreciation and amortization expense from new data center capacity expansion in 2022, as well as increases in hosting expenses primarily driven by higher power pricing.
We expect the cost of revenue to be higher in 2024 compared to 2023 in absolute dollars primarily due to increases in depreciation and amortization expense from data center capacity expansion in 2023, as well as increases in in software, hardware and equipment maintenance to support the data centers.
Accounts receivable are recorded at the amount of gross billings for the amounts we are responsible to collect, and accounts payable are recorded at the net amount payable to publishers.
Accounts receivable are recorded at the amount of gross billings for the amounts we are responsible to collect, and accounts payable are recorded at the net amount payable to publishers. Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis.
We expect technology and development expenses to generally increase in absolute dollars in future periods. Sales and Marketing. Sales and marketing expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs, for our employees engaged in sales, sales support, marketing, business development, and customer relationship functions.
We expect sales and marketing expenses to increase in absolute dollars in future periods. General and Administrative . General and administrative expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs for our executive, finance, legal, human resources, information technology, and other administrative employees.
Acquisition-related Intangible Assets and Goodwill Acquisition-related intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis, while goodwill amounts are not amortized. Acquisition-related intangible assets and goodwill are tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the acquisition-related intangible assets or goodwill may be impaired.
Acquisition-related intangible assets and goodwill are tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the acquisition-related intangible assets or goodwill may be impaired.
Overview We are an independent technology company seeking to maximize customer value by delivering digital advertising’s supply chain of the future. Our sell-side platform empowers the world’s leading digital content creators across the open internet to control access to their inventory and increase monetization by enabling marketers to drive ROI and reach addressable audiences across ad formats and devices.
Overview We are an independent technology company seeking to maximize customer value by delivering digital advertising’s supply chain of the future. Our technology platform empowers the world’s leading digital content creators (which we refer to as “publishers”) across the open internet to maximize monetization of their advertising inventory.
Managing Seasonality The global advertising industry experiences seasonal trends that affect the vast majority of participants in the digital advertising ecosystem. Most notably, advertisers have historically spent relatively more in the fourth quarter of the calendar year to coincide with the holiday shopping season, and relatively less in the first quarter.
Most notably, advertisers have historically spent relatively more in the fourth quarter of the calendar year to coincide with the holiday shopping season, and relatively less in the first quarter.
For the year ended December 31, 2021, we used $96.7 million of cash in investing activities, consisting of a net increase in investments of marketable securities of $57.4 million, $30.4 million in purchases of property and equipment (primarily data center infrastructure), and $8.9 million of investments in capitalized internal use software.
For the year ended December 31, 2023, we used $39.0 million of cash in investing activities, consisting of a net increase in investments of marketable securities of $29.6 million, $10.6 million in purchases of property and equipment (primarily data center infrastructure), $17.7 million of investments in capitalized internal use software, offset by an increase from sales of marketable securities prior to maturity of $18.9 million.
Financial Results Overview The table below summarizes the financial highlights of our business: Year Ended December 31, 2022 2021 2020 (in thousands) Revenue $ 256,380 $ 226,908 $ 148,748 Operating income 40,520 58,789 31,755 Net income 28,705 56,604 26,613 Adjusted EBITDA (1) 97,978 96,250 50,349 Net cash provided by operating activities 87,212 88,681 24,330 _______________ (1) For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure, and a reconciliation of Adjusted EBITDA to net income, see “Non-GAAP Financial Measures” below.
See “Risk Factors” for further discussion of the risks related to inflation, rising interest rates, foreign currency fluctuations and public health crises on our business. 45 Table of Contents Financial Results Overview The table below summarizes the financial highlights of our business: Year Ended December 31, 2023 2022 2021 (in thousands) Revenue $ 267,014 $ 256,380 $ 226,908 Operating income 2,036 40,520 58,789 Net income 8,881 28,705 56,604 Adjusted EBITDA (1) 75,309 97,014 96,250 Net cash provided by operating activities 81,121 87,212 88,681 _______________ (1) For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure, and a reconciliation of Adjusted EBITDA to net income, see “Non-GAAP Financial Measures” below.
