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What changed in Trade Desk (The)'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Trade Desk (The)'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.

+400 added−370 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-15)

Top changes in Trade Desk (The)'s 2023 10-K

400 paragraphs added · 370 removed · 319 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

74 edited+12 added−15 removed61 unchanged
Biggest changeWe also offer a broad selection of third-party measurement partners, which provides our clients with increased optionality to assess campaign performance. • Koa Artificial Intelligence. Koa, our predictive algorithmic tools that help platform users make data-driven decisions without sacrificing control or transparency, makes recommendations for campaign optimizations based on its sophisticated analysis of rich data sets.
Biggest changeWe also empower our clients with an extensive set of measurement capabilities, both through a number of proprietary benchmarking tools and indices, and through integrations with a broad selection of third-party measurement partners. 7 Table of Contents • Artificial Intelligence. Koa, our predictive algorithmic tools, utilizes artificial intelligence to process complex data sets and make recommendations for campaign optimizations.
Also, the supply of digital advertising inventory exceeds demand, and accordingly, we believe it is a buyer’s market. We also believe that by aligning our core offerings with buyers, we are able to avoid conflicts of interest that exist when serving both the buy side and sell side.
The supply of digital advertising inventory exceeds demand, and accordingly, we believe it is a buyer’s market. We also believe that by aligning our core offerings with buyers, we are able to avoid conflicts of interest that exist when serving both the buy side and sell side.
Unified ID 2.0 operates by transforming email addresses or phone numbers into an advertising identifier (a “UID2”) that is designed not to directly identify the individual. Subject to appropriate guardrails, participants in Unified ID 2.0 can then use this UID2 in connection with our platform and other services, including ad buying and reporting.
Unified ID 2.0 operates by transforming email addresses or phone numbers into an advertising identifier (a “UID2”) that is designed to not directly identify the individual. Subject to appropriate guardrails, participants in Unified ID 2.0 can then use this UID2 in connection with our platform and other services, including ad buying and reporting.
The processes used to identify devices and similar and associated technologies are governed by U.S. and foreign laws and regulations and dependent upon their implementation within the industry ecosystem.
The processes used to identify devices and similar and associated technologies are governed by U.S. and foreign laws and regulations and are dependent upon their implementation within the industry ecosystem.
Additionally, in the EU, EU Directive 2002/58/EC (as amended by Directive 2009/136/EC), commonly referred to as the ePrivacy or Cookie Directive, directs EU member states to ensure that accessing information on an Internet user’s computer, such as through a cookie and other similar technologies, is allowed only if the Internet user has been informed about such access, and provided consent.
Additionally, in the EU, the EU Directive 2002/58/EC (as amended by Directive 2009/136/EC), commonly referred to as the ePrivacy or Cookie Directive, directs EU member states to ensure that accessing information on an Internet user’s computer, such as through a cookie and other similar technologies, is allowed only if the Internet user has been informed about such access, and provided consent.
In connection with some of our newer offerings, including Unified ID 2.0 (and soon, EUID), we do allow users of those services to disclose some directly identifying information, such as phone number and email address, with us for purposes of transforming that information into pseudonymous identifiers to use on our platform.
In connection with some of our newer offerings, including Unified ID 2.0 and EUID, we do allow users of those services to disclose some directly identifying information, such as phone number and email address, to us for purposes of transforming that information into pseudonymous identifiers to use on our platform.
Media is increasingly digital as a result of advances in technology and changes in consumer behavior. This shift has enabled unprecedented options for advertisers to target and measure their advertising campaigns across nearly every media channel and device. The digital advertising market is a significant and growing part of the total advertising market.
Media is increasingly digital as a result of advances in technology and changes in consumer behavior. This shift has enabled unprecedented options for advertisers to target and measure their advertising campaigns across nearly every media channel and connected device. The digital advertising market is a significant and growing part of the total advertising market.
Our ability, like those of other advertising technology companies, to collect, augment, analyze, use and share data relies upon the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and measuring the effectiveness of ads.
Our ability, and the ability of other advertising technology companies, to collect, augment, analyze, use and share data relies upon the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and measuring the effectiveness of ads.
Our platform’s integration of these sources and services enables our clients to deploy their budgets through a wide variety of channels, media screens and formats, targeted in their desired manner, through a single platform. Some of the key features of our platform are: • Auto Optimization.
Our platform’s integration of these sources and services enables our clients to deploy their budgets through a wide variety of channels, media screens and formats, targeted in their desired manner, all through a single platform. Some of the key features of our platform are: • Auto Optimization.
In the United States, both federal and state legislation govern activities such as the collection and use of personal data, and data privacy in the advertising technology industry has frequently been subject to review by the Federal Trade Commission (the “FTC”), U.S. Congress, and individual states.
In the U.S., both federal and state legislation govern activities such as the collection and use of personal data, and data privacy in the advertising technology industry has frequently been subject to review by the Federal Trade Commission (the “FTC”), U.S. Congress, and individual states.
Our platform’s integrations with major inventory, publisher and data partners provide ad buyers reach and decisioning capabilities, and our enterprise application programming interfaces (“APIs”) enable our clients to customize and expand platform functionality. Our clients are advertising agencies, brands and other service providers for advertisers, with whom we enter into ongoing master services agreements (“MSAs”).
Our platform’s integrations with major inventory, publisher and data partners provide ad buyers reach and decisioning capabilities, and our enterprise application programming interfaces (“APIs”) enable our clients to customize and expand platform functionality. Our clients are advertising agencies, advertisers and other service providers for agencies or advertisers, with whom we enter into ongoing master services agreements (“MSAs”).
Our platform allows clients to execute integrated campaigns across ad formats and channels, including video (which includes connected TV (“CTV”)), display, audio, digital-out-of-home, native and social, on a multitude of devices, such as computers, mobile devices, televisions and streaming devices.
Our platform allows clients to execute integrated campaigns across ad formats and channels, including video (which includes connected television (“CTV”)), display, audio, digital-out-of-home, native and social, on a multitude of devices, such as computers, mobile devices, televisions and streaming devices.
Continuing to maintain compliance with the requirements of European privacy laws and regulations, including monitoring and adjusting to rulings and interpretations that affect our approach to compliance, requires significant time, resources and expense, and may lead to significant changes in our business operations, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business.
Maintaining compliance with the requirements of European privacy laws and regulations, including monitoring and adjusting to rulings and interpretations that affect our approach to compliance, requires significant time, resources and expense, and may lead to significant changes in our business operations, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business.
Given our independent buy-side focused approach and our strict protocols governing the ingestion of client first-party data into our data management platform, our clients trust us with their most granular and expressive data. Our technology platform enables an effective use of this data, allowing our clients to run precisely targeted advertising campaigns that help maximize their return on advertising investments.
Given our independent buy-side focused approach and our strict protocols governing the ingestion of client first-party data into our data management platform, our clients trust us with their most granular and expressive data. Our technology platform enables effective use of such data, allowing our clients to run precisely targeted advertising campaigns that help maximize their return on advertising investments.
We obtain digital advertising inventory from over 100 directly integrated ad exchanges and supply-side platforms, providing us with access to a breadth of programmatic advertising inventory across computers, mobile devices and CTV. We believe that our data marketplace represents an important distribution channel for third-party data vendors.
We obtain digital advertising inventory from over 140 directly integrated ad exchanges, publishers and supply-side platforms, providing us with access to a breadth of programmatic advertising inventory across computers, mobile devices and CTV. We believe that our data marketplace represents an important distribution channel for third-party data vendors.
We also intend to invest in technology to further automate our business processes. 10 Table of Contents Seasonality In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing.
We also intend to invest in technology to further automate our business processes. Seasonality In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing.
Such laws, regulations, and industry standards are changing frequently, including those relating to the level of consumer notice, consent and/or choice required when a company uses data for certain purposes, including targeted advertising, or employs cookies or other electronic tools to collect data about interactions with users online.
Such laws, regulations, and industry standards change frequently, including those relating to the level of consumer notice, consent and/or choice required when a company uses data for certain purposes, including targeted advertising, or employs cookies or other electronic tools to collect data about interactions with users online.
Website addresses referred to in this Annual Report on Form 10-K are not intended to function as hyperlinks, and the information contained on 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.
Website addresses referred to in this Annual Report on Form 10-K are not intended to function as hyperlinks, and the information contained on 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. 14 Table of Contents
Our leaders review the survey feedback and work with their teams to take action based on survey results. We demonstrate this commitment through a strategy of education, celebration, donations to the community, diversification of our talent and the creation of forums for internal dialogue and listening.
Our leaders review the survey feedback and work with their teams to take action based on survey results. 11 Table of Contents We demonstrate this commitment through a strategy of education, celebration, donations to the community, diversification of our talent and the creation of forums for internal dialogue and listening.
We provide a comprehensive view of consumers’ interactions with the ads purchased through our platform with robust reporting of performance insights across multiple variables, such as audience characteristics, ad format, site category, website, device, creative type and geography. Better reporting results in better learning, often leading to better campaign optimization and outcomes. • Data Management and Measurement Tools.
We provide a comprehensive view of consumers’ interactions with the ads purchased through our platform with robust reporting of performance insights across multiple variables, such as audience characteristics, ad format, site category, website, device, creative type and geography. Better reporting results in better learning, enabling better campaign optimization and outcomes. • Data Management and Measurement Tools.
Our growth and the success of our initiatives in newer markets will depend on the continued adoption of our platform by our existing clients, as well as new clients, in these markets. Information about our geographic gross billings is set forth in Note 12—Segment and Geographic Information of “Item 8.
Our growth and the success of our initiatives in newer markets will depend on the continued adoption of our platform by our existing clients, as well as new clients, in these markets. Information about our geographic gross billings is set forth in Note 12—Segment and Geographic Information of “ Item 8.
Regionally, North America, Asia Pacific (“APAC”) and Europe, Middle East and Africa (“EMEA”) make up approximately 63%, 18% and 19% of our workforce, respectively. Diversity and Inclusion We are committed to fostering a culture of inclusion and belonging in which all employees are empowered to bring their whole, authentic selves to work every day.
Regionally, North America, Asia Pacific (“APAC”) and Europe, Middle East and Africa (“EMEA”) make up approximately 64%, 17% and 19% of our workforce, respectively. Diversity and Inclusion We are committed to fostering a culture of inclusion and belonging in which all employees are empowered to bring their whole, authentic selves to work every day.
We believe this approach strengthens our relationships with our clients and helps us grow their use of our platform over the long term, providing us with a highly scalable business model. • We Are a Clear Box, Not a Black Box.
We believe this approach strengthens our relationships with our clients and helps us grow their use of our platform over the long term, providing us with a highly scalable business model. 6 Table of Contents • We Are a Clear Box, Not a Black Box.
While data from third-party data providers improves campaign performance, our clients’ success often relies largely on our ability to ingest proprietary data directly from brands and their agencies to enable intelligent decisioning that optimizes advertising campaigns.
While data from third-party data providers improves campaign performance, our clients’ success often relies largely on our ability to ingest proprietary data directly from advertisers and agencies to enable intelligent decisioning that optimizes advertising campaigns.
What We Do We empower ad buyers, by providing a self‑service cloud-based ad-buying platform that enables our clients to plan, manage, optimize and measure data‑driven digital advertising campaigns.
What We Do We empower ad buyers by providing a self‑service cloud-based ad-buying platform that enables them to plan, manage, optimize and measure data‑driven digital advertising campaigns.
Our platform is powerful and user friendly: • Easy to Use, Open and Customizable. Our platform provides multiple easy-to-use automation tools that help our users focus on managing the key elements of their campaigns. Our platform also enables clients to integrate custom features and interfaces for their own use through our APIs. • Expressiveness.
Our platform is powerful and user friendly: • Easy to Use, Open and Customizable. Our platform includes easy-to-use tools and interfaces that help our users focus on managing the key elements of their campaigns. Our platform also enables clients to integrate custom features and interfaces for their own use through our APIs. • Expressiveness.
We have developed Unified ID 2.0, a new open-source identity framework, which is currently in use with approved partners. The Unified ID 2.0 aims to preserve the value of relevant advertising on the open internet without reliance upon third-party cookies, while giving consumers transparency and control over their data.
We continue to develop and enhance Unified ID 2.0, a new open-source identity framework, which is currently in use with approved partners. Unified ID 2.0 aims to preserve the value of relevant advertising on the open internet without reliance upon third-party cookies, while giving consumers transparency and control over their data.
As of December 31, 2022, we have integrated our platform with more than 200 third-party data vendors whose products we make available for purchase through our platform. Sales and Marketing Given our self-service business model, we focus on supporting, advising and training our clients to use our platform independently as soon as they are ready to transact.
As of December 31, 2023, we have integrated our platform with more than 250 third-party data vendors whose products are available for purchase through our platform. Sales and Marketing Given our self-service business model, we focus on supporting, advising and training our clients to use our platform independently as soon as they are ready to transact.
Our platform enables a media planner or buyer at an advertising agency to: • purchase digital media programmatically on various media exchanges and sell-side platforms; • acquire and use third-party data to optimize and measure digital advertising campaigns; • integrate and deploy their proprietary first-party data within our platform to optimize campaign efficacy; • monitor and manage ongoing digital advertising campaigns on a real-time basis; • link digital campaigns to offline sales results or other business objectives; • access other services such as our data management platform and publisher management platform marketplace; and • use our user interface and APIs to customize and expand platform functionality.
Our platform enables advertisers and agencies to: • purchase digital media programmatically on various media exchanges and sell-side platforms; • acquire and use third-party data to optimize and measure digital advertising campaigns; • integrate and deploy their proprietary first-party data within our platform to optimize campaign efficacy; • monitor and manage ongoing digital advertising campaigns on a real-time basis; • link digital campaigns to offline sales results or other business objectives; • access other services such as our data management platform and publisher management platform marketplace; and • use our user interface and APIs to customize and expand platform functionality.
We believe that the global opportunity for programmatic advertising is significant and will continue to expand as publishers and advertisers outside the United States seek to adopt the benefits that programmatic advertising provides. To capitalize on this opportunity, we intend to continue investing in our presence internationally.
We believe that the global opportunity for programmatic advertising is significant and will continue to expand as publishers and advertisers outside the U.S. seek to adopt the benefits that programmatic advertising provides. To capitalize on this opportunity, we intend to continue investing in our presence internationally.
If the use of the Global Privacy Control or similar technical signals is adopted by many Internet users, is imposed by additional states or by federal or foreign legislation, or is agreed upon by standard setting groups, we may have to change our business practices, our clients may reduce their use of our platform, and our business could be harmed.
If the use of the GPC or similar technical signals is adopted by many Internet users, is imposed by additional states or by federal or foreign legislation, or is agreed upon by standard setting groups, we may have to change our business practices, our clients may reduce their use of our platform and services, and our business could be harmed.
Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. Intellectual Property The protection of our technology and intellectual property is an important component of our success.
Financial Statements and Supplementary Data ” in this Annual Report on Form 10-K. Intellectual Property The protection of our technology and intellectual property is an important component of our success.
We rely on intellectual property laws, including trade secret, copyright, patent and trademark laws in the United States and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property.
We rely on intellectual property laws, including trade secret, copyright, patent and trademark laws in the U.S. and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property.
Additionally, the number of devices used by individual consumers has increased. Both of these fragmentation trends are opportunities for technology companies that can consolidate and simplify media buying options for advertisers and their agencies. Emergence of CTV. We are witnessing a generational shift from linear TV to CTV with the convergence of the Internet and television programming.
