UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20202021
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TOFor the transition period from to
Commission File Numberfile number 001-40015
Viant Technology Inc.
(Exact name of Registrantregistrant as specified in its Charter)charter)
Delaware | 85-3447553 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2722 Michelson Drive, Suite 100 Irvine, CA | 92612 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (949) 861-8888
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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| Name of each exchange on which registered |
Class A common stock, par value $0.001 per share |
| DSP |
| The Nasdaq Stock Market LLC (Nasdaq Global Select Market) |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES Yes ☐ NO No ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES Yes ☐ NO No ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES Yes ☒ No ☐ NO ☒
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES Yes ☒ NO No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES Yes ☐NO No ☒
As of June 30, 2020, the last business dayThe aggregate market value of the registrant’s most recently completed second fiscal quarter,voting and non-voting common equity held by non-affiliates of the registrant’sRegistrant, based on the closing price of the shares of Class A common stock was not listed on any exchange or over-the-counter market. The registrant’s Class A common stock began trading on the Nasdaq Global Select Market on February 10, 2021. June 30, 2021, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $342.5 million.
As of March 19, 2021,8, 2022, there were 11,500,00013,741,508 shares and 47,435,55947,082,260 shares of the registrant’s Class A and Class B common stock, respectively, $0.001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NonePortions of the registrant’s definitive proxy statement for its 2022 Annual Meeting of Stockholders, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2021, are incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of ContentsTABLE OF CONTENTS
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Item 1. |
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Item 1A. |
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Item 1B. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 7A. |
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Item 8. | 77 | |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 110 |
Item 9A. | 110 | |
Item 9B. |
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Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 111 |
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Item 10. |
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Item 11. |
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13. | Certain Relationships and Related Transactions, and Director Independence |
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Item 14. |
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Item 15. |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. All statements, other than statements of historical fact included in this Annual Report, including, without limitation, statements regarding our financial position, business strategy and other plans and objectives for our future operations, are forward-looking statements. These statements include declarations regarding our management’s beliefs and current expectations. In some cases, you can identify forward-looking statements by terminologywords such as “may,” “will,” “should,” “could,” “intend,” “consider,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict” or “continue” or the negative of such words or other similar terms or other comparable terminology. expressions. Forward-looking statements contained in this Annual Report include, but are not limited to, statements about: our future financial performance, including our revenue, cost of revenue, gross profit, contribution excluding traffic acquisition costs (“contribution ex-TAC”), adjusted EBITDA, and operating expenses; trends in our key business measures; the sufficiency of our cash and cash provided by sales of our products and services to meet our liquidity needs; market trends; our market position and opportunity; our growth strategy and business aspirations for our demand side platform in enablingtheprogrammaticpurchaseof advertising in thedigitaladvertisingindustry; our product strategy; our efforts to enhance the security and privacy of our platform; the potential impacts of the COVID-19 pandemic and related public health measures on our business, the business of our customers, suppliers and channel partners, and the economy; our ability to attract new customers and retain existing customers; our ability to successfully expand into our existing markets and into new markets; our ability to effectively manage our growth and future expenses; and the impact of recent accounting pronouncements on our consolidated financial statements.
Such statements are not guarantees of future performance and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from expected results. As a result, you should not put undue reliance on any forward-looking statement.
These forward-looking statements are included throughout this Annual Report. Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to, the risk factors discussed in the “Risk Factors” section of this Annual Report.
The forward-looking statements contained in this Annual Report are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, as well as the other factors described in the section entitled “Risk Factors.” Additional factors or events that could cause our actual results to differ may also emerge from time to time, and it is not possible for us to predict all of them. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and we caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this Annual Report speaks only as of the date on which we make it. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws. You should read this Annual Report, and the documents that we reference in this Annual Report and have filed with the Securities and Exchange Commission (“SEC”), with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.
Our business is subject to numerous risks and uncertainties, including those described in the “Risk Factors” section of this Annual Report. You should carefully consider these risks and uncertainties when investing in our Class A common stock. Some of the principal risks and uncertainties include the following:
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• | Our successand revenuegrowth aredependenton adding new customers,effectivelyeducatingand training our existingcustomerson howto makefulluse of our platformand increasingusage of our platformby our customers; |
• | We maynot realizethe expectedbenefitsof an industryshiftaway fromcookie-basedconsumertrackingas such shiftmaynot occur as rapidlyas we expector maynot be realizedat all; |
• | The effectsof the ongoing COVID-19pandemicand otheradversemarketeventshave had, and could in the futurehave, an adverseimpacton our business,operatingresultsand financialcondition; |
• | Ifwe failto innovateand makethe rightinvestmentdecisionsin our offeringsand platform,we maynot attractand retaincustomersand our revenueand resultsof operationsmaydecline; |
• | The marketforprogrammaticadvertisingisevolving.Ifthismarket developssloweror differentlythan we expect,our business,operatingresultsand financialconditionwould be adverselyaffected; |
• | We receivea significantamount of revenuefroma selectnumber of advertisingagency holding companies, owning variousadvertisingagencies, and the lossof advertisingagenciesas customerscould harm our business,operatingresultsand financialcondition; |
• | We oftenhave long salescycles,which can resultin significanttimebetween initialcontactwith a prospect and executionof a customeragreement,makingitdifficultto projectwhen,ifat all,we willobtainnew customersand whenwe willgeneraterevenuefromthosecustomers; |
• | Ifour accessto advertisinginventoryisdiminishedor failsto grow, our revenuecould declineand our growth could be impeded; |
• | Ifour accessto people-baseddata isdiminished,the effectivenessof our platformwould be decreased,which could harm our operatingresultsand financialcondition; |
• | We are subject to stringent and changing obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of customers or sales, revenue declines,increasethe costof data, reducethe availabilityof data, adverselyaffectthe demand forour productsand services, or other adverse business consequences; |
• | Our businessor abilityto operateour platformcould be impactedby changes in the technologyindustryby technologycompanies, end users,or governmentregulation.Such developments,includingthe restrictionof “third-partycookies,”could cause instabilityin the advertisingtechnologyindustry; |
• | A significantinadvertentdisclosureor breach of our information technology systems or data, or of the securityof our or our customers’,suppliers’,or otherthird parties’ upon which we relycould be detrimentalto our business,reputationand resultsof operations; |
• | Our proprietaryrightsmaybe difficultto enforce,which could enableothersto copy or use aspectsof our technologywithout compensatingus, therebyerodingour competitiveadvantagesand harmingour business; |
• | Our businessissubjectto a wide range of laws and regulations,many of which are evolving,and failureto complywith such laws and regulationscould harm our business,financialcondition,and resultsof operations; |
• | We mayexperiencefluctuationsin our operatingresults,which could makeour futureoperatingresults difficultto predictor cause our operatingresultsto fallbelow securitiesanalysts’and investors’expectations; |
• | As our costs increase, we may not be able to generate sufficient revenue to sustain profitability; |
• | The marketpriceof our Class A commonstock has been and may continue tobe volatileor maydeclineregardlessof our operating performance,and you could lose all or part of your investment; |
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• | We are a “controlledcompany”within the meaningof the listingstandards of the Nasdaq Global Select Market and, as a result,qualifyfor,and relyon, exemptionsfromcertaincorporategovernancerequirements.You donot have the sameprotectionsaffordedto stockholdersof companiesthatare subjectto such requirements; and |
• | If we fail to maintain or implement effective internal controls, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business and the per share price of our Class A common stock. |
PART I
Item 1. Business.
Our Company
We arean advertisingsoftwarecompany. Our softwareenablestheprogrammaticpurchaseof advertising,which istheelectronificationof theadvertisingbuying process.Programmaticadvertisingisrapidly takingmarketsharefromtraditionalad saleschannels, which requiremorestaffing,offerlesstransparencyand involvehighercoststo buyers.
Our demandsideplatform(“DSP”), Adelphic,isan enterprisesoftwareplatformthatisused by marketersand theiradvertisingagenciesto centralizetheplanning,buying and measurementof theiradvertising acrossmostchannels.Through our technology,a marketercan easilybuy ads on desktop,mobile,connectedTV, linearTV, in-gamestreamingaudioand digitalbillboards.
Our softwareisdesignedto makeour customers’liveseasierby enablingmarketersand their advertisingagenciesto plan,buy and measureadvertisingcampaignsin a highlyautomatedfashion.We offeran easy-to-useself-serviceplatformthatprovidescustomerswith transparencyand controlovertheiradvertising campaigns.
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Our platformofferscustomersuniquevisibilityacrossinventory,allowingthemto createcustomized audiencesegmentsand leverageour people-basedand strategicpartnerdatato reachtargetaudiencesatscale. Our platformdeliversa fullsuiteof forecasting,reportingand built-inautomationthatprovidesour customers with insightsintoavailableinventorybasedon thedesiredtargetaudience. We offeradvancedforecastingand reportingthatempowersour customerswith functionalitydesignedto ensuretheycan accuratelymeasureand improvetheirreturn-on-advertisingspend (“ROAS”) acrosschannels.
Marketersuse our softwareto deliveradvertisingcampaignsto theirdesiredtargetaudienceacross channelsand formats.Through platformintegrations,we offerour customersaccessto omnichanneladvertising inventory,which refersto mediaavailableacrossdevices,channelsand formats. This includes access to over approximately 300 millionuniquedesktopand mobileusers, 114 approximately 115 millionconnected TVs, 112 million linear TV households, approximately 112 millionlinearTVhouseholds, over200 millionuniquedigitalaudiousers,and approximately 158,000 uniquedigitalbillboards, in the U.S.United States. Our platform supportsa fullrangeof transactiontypesincludingreal-timebidding,privatemarketplaceand programmatic guaranteed,allowingcustomersto easilysourceand integratead inventorydirectlyfrompublishersand private marketplaces.
We enabledeep dataaccessthroughour dataintegrationsto authenticateuseridentitiesacrossa rangeof devices.Our matchingof people-basedidentifiersenablesus to be thenexus pointwith morethan70 data partners,providingcustomerswith deep accessto people-baseddataacrossmarketverticalssuch as automotive, entertainment,businessto business,retail,consumerpackagedgoods, traveland tourism, and healthcare. Our proprietaryidentitygraph is matched to more than 250 million users acrosshas linked approximately 115 million households to an estimated 1 billion connected devices and is combined with access to approximately 280,000 audience attributes in the U.S., United States,which we believemakesitone of thelargestin theindustry.
Our customersareadvertisingbuyersincludinglargeadvertisingholdingcompanies,independent advertisingagencies,mid-marketadvertisingserviceorganizationsas wellas marketersthatrelyon our self-servicesoftware
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platformfortheirprogrammaticad buying needs.We area trustedpartnerto our customersand have had a 95% customersatisfactionratingforthelast 3four yearsbasedon Viant’sAnnualAdelphicCustomer SatisfactionSurvey. Many of our customersuse our softwareas theirprimary demand side platform.DSP.
Our platformisbuilton people-baseddata.Using our identityresolutioncapabilitiesand identitygraph, marketersand theiradvertisingagenciescan identifytargetedconsumersusingreal-worldidentifiersratherthan relyingprimarilyon cookiesto trackusers.We believetheindustryisshiftingto a people-basedframeworkto replace the cookie cookiesin deliveringpersonalizedadvertising, particularlyforidentification. People-baseddataallows marketersto deliverpersonalizedadvertisingwhilebeingableto accuratelylinkad impressionsacrossmultiple devicesand to customersales letting them know what they get in return forand measure the impact of their advertising dollars.ad spend. In addition, people-baseddataallowsconsumersto know who iscollectingtheirdataand what itisbeingused for, and also givesthemtherightto deleteor stop their use of theirdataforpersonalizedadvertising.Many of our competitorsrely on cookiesforthetargetingand measurementof digitaladvertisingbut thistechnologyhas not been effectiveat accuratelymeasuringtherealimpactof a marketer’sad spend on theirbusinessresults.Apple’spopularweb browser,Safari,currentlydoes not allowthird-partycookiesand Google Chrome has announcedplansto entirely disallowthird-partycookiesin their Chromebrowserin early 2022.2023. This marketchangehas createdan increasein demandby marketersactivelylookingforplatformslikeoursthatofferan alternativeto cookie-basedtracking, which we believeisstrengtheningour strategicposition.
Programmaticadvertisinghas provenitsvalueto marketersand moreorganizationsaredevotingmore of theirdigitalad spend to it.The digitalecosystemcontinuesto evolveand with itprogrammaticadvertising, creatingnew opportunitiesand needsformarketersand theiragencies.The U.S.programmaticadvertising marketisexpectedto grow from $65$75.1 billionin 20182020 to $140$142.0 billionin 2022,2023, a 21% 24% compound annual growth rate (“CAGRR”), accordingto eMarketer,a marketresearchcompanythatprovidesinsightsand trendsrelatedto digitalmarketing,mediaand commerce.We focuson ad buyersand believethatour solutionswillacceleratetheshiftof advertisingbudgets to programmaticadvertising.Additionally,as marketersdesiremorecontroloverprogrammaticadvertisingand movesomefunctionsof programmaticad buying in-house,our softwareplatformisdesignedto addressthese needsand expands expandour marketopportunity.
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Our totalrevenuewas $224.1 million, $165.3 million $164.9 million and $108.4164.9 millionforthefiscalyearsended December31, 2020, 2019 and 2018, respectively,representingan increaseof 0.2% from 2019 to 2020 and 52.1% from 2018 to 2019. We recordednetincomeof $20.6 million and $9.9 millionand AdjustedEBITDAof$31.8 million and $24.7 million fortheyearsended December 31,2021, 2020 and 2019, respectively,representingincreasesof 35.6% from fiscal 2020 to fiscal 2021 and 0.2% from fiscal 2019 to fiscal 2020. We recordednetlossof $37.6 million and net income $20.6 millionand adjustedEBITDAof $37.1 million and $31.8 million fortheyearsended December 31, 2021 and 2020, respectively, compared to a net lossincome of $25.5$9.9 millionand Adjustedadjusted EBITDAlossof $7.5$24.7 millionforthe fiscal yearended December31, 2018.2019.
AdjustedEBITDAisa financialmeasurenot presentedin accordancewith generally accepted accounting principlesintheUnitedStatesofAmerica (“GAAP”).For a definitionof Adjusted adjustedEBITDA,an explanationof our management’suse of thismeasureand a reconciliationof Adjusted adjustedEBITDAto our netincomeor netloss,see“Management’s Discussionand Analysisof FinancialConditionand Resultsof Operations—Key Operatingand Financial PerformanceMetricMeasures—Use of Non-GAAPFinancialMeasures.”
Our Industry
We believethekey industrytrendsshapingtheadvertisingmarketinclude:
Advertisingdollarsshifting towardstoward programmaticadvertising:We believetheadvertisingindustryis stillin theearlystagesof a shifttotoward programmaticadvertising.The abilityto transactthroughreal-time-bidding platformshas evolvedbeyond banneradvertisingto be used acrossa wide rangeof advertisingchannelsand formats,includingdesktop,mobile,connectedTV,linearTV, in-game, streamingaudioand digitalbillboards.U.S. programmaticadvertisingisexperiencinga rapidincreasein adoptionand, accordingto eMarketer,isexpectedto grow ata 21%24% CAGRfrom20182020 to 2023, reaching $123.2 billionin 2022 reaching$94and $142.0 billionby2023. U.S.programmaticadvertisingisforecastedto represent39% of totalU.S.mediaspend by 2023, increasingfrom31% in 2020. The TVindustryisundergoingsignificantdisruptionsas internet-enabled connectedTVhas becomea preferredvehicleforstreamingvideocontent.The amountof connectedTVusersin theU.S.isforecastedto increasefrom approximately 209 million,or 63% of theU.S.population,in 2020 $118 billionin 2021 and $140 billionby2022. U.S.programmaticadvertisingisforecastedto represent48% of totalU.S.mediaspend by 2022, increasingfrom29% in 2018. The TVindustryisundergoingsignificantdisruptionsas Internet-enabled connectedTVhas becomea preferredvehicleforstreamingvideocontent.The amountof connectedTVusersin theU.S.isforecastedto increasefrom195approximately 236 million,or 59%68% of theU.S.population,in 2019 to 226 million,or66% of theU.S.population,in 2024,2025, accordingto eMarketer.ConnectedTValsoprovidesa numberof benefits to
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advertisers,includingmoreaccuratecontrolof scale,addressabilityand measurement.Marketersare increasinglyinvestingin connectedTVas moreinventorybecomesavailable.Accordingto eMarketer,51%54% ofconnectedTVad spend was transactedprogrammaticallyin 2019 and theshareof programmaticwillis expected to increaseto nearly60%79% in 2021.2023. In addition,connectedTVad spend isexpectedto grow from$69.0 billionin 2019 to $8 billion in 2020 to $18$34.5 billionin 2024,2025, a 25%31% CAGR.
Strong marketerdemand for Return-On-Advertising-Spend ROASmeasurementacrossallchannels: Marketersarelookingfora centralizedview of theircustomers,whileconnectingonlineand offlinepurchasesto accuratelymeasureROAS.Return-on-advertising-spendROASisa criticalmetricformarketingcampaigns.Insights fromROASacrossallcampaignsinformmarketersaboutwhat theyaregettingfortheirmoneyacrossallmedia investmentsnearreal-time.Hence, marketersseektoolsto tracktheirROASacrossallchannels.We believe people-basedplatformsareableto providea moreaccuratemeasurementof ROASas comparedto cookie-based platforms.
Demand forscaledpeople-basedplatforms:Advertisinghas becomemoredatadrivenand marketers need to be ableto targetaudiencesattheindividualand householdlevelwhilerespectingconsumerprivacy. Internetadvertisersin thepasthave capitalizedon anonymousdatafromcookiesto gaininsightsintousersandad performance.However, increasedprivacyconcernsand changingrequirementsof browserprovidersincluding Google (Chrome)and Apple (Safari)arecausingmarketersto reducetheirrelianceon vendorsand software platformsthatprimarilyutilizecookiesfordeviceidentification.In today’sconnectedworld, marketersneed tobe ableto identifytheircustomersand connectwith themacrossmultiplechannels,devicesand formats.This is drivingan industryshiftaway fromcookie-basedDSPsto scaledpeople-basedDSPs.
Brands directlyselectingadvertisingsoftwaresolutions: Marketersareincreasinglybecomingdirectly involvedin theselectionof theiradvertisingsoftwaresolutionsas theyseekto reducecosts,betterleveragetheir customerdataand gainmorecontrolovertheiradvertising.These factorshave alsoledto an increasein marketersmovingprogrammaticad buying functionsin-house.The automationof ad-buyingtechnologyhas enabledfast,accurateand cost-effectivedecision-making,resultingin ad buying becominga skillsetthatan increasingnumberof ChiefMarketingOfficers(“CMOs”)chief marketing officers want to fullyown. Accordingto athe most recentsurveyby IABthe Interactive Advertising Bureau, an advertising business organization that develops industry standards, conducts research, and provides legal support for the online advertising industry, in 2019, 18% of U.S.brandshavehad completelymovedprogrammaticad buying in-house,and 51% of U.S. brandshavehad moveda portionof theirprogrammaticad buying in-house.
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Our MarketOpportunity
We believethatoverthelong term,our totaladdressablemarketisthetotalglobaladvertisingmarket which, according to eMarketer is hasforecastedto grow from $614$866 billionin 2022 to $1.09 trillionin 2025, an 8% CAGR.Currently,our focusisprimarilyon theU.S.market,which eMarketer hasforecastedto grow from$309 billion in 20202022 to $846$384 billionin 2024, 2025 in theUnited States,an 8% CAGR. Currently, our focus is primarily on CAGR,brokenintothe U.S. market, and according to eMarketer, desktop, mobile, connected TV, linear TV, streaming audio and digital billboard channels are forecasted to grow from $205 billion in 2020 to $314 billion in 2024 in the U.S., an 11% CAGR, broken into the followingsegments:
Mobileand Desktop: According to eMarketer, U.S. mobile and desktop advertising are forecasted to be a $129.7 billion market in 2020 and forecasted to grow to $218.2 billion in 2024, a 14% CAGR.
• | Desktop and Mobile:U.S.desktop and mobile advertisingareforecasted to grow from a $215 billionmarketin 2022 to a $273 billion marketin 2025, an 8% CAGR. |
Connected TV: According to eMarketer, U.S. connected TV advertising is forecasted to be an $8.1 billion market in 2020 and forecasted to grow to $18.3 billion in 2024, a 23% CAGR. Connected TV includes over-the-top (“OTT”) content delivered through a connected device over the internet.
• | Connected TV: U.S.connectedTVadvertisingisforecastedto be a$19 billionmarketin 2022 and forecastedto grow to $34 billionin 2025, a 22% CAGR. ConnectedTVincludesover-the-top(“OTT”) contentdeliveredthrougha connecteddeviceover theinternet. |
Linear TV: According to eMarketer, U.S. linear TV advertising is forecasted to be a $60.0 billion market in 2020 and forecasted to grow to $67.5 billion in 2024, a 3% CAGR.
• | Linear TV: U.S.linearTVadvertisingisforecastedto be a $67 billion marketin 2022 and forecastedto be a $66 billion marketin 2025, a negative 0.3% CAGR. |
StreamingAudio: According to eMarketer, U.S. digital audio advertising is forecasted to be a $4.5 billion market in 2020 and forecasted to grow to $6.3 billion in 2024, a 9% CAGR.
• | StreamingAudio: U.S.digitalaudioadvertisingisforecastedto be a$6 billionmarketin 2022 and forecastedto grow to $8 billionin 2025, a 9% CAGR. |
DigitalBillboards: According to eMarketer, U.S. billboard advertising is forecasted to be a $2.2 billion market in 2020 and forecasted to grow to $3.6 billion in 2024, a 14% CAGR.
• | DigitalBillboards: U.S.billboardadvertisingisforecastedto be a$2 billionmarketin 2022 and forecastedto grow to $3 billionin 2025, a 7% CAGR. |
The forecasts for each segment above includeboth programmaticand non-programmaticdigitaladvertising.In recent years,programmaticadvertisinghas representedan increasingportionof totalU.S.mediaspend. eMarketer estimates thattheU.S. programmatic advertising has represented an increasing portion of total U.S. media spend. According to eMarketer, the U.S. advertising market, as represented by desktop, mobile, connected TV, linear TV, streaming audio and digital billboard channels, is forecasted tothe segments above, will grow from $205$75 billionin 2020 to $241$142 billionin 2021 and $269 billion in 2022.2023, a 24% CAGR.
Our Solution
We provide amake it easy to buy an ad anywhere, and help brands measure the impact of their ad spend by providing electronic buying and measurement of all advertising. Our softwareplatform that enablesmarketersand theiradvertisingagenciesto plan,buy and measure their advertising campaignsacrosschannels.Integratedwith our people-basedcapabilities,we provideour customerswith a fullsuiteof forecasting,reportingand automationfunctionalityto makeinformeddecisions aroundtheiradvertisinginvestments. We provide superior customer service to ensure our customers withhave the level of support required for their unique business needs. Viant is driven to be a full suite of forecasting, reportingleader in innovation, automation, transparency, customer focus and automation functionality to make informed decisions around their advertising investments.responsible media.
Cloud-Based, Self-Service Portal: Our softwareisavailablein a self-serviceinterface,providing customerswith transparencyand controlovertheiradvertisingcampaignsand underlyingdatainfrastructure. Customerscan log on to theself-serviceplatformto immediatelycreate, updateor re-aligncampaigns themselves,withouthavingto involveour employeesor any thirdparties.
Holistic, Omnichannel Demand Side Platform: We area demandsideplatformforad buyers.DSP:Marketersand theiragenciescan use our integratedsoftwareplatformto efficientlymanageomnichannelcampaignsand access metricsfromeachchannelto informdecisionsin otherchannels.Our integrationsenablethepurchaseof advertisingmediaacrossdesktop,mobile,connectedTV,linearTV, in-game, streamingaudioand digitalbillboards.Our technologyleverages artificial intelligence (“AI”) and machinelearningto identifythebestsupplypartners,formatsand impressionsbasedon our customers’goals.
Viant Household ID™ (“VHHID”): Our proprietary people-based, household profile, which provides known household insights for optimized bid decisions and touchpoint collection across consumer pathways, offers holistic targeting and measurement across channels. Our omnichannel DSP has exclusive access to the VHHID, providing a major differentiator for our DSP technology in today’s cookieless world.
World Without Cookies Software Release/People-Based Advertising:Released in 2021, our World Without Cookies software integrates a people-based, household approach directly into the Adelphic® DSP. By unifying the Viant Household ID™ throughout Adelphic, World Without Cookies empowers marketers to manage reach and frequency at the household level, reducing waste and improving the customer experience. In a recent study, marketers using our World Without Cookies software saw over 200% more conversions and reached 40% more households compared to traditional cookie-based platforms, and decreased frequency by 28%.
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Viant Identity Graph: Our proprietary, established identityresolutioncapabilitiespowers our identitygraph, which reducesor eliminatestheneed forcookiesby enablingmatchingof people-basedidentifiers that anchor digital identifiersand allowmarketersto reachtargetedconsumersin a privacy-consciousmanner,irrespectiveof deviceor channel. Our proprietaryidentitygraphhas linked approximately 115 million U.S. households to approximately 1 billion connected devices.This process provides access to an estimated 280,000 audience attributes using our proprietary people-based, household profile, the VHHID, allowing marketers to reach real consumers, not proxies, whether they are at home or away. The VHHID provides known insights for optimized bid decisions and touchpoint collection across consumer pathways for holistic targeting and measurement across channels.
Advanced Reportingand Measurement:We investheavilyin our measurementcapabilities, as we believethiswillincreaseour customers’usageof our software.advertising should be driving a positive return.Our softwareand self-servicedatalakeempower customerswith differentiatedinsights,includingconversion lift, multi-touchattribution, foot-trafficdatareports,multi-touchattribution digital-out-of-home lift, sales reporting and ROAS analytics.Leveragingour people-basedframeworkand machinelearningalgorithms,our platformprovides marketersreal-timeactionableinsightsthroughoutan advertisingcampaign.Our built-inautomationenables marketersto optimizedigitalcampaignsdesignedto achievetheirKPI key performance indicator(“KPI”) goals.
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People-BasedIdentificationforAdvertising:Our identityresolutioncapabilitiesand identitygraph reduceor eliminatetheneed forcookiesby enablingmatchingof people-basedidentifiers,and allowmarketersto reachtargetedconsumersin a privacy-consciousmanner,irrespectiveof deviceor channel. Our identitygraph ismatchedto morethan250 millionusersacross115 millionhouseholdsin theU.S.,which we believe makesitone of thelargestin theindustry.
Onboarding: We enablemarketersto safely and securely onboardtheirfirst-partydatato gaina view intotheircustomers’ top attributes,createtargetingsegmentsand easilyactivate and measurethesecustomersegments.Our simpleinterfaceallows marketersto uploadaudiencedatawith easeand createa uniquesegmentor buildlook-a-likelookalikeaudienceswithout theneed fora separatedatamanagementplatform.Our dataintegrationsprovidemarketerswith high matchrates,which leadsprovides scalable and meaningfulaudienceinsightsforsegmentation, targeting and measuring key outcomes both online and offline.
Flexible Customer Engagement Models: Our softwareisavailable through several levels of best-in-class customer service, from a self-serviceinterface,providing customerswith transparencyand controlovertheiradvertisingcampaignsand underlyingdatainfrastructure to meaningfulaudienceinsightsa fully managed end-to-end solution, providing an experienced support team forsegmentation audiences, execution and targeting.advanced reporting.
Our Strengths
We believethefollowingattributesand capabilitiesprovideus with long-termcompetitiveadvantages:
ScalableSelf-ServicePlatform: We offer a self-service platform that enables customers to operate their ad campaigns without extensive involvement of our staff. This dynamic allows us to add new customers and allows customers to scale their spend on our platform in a manner that grows our revenue at a faster pace than the growth of our personnel costs.
• | ScalableSelf-ServicePlatform:We offera self-serviceplatformthatenablescustomersto operate theirad campaignswithoutextensiveinvolvementof our staff.This dynamicallowsus to add new customersand allowscustomersto scaletheirspend on our platformin a mannerthatgrows our revenuefasterthanthegrowth of our personnelcosts. |
CentralizedPlatform: We believe our software platform enables our customers to plan, buy and measure advertising across more channels than our competitors and to centralize the purchase of each type of programmatic media on a single platform. Our supply integrations provide customers with access to over 300 million unique desktop and mobile users, 114 million connected TVs, 112 million linear TV households, over 200 million unique streaming audio users and 158,000 unique digital billboards, in the U.S.
• | CentralizedPlatform:We believeour softwareplatformenablesour customersto plan,buy and measureadvertisingacrossmorechannelsthanour competitorsand to centralizethepurchaseof eachtypeof programmaticmediaon a singleplatform.Our supplyintegrationsprovidecustomers with accessto approximately300 millionuniquedesktopand mobileusers, approximately 115 millionconnectedTV households, 112 millionlinearTVhouseholds, over200 millionuniquedigitalaudiousers,and approximately 158,000 uniquedigitalbillboards, in theUnited States. |
ProprietaryTechnology: We leverage a robust suite of proprietary tools and products in order to enable our customers to utilize our platform and services. We are constantly iterating and developing new tools and products while utilizing our patented technologies and processes. As of December 31, 2020, we have 26 issued patents and 10 additional pending patent applications, which cover many of our proprietary products. As new offerings are developed, we continue to file and obtain patents on the most valuable and innovative products developed at the company.
MachineLearning Capabilities: We enable the use of machine learning, workflow automation, automated reporting and other functionalities that allow our customers to update and make thousands of changes automatically to help achieve their desired business outcomes. These capabilities make our customers’ lives easier and improve the performance of their campaigns.
AdvancedReportingandMeasurement:We invest heavily in our measurement capabilities, as we believe this will increase our customers’ usage of our software. Our platform measures ROAS across all channels and empowers our customers with real-time insights leveraging people-based data, including foot-traffic reports and multi-touch attribution analytics. Our advanced reporting functionality uses our identity graph that is currently matched to more than 250 million users across 115 million households in the U.S. to provide marketers with a holistic view of measurement across all channels.
DifferentiatedPeople-BasedCapabilities: Our software is built on a people-based framework. We integrate with over 70 data partners using people-based identifiers. We believe this allows for a much more effective and privacy-friendly approach to advertising than using cookies for identification. Our platform is built on a foundation of user consent with advanced consumer opt-out capabilities to keep privacy and security on the forefront.
• | ProprietaryTechnology:We leveragea robustsuiteof proprietarytoolsand productsin orderto enableour customersto utilizeour platformand services.We areconstantlyiteratingand developingnew toolsand productswhileutilizingour patentedtechnologiesand processes.As of December 31, 2021, we held 28 issuedpatentsand 13 additionalpendingpatentapplications, which covermanyof our proprietaryproducts.As new offeringsaredeveloped, we continueto fileand obtainpatentson themostvaluableand innovativeproductsdevelopedatourcompany. |
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ExperiencedManagementTeam:Our managementteamhas deep and extensiveexperiencein the advertisingtechnologysector,which we believeprovidesus with a competitiveadvantage.This experienceof our managementteamhas allowedus to continueto be innovativein developing solutionsforour customers.
• | MachineLearning Capabilities:We enabletheuse of machinelearning,workflow automation, automatedreportingand otherfunctionalitiesthatallowour customersto updateand make thousandsof changesautomaticallyto helpachievetheirdesiredbusinessoutcomes.We believe these capabilitiesmakeour customers’liveseasierand improvetheperformanceof theircampaigns. |
• | AdvancedReportingandMeasurement:Weinvestheavilyinourmeasurementcapabilities,aswe believethiswillincreaseourcustomers’usageofoursoftware.OurplatformmeasuresROASacrossall channelsandempowersourcustomerswithreal-timeinsightsleveragingpeople-baseddata,including foot-trafficreportsandmulti-touchattributionanalytics.Ouradvancedreportingfunctionalityusesour identitygraphthathas linked approximately 115 million households to an estimated 1 billion connected devices and is combined with access to approximately 280,000 audience attributes in theUnited Statestoprovidemarketerswithaholisticviewofmeasurementacrossallchannels. |
ProfitableBusinessModel:Because we are a self-service platform, as we add new customers and as customers increase the use of our software, we are able to demonstrate strong operating leverage. During the years ended December 31, 2020 and 2019, revenue was $165.3 million and 164.9 million, respectively. Ournet income was $20.6 million and $9.9 million and our Adjusted EBITDA was $31.8 million and $24.7 million during the years ended December 31, 2020 and 2019, respectively.
• | DifferentiatedPeople-BasedCapabilities:Our softwareisbuilton a people-basedframework.We integratewith over70 datapartnersusingpeople-basedidentifiers.We believethisallowsfora muchmoreeffectiveand privacy-friendlyapproachto advertisingthanusingcookiesfor identification. Our platformisbuilton a foundationof userconsentwith advancedconsumeropt-out capabilitiesto keep privacyand securityon theforefront. |
• | ExperiencedManagementTeam:Our managementteamhas deep and extensiveexperiencein the advertisingtechnologysector,which we believeprovidesus with a competitiveadvantage.This experienceof our managementteamhas allowedus to continueto be innovativein developing solutionsforour customers. |
• | ProfitableBusinessModel:Becauseweareaself-serviceplatform,asweaddnewcustomersandas customersincreasetheuseofoursoftware,weareabletodemonstratestrongoperatingleverage. Duringthe fiscal yearsendedDecember31,2021 and 2020, ourrevenuewas$224.1million and $165.3 million, respectively.Our net loss was $37.6 million and our netincomewas $20.6 million during the fiscal years ended December 31, 2021 and 2020, respectively. Our adjustedEBITDAwas $37.1 million and $31.8million during the fiscal years ended December31,2021 and 2020, respectively. |
Our Growth Strategy
We believethattheadvertisingmarketisin theearlystagesof a secular shift towardstoward programmatic advertising.We intendto capitalizeon thisopportunityby pursuingthefollowingstrategies:
Continue to investin our customers’success: Our platform provides extensive functionality designed to provide our customers with a high level of control and enable them to run the most efficient campaigns. We continue to enhance new customer onboarding and support while investing in training and education for customers to maximize their success with the platform.
• | Continue to investin our customers’success:Our platformprovidesextensivefunctionality designedto provideour customerswith a high levelof controland enablethemto run efficient adcampaigns.We continueto enhancenew customeronboardingand supportwhileinvesting in trainingand educationforcustomersto maximizetheirsuccesswith theplatform. |
Add new customersand increaseour customers’usage of our platform: We continue to add functionality to our platform to attract new customers and encourage our customers to increase their usage of our platform. We believe many advertisers are in the early stages of moving a greater percentage of their advertising budgets to programmatic channels. By providing solutions for the planning, buying and measuring of their media spend across all channels we believe we are well positioned to capture the increase in programmatic budgets from new and existing customers.
• | Add new customersand increaseour customers’usage of our platform: We continueto add functionalityto our platformto attractnew customersand encourageour customersto increasetheir usage of our platform.We believemanyadvertisersarein theearlystagesof movinga greater percentageof theiradvertisingbudgetsto programmaticchannels.By providingsolutionsforthe planning,buying and measuringof theirmediaspend acrossallchannels,we believewe arewell positionedto capturetheincreasein programmaticbudgetsfromnew and existingcustomers. |
• | Continue to strengthenour omnichannelpartnerships:We believewe have thelargestbreadthof advertisinginventoryacrosschannelsin our industrylandscape.We willcontinueto investin the integrationof new supplypartnersacrossallchannels,furtherbroadeningand deepeningour supply of advertisinginventory. |
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Continue to strengthenour omnichannelpartnerships: We believe we have the largest breadth of advertising inventory across channels in our industry landscape. We will continue to invest in the integration of new supply partners across all channels, further broadening and deepening our supply of advertising inventory.
• | Expandour salesand marketinginvestment:We intendto continueto expand salesand marketing effortsto increaseawarenessand considerationof our platformand promotetheadvantagesof our people-basedframeworkas cookie-basedoptionscontinueto decline. |
Expandour salesand marketinginvestment: We intend to continue to expand sales and marketing efforts to increase awareness and consideration of our platform and promote the advantages of our people-based framework as cookie-based options continue to decline.
• | Extend our leadershippositionin people-basedadvertising:We believethereissignificantvalue in continuingto investin enhancingour identityresolutioncapabilitiesthroughadditionalpeople-baseddataintegrations. |
Extend our leadershippositionin people-basedadvertising: We believe there is significant value in continuing to invest in enhancing our identity resolution capabilities through additional people-based data integrations.
• | Investin growth through acquisitions:We alsointendto investin acquisitions that will allow us to offernew productsand capitalizeon our largeand growing marketopportunity.To theextentwe find attractiveacquisitioncandidatesand businessopportunitiesin thefuture,we maycontinueto acquirecomplementarybusinesses,productsand technologies. |
Investin growth through acquisitions: We also intend to invest in acquisitions to offer new products and to capitalize on our large and growing market opportunity. To the extent we find attractive acquisition candidates and business opportunities in the future, we may continue to acquire complementary businesses, products and technologies.
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Our Platform
Our platformViant’s DSP, Adelphic®, enables a marketer or their agency to programmatically buy an ad in linear television, a digital billboard on the side of the highway, a streaming ad on connected TVs, an ad in your favoritea mobile app or on your favoriteapplication, creatively within gameplay, during a podcast, or a dynamically personalized ad on any website, all within a single user interface. As illustrated by the graphic above, we believe that our software sits at the center of the digital advertising ecosystem.
The key components of our platform include:
Omnichannel DSP: We offeran omni-channel,people-basedDSPthatprovidesenterprise-ready,self-servicetechnologyto enableour customersto engagewith consumersacrossallchannels,devices,and formats.
ComprehensiveForecasting. Our platform allows customers to plan future marketing campaigns based on desired targeting tactics by utilizing historical bid request data to project performance onto available inventory. Customers can easily apply multiple data segmentation filters and see what ad inventory is available and at what price.
• | Interoperable DSP: Our holistic, omnichannel DSP enables brands and agencies to seamlessly target and measure key audiences across leading supply from premium publishers within CTV, digital out-of-home, mobile, audio, in-game, desktop and more without having to constantly switch between platforms. |
Easy Campaign Setup. Our intuitive user interface enables marketers to seamlessly move from forecasting to launching live advertising campaigns. Our platform reduces the time from planning a campaign to execution, helping marketers to fluidly execute deterministic cross-channel campaigns using a variety of quality data and supply partners to reach their target audience.
• | Comprehensive Forecasting. Our platform allows customers to plan future marketing campaigns based on desired targeting tactics by utilizing historical bid request data to project performance onto available inventory. Customers can easily apply multiple data segmentation filters and see what ad inventory is available and at what price. |
• | Ease of Use. Our intuitive user interface enables marketers to seamlessly move from forecasting to launching live advertising campaigns. This reduces the time from planning a campaign to execution, |
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helping marketers to fluidly execute deterministic cross-channel campaigns using a variety of quality data and supply partners to reach their target audience. |
• | Campaign Decisioning. We offer the ability to continuously measure and optimize campaigns by leveraging powerful KPIs directly within platform reports. Marketers have the ability to optimize campaigns in-flight, even if they have already started. This granular decision-making ability provides customers more accurate and real-time understanding overtheperformanceof theirlivecampaigns. |
Campaign Decisioning. We offer the ability to continuously measure and optimize campaigns by leveraging powerful KPIs directly within platform reports. Marketers have the ability to log onViant Household ID:Adelphic software has exclusive access to the self-service platform to immediately pause, update or re-align campaigns, even if they haveVHHID, making it a people-based DSP, already started. This granular decision-making ability provides customers more accurateoperating in cookieless environments including CTV and real-time understanding over the performance of their live campaigns.
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IdentityManagement:mobile apps. The VHHID powers data, channel and publisher interoperability providing simple and effective advertising. Marketerscan easilysync customerdata,buildcustomaudiences,extendtarget audiencesand understandaudienceinsightsseamlesslywithinour cloud-based,on-demandplatform.software.
Onboarding. Through our simple interface, marketers can easily upload and leverage their first-party data. We enable marketers to onboard their first-party data and instantly gain a view into their customers’ top attributes, create targeting segments and easily activate these customer segments.
• | Cookieless Solution. The VHHID provides marketers the scalability, addressability, measurability and privacy compliance necessary for success today. This patented technology unlocks many benefits such as: |
Look-a-LikeModeling. We help expand the reach of an existing audience segment or prospect list for new customers.
• | built-in cross-device conversion tracking, allowing marketers to target all eligible devices in a household to drive conversions; |
IdentityDirectMatchto More than 70 Data Partners. Our DSP is integrated with more than 70 data partners. We use people-based identifiers to integrate with these data partners, which allows for marketers to achieve high match rates against 280,000 audience segments for use in targeted ad campaigns. Our latest software innovation, Mediator, quickly matches demand and supply and we believe efficiency will increase significantly as we continue to improve the software.
• | universal frequency management at scale, eliminating the need to control frequency in silos based on channel and/or device limitations; and |
• | tracking uniformity and identity persistence across all browsers and tracking environments with otherwise fragmented identifiers. |
Privacyand Security. We believe in giving consumers more transparency, choice, and control over how their data is used in digital advertising. We support most advanced hashing protocols and make data protection a top priority for consumers and customers.
• | Onboarding. Through our simple interface, marketers can safely and securely upload and leverage their first-party data using the VHHID. This enables marketers to onboard their first-party data and instantly gain a view into their customers’ top attributes, create targeting segments and easily activate and measure these customer segments across cookieless environments. |
• | Lookalike Modeling. We help expand the reach of an existing audience segment or prospect list for new customers for extended scale of critical audiences. |
• | People-Based Targeting and Data Integrations. Viant’s people-based approach allows brands to connect with real households and individuals with accurate reach and frequency. Our integrations with more than 70 data providers allow for extensive identity mapping, giving users the ability to target consumers based on purchase behaviors, location, TV viewership insights and much more. Superior integrations with TV viewership data providers present users with one of the most established, scalable and accurate CTV footprints in the market. |
• | Privacy and Security. We believe in giving consumers more transparency, choice and control over how their data is used in digital advertising. We support most advanced hashing protocols and make data protection a top priority for consumers and customers. |
Advanced Reporting:We closetheloop on digitaland traditionalmediaby linkingadvertisingspend to onlineand offlinesales.
Reach and Frequency. Our platform accurately measures how many households and unique users an advertising campaign reached and the frequency of exposures.
Cross-ChannelSuite. Our cross-channel reporting capabilities equip customers to analyze cross-device and cross-channel campaign impact on sales and other key performance indicators.
TV ReportingSuite. Our TV reporting suite gives insights into the impact connected and linear television advertising has on driving digital engagement like website visits or conversions, as well as offline sales. These insights create better visibility into the true ROAS of TV ad campaigns.
Multi-Touch Attribution(“MTA”). Our MTA suite gives customers the ability to report on six different attribution models, ingest online and offline files and gain visibility into consumer purchase pathways. The resulting holistic view of ad performance enables customers to close the loop in measurement and better link spend to sales.
• | Reach and Frequency.Our platformaccuratelymeasureshow manyhouseholdsand uniqueusers an advertisingcampaignreachedand thefrequencyof exposures. |
• | Cross-ChannelReporting.Our cross-channelreportingcapabilitiesequipcustomersto analyzecross-deviceand cross-channelcampaignimpacton salesand otherKPIs. |
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• | TV vs Digital reporting provides insights into the impact connected and linear television advertising has on driving digital engagement like website visits or conversions, as well as offline sales. These insights create better visibility into the true ROAS of TV ad campaigns. |
• | Multi-Touch Attribution gives customers the ability to receive insights into where target audiences are interacting with brands, the impact of touchpoints across channels and devices and the order of steps along the conversion journey. The resulting holistic view of ad performance enables customers to close the loop on measurement and better link spend to sales. |
• | Conversion Lift Reporting helps advertisers understand the impact of media in driving conversions. Ghost bids are a control group made up of consumers who were within the campaign targeting criteria and active on the programmatic network, on whom a bid request was placed to show them the campaign ad, but the bid was lost. Those impressions are then passively tracked and included in the control group. By leveraging ghost bids to create a control group, customers can see how much impact their media has in driving incremental conversions and use these insights to refine their optimization strategy for better results and investment impact. |
• | Foot TrafficAttribution.Our foottrafficdatareportingcapabilitiesallowcustomersto analyzethe impactof theirad campaignson drivingvisitsto a physicallocation. |
• | DigitalBillboardReporting.Our digitalbillboardreportingprovidesa holisticview ofad spend, givingcustomersreal-timeinsightsintotheirdigitalbillboardad performanceand helping customersoptimizebudgetsby allocatingad spend on effectivedigitalbillboardsand venue types. |
Foot TrafficAttribution.Our foot traffic data reporting capabilities allow customers to analyze the impact of their ad campaigns on driving visits to a physical location.
DigitalBillboardReportingSuite. Our digital billboard reporting suite provides a holistic view of ad spend, giving customers real-time insights into their digital billboard ad performance and helping customers optimize budgets by allocating ad spend on effective digital billboards and venue types.
Automated Brand Surveys. Customers using our reporting capabilities can generate on-demand surveys to better gauge the effectiveness of advertising campaigns. Brand surveys deliver automated feedback and give customers the ability to create accurate benchmarks for historical performance and for measurement of advertising performance with a real-time feedback loop.
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Our platformsoftware isbuiltwith ad buyersin mindand offersmanyin-depthfeaturesthatgivebuyersthe highestlevelsof control,which helpsensuretheyarerunningthemostefficientcampaignspossible.This includes:
Bulk Functionality: Our platform is built to ease the lives of programmatic traders. With Adelphic, traders can mass edit ad orders and campaigns, instead of making individual changes one at a time, saving significant time. For example, if a trader wants to change the bid price for all 1,000 of their ad orders, they could simply download a form and upload it, rather than wasting time by editing each ad order one by one.
• | Bulk Functionality: Our platform is built to ease the lives of programmatic traders. With Adelphic, traders can mass edit ad orders and campaigns, instead of making individual changes one at a time, saving significant time. For example, if a trader wants to change the bid price for all 1,000 of their ad orders, they could simply download a form and upload it, rather than wasting time by editing each ad order one by one. |
API Capabilities: Adelphic provides ease of integration using APIs and tools. The API capabilities provide bilateral data syndication into or out of the platform for trafficking and reporting in formats easily accepted by business intelligence teams for programmatic traders. With these, traders can maintain customer identities with a fully integrated platform that links devices and offline activities to real people and seamlessly execute and measure campaigns.
• | Application Integration Interfaces (“API”) Capabilities: Adelphic provides ease of integration using APIs and tools. The API capabilities provide bilateral data syndication into or out of the platform for trafficking and reporting in formats easily accepted by business intelligence teams for programmatic traders. With these, traders can maintain customer identities with a fully integrated platform that links devices and offline activities to real people and seamlessly execute and measure campaigns. |
MachineLearning Algorithms:
• | Machine Learning Algorithms: Our built-in advanced machine learning technology analyzes millions of impressions and data points every second. Our algorithms find optimal bid prices for maximizing performance and scale across all major KPIs, allowing our customers to strengthen their campaign efforts and build confidence in programmatic campaign performance. |
Our Technology and Development
Rapid and continuinginnovationisa coredriverof our businesssuccessand our corporateculture.Our productand engineeringteamisresponsibleforthedesign,developmentand testingof our platform.We are committedto continuousinnovationand rapidintroductionof new technologies,featuresand functionalitythat bringvalueto our customers.We expecttechnologyand developmentexpenseand capitalizedsoftware developmentcoststo increaseas we continueto investin thedevelopmentof our platformto supportadditional featuresand functions,such as enhancementof our userinterfaceand automationfunctions,and to increasethe numberof advertisingand datainventoryintegrationsin variouschannels.
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The technicalinfrastructureforour platformiscurrentlymanagedthroughthird-partyweb hosting servicesprovidersand to a limitedextent,our own serverswhich arelocatedata third-partydatacenterfacility. We generallyenterinto oneone- to two year two-yearagreementswith our web hostingproviders.
Our Customers
Our customersconsistof purchasersof programmaticadvertisinginventory. We define an Active Customeractive customer as a customer that had total aggregate revenuecontribution ex-TAC of at least $5,000 through our platform during the previous twelve months. We had 309 and 264 and 277 Active Customers active customersfortheyearsended December31, 2021 and 2020, and 2019,respectively, in eachcaseconsistingof advertisingbuyers, includinglargeadvertisingholding companies,independentadvertisingagencies,mid-marketadvertisingserviceorganizationsas wellas marketers relyingon our self-servicesoftwareplatformfortheirprogrammaticad buying needs. For a detailed discussion of Active Customers,active customers, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Key Operating and Financial Performance Metrics—Number of Measures—Active Customers and Average RevenueContribution ex-TAC per Active Customer.” RevenueContribution ex-TAC is a non-GAAP financial measure. For a detailed discussion of our key operating and financial performance metricsmeasures and a reconciliation of revenuecontribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Key Operating and Financial Performance Metrics—Measures—Use of Non-GAAP Financial Measures.”
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Many of theadvertisingagenciesthatwe work with areowned by holdingcompanies,where decision-makingisgenerallyhighlydecentralizedsuch thatpurchasingdecisionsaremade,and relationshipswith advertisersarelocated,attheagency,localbranchor divisionlevel.Our customercountincludesonly those partieswith which we have a billingrelationship.We contractwith our customerseitherthroughmasterservice agreementsor insertionorders.Our agreementsdo not containany materialcommitmentson behalfof customers to use our platformto purchasead inventoryor use otherfeatures.Our agreementswith customersgenerallydo not have a specifiedterm,and aregenerallyterminableatany timeby eitherpartyupon specifiednoticeperiods, typicallyrangingfrom30 to 90 days. Insertionordersaregenerallylimitedin scopeand can be reducedor canceledby a buyerwithoutpenalty. See “Risk Factors—Risks Related to Our Business and Operations—We receivea significantamount of revenuefroma selectnumber of advertisingagency holding companies, owning variousadvertisingagencies, and the lossof advertisingagenciesas customerscould harm our business,operatingresultsand financialcondition.”for additional discussion of our customer relationships with advertisingagencies.
Our Advertisingand Data Supply
We obtaindigitaladvertisinginventoryprimarilythroughour integrationswith supplysideplatforms (“SSPs”)and directlywith publishers.We believethatour integrationsacrosseverychannelgiveus themost robustomnichannelintegrationsof any singleplatform.These suppliersprovideus with accessto a breadthof programmaticadvertisinginventoryacrossdesktop,mobile,connectedTV,linearTV, in-game, streamingaudioand digitalbillboards.
We enabledeep dataaccessthroughour integrationswith over70 leadingdatacompanies, givingour customersaccessto dataacrosskey industryverticals,includingauto,retail,consumerpackagedgoods, travel and health.Customersonboardtheirown first-partydataonto our platform,withouttheneed of a separatedata managementplatform.Our operationof Myspace.comprovidescertaindataassetsand intellectualpropertythat we mayleverageto continueto offerinnovativeproductsand servicesto our clients.
Salesand Marketing
We sellour platformthrougha directsalesteamfocusedon businessdevelopmentacrossallmarkets, includingsalesto new customersand revenuegrowth withinexistingcustomers.We have an experiencedsales team of 75 sellers across the United States who are focusedon sellingaccessto our platformin our target markets,buildingand nurturingrelationshipswith globalbrandsand agencies.We use a consultativesales approachfocusedon educatingexistingand potentialcustomerson our platformcapabilities,and trainingclients to use our platform.We offera formalcertificationprogram,ProgrammaticUniversityand Adelphic Certification, that whichcoversprogrammaticindustrytrends,technologycapabilitiesand time-savingworkflowsand have an onlineknowledge basewith robustdocumentation.We provide
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dedicatedcustomersupportand work with customersas theysetup and optimizetheircampaigns,assistwith deliveryagainst key performance indicators KPIsand goals,and providepost-campaignsupportand recommendations.
We tailorour contractsand termsto theneedsof our customers,includingby offeringour threedifferent pricingoptions: a percentageof spend option, a subscriptionoptionand a fixed CPM pricing costpermille(“CPM”)option. Customers can use our platformon a self-servicebasisor can enlistour servicesto executetheircampaigns.
Our marketingeffortsarefocusedon increasingawarenessand considerationforour brands,executing thought-leadershipinitiatives,participatingin industryevents,creatingcomprehensivesalessupportmaterials and generatingnew customerleads.We seekto accomplishtheseobjectivesby presentingatindustry conferences,hostingcustomerconferences,publishingwhitepapersand research,publicrelationsactivities, advertisingcampaignsand socialmediapresence.
Privacyand Data Protection
Modern consumersIn the ordinary course of our business, we may collect, receive, compile, use, multiple platformsstore, process, share, dispose of, disclose, retain, transfer, and destroy (“Process”)personal information. Accordingly, we are subject to learn aboutnumerous data privacy and purchase productssecurity obligations, including federal, state, local, and services,foreign laws, regulations, guidance, and consumers have comeindustry standards related to expect a seamless experience across all channels. This challenges marketing organizations to balancedata privacy, security, and protection. Such obligations may include, without limitation, the demandsFederal Trade Commission Act, the Telephone Consumer Protection Act of 1991, the consumer andChildren’s Online Privacy Protection Act of 1998, the most effective advertising techniques with responsible, privacy-compliant methodsControlling the Assault of managing data internally and with advertising technology intermediaries.
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We believestronglyin providingconsumerswith morevisibilityand controlovertheirdata.We have prioritizedprotectingtheprivacyNon-Solicited Pornography And Marketing Act of consumersand theirdataand offerconsumersa robustsuiteof toolsto managetheirdata.We have policiesand operationalpracticesgoverningour use of datathataredesignedto activelypromotea setof meaningfulprivacyguidelines,includingadvancedconsumeropt-outcapability,bestin classsecuritymeasures,encryptionof datausingrobustindustrystandards,proactiveidentificationof threatsand regularpenetrationtesting.When givingour customersaccessto personaldata,we providethatdatain a “hashed,”or de-identified,manner.We have dedicatedpersonnelin placeto overseeour compliancewith thedataprotectionregulationsthatgovernour businessactivitiesin thejurisdictionsin which we operate.
The U.S. Congress and state legislatures, along with federal regulatory authorities, have recently increased their attention on matters concerning the collection and use of consumer data, including relating to internet-based advertising. Data privacy legislation has been introduced in the U.S. Congress, and California has enacted broad-based privacy legislation,2003, the California Consumer Privacy Act. State legislatures outsideAct of 2018 (“CCPA”), the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”), the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”), the ePrivacy Directive, and the Payment Card Industry Data Security Standard (“PCI DSS”). In addition, many U.S. states have enacted or proposed data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act.
The CCPA and EU GDPR are examples of the increasingly stringent and evolving regulatory frameworks related to personal information Processing that may increase our compliance obligations and exposure for any noncompliance. For example, the CCPA imposes obligations on covered businesses to provide specific disclosures related to a business’s Processing of personal information and to respond to certain requests from California have proposed,residents related to their personal information (for example, requests to know of the business’s personal information Processing activities, to delete the individual’s personal information, and into opt out of certain cases enacted,personal information disclosures). Also, the CCPA provides for civil penalties and a varietyprivate right of action for data breaches which may include an award of statutory damages. In addition, it is anticipated that the California Privacy Rights Act of 2020 (“CPRA”), effective January 1, 2023, will expand the CCPA. The CPRA will, among other things, give California residents the ability to limit use of certain sensitive personal information, establish restrictions on personal information retention, expand the types of data breaches that are subject to the CCPA’s private right of action, and establish a new California Privacy Protection Agency to implement and enforce the new law. U.S. federal and state consumer protection laws may also require us to publish statements that accurately and fairly describe how we handle personal information and choices individuals may have about the way we handle their personal information.
Foreign data privacy legislation. Many non-U.S. jurisdictions have also enactedand security laws impose significant and complex compliance obligations on entities that are subject to those laws. For example, the EU GDPR applies to any company established in the European Economic Area (“EEA”) and to companies established outside the EEA that Process personal information in connection with the offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA. These obligations may include limiting personal information Processing to only what is necessary for specified, explicit, and legitimate purposes; requiring a legal basis for personal information Processing; requiring the appointment of a data protection officer in certain circumstances; increasing transparency obligations to data subjects; requiring data protection impact assessments in certain circumstances; limiting the collection and retention of personal information; increasing rights for data subjects; formalizing a heightened and codified standard of data subject consents; requiring the implementation and maintenance of technical and organizational safeguards for personal information; mandating notice of certain personal information breaches to the relevant supervisory authority(ies) and affected individuals; and mandating the appointment of representatives in the UK and/or the EU in certain circumstances.
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See “Risk Factors—Risks Related to Data Privacy—We are developingsubject to stringent and changing obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of customers or sales, revenue declines, increase the cost of data, reduce the availability of data, adversely affect the demand for our products and services, or other adverse business consequences.” for additional information about the laws and regulations governingto which we are subject and about the collectionrisks to our business associated with such laws and use of personal data.
We expect the trend of enacting and revising data protection laws to continue and that new and expanded data privacy legislation in various forms will be implemented in the U.S. and in other countries around the globe.regulations.
Competition
Our industryishighlycompetitiveand fragmented.We competewith smaller,privately-heldcompanies, alongwith publiccompaniessuch as theTradeDesk, and with divisionsof large,well-establishedcompaniessuch as Google and Amazon. The competitivelandscapein recentyearshas been affectedby consolidationand limitedinvestmentin new startupsin our industryand therearefew competitorswith self-servicecapabilities. Our long historyand timein themarketwith customershas givenus significantadvantagesin termsof platform developmentand expertise, as wellas a long developmentleadaheadof new entrants. We believethatwe competeprimarilybasedon theperformanceof campaignsrunningon our platform,capabilitiesof our platform, our identityresolutioncapabilities,our omnichannelcapabilitiesand our advancereportingcapabilities.We believethatwe aredifferentiatedfromour competitorsin thefollowingareas:
we are an independent technology company focused on serving advertising agencies and marketers on the buy-side of our industry;
our platform is self-service and easy to use;
we offer our DSP in an integrated manner with our people-based capabilities, so customers do not need to use separate providers for onboarding client information and ad and data purchasing services;
our platform provides comprehensive access to a wide range of inventory types across a broad range of channels;
our platform provides comprehensive access to a wide range of data partners across a broad range of industry verticals and channels to enable precise audience targeting and measurement;
our identity resolution capabilities help marketers plan, buy and measure their campaigns more effectively;
we provide customer service and satisfaction; and
we provide flexible pricing options to support a wide variety of customers.
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| • | we arean independenttechnologycompanyfocusedon servingadvertisingagenciesand marketers on thebuy-sideof our industry; |
• | our platformisself-serviceand easyto use; |
• | we offerour DSPin an integratedmannerwith our people-basedcapabilities,so customersdo not need to use separateprovidersforonboardingclientinformationand ad and datapurchasing services; |
• | our platformprovidescomprehensiveaccessto a wide rangeof inventorytypesacrossa broad rangeof channels; |
• | our platformprovidescomprehensiveaccessto a wide rangeof datapartnersacrossa broadrange of industryverticalsand channelsto enablepreciseaudiencetargetingand measurement; |
• | our identityresolutioncapabilitieshelpmarketersplan,buy and measuretheircampaignsmore effectively; |
• | we provide extensive customerserviceand satisfaction;and |
• | we provideflexiblepricingoptionsto support our customer’s needs. |
Our Human Capital
We are a founder-led business and believe our employees and culture are key to our success. Our employees tend to be long tenured for our industry, with average tenure of the leadership team of nearly 12 years and more than 4 years across all employees. Our business and our culture are anchored on four core values that embody our resourceful mentality: “Live,” “Lead,” “Create” and “Figure It Out.” We believe we attract talented employees to our company and sophisticated customers to our platform in large part because of our vision and unwavering commitment to using cutting-edge technologies to create products that help advance the advertising industry.
As of December 31, 2020,2021, we had 289approximately 350 employees in 10 offices aroundacross the United States. Our team draws from a broad spectrum of backgrounds and experiences across technology and advertising industries.
Diversity and Inclusion
We are committed to fostering a culture of inclusion where all employees feel valued and included. We believe our greatest asset is the people who work for us, and as part of our investment in our people, we prioritize
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diversity and inclusion. Our goal is to create a culture where we value, respect, and provide fair treatment and opportunities for all employees. Each year, we conduct an annual survey to give employees the opportunity to provide feedback on our management team and culture. This survey helps drive new programs that continue the development of our inclusive culture. Our leaders review the survey feedback and work with their teams to initiate new initiatives based on the results.
We are committed to developing a diverse environment through recruiting, development programs, community involvement and fostering conversations about differences.
Talent Development
Even though Viant haswe have been around for 20+over 20 years, our culture still reflects an entrepreneurial spirit. We empower employees to develop their skills and abilities by following our core values and acting on great ideas regardless of their role or function. We encourage employees at all levels to be creative and come up with ideas that can help the business grow. We work to provide an environment where talented individuals and teams can take control of their career growth. We provide a wide range of learning and development opportunities in both individual and group settings.
Compensation and Benefits
We provide compensation and benefits programs to help meet the needs of our employees and reward their efforts and contributions. We use internal and external resources to help develop plans that are fair and reward our employees’ commitment and performance with the goal of attracting and retaining high performing individuals.
In addition to salaries, we provide competitive compensation programs that are in line with our peers and industry. These programs may include bonuses, equity awards, 401(k) plan, healthcare and insurance benefits, flexible spending accounts, paid time off, family leave and employee assistance programs among many others.
Health, Safety and Wellness
We strive to provide a work environment where our employees feel safe and are comfortable working. In response to the COVID-19 pandemic, we immediately implemented a teleworking program that complied with all applicable government regulations and protected our employees while allowing them to continue to be effective in their jobs. We continue to stay updated on changes in government regulations and implement them to meet our employees’ changing health and wellness needs.
IntellectualProperty
The protectionof our technologyand intellectualpropertyisan importantcomponentof our success. We relyon intellectualpropertylaws, includingtradesecret,copyright,patentand trademarklaws in the U.S.United States and abroad,and use contracts,confidentialityprocedures,non-disclosureagreements,employeedisclosureand inventionassignmentagreementsand othercontractualrightsto protectour intellectualproperty.
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As of December 31, 2020,2021, we held2628 issuedpatents,1013 pendingpatentapplicationsand 306323 issued trademarks.Our issuedpatentsarescheduledto expirebetween2025 and 2038. We continuallyreviewour developmenteffortsto assesstheexistenceand patentabilityof new intellectualproperty.In additionto the intellectualpropertyrelatingto theoperationof Adelphicand our people-basedframework,we own intellectual propertyrelatedto our owned site,Myspace.com.Of our issuedpatents,1113 relateto our platformand our people-basedframework,and 15 relateto theMyspace.comsite.Myspace.com.
Corporate Information
Viant wasWe were founded in 1999 by Tim, Chris and Russ Vanderhook who continue to lead our company today. Viant hasWe have been at the forefront of digital advertising technology since itsour inception and hashave demonstrated itsour ability to grow, thrive, and innovate as competitors have come and gone. In 2011, Viantwe acquired the social network website Myspace.com. In 2011, Tim and Chris Vanderhook started Xumo, a connected TV streaming service, which was acquired by Comcast Corp. in 2020. In 2015, Viantwe completed itsour first people-based integration. ViantWe remained independent until 2016, when Time Inc. acquired a 60% interest in Viantour company through itsour subsidiary, Viant Technology Holding Inc. (the “Former Holdco”). That interest was later acquired by Meredith Corporation when it
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acquired Time Inc. in 2018. In 2017, the Companywe purchased Adelphic, a DSP. Since the Adelphic acquisition, the Company haswe have materially transformed from a full-service provider of digital advertising solutions into a leading DSP that enables marketers and their advertising agencies to centralize the planning, buying and measurement of their media investments using a people-based framework. Viant hasWe have grown from a business operating from a home office to a company with nearly 300approximately 350 employees in 10 offices throughout the U.S.United States at the end of 2021. In 2019, Viantwe entered into an agreement that resulted in the retirement of the Former Holdco’s interest in Viantour company and Tim Vanderhook, Chris Vanderhook and Four Brothers 2 LLC (the “Vanderhook Parties”)acquired that 60% interest in the Companyour company (the “2019 Former Holdco transaction”), allowing it to once again become an independent company. Viant Technology Inc. was incorporated in Delaware on October 9, 2020. In connection with the consummation of our initial public offering (the “IPO”), Viant Technology Inc.we became the sole managing member of Viant Technology LLC. We completed the IPO of our Class A common stock on February 12, 2021. Our principal executive offices are located at 2722 Michelson Drive, Suite 100, Irvine, CA 92612 and our telephone number is (949) 861-8888. Our website address is www.viantinc.com.Our design logo, “Viant,” and our other registered and common law trade names, trademarks and service marks are the property of Viant Technology Inc.