For additional information, see Note 5, “Loan and Security Agreement and Senior Secured Credit Facilities Agreement” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 54 Table of Contents Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 87,212 $ 88,681 $ 24,330 Net cash used in investing activities (81,371) (96,723) (29,877) Net cash provided by financing activities 4,036 9,359 52,485 Net increase in cash and cash equivalents $ 9,877 $ 1,317 $ 46,938 Operating Activities Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our buyers and related payments to our publishers, as well as our investment in personnel to support the anticipated growth of our business.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 81,121 $ 87,212 $ 88,681 Net cash used in investing activities (39,018) (81,371) (96,723) Net cash provided by (used in) financing activities (55,976) 4,036 9,359 Net increase (decrease) in cash and cash equivalents $ (13,873) $ 9,877 $ 1,317 53 Table of Contents Operating Activities Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our buyers and related payments to our publishers, as well as our investment in personnel to support the anticipated growth of our business.
For the year ended December 31, 2021, net cash provided by financing activities of $9.4 million was primarily due to $5.4 million in proceeds from stock option exercises and $4.8 million in proceeds from the employee stock purchase plan, partially offset by $0.8 million due to payments of issuance costs of Class A common stock in connection with our IPO.
Financing Activities For the year ended December 31, 2023, net cash used in financing activities of $56.0 million was primarily due to $59.3 million in stock repurchases, offset by $1.5 million proceeds from stock option exercises and $1.9 million proceeds from the employee stock purchase plan.
These expenses include costs incurred in the development, implementation and maintenance of internal use software, including platform and related infrastructure. We expense technology and development costs as incurred, except to the extent that such costs are associated with internal use software development that qualifies for capitalization.
We expense technology and development costs as incurred, except to the extent that such costs are associated with internal use software development that qualifies for capitalization. We expect technology and development expenses to generally increase in absolute dollars in future periods. Sales and Marketing.
For additional information regarding stock-based compensation and the assumptions used for determining the fair value of stock options and ESPP awards, refer to Note 2—Basis of Presentation and Summary of Significant Accounting Policies and Note 10—Stockholders’ Equity and Equity Incentive Plans.
For additional information regarding stock-based compensation and the assumptions used for determining the fair value of stock options and ESPP awards, refer to Note 2—Basis of Presentation and Summary of Significant Accounting Policies and Note 10—Stockholders’ Equity and Equity Incentive Plans. 56 Table of Contents Acquisition-related Intangible Assets and Goodwill Acquisition-related intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis, while goodwill amounts are not amortized.
Our growth in the period ended December 31, 2022 and 2021 was primarily attributable to an increase in the number of ad impressions processed from our publishers, upselling additional products, penetration of header bidding for mobile app and digital video, and increased demand from the growth of our buyer relationships primarily through SPO agreements. 46 Table of Contents We work with DSPs to help them reduce their costs and improve advertiser ROI, which in turn makes us the specialized cloud infrastructure platform of choice for many of our buying partners.
Our revenue growth in the period ended December 31, 2023 and 2022 was primarily attributable to an increase in the number of ad impressions processed from our publishers, upselling additional products, penetration of header bidding for mobile app and digital video, and increased demand from the growth of our buyer relationships primarily through SPO agreements.
Accordingly, both accounts receivable and accounts payable appear large in relation to revenue, which is reported on a net basis.
Accordingly, both accounts receivable and accounts payable appear large in relation to revenue, which is reported on a net basis. The global advertising industry experiences seasonal trends that affect the vast majority of participants in the digital advertising ecosystem.
We reevaluate the judgments surrounding our estimates and make adjustments, as appropriate, each reporting period. Our effective tax rate differs from the U.S. federal statutory income tax rate due to state taxes, foreign tax rate differences, technology and development tax credits, Section 162(m) limitation, and stock-based compensation.