Additionally, the number of devices used by individual consumers has increased. Both of these fragmentation trends are opportunities for technology companies that can consolidate and simplify media buying options for advertisers and agencies. Emergence of CTV. We are witnessing a generational shift from linear television to CTV as Internet and television programming converge.
We continue to evolve our programs to meet our employees’ health and wellness needs. Development of International Markets We have been increasing our focus on markets outside the United States to serve the global needs of our clients.
We continue to evolve our programs to meet our employees’ health and wellness needs. Development of International Markets We have been increasing our focus on markets outside the U.S. to serve the global needs of our clients.
In the United Kingdom and the European Union (including the European Economic Area (the “EEA”) and the countries of Iceland, Liechtenstein and Norway), or EU, separate laws and regulations (and member states’ implementations thereof) govern the processing of personal data, and these laws and regulations continue to impact us.
In the United Kingdom (“U.K”) and the European Union (the “EU”) (including the European Economic Area (the “EEA”) and the countries of Iceland, Liechtenstein and Norway), separate laws and regulations (and member states’ implementations thereof) govern the processing of personal data, and these laws and regulations continue to impact us.
To ensure we live our values and our culture stays unique and strong, our board of directors and executive team has put significant focus on our human capital resources. As of December 31, 2022, we had 2,770 full-time employees in 19 countries.
To ensure we live our values and our culture stays unique and strong, our board of directors and executive team has put significant focus on our human capital resources. As of December 31, 2023, we had 3,115 full-time employees in 19 countries.
As of December 31, 2022, we had over 1,000 clients, consisting primarily of advertising agencies or groups within advertising agencies that have independent relationships with us, manage budgets independently of one another, are based in different jurisdictions and are served by unique Trade Desk teams.
As of December 31, 2023, we had over 1,100 clients, consisting primarily of advertising agencies or groups within advertising agencies that have independent relationships with us, manage budgets independently of one another, are based in different jurisdictions and 9 Table of Contents are served by unique Trade Desk teams.
Through the use of these types of data sources, together with real-time feedback on consumer reactions to the ads, programmatic advertising increases the value of impressions for 5 Table of Contents advertisers and inventory owners, and viewers receive more relevant ads.
Through the use of these types of data sources, together with measurement features, including real-time feedback on consumer reactions to the ads, programmatic advertising increases the value of impressions for advertisers and inventory owners, and viewers receive more relevant ads.
At the same time, new laws and self-regulatory rules governing the collection, use, and disclosure of personal information continue to impact these practices. Automation of Ad Buying. The growing complexity of digital advertising and the laws and rules that govern it have increased the need for automation.
At the same time, new laws, enforcement of existing laws, and self-regulatory rules regarding the collection, use, and disclosure of personal information continue to impact these practices. 5 Table of Contents Automation of Ad Buying. The growing complexity of digital advertising and the laws and rules that govern it have increased the need for automation.
With our platform, our clients control their campaign spend and are able to access and choose from many inventory sources. 6 Table of Contents • We Have Ongoing Relationships with Clients. We derive substantially all of our revenue from ongoing MSAs with our clients, rather than episodic insertion orders.
With our platform, our clients control their campaign spend and can access and choose from many inventory sources. • We Have Ongoing Relationships with Clients. We derive substantially all of our revenue from ongoing MSAs with our clients, rather than episodic insertion orders.
In particular, we believe that China, India, and Indonesia may represent substantial growth opportunities, and we are investing in developing our business in those and other markets. Our Clients Our clients consist of purchasers of programmatic advertising inventory and data.
In particular, we believe that the United Kingdom, Germany, France, China, Japan, India and Australia may represent substantial growth opportunities, and we are investing in developing our business in those and other markets. Our Clients Our clients consist of purchasers of programmatic advertising inventory and data.
However, there is increasing consumer concern over data privacy in recent years, which has led to a myriad of new and proposed legislation and regulation both at the federal and state levels, some of which has affected and will continue to affect our operations and those of our industry partners.
In addition, increasing consumer concern over data privacy in recent years has led to a myriad of enacted and proposed legislation and regulation both at the federal and state levels, some of which has affected and will continue to affect our operations and those of clients, inventory sources, and other industry partners.
We expect technology and development expense to increase as we continue to invest in the development of our platform and related offerings to support additional features and functions, increase the number of advertising and data inventory suppliers and ramp up the volume of advertising spending on our platform.
We expect technology and development expense to increase as we continue to invest in the development of our platform and related offerings to support additional features and functions, increase the number of advertising and data 10 Table of Contents inventory suppliers and support anticipated increases in volume of advertising spending by our clients on our platform.
Collection and Use of Data; Privacy and Data Protection Legislation and Regulation To power our platform, we and our clients currently use pseudonymous data about Internet and mobile app users to manage and execute digital advertising campaigns in a variety of ways, including delivering advertisements to end users 12 Table of Contents based on their geographic locations, the type of device they are using, their interests as inferred from their web browsing or app usage activity or their relationships with our clients.
Our patent applications may not result in the issuance of any patents, and our issued patents may not actually provide adequate defensive protection or competitive advantages to us. 12 Table of Contents Collection and Use of Data; Privacy and Data Protection Legislation and Regulation To power our platform, we and our clients currently use pseudonymous data about Internet and mobile app users to manage and execute digital advertising campaigns in a variety of ways, including delivering advertisements to end users based on information such as their geographic locations, the type of device they are using, their interests as inferred from their web browsing or app usage activity or their relationships with our clients.
The requirement in California and eventually in Colorado and Connecticut to honor users’ requests to opt out of certain disclosures and uses of data for advertising purposes through preference signals, such as the Global Privacy Control (“GPC”) or more generally an opt-out preference signal, reflects a broader attention that data privacy advocates, the media and some government regulators, such as the FTC, have devoted to digital advertising in recent years.
The requirement under certain states’ laws to honor users’ requests to opt out of certain disclosures and uses of data for advertising purposes through preference signals, such as the Global Privacy Control (“GPC”) or similar signals, reflects a broader attention that privacy advocates, the media and some government regulators, have devoted to digital advertising in recent years.
As of December 31, 2022, our global leadership team is 71% male and 29% female. 11 Table of Contents Talent Development Despite our rapid growth, we still cherish our roots as a startup and our company culture of ownership.
As of December 31, 2023, our global leadership team is 64% male and 36% female. Talent Development Despite our rapid growth, we still cherish our roots as a startup and our company culture of ownership.
Much of the federal oversight of digital advertising in the United States currently comes from the FTC. Relying on Section 5 of the Federal Trade Commission Act, which prohibits companies from engaging in “unfair” or “deceptive” trade practices, the FTC pursues alleged violations of representations concerning data privacy protections and acts that allegedly violate individuals’ data privacy interests.
Relying on Section 5 of the FTC Act, which prohibits companies from engaging in “unfair” or “deceptive” trade practices, the FTC actively pursues alleged violations of representations concerning privacy protections and acts that allegedly violate individuals’ privacy interests.
Our platform enables clients to utilize multiple data sets, including from an extensive selection of third-party vendors, in a seamless and easy manner, allowing 7 Table of Contents them to further optimize their campaigns with highly relevant data.
Our platform enables clients to optimize campaigns with numerous highly relevant data sets, including from an extensive selection of third-party vendors, in a seamless and easy manner.
Advertisers can integrate this targeting data with their own data or an agency’s proprietary data relating to client attributes, the advertisers’ own store locations and other related characteristics.
This data is pseudonymized and made available within seconds based on specific parameters and attributes. Advertisers can integrate this targeting data with their own data or an agency’s proprietary data relating to client attributes, the advertisers’ own store locations and other related characteristics.
Our platform was founded on the principle that data-driven decisions will be the future of advertising. We built a data-management platform first, before building our ad-buying technology.
Advertisers are able to use our platform directly or through their agencies of choice. • We Are Data Driven. Our platform was founded on the principle that data-driven decisions will be the future of advertising. We built a data-management platform first, before building our ad-buying technology.
This trust provides us with the benefit of long-term and stable relationships with our clients. • We Are an Enabler, Not a Disruptor. With our platform and related offerings, we enable advertising agencies and other service providers. Advertisers can benefit from a comprehensive solution that combines our platform with the services provided by advertising agencies. • We Are Data Driven.
This trust provides us with the benefit of long-term and stable relationships with our clients. • We Are an Enabler, Not a Disruptor. Through our platform and related offerings, we enable advertisers, agencies and other service providers that participate in the digital advertising ecosystem.
If all of our individual client contractual relationships were aggregated at the holding company level, one holding company, Publicis Groupe, would have represented more than 10% of our gross billings in 2022.
In addition, our clients typically grow their use of our platform and related offerings over time. If all of our individual client contractual relationships were aggregated at the holding company level, one holding company, Publicis Groupe, would have represented more than 10% of our gross billings in 2023 and 2022.
We have worked to cultivate industry-wide support and collaboration for the Unified ID 2.0 approach, and we intend to continue these efforts. EUID, a European-focused version of Unified ID 2.0, is likely to be released in a limited beta in 2023. • Expand Our International Presence.
We have worked to cultivate industry-wide support and collaboration for the Unified ID 2.0 approach, and we intend to continue these efforts. EUID, a European-focused version of Unified ID 2.0, was released in a limited beta in 2023. • Ensure Access to Quality Inventory, Including through OpenPath.
To address the transfer of personal data from the EU to the United States, like many U.S. and European companies, we have relied upon, and are currently certified under, the EU-U.S. and Swiss-U.S. Privacy Shield Frameworks.
To address the transfer of personal data from Europe to the United States, we rely upon, and are currently certified under, the EU-U.S. and Swiss-U.S. Data Privacy Frameworks (“DPF”) and the U.K. Extension to the EU-U.S. DPF.
If all or some jurisdictions within the EU or the United Kingdom determine that the new standard contractual clauses likewise cannot be used to transfer personal data to the United States and if the DPF is not ultimately adopted, we could be left with no reasonable option for the lawful cross-border transfer of personal data.
If all or some jurisdictions within the EU or the U.K. determine that the latest standard contractual clauses cannot be used to transfer personal data to the U.S. and if the DPF is ultimately struck down in a manner similar to the Privacy Shield Framework, then, we could be left with no reasonable option for the lawful cross-border transfer of personal data.
Many of these agencies are owned by holding companies, where decision making is decentralized such that purchasing decisions are made, and relationships with advertisers are located, at the agency, local branch or division level.
Many of these advertising agencies are owned by holding companies, where decision making is decentralized such that purchasing decisions are made, and relationships with advertisers are located, at the agency, local branch or division level. Our client count includes only those parties that have signed MSAs with us and have spent more than $20,000 on our platform.
These developments may result in decreased reliance on implied consent mechanisms that have been used to meet requirements of the ePrivacy Directive in some markets. A replacement for the ePrivacy Directive is currently under discussion by EU member states to complement and bring electronic communication services in line with the GDPR and force a harmonized approach across EU member states.
A replacement for the ePrivacy Directive is currently under discussion by EU member states to complement and bring electronic communication services in line with the EU GDPR and force a harmonized approach across EU member states.
In such circumstance, if we nonetheless continue to transfer personal data from the EU to the United States, that could lead to governmental enforcement actions, litigation, fines and penalties or adverse publicity, which could have an adverse effect on our reputation and business or cause us to need to establish systems to maintain certain data in the EU, which may involve substantial expense and cause us to divert resources from other aspects of our operations, all of which may harm our business.
Such consequences could have an adverse effect on our reputation and business, such as by requiring us to establish systems to maintain certain data in the EU, which may involve substantial expense and cause us to divert resources from other aspects of our operations, all of which may harm our business.
Other jurisdictions have adopted or are considering cross-border or data residency restrictions, which could reduce the amount of data we can collect or process and, as a result, significantly impact our business. We participate in several industry self-regulatory programs, mainly initiated by the Network Advertising Initiative, or NAI, the Digital Advertising Alliance, or DAA, and their international counterparts.
Other jurisdictions have adopted or are considering cross-border or data residency restrictions, which could reduce the amount of data we can collect or process and, as a result, significantly impact our business.
We have a small number of patents; however, historically, we have not patented our proprietary technology in order to keep our technology architecture, trade secrets and engineering roadmap private. Our patent applications may not result in the issuance of any patents, and our issued patents may not actually provide adequate defensive protection or competitive advantages to us.
We have a small number of patents; however, historically, we have not patented our proprietary technology in order to keep our technology architecture, trade secrets and engineering roadmap private.
In addition to extending many of the CCPA compliance obligations (such as data privacy rights and enhanced notices) to the other four states, those laws and the updates to the CCPA focus even more significantly on advertising activities, mandating all businesses that engage in certain advertising uses of consumer personal information to offer and honor an opt-out of such activities, including, in three states, through browser or device-based preference signals.
In many respects, these state laws focus significantly on advertising activities, mandating that businesses that engage in certain advertising uses of consumer personal information to offer and honor an opt-out of such activities, including, in some states, through browser or device-based preference signals.
Other EU mechanisms for adequate data transfer, such as the standard contractual clauses, were also questioned by the Court of Justice and whether and how standard contractual clauses can be used to transfer personal data to the United States is in question.
Whether and how other European mechanisms for adequate data transfer, such as the latest standard contractual clauses, can be used to transfer personal data to the U.S. remains in question.
Additionally, we offer a solution for advertisers to access publisher inventory via a direct tag in a publisher’s ad server where there is no other programmatic access to such publisher’s inventory.
For clients who wish to transact directly with individual publishers, we offer a comprehensive user interface for discovering and transacting via a wide variety of private contracts. Additionally, we offer a solution for advertisers to access publisher inventory via a direct tag in a publisher’s ad server where there is no other programmatic access to such publisher’s inventory.
We believe that this user-centric approach to addressing consumer data privacy empowers consumers to make informed decisions on the use of their data. 14 Table of Contents Available Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and related amendments, exhibits and other information with the Securities and Exchange Commission (the “SEC”).
Available Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and related amendments, exhibits and other information with the Securities and Exchange Commission (the “SEC”).
Television is the largest category of advertising spend, and we believe that the future of television is CTV, the streaming of media and video on demand through subscription and ad-supported streaming services and connected devices.
Television is the largest category of advertising spend, and we believe that the future of television is CTV, the streaming of media and video on demand through subscription and ad-supported streaming services. We plan to continue investing significant resources in technology, sales and support staff related to our CTV growth initiatives. • Continue to Innovate in Technology, Data and Measurement.
The MSAs do not contain any material commitments on behalf of clients to use our platform to purchase ad inventory, data or other features. Generally, these MSAs have one-year terms that renew automatically for additional one-year periods, unless earlier terminated, and are terminable at any time upon 60 days’ notice by either party.
Generally, these MSAs have one-year terms that renew automatically for additional one-year periods, unless earlier terminated, and are terminable at any time upon 60 days’ notice by either party. Our clients are loyal, as reflected by our client retention rate of over 95% in each of the last ten years.
The General Data Protection Regulation 13 Table of Contents (“GDPR”) and now the U.K.’s version of the GDPR, which both apply to us, the GDPR define “personal data” broadly, and it enhances data protection obligations for controllers of such data and for service providers processing the data.
The General Data 13 Table of Contents Protection Regulation (“EU GDPR”) and the U.K.’s version of the GDPR (the “UK GDPR”) (the EU GDPR and UK GDPR are hereinafter referred to as the GDPR), which apply to us, define “personal data” broadly.
(Terminology varies slightly among some of the state laws, referring to such practices as “processing for targeted advertising” or “sales” or “sharing” of personal information, but the opt-out requirement exists under each state’s law.) Importantly, as a consequence of these obligations, the availability of data within our platform and the advertising ecosystem more broadly may decline, potentially making our platform and services less valuable to our clients.