The SEC maintains a website at www.sec.gov that contains reports, information statements and other information regarding issuers that file electronically with the SEC. Our Annual Report can be downloaded from the SEC’s website. We will file with or furnish to the SEC periodic reports and other information. We furnish or make available to our stockholders annual reports containing our audited consolidated financial statements prepared in accordance with GAAP. We also furnish or make available to our stockholders quarterly reports containing our unaudited interim financial information, for the first three fiscal quarters of each fiscal year. We make our periodic reports and other information filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act, available, free of charge, through our website,www.viantinc.com, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information contained on our website or linked therein or otherwise connected thereto does not constitute part of nor is it incorporated by reference into this Annual Report.
15Emerging Growth Company
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). We may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until December 31, 2026 or until we are no longer an “emerging growth company,” whichever is earlier. We will cease to be an emerging growth company prior to the end of such period if certain earlier events occur, including if we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period.
In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption is required for private companies. As part of this election, we are delaying the adoption of accounting guidance related to leases and implementation costs incurred in cloud computing arrangements that currently applies to public companies. See Note 2 to our consolidated financial statements included elsewhere in this Annual Report for additional information.
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Item 1A. RiskRisk Factors.
Investingin our Class A commonstockinvolvesa high degreeof risk.You shouldcarefullyconsiderthe followingrisksand uncertaintiesdescribedbelow, togetherwith allotherinformationcontainedin this Annual Report and in our other public filings,includingour consolidatedfinancialstatementsand therelatednotesappearingat theend of this Annual Report.The occurrenceof any of thefollowingrisks, as wellas any risksor uncertaintiesnot currentlyknown to us or thatwe currentlydo not believeto be material, couldmateriallyand adverselyaffectour business,prospects,financialcondition,resultsof operationsand cash flow, in which case,thetradingpriceof our Class A commonstockcoulddeclineand you couldloseallor partof your investment.
Summary of Factors That May AffectRisks Relatedto Our Future ResultsBusiness and Operations
The following summarizes the principal factors that make an investment in the Company speculative or risky. This summary should be read in conjunction with the remainder of this “Risk Factors” section Our successand should not be relied upon as an exhaustive summary of the material risks facing our business. The occurrence of any of these risks could harm our business, financial condition, results of operations and/or revenuegrowth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described in our public filings when evaluating our business.
our ability to addaredependenton adding new customers,effectively educate educatingand traintraining our existingcustomerson howto makefulluse of our platformand increase the increasingusage of our platform by our customers;
failure to realize the expected benefits of an industry shift away from cookie-based consumer tracking;
the impact of the COVID-19 pandemic and other sustained adverse market events on our and our customers’ business operations;
our ability to innovate, effectively manage our growth and make the right investment decisions;
the relatively new and evolving market for programmatic buying for advertising campaigns;
the loss of a significant amount of revenue from select advertising agencies as customers;
fluctuations in our operating results and the varying nature, in terms of mix, of our different pricing options;
our lengthy sales cycle and payment-related risks;
diminishment of, or failure to grow, our access to advertising inventory;
the intensely competitive nature of the market in which we participate; and
the impact on our business of data privacy regulation or data privacy breaches.
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Risks Related to Our Business
Our success and revenue growth is dependent on adding new customers, effectively educating and training our existing customers on how to make full use of our platform and increasing usage of our platform by our customers.
Our successisdependenton regularlyaddingnew customersand increasingour customers’usage of our platform.Our contractsand relationshipswith customersgenerallydo not includelong-termor exclusive obligationsrequiringthemto use our platformor maintainor increasetheiruse of our platform.Our customers typicallyhave relationshipswith numerousprovidersand can use both our platformand thoseof our competitors withoutincurringsignificantcostsor disruption.Our customersmayalsochooseto decreasetheiroverall advertisingspend forany reason,includingiftheydo not believetheyarereceivinga sufficient return on their advertising spend.ROAS. Accordingly,we mustcontinuallywork to win new customersand retainexistingcustomers, increasetheirusageof our platformand capturea largershareof theiradvertisingspend. WeFor those customers utilizing our self-service capabilities, we maynot be successfulateducatingand trainingcustomers,particularlyour newer customers,on how to use our platform,in particularour advancedreportingtools,in orderforour customersto getthemostbenefitfromour platformand increasetheirusage.Iftheseeffortsareunsuccessfulor customersdecidenot to continueto maintainor increase theirusageof our platformforany otherreason,or ifwe failto attractnew customers,our revenuecouldfailto grow or decline,which would materiallyand adverselyharmour business,operatingresultsand financial condition.We cannotassureyou thatour customerswillcontinueto use and increasetheirspend on our platform or thatwe willbe ableto attracta sufficientnumberof new customersto continueto grow our businessand revenue.Ifcustomersrepresentinga significantportionof our businessdecideto materiallyreducetheiruse of our platformor ceaseusingour platformaltogether,our revenuecouldbe significantlyreduced,which couldhave a materialadverseeffecton our business,operatingresultsand financialcondition.We maynot be ableto replacecustomerswho decreaseor ceasetheirusageof our platformwith new customersthatwilluse our platformto thesame extent.extent or at all.
We maynot realizethe expectedbenefitsof an industryshiftaway fromcookie-basedconsumertrackingas such shiftmaynot occur as rapidlyas we expector maynot be realizedat all.
We expect to benefit as compared to others in our industry from marketers reducing their reliance on vendors and software platforms that utilize third-party cookies for tracking.tracking. However, we cannot assure you that the shift away from cookie-based consumer tracking will happen as rapidly as we expect or that such shift will occur at all. For example, in June 2021, Google announced that its previously announced timeline of blocking third-party cookies by 2022 would be delayed until 2023. Additionally, even if the shift away from cookie-based consumer tracking does occur, we may not be as successful in growing our business and increasing our revenue as we expect. For example, marketers may not shift their business away from our competitors if our competitors are successful in developing alternative products or services that are not significantly reliant on the cookie-based framework.framework, which could harm our business.
The effectsof the ongoing COVID-19pandemicand other sustained adversemarketeventshave had, and could in the futurehave, an adverseimpacton our business,operatingresultsand financialcondition.
Our businessand operationshave been and couldin thefuturebe adverselyaffectedby health epidemics,such as theglobalCOVID-19pandemic.The COVID-19pandemicand effortsto controlitsspread have curtailedthemovementof people,goods and servicesworldwide,includingin theregionsin which we and our customersand partnersoperate,and aresignificantlyimpactingeconomicactivityand financialmarkets. Many marketers,
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particularlythosein thetravel,retailand automotiveindustries,have decreasedor pausedtheir advertisingspendingas a responseto theeconomicuncertainty,declinein businessactivity,and otherCOVID-19-relatedimpacts,which has negativelyimpacted,and maycontinueto negativelyimpact,our revenue and resultsof operations,theextentand durationof which we maynot be ableto accuratelypredict.The spread of an infectiousdiseasemayalsoresultin, and, in thecaseof theCOVID-19pandemichas resultedin, regional quarantines,laborshortagesor stoppages,changesin consumerpurchasingpatterns,disruptionsto service providers’abilityto deliverdataon a timelybasis,or atall,and overalleconomicinstability.
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A recession,depressionor othersustainedadversemarketeventsresultingfromthespreadofCOVID-19couldmateriallyand adverselyaffectour businessand thatof our customersor potentialcustomers. Our customers’and potentialcustomers’businessesor cashflowshave been and maycontinueto be negatively impactedby theCOVID-19pandemic,which has ledand maycontinueto leadthemto reducetheiradvertising spendingand delaytheiradvertisinginitiativesor technologyspending,or attemptto renegotiatecontractsand obtainconcessions,which maymateriallyand negativelyimpactour business,operatingresultsand financial condition.Our customersmayalsoseekadjustmentsto theirpaymentterms,delaymakingpaymentsor default on theirpayables,any of which mayimpactthetimelyreceiptand/orcollectabilityof our receivables.Typically, we arecontractuallyrequiredto pay advertisinginventoryand datasupplierswithina negotiatedperiodof time, regardlessof whetherour customerspay us on time,or atall,and we maynot be ableto renegotiatebetterterms. As a result,our financialconditionand resultsof operationsmaybe adverselyimpactedifthebusinessor financialconditionof our customersand marketersisnegativelyaffectedby thepandemic.
Our operationsaresubjectto a rangeof externalfactorsrelatedto theCOVID-19pandemicthatarenot withinour control.We have takenprecautionarymeasuresintendedto minimizetheriskof thespreadof the virusto our employees,partnersand customers,and thecommunitiesin which we operate. A wide range of governmental restrictions has also been imposed on our employees’, customers’ and partners’ physical movement to limit the spread of COVID-19. Therecan be no assurancethatprecautionarymeasures,whether adoptedby us or imposedby others,willbe effective,and such measurescouldnegativelyaffectour sales, marketing,and customerserviceefforts,delayand lengthenour salescycles,decreaseour employees’or customers’or partners’productivity,or createoperationalor otherchallenges,any of which couldharmour business,operatingresultsand financialcondition.
The economicuncertaintycausedby theCOVID-19pandemic, including the recent surge caused by variants of the COVID-19 pandemic virus,has madeand maycontinueto makeit difficultforus to forecastrevenueand operatingresultsand to makedecisionsregardingoperationalcost structuresand investments.Our businessdependson theoveralldemandforadvertisingand on theeconomic healthof our customersthatbenefitfromour platform.Economicdownturnsor unstablemarketconditionsmay causeour customersto decreasetheiradvertisingbudgets,which couldreduceusageof our platformand adverselyaffectour business,operatingresultsand financialcondition.We have committed,and we planto continueto commit,resourcesto grow our business,includingto expand our employeebaseand further developour platformand systems,and such investmentsmaynot yieldanticipatedreturns,particularlyifworldwidebusiness activitycontinuesto be impactedby theCOVID-19pandemic.The durationand extentof theimpactfromthe COVID-19pandemicdepend on futuredevelopmentsthatcannotbe accuratelypredictedatthistime,and ifwe arenot ableto respondto and managetheimpactof such eventseffectively,our businessmaybe harmed.Such futuredevelopmentsmayinclude,amongothers,thedurationand spreadof theoutbreak, emerging variant strains of the outbreak, virus with varying degrees of vaccine resistance, new informationthat mayemergeconcerningtheseverityof COVID-19and governmentactionsto containCOVID-19or treatits impact,thelevelof reliefeffortsdesignedto helpbusinessesand consumers,includingany declinesin such levels,impacton our customersand our salescycles,impacton our customer,industryor employeeevents,and effecton our advertisinginventorypartners.
Our resultsmayalsofluctuateunpredictablyas and to theextentthereisa recoveryfromthepandemic and a returnto non-pandemicbusinessconditions.We cannotpredicttheimpactof a post-pandemicrecoveryon theeconomy,our customersor consumermediaconsumptionpatternsor thedegreeto which certaintrends,such as thegrowth in demandforour connectedTVoffering,willcontinue.
Ifwe failto innovateand makethe rightinvestmentdecisionsin our offeringsand platform,we maynot attractand retaincustomersand our revenueand resultsof operationsmaydecline.
Our industryissubjectto rapidand frequentchangesin technology,evolvingcustomerneedsand the frequentintroductionby our competitorsof new and enhancedofferings.We mustregularlymakeinvestment decisionsregardingofferingsand technologyto maintainthetechnologicalcompetitivenessof our productsand servicesand meetcustomerdemandand evolvingindustrystandards.The complexityand uncertaintyregarding thedevelopment
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of new technologiesand theextentand timingof marketacceptanceof innovativeproductsand servicescreatedifficultiesin maintainingthiscompetitiveness.The successof any enhancementor new solution dependson manyfactors,includingtimelycompletion,adequatequalitytesting,appropriateintroductionand marketacceptance.Withoutthetimelyintroductionof new products,servicesand enhancements,our offerings couldbecometechnologicallyor commerciallyobsoleteovertime,in which caseour revenueand operating resultswould suffer.Ifnew or existingcompetitorshave moreattractiveofferings,we maylosecustomersor customersmaydecreasetheiruse of our platform.Newcustomerdemands,superiorcompetitiveofferingsor new industrystandardscouldrequireus to makeunanticipatedand costlychangesto our platformor businessmodel.
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Ifwe failto enhanceour currentproductsand servicesor failto developnew productsto adaptto our rapidly changingindustryor to evolvingcustomerneeds,demandforour platformcoulddecreaseand our business, operatingresultsand financialconditionmaybe adverselyaffected.
The marketforprogrammatic buying for advertising campaigns is relatively new and evolving.Ifthismarket developssloweror differentlythan we expect,our business,operatingresultsand financialconditionwould be adverselyaffected.
We deriverevenuefromtheprogrammaticpurchaseof advertisingon our platform.We expectthat programmaticad buying willcontinueto be our primarysourceof revenuefortheforeseeablefuture,and thatour revenuegrowth willlargelydepend on increasingour customers’usageof our platform.Whilethemarketfor programmaticad buying fordesktopand mobiledisplayads isrelativelyestablished,themarketin otherchannelsisstillemerging,and our currentand potentialcustomersmaynot shiftquicklyenough to programmatic ad buying fromotherbuying methods,which wouldcould reduceour growth potential.Ifthemarketforprogrammatic ad buying deterioratesor developsmoreslowlythanwe expect,itcouldreducedemandforour platform,and our business,growth prospectsand financialconditionwould be adverselyaffected.
In particular,themarketforprogrammatic buying for advertising campaigns acrossmultipleadvertising channels,includingconnectedTV,linearTV, in-game, streamingaudioand digitalbillboardchannelsisan emerging market.Our abilityto providecapabilitiesacrossmultipleadvertisingchannels,which we referto as omnichannel,maybe constrainedifwe arenot ableto maintainor grow advertisinginventoryforsuch channels,and someof our omnichannelofferingsmaynot gainmarketacceptance.We maynot be able to maintain or grow advertising inventory for such channels, and some of our omnichannel offerings may not gain market acceptance. We may not be able to accuratelypredictchangesin overallindustrydemandforthechannelsin which we operateand cannotassure you thatour investmentin channeldevelopmentwillcorrespondto any such changes.For example,we cannot predictwhetherthegrowth in demandforour connectedTVofferingwillcontinue.Furthermore,ifour channel mixchangesdue to a shiftin customerdemand,such as customersshiftingtheirusagemorequicklyor more extensivelythanexpectedto channelsin which we have relativelylessfunctionality,features,or inventory,such as linearTV,thendemandforour platformcoulddecrease,and our business,financialcondition,and resultsof operationscouldbe adverselyaffected.
We receivea significantamount of revenuefroma selectnumber of advertisingagency holding companies, owning variousadvertisingagencies, and the lossof advertisingagenciesas customerscould harm our business,operatingresultsand financialcondition.
A significantamountof our revenuecomesfromadvertisingagencies.We had 264 Active Customers309 active customers fortheyearended December31, 2020, 2021,consistingprimarilyof advertisingagencies.Many of theseagenciesareowned by advertisingagencyholdingcompanies,where decisionmakingisgenerallyhighlydecentralizedsuch that purchasingdecisionsaremade,and relationshipswith marketersarelocated,attheagency,localbranchor divisionlevel.Ifallof our individualcustomercontractualrelationshipswere aggregatedattheholdingcompany level,two advertisingagencyholdingcompanieswould represent 13.3%15.5% and 13.2%14.2%, respectively,of our revenuefor 2020.2021. Due to thehighlydecentralizedoperationsand decision-makingattheagenciesowned by eachof theseadvertisingagencyholdingcompanies,we considertheindividual agenciesratherthantheholdingcompanyto be our customers.
Often,we enterintoseparatecontractsand billingrelationshipswith theindividualagenciesand account forthemas separatecustomers.However, someholdingcompaniesfortheseagenciesmaychooseto exertcontrolovertheindividualagenciesin thefuture.Ifso, any lossof relationshipswith such holdingcompanies and, consequently,of theiragencies,localbranchesor divisions,as customerscouldsignificantlyharmour business,operatingresultsand financialcondition.
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We do not have exclusiverelationshipswith advertisingagenciesand we depend on agenciesto work with us as theyembarkon advertisingcampaignsfortheirclients.The lossof such agenciescouldsignificantly harmour business,operatingresultsand financialcondition.Ifwe failto maintainsatisfactoryrelationshipswith an advertisingagency,we risklosingbusinessfromthemarketersrepresentedby thatagency.
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Marketersmaychangeadvertisingagencies.Ifa marketerswitchesfroman agencythatutilizesour platformto one thatdoes not, we couldloserevenuefromthatmarketer.In addition,someadvertisingagencies have strongrelationshipswith competingDSPsor otherplatformsand maydirecttheirmarketersto such other platforms.
We may experience fluctuations in If a significant number of marketers and their agencies begin to utilize competing platforms for the administration of their advertising campaigns, our operatingbusiness,financialconditionand results which could make our future operating results difficult to predict or cause our operating results to fall below securities analysts’ and investors’ expectations.
Our quarterly and annual operating results have fluctuated in the past and we expect our future operating results to fluctuate due to a variety of factors, many of which are beyond our control. In particular, we offer our customers a choice of three different pricing options: a percentage of spend option, a subscription option and a fixed cost per mille (“CPM”) pricing option. We also offer our customers the ability to use our services to aid them in data management, media execution and advanced reporting. Our revenue and revenue ex-TAC vary across these different pricing and service options, and therefore our results may vary based on the mix of pricing and service options chosen by customers in any given period. The varying nature of our pricing mix between periods therefore may make it more difficult for us to forecast our future operating results. Further, variation in our pricing mix may make it more difficult to make comparisons between prior, current and future periods. Period-to-period comparisons of our operating results should not operationscouldbe relied upon as an indication of our future performance. Fluctuations in our operating results could cause our performance to fall below the expectations of securities analysts and investors, and adversely affect the price of our Class A common stock. Because our business is changing and evolving rapidly, and the macroeconomic environment continues to evolve as a result of the COVID-19 pandemic, our historical operating results may not be necessarily indicative of our future operating results. It is also difficult to predict the impact of a post-pandemic recovery on our business and operating results. In addition to changes in terms of mix of our different pricing options, factors that may cause our operating results to fluctuate include the following:
changesin demandforour platform,includingthoserelatedto theseasonalnatureof our customers’spendingon digitaladvertisingcampaigns;
changes in our pricing policies, the pricing policies of our competitors and the pricing or availability of inventory, data or other third-party services;
changesin our customerbaseand platformofferings;
theadditionor lossof advertisingagenciesand marketersas customers;
changesin advertisingbudgetallocations,agencyaffiliationsor marketingstrategies;
changesto our channelmix(including,forexample,changesin demandforconnectedTV);
changesand uncertaintyin theregulatoryand businessenvironmentforus or customers(for example,when Apple or Google changepoliciesfortheirbrowsersand operatingsystems);
changesin theeconomicprospectsof marketersor theeconomygenerally(dueto COVID-19,or otherwise),which couldaltermarketers’spendingpriorities,or couldincreasethetimeor costs requiredto completeadvertisinginventorysales;
changesin theavailabilityof advertisinginventoryor in thecostof reachingend consumers throughdigitaladvertising;
disruptionsor outageson our platform;
theintroductionof new technologiesor offeringsby our competitors;
changesin our capitalexpendituresas we acquirethehardware,equipmentand otherassetsrequired to supportour business;
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timingdifferencesbetweenour paymentsforadvertisinginventoryand our collectionof related advertisingrevenue;
thelengthand unpredictabilityof our salescycle;
costsrelatedto acquisitionsof businessesor technologies,or employeerecruiting;and
shiftingviews and behaviorsof consumersconcerninguse of data.
Based upon the factors above and others beyond our control, we have a limited ability to forecast our future revenue, costs and expenses, and, as a result, our operating results may, from time to time, fall below our estimates or the expectations of securities analysts and investors.affected.
We oftenhave long salescycles,which can resultin significanttimebetween initialcontactwith a prospect and executionof a customeragreement,makingitdifficultto projectwhen,ifat all,we willobtainnew customersand whenwe willgeneraterevenuefromthosecustomers.
Our salescycle,frominitialcontactto contractexecutionand implementation,can takesignificanttime. As partof our salescycle,we mayincursignificantexpensesbeforewe generateany revenuefroma prospective customer.We have no assurancethatthesubstantialtimeand moneyspenton our saleseffortswillgenerate significantrevenue.Ifconditionsin themarketplace,generallyor with a specificprospectivecustomer,change negatively,itispossiblethatwe willbe unableto recoverany of theseexpenses.Our saleseffortsinvolve educatingour customersabouttheuse, technicalcapabilitiesand benefitsof our platform.Some of our customers undertakean evaluationprocessthatfrequentlyinvolvesnot only our platformbut alsotheofferingsof our competitors.As a result,itisdifficultto predictwhen we willobtainnew customersand begingeneratingrevenuefromthesenew customers.Even ifour saleseffortsresultin obtaininga new customer,thecustomer controlswhen and to what extentitusesour platformand thereforetheamountof revenuewe generate,and it maynot sufficientlyjustifytheexpensesincurredto acquirethecustomerand therelatedtrainingsupport.As a result,we maynot be ableto add customers,or generaterevenue,as quicklyas we mayexpect,which could harmour growth prospects.
Customershave the optionto use our platformon a self-servicebasis,which requiresus to commitsubstantial timeand expenses towardstoward trainingpotentialcustomerson howto makefulluse of our platform.Ifwe failto offersufficientcustomertrainingand supportforour platform,we maynot be ableto attractnew customersor maintainour currentcustomers.
Becausewe operatea platformthathas manypowerfultoolsand thatcustomerscan chooseto use on a self-servicebasis,we areoftenrequiredto spend a substantialamountof timeand efforteducatingand training currentcustomersand potentialcustomerson how to makefulluse of our platform.Becausepotentialcustomers mayalreadybe trainedto use our competitors’platforms,we arealsorequiredto spend a significantamountof timecultivatingrelationshipswith thosepotentialcustomersto ensuretheyunderstandthepotentialbenefitsof our platformand thisrelationshipbuildingprocesscan takemanymonthsand maynot resultin us winning an opportunitywith any givenpotentialcustomer.As a result,customertrainingand supportiscriticalforthe successfuland continueduse of our platformand formaintainingand increasingspend throughour platform fromexistingand new customers.
Providingthistrainingand supportrequiresthatour platformoperationspersonnelhave specificdomain knowledge and expertise,makingitmoredifficultforus to hirequalifiedpersonneland to scaleup our support operationsdue to theextensivetrainingrequired.The importanceof high-qualitycustomerservicewillincrease as we expand our businessand pursuenew customers.Ifwe arenot responsiveand proactiveregardingour customers’advertisingneeds,or do not provideeffectivesupportforour customers’advertisingcampaigns,our abilityto retainour existingcustomers wouldcould sufferand our reputationwith existingor potentialcustomers wouldcould be harmed,which would negativelyimpactour business.
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We are subjectto payment-relatedrisksand ifour customersdo not pay, or disputetheirinvoices,our business,operatingresultsand financialconditionmaybe adverselyaffected.
Many of our contractswith advertisingagenciesprovidethatifthemarketerdoes not pay theagency, theagencyisnot liableto us, and we mustseekpaymentsolelyfromthemarketer,a typeof arrangementcalled sequentialliability.The creditriskassociatedwith thesearrangementsmayvarydependingon thenatureof an advertisingagency’saggregatedmarketerbaseand thecreditriskof theagencyitself.We mayalsobe involved in disputeswith agenciesand theirmarketersovertheoperationof our platform,thetermsof our agreementsor our billingsforpurchasesmadeby themthroughour platform.When we areunableto collector make adjustmentsto our billsto customers,we incurwrite-offsforbad debt,which couldhave a materialadverse effecton our resultsof operationsfortheperiodsin which thewrite-offsoccur.In thefuture,bad debtmayexceedreservesforsuch contingenciesand our bad debtexposuremayincreaseovertime.Any increasein write-offsforbad debtcouldhave a materiallynegativeeffecton our business,operatingresultsand financial condition.
Furthermore,we aregenerallycontractuallyrequiredto pay suppliersof advertisinginventoryand data withina negotiatedperiodof time,regardlessof whetherour customerspay us on time,or atall.Whilewe attemptto negotiatelong paymentperiodswith our suppliersand shorterperiodsfromour customers,we arenot alwayssuccessful.As a result,our accountspayableareoftendue on shortercyclesthanour accounts receivables,requiringus to remitpaymentsfromour own funds,and accepttheriskof bad debt.
This payment process will increasingly consume working capital if we continue to be successful in growing our business. In addition, like many companies in our industry, we often experience slow payment by advertising agencies. In this regard, we had average days sales outstanding, or DSO, of 64 days, and average days payable outstanding, or DPO, of 62 for the year ended December 31, 2020. We compute our average DSO as of a given month end based on a weighted average of outstanding accounts receivable. Specifically, the DSO is calculated by multiplying the percentage of accounts receivable outstanding for each monthly billing period by the number of days outstanding related to each billing period and then summing the weighted days outstanding. We compute our DPO as of a given month end by dividing our trade payables (including accrued liabilities) by the average daily cost of media, data, other direct costs and certain operating expenses over the last four months. Historically, our DSOs have fluctuated over time. If our DSOs increase significantly, and we are unable to borrow against these receivables on commercially acceptable terms, our working capital availability could be reduced, and as a consequence our results of operations and financial condition would be adversely impacted.
Due to this potential imbalancein our DSOscollections and DPOs, payments,we mayrelyon our creditfacilityto partiallyor completelyfund our working capitalrequirements.We cannotassureyou thatas we continueto grow, our businesswillgeneratesufficientcashflow fromoperationsor thatfutureborrowingswillbe availableto us under thecreditfacilityin an amountsufficientto fund our working capitalneeds.Ifour cashflowsand creditfacility borrowingsareinsufficientto fund our working capitalrequirements,we maynot be ableto grow attheratewe currentlyexpector atall.In addition,in theabsenceof sufficientcashflowsfromoperations,we mightbe unable to meetour obligationsunderour creditfacilityand we may therefore be atriskof defaultthereunder.We cannot assureyou thatwe would be ableto accessadditionalfinancingor increaseour borrowingor borrowingcapacity underour currentor any futurecreditfacilityon commerciallyreasonabletermsor atall.
Ifour accessto advertisinginventoryisdiminishedor failsto grow, our revenuecould declineand our growth could be impeded.
We mustmaintaina consistentsupplyof ad inventory.Our successdependson our abilityto secure inventoryon reasonabletermsacrossa broadrangeof advertisinginventorypartnersin variousverticalsand formats.The amount,qualityand costof inventoryavailableto us can changeatany time.Ifour relationships with any of our significantsupplierswere to cease,or ifthematerialtermsof theserelationshipswere to change unfavorably,our businesswould be negativelyimpacted.Our suppliersaregenerallynot bound by long-term contracts.As a result,thereisno guaranteethatwe willhave accessto a consistentsupplyof inventoryon favorable terms. terms or at all.Inventorysupplierscontrolthesalesprocessfortheinventorytheysupply,and theirprocesses maynot alwayswork in our favor.For example,suppliersmayplacerestrictionson theuse of theirinventory, includingprohibitingtheplacementof advertisementson behalfof specificmarketers.
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As new typesof inventory,such as digitaladvertisingfortelevision,becomemorereadilyavailable,we willneed to expend significantresourcesto ensurewe have accessto such new inventory.Although television advertisingisa largemarket,only a relativelysmallpercentageof itiscurrentlypurchasedprogrammatically. We areinvestingheavilyin our programmatictelevisionoffering,includingby increasingour workforceand by addingnew features,functionsand integrationsto our platform.Ifthedigitaltelevisionadvertisingmarketdoes not grow as we anticipateor we failto successfullyservesuch a market,our growth prospectscouldbe harmed.
Our successdependson consistentlyaddingvaluedinventoryin a cost-effectivemanner.Ifwe are unableto maintaina consistentsupplyof inventoryforany reason,customerretentionand loyalty,and our operatingresultsand financialconditioncouldbe harmed.
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Ifour accessto people-baseddata isdiminished,the effectivenessof our platformwould be decreased,which could harm our operatingresultsand financialcondition.
Much of thedatathatwe use isobtainedthroughintegrationswith third-partydatasuppliers.We are dependentupon our abilityto obtainnecessarydatalicenseson commerciallyreasonableterms.We couldsuffer materialadverseconsequencesifwe were unableto obtaindatathroughour integrationswith datasuppliers.Our abilityto serveparticularcustomersisalsoenhancedwhen such customersuploadtheirown first-partydata.Our operationof our platformand accessto datacouldbe negativelyaffectedif,due to legal,contractual,privacy, marketoptics,competitionor othereconomicconcerns,thirdpartiesceaseenteringintodataintegration agreementswith us or customersceaseuploadingtheirdatato our platform.Additionally,we couldterminate relationshipswith our datasuppliersiftheyfailto adhereto our dataqualityand privacystandards.
Furthermore,digitaladvertisingand in-appadvertisingarelargelydependenton establishedtechnology companiesand theiroperationof themostcommonlyused internetbrowsers(Chrome,Firefox,InternetExplorer and Safari), devicesand operatingsystems(Android and iOS). These companiesmaychangetheoperationsor policiesof theirbrowsers,devicesand operatingsystemsin a mannerthatfundamentallychangesour abilityto operateour platformor use or collectdata.Usersof thesebrowsers,devicesor operatingsystemsmayalsoadjust theirbehaviorsand use of technologyin ways thatchangeour abilityto collectdata.Digitaladvertisingand in-app advertisingarealsodependent,in part,on internetprotocolsand thepracticesof internetserviceproviders, includingIP addressallocation.Changes thattheseprovidersmaketo theirpractices,or adoptionof new internet protocols,maymateriallylimitor altertheavailabilityof data.A limitationor alterationof theavailabilityofdatain any of theseor otherinstancesmayhave a materialimpacton theadvertisingtechnologyindustry,which coulddecreaseadvertisingbudgetsand subsequentlyreduceour revenueand adverselyaffectour business, operatingresultsand financialcondition.
Ifwe were to loseaccessto significantamountsof thedatathatenablesour people-basedframework, our abilityto provideproductsand servicesto our customerscouldbe materiallyand adverselyimpacted,which couldbe materiallyadverseto our business,operatingresultsand financialcondition.
Ifwe do not effectivelygrow and trainour salesand supportteams,we maybe unable to add new customers or increaseusage of our platformby our existingcustomersand our businesswillbe adverselyaffected.
We aresubstantiallydependenton our salesand supportteamsto obtainnew customersand to increase usageof our platformby our existingcustomers.We believethatthereissignificantcompetitionforsales personnelwith theskillsand technicalknowledge thatwe require.Our abilityto achieverevenuegrowth will depend, in largepart,on our successin recruiting,training,integratingand retainingsufficientnumbersof sales personnelto supportour growth. Due to thecomplexityof our platform,a significanttimelagexistsbetweenthe hiringdateof salesand supportpersonneland thetimewhen theybecomefullyproductive.Our recentand plannedhiresmaynot becomeproductiveas quicklyas we expect,and we maybe unableto hireor retain sufficientnumbersof qualifiedindividualsin themarketswhere we do businessor planto do business.Ifwe are unableto hireand trainsufficientnumbersof effectivesalespersonnel,or thesalespersonnelarenot successful in obtainingnew customersor increasingour existingcustomers’spend with us, our businesswillbe adversely affected.
We allow our customersand suppliersto utilizeAPIs, with our platform,which could resultin outagesor securitybreachesand negativelyimpactour business,operating resultsand financialcondition.
The use of APIs, by our customersand suppliershas significantlyincreasedin recentyears.Our APIs allowcustomersand suppliersto buildtheirown mediabuying and datamanagementinterfaceby usingour APIs to developcustomintegrationof theirbusinesswith our platform.The increaseduse of APIs increasessecurityand operationalrisksto our systems,includingtheriskfor intrusionattacks,datatheft,or denialof serviceattacks.Furthermore,whileAPIs allowcustomersand suppliers greatereaseand power in accessingour platform,theyalsoincreasetheriskof overusingour systems,potentially causingoutages.We have experiencedsystemslowdowns due to customeror supplieroveruseof our systems throughour APIs. Whilewe have takenmeasuresintendedto decreasesecurityand outagerisksassociatedwith theuse of APIs, we cannotguaranteethatsuch measureswillbe successful.Our failureto preventoutagesor securitybreachesresultingfromAPI use couldresultin governmentenforcementactionsagainstus, claimsfor damagesby consumersand otheraffectedindividuals,costsassociated
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with investigation,notification,mitigation,and remediation,damageto our reputationand lossof goodwill,any of which couldhave a material adverseimpacton our business,operatingresultsand financialcondition.
Operationaland performanceissueswith our platform,whether realor perceived,includinga failureto respond to technologicalchanges or to upgrade our technologysystems,mayadverselyaffectour business, operatingresultsand financialcondition.
We depend upon thesustainedand uninterruptedperformanceof our platformto manageour inventory supply,acquireinventoryforeachcampaign;collect,processand interpretdata;and optimizecampaign performancein realtimeand providebillinginformationto our financialsystems.Ifour platformcannotscaleto meetdemand,ifthereareerrorsin our executionof any of thesefunctionson our platform,or ifwe experience outages,thenour businessmaybe harmed.
Our platformiscomplexand multifaceted,and operationaland performanceissuescouldariseboth fromtheplatformitselfor fromoutsidefactors,such as cyberattacksor otherthird-partyattacks.Errors,failures, vulnerabilitiesor bugs have been found in thepast,and maybe found in thefuture.Our platformalsorelieson third-partytechnologyand systemsto performproperly,and our platformisoftenused in connectionwith computingenvironmentsutilizingdifferentoperatingsystems,systemmanagementsoftware,equipmentand networkingconfigurations,which maycauseerrorsin, or failuresof, our platformor such othercomputing environments.Operationaland performanceissueswith our platformcouldincludethefailureof our user interface,outages,errorsduringupgradesor patches,discrepanciesin costsbilledversuscostspaid, unanticipatedvolumeoverwhelmingour databases,serverfailure,or catastrophiceventsaffectingone or more serverfacilities.Whilewe have builtredundanciesin our systems,fullredundanciesdo not exist.Some failures willshutour platformdown completely,othersonly partially.We provideservicelevelagreementsto someof our customers,and ifour platformisnot availableforspecifiedamountsof time,we maybe requiredto provide creditsor otherfinancialcompensationto our customers.
As we grow our business,we expectto continueto investin technologyservicesand equipment. Withouttheseimprovements,our operationsmightsufferfromunanticipatedsystemdisruptions,slow transactionprocessing,unreliableservicelevels,impairedqualityor delaysin reportingaccurateinformation regardingtransactionsin our platform,any of which couldnegativelyaffectour reputationand abilityto attract and retaincustomers.In addition,theexpansionand improvementof our systemsand infrastructuremayrequireus to commitsubstantialfinancial,operationaland technicalresources,with no assuranceour businesswillgrow. Ifwe failto respondto technologicalchangeor to adequatelymaintain,expand, upgradeand developour systems and infrastructurein a timelyfashion,our growth prospectsand resultsof operationscouldbe adverselyaffected.
Operationaland performanceissueswith our platformcouldalsoresultin negativepublicity,damageto our brandand reputation,lossof or delayin marketacceptanceof our platform,increasedcostsor lossof revenue,lossof theabilityto accessour platform,lossof competitivepositionor claimsby customersforlosses sustainedby them.Alleviatingproblemsresultingfromsuch issuescouldrequiresignificantexpendituresof capitaland otherresourcesand couldcauseinterruptions,delaysor thecessationof our business,any of which mayadverselyaffectour operatingresultsand financialcondition.
We are dependenton the continuedavailabilityof third-partyhostingand transmissionservices.Operational issueswith, or changes to the costsof, our third-partydata centerproviderscould harm our business, reputationor resultsof operations.
We currentlyservethemajorityof our platformfunctionsfromthird-partydatacenterhostingfacilities operatedby Google Cloud Platformand Amazon Web Services,and we primarilyuse sharedserversin such facilities.We aredependenton thesethirdpartiesto providecontinuouspower, cooling,internetconnectivityand physicaland technologicalsecurityforour servers,and our operationsdepend, in part,on theirabilityto protect thesefacilitiesagainstany damageor interruptionfromnaturaldisasters,such as earthquakesand hurricanes, power or telecommunicationfailures,criminalactsand similarevents.In theeventthatany of our third-party facilitiesarrangementsisterminated,or ifthereisa lapseof serviceor damageto a facility,we couldexperience interruptionsin our platformas wellas delaysand additionalexpensesin arrangingnew facilitiesand services.
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Any damageto, or failureof, thesystemsof our third-partyproviderscouldresultin interruptionsto our platform.Despiteprecautionstakenatour datacenters,theoccurrenceof spikesin usagevolume,a natural disaster,such as earthquakesor hurricane,an actof terrorism,vandalismor sabotage,a decisionto closeafacilitywithoutadequatenotice,or otherunanticipatedproblemsata facilitycouldresultin lengthyinterruptions in theavailabilityof our platform.Even with currentand planneddisasterrecoveryarrangements,our business couldbe harmed.Also, in theeventof damageor interruption,our insurancepoliciesmaynot adequately compensateus forany lossesthatwe mayincur.These factorsin turncouldfurtherreduceour revenue,subjectus to liabilityand causeus to issuecreditsor causecustomersto stopusingour platform, any of which could materiallyand adverselyaffectour business.
We incursignificantcostswith our third-partydatahostingservices.Ifthecostsforsuch services increasedue to vendorconsolidation,regulation,contractrenegotiation,or otherwise,we maynot be ableto increasethefeesforour productsand servicesto coverthechanges.As a result,our operatingresultsmaybe significantlyworse thanforecasted.
Ifthe non-proprietarytechnology,software,productsand servicesthatwe use are unavailable,have future termswe cannot agreeto, or do not performas we expect,our business,operatingresultsand financial conditioncould be harmed.
We depend on varioustechnology,software,productsand servicesfromthirdpartiesor availableas open source,includingforcriticalfeaturesand functionalityof our platformand API technology,payment processing,payrolland otherprofessionalservices.Identifying,negotiating,complyingwith and integratingwith third-partytermsand technologyarecomplex,costlyand time-consumingmatters.Failureby third-party providersto maintain,supportor securetheirtechnologyeithergenerallyor forour accountsspecifically,or downtime,errorsor defectsin theirproductsor services,couldmateriallyand adverselyimpactour platform,our administrativeobligationsor otherareasof our business.Having to replaceany third-partyprovidersor their technology,productsor servicescouldresultin outagesor difficultiesin our abilityto provideour services, and our business, operating results and financial condition could be harmed.
If our access Our failureto people-based data is diminished, the effectiveness of our platform would be decreased, which could harm our operating results meetcontentand financial condition.
Much of the data that we use is obtained through integrations with third-party data suppliers. We are dependent upon our ability to obtain necessary data licenses on commercially reasonable terms. We could suffer material adverse consequences if we were unable to obtain data through our integrations with data suppliers. Our ability to serve particular customers is also enhanced when such customers upload their own first-party data. Our operation of our platform inventorystandardsand access to data could be negatively affected if, due to legal, contractual, privacy, market optics, competition or other economic concerns, third parties cease entering into data integration agreements with us or customers cease uploading their data to our platform. Additionally, we could terminate relationships with our data suppliers if they fail to adhere to our data quality and privacy standards.
Furthermore, digital advertising and in-app advertising are largely dependent on established technology companies and their operation of the most commonly used Internet browsers (Chrome, Firefox, Internet Explorer and Safari), devices and operating systems (Android and iOS). These companies may change the operations or policies of their browsers, devices and operating systems in a manner provideservicesthat fundamentally changes our ability to operate our platform or use or collect data. Users of these browsers, devices or operating systems may also adjust their behaviors and use of technology in ways that change our ability to collect data. Digital advertising and in-app advertising are also dependent, in part, on internet protocols and the practices of internet service providers, including IP address allocation. Changes that these providers make to their practices, or adoption of new internet protocols, may materially limit or alter the availability of data. A limitation or alteration of the availability of data in any of these or other instances may have a material impact on the advertising technology industry, which could decrease advertising budgets and subsequently reduce our revenue and adversely affect our business, operating results and financial condition.
If we were to lose access to significant amounts of the data that enables our people-based framework, our ability to provide products and services to our customers could be materially and adversely impacted, which could be materially adverse to our business, operating results and financial condition.
If we do not effectively grow and train our sales and support teams, we may be unable to add new customers or increase usage of our platform by our existing customers and our business will be adversely affected.
We are substantially dependent on our sales and support teams to obtain new customers and to increase usage of our platform by our existing customers. We believe that there is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve revenue growth will depend, in large part, on our success in recruiting, training, integrating and retaining sufficient numbers of sales personnel to support our growth. Due to the complexity of our platform, a significant time lag exists between the hiring date of sales and support personnel and the time when they become fully productive. Our recent and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. If we are unable to hire and train sufficient numbers of effective sales personnel, or the sales personnel are not successful in obtaining new customers or increasing our existing customers’ spend with us, our business will be adversely affected.
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As our costsincrease,we maynot be ableto generatesufficientrevenueto sustainprofitability.
We have expended significant resources to grow our business in recent years by increasing the offerings of our platform and growing our number of employees and expanding our number of offices in the United States. We anticipate continued growth that could require substantial financial and other resources to, among other things:
developour platform,includingby investingin our engineeringteam,creating,acquiringor licensingnew productsor features,and improvingthefunctionality,availabilityand securityof our platform;
improveour technologyinfrastructure,includinginvestingin internaltechnologydevelopmentand acquiringoutsidetechnologies;
covergeneraland administrativeexpenses,includinglegal,accountingand otherexpenses necessaryto supporta largerorganization;
cover sales and marketing expenses, including a significant expansion of our direct sales organization;
coverexpensesrelatingto datacollectionand consumerprivacycompliance,includingadditional infrastructure,automationand personnel;and
explorestrategicacquisitions.
Investing in the foregoing, however, may not yield anticipated returns. Consequently, as our costs increase, we may not be able to generate sufficient revenue to achieve or sustain profitability.
A significant inadvertent disclosure or breach of confidential and/or personal information we hold, or of the security of our or our customers’, suppliers’, or other partners’ computer systems could be detrimental to our business, reputation and results of operations.
Our business requires the storage, transmission and utilization of data, including personal information, much of which must be maintained on a confidential basis. These activities have made, and may in the future make, us a target of cyber-attacks by third parties seeking unauthorized access to the data we maintain, including our customer data, or to disrupt our ability to provide service. As a result of the types and volume of personal data on our systems, we believe that we are a particularly attractive target for such breaches and attacks. For example, in 2016, we discovered a breach of information from our Myspace databases resulting in the unauthorized access and offer for sale of approximately 360 million Myspace user account email addresses, usernames, and hashed passwords. See “—Wefaceliabilitiesarisingout of our ownershipand operationof Myspace.com.”
In recent years, the frequency, severity and sophistication of cyber-attacks, computer malware, viruses, social engineering, and other intentional misconduct by computer hackers has significantly increased, and government agencies and security experts have warned about the growing risks of hackers, cyber criminals and other potential attackers targeting information technology systems. Such third parties could attempt to gain entry to our systems for the purpose of stealing data or disrupting the systems. In addition, our security measures may also be breached due to employee error, malfeasance, system errors or vulnerabilities, including vulnerabilities of our vendors, suppliers, their products, or otherwise. Third parties may also attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information to gain access to our customers’ data or our data, including intellectual property and other confidential business information.
We currently serve the majority of our platform functions from third-party data center hosting facilities operated by Google Cloud Platform and Amazon Web Services. While we and our third-party cloud providers have implemented security measures designed to protect against security breaches, these measures could fail or may be insufficient, particularly as techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until launched against a target, resulting in the unauthorized disclosure, modification, misuse, destruction, or loss of our or our customers’ data or other sensitive information. Any failure to prevent or mitigate security breaches and improper access to or disclosure of the data we maintain, including personal information, could result in litigation, indemnity obligations, regulatory enforcement actions, investigations, fines, penalties, mitigation and remediation costs, disputes, reputational harm, diversion of management’s attention, and other liabilities and damage to our business.
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We believewe have takenappropriatemeasuresto protectour systemsfromintrusion,but we cannotbe certainthatadvancesin criminalcapabilities,discoveryof new vulnerabilitiesin our systemsand attemptsto exploitthosevulnerabilities,physicalsystemor facilitybreak-insand datatheftsor otherdevelopmentswillnot compromiseor breachthetechnologyprotectingour systemsand theinformationwe possess.
We may incur significant costs in protecting against or remediating cyber-attacks. Any security breach could result in operational disruptions that impair our ability to meet our customers’ requirements, which could result in decreased revenue. Also, whether there is an actual or a perceived breach of our security, our reputation could suffer irreparable harm, causing our current and prospective customers to reject our products and services in the future, deterring data suppliers from supplying us data or customers from uploading their data on our platform, or changing consumer behaviors and use of our technology. Further, we could be forced to expend significant resources in response to a security breach, including those expended in notifying individuals and providing mitigating services, repairing system damage, increasing cyber security protection costs by deploying additional personnel and protection technologies, and litigating and resolving legal claims or governmental inquiries and investigations, all of which could divert the attention of our management and key personnel away from our business operations. Federal, state and foreign governments continue to consider and implement laws and regulations addressing data privacy, cybersecurity, and data protection laws, which include provisions relating to breaches. For example, statutory damages may be available to users through a private right of action for certain data breaches under the California Consumer Privacy Act (the “CCPA”), and potentially other states’ laws. In any event, a significant security breach could materially harm our business, operating results and financial condition. See “Risks Relatedto Data Privacy.”
Our customers, suppliers and other partners are primarily responsible for the security of their information technology environments, and we rely heavily on them and other third parties to supply clean data content and/or to utilize our products and services in a secure manner. Each of these third parties may face risks relating to cyber security, which could disrupt their businesses and therefore materially impact ours. While we provide guidance and specific requirements in some cases, we do not directly control any of such parties’ cyber security operations, or the amount of investment they place in guarding against cyber security threats. Accordingly, we are subject to any flaw in or breaches of their systems, which could materially impact our business, operating results and financial results.
We allow our customers and suppliers to utilize application programming interfaces, or APIs, with our platform, which could result in outages or security breaches and negatively impact our business, operating results and financial condition.
The use of application programming interfaces, or APIs, by our customers and suppliers has significantly increased in recent years. Our APIs allow customers and suppliers to build their own media buying and data management interface by using our APIs to develop custom integration of their business with our platform. The increased use of APIs increases security and operational risks to our systems, including the risk for intrusion attacks, data theft, or denial of service attacks. Furthermore, while APIs allow customers and suppliers greater ease and power in accessing our platform, they also increase the risk of overusing our systems, potentially causing outages. We have experienced system slowdowns due to customer or supplier overuse of our systems through our APIs. While we have taken measures intended to decrease security and outage risks associated with the use of APIs, we cannot guarantee that such measures will be successful. Our failure to prevent outages or security breaches resulting from API use could result in government enforcement actions against us, claims for damages by consumers and other affected individuals, costs associated with investigation, notification, mitigation, and remediation, damage to our reputation and loss of goodwill, any of which could have a material adverse impact on our business, operating results and financial condition.
Operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems, may adversely affect our business, operating results and financial condition.
We depend upon the sustained and uninterrupted performance of our platform to manage our inventory supply; acquire inventory for each campaign; collect, process and interpret data; and optimize campaign performance in real time and provide billing information to our financial systems. If our platform cannot scale to meet demand, if there are errors in our execution of any of these functions on our platform, or if we experience outages, then our business may be harmed.
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Our platformiscomplexand multifaceted,and operationaland performanceissuescouldariseboth fromtheplatformitselfor fromoutsidefactors,such as cyberattacksor otherthirdpartyattacks.Errors,failures, vulnerabilitiesor bugs have been found in thepast,and maybe found in thefuture.Our platformalsorelieson third-partytechnologyand systemsto performproperly,and our platformisoftenused in connectionwith computingenvironmentsutilizingdifferentoperatingsystems,systemmanagementsoftware,equipmentand networkingconfigurations,which maycauseerrorsin, or failuresof, our platformor such othercomputing environments.Operationaland performanceissueswith our platformcouldincludethefailureof our user interface,outages,errorsduringupgradesor patches,discrepanciesin costsbilledversuscostspaid, unanticipatedvolumeoverwhelmingour databases,serverfailure,or catastrophiceventsaffectingone or more serverfacilities.Whilewe have builtredundanciesin our systems,fullredundanciesdo not exist.Some failures willshutour platformdown completely,othersonly partially.We provideservicelevelagreementsto someof our customers,and ifour platformisnot availableforspecifiedamountsof time,we maybe requiredto provide creditsor otherfinancialcompensationto our customers.
As we grow our business, we expect to continue to invest in technology services and equipment. Without these improvements, our operations might suffer from unanticipated system disruptions, slow transaction processing, unreliable service levels, impaired quality or delays in reporting accurate information regarding transactions in our platform, any of which could negatively affect our reputation and ability to attract and retain customers. In addition, the expansion and improvement of our systems and infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance our business will grow. If we fail to respond to technological change or to adequately maintain, expand, upgrade and develop our systems and infrastructure in a timely fashion, our growth prospects and results of operations could be adversely affected.
Operational and performance issues with our platform could also result in negative publicity, damage to our brand and reputation, loss of or delay in market acceptance of our platform, increased costs or loss of revenue, loss of the ability to access our platform, loss of competitive position or claims by customers for losses sustained by them. Alleviating problems resulting from such issues could require significant expenditures of capital and other resources and could cause interruptions, delays or the cessation of our business, any of which may adversely affect our operating results and financial condition.
We are dependent on the continued availability of third-party hosting and transmission services. Operational issues with, or changes to the costs of, our third-party data center providers could harm our business, reputation or results of operations.
We currently serve the majority of our platform functions from third-party data center hosting facilities operated by Google Cloud Platform and Amazon Web Services, and we primarily use shared servers in such facilities. We are dependent on these third parties to provide continuous power, cooling, Internet connectivity and physical and technological security for our servers, and our operations depend, in part, on their ability to protect these facilities against any damage or interruption from natural disasters, such as earthquakes and hurricanes, power or telecommunication failures, criminal acts and similar events. In the event that any of our third-party facilities arrangements is terminated, or if there is a lapse of service or damage to a facility, we could experience interruptions in our platform as well as delays and additional expenses in arranging new facilities and services.
Any damage to, or failure of, the systems of our third-party providers could result in interruptions to our platform. Despite precautions taken at our data centers, the occurrence of spikes in usage volume, a natural disaster, such as earthquakes or hurricane, an act of terrorism, vandalism or sabotage, a decision to close a facility without adequate notice, or other unanticipated problems at a facility could result in lengthy interruptions in the availability of our platform. Even with current and planned disaster recovery arrangements, our business could be harmed. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to liability and cause us to issue credits or cause customers to stop using our platform, any of which could materially and adversely affect our business.
We incur significant costs with our third-party data hosting services. If the costs for such services increase due to vendor consolidation, regulation, contract renegotiation, or otherwise, we may not be able to increase the fees for our products and services to cover the changes. As a result, our operating results may be significantly worse than forecasted.
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Ifthe non-proprietarytechnology,software,productsand servicesthatwe use are unavailable,have future termswe cannot agreeto, or do not performas we expect,our business,operatingresultsand financial conditioncould be harmed.
We depend on various technology, software, products and services from third parties or available as open source, including for critical features and functionality of our platform and API technology, payment processing, payroll and other professional services. Identifying, negotiating, complying with and integrating with third-party terms and technology are complex, costly and time-consuming matters. Failure by third-party providers to maintain, support or secure their technology either generally or for our accounts specifically, or downtime, errors or defects in their products or services, could materially and adversely impact our platform, our administrative obligations or other areas of our business. Having to replace any third-party providers or their technology, products or services could result in outages or difficulties in our ability to provide our services.
Our failure to meet content and inventory standards and provide services that our customers and inventory supplierstrust,could harm our brand and reputationand negativelyimpactour business,operatingresults and financialcondition.
We do not provideor controlthecontentof theadvertisementswe serveor thatof thewebsites providingtheinventory.Our customersprovidetheadvertisingcontentand inventorysuppliersprovidethe inventory. OurBoth customers provide the advertising content and inventorysuppliers provide the inventory. Both customers and inventory suppliers areconcernedaboutbeingassociatedwith contentthey considerinappropriate,competitiveor inconsistentwith theirbrands,or illegal, and theyarehesitantto spend moneywithoutguaranteedbrandsecurity.For example,our customersexpectthatad placementswillnot be misrepresented,such as auto-playin bannerplacementsmarketedas pre-rollinventory.Consequently,our reputationdependsin parton providingservicesthatour customersand inventorysupplierstrust,and we have contractualobligationsto meetcontentand inventorystandards.We contractuallyprohibitthemisuseof our platformby agencies (and (andtheirmarketercustomers)and inventorysuppliers.Additionally,we use our proprietarytechnologyand third-partyservicesto, and we participatein industryco-opsthatwork to, detect malwareand othercontentissuesas wellas clickfraud (whether (whetherby humansor softwareknown as “bots”)and toblockfraudulentinventory.Despitesuch efforts,our customersmayinadvertentlypurchaseinventorythatproves to be unacceptablefortheircampaigns,in which casewe maynot be ableto recouptheamountspaidtoinventorysuppliers.Preventingand combatingfraudisan industry-wideissuethatrequiresconstantvigilance,as wellas a balancingof costeffectivenessand risk,and we cannotguaranteethatwe willbe fullysuccessfulin our effortsto combatfraud.We mayprovideaccessto inventorythatisobjectionableto our customersor we may serveadvertisingthatcontainsmalwareor objectionablecontentto our inventorysuppliers,which couldharmour or our customers’brandand reputation,causecustomersto decreaseor terminatetheirrelationshipwith us or otherwisenegativelyimpactour business,operatingresultsand financialcondition.
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We facepotentialliabilityand harm to our businessbased on the human factorof inputtinginformationinto our platform.
We or our customerssetup campaignson our platformusinga numberof availablevariables.Whileour platformincludesseveralchecksand balances,itispossibleforhumanerrorto resultin significantover-spending.We offera numberof protectionssuch as dailyor overallspendingcaps,but despitetheseprotections, theabilityforoverspendexists.For example,campaignswhich lastfora periodof timecan be setto paceevenly or as quicklyas possible.Ifa customerwith a high creditlimitentersan incorrectdailycap with a campaignsetto a rapidpace,itispossiblefora campaignto accidentlygo significantlyoverbudget.Our potentialliabilityfor such errorsmaybe higherwhen theyoccurin situationsin which we areexecutingpurchaseson behalfof a customerratherthanthecustomerusingtheself-servicefeatureof our platform.Whileour customercontracts statethatcustomersareresponsibleformediapurchasedthroughour platform,we areultimatelyresponsiblefor payingtheinventoryprovidersand we maybe unableto collectwhen such issuesoccur.
Future acquisitions,strategicinvestmentsor alliancescould disruptour businessand harm our business, operatingresultsand financialcondition.
We have acquired businesses and technologiesto grow our business.To theextentwe findsuitableand attractive acquisitioncandidatesand businessopportunitiesin thefuture,we maycontinueto acquireothercomplementary businesses,productsand technologiesand enterintojointventuresor similarstrategicrelationships.We have no presentcommitmentsor agreementsto enterintoany such acquisitionsor makeany such investments.However, ifwe identifyan appropriateacquisitioncandidate,we maynot be successfulin negotiatingthetermsor financingof theacquisition,and our due diligencemayfailto identifyallof theproblems,liabilitiesor othershortcomingsor challengesof an acquiredbusiness,productor technology,includingissuesrelatedto intellectual property,productqualityor architecture,regulatorycompliancepractices,revenuerecognitionor otheraccountingpractices, taxliabilities,privacyor cybersecurityissuesor employeeor customerissues.Thereisno certaintythatwe willbe ableto successfully integratetheservices,productsand personnelof any acquired businessintoour operations.In addition,any futureacquisitions,jointventuresor similarrelationshipsmaycausea disruptionin our ongoing businessand distractour management.Further,we maybe unableto realizethe revenueimprovements,costsavingsand otherintendedbenefitsof any such transaction.Acquisitionsinvolve numerousotherrisks,any of which couldharmour business,including:
• | regulatoryhurdles; |
• | failureof anticipatedbenefitsto materialize; |
• | diversionof managementtimeand focusfromoperatingour businessto addressingacquisition integrationchallenges; |
• | retentionof employeesfromtheacquiredcompany; |
• | culturalchallengesassociatedwith integratingemployeesfromtheacquiredcompanyintoour organization; |
• | integrationof theacquiredcompany’saccounting,managementinformation,humanresourcesand otheradministrativesystems; |
• | theneed to implementor improvecontrols,proceduresand policiesata businessthatpriorto the acquisitionmayhave lackedeffectivecontrols,proceduresand policies; |
• | coordinationof productdevelopmentand salesand marketingfunctions; |
• | liabilityforactivitiesof theacquiredcompanybeforetheacquisition,includingknown and unknown liabilities;and |
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• | litigationor otherclaimsin connectionwith theacquiredcompany,includingclaimsfrom terminatedemployees,users,formerstockholdersor otherthirdparties. |
Failureto appropriatelymitigatetheserisksor otherissuesrelatedto such strategicinvestmentsand acquisitionscouldresultin reducingor completelyeliminatingany anticipatedbenefitsof transactions,and harm our businessgenerally.Futureacquisitionscouldalsoresultin dilutiveissuancesof our equitysecurities,the incurrenceof debt,contingentliabilities,amortizationor theimpairmentof goodwill,any of which couldharmour business,operatingresultsand financialcondition.
Our futuresuccessdepends on the continuingeffortsof our key employees,includingTimVanderhook and Chris Vanderhook, and our abilityto attract,hire,retainand motivatehighlyskilledemployeesin the future.
We area founder-ledbusinessand our futuresuccessdependson thecontinuingeffortsof our executive officersand otherkey employees,includingTimVanderhook, our chiefexecutiveofficer,and Chris Vanderhook, our chiefoperatingofficer.We relyon theleadership,knowledge and experiencethatour executive officersprovide.They fosterour corporateculture,which has been instrumentalto our abilityto attractand retain new talent.We alsorelyon employeesin our engineering,technical,productdevelopment,supportand sales teamsto attractand retainkey customers.
The marketfortalentin our key areasof operations,includingCalifornia,isintenselycompetitive, which couldincreaseour coststo attractand retaintalentedemployees.As a result,we mayincursignificant coststo attractand retainemployees,includingsignificantexpendituresrelatedto salariesand benefitsand compensationexpensesrelatedto equityawards,and we maylosenew employeesto our competitorsor other companiesbeforewe realizethebenefitof our investmentin recruitingand trainingthem.We have attimes experiencedemployeeturnover.Becauseof thecomplexityof our platform,new employeesoftenrequire significanttrainingand, in manycases,takesignificanttimebeforetheyachievefullproductivity.Our account managers,forinstance,need to be trainedquicklyon thefeaturesof our platformsincefailureto offerhigh-qualitysupportmayadverselyaffectour relationshipswith our customers.
Employeeturnover,includingchangesin our managementteam,coulddisruptour business.None of our foundersor otherkey employeeshas an employmentagreementfora specificterm,and any of our employeesmayterminatehisor heremploymentwith us atany time.The lossof one or moreof our executiveofficers, especiallyour two founders,or our inabilityto attractand retainhighlyskilledemployeescouldhave an adverse effecton our business,operatingresultsand financialcondition.
We faceliabilitiesarisingout of our ownership and operationof Myspace.com.
In 2011, we acquiredMyspaceLLC,which owns Myspace.com. We have facedand maycontinueto faceclaims, investigations,or lawsuitsor incurliabilityas a resultof contentpublishedor madeavailableon Myspace.com, includingclaimsfordefamation,intellectualpropertyrights,includingcopyrightinfringement,rightsof publicity and privacy,illegalcontent,misinformation,contentregulationand personalinjurytorts.The laws relatingto the liabilityof providersof onlineproductsor servicesforactivitiesof thepeoplewho use themremainsomewhat unsettled,both withintheUnitedStatesand internationally.This riskisenhancedin certainjurisdictionsoutside theUnitedStateswhere our protectionfromliabilityforthird-partyactionsmaybe unclearor where we maybe lessprotectedunderlocallaws thanwe arein theUnitedStates.For example,in April2019, theEuropeanUnion passeda directiveexpandingonlineplatformliabilityforcopyrightinfringementand regulatingcertainusesof news contentonline,which memberstates must had toimplementby June 2021. In addition,therehave been various Congressionalefforts,executiveactions,and civillitigationeffortsto restrictthescopeof theprotections availableto onlineplatformsunderSection230 of theCommunicationsDecency Act, and our currentprotections fromliabilityforthird-partycontentin theUnitedStatescoulddecreaseor change.We couldincursignificant costsinvestigatingand defendingclaimsrelatedto contentpublishedor madeavailableon Myspace.comand, if we arefound liable,couldfacesignificantdamages.
In late 2011, shortly after we acquired MyspaceLLC, theFederalTradeCommission(“FTC”) initiated an investigation of the entity relatingto certain of its historical privacypractices in place between 2008 and 2010.In
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connectionwith its 2012 settlement, Myspace LLC was the subject of an investigation by the Federal Trade Commission (“FTC”) relating to its privacy practices. In connection with its settlement of this matter with the FTC in 2012, Myspace LLC agreedto a settlement consentorder that bars Myspace LLC barring itfrommisrepresentingtheextentto which itprotectsthe privacyof users’personalinformationor theextentto which itbelongsto or complieswith any privacy,security or othercomplianceprogram.The orderalso requires that mandatesMyspaceLLCestablisha comprehensiveprivacy programdesignedto protectconsumers’information,and to obtainbiennialassessmentsof itsprivacyprogram by independent,third-partyauditorsfor20 years.The orderterminatesin August 2032.
IfMyspaceLLCfailstocomplywith themandatesof the FTC consentorder,or ifMyspaceLLCisfound to be in violationof theconsent orderor otherrequirements,we maybe subjectto regulatoryor governmentalinvestigationsor lawsuits,which mayresultin significantmonetaryfines,judgments,or otherpenalties,and we mayalsobe requiredto make additionalchangesto our businesspractices.
Myspace.comhas been and mayin thefuturebe a source ofsubject to cybersecurityincidentsor databreaches.In2016, we announced our discovery ofdiscovered a third-partycyber-attackin which Myspace.comusernames,passwords and emailaddresseswere stolenfromtheold Myspace Myspace.complatformpriorto June 11, 2013, when the site was relaunched with significant steps to strengthen account security. 2013.Whilewe took stepsto remediatetheattack, includingnotifyingand invalidatingthepasswordsof known affectedusers,any furtherpresent failureto preventor mitigatesecuritybreachesand improperaccessto or disclosureof thedataon the Myspace.com site couldresult in litigation,indemnityobligations,regulatoryenforcementactions,investigations,fines,penalties,mitigation and remediationcosts,disputes,reputationalharm,diversionof management’sattention,and otherliabilitiesand damageto our business.Myspace.commayalsofaceoperationalor performanceissues.For example,as a result of a servermigrationprojectin 2019, olderphoto, videoor audiofilesof someuserswere lost.
Myspace.comhas in thepastbeen, and mayin thefuturebe, thesubjectof unfavorablepublicity regarding,forexample,itsprivacypractices,sitequalityand siteoperationalmatters.Myspace.commayalso facenegativepublicityrelatingto contentor informationthatispublishedor madeavailableon theplatform, includingdefamation,disseminationof misinformationor news hoaxes,discrimination,violationsof intellectual propertyrights,violationsof rightsof publicityand privacy,hatespeechor othertypesof content.Any such negativepublicitycoulddamageour reputationand thereputationof our primarybusiness,which could adverselyaffectour businessand financialresults.
The marketin which we participateisintenselycompetitive,and we maynot be ableto competesuccessfully with our currentor futurecompetitors.
We operatein a highlycompetitiveand rapidlychangingindustrythatissubjectto changingtechnology and customerdemandsand thatincludesmanycompaniesprovidingcompetingsolutions.Withtheintroductionof new technologiesand theinfluxof new entrantsintothemarket,we expectcompetitionto persistand intensify in thefuture,which couldharmour abilityto increaserevenueand maintainprofitability.Newtechnologiesand methodsof buying advertisingpresenta dynamiccompetitivechallenge,as marketparticipantsoffermultiplenew productsand servicesaimedatcapturingadvertisingspend.
