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美国

证券交易委员会

华盛顿特区20549

表格 10-Q

(标记一个)

x 根据1934年证券交易法第13或15(d)条款提交的季度报告

截至2024年6月30日季度结束 2024年9月30日
或

o 根据1934年证券交易法第13条或第15(d)条进行的过渡报告

在从________到________的过渡期间

委员会档案编号： 001-39748

PUBMATIC, INC.

（注册人的确切姓名，如其章程中指明）

特拉华			20-5863224
(成立地或组织其他管辖区)			（国税局雇主身份识别号码）
不适用			不适用
(总部办公地址)			(邮递区号)
不适用
(注册人电话号码，包括区号)
不适用
(如与上次报告不同，列明前名称、前地址及前财政年度)

根据法案第12(b)条规定注册的证券：

每种类别的名称			交易符号			每个注册交易所的名称
每股面额为0.0001美元的A类普通股			首席会计官			纳斯达克全球市场

请勾选以下项目，以判定在过去12个月(或更短期间，该注册人被要求提交报告)内所有根据1934年证券交易法第13条或第15(d)条要求提供报告的报告是否已经提交，并且该注册人在过去90天中是否受到提交报告的要求。 是 x 不 o

在前12个月内（或公司需要提交这些文件的较短时间内），公司是否已通过选中标记表明已阅读并提交了应根据S-t法规第405条规定（本章第232.405条）提交的所有互动式数据文件？ 是 x 不 o

勾选该申报人是否属于大型加速提交人，加速提交人，非加速提交人，更小的报告公司或新兴增长公司。请参阅《交易所法》1202条中“大型加速提交人”，“加速提交人”，“更小的报告公司”和“新兴增长公司”的定义。

大型加速归档人

☒

加速归档人

o

非加速归档人

o

较小报告公司

o

新兴成长型企业

o

如果一家新兴成长型公司，请用勾选标记表示该申报人已选择不使用根据证交所法案13(a)条款提供的任何新的或修订过的财务会计准则的延长过渡期。 o

请在选框内打勾，表示公司是否为空壳公司（根据交易所法规第12亿2条定义）。是 o 否 x

截至2024年11月5日，登记人持有 39,474,129 普通A类股股票，并且 8,292,615 类B普通股股份。

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Table of Contents

目录
						页面
第一部分-财务资讯
项目一。			简明综合财务报表（未经审核）			1
			简明综合资产负债表			1
			简明综合营运报表			2
			简明综合综合报表 收入 (损失)			3
			简明综合股东权益表			4
			简明综合现金流量报表			6
			简明综合财务报表附注			7
项目二。			管理层对财务状况及营运结果进行讨论及分析			19
第三项目。			关于市场风险的定量和定性披露			33
第四项。			控制和程序			33
第二部分-其他资料
项目一。			法律程序			35
项目 1A。			风险因素			35
项目二。			非登记股份证券销售及所得款项的使用			38
第三项目。			高级证券违约			38
第四项。			矿山安全披露			38
第五项。			其他资讯			39
第六项			展品			40
			签名			41

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Table of Contents

第一部分 - 财务信息

项目1. 基本报表

PUBMATIC, INC.及其附属公司

缩表合并资产负债表

(以千为单位，除每股面值外)

			九月三十日， 2024						12月31日， 2023
			(未经审计)
资产
流动资产合计
现金及现金等价物			$	78,914					$	78,509
有价证券			61,463						96,835
应收帐款净额			376,790						375,468
预付费用及其他流动资产			12,640						11,143
全部流动资产			529,807						561,955
不动产、设备及软体，净值			63,247						60,729
营业租赁使用权资产			34,440						21,102
并购相关的无形资产，净值			4,679						5,864
商誉			29,577						29,577
递延税款贷项			24,711						13,880
其他非流动资产			2,683						2,136
总资产			$	689,144					$	695,243
负债和股东权益
流动负债
应付帐款			$	360,696					$	347,673
应计负债			25,697						25,684
营运租赁负债，流动			6,376						6,236
流动负债合计			392,769						379,593
营运租赁负债，非流动			28,978						15,607
其他非流动负债			4,196						3,844
负债合计			425,943						399,044
承诺事项和或附带条件（注8）
股东权益
优先股，面额$0.01，授权股数为5,000,000股，发行且流通股数为截至2024年6月30日和2023年12月31日之184,668,188股和181,364,180股。0.0001 每股面值， 10,000 shares授权于2024年9月30日和2023年12月31日; 没有 于2024年9月30日及2023年12月31日期间已发行并流通的股份			—						—
0.010.0001HEICO股票由不可撤销信托持有。1,000,000 截至2024年9月30日和2023年12月31日，已核准的A类股份为 47,618 于2023年12月31日已发行股份及 40,006 2024年9月30日股份流通数量； 45,542 于2023年12月31日已发行股份及 41,502 截至2023年12月31日的流通股份为 1,000,000 2024年9月30日和2023年12月31日授权的B类股份； 11,428 于2023年12月31日已发行股份及 8,287 截至2024年9月30日持有的股份； 11,884 于2023年12月31日已发行股份及 8,744 截至2023年12月31日，流通股票数量为			6						6
库藏股股数，成本法； 10,753 和 7,180 股份截至2024年9月30日和2023年12月31日，分别			(136,275)						(71,103)
资本公积额额外增资			264,013						230,419
累积其他全面损失			(29)						(4)
保留盈余			135,486						136,881
股东权益总额			263,201						296,199
负债总额及股东权益			$	689,144					$	695,243

随附附注是这些简明综合财务报表的重要组成部分。

1

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Table of Contents

PUBMATIC, INC.及其附属公司

综合损益简明合并报表

(以千为单位，除每股数据外)

(Unaudited)

			截至9月30日三个月结束时，												截至9月30日九个月结束时，
			2024						2023						2024						2023
营收			$	71,786					$	63,677					$	205,754					$	182,414
营业成本			25,508						26,091						76,092						75,021
毛利润			46,278						37,586						129,662						107,393
营业费用：
科技和研发			8,813						6,634						25,432						19,881
销售和市场营销			23,696						19,513						71,606						62,450
总务及行政(1)			15,134						12,010						43,499						43,439
总营业费用			47,643						38,157						140,537						125,770
营业亏损			(1,365)						(571)						(10,875)						(18,377)
利息收入			1,969						2,246						6,873						6,313
其他收入（费用），净额			(930)						210						3,356						(476)
所得（亏损）税前收入			(326)						1,885						(646)						(12,540)
所得税赋（减）益			586						111						749						(2,719)
净利润（亏损）			$	(912)					$	1,774					$	(1,395)					$	(9,821)
A类股和B类股的基本每股净利润（损失）			$	(0.02)					$	0.03					$	(0.03)					$	(0.19)
A类股和B类股的稀释每股净利润（损失）			$	(0.02)					$	0.03					$	(0.03)					$	(0.19)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
基本			49,056						51,638						49,623						52,132
Diluted			49,056						55,979						49,623						52,132

(1)截至2023年9月30日的九个月的金额中包括一个坏账准备：$5.7 百万与一位申请第11章破产的需求方平台（“DSP”）买家有关。

附注是基本报表的一部分。

2

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目录

PUBMATIC，INC.及其附属公司

基本报表综合损益表

（以千计）

(未经审计)

			截至9月30日的三个月												截至9月30日的九个月
			2024						2023						2024						2023
净收益（亏损）			$	(912)					$	1,774					$	(1,395)					$	(9,821)
其他综合收益（亏损）：
有价证券的未实现收益（亏损），扣除税款			85						20						56						(3)
外币折算调整的净变动			(81)						—						(81)						—
综合收益（亏损）			$	(908)					$	1,794					$	(1,420)					$	(9,824)

附注是基本报表的一部分。

3

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目录

PUBMATIC，INC.及其附属公司

股东权益的简明合并报表

（以千计）

(未经审计)

			普通股												财政 股票						额外 实收资本						累积其他 综合损失						Retained 收益						总计 股东权益
			股票						金额
截至2023年12月31日的余额			50,246						$	6					$	(71,103)					$	230,419					$	(4)					$	136,881					$	296,199
股票补偿			—						—						—						9,821						—						—						9,821
期权的行使			298						—						—						939						—						—						939
股票回购			(895)						—						(15,754)						—						—						—						(15,754)
与限制性股票单位（RSU）归属相关的普通股发行			230						—						—						—						—						—						—
其他综合损失			—						—						—						—						(21)						—						(21)
净损失			—						—						—						—						—						(2,454)						(2,454)
截至2024年3月31日的余额			49,879						6						(86,857)						241,179						(25)						134,427						288,730
股票基础的补偿			—						—						—						10,490						—						—						10,490
期权的行使			94						—						—						335						—						—						335
股份回购			(883)						—						(20,240)						—						—						—						(20,240)
Issuance of common stock related to employee stock purchase plan			102						—						—						1,451						—						—						1,451
与限制性股票单位（RSU）归属相关的普通股发行			394						—						—						—						—						—						—
其他全面损失			—						—						—						—						(8)						—						(8)
净利润			—						—						—						—						—						1,971						1,971
截至2024年6月30日的余额			49,586						6						(107,097)						253,455						(33)						136,398						282,729
基于股票的补偿			—						—						—						10,254						—						—						10,254
行使期权			143						—						—						304						—						—						304
股份回购			(1,795)						—						(29,178)						—						—						—						(29,178)
与RSU归属相关的普通股发行			359						—						—						—						—						—						—
其他全面收益			—						—						—						—						4						—						4
净亏损			—						—						—						—						—						(912)						(912)
截至2024年9月30日的余额			48,293						$	6					$	(136,275)					$	264,013					$	(29)					$	135,486					$	263,201