Our effective tax rate differs from the U.S. federal statutory income tax rate due to state taxes, foreign tax rate differences, technology and development tax credits, Section 162(m) limitation, and stock-based compensation. Realization of our deferred tax assets is dependent primarily on the generation of future taxable income.
Key Factors Affecting Our Performance We believe our growth and financial performance are dependent on many factors, including those described below. Growing access to valuable ad impressions Our recent growth has been driven by a variety of factors including increased access to mobile web (display and video) and mobile app (display and video) impressions and desktop video impressions.
We expect to continue to invest in both software and hardware infrastructure to continue growing the number of valuable ad impressions we process on our platform. Our recent growth has been driven by a variety of factors including increased access to mobile web (display and video) and mobile app (display and video) impressions and desktop video impressions.
We generate revenue from publishers primarily through revenue share agreements, generally one-year contracts that renew automatically for successive one-year periods, unless terminated prior to renewal. We primarily work with publishers and app developers who allow us direct access to their ad inventory, as well as select channel partners that meet our quality and scale thresholds.
Key Components of Our Results of Operations Revenue We generate revenue from the use of our platform for the purchase and sale of digital advertising inventory. We primarily work with publishers and app developers who allow us direct access to their ad inventory, as well as select channel partners that meet our quality and scale thresholds.
We recognize revenue when a bid is won and a buyer purchases inventory on our platform.
We recognize revenue when a bid is won and a buyer purchases inventory on our platform. We estimate and record reductions to revenue for volume discounts based on expected volumes during the incentive term.
General and administrative expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs for our executive, finance, legal, human resources, information technology, and other administrative employees. General and administrative expenses also include outside consulting, legal and accounting services, allocated facilities costs, and travel and entertainment primarily related to inter-office travel and conferences.
General and administrative expenses also include outside consulting, legal and accounting services, allocated facilities costs, and travel and entertainment primarily related to inter-office travel and conferences.
Sales and Marketing Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Sales and marketing $ 68,562 $ 58,160 $ 10,402 18 % Percent of revenue 27 % 26 % 52 Table of Contents Sales and marketing costs increased primarily due to a $6.0 million increase in personnel costs associated with a headcount increase by 9% and higher stock-based compensation costs, a $0.7 million increase in travel and entertainment expenses, a $0.8 million increase in marketing expenses, and a $2.3 million increase in facilities costs associated with new offices.
We expect technology and development expenses to increase in 2024 compared to 2023 in absolute dollars, primarily due to the additional headcount investment in our key growth opportunities. 50 Table of Contents Sales and Marketing Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) Sales and marketing $ 82,803 $ 68,562 $ 14,241 21 % Percent of revenue 31 % 27 % Sales and marketing costs increased primarily due to a $10.7 million increase in personnel costs associated with a headcount increase by 5% and higher stock-based compensation costs, a $2.2 million increase in travel and entertainment expenses, and a $0.7 million increase in amortization for acquisition-related intangible assets.
Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis. 56 Table of Contents Internal Use Software Development Costs We capitalize certain internal use software development costs associated with creating and enhancing internal use software related to our platform and technology infrastructure.
Internal Use Software Development Costs We capitalize certain internal use software development costs associated with creating and enhancing internal use software related to our platform and technology infrastructure.
For the year ended 2022, we served approximately 1,650 publishers worldwide on our platform, compared to approximately 1,450 publishers worldwide for the year ended 2021, including approximately 200 net new publishers in 2022, which represented over 67,000 domains and 25,000 apps in total, compared to approximately 250 new publishers in 2021, which represented approximately 62,000 domains and 35,000 apps in total.
We ended fiscal 2023 with approximately 150 net new publishers in 2023, which represented over 66,000 domains and 29,000 apps in total, compared to approximately 200 new publishers in 2022, which represented approximately 67,000 domains and 25,000 apps in total.
Objectively verifiable evidence includes our realization of tax attributes, assessment of tax credits, and utilization of net operating loss carryforwards during the year.