We competewith smaller,privately-heldcompanies,with publiccompaniessuch as The TradeDesk, and with divisionsof large,well-establishedcompaniessuch as Google and Amazon. Our currentand potentialcompetitors mayhave significantlymorefinancial,technical,marketingand otherresourcesthanwe have, allowingthemto devotegreaterresourcesto thedevelopment,promotion,saleand supportof theirproductsand services.They mayalsohave moreextensivecustomerbasesand broadersupplierrelationshipsthanwe have. As a result,these competitorsmaybe betterableto respondquicklyto new technologies,developdeepermarketerrelationshipsor offerservicesatlowerprices.Increasedcompetitionmayresultin reducedpricingforour platform,increased salesand marketingexpense,longersalescyclesor a decreaseof our marketshare,any of which could negativelyaffectour revenueand futureoperatingresultsand our abilityto grow our business.These companies mayalsohave greaterbrandrecognitionand longerhistoriesthanwe have and mayactivelyseekto serveour marketand have thepower to significantlychangethenatureof themarketplaceto theiradvantage.Some of our largercompetitors,particularlythosethataredivisionsof largecompanies,have substantiallybroaderproduct offeringsand mayleveragetheirrelationshipsbasedon otherproductsor incorporatefunctionalityintoexistingproductsto gainbusinessin a mannerthatmaydiscouragecustomersfromusingour platform,includingthrough sellingatzeroor negativemarginsor productbundlingwith otherservicestheyprovideatreducedprices. Customersmaypreferto purchaseadvertisingfromsocialmedialplatformsor otherclosedplatforms,which they cannotacquirethroughour platform.Potentialcustomersmayalsopreferto purchasefromtheirexisting platformratherthana new platform
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regardlessof productperformanceor features.These largercompetitors oftenhave broaderproductlinesand marketfocusand maythereforenot be as susceptibleto downturnsin a particularmarket.We mayalsoexperiencenegativemarketperceptionas a resultof beinga smallercompany thanour largercompetitors.
In addition,we derivea significantportionof our revenuefromadvertisingin thedesktopand mobile and connectedTVchannels, which arerapidlyevolving,highlycompetitive,complexand fragmented.We face significantcompetitionin thesemarketswhich we expectwillintensifyin thefuture.Whilefewerof our competitorscurrentlyhave capabilityin otherchannelssuch as linearTV, in-game streamingaudioand digitalbillboard channels, we alsoexpectto faceadditionalcompetitionin thosechannelsin thefuture.
Our corporateculturehas contributedto our successand, ifwe are unable to maintainitas we grow, our business,operatingresultsand financialconditioncould be harmed.
We have experiencedand maycontinueto experiencerapidexpansionof our employeeranks.We had approximately 350employeesin theUnitedStatesas of December 31, 2021. We believeour corporateculturehas been critical to our successand we have investedsubstantialtimeand resourcesin buildingour teamwithinour company culture.However, as our organizationgrows, itmaybe difficultto maintainour culture,which couldreduceour abilityto innovateand operateeffectivelyand proactivelyfocuson and pursueour corporateobjectives.The failureto maintainthekey aspectsof our cultureas our organizationgrows couldresultin decreasedemployee satisfaction,increaseddifficultyin attractingtop talent,increasedturnoverand degradedqualityof customer service,allof which areimportantto our successand to theeffectiveexecutionof our businessstrategy.In the eventwe areunableto maintainour corporatecultureas we grow to scale,our business,operatingresultsand financialconditioncouldbe harmed.
The marketgrowth forecastsincludedin thisAnnual Reportmayproveto be inaccurateand, even ifthe marketin which we competeachievesforecastedgrowth, we cannot assureyou our businesswillgrow at similarrates,if at all.
Marketgrowth forecastsaresubjectto significantuncertaintyand arebasedon assumptionsand estimateswhich maynot proveto be accurate.The forecastsin thisAnnual Reportrelatingto expectedgrowth in the digitaladvertisingand programmaticad marketsmayproveto be inaccurate.Even ifthesemarketsexperience theforecastedgrowth, we maynot grow our businessatsimilarrates,or atall.Our growth issubjectto many factorsincludingour successin implementingour businessstrategy,which issubjectto manyrisksand uncertainties.
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Risks Relatedto Data Privacy
Changes in legislative, judicial, regulatory, or cultural environments relating to information collection, use and processing may limit our ability to collect, use and process data. Such developments could cause revenue to decline, increase the cost of data, reduce the availability of data and adversely affect the demand for our products and services.
We receive, store and process personal information and other data from and about consumers in addition to personal information and other data from and about our customers, employees, and services providers. Our handling of this data is subject to a wide variety of federal, state, and foreign laws and regulations and is subject to regulation by various government authorities and consumer actions. Our data handling is also subject to contractual obligations and may be deemed to be subject to industry standards.
The U.S. federal and various state and foreign governments have adopted or proposed laws relating to the collection, disclosure, processing, use, storage and security of data relating to individuals and households, including the use of contact information and other data for marketing, advertising and other communications with individuals and businesses. In the U.S., various laws and regulations apply to the collection, disclosure, processing, use, storage and security of certain types of data. Additionally, the FTC, many state attorneys general, and many courts are interpreting federal and state consumer protection laws as imposing standards for the collection, disclosure, process, use, storage and security of data. The regulatory framework for data privacy issues worldwide is complex, continually evolving and often conflicting, and is likely to remain uncertain for the foreseeable future. The occurrence of unanticipated events often rapidly drives the adoption of legislation or regulation affecting the use, collection or other processing of data and manner in which we conduct our business. As a result, further restrictions could be placed upon the collection, disclosure, processing, use, storage and security of information, which could result in a material increase in the cost of obtaining certain kinds of data and could limit the ways in which we may collect, disclose, process, use, store or secure information.
U.S. federal and state legislatures, along with federal regulatory authorities, have recently increased their focus on matters concerning the collection and use of consumer data, including relating to interest-based advertising, or the use of data to draw inferences about a user’s interests and deliver relevant advertising to that user, and similar or related practices, such as cross-device data collection and aggregation, and steps taken to de-identify personal data and to use and distribute the resulting data, including for purposes of personalization and the targeting of advertisements. In the U.S., non-sensitive consumer data generally may be used under current rules and regulations, subject to certain restrictions, including relating to transparency and affirmative “opt-out” rights of the collection or use of such data in certain instances. To the extent additional opt-out rights are made available in the U.S., additional regulations are imposed, or if an “opt-in” model were to be adopted, less data would be available, the cost of data and compliance would be higher, or we could be required to modify our data processing practices and policies. For example, California recently enacted legislation, the CCPA, that became operative on January 1, 2020 and came under California Attorney General (“AG”) enforcement on July 1, 2020. The CCPA requires covered companies to, among other things, provide new disclosures to California consumers and grant such consumers a new right to opt-out of “sales” of personal information, a concept that is defined broadly. The CCPA is also subject to regulations issued by the California AG, which were finalized and became effective in August 2020. The California Privacy Rights and Enforcement Act (“CPRA”), which was passed as a ballot initiative in November 2020 and comes into effect on January 1, 2023, expands upon the CCPA and, among other things, creates new categories of personal information with additional protections, creates new data subject rights such as a right of correction, creates a new state rulemaking and enforcement agency for the CPRA, expands potential liability for violations and gives consumers rights to opt out of additional forms of data sharing with third parties. It remains unclear how aspects of the CCPA (as amended by the CPRA) or its implementing regulations will be interpreted. We cannot yet fully predict the impact of these laws on our business or operations, but it or future regulations (particularly any regulations using an “opt-in” model), could require us or our customers to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. Decreased availability and increased costs of information and costs of compliance could adversely affect our ability to meet our customers’ expectations and requirements and could result in decreased revenue.
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Whileour platformand people-basedframeworkoperatesprimarilyin theUnitedStates,someof our operations,includingour owned websiteMyspace.com,maysubjectus to dataprivacylaws outsidetheUnited States.In theEuropeanUnion (“EU”),theEuropeanGeneralData ProtectionRegulation(“GDPR”) took effect on May 25, 2018 and appliesto our processingrelatedto productsand servicesthatwe provideto individuals who arein theEuropeanUnion. The GDPRincludessignificantpenaltiesfornoncomplianceof up to thegreater of €20 millionor 4% of an enterprise’sglobalturnover(orrevenue)fortheprecedingfiscalyearand each EuropeanUnion MemberStatemayprovideforotherpenaltiesapplicableto such noncompliance.
We are subject to stringent and changing obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of customers or sales, revenue declines,increasethe costof data, reducethe availabilityof data, adverselyaffectthe demand forour productsand services, or other adverse business consequences.
We Processpersonalinformationand other sensitive data such as confidential business data, trade secrets, and intellectual property,fromand aboutour customers,employees,serviceproviders, and other third parties.Our handlingof thisdataissubjectto a wide varietyof federal,state, local, and foreignlaws regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the Processing of personal information by us and on our behalf.
U.S.federal, state, and local governments,and foreigngovernments,have adoptedor proposed numerous laws relatingto theProcessingof personal informationrelatingto individualsand households, includingcontactinformationand otherdataformarketing,advertisingand othercommunicationswith individualsand businesses.The legallandscapefordataprivacy issuesworldwideiscomplex,continuallyevolvingand oftenconflicting,and islikelyto remainuncertainforthe foreseeablefuture.
In theUnited States,variouslaws and regulations that dictate whether, how, and under what circumstances we, or our data processors, may transfer, process and/or receive certain data, including data shared between countries or regions in which we operate and data shared among our products and services. applyto theProcessingof personal information.For example, ongoing legal uncertaintyU.S.federaland statelegislatures,alongwith regulatoryauthorities,have recentlyincreased theirfocuson
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thecollectionand use of personalinformation,includingrelatingto “interest-based” or “targeted” advertising. As an example,Californiaenactedthe California Consumer Privacy Act of 2018 (“CCPA”),whichrequirescoveredcompaniesto, amongotherthings,providenew disclosuresto Californiaconsumersand grantCalifornia consumersa rightto opt-outof “sales”of personalinformation,a conceptthatisbroadly defined.In addition, it is anticipated that the CaliforniaPrivacyRightsand EnforcementAct (“CPRA”), which comesintoeffecton January1, 2023, will expandtheCCPAand, amongotherthings, require additional protections for sensitive personal information,createnew datasubjectrights,createa new staterulemakingand enforcementagencyfortheCPRA,expandpotentialliabilityforviolationsand giveconsumersrightsto opt out of additionalformsof datasharingwith thirdparties. Other states have enacted data privacy laws, such as Virginia and Colorado. In addition, data privacy and security laws have been proposed at the federal, state, and local levels in Europe regarding the transfer of data torecent years, which could further complicate compliance efforts.
Outside the United States, could result in further limitations, including in lightan increasing number of the recent Schrems II ruling from the Court of Justice of the European Union dated July 16, 2020. This ruling effectively invalidated the EU-U.S. Privacy Shield framework,laws, regulations, and while it upheldindustry standards may apply to our data privacy and security practices. For example, the Standard Contractual Clauses (“SCCs”European Union’s GeneralData ProtectionRegulation(“EU GDPR”) as an alternative mechanism, it requires the parties to the SCCs to ensure that the level of protection required by European Union law is respected, potentially by yet-to-be-clarified supplementary measures. Similarly, legal uncertainty could result in further limitations regarding the United Kingdom, which exited the European Union with the transition period ending on December 31, 2020 (transition period for certain matters scheduled to run through December 31, 2020), in particular in relation to data transfers to and from the United Kingdom. However, as part of the European Union and the United Kingdom’s new trade deal, the European Union allows personal data to flow freelyGDPR (“UK GDPR”) imposes strict requirements applicable to the United Kingdom for a durationProcessing of six monthsindividuals’ personal information, respectively, in total as from January 1, 2021 (known as the “bridge”), until an adequacy decision has been adopted by the European Commission. In the unlikely event that no such adequacy decision is adopted by the European Commission at the end of the “bridge” period, we will need to rely on SCCs or other GDPR transfer mechanisms to ensure a lawful transfer of data from the European Economic Area to(“EEA”) and the United Kingdom. CertainKingdom (“UK”). For example, the EU GDPR imposes strict requirements for Processing the personal information of individuals andincludessignificantpenaltiesfornoncomplianceof up to thegreater of €20 millionor 4% of an enterprise’sglobalturnover(orrevenue)fortheprecedingfiscalyear. Additionally, MemberStatesmayassessotherpenaltiesfor noncompliance. Additionally, several Europeanlegislativeproposalscouldsignificantlyaffectour business.For example,the ePrivacy Regulation, which would repeal that EuropeanUnion Directive2002/58/EC (ePrivacy Directive), couldimpose new obligationsor limitationsin areasaffectingour business,notablywith respectto theuse of cookies.
Furthermore, we aresubjectto evolvinglaws and regulationsregarding our, or the third parties upon which we rely, cross border transfers ofpersonal information, which could make it more difficult for us to transfer personal information across jurisdictions (such as transferring or receiving personal information that originates in the EU). For example, absent appropriate safeguards or other circumstances, the EU GDPR generally restricts the transfer of personal information to countries outside of the EEA, such as the United States, which the European Commission does not consider to provide an adequate level of data privacy and security. The European Commission released a set of “Standard Contractual Clauses” that are designed to be a valid mechanism by which entities can transfer personal information out of the EEA to jurisdictions that the European Commission has not found to provide an adequate level of protection. Currently, these Standard Contractual Clauses are a valid mechanism to transfer personal information outside of the EEA. The Standard Contractual Clauses, however, require parties that rely upon that legal mechanism to comply with additional obligations, such as conducting transfer impact assessments to determine whether additional security measures are necessary to protect the at-issue personal information. Moreover, due to potential legal challenges, there exists some uncertainty regarding whether the Standard Contractual Clauses will remain a valid mechanism for transfers of personal information out of the EEA. Existing mechanisms, such as the Standard Contractual Clauses, that may facilitate cross-border personal information transfers may change or be invalidated. In addition, laws in Switzerland and the UK similarly restrict transfers of personal information outside of those jurisdictions to countries such as the United States that do not provide an adequate level of personal information protection and certain countries outside Europe (e.g., Russia, China) have also passed (e.g. Russia, China) or are considering passing laws requiring local data residency or otherwise impeding the transfer of datapersonal information across borders.
If onewe cannot implement a valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions, substantial fines, and injunctions against Processing or more of the legal bases for transferring datapersonal information from Europe or elsewhere. The inability to import personal information to the U.S. is invalidated, if we are unable to transfer or receive data betweenUnited States could significantly and among countries and regions in which we operate, or if we are prohibited from sharing data among our products and services, it could affect the manner in which we provide our services or adversely affect our financial results. Similarly, there are a number of European legislative proposals that could also significantly affect our business. For example, the proposal for a Regulation concerning the respect for private life and the protection of personal data in electronic communications and repealing European Union Directive 2002/58/EC, could impose new obligations or limitations in areas affectingnegatively impact our business notably with respect to the use of cookies.
In addition to government regulation, self-regulatory standards and other industry standards may legally or contractually apply to us or be argued to apply to us, or we may elect to comply with such standards or to facilitate our customers’ compliance with such standards. Because privacy, data protection, and information security are competitive factors in our industry, we may make statements on our website, in marketing materials, or in other settings about our data security measures and our compliance with, oroperations, including by limiting our ability to facilitatecollaborate with parties that are subject to European and other data privacy and security laws or requiring us to increase our customers’ compliancepersonal information processing capabilities and infrastructure in Europe and/or elsewhere at significant expense.
Inaddition, privacy advocates and industry groups have proposed, and may propose in the future, standards with these standards. We are members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data. Under the requirements of these self-regulatory bodies, in addition to other compliance obligations,which we are obligatedlegallyor contractuallybound to provide all consumers comply.Additionally,wemaymakestatementsaboutourdataProcessing practicesandourcompliancewith,orourabilitytofacilitateourcustomers’ compliancewith,thesestandards. For example, we have committedto comply,and generallyrequireour customers and the third parties upon which we relyto comply,with applicableself-regulatoryprinciples,such as theNetwork Advertising
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Initiative’s Code of Conduct and theDigitalAdvertisingAlliance’sSelf-RegulatoryPrinciplesforOnlineBehavioral Advertisingin theUnited States,and similarself-regulatoryprinciplesin Europe and Canada adoptedby thelocalDigital AdvertisingAlliance. Theseself-regulatorybodiesimposeadditionalrequirements relatedtotheProcessingofpersonalinformation, such as providing notice about our use of cookies and other technologies.Someoftheseself-regulatorybodiescandisciplinemembers,whichcouldresult infines,penalties,and/orpubliccensure.Additionally,someofthese self-regulatorybodiesmightreferviolationsoftheirrequirementstotheFederalTradeCommissionorother regulatorybodies. See “—Our businessor abilityto executeoperateour platformcould be impactedby changes in the collection technologyindustryby technologycompanies, end users,or governmentregulation.Such developments,includingthe restrictionof consumer“third-partycookies,”could cause instabilityin the advertisingtechnologyindustry.”
Similarly, there has been increasing global scrutiny over online politicaladvertising,and onlinepoliticaladvertisinglaws arerapidlyevolving. For example, publishers have imposed varyingprohibitionsand restrictionson thetypes and breadth of politicaladvertisingallowedon theirplatforms.The lackof uniformityand increasingrequirementsfor transparencyand disclosurecouldadverselyimpactthedemandforpoliticaladvertisingservices andincreaseour operatingand compliancecosts.
Becausetheinterpretationand applicationof privacyand dataprotectionlaws, regulationsand standards areuncertain and quickly changing,itispossiblethattheseobligationsmaybe interpretedand appliedin manners thatare,or areassertedto be, inconsistentwith our practices. Preparing for and complying with these obligations requires significant resources. Further, adaptationof thedigitaladvertisingmarketplacerequiresincreasinglysignificantcollaborationbetween participantsin themarket,such as publishersand marketers.Failureof theindustryto adaptto changes in data privacy and security obligationsand userresponseto such changescouldnegatively impactinventory,data,and demand.We cannotcontrolor predictthepaceor effectivenessof such adaptation, and we cannotpredicttheimpactsuch changesmayhave on our collectionbusiness. In addition,itmaybe necessaryforus to fundamentallychangeour businessactivities, information technologies, systems, and use of consumer data for certain purposes,practices, and to provide consumersthose of any third parties that Process personal information on our behalf.
Although we endeavor to comply with certain choices relatingall applicable data privacy and security obligations, we may at times fail or be perceived to the use of consumer data. Some of these self-regulatory bodies have the abilityfailed to discipline membersdo so. Moreover, despite our efforts, our customers, personnel or participants,third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture. For example, any failure by a third-party processor to comply with applicable law, regulations, or contractual obligations could result in adverse effects, including inability to operate our business and proceedings against us by governmental entities or others. Any inability, or perceived inability,to address or comply with applicable data privacy or securityobligationscould resultin significant consequences, including, but not limited to,government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional reporting requirements and/or public censure (which could in turn cause reputational harm). Additionally, someoversight; bans on Processing personal information; and orders to destroy or not use personal information. Any of these self-regulatory bodies might refer violationsevents could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of their requirementscustomers; additionalcosts and liabilities; damage our reputation;reduction insales and demand for our platform; and harm our business.
We have in the past been, and may in the future be, subject to the Federal Trade Commissionenforcement actions, investigations, litigation, or other regulatory bodies.
Regulatory investigationsinquiries regarding our data privacy and enforcement actions could also impact us. Insecurity practices. For example, the U.S., the FTC uses its enforcement powers under Section 5 of the Federal Trade Commission Act (which prohibits “unfair”investigated our wholly owned subsidiary, Myspace LLC, and “deceptive” trade practices) to investigate companies engagingfiled a complaint shortly after we acquired them in online tracking and the processing of consumer personal information more generally. This is the basis on which the FTC investigated Myspace LLC.late 2011. See “—We faceliabilitiesarisingout of our ownershipand operationof Myspace.comMyspace.com.” AdvocacyAdditionally, advocacy organizationshave also filed complaintswith data protectionauthoritiesagainst advertisingtechnology companies,arguing that certainof these companies’practicesdo not comply with the EU GDPR and/or the UK GDPR.It is possible that investigationsor enforcement actions will involve our practicesor practicessimilarto ours.
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Our legalriskdependsin parton our customers’businessor otherthirdparties’adherenceabilityto privacylaws and regulationsand theiruse of our servicesin ways consistentwith end userexpectations.We relyon representationsmadeto us by customersand datasuppliersthattheywillcomplywith allapplicablelaws, includingallrelevantprivacyand dataprotectionregulations.Although we makereasonableeffortsto enforce such representationsand contractualrequirements,we do not fullyauditour customers’or datasuppliers’ compliancewith our recommendeddisclosuresor theiradherenceto privacylaws and regulations.Ifour customersor datasuppliersfailto adhereto our expectationsor contractsin thisregard,we and our customersor datasupplierscouldbe subjectto adversepublicity,damages,and relatedpossibleinvestigationor other regulatoryactivity.
Because the interpretation and application of privacy and data protection laws, regulations and standards are uncertain, it is possible that these laws, regulations and standards may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our data management practices or the technological features of our products and services. If so, in addition to the possibility of fines, investigations, lawsuits and other claims and proceedings, it may be necessary or desirable for us to fundamentally change our business activities and practices or modify our products and services, which could have an adverse effect on our business. We may be unable to make such changes or modifications in a commercially reasonable manner or at all. Any inability to adequately address privacy concerns, even if unfounded, or any actual or perceived failure to comply with applicable privacy or data protection laws, regulations, standards or policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and harm our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, standards and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our platform. Privacy concerns, whether valid or not valid, may inhibit market adoption of operateour platform particularly in certain industries and foreign countries.
Adapting our business to the CCPA and its implementing regulations and to the enhanced and evolving privacy obligations in the EU and elsewhere could continue to involve substantial expense and may cause us to divert resources from other aspects of our operations, all of which may adversely affect our business. Further, adaptation of the digital advertising marketplace requires increasingly significant collaboration between participants in the market, such as publishers and marketers. Failure of the industry to adapt to changes required for operating under laws including the CCPA and the GDPR and user response to such changes could negatively impact inventory, data, and demand. We cannot control or predict the pace or effectiveness of such adaptation, and we cannot currently predict the impact such changes may have on our business.
Our business or ability to operate our platform could be impactedby changes in the technologyindustryby established technologycompanies, end users,or governmentregulation.Such developments,includingthe restrictionof “third-partycookies,”could cause instabilityin the advertisingtechnologyindustry.
Digital advertising and in-app advertising are largely dependent on established technology companies and their operation of the most commonly used Internet browsers (Chrome, Firefox, Internet Explorer and Safari)Safari), devices and their operating systems (Android and iOS). These companies may change the operations or policies of
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their browsers, devices and operating systems in a manner that fundamentally changes our ability to operate our platform or collect data. Users of these browsers, devices or operating systems may also adjust their behaviors and use of technology in ways that change our ability to collect data. Digital advertising and in-app advertising are also dependent, in part, on internet protocols and the practices of internet service providers, including IP address allocation. Changes that these providers make to their practices, or adoption of new internet protocols, may materially limit or alter the availability of data. A limitation or alteration of the availability of data in any of these or other instances may have a material impact on the advertising technology industry, which could decrease advertising budgets and subsequently reduce our revenue and adversely affect our business, operating results and financial condition.
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For example,browserprovidershave recentlyenactedchangesrestrictingtheuse of third-partycookies in theirbrowsers,which maycauseinstabilityin thedigitaladvertisingmarket.Executionof digitaladvertising reliesto a significantextenton theuse of cookies,pixelsand othersimilartechnology,includingmobiledevice identifiersthatareprovidedby mobileoperatingsystemsforadvertisingpurposes,which we referto collectively as cookies,to collectdataaboutusersand devices.Although our businessislessrelianton cookiesthansomeof our competitorsbecausewe do not need cookiesformarketersand theiradvertisingagenciesto identify consumerswith our identityresolutioncapabilitiesand identitygraph, we do use third-partycookies. Third-party cookiesarecookiesowned and used by partiesotherthantheowners of thewebsitevisitedby theInternet internet user,in connectionwith our businessforexecutionof obtaininginformationaboutconsumers,and fordelivering digitaladvertising. advertising. In January2020, Google publiclystateditintendsforChrometo blockthird-partycookiesat somepointin thefollowing24 months.Google has alsointroducedad blockingsoftwarein itsChromeweb browserthatwillblockcertainads basedon qualitystandardsestablishedundera multi-stakeholdercoalition. Additionally,theSafaribrowsercurrentlyblocksthird-partycookiesby defaultand has recentlyadded controls thatalgorithmicallyblockor limitsomecookies.Otherbrowsershave added similarcontrols.These actionswill have significantimpactson thedigitaladvertisingand marketingecosystemsin which we operate,which could causechangesin advertisingbudgetallocationsand therebycouldnegativelyimpactour business. In addition, these browser providers may frequently delay or change their previously announced operations or policies. For example, in June 2021, Google announced that it would delay its timeline of blocking third-party cookies by 2022 until 2023.
For in-app advertising, data regarding interactions between users and devices are tracked mostly through stable, pseudonymous mobile device identifiers that are built into the device operating system with privacy controls that allow users to express a preference with respect to data collection for advertising, including to disable the identifier. These identifiers and privacy controls are defined by the developers of the mobile platforms and could be changed by the mobile platforms in a way that may negatively impact our business. Privacy aspects of other channels for programmatic advertising, such as connected TVs or over-the-top video, are still developing. Technical or policy changes, including regulation or industry self-regulation, could harm our growth in those channels.
Digital advertising is also subject to government regulation which may impact our ability to collect and use data. As the collection and use of data for digital advertising has received ongoing media attention over the past several years, some government regulators, such as the FTC, and privacy advocates have raised significant concerns around observed data. There has been an array of ‘do-not-track’ efforts, suggestions and technologies introduced to address these concerns. However, the potential regulatory and self-regulatory landscape is inherently uncertain, and there is no consensus definition of tracking, nor agreement on what would be covered by ‘do-not-track’ functionality. There is activity by the major Internetinternet browsers to default set on ‘do-not-track’ functionality, including by Safari and Firefox. It is not clear if other Internetinternet browsers will follow.
Limitations on our or our customers’ ability to collect and use data for advertising, whether imposed by established technology companies or U.S. legislation, or otherwise, may impact the performance of our platform.
Uncertainty caused by lackA significantinadvertentdisclosureor breach of uniformity among laws toour information technology systems or data, or of the securityof our or our customers’,suppliers’,or otherthird parties’ upon which we arerelycould be detrimentalto our business,reputationand resultsof operations.
Our business requires the processing of proprietary, confidential, and sensitive data, including personal information, intellectual property and trade secrets. We rely upon third party service providers and technologies to operate critical business systems to process such data, including, without limitation, third-party providers of cloud-based infrastructure such as Google Cloud Platform and Amazon Web Services, employee email, and other functions. We may share or receive sensitive data with or from third parties. Our ability to monitor these third
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parties’ security practices is limited, and these parties may become subject not have adequate information security measures in place.
Our data processing activitieshave made,and instability mayin the global legal landscapefuture make,us and the third parties upon which we rely a targetof cyber-attacksby thirdpartiesseekingunauthorizedaccessto sensitivedata.We and the third parties upon which we rely face a variety of evolving threats, which could cause security breaches. In recentyears,thefrequency,severityand sophisticationof cyber-attacks,computermalware,viruses, socialengineering,and otherintentionalmisconducthas significantlyincreased, and these threats are becoming increasingly difficult to detect. These threats come from a variety of sources, including traditional computer hackers, threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. We and the third parties upon which we rely may cause usbe subject to incur additionala variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or unexpected costserror, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and legal risk, increaseother similar threats.
Ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions in our riskoperations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or cause usunable to change our platform or business model.
We cannot predict the future of the regulatory landscape regarding the protection of personal information. U.S. (state and federal) and foreign governments are considering enacting additional legislation relatedmake such payments due to, privacy and data protection and we expect to see an increase in, or changes to, legislation and regulation in this area. Forfor example, in the U.S., a federal privacy law is the subject of active discussion and several bills have been introduced. Additionally, industry groups in the U.S. and their international counterparts have self-regulatory guidelines that are subject to periodic updates to which we have agreed to adhere. High profile incidents involving breaches of personal information or misuse of consumer information may increase the likelihood of new U.S. federal, state, or internationalapplicable laws or regulations prohibiting such payments. Similarly, supply-chain attacks have increased in addition to those set out above,frequency and such lawsseverity, and regulations may be inconsistent across jurisdictions.
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In additionto laws regulatingtheprocessingof personalinformation,we arealsosubjectto regulation with respectto politicaladvertisingactivities,which aregovernedby variousfederalcannot guarantee that third parties and statelawsinfrastructure in theU.S., and nationaland provinciallaws worldwide.Onlinepoliticaladvertisinglaws arerapidlyevolving,and in certain jurisdictionsour supply chain or our third-party partners’ supply chains have varyingtransparencyand disclosurerequirements.We have alreadyseenpublishersimpose varyingprohibitionsand restrictionson thetypesof politicaladvertisingand breadthof targetedadvertising allowedon theirplatformswith respectto advertisementsforthe2020 U.S.presidentialelectionin responseto politicaladvertisingscandalsin priorelectioncycles.The lackof uniformityand increasingrequirementson transparencyand disclosurecouldadverselyimpacttheinventorymadeavailableforpoliticaladvertisingand the demandforsuch inventoryon our platform,and otherwiseincreaseour operatingand compliancecosts.
Concerns about political advertising, whethernot been compromised or that they do not valid and whethercontain exploitable defects or not driven by applicable laws and regulations, industry standards, customer or inventory provider expectations, or public perception, may harm our reputation, result in loss of goodwill, and inhibit use of our platform by current and future customers.
Additionally, as the advertising industry evolves, and new ways of collecting, combining and using data are created, governments may enact legislation in response to technological advancements and changesbugs that could result in a breach of or disruption to our having to re-design featuresinformation technology systems (including our products/services) or functionsthe third-party information technology systems that support us and our services.
Any of our platform, therefore incurring unexpected compliance costs.the previously identified or similar threats could cause a security breach or other interruption,resultingin theunauthorized, unlawful, or accidental acquisition, disclosure,modification,misuse,destruction, disclosure of, encryption of, or lossofdata.
These lawsWe mayincursignificantcostsin protectingagainstsuchsecurity breaches. Furthermore, certain data privacy and othersecurity obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our platform. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our products, which could have an adverse effect on our business. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new products and features could be limited. All of this could impair our or our customers’ ability to collect, use, or disclose information relating to consumers, which could decrease demand for our platform, increase our costs, and impair our ability to maintain and grow our customer base and increase our revenue.
Commitments to advertising technology industry self-regulation may subject us to investigation by government or self-regulatory bodies, government or private litigation, and operational costs or harm to reputation or brand.
In addition to our legal obligations, we have committed to comply, and generally require our customers and partners to comply, with applicable self-regulatory principles, such as the Network Advertising Initiative’s Code of Conduct and the Digital Advertising Alliance’s Self-Regulatory Principles for Online Behavioral Advertising in the U.S., and similar self-regulatory principles in Europe and Canada adopted by the local Digital Advertising Alliance.
Trade associations and industry self-regulatory groups have also promulgated best practices and other industry standards relating to targeted advertising. Our efforts to comply with these self-regulatory principles include offering Internet users notice and choice when advertising is served to them based, in part, on their interests. If we or our customers or partners make mistakes in the implementation of these principles, or if self-regulatory bodies expand these guidelines or government authorities issue different guidelines regarding Internet-based advertising, or opt out mechanisms fail to work as designed, or if Internet users misunderstand our technology or our commitments with respect to these principles, we may, as a result, be subject to negative publicity, government investigation, government or private litigation, or investigation by self-regulatory bodies or other accountability groups. Any such action against us, or investigations, even if meritless, could be costly and time consuming, require us to change implement and maintain specific security measures. Although we have takenmeasuresto protectour business practices, cause us to divert management’s attention and our resources, and systemsfrom such threats,we cannotbe damaging to our brand, reputation, and business. In addition, privacy advocates and industry groups may propose new and different self-regulatory standards certainthat either legally or contractually apply to us. We cannot yet determine the impact such future standards may have on our business.
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Unfavorablepublicityand negativepublicperceptionabout our industry,particularlyconcernsregardingdata privacyand securityrelatingto our industry’stechnologyand practices,and perceivedfailureto complywith laws and industryself-regulation,could adverselyaffectour businessand operatingresults.
With the growth of digital advertising and e-commerce, there is increasing awareness and concern among the general public, privacy advocates, mainstream media, governmental bodies and others regarding marketing, advertising, and data privacy matters, particularly as they relate to individual privacy interests and the global reach of the online marketplace. Concerns about industry practices with regard to the collection, use, and disclosure of personal information, whether or not valid and whether driven by applicable laws and regulations, industry standards, customer or inventory provider expectations, or the broader public, may harm our reputation, result in loss of goodwill, and inhibit use of our platform by current and future customers. Any unfavorable publicity or negative public perception about us, our industry, including our competitors, or even other data focused industries can affect our business and results of operations, and may lead to digital publishers or our customers changing their business practices or additional regulatory scrutiny or lawmaking that affects us or our industry.these measures will be effective. For example, in recent years, consumer advocates, mainstream media 2016, we discovereda breachof informationfromour Myspacedatabasesresultingin the unauthorizedaccessand elected officials have increasingly offerforsaleof approximately360 millionMyspaceuseraccountemailaddresses, usernames,and publicly criticized the data and marketing industry for its collection, storage and use of personal data. Additional public scrutiny may lead to general distrusthashedpasswords.See “—Wefaceliabilitiesarisingout of our industry, consumer reluctance to share ownershipand permit use operationof personal data, increased consumer opt-out rates or increased private class actions, any of which could negatively influence, change or reduce our current and prospective customers’ demand for our products and services, subject us to liability and adversely affect our business and operating results.
Risks Related to Our Intellectual Property
Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our technology without compensating us, thereby eroding our competitive advantages and harming our business.
Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop or otherwise acquire, so that we can prevent others from using our inventions and proprietary information. If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology and our business might be adversely affected. We rely upon a combination of patent, trademark, copyright and trade secret laws, as well as third-party confidentiality and non-disclosure agreements, to establish and protect our proprietary rights. Establishing trade secret, copyright, trademark, domain name, and patent protection can be difficult and expensive, and the laws, procedures and restrictions may provide only limited protection. It may be possible for unauthorized third parties to copy or reverse engineer aspects of our technology or otherwise obtain and use information that we regard as proprietary, or to develop technologies similar or superior to our technology or design around our proprietary rights, despite the steps we have taken to protect our proprietary rights. Our contracts with our employees and contractors that relate to intellectual property issues generally restrict the use of our confidential information solely in connection with our services. However, the theft or misuse of our proprietary information could occur by employees or contractors who have access to our technology.
While we have issued patents and patent applications pending,Myspace.com.” Additionally, we may be unable to obtain patent protection for the technology covereddetect vulnerabilities in our patent applications orinformation technology systems because such patent protectionthreats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security breach has occurred.
Any securitybreach of our or the third parties’ upon which we rely information technology systems or data couldresultin adverse consequences, including but not limited to litigation,indemnityobligations, enforcementactions, investigations,fines,penalties,mitigationand remediationcosts,disputes,reputationalharm,diversionof management’sattention, operationaldisruptions, decreasedrevenue, and reduced demand for our platform.Further,applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences
Furthermore, our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. Additionally, we cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.
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Risks Relatedto Our IntellectualProperty
Our proprietaryrightsmaybe difficultto enforce,which could enableothersto copy or use aspectsof our technologywithout compensatingus, therebyerodingour competitiveadvantagesand harmingour business.
Oursuccessdepends,inpart,onourabilitytoprotectproprietarymethodsandtechnologiesthatwe developorotherwiseacquire,sothatwecanpreventothersfromusingourinventionsandproprietaryinformation. Ifwefailtoprotectourintellectualpropertyrightsadequately,ourcompetitorsmightgainaccesstoourtechnologyandourbusinessmightbeadverselyaffected.Werelyuponacombinationofpatent,trademark,copyrightandtrade secretlaws,aswellasthird-partyconfidentialityandnon-disclosureagreements,toestablishandprotectour proprietaryrights.Establishingtradesecret,copyright,trademark,domainname,andpatentprotectioncanbe difficultandexpensive,andthelaws,proceduresandrestrictionsmayprovideonlylimitedprotection.Itmaybe possibleforunauthorizedthirdpartiestocopyorreverseengineeraspectsofourtechnologyorotherwiseobtainand useinformationthatweregardasproprietary,ortodeveloptechnologiessimilarorsuperiortoourtechnologyor designaroundourproprietaryrights,despitethestepswehavetakentoprotectourproprietaryrights.Ourcontracts withouremployeesandcontractorsthatrelatetointellectualpropertyissuesgenerallyrestricttheuseofour confidentialinformationsolelyinconnectionwithourservices.However,thetheftormisuseofourproprietary informationcouldoccurbyemployeesorcontractorswhohaveaccesstoourtechnology.
Whilewe have issuedpatentsand patentapplicationspending,we maybe unableto obtainpatent protectionforthetechnologycoveredin our patentapplicationsor such patentprotectionmaynot be obtained quicklyenough to meetour businessneeds.Furthermore,thepatentprosecutionprocessisexpensive,time-consuming,and complex,and we maynot be ableto prepare,file,prosecute,maintain,and enforceallnecessary or desirablepatentapplicationsata reasonablecostor in a timelymanner.The scopeof patentprotectionalsocan be reinterpretedafterissuanceand issuedpatentsmaybe invalidated.Even ifour patentapplicationsdo issue as patents,theymaynot issuein a formthatissufficientlybroadto protectour technology,preventcompetitorsor otherthirdpartiesfromcompetingwith us or otherwiseprovideus with any competitiveadvantage.
Policingunauthorizeduse of our technologyisdifficult.In addition,thelaws of someforeigncountries maynot be as protectiveof intellectualpropertyrightsas thoseof theUnitedStates,and mechanismsfor enforcementof our proprietaryrightsin such countriesmaybe inadequate.Ifwe areunableto protectour proprietaryrights (including (includingin particular,theproprietaryaspectsof our platform)we mayfindourselvesata competitivedisadvantageto otherswho have not incurredthesamelevelof expense,timeand effortto createand protecttheirintellectualproperty.
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We are subjectto thirdpartyclaimsforallegedinfringementof theirproprietaryrights,which would resultin additionalexpenseand potentialdamages.
Thereissignificantpatentand otherintellectualpropertydevelopmentactivityin thedigitaladvertising industry.Third-partyintellectualpropertyrightsmaycoversignificantaspectsof our technologiesor business methodsor blockus fromexpandingour offerings.Our successdependson thecontinualdevelopmentof our platform.Fromtimeto time,we receiveclaimsfromthirdpartiesthatour platformand underlyingtechnology infringeor violatesuch thirdparties’intellectualpropertyrights.To theextentwe gaingreaterpublic recognition,we mayfacea higherriskof beingthesubjectof intellectualpropertyclaims.The costof defending againstsuch claims,whetheror not theclaimshave merit,issignificant,regardlessof whetherwe aresuccessful in our defense,and coulddiverttheattentionof management,technicalpersonneland otheremployeesfromour businessoperations.Litigationregardingintellectualpropertyrightsisinherentlyuncertaindue to thecomplex issuesinvolved,and we maynot be successfulin defendingourselvesin such matters.Additionally,we maybe obligatedto indemnifyour customersor inventoryand datasuppliersin connectionwith any such litigation.If we arefound to infringetheserights,we couldpotentiallybe requiredto ceaseutilizingportionsof our platform. We mayalsobe requiredto developalternativenon-infringingtechnology,which couldrequiresignificanttimeand expense.Alternatively,we couldbe requiredto pay royaltypayments,eitheras a one-timefeeor ongoing, as wellas damagesforpastuse thatwas deemedto be infringing.Ifwe cannotlicenseor developtechnologyforany allegedlyinfringingaspectof our business,we would be forcedto limitour serviceand maybe unableto competeeffectively.Any of theseresultscouldharmour business.
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We facepotentialliabilityand harm to our businessbased on the nature of our businessand the contenton our platform.
Advertisingoftenresultsin litigationrelatingto copyrightor trademarkinfringement,public performanceroyaltiesor otherclaimsbasedon thenatureand contentof advertisingthatisdistributedthrough our platform.Though we contractuallyrequireagenciesto representto us thattheyhave therightsnecessaryto serveadvertisementsthroughour platform,we do not independentlyverifywhetherwe arepermittedto deliver, or reviewthecontentof, such advertisements.Ifany of theserepresentationsareuntrue,we maybe exposedto potentialliabilityand our reputationmaybe damaged.Whileour customersaretypicallyobligatedto indemnify us, such indemnificationmaynot fullycoverus, or we maynot be ableto collect.In additionto settlementcosts, we maybe responsibleforour own litigationcosts,which can be extensive.
Risks Relating Relatedto GovernmentalRegulationand Tax Matters
Our businessissubjectto a wide range of laws and regulations,many of which are evolving,and failureto complywith such laws and regulationscould harm our business,financialcondition,and resultsof operations.
Our businessissubjectto regulationby variousfederal,state,localand foreigngovernmentalagencies, includingagenciesresponsibleformonitoringand enforcingemploymentand laborlaws, consumerprotection laws, anti-briberylaws, importand exportcontrols,federalsecuritieslaws, and taxlaws and regulations.These laws and regulationsimposeadded costson our businessand couldrequireus to makechangesto our businessor platform.Noncompliancewith applicableregulationsor requirementscouldsubjectus to investigations, enforcementactions,sanctions,fines,damages,penalties,injunctionsor terminationof contracts.Any such matterscouldhave a materialadverseeffecton our business,resultsof operationsand financialcondition.
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Viant Technology Inc. dependsWe depend on distributionsfromViant Technology LLCto pay any dividends,if declared,taxesand otherexpenses,includingpaymentsunder the Tax ReceivableAgreement.
ViantTechnologyInc.is a holdingcompanyanditsonly businessis to actas themanagingmemberof ViantTechnologyLLC,and itsonly materialassetsare ClassA units representingapproximately 19.5%22.5% of themembershipinterestsof ViantTechnologyLLC.Viant TechnologyInc.does not have any independentmeansof generatingrevenue.We anticipatethatViant TechnologyLLCwillcontinueto be treatedas a partnershipforU.S.federalincometaxpurposesand, as such, generallywillnot be subjectto any entity-levelU.S.federalincometax.Instead,taxableincomewillbe allocated to themembersof ViantTechnologyLLC.Accordingly,ViantTechnologyInc.is requiredto pay income taxeson itsallocableshareof any nettaxableincomeof ViantTechnologyLLC.We causeViant TechnologyLLCto makedistributionsto eachof itsmembers,includingViantTechnologyInc.,in an amount intendedto enableeachmemberto pay allapplicabletaxeson taxableincomeallocableto such memberand to allowViantTechnologyInc.to makepaymentsundertheTax ReceivableAgreement.In addition,Viant TechnologyLLCreimbursesViantTechnologyInc. to make payments under the Tax Receivable Agreement. In addition, Viant Technology LLC reimburses Viant Technology Inc. forcorporateand otheroverheadexpenses.Iftheamount of taxdistributionsto be madeexceedstheamountof fundsavailablefordistribution,ViantTechnologyInc. shallreceivethefullamountof itstaxdistributionbeforetheothermembersreceiveany distributionand the balance,ifany, of fundsavailablefordistributionshallbe distributedto theothermemberspro ratain accordance with theirassumedtaxliabilities.To theextentthatViantTechnologyInc.needsfunds,and ViantTechnology LLCisrestrictedfrommakingsuch distributionsunderapplicablelaws or regulations,or isotherwiseunableto providesuch funds,itcouldmateriallyand adverselyaffectViantTechnologyInc.’sabilityto pay dividendsand taxesand otherexpenses,includingpaymentsundertheTax ReceivableAgreement,and affectour liquidityand financialcondition.
The InternalRevenue Service(“IRS”) mightchallengethe tax basisstep-upsand othertax benefitswe received in connectionwith our IPOand the relatedtransactionsand in connectionwith futureacquisitionsof Viant Technology LLCunits.
The ViantTechnologyLLCunitshelddirectlyby themembersof ViantTechnologyLLCotherthan ViantTechnologyInc.,including the Vanderhook Parties,mayin thefuturebe exchangedforsharesof our ClassA commonstockor, atour election,cash.Those exchangesmayresultin increasesin thetaxbasisof the assetsof ViantTechnologyLLCthatotherwisewould not have been available.These increasesin taxbasisareexpectedto increase (for (fortaxpurposes)ViantTechnologyInc.’sdepreciationand amortizationand, togetherwith othertax
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benefits,reducetheamountof taxthatViantTechnologyInc.would otherwisebe requiredto pay, althoughitispossiblethattheIRS mightchallengeallor partof thesetaxbasisincreasesor othertaxbenefits, and a courtmightsustainsuch a challenge.ViantTechnologyInc.’sabilityto achievebenefitsfromany taxbasis increasesor othertaxbenefitswilldepend upon a numberof factors,as discussedbelow, includingthetimingand amountof our futureincome.
We willnot be reimbursedforany paymentspreviouslymadeundertheTax ReceivableAgreementif thebasisincreasesor othertaxbenefitsdescribedabove aresuccessfullychallengedby theIRS or anothertaxing authority.As a result,in certaincircumstances,paymentscouldbe madeundertheTax ReceivableAgreementin excessof our ultimatecashtaxsavings.
Viant Technology Inc. isWe are requiredto pay overto continuingmembersof Viant Technology LLCmostof the tax benefits Viant Technology Inc. receives we receivefromtax basisstep-ups (and(and certainothertax benefits) attributableto itsacquisitionof unitsof Viant Technology LLC,and the amount of thosepaymentsare expectedto be substantial.
ViantTechnologyInc.has enteredintoa Tax ReceivableAgreementwith ViantTechnologyLLC, continuingmembersof ViantTechnologyLLC (not (notincludingViantTechnologyInc.)and therepresentativeof such continuingmembersof ViantTechnologyLLC (the “TRA (the“TRARepresentative”). The Tax Receivable Agreementprovidesforpaymentby ViantTechnologyInc.to continuingmembersof ViantTechnologyLLC (notincludingViantTechnologyInc.)of 85% of theamountof thenetcashtaxsavings,ifany, thatViant TechnologyInc.realizes (or, (or,undercertaincircumstances,isdeemedto realize)as a resultof increasesin taxbasis (and (andutilizationof certainothertaxbenefits)resultingfrom(i)ViantTechnologyInc.’sacquisitionof Viant TechnologyLLCunitsfrompre-IPOmembersof ViantTechnologyLLCin connectionwith the IPOand in futureexchangesand (ii)any paymentsViantTechnologyInc.makesundertheTax ReceivableAgreement (includingtaxbenefitsrelatedto imputedinterest).ViantTechnologyInc.willretainthebenefitof theremaining15% of thesenetcashtaxsavings.
ThetermoftheTaxReceivableAgreementwill continueuntilalltaxbenefitsthataresubjecttotheTaxReceivableAgreementhavebeenutilizedorhaveexpired, unlessweexerciseourrighttoterminatetheTaxReceivableAgreement(oritisterminatedduetoachangein controlorourbreachofamaterialobligationthereunder),inwhichcase,ViantTechnologyInc.willberequiredto maketheterminationpaymentspecifiedintheTaxReceivableAgreement.Inaddition,paymentswemakeunder theTaxReceivableAgreementwillbeincreasedbyanyinterestaccruedfromtheduedate(withoutextensions)of thecorrespondingtaxreturn.Theactual futurepaymentstothecontinuingmembersofViantTechnologyLLCwillvarybasedonthefactorsdiscussed below,andestimatingtheamountandtimingofpaymentsthatmaybemadeundertheTaxReceivableAgreement isbyitsnatureimprecise,asthecalculationofamountspayabledependsonavarietyoffactorsandfutureevents. WeexpecttoreceivedistributionsfromViantTechnologyLLCinordertomakeanyrequiredpaymentsunderthe TaxReceivableAgreement.However,wemayneedtoincurdebttofinancepaymentsundertheTaxReceivable Agreementtotheextentsuchdistributionsorourcashresourcesareinsufficienttomeetourobligationsunderthe TaxReceivableAgreementasaresultoftimingdiscrepanciesorotherwise.
The actualincreasein taxbasis,as wellas theamountand timingof any paymentsundertheTax ReceivableAgreement,willvarydependingon a numberof factors,includingthepriceof our ClassA common stockatthetimeof theexchange;thetimingof futureexchanges;theextentto which exchangesaretaxable;the amountand timingof theutilizationof taxattributes;theamount,timingand characterof ViantTechnology Inc.’sincome;theU.S.federal,stateand localtaxratesthenapplicable;theamountof eachexchanging unitholder’staxbasisin itsunitsatthetimeof therelevantexchange;thedepreciationand amortizationperiodsthatapplyto theincreasesin taxbasis;thetimingand amountof any earlierpaymentsthatViantTechnologyInc. mayhave madeundertheTax ReceivableAgreementand theportionof ViantTechnologyInc.’spaymentsunder theTax ReceivableAgreementthatconstituteimputedinterestor giveriseto depreciableor amortizabletax basis.We expectthat,as a resultof theincreasesin thetaxbasisof thetangibleand intangibleassetsof Viant TechnologyLLCattributableto theexchangedViantTechnologyLLCinterests,and certainothertaxbenefits, thepaymentsthatViantTechnologyInc.willbe requiredto maketo theholdersof rightsundertheTax ReceivableAgreementwillbe substantial.Theremaybe a materialnegativeeffecton our financialconditionand liquidityif,as describedbelow, thepaymentsundertheTax ReceivableAgreementexceedtheactualbenefits ViantTechnologyInc.receivesin connection withrespectof the IPO and in future exchanges and (ii) any paymentstaxattributessubjectto theTax ReceivableAgreementand/or distributionsto ViantTechnologyInc.by ViantTechnologyLLCarenot sufficientto permitViantTechnology Inc. makes to makepaymentsundertheTax ReceivableAgreement.
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In certaincircumstances,paymentsunder the Tax ReceivableAgreement (including maybe acceleratedand/or significantlyexceedthe actualtax benefits, related to imputed interest). ifany, thatViant Technology Inc. will retain the benefit of the remaining 15% of these net cash tax savings.
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ThetermoftheTaxReceivableAgreementwill continueuntilalltaxbenefitsthataresubjecttotheTaxReceivableAgreementhavebeenutilizedorhaveexpired, unlessweexerciseourrighttoterminatetheTaxReceivableAgreement(oritisterminatedduetoachangein controlorourbreachofamaterialobligationthereunder),inwhichcase,ViantTechnologyInc.willberequiredto maketheterminationpaymentspecifiedintheTaxReceivableAgreement.Inaddition,paymentswemakeunder theTaxReceivableAgreementwillbeincreasedbyanyinterestaccruedfromtheduedate(withoutextensions)of thecorrespondingtaxreturn.Theactual futurepaymentstothecontinuingmembersofViantTechnologyLLCwillvarybasedonthefactorsdiscussed below,andestimatingtheamountandtimingofpaymentsthatmaybemadeundertheTaxReceivableAgreement isbyitsnatureimprecise,asthecalculationofamountspayabledependsonavarietyoffactorsandfutureevents. WeexpecttoreceivedistributionsfromViantTechnologyLLCinordertomakeanyrequiredpaymentsunderthe TaxReceivableAgreement.However,wemayneedtoincurdebttofinancepaymentsundertheTaxReceivable Agreementtotheextentsuchdistributionsorourcashresourcesareinsufficienttomeetourobligationsunderthe TaxReceivableAgreementasaresultoftimingdiscrepanciesorotherwise.actuallyrealizes.
The actual increase Tax ReceivableAgreementprovidesthatif(i)ViantTechnologyInc.exercisesitsrightto early terminationof theTax ReceivableAgreementin tax basis, as well as whole (thatis,with respectto allbenefitsdue to allbeneficiaries underthe amount and timing of any paymentsTax ReceivableAgreement)or in part(thatis,with respectto somebenefitsdue to allbeneficiaries undertheTax ReceivableAgreement),(ii)ViantTechnologyInc.experiencescertainchangesin control,(iii)the Tax ReceivableAgreementisrejectedin certainbankruptcyproceedings,(iv)ViantTechnologyInc.fails(subjectto certainexceptions)to makea paymentundertheTax ReceivableAgreementwithin180 days afterthe due dateor (v)ViantTechnologyInc.materiallybreachesitsobligationsundertheTax ReceivableAgreement, ViantTechnologyInc.will vary depending be obligatedto makean earlyterminationpaymentto holdersof rightsundertheTax ReceivableAgreementequalto thepresentvalueof allpaymentsthatwould be requiredto be paidby Viant TechnologyInc.undertheTax ReceivableAgreement.The amountof such paymentswillbe determinedon the basisof certainassumptionsin theTax ReceivableAgreement,including(i)theassumptionthatViant TechnologyInc.would have enough taxableincomein thefutureto fullyutilizethetaxbenefitresultingfromthe taxassetsthatarethesubjectof theTax ReceivableAgreement,(ii)theassumptionthatany itemof loss deductionor creditgeneratedby a number basisadjustmentor imputedinterestarisingin a taxableyearprecedingthe taxableyearthatincludesan earlyterminationwillbe used by ViantTechnologyInc.ratablyfromsuch taxable yearthroughtheearlierof factors, including(x)thescheduledexpirationof such taxitemor (y)15 years;(iii)theassumptionthat any non-amortizableassetsaredeemedto be disposedof in a fullytaxabletransactionon thefifteenthanniversaryof theearlierof thebasisadjustmentand theearlyterminationdate;(iv)theassumptionthatU.S. federal,stateand localtaxrateswillbe thesameas in effecton theearlyterminationdate,unlessscheduledto change;and (v)theassumptionthatany unitsof ViantTechnologyLLC(otherthanthoseheldby Viant TechnologyInc.)outstandingon theterminationdatearedeemedto be exchangedforan amountequalto the price marketvalueof ourthecorrespondingnumberof sharesof ClassA commonstock aton the time terminationdate.Any early terminationpaymentmaybe madesignificantlyin advanceof the exchange;actualrealization,ifany, of the timing of future exchanges; the extent tax benefitsto which exchanges are taxable; theterminationpaymentrelates.The amountof theearlyterminationpaymentisdeterminedby discountingthepresentvalueof allpaymentsthatwould be requiredto be paidby ViantTechnologyInc.under theTax ReceivableAgreementata rateequalto thelesserof (a)6.5% and timing of (b)the utilization of tax attributes;SecuredOvernightFinancing Rate, as reportedby the amount, timing and character of Viant Technology Inc.’s income; the U.S. federal, state and local tax rates then applicable; the amount of each exchanging unitholder’s taxWallStreetJournal(“SOFR”) plus400 basis in its units at the time of the relevant exchange; the depreciation and amortization periods that apply to the increases in tax basis; the timing and amount of any earlier payments that Viant Technology Inc. may have made under the Tax Receivable Agreement and the portion of Viant Technology Inc.’s payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis. We expect that, points.
Moreover,as a resultof the increases an electiveearlytermination,a changein the tax basis controlor ViantTechnologyInc.’s materialbreachof itsobligationsunderthe tangible and intangible assets of Tax ReceivableAgreement,ViantTechnology LLC attributable to the exchanged Viant Technology LLC interests, and certain other tax benefits, the payments that Viant Technology Inc. will couldbe required to make to paymentsunderthe holders of rights under the Tax ReceivableAgreement will be substantial. There may be a material negative effect on our financial condition and liquidity if, as described below, thatexceeditsactualcashsavingsunderthe payments under the Tax Receivable Agreement exceed Agreement.Thus, ViantTechnologyInc.’sobligationsunderthe actual benefits Viant Technology Inc. receives in respect of the tax attributes subject to the Tax ReceivableAgreement and/or distributions to Viant Technology Inc. by Viant Technology LLC are not sufficient to permit Viant Technology Inc. to make payments under the Tax Receivable Agreement.
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In certaincircumstances,paymentsunder the Tax ReceivableAgreementmaybe acceleratedand/or significantlyexceedthe actualtax benefits,ifany, thatViant Technology Inc. actuallyrealizes.
The Tax Receivable Agreement provides that if (i) Viant Technology Inc. exercises its right to early termination of the Tax Receivable Agreement in whole (that is, with respect to all benefits due to all beneficiaries under the Tax Receivable Agreement) or in part (that is, with respect to some benefits due to all beneficiaries under the Tax Receivable Agreement), (ii) Viant Technology Inc. experiences certain changes in control, (iii) the Tax Receivable Agreement is rejected in certain bankruptcy proceedings, (iv) Viant Technology Inc. fails (subject to certain exceptions) to make a payment under the Tax Receivable Agreement within 180 days after the due date or (v) Viant Technology Inc. materially breaches its obligations under the Tax Receivable Agreement, Viant Technology Inc. will be obligated to make an early termination payment to holders of rights under the Tax Receivable Agreement equal to the present value of all payments that would be required to be paid by Viant Technology Inc. under the Tax Receivable Agreement. The amount of such payments will be determined on the basis of certain assumptions in the Tax Receivable Agreement, including (i) the assumption that Viant Technology Inc. would have enough taxable income in the future to fully utilize the tax benefit resulting from the tax assets that are the subject of the Tax Receivable Agreement, (ii) the assumption that any item of loss deduction or credit generated by a basis adjustment or imputed interest arising in a taxable year preceding the taxable year that includes an early termination will be used by Viant Technology Inc. ratably from such taxable year through the earlier of (x) the scheduled expiration of such tax item or (y) 15 years; (iii) the assumption that any non-amortizable assets are deemed to be disposed of in a fully taxable transaction on the fifteenth anniversary of the earlier of the basis adjustment and the early termination date; (iv) the assumption that U.S. federal, state and local tax rates will be the same as in effect on the early termination date, unless scheduled to change; and (v) the assumption that any units of Viant Technology LLC (other than those held by Viant Technology Inc.) outstanding on the termination date are deemed to be exchanged for an amount equal to the market value of the corresponding number of shares of Class A common stock on the termination date. Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates. The amount of the early termination payment is determined by discounting the present value of all payments that would be required to be paid by Viant Technology Inc. under the Tax Receivable Agreement at a rate equal to the lesser of (a) 6.5% and (b) the Secured Overnight Financing Rate, as reported by the Wall Street Journal (“SOFR”) plus 400 basis points.
Moreover, as a result of an elective early termination, a change in control or Viant Technology Inc.’s material breach of its obligations under the Tax Receivable Agreement, Viant Technology Inc. could be required to make payments under the Tax Receivable Agreement that exceed its actual cash savings under the Tax Receivable Agreement. Thus, Viant Technology Inc.’s obligations under the Tax Receivable Agreement could have a substantialnegativeeffecton itsfinancialconditionand liquidityand couldhave theeffectof delaying, deferringor preventingcertainmergers,assetsales,or otherformsof businesscombinationsor changesof control.We cannotassureyou thatwe willbe ableto financeany earlyterminationpayment.Itisalsopossible thattheactualbenefitsultimatelyrealizedby us maybe significantlylessthanwere projectedin thecomputation of theearlyterminationpayment.We willnot be reimbursediftheactualbenefitsultimatelyrealizedby us are lessthanwere projectedin thecomputationof theearlyterminationpayment.
PaymentsundertheTax ReceivableAgreementwillbe basedon thetaxreportingpositionsthatwe will determineand theIRS or anothertaxauthoritymaychallengeallor partof thetaxbasisincreases,as wellas otherrelatedtaxpositionswe take,and a courtcouldsustainsuch challenge.Ifany taxbenefitsthathave given riseto paymentsundertheTax ReceivableAgreementaresubsequentlydisallowed,ViantTechnologyInc. would be entitledto reducefutureamountsotherwisepayableto a holderof rightsundertheTax Receivable Agreementto theextenttheholderhas receivedexcesspayments.However, therequiredfinaland bindingdeterminationthata holderof rightsundertheTax ReceivableAgreementhas receivedexcesspaymentsmaynot be madefora numberof yearsfollowingcommencementof any challenge,and ViantTechnologyInc.willnotbe permittedto reduceitspaymentsundertheTax ReceivableAgreementuntiltherehas been a finaland binding determination,by which timesufficientsubsequentpaymentsundertheTax ReceivableAgreementmaynot be availableto offsetpriorpaymentsfordisallowedbenefits.ViantTechnologyInc.willnot be reimbursedforany paymentspreviouslymadeundertheTax ReceivableAgreementifthebasisincreasesdescribedabove are successfullychallengedby theIRS or anothertaxingauthority.As a result,in certaincircumstances,payments couldbe madeundertheTax ReceivableAgreementthataresignificantlyin excessof thebenefitthatViant TechnologyInc.actuallyrealizesin respectof theincreasesin taxbasis (and (andutilizationof certainothertax benefits)and ViantTechnologyInc.maynot be ableto recoupthosepayments,which couldadverselyaffect ViantTechnologyInc.’sfinancialconditionand liquidity.
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In certaincircumstances,Viant Technology LLCwillbe requiredto makedistributionsto us and the existing membersof Viant Technology LLC,and the distributionsthatViant Technology LLCwillbe requiredto make maybe substantial.
ViantTechnologyLLCisexpectedto continueto be treatedas a partnershipforU.S.federalincometax purposesand, as such, isnot subjectto U.S.federalincometax.Instead,taxableincomeis allocatedto members,includingViantTechnologyInc.Pursuantto theViantTechnologyLLCOperatingAgreement,Viant Technology Inc. Pursuant to the Viant Technology LLC Operating Agreement, Viant Technology LLC makestaxdistributionsto itsmembers,includingViantTechnologyInc.,which generally are pro ratabasedon theownershipof ViantTechnologyLLCunits,calculatedusingan assumedtaxrate,to helpeachof themembersto pay taxeson thatmember’sallocableshareof ViantTechnologyLLC’s nettaxable income.Under applicabletaxrules,ViantTechnologyLLCisrequiredto allocatenettaxableincome disproportionatelyto itsmembersin certaincircumstances.Becausetaxdistributionsare determinedbasedon thememberwho isallocatedthelargestamountof taxableincomeon a perunitbasisand on an assumedtaxrate thatisthehighestpossiblerateapplicableto any member,but are madepro ratabasedon ownershipof Viant TechnologyLLCunits,ViantTechnologyLLCis requiredto maketaxdistributionsthat,in theaggregate, likelyexceedtheaggregateamountof taxespayableby itsmemberswith respectto theallocationof Viant TechnologyLLCincome.
Funds used by ViantTechnologyLLCto satisfyitstaxdistributionobligationsarenot availablefor reinvestmentin our business.Moreover,thetaxdistributionsViantTechnologyLLCis requiredto make maybe substantial,and maysignificantlyexceed (as (asa percentageof ViantTechnologyLLC’s income)the overalleffectivetaxrateapplicableto a similarlysituatedcorporatetaxpayer.In addition,becausethese paymentsare calculatedwith referenceto an assumedtaxrate,and becauseof thedisproportionateallocation of nettaxableincome,thesepaymentslikelysignificantlyexceedtheactualtaxliabilityformanyof the existingmembersof ViantTechnologyLLC.
As a resultof potentialdifferencesin theamountof nettaxableincomeallocableto us and to the existingmembersof ViantTechnologyLLC,as wellas theuse of an assumedtaxratein calculatingViant TechnologyLLC’s distributionobligations,we mayreceivedistributionssignificantlyin excessof our tax liabilitiesand obligationsto makepaymentsundertheTax ReceivableAgreement.We maychooseto manage theseexcessdistributionsthrougha numberof differentapproaches,includingby applyingthemto general corporatepurposes.
Pursuant to recentregulationsissuedunder Section162(m)of the Internal Revenue Code of 1986, as amended (the “Code”), Viant Technology Inc. maynot be permittedto deductitsdistributiveshare of compensationexpenseto the extentthatthe compensationwas paid by Viant Technology LLCto certainof Viant Technology Inc.’scoveredemployees, potentiallyresultingin additionalU.S.federalincometax liabilityforViant Technology Inc. and reducing cash availablefordistributionto Viant Technology Inc.’sstockholdersand/or forthe paymentof other expensesand obligationsof Viant Technology Inc.