Importantly, as a consequence of the obligations under these laws, the availability of data within our platform, our related offerings, and the advertising ecosystem more broadly may decline, potentially making our platform and services less valuable to our clients.
Data vendors and other organizations are able to collect this user data across a wide range of Internet properties and connected devices, aggregate it and combine it with other data sources. This data is then made non-identifiable and available within seconds based on specific parameters and attributes.
Advances in software and hardware, and the ubiquitous use of the Internet, have enabled the generation of user data at an unprecedented scale. Data vendors and other organizations are able to collect this user data across a wide range of Internet properties and connected devices, aggregate it and combine it with other data sources.
We view data as one of our key competitive advantages and we will continue to invest resources in growing our data and measurement offerings, from clients, third-party providers and our proprietary data and product capabilities. • Expand our Offerings, Including Unified ID 2.0.
We intend to continue innovating and improving the technology underlying our platform and enhancing its features and functionalities. We view data and measurement as key competitive advantages and we will continue to invest resources in growing our data and measurement offerings. • Further Enhance Identity Solutions, Including Unified ID 2.0.
Our tools analyze the actions of existing core audiences with the data we see across the open Internet to deliver fully transparent, performance-focused and ready-to-activate campaigns. • Private Marketplace Support. For clients who wish to transact directly with individual publishers, we offer a comprehensive user interface for discovering and transacting via a wide variety of private contracts.
Our platform enables clients to use audience insights and strategic goals to help optimize campaign planning, with the ability to generate, analyze and launch data-driven, programmatic media plans. Our tools analyze the actions of existing core audiences with the data we see across the open Internet to deliver fully transparent, performance-focused and ready-to-activate campaigns. • Private Marketplace Support.
The Privacy Shield Framework, however, was struck down in July 2020 by the Court of Justice of the European Union as an adequate mechanism by which EU companies may pass personal data to the US.
The European Commission adopted an adequacy decision for the DPF in July 2023, replacing the prior Privacy Shield Framework, as an adequate mechanism by which EU companies may pass personal data to the U.S. However, the DPF is already subject to legal challenge in Europe.
These laws also provide certain rights, such as access and deletion, to the individuals about whom the personal data relates.
Together with related laws, such as the ePrivacy Directive, we and our clients and inventory partners face enhanced data protection obligations, both as controllers of such data and as service providers processing the data. These laws also provide certain rights, such as access and deletion, to the individuals about whom the personal data relates, and require consent for certain activities.
Removed
New technologies allow more video content to be delivered seamlessly over the Internet, accelerating consumer demand to watch what they want, when they want and where they want. The worldwide rollout of 5G, the fifth generational standard for wireless networks, has brought significantly faster data transfer speeds with less latency and a better user experience to consumers of mobile video.
Added
New technologies, including 5G internet, support seamless delivery of streaming video content, accelerating consumers’ demand to watch what they want, when they want and where they want.
Removed
We believe these technologies will continue to feed consumer demand for CTV and mobile video and bring about new opportunities for content owners and advertisers to connect with consumers. Consumers are increasingly shifting their viewing habits to decentralized CTV providers from traditional linear television, and CTV providers are increasingly providing customers with more choices by offering ad-supported subscription options.
Added
We believe that this increased demand for CTV will bring about new opportunities for content owners and advertisers to connect with consumers, including through ad-supported subscription models, and will further drive the shift towards data-driven advertising. Increased Use of Data and Measurement.
Removed
We believe these shifts will incentivize content owners to provide more relevant ads using data-driven advertising. Increased Use of Data. Advances in software and hardware, and the growing use of the Internet, have enabled the generation of user data at an unprecedented scale.
Added
These recommendations help platform users make data-driven decisions without sacrificing control or transparency and empower users to choose which optimizations make the most sense for their campaigns. Koa’s artificial intelligence capabilities are used across various aspects of the platform, including predictive clearing, ad impression relevance scoring, measurement and forecasting, budget optimization and key performance indicator scoring. • Informed Media Planning.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCertain holders of our common stock have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders. 35 Table of Contents Insiders have substantial control over our company, including as a result of the dual class structure of our common stock, which could limit your ability to influence the outcome of key decisions, including a change of control.
Biggest changeInsiders have substantial control over our company, including as a result of the dual class structure of our common stock, which could limit your ability to influence the outcome of key decisions, including a change of control. Our Class B common stock has ten votes per share and our Class A common stock has one vote per share.
For example, if publishers or supply-side platforms decide to limit the data that we receive in order to comply (in their view) with state data privacy laws or a potential federal data privacy law, then our service may prove to be less valuable to our clients and we may find it more difficult to generate revenue.
For example, if publishers or supply-side platforms decide to limit the data that we receive in order to comply (in their view) with state privacy laws or a potential federal privacy law, then our service may prove to be less valuable to our clients and we may find it more difficult to generate revenue.
Increased transparency into the collection and use of data for digital advertising, introduced both through features in browsers and devices and regulatory requirements, such as the GDPR, state data privacy laws, “Global Privacy Control,” and the ePrivacy Directive, as well as compliance with such requirements, may create operational burdens to implement and may lead more users to choose to block the collection and use of data about them.
Increased transparency into the collection and use of data for digital advertising, introduced both through features in browsers and devices and regulatory requirements, such as the GDPR, state privacy laws, “Global Privacy Control,” and the ePrivacy Directive, as well as compliance with such requirements, may create operational burdens to implement and may lead more users to choose to block the collection and use of data about them.
Acquisitions involve numerous risks, any of which could harm our business, including: • regulatory hurdles; • anticipated benefits may not materialize; • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • retention of employees from the acquired company; • cultural challenges associated with integrating employees from the acquired company into our organization; • integration of the acquired company’s products and technology; • integration of the acquired company’s accounting, management information, human resources and other administrative systems; • the need to implement or improve controls, procedures and policies at a business that, prior to the acquisition, may have lacked effective controls, procedures and policies; • coordination of product development and sales and marketing functions; • liability for activities of the acquired company before the acquisition, including relating to privacy and data security, patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and 38 Table of Contents • litigation or other claims in connection with the acquisition, including claims from terminated employees, users, former stockholders or other third parties.
Acquisitions involve numerous risks, any of which could harm our business, including: • regulatory hurdles; • anticipated benefits may not materialize; • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • retention of employees from the acquired company; • cultural challenges associated with integrating employees from the acquired company into our organization; 38 Table of Contents • integration of the acquired company’s products and technology; • integration of the acquired company’s accounting, management information, human resources and other administrative systems; • the need to implement or improve controls, procedures and policies at a business that, prior to the acquisition, may have lacked effective controls, procedures and policies; • coordination of product development and sales and marketing functions; • liability for activities of the acquired company before the acquisition, including relating to privacy and data security, patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and • litigation or other claims in connection with the acquisition, including claims from terminated employees, users, former stockholders or other third parties.
Our international operations and expansion subject us to a variety of additional risks, including: • risks related to local advertising markets, where adoption of programmatic ad buying may be slower than in the United States, advertising buyers and inventory and data providers may be less familiar with demand-side platforms and our brand, and business models may not support our value proposition; • exposure to public health issues and to travel restrictions and other measures undertaken by governments in response to such issues; • risks related to compliance with local laws and regulations, including those relating to privacy, cybersecurity, data security, antitrust, data localization, anti-bribery, import and export controls, economic sanctions (including to existing and potential partners and clients), tax and withholding (including overlapping of different tax regimes), and varied labor and employment laws (including those relating to termination of employees); corporate formation, partnership, restrictions on foreign ownership or investment and other regulatory limitations or obligations on our operations (such as obtaining requisite licenses or other governmental requirements); and the increased administrative costs and risks associated with such compliance; • operational and execution risk, and other challenges caused by distance, language and cultural differences, which may burden management, increase travel, infrastructure and legal compliance costs, and add complexity to our enforcement of advertising standards across languages and countries; • geopolitical and social factors, such as concerns regarding negative, unstable or changing economic conditions in the countries and regions where we operate, recessions, armed conflicts and wars, political instability and trade disputes; • risks related to pricing structure, payment and currency, including aligning our pricing model and payment terms with local norms, higher levels of credit risk and payment fraud, difficulties in invoicing and collecting in foreign currencies and associated foreign currency exposure, and difficulties in repatriating or transferring funds from or converting currencies; and • reduced protection for intellectual property rights in some countries and practical difficulties in enforcing contractual and intellectual property rights abroad.
Our international operations and expansion subject us to a variety of additional risks, including: • risks related to local advertising markets, where adoption of programmatic ad buying may be slower than in the United States, advertising buyers and inventory and data providers may be less familiar with demand-side platforms and our brand, and business models may not support our value proposition; • exposure to public health issues and to travel restrictions and other measures undertaken by governments in response to such issues; 30 Table of Contents • risks related to compliance with local laws and regulations, including those relating to privacy, cybersecurity, data security, antitrust, data localization, anti-bribery, import and export controls, economic sanctions (including to existing and potential partners and clients), tax and withholding (including overlapping of different tax regimes), and varied labor and employment laws (including those relating to termination of employees); corporate formation, partnership, restrictions on foreign ownership or investment and other regulatory limitations or obligations on our operations (such as obtaining requisite licenses or other governmental requirements); and the increased administrative costs and risks associated with such compliance; • operational and execution risk, and other challenges caused by distance, language and cultural differences, which may burden management, increase travel, infrastructure and legal compliance costs, and add complexity to our enforcement of advertising standards across languages and countries; • geopolitical and social factors, such as concerns regarding negative, unstable or changing economic conditions in the countries and regions where we operate, recessions, armed conflicts and wars, political instability and trade disputes; • risks related to pricing structure, payment and currency, including aligning our pricing model and payment terms with local norms, higher levels of credit risk and payment fraud, difficulties in invoicing and collecting in foreign currencies and associated foreign currency exposure, and difficulties in repatriating or transferring funds from or converting currencies; and • reduced protection for intellectual property rights in some countries and practical difficulties in enforcing contractual and intellectual property rights abroad.
We use device identifiers to help us achieve our advertisers’ campaign goals, including to limit the instances that an Internet user sees the same advertisement, report information to our advertisers regarding the performance of their advertising campaigns, and detect and prevent malicious behavior and invalid traffic throughout our network of inventory.
We use device and other identifiers to help us achieve our advertisers’ campaign goals, including to limit the instances that an Internet user sees the same advertisement, report information to our advertisers regarding the performance of their advertising campaigns, and detect and prevent malicious behavior and invalid traffic throughout our network of inventory.
The Interactive Advertising Bureau and Digital Advertising Alliance have also developed frameworks that allow users to opt out of the “sale” or use of their personal information for targeted advertising purposes under state data privacy laws in ways that stop or severely limit the ability to show targeted ads.
The Interactive Advertising Bureau and Digital Advertising Alliance have also developed frameworks that allow users to opt out of the “sale” or use of their personal data for targeted advertising purposes under state privacy laws in ways that stop or severely limit the ability to show targeted ads.
As a result, we may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them.
As a result, we may incur increasingly significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them.
Factors that may cause our results of operations to fluctuate include the following: • changes in demand for programmatic advertising and for our platform, including related to the seasonal nature of our clients’ spending on digital advertising campaigns; • changes to availability of and pricing of competitive products and services, and their effects on our pricing; • changes in the pricing or availability of data and other third-party services, including pricing structure changes and the alignment of our pricing model with our data partners; • changes in our client base and platform or related offerings; • the addition or loss of advertising agencies and advertisers as clients; • changes in advertising budget allocations, agency affiliations or marketing strategies; • changes to our product, media, client or channel mix; • changes and uncertainty in the regulatory environment for us, advertisers or others in the advertising industry, and the effects of our efforts and those of our clients and partners to address changes and uncertainty in the regulatory environment; • changes in the economic prospects of advertisers or the economy generally, which could alter advertisers’ budgets or spending priorities, or could increase the time or costs required to complete advertising inventory sales; • changes in the pricing and availability of advertising inventory, including through real-time advertising exchanges or in the cost of reaching end consumers through digital advertising; • disruptions, outages, vulnerabilities or technological issues uncovered on our platform or related offerings; • factors beyond our control, such as natural disasters, terrorism, war and public health crises; • the introduction of new technologies or offerings by our competitors or others in the advertising marketplace; • changes in our capital expenditures as we acquire the hardware, equipment and other assets required to support our business; • timing differences between our payments for advertising inventory and our collection of related advertising revenue; • the length and unpredictability of our sales cycle; • costs related to acquisitions of businesses or technologies and development of new products; • cost of employee recruiting and retention; and • changes to the cost of infrastructure, including real estate and information technology.
Factors that may cause our results of operations to fluctuate include the following: • changes in demand for programmatic advertising and for our platform, including related to the seasonal nature of our clients’ spending on digital advertising campaigns; • changes to availability of and pricing of competitive products and services, and their effects on our pricing; • changes in the pricing or availability of data and other third-party services, including pricing structure changes and the alignment of our pricing model with our data partners; • changes in our client base and platform or related offerings; • the addition or loss of advertising agencies and advertisers as clients; • changes in advertising budget allocations, agency affiliations or marketing strategies; • changes to our product, media, client or channel mix; • changes and uncertainty in the regulatory environment for us, advertisers, inventory providers, or others in the advertising industry, and the effects of our efforts and those of our clients and partners to address changes and uncertainty in the regulatory environment; 28 Table of Contents • changes in the economic prospects of advertisers or the economy generally, which could alter advertisers’ budgets or spending priorities, or could increase the time or costs required to complete advertising inventory sales; • changes in the pricing and availability of advertising inventory, including through real-time advertising exchanges or in the cost of reaching end consumers through digital advertising; • disruptions, outages, vulnerabilities or technological issues uncovered on our platform or related offerings; • factors beyond our control, such as natural disasters, terrorism, war and public health crises; • the introduction of new technologies or offerings by our competitors or others in the advertising marketplace; • changes in our capital expenditures as we acquire the hardware, equipment and other assets required to support our business; • timing differences between our payments for advertising inventory and our collection of related advertising revenue; • the length and unpredictability of our sales cycle; • costs related to acquisitions of businesses or technologies and development of new products; • cost of employee recruiting and retention; and • changes to the cost of infrastructure, including real estate and information technology.
We also use data associated with device identifiers to help our clients decide whether to bid on, and how to price, an opportunity to place an advertisement in a specific location, at a given time, in front of a particular Internet user.
We also use data associated with device and other identifiers to help our clients decide whether to bid on, and how to price, an opportunity to place an advertisement in a specific location, at a given time, in front of a particular Internet user.
Supporting our continued growth may require substantial financial and other resources to, among other things: • develop our platform and related offerings, including by investing in our engineering team, creating, acquiring or licensing new products or features, and improving the availability and security of our platform and related offerings; • continue to expand internationally by growing our sales force and client services team in an effort to increase our client base and spend through our platform, and by adding inventory and data from countries our clients are seeking; • improve our technology infrastructure, including investing in internal technology development and acquiring outside technologies; • expand our platform’s reach in new and growing channels such as CTV, including expanding the supply of CTV inventory; • cover general and administrative expenses, including legal, accounting and other expenses necessary to support a larger organization; • cover sales and marketing expenses, including a significant expansion of our direct sales organization; • cover expenses relating to data collection and use and consumer privacy compliance, including additional infrastructure, product features, security, automation and personnel; and • explore strategic acquisitions.