Objectively verifiable evidence includes our realization of tax attributes, assessment of tax credits, and utilization of net operating loss carryforwards during the year. 48 Table of Contents Results of Operations The following tables set forth our consolidated results of operations data (in thousands) and such data as a percentage of revenue for the periods presented.
We expect seasonality trends to continue, and our ability to manage our resources in anticipation of these trends will affect our operating results. 47 Table of Contents Key Components of Our Results of Operations Revenue We generate revenue from publishers who use our platform.
We expect seasonality trends to continue, thereby resulting in seasonality in our revenues and corresponding accounts receivable and accounts payable balances, and our ability to manage our resources in anticipation of these trends will affect our operating results.
The number of ad impressions processed on our platform was approximately 18.5 trillion, 20.2 trillion, 23.9 trillion, 29.6 trillion, 32.6 trillion, 36.2 trillion, 42.1 trillion and 48.2 trillion, for each of the three months ended March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021, March 31, 2022, June 30, 2022, September 30, 2022, and December 31, 2022, respectively. 45 Table of Contents Monetizing ad impressions for publishers and buyers We focus on monetizing digital impressions by coordinating daily over a hundred billion real-time auctions and nearly a trillion bids globally, using our specialized cloud software, machine learning algorithms, and scaled transaction infrastructure.
We have been investing in SPO technology and partnerships for five years and SPO represented approximately 45% of total activity for the year ended December 31, 2023. 46 Table of Contents Monetization Excellence We focus on monetizing digital impressions by coordinating over a hundred billion real-time auctions and nearly a trillion bids globally on a daily basis, using our specialized cloud software, machine learning algorithms, and scaled transaction infrastructure.
We expect cost of revenue to generally increase in absolute dollars in future periods. Operating Expenses Technology and Development. Technology and development expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs, allocated facilities costs, and professional services.
Technology and development expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs, allocated facilities costs, and professional services. These expenses include costs incurred in the development, implementation and maintenance of internal use software, including platform and related infrastructure.
General and Administrative Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) General and administrative $ 44,940 $ 35,761 $ 9,179 26 % Percent of revenue 17 % 16 % General and administrative expense increased primarily due to a $5.4 million increase in personnel costs associated with a 13% increase in headcount and higher stock-based compensation costs, a $1.1 million increase in professional services, accounting and legal service costs, a $1.6 million increase in facilities costs associated with new offices, a $0.3 million increase in travel and entertainment, and a $0.4 million increase in property taxes.
General and Administrative Year Ended December 31, 2023 2022 $ Change % Change (dollars in thousands) General and administrative $ 56,219 $ 44,940 $ 11,279 25 % Percent of revenue 21 % 17 % General and administrative expense increased primarily due to a $6.4 million increase in personnel costs associated with higher stock-based compensation costs, and a $5.7 million increase in provision for bad debt relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy.
Since 2006, our infrastructure-driven approach has allowed for the efficient processing and utilization of data in real time. By delivering scalable and flexible programmatic innovation, we improve outcomes for our customers while championing a vibrant and transparent digital advertising supply chain.
By delivering scalable and flexible programmatic innovation, we believe we improve outcomes for our customers while championing a vibrant and transparent digital advertising supply chain. We continue to focus on the strengths that we believe provide us with long-term competitive advantages.
Our financial performance depends in part on how efficiently and effectively we can conduct these activities at scale. Increasing revenue from publishers and advertising spend from buyers We leverage our extensive platform capabilities and the subject matter expertise of our team members to grow revenue from our publishers and increase advertising spending from our buyers.
Our Strategy and Performance We believe our growth and financial performance are dependent on many factors, including those described below. Attract New Customers and Expand our Relationship with Existing Customers Globally We leverage our extensive platform capabilities and the subject matter expertise of our team members to grow revenue from our publishers and increase advertising spending from our buyers.