附注是这些简明综合财务报表的一部分。

4

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目录

			Common Stock												Treasury Stock						Additional Paid-In Capital						Accumulated Other Comprehensive Income (Loss)						Retained Earnings						Total Stockholders’ Equity
			Shares						Amount
Balance as of December 31, 2022			52,705						$	6					$	(11,486)					$	195,677					$	(9)					$	128,000					$	312,188
Stock-based compensation			—						—						—						7,606						—						—						7,606
Exercise of stock options			109						—						—						314						—						—						314
Repurchase of shares			(587)						—						(7,898)						—						—						—						(7,898)
Issuance of common stock related to RSU vesting			96						—						—						—						—						—						—
Other comprehensive income			—						—						—						—						17						—						17
Net loss			—						—						—						—						—						(5,871)						(5,871)
Balance as of March 31, 2023			52,323						6						(19,384)						203,597						8						122,129						306,356
Stock-based compensation			—						—						—						7,924						—						—						7,924
Exercise of stock options			281						—						—						623						—						—						623
Repurchase of shares			(999)						—						(15,582)						—						—						—						(15,582)
Issuance of common stock related to employee stock purchase plan			65						—						—						971						—						—						971
Issuance of common stock related to RSU vesting			272						—						—						—						—						—						—
Other comprehensive loss			—						—						—						—						(40)						—						(40)
Net loss			—						—						—						—						—						(5,724)						(5,724)
Balance as of June 30, 2023			51,942						6						(34,966)						213,115						(32)						116,405						294,528
Stock-based compensation			—						—						—						7,817						—						—						7,817
Exercise of stock options			78						—						—						273						—						—						273
Repurchase of shares			(1,062)						—						(15,838)						—						—						—						(15,838)
Issuance of common stock related to RSU vesting			250						—						—						—						—						—						—
Other comprehensive income			—						—						—						—						20						—						20
Net income			—						—						—						—						—						1,774						1,774
Balance as of September 30, 2023			51,208						$	6					$	(50,804)					$	221,205					$	(12)					$	118,179					$	288,574

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents

PUBMATIC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

			Nine Months Ended September 30,
			2024						2023
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss			$	(1,395)					$	(9,821)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			33,931						33,731
Stock-based compensation			28,267						21,525
Provision for doubtful accounts			—						5,675
Deferred income taxes			(10,831)						(14,185)
Accretion of discount on marketable securities			(3,552)						(3,061)
Non-cash operating lease expense			5,098						4,605
Other			(78)						3
Changes in operating assets and liabilities:
Accounts receivable			(1,322)						8,367
Prepaid expenses and other assets			(1,554)						3,501
Accounts payable			8,841						4,141
Accrued liabilities			2,259						3,214
Operating lease liabilities			(4,741)						(4,282)
Other liabilities, non-current			454						(966)
Net cash provided by operating activities			55,377						52,447
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(13,268)						(5,424)
Capitalized software development costs			(16,068)						(13,725)
Purchases of marketable securities			(117,977)						(76,932)
Proceeds from sales of marketable securities			—						18,873
Proceeds from maturities of marketable securities			156,958						69,500
Net cash provided by (used in) investing activities			9,645						(7,708)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of business combination indemnification claims holdback			(2,148)						—
Proceeds from issuance of common stock for employee stock purchase plan			1,451						971
Proceeds from exercise of stock options			1,578						1,210
Principal payments on finance lease obligations			(98)						(93)
Payments to acquire treasury stock			(65,400)						(41,479)
Net cash used in financing activities			(64,617)						(39,391)
NET INCREASE IN CASH AND CASH EQUIVALENTS			405						5,348
CASH AND CASH EQUIVALENTS - Beginning of period			78,509						92,382
CASH AND CASH EQUIVALENTS - End of period			$	78,914					$	97,730
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid			$	10,332					$	11,518
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Stock-based compensation capitalized as internal-use software costs			$	2,298					$	1,822
Property and equipment included in accounts payable and accrued liabilities			$	4,270					$	1,229
Capitalized software costs included in accounts payable and accrued liabilities			$	2,530					$	2,287
Business combination purchase consideration - indemnification claims holdback			$	—					$	2,148

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PUBMATIC, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Organization and Description of Business

PubMatic, Inc. (together with its subsidiaries, the “Company” or “PubMatic”) was founded in 2006. The Company has offices worldwide. The Company provides a specialized cloud infrastructure platform that enables real-time programmatic advertising transactions. The purpose-built technology and infrastructure provides superior outcomes for both publishers and advertisers leveraging an efficient design, machine learning, and data processing capabilities, with customer alignment and global omnichannel reach.

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

Fiscal Year

The Company’s fiscal year ends on December 31, and its fiscal quarters end on March 31, June 30, September 30, and December 31. References to fiscal year 2024, for example, refer to the fiscal year ending December 31, 2024.

Unaudited Interim Condensed Consolidated Financial Information

The unaudited condensed consolidated financial statements include the accounts of PubMatic, Inc. and its wholly owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2024 or for any other interim period or for any other future year. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on February 28, 2024 (the “Annual Report”).

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP. The accompanying condensed consolidated financial statements include the accounts of PubMatic, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates and assumptions. Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after September 30, 2024 may result in actual outcomes that differ from those contemplated by the Company’s assumptions and estimates.

Concentration of Revenue and Accounts Receivable

The Company defines its revenue concentration based on revenue recognized from individual publishers. For the three months ended September 30, 2024 and 2023, no publisher represented more than 10% of the Company’s revenue. For the nine months ended September 30, 2024 and 2023, no publisher represented more than 10% of the Company’s revenue. As of September 30, 2024, two buyers accounted for 41% and 12%, respectively, of accounts receivable. As of December 31, 2023, three buyers accounted for 30%, 21%, and 14%, respectively, of accounts receivable.

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Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded at the invoiced amount, are unsecured, and do not bear interest. The allowance for credit losses is based on the best estimate of the amount of probable credit losses in existing accounts receivable. The allowance for credit losses is determined based on historical collection experience and the review in each period of the status of the then outstanding accounts receivable, while taking into consideration current customer information, collection history, and other relevant data. Account balances are written off against the allowance when the Company believes it is probable the receivable will not be recovered.

The following table presents the changes in the allowance for credit losses (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Allowance for credit losses, beginning balance			$	933					$	14,845					$	770					$	1,765
Increase in provision for expected credit losses			—						—						—						14,547
Write-offs			—						—						163						(1,467)
Allowance for credit losses, ending balance			$	933					$	14,845					$	933					$	14,845

During the nine months ended September 30, 2023, the provision for expected credit losses associated with accounts receivable increased by $14.5 million relating to uncollectible receivables for a DSP buyer of the Company’s platform that filed for Chapter 11 bankruptcy on June 30, 2023. Of the total uncollectible receivables from the DSP buyer of $14.5 million, $8.8 million was subject to chargeback to publishers of the Company and recorded as contra payable to publishers related to expected recoveries. The result was $5.7 million of bad debt expense for the nine months ended September 30, 2023.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 requires additional disclosures for segment reporting, including disclosure of the title and position of the Chief Operating Decision Maker and requires a public entity that has a single reportable segment to provide all the disclosures required by the amendments in ASU 2023-07, and all existing segment disclosures in Topic 280. ASU 2023-07 is effective for fiscal periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company plans to adopt ASU 2023-07 effective for the annual report on Form 10-K for the year ended December 31, 2024 and subsequent interim periods. Since ASU 2023-07 addresses only disclosures, the adoption of ASU 2023-07 is not expected to have a significant impact on the Company’s consolidated financial statements.

In December 2023, FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

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Note 3 – Fair Value Measurements

The following tables set forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy (in thousands):

			September 30, 2024
			Level 1						Level 2						Level 3						Total
Financial Assets
Money market funds			$	38,797					$	—					$	—					$	38,797
Certificates of deposit			—						11,241						—						11,241
Cash equivalents			38,797						11,241						—						50,038
Commercial paper			—						41,520						—						41,520
U.S. Treasury and government debt securities			—						19,943						—						19,943
Marketable securities			—						61,463						—						61,463
Total financial assets			$	38,797					$	72,704					$	—					$	111,501
			December 31, 2023
			Level 1						Level 2						Level 3						Total
Financial Assets
Money market funds			$	42,126					$	—					$	—					$	42,126
Certificates of deposit			—						12,528						—						12,528
Cash equivalents			42,126						12,528						—						54,654
Commercial paper			—						50,962						—						50,962
Agency debt securities			—						2,995						—						2,995
U.S. Treasury and government debt securities			—						42,878						—						42,878
Marketable securities			—						96,835						—						96,835
Total financial assets			$	42,126					$	109,363					$	—					$	151,489

The Company’s financial assets consist of Level 1 and 2 assets. The Company had no Level 3 assets or liabilities for the periods presented. The Company classifies its cash equivalents and marketable securities within Level 1 or Level 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. The Company’s fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers. The valuation techniques used to measure the fair value of the Company’s marketable securities were derived from non-binding market consensus prices that are corroborated by observable market data and quoted market prices for similar instruments.

Note 4 – Balance Sheet Components

Marketable Securities

The following tables summarize the Company’s marketable securities by significant investment categories (in thousands):

			September 30, 2024
			Amortized Cost						Unrealized Gain						Unrealized Loss						Fair Value
Commercial paper			$	41,474					$	46					$	—					$	41,520
U.S. Treasury and government debt securities			19,937						6						—						19,943
Total			$	61,411					$	52					$	—					$	61,463
			December 31, 2023
			Amortized Cost						Unrealized Gain						Unrealized Loss						Fair Value
Commercial paper			$	50,975					$	3					$	(16)					$	50,962
Agency debt securities			2,997						—						(2)						2,995
U.S. Treasury and government debt securities			42,867						12						(1)						42,878
Total			$	96,839					$	15					$	(19)					$	96,835

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The remaining contractual maturity of all marketable securities was within one year as of September 30, 2024 and December 31, 2023. Realized gains and losses were not material for the nine months ended September 30, 2024 and 2023. As of September 30, 2024 and 2023, there were no securities that were in an unrealized loss position for more than twelve months.

Property, Equipment and Software, Net

Property, equipment and software, net consisted of the following (in thousands):

			September 30, 2024						December 31, 2023
Internal-use software			$	74,186					$	56,257
Network hardware, computer equipment and software			153,389						137,709
Leasehold improvements			5,526						5,173
Furniture and fixtures			2,339						2,304
Property, equipment and software, gross			235,440						201,443
Less: accumulated depreciation and amortization			(172,193)						(140,714)
Total property, equipment and software, net			$	63,247					$	60,729

Depreciation and amortization expense related to property, equipment, and software (excluding amortization of internal-use software) was $6.1 million and $7.2 million for the three months ended September 30, 2024 and 2023, respectively, and $19.1 million and $21.8 million for the nine months ended September 30, 2024 and 2023, respectively.