Supporting our continued growth may require substantial financial and other resources to, among other things: • develop our platform and related offerings, including by investing in our engineering team, creating, acquiring or licensing new products or features, and improving the availability and security of our platform and related offerings; • continue to expand internationally by growing our sales force and client services team in an effort to increase our client base and spend through our platform, and by adding inventory and data from countries our clients are seeking; 26 Table of Contents • improve our technology infrastructure, including investing in internal technology development and acquiring outside technologies; • expand our platform’s reach in new and growing channels such as CTV, including expanding the supply of CTV inventory; • cover general and administrative expenses, including legal, accounting and other expenses necessary to support a larger organization; • cover sales and marketing expenses, including a significant expansion of our direct sales organization; • cover expenses relating to data collection and use and consumer privacy compliance, including additional infrastructure, product features, security, automation and personnel; and • explore strategic acquisitions.
Our failure to prevent outages or security breaches resulting from API use could result in government enforcement actions against us, claims for damages by consumers and other affected individuals, costs associated with investigation and remediation damage to our reputation and loss of goodwill, any of which could harm our business, financial condition and results of operations. 21 Table of Contents We may experience outages, disruptions, and malfunctions on our platform and related offerings, if we fail to maintain adequate security and supporting infrastructure and processes, which may harm our reputation and negatively impact our business, financial condition and results of operations.
Our failure to prevent outages or security breaches resulting from API use could result in government enforcement actions against us, claims for damages by consumers and other affected individuals, costs associated with investigation and remediation damage to our reputation and loss of goodwill, any of which could harm our business, financial condition and results of operations. 18 Table of Contents We may experience outages, disruptions and malfunctions on our platform and related offerings if we fail to maintain adequate security and supporting infrastructure and processes, which may harm our reputation and negatively impact our business, financial condition and results of operations.
Although we have implemented work-from-home protocols and provide work-issued devices to employees, the actions of our employees while working from home may have a greater effect on the security of our systems, the platform and the data we process, including by increasing the risk of compromise to our systems, confidential information or data arising from employees’ combined personal and private use of devices, accessing our systems or data using wireless networks that we do not control or the ability to transmit or store company-controlled data outside of our secured network.
Although we have implemented work-from-home protocols and provide work-issued devices to employees, the actions of our employees while working from home may have a greater effect on the security of our systems, platform, related offerings and the data we process, including by increasing the risk of compromise to our systems, confidential information or data arising from employees’ combined personal and private use of devices, accessing our systems or data using wireless networks that we do not control or the ability to transmit or store company-controlled data outside of our secured network.
The lack of uniformity and increasing requirements on transparency and disclosure could adversely impact the inventory made available for political advertising and the demand for such inventory on our platform, and otherwise increase our operating and compliance costs.
The lack of uniformity and increasing restrictions and requirements on transparency and disclosure could adversely impact the inventory made available for political advertising and the demand for such inventory on our platform, and otherwise increase our operating and compliance costs.
If we fail to innovate or make the right investment decisions in our offerings and platform, we may not attract and retain advertisers and advertising agencies and our revenue and results of operations may decline.
If we fail to innovate or make the right investment decisions in our offerings and platform, we may fail to attract and retain advertisers and advertising agencies and our revenue and results of operations may decline.
In addition, as we develop and introduce new products and services, including those incorporating or utilizing artificial intelligence and machine learning and new processing of personal information, including identifiable information, they may raise new, or heighten existing, technological, security, legal and other challenges, may cause unintended consequences and may not function properly or may be misused by our clients.
In addition, as we develop and introduce new products and services, including those incorporating or utilizing artificial intelligence and machine learning and new processing of personal information, including identifiable information, they may raise new, or heighten existing, technological, security, legal and other risks and challenges, that may cause unintended consequences and may not function properly or may be misused by our clients.
Concerns about industry practices with regard to the collection, use, and disclosure of personal information, whether or not valid and whether driven by applicable laws and regulations, industry standards, client or inventory provider expectations, or the broader public, may harm our reputation, result in loss of goodwill, and inhibit use of our platform or related offerings by current and future clients.
Concerns about industry practices with regard to the collection, use, and disclosure of personal data, whether or not valid and whether driven by applicable laws and regulations, industry standards, client or inventory provider expectations, or the broader public, may harm our reputation, result in loss of goodwill, and inhibit use of our platform or related offerings by current and future clients.
Other companies in the advertising technology space have been subject to government investigation by regulatory bodies; advocacy organizations have also filed complaints with data protection authorities against advertising technology companies, arguing that certain of these companies’ practices do not comply with data privacy laws, such as the CCPA or GDPR, or consumer protection laws such as the FTC Act.
Other companies in the advertising technology space have been subject to government investigation by regulatory bodies; advocacy organizations have also filed complaints with data protection authorities against advertising technology companies, arguing that certain of these companies’ practices do not comply with data privacy laws, or consumer protection laws such as the FTC Act.
If we fail to adapt to our rapidly changing industry or to evolving client needs, or we provide new products and services that exacerbate technological, security, legal or other challenges, the reputation of and demand for our platform or related offerings could decrease and our business, financial condition and operations may be adversely affected.
If we fail to adapt to our rapidly changing industry or to evolving client needs or expectations, or we provide new or updated products and services that exacerbate technological, security, legal or other challenges, the reputation of and demand for our platform or related offerings could decrease and our business, financial condition and operations may be adversely affected.
If all of our individual client contractual relationships were aggregated at the holding company level, Publicis Groupe would have represented more than 10% of our gross billings for 2022. In most cases, we enter into separate contracts and billing relationships with the individual agencies and account for them as separate clients.
If all of our individual client contractual relationships were aggregated at the holding company level, Publicis Groupe would have represented more than 10% of our gross billings for 2023. In most cases, we enter into separate contracts and billing relationships with the individual agencies and account for them as separate clients.
Additionally, as the advertising industry evolves, and new ways of collecting, combining and using data are created, governments may enact legislation in response to technological advancements and changes that could result in our having to re-design features or functions of our platform, therefore incurring unexpected compliance costs.
Additionally, as the advertising industry evolves, and new ways of collecting, combining and using data are created, governments may enact legislation in response to technological advancements and changes that could result in our having to re-design features or functions of our platform and related offerings, therefore incurring unexpected compliance costs.
The increased use of APIs increases security and operational risks to our systems and the users of our systems, including the risk for intrusion attacks, data theft, or denial of service attacks. Furthermore, while APIs allow clients greater ease and power in accessing our platform, they also increase the risk of overusing our systems, potentially causing outages.
The increased use of APIs increases security and operational risks to our systems and the users of our systems, including the risk for intrusion attacks, data theft or denial of service attacks. Furthermore, while APIs allow clients greater ease and power in accessing our platform and related offerings, they also increase the risk of overusing our systems, potentially causing outages.
They may also be subject to break-ins, sabotage, intentional acts of vandalism, cyber-attacks and similar misconduct. Although we have made certain disaster recovery and business continuity arrangements, such events could cause damage to, or failure of, our systems generally, or those of the third-party cloud computing and hosting providers, which could result in disruptions to our service.
They may also be subject to break-ins, sabotage, intentional acts of vandalism, cyberattacks and similar misconduct. Although we have made certain disaster recovery and business continuity arrangements, such events could cause damage to, or failure of, our systems generally, or those of the third-party cloud computing and hosting providers, which could result in disruptions to our service.
The market price of our Class A common stock has fluctuated and may fluctuate significantly in response to numerous factors, some of which are beyond our control and may not be related to our operating performance, including: • announcements of new offerings, products, services or technologies, commercial relationships, acquisitions, or other events by us or our competitors; • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of technology companies in general and of companies in the digital advertising industry in particular; • fluctuations in the trading volume of our shares or the size of our public float; • actual or anticipated changes or fluctuations in our results of operations; • whether our results of operations meet the expectations of securities analysts or investors; • actual or anticipated changes in the expectations of investors or securities analysts; • litigation involving us, our industry, or both; • regulatory developments in the United States, foreign countries, or both; • general economic conditions and trends; • terrorist attacks, political upheaval, natural disasters, war, public health crises, or other major catastrophic events; • sales of large blocks of our common stock; • departures of key employees; or • an adverse impact on us from any of the other risks cited herein.
The market price of our Class A common stock has fluctuated and may fluctuate significantly in response to numerous factors, some of which are beyond our control and may not be related to our operating performance, including: • announcements of new offerings, products, services or technologies, commercial relationships, acquisitions, or other events by us or our competitors; • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of technology companies in general and of companies in the digital advertising industry in particular; • fluctuations in the trading volume of our shares or the size of our public float; • trading activity in our share repurchase program; • actual or anticipated changes or fluctuations in our results of operations; • whether our results of operations meet the expectations of securities analysts or investors; • actual or anticipated changes in the expectations of investors or securities analysts; • litigation involving us, our industry, or both; • regulatory developments in the United States, foreign countries, or both; • general economic conditions and trends; 34 Table of Contents • terrorist attacks, political upheaval, natural disasters, war, public health crises, or other major catastrophic events; • sales of large blocks of our common stock; • departures of key employees; or • an adverse impact on us from any of the other risks cited herein.
In addition, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us. We cannot yet determine the impact such future standards may have on our business.
In addition, privacy advocates and industry groups may propose new and different standards that either legally or contractually apply to us. We cannot yet determine the impact such future standards may have on our business.
The covenants in our credit facility may limit our ability to take actions and, in the event that we breach one or more covenants, our lenders may choose to declare an event of default and require that we immediately repay all amounts outstanding, terminate the commitment to extend further credit and foreclose on the collateral granted to them to collateralize such indebtedness, which includes our intellectual property.
The covenants in our 31 Table of Contents credit facility may limit our ability to take actions and, in the event that we breach one or more covenants, our lenders may choose to declare an event of default and require that we immediately repay all amounts outstanding, terminate the commitment to extend further credit and foreclose on the collateral granted to them to collateralize such indebtedness, which includes our intellectual property.
These provisions include the following provisions: • permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • provide that our board of directors will be classified into three classes with staggered, three-year terms and that directors may only be removed for cause; • require super-majority voting to amend certain provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • specify that special meetings of our stockholders can be called only by our board of directors, the chairman of our board of directors, our chief executive officer, or a stockholder that has held at least 20% of our outstanding shares of common stock continuously for one year; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • prohibit cumulative voting in the election of directors; • restrict the forum for certain litigation against us to Delaware; • permit our board of directors to alter our bylaws without obtaining stockholder approval; • reflect the dual class structure of our common stock, as discussed above; and 36 Table of Contents • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
These provisions include the following provisions: • permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • provide that our board of directors will be classified into three classes with staggered, three-year terms and that directors may only be removed for cause; • require super-majority voting to amend certain provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • specify that special meetings of our stockholders can be called only by our board of directors, the chairman of our board of directors, our chief executive officer, or a stockholder that has held at least 20% of our outstanding shares of common stock continuously for one year; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • prohibit cumulative voting in the election of directors; • restrict the forum for certain litigation against us to Delaware; • restrict the forum for certain litigation against us to the federal district courts of the United States; • permit our board of directors to alter our bylaws without obtaining stockholder approval; • reflect the dual class structure of our common stock, as discussed above; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Our international operations and expansion plans create challenges associated with supporting a rapidly growing business across a multitude of cultures, customs, monetary, legal and regulatory systems and commercial infrastructures. 30 Table of Contents We have a limited operating history outside of the United States, and our ability to manage and expand our business and conduct our operations internationally requires considerable attention and resources.
Our international operations and expansion plans create challenges associated with supporting a rapidly growing business across a multitude of cultures, customs, monetary, legal and regulatory systems and commercial infrastructures. We have a limited operating history outside of the United States, and our ability to manage and expand our business and conduct our operations internationally requires considerable attention and resources.
In the event we are unable to maintain our corporate culture as we grow to scale, our business, financial condition and results of operations could be harmed. 32 Table of Contents Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our technology without compensating us, thereby eroding our competitive advantages and harming our business.
In the event we are unable to maintain our corporate culture as we grow to scale, our business, financial condition and results of operations could be harmed. Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our technology without compensating us, thereby eroding our competitive advantages and harming our business.
Any investigations, actions and/or sanctions could have a material negative impact on our business, financial condition and results of operations. We are subject to governmental economic sanctions requirements and export and import controls that could impair our ability to compete in international markets or subject us to liability if we are not in compliance with applicable laws.
Any investigations, actions and/or sanctions could have a material negative impact on our business, financial condition and results of operations. 33 Table of Contents We are subject to governmental economic sanctions requirements and export and import controls that could impair our ability to compete in international markets or subject us to liability if we are not in compliance with applicable laws.
All of this could impair our or our clients’ ability to collect, use, or disclose information relating to consumers, which could decrease demand for our platform, increase our costs, and impair our ability to maintain and grow our client base and increase our revenue.
All of this could impair our or our clients’ ability to collect, use, or disclose information relating to consumers, which could decrease demand for our platform and related offerings, increase our costs, and impair our ability to maintain and grow our client base and increase our revenue.
However, some holding companies for these agencies may choose to exert control over the individual agencies in the future. If so, any loss of relationships with such holding companies and, consequently, of their agencies, local branches or divisions, as clients could significantly harm our business, financial condition, and results of operations.
However, some holding companies for these agencies may choose to exert control over the 15 Table of Contents individual agencies in the future. If so, any loss of relationships with such holding companies and consequently, of their agencies, local branches or divisions, as clients could significantly harm our business, financial condition and results of operations.
Alleviating problems resulting from such issues could require significant expenditures of capital and other resources and could cause interruptions, delays or the cessation of our business, any of which may adversely affect our business, financial condition and results of operations. 22 Table of Contents If unauthorized access is obtained to user, client or inventory and third-party provider data, or our platform is compromised, our services may be disrupted or perceived as insecure, and as a result, we may lose existing clients or fail to attract new clients, and we may incur significant reputational harm and legal and financial liabilities.
Alleviating problems resulting from such issues could require significant expenditures of capital and other resources and could cause interruptions, delays or the cessation of our business, any of which may adversely affect our business, financial condition and results of operations. 19 Table of Contents If unauthorized access is obtained to user, client or inventory and third-party provider data, or our platform or related offerings are compromised, our services may be disrupted or perceived as insecure, and as a result, we may lose existing clients or fail to attract new clients, and we may incur significant reputational harm and legal and financial liabilities.
Though we contractually require clients to generally represent to us that their advertisements comply 33 Table of Contents with our ad standards and our inventory providers’ ad standards and that they have the rights necessary to serve advertisements through our platform, we do not independently verify whether we are permitted to deliver, or review the content of, such advertisements.
Though we contractually require clients to generally represent to us that their advertisements comply with our ad standards and our inventory providers’ ad standards and that they have the rights necessary to serve advertisements through our platform, we do not independently verify whether we are permitted to deliver, or review the content of, such advertisements.
In addition, advertising markets outside of the United States are not as developed as those within the United States, and we 31 Table of Contents may be unable to grow our business sufficiently. Any failure to successfully manage the risks and challenges related to our international operations could adversely affect our business, financial condition and results of operations.
In addition, advertising markets outside of the United States are not as developed as those within the United States, and we may be unable to grow our business sufficiently. Any failure to successfully manage the risks and challenges related to our international operations could adversely affect our business, financial condition and results of operations.
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 materially affect our financial condition and results of operations. Item 1B. Unresolved Staff Comments None. 39 Table of Contents
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 materially affect our financial condition and results of operations. Item 1B. Unresolved Staff Comments None.
Furthermore, the inventory that we access through real-time advertising exchanges may be of low quality or misrepresented to us, despite attempts by us and our suppliers to prevent fraud and conduct quality assurance checks. Inventory suppliers control the bidding process, rules and procedures for the inventory they supply.