We further expect video to constitute an increasingly important component of our business. 44 Table of Contents COVID-19 and Macroeconomic Factors Ongoing interest rate increases, foreign currency fluctuation and persistent inflation in the U.S. and other markets globally may increase the risk of economic volatility and dislocation in the capital or credit markets in the U.S. or globally.
Additionally, recent interest rate increases, foreign currency fluctuation and persistent inflation in the U.S. and other markets globally continue to create economic volatility and dislocation in the capital and credit markets in the U.S. and globally.
Acquisition-related expenses incurred in connection with our acquisition of Martin include third-party transaction costs. Other expenses incurred in connection with our acquisition of Martin include post-acquisition cash compensation arrangements for certain key acquired employees to be paid ratably over three years following the closing of the acquisition (subject to forfeiture upon termination).
Acquisition-related expenses incurred in connection with our acquisition of Martin include third-party transaction costs. Beginning in fiscal year 2023, we no longer exclude the impact of post-acquisition cash compensation arrangements for certain key acquired employees from our Adjusted EBITDA calculation. We have updated prior period results for comparability.
Our platform allows publishers to sell, in real time, customized ad inventory to buyers and provides automated inventory management and monetization tools to publishers across various device types and digital ad formats. We generate revenue primarily through fees charged to our publishers, which are generally a percentage of the value of the advertising impressions that publishers monetize on the platform.
Our channel partners aggregate and provide further access to thousands of sites and apps from smaller publishers. We generate revenue through fees charged to our publishers, which are generally a percentage of the value of the advertising impressions that publishers monetize on our platform.
Because of these and other limitations, you should consider Adjusted EBITDA along with other GAAP-based financial performance measures, including net income and our GAAP financial results. 50 Table of Contents Results of Operations The following tables set forth our consolidated results of operations data (in thousands) and such data as a percentage of revenue for the periods presented.
Because of these and other limitations, you should consider Adjusted EBITDA along with other GAAP-based financial performance measures, including net income and our GAAP financial results. Liquidity and Capital Resources We have financed our operations and capital expenditures primarily through utilization of cash generated from operations, as well as a public offering of our common stock.
As buyers increasingly consolidate their spending with fewer larger technology platforms, we seek to bring an increased proportion of their digital ad spending to our platform through direct deals. We have entered into SPO agreements directly with buyers, advertisers and agencies through various arrangements ranging from custom data and workflow integrations, product features, and volume-based business terms.
As buyers increasingly consolidate their spending with fewer larger technology platforms, we seek to bring an increased proportion of their digital ad spending to our platform through direct deals. S upply Path Optimization (“SPO”) continues to be a major growth driver for us as we add new SPO relationships and expand existing ones.
Sales and marketing expenses also include expenses related to promotional, advertising and marketing activities, allocated facilities costs, travel, and entertainment primarily related to sales activity and professional services. We expect sales and marketing expenses to increase in absolute dollars in future periods. General and Administrative .
Sales and marketing expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs for our employees engaged in sales, sales support, marketing, business development, and customer relationship functions. Sales and marketing expenses also include expenses related to promotional, advertising and marketing activities, allocated facilities costs, travel, and entertainment primarily related to sales activity and professional services.
Liquidity and Capital Resources We have financed our operations and capital expenditures primarily through utilization of cash generated from operations, as well as a public offering of our common stock. As of December 31, 2022, we had cash, cash equivalents, and marketable securities of $174.4 million and net working capital, consisting of current assets less current liabilities, of $201.5 million.
As of December 31, 2023, we had cash, cash equivalents, and marketable securities of $175.3 million and net working capital, consisting of current assets less current liabilities, of $182.4 million. As of December 31, 2023, we had retained earnings of $136.9 million.
The following table summarizes our contractual obligations, at December 31, 2022 (in thousands): Payments due by period Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years Other contractual obligations (1) 41,080 19,698 21,382 — — Operating lease liabilities 28,651 6,440 11,628 9,603 980 Finance lease liabilities 786 140 294 311 41 Total $ 70,517 $ 26,278 $ 33,304 $ 9,914 $ 1,021 ______________ (1) Other contractual obligations consist primarily of contractual obligations to third-party data center providers.