The Company capitalized $6.1 million and $5.0 million in software development costs during the three months ended September 30, 2024 and 2023, respectively, and $17.9 million and $15.9 million for the nine months ended September 30, 2024 and 2023, respectively. Amortization expense of internal-use software was $4.9 million and $3.8 million during the three months ended September 30, 2024 and 2023, respectively, and $13.7 million and $9.9 million for the nine months ended September 30, 2024 and 2023, respectively. These costs are included within cost of revenue in the condensed consolidated statements of operations.

The Company did not recognize any impairment charges on its long-lived assets during the nine months ended September 30, 2024 and 2023, respectively.

Accounts Payable

Accounts payable consisted of the following (in thousands):

			September 30, 2024						December 31, 2023
Payable to publishers			$	337,858					$	335,061
Trade and other payables			22,838						12,612
Total accounts payable			$	360,696					$	347,673

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

			September 30, 2024						December 31, 2023
Accrued compensation			$	19,140					$	18,784
Accrued and other current liabilities			6,557						6,900
Total accrued liabilities			$	25,697					$	25,684

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Note 5 – Senior Secured Credit Facilities Agreement

On October 17, 2022, the Company entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with the several lenders parties thereto (the “Lenders”), and Silicon Valley Bank (“SVB”), as administrative agent, lead arranger, issuing lender, and swingline lender. The Credit Agreement matures on October 17, 2027.

The Credit Agreement provides a revolving credit facility in an aggregate principal amount of $110.0 million (“the Revolving Credit Facility”), including a $25.0 million letter of credit sub-facility and a $25.0 million swingline sub-facility. The Company’s obligations under the Revolving Credit Facility and the letter of credit sub-facility (described in Note 8) with SVB are secured by substantially all of its assets excluding its intellectual property. The Company may, subject to certain customary conditions, on one or more occasions increase commitments under the Revolving Credit Facility in an amount not to exceed $90.0 million in the aggregate (the “Incremental Facility”). Each Lender will have discretion to determine whether it will participate in any Incremental Facility.

Borrowings under the Revolving Credit Facility will accrue interest at rates equal, at the Company’s election, to (i) the applicable secured overnight financing rate (“SOFR”), plus the applicable margin for such loans, or (ii) the alternate base rate (“ABR”), which is defined as the highest of (a) the prime rate in effect from time to time, (b) the federal funds effective rate in effect from time to time plus 0.50%, and (c) the adjusted term SOFR for a one (1) month tenor in effect from time to time plus 1.00%, plus the applicable margin for such loans. The applicable margin for borrowings bearing interest on the SOFR ranges from 2.00% to 2.75%, and the applicable margin for borrowings bearing interest based on the ABR ranges from 1.00% to 1.75%. As of September 30, 2024, the applicable interest rate under the revolving credit facility was 9.00%. The Company will pay a quarterly commitment fee during the term of the Credit Agreement for the non-use of available funds ranging from 0.25% to 0.35%. In addition, the Credit Agreement provides a mechanism to determine a successor reference rate to the applicable reference rate if, among other things, the applicable reference rate becomes unavailable or is generally replaced as a benchmark interest rate.

The Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants. Negative covenants include, among others, limitations on incurrence of indebtedness, liens, disposition of property and investments by the Company and its subsidiaries. In addition, the Credit Agreement requires the Company to maintain certain interest coverage, leverage and senior leverage ratios. To date, the Company is in compliance with the affirmative and negative covenants.

The Credit Agreement contains customary events of default. Upon the occurrence and during the continuance of an event of default, the Lenders may declare the outstanding advances and all other obligations under the Credit Agreement immediately due and payable.

The Company may use amounts borrowed under the Credit Agreement for general corporate purposes or working capital financing. The Company may borrow additional amounts under the Credit Agreement from time to time as opportunities and needs arise. As of September 30, 2024, the Company has not drawn down on the credit facility.

Following the SVB closure by the California Department of Financial Protection and Innovation on March 10, 2023, and its subsequent receivership by the Federal Deposit Insurance Corporation (“FDIC”), the FDIC announced that all of SVB’s deposits and substantially all of its assets had been transferred to a newly created, full-service FDIC-operated bridge bank, Silicon Valley Bridge Bank, N.A. (“SVBB”). On March 27, 2023, First Citizens Bank & Trust Company (“First Citizens”) acquired substantially all of the loans and certain other assets of the former SVB, and assumed all customer deposits and certain other liabilities of the former SVB. As such, First Citizen assumed SVB’s obligations under the Credit Agreement.

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Note 6 – Leases

Operating lease cost is recognized on a straight-line basis over the lease term. Finance lease cost is recognized as a combination of the amortization expense for the right-of-use assets and interest expense for the outstanding lease liabilities, and results in a front-loaded expense pattern over the lease term. Short-term and variable lease costs are not material to the Company’s condensed consolidated financial statements.

In July 2024, the Company entered into an agreement to continue to lease approximately 30,000 square feet of office space located in New York City, New York (“July 2024 Lease”), which was previously subleased. The original sublease agreement for the space was set to expire in January 2025. The July 2024 Lease extends the lease term through January 2036 and grants the Company the right to use an additional floor in the building, also comprised of approximately 30,000 square feet, which has yet to commence. The Company will use the aggregate space to support its general and administrative functions, sales and marketing, technology and development, engineering and customer support. The Company has the option to exercise an early termination at either of two different points during the lease term, neither of which has been reflected in the lease term. The Company has provided an irrevocable letter of credit in the amount of approximately $1.5 million, pursuant to the terms of the July 2024 Lease.

During the nine months ended September 30, 2024, operating right-of-use assets obtained in exchange for new lease obligations was $18.3 million.

The components of lease cost were as follows (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Operating lease cost			$	2,115					$	1,882					$	6,162					$	5,550
Finance lease cost			47						47						140						142
Total lease cost			$	2,162					$	1,929					$	6,302					$	5,692

As of September 30, 2024, a weighted average discount rate of 4.38% and 2.24% has been applied to the remaining operating and finance lease payments, respectively, to calculate the lease liabilities included within the condensed consolidated balance sheets. The weighted average remaining lease term of operating and finance leases is 6.7 and 3.5 years, respectively, as of September 30, 2024.

As of September 30, 2024, the maturities of lease liabilities under operating and finance leases were as follows (in thousands):

			Operating Leases						Finance Leases						Total
Remainder of 2024			$	2,032					$	36					$	2,068
2025			6,479						149						6,628
2026			8,449						153						8,602
2027			7,228						158						7,386
2028			3,798						41						3,839
Thereafter			15,153						—						15,153
Total minimum lease payments			43,139						537						43,676
Less: imputed interest			(7,785)						(20)						(7,805)
Total present value of lease liabilities			$	35,354					$	517					$	35,871

As of September 30, 2024, the Company has additional operating lease liabilities of $17.2 million from the July 2024 Lease that have not yet commenced, which are not reflected in the condensed consolidated balance sheets or the tables above.

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Note 7 - Acquisition-related Intangible Assets, Net

Acquisition-related Intangible Assets, Net

Acquisition-related intangible assets, net consisted of the following (in thousands):

			September 30, 2024
			Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Developed technology			$	7,900					$	3,221					$	4,679
Total acquisition-related intangible assets			$	7,900					$	3,221					$	4,679
			December 31, 2023
			Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Developed technology			$	7,900					$	2,036					$	5,864
Customer relationships			1,000						1,000						—
Total acquisition-related intangible assets			$	8,900					$	3,036					$	5,864

The weighted average remaining useful life of developed technology was 3 years as of September 30, 2024. Amortization expense related to acquisition-related intangibles was $0.4 million for the three months ended September 30, 2024 and 2023, and $1.2 million and $2.0 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, estimated future amortization expense for acquisition-related intangible assets was as follows (in thousands):

Remainder of 2024						$	395
2025						1,580
2026						1,580
2027						1,124
Total estimated future amortization expense for acquisition-related intangible assets						$	4,679

Note 8 – Commitments and Contingencies

Purchase Obligations

The Company’s purchase obligations primarily relate to minimum contractual payments due to data center providers. During the nine months ended September 30, 2024, there were no material changes to the Company’s non-cancelable purchase obligations disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Letters of Credit

Pursuant to the July 2024 Lease, the Company has provided an irrevocable letter of credit in the amount of approximately $1.5 million, and concurrently terminated the previous irrevocable line of credit related to the sublease of the premises of $0.5 million. Therefore, as of September 30, 2024, the Company had two irrevocable letters of credit outstanding related to non-cancelable facilities leases in the amounts of $3.5 million and $1.5 million, with annual automatic renewal and final expiration dates in July 2028 and April 2036, respectively. The letter of credit of $3.5 million was also outstanding as of December 31, 2023.

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Legal Matters

From time to time, the Company is or may be involved in various claims and other legal matters arising in the normal course of business. The Company records an accrual for a liability relating to claims and other legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Any such accruals are reviewed at least quarterly and adjusted for the impacts of negotiations, rulings, settlements, and other information or events pertaining to a particular matter, or on the advice of legal counsel. To date, the Company has not incurred a material loss, or a material loss in excess of a recorded accrual, with respect to any claims and other legal matters arising in the normal course of business. However, the outcomes of claims and other legal matters are inherently unpredictable and subject to significant uncertainties. If the Company subsequently concludes that there is a reasonable possibility that a loss exceeding amounts already recognized may be incurred, and the amount of such additional loss would be material, the Company will either disclose the estimated additional loss or state that such an estimate cannot be made.

Indemnification

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves future claims that may be made against the Company but have not yet been made. To date, the Company has not paid any material claims or been required to defend any actions related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. In addition, the Company has indemnification agreements with certain of its directors and executive officers that require it, among other things, to indemnify them against certain liabilities that may arise due to their status or service as directors or officers of the Company. The terms of such obligations may vary.