Furthermore, the inventory that we access through real-time advertising exchanges may be of low quality or misrepresented to us, despite attempts by us and our suppliers to prevent fraud and conduct quality assurance checks. 17 Table of Contents Inventory suppliers control the bidding process, rules and procedures for the inventory they supply.
These laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our platform.
These laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our platform and related offerings.
If we or our clients or partners make mistakes in the implementation of these principles, or if self-regulatory bodies expand these guidelines or government authorities issue different guidelines regarding targeted advertising, or opt out mechanisms fail to work as designed, or if Internet users misunderstand our technology or our commitments with respect to these principles, we may, as a result, be subject to negative publicity, government investigation, government or private litigation or investigation by self-regulatory bodies or other accountability groups.
If we or our clients or partners make mistakes in the implementation of these principles, if self-regulatory bodies expand these guidelines, if government authorities issue different guidelines regarding targeted advertising, if opt out mechanisms fail to work as designed, or if Internet users misunderstand our technology or our commitments with respect to these principles, we could be subject to negative publicity, government investigation, government or private litigation or investigation by self-regulatory bodies or other accountability groups.
The loss of agencies as clients could significantly harm our business, financial condition and results of operations. If we fail to maintain satisfactory relationships with an advertising agency, we risk losing business from the current and future advertisers represented by that agency. 15 Table of Contents Advertisers may change advertising agencies.
The loss of agencies as clients could significantly harm our business, financial condition and results of operations. If we fail to maintain satisfactory relationships with an advertising agency, we risk losing business from the current and future advertisers represented by that agency. Advertisers may change advertising agencies.
Any increase in our tax expense could have a negative effect on our financial condition and results of operations. Moreover, the determination of our provision for income taxes and other tax liabilities requires significant estimates and judgment by management, and the tax treatment of certain transactions is uncertain.
Any increase in our tax expense could have a negative effect on our financial condition and results of operations. Moreover, the determination of our provision for income taxes and other tax liabilities requires significant estimates and judgment by management, and the tax treatment of certain transactions is 39 Table of Contents uncertain.
We use device identifiers to record information such as when an Internet user views an ad, clicks on an ad, or visits one of our advertiser’s websites or applications.
We use device and other identifiers to record information such as when an Internet user views an ad, clicks on an ad, or visits one of our advertiser’s websites or applications.
Advertisers provide the advertising content and inventory suppliers provide the inventory. Both 28 Table of Contents advertisers and inventory suppliers are concerned about being associated with content they consider inappropriate, competitive or inconsistent with their brands or illegal, and they are hesitant to spend money or make inventory available, respectively, without some guarantee of brand security.
Advertisers provide the advertising content and inventory suppliers provide the inventory. Both advertisers and inventory suppliers are concerned about being associated with content they consider inappropriate, competitive or inconsistent with their brands or illegal, and they are hesitant to spend money or make inventory available, respectively, without some guarantee of brand security.
Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Policing unauthorized use of our technology is difficult.
Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. 32 Table of Contents Policing unauthorized use of our technology is difficult.
Our services and the data on our platform and in our systems could be exposed to unauthorized access due to activities that breach or undermine security measures, including: negligence or malfeasance by internal or external actors; attempts by outside parties to fraudulently induce employees, clients or vendors to disclose sensitive information; or errors or vulnerabilities in our systems, products or processes or in those of our service providers, clients, and vendors.
Our services and the data on our platform, related offerings and in our systems could be exposed to unauthorized access due to activities that breach or undermine security measures, including: negligence or malfeasance by internal or external actors; attempts by outside parties to fraudulently induce employees, clients or vendors to disclose information or data, including personal information; or errors or vulnerabilities in our systems, products or processes or in those of our service providers, clients, and vendors.
Fluctuations in our results of operations could cause our performance to fall below the expectations of analysts and investors, and adversely affect the price of our common stock. Because our business is changing and evolving rapidly, our historical results of operations may 18 Table of Contents not be necessarily indicative of our future results of operations.
Fluctuations in our results of operations could cause our performance to fall below the expectations of analysts and investors, and adversely affect the price of our common stock. Because our business is changing and evolving rapidly, our historical results of operations may not be necessarily indicative of our future results of operations.
This could result in government investigations, enforcement actions and other legal and financial liability, and/or loss of confidence in the availability and security of our products and services, all of which could seriously harm our reputation and brand and impair our ability to attract and retain clients.
This could result in government investigations, lawsuits (including class actions), enforcement actions and other legal and financial liability, and/or loss of confidence in the availability and security of our products and services, all of which could seriously harm our reputation and brand and impair our ability to attract and retain clients.
Third parties control our access to unique identifiers, and if the use of “third-party cookies” or other technology to uniquely identify devices is rejected by Internet users, restricted or otherwise subject to unfavorable regulation, blocked or limited by preference signals, technical changes on end users’ devices and web browsers, or our and our clients’ 26 Table of Contents ability to use data on our platform is otherwise restricted, our performance may decline and we may lose advertisers and revenue.
Third parties control our access to unique identifiers, and if the use of “third-party cookies” or other technology to uniquely identify devices or users is rejected by Internet users, restricted or otherwise subject to unfavorable regulation, blocked or limited by preference signals, technical changes on end users’ devices and web browsers, or our and our 23 Table of Contents clients’ ability to use data, including on our platform or related offerings is otherwise restricted, our performance may decline, and we may lose advertisers and revenue.
Cyberattacks of increasing sophistication may be difficult to detect and could result in the theft of our intellectual property and data, including personal information, from our platform.
Cyberattacks of increasing sophistication may be difficult to detect and could result in the theft of our intellectual property and data, including personal information.
If we are unsuccessful in establishing or maintaining our relationships with our third-party providers or otherwise need to replace them, internal resources may need to be diverted and our business, financial condition and results of operations could be harmed.
If we are unsuccessful in establishing or 29 Table of Contents maintaining our relationships with our third-party providers or otherwise need to replace them, internal resources may need to be diverted and our business, financial condition and results of operations could be harmed.
The COVID-19 pandemic and efforts to control its spread curtailed the movement of 16 Table of Contents people, goods and services worldwide, including in the regions in which we and our clients and partners operate, and significantly impacted economic activity and financial markets .
The COVID-19 pandemic and efforts to control its spread curtailed the movement of people, goods and services worldwide, including in the regions in which we and our clients and partners operate, and significantly impacted economic activity and financial markets .
This concentrated control limits or precludes your ability to influence corporate matters, as the holders of Class B common stock are able to influence or substantially control matters requiring approval by our stockholders, including the election of the directors, excluding the director we plan to designate as a Class A director, and the approval of mergers, acquisitions or other extraordinary transactions.
This concentrated control limits or precludes your ability to influence corporate matters, as the holders of Class B common stock are able to influence or substantially control matters requiring approval by our stockholders, including the election of the directors, excluding the director we have designated as a Class A director, and the approval of mergers, acquisitions or other extraordinary transactions.
If use of the “Global Privacy Control” or similar signals is adopted by many Internet users or if such a standard is imposed by other states or by federal or foreign legislation or is agreed upon by standard setting groups, we may have to change our business practices, our clients may reduce their use of our platform, and our business, financial condition and results of operations could be adversely affected.
If use of the “Global Privacy Control” or similar signals is adopted by many Internet users or if such a standard is imposed by even more states or by federal or foreign legislation or is agreed upon by standard setting groups, we may have to change our business practices, our clients may reduce their use of our platform and related offerings, and our business, financial condition and results of operations could be adversely affected.
We also rely on third-party technology and systems to perform properly and is often used in connection with computing environments utilizing different operating systems, system management software, equipment and networking configurations, which may cause errors in, or failures of, our platform or such other computing environments.
We also rely on third-party technology and systems to perform properly, which are often used in connection with computing environments utilizing different operating systems, system management software, equipment and networking configurations, which may cause errors in, or failures of, our platform and related offerings or such other computing environments.
Additionally, our clients rely on device identifiers to add information they have collected or acquired about users into our platform.
Additionally, our clients rely on device and other identifiers to add information they have collected or acquired about users into our platform.
Our business may suffer to the extent that advertising agencies and inventory suppliers purchase and sell advertising inventory directly from one another or through intermediaries other than us. We had over 1,000 clients, consisting primarily of advertising agencies, as of December 31, 2022.
Our business may suffer to the extent that advertising agencies and inventory suppliers purchase and sell advertising inventory directly from one another or through intermediaries other than us. We had over 1,100 clients, consisting primarily of advertising agencies, as of December 31, 2023.
Current or future global market uncertainties or downturns and associated macroeconomic conditions, such as growing inflation, rising interest rates, recessionary fears, changes in foreign currency exchange rates, the impact of global instability in many parts of the world and the COVID-19 pandemic or other public health crises, may disrupt the operations of our clients and partners and cause advertisers to decrease or pause their advertising budgets, which could reduce spend though our platform and adversely affect our business, financial condition and results of operations.
Current or future global market uncertainties or downturns and associated macroeconomic conditions, such as growing inflation, rising interest rates, recessionary fears, changes in foreign currency exchange rates, supply chain disruptions, the impact of global instability in many parts of the world and public health crises, may disrupt the operations of our clients and partners and cause advertisers to decrease or pause their advertising budgets, which could reduce spend though our platform and adversely affect our business, financial condition and results of operations.
For example, Apple has shifted to require user opt-in before permitting access to Apple’s unique identifier, or IDFA, and Google has announced that it will deprecate the mobile 27 Table of Contents advertising identifier used on Android devices entirely.
For example, Apple has shifted to require user opt-in before permitting access to Apple’s unique identifier, or IDFA, and Google has announced that it will deprecate the mobile advertising identifier used on Android devices entirely.
Continuing to maintain compliance with the requirements of the GDPR and the United Kingdom Data Protection Act 2018, including monitoring and adjusting to rulings and interpretations that affect our approach to compliance, requires significant time, resources and expense, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business.
Continuing to maintain compliance with the requirements of the GDPR, including monitoring and adjusting to rulings and interpretations that affect our approach to compliance, requires significant time, resources and expense, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business.
We may not be 17 Table of Contents able to accurately predict changes in overall advertiser demand for the channels in which we operate and cannot assure you that our investment in channel development 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 channel development will correspond to any such changes.
Digital advertising mostly relies on the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and measuring the effectiveness of ads.
Digital advertising mostly relies on the ability to uniquely identify devices or users across websites and applications, and to collect data about user interactions for purposes such as serving relevant ads and measuring the effectiveness of ads.
Operational performance and internal control issues with our platform may adversely affect our business, financial condition and results of operations and subject us to liability. Our platform and other offerings are complex and proprietary, and we rely on the expertise of members of our engineering, operations and software development teams for its continued performance.
Operational performance and internal control issues may adversely affect our business, financial condition and results of operations and subject us to liability. Our platform and related offerings are complex and proprietary, and we rely on the expertise of members of our engineering, operations and software development teams for their continued performance.
As of December 31, 2022, stockholders who held shares of Class B common stock, including our executive officers, employees, and directors and their affiliates, together held approximately 49.6% of the voting power of our outstanding capital stock.
As of December 31, 2023, stockholders who held shares of Class B common stock, including our executive officers, employees, and directors and their affiliates, together held approximately 49.7% of the voting power of our outstanding capital stock.
Information relating to individuals and their devices (sometimes called “personal information” or “personal data”) is regulated under a wide variety of local, state, national and international laws and regulations that apply to the collection, use, retention, protection, disclosure, transfer (including transfer across national boundaries) and other processing of such data.
Information relating to individuals and their devices (commonly called “personal information” or “personal data”) is regulated under a wide variety of local, state, national and international laws and regulations that apply to its collection, use, retention, protection, disclosure, transfer (including transfer across national boundaries) and other processing.
We typically collect and store IP addresses and other device identifiers (such as unique cookie identifiers and mobile application identifiers), which are or may be considered personal data or personal information in some jurisdictions or otherwise may be the subject of regulation.
We typically collect and store IP addresses and other device identifiers (such as unique cookie identifiers and mobile application identifiers), which are or may be considered personal data or personal information in many jurisdictions or otherwise subject to regulation.
Most significant for the advertising industry, however, these laws require all businesses that engage in certain advertising uses of consumer personal information to offer and honor an opt-out of such activities, including, in three states, through browser or device-based preference signals.
Most significant for the advertising industry, however, these laws require businesses that engage in certain advertising uses of personal data to offer and honor an opt-out of such activities, including, in some states, through browser or device-based preference signals.
The importance of high-quality client service will 29 Table of Contents increase as we expand our business and pursue new clients.
The importance of high-quality client service will increase as we expand our business and pursue new clients.
Thus, we expect that continuing to maintain compliance with California’s legal requirements, including monitoring and adjusting to new regulations and interpretations that affect our approach to compliance, will require significant time, resources, and expense, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business.
Thus, we expect that continuing to maintain compliance with states’ varying legal requirements, including monitoring and adjusting to new regulations and interpretations that emerge through enforcement actions will require significant time, resources, and expense, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business.
As we launch new products and services, some of which involve the receipt and processing of identifiable information, the risks associated with data including risks to breach of our systems increases, and we could be subject to contractual breach and indemnification claims from other clients and partners and otherwise suffer damage to our reputation, brand, and business.
As some of our newer offerings involve the receipt and processing of identifiable information, the risks associated with data including risks to breach of our systems increases, and we could be subject to contractual breach and indemnification claims from other clients and partners and otherwise suffer damage to our reputation, brand, and business.
Commitments to advertising technology industry self-regulation may subject us to investigation by government or self-regulatory bodies, government or private litigation, and operational costs or harm to reputation or brand.
Advertising technology industry self-regulation may lead to investigation by government or self-regulatory bodies, government or private litigation, and operational costs or harm to reputation or brand.
Other jurisdictions have adopted or are considering cross-border or data residency restrictions, which could reduce the amount of data we can collect or process and, as a result, significantly impact our business. Regulatory investigations and enforcement actions could also impact us.
Other jurisdictions have adopted or are considering cross-border or data residency restrictions, which could reduce the amount of data we can collect or process and, as a result, significantly impact our business.
Many of our contracts with advertising agencies provide that if the advertiser does not pay the agency, the agency is not liable to us, and we must seek payment solely from the advertiser, a type of arrangement called sequential liability.
Spend on our platform primarily comes through our agency clients. Many of our contracts with advertising agencies provide that if the advertiser does not pay the agency, the agency is not liable to us, and we must seek payment solely from the advertiser, a type of arrangement called sequential liability.
Our Class B common stock has ten votes per share and our Class A common stock has one vote per share. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively have substantial control of the combined voting power of our common stock.
Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively have substantial control of the combined voting power of our common stock.
We must maintain a consistent supply of attractive ad inventory. Our success depends on our ability to secure quality inventory on reasonable terms across a broad range of advertising networks and exchanges and social media platforms, including video, display, CTV, audio and mobile inventory.
Our success depends on our ability to secure quality inventory on reasonable terms across a broad range of advertising networks and exchanges and social media platforms, including video, display, CTV, audio and mobile inventory.
Current or future global market uncertainties or downturns and associated macroeconomic conditions beyond our control could adversely affect our business, financial condition and results of operations. Our business depends on the overall demand for advertising and on the economic health of advertisers that benefit from our platform.
Current or future global market uncertainties or downturns and associated macroeconomic conditions beyond our control could harm the overall demand for advertising and the economic health of advertisers, which could adversely affect our business, financial condition and results of operations.