Section162(m)of theCode disallowsthedeductionby any publiclyheldcorporationof applicable employeecompensationpaidwith respectto any coveredemployeeto theextentthatsuch compensationforthe taxableyearexceeds $1,000,000.$1,000,000. A “coveredemployee”meansany employeeof thetaxpayeriftheemployee (a)istheprincipalexecutiveofficer(“PEO”) or principalfinancialofficer(“PFO”) of thetaxpayeratany time duringthetaxableyear,or was an individualactingin such a capacity,(b)was amongthethreehighest compensated executiveofficersforthetaxableyear (other (otherthanthePEOor PFO or an individual acting in such capacity),or (c)was a coveredemployeeof thetaxpayer (or (orany predecessor)forany precedingtaxableyear beginningafterDecember31, 2016. Pursuantto final regulations released for publication in the Federal Register by theIRS and the United States Department of the Treasury on December30, 2020 (the “162(m) “162(m)Regulations”),Viant TechnologyInc.willnot be permittedto claim a deduction for thedistributiveshareof compensationexpense of Viant Technology LLCallocatedto itto theextentthatsuch distributiveshare,plustheamountof any compensationpaiddirectlyby ViantTechnology Inc.,exceeds $1,000,000$1,000,000 with respectto a coveredemployee,even ifViantTechnologyLLC,ratherthanViant Technology LLC, rather than Viant Technology Inc.,pays thecompensation.The 162(m) Regulationswere effectiveupon publicationof finalregulationsin theFederalRegister butapplyto any deductionforcompensationthatis otherwiseallowablefora taxableyearendingon or afterDecember20, 2019. However, the162(m) Regulationsdonot applyto compensationpaidpursuantto a writtenbindingcontractin effecton December20, 2019 thatisnot materiallymodifiedafterthatdate.Accordingly,to theextentthatViantTechnologyInc.is disalloweda deductionforitsdistributiveshareof compensationexpenseunderSection162(m)of theCode, it mayresultin additionalU.S.federalincometaxliabilityforViantTechnologyInc.and/orreducecashavailable fordistributionto ViantTechnologyInc.’sstockholdersor forthepaymentof otherexpensesand obligationsof ViantTechnologyInc.
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Future changes to tax laws or our effectivetax ratecould materiallyand adverselyaffectour companyand reducenet returnsto our stockholders.
Our taxtreatmentissubjectto theenactmentof, or changesin, taxlaws, regulationsand treaties,or the interpretationthereof,taxpolicyinitiativesand reformsunderconsiderationand thepracticesof taxauthoritiesin variousjurisdictions, includingthoserelatedto theBase Erosionand ProfitShiftingProjectof theOrganisation forEconomicCo-Operationand Development(“OECD”), theEuropeanCommission’sstateaidinvestigations and otherinitiatives.Such changesmayinclude(butarenot limitedto)thetaxationof operatingincome, investmentincome,dividendsreceivedor (inthespecificcontextof withholdingtax)dividendspaid,or the taxationof partnershipsand otherpassthroughentities.In addition,theGroup of Twenty, theOECD,theU.S. Congressand TreasuryDepartmentand othergovernmentagenciesin jurisdictionswhere we and our affiliatesdo businesshave focusedon issuesrelatedto thetaxationof multinationalcorporations,including,but not limitedto, transferpricing,country-by-countryreportingand baseerosion.As a result,thetaxlaws in theUnitedStates and in jurisdictionswhich we do businesscouldchangeon a prospectiveor retroactivebasis,and any such changescouldhave an adverseeffecton our worldwidetaxliabilities,business,financialconditionand resultsof operations.We areunableto predictwhat taxreformmaybe proposedor enactedin thefutureor what effectsuch changeswould have on our business,but such changes,to theextenttheyarebroughtintotaxlegislation, regulations,policiesor practices,couldaffectour financialpositionand overallor effectivetaxratesin thefuture in countrieswhere we have operations,reducepost-taxreturnsto our stockholders,and increasethecomplexity, burdenand costof taxcompliance.
Our businessesaresubjectto incometaxationin theUnitedStates.Tax ratesmaybe subjectto significantchange.Ifour effectivetaxrateincreases,our operatingresultsand cashflow couldbe adversely affected.Our effectiveincometaxratecan varysignificantlybetweenperiodsdue to a numberof complex factorsincluding,but not limitedto, projectedlevelsof taxableincomein eachjurisdiction,taxauditsconducted and settledby varioustaxauthorities,and adjustmentsto incometaxesupon finalizationof incometaxreturns.
We maybe requiredto pay additionaltaxesbecauseof the U.S.federalpartnershipauditrulesand potentially alsostateand localtax rules.
Under theU.S.federalpartnershipauditrules,subjectto certainexceptions,auditadjustmentsto items of income,gain,loss,deduction,or creditof an entity(andany holder’ssharethereof)aredetermined,and taxes, interest,and penaltiesattributablethereto,areassessedand collected,attheentitylevel.ViantTechnologyLLC (orany of itsapplicablesubsidiariesor otherentitiesin which ViantTechnologyLLCdirectlyor indirectly investsthataretreatedas partnershipsforU.S.federalincometaxpurposes)maybe requiredto pay additional taxes,interestand penaltiesas a resultof an auditadjustment,and ViantTechnologyInc.,as a memberof Viant TechnologyLLC(orsuch otherentities),couldbe requiredto indirectlybeartheeconomicburdenof thosetaxes, interest,and penaltieseven though we maynot otherwisehave been requiredto pay additionalcorporate-level taxesas a resultof therelatedauditadjustment.Audit adjustmentsforstateor localtaxpurposescouldsimilarly resultin ViantTechnologyLLC(orany of itsapplicablesubsidiariesor otherentitiesin which ViantTechnology LLCdirectlyor indirectlyinvests)beingrequiredto pay or indirectlybeartheeconomicburdenof stateor local taxesand associatedinterest,and penalties.
Under certaincircumstances,ViantTechnologyLLCor an entityin which ViantTechnologyLLC directlyor indirectlyinvestsmaybe eligibleto makean electionto causemembersof ViantTechnologyLLC(or such otherentity)to takeintoaccounttheamountof any understatement,includingany interestand penalties,in accordancewith such member’ssharein ViantTechnologyLLCin theyearunderaudit.We willdecidewhether or not to causeViantTechnologyLLCto makethiselection;however, therearecircumstancesin which the electionmaynot be availableand, in thecaseof an entityin which ViantTechnologyLLCdirectlyor indirectly invests,such decisionmaybe outsideof our control.IfViantTechnologyLLCor an entityin which Viant TechnologyLLCdirectlyor indirectlyinvestsdoes not makethiselection,thethen-currentmembersof Viant TechnologyLLC(includingViantTechnologyInc.)couldeconomicallybeartheburdenof theunderstatement.
Our tax treatment isliabilities may be greater than anticipated.
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The U.S. and non-U.S. tax laws applicable to our business activities are subject to interpretation. We are subject to audit by the enactmentInternal Revenue Service and by taxing authorities of orthe state, local and foreign jurisdictions in which we operate. Our tax obligations are based in part on our corporate operating structure, including the manner in which we develop, value, and use our intellectual property, the jurisdictions in which we operate, and how tax authorities assess revenue-based taxes such as sales and use taxes. Taxing authorities may challenge our tax positions and methodologies for valuing developed technology, as well as our positions regarding the collection of sales and use taxes and the jurisdictions in which we are subject to taxes, which could expose us to additional taxes. Any adverse outcomes of such challenges to our tax positions (or other challenges to our tax positions) could result in additional taxes for prior periods, interest and penalties, as well as higher future taxes. In addition, our future tax expense could increase as a result of changes in tax laws, regulations and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration and the practicesaccounting principles, or as a result of tax authorities in various jurisdictions, including those related to the Base Erosion and Profit Shifting Project of the Organisation for Economic Co-Operation and Development (“OECD”), the European Commission’s state aid investigations and other initiatives. Such changes may include (but are not limited to) the taxation of operatingearning income investment income, dividends received or (in the specific context of withholding tax) dividends paid, or the taxation of partnerships and other passthrough entities. In addition, the Group of Twenty, the OECD, the U.S.
Congress and Treasury Department and other government agencies in jurisdictions where we andthat have higher tax rates. An increase in our affiliates do business have focused on issues related to the taxation of multinational corporations, including, but not limited to, transfer pricing, country-by-country reporting and base erosion. As a result, the tax laws in the United States and in jurisdictions which we do business could change on a prospective or retroactive basis, and any such changesexpense could have an adversea negative effect on our worldwide tax liabilities, business, financial conditionposition and results of operations. We are unable to predict whatMoreover, the determination of our provision for income taxes and other tax reformliabilities requires significant estimates and judgment by management, and the tax treatment of certain transactions is uncertain. Although we believe we will make reasonable estimates and judgments, the ultimate outcome of any particular issue may be proposed or enacteddiffer from the amounts previously recorded in the future or what effectour consolidated financial statements and any such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices,occurrence could materially affect our financial position and overall or effective tax rates in the future in countries where we have operations, reduce post-tax returns to our stockholders, and increase the complexity, burden and costresults of tax compliance.operations.
Our businesses are subject to income taxation in the United States. Tax rates may be subject to significant change. If our effective tax rate increases, our operating results and cash flow could be adversely affected. Our effective income tax rate can vary significantly between periods due to a number of complex factors including, but not limited to, projected levels of taxable income in each jurisdiction, tax audits conducted and settled by various tax authorities, and adjustments to income taxes upon finalization of income tax returns.
We may be required to pay additional taxes because of the U.S. federal partnership audit rules and potentially also state and local tax rules.
Under the U.S. federal partnership audit rules, subject to certain exceptions, audit adjustments to items of income, gain, loss, deduction, or credit of an entity (and any holder’s share thereof) is determined, and taxes, interest, and penalties attributable thereto, are assessed and collected, at the entity level. Viant Technology LLC (or any of its applicable subsidiaries or other entities in which Viant Technology LLC directly or indirectly invests that are treated as partnerships for U.S. federal income tax purposes) may be required to pay additional taxes, interest and penalties as a result of an audit adjustment, and Viant Technology Inc., as a member of Viant Technology LLC (or such other entities), could be required to indirectly bear the economic burden of those taxes, interest, and penalties even though we may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment. Audit adjustments for state or local tax purposes could similarly result in Viant Technology LLC (or any of its applicable subsidiaries or other entities in which Viant Technology LLC directly or indirectly invests) being required to pay or indirectly bear the economic burden of state or local taxes and associated interest, and penalties.
Under certain circumstances, Viant Technology LLC or an entity in which Viant Technology LLC directly or indirectly invests may be eligible to make an election to cause members of Viant Technology LLC (or such other entity) to take into account the amount of any understatement, including any interest and penalties, in accordance with such member’s share in Viant Technology LLC in the year under audit. We will decide whether or not to cause Viant Technology LLC to make this election; however, there are circumstances in which the election may not be available and, in the case of an entity in which Viant Technology LLC directly or indirectly invests, such decision may be outside of our control. If Viant Technology LLC or an entity in which Viant Technology LLC directly or indirectly invests does not make this election, the then-current members of Viant Technology LLC (including Viant Technology Inc.) could economically bear the burden of the understatement.
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IfViant Technology LLCwere to becomea publiclytradedpartnershiptaxableas a corporationforU.S. federalincometax purposes,Viant Technology Inc. and Viant Technology LLCmightbe subjectto potentially significanttax inefficiencies,and Viant Technology Inc. would not be ableto recoverpaymentspreviously madeby itunder the Tax ReceivableAgreement,even ifthe correspondingtax benefitswere subsequently determinedto have been unavailabledue to such status.
We intendto operatesuch thatViantTechnologyLLCdoes not becomea publiclytradedpartnership taxableas a corporationforU.S.federalincometaxpurposes.A “publiclytradedpartnership”isan entitythat otherwisewould be treatedas a partnershipforU.S.federalincometaxpurposes,theinterestsof which are tradedon an establishedsecuritiesmarketor readilytradableon a secondarymarketor thesubstantialequivalent thereof.Under certaincircumstances,exchangesof ViantTechnologyLLCunitspursuantto theViant TechnologyLLCOperatingAgreementor othertransfersof ViantTechnologyLLCunitscouldcauseViant TechnologyLLCto be treatedlikea publiclytradedpartnership.Fromtimeto timetheU.S.Congresshas consideredlegislationto changethetaxtreatmentof partnershipsand therecan be no assurancethatany such legislationwillnot be enactedor ifenactedwillnot be adverseto us.
IfViantTechnologyLLCwere to becomea publiclytradedpartnershiptaxableas a corporationforU.S. federalincometaxpurposes,significanttaxinefficienciesmightresultforViantTechnologyInc.and Viant TechnologyLLC,includingas a resultof ViantTechnologyInc.’sinabilityto filea consolidatedU.S.federal incometaxreturnwith ViantTechnologyLLC.In addition,ViantTechnologyInc.maynot be ableto realizetax benefitscoveredundertheTax ReceivableAgreementand would not be ableto recoverany paymentspreviously madeby itundertheTax ReceivableAgreement,even ifthecorrespondingtaxbenefits (including (includingany claimed increasein thetaxbasisof ViantTechnologyLLC’s assets)were subsequentlydeterminedto have been unavailable.
Risks Related to Our Financial Position and Capital Requirements
We mayexperiencefluctuationsin our operatingresults,which could makeour futureoperatingresults difficultto predictor cause our operatingresultsto fallbelow securitiesanalysts’and investors’expectations.
Our quarterlyand annualoperatingresultshave fluctuatedin thepastand we expectour futureoperating resultsto fluctuatedue to a varietyof factors,manyof which arebeyond our control.In particular,we offerour customersa choiceof threedifferentpricingoptions: a percentageof spend option, a subscriptionoptionand a fixedCPMpricingoption. We alsoofferour customerstheabilityto use our servicesto aid themin datamanagement,mediaexecutionand advancedreporting.Our revenueand contribution ex-TAC varyacrossthesedifferentpricingand serviceoptions, and thereforeour resultsmayvarybasedon themixof pricing and serviceoptionschosenby customersin any givenperiod.The varyingnatureof our pricingmixbetween periodsmaymakeitmoredifficultforus to forecastour futureoperatingresults.Further,variationin our pricingmixmaymakeitmoredifficultto makecomparisonsbetweenprior,currentand futureperiods. Period-to-periodcomparisonsof our operatingresults
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shouldnot be reliedupon as an indicationof our future performance.Fluctuationsin our operatingresultscouldcauseour performanceto fallbelow theexpectationsof securitiesanalystsand investors,and adverselyaffectthepriceof our ClassA commonstock.Becauseourbusinessischangingand evolvingrapidly,and themacroeconomicenvironmentcontinuesto evolveas a resultof theCOVID-19pandemic,our historicaloperatingresultsmaynot be necessarilyindicativeof our futureoperatingresults.Itisalsodifficultto predicttheimpactof a post-pandemicrecoveryon our businessand operatingresults.In additionto changesin termsof mixof our differentpricingoptions, factorsthatmaycause our operatingresultsto fluctuateincludethefollowing:
• | changesin demandforour platform,includingthoserelatedto theseasonalnatureof our customers’spendingon digitaladvertisingcampaigns; |
• | changesin our pricingpolicies,thepricingpoliciesof our competitorsand thepricingor availabilityof inventory,dataor otherthird-partyservices; |
• | changesin our customerbaseand platformofferings; |
• | theadditionor lossof advertisingagenciesand marketersas customers; |
• | changesin advertisingbudgetallocations,agencyaffiliationsor marketingstrategies; |
• | changesto our channelmix(including,forexample,changesin demandforconnectedTV); |
• | changesand uncertaintyin theregulatoryand businessenvironmentforus or customers(for example,when Apple or Google changepoliciesfortheirbrowsersand operatingsystems); |
• | changesin theeconomicprospectsof marketersor theeconomygenerally(dueto COVID-19,or otherwise),which couldaltermarketers’spendingpriorities,or couldincreasethetimeor costs requiredto completeadvertisinginventorysales; |
• | changesin theavailabilityof advertisinginventoryor in thecostof reachingend consumers throughdigitaladvertising; |
• | disruptionsor outageson our platform; |
• | theintroductionof new technologiesor offeringsby our competitors; |
• | changesin our capitalexpendituresas we acquirethehardware,equipmentand otherassetsrequired to supportour business; |
• | timingdifferencesbetweenour paymentsforadvertisinginventoryand our collectionof related advertisingrevenue; |
• | thelengthand unpredictabilityof our salescycle; |
• | costsrelatedto acquisitionsof businessesor technologies,or employeerecruiting;and |
• | shiftingviews and behaviorsof consumersconcerninguse of data. |
Based upon thefactorsabove and othersbeyond our control,we have a limitedabilityto forecastour futurerevenue,costsand expenses,and, as a result,our operatingresultsmay,fromtimeto time,fallbelow our estimatesor theexpectationsof securitiesanalystsand investors.
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We maynot be ableto secureadditionalfinancingon favorableterms,or at all,to meetour futurecapital needs, which mayin turn impairour growth.
We intendto continueto grow our business,which mayrequireadditionalcapitalto developnew featuresor enhanceour platform,improveour operatinginfrastructure,financeworking capitalrequirementsor acquirecomplementarybusinessesand technologies.Accordingly,we mayneed to engagein additionalequityor debtfinancingsto secureadditionalcapital.Ifwe raiseadditionalfundsthroughfutureissuancesof equityor convertibledebtsecurities,our existingstockholderscouldsuffersignificantdilution,and any new equity securitieswe issuecouldhave rights,preferencesand privilegessuperiorto thoseof holdersof our ClassA commonstock.Any debtfinancingthatwe securein thefuturecouldinvolverestrictivecovenantsrelatingto our capitalraisingactivitiesand otherfinancialand operationalmatters,which maymakeitmoredifficultforus to obtainadditionalcapitaland to pursuebusinessopportunities.Ifwe areunableto secureadditionalfundingon favorableterms,or atall,when we requireit,our abilityto continueto grow our businessto reactto market conditionscouldbe impairedand our businessmaybe harmed.
As our costsincrease,we maynot be ableto generatesufficientrevenueto sustainprofitability.
We have expendedsignificantresourcesto grow our businessin recentyearsby increasingtheofferings of our platformand growing our numberof employeesand expandingour numberof officesin theUnitedStates. We anticipatecontinuedgrowth thatcouldrequiresubstantialfinancialand otherresourcesto, amongother things:
• | developour platform,includingby investingin our engineeringteam,creating,acquiringor licensingnew productsor features,and improvingthefunctionality,availabilityand securityof our platform; |
• | improveour technologyinfrastructure,includinginvestingin internaltechnologydevelopmentand acquiringoutsidetechnologies; |
• | covergeneraland administrativeexpenses,includinglegal,accountingand otherexpenses necessaryto supporta largerorganization; |
• | coversalesand marketingexpenses,includinga significantexpansionof our directsales organization; |
• | coverexpensesrelatingto datacollectionand consumerprivacycompliance,includingadditional infrastructure,automationand personnel;and |
• | explorestrategicacquisitions. |
Investingin theforegoing,however, maynot yieldanticipatedreturns.Consequently,as our costs increase,we maynot be ableto generatesufficientrevenueto achieveor sustainprofitability.
We are a partyto a revolvingcreditagreement,which containsa number of covenantsthatmayrestrictour currentand futureoperationsand could adverselyaffectour abilityto executebusinessneeds.
Our revolving credit and security agreement and guaranty(the“Loan Agreement”)with PNCBank, NationalAssociation (“PNC Bank”)containsa number of covenantsthatlimitour abilityand our subsidiaries’abilityto, amongotherthings,incurindebtedness,create liens,makeinvestments,mergewith othercompanies,disposeof our assets,prepayotherindebtednessand make dividendsand otherdistributions.The termsof our Loan Agreementmayrestrictour currentand future operationsand couldadverselyaffectour abilityto financeour futureoperationsor capitalneedsor to execute businessstrategiesin themeansor mannerdesired.In addition,complyingwith thesecovenantsmaymakeit moredifficultforus to successfullyexecuteour businessstrategy,investin our growth strategyand compete againstcompanieswho arenot subjectto such restrictions.The Loan Agreementalsocontainsa financial covenantthatrequiresus to maintaina minimumfixedchargecoverageratioof 1.40 to 1 when undrawn availabilityundertheLoan Agreementislessthan25%. We maynot be ableto generatesufficientcashflow or salesto meetthefinancialcovenantor pay theprincipalor interestundertheLoan Agreement.
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Ifwe areunableto complywith our paymentrequirements,our lendermayaccelerateour obligations underour Loan Agreementand forecloseupon thecollateral,or we maybe forcedto sellassets,restructureour indebtednessor seekadditionalequitycapital,which would diluteour stockholders’interests.Ifwe failto complywith our covenantsundertheLoan Agreement,itcouldresultin an eventof defaultundertheagreement and our lendercouldmaketheentiredebtimmediatelydue and payable.Ifthisoccurs,we mightnot be ableto repayour debtor borrow sufficientfundsto refinanceit.Even ifnew financingisavailable,itmaynot be on termsthatareacceptableto us.
The phase out of the London Interbank Offered Rate (“LIBOR”), or the replacement of LIBOR with a different reference rate, may adversely affect interest rates.
Interestratesunderour Loan Agreementarebasedpartlyon LIBOR,theLondon interbankofferedrate, which isthebasicrateof interestused in lendingbetweenbanks on theLondon interbankmarketand iswidely used as a referenceforsettingtheinterestrateon loansglobally. ICE Benchmark Administration, the administrator of LIBOR, has ceased the publication of certain tenors of U.S. dollar LIBOR after December 31, 2021, and plans to cease the publication of all other tenors of U.S. dollar LIBOR after June 30, 2023. It is unclear if new methods of calculating LIBOR will be established such that it continues to exist after 2023. The U.S.FederalReservehas begun publishinga SecuredOvernight Funding Rate which iscurrentlyintendedto serveas an alternativereferencerateto LIBOR.Ifthemethodfor calculationof LIBORchanges,ifLIBORisno longeravailable,or iflendershave increasedcostsdue to changes in LIBOR,we maysufferfrompotentialincreasesin interestrateson our borrowings.Further,we mayneed to renegotiateour Loan Agreementor any otherborrowingsthatutilizeLIBORas a factorin determiningthe interestrateto replaceLIBORwith thenew standardthatisestablished.
Failureto manage our growth effectivelycould cause our businessto sufferand have an adverseeffecton our business,operatingresultsand financialcondition.
We have experiencedsignificantgrowth in a shortperiodof time.To manageour growth effectively,we mustcontinuallyevaluateand evolveour organization.We mustalsomanageour employees,operations,finances,technologyand developmentand capitalinvestmentsefficiently.Our efficiency,productivityand the qualityof our platformand customerservicemaybe adverselyimpactedifwe do not trainour new personnel, particularlyour salesand supportpersonnel,quicklyand effectively,or ifwe failto appropriatelycoordinate acrossour organization.Additionally,our rapidgrowth mayplacea strainon our resources,infrastructureand abilityto maintainthequalityof our platform.You shouldnot considerour revenuegrowth and levelsof profitabilityin recentperiodsas indicativeof futureperformance.In futureperiods,our revenueor profitability coulddeclineor grow moreslowlythanwe expect.Failureto manageour growth effectivelycouldcauseour businessto sufferand have an adverseeffecton our operatingresultsand financialcondition.
Seasonal fluctuationsin advertisingactivitycould have a materialimpacton our revenue,cash flow and operatingresults.
Our revenue,cashflow, operatingresultsand otherkey operatingand performancemeasuresmayvary fromquarterto quarterdue to theseasonalnatureof our customers’spendingon advertisingcampaigns.For example,in prioryears,customerstendedto devotemoreof theiradvertisingbudgetsto thefourthcalendar quarterto coincidewith consumerholidayspending.In contrast,thefirstquarterof thecalendaryearhas typicallybeen theslowestin termsof advertisingspend. These patternsmayor maynot hold trueduringthe COVID-19pandemic.Politicaladvertisingcouldalsocauseour revenueto increaseduringelectioncyclesand decreaseduringotherperiods,makingitdifficultto predictour revenue,cashflow, and operatingresults,allof which couldfallbelow our expectations.
Risks Relatedto Ownership of Our Class A Common Stock
The marketpriceof our Class A commonstock has been and may continue tobe volatileor maydeclineregardlessof our operating performance,and you could lose all or part of your investment.
The marketpriceof equitysecuritiesof technologycompanieshas historicallyexperiencedhigh levels of volatility.Themarketpriceof our ClassA commonstock has been and may continue to fluctuatesignificantlyin
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responseto numerousfactors,someof which arebeyond our controland maynot be relatedto our operatingperformance. For example, the closing price of our Class A common stock since first trading on February 10, 2021 through March 8, 2022 has been and may continueranged from a low of $6.62 to fluctuate significantlya high of $68.31. In addition to the factors discussed in response to numerousthis “Risk Factors” section, these factors some of which are beyond our control and may not be related to our operating performance, including:include:
announcementsof new offerings,products,servicesor technologies,commercialrelationships, acquisitionsor othereventsby us or our competitors;
priceand volumefluctuationsin theoverallstockmarketfromtimeto time;
significantvolatilityin themarketpriceand tradingvolumeof technologycompaniesin generaland of companiesin thedigitaladvertisingindustryin particular;
fluctuationsin thetradingvolumeof our sharesor thesizeof our publicfloat;
actualor anticipatedchangesor fluctuationsin our operatingresults;
whetherour operatingresultsmeettheexpectationsof securitiesanalystsor investors;
actualor anticipatedchangesin theexpectationsof investorsor securitiesanalysts;
litigationinvolvingus, our industry,or both;
regulatorydevelopmentsin theUnitedStates,foreigncountries,or both;
generaleconomicconditionsand trends;
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| • | announcementsof new offerings,products,servicesor technologies,commercialrelationships, acquisitionsor othereventsby us or our competitors; |
majorcatastrophicevents;
• | priceand volumefluctuationsin theoverallstockmarketfromtimeto time; |
• | significantvolatilityin themarketpriceand tradingvolumeof technologycompaniesin generaland of companiesin thedigitaladvertisingindustryin particular; |
• | fluctuationsin thetradingvolumeof our Class A common stockor thesizeof our publicfloat; |
• | actualor anticipatedchangesor fluctuationsin our operatingresults; |
• | whetherour operatingresultsmeettheexpectationsof securitiesanalystsor investors; |
• | actualor anticipatedchangesin theexpectationsof investorsor securitiesanalysts; |
• | litigationinvolvingus, our industry,or both; |
• | regulatorydevelopmentsin theUnitedStates,foreigncountries,or both; |
• | general political, health andeconomicconditionsand trends, including the COVID-19 pandemic; |
• | majorcatastrophicevents; |
• | lockupreleasesor salesof largeblocksof our ClassA commonstock; |
• | departuresof key employees;or |
• | an adverseimpacton our companyfromany of theotherriskscitedin thisAnnual Report. |
lockupreleasesIn addition,ifthestockmarketfortechnologycompanies,or salesthestockmarketgenerally,experiencesa lossof largeblocksinvestorconfidence,thetradingpriceof our ClassA commonstock;
departuresstockcoulddeclineforreasonsunrelatedto our business,operatingresultsor financialcondition.Stock pricesof key employees;manytechnologycompanieshavefluctuatedin a mannerunrelatedor
an adverseimpacton disproportionateto theCompanyfromany operatingperformanceof theotherriskscitedthosecompanies.The tradingpriceof our ClassA commonstockmightalsodeclinein thisAnnual Report.
reactionto eventsthataffectothercompaniesin our industryeven iftheseeventsdo not directlyaffectus. In addition, if the stock market for technology companies, or the stock market generally, experiences a loss past,stockholdershave filedsecuritiesclass actionlitigationfollowingperiodsof investor confidence,marketvolatility.Ifwe were to becomeinvolvedin securitieslitigation,it couldsubjectus to substantialcosts,divertresourcesand the trading price attentionof managementfromour business,and adverselyaffectour business.
Salesof substantialblocksof our Class A commonstockintothe publicmarket, or the perceptionthatsuch salesmightoccur, could decline for reasons unrelated to our business, operating results or financial condition. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate tocause the operating performance of those companies. The trading marketpriceof our Class A commonstock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
Sales of substantial blocks of our Class A common stock into the public market, or the perception that such sales might occur, could cause the market price of our Class A common stock to decline.
Salesof substantialblocksof our ClassA commonstockintothepublicmarket, or theperceptionthatsuch salesmightoccur,could causethemarketpriceof our ClassA commonstockto declineand maymakeitmoredifficultforyou to sell your ClassA commonstockata timeand pricethatyou deemappropriate.As of March 19, 2021, 8, 2022,there were 13,741,508 sharesof our ClassA commonstockoutstanding. All of thesharesof ClassA commonstock soldin the IPOare freelytradablewithoutrestrictionsor furtherregistrationunderthe, exceptforany sharesheldby our “affiliates”as definedin Rule 144 undertheSecuritiesAct.
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Pursuantto theRegistrationRightsAgreement,holdersof our ClassB commonstockhave rightsto requireus to fileregistrationstatementscoveringthe saleof sharesof ClassA commonstockissuableupon exchangeof ClassB commonstockor to includesuch sharesin registrationstatementsthatwe had 11,500,000 mayfileforourselvesor otherstockholders.We alsointendto registertheofferand saleof allsharesof Class A common stock outstanding. All of the shares of Class A common stock soldissuableunderour equitycompensationplan adopted in the IPO are freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, or the Securities Act, except for any shares held byconnection with our “affiliates” as defined in Rule 144 under the Securities Act.
Subject to certain exceptions, we, all of our directors and officers and all of the other holders of our capital stock and securities convertible into, or exchangeable for, our capital stock have agreed not to offer, sell or agree to sell, directly or indirectly, any shares of Class A common stock without the permission of BofA Securities for a period of 180 days from February 9, 2021. When the applicable lock-up period expires, we, our directors and officers and locked-up equityholders will be able to sell shares into the public market.IPO.
The underwriters may, in their sole discretion, permit our directors and officers and locked-up equityholders to sell shares prior to the expiration of the restrictive provisions contained in the “lock-up” agreements with the underwriters.
Pursuant to the Registration Rights Agreement, and subject to the lock-up agreements described above, holders marketpriceof our Class B common stock have rights to require us to file registration statements covering the sale of shares of Class A commonstock issuable upon exchange of Class B common stock or to include such shares in registration statements that we may file for ourselves or other stockholders. We also intend to register the offer and sale of all shares of common stock that we may issue under our equity compensation plans.
The market price of our Class A common stock coulddeclineas a resultof thesaleof substantialblocks of our ClassA commonstockintothepublicmarket,or theperceptionthatsuch salesmight occur.
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We are a “controlledcompany”within the meaningof the listingstandards of the Nasdaq Global Select Market (“Nasdaq”) and, as a result,qualifyfor,and relyon, exemptionsfromcertaincorporategovernancerequirements.You donot have the sameprotectionsaffordedto stockholdersof companiesthatare subjectto such requirements.
TheVanderhook Parties control holda majorityof thevotingpower of our outstandingcommonstock throughtheirownershipof our ClassB commonstock.As a result,we qualifyas a “controlledcompany”withinthemeaningof the corporategovernancestandardsof Nasdaq. Under theserules,a listedcompanyof which morethan50% of the votingpower with respectto theelectionof directorsisheldby an individual,group or anothercompanyisa “controlledcompany”and mayelectnot to complywith certaincorporategovernancerequirements,includingtherequirementthat(i)a majorityof our boardof directorsconsistof independentdirectors,(ii)director nomineesbe selectedor recommendedto theboard of directorsentirelyby independentdirectorsand (iii)thecompensation committeebe composedentirelyof independentdirectors.
We relyon some or all of these exemptions. We also rely on thecertainexemptions and transition period with respect to the composition of the audit committee availableperiods provided under the applicableNasdaq listing rules.As a result, at least initially, we will our compensationcommitteedoesnot have a majority consistentirelyof independentdirectors our audit committee and our compensation committee will not consist entirely of independent directors and our directors mayare not be nominatedor selectedentirelyby independentdirectors.Accordingly,you maynot have thesameprotections affordedto stockholdersof companiesthataresubjectto allof thecorporategovernancerequirementsof Nasdaq.
Insidershave substantialcontroloverour company,which could limityour abilityto influencethe outcomeof key decisions,includinga change of control.
Throughtheirownershipof ClassB commonstock,theVanderhook Partiescontrol74.9% of thevotingpower of our commonstockin theelectionof directors. This controlwilllimitor precludeyour abilityto influencecorporatemattersfortheforeseeablefuture.These stockholderswillbe ableto influenceor controlmattersrequiringapprovalby our stockholders,includingtheelectionof directorsand the approvalof mergers,acquisitionsor otherextraordinarytransactions.Theirinterestsmaydifferfromyoursand theymayvotein a mannerthatisadverseto your interests.This controlmaydeter,delayor preventa changeof controlof our company,depriveour stockholdersof an opportunityto receivea premiumfortheirClassA commonstockas partof a saleof our companyand mayultimatelyaffectthemarketpriceof our ClassA commonstock.
We cannot assureyou thatan activetradingmarketforour Class A commonstockwillbe sustained,and we cannot predictthe marketpriceat which our Class A commonstockwilltradein the future.
Our common stock is currently listed on the Nasdaq under the symbol “DSP”.“DSP.” We cannotassureyou thatan activetradingmarketforour ClassA commonstockwillbe sustained.We cannotpredictthemarketpriceatwhich our ClassA commonstockwilltradein thefuture. The lack of an active market may impair the value of your shares, your ability to sell your shares at the time you wish to sell them and the prices that you may obtain for your shares. An inactive market may also impair our ability to raise capital by selling our Class A common stock and our ability to acquire other companies, products or technologies by using our Class A common stock as consideration.
We do not intendto pay dividendsforthe foreseeablefutureand, as a result,your abilityto achievea return on your investmentwilldepend on appreciationin the priceof our Class A commonstock.
We do not intendto pay any cashdividendsin theforeseeablefuture.We anticipatethatwe willretain allof our futureearningsforuse in thedevelopmentof our businessand forgeneralcorporatepurposes.Any
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determinationto pay dividendsin thefuturewillbe atthediscretionof our boardof directorsand thetermsof our currentand futuredebt arrangements.arrangements. In addition, the Loan Agreement (as defined below) contains certain negative covenants that limit our ability to pay dividends. Accordingly,investorsmustrelyon salesof theirClassA common stockafterpriceappreciation,which mayneveroccur,as theonly way to realizeany futuregainson their investments.
43Our charterdocumentsand Delaware law could discouragetakeoverattemptsand othercorporategovernance changes.
Our amended and restated certificateof incorporationand amended and restated bylaws containprovisions thatcoulddelayor preventa changein controlof our company.These provisionscouldalsomakeitdifficultfor stockholdersto electdirectorsthatarenot nominatedby thecurrentmembersof our boardof directorsor take othercorporateactions,includingeffectingchangesin our management.These provisionsincludethefollowing provisionsthat:
• | providethatour boardof directorswillbe classifiedintothreeclasseswith staggered,three-year termsand thatdirectorsmayonly be removedforcauseafterTim Vanderhook, Chris Vanderhook and Four Brothers 2 LLC collectively cease to beneficially own a majority of the combined voting power of our Class A and Class B Common Stock (the “TriggeringEvent”); |
• | permittheboardof directorsto establishthenumberof directorsand fillany vacanciesand newly createddirectorships; |
• | providethat, afterthe TriggeringEvent, vacancieson our boardof directorsmaybe filledonly by a majorityof directorsthenin office,even though lessthana quorum; |
• | prohibitcumulativevotingin theelectionof directors; |
• | requiresuper-majorityvotingto amendour certificateof incorporationand bylaws; |
• | authorizetheissuanceof “blankcheck”preferredstockthatour boardof directorscoulduse to implementa stockholderrightsplan; |
• | eliminatetheabilityof our stockholdersto callspecialmeetingsof stockholders; |
• | specifythatspecialmeetingsof our stockholderscan be calledonly by our boardof directors,the chairmanof our boardof directors,or our chiefexecutiveofficerwith theconcurrenceof a majority of our boardof directors; |
• | prohibitstockholderactionby writtenconsentafterthe TriggeringEvent, which requiresall stockholderactionsto be takenata meetingof our stockholders; |
• | restricttheforumforcertainlitigationagainstus to Delawareor federalcourts; |
• | permitour boardof directorsto alterour bylaws withoutobtainingstockholderapproval; |
• | reflectthedualclassstructureof our commonstock,as discussedabove;and |
• | establishadvancenoticerequirementsfornominationsforelectionto our boardof directorsor for proposingmattersthatcan be actedupon by stockholdersatannualstockholdermeetings. |
In addition,as a Delawarecorporation,we aresubjectto Section203 of theDelawareGeneral CorporationLaw. These provisionsmayprohibitlargestockholders,in particularthoseowning 15% or moreof our outstandingvotingstock,frommergingor combiningwith us fora periodof time.In addition,our credit facilityincludes,and
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otherdebtinstrumentswe mayenterintoin thefuturemayinclude,provisionsentitlingthe lendersto demandimmediaterepaymentof allborrowingsupon theoccurrenceof certainchangeof control eventsrelatingto our company,which alsocoulddiscourage,delayor preventa businesscombination transaction.
Our amendedand restatedcertificateof incorporationincludesan exclusiveforumclause,which could limitour stockholders’abilityto obtaina favorablejudicialforumfordisputeswith us.
Our amendedand restatedcertificateof incorporationprovidesthattheCourt of Chanceryof the Stateof Delawareshallbe thesoleand exclusiveforumforany complaintassertingany internalcorporate claims,includingclaimsin therightof theCompany thatarebasedupon a violationof a duty by a currentor formerdirector,officer,employeeor stockholderin such capacity, or as to which theDelawareGeneral CorporationLaw confersjurisdictionupon theCourt of Chancery. In addition,our amendedand restated certificateof incorporationprovidesthatthefederaldistrictcourtsof theUnitedStateswillbe theexclusive forumforresolvingany complaintassertinga causeof actionarisingundertheSecuritiesAct. We note, however, thatthereisuncertaintyas to whethera courtwould enforcethisprovisionand thatinvestorscannotwaive compliancewith thefederalsecuritieslaws and therulesand regulationsthereunder.Section22 of theSecurities Act createsconcurrentjurisdictionforstateand federalcourtsoverallsuitsbroughtto enforceany duty or liabilitycreatedby theSecuritiesAct or therulesand regulationsthereunder.This forumselectionprovisionwill not applyto claimsbroughtto enforcea duty or liabilitycreatedby theExchange Act.
This choiceof forumprovisionmaylimita stockholder’sabilityto bringa claimin otherjudicial forumsfordisputeswith us or our directors,officersor otheremployees,which maydiscouragelawsuitsagainst us and our directors,officersand otheremployeesin jurisdictionsotherthanDelaware,or federalcourts,in the caseof claimsarisingundertheSecuritiesAct. Alternatively,ifa courtwere to findthechoiceof forum provisioncontainedin our amendedand restatedcertificateof incorporationto be inapplicableor unenforceable in an action,we mayincuradditionalcostsassociatedwith resolvingsuch actionin otherjurisdictions,which couldhave a materialadverseeffecton our business,financialconditionor resultsof operations.
Any personor entitypurchasingor otherwiseacquiringany interestin sharesof our capitalstockis deemedto have noticeof and consentedto theforegoingprovisions.The requirementsof beingexclusiveforumclausemaylimitour stockholders’abilityto obtaina favorablejudicialforumfordisputeswith us.
GeneralRisk Factors
Our managementteamhas limitedexperiencemanaging a publiccompanymaystraincompany.
Mostmembersof our resources,divertour management’sattentionmanagementteamhave limitedor no experiencemanaginga publicly-traded company,interactingwith publiccompanyinvestors,and affectour abilityto attractcomplyingwith theincreasinglycomplexlaws, rules and retainqualifiedboard members.
As a regulationsthatgovernpublic company, companies.Therearesignificantobligationswe are subjectto relating to reporting,proceduresand internalcontrols,and our managementteammaynot successfullyor efficiently manageour transitionto beinga publiccompany.These obligationsand added scrutinyrequire significantattentionfromour managementand coulddiverttheirattentionaway fromthe reporting requirements day-to-day managementof the Exchange Act, and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations. Compliance with these rules and regulations increase our legal business,which couldadverselyaffectour business,operatingresultsand financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and operating results and maintain effective disclosure controls and procedures and internal controls over financial reporting. Significant resources and management oversight are required to maintain and, if required, improve our disclosure controls and procedures and internal controls over financial reporting to meet this standard. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. Although we have already hired additional employees to comply with these requirements, we may need to hire even more employees in the future, which will increase our costs and expenses.
Being a public company and these new rules and regulations also make it more expensive for us to obtain director and officer liability insurance, and we accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.condition.
Reduced reportingand disclosurerequirementsapplicableto us as an emerginggrowth companycould make our Class A commonstocklessattractiveto investors.
We arean emerging growth company (an “EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”)and, foras long as we continueto be an EGC,we maychooseto continueto take advantageof exemptionsfromvariousreportingrequirementsapplicableto otherpubliccompanies. Consequently,we arenot requiredto have our independentregisteredpublicaccountingfirmauditour internal controloverfinancialreportingunderSection404 of theSarbanes-OxleyAct, and we aresubjectto reduced disclosureobligationsregardingexecutivecompensationin our periodicreportsand proxy statementsand exemptionsfromtherequirementsof holdinga nonbindingadvisoryvoteon executivecompensationand stockholderapprovalof any goldenparachutepaymentsnot previouslyapproved.In addition,theJOBSAct providesthatan EGCcan takeadvantageof an extendedtransitionperiodforcomplyingwith new or revised accountingstandards.We have electedto take
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advantageof theextendedtransitionperiod.As a result,our consolidated financialstatementsmaynot be comparableto companiesthatcomplywith new or revisedaccounting pronouncementsas of thedatessuch pronouncementsareeffectiveforpubliccompanies.We couldbe an EGC for up to five years following the completion of the IPO. until December 31, 2026.We willceaseto be an EGCupon theearliestof: (i)until December 31, 2026,(ii)the end of the firstfiscalyear following the fifth anniversary of the IPO, (ii) the first fiscal year afterour annualgrossrevenueis $1.07$1.07 billionor more,(iii)thedateon which we have, duringthepreviousthree-year period,issuedmorethan $1$1 billionin nonconvertibledebtsecuritiesor (iv)theend of any fiscalyearin which themarketvalueof our ClassA commonstockheldby non-affiliatesexceeded $700$700 millionas of theend of the secondquarterof thatfiscalyear.We cannotpredictwhetherinvestorswillfindour ClassA commonstockless attractiveifwe chooseto relyon theseexemptions.Ifsomeinvestorsfindour ClassA commonstockless attractiveas a resultof any choicesto reducefuturedisclosure,theremaybe a lessactivetradingmarketforour ClassA commonstock,and thepriceof our ClassA commonstockmaybe morevolatile.
Ifwe failto maintainor implementeffectiveinternalcontrols,we maynot be ableto reportfinancialresults accuratelyor on a timelybasis,or to detectfraud, which could have a materialadverseeffecton our business and the per share priceof our Class A commonstock.
The Sarbanes-OxleyAct requires,amongotherthings,thatwe maintaineffectivedisclosurecontrols and procedures,and internalcontroloverfinancialreporting.We arecontinuingto developand refineour disclosurecontrolsand otherproceduresthataredesignedto ensurethatinformationrequiredto be disclosedby us in thereportsthatwe willfilewith theSECisrecorded,processed,summarizedand reportedwithinthetime periodsspecifiedin SECrulesand forms.We arealsocontinuingto improveour internalcontroloverfinancial reporting.We have expended,and anticipatethatwe willcontinueto expend, significantresourcesin orderto maintainand improvetheeffectivenessof our disclosurecontrolsand proceduresand internalcontrolover financialreporting.
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Our currentcontrolsand any new controlsthatwe developmaybecomeinadequatebecauseof changes in conditionsin our business.Further,weaknessesin our disclosurecontrolsor our internalcontroloverfinancial reportingmaybe discoveredin thefuture.In connectionwith theauditof our 2018 and 2019 consolidated financialstatements,we identifieda materialweaknessin our internalcontrolscausedby themisapplicationof accountingprinciplesrelatedto thetimingof depreciationof softwaredevelopmentcostscapitalizedand unrecordeddisposalsof decommissionedsoftwareprojects.We have remediatedthismaterialweakness,which we believehas addressedtheunderlyingcausesof thisissue.We implementedadditionalcontrolsaround identifyingand determiningtheappropriatetimingforwhich capitalizedsoftwaredevelopmentcostsshouldbe reclassifiedfromwork-in-processto placed-in-serviceand begindepreciationand ultimatelydecommissioned,if applicable.Any failureto developor maintaineffectivecontrols,or any difficultiesencounteredin their implementationor improvement,couldharmour operatingresultsor causeus to failto meetour reporting obligationsand mayresultin a restatementof our consolidated financialstatementsforpriorperiods.Any failureto implement and maintaineffectiveinternalcontroloverfinancialreportingcouldalsoadverselyaffecttheresultsof managementreportsand independentregisteredpublicaccountingfirmauditsof our internalcontrolover financialreportingthatwe are or will be requiredto includein our periodicreportsthatwillbe filedwith the SEC.Ineffectivedisclosurecontrolsand procedures,and internalcontroloverfinancialreportingcouldalsocauseinvestorsto loseconfidencein our reportedfinancialand otherinformation,which would likelyhave a negativeeffecton themarketpriceof our ClassA commonstock.In addition,ifwe areunableto continueto meettheserequirements,we maynot be ableto remainlistedon Nasdaq.
We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore Our independentregisteredpublicaccountingfirmisnot requiredto make a formal assessment of audittheeffectivenessof our internalcontroloverfinancialreporting for that purpose. We will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K. Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting untilafterwe areno longeran EGC. At such time,our independentregisteredpublicaccountingfirm mayissue a report an opinion on our internal controls over financial reportingthatisadversein theeventitisnot satisfiedwith thelevelatwhich our internalcontrolover financialreportingisdocumented,designedor operating.
Any failureto maintaineffectivedisclosurecontrolsand internalcontroloverfinancialreportingcould have a materialand adverseeffecton our businessand operatingresults,and causea declinein themarketprice of our ClassA commonstock.
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The requirementsof being a publiccompanymaystrainour resources,divertour management’sattentionand affectour abilityto attractand retainqualifiedboard members.
As a publiccompany,we are subjectto thereportingrequirementsof theExchange Act,and are requiredto complywith theapplicablerequirementsof the Sarbanes-OxleyAct and theDodd-Frank WallStreetReformand ConsumerProtectionAct, thelisting requirementsof Nasdaq, and otherapplicablesecuritiesrulesand regulations.Compliancewith theserulesand regulationsincreaseour legaland financialcompliancecosts,makesomeactivitiesmoredifficult,time-consumingor costlyand increasedemandon our systemsand resources.Among otherthings,theExchange Act requiresthatwe fileannual,quarterlyand currentreportswith respectto our businessand operatingresultsand maintaineffectivedisclosurecontrolsand proceduresand internalcontrolsoverfinancialreporting.Significant resourcesand managementoversightare requiredto maintainand, ifrequired,improveour disclosure controlsand proceduresand internalcontrolsoverfinancialreportingto meetthisstandard.As a result, management’sattentionmaybe divertedfromotherbusinessconcerns,which couldharmour businessand operatingresults.Although we have alreadyhiredadditionalemployeesto complywith theserequirements,we mayneed to hireeven moreemployeesin thefuture,which willincreaseour costsand expenses.
Beinga publiccompanyand thesenew rulesand regulationsalsomakeitmore expensiveforus to obtaindirectorand officerliabilityinsurance,and we acceptreduced coverageor incursubstantiallyhighercoststo obtaincoverage.These factorscouldalsomakeitmoredifficult forus to attractand retainqualifiedmembersof our boardof directors,particularlyto serveon our audit committeeand compensationcommittee,and qualifiedexecutiveofficers.
Ifsecuritiesor industryanalystsdo not publishresearchor reportsabout our business,or publishinaccurate or unfavorableresearchreportsabout our business,our share priceand tradingvolumecould decline.
The tradingmarketforour ClassA commonstockpartiallydepends on theresearchand reportsthat securitiesor industryanalystspublishaboutus or our business.We do not have any controlovertheseanalysts.
Ifone or moreof theanalystswho coverus shoulddowngrade our sharesor changetheiropinionof our business prospects,our sharepricewould likelydecline.Ifone or moreof theseanalystsceasescoverageof our company or failsto regularlypublishreportson us, we couldlosevisibilityin thefinancialmarkets,which couldcauseour sharepriceor tradingvolumeto decline.
Our charter documents and Delaware law could discourage takeover attempts and other corporate governance changes.
Our certificate of incorporation and bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions include the following provisions that:
providethatour boardof directorswillbe classifiedintothreeclasseswith staggered,three-year termsand thatdirectorsmayonly be removedforcauseaftera TriggeringEvent (asdefined herein);
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permittheboardof directorsto establishthenumberof directorsand fillany vacanciesand newly createddirectorships;
providethat, aftera TriggeringEvent, vacancieson our boardof directorsmaybe filledonly by a majorityof directorsthenin office,even though lessthana quorum;
prohibitcumulativevotingin theelectionof directors;
requiresuper-majorityvotingto amendour certificateof incorporationand bylaws;
authorizetheissuanceof “blankcheck”preferredstockthatour boardof directorscoulduse to implementa stockholderrightsplan;
eliminatetheabilityof our stockholdersto callspecialmeetingsof stockholders;
specifythatspecialmeetingsof our stockholderscan be calledonly by our boardof directors,the chairmanof our boardof directors,or our chiefexecutiveofficerwith theconcurrenceof a majority of our boardof directors;
prohibitstockholderactionby writtenconsentaftera TriggeringEvent, which requiresall stockholderactionsto be takenata meetingof our stockholders;
restricttheforumforcertainlitigationagainstus to Delawareor federalcourts;
permitour boardof directorsto alterour bylaws withoutobtainingstockholderapproval;
reflectthedualclassstructureof our commonstock,as discussedabove;and
establishadvancenoticerequirementsfornominationsforelectionto our boardof directorsor for proposingmattersthatcan be actedupon by stockholdersatannualstockholdermeetings.
In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a period of time. In addition, our credit facility includes, and other debt instruments we may enter into in the future may include, provisions entitling the lenders to demand immediate repayment of all borrowings upon the occurrence of certain change of control events relating to our company, which also could discourage, delay or prevent a business combination transaction.
Our amended and restated certificate of incorporation includes an exclusive forum clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any complaint asserting any internal corporate claims, including claims in the right of the Company that are based upon a violation of a duty by a current or former director, officer, employee or stockholder in such capacity, or as to which the Delaware General Corporation Law confers jurisdiction upon the Court of Chancery. In addition, our amended and restated certificate of incorporation provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. This forum selection provision will not apply to claims brought to enforce a duty or liability created by the Exchange Act.
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This choiceof forumprovisionmaylimita stockholder’sabilityto bringa claimin otherjudicial forumsfordisputeswith us or our directors,officersor otheremployees,which maydiscouragelawsuitsagainst us and our directors,officersand otheremployeesin jurisdictionsotherthanDelaware,or federalcourts,in the caseof claimsarisingundertheSecuritiesAct. Alternatively,ifa courtwere to findthechoiceof forum provisioncontainedin our amendedand restatedcertificateof incorporationto be inapplicableor unenforceable in an action,we mayincuradditionalcostsassociatedwith resolvingsuch actionin otherjurisdictions,which couldhave a materialadverseeffecton our business,financialconditionor resultsof operations.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions. The exclusive forum clause may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
General Risk Factors
The market in which we participate is intensely competitive, and we may not be able to compete successfully with our current or future competitors.
We operate in a highly competitive and rapidly changing industry that is subject to changing technology and customer demands and that includes many companies providing competing solutions. With the introduction of new technologies and the influx of new entrants into the market, we expect competition to persist and intensify in the future, which could harm our ability to increase revenue and maintain profitability. New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants offer multiple new products and services aimed at capturing advertising spend.
We compete with smaller, privately-held companies, with public companies such as The Trade Desk, and with divisions of large, well-established companies such as Google. Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we have, allowing them to devote greater resources to the development, promotion, sale and support of their products and services. They may also have more extensive customer bases and broader supplier relationships than we have. As a result, these competitors may be better able to respond quickly to new technologies, develop deeper marketer relationships or offer services at lower prices. Increased competition may result in reduced pricing for our platform, increased sales and marketing expense, longer sales cycles or a decrease of our market share, any of which could negatively affect our revenue and future operating results and our ability to grow our business. These companies may also have greater brand recognition and longer histories than we have and may actively seek to serve our market and have the power to significantly change the nature of the marketplace to their advantage. Some of our larger competitors, particularly those that are divisions of large companies, have substantially broader product offerings and may leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that may discourage customers from using our platform, including through selling at zero or negative margins or product bundling with other services they provide at reduced prices. Customers may prefer to purchase advertising from social medial platforms or other closed platforms, which they cannot acquire through our platform. Potential customers may also prefer to purchase from their existing platform rather than a new platform regardless of product performance or features. These larger competitors often have broader product lines and market focus and may therefore not be as susceptible to downturns in a particular market. We may also experience negative market perception as a result of being a smaller company than our larger competitors.
In addition, we derive a significant portion of our revenue from advertising in the desktop and mobile and connected TV channels, which are rapidly evolving, highly competitive, complex and fragmented. We face significant competition in these markets which we expect will intensify in the future. While fewer of our competitors currently have capability in other channels such as linear TV, streaming audio and digital billboard channels, we also expect to face additional competition in those channels in the future.
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Our futuresuccessdepends on the continuingeffortsof our key employees,includingTimVanderhook and Chris Vanderhook, and our abilityto attract,hire,retainand motivatehighlyskilledemployeesin the future.
We are a founder-led business and our future success depends on the continuing efforts of our executive officers and other key employees, including Tim Vanderhook, our chief executive officer, and Chris Vanderhook, our chief operating officer. We rely on the leadership, knowledge and experience that our executive officers provide. They foster our corporate culture, which has been instrumental to our ability to attract and retain new talent. We also rely on employees in our engineering, technical, product development, support and sales teams to attract and retain key customers.
The market for talent in our key areas of operations, including California, is intensely competitive, which could increase our costs to attract and retain talented employees. As a result, we may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. We have at times experienced employee turnover. Because of the complexity of our platform, new employees often require significant training and, in many cases, take significant time before they achieve full productivity. Our account managers, for instance, need to be trained quickly on the features of our platform since failure to offer high-quality support may adversely affect our relationships with our customers.
Employee turnover, including changes in our management team, could disrupt our business. None of our founders or other key employees has an employment agreement for a specific term, and any of our employees may terminate his or her employment with us at any time. The loss of one or more of our executive officers, especially our two founders, or our inability to attract and retain highly skilled employees could have an adverse effect on our business, operating results and financial condition.
Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our business, operating results and financial condition.
We have experienced significant growth in a short period of time. To manage our growth effectively, we must continually evaluate and evolve our organization. We must also manage our employees, operations, finances, technology and development and capital investments efficiently. Our efficiency, productivity and the quality of our platform and customer service may be adversely impacted if we do not train our new personnel, particularly our sales and support personnel, quickly and effectively, or if we fail to appropriately coordinate across our organization. Additionally, our rapid growth may place a strain on our resources, infrastructure and ability to maintain the quality of our platform. You should not consider our revenue growth and levels of profitability in recent periods as indicative of future performance. In future periods, our revenue or profitability could decline or grow more slowly than we expect. Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our operating results and financial condition.
Seasonal fluctuations in advertising activity could have a material impact on our revenue, cash flow and operating results.
Our revenue, cash flow, operating results and other key operating and performance metrics may vary from quarter to quarter due to the seasonal nature of our customers’ spending on advertising campaigns. For example, in prior years, customers tended to devote more of their advertising budgets to the fourth calendar quarter to coincide with consumer holiday spending. In contrast, the first quarter of the calendar year has typically been the slowest in terms of advertising spend. These patterns may or may not hold true during the COVID-19 pandemic. Political advertising could also cause our revenue to increase during election cycles and decrease during other periods, making it difficult to predict our revenue, cash flow, and operating results, all of which could fall below our expectations.
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Future acquisitions,strategicinvestmentsor alliancescould disruptour businessand harm our business, operatingresultsand financialcondition.
We have engaged in acquisitions to grow our business. To the extent we find suitable and attractive acquisition candidates and business opportunities in the future, we may continue to acquire other complementary businesses, products and technologies and enter into joint ventures or similar strategic relationships. We have no present commitments or agreements to enter into any such acquisitions or make any such investments. However, if we identify an appropriate acquisition candidate, we may not be successful in negotiating the terms or financing of the acquisition, and our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or architecture, regulatory compliance practices, revenue recognition or other accounting practices, tax liabilities, privacy or cybersecurity issues or employee or customer issues. There is no certainty that we will be able to successfully integrate the services, products and personnel of any acquired business into our operations. In addition, any future acquisitions, joint ventures or similar relationships may cause a disruption in our ongoing business and distract our management. Further, we may be unable to realize the revenue improvements, cost savings and other intended benefits of any such transaction. Acquisitions involve numerous other risks, any of which could harm our business, including:
regulatory hurdles;
failureof anticipatedbenefitsto materialize;
diversionof managementtimeand focusfromoperatingour businessto addressingacquisition integrationchallenges;
retentionof employeesfromtheacquiredcompany;
culturalchallengesassociatedwith integratingemployeesfromtheacquiredcompanyintoour organization;
integrationof theacquiredcompany’saccounting,managementinformation,humanresourcesand otheradministrativesystems;
theneed to implementor improvecontrols,proceduresand policiesata businessthatpriorto the acquisitionmayhave lackedeffectivecontrols,proceduresand policies;
coordinationof productdevelopmentand salesand marketingfunctions;
liabilityforactivitiesof theacquiredcompanybeforetheacquisition,includingknown and unknown liabilities;and
litigationor otherclaimsin connectionwith theacquiredcompany,includingclaimsfrom terminatedemployees,users,formerstockholdersor otherthirdparties.
Failure to appropriately mitigate these risks or other issues related to such strategic investments and acquisitions could result in reducing or completely eliminating any anticipated benefits of transactions, and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses or the impairment of goodwill, any of which could harm our business, operating results and financial condition.
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Our managementteamhas limitedexperiencemanaging a publiccompany.
Most members of our management team have limited or no experience managing a publicly-traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that govern public companies. There are significant obligations we will now be subject to relating to reporting, procedures and internal controls, and our management team may not successfully or efficiently manage our transition to being a public company. These new obligations and added scrutiny will require significant attention from our management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, operating results and financial condition.
Our corporate culture has contributed to our success and, if we are unable to maintain it as we grow, our business, operating results and financial condition could be harmed.
We have experienced and may continue to experience rapid expansion of our employee ranks. We had 289 employees in the United States as of December 31, 2020. We believe our corporate culture has been critical to our success and we have invested substantial time and resources in building our team within our company culture. However, as our organization grows, it may be difficult to maintain our culture, which could reduce our ability to innovate and operate effectively and proactively focus on and pursue our corporate objectives. The failure to maintain the key aspects of our culture as our organization grows could result in decreased employee satisfaction, increased difficulty in attracting top talent, increased turnover and degraded quality of customer service, all of which are important to our success and to the effective execution of our business strategy. In the event we are unable to maintain our corporate culture as we grow to scale, our business, operating results and financial condition could be harmed.
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs, which may in turn impair our growth.
We intend to continue to grow our business, which may require additional capital to develop new features or enhance our platform, improve our operating infrastructure, finance working capital requirements or acquire complementary businesses and technologies. Accordingly, we may need to engage in additional equity or debt financings to secure additional capital. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Class A common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. If we are unable to secure additional funding on favorable terms, or at all, when we require it, our ability to continue to grow our business to react to market conditions could be impaired and our business may be harmed.
We are a party to a revolving credit agreement, which contains a number of covenants that may restrict our current and future operations and could adversely affect our ability to execute business needs.
Our credit agreement with PNC Bank, National Association (the “Loan Agreement”) contains a number of covenants that limit our ability and our subsidiaries’ ability to, among other things, incur indebtedness, create liens, make investments, merge with other companies, dispose of our assets, prepay other indebtedness and make dividends and other distributions. The terms of our Loan Agreement may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs or to execute business strategies in the means or manner desired. In addition, complying with these covenants may make it more difficult for us to successfully execute our business strategy, invest in our growth strategy and compete against companies who are not subject to such restrictions. The Loan Agreement also contains a financial covenant that requires us to maintain a minimum fixed charge coverage ratio of 1.40 to 1 when undrawn availability under the Loan Agreement is less than 25%. We may not be able to generate sufficient cash flow or sales to meet the financial covenant or pay the principal or interest under the Loan Agreement.
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Ifwe areunableto complywith our paymentrequirements,our lendermayaccelerateour obligations underour Loan Agreementand forecloseupon thecollateral,or we maybe forcedto sellassets,restructureour indebtednessor seekadditionalequitycapital,which would diluteour stockholders’interests.Ifwe failto complywith our covenantsundertheLoan Agreement,itcouldresultin an eventof defaultundertheagreement and our lendercouldmaketheentiredebtimmediatelydue and payable.Ifthisoccurs,we mightnot be ableto repayour debtor borrow sufficientfundsto refinanceit.Even ifnew financingisavailable,itmaynot be on termsthatareacceptableto us.
Interest rates under our Loan Agreement are based partly on LIBOR, the London interbank offered rate, which is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. ICE Benchmark Administration, the administrator of LIBOR, will cease the publication of certain tenors of U.S. dollar LIBOR after December 31, 2021, and plans to cease the publication of all other tenors of U.S. dollar LIBOR after June 30, 2023. It is unclear if new methods of calculating LIBOR will be established such that it continues to exist after 2023. The U.S. Federal Reserve has begun publishing a Secured Overnight Funding Rate which is currently intended to serve as an alternative reference rate to LIBOR. If the method for calculation of LIBOR changes, if LIBOR is no longer available, or if lenders have increased costs due to changes in LIBOR, we may suffer from potential increases in interest rates on our borrowings. Further, we may need to renegotiate our Loan Agreement or any other borrowings that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.
There is no guarantee that our PPP Loan will be forgiven in whole or in part, and we could be subject to audit or enforcement action related to the PPP Loan.
In April 2020, we received loan proceeds in the amount of approximately $6.035 million (the “PPP Loan”) from PNC Bank, as lender, under the Paycheck Protection Program (“PPP”), established as part of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, which provides economic relief to businesses in response to the COVID-19 pandemic. We used the proceeds to support payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. The PPP Loan bears interest at an annual rate of 1.0% and matures on April 11, 2022. Under the terms of the CARES Act, all or a portion of the principal of the PPP Loan may be forgiven. Such forgiveness will be determined, subject to limitations, based on the use of the PPP Loan proceeds for payroll costs, mortgage interest payments, lease payments or utility payments.We expect to apply for forgiveness of the PPP Loan, but we cannot provide any assurance that we will be eligible for loan forgiveness or that any amount of the PPP Loan will ultimately be forgiven.
No interest or principal will be due during the first fifteen months after April 11, 2020, although interest will continue to accrue over this fifteen-month deferral period. In the event that any amounts are not forgiven, such unforgiven amounts shall be payable in equal monthly installments over the remaining term of the facility. The promissory note evidencing the PPP Loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or other provisions of the promissory note. The occurrence of an event of default may trigger the immediate repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining a judgment against the Company.
The PPP Loan is subject to the terms and conditions applicable to loans administered by the Small Business Administration (the “SBA”) under the CARES Act, which is subject to revisions and changes by the SBA and Congress. Given that we received more than $2.0 million under our PPP Loan, we will be subject to an audit by the SBA. We believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan was consistent with the broad objectives of the PPP of the CARES Act. The certification regarding necessity described above did not at the time contain any objective criteria and continues to be subject to interpretation. If, despite our good-faith belief that we satisfied all eligibility requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan or it is otherwise determined that we were ineligible to receive the PPP Loan, we could be subject to civil, criminal and administrative penalties or adverse publicity. Any such events could consume significant financial and management resources and could have a material adverse effect on our business, results of operations and financial condition.
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Item 1B. UnresolvedUnresolved Staff Comments.
None.
Our headquartersarelocatedin Irvine,California,where we occupy facilitiestotalingapproximately47,000 squarefeetundera leasethatexpiresin June 2022. As of December 31, 2020, we have 9May 2031. We currently lease nine otherofficespacesacrosstheUnited States. These offices are leased,States and we do not own any realproperty.We believethatour currentfacilitiesare adequateto meetour currentneeds.
From time to time, we are involved in various legal proceedings arising fromin the normalordinary course of business activities.business. We are not currently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows, or financial condition. Defending any such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information and Holders of Record
Our Class A common stock has been listed on Nasdaq under the symbol “DSP” since February 10, 2021. There is no market for our Class B common stock. Each share of Class B common stock has no economic rights but entitles its holders to one vote on all matters to be voted on by the shareholders generally.