Note 9 – Stockholders’ Equity and Equity Incentive Plans

Share Repurchases

In February 2023, the Company’s board of directors authorized the Company to repurchase up to $75 million of its Class A common stock (“2023 Repurchase Program”). In February 2024, the Company’s board of directors authorized the Company to repurchase up to an additional $100 million of its Class A common stock (“2024 Repurchase Program”) in addition to the $75 million previously authorized under the 2023 Repurchase Program. As of September 30, 2024, $50.9 million remains available for repurchases. Shares are repurchased in a manner deemed in the best interest of the Company and its stockholders, dependent upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices and other considerations.

During the three and nine months ended September 30, 2024, the Company repurchased 1,794,717 and 3,572,563 aggregate shares of Class A common stock for $29.0 million and $64.8 million, respectively.

Repurchases are executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, in accordance with Rule 10b-18 and/or Rule 10b5-1 of the Exchange Act. The 2023 Repurchase Program is scheduled to terminate on December 31, 2024, while the 2024 Repurchase Program is scheduled to terminate on December 31, 2025.

Equity Incentive Plans

The Company maintains the 2020 Equity Incentive Plan (“2020 Plan”), pursuant to which the Company may grant stock options, restricted stock awards, stock appreciation rights, restricted stock units (“RSUs”), deferred stock units (“DSUs”), performance awards, and stock bonus awards. As of September 30, 2024, the Company has reserved 5,529,727 shares of Class A common stock for the issuance of awards under the 2020 Plan. These available shares will increase automatically on January 1 for each of the first ten calendar years during the term of the 2020 Plan by the number of shares equal to the lesser of five percent (5%) of the aggregate number of outstanding shares of all classes of the Company’s common stock outstanding as of the immediately preceding December 31, or a number as may be determined by the Company’s board of directors or compensation committee. No new awards were issued under the Company’s prior 2006 Plan or 2017 Plan (“Prior Plans”) after the effective date of the 2020 Plan. To the extent outstanding awards under the 2006 Plan and the 2017 Plan are forfeited, expire unexercised, or would otherwise have been returned to the share reserve under the Prior Plans, the shares of Class B common stock subject to such awards instead will be available for future issuance as Class A common stock under the 2020 Plan.

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Stock Options

The following table summarizes stock option activity and related information under the Company’s equity incentive plans:

			Stock Options
			Number of Shares Underlying Outstanding Options (in thousands)						Weighted-Average Exercise Price						Weighted Average Remaining Contractual Term (Years)						Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2023			7,079						$	9.02					5.78						$	67,418
Options granted			1,544						15.46
Options exercised			(535)						2.95
Options canceled			(52)						1.16
Options expired			(33)						32.94
Outstanding as of September 30, 2024			8,003						$	10.62					5.99						$	52,151
Vested and exercisable as of September 30, 2024			5,774						$	8.39					4.90						$	52,003

As of September 30, 2024, unrecognized stock-based compensation of $19.8 million related to unvested stock options will be recognized on a straight-line basis over a weighted average period of 2.64 years.

Restricted Stock Units

The following table summarizes RSU activity and related information under the Company’s 2020 Plan:

			RSUs
			Number of Shares (in thousands)						Weighted-Average Grant Date Fair Value per Share
Unvested as of December 31, 2023			2,934						$	19.49
Granted			2,330						16.55
Vested			(983)						19.46
Canceled or forfeited			(288)						18.00
Unvested as of September 30, 2024			3,993						$	17.88

As of September 30, 2024, unrecognized stock-based compensation of $63.4 million related to unvested RSUs will be recognized on a straight-line basis over a weighted average period of 2.63 years.

2020 Employee Stock Purchase Plan

In November 2020, the Company’s board of directors adopted, and its stockholders approved, the 2020 Employee Stock Purchase Plan (“ESPP”).

The aggregate number of shares reserved for issuance under the ESPP increases automatically on January 1st of each of the first ten calendar years during the term of the ESPP by the number of shares equal to the lesser of (a) 1% of the total outstanding shares of all classes of the Company’s common stock as of the immediately preceding December 31, and (b) such number of shares of common stock as determined by the Company’s board of directors. The aggregate number of shares issued over the term of the ESPP may not exceed 7,500,000 shares of Class A common stock. As of September 30, 2024, the Company had reserved 1,847,439 shares of its Class A common stock for issuance under the ESPP.

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Under the ESPP, Class A common stock will be purchased for the accounts of employees participating in the ESPP on each purchase date at a price per share equal to 85% of the lesser of: (a) the fair market value on the offering date or (b) the fair market value on the purchase date. The ESPP provides for, at maximum, 27 month offering periods and each offering period may consist of one or more six-month purchase periods, whereby the latest offering period commenced on June 1, 2024, and the offering periods thereafter consist of two six-month purchase periods ending May 31, 2025. In August 2024, the compensation committee of the Company’s board of directors approved an overlapping twelve-month offering period consisting of two six-month purchase periods to commence on December 1, 2024. As of September 30, 2024, $0.7 million has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions and is included in accrued liabilities. For the nine months ended September 30, 2024 and 2023, 102,145 and 65,092 shares of our Class A common stock were purchased under the ESPP, respectively.

As of September 30, 2024, unrecognized stock-based compensation expense related to the ESPP was $0.8 million, which is expected to be recognized over a weighted-average period of 0.67 years.

Stock-Based Compensation

Total stock-based compensation expense recognized in the condensed consolidated statements of operations was as follows (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Cost of revenue			$	486					$	387					$	1,417					$	1,089
Technology and development			1,603						1,112						4,688						3,209
Sales and marketing			3,450						2,550						10,160						7,873
General and administrative			3,918						3,151						12,002						9,354
Total stock-based compensation expense			9,457						7,200						28,267						21,525
Tax benefit from stock-based compensation			(1,978)						(1,397)						(5,863)						(4,105)
Total stock-based compensation expense, net of tax effect			$	7,479					$	5,803					$	22,404					$	17,420

Note 10 – Net Income (Loss) Per Share

The Company has two classes of common stock, Class A and Class B. Basic and diluted earnings per share (“EPS”) attributable to common stockholders for Class A and Class B common stock were the same because they were entitled to the same liquidation and dividend rights.

The following table sets forth the computation of the Company’s basic and diluted net income (loss) per share (in thousands, except per share data):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Numerator:
Net income (loss)			$	(912)					$	1,774					$	(1,395)					$	(9,821)
Denominator:
Weighted average shares outstanding – basic			49,056						51,638						49,623						52,132
Options to purchase common stock			—						4,000						—						—
Restricted stock			—						222						—						—
Employee stock purchase plan shares			—						119						—						—
Weighted average shares outstanding – diluted			49,056						55,979						49,623						52,132
Net income (loss) per share – diluted			$	(0.02)					$	0.03					$	(0.03)					$	(0.19)

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The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Options to purchase common stock			3,771						2,269						3,224						2,134
Unvested restricted stock units			177						669						72						1,337
ESPP			—						—						—						50
Total common stock equivalents excluded from net loss per share – diluted			3,948						2,938						3,296						3,521

Note 11 – Income Taxes

The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate (“AETR”) for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The Company has determined that since small changes in estimated “ordinary” income would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the fiscal nine months ended September 30, 2024. Therefore, the discrete effective tax rate method has been used to calculate taxes for the fiscal nine months ended September 30, 2024.

The Company recorded a provision for income taxes of $0.6 million and $0.1 million for the three months ended September 30, 2024 and 2023, respectively, and a provision for income taxes of $0.7 million and income tax benefit of $2.7 million for the nine months ended September 30, 2024 and 2023, respectively.

The effective income tax rate was (180)% and 6% for the three months ended September 30, 2024 and 2023, respectively, and (116)% and 22% for the nine months ended September 30, 2024 and 2023, respectively. The provision for income taxes for the nine months ended September 30, 2024 is related to tax benefits from foreign-derived intangible income, research tax credits, deductions for equity awards, partially offset by nondeductible stock-based compensation and Section 162(m) limitation on the tax deductibility of officers’ compensation.

Realization of the Company’s deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance, the Company considers its historical, as well as future projected, taxable income along with other objectively verifiable evidence. Objectively verifiable evidence includes the Company’s realization of tax attributes, assessment of tax credits, and utilization of net operating loss carryforwards during the year.

Note 12 – Segment Information

The following table presents total revenue by geographic area based on the publisher’s billing address (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
United States			$	43,613					$	38,077					$	124,004					$	108,608
EMEA			19,935						19,686						60,413						57,345
APAC			6,883						4,655						17,684						13,117
Rest of the world			1,355						1,259						3,653						3,344
Total			$	71,786					$	63,677					$	205,754					$	182,414

The following table presents long-lived assets, net, which consist primarily of property and equipment and operating lease right-of-use assets, by geographic area (in thousands):

			September 30, 2024						December 31, 2023
United States			$	81,646					$	68,299
Rest of the world			16,041						13,532
Total			$	97,687					$	81,831

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Note 13 – 401(k) Plan

The Company has a 401(k) Savings Plan (the “401(k) Plan”) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, participating employees may elect to contribute up to 100% of their eligible compensation, subject to certain limitations. The 401(k) Plan provides for a discretionary employer matching contribution. The Company made $1.2 million and $1.0 million in matching contributions to the 401(k) Plan for the nine months ended September 30, 2024 and 2023, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally are identified by the words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” and similar expressions. Examples of forward-looking statements include, but are not limited to, statements we make regarding our ability to maintain our growth and profitability, our ability to attract and retain publishers, and our expectations concerning the advertising industry.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”).

Overview

We are an independent technology company seeking to maximize customer value by delivering digital advertising’s supply chain of the future.

Our technology platform empowers the world’s leading digital content creators (which we refer to as “publishers”) across the open internet to maximize monetization of their advertising inventory. Our platform also provides control and transparency to buyers, which includes advertisers, agencies, agency trading desks, and demand side platforms (“DSPs”), (which we collectively refer to as “buyers”) and enables both publishers and buyers to drive better business outcomes. Our infrastructure-driven approach allows for the efficient processing and utilization of data in real time. By delivering scalable and flexible programmatic innovation, we believe we improve outcomes for our customers while championing a vibrant and transparent digital advertising supply chain.