Because additional state data privacy laws require businesses to permit end users to opt out of processing their personal information for purposes of targeted advertising, we expect that more opt-out solutions will become available that may ultimately be used by end users, which may reduce our clients’ use of our platform, and our business, financial condition, and results of operations could be adversely affected.
Because additional state privacy laws require businesses to permit end users to opt out of processing 24 Table of Contents their personal data for purposes of targeted advertising, including, in some states through automated signals, we expect that more opt-out solutions will become available that may ultimately be used by end users, which may reduce our clients’ use of our platform and related offerings, and our business, financial condition, and results of operations could be adversely affected.
For example, from time to time, we experience cyberattacks of varying degrees and other attempts to obtain unauthorized access to our systems, including to employee mailboxes. We have dedicated and expect to continue to dedicate resources toward security protections that shield data from these activities. However, such measures cannot provide absolute security.
For example, from time to time, we experience cyberattacks of varying degrees and other attempts to obtain unauthorized access to our systems, including to employee mailboxes. We have dedicated and expect to continue to dedicate resources toward security protections that shield data from these activities, including worldwide incident response teams and dedicated resources to incident response processes.
These laws require covered businesses to meet numerous data privacy-related obligations, among other requirements, establishing data privacy rights for consumers in such states (including rights to request deletion of and access to personal information), imposing special rules on the collection of consumer data from minors and other data deemed “sensitive” under the laws, and creating new notice obligations.
These laws generally require covered businesses to meet numerous data privacy-related obligations and establish data privacy rights for consumers in such states (including rights to opt out of certain processing of their personal data and to request correction and deletion of and access to personal data), imposing special rules on the collection of personal data from minors and other personal data deemed “sensitive” under the laws, and creating new notice obligations.
We may not be successful in developing and maintaining effective internal controls , and any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods .
We may not be successful in developing and maintaining effective internal controls , and any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods . 37 Table of Contents If we identify material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.
Our efficiency, productivity and the quality of our platform and client service may be adversely impacted if we do not train our new personnel, particularly our sales and support personnel, quickly and effectively, or if we fail to appropriately coordinate across our organization.
We must also manage our employees, operations, finances, technology and development and capital investments efficiently. Our efficiency, productivity and the quality of our platform and client service may be adversely impacted if we do not train our new personnel, particularly our sales and support personnel, quickly and effectively, or if we fail to appropriately coordinate across our organization.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We maintain our principal offices in Ventura, California. We also lease office and data center space in various cities within the United States, Europe, Asia and Australia.
Biggest changeItem 2. Properties We maintain our principal offices in Ventura, California. We also lease office and data center space in various cities within North America, Europe, Asia and Australia.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe two complaints allege generally that the defendants breached their fiduciary duties to us and our stockholders in connection with the negotiation and approval of the CEO Performance Option. The plaintiffs seek a court order rescinding the CEO Performance Option and monetary damages.
Biggest changeThose lawsuits were consolidated on August 18, 2022, and a lead plaintiff was appointed on October 7, 2022. The two complaints allege generally that the defendants breached their fiduciary duties to us and our stockholders in connection with the negotiation and approval of the CEO Performance Option.
Green, et al. , No. 2022-0461, asserting claims on our behalf against certain members of our board of directors in the Court of Chancery of the State of Delaware. On June 27, 2022, a second derivative lawsuit captioned Pfeiffer v.
Green, et al., No. 2022-0461, asserting claims on our behalf against certain members of our board of directors in the Court of Chancery of the State of Delaware. On June 27, 2022, a second derivative lawsuit captioned Pfeiffer v. Green, et al., No. 2022-0560, was filed in the Court of Chancery of the State of Delaware alleging substantially similar claims.
Mine Safety Disclosures Not applicable. 40 Table of Contents PART II
Mine Safety Disclosures Not applicable. 41 Table of Contents PART II
On November 10, 2022, the plaintiffs filed a consolidated complaint, and on January 12, 2023, the defendants moved to dismiss the consolidated complaint. Litigation is inherently uncertain and there can be no assurance regarding the likelihood that the motions to dismiss or defense of the various actions will be successful. Item 4.
Defendants filed their replies in support of their motions to dismiss on May 19, 2023. Oral argument on the motions has been set for April 3, 2024. Litigation is inherently uncertain and there can be no assurance regarding the likelihood that the motions to dismiss or defense of the various actions will be successful. Item 4.
Removed
Green, et al. , No. 2022-0560, was filed in the Court of Chancery of the State of Delaware alleging substantially similar claims. Those lawsuits were consolidated on August 18, 2022, and a lead plaintiff was appointed on October 7, 2022.
Added
The plaintiffs seek a court order rescinding the CEO Performance Option and monetary damages. On November 10, 2022, the plaintiffs filed a consolidated complaint, and on January 12, 2023, the defendants moved to dismiss the consolidated complaint. On March 24, 2023, plaintiffs filed an opposition to defendants’ motions to dismiss.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividend Policy We have never declared or paid any dividends on our Class A or Class B common stock, and we do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain any earnings to finance the operation and expansion of our business.
Biggest changeDividend Policy We have never declared or paid any dividends on our Class A or Class B common stock, and we do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain any earnings to finance the operation and expansion of our business or to conduct repurchases of our Class A common stock.
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.
We have not paid any cash dividends: therefore, the cumulative total return calculation for us is based solely upon stock price appreciation and not the reinvestment of cash dividends. However, the data for the S&P 500 Index, Nasdaq 100 Index and 41 Table of Contents Russell 3000 Index assumes reinvestment of dividends.
We have not paid any cash dividends: therefore, the cumulative total return calculation for us is based solely upon stock price appreciation and not the reinvestment of cash dividends. However, the data for the S&P 500 Index, Nasdaq 100 Index and Russell 3000 Index assumes reinvestment of dividends.
The following graph compares the cumulative total stockholder return on an initial investment of $100 in our Class A common stock between December 31, 2017, and December 31, 2022, with the comparative cumulative total returns of the Standard & Poor’s (S&P) 500 Index, Nasdaq 100 Index and Russell 3000 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 31, 2018, and December 31, 2023, with the comparative cumulative total returns of the Standard & Poor’s (S&P) 500 Index, Nasdaq 100 Index and Russell 3000 Index over the same period.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information regarding our financial condition. In addition, our Credit Facility (as defined below) contains restrictions on our ability to pay dividends.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information regarding our financial condition, liquidity and capital resources. In addition, our Amended Credit Facility (as defined below) contains restrictions on our ability to pay dividends.
The graph assumes the closing market price on December 31, 2017, of $4.57 per share as the initial value of our Class A common stock after retroactive adjustment for the Stock Split. The returns shown are based on historical results and are not indicative of, nor intended to forecast, future stock price performance. Item 6. Reserved
The graph assumes the closing market price on December 31, 2018, of $11.61 per share as the initial value of our Class A common stock after retroactive adjustment for the Stock Split. 43 Table of Contents The returns shown are based on historical results and are not indicative of, nor intended to forecast, future stock price performance. Item 6. Reserved
Holders of Record As of January 31, 2023, there were approximately 20 holders of record of our Class A common stock and 14 holders of record of our Class B common stock.
Holders of Record As of January 31, 2024, there were approximately 16 holders of record of our Class A common stock and 14 holders of record of our Class B common stock.
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Recent Sales of Unregistered Securities None. 42 Table of Contents Issuer Purchases of Equity Securities The following table summarizes share repurchase activity for the three months ended December 31, 2023: Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (in thousands) (in thousands) (in millions) October 1-31 — $ — — $ 273 November 1-30 1,685 $ 68.19 1,685 $ 158 December 1-31 1,507 $ 69.64 1,507 $ 53 3,192 3,192 _______________ (1) On February 15, 2023, we announced that our board of directors approved a share repurchase program with authorization to repurchase up to $700 million our Class A common stock, which commenced in February 2023 and has no expiration date.
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In February 2024, an additional $647 million was authorized under this program, bringing the total amount for future repurchases back to $700 million. The share repurchase program is designed to help offset the impact of future share dilution from employee stock issuances.
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Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases determined at our discretion, depending on market conditions and corporate needs.
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Open market repurchases are structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization.
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The program does not obligate us to acquire a minimum amount of Class A common stock, and may be modified, suspended or terminated at any time at the discretion of our board of directors. See Note 9—Capitalization in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to share repurchases.
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(2) Excludes other costs such as broker commissions and the accrued excise tax imposed by the Inflation Reduction Act of 2022 (“IRA”).

Item 7. Management's Discussion & Analysis

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

84 edited+24 added−5 removed55 unchanged
Biggest changeFinancing Activities Our financing activities consisted primarily of borrowings and repayments of our debt, proceeds from our equity compensation plans and taxes paid to net settle restricted stock awards. 50 Table of Contents In 2022, cash provided by financing activities of $32 million was primarily due to $48 million of proceeds from stock option exercises and $33 million of proceeds from the employee stock purchase plan, partially offset by $49 million of taxes paid for restricted stock award settlements.
Biggest changeIn 2023, we used $626 million of cash in financing activities, consisting of $647 million of cash paid for repurchases of Class A common stock and $79 million of taxes paid for restricted stock award settlements, partially offset by $61 million of proceeds from stock option exercises and $38 million of proceeds from the employee stock purchase plan.
Platform operations expense includes hosting costs, data-related costs, personnel costs and amortization of acquired technology and capitalized software costs for the development of our platform. Personnel costs include salaries, bonuses, stock-based compensation and employee benefit costs for personnel who support our platform and provide our clients with platform support.
Platform operations expense includes hosting costs, personnel costs, data-related costs and amortization of acquired technology and capitalized software costs for the development of our platform. Personnel costs include salaries, bonuses, stock-based compensation and employee benefit costs for personnel who support our platform and provide our clients with platform support.
In 2022, cash provided by operating activities of $549 million resulted primarily from net income adjusted for noncash items of $643 million and a net decrease in our operating assets and liabilities of $94 million.
In 2022, cash provided by operating activities of $549 million resulted primarily from net income adjusted for noncash items of $643 million and a net decrease from our operating assets and liabilities of $94 million.
We expect that our revenue as a percentage of gross spend will fluctuate in the future, especially as we introduce new platform features that are adopted by our clients, expand our omnichannel capabilities, extend our reach to more CTV inventory and add additional clients whose businesses may have different underlying business models.
We expect that our revenue as a percentage of gross spend will fluctuate in the future, especially as we introduce new platform features that are adopted by our clients, expand our omnichannel capabilities, extend our reach to more CTV and other inventory and add additional clients whose businesses may have different underlying business models.
The net decrease was primarily due to increase in accounts receivable of $292 million and a $48 million decrease in operating lease liabilities, partially offset by a $187 million increase in accounts payable and a $51 million decrease in prepaid expenses and other assets.
The net decrease was primarily due to a $292 million increase in accounts receivable and a $48 million decrease in operating lease liabilities, partially offset by a $187 million increase in accounts payable and a $51 million decrease in prepaid expenses and other assets.
In the ordinary course of business, demands have been made upon us to provide indemnification under such agreements, but we are not aware of any claims that could have a material effect on our consolidated financial statements. Accordingly, no amounts for any obligation have been recorded at December 31, 2022.
In the ordinary course of business, demands have been made upon us to provide indemnification under such agreements, but we are not aware of any claims that could have a material effect on our consolidated financial statements. Accordingly, no amounts for any obligation have been recorded at December 31, 2023.
Refer to “Critical Accounting Policies and Estimates—Revenue Recognition” below for a description of our revenue recognition policies. Operating Expenses We classify our operating expenses into the following four categories and allocate overhead such as information technology infrastructure, rent and occupancy charges based on headcount for these categories: Platform Operations.
Refer to “Critical Accounting Policies and Estimates—Revenue Recognition” below for a description of our revenue recognition policies. Operating Expenses We classify our operating expenses into the following four categories and allocate overhead such as information technology infrastructure, rent, office support and occupancy charges based on headcount for these categories: Platform Operations.
Our platform’s integrations with major inventory, publisher and data partners provide ad buyers reach and decisioning capabilities, and our enterprise APIs enable our clients to customize and expand platform functionality. Our clients are advertising agencies, brands and other service providers for advertisers, with whom we enter into ongoing MSAs.
Our platform’s integrations with major inventory, publisher and data partners provide ad buyers reach and decisioning capabilities, and our enterprise APIs enable our clients to customize and expand platform functionality. Our clients are advertising agencies, advertisers and other service providers for agencies or advertisers, with whom we enter into ongoing MSAs.
Stock-based compensation for the CEO Performance Option, which was granted in 2021, is recognized on a graded-vesting basis over a period of approximately five years but may be accelerated if the vesting criteria is met prior to the estimated performance period.
Stock-based compensation for the CEO Performance Option, which was granted in 2021, is recognized on a graded-vesting basis over a derived service period of approximately five years but may be accelerated if the vesting criteria is met prior to the estimated performance period.
Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives.
Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. There can be no assurance that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives.
Ability to Expand our Omnichannel Reach, Including CTV We enable the purchase of advertising inventory in a wide variety of ad formats and channels, including video (which includes CTV), display, audio, digital-out-of-home, native and social, on a multitude of devices, such as computers, mobile devices, televisions and streaming devices.
Ability to Expand our Omnichannel Reach, Including CTV, and Innovate across our Platform We enable the purchase of advertising inventory in a wide variety of ad formats and channels, including video (which includes CTV), display, audio, digital-out-of-home, native and social, on a multitude of devices, such as computers, mobile devices, televisions and streaming devices.
The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth. Excluding the impact of the CEO Performance Option, we expect general and administrative expenses to increase primarily due to continued investment in corporate infrastructure to support growth.
The increase in allocated facilities costs was primarily driven by return-to-office support expenses as well as new leases for additional office space to support our future growth. Excluding the impact of the CEO Performance Option, we expect general and administrative expenses to increase primarily due to continued investment in corporate infrastructure to support growth.
Our income tax provision (benefit) may also be affected by the timing of vesting and/or exercise of our stock-based awards. The extent of the impact may be subject to volatility resulting from changes in our stock price and volume of transactions by employees.
Our income tax provision (benefit) may also be affected by the timing of vesting and/or exercise of our stock-based 48 Table of Contents awards. The extent of the impact may be subject to volatility resulting from changes in our stock price and volume of transactions by employees.
We expect technology and development expense to increase in absolute dollars as we continue to invest in the development of our platform to support additional features and functions, increase the number of advertising and data inventory suppliers and support the increase in volume of advertising spending by our clients on our platform.
We expect technology and development expense to increase in absolute dollars as we continue to invest in the development of our platform and related offerings to support additional features and functions, increase the number of advertising and data inventory suppliers and support the anticipated increase in volume of advertising spending by our clients on our platform.
Judgment is required to determine whether we are the principal and report revenue on a gross basis for Supplier Features or the agent and report revenue on a net basis for the amount of platform fees charged to the client.
Judgment is required to determine whether we are the principal and report revenue on a gross basis for Supplier Features or the agent and report revenue on a net basis for the 54 Table of Contents amount of platform fees charged to the client.
We have foreign currency exposure related to our accounts receivable and, to a much lesser extent, accounts payable that are denominated in currencies other than the U.S. Dollar, principally the Euro, British Pound, Australian Dollar, Canadian Dollar, Japanese Yen, Indonesian Rupiah and Singapore Dollar.
We have foreign currency exposure related to our accounts receivable and, to a much lesser extent, accounts payable that are denominated in currencies other than the U.S. Dollar, principally the Euro, British Pound, Australian Dollar, Canadian Dollar, Japanese Yen, Indian Rupee, Indonesian Rupiah, Hong Kong Dollar and Singapore Dollar.