Holders
As of March 19, 2021,8, 2022, there was approximately 1one stockholder of record of our Class A common stock and 4four holders of record of our Class B common stock.Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividend Policy
Dividends
We have not paid any cash dividends on our Class A commoncapital stock and have no present intention to pay cash dividends on our commoncapital stock. Any determination to pay dividends to holders of our commoncapital stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, restrictions in our existing and any future debt, including pursuant to the Loan Agreement with PNC Bank, and other factors that our board of directors deems relevant.
Use of Proceeds from our Initial Public Offering
On February 12, 2021, we completed our IPO, pursuant to which we issued and sold an aggregate of 11,500,000 shares of our Class A common stock (inclusive of 1,500,000 shares pursuant to the underwriters’ option to purchase additional shares) at the IPO price of $25.00 per share. The aggregate gross proceeds to the Company from our IPO were $250.0 million and the net proceeds were $232.5 million after deducting underwriting discounts and commissions of $17.5 million. The offer and sale of the shares of Class A common stock in the IPO were registered pursuant to registration statements on Form S-1 (File Nos. 333-252117 and 333-252907), which the SEC declared effective on February 9, 2021. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10% or more of any class of our equity securities or to any other affiliates. The underwriters for our IPO were BofA Securities, Inc., UBS Securities LLC, Canaccord Genuity LLC, JMP Securities LLC, Needham & Company, LLC and Raymond James & Associates, Inc.
There has been no material change in the intended use of proceeds from our IPO as described in our final prospectus, dated February 9, 2021 and filed with the SEC pursuant to Rule 424(b)(4) on February 10,11, 2021.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Under the Viant Technology Inc. 2021 Long-Term Incentive Plan (the “LTIP”), we are permitted to satisfy any national, state, local or other tax withholding obligation due upon the vesting of an award granted under the LTIP by repurchasing an amount of shares otherwise deliverable on the vesting date having a fair market value equal to the withholding obligation. All of the shares repurchased by us during the fourth quarter of 2021 were in connection with this tax withholding obligation. During the three months ended December 31, 2021, we repurchased the following shares of our Class A common stock:
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Period |
| Total Number of Shares Purchased (1) |
|
| Average Price Paid Per Share (2) |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||
10/1/21 to 10/31/21 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
11/1/21 to 11/30/21 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
12/1/21 to 12/31/21 |
|
| 142,445 |
|
| $ | 9.41 |
|
|
| — |
|
|
| — |
|
Total |
|
| 142,445 |
|
| $ | 9.41 |
|
| $ | — |
|
| $ | — |
|
(1) Represents the shares of Class A common stock we repurchased upon the vesting of restricted stock units to satisfy the applicable tax withholding obligations incidental to the vesting of such awards.
(2) Represents the average price per share that we paid for the repurchases described above.
Stock Performance Graph
This performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing under the Securities Act.
The following graph shows a comparison from February 10, 2021 (the date our Class A common stock commenced trading on Nasdaq) through December 31, 2021 of the cumulative total stockholder return for our Class A common stock, the Standard & Poor’s 500 Index (the “S&P 500”) and the Russell Index 2000 (the “Russell 2000”). The graph assumes that $100 was invested at the market close on February 10, 2021 in our Class A common stock, the S&P 500 and the Russell 2000. Data for the S&P 500 and the Russell 2000 assumes reinvestment of any dividends. The comparisons shown in the graph below are based upon historical data. The stock price performance of the following graph is not necessarily indicative of future stock price performance.
Since there is no published industry or line-of-business index for our business reflective of our performance, nor do we believe we can reasonably identify a peer group, we measure our performance against issuers with similar market capitalizations. We selected the Russell 2000 Index because it measures the performance of a broad range of companies with lower market capitalizations than those companies included in the S&P 500 Index.
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54
Item 6. Selected Financial Data.
The followingtablesetsforthselectedfinancialinformationand otherdataof Viant Technology Inc. and Viant Technology LLC its subsidiarieson a historical basis. basis for the periods and as of the dates indicated.ViantTechnologyLLCisconsideredour predecessorforaccountingpurposesand accordingly, for all periods presented prior to February 12, 2021, our consolidated financial statements represent the financial statements of theour predecessor. The followingWe have derived the selected consolidated statements of operations data for the years ended December 31, 2021, 2020 and 2019 and the selected consolidated balance sheets data as of December 31, 2021 and 2020 from our audited consolidated financial statements included elsewhere in this Annual Report. The selected consolidated statements of operations data for the year ended December 31, 2018 and the selected consolidated balance sheetsheets data as of December 31, 2020, 2019 and 2018 have beenwere derived from theour audited consolidated financial statements of Viant Technology LLC.not included in this Annual Report. Our historicalresultsand growth ratesarenot necessarilyindicativeof resultsor growth ratesto be expectedin futureperiods.
You should read the following information in conjunction with “Management’s Discussionand Analysisof FinancialConditionand Resultsof Operations,” “CertainRelationshipsand Related Transactions, and Director Independence” and our consolidated financial statements and related notes thereto included elsewhere in this Annual Report.Report, as well as the information included under the caption “Transactions with Related Persons” in our definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2021.
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||
|
| (in thousands, except per unit data and number of customers) |
|
| (in thousands, except per share/unit data and number of customers) |
| ||||||||||||||||||||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
| $ | 165,251 |
|
| $ | 164,892 |
|
| $ | 108,355 |
|
| $ | 224,127 |
|
| $ | 165,251 |
|
| $ | 164,892 |
|
| $ | 108,355 |
|
Operating expenses(1): |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Operating expenses(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Platform operations |
|
| 88,260 |
|
|
| 94,060 |
|
|
| 74,344 |
|
|
| 129,604 |
|
|
| 88,260 |
|
|
| 94,060 |
|
|
| 74,344 |
|
Sales and marketing |
|
| 28,887 |
|
|
| 29,027 |
|
|
| 26,766 |
|
|
| 65,042 |
|
|
| 28,887 |
|
|
| 29,027 |
|
|
| 26,766 |
|
Technology and development |
|
| 8,698 |
|
|
| 9,240 |
|
|
| 9,585 |
|
|
| 25,372 |
|
|
| 8,698 |
|
|
| 9,240 |
|
|
| 9,585 |
|
General and administrative |
|
| 17,639 |
|
|
| 19,770 |
|
|
| 18,326 |
|
|
| 46,904 |
|
|
| 17,639 |
|
|
| 19,770 |
|
|
| 18,326 |
|
Total operating expenses |
|
| 143,484 |
|
|
| 152,097 |
|
|
| 129,021 |
|
|
| 266,922 |
|
|
| 143,484 |
|
|
| 152,097 |
|
|
| 129,021 |
|
Income (loss) from operations |
|
| 21,767 |
|
|
| 12,795 |
|
|
| (20,666 | ) |
|
| (42,795 | ) |
|
| 21,767 |
|
|
| 12,795 |
|
|
| (20,666 | ) |
Total other expense, net |
|
| 1,129 |
|
|
| 2,871 |
|
|
| 4,869 |
| ||||||||||||||||
Total other expense (income), net |
|
| (5,186 | ) |
|
| 1,129 |
|
|
| 2,871 |
|
|
| 4,869 |
| ||||||||||||
Net income (loss) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
|
| (37,609 | ) |
|
| 20,638 |
|
|
| 9,924 |
|
|
| (25,535 | ) |
Earnings (loss) per unit—basic(2) |
| $ | 20.64 |
|
| $ | 31.31 |
|
| $ | (137.28 | ) | ||||||||||||||||
Earnings (loss) per unit—diluted(2) |
| $ | 20.64 |
|
| $ | 27.37 |
|
| $ | (137.28 | ) | ||||||||||||||||
Other Key Operating and Financial Performance Metrics(3) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Revenue ex-TAC |
| $ | 110,516 |
|
| $ | 104,440 |
|
| $ | 64,526 |
| ||||||||||||||||
Less: Net loss attributable to noncontrolling interests |
|
| (29,867 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||
Net loss attributable to Viant Technology Inc. |
| $ | (7,742 | ) |
| $ | — |
|
| $ | — |
|
| $ | — |
| ||||||||||||
Earnings (loss) per share/unit—basic(2) |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 31.31 |
|
| $ | (137.28 | ) | ||||||||||||
Earnings (loss) per share/unit—diluted(2) |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 27.37 |
|
| $ | (137.28 | ) | ||||||||||||
Other Key Operating and Financial Performance Measures(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Gross profit |
| $ | 94,523 |
|
| $ | 76,991 |
|
| $ | 70,832 |
|
| $ | 34,011 |
| ||||||||||||
Contribution ex-TAC |
| $ | 141,500 |
|
| $ | 110,516 |
|
| $ | 104,440 |
|
| $ | 64,526 |
| ||||||||||||
Adjusted EBITDA |
| $ | 31,782 |
|
| $ | 24,655 |
|
| $ | (7,534 | ) |
| $ | 37,108 |
|
| $ | 31,782 |
|
| $ | 24,655 |
|
| $ | (7,534 | ) |
Net income as a percentage of gross profit |
|
| 27 | % |
|
| 14 | % |
| N/A |
| |||||||||||||||||
Adjusted EBITDA as a percentage of revenue ex- TAC |
|
| 29 | % |
|
| 24 | % |
| N/A |
| |||||||||||||||||
Number of Active Customers(4) |
|
| 264 |
|
|
| 277 |
|
|
| 267 |
| ||||||||||||||||
Average revenue ex-TAC per Active Customer(4) |
| $ | 419 |
|
| $ | 377 |
|
| $ | 242 |
| ||||||||||||||||
Net income (loss) as a percentage of gross profit(4) |
| N/A |
|
|
| 27 | % |
|
| 14 | % |
| N/A |
| ||||||||||||||
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 26 | % |
|
| 29 | % |
|
| 24 | % |
| N/A |
| |||||||||||||
Active customers(5) |
|
| 309 |
|
|
| 264 |
|
|
| 277 |
|
|
| 267 |
| ||||||||||||
Average gross profit per active customer |
| $ | 306 |
|
| $ | 292 |
|
| $ | 256 |
|
| $ | 127 |
| ||||||||||||
Average contribution ex-TAC per active customer |
| $ | 458 |
|
| $ | 419 |
|
| $ | 377 |
|
| $ | 242 |
| ||||||||||||
55
|
| As of December 31, |
|
| As of December 31, |
|
| ||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| |||||||
|
| (in thousands) |
|
| (in thousands) |
|
| ||||||||||||||||||||||
Consolidated Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Consolidated Balance Sheets Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Cash |
| $ | 9,629 |
|
| $ | 4,815 |
|
| $ | 2,655 |
|
| $ | 238,480 |
|
| $ | 9,629 |
|
| $ | 4,815 |
|
| $ | 2,655 |
|
|
Accounts receivable, net |
|
| 89,767 |
|
|
| 68,083 |
|
|
| 48,497 |
|
|
| 110,739 |
|
|
| 89,767 |
|
|
| 68,083 |
|
|
| 48,497 |
|
|
Total assets |
|
| 133,520 |
|
|
| 106,857 |
|
|
| 86,662 |
|
|
| 389,131 |
|
|
| 133,520 |
|
|
| 106,857 |
|
|
| 86,662 |
|
|
Accounts payable |
|
| 29,763 |
|
|
| 20,480 |
|
|
| 17,752 |
|
|
| 32,877 |
|
|
| 29,763 |
|
|
| 20,480 |
|
|
| 17,752 |
|
|
Total debt |
|
| 23,535 |
|
|
| 17,500 |
|
|
| 65,955 |
|
|
| 17,500 |
|
|
| 23,535 |
|
|
| 17,500 |
|
|
| 65,955 |
|
|
Total liabilities |
|
| 105,903 |
|
|
| 84,152 |
|
|
| 124,859 |
|
|
| 106,557 |
|
|
| 105,903 |
|
|
| 84,152 |
|
|
| 124,859 |
|
|
Convertible preferred units |
|
| 7,500 |
|
|
| 7,500 |
|
|
| 45,000 |
|
|
| — |
|
|
| 7,500 |
|
|
| 7,500 |
|
|
| 45,000 |
|
|
Total members’ equity (deficit) |
|
| 20,117 |
|
|
| 15,205 |
|
|
| (83,197 | ) | |||||||||||||||||
Total equity (deficit) |
|
| 282,574 |
|
|
| 20,117 |
|
|
| 15,205 |
|
|
| (83,197 | ) |
| ||||||||||||
(1) |
|
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||
Unit-based compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Stock/unit-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Platform operations |
| $ | — |
|
| $ | 42 |
|
| $ | 25 |
|
| $ | 13,096 |
|
| $ | — |
|
| $ | 42 |
|
| $ | 25 |
|
Sales and marketing |
|
| — |
|
|
| 44 |
|
|
| 26 |
|
|
| 25,639 |
|
|
| — |
|
|
| 44 |
|
|
| 26 |
|
Technology and development |
|
| — |
|
|
| 82 |
|
|
| 49 |
|
|
| 12,373 |
|
|
| — |
|
|
| 82 |
|
|
| 49 |
|
General and administrative |
|
| — |
|
|
| 922 |
|
|
| 547 |
|
|
| 17,714 |
|
|
| — |
|
|
| 922 |
|
|
| 547 |
|
Total unit-based compensation expense |
| $ | — |
|
| $ | 1,090 |
|
| $ | 647 |
| ||||||||||||||||
Total stock/unit-based compensation |
| $ | 68,822 |
|
| $ | — |
|
| $ | 1,090 |
|
| $ | 647 |
| ||||||||||||
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||
|
|
|
|
|
| (in thousands) |
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Depreciation and amortization expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Platform operations |
| $ | 7,338 |
|
| $ | 7,535 |
|
| $ | 8,067 |
|
| $ | 8,388 |
|
| $ | 7,338 |
|
| $ | 7,535 |
|
| $ | 8,067 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| 1,608 |
|
|
| 1,537 |
|
|
| 1,314 |
|
|
| 1,599 |
|
|
| 1,608 |
|
|
| 1,537 |
|
|
| 1,314 |
|
General and administrative |
|
| 1,160 |
|
|
| 1,083 |
|
|
| 1,247 |
|
|
| 1,154 |
|
|
| 1,160 |
|
|
| 1,083 |
|
|
| 1,247 |
|
Total depreciation and amortization expense |
| $ | 10,106 |
|
| $ | 10,155 |
|
| $ | 10,628 |
| ||||||||||||||||
Total depreciation and amortization |
| $ | 11,141 |
|
| $ | 10,106 |
|
| $ | 10,155 |
|
| $ | 10,628 |
| ||||||||||||
See Note 4, Note 5 and Note 9 to our consolidatedfinancialstatementsincludedelsewherein this Annual Reportformoreinformationregardingdepreciation,expense,amortizationexpenseand stock/unit-based compensation,expense, respectively.
(2) | See Note 2 to our |
(3) | For a detaileddiscussionof our key operatingand financialperformance |
| Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
(5) | We definean |
5556
Discussionand Analysisof FinancialConditionand Resultsof Operation—Key Operatingand FinancialPerformanceMeasures—Useof Non-GAAPFinancialMeasures—Contributionex-TAC.” |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management’sManagement’sDiscussionand Analysisof FinancialConditionand Resultsof Operationsshouldbe read in conjunctionwith, and isqualifiedin itsentiretyby referenceto, thesectionentitled “SelectedFinancial Data”and our consolidatedfinancialstatementsand therelatednotesincludedwithinthisAnnual Report. In addition to historical financial information, the following discussionand analysiscontainsforward-lookingstatementsthatinvolverisksand uncertainties which couldcauseour actualresultsto differmateriallyfrom thoseanticipatedin theseforward-looking statements,including,but not limitedto, risksand uncertaintiesdiscussedunder theheading“Special Note Regarding Forward-Looking Statements” and “Risk Factors” and discussed elsewherein thisAnnual Report.Additionally,our historicalresultsare not necessarilyindicativeof theresultsthatmay be expectedforany periodin thefuture.
The following primarily discusses our financial condition and results of operations for our fiscal year ended December 31, 2021 compared to our fiscal year ended December 31, 2020. Discussions of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by reference to, the section entitled “SelectedFinancial Data” and the consolidated financial statements and the related notes included within this Annual Report. This Annual Report, including the historical consolidated financial data discussed below, reflects the historical results of operations and financial position of Viant Technology LLC,for our predecessor for accounting purposes, prior to the corporate reorganization and IPO. This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Forward-Looking Statements” and “Risk Factors” and discussed elsewhere in this Annual Report. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.
The following primarily discusses 2020 and 2019 items and year over year comparisons between 2020 and 2019. Discussions of thefiscal year ended December 31, 2018 items and comparisons between the2020 compared to our fiscal year ended December 31, 2019 and the year ended December 31, 2018 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our prospectus dated February 9, 2021,Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange CommissionSEC on February 11,March 23, 2021.
Overview
We arean advertisingsoftwarecompany. Our softwareenablestheprogrammaticpurchaseof advertising,which istheelectronificationof theadvertisingbuying process.Programmaticadvertisingisrapidly takingmarketsharefromtraditionalad saleschannels,which requiremorestaffing,offerlesstransparencyand involvehighercoststo buyers.
Our demandsideplatform(“DSP”), Adelphic,isan enterprisesoftwareplatformthatisused by marketersand theiradvertisingagenciesto centralizetheplanning,buying and measurementof theiradvertising mediaacrossmostchannels.Through our technology,a marketercan easilybuy ads on desktop,mobile, connectedTV,linearTV, linear TV, in-game,streamingaudioand digitalbillboards.
Viant wasWe were foundedin 1999 by Tim,Chrisand Russ Vanderhook who continueto leadour company today. Viant hasWe have been attheforefrontof digitaladvertisingtechnologysince its ourinceptionand hashave demonstrated its ourabilityto grow, thrive,and innovateas competitorshave comeand gone. In 2011, Viant weacquiredthesocial networkwebsiteMyspace.com.In 2011, Timand ChrisVanderhook startedXumo, a connectedTVstreaming service,which was acquiredby ComcastCorp. in 2020. In 2015, Viant wecompleted its ourfirstpeople-based integration. Viant Weremainedindependentuntil2016, when TimeInc.acquireda 60% interestin Viant our company throughits subsidiary,theFormerHoldco. That interestwas lateracquiredby MeredithCorporationwhen itacquiredTime Inc.in 2018. In 2017, the Companywe purchasedAdelphic,a DSP.SincetheAdelphicacquisition, the Company haswe have materiallytransformedfroma full-serviceproviderof digitaladvertisingsolutionsintoa leadingDSPthat enablesmarketersand theiradvertisingagenciesto centralizetheplanning,buying and measurementof their mediainvestmentsusinga people-basedframework. Viant hasWe have grown froma businessoperatingfroma home officeto a companywith nearly 300approximately 350 employeesin 10 officesthroughoutthe U.S. United States, as of December 31, 2021.In 2019, Viant weenteredintothe 2019 FormerHoldco transactionthatresultedin theretirementof theFormerHoldco’sinterestin Viant our companyand the Vanderhook Partiesacquiredthat60% interestin the Company,Viant, allowingitto once againbecomean independent company. ViantWe completed itsour IPO on February 12, 2021.
We servemarketersand theiradvertisingagenciesby enablingthemto plan,buy and measure programmaticcampaigns.We providean easy-to-useself-serviceprogrammaticplatformthatdelivers transparencyand control.Our platformofferscustomersuniquevisibilityacrossa varietyof advertisingchannels with theabilityto createcustomizedaudiencesegmentsleveragingour people-basedand strategicpartnerdatato reachtargetaudiencesatscale.Our people-basedapproachisin contrastto theinefficientapproachof cookie-basedtracking.People-baseddataenablesmarketersto use first-partydataforboth thetargetingand measurementof theirad campaignsin a mannerthatwe believeismoreaccuratethanutilizinga cookie-based approach.
5658
We makeour software platformavailablethroughdifferentpricingoptionsto tailor tailored to multipleclient customer typesand customerneeds.These optionsconsistof a percentageof spend option, a monthly subscription pricing optionand a fixedCPM pricingoption. CPM“CPM” refersto a paymentoptionin which customerspay a priceforevery1,000 impressionsan ad receives.Customerscan enterintomasterserviceagreements(“MSAs”)with us thatenablethemto use our platformon a self-servicebasisto executetheiradvertisingcampaigns.We generaterevenuewhen theourplatform isused on a self-servicebasisby charginga platformfeethatiseithera percentageof spend or a flatmonthly subscriptionfee,as wellas feesforadditionalfeaturessuch as dataand advancedreporting.We alsoofferour customerstheabilityto use our servicesto aidthemin datamanagement,mediaexecutionand advanced reporting.When customersutilizeour services,we generaterevenueby charginga (1)separateservicefeethat representsa percentageof spend in additionto theplatformfee;(2)a flatmonthlyfeecoveringservicesin connectionwith datamanagementand advancedreporting;or (3)a fixedCPM thatisinclusiveof media,other directcostsand services.We believethatofferinga multitudeof pricing optionsprovidesour customersgreater flexibilityand accessto our platform.Some of our pricingoptionsarerelativelynew to themarketand arenot yetmaterialto our businessfroma financialperspective.
Our financialresults for the fiscal years ended December 31, 2021 and 2020 include:
• | Revenue of $224.1 millionand $165.3 millionfortheyearsended December31, 2021 and 2020, respectively, representingan increaseof 35.6%; |
• | Gross profit of $94.5 millionand $77.0 millionfortheyearsended December31, 2021 and 2020, respectively,representingan increaseof 22.8%; |
• | Contribution ex-TAC* of $141.5 millionand $110.5 millionfortheyearsended December31, 2021 and 2020, respectively,representingan increaseof 28.0%; |
• | Net lossof $37.6 millionand net income of $20.6 millionfortheyearsended December31, 2021 and 2020, respectively; |
• | Non-GAAP net income* of $23.9 million and $20.6 million for the years ended December 31, 2021 and 2020, respectively; and |
• | AdjustedEBITDA*of $37.1 millionand $31.8 millionforthe yearsended December31, 2021 and 2020, respectively. |
Revenue of $165.3 million*Contribution ex-TAC, non-GAAP net income and $164.9 millionfortheyearsended December31, 2020 and 2019, respectively, representingan increaseof 0.2%;
Revenue ex-TAC of $110.5 millionand $104.4 millionfortheyearsended December31, 2020 and 2019, respectively,representingan increaseof 6%;
Net incomeof $20.6 millionand $9.9 millionfortheyearsended December31, 2020 and 2019, respectively, representingan increaseof 108%;and
AdjustedEBITDAof $31.8 millionand $24.7 millionforthe yearsended December31, 2020 and 2019, respectively, representingan increaseof 29%.
Revenue ex-TAC and Adjustedadjusted EBITDA are non-GAAP financial measures. For a detailed discussion of our key operating and financial performance metricsmeasures and a reconciliation of revenuecontribution ex-TAC, non-GAAP net income and Adjustedadjusted EBITDA to the most directly comparable financial measures calculated in accordance with GAAP, see “—“—Key Operatingand FinancialPerformanceMetrics— Measures—Useof Non-GAAPFinancialMeasures. Measures.”
FactorsAffectingOur Performance
COVID-19
In March2020, theWorldHealthOrganizationcharacterizedthecoronavirus(“COVID-19”) a pandemic,and in March2020, thePresidentof theUnitedStatesdeclaredtheCOVID-19outbreaka national emergency.COVID-19has spreadacrosstheglobe duringsince 2020 and hasimpactedeconomicactivityworldwide.
ThechallengesposedbytheCOVID-19pandemicontheglobaleconomycontinued throughout 2021.InresponsetoCOVID-19,nationalandlocal governmentsaroundtheworldhaveinstitutedcertainmeasures,includingtravelbans, vaccine mandates, prohibitionsongroupevents andgatherings,shutdownsofcertainbusinesses,curfews,shelter-in-placeordersandrecommendationstopractice socialdistancing.Weinstitutedtemporarysalaryreductionsinthesecondandthirdquartersof2020due toCOVID-19.Inthefourthquarterof2020,normalsalarieswerereinstatedandwepaidemployeesfor theamountsbywhichtheirsalarieshadbeenreducedinthesecondandthirdquartersof2020. Salaries were not impacted by the COVID-19 pandemic on in 2021. During 2020, certainmarketersin industriessuchastravelandtourism,retailandautomotive,decreasedorpausedtheiradvertisingspendasa responsetothe global economyeconomicuncertainty. The advertising spend in some of these industries increased significantlyin 2021 compared to 2020 as the first quarter of 2020 progressed and have continued throughout 2020. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The Company instituted temporary salary reductions in the second and third quarters of 2020 due to COVID-19. In the fourth quarter of 2020, normal salaries were reinstated and the Company paid employees for the amounts by which their salaries had been reduced in the second and third quarters of 2020. Certain marketers in industries such as travel and tourism, retail and automotive, decreased or paused their advertising spend as a response to the economic uncertainty. As a result, our revenue and Adjusted EBITDA have been negatively impacted during 2020 as a result of the COVID-19 pandemic. In addition, as a result of our temporary salary reductions in the second and third quarters, our personnel costs temporarily decreased. The ultimate impact of COVID-19 on the Company’s results of operations, financial condition and cash flows is dependent on future developments, including the durationeffects of the pandemic became, or were perceived to have become, less volatile. Our revenueand adjustedEBITDAwere
59
negatively impactedthroughout 2020 and 2021 asaresultoftheCOVID-19pandemic, however with vaccines being made widely available during 2021, the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. See “RiskFactors—TheeffectsoftheongoingCOVID-19 pandemicandothersustainedadversemarketeventshavehad,andcouldinthefuturehave,anadverseimpacton ourbusiness,operatingresultsandfinancialcondition” for further discussion of the potential impacts of the COVID-19 pandemic on our business.
57
Attract,Retainbusiness and Growour CustomerBase
Our recent growth has been driven by expanding the usage of our platform by our existing customers as well as adding new customers. We believe that our customers value our solutions, as our average revenue ex-TAC per Active Customer has increased from $377,000 per Active Customer to $419,000 per Active Customer, an increase of $42,000 or 11.1%, from the year ended December 31, 2019 to the year ended December 31, 2020. The number of Active Customers decreased by 13 customers or 4.7%, from the year ended December 31, 2019 to the year ended December 31, 2020. We review changes in usage of our platform as represented by changes in aggregate spend on the platform as a metric of customer engagement. Platform spend, which we previously referred to in our registration statement on Form S-1 as ‘platform usage’ is represented by aggregate spend on the platform and increased by 17%operations was less significant for the year ended December 31, 2020.2021.Theultimateimpactof COVID-19onourresultsofoperations,financialconditionandcashflowsisdependentonfuture developments,includingthedurationofthepandemic, emerging variant strains of the virus with varying degrees of vaccine resistance,andtherelatedlengthofitsimpactontheglobaleconomy, whichareuncertainandcannotbepredictedatthistime.See“RiskFactors—TheeffectsoftheongoingCOVID-19 pandemicandotheradversemarketeventshavehad,andcouldinthefuturehave,anadverseimpacton ourbusiness,operatingresultsandfinancialcondition”forfurtherdiscussionofthepotentialimpactsofCOVID-19onourbusiness, financialconditionand resultsof operations.
Attract,Retain and Growour CustomerBase
Our recentgrowth has been drivenby expandingtheusage of our platformby our existingcustomersas wellas addingnew customers.We believethatour customersvalueour solutions,as our average gross profit per active customer has increased from $292,000 to $306,000, an increaseof $14,000 or 4.8%, fromtheyearended December31, 2020 to theyearended December31, 2021, respectively, and our averagecontribution ex-TACperactivecustomerhas increasedfrom $419,000 to $458,000, an increaseof $39,000 or 9.3%, fromtheyearended December31, 2020 to theyearended December31, 2021, respectively. We define an “active customer” as a customer that had total aggregate contribution ex-TAC of at least $5,000 through our platform during the previous twelve months. Activecustomers increased by 45 customers or 17.0%, fromfiscal 2020 to fiscal 2021. For a detaileddiscussionof our key operating metrics measuresincludingthedefinitionof Active Customers, active customers,see“—Key Operatingand FinancialPerformanceMetrics—Measures—Useof Non-GAAPFinancialMeasures.”
We continueto add functionalityto our platform softwareto encourageour customersto increasetheirusage of our platform.We believemanyadvertisersarein theearlystagesof movinga greaterpercentageof their advertisingbudgetsto programmaticchannels.By providingsolutionsfortheplanning,buying and measuringof theirmediaspend acrosschannels,we believethatwe arewellpositionedto capturetheincreasein programmaticbudgets.Further,we intendto continueto grow our marketingeffortsto increaseawarenessof our Adelphic DSPplatform, Adelphic,and highlighttheadvantagesof our people-basedframeworkas cookie-basedoptionsbecome increasinglylimited.As a result,futurerevenuegrowth dependsupon our abilityto retainour existingcustomers and increasetheirusageof our platformas wellas add new customers.
Investmentin Growth
We believethattheadvertisingmarketisin theearlystagesof a secular shift towards towardprogrammatic advertising.We planto investforlong-termgrowth. We anticipatethatour operatingexpenseswillincrease significantlyin theforeseeablefutureas we investin platformoperations, and technologyand developmentto enhanceour productcapabilitiesincludingidentityresolutionand theintegrationof new advertisingchannels, and in salesand marketingto acquirenew customersand increaseour customers’usage of our platform.We believethattheseinvestmentswillcontributeto our long-termgrowth, althoughtheymayhave a negativeimpact on our profitabilityin thenear-term.
Growth of the DigitalAdvertisingMarketand MacroeconomicsFactors
We expectto continueto benefitfromoveralladoptionof programmaticadvertisingby marketersand theiragencies.Any materialchangein thegrowth rateof digitaladvertisingor therateof adoptionof programmatic advertising, by marketers and their agencies. Any material change in the growth rate of digital advertising or the rate of adoption of programmatic, includingexpansionof new programmaticchannels,couldaffectour performance.Recentyears have shown thatadvertisingspend iscloselytiedto advertisers’financialperformanceand a downturn, either generallyor in one or moreof theindustriesin which our customersoperate,couldadverselyimpactthedigital advertisingmarketand our operatingresults.
Seasonality
In the advertising industry, Advertisingcompaniescommonlyexperienceseasonalfluctuationsin revenue. For example, revenue, asmanymarketersallocatethelargestportionof theirbudgetsto thefourthquarterof thecalendaryearin orderto coincidewith increasedholidaypurchasing.Historically,thefourthquarterhas reflectedour highestlevelof advertisingactivityfortheyear.We generallyexpectthesubsequentfirstquarterto reflectlower activitylevels,but thistrendmaybe masked
60
due to thecontinuedgrowth of our business.In addition,historical seasonalitymaynot be predictiveof futureresultsgiventhepotentialforchangesin advertisingbuying patterns and consumeractivitydue to the COVID-19 pandemic.COVID-19.Politicaladvertisingcouldalsocauseour revenueto increaseduringelectioncyclesand decreaseduringotherperiods,makingitdifficultto predictour revenue,cashflow, and operatingresults,allof which couldfallbelow our expectations. We expectour revenueto continueto fluctuatebasedon seasonalfactorsthataffecttheadvertisingindustryas a whole.
58
Components of Our Resultsof Operations
We have one primarybusinessactivityand operatein a singleoperatingand reportablesegment.
Revenue
We generaterevenueby providingmarketersand theiradvertisingagencieswith theabilityto plan,buy and measuretheirdigitaladvertisingcampaignsusingour people-basedDSP.We maintainagreementswith customersin theformof MSAs (inconnectionwith thepercentageof spend and monthlysubscriptionpricing options, as wellas in instanceswhere we chargeour customersa flatmonthlyfeeforservicesin connectionwith datamanagementand advancedreporting)and IOs (inconnectionwith thefixedCPM pricingoption) which set out thetermsof therelationshipand use of our platform.
We recognizerevenuewhen we transfercontrolof promisedservicesdirectlyto our customersin an amountthatreflectstheconsiderationto which we expectto be entitledin exchangeforthoseservices. Forthepercentageof spend pricingoption, we recognizerevenueatthe pointin timewhen a purchaseby thecustomeroccursthroughour platform.For the monthlysubscriptionpricingoption, we recognizesubscriptionfeesas revenueovertimeon a ratablebasisoverthetermof theagreement.In both instances,revenueisreportednetof amountsincurredand payableto suppliersforthecostof advertisingmedia,third-partydataand otheradd-on features (collectively, “traffic (collectively,“trafficacquisitioncosts” or “TAC”)sincewe arrangeforthetransferof TACfromthe supplierto thecustomerthroughtheuse of our platformand do not controlsuch featurespriorto transferto the customer.Fordatamanagementand advancedreporting services,we recognizerevenueover timeon a ratablebasisoverthetermof theagreement.
For the fixed CPM pricing option,we recognizerevenueatthepointin timewhen theadvertising impressionsaredeliveredto thecustomer.This revenueisreportedgrossof any amountsincurredand payableto suppliersforTAC, sincewe controlsuch featurespriorto transferto thecustomer.
We expecttheportionof our revenuederivedfromthepercentageof spend and monthlysubscriptionpricingoptionsto increasein theaggregateovertime,which would reducethepercentageof revenuethatwe recognizeon a grossbasisin connectionwith thefixedCPM pricingoption.
See “CriticalAccountingEstimates—RevenueRecognition” fora descriptionof our revenuerecognitionpolicies.
OperatingExpenses
We classifyour operatingexpensesintothefollowingfourcategories.Each expensecategoryincludes overheadsuch as rentand occupancycharges,which isallocatedbasedon headcount.
PlatformOperations. Platformoperationsexpenserepresentsour costof revenues,which consistsof TAC, hostingcosts,personnelcosts,depreciationof capitalizedsoftwaredevelopmentcostsrelatedto our platform,customersupportcostsand allocatedoverhead.TACrecordedin platformoperationsconsistof amountsincurredand payableto suppliersforcostsassociatedwith our fixedCPM pricingoption. Personnel costswithinplatformoperationsincludesalaries,bonuses, stock/unit-basedcompensationand employee benefitcostsprimarilyattributableto personnelwho directlysupportour platform.
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OtherthanTAC, manyof thecostsincludedin platformoperationsexpensedo not increaseor decrease proportionatelywith increasesor decreasesin our revenue.We expectplatformoperationsexpensesto increase in futureperiods, includingas a resultof stock-basedcompensation and depreciation of capitalized software development costs as we continueto investin the aggregate developmentof our platformto add new featuresand functions,increasethenumberof advertisingmediaand datasuppliers,rampup thevolumeof advertisingspend on our platformresultingin increasedvolumesof transactions,and hireadditionalpersonnelto supportour customers.
Salesand Marketing. Salesand marketingexpenseconsistsprimarilyof personnelcosts,including salaries,bonuses,stock/unit-basedcompensation,employeebenefitcostsand commissionsforour sales personnel.Salesand marketingexpensealsoincludescostsformarketdevelopmentprograms,advertising, promotionaland othermarketingactivitiesand allocatedoverhead.Commissionsareexpensedas incurred.
Our salesand marketingorganizationfocuseson marketingour platformto increaseitsadoptionby existingand new customers.As a result,we expectsalesand marketingexpensesto increasein futureperiods, includingas a resultof stock-basedcompensation, as we increase our sales and marketing team and our focus on market development programs. Salesand marketingexpenseas a percentageof revenuemayfluctuatefromperiodto periodbasedon revenuelevelsand thetimingof our investmentsin our salesand marketingfunctionsas theseinvestmentsmayvaryin scopeand scaleover time, time.
Technologyand Development. Technologyand developmentexpenseconsistsprimarilyof personnel costs,includingsalaries,bonuses,stock/unit-basedcompensationand employeebenefitcostsassociatedwith theongoing developmentand maintenanceof our platformand allocatedoverhead.Technologyand development costsareexpensedas incurred,exceptto theextentthatsuch costsareassociatedwith softwaredevelopmentthat qualifiesforcapitalization,which would reducearethenrecordedas capitalizedsoftwareincludedin property,equipmentand software,net,on the consolidatedbalancesheet.We recorddepreciationforcapitalizedsoftware development costsnot relatedto our platformwithintechnologyand developmentexpense.
We believethatcontinuedinvestmentin our platformiscriticalto attainingour strategicobjectivesand long-termgrowth. We thereforeexpecttechnologyand developmentexpenseto increaseas we continueto invest in thedevelopmentof our platformto supportand maintainadditionalfeaturesand functions,increasethe numberof advertisingmediaand datasuppliers,and rampup thevolumeof advertisingspend on our platform.
Generaland Administrative. Generaland administrativeexpenseconsistsprimarilyof personnelcosts, includingsalaries,bonuses,stock/unit-basedcompensationand employeebenefitcostsassociatedwith our executive,accounting,finance,legal,humanresourcesand otheradministrativepersonnel.Additionally,this includesaccounting, legal and otherprofessionalservicesfees, insurance expense,bad debtexpenseand allocatedoverhead.
We expectto continueto investin corporateinfrastructureand incuradditionalexpensesassociatedwith our operationas a publiccompany,includingincreasedlegaland accountingcosts,investorrelationscosts, higherinsurancepremiumsand compliancecostsassociatedwith developingtherequisiteinfrastructurerequired forinternalcontrolsoverfinancialreporting.As a result,we expectgeneraland administrativeexpensesto increasein futureperiods, includingas a resultof stock-basedcompensation.
TotalOther Expense, Net
InterestExpense,Net. Interestexpense,netisprimarilyrelatedto our long-termdebtand revolving creditfacility.
Other Expense(Income),Net. Otherexpense(income),netconsists primarilyof foreigncurrency exchange gains and losses, debt extinguishment gainsand lossesand miscellaneousexpensesnot attributableto operations.
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Resultsof Operations
The following tables set forth our consolidated results of operations, our consolidated results of operations as a percentage of revenue, thatand the Company recognizesimpact of stock-based compensation, depreciation and amortization on each operating expense line item for the fiscal years ended December 31, 2021 and 2020:
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
Revenue |
| $ | 224,127 |
|
| $ | 165,251 |
|
Operating expenses(1): |
|
|
|
|
|
|
|
|
Platform operations |
|
| 129,604 |
|
|
| 88,260 |
|
Sales and marketing |
|
| 65,042 |
|
|
| 28,887 |
|
Technology and development |
|
| 25,372 |
|
|
| 8,698 |
|
General and administrative |
|
| 46,904 |
|
|
| 17,639 |
|
Total operating expenses |
|
| 266,922 |
|
|
| 143,484 |
|
Income from operations |
|
| (42,795 | ) |
|
| 21,767 |
|
Total other expense (income), net |
|
| (5,186 | ) |
|
| 1,129 |
|
Net income (loss) |
|
| (37,609 | ) |
|
| 20,638 |
|
Less: Net loss attributable to noncontrolling interests |
|
| (29,867 | ) |
|
| — |
|
Net loss attributable to Viant Technology Inc. |
| $ | (7,742 | ) |
| $ | — |
|
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (% of revenue*) |
| |||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
Revenue |
|
| 100 | % |
|
| 100 | % |
Operating expenses: |
|
|
|
|
|
|
|
|
Platform operations |
|
| 58 | % |
|
| 53 | % |
Sales and marketing |
|
| 29 | % |
|
| 17 | % |
Technology and development |
|
| 11 | % |
|
| 5 | % |
General and administrative |
|
| 21 | % |
|
| 11 | % |
Total operating expenses |
|
| 119 | % |
|
| 87 | % |
Income from operations |
|
| (19 | )% |
|
| 13 | % |
Total other expense (income), net |
|
| (2 | )% |
|
| 1 | % |
Net income (loss) |
|
| (17 | )% |
|
| 12 | % |
Less: Net loss attributable to noncontrolling interests |
|
| (13 | )% |
|
| — |
|
Net loss attributable to Viant Technology Inc. |
|
| (3 | )% |
|
| — |
|
* | Percentagesmaynot sumdue to rounding |
(1) | Stock-basedcompensation, depreciation,and amortization factored into the operating expense line item as follows: |
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Stock-based compensation: |
|
|
|
|
|
|
|
|
Platform operations |
| $ | 13,096 |
|
| $ | — |
|
Sales and marketing |
|
| 25,639 |
|
|
| — |
|
Technology and development |
|
| 12,373 |
|
|
| — |
|
General and administrative |
|
| 17,714 |
|
|
| — |
|
Total stock-based compensation |
| $ | 68,822 |
|
| $ | — |
|
63
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Depreciation: |
|
|
|
|
|
|
|
|
Platform operations |
| $ | 7,688 |
|
| $ | 6,638 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
Technology and development |
|
| 1,599 |
|
|
| 1,608 |
|
General and administrative |
|
| 625 |
|
|
| 631 |
|
Total depreciation |
| $ | 9,912 |
|
| $ | 8,877 |
|
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Amortization: |
|
|
|
|
|
|
|
|
Platform operations |
| $ | 700 |
|
| $ | 700 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
Technology and development |
|
| — |
|
|
| — |
|
General and administrative |
|
| 529 |
|
|
| 529 |
|
Total amortization |
| $ | 1,229 |
|
| $ | 1,229 |
|
Comparison of the Fiscal Years EndedDecember31, 2021 and 2020
Revenue
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Revenue |
| $ | 224,127 |
|
| $ | 165,251 |
|
| $ | 58,876 |
|
|
| 36 | % |
Revenue increasedby $58.9 million,or 36% duringtheyearended December31, 2021 comparedto theyearended December31, 2020. In fiscal 2021, reduced COVID-19-related restrictions contributed to increased revenue and demand for our people-based advertising products and services, and our customers increased usage of our platform. During fiscal 2020, our revenue was adversely impacted by the COVID-19 pandemic, as certain marketers in the travel and tourism, automotive and retail industries decreased or paused their advertising spending, resulting in a gross basis in connection with25% revenue decrease across these customer verticals compared to fiscal 2019. During fiscal 2021, the fixed CPM pricing option.
See “CriticalAccountingPoliciestravel and Estimates—RevenueRecognition” for a descriptiontourism and retail industry verticals increased by 51% compared to fiscal 2020. Approximately 89% of our revenue recognition policies.for the year ended December 31, 2021 came from customers that had been customers in the fiscal year ended December 31, 2020.
Operating Expenses
We classify our operating expenses into the following four categories. Each expense category includes overhead such as rent and occupancy charges, which is allocated based on headcount.
Platform Operations. Platformoperationsexpenserepresentsour costof revenues,which consistsof TAC, hostingcosts,personnelcosts,depreciationof capitalizedsoftwaredevelopmentcostsrelatedto our platform,customersupportcostsand allocatedoverhead.TACrecordedin platformoperationsconsistof amountsincurredand payableto suppliersforcostsassociatedwith our fixedCPM pricingoption. Personnel costswithinplatformoperationsincludesalaries,bonuses,unit-basedcompensationexpenseand employee benefitcostsprimarilyattributableto personnelwho directlysupportour platform.
Other than TAC, many of the costs included in platform operations expense do not increase or decrease proportionately with increases or decreases in our revenue. We expect platform operations expenses to increase in future periods, including as a result of stock based compensation expense and depreciation of capitalized software development costs as we continue to invest in the development of our platform to add new features and functions, increase the number of advertising media and data suppliers, ramp up the volume of advertising spend on our platform resulting in increased volumes of transactions, and hire additional personnel to support our customers.
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Salesand Marketing. Salesand marketingexpenseconsistsprimarilyof personnelcosts,including salaries,bonuses,unit-basedcompensationexpense,employeebenefitcostsand commissionsforour sales personnel.Salesand marketingexpensealsoincludescostsformarketdevelopmentprograms,advertising, promotionaland othermarketingactivitiesand allocatedoverhead.Commissionsareexpensedas incurred.
Our sales and marketing organization focuses on marketing our platform to increase its adoption by existing and new customers. As a result, we expect sales and marketing expenses to increase in future periods, including as a result of stock based compensation expense. Sales and marketing expense as a percentage of revenue may fluctuate from period to period based on revenue levels and the timing of our investments in our sales and marketing functions as these investments may vary in scope and scale over time.
Technology and Development. Technologyand developmentexpenseconsistsprimarilyof personnel costs,includingsalaries,bonuses,unit-basedcompensationexpenseand employeebenefitcostsassociatedwith theongoing developmentand maintenanceof our platformand allocatedoverhead.Technologyand development costsareexpensedas incurred,exceptto theextentthatsuch costsareassociatedwith softwaredevelopmentthat qualifiesforcapitalization,which arethenrecordedas capitalizedsoftwareincludedin property,equipmentand software,net,on theconsolidatedbalancesheet.We recorddepreciationexpenseforcapitalizedsoftware development costsnot relatedto our platformwithintechnologyand developmentexpense.
We believe that continued investment in our platform is critical to attaining our strategic objectives and long-term growth. We therefore expect technology and development expense to increase as we continue to invest in the development of our platform to support and maintain additional features and functions, increase the number of advertising media and data suppliers, and ramp up the volume of advertising spend on our platform.
General and Administrative. Generaland administrativeexpenseconsistsprimarilyof personnelcosts, includingsalaries,bonuses,unit-basedcompensationexpenseand employeebenefitcostsassociatedwith our executive,accounting,finance,legal,humanresourcesand otheradministrativepersonnel.Additionally,this includesaccounting, legal and otherprofessionalservicesfees, insurance expense,bad debtexpenseand allocatedoverhead.
We expect to continue to invest in corporate infrastructure and incur additional expenses associated with our operation as a public company, including increased legal and accounting costs, investor relations costs, higher insurance premiums and compliance costs associated with developing the requisite infrastructure required for internal controls over financial reporting. As a result, we expect general and administrative expenses to increase in future periods, including as a result of stock based compensation expense.
Total Other Expense, Net
Interest Expense, Net. Interestexpense,netisprimarilyrelatedto our long-termdebtand revolving creditfacility.
Other Expense (Income), Net. Otherexpense(income),netconsists primarilyof foreigncurrency exchangegainsand lossesand miscellaneousexpensesnot attributableto operations.During theyearended December31, 2019, otherexpense(income),net primarilyrelatedto a gainon thedissolutionof our UKsubsidiary.
60
Resultsof Operations
The following tables set forth our consolidated results of operations, our consolidated results of operations as a percentage of revenue, and the impact of unit-based compensation expense, depreciation expense and amortization expense on each operating expense line item for the years ended December 31, 2020 and 2019:
|
| Year Ended December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
| (in thousands) |
| |||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
Revenue |
| $ | 165,251 |
|
| $ | 164,892 |
|
Operating expenses(1): |
|
|
|
|
|
|
|
|
Platform operations |
|
| 88,260 |
|
|
| 94,060 |
|
Sales and marketing |
|
| 28,887 |
|
|
| 29,027 |
|
Technology and development |
|
| 8,698 |
|
|
| 9,240 |
|
General and administrative |
|
| 17,639 |
|
|
| 19,770 |
|
Total operating expenses |
|
| 143,484 |
|
|
| 152,097 |
|
Income from operations |
|
| 21,767 |
|
|
| 12,795 |
|
Total other expense, net |
|
| 1,129 |
|
|
| 2,871 |
|
Net income |
| $ | 20,638 |
|
| $ | 9,924 |
|
|
| Year Ended December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
| (% of revenue*) |
| |||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
Revenue |
|
| 100 | % |
|
| 100 | % |
Operating expenses: |
|
|
|
|
|
|
|
|
Platform operations |
|
| 53 | % |
|
| 57 | % |
Sales and marketing |
|
| 17 | % |
|
| 18 | % |
Technology and development |
|
| 5 | % |
|
| 6 | % |
General and administrative |
|
| 11 | % |
|
| 12 | % |
Total operating expenses |
|
| 87 | % |
|
| 92 | % |
Income from operations |
|
| 13 | % |
|
| 8 | % |
Total other expense, net |
|
| 1 | % |
|
| 2 | % |
Net income |
|
| 12 | % |
|
| 6 | % |
|
|
|
|
|
| Year Ended December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
| (in thousands) |
| |||||
Unit-based compensation expense: |
|
|
|
|
|
|
|
|
Platform operations |
| $ | — |
|
| $ | 42 |
|
Sales and marketing |
|
| — |
|
|
| 44 |
|
Technology and development |
|
| — |
|
|
| 82 |
|
General and administrative |
|
| — |
|
|
| 922 |
|
Total unit-based compensation expense |
| $ | — |
|
| $ | 1,090 |
|
|
| Year Ended December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
| (in thousands) |
| |||||
Depreciation expense: |
|
|
|
|
|
|
|
|
Platform operations |
| $ | 6,638 |
|
| $ | 6,832 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
Technology and development |
|
| 1,608 |
|
|
| 1,537 |
|
General and administrative |
|
| 631 |
|
|
| 554 |
|
Total depreciation expense |
| $ | 8,877 |
|
| $ | 8,923 |
|
|
| Year Ended December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
| (in thousands) |
| |||||
Amortization expense: |
|
|
|
|
|
|
|
|
Platform operations |
| $ | 700 |
|
| $ | 703 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
Technology and development |
|
| — |
|
|
| — |
|
General and administrative |
|
| 529 |
|
|
| 529 |
|
Total amortization expense |
| $ | 1,229 |
|
| $ | 1,232 |
|
Comparison of the Years Ended December 31, 2020 and 2019
Revenue
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Revenue |
| $ | 165,251 |
|
| $ | 164,892 |
|
| $ | 359 |
|
|
| 0.2 | % |
Revenue increased by $0.4 million, or 0.2% during the year ended December 31, 2020 compared to the year ended December 31, 2019. The minimal increasein revenuewas primarilydue to adverse effects of the COVID-19 pandemic. Certain marketers in industries such as travel and tourism, retail and automotive decreased or paused their advertising spending as a response to the economic uncertainty created by the COVID-19 pandemic. Despite the negative impacts of the COVID-19 pandemic, we have continued to experience increased customer usage of our platform, particularly in the percentage of spend pricing option, and continuing demand for our people-based advertising products and services.Platformspend,as representedby aggregatespend on theplatform,increasedby 17% in thecomparativeperiods.
Platform Operations
|
| Year Ended December 31, |
|
| Change |
|
| Year Ended December 31, |
|
| Change |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| $ |
|
| % |
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||
|
| (in thousands, except for percentages) |
|
| (in thousands, except for percentages) |
| ||||||||||||||||||||||||||
Traffic acquisition costs |
| $ | 54,735 |
|
| $ | 60,452 |
|
| $ | (5,717 | ) |
|
| (9 | %) |
| $ | 82,627 |
|
| $ | 54,735 |
|
| $ | 27,892 |
|
|
| 51 | % |
Other platform operations |
|
| 33,525 |
|
|
| 33,608 |
|
|
| (83 | ) |
|
| (0 | %) |
|
| 46,977 |
|
|
| 33,525 |
|
|
| 13,452 |
|
|
| 40 | % |
Total platform operations |
| $ | 88,260 |
|
| $ | 94,060 |
|
| $ | (5,800 | ) |
|
| (6 | %) |
| $ | 129,604 |
|
| $ | 88,260 |
|
| $ | 41,344 |
|
|
| 47 | % |
Platform operations as a percentage of revenue |
|
| 53 | % |
|
| 57 | % |
|
|
|
|
|
|
|
|
|
| 58 | % |
|
| 53 | % |
|
|
|
|
|
|
|
|
64
Platformoperationsexpense decreased increasedby $5.8$41.3 million,or 6%47%, duringthe yearended December31, 20202021 comparedto the yearended December31, 2019. This is 2020. The change wasprimarily comprised ofdriven by a $5.7$27.9 million decrease increasein TAC, associated witha variable function of revenue, as well as an increase in other platform operations driven by a $13.1 million increase in stock-based compensation related to our fixed CPM pricing option2021 LTIP and a $1.0 million increase in depreciation, partially offset by a decrease of $0.7 million in cloud costs due to a shift in mix of platform spend toward our percentage of spend pricing option. Other platform operations remained consistent from the prior year and included a $0.3 million decrease in third-party hosting services due to concertedcontinued efforts to increase the efficiency of our cloud infrastructure.infrastructure efficiencies.
62
Salesand Marketing
|
| Year Ended December 31, |
|
| Change |
|
| Year Ended December 31, |
|
| Change |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| $ |
|
| % |
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||
|
| (in thousands, except for percentages) |
|
| (in thousands, except for percentages) |
| ||||||||||||||||||||||||||
Sales and marketing |
| $ | 28,887 |
|
| $ | 29,027 |
|
| $ | (140 | ) |
|
| (0.5 | %) |
| $ | 65,042 |
|
| $ | 28,887 |
|
| $ | 36,155 |
|
|
| 125 | % |
Percentage of revenue |
|
| 17 | % |
|
| 18 | % |
|
|
|
|
|
|
|
|
|
| 29 | % |
|
| 17 | % |
|
|
|
|
|
|
|
|
Salesand marketingexpense decreased increasedby $0.1$36.2 million,or 0.5%125%, duringtheyearended December31, 20202021 comparedto theyearended December31, 2019. The change in sales and marketing expense2020. This increase was primarily due to a $1.7$25.6 million increase in stock-based compensation, a $6.4 million increase in personnel costs and overhead, which was allocated to sales and marketing as a result of the departments’ increased headcount relative to other departments, a $2.9 million increase in advertising, a $0.2 million increase in facilities expense, a $0.2 increase in software license expenses and a $0.8 million increase in travel and entertainment expenses.
Technology and Development
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Technology and development |
| $ | 25,372 |
|
| $ | 8,698 |
|
| $ | 16,674 |
|
|
| 192 | % |
Percentage of revenue |
|
| 11 | % |
|
| 5 | % |
|
|
|
|
|
|
|
|
Technologyand developmentexpenseincreasedby $16.7 million,or 192%, duringtheyear ended December31, 2021 comparedto theyearended December31, 2020. This increase was primarily attributable to a $12.4 million increase in stock-based compensation, a $3.8 million increase in personnel costs associated with salesforce headcount increases offset by a $1.8 million decrease in travel and entertainment costs as a result of the COVID-19 pandemic.
Technology and Development
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Technology and development |
| $ | 8,698 |
|
| $ | 9,240 |
|
| $ | (542 | ) |
|
| (6 | %) |
Percentage of revenue |
|
| 5 | % |
|
| 6 | % |
|
|
|
|
|
|
|
|
Technology and development expense decreased by $0.5 million, or 6%, during the year ended December 31, 2020 comparedan increase in headcount to the year ended December 31, 2019. The decreasesupport our continued investment in developed technology and development expense was attributable to a $0.3$0.4 million decreaseincrease in allocated overhead primarily due to the reduction of rent expense related to the relocation of our corporate headquarters in 2019. Additionally, the amount of overhead allocated to technologysoftware and development expense decreased as a result of salesforce headcount increases which increased at a higher rate than other departments.license expenses.
General and Administrative
|
| Year Ended December 31, |
|
| Change |
|
| Year Ended December 31, |
|
| Change |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| $ |
|
| % |
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||
|
| (in thousands, except for percentages) |
|
| (in thousands, except for percentages) |
| ||||||||||||||||||||||||||
General and administrative |
| $ | 17,639 |
|
| $ | 19,770 |
|
| $ | (2,131 | ) |
|
| (11 | %) |
| $ | 46,904 |
|
| $ | 17,639 |
|
| $ | 29,265 |
|
|
| 166 | % |
Percentage of revenue |
|
| 11 | % |
|
| 12 | % |
|
|
|
|
|
|
|
|
|
| 21 | % |
|
| 11 | % |
|
|
|
|
|
|
|
|
Generaland administrativeexpense decreased increasedby $2.1$29.3 million,or 11%166%, duringtheyearended December31, 20202021 comparedto the yearended December31, 2019. The2020. This increase was primarily attributable to a $17.7 million increase in stock-based compensation, a $5.6 million increase in insurance, legal and accounting expenses associated with being a publicly traded company, a $3.3 million increase in personnel costs due to the increase in headcount, a $1.4 million increase in recruiting expenses, a $0.5 million increase in bad debt expense due to recoveries of bad debt in a prior year, a $0.2 million increase in dues and subscriptions and a $0.3 million increase in software and license expenses.
65
TotalOther Expense (Income), Net
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Total other expense (income), net |
| $ | (5,186 | ) |
| $ | 1,129 |
|
| $ | (6,315 | ) |
|
| (559 | %) |
Percentage of revenue |
|
| (2 | %) |
|
| 1 | % |
|
|
|
|
|
|
|
|
Totalotherexpense (income),netdecreasedby $6.3 million,or 559%, duringtheyearended December31, 2021 comparedto theyearended December31, 2020. This decrease in general and administrative expense was primarily due to a $1.2$6.1 million decrease in badgain on debt expense resulting from recoveries of bad debt in the current year, a $0.9 million decrease in unit-based compensation expense, and a $1.0 million decrease in legal and consulting services expense related to costs incurred in connection with the 2019 Former Holdco transaction. These decreases were offset by a $0.8 million increase in accounting fees.
Total Other Expense, Net
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Total other expense, net |
| $ | 1,129 |
|
| $ | 2,871 |
|
| $ | (1,742 | ) |
|
| (61 | %) |
Percentage of revenue |
|
| 1 | % |
|
| 2 | % |
|
|
|
|
|
|
|
|
63
Total other expense, net decreased by $1.7 million, or 61%, during the year ended December 31, 2020 compared to the year ended December 31, 2019. The decrease in total other expense, net was primarily due to a $2.9 million decrease in interest expenseextinguishment as a result of the lowerforgiveness of Company’s PPP Loan and related accrued interest rates and principal outstandinga $0.2 decrease in interest expense attributable to an amendment to our Loan Agreement with PNC Bank which decreased the applicable margin on our revolving credit facility in the current year comparedloan. For additional information regarding forgiveness of the Company’s PPP Loan and the amendment to the long term debt owedLoan Agreement, see Note 7 to the Former Holdcoour consolidated financial statements included elsewhere in the prior year. This decrease was offset by a net increase related to a $0.9 million gain on the dissolution of our UK subsidiary in 2019.this Annual Report.
QuarterlyResultsof Operations
The following table sets tablessetforthour unauditedquarterlyconsolidatedstatementsof operationsdatafor eachquarter of the quarters in the our fiscalyearsended December31, 20202021 and 2019.2020. The informationforeachof thesequartershas been preparedon a basisconsistentwith our audited consolidated financialstatementsand, in our opinion,includesalladjustments, consistingonly of normalrecurringadjustmentsnecessaryforthefairpresentationof thefinancialinformation containedin thosestatements.The followingunauditedconsolidatedquarterlyfinancialdatashouldbe readin conjunctionwith our annual audited consolidatedfinancialstatementsand therelatednotes included elsewhere in this Annual Report.These quarterlyresultsarenot necessarilyindicativeof our operatingresultsfora fullyearor any futureperiod.