In certain cases, the terms of the lease agreements provide for rental payments that increase over time. 54 Table of Contents The following table summarizes our contractual obligations, at December 31, 2023 (in thousands): Payments due by period Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years Other contractual obligations (1) $ 24,771 $ 18,314 $ 6,457 $ — $ — Operating lease liabilities 23,169 6,842 11,055 5,272 — Finance lease liabilities 646 145 302 199 — Total $ 48,586 $ 25,301 $ 17,814 $ 5,471 $ — ______________ (1) Other contractual obligations consist primarily of contractual obligations to third-party data center providers.
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Our specialized cloud infrastructure platform provides superior monetization for publishers by increasing the value of an impression and providing incremental demand through our deep and growing relationships with buyers. We are aligned with our publisher and app developer partners by being independent.
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Our platform also provides control and transparency to buyers, which includes advertisers, agencies, agency trading desks, and demand side platforms (“DSPs”), (which we collectively refer to as “buyers”) and enables both publishers and buyers to drive better business outcomes. Our infrastructure-driven approach allows for the efficient processing and utilization of data in real time.
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We do not own media and therefore do not have a vested interest in driving ad revenue to specific media properties. Our global platform is omnichannel, supporting a wide array of ad formats and digital device types, including mobile app, mobile web, desktop, display, video, OTT, CTV, and rich media.
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These strengths include our global, omnichannel reach which targets a diverse set of publishers touching many ad formats and digital device types, including mobile app, mobile web, desktop, display, video, over-the-top video/connected TV (“OTT/CTV”), and rich media.
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In December 2022, our platform efficiently processed approximately 524 billion ad impressions daily, each in a fraction of a second, and 7.4 petabytes of data every day. During the fiscal year ended December 31, 2022, we added approximately 200 net new publishing partners.
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Additionally, as an independent infrastructure provider prioritizing transparency, we can be more closely aligned with both publishers and buyers which has enabled us to build direct relationships with publishers, advertisers, agencies, and DSPs and create bespoke products that meet our customers’ needs.

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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 changeDollar to India Rupee exchange rate could result in a change of $1.6 million and $1.2 million in our operating income for the year ended December 31, 2022 and December 31, 2021, respectively. A hypothetical 10% change in the U.S.
Biggest changeDollar to India Rupee exchange rate could result in a change of $2.0 million and $1.6 million in our operating income for the year ended December 31, 2023 and December 31, 2022, respectively. A hypothetical 10% change in the U.S.
We had no amounts outstanding under our credit facility as of December 31, 2022. We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. In future periods, we will continue to evaluate our investment policy relative to our overall objectives.
We had no amounts outstanding under our credit facility as of December 31, 2023. We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. In future periods, we will continue to evaluate our investment policy relative to our overall objectives.
If our costs were to become subject to significant inflationary pressures, for example in India or increases in data center base costs, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, results of operations, and financial condition. 59 Table of Contents
If our costs were to become subject to significant inflationary pressures, for example in India or increases in data center base costs, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, results of operations, and financial condition. 58 Table of Contents
Dollar to British Pound exchange rate could result in a change of $1.4 million and $1.4 million in our operating income for the year ended December 31, 2022 and December 31, 2021, respectively. Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
Dollar to British Pound exchange rate could result in a change of $1.7 million and $1.4 million in our operating income for the year ended December 31, 2023 and December 31, 2022, respectively. Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
These risks primarily include: Interest Rate Risk We had cash and cash equivalents of $92.4 million and marketable securities of $82.0 million as of December 31, 2022, which consisted of bank deposits, money market accounts, commercial paper, agency debt securities, U.S. Treasury and government debt securities.
These risks primarily include: Interest Rate Risk We had cash and cash equivalents of $78.5 million and marketable securities of $96.8 million as of December 31, 2023, which consisted of bank deposits, money market accounts, commercial paper, agency debt securities, and U.S. Treasury and government debt securities.

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