We continue to focus on the strengths that we believe provide us with long-term competitive advantages. These strengths include our global, omnichannel reach which targets a diverse set of publishers touching many ad formats and digital device types, including mobile app, mobile web, desktop, display, video, over-the-top video/connected TV (“OTT/CTV”), and rich media. Additionally, as an independent infrastructure provider prioritizing transparency, we can be more closely aligned with both publishers and buyers which has enabled us to build direct relationships with publishers, advertisers, agencies, and DSPs and create bespoke products that meet our customers’ needs. We have also maintained a demonstrated track record of stability and agility to address these market conditions and provide superior outcomes for both publishers and buyers. Finally, we have designed our technology to efficiently process real-time advertising transactions while leveraging data to optimize outcomes for publishers and buyers. We own and operate our software and hardware infrastructure globally, which saves significant infrastructure expenditures as compared to public cloud alternatives.

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Industry Trends and Macroeconomic Factors

The digital advertising ecosystem continues to evolve and adapt at a rapid pace. Some noted trends include the continued growth of digital media across multiple platforms, a continued increase in the number of ad impressions processed and analyzed in real-time by each participant in the digital advertising ecosystem, and a desire for transparency and control throughout the supply chain from both the buyers and publishers. Additionally, rapidly evolving data and privacy regulations and industry standards continue to impact our business. For example, in July 2024, Google announced it will no longer deprecate its use of third-party cookies in Chrome and instead ask users to opt-in or opt-out of cookies in Chrome, which may impact the industry’s anticipated shift to alternative identity solutions.

Additionally, recent interest rate increases, foreign currency fluctuation and persistent inflation in the U.S. and other markets globally continue to create economic volatility and dislocation in the capital and credit markets in the U.S. and globally. To date, we have not observed material impacts in our business or outlook, but we intend to continue to monitor macroeconomic conditions closely and may determine to take certain financial or operational actions in response to such conditions to the extent our business begins to be adversely impacted.

We believe we are positioned to benefit from tailwinds in the advertising industry, including the rapid proliferation of digital media, the need for purpose-built infrastructure to address the increasing complexity in the digital advertising landscape, and increasing consumer time spent online.

See “Risk Factors” in this report and in our Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion of the risks related to inflation, rising interest rates, foreign currency fluctuations and public health crises on our business.

Business Highlights

The table below summarizes the financial highlights of our business performance:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
						(in thousands)
			Revenue			$	71,786					$	63,677					$	205,754					$	182,414
			Operating loss(2)			$	(1,365)					$	(571)					$	(10,875)					$	(18,377)
			Net income (loss)(2)			$	(912)					$	1,774					$	(1,395)					$	(9,821)
			Adjusted EBITDA(1)(2)			$	18,546					$	18,240					$	54,679					$	36,403
			Net cash provided by operating activities(2)			$	19,139					$	23,845					$	55,377					$	52,447

_______________

(1)For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure, and a reconciliation of Adjusted EBITDA to net income, see “Non-GAAP Financial Measure.”

(2)Amounts for the nine months ended September 30, 2023 include a provision for bad debt of $5.7 million relating to a Demand Side Platform (“DSP”) buyer of our platform that filed for Chapter 11 bankruptcy.

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Our Strategy and Performance

We believe our growth and financial performance are dependent on many factors, including those described below.

Attract New Customers and Expand our Relationship with Existing Customers Globally

We leverage our extensive platform capabilities and the subject matter expertise of our team members to grow revenue from our publishers and increase advertising spending from our buyers. Our sales and marketing team includes customer success pods to enhance customer knowledge and implementation of best practices. Once we onboard a new customer, we seek to expand our relationship with existing publishers by establishing multiple header bidding integrations by leveraging our omnichannel capabilities to maximize our access to publishers’ ad formats and devices, and expanding into the various properties that a publisher may own around the world. We may also up-sell additional products to publisher customers including our header bidding management, identity, and audience solutions. We automate workflow processes whenever feasible to drive predictable and value-added outcomes for our customers and increase productivity of our organization.

Net dollar-based retention rate is an important indicator of publisher satisfaction and usage of our platform, as well as potential revenue for future periods. We calculate our net dollar-based retention rate at the end of each quarter for a cumulative twelve months. We calculate our net dollar-based retention rate by starting with the revenue from publishers in the prior trailing twelve-month period (“Prior Period Revenue”). We then calculate the revenue from these same publishers in the current trailing twelve-month period (“Current Period Revenue”). Current Period Revenue includes any upsells and is net of contraction or attrition, but excludes revenue from new publishers.

Our net dollar-based retention rate equals the Current Period Revenue divided by Prior Period Revenue. Our net dollar-based retention rate was 112% for the trailing twelve months ended September 30, 2024 and 97% for the trailing twelve months ended September 30, 2023. Our revenue growth in the period ended September 30, 2024 and 2023 was primarily attributable to an increase in the number of ad impressions processed from our publishers, upselling additional products, penetration of header bidding for mobile app and digital video, and increased demand from the growth of our buyer relationships primarily through SPO agreements.

Further, we work with DSPs to help them reduce their costs and improve advertiser ROI, which in turn makes us the specialized cloud infrastructure platform of choice for many of our buying partners. We depend upon a limited number of large DSPs for a large percentage of impressions purchased and our business results, including revenues, may be impacted by changes in their pricing strategies, bidding algorithms or go-to market efforts. As buyers increasingly consolidate their spending with fewer larger technology platforms, we seek to bring an increased proportion of their digital ad spending to our platform through direct deals. Supply Path Optimization (“SPO”) continues to be a major growth driver for us as we add new SPO relationships and expand existing ones. We have been investing in SPO technology and partnerships for five years and SPO represented over 50% of total activity for the three months ended September 30, 2024.

Monetization Excellence

We focus on monetizing digital impressions by coordinating over a hundred billion real-time auctions and nearly a trillion bids globally on a daily basis, using our specialized cloud software, machine learning algorithms, and scaled transaction infrastructure. Valuable ad impressions are transparent and data rich, viewable by humans, and verifiable. Each ad impression we auction consists of 631 independent data parameters, which can yield valuable insights if recorded and analyzed properly. This processing of voluminous data for each ad impression must occur in less than half a second as consumers expect a seamless digital ad experience. We continually assess impressions from new and existing publishers through a rigorous validation process. We add or remove impressions from our platform based on an assessment of the projected value of the impressions, which is influenced by the type of publisher and its related consumers, as well as the potential volume of monetizable impressions and ad format types, such as digital video. We continuously create and iterate algorithms that leverage vast datasets flowing through our infrastructure to improve the liquidity in our marketplace. Our ability to drive successful outcomes in the real-time auction process on behalf of our publishers and buyers will affect our operating results.

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Infrastructure Platform Efficiency

We have a track record of expanding the capacity of our infrastructure platform, while maintaining or reducing the corresponding costs related to processing impressions transacted on our platform on a per impression basis. We expect to continue to invest in both software and hardware infrastructure to continue growing the number of valuable ad impressions we process on our platform.

Our recent growth has been driven by a variety of factors including increased access to mobile web (display and video) and mobile app (display and video) impressions and desktop video impressions. Our performance is affected by our ability to maintain and grow our access to valuable ad impressions from current publishers as well as through new relationships with publishers. In September 2024, our platform processed approximately 781 billion ad impressions daily, each in a fraction of a second.

Key Components of Our Results of Operations

Revenue

We generate revenue from publishers who use our platform. We generate revenue primarily through fees charged to our publishers, which are generally a percentage of the value of the advertising impressions that publishers monetize on the platform. We also generate revenues from our other products such as OpenWrap, our header bidding solution, and Connect, our solution that provides additional data and insights to buyers, which are sold separate from or in conjunction with use of our platform. In 2023, we launched Activate, which allows buyers to execute direct deals on our platform with publisher inventory, and Convert, our commerce media solution.

We report revenue on a net basis. This represents gross billings to buyers, net of amounts we pay publishers. We record our accounts receivable at the amount of gross billings to buyers, net of allowances, for the amounts we are responsible to collect, and we record our accounts payable at the net amount payable to publishers. Accordingly, both accounts receivable and accounts payable appear large in relation to revenue, which is reported on a net basis.

Cost of Revenue

Cost of revenue consists of data center co-location costs, depreciation expense related to hardware supporting our platform, amortization expense related to capitalized internal-use software development costs, personnel costs, and allocated facilities costs. Personnel costs include salaries, bonuses, stock-based compensation, and employee benefit costs, and are primarily attributable to our cloud operations group, which maintains our servers, and our client operations group, which is responsible for the integration of new publishers and buyers and providing customer support for existing customers.

Operating Expenses

Technology and Development. Technology and development expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs, allocated facilities costs, and professional services. These expenses include costs incurred in the development, implementation and maintenance of internal-use software, including platform and related infrastructure. We expend technology and development costs as incurred, except to the extent that such costs are associated with internal-use software development that qualifies for capitalization. We expect technology and development expenses to generally increase in absolute dollars in future periods.

Sales and Marketing. Sales and marketing expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs, for our employees engaged in sales, sales support, marketing, business development, and customer relationship functions. Sales and marketing expenses also include expenses related to promotional, advertising and marketing activities, allocated facilities costs, travel, and entertainment primarily related to sales activity and professional services. We expect sales and marketing expenses to increase in absolute dollars in future periods.

General and Administrative. General and administrative expenses consist of personnel costs, including salaries, bonuses, stock-based compensation, and employee benefits costs for our executive, finance, legal, human resources, information technology, and other administrative employees. General and administrative expenses also include outside consulting, legal and accounting services, allocated facilities costs, and travel and entertainment primarily related to inter-office travel and conferences.

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Total Other Income (expense), Net

Total other income (expense), net consists of interest income and other income (expense), net. Interest income is generated by investing excess cash into money market accounts and marketable securities. Other income (expense), net consists primarily of gains and losses from foreign currency exchange transactions.

We believe that investment gains and losses, whether realized from dispositions or unrealized from changes in market prices of equity securities, are generally meaningless in understanding our reported results or evaluating the economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.

Provision for (benefit from) Income Taxes

The provision for (benefit from) income taxes consists primarily of federal, state, and foreign income taxes. Our provision for income taxes or income tax benefit may be significantly affected by changes to our estimates for tax in jurisdictions in which we operate and other estimates utilized in determining the global effective tax rate. Actual results may also differ from our estimates based on changes in economic conditions. Such changes could have a substantial impact on the income tax provision. We reevaluate the judgments surrounding our estimates and make adjustments, as appropriate, each reporting period.