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| September 30, 2019 |
|
| June 30, 2019 |
|
| March 31, 2019 |
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||||||||||
|
| (in thousands, except per unit data) |
|
| (in thousands, except per share/unit data) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue |
| $ | 56,461 |
|
| $ | 40,205 |
|
| $ | 30,425 |
|
| $ | 38,160 |
|
| $ | 51,954 |
|
| $ | 38,855 |
|
| $ | 41,788 |
|
| $ | 32,295 |
|
| $ | 82,715 |
|
| $ | 50,857 |
|
| $ | 50,411 |
|
| $ | 40,144 |
|
| $ | 56,461 |
|
| $ | 40,205 |
|
| $ | 30,425 |
|
| $ | 38,160 |
|
Operating expenses(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Operating expenses(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Platform operations |
|
| 25,944 |
|
|
| 20,124 |
|
|
| 18,589 |
|
|
| 23,603 |
|
|
| 28,710 |
|
|
| 22,291 |
|
|
| 23,415 |
|
|
| 19,644 |
|
|
| 44,578 |
|
|
| 28,967 |
|
|
| 31,715 |
|
|
| 24,344 |
|
|
| 25,944 |
|
|
| 20,124 |
|
|
| 18,589 |
|
|
| 23,603 |
|
Sales and marketing |
|
| 9,494 |
|
|
| 6,521 |
|
|
| 5,742 |
|
|
| 7,130 |
|
|
| 8,277 |
|
|
| 7,042 |
|
|
| 6,954 |
|
|
| 6,754 |
|
|
| 15,173 |
|
|
| 15,131 |
|
|
| 20,553 |
|
|
| 14,185 |
|
|
| 9,494 |
|
|
| 6,521 |
|
|
| 5,742 |
|
|
| 7,130 |
|
Technology and development |
|
| 2,618 |
|
|
| 1,946 |
|
|
| 1,984 |
|
|
| 2,150 |
|
|
| 2,585 |
|
|
| 2,442 |
|
|
| 2,216 |
|
|
| 1,997 |
|
|
| 4,851 |
|
|
| 6,590 |
|
|
| 8,031 |
|
|
| 5,900 |
|
|
| 2,618 |
|
|
| 1,946 |
|
|
| 1,984 |
|
|
| 2,150 |
|
General and administrative |
|
| 5,231 |
|
|
| 3,861 |
|
|
| 3,891 |
|
|
| 4,656 |
|
|
| 6,597 |
|
|
| 4,195 |
|
|
| 4,299 |
|
|
| 4,679 |
|
|
| 10,428 |
|
|
| 11,981 |
|
|
| 14,075 |
|
|
| 10,420 |
|
|
| 5,231 |
|
|
| 3,861 |
|
|
| 3,891 |
|
|
| 4,656 |
|
Total operating expenses |
|
| 43,287 |
|
|
| 32,452 |
|
|
| 30,206 |
|
|
| 37,539 |
|
|
| 46,169 |
|
|
| 35,970 |
|
|
| 36,884 |
|
|
| 33,074 |
|
|
| 75,030 |
|
|
| 62,669 |
|
|
| 74,374 |
|
|
| 54,849 |
|
|
| 43,287 |
|
|
| 32,452 |
|
|
| 30,206 |
|
|
| 37,539 |
|
Income (loss) from operations |
|
| 13,174 |
|
|
| 7,753 |
|
|
| 219 |
|
|
| 621 |
|
|
| 5,785 |
|
|
| 2,885 |
|
|
| 4,904 |
|
|
| (779 | ) |
|
| 7,685 |
|
|
| (11,812 | ) |
|
| (23,963 | ) |
|
| (14,705 | ) |
|
| 13,174 |
|
|
| 7,753 |
|
|
| 219 |
|
|
| 621 |
|
Total other expense, net |
|
| 313 |
|
|
| 275 |
|
|
| 249 |
|
|
| 292 |
|
|
| 375 |
|
|
| 388 |
|
|
| 1,119 |
|
|
| 989 |
| ||||||||||||||||||||||||||||||||
Total other expense (income), net |
|
| 169 |
|
|
| 348 |
|
|
| (5,868 | ) |
|
| 165 |
|
|
| 313 |
|
|
| 275 |
|
|
| 249 |
|
|
| 292 |
| ||||||||||||||||||||||||||||||||
Net income (loss) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
| $ | 5,410 |
|
| $ | 2,497 |
|
| $ | 3,785 |
|
| $ | (1,768 | ) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Earnings (loss) per unit—basic(2) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
| $ | 23.46 |
|
| $ | 2.97 |
|
| $ | 4.50 |
|
| $ | (7.37 | ) | ||||||||||||||||||||||||||||||||
Earnings (loss) per unit—diluted(2) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
| $ | 22.85 |
|
| $ | 2.50 |
|
| $ | 3.79 |
|
| $ | (7.37 | ) | ||||||||||||||||||||||||||||||||
Non-GAAP earnings (loss) per unit—basic(3) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
| $ | 5.55 |
|
| $ | 2.97 |
|
| $ | 4.50 |
|
| $ | (7.37 | ) | ||||||||||||||||||||||||||||||||
Non-GAAP earnings (loss) per unit—diluted(3) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
| $ | 5.41 |
|
| $ | 2.50 |
|
| $ | 3.79 |
|
| $ | (7.37 | ) | ||||||||||||||||||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
|
| 5,962 |
|
|
| (9,623 | ) |
|
| (14,440 | ) |
|
| (11,766 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||
Net income (loss) attributable to Viant Technology Inc. |
| $ | 1,554 |
|
|
| (2,537 | ) |
|
| (3,655 | ) |
|
| (3,104 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||
66
Earnings (loss) per Class A common stock/unit —basic(2) |
| $ | 0.11 |
|
| $ | (0.20 | ) |
| $ | (0.32 | ) |
| $ | (0.27 | ) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
Earnings (loss) per Class A common stock/unit —diluted(2) |
| $ | 0.11 |
|
| $ | (0.20 | ) |
| $ | (0.32 | ) |
| $ | (0.27 | ) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| September 30, 2019 |
|
| June 30, 2019 |
|
| March 31, 2019 |
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||||||||||
|
| (as a percentage of revenue*) |
|
| (as a percentage of revenue*) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
|
| 46 | % |
|
| 50 | % |
|
| 61 | % |
|
| 62 | % |
|
| 55 | % |
|
| 57 | % |
|
| 56 | % |
|
| 61 | % |
|
| 54 | % |
|
| 57 | % |
|
| 63 | % |
|
| 61 | % |
|
| 46 | % |
|
| 50 | % |
|
| 61 | % |
|
| 62 | % |
Sales and marketing |
|
| 17 | % |
|
| 16 | % |
|
| 19 | % |
|
| 19 | % |
|
| 16 | % |
|
| 18 | % |
|
| 17 | % |
|
| 21 | % |
|
| 18 | % |
|
| 30 | % |
|
| 41 | % |
|
| 35 | % |
|
| 17 | % |
|
| 16 | % |
|
| 19 | % |
|
| 19 | % |
Technology and development |
|
| 5 | % |
|
| 5 | % |
|
| 7 | % |
|
| 6 | % |
|
| 5 | % |
|
| 6 | % |
|
| 5 | % |
|
| 6 | % |
|
| 6 | % |
|
| 13 | % |
|
| 16 | % |
|
| 15 | % |
|
| 5 | % |
|
| 5 | % |
|
| 7 | % |
|
| 6 | % |
General and administrative |
|
| 9 | % |
|
| 10 | % |
|
| 13 | % |
|
| 12 | % |
|
| 13 | % |
|
| 11 | % |
|
| 10 | % |
|
| 14 | % |
|
| 13 | % |
|
| 24 | % |
|
| 28 | % |
|
| 26 | % |
|
| 9 | % |
|
| 10 | % |
|
| 13 | % |
|
| 12 | % |
Total operating expenses |
|
| 77 | % |
|
| 81 | % |
|
| 99 | % |
|
| 98 | % |
|
| 89 | % |
|
| 93 | % |
|
| 88 | % |
|
| 102 | % |
|
| 91 | % |
|
| 123 | % |
|
| 148 | % |
|
| 137 | % |
|
| 77 | % |
|
| 81 | % |
|
| 99 | % |
|
| 98 | % |
Income (loss) from operations |
|
| 23 | % |
|
| 19 | % |
|
| 1 | % |
|
| 2 | % |
|
| 11 | % |
|
| 7 | % |
|
| 12 | % |
|
| (2 | %) |
|
| 9 | % |
|
| (23 | %) |
|
| (48 | %) |
|
| (37 | %) |
|
| 23 | % |
|
| 19 | % |
|
| 1 | % |
|
| 2 | % |
Total other expense, net |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
|
| 3 | % |
|
| 3 | % | ||||||||||||||||||||||||||||||||
Total other expense (income), net |
|
| 0 | % |
|
| 1 | % |
|
| (12 | )% |
|
| 0 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % | ||||||||||||||||||||||||||||||||
Net income (loss) |
|
| 23 | % |
|
| 19 | % |
|
| 0 | % |
|
| 1 | % |
|
| 10 | % |
|
| 6 | % |
|
| 9 | % |
|
| (5 | %) |
|
| 9 | % |
|
| -24 | % |
|
| (36 | )% |
|
| -37 | % |
|
| 23 | % |
|
| 19 | % |
|
| — |
|
|
| 1 | % |
Less: Net income (loss) attributable to noncontrolling interests |
|
| 7 | % |
|
| (19 | )% |
|
| (29 | )% |
|
| (29 | )% |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||
Net income (loss) attributable to Viant Technology Inc. |
|
| 2 | % |
|
| (5 | )% |
|
| (7 | )% |
|
| (8 | )% |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||
* | Percentagesmaynot sumdue to rounding |
6467
(1) |
|
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| September 30, 2019 |
|
| June 30, 2019 |
|
| March 31, 2019 |
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unit-based compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Platform operations |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 24 |
|
| $ | 6 |
|
| $ | 6 |
|
| $ | 6 |
|
| $ | 1,253 |
|
| $ | 3,142 |
|
| $ | 5,540 |
|
| $ | 3,161 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
|
| 7 |
|
|
| 6 |
|
|
| 6 |
|
|
| 2,053 |
|
|
| 4,859 |
|
|
| 11,914 |
|
|
| 6,813 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
|
| 11 |
|
|
| 12 |
|
|
| 12 |
|
|
| 1,390 |
|
|
| 3,015 |
|
|
| 5,029 |
|
|
| 2,939 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
General and administrative |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 528 |
|
|
| 133 |
|
|
| 131 |
|
|
| 130 |
|
|
| 1,935 |
|
|
| 4,399 |
|
|
| 7,203 |
|
|
| 4,177 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total unit-based compensation expense |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 624 |
|
| $ | 157 |
|
| $ | 155 |
|
| $ | 154 |
| ||||||||||||||||||||||||||||||||
Depreciation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Total stock-based compensation |
| $ | 6,631 |
|
| $ | 15,415 |
|
| $ | 29,686 |
|
| $ | 17,090 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||||||||||||||||||
Depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Platform operations |
| $ | 1,579 |
|
| $ | 1,619 |
|
| $ | 1,678 |
|
| $ | 1,762 |
|
| $ | 1,704 |
|
| $ | 1,728 |
|
| $ | 1,726 |
|
| $ | 1,674 |
|
| $ | 2,264 |
|
| $ | 2,080 |
|
| $ | 1,766 |
|
| $ | 1,578 |
|
| $ | 1,579 |
|
| $ | 1,619 |
|
| $ | 1,678 |
|
| $ | 1,762 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| 402 |
|
|
| 403 |
|
|
| 402 |
|
|
| 401 |
|
|
| 399 |
|
|
| 391 |
|
|
| 381 |
|
|
| 366 |
|
|
| 414 |
|
|
| 421 |
|
|
| 383 |
|
|
| 381 |
|
|
| 402 |
|
|
| 403 |
|
|
| 402 |
|
|
| 401 |
|
General and administrative |
|
| 163 |
|
|
| 171 |
|
|
| 153 |
|
|
| 144 |
|
|
| 141 |
|
|
| 137 |
|
|
| 131 |
|
|
| 145 |
|
|
| 132 |
|
|
| 164 |
|
|
| 168 |
|
|
| 161 |
|
|
| 163 |
|
|
| 171 |
|
|
| 153 |
|
|
| 144 |
|
Total depreciation expense |
| $ | 2,144 |
|
| $ | 2,193 |
|
| $ | 2,233 |
|
| $ | 2,307 |
|
| $ | 2,244 |
|
| $ | 2,256 |
|
| $ | 2,238 |
|
| $ | 2,185 |
| ||||||||||||||||||||||||||||||||
Amortization expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Total depreciation |
| $ | 2,810 |
|
| $ | 2,665 |
|
| $ | 2,317 |
|
| $ | 2,120 |
|
| $ | 2,144 |
|
| $ | 2,193 |
|
| $ | 2,233 |
|
| $ | 2,307 |
| ||||||||||||||||||||||||||||||||
Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Platform operations |
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 174 |
|
| $ | 176 |
|
| $ | 178 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
General and administrative |
|
| 133 |
|
|
| 132 |
|
|
| 132 |
|
|
| 132 |
|
|
| 133 |
|
|
| 132 |
|
|
| 132 |
|
|
| 132 |
|
|
| 133 |
|
|
| 132 |
|
|
| 132 |
|
|
| 132 |
|
|
| 133 |
|
|
| 132 |
|
|
| 132 |
|
|
| 132 |
|
Total amortization expense |
| $ | 308 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 308 |
|
| $ | 306 |
|
| $ | 308 |
|
| $ | 310 |
| ||||||||||||||||||||||||||||||||
Total amortization |
| $ | 308 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 308 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 307 |
| ||||||||||||||||||||||||||||||||
See Note 4, Note 5 and Note 9 to our consolidated financial statements included elsewhere in this Annual Report for more information regarding depreciation, expense, amortization expense and unit-basedstock-based compensation expense, respectively.
(2) | See Note 2 to our consolidatedfinancialstatements included elsewhere in this Annual Reportfora descriptionof theearnings(loss)per share/unit—basic and dilutedcomputations. |
| QuarterlyNon-GAAP Financial Measures |
Adjusted EBITDA
The following table sets forth a reconciliation of net income (loss) to AdjustedWe monitor certain non-GAAP financial measures such ascontribution ex-TAC, adjusted EBITDA for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| September 30, 2019 |
|
| June 30, 2019 |
|
| March 31, 2019 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Net income (loss) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
| $ | 5,410 |
|
| $ | 2,497 |
|
| $ | 3,785 |
|
| $ | (1,768 | ) |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 249 |
|
|
| 264 |
|
|
| 244 |
|
|
| 281 |
|
|
| 555 |
|
|
| 1,147 |
|
|
| 1,130 |
|
|
| 1,116 |
|
Depreciation and amortization expense |
|
| 2,452 |
|
|
| 2,500 |
|
|
| 2,540 |
|
|
| 2,614 |
|
|
| 2,552 |
|
|
| 2,562 |
|
|
| 2,546 |
|
|
| 2,495 |
|
Unit-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 624 |
|
|
| 157 |
|
|
| 155 |
|
|
| 154 |
|
2019 Former Holdco transaction expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 401 |
|
|
| 50 |
|
|
| — |
|
|
| 20 |
|
UK subsidiary closure |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (174 | ) |
|
| (760 | ) |
|
| — |
|
|
| 1 |
|
Adjusted EBITDA |
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
| $ | 9,368 |
|
| $ | 5,653 |
|
| $ | 7,616 |
|
| $ | 2,018 |
|
The following table presents the reconciliation of net income as a percentage of gross profit to Adjustedand adjusted EBITDA as a percentage of revenuecontribution ex-TAC for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| September 30, 2019 |
|
| June 30, 2019 |
|
| March 31, 2019 |
| ||||||||
|
| (in thousands, except for percentages) |
| |||||||||||||||||||||||||||||
Gross profit |
| $ | 30,517 |
|
| $ | 20,081 |
|
| $ | 11,836 |
|
| $ | 14,557 |
|
| $ | 23,244 |
|
| $ | 16,564 |
|
| $ | 18,373 |
|
| $ | 12,651 |
|
Net income (loss) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
| $ | 5,410 |
|
| $ | 2,497 |
|
| $ | 3,785 |
|
| $ | (1,768 | ) |
Net income as a percentage of gross profit |
|
| 42 | % |
|
| 37 | % |
|
| 0 | % |
|
| 2 | % |
|
| 23 | % |
|
| 15 | % |
|
| 21 | % |
| N/A |
| |
Revenue ex-TAC (1) |
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
| $ | 32,843 |
|
| $ | 25,033 |
|
| $ | 26,388 |
|
| $ | 20,176 |
|
Adjusted EBITDA (2) |
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
| $ | 9,368 |
|
| $ | 5,653 |
|
| $ | 7,616 |
|
| $ | 2,018 |
|
Adjusted EBITDA as a percentage of revenue ex-TAC |
|
| 40 | % |
|
| 37 | % |
|
| 14 | % |
|
| 14 | % |
|
| 29 | % |
|
| 23 | % |
|
| 29 | % |
|
| 10 | % |
|
|
|
|
Revenue ex-TAC
The following table sets forth a reconciliationwhen evaluating our quarterly results of revenue to gross profit to revenue ex-TAC for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| September 30, 2019 |
|
| June 30, 2019 |
|
| March 31, 2019 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Revenue |
| $ | 56,461 |
|
| $ | 40,205 |
|
| $ | 30,425 |
|
| $ | 38,160 |
|
| $ | 51,954 |
|
| $ | 38,855 |
|
| $ | 41,788 |
|
| $ | 32,295 |
|
Less: Platform operations |
|
| (25,944 | ) |
|
| (20,124 | ) |
|
| (18,589 | ) |
|
| (23,603 | ) |
|
| (28,710 | ) |
|
| (22,291 | ) |
|
| (23,415 | ) |
|
| (19,644 | ) |
Gross profit |
| $ | 30,517 |
|
| $ | 20,081 |
|
| $ | 11,836 |
|
| $ | 14,557 |
|
| $ | 23,244 |
|
| $ | 16,564 |
|
| $ | 18,373 |
|
| $ | 12,651 |
|
Add back: Other platform operations |
|
| 8,618 |
|
|
| 7,914 |
|
|
| 8,209 |
|
|
| 8,784 |
|
|
| 9,599 |
|
|
| 8,469 |
|
|
| 8,015 |
|
|
| 7,525 |
|
Revenue ex-TAC |
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
| $ | 32,843 |
|
| $ | 25,033 |
|
| $ | 26,388 |
|
| $ | 20,176 |
|
66
Key Operating and Financial Performance Metrics
Use of Non-GAAP Financial Measures
We monitor the key operating and financial performance metrics set forth belowoperations to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. This Annual Report includes financial measures defined asReconciliations of these non-GAAP financial measures for eachquarter of our fiscalyearsended December31, 2021 and 2020 to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables presented below. For a description of management’s use of each non-GAAP financial measure contained in this Annual Report, see “—KeyOperatingand FinancialPerformance Measures—Use of Non-GAAPFinancialMeasures.”
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Operating and Financial Performance Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
| $ | 38,137 |
|
| $ | 21,890 |
|
| $ | 18,696 |
|
| $ | 15,800 |
|
| $ | 30,517 |
|
| $ | 20,081 |
|
| $ | 11,836 |
|
| $ | 14,557 |
|
Contribution ex-TAC |
| $ | 48,483 |
|
| $ | 34,077 |
|
| $ | 32,199 |
|
| $ | 26,741 |
|
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Adjusted EBITDA |
| $ | 17,426 |
|
| $ | 6,454 |
|
| $ | 8,346 |
|
| $ | 4,882 |
|
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
Net income as a percentage of gross profit |
|
| 20 | % |
| N/A |
|
| N/A |
|
| N/A |
|
|
| 42 | % |
|
| 37 | % |
|
| 0 | % |
|
| 2 | % | |||
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 36 | % |
|
| 19 | % |
|
| 26 | % |
|
| 18 | % |
|
| 40 | % |
|
| 37 | % |
|
| 14 | % |
|
| 14 | % |
68
Contribution ex-TAC
The following table sets forth a reconciliation of revenue to gross profit to contribution ex-TAC for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Revenue |
| $ | 82,715 |
|
| $ | 50,857 |
|
| $ | 50,411 |
|
| $ | 40,144 |
|
| $ | 56,461 |
|
| $ | 40,205 |
|
| $ | 30,425 |
|
| $ | 38,160 |
|
Less: Platform operations |
|
| (44,578 | ) |
|
| (28,967 | ) |
|
| (31,715 | ) |
|
| (24,344 | ) |
|
| (25,944 | ) |
|
| (20,124 | ) |
|
| (18,589 | ) |
|
| (23,603 | ) |
Gross profit |
|
| 38,137 |
|
|
| 21,890 |
|
|
| 18,696 |
|
|
| 15,800 |
|
|
| 30,517 |
|
|
| 20,081 |
|
|
| 11,836 |
|
|
| 14,557 |
|
Add: Other platform operations |
|
| 10,346 |
|
|
| 12,187 |
|
|
| 13,503 |
|
|
| 10,941 |
|
|
| 8,618 |
|
|
| 7,914 |
|
|
| 8,209 |
|
|
| 8,784 |
|
Contribution ex-TAC |
| $ | 48,483 |
|
| $ | 34,077 |
|
| $ | 32,199 |
|
| $ | 26,741 |
|
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
Adjusted EBITDA
The following table sets forth a reconciliation of net income (loss) to adjusted EBITDA for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 161 |
|
|
| 227 |
|
|
| 241 |
|
|
| 235 |
|
|
| 249 |
|
|
| 264 |
|
|
| 244 |
|
|
| 281 |
|
Depreciation and amortization |
|
| 3,118 |
|
|
| 2,972 |
|
|
| 2,624 |
|
|
| 2,427 |
|
|
| 2,452 |
|
|
| 2,500 |
|
|
| 2,540 |
|
|
| 2,614 |
|
Stock-based compensation |
|
| 6,631 |
|
|
| 15,415 |
|
|
| 29,686 |
|
|
| 17,090 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Adjusted EBITDA |
| $ | 17,426 |
|
| $ | 6,454 |
|
| $ | 8,346 |
|
| $ | 4,882 |
|
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
Adjusted EBITDA as a percentage of contribution ex-TAC
The following table sets forth a reconciliation of net income (loss) as a percentage of gross profit to adjusted EBITDA as a percentage of contribution ex-TAC for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands, except for percentages) |
| |||||||||||||||||||||||||||||
Gross profit |
| $ | 38,137 |
|
| $ | 21,890 |
|
| $ | 18,696 |
|
| $ | 15,800 |
|
| $ | 30,517 |
|
| $ | 20,081 |
|
| $ | 11,836 |
|
| $ | 14,557 |
|
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Net income as a percentage of gross profit(1) |
|
| 20 | % |
| N/A |
|
| N/A |
|
| N/A |
|
|
| 42 | % |
|
| 37 | % |
|
| 0 | % |
|
| 2 | % | |||
Contribution ex-TAC (2) |
| $ | 48,483 |
|
| $ | 34,077 |
|
| $ | 32,199 |
|
| $ | 26,741 |
|
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
Adjusted EBITDA (3) |
| $ | 17,426 |
|
| $ | 6,454 |
|
| $ | 8,346 |
|
| $ | 4,882 |
|
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 36 | % |
|
| 19 | % |
|
| 26 | % |
|
| 18 | % |
|
| 40 | % |
|
| 37 | % |
|
| 14 | % |
|
| 14 | % |
(1) | Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
69
(2) | For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Contribution ex-TAC.” |
(3) | For a reconciliation of adjusted EBITDA to the most directly comparable financial measure calculated in accordance with GAAP, see “—Adjusted EBITDA.” |
KeyOperatingand FinancialPerformanceMeasures
Use of Non-GAAPFinancialMeasures
We monitor certain non-GAAP financial measures to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. We believe these measures enhance an overall understanding of our performance and investors’ ability to review our business from the same perspective as management and facilitate comparisons of this period’s results with prior periods on a consistent basis by the SEC. excluding items that management does not believe are indicative of Viant’s ongoing operating performance. These non-GAAP financial measures include revenuecontribution ex-TAC, adjusted EBITDA, adjusted EBITDA as a percentage of contribution ex-TAC, non-GAAP net income (loss), non-GAAP earnings (loss) per Class A common stock/unit—basic and Adjusted EBITDA,diluted, and average contribution ex-TAC per active customer, each of which are discussed immediately following the table below, along with the operational performance measure Active Customers. Theseactive customers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables presented below. There are limitations in using non-GAAP financial measures which are not calculatedprepared in accordance with GAAP, as they may be different from non-GAAP financial measures used by other companies and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.
|
| Year Ended December 31, |
|
|
|
|
| |||||
|
| 2020 |
|
| 2019 |
|
| Change (%) |
| |||
|
| (in thousands, except for percentages, number of customers and per unit data) |
|
|
|
|
| |||||
Operating and Financial Performance Metrics |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue ex-TAC |
| $ | 110,516 |
|
| $ | 104,440 |
|
|
| 6 | % |
Adjusted EBITDA |
| $ | 31,782 |
|
| $ | 24,655 |
|
|
| 29 | % |
Adjusted EBITDA as a percentage of revenue ex-TAC |
|
| 29 | % |
|
| 24 | % |
|
|
|
|
Number of Active Customers(1) |
|
| 264 |
|
|
| 277 |
|
|
| (5 | %) |
Average revenue ex-TAC per Active Customer(1) |
| $ | 419 |
|
| $ | 377 |
|
|
| 11 | % |
Non-GAAP earnings (loss) per unit—basic |
| $ | 20.64 |
|
| $ | 11.35 |
|
|
| 82 | % |
Non-GAAP earnings (loss) per unit—diluted |
| $ | 20.64 |
|
| $ | 9.92 |
|
|
| 108 | % |
|
| Year Ended December 31, |
|
|
|
|
| |||||
|
| 2021 |
|
| 2020 |
|
| Change (%) |
| |||
|
| (in thousands, except for percentages, number of customers and per share data) |
|
|
|
|
| |||||
Operating and Financial Performance Measures |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
| $ | 94,523 |
|
| $ | 76,991 |
|
|
| 23 | % |
Contribution ex-TAC |
| $ | 141,500 |
|
| $ | 110,516 |
|
|
| 28 | % |
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
|
| (282 | %) |
Adjusted EBITDA |
| $ | 37,108 |
|
| $ | 31,782 |
|
|
| 17 | % |
Net income as a percentage of gross profit(1) |
| N/A |
|
|
| 27 | % |
| N/A |
| ||
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 26 | % |
|
| 29 | % |
|
| (9 | %) |
Non-GAAP net income |
| $ | 23,865 |
|
| $ | 20,638 |
|
|
| 16 | % |
Earnings (loss) per share/unit—basic |
| $ | (0.63 | ) |
| $ | 20.64 |
|
|
| (103 | %) |
Earnings (loss) per share/unit—diluted |
| $ | (0.63 | ) |
| $ | 20.64 |
|
|
| (103 | %) |
Non-GAAP earnings (loss) per share—basic(2) |
| $ | 0.31 |
|
| N/A |
|
| N/A |
| ||
Non-GAAP earnings (loss) per share—diluted(2) |
| $ | 0.30 |
|
| N/A |
|
| N/A |
| ||
Active customers(3) |
|
| 309 |
|
|
| 264 |
|
|
| 17 | % |
Average gross profit per active customer |
| $ | 306 |
|
| $ | 292 |
|
|
| 5 | % |
Average contribution ex-TAC per active customer |
| $ | 458 |
|
| $ | 419 |
|
|
| 9 | % |
| Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
(2) | Non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted was not adjusted for the prior comparative periods presented. For a discussion on why prior periods were not adjusted, see “—Non-GAAP Earnings (loss) per Class A Common Stock/Unit—Basic and Diluted.” |
(3) | We define an |
Revenue70
using contribution ex-TAC, a non-GAAP financial measure. For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Contribution ex-TAC.” |
Contribution ex-TAC
RevenueContribution ex-TAC is a non-GAAP financial measure. Gross profit is the most comparable GAAP measurement, which is calculated as revenue less platform operations. In calculating revenuecontribution ex-TAC, we add back other platform operations expense to gross profit. RevenueContribution ex-TAC is a key profitability measure used by our management and board of directors to understand and evaluate our operating performance and trends, develop short-andshort- and long-term operational plans and make strategic decisions regarding the allocation of capital. In particular, we believe that revenuecontribution ex-TAC can provide a useful measure of period-to-period comparisons for all pricing options within our business. Accordingly, we believe that this measure provides useful information to investors and the market in understanding and evaluating our operating results in the same manner as our management and board.board of directors.
Our use of revenuecontribution ex-TAC has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry whichthat have similar business arrangements, may define revenuecontribution ex-TAC differently, which may make comparisons difficult. Because of these and other limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, gross profit, net income (loss) and cash flows.
67
The followingtablepresentsActivecustomers
We definean activecustomeras a customerthathad total aggregatecontribution ex-TAC of atleast$5,000 throughour platformduringtheprevioustwelvemonths. For purposesof thisdefinition,a customerthatoperatesunderany of our pricing options thatequalsor exceedsthe calculation aforementionedcontribution ex-TAC thresholdisconsideredan activecustomer. Activecustomersis an operational metric calculated using contribution ex-TAC, a non-GAAP financial measure. For a reconciliationof contributionex-TAC to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—Contributionex-TAC.”
Average contribution ex-TAC per activecustomer
We defineaveragecontribution ex-TAC peractivecustomeras contribution ex-TAC forthetrailing12-monthperiodpresenteddividedby activecustomers. Average gross profit andreconciliationof peractivecustomeris the most comparable GAAP measurement, which we define as gross profit forthetrailing12-monthperiodpresenteddividedby activecustomers. We believethatthe totalnumber of activecustomersand averagecontribution ex-TAC peractivecustomeraremeasuresof our abilityto increaserevenueand theeffectivenessof our salesforce,althoughwe expectthesemeasuresto fluctuatebased on theseasonalityin our business.Customersthatgeneratedlessthan$5,000 in contribution ex-TAC forin theyearsended December31, 2020trailing 12-monthperiodwere not materialin theaggregatein any period. For a reconciliationof contributionex-TAC to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—Contributionex-TAC.”
The followingtablesets forth a reconciliation of (i) revenue to gross profit to contribution ex-TAC and 2019:(ii) average gross profit per active customer to average contribution ex-TAC per active customer, in each case forthe periods presented:
71
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||
Revenue |
| $ | 165,251 |
|
| $ | 164,892 |
|
| $ | 224,127 |
|
| $ | 165,251 |
|
| $ | 164,892 |
|
| $ | 108,355 |
|
Less: Platform operations |
|
| (88,260 | ) |
|
| (94,060 | ) |
|
| (129,604 | ) |
|
| (88,260 | ) |
|
| (94,060 | ) |
|
| (74,344 | ) |
Gross profit |
|
| 76,991 |
|
|
| 70,832 |
|
|
| 94,523 |
|
|
| 76,991 |
|
|
| 70,832 |
|
|
| 34,011 |
|
Add back: Other platform operations |
|
| 33,525 |
|
|
| 33,608 |
| ||||||||||||||||
Revenue ex-TAC |
| $ | 110,516 |
|
| $ | 104,440 |
| ||||||||||||||||
Add: Other platform operations |
|
| 46,977 |
|
|
| 33,525 |
|
|
| 33,608 |
|
|
| 30,515 |
| ||||||||
Contribution ex-TAC |
| $ | 141,500 |
|
| $ | 110,516 |
|
| $ | 104,440 |
|
| $ | 64,526 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Active customers(1) |
|
| 309 |
|
|
| 264 |
|
|
| 277 |
|
|
| 267 |
| ||||||||
Average gross profit per active customer |
| $ | 306 |
|
| $ | 292 |
|
| $ | 256 |
|
| $ | 127 |
| ||||||||
Average contribution ex-TAC per active customer |
| $ | 458 |
|
| $ | 419 |
|
| $ | 377 |
|
| $ | 242 |
| ||||||||
(1)We define an active customer as a customer that had total aggregate contribution ex-TAC of at least $5,000 through our platform during the previous twelve months. Active customers is an operational metric calculated using contribution ex-TAC, a non-GAAP financial measure.
AdjustedEBITDA and adjusted EBITDA as a percentage of contribution ex-TAC
Adjusted EBITDA is a non-GAAP financial measure defined by us as net income (loss), the most comparable GAAP measurement, before interest expense, net, income tax expense (benefit), depreciation, expense, amortization, expense, unit-basedstock-based compensation expense, and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses associated withand the 2019 Former Holdco transaction described in Note 7 to our consolidated financial statements, and expenses or benefits related toextinguishment of debt. Net income (loss) is the dissolution of our UK subsidiary.
Adjusted EBITDA andmost comparable GAAP measurement. Adjusted EBITDA as a percentage of revenuecontribution ex-TAC is a non-GAAP financial measure we calculate by dividing adjusted EBITDA by contribution ex-TAC for the period or periods presented.
Adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short-andshort- and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjustedadjusted EBITDA can provide a useful measure for period-to-period comparisons of our business. Adjusted EBITDA as a percentage of our non-GAAP metric, revenuemeasure, contribution ex-TAC, is used by our management and board of directors to evaluate Adjustedadjusted EBITDA relative to our profitability after costs that are directly variable to revenues, which comprise traffic acquisition costs.TAC. Accordingly, we believe that Adjustedadjusted EBITDA and Adjustedadjusted EBITDA as a percentage of revenuecontribution ex-TAC provide useful information to investors and the market in understanding and evaluating our operating results in the same manner as our management and board.board of directors.
Our use of Adjustedadjusted EBITDA and Adjustedadjusted EBITDA as a percentage of revenuecontribution ex-TAC has limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these potential limitations include:
othercompanies,includingcompaniesin our industrywhich have similarbusinessarrangements, mayreportAdjustedEBITDAor AdjustedEBITDAas a percentageof revenueex-TAC, or similarlytitledmeasuresbut calculatethemdifferently,which reducestheirusefulnessas comparativemeasures.
• | othercompanies,includingcompaniesin our industrythat have similarbusinessarrangements, mayreportadjustedEBITDAor adjustedEBITDAas a percentageof contribution ex-TAC, or similarlytitledmeasuresbut calculatethemdifferently,which reducestheirusefulnessas comparativemeasures; |
althoughdepreciationand amortizationexpensearenon-cashcharges,theassetsbeingdepreciated and amortizedmayhave to be replacedin thefuture,and AdjustedEBITDAdoes not reflectcash capitalexpenditurerequirementsforsuch replacementsor fornew capitalexpenditure requirements;and
• | althoughdepreciationand amortizationarenon-cashcharges,theassetsbeingdepreciated and amortizedmayhave to be replacedin thefuture,and adjustedEBITDAdoes not reflectcash capitalexpenditurerequirementsforsuch replacementsor fornew capitalexpenditure requirements;and |
AdjustedEBITDAdoes not reflectchangesin, or cashrequirementsfor,our working capital needsor thepotentiallydilutiveimpactof unit-basedcompensation.
• | AdjustedEBITDAdoes not reflectchangesin, or cashrequirementsfor,our working capital needsor thepotentiallydilutiveimpactof stock-basedcompensation. |
6872
Becauseof theseand otherlimitations,you shouldconsiderour non-GAAP financial measuresonly as supplementalto otherGAAP-based financialperformancemeasures,includingrevenue,netincome(loss)and cashflows.
The followingtablepresentsthesets forth areconciliationof netincome (loss)to AdjustedadjustedEBITDAforthe yearsended December31, 2020 and 2019:periods presented:
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||
Net income |
| $ | 20,638 |
|
| $ | 9,924 |
| ||||||||||||||||
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) | ||||||||
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 1,038 |
|
|
| 3,948 |
|
|
| 864 |
|
|
| 1,038 |
|
|
| 3,948 |
|
|
| 4,362 |
|
Depreciation and amortization expense |
|
| 10,106 |
|
|
| 10,155 |
| ||||||||||||||||
Unit-based compensation expense |
|
| — |
|
|
| 1,090 |
| ||||||||||||||||
Depreciation and amortization |
|
| 11,141 |
|
|
| 10,106 |
|
|
| 10,155 |
|
|
| 10,628 |
| ||||||||
Stock/unit-based compensation |
|
| 68,822 |
|
|
| — |
|
|
| 1,090 |
|
|
| 647 |
| ||||||||
Restructuring expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 893 |
| ||||||||
2019 Former Holdco transaction expense |
|
| — |
|
|
| 471 |
|
|
| — |
|
|
| — |
|
|
| 471 |
|
|
| 100 |
|
UK subsidiary closure |
|
| — |
|
|
| (933 | ) |
|
| — |
|
|
| — |
|
|
| (933 | ) |
|
| 1,371 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||
Adjusted EBITDA |
| $ | 31,782 |
|
| $ | 24,655 |
|
| $ | 37,108 |
|
| $ | 31,782 |
|
| $ | 24,655 |
|
| $ | (7,534 | ) |
The following table presents thesets forth a reconciliation of net income (loss) as a percentage of gross profit to Adjustedadjusted EBITDA as a percentage of revenuecontribution ex-TAC for the years ended December 31, 2020 and 2019:periods presented:
|
| Year Ended December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
| (in thousands, except for percentages) |
| |||||
Gross profit |
| $ | 76,991 |
|
| $ | 70,832 |
|
Net income |
| $ | 20,638 |
|
| $ | 9,924 |
|
Net income as a percentage of gross profit |
|
| 27 | % |
|
| 14 | % |
Revenue ex-TAC(1) |
| $ | 110,516 |
|
| $ | 104,440 |
|
Adjusted EBITDA(2) |
| $ | 31,782 |
|
| $ | 24,655 |
|
Adjusted EBITDA as a percentage of revenue ex-TAC |
|
| 29 | % |
|
| 24 | % |
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Gross profit |
| $ | 94,523 |
|
| $ | 76,991 |
|
| $ | 70,832 |
|
| $ | 34,011 |
|
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Net income (loss) as a percentage of gross profit(1) |
| N/A |
|
|
| 27 | % |
|
| 14 | % |
| N/A |
| ||
Contribution ex-TAC(2) |
| $ | 141,500 |
|
| $ | 110,516 |
|
| $ | 104,440 |
|
| $ | 64,526 |
|
Adjusted EBITDA(3) |
| $ | 37,108 |
|
| $ | 31,782 |
|
| $ | 24,655 |
|
| $ | (7,534 | ) |
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 26 | % |
|
| 29 | % |
|
| 24 | % |
|
| (12 | )% |
| Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
(2) | For a reconciliationof |
| For a reconciliationof |
Non-GAAP earningsNet Income (Loss)
Non-GAAP net income (loss) is a non-GAAP financial measure defined by us as net income (loss) adjusted to eliminate the impact of stock-based compensation and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Net income (loss) is the most comparable GAAP measurement. Non-GAAP net income (loss) is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of stock-based compensation, gain on debt extinguishment, and certain other items that are not related to our core operations provides measures for period-to-period comparisons of our business and additional insight into our core controllable costs. Accordingly, we believe that non-GAAP net income (loss) provides information to investors and the market generally in
73
understanding and evaluating our results of operations in the same manner as our management and board of directors.
Our use of non-GAAP net income (loss) has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry that have similar business arrangements, may define non-GAAP net income (loss) differently, which may make comparisons difficult. Because of these and other limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, gross profit, net income (loss) and cash flows.
The following table sets forth a reconciliation of net income (loss) to non-GAAP net income (loss) for the periods presented:
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands) |
| |||||||||||||
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Add back: Stock-based compensation |
|
| 68,822 |
|
|
| — |
|
|
| 1,090 |
|
|
| 647 |
|
Less: Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Less: Income tax effect related to Viant Technology Inc.’s share of adjustments |
|
| (1,238 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Non-GAAP net income (loss) |
| $ | 23,865 |
|
| $ | 20,638 |
|
| $ | 11,014 |
|
| $ | (24,888 | ) |
Non-GAAPEarnings(loss)per unitClass A Common Stock/Unit—Basic and Diluted
Non-GAAP earnings (loss) per unitClass A common stock/unit—basic and diluted is a non-GAAP financial measure defined by us as earnings (loss) per unit,Class A common stock/unit—basic and diluted, adjusted to eliminate the impact of stock-based compensation and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Earnings (loss) per Class A common stock/unit—basic and diluted is the most comparable GAAP measurement, adjusted for certain non-recurring, infrequent, and unusual transactions that are not reasonably likely to recur within two years nor have similar transactions occurred within the prior two years.measurement. Non-GAAP earnings (loss) per unit adjusts GAAP earnings (loss) per unit forClass A common stock/unit—basic and diluted is used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the impactsallocation of the 2019 Former Holdco transaction, namely, the deemed contribution of 2016 convertible preferred unit interest by Former Holdco and the deemed dividend related to the beneficial conversion feature recognized upon issuance of 2019 convertible preferred units. See Note 8 to our consolidated financial statements for further information. Wecapital. In particular, we believe that the exclusionelimination of such amounts in calculating Non-GAAP earnings (loss) per unit can provide a useful measurestock-based compensation, gain on extinguishment of debt and certain other items that are not related to our core operations provides measures for period-to-period comparisons of our business.
69
Our use of Non-GAAPearnings(loss)perunithas limitationsas an analyticaltool,business and you shouldnot consideritin isolationor as a substituteforanalysisofprovides additional insight into our financialresultsas reportedunderGAAP.Some of thesepotentiallimitationsinclude:
othercompanies,includingcompaniesin our industrywhich have similarbusinessarrangements, mayreportNon-GAAPearnings(loss)perunitor similarlytitledmeasures,but calculatethem differently,which reducestheirusefulnessas comparativemeasures;
althoughthedeemedcontributionreferredto above isnon-cashin nature,Non-GAAPearnings (loss)perunitdoes not reflecttheeffectivecontributionof capitalby theFormerHoldco upon retirementof 2016 convertiblepreferredunitsand itsimpacton netincomeattributableto all unitholdersand netincomeattributableto commonunitholders;and
althoughthedeemeddividendreferredto above isnon-cashin nature,Non-GAAPearnings(loss) perunitdoes not reflecttheimplieddiscounton issuanceof 2019 convertiblepreferredunitsand its impacton netincomeattributableto allunitholdersand netincome attributableto commonunitholders.
Because of these and other limitations, you should consider ourcore controllable costs. Accordingly, we believe that non-GAAP measures only as supplemental to other GAAP-based financial performance measures, including earnings (loss) per unit. The following table presentsClass A common stock/unit—basic and diluted provides information to investors and the reconciliationmarket generally in understanding and evaluating our results of earnings (loss) per unit tooperations in the same manner as our management and board of directors.
Our use of Non-GAAP earnings (loss) per unit Class A common stock/unit—basic and diluted has limitationsas an analyticaltool,and you shouldnot consideritin isolationor as a substituteforanalysisof our financialresultsas reportedunderGAAP.Some of thesepotentiallimitationsinclude:
• | othercompanies,includingcompaniesin our industrythat have similarbusinessarrangements, mayreportnon-GAAP earnings (loss) per Class A common stock/unit—basic and diluted or similarlytitledmeasures,but calculatethem differently,which reducestheirusefulnessas comparativemeasures; |
• | althoughthestock-based compensation related to the 2021 LTIPreferredto above isnon-cashin nature,non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted does not reflectitsimpacton netincome (loss)attributableto all common shareholders; and |
• | althoughthegain on debt extinguishment related to the forgiveness of our PPP Loan and related accrued interest isnon-cashin nature,non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted does not reflectitsimpacton netincome (loss)attributableto all common shareholders. |
74
Becauseof theseand otherlimitations,you shouldconsiderour non-GAAPmeasuresonly as supplementalto otherGAAP-based financialperformancemeasures,includingearnings(loss)perClass A common stock/unit—basic and diluted.
Basic non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted iscalculatedby dividingthe non-GAAP net income (loss)attributableto Class A common stockholdersby the number of weighted-average shares of Class A commonstock outstanding. Shares of our Class B common stock do not share in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted of Class B common stock under the two-class method has not been presented.
Diluted non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted adjuststhebasic non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted calculation forthepotentialdilutiveimpactof commonshares such as equity awardsusingthetreasury-stockmethod and Class B common stock using the if-converted method.Dilutedearnings(loss)pershare considerstheimpactof potentially dilutivesecuritiesexceptin periodsin which thereisa lossbecausetheinclusionof thepotentialcommonshares would have an anti-dilutiveeffect. Shares of our Class B common stock, RSUs and nonqualified stock options are considered potentially dilutive shares of Class A common stock. For the year and three months ended December 31, 2019. Earnings2021, Class B common stock and nonqualified stock options amounts have been excluded from the computation of diluted earnings (loss) per unit share of Class A common stock because the effect would have been anti-dilutive under the if-converted and treasury stock method, respectively.
The followingtablepresentsthereconciliationof earnings(loss)perClass A common stock/unit—basic and dilutedto non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted for theyearended December 31, 2021. Earnings(loss)per share was not adjustedfor any other periods presentedthe year ended December 31, 2020 as there was no stock-based compensation or gain on debt extinguishment in that period.
75
|
| Year Ended |
|
| Three Months Ended |
| ||||||||||||||||||
|
| December 31, 2019 |
|
| December 31, 2019 |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Non-GAAP |
|
|
|
|
|
|
|
|
|
| Non-GAAP |
| ||
|
| Earnings |
|
|
|
|
|
| Earnings |
|
| Earnings |
|
|
|
|
|
| Earnings |
| ||||
|
| (Loss) per |
|
|
|
|
|
| (Loss) |
|
| (Loss) per |
|
|
|
|
|
| (Loss) |
| ||||
|
| Unit |
|
| Adjustments |
|
| per Unit |
|
| Unit |
|
| Adjustments |
|
| per Unit |
| ||||||
|
| (in thousands, except unit data) |
|
| (in thousands, except unit data) |
| ||||||||||||||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 9,924 |
|
| $ | — |
|
| $ | 9,924 |
|
| $ | 5,410 |
|
| $ | — |
|
| $ | 5,410 |
|
Deemed contribution of 2016 convertible preferred unit interest |
|
| 45,000 |
|
|
| (45,000 | ) |
|
| — |
|
|
| 45,000 |
|
|
| (45,000 | ) |
|
| — |
|
Deemed dividend upon issuance of 2019 convertible preferred units |
|
| (27,558 | ) |
|
| 27,558 |
|
|
| — |
|
|
| (27,558 | ) |
|
| 27,558 |
|
|
| — |
|
Adjusted net income attributable to all unitholders |
|
| 27,366 |
|
|
| (17,442 | ) |
|
| 9,924 |
|
|
| 22,852 |
|
|
| (17,442 | ) |
|
| 5,410 |
|
Less: Undistributed earnings attributable to participating securities |
|
| (18,787 | ) |
|
| 11,974 |
|
|
| (6,813 | ) |
|
| (14,078 | ) |
|
| 10,745 |
|
|
| (3,333 | ) |
Net income attributable to common unitholders |
| $ | 8,579 |
|
| $ | (5,468 | ) |
| $ | 3,111 |
|
| $ | 8,774 |
|
| $ | (6,697 | ) |
| $ | 2,077 |
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units outstanding—basic |
|
| 274 |
|
|
| — |
|
|
| 274 |
|
|
| 374 |
|
|
| — |
|
|
| 374 |
|
Weighted average units outstanding—diluted |
|
| 1,000 |
|
|
| — |
|
|
| 1,000 |
|
|
| 1,000 |
|
|
| — |
|
|
| 1,000 |
|
Basic earnings per unit |
| $ | 31.31 |
|
| $ | (19.96 | ) |
| $ | 11.35 |
|
| $ | 23.46 |
|
| $ | (17.91 | ) |
| $ | 5.55 |
|
Diluted earnings per unit |
| $ | 27.37 |
|
| $ | (17.45 | ) |
| $ | 9.92 |
|
| $ | 22.85 |
|
| $ | (17.44 | ) |
| $ | 5.41 |
|
|
| Year Ended |
| |||||||||
|
| December 31, 2021 |
| |||||||||
|
| Earnings |
|
|
|
|
|
| Non-GAAP |
| ||
|
| (Loss) per |
|
|
|
|
|
| Earnings (Loss) |
| ||
|
| Share |
|
| Adjustments |
|
| per Share |
| |||
|
| (in thousands, except per share data) |
| |||||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (37,609 | ) |
| $ | — |
|
| $ | (37,609 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Add back: Stock-based compensation |
|
| — |
|
|
| 68,822 |
|
|
| 68,822 |
|
Less: Gain on extinguishment of debt |
|
| — |
|
|
| (6,110 | ) |
|
| (6,110 | ) |
Less: Income tax effect related to Viant Technology Inc.'s share of adjustments (1) |
|
| — |
|
|
| (1,238 | ) |
|
| (1,238 | ) |
Non-GAAP net income (loss) |
|
| (37,609 | ) |
|
| 61,474 |
|
|
| 23,865 |
|
Less: Net income (loss) attributable to noncontrolling interests (2) |
|
| (29,867 | ) |
|
| 49,897 |
|
|
| 20,030 |
|
Net income (loss) attributable to Viant Technology, Inc.—basic |
|
| (7,742 | ) |
|
| 11,577 |
|
|
| 3,835 |
|
Add back: Reallocation of net loss attributable to noncontrolling interest from the assumed exchange of RSUs for Class A common stock |
|
| — |
|
|
| 253 |
|
|
| 253 |
|
Less: Income tax effect from the assumed exchange of RSUs for Class A common stock(1) |
|
| — |
|
|
| (62 | ) |
|
| (62 | ) |
Net income (loss) attributable to Viant Technology, Inc.—diluted |
| $ | (7,742 | ) |
| $ | 11,768 |
|
| $ | 4,026 |
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of Class A common stock outstanding —basic |
|
| 12,364 |
|
|
| — |
|
|
| 12,364 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
RSUs |
|
| — |
|
|
| 1,088 |
|
|
| 1,088 |
|
Nonqualified stock options |
|
| — |
|
|
| 8 |
|
|
| 8 |
|
Weighted-average shares of Class A common stock outstanding —diluted |
|
| 12,364 |
|
|
| 1,096 |
|
|
| 13,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of Class A common stock—basic |
| $ | (0.63 | ) |
| $ | 0.94 |
|
| $ | 0.31 |
|
Earnings (loss) per share of Class A common stock—diluted |
| $ | (0.63 | ) |
| $ | 0.93 |
|
| $ | 0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from earnings (loss) per share of Class A common stock—diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Class B common stock |
|
|
|
|
|
|
|
|
|
| 47,107 |
|
Total shares excluded from earnings (loss) per share of Class A common stock—diluted |
|
|
|
|
|
|
|
|
|
| 47,107 |
|
(1) | The estimated income tax effect of our share of non-GAAP reconciling items are calculated using an assumed blended tax rate of 24%, which represents our expected corporate tax rate, excluding discrete and non-recurring tax items. |
(2) | The adjustment to net income (loss) attributable to noncontrolling interests represents stock-based compensation and gain on extinguishment of debt attributed to the noncontrolling interests of our company outstanding during the period. |
Liquidityand CapitalResources
70As of December31, 2021, we had cashof $238.5 millionand working capital,consistingof currentassets lesscurrentliabilities,of $269.1 million.
76
NumberOur primary sources of Active Customerscash are revenues derived from theprogrammaticpurchaseof advertisingon our platform and Average Revenue ex-TAC per Active Customerour existing cash balances, although we have, and may in the future, addressed our liquidity needs by utilizing our borrowing capacity under our revolving credit facility or raising additional funds by issuing equity.
NumberOur primary uses of Active Customers cash are capitalexpendituresto developour softwarein supportof enhancingour technologyplatform; purchasesof propertyand average revenue ex-TAC per Active Customer are operational metrics. We define an Active Customer equipmentin supportof our expandingheadcountas a customer that had total aggregate revenue ex-TAC of at least $5,000 through our platform during the previous twelve months. We define average revenue ex-TAC per Active Customer as revenue ex-TAC for the trailing twelve month period presented divided by Active Customers. For purposes of this definition, a customer that operates under any resultof our pricing options that equals or exceedsgrowth; the aforementioned revenue ex-TAC threshold is considered an Active Customer. payment of debt obligations used to financeour operations,capitalexpenditures,platformdevelopmentand rapidgrowth; and future minimumpaymentsunderournon-cancelable operating leases.
We believe that the total number of Active Customers and average revenue ex-TAC per Active Customer are important measuresassess our liquidity in terms of our ability to increase revenue generate cash sufficient to fund our short- and long-term cash requirements. As such, we project our anticipated cash requirements as well as cash flows generated from operating activities to meet those needs. We believeour existingcash, cash flow from revenues derived from theprogrammaticpurchaseof advertisingon our platform,and the effectivenessundrawn availabilityunderour credit facilitywillbe sufficientto meetour cashrequirementsoverthenext12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of existingcash,cashflow fromoperations, the undrawn availabilityunderour sales force, although we expect these measurescredit facilityand issuances of equity securities or debt offerings. Our ability to fluctuate basedfund longer-term operating needs will depend on our ability to generate positive cash flows through programmatic advertising purchases on our platform, our ability to access the seasonality in our business. Customers that generated less than $5,000 in revenue ex-TAC incapital markets, and other factors, including those discussed under the trailing twelve month period were not material in the aggregate in any period.
Liquidity and Capital Resourcessection titled “Risk Factors.”
As of December 31, 2020,2021, our material cash requirements from known contractual obligations consisted of future minimumpaymentsunderournon-cancelable operating leases, which we had cash of $9.6 million and working capital, consisting of current assets less current liabilities, of $24.2 million. We believe our existing cash, cash flow from operations, and undrawn availability under our credit facilityestimate will be sufficientapproximately $3.0 million in 2022, $4.0 million in 2023, $3.1 million in 2024 and $3.0 million in 2025. We did not have any otheroff-balance sheetarrangementsas of December31, 2021 otherthan the minimum payments under theseoperatingleasesand the indemnificationagreementsdescribedin Note 14 to meet our working capital requirements for at least the next 12 months.consolidatedfinancialstatements included elsewhere in this Annual Report.
Viant Technology Inc. isWe are a holdingcompanywith no operationsof its own. Accordingly, upon completion of the IPO, ourown and are dependenton distributionsfromViant Technology Inc. is dependent on distributions from Viant Technology LLC,includingpaymentsundertheTax ReceivableAgreement,to pay its ourtaxesand other expenses.satisfy any current or future cash requirements. The Loan Agreement, as defined below, imposes,and any futurecreditfacilitiesmayimpose,limitationson theabilityof Viant TechnologyLLC or Viant Technology Inc.to pay dividendsto third parties.
RevolvingCreditFacility
On October31, 2019, we enteredinto an asset-based revolving credit and security agreementthe Loan Agreement with PNC Bank (the “Loan Agreement”). Bank.The Loan Agreementprovidesa seniorsecuredrevolvingcreditfacilityof up to $40.0 millionwith a maturitydateof October31, 2024. The Loan Agreementiscollateralizedby security interestsin substantiallyallof our assets.
Advances undertheLoan Agreementbearinterestthroughmaturityata variableratebasedupon our selectionof either,a DomesticRate or a LIBORrate,plusan applicablemargin (“(“DomesticRate Loans” and “LIBORRate Loans”).The DomesticRate isdefinedas a fluctuatinginterestrateequalto thegreaterof (1)the basecommerciallendingrateof PNCBank, (2)theovernightfederalfundsrateplus0.50% and (3)theDaily LIBORRate plus1.00%. The applicable margin througheffectiveweightedaverageinterestrateas of December31, 20202021 was 3.24%. The applicablemarginas ofDecember31, 2021 wasequalto 2.00%0.75% forDomestic Rate Loans and 4.00%1.75% forLIBORRate Loans. The effective weighted average interest rate as of December 31, 2020 was 4.15%. The applicablemargin commencing January 1,that commenced on October 15, 2021 isbetween 1.50%0.75% to 2.25%1.25% forDomesticRate Loans and between 3.50%1.75% and 4.25%2.25% forLIBOR Rate Loans basedon maintainingcertainundrawn availabilityratios.The facilityfeeforundrawn amountsunder theLoan Agreementis0.375% perannum.We willalsobe requiredto pay customaryletterof creditfees,as necessary.
The Loan Agreementcontainscustomaryconditionsto borrowings,eventsof defaultand covenants, includingcovenantsthatrestrictour abilityto sellassets,makechangesto thenatureof thebusiness,engagein mergersor acquisitions,incur,assumeor permitto existadditionalindebtednessand guarantees,createor permit to exist additional indebtedness and guarantees, create or permit to exist liens,pay dividends,issueequityinstruments,makedistributionsor redeemor repurchasecapitalstock or makeotherinvestments,and engagein transactionswith affiliates.The Loan Agreementalsorequiresthatwe maintaincompliancewith a minimumFixed Charge CoverageRatio (as (asdefinedin theLoan Agreement)of 1.40 to 1.00 at
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any timeundrawn availabilityundertheLoan Agreementislessthan25%. As of December31, 2020,2021, we arein compliancewith allcovenants.
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Cash Flows
The following table summarizes our cashFiscal 2021 Changes in Cash Flows
Cash flows from operating, investing and financing activities for the fiscal years ended December 31, 2021 and 2020, and 2019:
as reflected in the Consolidated Statements of Cash Flows included in Item 8 of this Annual Report, are summarized in the following table:
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| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Consolidated Statements of Cash Flows Data |
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|
|
|
|
|
|
| ||||||||
Consolidated statements of cash flows data |
|
|
|
|
|
|
|
| ||||||||
Cash flows provided by operating activities |
| $ | 18,875 |
|
| $ | 13,033 |
|
| $ | 28,665 |
|
| $ | 18,875 |
|
Cash flows used in investing activities |
|
| (7,841 | ) |
|
| (7,813 | ) |
|
| (7,372 | ) |
|
| (7,841 | ) |
Cash flows used in financing activities |
|
| (6,220 | ) |
|
| (3,061 | ) | ||||||||
Effect of exchange rate changes on cash |
|
| — |
|
|
| 1 |
| ||||||||
Cash flows provided by (used in) financing activities |
|
| 207,558 |
|
|
| (6,220 | ) | ||||||||
Increase in cash |
| $ | 4,814 |
|
| $ | 2,160 |
|
| $ | 228,851 |
|
| $ | 4,814 |
|
Cash Flows Provided by OperatingActivities
Our cashflowsfromoperatingactivitiesareprimarilyinfluencedby growth in our operations,increases or decreasesin collectionsfromour customersand relatedpaymentsto our suppliersof advertisingmediaand data.Cash flowsfromoperatingactivitieshave been affectedby changesin our working capital,particularly changesin accountsreceivable,accountspayableand accruedliabilities.The timingof cashreceiptsfrom customersand paymentsto supplierscan significantlyimpactour cashflowsfromoperatingactivities.We typicallypay suppliersin advanceof collectionsfromour customers.Our collectionand paymentcyclescan vary fromperiodto period.In addition,we expectseasonalityto impactcashflowsfromoperatingactivitieson a quarterlybasis.
Our cashflowsprovided byoperatingactivities for fiscal 2021 was $28.7 million, a net increase of $9.8 million, or 51.9%, from cashflowsprovided byoperatingactivities for fiscal 2020 of $18.9 million. The change in cash flows from operating activities. We typically pay suppliersfor fiscal 2021 were primarily due to:
• | a decrease of $37.6 million from net loss; |
• | an increase of $73.9 million due to noncash add back adjustments to net loss comprised of $68.8 million for stock-based compensation, $11.1 million for depreciation and amortization, loss on disposal of assets of $0.2 million, offset by $0.1 million recovery of doubtful accounts and gain on debt extinguishment of $6.1 million; |
• | a decrease of $6.2 million from changes in working capital (excluding deferred revenue and other liabilities) primarily related to an increase of $15.5 million in accounts payable, accrued liabilities and accrued compensation, net against a decrease of $21.6 million in accounts receivable and prepaid assets and other assets. |
• | a decrease in deferred revenue of $1.8 million; and |
• | an increase in other liabilities of $0.3 million. |
Cash Flows Used in advance of collections from our customers. Our collection and payment cycles can vary from period to period. In addition, we expect seasonality to impact cash flows from operating activities on a quarterly basis.
We compute our average days sales outstanding (“DSO”) as of a given month end based on a weighted average of outstanding accounts receivable. Specifically, the DSO is calculated by multiplying the percentage of accounts receivable outstanding for each monthly billing period by the number of days outstanding related to each billing period and then summing the weighted days outstanding. Historically, our DSOs have fluctuated over time. If our DSOs increase significantly, and we are unable to borrow against these receivables on commercially acceptable terms, our working capital availability could be reduced, and as a consequence our results of operations and financial condition would be adversely impacted.
We compute our days payable outstanding (“DPO”) as of a given month end by dividing our trade payables (including accrued liabilities) by the average daily cost of media, data, other direct costs and certain operating expenses over the last four months.
The following table summarizes the DSO and DPO for the periods presented.
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| As of December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
| (in days) |
| |||||
DSO |
|
| 64 |
|
|
| 93 |
|
DPO |
|
| 62 |
|
|
| 76 |
|
Our average DSO was 64 and 93 days and our average DPO was 62 and 76 days as of December 31, 2020 and 2019, respectively. The majority of our revenue is sourced through advertising agencies that pay us after they have received payment from the advertiser, increasing our DSO. We remit payment for media, data and other direct costs purchased through our platform before receiving payment from the advertising agency typically resulting in a DPO that is lower than our DSO. The year over year decrease in our DSO reflects our continued focus to lower our DSO through collection efforts. As our operating cash flows increased year over year, we were able to decrease our DPO correspondingly.
During the year ended December 31, 2020, cash provided by operating activities of $18.9 million resulted primarily from net income of $20.6 million and noncash add back adjustments to net income of $10.1 million for depreciation and amortization, offset by a $1.7 million decrease in deferred revenue, a decrease in net working capital (excluding deferred revenue and other liabilities) of $9.3 million, and a decrease in other liabilities of $0.4 million.
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During theyearended December31, 2019, cashprovidedby operatingactivitiesof $13.0 million resultedprimarilyfromnetincomeof $9.9 million,noncashadd back adjustmentsto netincomeof $10.2 million fordepreciationand amortizationoffsetby a $4.6 milliondecreasein deferredrevenue,a decreasein networking capital(excludingdeferredrevenueand otherliabilities)of $3.2 million,and a decreasein otherliabilitiesof $1.0 million.
InvestingActivities
Our primaryinvestingactivitieshave consistedof capitalexpendituresto developour softwarein supportof enhancingour technologyplatformand purchasesof propertyand equipmentin supportof our expandingheadcountas a resultof our growth. We capitalizecertaincostsassociatedwith creatingand enhancinginternallydevelopedsoftwarerelatedto our technologyinfrastructurethatarerecordedwithin property,equipmentand software,net.These costsincludepersonneland relatedemployeebenefitexpensesfor employeeswho aredirectlyassociatedwith and who devotetimeto softwaredevelopmentprojects.Purchasesof propertyand equipmentand capitalizedsoftwaredevelopmentcostsmayvaryfromperiod-to-perioddue to the timingof theexpansionof our operations,theadditionof headcountand our softwaredevelopmentcycles.As a result of capitalization of stock based stock-based
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compensation expense in future periods and the growth of our business, we expectour capitalexpendituresand our investmentactivityto continueto increase.
DuringOur cashflowsused in investingactivities for fiscal 2021 was $7.4 million, a net decrease of $0.4 million, or 6.0%, from cashflowsused in investingactivities for fiscal 2020 of $7.8 million. The change in cash flows for fiscal 2021 were primarily due to:
• | $6.9 millionof investmentsin capitalizedsoftware;and |
• | $0.4 millionof purchasesof propertyand equipment. |
Cash Flows Provided by Financing Activities
Our financingactivitiesconsistedprimarilyof proceedsfromborrowingsand repaymentsof our debt, issuancesof our equityand paymentsof memberdistributions. Net cashprovidedby or used in financing activitieshas been and willbe used to financeour operations,capitalexpenditures,platformdevelopmentand rapidgrowth.
Our cashflowsprovided by financingactivities for fiscal 2021 was $207.6 million, a net increase of $213.8 million from cashflowsused in financingactivities for fiscal 2020 of $6.2 million. The change in cash flows for fiscal 2021 were primarily due to:
• | $232.5 million of IPO proceeds, net of underwriting discounts, partially offset by payments of $2.6 million in offering costs; |
• | $7.3 million in payments of member tax distributions; and |
• | $15.0 million in taxes paid related to the net share settlement of equity awards. |
Fiscal 2020 Changes in Cash Flows
For the comparison of fiscal 2021 to fiscal 2020, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" of our Form 10-K for our fiscal year ended December 31, 2020, cash used in investing activities of $7.8 million resulted from $7.4 million of investments in capitalized software and $0.4 million of purchases of property and equipment.
During the year ended December 31, 2019, cash used in investing activities of $7.8 million resulted from $7.4 million of investments in capitalized software and $0.4 million of purchases of property and equipment.
Financing Activities
Our financing activities consisted primarily of proceeds from borrowings and repayments of our debt, issuances of our equity and payments of member distributions. Net cash provided by or used in financing activities has been and will be used to finance our operations, capital expenditures, platform development and rapid growth.
During the year ended December 31, 2020, cash used in financing activities of $6.2 million resulted primarily from $6.0 million of proceeds from the PPP Loan offset by $5.5 million in payments of member tax distributions, $5.0 million in payments of member dividends, and $1.7 million in payment of offering costs associated with our IPO.
During the year ended December 31, 2019, cash used in financing activities of $3.1 million resulted primarily from the settlement of long-term debt from a related party of $28.6 million offset by $17.5 million of borrowings on our line of credit, $7.5 million from the issuance of the 2019 convertible preferred units and $0.5 million of borrowings on long term debt from a related party. See Note 7 to our consolidated financial statements for more information on related party transactionsfiled with the Former Holdco.
Off-Balance Sheet Arrangements
We do not have any relationships with other entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities established forSEC on March 23, 2021 under the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We did not have any other off-balance sheet arrangements as of December 31, 2020 other than operating leasessubheading "Liquidity and the indemnification agreements described in Note 11 to our consolidated financial statements.
Contractual Obligations
Our principal commitments consist of our debt obligations and non-cancelable leases for our various office facilities. In certain cases, the terms of the lease agreements provide for rental payments on a graduated basis.
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We have madeno significantcontractualguaranteesforthebenefitof thirdparties.However, in the ordinarycourseof business,we mayprovideindemnificationsof varyingscopeand termsto customers,vendors, lessors,businesspartnersand otherpartieswith respectto certainmatters,including,but not limitedto, losses arisingout of breachof such agreements,servicesto be providedby us or fromintellectualpropertyinfringement claimsmadeby thirdparties.In addition,we have enteredintoindemnificationagreementswith directorsand certainofficersand employeesthatwillrequireus, amongotherthings,to indemnifythemagainstcertain liabilitiesthatmayariseby reasonof theirstatusor serviceas directors,officersor employees.No demandshave been madeupon us to provideindemnificationundersuch agreementsand thus,thereareno claimsthatwe are awareof thatcouldhave a materialeffecton our consolidatedfinancialstatements.Accordingly,no amountsfor any obligationhave been recordedas of December31, 2020.Capital Resources".
CriticalAccounting Policies and Estimates
Our consolidatedfinancialstatementsarepreparedin accordancewith GAAP.The preparationof these consolidatedfinancialstatementsrequiresus to makeestimatesand assumptionsthataffectthereportedamounts of assets,liabilities,revenue,expensesand relateddisclosures.We evaluateour estimatesand assumptionson an ongoing basis.Our estimatesarebasedon historicalexperienceand variousotherassumptionsthatwe believeto be reasonableunderthecircumstances.Our actualresultscoulddifferfromtheseestimates.
An accountingpolicyisdeemedto be criticalifitrequiresan accountingestimateto be madeon assumptionsaboutmattersthatarehighlyuncertainatthetimetheestimateismade if different estimates reasonably couldand have been used,had or if changes in the estimate that are reasonably possible could materiallylikely to have a material impact theon our financial statements.condition or results of operations. We believe that the assumptions and estimates associated with the evaluation of revenue recognition criteria, including the determination of revenue recognition net versus gross assessment in our revenuearrangements,theassumptionsused in thevaluationmodelsto determinethefairvalueof common unitsand stock/unit-basedcompensation,and internal usesoftwarehave thegreatestpotentialimpacton our consolidatedfinancialstatements.Therefore,we considertheseto be our criticalaccountingpoliciesand estimates.
See Note 2 to our consolidatedfinancialstatementsincluded elsewhere in this Annual Report foradditionalinformation on the assumptionssignificant accounting policies and methods used in the valuation models to determine the fair valuepreparation of common units and unit-based compensation expense, and internal-use software have the greatest potential impact on our consolidatedfinancialstatements. Therefore, we consider these to be our critical accounting policies and estimates.
Revenue Recognition
We derivegenerate our revenueby providing agencies marketersand brandsadvertisingagencieswith theabilityto plan,buy and measuretheirdigitaladvertisingcampaignsusingour platform. people-basedDSP,Adelphic.Our platform enables marketers
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to reach their target audience across desktop,mobile,connectedTV,linearTV, in-game, streamingaudio and digitalbillboards.
We applya five-stepapproachas definedin FinancialAccountingStandardsBoard (“FASB”) AccountingStandardsCodification(“ASC”) 606, Revenue fromContractswith Customers(“ASC 606”),in determiningtheamountand timingof revenueto be recognized:
Identificationof a contractwith a customer;
• | Identificationof a contractwith a customer; |
Identificationof theperformanceobligationsin thecontract;
• | Identificationof theperformanceobligationsin thecontract; |
Determinationof thetransactionprice;
• | Determinationof thetransactionprice; |
Allocationof thetransactionpriceto theperformanceobligationsin thecontract;and
• | Allocationof thetransactionpriceto theperformanceobligationsin thecontract;and |
Recognitionof revenuewhen or as theperformanceobligationsaresatisfied.
• | Recognitionof revenuewhen or as theperformanceobligationsaresatisfied. |
We makeour software platformavailablethroughdifferentpricingoptionsto tailorto multiple clientcustomer typesand customer needs.These optionsconsistof a percentageof spend option, a monthly subscriptionpricing option and a fixedCPMpricingoption. Customers can use our software platform on“CPM” refersto a self-service basis to execute their advertising campaigns. paymentoptionin which customerspay a priceforevery1,000 impressionsan ad receives.We generaterevenuewhen the oursoftwareplatformisused on a self-service basis by charginga platformfeethatiseithera percentageof spend or a flatmonthlysubscriptionfeeas wellas feesforadditionalfeaturessuch as dataand advancedreporting.We alsoofferour customerstheabilityto use our servicesto aidin datamanagement,mediaexecutionand advancedreporting.When customersutilizeour services,we generaterevenueby charginga (1)separateservicefeethatrepresentsa percentageof spend in additionto theplatformfee;(2)a flatmonthly subscription feecoveringservicesin connectionwith datamanagementand advancedreporting;or (3)a fixedCPM thatisinclusiveof media,otherdirectcostsand services.Some of the aforementionedofferingsarerelativelynew to themarketand arenot yetmaterialto our businessfroma financialperspective.