Our platform allows clients to execute integrated campaigns across ad formats and channels, including video (which includes CTV), display, audio, digital-out-of-home, native and social, on a multitude of devices, such as computers, mobile devices, televisions and streaming devices.
Our platform allows clients to execute integrated campaigns across ad formats and channels, including video (which includes connected television (“CTV”)), display, audio, digital-out-of-home, native and social, on a multitude of devices, such as computers, mobile devices, televisions and streaming devices.
For a discussion of the results of our operations for the year ended December 31, 2021 compared with the year ended December 31, 2020, see “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, filed with SEC on February 16, 2022.
For a discussion of the results of our operations for the year ended December 31, 2022 compared with the year ended December 31, 2021, see “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, filed with SEC on February 15, 2023.
For the year ended December 31, 2022, we generated $549 million of cash flows from operating activities. We believe our existing cash and cash equivalents, cash flow from operations and our undrawn available balance under our Credit Facility will be sufficient to meet our working capital requirements for at least the next 12 months.
For the year ended December 31, 2023, we generated $598 million of cash flows from operating activities. We believe our existing cash and cash equivalents, cash flow from operations and our undrawn available balance under our Amended Credit Facility will be sufficient to meet our working capital requirements for at least the next 12 months.
Investing Activities Our primary investing activities consist of investing in short-term investments in marketable securities, purchases of property and equipment to support of our growth and capital expenditures to develop our software to enhance our technology platform. As our business grows, we expect our capital expenditures and our investment activity to continue to increase.
Investing Activities Our primary investing activities consist of investing in short-term investments in marketable securities, purchases of property and equipment to support of our growth and capital expenditures to develop our software to enhance our technology platform. As our business grows, our capital expenditures and our investment activity may increase.
Provision for (Benefit From) Income Taxes The difference between the effective tax rate in 2022 of 58% and the U.S. federal statutory income tax rate of 21% was primarily due to nondeductible stock-based compensation and the impact of taxes in foreign jurisdictions, partially offset by the impact of tax benefits associated with stock-based awards and research and development tax credits.
The difference between the effective tax rate in 2022 of 58% and the U.S. federal statutory income tax rate of 21% was primarily due to nondeductible stock-based compensation and the impact of taxes in foreign jurisdictions, partially offset by the impact of excess tax benefits associated with stock-based awards and research and development tax credits.
Results of Operations for the Year Ended December 31, 2022 Compared with the Year Ended December 31, 2021 The following discusses the results of our operations for the year ended December 31, 2022 compared with the year ended December 31, 2021.
Results of Operations for the Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 The following discusses the results of our operations for the year ended December 31, 2023 compared with the year ended December 31, 2022.
Revenue as a percentage of gross spend in the aggregate may fluctuate from period to period based on our client mix and the extent to which clients utilize our platform’s features. Platform Operations Platform operations expense increased by $60 million, or 27%, for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Revenue as a percentage of gross spend in the aggregate may fluctuate from period to period based on our client mix and the extent to which clients utilize our platform’s features. Platform Operations Platform operations expense increased by $84 million, or 30%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Sales and marketing expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, employee benefits costs and commission costs, for our sales and marketing personnel. Sales and marketing expense also includes costs for market development programs, marketing events, advertising and promotional and other marketing activities.
Sales and marketing expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, employee benefits costs and commission costs, for our sales and marketing personnel. Sales and marketing expense also includes costs for market development programs, marketing events, advertising and promotional and other marketing activities. Commissions costs are expensed as incurred.
The increase in advertising and marketing costs was primarily due to an increase in marketing campaigns, events, sponsorships and client engagement. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth.
The increase in marketing costs was primarily due to an increase in marketing campaigns, events, sponsorships and client engagement. The increase in allocated facilities costs was primarily driven by return-to-office support expenses as well as new leases for additional office space to support our future growth.
For additional information regarding the CEO Performance Option, refer to Note 10— Stock-Based Compensation . Other Expense (Income), Net Total other income, net increased by $16 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
For additional information regarding the CEO Performance Option, refer to Note 10— Stock-Based Compensation . Other Income, Net Total other income, net increased by $54 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
The extent of the impact of these macroeconomic factors on our operational and financial performance will depend on a variety of factors, including the duration and spread of COVID-19 and its variants and the duration and the extent of geopolitical disruption and their respective impacts on our clients, partners, industry, and employees, all of which are uncertain at this time and cannot be accurately predicted.
The extent of the impact of these macroeconomic factors on our operational and financial performance will depend on a variety of factors, and the duration and extent of geopolitical and global economic disruption and their respective impacts on our clients, partners, industry and employees, all of which are uncertain at this time and cannot be accurately predicted.
As the middle class grows abroad, we believe that the global opportunity for programmatic advertising is significant and should continue to expand as publishers and advertisers outside the United States seek to adopt the benefits that programmatic advertising provides. To capitalize on this opportunity, we intend to continue investing in our presence 44 Table of Contents internationally.
As the middle class grows abroad, we believe that the global opportunity for programmatic advertising is significant and should continue to expand as publishers and advertisers outside the U.S. seek to adopt the benefits that programmatic advertising provides. To capitalize on this opportunity, we intend to continue investing in our presence internationally.
The difference between the effective tax rate in 2021 of (13)% and the U.S. federal statutory income tax rate of 21% was primarily due to the impact of tax benefits associated with stock-based awards and research and development tax credits, partially offset by nondeductible stock-based compensation and the impact of taxes in foreign jurisdictions.
Provision for Income Taxes The difference between the effective tax rate in 2023 of 33% and the U.S. federal statutory income tax rate of 21% was primarily due to nondeductible stock-based compensation and the impact of taxes in foreign and state jurisdictions, partially offset by the impact of excess tax benefits associated with stock-based awards and research and development tax credits.
We believe that the assumptions and estimates associated with the evaluation of revenue recognition criteria, including the determination of revenue recognition as net versus gross in our revenue arrangements, stock-based compensation expense and income taxes have the greatest potential impact on our consolidated financial statements.
We believe that the assumptions and estimates associated with the evaluation of revenue recognition criteria, including the determination of revenue recognition as net versus gross in our revenue arrangements, stock-based compensation expense and income taxes have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
For additional information regarding income taxes and the assumptions used for determining our income tax provision, as well as our related deferred income tax assets and liabilities, refer to Note 2—Basis of Presentation and Summary of Significant Accounting Policies and Note 11—Income Taxes . Recently Issued Accounting Pronouncements None. 52 Table of Contents
For additional information regarding income taxes and the assumptions used for determining our income tax provision, as well as our related deferred income tax assets and liabilities, refer to Note 2—Basis of Presentation and Summary of Significant Accounting Policies and Note 11—Income Taxes .
Commissions costs are expensed as incurred. 45 Table of Contents Our sales organization focuses on marketing our platform to increase its adoption by existing and new clients. We are also focused on expanding our international business by growing our sales teams in countries in which we currently operate, as well as establishing a presence in additional countries.
Our sales organization focuses on marketing our platform to increase its adoption by existing and new clients. We are also focused on expanding our international business by growing our sales teams in countries in which we currently operate, as well as establishing a presence in additional countries.
Our technology and development expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation and employee benefits costs, third-party consultant costs associated with the ongoing development of our platform and integrations with our advertising and data inventory suppliers and amortization of capitalized third-party software used in the development of our platform.
Our technology and development expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation and employee benefits costs as well as third-party consultant costs associated with the ongoing development of our platform and integrations with our advertising and data inventory suppliers.
See “ Item 1A. Risk Factors ” in Part I of this Annual Report on Form 10-K for further discussion of the adverse impacts of macroeconomic factors on our business. During the year ended December 31, 2022, many of our employees adopted a hybrid work schedule consisting of both in-person work and working from home.
See “ Item 1A. Risk Factors ” in Part I of this Annual Report on Form 10-K for further discussion of the adverse impacts of macroeconomic uncertainty on our business. During the second half of 2022, many of our employees adopted a hybrid work schedule consisting of both in-person work and working from home, primarily beginning in September 2022.
Revenue Revenue increased by $381 million, or 32%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021. The increase was primarily due to an increase in gross spend on our platform, which was primarily driven by more advertisers and more campaigns executed by existing clients.
Revenue Revenue increased by $368 million, or 23%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily due to higher gross spend in the current year on our platform, which was primarily driven by more advertisers and more campaigns executed by existing clients.
Liquidity and Capital Resources As of December 31, 2022, we had cash and cash equivalents of $1,031 million, including $93 million held by our international subsidiaries, short-term investments in marketable securities of $416 million, working capital of $1,816 million and $445 million of availability under our Credit Facility (refer to the “Credit Facility” section below).
Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of $895 million, including $112 million held by our international subsidiaries, short-term investments in marketable securities of $485 million, working capital of $1,803 million and $445 million of availability under our Amended Credit Facility (refer to the “Credit Facility” section below).
We also intend to invest in technology to further automate our business processes. General and Administrative General and administrative expense increased by $151 million, or 40%, for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
We also intend to invest in technology to further automate our business processes. General and Administrative General and administrative expense decreased by $5 million, or 1%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Our effective tax rate differs from the U.S. federal statutory tax rate of 21% primarily due to nondeductible stock-based compensation, tax benefits associated with employee exercises of stock options and vesting of restricted stock units, research and development tax credits, foreign tax rate differences and state taxes. 46 Table of Contents Realization of our deferred tax assets is dependent primarily on the generation of future taxable income.
Our effective tax rate differs from the U.S. federal statutory tax rate of 21% primarily due to nondeductible stock-based compensation, tax benefits associated with employee exercises of stock options and vesting of restricted stock units, research and development tax credits, foreign tax rate differences and state taxes.
Technology and Development Technology and development expense increased by $94 million, or 41%, for the year ended December 31, 2022, as compared to the year ended December 31, 2021. The increase was primarily due to increases of $87 million in personnel costs, which includes $37 million of stock-based compensation and $6 million in allocated facilities costs.
Technology and Development Technology and development expense increased by $92 million, or 29%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was primarily due to increases of $84 million in personnel costs, which includes $26 million of stock-based compensation and $7 million in allocated facilities costs.
In 2021, cash provided by financing activities of $32 million was primarily due to $61 million of proceeds from stock option exercises and $29 million of proceeds from the employee stock purchase plan, partially offset by $57 million of taxes paid for restricted stock award settlements and $2 million paid for debt financing costs.
In 2022, cash provided by financing activities of $32 million was primarily due to $48 million of proceeds from stock option exercises and $33 million of proceeds from the employee stock purchase plan, partially offset by $49 million of taxes paid for restricted stock award settlements.
On December 17, 2021, we amended the Credit Facility to expand the process for issuing letters of credit and the related invoicing, particularly with respect to letters of credit not denominated in U.S. Dollars. As of December 31, 2022, we did not have an outstanding debt balance under the Credit Facility.
On December 17, 2021, we amended the Credit Facility to expand the process for issuing letters of credit and the related invoicing, particularly with respect to letters of credit not denominated in U.S. Dollars.
We also generate revenue from providing data and other value-added services and platform features. 42 Table of Contents Executive Summary Highlights Year Ended December 31, Change 2022 2021 $ % (in millions, except percentages) Revenue $ 1,578 $ 1,197 $ 381 32 % Net Income $ 53 $ 138 $ (85) (62) % Gross Spend (1) $ 7,741 $ 6,172 $ 1,569 25 % ________ (1) For internal management purposes, we utilize gross spend as a metric to assess our market share and scale, plan for optimal levels of support for our clients and measure our growth from existing clients.
We also generate revenue from providing data and other value-added services and platform features. 44 Table of Contents Executive Summary Highlights Year Ended December 31, Change 2023 2022 $ % (in millions, except percentages) Revenue $ 1,946 $ 1,578 $ 368 23 % Net income $ 179 $ 53 $ 126 238 % Gross spend (1) $ 9,611 $ 7,741 $ 1,870 24 % ________ (1) For internal management purposes, we utilize gross spend as a metric to assess our market share and scale, plan for optimal levels of support for our clients and measure our growth from existing clients.
We believe that our ability to integrate and offer CTV and digital radio advertising inventory for purchase through our platform and, in particular, our ability to manage the increased costs that will accompany these purchases, will impact the future growth of our business.
We believe that our ability to integrate and offer CTV and other advertising inventory for purchase through our platform, our ability to continuously improve our platform’s and related offerings’ features and functionality and, in particular, our ability to manage the increased costs that will accompany these efforts, will impact the future growth of our business.
Generally, we report revenue net of amounts we pay suppliers for the cost of advertising inventory, third-party data and other add-on features (collectively, “Supplier Features”).
In addition, we invoice our clients for the cost of advertising inventory purchased, plus data and any add-on features purchased through the platform. Generally, we report revenue net of amounts we pay suppliers for the cost of advertising inventory, third-party data and other add-on features (collectively, “Supplier Features”).
Our business model has allowed us to grow significantly, and we believe that our operating leverage enables us to support future growth profitably. 43 Table of Contents COVID-19 and Other Macroeconomic Factors The worldwide spread of COVID-19, including the emergence of variants and subvariants, as well as rising interest rates, inflation, changes in foreign currency exchange rates and geopolitical developments have resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by our clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time until economic activity normalizes.
Macroeconomic Uncertainty and COVID-19 Rising interest rates, inflation, changes in foreign currency exchange rates, strikes and geopolitical developments, as well as the COVID-19 pandemic, including the emergence of variants and subvariants, have resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by our clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time until economic activity normalizes.
For 2022, 48 Table of Contents the provision for income taxes included $48 million of benefits associated with stock-based awards and $15 million of research and development tax credits.
For 2022, the provision from income taxes included $48 million of excess tax benefits associated with stock-based awards and $15 million of research and development tax credits. Refer to Note 11—Income Taxes for additional information.
Availability under the Credit Facility was $445 million as of December 31, 2022, which is net of outstanding letters of credit of $5 million. The Credit Facility matures, and all outstanding amounts become due and payable, on June 15, 2026. As of December 31, 2022, we were in compliance with all covenants.
As of December 31, 2023, we did not have an outstanding debt balance under the Amended Credit Facility. Availability under the Amended Credit Facility was $445 million as of December 31, 2023, which is net of outstanding letters of credit of $5 million. The Amended Credit Facility matures, and all outstanding amounts become due and payable, on June 15, 2026.
Stock-based compensation expense for ESPP awards is recognized on a graded-vesting attribution basis over the requisite service period of each award. 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—Stock-Based Compensation.
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—Stock-Based Compensation.
The net decrease was primarily due to increase in accounts receivable of $444 million and a $44 million decrease in operating lease liabilities, partially offset by a $309 million increase in accounts payable. The increase in accounts receivable resulted primarily from the growth of our business and the timing of cash receipts from clients.
The increase in accounts receivable resulted primarily from the growth of our business and the timing of cash receipts from clients. The decrease in operating lease liabilities was due primarily to rent payments.
For additional information regarding the Credit Facility , refer to Note 7—Debt . 49 Table of Contents Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 548,734 $ 378,513 Net cash used in investing activities $ (304,374) $ (93,638) Net cash provided by financing activities $ 31,992 $ 31,926 Operating Activities Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our clients and related payments to our suppliers for advertising inventory and data.
Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): Year Ended December 31, 2023 2022 Net cash provided by operating activities $ 598,322 $ 548,734 Net cash used in investing activities $ (107,593) $ (304,374) Net cash provided by (used in) financing activities $ (626,106) $ 31,992 Operating Activities Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our clients and related payments to our suppliers for advertising inventory and data.