Our effective tax rate differs from the U.S. federal statutory income tax rate due to state taxes, foreign tax rate differences, research tax credits, and stock-based compensation.

Realization of our deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance, we consider our historical, as well as future projected, taxable income along with other objectively verifiable evidence. Objectively verifiable evidence includes our realization of tax attributes, assessment of tax credits, and utilization of net operating loss carryforwards during the year.

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Results of Operations

The following tables set forth our condensed consolidated results of operations data and such data as a percentage of revenue for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)												(in thousands)
Revenue			$	71,786					$	63,677					$	205,754					$	182,414
Cost of revenue(2)			25,508						26,091						76,092						75,021
Gross profit			46,278						37,586						129,662						107,393
Operating expenses(2):
Technology and development			8,813						6,634						25,432						19,881
Sales and marketing			23,696						19,513						71,606						62,450
General and administrative(1)			15,134						12,010						43,499						43,439
Total operating expenses			47,643						38,157						140,537						125,770
Operating loss			(1,365)						(571)						(10,875)						(18,377)
Interest income			1,969						2,246						6,873						6,313
Other income (expense), net			(930)						210						3,356						(476)
Income (loss) before income taxes			(326)						1,885						(646)						(12,540)
Provision for (benefit from) income taxes			586						111						749						(2,719)
Net income (loss)			$	(912)					$	1,774					$	(1,395)					$	(9,821)

_______________

(1)Amounts for the nine months ended September 30, 2023 include a provision for bad debt of $5.7 million relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy.

(2)Amounts include stock-based compensation expense before tax benefit as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)												(in thousands)
Cost of revenue			$	486					$	387					$	1,417					$	1,089
Technology and development			1,603						1,112						4,688						3,209
Sales and marketing			3,450						2,550						10,160						7,873
General and administrative			3,918						3,151						12,002						9,354
Total stock-based compensation expense			$	9,457					$	7,200					$	28,267					$	21,525

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			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(as percentage of revenue)												(as percentage of revenue)
Revenue			100		%				100		%				100		%				100		%
Cost of revenue			36						41						37						41
Gross profit			64						59						63						59
Operating expenses:
Technology and development			12						10						12						11
Sales and marketing			33						31						35						34
General and administrative			21						19						21						24
Total operating expenses			66						60						68						69
Operating loss			(2)						(1)						(5)						(10)
Interest income			3						4						3						3
Other income (expense), net			(1)						—						1						—
Income (loss) before income taxes			—						3						(1)						(7)
Provision for (benefit from) income taxes			1						—						—						(1)
Net income (loss)			(1)		%				3		%				(1)		%				(6)		%

Revenue, Cost of Revenue and Gross Profit

			Three Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Revenue			$	71,786					$	63,677					$	8,109					13		%
Cost of revenue			25,508						26,091						(583)						(2)		%
Gross profit			$	46,278					$	37,586					$	8,692					23		%
Gross profit margin			64		%				59		%
			Nine Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Revenue			$	205,754					$	182,414					$	23,340					13		%
Cost of revenue			76,092						75,021						1,071						1		%
Gross profit			$	129,662					$	107,393					$	22,269					21		%
Gross profit margin			63		%				59		%

Revenue for the three months ended September 30, 2024 increased by $8.1 million, or 13%, compared to the three months ended September 30, 2023. Revenue for the nine months ended September 30, 2024 increased by $23.3 million, or 13%, compared to the nine months ended September 30, 2023. Our revenues were primarily driven by increased impressions processed on our platform, new revenue streams, and growth in customer relationships. In addition,our revenues for the three and nine months ended September 30, 2024 benefited by approximately $4.2 million and $5.3 million, respectively, from incremental political spend in the United States due to the 2024 presidential election. Our business was negatively impacted by bidding methodology changes implemented by one of our buyers in the second half of the second fiscal quarter.

As of September 30, 2024, we served approximately 1,900 publishers and app developers worldwide on our platform, compared to approximately 1,750 publishers and app developers worldwide as of September 30, 2023. For purposes of our publisher count, we aggregate multiple business accounts from separate divisions, segments or subsidiaries into a single “master” publisher based on our assessment of the related nature of the group.

We expect our revenues to be affected by macroeconomic conditions for the remainder of 2024, and will continue to be impacted by the bidding methodology changes implemented by one of our buyers in the near term. The magnitude of these impacts on our future revenues is difficult to predict.

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Cost of revenue decreased $0.6 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to a $1.1 million decrease in data center costs offset by a $0.4 million increase in personnel costs as headcount increased. Overall, our cost of revenue per impression processed for the three months ended September 30, 2024 decreased by approximately 22% compared to the three months ended September 30, 2023.

Cost of revenue increased $1.1 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to a $0.9 million increase in depreciation of data center equipment and amortization of internal-use software, and a $1.5 million increase in personnel costs, offset by a $1.6 million decrease in data center costs. Overall, our cost of revenue per impression processed for the nine months ended September 30, 2024 decreased by approximately 19% compared to the nine months ended September 30, 2023.

Our gross margin of 64% for the three months ended September 30, 2024 increased compared to 59% for the three months ended September 30, 2023, and our gross margin of 63% for the nine months ended September 30, 2024 increased compared to 59% for the nine months ended September 30, 2023 primarily due to acceleration of revenue growth.

We expect the cost of revenue to be higher in 2024 compared to 2023 in absolute dollars as we continue to expand our capacity to process impressions. Cost of revenue may fluctuate from quarter to quarter and period to period, on an absolute dollar basis and as a percentage of revenue, depending on revenue levels and the volume of transactions we process supporting those revenues, and the timing and amounts of depreciation and amortization of equipment and software.

Technology and Development

			Three Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Technology and development			$	8,813					$	6,634					$	2,179					33		%
Percent of revenue			12		%				10		%
			Nine Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Technology and development			$	25,432					$	19,881					$	5,551					28		%
Percent of revenue			12		%				11		%

The increase in technology and development costs for the three months ended September 30, 2024 was primarily due to an increase of $2.9 million in personnel costs as headcount increased, partially offset by an increase of $1.0 million related to the capitalization of internal-use software.

The increase in technology and development costs for the nine months ended September 30, 2024 was primarily due to an increase of $6.7 million in personnel costs as headcount increased and an increase in facilities costs of $0.5 million, partially offset by an increase of $2.1 million related to the capitalization of internal-use software.

We expect technology and development expenses to continue to increase in 2024 compared to 2023 in absolute dollars, primarily due to additional headcount and investment in technological innovation.

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Sales and Marketing

			Three Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Sales and marketing			$	23,696					$	19,513					$	4,183					21		%
Percent of revenue			33		%				31		%
			Nine Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Sales and marketing			$	71,606					$	62,450					$	9,156					15		%
Percent of revenue			35		%				34		%

Sales and marketing costs for the three months ended September 30, 2024 increased primarily due to a $3.8 million increase in personnel costs and a $0.2 million increase in facilities costs.

Sales and marketing costs for the nine months ended September 30, 2024 increased primarily due to a $9.0 million increase in personnel costs and a $0.7 million increase in facilities costs, offset by a decrease in amortization of intangible assets of $0.9 million.

We expect sales and marketing expenses to increase in 2024 compared to 2023 in absolute dollars primarily due to additional headcount investment and marketing programs.

General and Administrative

			Three Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
General and administrative			$	15,134					$	12,010					$	3,124					26		%
Percent of revenue			21		%				19		%
			Nine Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
General and administrative			$	43,499					$	43,439					$	60					—		%
Percent of revenue			21		%				24		%

General and administrative expense increased for the three months ended September 30, 2024 primarily due to a $1.9 million increase in personnel costs and a $1.0 million increase in professional services fees.

General and administrative expense increased for the nine months ended September 30, 2024 primarily due to a $5.2 million increase in personnel costs and a $1.0 million increase in professional services fees, offset by a $5.7 million decrease in provision for bad debt relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy in June 2023 and a $0.5 million decrease in property taxes.

We expect general and administrative expenses to increase in 2024 compared to 2023 in absolute dollars primarily due to additional headcount.

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Interest Income

			Three Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Interest income			$	1,969					$	2,246					$	(277)					(12)		%
			Nine Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Interest income			$	6,873					$	6,313					$	560					9		%

Interest income decreased for the three months ended September 30, 2024 compared to the prior year period due to a decrease in the Company’s interest-bearing securities balance. Interest income increased for the nine months ended September 30, 2024 compared to the prior year period due to the increase in interest rates.

Other Income (Expense), net

			Three Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Other income (expense), net			$	(930)					$	210					$	(1,140)					(543)		%
			Nine Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Other income (expense), net			$	3,356					$	(476)					$	3,832					(805)		%

Other income (expense), net decreased for the three months ended September 30, 2024 due to foreign exchange rate fluctuations. Other income (expense), net increased for the nine months ended September 30, 2024 compared to the prior year period due to other income of $4.0 million from the Google Privacy Sandbox initiative in connection with their previous initiative to phase out the use of third-party cookies. This income was related to our efforts to build and test integrations with the privacy sandbox.

Provision for (benefit from) Income Taxes

			Three Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Provision for income taxes			$	586					$	111					$	475					428		%
			Nine Months Ended September 30,
			2024						2023						$ Change						% Change
			(dollars in thousands)
Provision for (benefit from) income taxes			$	749					$	(2,719)					$	3,468					(128)		%

The difference between the effective tax rate for the three months ended September 30, 2024 of (180)% and the federal statutory income tax rate of 21% was related to tax benefits from foreign-derived intangible income (FDII), research tax credits and deductions for equity awards, partially offset by nondeductible stock-based compensation, and Section 162(m) limitation on the tax deductibility of officers' compensation. The effective income tax rate of 6% for the three months ended September 30, 2023 was related to the tax benefit from FDII, the 2022 federal tax provision to return adjustments and research tax credit, partially offset by an increase in nondeductible stock-based compensation and Section 162(m) limitation on the tax deductibility of officers’ compensation.