We maintainagreementswith our customersin theformof MSAsin connectionwith thepercentageof spend and monthlysubscriptionpricingoptions, as wellas instanceswhere we chargeour customersa flatmonthlyfeeforservicesin connectionwith datamanagementand advanced reporting. We also offer our customers the ability to use our services to aid in data management, media execution and advanced reporting. When customers utilize our services, we generate revenue by charging a (1) separate service fee that represents a percentage of spend in addition to the platform fee; (2) a flat monthly fee covering services maintain insertionorders(“IO”)in connection with data management and advanced reporting; or (3) a fixed CPM that is inclusive of media, other direct costs and services. Some of the aforementioned offerings are relatively new to the market and are not yet material to our business from a financial perspective.
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We maintainagreementswith our customersin theformof MSAs in connectionwith thepercentageof spend and monthlysubscriptionpricingoptions, as wellas in instanceswhere we chargeour customersa flat monthlyfeeforservicesin connectionwith datamanagementand advancedreporting,and IOs in connection with thefixedCPM pricingoption, which setout thetermsof therelationshipand use of our software platform.The natureof our performanceobligationsisto enablecustomersto plan,buy and measureadvertisingcampaignsusingourplatformand providecampaignexecutionservicesas requested.
Forthepercentageof spend pricingoption, we typicallybillcustomersa platformfee,and in certaininstancesan additionalservicefee,which isbasedon a specifiedpercentageof the customer’spurchasesthroughtheplatform as well as fees for additional features such as data and advanced reporting,plusthecostof TAC. We recognizerevenueatthe pointin timewhen a purchaseby thecustomeroccursthroughour software platform.Forthe monthlysubscriptionpricingoption, we bill customers a platform fee represented by a fixed monthly subscription amount, as well as fees for additional features such as data and advanced reporting, plus the cost of TAC. We recognizesubscriptionfees for customers accessing our platform as revenue overtimeon a ratablebasisoverthetermof theagreement.
The determination of whether revenue for the percentage of spend pricing option should be reported on a gross or net basis overis based on an assessment of whether we are acting as the termprincipal or an agent in the transaction. In determining whether we are acting as the principal or an agent, we follow the accounting guidance for principal-agent considerations. Making such determinations involves judgment and is based on an evaluation of the agreement. terms of each arrangement, none of which are considered presumptive or determinative.
In both instances revenue is reported net of TAC since we arrange for the transfer of TAC from the supplierdiscussed above related to the percentage of spend pricing option,we typically act as an agent because we arrangeforthetransferof such costs fromthesupplierto thecustomerthroughtheuse of our software platformand do not controlsuch featurespriorto transferto thecustomer. As it relates to the TAC in these pricing options, weWe do not have primaryresponsibility formeetingcustomerspecificationsand do not have discretionin establishingtheprice of TAC related to this pricing option. As we act as the agent in these arrangements, we report revenue on a net basis.In certain arrangements, we act as a principal in percentage of spend arrangements because (i) we control the advertising inventory before it is transferred to our clients; (ii) we bear sole responsibility for fulfillment of the advertising
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promise and inventory risks and (iii) we have full discretion in establishing prices. As we act as the price. For data managementprincipal in these arrangements, we report revenue and advanced reporting services, we typically bill a fixed monthly fee and recognize revenue over timethe related costs incurred on a ratable basis over the term of the agreement.gross basis.
For the fixed CPM pricing option,we typicallybillcustomersa fixedCPM pricebasedon advertisingimpressions deliveredthroughthe platform. Weplatform and recognizerevenueatthepointin timewhen theadvertisingimpressionsare delivered. This revenue is reported grossIn certaincases,we alsoprovidethirdpartydatasegmentsand measurementreporting, which arerecognizedatthepointin timetheyaredeliveredto thecustomer.We have theprimaryresponsibilityformeetingcustomer specificationsand have discretionin establishingtheprice of any amounts incurred and payableTAC related to suppliers for TAC, since we control such features prior to transfer to the customer. As it relates to TAC in this pricing option,option. As we haveact as the primary responsibility for meeting customer specificationsprincipal in these arrangements, we report revenue and have discretion in establishing the price.
Unit-Based Compensationrelated costs incurred on a gross basis.
We record compensation expense for all common unit awards granted toinvoice our employees, which is measured and recognized customerson a graded-vesting attribution monthlybasis overforall pricing options.Invoice paymentterms,negotiatedon a customer-by-customerbasis,aretypically30 to 60 days. Advertisingagency customerstypicallyhave sequentialliabilityterms,which meanspaymentsarenot due to us fromour advertisingagencycustomeruntiltheadvertisingagencycustomerhas receivedpaymentfromitscustomer, the requisite service period based advertiser.
Thereareno contractassetsrecordedon the fair value consolidatedbalancesheetsbecauseourrightto any unbilledconsiderationforperformanceobligationssatisfiedisonly conditionalupon thepassageof time. Contractliabilities,or deferredrevenue,arerecordedforamountsthatarecollectedin advanceof the units at the grant date.
During the periods covered by the consolidated financial statements included in this Annual Report, we were a privately held company with no active public market for our common units. Therefore, in determining the fair valuesatisfaction of unit-based awards, we relied in part on valuations prepared by an independent third party. The independent third party performed the valuations in a manner consistent with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued performanceobligations.These liabilitiesareclassifiedas Compensation (“Practice Aid”). In determining currentifthe fair value of our units, we considered all objective and subjective factors that we believed respectiveperformanceobligationsare anticipatedto be relevant, including our best estimate satisfiedduringthesucceeding12-monthperiodperthetermsof our business condition, prospects and operating performance at the valuation date. There are significant judgments and estimates inherent in these valuations. These judgments and estimates include assumptions regarding our future operating performance, industry growth, average revenue ex-TAC per customer, contract,and the timingremaining portionisrecordedas non-currentdeferredrevenuein the consolidatedbalancesheets.
ASC606 providesvariousoptionalpracticalexpedients.We electedtheuse of thepractical expedientrelatingto thedisclosureof remainingperformanceobligationswithina potential initial public offering contractand willnot disclose remainingperformanceobligationsforcontractswith an originalexpecteddurationof one yearor other liquidity event.less.
For additional information regarding unit-based compensation and the assumptions used for determining the fair value of unit awards see Note 2 and Note 9 to our consolidated financial statements.
Internal-Use Internal UseSoftware
We capitalizecertaincostsassociatedwith creatingand enhancinginternallydevelopedsoftware.These costsincludepersonneland relatedemployeebenefitsexpensesforemployeeswho aredirectlyassociatedwith and who devotetimeto softwaredevelopmentprojects.Softwaredevelopmentcoststhatdo not qualifyfor capitalizationareexpensedas incurredand recordedin technologyand developmentexpensein the consolidated statementsof operations and comprehensive income (loss).
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Softwaredevelopmentactivitiestypicallyconsistof threestages:(1)theplanningphase;(2)the applicationand infrastructuredevelopmentstage;and (3)thepostimplementationstage.Costs incurredin the planningand postimplementationphases,includingcostsassociatedwith trainingand repairsand maintenance of thedevelopedtechnologies,areexpensedas incurred.We capitalizecostsassociatedwith softwaredeveloped when thepreliminaryprojectstageiscompleted,managementimplicitlyor explicitlyauthorizesand commitsto fundingtheprojectand itisprobablethattheprojectwillbe completedand performas intended.Costs incurred in theapplicationand infrastructuredevelopmentphases,includingsignificantenhancementsand upgrades,are capitalized.Capitalizationends once a projectissubstantiallycompleteand thesoftwareisreadyforitsintended purpose,atwhich pointthesoftwarebegins to bedepreciated over its estimated useful life.
JOBS Act Accounting Election
On April5, 2012, theJOBSAct was signedintolaw. The JOBSAct containsprovisionsthat,among otherthings,reducecertainreportingrequirementsforqualifyingpubliccompanies.As an “emerginggrowth company,” the Companywe may,underSection7(a)(2)(B)of theSecuritiesAct, delayadoptionof new or revised accountingstandardsapplicableto publiccompaniesuntilsuch standardswould otherwiseapplyto private companies.An “emerginggrowth company”isone with lessthan $1.07$1.07 billionin annualsales,has lessthan $700 millionin marketvalueof our sharesof commonstockheldby non-affiliatesand issueslessthan $1$1 billion of non-convertibledebtovera three-yearperiod.We may take advantage of this extended transition periodwill remain an emerging growth company until the first to occur of the date thatDecember 31, 2026, or sooner if we (i) are no longer qualify. We maytakeadvantageof thisextendedtransitionperioduntil thefirstto occurof thedatethatwe (i)areno longeran “emerginggrowth company”or (ii)affirmativelyand irrevocablyoptout of thisextendedtransitionperiod.
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We have electedto takeadvantageof thebenefitsof thisextendedtransitionperiod.Untilthedatethat we areno longeran “emerginggrowth company”or affirmativelyand irrevocablyoptout of theexemption providedby SecuritiesAct Section7(a)(2)(B),upon issuanceof a new or revisedaccountingstandardthatapplies to our consolidatedfinancialstatementsand thathas a differenteffectivedateforpublicand privatecompanies, theCompany willdisclosethedateon which adoptionisrequiredfornon-emerginggrowth companiesand the dateon which we willadopttherecentlyissuedaccountingstandard.As partof thiselection, we aredelayingthe adoptionof accountingguidancerelatedto leasesand implementationcostsincurredin cloudcomputing arrangementsthatcurrentlyappliesto publiccompanies.We areassessingtheimpactthisguidancewillhave on our consolidated financialstatements.See Note 2 to our consolidatedfinancialstatementsincluded elsewhere in this Annual Report foradditionalinformation.
RecentlyIssued Accounting Pronouncements
For informationregardingrecentlyissuedaccountingpronouncements,seeNote 2 to our consolidated financial statements.statements included elsewhere in this Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our operationsareprimarilywithintheUnitedStates,and we areexposedto marketrisksin the ordinarycourseof our business,includingtheeffectsof interestratechanges,foreigncurrencyfluctuationsand inflation.
InterestRate Risk
We areexposedto marketriskfromchangesin interestrateson our Loan Agreement,which accrues interestata variablerate.We have not used any derivativefinancialinstrumentsto manageour interestraterisk exposure.Based upon theprincipalbalanceowed on our revolvingcreditfacilityas of December31, 2020,2021, a hypotheticalone percentagepointincreaseor decreasein theinterestrateunderour revolvingcreditfacilitywould resultin a corresponding increase or decreasede minimis change in interestexpense of approximately $0.2 million annually.for the year ended December 31, 2021.
InflationRisk
We do not believethatinflationhas had a materialeffecton our business,financialconditionor results of operations.Ifour costswere to becomesubjectto significantinflationarypressures,we mightnot be ableto fullyoffsetsuch highercoststhroughpriceincreases.Our inabilityor failureto do so couldharmour business, financialconditionand resultsof operations.
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Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
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REPORTOF INDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
To the Stockholders and the Board of Directors of Viant Technology Inc.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Viant Technology Inc. (the “Company”) as of December 31, 2020 and October 9, 2020, and the related notes (collectively referred to as the “financial statement”). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2020 and October 9, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statement based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Costa Mesa, California
March 23, 2021
We have served as the Company’s auditor since 2020.
VIANT TECHNOLOGY INC.
|
| As of December 31, |
|
| As of October 9, |
| ||
|
| 2020 |
|
| 2020 |
| ||
Assets |
|
|
|
|
|
|
|
|
Cash |
| $ | 1 |
|
| $ | 1 |
|
Total assets |
| $ | 1 |
|
| $ | 1 |
|
Stockholder's equity |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 1,000 shares authorized, issued and outstanding |
| $ | 1 |
|
| $ | 1 |
|
Total stockholder's equity |
| $ | 1 |
|
| $ | 1 |
|
1. Organization and Nature of the Business
Viant Technology Inc. (the “Company”) was incorporated in the State of Delaware on October 9, 2020 (inception). The initial stockholder of the Company is Four Brothers 2 LLC (“Parent”) which holds all of the shares of common stock authorized, issued and outstanding. The Company was incorporated for the purpose of completing an initial public offering ("IPO") and related transactions in order to carry on the business of Viant Technology LLC. As the managing member of Viant Technology LLC, the Company is expected to operate and control all of the business and affairs of Viant Technology LLC. Refer to Note 3 for further information regarding the IPO.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying balance sheets have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of the financial statement in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statement. As there has been no activity for this entity during the reportable period, separate statements of operations, changes in stockholder’s equity and cash flows have not been presented. The Company’s year end is December 31.
On the date of incorporation, the sole stockholder, Parent, acquired 1,000 shares of common stock for cash consideration of $0.001 per share, or total cash consideration of $1.
Offering Costs
In connection with the IPO, Viant Technology LLC incurred accounting, legal and other costs, which were reimbursed by the Company upon the consummation of the IPO. Such costs will be recorded as a reduction to stockholder’s equity and recorded against the proceeds from the offering.
Organization Costs
Organization costs were expensed as incurred. Such costs are comprised of the legal and professional fees associated with the formation of the Company.
3. Subsequent Events
The Company has assessed subsequent events through the date of this report and has concluded the following required disclosure in the financial statement.
Initial Public Offering and Tax Receivable Agreement
On February 9, 2021, the Company’s Form S-1 was declared effective by the SEC related to the IPO of its Class A common stock. The closing date of the IPO was February 12, 2021, and in connection with the closing, the following actions were taken:
The Company amended and restated its certificate of incorporation, under which the Company is authorized to issue up to 450,000,000 shares of Class A common stock, up to 150,000,000 shares of Class B common stock, and up to 10,000,000 shares of preferred stock;
The limited liability company agreement of Viant Technology LLC was amended and restated (as amended and restated, the “Viant Technology LLC Agreement”) to, among other things, provide for Class A units and Class B units and appoint the Company as the sole managing member of Viant Technology LLC;
The Viant Technology LLC Agreement classifies the interests acquired by the Company as Class A units and reclassified the interests held by the continuing members of Viant Technology LLC as Class B units, and permits the continuing members of Viant Technology LLC to exchange Class B units for shares of Class A common stock on a one-for-one basis or, at the election of Viant Technology LLC, for cash. Immediately following such reclassification, the continuing members held 48,935,559 Class B units. For each membership unit of Viant Technology LLC that is reclassified as a Class B unit, the Company issued one corresponding share of our Class B common stock to the continuing members, or 48,935,559 shares of Class B common stock in total;
The Company issued and sold 10,000,000 shares of its Class A common stock to the underwriters at an initial public offering price of $25.00 per share, for gross proceeds of $250.0 million before deducting underwriting discounts and commissions of $17.5 million;
The Company used the net proceeds of $232.5 million to acquire 10,000,000 newly issued Class A units of Viant Technology LLC at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock;
The Company entered into a Tax Receivable Agreement (the “Tax Receivable Agreement”) for the benefit of the continuing members of Viant Technology LLC, pursuant to which the Company will pay them 85% of the amount of the net cash tax savings, if any, that the Company realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and certain other tax benefits) resulting from (i) the Company’s acquisition of Viant Technology LLC units in the IPO and in future exchanges and (ii) any payments the Company makes under the Tax Receivable Agreement;
The underwriters exercised their option to purchase 1,500,000 additional shares of Class A common stock from the selling stockholders. The Company did not receive any proceeds from the sale of shares by the selling stockholders. Pursuant to such exercise, the selling stockholders exchanged the corresponding number of Class B units for the shares of Class A common stock, the corresponding number of shares of Class B common stock were automatically retired, and 1,500,000 Class A units were issued to the Company;
Due to the exchange of Class B units for shares of Class A common stock by the selling stockholders in connection with the IPO, the Company recognized a deferred tax asset of approximately $11.1 million and an other long-term liability of approximately $9.9 million, assuming (i) no material changes in relevant tax law and (ii) that the Company has sufficient taxable income in each year to realize on a current basis the increased depreciation, amortization and other tax benefits that are subject of the Tax Receivable Agreement.
The Class B stockholders and Class A stockholders will initially have 80.5% and 19.5%, respectively, of the combined voting power of the Company’s common stock. The Class A common stock outstanding will represent 100% of the rights of the holders of all classes of the Company’s outstanding common stock to share in distributions from the Company, except for the right of Class B stockholders to receive the par value of the Class B common stock upon our liquidation, dissolution or winding up or an exchange of Class B units.
The Company entered into a Registration Rights Agreement with the Class B stockholders to provide for certain rights and restrictions after the IPO.
Immediately following the closing of the IPO, Viant Technology LLC is the predecessor of the Company for financial reporting purposes. The Company is a holding company, and its sole material asset is its equity interest in Viant Technology LLC. As the sole managing member of Viant Technology LLC, the Company operates and controls all of the business and affairs of Viant Technology LLC. This reorganization is accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements of the Company will recognize the assets and liabilities received in the reorganization at their historical carrying amounts, as reflected in the historical consolidated financial statements of Viant Technology LLC. The Company will consolidate Viant Technology LLC on its consolidated financial statements and record a noncontrolling interest related to the Class B units held by the Class B stockholders on its consolidated balance sheet and statement of operations.
2021 Long Term Incentive Plan (“2021 LTIP”)
Immediately prior to the closing of the IPO, the Company’s board of directors adopted the 2021 LTIP to replace Viant Technology LLC’s 2020 Equity Based Incentive Compensation Plan (“Phantom Unit Plan”). The aggregate maximum number of shares of the Company’s Class A common stock that may be issued pursuant to stock awards under the 2021 LTIP, or the Share Reserve, is 11,787,112 shares of Class A common stock. The Share Reserve will automatically increase on January 1 of each year commencing on January 1, 2022 and ending with a final increase on January 1, 2031 in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year; provided, however, that the Company’s board of directors may provide that there will not be a January 1st increase in the Share Reserve in a given year or that the increase will be less than 5% of the shares of capital stock outstanding on the preceding December 31st.
Upon adoption of the 2021 LTIP, approximately 6.2 million restricted stock units (“RSUs”) were granted to certain employees with a grant date fair value of $155 million and approximately 2.2 million RSUs will vest upon expiration of the 180 day lock-up period. Approximately $83.5 million of stock-based compensation expense will be recognized during 2021 and the remainder over a weighted average period of 2.1 years.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Unitholders and the Managing Member of Viant Technology LLC:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Viant Technology LLCInc. and subsidiaries (the "Company") as of December 31, 20202021 and 2019,2020, the related consolidated statements of operations, and comprehensive income (loss), convertible preferred units and members' equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2020,2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20202021 and 2019,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020,2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte& Touche LLP
Costa Mesa, California
March 23, 202110, 2022
We have served as the Company's auditor since 2020.
78
VIANT TECHNOLOGY LLCINC.
(In thousands, except share/unit data)
|
| As of December 31, |
|
| As of December 31, |
| |||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash |
| $ | 9,629 |
|
| $ | 4,815 |
|
| $ | 238,480 |
|
| $ | 9,629 |
| |
Accounts receivable, net of allowances |
|
| 89,767 |
|
|
| 68,083 |
|
|
| 110,739 |
|
|
| 89,767 |
| |
Prepaid expenses and other current assets |
|
| 4,487 |
|
|
| 1,892 |
|
|
| 2,967 |
|
|
| 4,487 |
| |
Total current assets |
|
| 103,883 |
|
|
| 74,790 |
|
|
| 352,186 |
|
|
| 103,883 |
| |
Property, equipment, and software, net |
|
| 13,829 |
|
|
| 14,924 |
|
|
| 22,331 |
|
|
| 13,829 |
| |
Intangible assets, net |
|
| 3,015 |
|
|
| 4,243 |
|
|
| 1,786 |
|
|
| 3,015 |
| |
Goodwill |
|
| 12,422 |
|
|
| 12,422 |
|
|
| 12,422 |
|
|
| 12,422 |
| |
Other assets |
|
| 371 |
|
|
| 478 |
|
|
| 406 |
|
|
| 371 |
| |
Total assets |
| $ | 133,520 |
|
| $ | 106,857 |
|
| $ | 389,131 |
|
| $ | 133,520 |
| |
Liabilities, convertible preferred units and members’ equity |
|
|
|
|
|
|
|
| |||||||||
Liabilities, convertible preferred units and stockholders' equity/members' equity |
|
|
|
|
|
|
|
| |||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Accounts payable |
| $ | 29,763 |
|
| $ | 20,480 |
|
| $ | 32,877 |
|
| $ | 29,763 |
| |
Accrued liabilities |
|
| 24,677 |
|
|
| 22,697 |
|
|
| 34,086 |
|
|
| 24,677 |
| |
Accrued compensation |
|
| 9,711 |
|
|
| 8,387 |
|
|
| 12,247 |
|
|
| 9,711 |
| |
Current portion of long-term debt |
|
| 3,353 |
|
|
| — |
|
|
| — |
|
|
| 3,353 |
| |
Current portion of deferred revenue |
|
| 2,725 |
|
|
| 5,261 |
|
|
| 1,317 |
|
|
| 2,725 |
| |
Accrued member tax distributions |
|
| 6,878 |
|
|
| 1,700 |
|
|
| 5 |
|
|
| 6,878 |
| |
Other current liabilities |
|
| 2,549 |
|
|
| 2,536 |
|
|
| 2,526 |
|
|
| 2,549 |
| |
Total current liabilities |
|
| 79,656 |
|
|
| 61,061 |
|
|
| 83,058 |
|
|
| 79,656 |
| |
Long-term debt |
|
| 20,182 |
|
|
| 17,500 |
|
|
| 17,500 |
|
|
| 20,182 |
| |
Long-term portion of deferred revenue |
|
| 5,612 |
|
|
| 4,769 |
|
|
| 5,234 |
|
|
| 5,612 |
| |
Other long-term liabilities |
|
| 453 |
|
|
| 822 |
|
|
| 765 |
|
|
| 453 |
| |
Total liabilities |
|
| 105,903 |
|
|
| 84,152 |
|
|
| 106,557 |
|
|
| 105,903 |
| |
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
|
| |||||||||
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
|
| |||||||||
Convertible preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
2019 convertible preferred units, no par value; 600,000 units authorized, issued and outstanding as of December 31, 2020 and 2019; liquidation preference of $5,444 and $7,628 as of December 31, 2020 and 2019, respectively |
|
| 7,500 |
|
|
| 7,500 |
| |||||||||
Members’ equity |
|
|
|
|
|
|
|
| |||||||||
Common units, no par value; 400,000 units authorized, issued and outstanding as of December 31, 2020 and 2019 |
|
| — |
|
|
| — |
| |||||||||
2019 convertible preferred units, no par value; NaN issued and outstanding as of December 31, 2021 and 600,000 units authorized, issued and outstanding as of December 31, 2020; liquidation preference $5,444 as of December 31, 2020 |
|
| — |
|
|
| 7,500 |
| |||||||||
Members' equity |
|
|
|
|
|
|
|
| |||||||||
Common units, no par value; NaN issued and outstanding as of December 31, 2021 and 400,000 units authorized, issued and outstanding as of December 31, 2020 |
|
| — |
|
|
| — |
| |||||||||
Additional paid-in capital |
|
| 92,187 |
|
|
| 92,187 |
|
|
| — |
|
|
| 92,187 |
| |
Accumulated deficit |
|
| (72,070 | ) |
|
| (76,982 | ) |
|
| — |
|
|
| (72,070 | ) | |
Total members’ equity |
|
| 20,117 |
|
|
| 15,205 |
| |||||||||
Total liabilities, convertible preferred units and members’ equity |
| $ | 133,520 |
|
| $ | 106,857 |
| |||||||||
Stockholders’ equity |
|
|
|
|
|
|
|
| |||||||||
Preferred stock, $0.001 par value, 10,000,000 shares authorized, NaN issued and outstanding as of December 31, 2021 |
|
| — |
|
|
| — |
| |||||||||
Class A common stock, $0.001 par value; 450,000,000 shares authorized and 13,920,868 shares issued and 13,704,638 shares outstanding as of December 31, 2021 |
|
| 14 |
|
|
| — |
| |||||||||
Class B common stock, $0.001 par value; 150,000,000 shares authorized and 47,107,130 shares issued and outstanding as of December 31, 2021 |
|
| 47 |
|
|
| — |
| |||||||||
Additional paid-in capital |
|
| 82,888 |
|
|
| — |
| |||||||||
Accumulated deficit |
|
| (20,139 | ) |
|
| — |
| |||||||||
Treasury stock, at cost; 216,230 shares as of December 31, 2021 |
|
| (2,648 | ) |
|
| — |
| |||||||||
Total stockholders' equity attributable to Viant Technology Inc./members' equity |
|
| 60,162 |
|
|
| 20,117 |
| |||||||||
Noncontrolling interests |
|
| 222,412 |
|
|
| — |
| |||||||||
Total equity |
|
| 282,574 |
|
|
| 20,117 |
| |||||||||
Total liabilities, convertible preferred units and stockholders' equity/members' equity |
| $ | 389,131 |
|
| $ | 133,520 |
| |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
79
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share/unit data)
|
| Year Ended December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Revenue |
| $ | 224,127 |
|
| $ | 165,251 |
|
| $ | 164,892 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
|
| 129,604 |
|
|
| 88,260 |
|
|
| 94,060 |
|
Sales and marketing |
|
| 65,042 |
|
|
| 28,887 |
|
|
| 29,027 |
|
Technology and development |
|
| 25,372 |
|
|
| 8,698 |
|
|
| 9,240 |
|
General and administrative |
|
| 46,904 |
|
|
| 17,639 |
|
|
| 19,770 |
|
Total operating expenses |
|
| 266,922 |
|
|
| 143,484 |
|
|
| 152,097 |
|
Income (loss) from operations |
|
| (42,795 | ) |
|
| 21,767 |
|
|
| 12,795 |
|
Interest expense, net |
|
| 864 |
|
|
| 1,038 |
|
|
| 3,948 |
|
Other expense (income), net |
|
| 60 |
|
|
| 91 |
|
|
| (1,077 | ) |
Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
Total other expense (income), net |
|
| (5,186 | ) |
|
| 1,129 |
|
|
| 2,871 |
|
Net income (loss) |
|
| (37,609 | ) |
|
| 20,638 |
|
|
| 9,924 |
|
Less: Net loss attributable to noncontrolling interests |
|
| (29,867 | ) |
|
| — |
|
|
| — |
|
Net loss attributable to Viant Technology Inc. |
| $ | (7,742 | ) |
| $ | — |
|
| $ | — |
|
Earnings (loss) per Class A common stock/unit: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 31.31 |
|
Diluted |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 27.37 |
|
Weighted-average Class A common stock/units outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 12,364 |
|
|
| 400 |
|
|
| 274 |
|
Diluted |
|
| 12,364 |
|
|
| 1,000 |
|
|
| 1,000 |
|
The accompanying notes are an integral part of these consolidated financial statements.
80
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
|
| Year Ended December 31, 2021 |
|
| Year Ended December 31, 2020 |
|
| Year Ended December 31, 2019 |
| |||||||||||||||||||||||||||
|
| Viant |
|
| Noncontrolling |
|
|
|
|
|
| Viant |
|
| Noncontrolling |
|
|
|
|
|
| Viant |
|
| Noncontrolling |
|
|
|
|
| ||||||
|
| Technology Inc. |
|
| Interest |
|
| Total |
|
| Technology Inc. |
|
| Interest |
|
| Total |
|
| Technology Inc. |
|
| Interest |
|
| Total |
| |||||||||
Net income (loss) |
| $ | (7,742 | ) |
|
| (29,867 | ) |
| $ | (37,609 | ) |
| $ | — |
|
| $ | 20,638 |
|
| $ | 20,638 |
|
| $ | — |
|
| $ | 9,924 |
|
| $ | 9,924 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Total other comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Comprehensive income (loss) |
| $ | (7,742 | ) |
|
| (29,867 | ) |
| $ | (37,609 | ) |
| $ | — |
|
| $ | 20,638 |
|
| $ | 20,638 |
|
| $ | — |
|
| $ | 9,943 |
|
| $ | 9,943 |
|
The accompanying notes are an integral part of these consolidated financial statements.
82
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED UNITS AND EQUITY (DEFICIT)
(In thousands)
|
| Convertible Preferred Units |
|
|
| Common Units |
|
| Class A Common Stock |
|
| Class B Common Stock |
|
| Additional Paid-In |
|
| Accumulated |
|
| Members' |
|
| Treasury Stock |
|
| Noncontrolling |
|
| Total |
| ||||||||||||||||||||||||||||||
|
| Units |
|
| Amount |
|
|
| Units |
|
| Amount |
|
| Units |
|
| Amount |
|
| Units |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Equity |
| |||||||||||||||
Balance as of December 31, 2018 |
|
| 600 |
|
| $ | 45,000 |
|
|
|
| 240 |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | (83,197 | ) |
|
| — |
|
| $ | — |
|
| $ | — |
|
| $ | (83,197 | ) |
Unit-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,090 |
|
Vesting of common units |
|
|
|
|
|
|
|
|
|
|
| 160 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
Retirement of 2016 convertible preferred units held by related party |
|
| (600 | ) |
|
| (45,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 45,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 45,000 |
|
Forgiveness of long-term debt and accrued interest with related party, net of transaction costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 44,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 44,069 |
|
Issuance of 2019 convertible preferred units to a related party |
|
| 600 |
|
|
| 7,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Beneficial conversion feature on 2019 convertible preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,558 |
|
Deemed dividend related to beneficial conversion feature on 2019 convertible preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (27,558 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (27,558 | ) |
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,700 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,700 | ) |
83
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,924 |
|
Balance as of December 31, 2019 |
|
| 600 |
|
|
| 7,500 |
|
|
|
| 400 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,205 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,205 |
|
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,726 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,726 | ) |
Member dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,000 | ) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,638 |
|
Balance as of December 31, 2020 |
|
| 600 |
|
|
| 7,500 |
|
|
|
| 400 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,117 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,117 |
|
Net income prior to Reorganization Transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 669 |
|
Effect of Reorganization Transactions |
|
| (600 | ) |
|
| (7,500 | ) |
|
|
| (400 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
| 48,936 |
|
|
| 49 |
|
|
| 28,237 |
|
|
|
|
|
|
| (20,786 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,500 |
|
Issuance of Class A common stock in initial public offering, net of underwriting and offering costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,500 |
|
|
| 12 |
|
|
| (1,500 | ) |
|
| (2 | ) |
|
| 228,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 228,185 |
|
Exchange of Class B common stock for Class A common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 329 |
|
|
| — |
|
|
| (329 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Issuance of common stock in connection with equity- based compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,092 |
|
|
| 2 |
|
|
|
|
|
|
|
|
|
|
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Repurchase of treasury shares in connection with the taxes paid related to net share settlement of equity awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (915 | ) |
|
| (15,045 | ) |
|
|
|
|
|
| (15,045 | ) |
84
Reissuance of treasury stock in connection with equity- based compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (12,397 | ) |
|
|
|
|
|
| 699 |
|
|
| 12,397 |
|
|
|
|
|
|
| — |
|
Allocation of equity to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (252,948 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 252,948 |
|
|
| — |
|
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (413 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (413 | ) |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 79,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 79,839 |
|
Net loss subsequent to Reorganization Transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,742 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (30,536 | ) |
|
| (38,278 | ) |
Balance as of December 31, 2021 |
|
| — |
|
| $ | — |
|
|
|
| — |
|
| $ | — |
|
|
| 13,921 |
|
| $ | 14 |
|
|
| 47,107 |
|
| $ | 47 |
|
| $ | 82,888 |
|
| $ | (20,139 | ) |
| $ | — |
|
|
| (216 | ) |
| $ | (2,648 | ) |
| $ | 222,412 |
|
| $ | 282,574 |
|
The accompanying notes are an integral part of these consolidated financial statements.
85
VIANT TECHNOLOGY LLC
INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
CASH FLOWS
(In thousands, except per unit data)thousands)
|
| Year Ended December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 11,141 |
|
|
| 10,106 |
|
|
| 10,155 |
|
Stock/Unit-based compensation |
|
| 68,822 |
|
|
| — |
|
|
| 1,090 |
|
Provision for (recovery of) doubtful accounts |
|
| (107 | ) |
|
| (584 | ) |
|
| 613 |
|
Loss on disposal of assets |
|
| 188 |
|
|
| 61 |
|
|
| 13 |
|
Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (20,865 | ) |
|
| (21,099 | ) |
|
| (20,200 | ) |
Prepaid expenses and other assets |
|
| (750 | ) |
|
| (252 | ) |
|
| (467 | ) |
Accounts payable |
|
| 3,404 |
|
|
| 8,995 |
|
|
| 2,745 |
|
Accrued liabilities |
|
| 9,728 |
|
|
| 1,736 |
|
|
| 15,827 |
|
Accrued compensation |
|
| 2,319 |
|
|
| 1,323 |
|
|
| (1,107 | ) |
Deferred revenue |
|
| (1,786 | ) |
|
| (1,694 | ) |
|
| (4,607 | ) |
Other liabilities |
|
| 290 |
|
|
| (355 | ) |
|
| (953 | ) |
Net cash provided by operating activities |
|
| 28,665 |
|
|
| 18,875 |
|
|
| 13,033 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (441 | ) |
|
| (434 | ) |
|
| (423 | ) |
Capitalized software development costs |
|
| (6,931 | ) |
|
| (7,407 | ) |
|
| (7,390 | ) |
Net cash used in investing activities |
|
| (7,372 | ) |
|
| (7,841 | ) |
|
| (7,813 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings on line of credit |
|
| — |
|
|
| — |
|
|
| 17,500 |
|
Proceeds from borrowings on debt with related party |
|
| — |
|
|
| — |
|
|
| 500 |
|
Proceeds from Paycheck Protection Program Loan |
|
| — |
|
|
| 6,035 |
|
|
| — |
|
Repayments of debt with related party |
|
| — |
|
|
| — |
|
|
| (25,000 | ) |
Proceeds from issuance of 2019 convertible preferred units to a related party |
|
| — |
|
|
| — |
|
|
| 7,500 |
|
Transaction costs paid on behalf of related party |
|
| — |
|
|
| — |
|
|
| (3,561 | ) |
Proceeds from issuance of common stock, net of underwriting discounts |
|
| 232,500 |
|
|
|
|
|
|
|
|
|
Payment of member tax distributions |
|
| (7,289 | ) |
|
| (5,547 | ) |
|
| — |
|
Payment of member dividends |
|
| — |
|
|
| (5,000 | ) |
|
| — |
|
Payment of offering costs |
|
| (2,608 | ) |
|
| (1,708 | ) |
|
| — |
|
Taxes paid related to net share settlement of equity awards |
|
| (15,045 | ) |
|
| — |
|
|
| — |
|
Net cash provided by (used in) financing activities |
|
| 207,558 |
|
|
| (6,220 | ) |
|
| (3,061 | ) |
Effect of exchange rate changes on cash |
|
| — |
|
|
| — |
|
|
| 1 |
|
Net increase in cash |
|
| 228,851 |
|
|
| 4,814 |
|
|
| 2,160 |
|
Cash at beginning of period |
|
| 9,629 |
|
|
| 4,815 |
|
|
| 2,655 |
|
Cash at end of period |
| $ | 238,480 |
|
| $ | 9,629 |
|
| $ | 4,815 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 660 |
|
| $ | 1,065 |
|
| $ | 12 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Additions of property and equipment paid by landlord pursuant to tenant improvement allowance |
|
| — |
|
|
| — |
|
|
| 355 |
|
Retirement of 2016 convertible preferred units with related party |
|
| — |
|
|
| — |
|
|
| 45,000 |
|
Forgiveness of long-term debt and accrued interest by related party |
|
| — |
|
|
| — |
|
|
| 47,630 |
|
Beneficial conversion feature and deemed dividend related to 2019 convertible preferred units |
|
| — |
|
|
| — |
|
|
| 27,558 |
|
Accrued member tax distributions |
|
| 5 |
|
|
| 6,878 |
|
|
| 1,700 |
|
86
|
| Year Ended December 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Revenue |
| $ | 165,251 |
|
| $ | 164,892 |
|
| $ | 108,355 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
|
| 88,260 |
|
|
| 94,060 |
|
|
| 74,344 |
|
Sales and marketing |
|
| 28,887 |
|
|
| 29,027 |
|
|
| 26,766 |
|
Technology and development |
|
| 8,698 |
|
|
| 9,240 |
|
|
| 9,585 |
|
General and administrative |
|
| 17,639 |
|
|
| 19,770 |
|
|
| 18,326 |
|
Total operating expenses |
|
| 143,484 |
|
|
| 152,097 |
|
|
| 129,021 |
|
Income (loss) from operations |
|
| 21,767 |
|
|
| 12,795 |
|
|
| (20,666 | ) |
Interest expense, net |
|
| 1,038 |
|
|
| 3,948 |
|
|
| 4,362 |
|
Other expense (income), net |
|
| 91 |
|
|
| (1,077 | ) |
|
| 507 |
|
Total other expense, net |
|
| 1,129 |
|
|
| 2,871 |
|
|
| 4,869 |
|
Net income (loss) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Foreign currency translation adjustments |
|
| — |
|
|
| 19 |
|
|
| 81 |
|
Comprehensive income (loss) |
| $ | 20,638 |
|
| $ | 9,943 |
|
| $ | (25,454 | ) |
Earnings (loss) per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 20.64 |
|
| $ | 31.31 |
|
| $ | (137.28 | ) |
Diluted |
| $ | 20.64 |
|
| $ | 27.37 |
|
| $ | (137.28 | ) |
Weighted-average units outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 400 |
|
|
| 274 |
|
|
| 186 |
|
Diluted |
|
| 1,000 |
|
|
| 1,000 |
|
|
| 186 |
|
Deferred offering costs recorded in accounts payable and accrued liabilities | — | 529 | — | |||||||||
Stock-based compensation included in capitalized software development costs | 11,017 | — | — | |||||||||
Capitalized assets financed by accounts payable and accrued liabilities | 356 | — | — | |||||||||
Noncash gain on extinguishment of debt related to Paycheck Protection Program loan | 6,110 | — | — |
The accompanying notes are an integral part of these consolidated financial statements.
87
VIANT TECHNOLOGY LLCINC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED UNITS AND MEMBERS’ EQUITY (DEFICIT)
(In thousands)
|
| Convertible Preferred Units |
|
|
| Common Units |
|
| Additional Paid-In |
|
| Accumulated |
|
| Cumulative Translation |
|
| Total Members’ Equity |
| ||||||||||||||
|
| Units |
|
| Amount |
|
|
| Units |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Adjustment |
|
| (Deficit) |
| ||||||||
Balance as of January 1, 2018 |
|
| 600 |
|
| $ | 45,000 |
|
|
|
| 100 |
|
| $ | — |
|
| $ | 1,381 |
|
| $ | (59,671 | ) |
| $ | (100 | ) |
| $ | (58,390 | ) |
Unit-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 647 |
|
|
|
|
|
|
|
|
|
|
| 647 |
|
Vesting of common units |
|
|
|
|
|
|
|
|
|
|
| 140 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 81 |
|
|
| 81 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (25,535 | ) |
|
|
|
|
|
| (25,535 | ) |
Balance as of December 31, 2018 |
|
| 600 |
|
|
| 45,000 |
|
|
|
| 240 |
|
|
| — |
|
|
| 2,028 |
|
|
| (85,206 | ) |
|
| (19 | ) |
|
| (83,197 | ) |
Unit-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,090 |
|
|
|
|
|
|
|
|
|
|
| 1,090 |
|
Vesting of common units |
|
|
|
|
|
|
|
|
|
|
| 160 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
|
| 19 |
|
Retirement of 2016 convertible preferred units held by related party |
|
| (600 | ) |
|
| (45,000 | ) |
|
|
|
|
|
|
|
|
|
|
| 45,000 |
|
|
|
|
|
|
|
|
|
|
| 45,000 |
|
Forgiveness of long-term debt and accrued interest with related party, net of transaction costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 44,069 |
|
|
|
|
|
|
|
|
|
|
| 44,069 |
|
Issuance of 2019 convertible preferred units to a related party |
|
| 600 |
|
|
| 7,500 |
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
| — |
|
Beneficial conversion feature on 2019 convertible preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,558 |
|
|
|
|
|
|
|
|
|
|
| 27,558 |
|
Deemed dividend related to beneficial conversion feature on 2019 convertible preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (27,558 | ) |
|
|
|
|
|
|
|
|
|
| (27,558 | ) |
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,700 | ) |
|
|
|
|
|
| (1,700 | ) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,924 |
|
|
|
|
|
|
| 9,924 |
|
Balance as of December 31, 2019 |
|
| 600 |
|
|
| 7,500 |
|
|
|
| 400 |
|
|
| — |
|
|
| 92,187 |
|
|
| (76,982 | ) |
|
| — |
|
|
| 15,205 |
|
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,726 | ) |
|
|
|
|
|
| (10,726 | ) |
Member dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,000 | ) |
|
|
|
|
|
| (5,000 | ) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,638 |
|
|
|
|
|
|
| 20,638 |
|
Balance as of December 31, 2020 |
|
| 600 |
|
| $ | 7,500 |
|
|
|
| 400 |
|
| $ | — |
|
| $ | 92,187 |
|
| $ | (72,070 | ) |
| $ | — |
|
| $ | 20,117 |
|
The accompanying notes are an integral part of these consolidated financial statements.
VIANT TECHNOLOGY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
| Year Ended December 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 10,106 |
|
|
| 10,155 |
|
|
| 10,628 |
|
Unit-based compensation |
|
| — |
|
|
| 1,090 |
|
|
| 647 |
|
Provision for (recovery of) doubtful accounts |
|
| (584 | ) |
|
| 613 |
|
|
| 512 |
|
Loss on disposal of assets |
|
| 61 |
|
|
| 13 |
|
|
| 411 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (21,099 | ) |
|
| (20,200 | ) |
|
| 14,873 |
|
Prepaid expenses and other assets |
|
| (252 | ) |
|
| (467 | ) |
|
| 897 |
|
Accounts payable |
|
| 8,995 |
|
|
| 2,745 |
|
|
| (4,811 | ) |
Accrued liabilities |
|
| 1,736 |
|
|
| 15,827 |
|
|
| (5,983 | ) |
Accrued compensation |
|
| 1,323 |
|
|
| (1,107 | ) |
|
| (979 | ) |
Deferred revenue |
|
| (1,694 | ) |
|
| (4,607 | ) |
|
| 10,571 |
|
Other liabilities |
|
| (355 | ) |
|
| (953 | ) |
|
| 2,232 |
|
Net cash provided by operating activities |
|
| 18,875 |
|
|
| 13,033 |
|
|
| 3,463 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (434 | ) |
|
| (423 | ) |
|
| (389 | ) |
Capitalized software development costs |
|
| (7,407 | ) |
|
| (7,390 | ) |
|
| (8,384 | ) |
Net cash used in investing activities |
|
| (7,841 | ) |
|
| (7,813 | ) |
|
| (8,773 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings on line of credit |
|
| — |
|
|
| 17,500 |
|
|
| — |
|
Proceeds from borrowings on debt with related party |
|
| — |
|
|
| 500 |
|
|
| 5,000 |
|
Proceeds from Paycheck Protection Program Loan |
|
| 6,035 |
|
|
| — |
|
|
| — |
|
Repayments of debt with related party |
|
| — |
|
|
| (25,000 | ) |
|
| (2,432 | ) |
Proceeds from issuance of 2019 convertible preferred units to a related party |
|
| — |
|
|
| 7,500 |
|
|
| — |
|
Transaction costs paid on behalf of related party |
|
| — |
|
|
| (3,561 | ) |
|
| — |
|
Payment of member tax distributions |
|
| (5,547 | ) |
|
| — |
|
|
| — |
|
Payment of member dividends |
|
| (5,000 | ) |
|
| — |
|
|
| — |
|
Payment of offering costs |
|
| (1,708 | ) |
|
| — |
|
|
| — |
|
Net cash provided by (used in) financing activities |
|
| (6,220 | ) |
|
| (3,061 | ) |
|
| 2,568 |
|
Effect of exchange rate changes on cash |
|
| — |
|
|
| 1 |
|
|
| (6 | ) |
Net increase (decrease) in cash |
|
| 4,814 |
|
|
| 2,160 |
|
|
| (2,748 | ) |
Cash at beginning of period |
|
| 4,815 |
|
|
| 2,655 |
|
|
| 5,403 |
|
Cash at end of period |
| $ | 9,629 |
|
| $ | 4,815 |
|
| $ | 2,655 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 1,065 |
|
| $ | 12 |
|
| $ | 2,233 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Additions of property and equipment paid by landlord pursuant to tenant improvement allowance |
|
| — |
|
|
| 355 |
|
|
| 506 |
|
Retirement of 2016 convertible preferred units with related party |
|
| — |
|
|
| 45,000 |
|
|
| — |
|
Forgiveness of long-term debt and accrued interest by related party |
|
| — |
|
|
| 47,630 |
|
|
| — |
|
Beneficial conversion feature and deemed dividend related to 2019 convertible preferred units |
|
| — |
|
|
| 27,558 |
|
|
| — |
|
Accrued member tax distributions |
|
| 6,878 |
|
|
| 1,700 |
|
|
| — |
|
Deferred offering costs recorded in accounts payable and accrued liabilities |
|
| 529 |
|
|
| — |
|
|
| — |
|
The accompanying notes are an integral part of these consolidated financial statements.
VIANT TECHNOLOGY LLC
Notes to Consolidated Financial Statements
1. Nature of Operations
ViantTechnology LLCInc. (the “Company,“Company,” “we,“we,” “us,” “our” “our”or “Viant”) is awas incorporated in the State of Delaware limited liability company headquartered in Irvine, California with offices located throughouton October9, 2020 for the United States. purpose of facilitating an Initial Public Offering (“IPO”) and other related transactions. The Company operatesa demandsideplatform(“DSP”), Adelphic,an enterprisesoftwareplatformthatisused by marketers and theiradvertisingagenciesto centralizetheplanning,buying and measurementof theiradvertisingacross channels,includingdesktop,mobile,connectedTV,linearTV, in-game, streamingaudioand digitalbillboards.
InOn February 2017, Viant completed9, 2021, the acquisitionSecurities and Exchange Commission (“SEC”) declared effective the Company’s Form S-1 related to the IPO of Adelphic.its Class A common stock. The combinationclosing date of the Adelphic platform with Viant’s extensive inventoryIPO was February 12, 2021, and data partner integrations and identity resolution capabilities established the Company’s unique omnichannel people-based DSP.
On September 15, 2019, the Company’s co-founders entered into a Unit Repurchase Agreement (the “Agreement”)in connection with the Companyclosing and the corporate reorganization (the “Reorganization Transactions”), the following actions were taken:
• | The Company amended and restated its certificate of incorporation, under which the Company is authorized to issue up to 450,000,000 shares of Class A common stock, up to 150,000,000 shares of Class B common stock, and up to 10,000,000 shares of preferred stock; |
• | The limited liability company agreement of Viant Technology LLC was amended and restated (as amended and restated, the “Viant Technology LLC Agreement”) to, among other things, provide for Class A units and Class B units and appoint the Company as the sole managing member of Viant Technology LLC; |
• | The Viant Technology LLC Agreement classified the interests acquired by the Company as Class A units, reclassified the interests held by the continuing members of Viant Technology LLC as Class B units, and permits the continuing members of Viant Technology LLC to exchange Class B units for shares of Class A common stock on a one-for-one basis or, at the election of Viant Technology Inc., for cash at the current fair value on the date of the exchange. Immediately following such reclassification, the continuing members held 48,935,559 Class B units. For each membership unit of Viant Technology LLC that was reclassified as a Class B unit, the Company issued 1 corresponding share of our Class B common stock to the continuing members, or 48,935,559 shares of Class B common stock in total; |
• | The Company issued and sold 10,000,000 shares of its Class A common stock to the underwriters at an IPO price of $25.00 per share, for gross proceeds of $250.0 million before deducting underwriting discounts and commissions of $17.5 million; |
• | The Company used the net proceeds of $232.5 million to acquire 10,000,000 newly issued Class A units of Viant Technology LLC at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock; |
• | The underwriters exercised their option to purchase 1,500,000 additional shares of Class A common stock from the selling stockholders. The Company did not receive any proceeds from the sale of shares by the selling stockholders. Pursuant to such exercise, the selling stockholders exchanged the corresponding number of Class B units for the shares of Class A common stock, the corresponding number of shares of Class B common stock were automatically retired, and 1,500,000 Class A units were issued to the Company; |
• | The Class B stockholders and Class A stockholders initially had 80.5% and 19.5%, respectively, of the combined voting power of the Company’s common stock. The Class A common stock outstanding represents 100% of the rights of the holders of all classes of the Company’s outstanding common stock to share in distributions from the Company, except for the right of Class B stockholders to receive the par value of the Class B common stock upon our liquidation, dissolution or winding up or an exchange of Class B units; |
• | The Company entered into a Registration Rights Agreement with the Class B stockholders to provide for certain rights and restrictions after the IPO; and |
88
• | Viant Technology LLC’s 2020 Equity Based Incentive Compensation Plan (the “Phantom Unit Plan”) was terminated and replaced with the Company’s 2021 Long Term Incentive Plan (the “LTIP”). |
Immediately following the closing of the IPO, Viant Technology Holding Inc. (the “Former Holdco”) pursuant to whichLLC is the Company retired all outstanding convertible preferred unitspredecessor of the Company for financial reporting purposes. The Company is a holding company, and its sole material asset is its equity interest in Viant Technology LLC. As the sole managing member of Viant Technology LLC, the Company operates and controls all of the business and affairs of Viant Technology LLC. The Reorganization Transactions are accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements of the Company recognize the assets and liabilities received in the Reorganization Transactions at their historical carrying amounts, as reflected in the historical consolidated financial statements of Viant Technology LLC. The Company consolidates Viant Technology LLC in its consolidated financial statements and records a noncontrolling interest related to the Class B units held by the Former Holdco, which represented a 60.0% ownership interest in the Company (the “2019 Former Holdco transaction”). This transaction was completedClass B stockholders on October 31, 2019. Refer to Note 7 for more information, including with respect to the presentationits consolidated balance sheets, statements of this transaction within the consolidated financial statements.operations and statements of comprehensive income (loss).
2. Basis of Presentationand Summaryof SignificantAccounting Policies
Basis of Presentationand Principlesof Consolidation
Theaccompanying consolidated financial statements arepreparedinaccordancewithaccounting principlesgenerallyacceptedintheUnitedStatesofAmerica(“GAAP”)andincludetheoperationsoftheCompany, Viant Technology LLC anditswhollyownedsubsidiaries. Viant Technology LLC is considered a variable interest entity (“VIE”). The Company is the United Statesprimary beneficiary and sole managing member of America (“GAAP”)Viant Technology LLC and includehas decision making authority that significantly affects the operationseconomic performance of the entity. As a result, the Company and its wholly owned subsidiaries.consolidates Viant Technology LLC. All intercompany balances and transactions have been eliminated in consolidation.consolidation.
Viant Technology LLC has been determined to be the predecessor for accounting purposes and, accordingly, the consolidated financial statements for periods prior to the IPO and the related Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes. Amounts for the period prior to February 12, 2021 presented in the consolidated financial statements and notes to consolidated financial statements herein represent the historical operations of Viant Technology LLC. The amounts as of December 31, 2021 and for the period from February 12, 2021 reflect the consolidated operations of the Company.
Management believes that the accompanying consolidated financial statements reflect the adjustments necessary for the fair statement of its consolidated balance sheet as of December 31, 2021 and 2020, results of operations for the years ended December 31, 2021, 2020 and 2019, and cash flows for the years ended December 31, 202, 2020 and 2019.
UseOperating Expenses
PlatformOperations
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Traffic acquisition costs |
| $ | 82,627 |
|
| $ | 54,735 |
|
| $ | 27,892 |
|
|
| 51 | % |
Other platform operations |
|
| 46,977 |
|
|
| 33,525 |
|
|
| 13,452 |
|
|
| 40 | % |
Total platform operations |
| $ | 129,604 |
|
| $ | 88,260 |
|
| $ | 41,344 |
|
|
| 47 | % |
Platform operations as a percentage of revenue |
|
| 58 | % |
|
| 53 | % |
|
|
|
|
|
|
|
|
64
Platformoperationsexpenseincreasedby $41.3 million,or 47%, duringthe yearended December31, 2021 comparedto the yearended December31, 2020. The change wasprimarilydriven by a $27.9 millionincreasein TAC, a variable function of Estimatesrevenue, as well as an increase in other platform operations driven by a $13.1 million increase in stock-based compensation related to our 2021 LTIP and a $1.0 million increase in depreciation, partially offset by a decrease of $0.7 million in cloud costs due to continued efforts to increase cloud infrastructure efficiencies.
The preparationSalesand Marketing
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Sales and marketing |
| $ | 65,042 |
|
| $ | 28,887 |
|
| $ | 36,155 |
|
|
| 125 | % |
Percentage of revenue |
|
| 29 | % |
|
| 17 | % |
|
|
|
|
|
|
|
|
Salesand marketingexpenseincreasedby $36.2 million,or 125%, duringtheyearended December31, 2021 comparedto theyearended December31, 2020. This increase was primarily due to a $25.6 million increase in stock-based compensation, a $6.4 million increase in personnel costs and overhead, which was allocated to sales and marketing as a result of the departments’ increased headcount relative to other departments, a $2.9 million increase in advertising, a $0.2 million increase in facilities expense, a $0.2 increase in software license expenses and a $0.8 million increase in travel and entertainment expenses.
Technology and Development
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Technology and development |
| $ | 25,372 |
|
| $ | 8,698 |
|
| $ | 16,674 |
|
|
| 192 | % |
Percentage of revenue |
|
| 11 | % |
|
| 5 | % |
|
|
|
|
|
|
|
|
Technologyand developmentexpenseincreasedby $16.7 million,or 192%, duringtheyear ended December31, 2021 comparedto theyearended December31, 2020. This increase was primarily attributable to a $12.4 million increase in stock-based compensation, a $3.8 million increase in personnel costs as a result of an increase in headcount to support our continued investment in developed technology and a $0.4 million increase in software and license expenses.
General and Administrative
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
General and administrative |
| $ | 46,904 |
|
| $ | 17,639 |
|
| $ | 29,265 |
|
|
| 166 | % |
Percentage of revenue |
|
| 21 | % |
|
| 11 | % |
|
|
|
|
|
|
|
|
Generaland administrativeexpenseincreasedby $29.3 million,or 166%, duringtheyearended December31, 2021 comparedto the yearended December31, 2020. This increase was primarily attributable to a $17.7 million increase in stock-based compensation, a $5.6 million increase in insurance, legal and accounting expenses associated with being a publicly traded company, a $3.3 million increase in personnel costs due to the increase in headcount, a $1.4 million increase in recruiting expenses, a $0.5 million increase in bad debt expense due to recoveries of bad debt in a prior year, a $0.2 million increase in dues and subscriptions and a $0.3 million increase in software and license expenses.
65
TotalOther Expense (Income), Net
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Total other expense (income), net |
| $ | (5,186 | ) |
| $ | 1,129 |
|
| $ | (6,315 | ) |
|
| (559 | %) |
Percentage of revenue |
|
| (2 | %) |
|
| 1 | % |
|
|
|
|
|
|
|
|
Totalotherexpense (income),netdecreasedby $6.3 million,or 559%, duringtheyearended December31, 2021 comparedto theyearended December31, 2020. This decrease was primarily due to a $6.1 million gain on debt extinguishment as a result of the forgiveness of Company’s PPP Loan and related accrued interest and a $0.2 decrease in interest expense attributable to an amendment to our Loan Agreement with PNC Bank which decreased the applicable margin on the loan. For additional information regarding forgiveness of the Company’s PPP Loan and the amendment to the Loan Agreement, see Note 7 to our consolidated financial statements included elsewhere in conformity this Annual Report.
QuarterlyResultsof Operations
The followingtablessetforthour unauditedquarterlyconsolidatedstatementsof operationsdatafor eachquarter of our fiscalyearsended December31, 2021 and 2020. The informationforeachof thesequartershas been preparedon a basisconsistentwith GAAP requires management to make estimates our consolidated financialstatementsand, assumptions that affect the reported amountsin our opinion,includesalladjustments, consistingonly of assets and liabilities and disclosures of contingent assets and liabilities at normalrecurringadjustmentsnecessaryforthe date fairpresentationof thefinancialinformation containedin thosestatements.The followingunauditedconsolidatedquarterlyfinancialdatashouldbe readin conjunctionwith our annual audited consolidatedfinancialstatementsand therelatednotes included elsewhere in this Annual Report.These quarterlyresultsarenot necessarilyindicativeof our operatingresultsfora fullyearor any futureperiod.
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands, except per share/unit data) |
| |||||||||||||||||||||||||||||
Revenue |
| $ | 82,715 |
|
| $ | 50,857 |
|
| $ | 50,411 |
|
| $ | 40,144 |
|
| $ | 56,461 |
|
| $ | 40,205 |
|
| $ | 30,425 |
|
| $ | 38,160 |
|
Operating expenses(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
|
| 44,578 |
|
|
| 28,967 |
|
|
| 31,715 |
|
|
| 24,344 |
|
|
| 25,944 |
|
|
| 20,124 |
|
|
| 18,589 |
|
|
| 23,603 |
|
Sales and marketing |
|
| 15,173 |
|
|
| 15,131 |
|
|
| 20,553 |
|
|
| 14,185 |
|
|
| 9,494 |
|
|
| 6,521 |
|
|
| 5,742 |
|
|
| 7,130 |
|
Technology and development |
|
| 4,851 |
|
|
| 6,590 |
|
|
| 8,031 |
|
|
| 5,900 |
|
|
| 2,618 |
|
|
| 1,946 |
|
|
| 1,984 |
|
|
| 2,150 |
|
General and administrative |
|
| 10,428 |
|
|
| 11,981 |
|
|
| 14,075 |
|
|
| 10,420 |
|
|
| 5,231 |
|
|
| 3,861 |
|
|
| 3,891 |
|
|
| 4,656 |
|
Total operating expenses |
|
| 75,030 |
|
|
| 62,669 |
|
|
| 74,374 |
|
|
| 54,849 |
|
|
| 43,287 |
|
|
| 32,452 |
|
|
| 30,206 |
|
|
| 37,539 |
|
Income (loss) from operations |
|
| 7,685 |
|
|
| (11,812 | ) |
|
| (23,963 | ) |
|
| (14,705 | ) |
|
| 13,174 |
|
|
| 7,753 |
|
|
| 219 |
|
|
| 621 |
|
Total other expense (income), net |
|
| 169 |
|
|
| 348 |
|
|
| (5,868 | ) |
|
| 165 |
|
|
| 313 |
|
|
| 275 |
|
|
| 249 |
|
|
| 292 |
|
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Less: Net income (loss) attributable to noncontrolling interests |
|
| 5,962 |
|
|
| (9,623 | ) |
|
| (14,440 | ) |
|
| (11,766 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net income (loss) attributable to Viant Technology Inc. |
| $ | 1,554 |
|
|
| (2,537 | ) |
|
| (3,655 | ) |
|
| (3,104 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
66
Earnings (loss) per Class A common stock/unit —basic(2) |
| $ | 0.11 |
|
| $ | (0.20 | ) |
| $ | (0.32 | ) |
| $ | (0.27 | ) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
Earnings (loss) per Class A common stock/unit —diluted(2) |
| $ | 0.11 |
|
| $ | (0.20 | ) |
| $ | (0.32 | ) |
| $ | (0.27 | ) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (as a percentage of revenue*) |
| |||||||||||||||||||||||||||||
Revenue |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
|
| 54 | % |
|
| 57 | % |
|
| 63 | % |
|
| 61 | % |
|
| 46 | % |
|
| 50 | % |
|
| 61 | % |
|
| 62 | % |
Sales and marketing |
|
| 18 | % |
|
| 30 | % |
|
| 41 | % |
|
| 35 | % |
|
| 17 | % |
|
| 16 | % |
|
| 19 | % |
|
| 19 | % |
Technology and development |
|
| 6 | % |
|
| 13 | % |
|
| 16 | % |
|
| 15 | % |
|
| 5 | % |
|
| 5 | % |
|
| 7 | % |
|
| 6 | % |
General and administrative |
|
| 13 | % |
|
| 24 | % |
|
| 28 | % |
|
| 26 | % |
|
| 9 | % |
|
| 10 | % |
|
| 13 | % |
|
| 12 | % |
Total operating expenses |
|
| 91 | % |
|
| 123 | % |
|
| 148 | % |
|
| 137 | % |
|
| 77 | % |
|
| 81 | % |
|
| 99 | % |
|
| 98 | % |
Income (loss) from operations |
|
| 9 | % |
|
| (23 | %) |
|
| (48 | %) |
|
| (37 | %) |
|
| 23 | % |
|
| 19 | % |
|
| 1 | % |
|
| 2 | % |
Total other expense (income), net |
|
| 0 | % |
|
| 1 | % |
|
| (12 | )% |
|
| 0 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
Net income (loss) |
|
| 9 | % |
|
| -24 | % |
|
| (36 | )% |
|
| -37 | % |
|
| 23 | % |
|
| 19 | % |
|
| — |
|
|
| 1 | % |
Less: Net income (loss) attributable to noncontrolling interests |
|
| 7 | % |
|
| (19 | )% |
|
| (29 | )% |
|
| (29 | )% |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net income (loss) attributable to Viant Technology Inc. |
|
| 2 | % |
|
| (5 | )% |
|
| (7 | )% |
|
| (8 | )% |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
* | Percentagesmaynot sumdue to rounding |
67
(1) | The impact of stock-basedcompensation,depreciationand amortizationon each operating expense line item is set forth below: |
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
| $ | 1,253 |
|
| $ | 3,142 |
|
| $ | 5,540 |
|
| $ | 3,161 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Sales and marketing |
|
| 2,053 |
|
|
| 4,859 |
|
|
| 11,914 |
|
|
| 6,813 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| 1,390 |
|
|
| 3,015 |
|
|
| 5,029 |
|
|
| 2,939 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
General and administrative |
|
| 1,935 |
|
|
| 4,399 |
|
|
| 7,203 |
|
|
| 4,177 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total stock-based compensation |
| $ | 6,631 |
|
| $ | 15,415 |
|
| $ | 29,686 |
|
| $ | 17,090 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
| $ | 2,264 |
|
| $ | 2,080 |
|
| $ | 1,766 |
|
| $ | 1,578 |
|
| $ | 1,579 |
|
| $ | 1,619 |
|
| $ | 1,678 |
|
| $ | 1,762 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| 414 |
|
|
| 421 |
|
|
| 383 |
|
|
| 381 |
|
|
| 402 |
|
|
| 403 |
|
|
| 402 |
|
|
| 401 |
|
General and administrative |
|
| 132 |
|
|
| 164 |
|
|
| 168 |
|
|
| 161 |
|
|
| 163 |
|
|
| 171 |
|
|
| 153 |
|
|
| 144 |
|
Total depreciation |
| $ | 2,810 |
|
| $ | 2,665 |
|
| $ | 2,317 |
|
| $ | 2,120 |
|
| $ | 2,144 |
|
| $ | 2,193 |
|
| $ | 2,233 |
|
| $ | 2,307 |
|
Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
General and administrative |
|
| 133 |
|
|
| 132 |
|
|
| 132 |
|
|
| 132 |
|
|
| 133 |
|
|
| 132 |
|
|
| 132 |
|
|
| 132 |
|
Total amortization |
| $ | 308 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 308 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 307 |
|
See Note 4, Note 5 and Note 9 to our consolidated financial statements included elsewhere in this Annual Report for more information regarding depreciation, amortization and stock-based compensation expense, respectively.
(2) | See Note 2 to our consolidatedfinancialstatements included elsewhere in this Annual Reportfora descriptionof theearnings(loss)per share/unit—basic and dilutedcomputations. |
QuarterlyNon-GAAP Financial Measures
We monitor certain non-GAAP financial measures such ascontribution ex-TAC, adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC when evaluating our quarterly results of operations to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. Reconciliations of these non-GAAP financial measures for eachquarter of our fiscalyearsended December31, 2021 and 2020 to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables presented below. For a description of management’s use of each non-GAAP financial measure contained in this Annual Report, see “—KeyOperatingand FinancialPerformance Measures—Use of Non-GAAPFinancialMeasures.”