The increase in data-related costs was primarily attributable to investments in new data providers. 47 Table of Contents We expect platform operations expenses to increase in absolute dollars in future periods as we continue to experience increased volumes of media impressions through our platform and hire additional personnel to support our clients.
We expect platform operations expenses to increase in absolute dollars in future periods as we continue to experience increased volumes of QPS through our platform and hire additional personnel to support our clients. 47 Table of Contents Sales and Marketing.
Further, we have a shelf registration statement on Form S-3 on file with the SEC (the “Shelf Registration”), which permits us to issue equity securities and equity-linked securities from time to time, subject to certain limitations.
We believe our existing cash and cash equivalents, short-term investments and cash flow from operations will be sufficient to fund our share repurchase program. Further, we have a shelf registration statement on Form S-3 on file with the SEC (the “Shelf Registration”), which permits us to issue equity securities and equity-linked securities from time to time, subject to certain limitations.
We expect sales and marketing expenses to increase in absolute dollars in future periods, as we focus on increasing the adoption of our platform with existing and new clients and expanding our international business.
The increase in stock-based compensation was primarily due to new equity grants, partially offset by the impact of stock price volatility on ESPP expense. We expect sales and marketing expenses to increase in absolute dollars in future periods, as we focus on increasing the adoption of our platform with existing and new clients and expanding our international business.
For 2021, the benefit from income taxes included $104 million of benefits associated with stock-based awards and $19 million of research and development tax credits.
For 2023, the provision for income taxes included $53 million of excess tax benefits associated with stock-based awards and $23 million of research and development tax credits.
The increase in hosting costs was primarily attributable to support related to the increased use of our platform by our clients as well as investment in new data centers to support our platform.
The increase in hosting costs was primarily attributable to support related to the increased use of our platform by our clients and by investment in new data centers to support our platform. The increase in personnel costs was primarily due to headcount growth as well as return-to-office, travel and employee engagement costs, including in-person events impacted by headcount growth.
Adoption of programmatic advertising by advertisers allows us to acquire new clients and grow revenue from existing clients. Although our clients include some of the largest advertising agencies in the world, we believe there is significant room for us to expand further within these clients and gain a larger amount of their advertising spend through our platform.
Although our clients include some of the largest advertising agencies in the world, we believe there is significant room for us to expand further within these clients and gain a larger amount of their advertising spend through our platform. We also believe that the industry trends noted above will lead to advertisers adopting programmatic advertising through platforms such as ours.
Our future growth will depend on our ability to maintain and grow the inventory and spend across these channels, in addition to continued growth in CTV.
Our future growth will depend on our ability to maintain and grow the inventory and spend across these channels, in addition to continued growth in CTV. Our future growth will also depend on our ability to continue innovating and improving the technology underlying our platform and related offerings and enhancing their features and functionality.
In addition, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected. We are closely monitoring the effect that current macroeconomic factors may have on our working capital requirements.
In addition, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected.
The increase was primarily due to higher interest income on our short-term investments driven by increased purchases and rising interest rates, partially offset by credit loss expense on available-for-sale securities.
The increase was primarily due to higher interest income on our cash and cash equivalents and short-term investments driven by rising interest rates.
We intend to make additional investments in sales and marketing and product development to expand in international markets where we are making significant investments in our platform and growing our team. We believe that these investments will contribute to our long-term growth, although they may negatively impact profitability in the near term.
We intend to make additional investments in sales and marketing and product development to expand in international markets where we are making significant investments in our platform and growing our team.
For the Year Ended December 31, 2022 2021 (in thousands) (% of Revenue) (in thousands) (% of Revenue) Revenue $ 1,577,795 100 % $ 1,196,467 100 % Operating expenses: Platform operations 281,123 18 % 221,554 19 % Sales and marketing 337,975 21 % 249,298 21 % Technology and development 319,876 20 % 226,137 19 % General and administrative 525,167 33 % 374,661 31 % Total operating expenses 1,464,141 93 % 1,071,650 90 % Income from operations 113,654 7 % 124,817 10 % Total other expense (income), net (13,716) (1) % 2,781 — % Income before income taxes 127,370 8 % 122,036 10 % Provision for (benefit from) income taxes 73,985 5 % (15,726) (1) % Net income $ 53,385 3 % $ 137,762 12 % __________________ Note: Percentages may not sum due to rounding.
For the Year Ended December 31, 2023 2022 (in thousands) (% of Revenue) (in thousands) (% of Revenue) Revenue $ 1,946,120 100 % $ 1,577,795 100 % Operating expenses: Platform operations 365,598 19 % 281,123 18 % Sales and marketing 447,970 23 % 337,975 21 % Technology and development 411,794 21 % 319,876 20 % General and administrative 520,278 27 % 525,167 33 % Total operating expenses 1,745,640 90 % 1,464,141 93 % Income from operations 200,480 10 % 113,654 7 % Total other income, net (67,515) (3) % (13,716) (1) % Income before income taxes 267,995 14 % 127,370 8 % Provision for income taxes 89,055 5 % 73,985 5 % Net income $ 178,940 9 % $ 53,385 3 % __________________ Note: Percentages may not sum due to rounding.
In considering the need for a valuation allowance, we consider our historical, as well as future, projected taxable income along with other objectively verifiable evidence. Objectively verifiable evidence includes our realization of tax attributes, assessment of tax credits and utilization of net operating loss carryforwards during the year.
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.
The increase in personnel costs was primarily due to an increase in headcount to support our sales efforts and continue to develop and maintain relationships with our clients; an increase in incentive compensation; and return-to-office, travel and in-person event costs that did not occur in the prior year.
The increase in personnel costs was primarily due to headcount growth to support our sales efforts and to continue to develop and maintain relationships with our clients; higher incentive compensation driven by headcount growth and gross spend growth; and return-to-office, travel and employee engagement costs, including in-person events impacted by headcount growth.
We believe that key opportunities include our ongoing global expansion, continuing development of our video (including CTV), audio and native ad inventory and continuing development and adoption of the data usage, measurement and targeting capabilities provided by our platform. We believe that growth of the programmatic advertising market is important for our ability to grow our business.
We believe that key opportunities include our ongoing global expansion, continuing development of our omnichannel ad inventory (including in channels such as video, including CTV, mobile, audio and others), adoption and utilization of retail media and continuing development and adoption of the data usage, measurement and targeting capabilities provided by our platform.
In addition, we expect to continue making investments in our infrastructure, including our information technology, financial and administrative systems and controls, to support our growing operations. We believe the markets outside of the United States, and in particular across China, India and Indonesia, offer opportunities for growth.
In addition, we expect to continue making investments in our infrastructure, including our information technology, financial and administrative systems and controls, to support our growing operations.
Our clients include some of the largest advertising agencies in the world, and we believe there is significant room for us to expand further within these clients. As a result, future revenue growth depends upon our ability to retain our existing clients and to gain a larger amount of their advertising spend through our platform.
As a result, future revenue growth depends upon our ability to retain our existing clients and to gain a larger amount of their advertising spend through our platform.
The increase was primarily due to increases of $138 million in personnel costs and $5 million in allocated facilities costs.
The decrease was primarily due to a $47 million decrease in stock-based compensation, partially offset by increases of $36 million in personnel costs and $5 million in allocated facilities costs.
The decrease in operating lease liabilities was due primarily to rent payments. The increase in accounts payable was due to the growth of our business and the timing of payments to suppliers for the cost of advertising inventory, data and add-on features.
The increase in prepaid expenses and other assets is primarily due to the prepayment of personnel travel costs and certain software, networking and infrastructure costs to support our platform. The increase in accounts payable was due to the growth of our business and the timing of payments to suppliers for the cost of advertising inventory, data and add-on features.
For example, we have expanded our CTV, native and audio advertising offerings through our integrations with supply-side partners. We invest for long-term growth.
Similarly, the adoption of programmatic advertising by inventory owners and content providers allows us to expand the volume and type of advertising inventory we present to our clients. For example, we have expanded our CTV, native and audio advertising offerings through our integrations with supply-side partners. We invest for long-term growth.
The increase was primarily due to increases of $69 million in personnel costs, which includes $14 million of stock-based compensation; $13 million in advertising and marketing costs; and $7 million in allocated facilities costs.
The increase was primarily due to increases of $54 million in hosting 49 Table of Contents costs and $23 million in personnel costs, which includes $3 million in stock-based compensation.
The increase in personnel costs was primarily attributable to increased headcount to maintain and support further development of our platform, as well as return-to-office, travel and in-person event costs that did not occur in the prior year. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth.
The increase in allocated facilities costs was primarily driven by return-to-office support expenses as well as new leases for additional office space to support our future growth.
Credit Facility On June 15, 2021, we and a syndicate of banks, led by JPMorgan Chase Bank, N.A., as agent, entered into a Loan and Security Agreement (the “Credit Facility”). This Credit Facility replaced our prior credit facility, which was scheduled to terminate in May 2022.
We are closely monitoring the effect that current macroeconomic factors may have on our working capital requirements. 51 Table of Contents Credit Facility On June 15, 2021, we and a syndicate of banks, led by JPMorgan Chase Bank, N.A., as agent, entered into a Loan and Security Agreement (the “Credit Facility”).
We typically pay suppliers in advance of collections from our clients. Our collection and payment cycles can vary from period to period. In addition, we expect seasonality to impact cash flows from operating activities on a sequential quarterly basis during the year.
We typically pay suppliers in advance of collections from our clients. Our collection and payment cycles can vary from period to period.
Therefore, we consider these to be our critical accounting policies and estimates. 51 Table of Contents Revenue Recognition We generate revenue from clients who enter into agreements with us to use our platform to purchase advertising inventory, data and other add-on features.
Revenue Recognition We generate revenue from clients who enter into agreements with us to use our platform to purchase advertising inventory, data and other add-on features. We charge our clients a platform fee, which is generally a percentage of the client’s purchases through the platform.
Subsequent to December 31, 2022, we amended our Credit Facility to transition from a variable interest rate based on LIBOR to a variable interest rate based on the secured overnight financing rate (“SOFR”).
On February 9, 2023, we further amended the Credit Facility (as amended, the “Amended Credit Facility”) to transition from a variable interest rate based on the London Interbank Offered Rate to a variable interest rate based on the secured overnight financing rate (“SOFR”).
In 2021, we used $94 million of cash in investing activities, consisting of $55 million to purchase property and equipment, $20 million of net purchases of short-term investments, $13 million for certain assets accounted for as a business acquisition and $5 million of investments in capitalized software.
In 2023, we used $108 million of cash in investing activities, consisting of $53 million of net purchases of short-term investments, $47 million to purchase property and equipment and $8 million of investments in capitalized software.
Programmatic advertising has grown rapidly in recent years, and any acceleration or slowing of this growth may affect our operating and financial performance. In addition, even if the programmatic advertising market continues to grow at its current rate, our ability to position ourselves within the market will impact the future growth of our business.
Programmatic advertising has grown rapidly in recent years, and any acceleration or slowing of this growth may affect our operating and financial performance.
The following table summarizes our non-cancellable contractual obligations at December 31, 2022 (in thousands): Payments Due by Period One Year or Less More than One Year Total Operating lease commitments $ 59,406 $ 230,842 $ 290,248 Other contractual commitments 116,964 375,152 492,116 Total $ 176,370 $ 605,994 $ 782,364 As of December 31, 2022, our total amount of gross unrecognized tax benefits was $91 million before netting with deferred tax assets for tax credit carryforwards and is considered a long-term obligation.
The following table summarizes our non-cancellable contractual obligations at December 31, 2023 (in thousands): Payments Due by Period 2024 2025 and Thereafter Total Operating lease commitments $ 62,412 $ 259,076 $ 321,488 Other contractual commitments 155,703 263,711 419,414 Total $ 218,115 $ 522,787 $ 740,902 As of December 31, 2023, our total amount of gross unrecognized tax benefits was $98 million before netting with deferred tax assets for tax credit carryforwards and is considered a long-term obligation.
Contractual Obligations and Known Future Cash Requirements Our principal commitments consist of non-cancelable operating leases for our various office facilities, and other contractual commitments consisting of obligations to our hosting services providers, marketing contracts and providers of software as a service. In certain cases, the terms of the lease agreements provide for rental payments on a graduated basis.
We did not have any off-balance sheet arrangements at December 31, 2023 other than the indemnification agreements described below. 53 Table of Contents Contractual Obligations and Known Future Cash Requirements Our principal commitments consist of non-cancelable operating leases for our various office facilities, and other contractual commitments consisting of obligations to our hosting services and hardware providers and providers of software as a service.
In 2021, cash provided by operating activities of $379 million resulted primarily from net income adjusted for noncash items of $548 million and a net decrease in our operating assets and liabilities of $170 million.
In addition, we expect seasonality to impact cash flows from operating activities on a sequential quarterly basis during the year. 52 Table of Contents In 2023, cash provided by operating activities of $598 million resulted primarily from net income adjusted for noncash items of $721 million and a net decrease from our operating assets and liabilities of $123 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased upon the short-term investment amount as of December 31, 2022, a hypothetical one percentage point increase or decrease in the interest rate would result in a corresponding increase or decrease in investment income of approximately $4 million annually. Foreign Currency Exchange Rate Risk We have foreign currency exchange risk related to transactions denominated in currencies other than the U.S.
Biggest changeWe have not used any derivative financial instruments to manage our interest rate risk exposure. Based upon the short-term investment amount as of December 31, 2023, a hypothetical one percentage point increase or decrease in the interest rate would result in a corresponding increase or decrease in investment income of approximately $5 million annually.
We enter into forward contracts or other derivative transactions in an attempt to hedge our foreign currency risk. There can be no assurance that such transactions will be effective in hedging some or all of our foreign currency exposures, and under some circumstances, such transactions could generate losses. 53 Table of Contents
We enter into forward contracts or other derivative transactions in an attempt to hedge our foreign currency risk. There can be no assurance that such transactions will be effective in hedging some or all of our foreign currency exposures, and under some circumstances they could generate losses. 56 Table of Contents
As of December 31, 2022, an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts would result in a foreign currency loss of approximately $35 million. In the event our non-U.S. Dollar denominated sales and expenses increase, our operating results may be more greatly affected by exchange rate fluctuations.
As of December 31, 2023, an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts would result in a foreign currency loss of approximately $38 million. In the event our non-U.S. Dollar denominated sales and expenses increase, our operating results may be more greatly affected by exchange rate fluctuations.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk We have operations within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks include primarily interest rate and foreign currency exchange risk.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk We have operations within the U.S. and internationally, and we are exposed to market risks in the ordinary course of our business.
Dollar, principally the Euro, British Pound, Australian Dollar, Canadian Dollar, Japanese Yen, Indonesian Rupiah and Singapore Dollar. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.
Foreign Currency Exchange Rate Risk We have foreign currency exchange rate risk related to transactions denominated in currencies other than the U.S. Dollar, principally the Euro, British Pound, Australian Dollar, Canadian Dollar, Japanese Yen, Indian Rupee, Indonesian Rupiah, Hong Kong Dollar and Singapore Dollar. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.
Interest Rate Risk We are exposed to market risk from changes in interest rates on our Credit Facility, which accrues interest at a variable rate, and our short-term investments. No amount was owed on our Credit Facility as of December 31, 2022. We have not used any derivative financial instruments to manage our interest rate risk exposure.
These risks include primarily interest rate and foreign currency exchange rate risk. 55 Table of Contents Interest Rate Risk We are exposed to market risk from changes in interest rates on our Amended Credit Facility, which accrues interest at a variable rate, and our short-term investments. No amount was owed on our Amended Credit Facility as of December 31, 2023.

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