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The difference between the effective tax rate for the nine months ended September 30, 2024 of (116)% and the federal statutory income tax rate of 21% was related to tax benefits from FDII, research tax credits and deductions for equity awards, partially offset by nondeductible stock-based compensation, and Section 162(m) limitation on the tax deductibility of officers' compensation. The effective income tax rate of 22% for the nine months ended September 30, 2023 was related to the tax benefit from FDII, research tax credit, and 2022 federal tax provision to return adjustments, partially offset by an increase in tax expense primarily related to nondeductible stock-based compensation, and Section 162(m) limitation on the tax deductibility of officers’ compensation.

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), including, in particular, operating loss, net cash provided by operating activities, and net income (loss), we believe that Adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance. We define Adjusted EBITDA as net income (loss) adjusted for stock-based compensation expense, depreciation and amortization, interest income, and provision for (benefit from) income taxes.

The following table presents a reconciliation of Adjusted EBITDA to net income (loss) for each of the periods indicated:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)												(in thousands)
Net income (loss) (1)(2)			$	(912)					$	1,774					$	(1,395)					$	(9,821)
Add back (deduct):
Stock-based compensation			9,457						7,200						28,267						21,525
Depreciation and amortization			11,384						11,401						33,931						33,731
Interest income			(1,969)						(2,246)						(6,873)						(6,313)
Provision for (benefit from) income taxes			586						111						749						(2,719)
Adjusted EBITDA (1)			$	18,546					$	18,240					$	54,679					$	36,403

_______________

(1)Net income (loss) and Adjusted EBITDA for the nine months ended September 30, 2024 include other income of $4.0 million related to our efforts to build and test integrations with the Google Privacy Sandbox.

(2)Amounts for the nine months ended September 30, 2023 include a provision for bad debt of $5.7 million relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy.

Although Adjusted EBITDA is used by many investors and securities analysts in their evaluations of companies, it has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results of operations as reported under GAAP. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

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Liquidity and Capital Resources

We have financed our operations and capital expenditures primarily through utilization of cash generated from operations as well as sales of equity securities. As of September 30, 2024, we had cash, cash equivalents, and marketable securities of $140.4 million and net working capital, consisting of current assets less current liabilities, of $137.0 million.

Our principal uses of cash are funding our operations and other working capital requirements.

We believe our existing cash, cash equivalents, marketable securities and anticipated net cash provided by operating activities, together with available borrowings under our credit facility, will be sufficient to meet our working capital requirements for at least the next 12 months. However, 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. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk Factors” in this report and in our Annual Report on Form 10-K for the year ended December 31, 2023. As of September 30, 2024, our material cash requirements included the contractual commitments set forth under “Contractual Obligations and Future Cash Requirements.”

In February 2023, our board of directors authorized the 2023 Repurchase Program. Subsequently in February 2024, our board of directors authorized the 2024 Repurchase Program. During the nine months ended September 30, 2024, we repurchased 3,572,563 shares of Class A common stock under the 2023 Repurchase Program and 2024 Repurchase Program, collectively, for an aggregate purchase price of $64.8 million. As of September 30, 2024, $50.9 million remained available for future share repurchases under the 2024 Repurchase Program. The U.S. Inflation Reduction Act of 2022 was enacted on August 16, 2022 and requires a one percent excise tax on certain share repurchases in excess of shares issued for employee compensation made after December 31, 2022. For purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain stock issuances against the fair market value of stock repurchases during the same taxable year, with certain exceptions. We do not expect this provision to have a material effect on our condensed consolidated financial statements.

In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by incurring additional indebtedness, we may be subject to increased fixed payment obligations and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. We cannot guarantee that we will be able to raise additional capital in the future on favorable terms, or at all. Any inability to raise capital could adversely affect our ability to achieve our business objectives.

The global advertising industry experiences seasonal trends that affect the vast majority of participants in the digital advertising ecosystem. Most notably, advertisers have historically spent relatively more in the fourth quarter of the calendar year to coincide with the holiday shopping season, and relatively less in the first quarter. We expect seasonality trends to continue, thereby resulting in seasonality in our revenues and corresponding accounts receivable and accounts payable balances, and our ability to manage our resources in anticipation of these trends will affect our operating results.

Cash Flows

The following table summarizes our cash flows for the periods presented:

			Nine Months Ended September 30,
			2024						2023
			(in thousands)
Net cash provided by operating activities			$	55,377					$	52,447
Net cash provided by (used in) investing activities			9,645						(7,708)
Net cash used in financing activities			(64,617)						(39,391)
Net increase in cash and cash equivalents			$	405					$	5,348

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Operating Activities

Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our buyers and related payments to our publishers, as well as our investment in personnel to support the anticipated growth of our business. Cash flows from operating activities have been affected by changes in our working capital, particularly changes in accounts receivable and accounts payable. The timing of cash receipts from buyers and payments to publishers can significantly impact our cash flows from operating activities. For example, we noted an impact to our operating cash flows for the nine months ended September 30, 2024 as a result of shifts in spend from one of our large DSPs. In addition, we expect seasonality to impact quarterly cash flows from operating activities.

For the nine months ended September 30, 2024, net cash provided by operating activities of $55.4 million resulted primarily from adjustments for non-cash expenses of $52.8 million, including $33.9 million for depreciation and amortization and $28.3 million for stock-based compensation, offset by a net loss of $1.4 million, an increase in accounts receivable of $1.3 million, an increase in prepaid expenses and other assets of $1.6 million, a decrease in operating lease liabilities of $4.7 million, and an increase in accounts payable of $8.8 million.

For the nine months ended September 30, 2023, net cash provided by operating activities of $52.4 million resulted primarily from adjustments for non-cash expenses of $48.3 million, including $33.7 million for depreciation and amortization and $21.5 million for stock-based compensation, provision for bad debt of $5.7 million relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy, a decrease in accounts receivable of $8.4 million, offset by a net loss of $9.8 million, and an increase in accrued liabilities of $3.2 million.

Investing Activities

Our investing activities primarily included investments in marketable securities, purchases of equipment as we expanded the infrastructure in our third-party data centers, and capitalized internal-use software costs in support of enhancing our platform. Purchases of property and equipment may vary from period-to-period due to the timing of the expansion of our data centers, the addition of headcount, and the development cycles of our software development. As our business grows, we expect our capital expenditures and our investment activity to continue to increase.

For the nine months ended September 30, 2024, we used $9.6 million in investing activities, consisting of $13.3 million in purchases of property and equipment (primarily data center infrastructure), and $16.1 million of investments in capitalized internal-use software, and a net decrease in investments of marketable securities of $39.0 million.

For the nine months ended September 30, 2023, we used $7.7 million in investing activities, consisting of $5.4 million in purchases of property and equipment (primarily data center infrastructure), and $13.7 million of investments in capitalized internal-use software, a net increase in investments of marketable securities of $7.4 million, offset by an increase from sales of marketable securities prior to maturity of $18.9 million.

Financing Activities

For the nine months ended September 30, 2024, net cash used in financing activities of $64.6 million was primarily due to purchases of treasury stock of $65.4 million, payment of a business combination indemnification holdback of $2.1 million, offset by proceeds from employee stock option exercises of $1.6 million and proceeds from our employee stock purchase plan of $1.5 million.

For the nine months ended September 30, 2023, net cash used in financing activities of $39.4 million was primarily due to purchases of treasury stock.

Contractual Obligations and Future Cash Requirements

Our principal contractual obligations consist of non-cancelable leases for our various facilities. In certain cases, the terms of the lease agreements provide for rental payments that increase over time.

There were no material changes to our contractual obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

As of September 30, 2024, we had $5.4 million of long-term income tax liabilities, including interest, related to uncertain tax positions. Because of the high degree of uncertainty regarding the settlement of these liabilities, we are unable to estimate the years in which future cash outflows may occur.

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Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in accordance with GAAP. The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from these estimates and assumptions.

Besides the update to our allowance for credit losses as included within "Note 2 – Basis of Presentation and Summary of Significant Accounting Policies" to the condensed consolidated financial statements in this report, there have been no significant changes in our critical accounting policies and estimates from those disclosed in our audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2023.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks in the ordinary course of our business. These risks primarily include:

Interest Rate Risk

We had cash and cash equivalents of $78.9 million and marketable securities of $61.5 million as of September 30, 2024, which consisted of bank deposits, money market accounts, time deposits, commercial paper, U.S. Treasury and government debt securities. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Because our cash, cash equivalents, and marketable securities have a relatively short maturity, our portfolio’s fair value is relatively insensitive to interest rate changes. Our line of credit is at variable interest rates. We had no amounts outstanding under our credit facility as of September 30, 2024. We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. In future periods, we will continue to evaluate our investment policy relative to our overall objectives.

Currency Exchange Risk

Our condensed consolidated results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Historically, the majority of our revenue contracts have been denominated in U.S. Dollars. Our expenses are generally denominated in the currencies in which our operations are located, primarily the U.S. Dollar, Indian Rupee and British Pound. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative instruments. In the event our foreign sales and expenses increase, our operating results may be more greatly affected by foreign currency exchange rate fluctuations, which can affect our operating income. A hypothetical 10% change in the U.S. Dollar to India Rupee exchange rate could result in a change of $1.6 million in our operating loss for the nine months ended September 30, 2024. A hypothetical 10% change in the U.S. Dollar to British Pound exchange rate could result in a change of $1.6 million in our operating loss for the nine months ended September 30, 2024.

Inflation Risk

We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. If our costs were to become subject to significant inflationary pressures, for example in India, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, results of operations, and financial condition.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2024. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) that occurred during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitations on Effectiveness of Controls and Procedures

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designated and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in legal or regulatory proceedings, lawsuits and other claims arising in the ordinary course of our business. In view of the inherent difficulty of predicting the outcome of such matters, we cannot state what the eventual outcome of such matters will be. However, based on our knowledge, we are not presently a party to any legal proceedings that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, and other factors. For additional information, see Note 8, “Commitments and Contingencies,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. The Company’s business, operations, financial results, and our stock price can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023. When any one or more of these risks materialize from time to time, such developments could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our stock. Below are material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2023.

Risks Related to Our Business, Results of Operations and Growth

If our existing customers do not expand their usage of our platform, or if we fail to attract new publishers and buyers, our growth will suffer. Moreover, any decrease in the use of the advertising channels that we primarily depend on, or failure to expand into emerging channels, could adversely affect our business, results of operations, and financial condition.

We depend upon our buyer and publisher relationships, including channel partners, which aggregate large numbers of smaller publishers, to provide advertising space which we can offer to prospective buyers to continue to grow the usage of our platform. In doing so, we compete for both supply and demand with larger, well-established companies that may have technological or other advantages stemming from their broader experience in the market. We must continue to adapt and improve our technology to compete effectively, and customers have not always embraced our offerings due to various factors, including switching costs from moving away from pre-existing technology integrations, such as already implemented header bidding wrappers, and lack of awareness of our omnichannel offerings. Although we believe we provide superior transparency and accountability to such competitors, certain customers may make technological or financial demands that we are unable or unwilling to meet. These and other factors may make it difficult for us to increase our business with our publishers and buyers, cause some buyers to reduce their spending with us, or increase our costs of doing business, which could adversely affect our business, results of operations, and financial condition.

A relatively small number of premium publishers have historically accounted for a significant portion of the ad impressions sold on our platform, as well as a significant portion of our revenue from publishers, including a relatively small number of channel partners.

We generally do not have minimum commitments from publishers. As a result, the amount, quality, and cost of ad impressions available to us can change at any time with little or no prior notice, and we cannot assure you that we will have access to a consistent volume or quality of ad impressions at a reasonable cost, or at all. We depend upon a relatively small number of premium publishers and channel partners and expect to continue to do so for the foreseeable future. To support our continued growth, we seek to add additional publishers and buyers to our platform and to expand current utilization with our existing publishers and buyers. Any disruptions in our relationships with premium publishers, buyers, or our largest channel partners could adversely affect our business, results of operations, and financial condition. If we cannot retain or add individual publishers with valuable ad impressions, or if such publishers decide not to make their valuable ad impressions available to us, then our buyers may be less inclined to use our platform, which could adversely affect our business, results of operations, and financial condition.

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A limited number of large demand side platforms (“DSPs”) – The Trade Desk and Google DV360 in particular – account for a significant portion of the ad impressions purchased on our platform. We depend upon these DSPs for a large percentage of impressions purchased and expect to do so for the foreseeable future. We have no minimum commitments from buyers to spend on our platform, so the amount of demand available to us and our ability to generate revenue from that demand can change at any time with little or no prior notice, and we cannot assure you that we will have access to a consistent volume or quality of ad campaigns or demand for our ad impressions at a reasonable or consistent price, or at all. A change in the pricing strategies, bidding algorithms or go-to-market efforts by one of these large DSPs could disproportionately impact our business results, including revenues. For example, bidding methodology changes implemented by one of our buyers in the second fiscal quarter of 2024 impacted our revenue for the quarter. Any disruptions in our relationships with DSPs, agencies, advertisers, or buyers could adversely affect our business, results of operations, and financial condition. If a buyer or group of buyers representing a significant portion of the demand in our marketplace decides to materially reduce use of our platform or the manner in which they use our platform, it could cause an immediate and significant decline in our revenue and profitability and adversely affect our business, results of operations, and financial condition.

Historically, our buyers have predominantly used our platform to purchase mobile, display, and video advertising inventory from our publishers. We expect that these will continue to be significant channels used by our customers for digital advertising in the future. We also believe that our revenue growth may depend on our ability to expand within mobile, video, and in particular, CTV, and we are continuing to enhance such channels. We may not be able to accurately predict changes in overall advertiser demand for the channels in which we operate and cannot assure you that our investment in formats will correspond to any such changes or shifts in demand. Any decrease in the use of mobile, display, and video advertising, whether due to customers losing confidence in the value or effectiveness of such channels, regulatory restrictions or other causes, or any inability to further penetrate CTV or enter new and emerging advertising channels, could adversely affect our business, results of operations, and financial condition.

Our results of operations may fluctuate significantly and may not meet our expectations or those of securities analysts and investors.

We operate in an evolving industry with ever-changing customer needs and behavior, and, as a result, our business has evolved over time such that our operating history makes it difficult to evaluate our business and future prospects. Our results of operations have fluctuated in the past, and future results of operations are likely to fluctuate as well. Although we have experienced prolonged revenue growth, we may not be able to sustain this growth rate, current revenue levels, or profitability. In addition, because our business is evolving, our historical results of operations may be of limited utility in assessing our future prospects. We expect to face challenges, risks, and difficulties frequently experienced by growing companies in rapidly developing industries, including those relating to:

•changes in demand and pricing for ad impressions sold on our platform;

•changes in our access to valuable ad impressions from publishers;

•responding to evolving industry standards and government regulations that impact our business, particularly in the areas of data protection and consumer privacy;

•developing, maintaining, and expanding relationships with publishers, DSPs, agencies, advertisers, and buyers;

•seasonality in our business;

•innovating and developing new solutions that are adopted by and meet the needs of publishers, DSPs, agencies, advertisers, and buyers;

•competing against companies with a larger customer base or greater financial or technical resources;

•changes in the structure of the buying and selling of ad impressions;

•changes in the pricing policies of publishers and competitors;

•changes in the bidding behavior of buyers of ad impressions;

•changes in demand due to changes in macroeconomic environment, including as a result of an economic downturn, recession, inflation, changes in interest rates or foreign exchange rates, disruptions to supply chains, or otherwise;

•further expanding our business internationally; and

•recruiting, integrating, and retaining qualified and motivated employees, particularly engineers.

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Any one or more of the factors above may result in significant fluctuations in our results of operations. You should not rely on our past results as an indicator of our future performance.

Risk Related to Data Collection and the Use of Collected Data

The disabling of third-party cookies, and the potential of others to develop proprietary replacements for cookies, could adversely affect our business, results of operations, and financial condition.

Some prominent technology companies have also announced intentions to discontinue the use of third-party cookies, and to develop alternative methods and mechanisms for targeting advertisements. For example, in January 2024, Google disabled third-party cookies for up to 1% of Chrome users and also initially announced plans to disable cookies for additional users beginning in the third quarter of 2024. However, in July 2024, Google announced it will no longer depreciate its use of third-party cookies in Chrome and instead ask users to opt-in or opt-out of cookies in Chrome. If companies are forced to rely on targeting methodologies other than cookies, such companies may instead rely on proprietary products, algorithms, or statistical methods to track consumers without cookies, or may utilize log-in credentials entered by consumers into other web properties owned by those companies such as their email services to track web usage, including usage across multiple devices.

Additionally, such companies may build different and potentially proprietary consumer tracking methods into their widely used web browsers, which we may not be able to effectively use for our publishers and buyers. Many applications and other devices also allow consumers to avoid receiving advertisements by paying for subscriptions or other downloads. Although we believe our platform is well-positioned to adapt and continue to provide key data insights to our publishers without cookies, this transition could be more disruptive, slower, or more expensive than we currently anticipate, or publishers and buyers could elect to move a larger proportion of their advertising inventory or spend to these providers to take advantage of proprietary consumer tracking methods, any of which could materially affect our ability to serve our customers, publishers, and buyers, and our business, results of operations, and financial condition could be adversely affected.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASE OF EQUITY SECURITIES

The following table provides information about our repurchases of our Class A common stock during the three months ended September 30, 2024:

Period						Total Number of Shares Purchased						Average Price Paid Per Share(2)						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)						Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)
July 1, 2024 – July 31, 2024						226,100						$	20.98					226,100						$	75,120,740
August 1, 2024 – August 31, 2024						1,230,917						$	15.46					1,230,917						$	56,091,910
September 1, 2024 – September 30, 2024						337,700						$	15.39					337,700						$	50,894,232
Total						1,794,717												1,794,717

The amounts above do not include the 1% excise tax on stock repurchases enacted by the Inflation Reduction Act of 2022.

_______________

(1)On February 28, 2023, we announced the authorization of a share repurchase program for the repurchase of shares of our Class A common stock in an aggregate amount of up to $75 million through December 31, 2024. On February 22, 2024, we announced the authorization of an additional share repurchase program for the repurchase of shares of our Class A common stock in an aggregate amount of up to $100 million through December 31, 2025.

(2)Average price paid per share includes costs associated with the repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5. OTHER INFORMATION

(c) Trading Plans

In the third quarter of 2024, the following trading plans were adopted or terminated:

Trading Arrangement

Name

Title

Action

Date

Rule 10b5-1*

Non-Rule 10b5-1**

Total Shares to be Sold

Expiration Date

Lisa Gimbel (2)

Chief Accounting Officer

Adopted

8/22/2024

X (1)

4,185

9/30/2025

* Intended to satisfy the affirmative defense of Rule 10b5-1(c).

** Not intended to satisfy the affirmative defense of Rule 10b5-1(c).

(1)The 10b5-1 plan included a representation from the officer to the broker administering the plan that they were not in possession of any material nonpublic information regarding the Company or the securities subject to the plan. A similar representation was made to the Company in connection with the adoption of the plan under the Company’s insider trading policy. Those representations were made as of the date of adoption of the 10b5-1 plan, and speak only as of that date. In making those representations, there is no assurance with respect to any material non-public information of which the officer was unaware, or with respect to any material non-public information acquired by the officer or the Company after the date of the representation.

(2)The aggregate number of RSU Shares that will be available for sale under the Plan is not yet determinable because the shares available will be net of shares sold to satisfy tax withholding obligations that arise in connection with the vesting and settlement of such RSU awards. As such, for purposes of this disclosure, the shares included in this table reflect the aggregate maximum number of shares underlying the holders RSUs without excluding the shares that will be sold to satisfy the tax withholding obligations.

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ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit Number

Description of Document

Form

File No.

Exhibit

Filing Date

Filed Herewith

31.1

Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X

31.2

Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X

32.1*

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X

32.2*

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X

101.INS

Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

X

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

X

________________
† Registrant has omitted portions of the exhibit as permitted under Item 601(b)(10) of Regulation S-K.

*      The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is not to be incorporated by reference into any filing of PubMatic, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

** Indicates a management contract, compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November 12, 2024

PUBMATIC, INC.
By:			/s/ Steven Pantelick
			Steven Pantelick
			Chief Financial Officer (Principal Financial Officer)

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