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Operating and Financial Performance Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
| $ | 38,137 |
|
| $ | 21,890 |
|
| $ | 18,696 |
|
| $ | 15,800 |
|
| $ | 30,517 |
|
| $ | 20,081 |
|
| $ | 11,836 |
|
| $ | 14,557 |
|
Contribution ex-TAC |
| $ | 48,483 |
|
| $ | 34,077 |
|
| $ | 32,199 |
|
| $ | 26,741 |
|
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Adjusted EBITDA |
| $ | 17,426 |
|
| $ | 6,454 |
|
| $ | 8,346 |
|
| $ | 4,882 |
|
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
Net income as a percentage of gross profit |
|
| 20 | % |
| N/A |
|
| N/A |
|
| N/A |
|
|
| 42 | % |
|
| 37 | % |
|
| 0 | % |
|
| 2 | % | |||
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 36 | % |
|
| 19 | % |
|
| 26 | % |
|
| 18 | % |
|
| 40 | % |
|
| 37 | % |
|
| 14 | % |
|
| 14 | % |
68
Contribution ex-TAC
The following table sets forth a reconciliation of revenue to gross profit to contribution ex-TAC for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Revenue |
| $ | 82,715 |
|
| $ | 50,857 |
|
| $ | 50,411 |
|
| $ | 40,144 |
|
| $ | 56,461 |
|
| $ | 40,205 |
|
| $ | 30,425 |
|
| $ | 38,160 |
|
Less: Platform operations |
|
| (44,578 | ) |
|
| (28,967 | ) |
|
| (31,715 | ) |
|
| (24,344 | ) |
|
| (25,944 | ) |
|
| (20,124 | ) |
|
| (18,589 | ) |
|
| (23,603 | ) |
Gross profit |
|
| 38,137 |
|
|
| 21,890 |
|
|
| 18,696 |
|
|
| 15,800 |
|
|
| 30,517 |
|
|
| 20,081 |
|
|
| 11,836 |
|
|
| 14,557 |
|
Add: Other platform operations |
|
| 10,346 |
|
|
| 12,187 |
|
|
| 13,503 |
|
|
| 10,941 |
|
|
| 8,618 |
|
|
| 7,914 |
|
|
| 8,209 |
|
|
| 8,784 |
|
Contribution ex-TAC |
| $ | 48,483 |
|
| $ | 34,077 |
|
| $ | 32,199 |
|
| $ | 26,741 |
|
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
Adjusted EBITDA
The following table sets forth a reconciliation of net income (loss) to adjusted EBITDA for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 161 |
|
|
| 227 |
|
|
| 241 |
|
|
| 235 |
|
|
| 249 |
|
|
| 264 |
|
|
| 244 |
|
|
| 281 |
|
Depreciation and amortization |
|
| 3,118 |
|
|
| 2,972 |
|
|
| 2,624 |
|
|
| 2,427 |
|
|
| 2,452 |
|
|
| 2,500 |
|
|
| 2,540 |
|
|
| 2,614 |
|
Stock-based compensation |
|
| 6,631 |
|
|
| 15,415 |
|
|
| 29,686 |
|
|
| 17,090 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Adjusted EBITDA |
| $ | 17,426 |
|
| $ | 6,454 |
|
| $ | 8,346 |
|
| $ | 4,882 |
|
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
Adjusted EBITDA as a percentage of contribution ex-TAC
The following table sets forth a reconciliation of net income (loss) as a percentage of gross profit to adjusted EBITDA as a percentage of contribution ex-TAC for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands, except for percentages) |
| |||||||||||||||||||||||||||||
Gross profit |
| $ | 38,137 |
|
| $ | 21,890 |
|
| $ | 18,696 |
|
| $ | 15,800 |
|
| $ | 30,517 |
|
| $ | 20,081 |
|
| $ | 11,836 |
|
| $ | 14,557 |
|
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Net income as a percentage of gross profit(1) |
|
| 20 | % |
| N/A |
|
| N/A |
|
| N/A |
|
|
| 42 | % |
|
| 37 | % |
|
| 0 | % |
|
| 2 | % | |||
Contribution ex-TAC (2) |
| $ | 48,483 |
|
| $ | 34,077 |
|
| $ | 32,199 |
|
| $ | 26,741 |
|
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
Adjusted EBITDA (3) |
| $ | 17,426 |
|
| $ | 6,454 |
|
| $ | 8,346 |
|
| $ | 4,882 |
|
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 36 | % |
|
| 19 | % |
|
| 26 | % |
|
| 18 | % |
|
| 40 | % |
|
| 37 | % |
|
| 14 | % |
|
| 14 | % |
(1) | Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
69
(2) | For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Contribution ex-TAC.” |
(3) | For a reconciliation of adjusted EBITDA to the most directly comparable financial measure calculated in accordance with GAAP, see “—Adjusted EBITDA.” |
KeyOperatingand FinancialPerformanceMeasures
Use of Non-GAAPFinancialMeasures
We monitor certain non-GAAP financial measures to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. We believe these measures enhance an overall understanding of our performance and investors’ ability to review our business from the same perspective as management and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Viant’s ongoing operating performance. These non-GAAP financial measures include contribution ex-TAC, adjusted EBITDA, adjusted EBITDA as a percentage of contribution ex-TAC, non-GAAP net income (loss), non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted, and average contribution ex-TAC per active customer, each of which are discussed immediately following the table below, along with the operational performance measure active customers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables presented below. There are limitations in using non-GAAP financial measures which are not prepared in accordance with GAAP, as they may be different from non-GAAP financial measures used by other companies and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.
|
| Year Ended December 31, |
|
|
|
|
| |||||
|
| 2021 |
|
| 2020 |
|
| Change (%) |
| |||
|
| (in thousands, except for percentages, number of customers and per share data) |
|
|
|
|
| |||||
Operating and Financial Performance Measures |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
| $ | 94,523 |
|
| $ | 76,991 |
|
|
| 23 | % |
Contribution ex-TAC |
| $ | 141,500 |
|
| $ | 110,516 |
|
|
| 28 | % |
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
|
| (282 | %) |
Adjusted EBITDA |
| $ | 37,108 |
|
| $ | 31,782 |
|
|
| 17 | % |
Net income as a percentage of gross profit(1) |
| N/A |
|
|
| 27 | % |
| N/A |
| ||
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 26 | % |
|
| 29 | % |
|
| (9 | %) |
Non-GAAP net income |
| $ | 23,865 |
|
| $ | 20,638 |
|
|
| 16 | % |
Earnings (loss) per share/unit—basic |
| $ | (0.63 | ) |
| $ | 20.64 |
|
|
| (103 | %) |
Earnings (loss) per share/unit—diluted |
| $ | (0.63 | ) |
| $ | 20.64 |
|
|
| (103 | %) |
Non-GAAP earnings (loss) per share—basic(2) |
| $ | 0.31 |
|
| N/A |
|
| N/A |
| ||
Non-GAAP earnings (loss) per share—diluted(2) |
| $ | 0.30 |
|
| N/A |
|
| N/A |
| ||
Active customers(3) |
|
| 309 |
|
|
| 264 |
|
|
| 17 | % |
Average gross profit per active customer |
| $ | 306 |
|
| $ | 292 |
|
|
| 5 | % |
Average contribution ex-TAC per active customer |
| $ | 458 |
|
| $ | 419 |
|
|
| 9 | % |
(1) | Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
(2) | Non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted was not adjusted for the prior comparative periods presented. For a discussion on why prior periods were not adjusted, see “—Non-GAAP Earnings (loss) per Class A Common Stock/Unit—Basic and Diluted.” |
(3) | We define an active customer as a customer that had total aggregate contribution ex-TAC of at least $5,000 through our platform during the previous twelve months. Active customers is an operational metric calculated |
70
using contribution ex-TAC, a non-GAAP financial measure. For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Contribution ex-TAC.” |
Contribution ex-TAC
Contribution ex-TAC is a non-GAAP financial measure. Gross profit is the most comparable GAAP measurement, which is calculated as revenue less platform operations. In calculating contribution ex-TAC, we add back other platform operations expense to gross profit. Contribution ex-TAC is a key profitability measure used by our management and board of directors to understand and evaluate our operating performance and trends, develop short- and long-term operational plans and make strategic decisions regarding the allocation of capital. In particular, we believe that contribution ex-TAC can provide a measure of period-to-period comparisons for all pricing options within our business. Accordingly, we believe that this measure provides information to investors and the market in understanding and evaluating our operating results in the same manner as our management and board of directors.
Our use of contribution ex-TAC has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial results as reported amountsunder GAAP. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry that have similar business arrangements, may define contribution ex-TAC differently, which may make comparisons difficult. Because of these and other limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, gross profit, net income (loss) and expensescash flows.
Activecustomers
We definean activecustomeras a customerthathad total aggregatecontribution ex-TAC of atleast$5,000 throughour platformduringtheprevioustwelvemonths. For purposesof thisdefinition,a customerthatoperatesunderany of our pricing options thatequalsor exceedsthe aforementionedcontribution ex-TAC thresholdisconsideredan activecustomer. Activecustomersis an operational metric calculated using contribution ex-TAC, a non-GAAP financial measure. For a reconciliationof contributionex-TAC to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—Contributionex-TAC.”
Average contribution ex-TAC per activecustomer
We defineaveragecontribution ex-TAC peractivecustomeras contribution ex-TAC forthetrailing12-monthperiodpresenteddividedby activecustomers. Average gross profit peractivecustomeris the most comparable GAAP measurement, which we define as gross profit forthetrailing12-monthperiodpresenteddividedby activecustomers. We believethatthe totalnumber of activecustomersand averagecontribution ex-TAC peractivecustomeraremeasuresof our abilityto increaserevenueand theeffectivenessof our salesforce,althoughwe expectthesemeasuresto fluctuatebased on theseasonalityin our business.Customersthatgeneratedlessthan$5,000 in contribution ex-TAC in thetrailing 12-monthperiodwere not materialin theaggregatein any period. For a reconciliationof contributionex-TAC to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—Contributionex-TAC.”
The followingtablesets forth a reconciliation of (i) revenue to gross profit to contribution ex-TAC and (ii) average gross profit per active customer to average contribution ex-TAC per active customer, in each case forthe periods presented:
71
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands) |
| |||||||||||||
Revenue |
| $ | 224,127 |
|
| $ | 165,251 |
|
| $ | 164,892 |
|
| $ | 108,355 |
|
Less: Platform operations |
|
| (129,604 | ) |
|
| (88,260 | ) |
|
| (94,060 | ) |
|
| (74,344 | ) |
Gross profit |
|
| 94,523 |
|
|
| 76,991 |
|
|
| 70,832 |
|
|
| 34,011 |
|
Add: Other platform operations |
|
| 46,977 |
|
|
| 33,525 |
|
|
| 33,608 |
|
|
| 30,515 |
|
Contribution ex-TAC |
| $ | 141,500 |
|
| $ | 110,516 |
|
| $ | 104,440 |
|
| $ | 64,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active customers(1) |
|
| 309 |
|
|
| 264 |
|
|
| 277 |
|
|
| 267 |
|
Average gross profit per active customer |
| $ | 306 |
|
| $ | 292 |
|
| $ | 256 |
|
| $ | 127 |
|
Average contribution ex-TAC per active customer |
| $ | 458 |
|
| $ | 419 |
|
| $ | 377 |
|
| $ | 242 |
|
(1)We define an active customer as a customer that had total aggregate contribution ex-TAC of at least $5,000 through our platform during the reporting period.previous twelve months. Active customers is an operational metric calculated using contribution ex-TAC, a non-GAAP financial measure.
On an on-going basis, management evaluates its estimates, primarily those
AdjustedEBITDA and adjusted EBITDA as a percentage of contribution ex-TAC
Adjusted EBITDA is a non-GAAP financial measure defined by us as net income (loss) before interest expense, net, income tax expense (benefit), depreciation, amortization, stock-based compensation and certain other items that are not related to revenue recognition, allowancesour core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Net income (loss) is the most comparable GAAP measurement. Adjusted EBITDA as a percentage of contribution ex-TAC is a non-GAAP financial measure we calculate by dividing adjusted EBITDA by contribution ex-TAC for doubtful accounts, the useful livesperiod or periods presented.
Adjusted EBITDA and adjusted EBITDA as a percentage of capitalized software developmentcontribution ex-TAC are used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating adjusted EBITDA can provide a measure for period-to-period comparisons of our business. Adjusted EBITDA as a percentage of our non-GAAP measure, contribution ex-TAC, is used by our management and board of directors to evaluate adjusted EBITDA relative to our profitability after costs that are directly variable to revenues, which comprise TAC. Accordingly, we believe that adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC provide information to investors and the market in understanding and evaluating our operating results in the same manner as our management and board of directors.
Our use of adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC has limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these potential limitations include:
• | othercompanies,includingcompaniesin our industrythat have similarbusinessarrangements, mayreportadjustedEBITDAor adjustedEBITDAas a percentageof contribution ex-TAC, or similarlytitledmeasuresbut calculatethemdifferently,which reducestheirusefulnessas comparativemeasures; |
• | althoughdepreciationand amortizationarenon-cashcharges,theassetsbeingdepreciated and amortizedmayhave to be replacedin thefuture,and adjustedEBITDAdoes not reflectcash capitalexpenditurerequirementsforsuch replacementsor fornew capitalexpenditure requirements;and |
• | AdjustedEBITDAdoes not reflectchangesin, or cashrequirementsfor,our working capital needsor thepotentiallydilutiveimpactof stock-basedcompensation. |
72
Becauseof theseand otherlimitations,you shouldconsiderour non-GAAP financial measuresonly as supplementalto otherGAAP-based financialperformancemeasures,includingrevenue,netincome(loss)and cashflows.
The followingtablesets forth areconciliationof netincome (loss)to adjustedEBITDAforthe periods presented:
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands) |
| |||||||||||||
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 864 |
|
|
| 1,038 |
|
|
| 3,948 |
|
|
| 4,362 |
|
Depreciation and amortization |
|
| 11,141 |
|
|
| 10,106 |
|
|
| 10,155 |
|
|
| 10,628 |
|
Stock/unit-based compensation |
|
| 68,822 |
|
|
| — |
|
|
| 1,090 |
|
|
| 647 |
|
Restructuring expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 893 |
|
2019 Former Holdco transaction expense |
|
| — |
|
|
| — |
|
|
| 471 |
|
|
| 100 |
|
UK subsidiary closure |
|
| — |
|
|
| — |
|
|
| (933 | ) |
|
| 1,371 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Adjusted EBITDA |
| $ | 37,108 |
|
| $ | 31,782 |
|
| $ | 24,655 |
|
| $ | (7,534 | ) |
The following table sets forth a reconciliation of net income (loss) as a percentage of gross profit to adjusted EBITDA as a percentage of contribution ex-TAC for the periods presented:
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Gross profit |
| $ | 94,523 |
|
| $ | 76,991 |
|
| $ | 70,832 |
|
| $ | 34,011 |
|
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Net income (loss) as a percentage of gross profit(1) |
| N/A |
|
|
| 27 | % |
|
| 14 | % |
| N/A |
| ||
Contribution ex-TAC(2) |
| $ | 141,500 |
|
| $ | 110,516 |
|
| $ | 104,440 |
|
| $ | 64,526 |
|
Adjusted EBITDA(3) |
| $ | 37,108 |
|
| $ | 31,782 |
|
| $ | 24,655 |
|
| $ | (7,534 | ) |
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 26 | % |
|
| 29 | % |
|
| 24 | % |
|
| (12 | )% |
(1) | Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
(2) | For a reconciliationof contributionex-TAC to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—Contributionex-TAC.” |
(3) | For a reconciliationof adjustedEBITDA to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—AdjustedEBITDA.” |
Non-GAAP Net Income (Loss)
Non-GAAP net income (loss) is a non-GAAP financial measure defined by us as net income (loss) adjusted to eliminate the impact of stock-based compensation and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Net income (loss) is the most comparable GAAP measurement. Non-GAAP net income (loss) is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of stock-based compensation, gain on debt extinguishment, and certain other items that are not related to our core operations provides measures for period-to-period comparisons of our business and additional insight into our core controllable costs. Accordingly, we believe that non-GAAP net income (loss) provides information to investors and the market generally in
73
understanding and evaluating our results of operations in the same manner as our management and board of directors.
Our use of non-GAAP net income (loss) has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry that have similar business arrangements, may define non-GAAP net income (loss) differently, which may make comparisons difficult. Because of these and other property, equipmentlimitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, gross profit, net income (loss) and software, assumptionscash flows.
The following table sets forth a reconciliation of net income (loss) to non-GAAP net income (loss) for the periods presented:
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands) |
| |||||||||||||
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Add back: Stock-based compensation |
|
| 68,822 |
|
|
| — |
|
|
| 1,090 |
|
|
| 647 |
|
Less: Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Less: Income tax effect related to Viant Technology Inc.’s share of adjustments |
|
| (1,238 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Non-GAAP net income (loss) |
| $ | 23,865 |
|
| $ | 20,638 |
|
| $ | 11,014 |
|
| $ | (24,888 | ) |
Non-GAAPEarnings(loss)per Class A Common Stock/Unit—Basic and Diluted
Non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted is a non-GAAP financial measure defined by us as earnings (loss) per Class A common stock/unit—basic and diluted, adjusted to eliminate the impact of stock-based compensation and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Earnings (loss) per Class A common stock/unit—basic and diluted is the most comparable GAAP measurement. Non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted is used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of stock-based compensation, gain on extinguishment of debt and certain other items that are not related to our core operations provides measures for period-to-period comparisons of our business and provides additional insight into our core controllable costs. Accordingly, we believe that non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted provides information to investors and the market generally in understanding and evaluating our results of operations in the impairment analysessame manner as our management and board of long-lived assetsdirectors.
Our use of Non-GAAP earnings (loss) per Class A common stock/unit—basic and goodwill, deferred revenue, accrued liabilities diluted has limitationsas an analyticaltool,and assumptions usedyou shouldnot consideritin isolationor as a substituteforanalysisof our financialresultsas reportedunderGAAP.Some of thesepotentiallimitationsinclude:
• | othercompanies,includingcompaniesin our industrythat have similarbusinessarrangements, mayreportnon-GAAP earnings (loss) per Class A common stock/unit—basic and diluted or similarlytitledmeasures,but calculatethem differently,which reducestheirusefulnessas comparativemeasures; |
• | althoughthestock-based compensation related to the 2021 LTIPreferredto above isnon-cashin nature,non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted does not reflectitsimpacton netincome (loss)attributableto all common shareholders; and |
• | althoughthegain on debt extinguishment related to the forgiveness of our PPP Loan and related accrued interest isnon-cashin nature,non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted does not reflectitsimpacton netincome (loss)attributableto all common shareholders. |
74
Becauseof theseand otherlimitations,you shouldconsiderour non-GAAPmeasuresonly as supplementalto otherGAAP-based financialperformancemeasures,includingearnings(loss)perClass A common stock/unit—basic and diluted.
Basic non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted iscalculatedby dividingthe non-GAAP net income (loss)attributableto Class A common stockholdersby the number of weighted-average shares of Class A commonstock outstanding. Shares of our Class B common stock do not share in the fair valuationearnings or losses of equity-basedthe Company and are therefore not participating securities. As such, separate presentation of basic and diluted non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted of Class B common stock under the two-class method has not been presented.
Diluted non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted adjuststhebasic non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted calculation forthepotentialdilutiveimpactof commonshares such as equity awardsusingthetreasury-stockmethod and Class B common stock using the if-converted method.Dilutedearnings(loss)pershare considerstheimpactof potentially dilutivesecuritiesexceptin periodsin which thereisa lossbecausetheinclusionof thepotentialcommonshares would have an anti-dilutiveeffect. Shares of our Class B common stock, RSUs and nonqualified stock options are considered potentially dilutive shares of Class A common stock. For the year ended December 31, 2021, Class B common stock and nonqualified stock options amounts have been excluded from the computation of diluted earnings (loss) per share of Class A common stock because the effect would have been anti-dilutive under the if-converted and treasury stock method, respectively.
The followingtablepresentsthereconciliationof earnings(loss)perClass A common stock/unit—basic and dilutedto non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted for theyearended December 31, 2021. Earnings(loss)per share was not adjustedforthe year ended December 31, 2020 as there was no stock-based compensation or gain on debt extinguishment in that period.
75
|
| Year Ended |
| |||||||||
|
| December 31, 2021 |
| |||||||||
|
| Earnings |
|
|
|
|
|
| Non-GAAP |
| ||
|
| (Loss) per |
|
|
|
|
|
| Earnings (Loss) |
| ||
|
| Share |
|
| Adjustments |
|
| per Share |
| |||
|
| (in thousands, except per share data) |
| |||||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (37,609 | ) |
| $ | — |
|
| $ | (37,609 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Add back: Stock-based compensation |
|
| — |
|
|
| 68,822 |
|
|
| 68,822 |
|
Less: Gain on extinguishment of debt |
|
| — |
|
|
| (6,110 | ) |
|
| (6,110 | ) |
Less: Income tax effect related to Viant Technology Inc.'s share of adjustments (1) |
|
| — |
|
|
| (1,238 | ) |
|
| (1,238 | ) |
Non-GAAP net income (loss) |
|
| (37,609 | ) |
|
| 61,474 |
|
|
| 23,865 |
|
Less: Net income (loss) attributable to noncontrolling interests (2) |
|
| (29,867 | ) |
|
| 49,897 |
|
|
| 20,030 |
|
Net income (loss) attributable to Viant Technology, Inc.—basic |
|
| (7,742 | ) |
|
| 11,577 |
|
|
| 3,835 |
|
Add back: Reallocation of net loss attributable to noncontrolling interest from the assumed exchange of RSUs for Class A common stock |
|
| — |
|
|
| 253 |
|
|
| 253 |
|
Less: Income tax effect from the assumed exchange of RSUs for Class A common stock(1) |
|
| — |
|
|
| (62 | ) |
|
| (62 | ) |
Net income (loss) attributable to Viant Technology, Inc.—diluted |
| $ | (7,742 | ) |
| $ | 11,768 |
|
| $ | 4,026 |
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of Class A common stock outstanding —basic |
|
| 12,364 |
|
|
| — |
|
|
| 12,364 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
RSUs |
|
| — |
|
|
| 1,088 |
|
|
| 1,088 |
|
Nonqualified stock options |
|
| — |
|
|
| 8 |
|
|
| 8 |
|
Weighted-average shares of Class A common stock outstanding —diluted |
|
| 12,364 |
|
|
| 1,096 |
|
|
| 13,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of Class A common stock—basic |
| $ | (0.63 | ) |
| $ | 0.94 |
|
| $ | 0.31 |
|
Earnings (loss) per share of Class A common stock—diluted |
| $ | (0.63 | ) |
| $ | 0.93 |
|
| $ | 0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from earnings (loss) per share of Class A common stock—diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Class B common stock |
|
|
|
|
|
|
|
|
|
| 47,107 |
|
Total shares excluded from earnings (loss) per share of Class A common stock—diluted |
|
|
|
|
|
|
|
|
|
| 47,107 |
|
(1) | The estimated income tax effect of our share of non-GAAP reconciling items are calculated using an assumed blended tax rate of 24%, which represents our expected corporate tax rate, excluding discrete and non-recurring tax items. |
(2) | The adjustment to net income (loss) attributable to noncontrolling interests represents stock-based compensation and gain on extinguishment of debt attributed to the noncontrolling interests of our company outstanding during the period. |
Liquidityand CapitalResources
As of December31, 2021, we had cashof $238.5 millionand working capital,consistingof currentassets lesscurrentliabilities,of $269.1 million.
76
Our primary sources of cash are revenues derived from theprogrammaticpurchaseof advertisingon our platform and our existing cash balances, although we have, and may in the future, addressed our liquidity needs by utilizing our borrowing capacity under our revolving credit facility or raising additional funds by issuing equity.
Our primary uses of cash are capitalexpendituresto developour softwarein supportof enhancingour technologyplatform; purchasesof propertyand equipmentin supportof our expandingheadcountas a resultof our growth; the payment arrangements. These estimates are based on historical data of debt obligations used to financeour operations,capitalexpenditures,platformdevelopmentand experience,rapidgrowth; and future minimumpaymentsunderournon-cancelable operating leases.
We assess our liquidity in terms of our ability to generate cash sufficient to fund our short- and long-term cash requirements. As such, we project our anticipated cash requirements as well as variouscash flows generated from operating activities to meet those needs. We believeour existingcash, cash flow from revenues derived from theprogrammaticpurchaseof advertisingon our platform,and the undrawn availabilityunderour credit facilitywillbe sufficientto meetour cashrequirementsoverthenext12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of existingcash,cashflow fromoperations, the undrawn availabilityunderour credit facilityand issuances of equity securities or debt offerings. Our ability to fund longer-term operating needs will depend on our ability to generate positive cash flows through programmatic advertising purchases on our platform, our ability to access the capital markets, and other factors, that management believes to be reasonableincluding those discussed under the circumstances, the results of which form the basis for making judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.section titled “Risk Factors.”
As of December 31, 2020,2021, our material cash requirements from known contractual obligations consisted of future minimumpaymentsunderournon-cancelable operating leases, which we estimate will be approximately $3.0 million in 2022, $4.0 million in 2023, $3.1 million in 2024 and $3.0 million in 2025. We did not have any otheroff-balance sheetarrangementsas of December31, 2021 otherthan the impact minimum payments under theseoperatingleasesand the indemnificationagreementsdescribedin Note 14 to our consolidatedfinancialstatements included elsewhere in this Annual Report.
We are a holdingcompanywith no operationsof ourown and are dependenton distributionsfromViant TechnologyLLC,includingpaymentsundertheTax ReceivableAgreement,to pay ourtaxesand satisfy any current or future cash requirements. The Loan Agreement, as defined below, imposes,and any futurecreditfacilitiesmayimpose,limitationson theabilityof Viant TechnologyLLC or Viant Technology Inc.to pay dividendsto third parties.
RevolvingCreditFacility
On October31, 2019, we enteredintothe Loan Agreement with PNC Bank.The Loan Agreementprovidesa seniorsecuredrevolvingcreditfacilityof up to $40.0 millionwith a maturitydateof October31, 2024. The Loan Agreementiscollateralizedby security interestsin substantiallyallof our assets.
Advances undertheLoan Agreementbearinterestthroughmaturityata variableratebasedupon our selectionof either,a DomesticRate or a LIBORrate,plusan applicablemargin(“DomesticRate Loans” and “LIBORRate Loans”).The DomesticRate isdefinedas a fluctuatinginterestrateequalto thegreaterof (1)the basecommerciallendingrateof PNCBank, (2)theovernightfederalfundsrateplus0.50% and (3)theDaily LIBORRate plus1.00%. The effectiveweightedaverageinterestrateas of December31, 2021 was 3.24%. The applicablemarginas ofDecember31, 2021 wasequalto 0.75% forDomestic Rate Loans and 1.75% forLIBORRate Loans. The applicablemarginthat commenced on October 15, 2021 isbetween0.75% to 1.25% forDomesticRate Loans and between1.75% and 2.25% forLIBOR Rate Loans basedon maintainingcertainundrawn availabilityratios.The facilityfeeforundrawn amountsunder theLoan Agreementis0.375% perannum.We willalsobe requiredto pay customaryletterof creditfees,as necessary.
The Loan Agreementcontainscustomaryconditionsto borrowings,eventsof defaultand covenants, includingcovenantsthatrestrictour abilityto sellassets,makechangesto thenatureof the COVID-19 pandemic business,engagein mergersor acquisitions,incur,assumeor permitto existadditionalindebtednessand guarantees,createor permit to existliens,pay dividends,issueequityinstruments,makedistributionsor redeemor repurchasecapitalstock or makeotherinvestments,and engagein transactionswith affiliates.The Loan Agreementalsorequiresthatwe maintaincompliancewith a minimumFixed Charge CoverageRatio(asdefinedin theLoan Agreement)of 1.40 to 1.00 at
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any timeundrawn availabilityundertheLoan Agreementislessthan25%. As of December31, 2021, we arein compliancewith allcovenants.
Cash Flows
Fiscal 2021 Changes in Cash Flows
Cash flows from operating, investing and financing activities for the fiscal years ended December 31, 2021 and 2020, as reflected in the Consolidated Statements of Cash Flows included in Item 8 of this Annual Report, are summarized in the following table:
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Consolidated statements of cash flows data |
|
|
|
|
|
|
|
|
Cash flows provided by operating activities |
| $ | 28,665 |
|
| $ | 18,875 |
|
Cash flows used in investing activities |
|
| (7,372 | ) |
|
| (7,841 | ) |
Cash flows provided by (used in) financing activities |
|
| 207,558 |
|
|
| (6,220 | ) |
Increase in cash |
| $ | 228,851 |
|
| $ | 4,814 |
|
Cash Flows Provided by OperatingActivities
Our cashflowsfromoperatingactivitiesareprimarilyinfluencedby growth in our operations,increases or decreasesin collectionsfromour customersand relatedpaymentsto our suppliersof advertisingmediaand data.Cash flowsfromoperatingactivitieshave been affectedby changesin our working capital,particularly changesin accountsreceivable,accountspayableand accruedliabilities.The timingof cashreceiptsfrom customersand paymentsto supplierscan significantlyimpactour cashflowsfromoperatingactivities.We typicallypay suppliersin advanceof collectionsfromour customers.Our collectionand paymentcyclescan vary fromperiodto period.In addition,we expectseasonalityto impactcashflowsfromoperatingactivitieson a quarterlybasis.
Our cashflowsprovided byoperatingactivities for fiscal 2021 was $28.7 million, a net increase of $9.8 million, or 51.9%, from cashflowsprovided byoperatingactivities for fiscal 2020 of $18.9 million. The change in cash flows for fiscal 2021 were primarily due to:
• | a decrease of $37.6 million from net loss; |
• | an increase of $73.9 million due to noncash add back adjustments to net loss comprised of $68.8 million for stock-based compensation, $11.1 million for depreciation and amortization, loss on disposal of assets of $0.2 million, offset by $0.1 million recovery of doubtful accounts and gain on debt extinguishment of $6.1 million; |
• | a decrease of $6.2 million from changes in working capital (excluding deferred revenue and other liabilities) primarily related to an increase of $15.5 million in accounts payable, accrued liabilities and accrued compensation, net against a decrease of $21.6 million in accounts receivable and prepaid assets and other assets. |
• | a decrease in deferred revenue of $1.8 million; and |
• | an increase in other liabilities of $0.3 million. |
Cash Flows Used in InvestingActivities
Our primaryinvestingactivitieshave consistedof capitalexpendituresto developour business continues softwarein supportof enhancingour technologyplatformand purchasesof propertyand equipmentin supportof our expandingheadcountas a resultof our growth. We capitalizecertaincostsassociatedwith creatingand enhancinginternallydevelopedsoftwarerelatedto evolve. our technologyinfrastructurethatarerecordedwithin property,equipmentand software,net.These costsincludepersonneland relatedemployeebenefitexpensesfor employeeswho aredirectlyassociatedwith and who devotetimeto softwaredevelopmentprojects.Purchasesof propertyand equipmentand capitalizedsoftwaredevelopmentcostsmayvaryfromperiod-to-perioddue to the timingof theexpansionof our operations,theadditionof headcountand our softwaredevelopmentcycles.As a result manyof capitalization of stock-based
78
compensation in future periods and the growth of our business, we expectour capitalexpendituresand our investmentactivityto continueto increase.
Our cashflowsused in investingactivities for fiscal 2021 was $7.4 million, a net decrease of $0.4 million, or 6.0%, from cashflowsused in investingactivities for fiscal 2020 of $7.8 million. The change in cash flows for fiscal 2021 were primarily due to:
• | $6.9 millionof investmentsin capitalizedsoftware;and |
• | $0.4 millionof purchasesof propertyand equipment. |
Cash Flows Provided by Financing Activities
Our financingactivitiesconsistedprimarilyof proceedsfromborrowingsand repaymentsof our debt, issuancesof our equityand paymentsof memberdistributions. Net cashprovidedby or used in financing activitieshas been and willbe used to financeour operations,capitalexpenditures,platformdevelopmentand rapidgrowth.
Our cashflowsprovided by financingactivities for fiscal 2021 was $207.6 million, a net increase of $213.8 million from cashflowsused in financingactivities for fiscal 2020 of $6.2 million. The change in cash flows for fiscal 2021 were primarily due to:
• | $232.5 million of IPO proceeds, net of underwriting discounts, partially offset by payments of $2.6 million in offering costs; |
• | $7.3 million in payments of member tax distributions; and |
• | $15.0 million in taxes paid related to the net share settlement of equity awards. |
Fiscal 2020 Changes in Cash Flows
For the comparison of fiscal 2021 to fiscal 2020, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" of our Form 10-K for our fiscal year ended December 31, 2020, filed with the SEC on March 23, 2021 under the subheading "Liquidity and Capital Resources".
CriticalAccounting Estimates
Our consolidatedfinancialstatementsarepreparedin accordancewith GAAP.The preparationof these consolidatedfinancialstatementsrequiresus to makeestimatesand assumptionsthataffectthereportedamounts of assets,liabilities,revenue,expensesand relateddisclosures.We evaluateour estimatesand assumptionson an ongoing basis.Our estimatesarebasedon historicalexperienceand variousotherassumptionsthatwe believeto be reasonableunderthecircumstances.Our actualresultscoulddifferfromtheseestimates.
An accountingpolicyisdeemedto be criticalifitrequiresan accountingestimateto be madeon assumptionsaboutmattersthatarehighlyuncertainatthetimetheestimateismade and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe that the assumptions and estimates associated with the evaluation of revenue recognition criteria, including the determination of revenue recognition net versus gross assessment in our revenuearrangements,theassumptionsused in thevaluationmodelsto determinethefairvalueof common unitsand stock/unit-basedcompensation,and internal usesoftwarehave thegreatestpotentialimpacton our consolidatedfinancialstatements.Therefore,we consider macro-economic factorstheseto be our criticalaccountingpoliciesand estimates.
See Note 2 to our consolidatedfinancialstatementsincluded elsewhere in this Annual Report foradditionalinformation on the significant accounting policies and methods used in the market, which require increased judgment and carry a higher degreepreparation of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.
SegmentInformation
The Company has a single reportable operating segment which operates an enterprise software platform, Adelphic, that enables marketers and their advertising agencies to automate and centralize the planning, buying and measurement of their video, audio and display ads across all channels, including desktop, mobile, connected TV, linear TV, streaming audio and digital billboards in the United States. In reaching this conclusion, management considers the definition of the chief operating decision maker (“CODM”), how the business is defined by the CODM, the nature of the information provided to the CODM and how that information is used to make operating decisions, allocate resources and assess performance. The Company’s CODM is comprised of the chief executive officer and chief operating officer. The results of operations provided to and analyzed by the CODM are at the consolidated level and accordingly, key resource decisions and assessment of performance are performed at the consolidated level. The Company assesses its determination of operating segments at least annually.financialstatements.
Revenue Recognition
The Company generates itsWe generate our revenueby providingmarketersand advertisingagencieswith theabilityto plan,buy and measuretheirdigitaladvertisingcampaignsusing its ourpeople-basedDSP,Adelphic.Our platform enables marketers
79
to reach their target audience across desktop,mobile,connectedTV,linearTV, in-game, streamingaudio and digitalbillboards.
The Company applies We applya five-stepapproachas definedin FinancialAccountingStandardsBoard (“FASB”) AccountingStandardsCodification(“ASC”) 606, Revenue fromContractswith Customers (“(“ASC 606”),in determiningtheamountand timingof revenueto be recognized:
Identificationof a contractwith a customer;
• | Identificationof a contractwith a customer; |
Identificationof theperformanceobligationsin thecontract;
• | Identificationof theperformanceobligationsin thecontract; |
Determinationof thetransactionprice;
• | Determinationof thetransactionprice; |
Allocationof thetransactionpriceto theperformanceobligationsin thecontract;and
• | Allocationof thetransactionpriceto theperformanceobligationsin thecontract;and |
Recognitionof revenuewhen or as theperformanceobligationsaresatisfied.
• | Recognitionof revenuewhen or as theperformanceobligationsaresatisfied. |
We makeour software platformavailablethroughdifferentpricingoptionsto tailorto multiplecustomer typesand customer needs.These optionsconsistof a percentageof spend option, a monthly subscriptionpricing option and a fixed cost per mille (“CPM”) CPMpricingoption. CPM“CPM” refersto a paymentoptionin which customerspay a priceforevery1,000 impressionsan ad receives. Customers can use our software platform on a self-service basis to execute their advertising campaigns. We generaterevenuewhen the oursoftwareplatformisused on a self-service basis by charginga platformfeethatiseithera percentageof spend or a flatmonthlysubscriptionfeeas wellas feesforadditionalfeaturessuch as dataand advancedreporting.We alsoofferour customerstheabilityto use our servicesto aidin datamanagement,mediaexecutionand advancedreporting.When customersutilizeour services,we generaterevenueby charginga (1)separateservicefeethatrepresentsa percentageof spend in additionto theplatformfee;(2)a flatmonthly subscription feecoveringservicesin connectionwith datamanagementand advancedreporting;or (3)a fixedCPM thatisinclusiveof media,otherdirectcostsand services.Some of the aforementionedofferingsarerelativelynew to themarketand arenot yetmaterialto our businessfroma financialperspective.
We maintainagreementswith our customersin theformof MSAsin connectionwith thepercentageof spend and monthlysubscriptionpricingoptions, as wellas instanceswhere we chargeour customersa flatmonthlyfeeforservicesin connectionwith datamanagementand advanced reporting. We also offer our customers the ability to use our services to aid in data management, media execution and advanced reporting. When customers utilize our services, we generate revenue by charging a (1) separate service fee that represents a percentage of spend in addition to the platform fee; (2) a flat monthly fee covering services maintain insertionorders(“IO”)in connection with data management and advanced reporting; or (3) a fixed CPM that is inclusive of media, other direct costs and services. Some of the aforementioned offerings are relatively new to the market and are not yet material to our business from a financial perspective.
We maintain agreements with our customers in the form of master service agreements (“MSA”) in connection with the percentage of spend and monthly subscription pricing options, as well as instances where we charge our customers a flat monthly fee for services in connection with data management and advanced reporting, and insertion orders (“IO”) in connection with the fixedCPM pricingoption, which setout theterms of therelationshipand use of our software platform.The natureof our performanceobligationsisto enablecustomersto plan,buy and measureadvertisingcampaignsusingourplatformand providecampaignexecution servicesas requested.
Forthepercentageof spend pricingoption, we typicallybillcustomersa platformfee,and in certaininstancesan additionalservicefee,which isbasedon a specifiedpercentageof the customer’spurchasesthroughtheplatform as well as fees for additional features such as data and advanced reporting,plusthecostof TAC, as definedbelow.TAC. We recognizerevenueatthe pointin timewhen a purchaseby thecustomeroccursthroughour software platform.Forthe monthlysubscriptionpricingoption, we bill customers a platform fee represented by a fixed subscription amount, as well as fees for additional features such as data and advanced reporting, plus the cost of TAC. We recognizesubscriptionfees as revenue overtimeon a ratablebasisoverthetermof theagreement.
The determination of whether revenue for the percentage of spend pricing option should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in the transaction. In bothdetermining whether we are acting as the principal or an agent, we follow the accounting guidance for principal-agent considerations. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative.
In instancesrevenueisreported net discussed above related to the percentage of amountsincurredand payableto suppliersforthecostof advertisinginventory,third-partydataand other add-onfeatures(collectively,“trafficacquisitioncosts” or “TAC”)sincespend pricing option,we typically act as an agent because we arrangeforthetransferof such costs fromthesupplierto thecustomerthroughtheuse of our software platformand do not controlsuch featurespriorto transferto thecustomer.As itrelatesto TACin thesepricing options,weWe do not have primaryresponsibility formeetingcustomerspecificationsand do not have discretionin establishingtheprice.Fordatamanagementand advancedreporting services,price of TAC related to this pricing option. As we typically bill a fixed monthly fee and recognizeact as the agent in these arrangements, we report revenueovertimeon a ratablebasisovernet basis.In certain arrangements, we act as a principal in percentage of spend arrangements because (i) we control the termadvertising inventory before it is transferred to our clients; (ii) we bear sole responsibility for fulfillment of theagreement. advertising
80
promise and inventory risks and (iii) we have full discretion in establishing prices. As we act as the principal in these arrangements, we report revenue and the related costs incurred on a gross basis.
For the fixed CPM pricing option,we typicallybillcustomersa fixedCPM pricebasedon advertisingimpressions deliveredthroughthe platform. Weplatform and recognizerevenueatthepointin timewhen theadvertisingimpressionsare delivered.In certaincases,we alsoprovidethirdpartydatasegmentsand measurementreporting, which arerecognizedatthepointin timetheyaredeliveredto thecustomer. This revenue is reported grossWe have theprimaryresponsibilityformeetingcustomer specificationsand have discretionin establishingtheprice of any amounts incurred and payableTAC related to suppliers for TAC, since we control such features prior to transfer to the customer. As it relates to TAC in this pricing option,option. As we haveact as the primary responsibility for meeting customer specificationsprincipal in these arrangements, we report revenue and have discretion in establishing the price.
The Company invoices its customersrelated costs incurred on a gross basis.
We invoice our customerson a monthlybasisforall pricing options.Invoice paymentterms,negotiatedon a customer-by-customerbasis,aretypically30 to 60 days. Advertisingagency customerstypicallyhave sequentialliabilityterms,which meanspaymentsarenot due to us fromour advertisingagencycustomeruntilthe Company from its advertisingagencycustomer until the advertising agency customer has receivedpaymentfromitscustomer, the advertiser.
Thereareno contractassetsrecordedon the consolidatedbalancesheetsbecauseourrightto any unbilledconsiderationforperformanceobligationssatisfiedisonly conditionalupon thepassageof time. Contractliabilities,or deferredrevenue,arerecordedforamountsthatarecollectedin advanceof thesatisfaction of performanceobligations.These liabilitiesareclassifiedas currentiftherespectiveperformanceobligationsare anticipatedto be satisfiedduringthesucceeding12-monthperiodperthetermsof thecontract,and theremaining portionisrecordedas non-currentdeferredrevenuein the consolidatedbalancesheets.
ASC606 providesvariousoptionalpracticalexpedients.We electedtheuse of thepractical expedientrelatingto thedisclosureof remainingperformanceobligationswithina contractand willnot disclose remainingperformanceobligationsforcontractswith an originalexpecteddurationof one yearor less.
Internal UseSoftware
We capitalizecertaincostsassociatedwith creatingand enhancinginternallydevelopedsoftware.These costsincludepersonneland relatedemployeebenefitsexpensesforemployeeswho aredirectlyassociatedwith and who devotetimeto softwaredevelopmentprojects.Softwaredevelopmentcoststhatdo not qualifyfor capitalizationareexpensedas incurredand recordedin technologyand developmentexpensein the consolidated statementsof operations.
Softwaredevelopmentactivitiestypicallyconsistof threestages:(1)theplanningphase;(2)the applicationand infrastructuredevelopmentstage;and (3)thepostimplementationstage.Costs incurredin the planningand postimplementationphases,includingcostsassociatedwith trainingand repairsand maintenance of thedevelopedtechnologies,areexpensedas incurred.We capitalizecostsassociatedwith softwaredeveloped when thepreliminaryprojectstageiscompleted,managementimplicitlyor explicitlyauthorizesand commitsto fundingtheprojectand itisprobablethattheprojectwillbe completedand performas intended.Costs incurred in theapplicationand infrastructuredevelopmentphases,includingsignificantenhancementsand upgrades,are capitalized.Capitalizationends once a projectissubstantiallycompleteand thesoftwareisreadyforitsintended purpose,atwhich pointthesoftwarebegins to bedepreciated over its estimated useful life.
JOBS Act Accounting Election
On April5, 2012, theJOBSAct was signedintolaw. The JOBSAct containsprovisionsthat,among otherthings,reducecertainreportingrequirementsforqualifyingpubliccompanies.As an “emerginggrowth company,”we may,underSection7(a)(2)(B)of theSecuritiesAct, delayadoptionof new or revised accountingstandardsapplicableto publiccompaniesuntilsuch standardswould otherwiseapplyto private companies.An “emerginggrowth company”isone with lessthan$1.07 billionin annualsales,has lessthan $700 millionin marketvalueof sharesof commonstockheldby non-affiliatesand issueslessthan$1 billion of non-convertibledebtovera three-yearperiod.We will remain an emerging growth company until December 31, 2026, or sooner if we no longer qualify. We maytakeadvantageof thisextendedtransitionperioduntil thefirstto occurof thedatethatwe (i)areno longeran “emerginggrowth company”or (ii)affirmativelyand irrevocablyoptout of thisextendedtransitionperiod.
81
We have electedto takeadvantageof thebenefitsof thisextendedtransitionperiod.Untilthedatethat we areno longeran “emerginggrowth company”or affirmativelyand irrevocablyoptout of theexemption providedby SecuritiesAct Section7(a)(2)(B),upon issuanceof a new or revisedaccountingstandardthatapplies to our consolidatedfinancialstatementsand thathas a differenteffectivedateforpublicand privatecompanies, theCompany willdisclosethedateon which adoptionisrequiredfornon-emerginggrowth companiesand the dateon which we willadopttherecentlyissuedaccountingstandard.As partof thiselection, we aredelayingthe adoptionof accountingguidancerelatedto leasesand implementationcostsincurredin cloudcomputing arrangementsthatcurrentlyappliesto publiccompanies.We areassessingtheimpactthisguidancewillhave on our consolidated financialstatements.See Note 2 to our consolidatedfinancialstatementsincluded elsewhere in this Annual Report foradditionalinformation.
RecentlyIssued Accounting Pronouncements
For informationregardingrecentlyissuedaccountingpronouncements,seeNote 2 to our consolidated financialstatements included elsewhere in this Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our operationsareprimarilywithintheUnitedStates,and we areexposedto marketrisksin the ordinarycourseof our business,includingtheeffectsof interestratechanges,foreigncurrencyfluctuationsand inflation.
InterestRate Risk
We areexposedto marketriskfromchangesin interestrateson our Loan Agreement,which accrues interestata variablerate.We have not used any derivativefinancialinstrumentsto manageour interestraterisk exposure.Based upon theprincipalbalanceowed on our revolvingcreditfacilityas of December31, 2021, a hypotheticalone percentagepointincreaseor decreasein theinterestrateunderour revolvingcreditfacilitywould resultin a de minimis change in interestexpense for the year ended December 31, 2021.
InflationRisk
We do not believethatinflationhas had a materialeffecton our business,financialconditionor results of operations.Ifour costswere to becomesubjectto significantinflationarypressures,we mightnot be ableto fullyoffsetsuch highercoststhroughpriceincreases.Our inabilityor failureto do so couldharmour business, financialconditionand resultsof operations.
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Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID No.34) | 78 |
79 | |
80 | |
82 | |
Consolidated Statements of Convertible Preferred Units and Equity (Deficit) | 83 |
86 | |
88 | |
77
REPORTOF INDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
To the Stockholders and the Board of Directors of Viant Technology Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets becauseof Viant Technology Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), convertible preferred units and equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s rightinternal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to any unbilled consideration for performance obligations satisfied is only conditional uponassess the passagerisks of time. Contract liabilities, or deferred revenue, are recorded for amounts that are collected in advancematerial misstatement of the satisfactionfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte& Touche LLP
Costa Mesa, California
March 10, 2022
We have served as the Company's auditor since 2020.
78
VIANT TECHNOLOGY INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share/unit data)
|
| As of December 31, |
| ||||||
|
| 2021 |
|
| 2020 |
| |||
Assets |
|
|
|
|
|
|
|
| |
Current assets: |
|
|
|
|
|
|
|
| |
Cash |
| $ | 238,480 |
|
| $ | 9,629 |
| |
Accounts receivable, net of allowances |
|
| 110,739 |
|
|
| 89,767 |
| |
Prepaid expenses and other current assets |
|
| 2,967 |
|
|
| 4,487 |
| |
Total current assets |
|
| 352,186 |
|
|
| 103,883 |
| |
Property, equipment, and software, net |
|
| 22,331 |
|
|
| 13,829 |
| |
Intangible assets, net |
|
| 1,786 |
|
|
| 3,015 |
| |
Goodwill |
|
| 12,422 |
|
|
| 12,422 |
| |
Other assets |
|
| 406 |
|
|
| 371 |
| |
Total assets |
| $ | 389,131 |
|
| $ | 133,520 |
| |
Liabilities, convertible preferred units and stockholders' equity/members' equity |
|
|
|
|
|
|
|
| |
Liabilities |
|
|
|
|
|
|
|
| |
Current liabilities: |
|
|
|
|
|
|
|
| |
Accounts payable |
| $ | 32,877 |
|
| $ | 29,763 |
| |
Accrued liabilities |
|
| 34,086 |
|
|
| 24,677 |
| |
Accrued compensation |
|
| 12,247 |
|
|
| 9,711 |
| |
Current portion of long-term debt |
|
| — |
|
|
| 3,353 |
| |
Current portion of deferred revenue |
|
| 1,317 |
|
|
| 2,725 |
| |
Accrued member tax distributions |
|
| 5 |
|
|
| 6,878 |
| |
Other current liabilities |
|
| 2,526 |
|
|
| 2,549 |
| |
Total current liabilities |
|
| 83,058 |
|
|
| 79,656 |
| |
Long-term debt |
|
| 17,500 |
|
|
| 20,182 |
| |
Long-term portion of deferred revenue |
|
| 5,234 |
|
|
| 5,612 |
| |
Other long-term liabilities |
|
| 765 |
|
|
| 453 |
| |
Total liabilities |
|
| 106,557 |
|
|
| 105,903 |
| |
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
|
| |
Convertible preferred units |
|
|
|
|
|
|
|
| |
2019 convertible preferred units, no par value; NaN issued and outstanding as of December 31, 2021 and 600,000 units authorized, issued and outstanding as of December 31, 2020; liquidation preference $5,444 as of December 31, 2020 |
|
| — |
|
|
| 7,500 |
| |
Members' equity |
|
|
|
|
|
|
|
| |
Common units, no par value; NaN issued and outstanding as of December 31, 2021 and 400,000 units authorized, issued and outstanding as of December 31, 2020 |
|
| — |
|
|
| — |
| |
Additional paid-in capital |
|
| — |
|
|
| 92,187 |
| |
Accumulated deficit |
|
| — |
|
|
| (72,070 | ) | |
Stockholders’ equity |
|
|
|
|
|
|
|
| |
Preferred stock, $0.001 par value, 10,000,000 shares authorized, NaN issued and outstanding as of December 31, 2021 |
|
| — |
|
|
| — |
| |
Class A common stock, $0.001 par value; 450,000,000 shares authorized and 13,920,868 shares issued and 13,704,638 shares outstanding as of December 31, 2021 |
|
| 14 |
|
|
| — |
| |
Class B common stock, $0.001 par value; 150,000,000 shares authorized and 47,107,130 shares issued and outstanding as of December 31, 2021 |
|
| 47 |
|
|
| — |
| |
Additional paid-in capital |
|
| 82,888 |
|
|
| — |
| |
Accumulated deficit |
|
| (20,139 | ) |
|
| — |
| |
Treasury stock, at cost; 216,230 shares as of December 31, 2021 |
|
| (2,648 | ) |
|
| — |
| |
Total stockholders' equity attributable to Viant Technology Inc./members' equity |
|
| 60,162 |
|
|
| 20,117 |
| |
Noncontrolling interests |
|
| 222,412 |
|
|
| — |
| |
Total equity |
|
| 282,574 |
|
|
| 20,117 |
| |
Total liabilities, convertible preferred units and stockholders' equity/members' equity |
| $ | 389,131 |
|
| $ | 133,520 |
| |
The accompanying notes are an integral part of these consolidated financial statements.
79
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share/unit data)
|
| Year Ended December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Revenue |
| $ | 224,127 |
|
| $ | 165,251 |
|
| $ | 164,892 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
|
| 129,604 |
|
|
| 88,260 |
|
|
| 94,060 |
|
Sales and marketing |
|
| 65,042 |
|
|
| 28,887 |
|
|
| 29,027 |
|
Technology and development |
|
| 25,372 |
|
|
| 8,698 |
|
|
| 9,240 |
|
General and administrative |
|
| 46,904 |
|
|
| 17,639 |
|
|
| 19,770 |
|
Total operating expenses |
|
| 266,922 |
|
|
| 143,484 |
|
|
| 152,097 |
|
Income (loss) from operations |
|
| (42,795 | ) |
|
| 21,767 |
|
|
| 12,795 |
|
Interest expense, net |
|
| 864 |
|
|
| 1,038 |
|
|
| 3,948 |
|
Other expense (income), net |
|
| 60 |
|
|
| 91 |
|
|
| (1,077 | ) |
Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
Total other expense (income), net |
|
| (5,186 | ) |
|
| 1,129 |
|
|
| 2,871 |
|
Net income (loss) |
|
| (37,609 | ) |
|
| 20,638 |
|
|
| 9,924 |
|
Less: Net loss attributable to noncontrolling interests |
|
| (29,867 | ) |
|
| — |
|
|
| — |
|
Net loss attributable to Viant Technology Inc. |
| $ | (7,742 | ) |
| $ | — |
|
| $ | — |
|
Earnings (loss) per Class A common stock/unit: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 31.31 |
|
Diluted |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 27.37 |
|
Weighted-average Class A common stock/units outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 12,364 |
|
|
| 400 |
|
|
| 274 |
|
Diluted |
|
| 12,364 |
|
|
| 1,000 |
|
|
| 1,000 |
|
The accompanying notes are an integral part of these consolidated financial statements.
80
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
|
| Year Ended December 31, 2021 |
|
| Year Ended December 31, 2020 |
|
| Year Ended December 31, 2019 |
| |||||||||||||||||||||||||||
|
| Viant |
|
| Noncontrolling |
|
|
|
|
|
| Viant |
|
| Noncontrolling |
|
|
|
|
|
| Viant |
|
| Noncontrolling |
|
|
|
|
| ||||||
|
| Technology Inc. |
|
| Interest |
|
| Total |
|
| Technology Inc. |
|
| Interest |
|
| Total |
|
| Technology Inc. |
|
| Interest |
|
| Total |
| |||||||||
Net income (loss) |
| $ | (7,742 | ) |
|
| (29,867 | ) |
| $ | (37,609 | ) |
| $ | — |
|
| $ | 20,638 |
|
| $ | 20,638 |
|
| $ | — |
|
| $ | 9,924 |
|
| $ | 9,924 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Total other comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Comprehensive income (loss) |
| $ | (7,742 | ) |
|
| (29,867 | ) |
| $ | (37,609 | ) |
| $ | — |
|
| $ | 20,638 |
|
| $ | 20,638 |
|
| $ | — |
|
| $ | 9,943 |
|
| $ | 9,943 |
|
The accompanying notes are an integral part of these consolidated financial statements.
82
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED UNITS AND EQUITY (DEFICIT)
(In thousands)
|
| Convertible Preferred Units |
|
|
| Common Units |
|
| Class A Common Stock |
|
| Class B Common Stock |
|
| Additional Paid-In |
|
| Accumulated |
|
| Members' |
|
| Treasury Stock |
|
| Noncontrolling |
|
| Total |
| ||||||||||||||||||||||||||||||
|
| Units |
|
| Amount |
|
|
| Units |
|
| Amount |
|
| Units |
|
| Amount |
|
| Units |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Equity |
| |||||||||||||||
Balance as of December 31, 2018 |
|
| 600 |
|
| $ | 45,000 |
|
|
|
| 240 |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | (83,197 | ) |
|
| — |
|
| $ | — |
|
| $ | — |
|
| $ | (83,197 | ) |
Unit-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,090 |
|
Vesting of common units |
|
|
|
|
|
|
|
|
|
|
| 160 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
Retirement of 2016 convertible preferred units held by related party |
|
| (600 | ) |
|
| (45,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 45,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 45,000 |
|
Forgiveness of long-term debt and accrued interest with related party, net of transaction costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 44,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 44,069 |
|
Issuance of 2019 convertible preferred units to a related party |
|
| 600 |
|
|
| 7,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Beneficial conversion feature on 2019 convertible preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,558 |
|
Deemed dividend related to beneficial conversion feature on 2019 convertible preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (27,558 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (27,558 | ) |
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,700 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,700 | ) |
83
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,924 |
|
Balance as of December 31, 2019 |
|
| 600 |
|
|
| 7,500 |
|
|
|
| 400 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,205 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,205 |
|
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,726 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,726 | ) |
Member dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,000 | ) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,638 |
|
Balance as of December 31, 2020 |
|
| 600 |
|
|
| 7,500 |
|
|
|
| 400 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,117 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,117 |
|
Net income prior to Reorganization Transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 669 |
|
Effect of Reorganization Transactions |
|
| (600 | ) |
|
| (7,500 | ) |
|
|
| (400 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
| 48,936 |
|
|
| 49 |
|
|
| 28,237 |
|
|
|
|
|
|
| (20,786 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,500 |
|
Issuance of Class A common stock in initial public offering, net of underwriting and offering costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,500 |
|
|
| 12 |
|
|
| (1,500 | ) |
|
| (2 | ) |
|
| 228,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 228,185 |
|
Exchange of Class B common stock for Class A common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 329 |
|
|
| — |
|
|
| (329 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Issuance of common stock in connection with equity- based compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,092 |
|
|
| 2 |
|
|
|
|
|
|
|
|
|
|
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Repurchase of treasury shares in connection with the taxes paid related to net share settlement of equity awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (915 | ) |
|
| (15,045 | ) |
|
|
|
|
|
| (15,045 | ) |
84
Reissuance of treasury stock in connection with equity- based compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (12,397 | ) |
|
|
|
|
|
| 699 |
|
|
| 12,397 |
|
|
|
|
|
|
| — |
|
Allocation of equity to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (252,948 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 252,948 |
|
|
| — |
|
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (413 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (413 | ) |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 79,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 79,839 |
|
Net loss subsequent to Reorganization Transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,742 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (30,536 | ) |
|
| (38,278 | ) |
Balance as of December 31, 2021 |
|
| — |
|
| $ | — |
|
|
|
| — |
|
| $ | — |
|
|
| 13,921 |
|
| $ | 14 |
|
|
| 47,107 |
|
| $ | 47 |
|
| $ | 82,888 |
|
| $ | (20,139 | ) |
| $ | — |
|
|
| (216 | ) |
| $ | (2,648 | ) |
| $ | 222,412 |
|
| $ | 282,574 |
|
The accompanying notes are an integral part of these consolidated financial statements.
85
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
| Year Ended December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 11,141 |
|
|
| 10,106 |
|
|
| 10,155 |
|
Stock/Unit-based compensation |
|
| 68,822 |
|
|
| — |
|
|
| 1,090 |
|
Provision for (recovery of) doubtful accounts |
|
| (107 | ) |
|
| (584 | ) |
|
| 613 |
|
Loss on disposal of assets |
|
| 188 |
|
|
| 61 |
|
|
| 13 |
|
Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (20,865 | ) |
|
| (21,099 | ) |
|
| (20,200 | ) |
Prepaid expenses and other assets |
|
| (750 | ) |
|
| (252 | ) |
|
| (467 | ) |
Accounts payable |
|
| 3,404 |
|
|
| 8,995 |
|
|
| 2,745 |
|
Accrued liabilities |
|
| 9,728 |
|
|
| 1,736 |
|
|
| 15,827 |
|
Accrued compensation |
|
| 2,319 |
|
|
| 1,323 |
|
|
| (1,107 | ) |
Deferred revenue |
|
| (1,786 | ) |
|
| (1,694 | ) |
|
| (4,607 | ) |
Other liabilities |
|
| 290 |
|
|
| (355 | ) |
|
| (953 | ) |
Net cash provided by operating activities |
|
| 28,665 |
|
|
| 18,875 |
|
|
| 13,033 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (441 | ) |
|
| (434 | ) |
|
| (423 | ) |
Capitalized software development costs |
|
| (6,931 | ) |
|
| (7,407 | ) |
|
| (7,390 | ) |
Net cash used in investing activities |
|
| (7,372 | ) |
|
| (7,841 | ) |
|
| (7,813 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings on line of credit |
|
| — |
|
|
| — |
|
|
| 17,500 |
|
Proceeds from borrowings on debt with related party |
|
| — |
|
|
| — |
|
|
| 500 |
|
Proceeds from Paycheck Protection Program Loan |
|
| — |
|
|
| 6,035 |
|
|
| — |
|
Repayments of debt with related party |
|
| — |
|
|
| — |
|
|
| (25,000 | ) |
Proceeds from issuance of 2019 convertible preferred units to a related party |
|
| — |
|
|
| — |
|
|
| 7,500 |
|
Transaction costs paid on behalf of related party |
|
| — |
|
|
| — |
|
|
| (3,561 | ) |
Proceeds from issuance of common stock, net of underwriting discounts |
|
| 232,500 |
|
|
|
|
|
|
|
|
|
Payment of member tax distributions |
|
| (7,289 | ) |
|
| (5,547 | ) |
|
| — |
|
Payment of member dividends |
|
| — |
|
|
| (5,000 | ) |
|
| — |
|
Payment of offering costs |
|
| (2,608 | ) |
|
| (1,708 | ) |
|
| — |
|
Taxes paid related to net share settlement of equity awards |
|
| (15,045 | ) |
|
| — |
|
|
| — |
|
Net cash provided by (used in) financing activities |
|
| 207,558 |
|
|
| (6,220 | ) |
|
| (3,061 | ) |
Effect of exchange rate changes on cash |
|
| — |
|
|
| — |
|
|
| 1 |
|
Net increase in cash |
|
| 228,851 |
|
|
| 4,814 |
|
|
| 2,160 |
|
Cash at beginning of period |
|
| 9,629 |
|
|
| 4,815 |
|
|
| 2,655 |
|
Cash at end of period |
| $ | 238,480 |
|
| $ | 9,629 |
|
| $ | 4,815 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 660 |
|
| $ | 1,065 |
|
| $ | 12 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Additions of property and equipment paid by landlord pursuant to tenant improvement allowance |
|
| — |
|
|
| — |
|
|
| 355 |
|
Retirement of 2016 convertible preferred units with related party |
|
| — |
|
|
| — |
|
|
| 45,000 |
|
Forgiveness of long-term debt and accrued interest by related party |
|
| — |
|
|
| — |
|
|
| 47,630 |
|
Beneficial conversion feature and deemed dividend related to 2019 convertible preferred units |
|
| — |
|
|
| — |
|
|
| 27,558 |
|
Accrued member tax distributions |
|
| 5 |
|
|
| 6,878 |
|
|
| 1,700 |
|
86
Deferred offering costs recorded in accounts payable and accrued liabilities | — | 529 | — | |||||||||
Stock-based compensation included in capitalized software development costs | 11,017 | — | — | |||||||||
Capitalized assets financed by accounts payable and accrued liabilities | 356 | — | — | |||||||||
Noncash gain on extinguishment of debt related to Paycheck Protection Program loan | 6,110 | — | — |
The accompanying notes are an integral part of these consolidated financial statements.
87
VIANT TECHNOLOGY INC.
Notes to Consolidated Financial Statements
1. Nature of Operations
ViantTechnologyInc. (the“Company,”“we,” “us,”“our”or “Viant”)was incorporated in the State of Delawareon October9, 2020 for the purpose of facilitating an Initial Public Offering (“IPO”) and other related transactions. The Company operatesa demandsideplatform(“DSP”), Adelphic,an enterprisesoftwareplatformthatisused by marketers and theiradvertisingagenciesto centralizetheplanning,buying and measurementof theiradvertisingacross channels,includingdesktop,mobile,connectedTV,linearTV, in-game, streamingaudioand digitalbillboards.
On February 9, 2021, the Securities and Exchange Commission (“SEC”) declared effective the Company’s Form S-1 related to the IPO of its Class A common stock. The closing date of the IPO was February 12, 2021, and in connection with the closing and the corporate reorganization (the “Reorganization Transactions”), the following actions were taken:
• | The Company amended and restated its certificate of incorporation, under which the Company is authorized to issue up to 450,000,000 shares of Class A common stock, up to 150,000,000 shares of Class B common stock, and up to 10,000,000 shares of preferred stock; |
• | The limited liability company agreement of Viant Technology LLC was amended and restated (as amended and restated, the “Viant Technology LLC Agreement”) to, among other things, provide for Class A units and Class B units and appoint the Company as the sole managing member of Viant Technology LLC; |
• | The Viant Technology LLC Agreement classified the interests acquired by the Company as Class A units, reclassified the interests held by the continuing members of Viant Technology LLC as Class B units, and permits the continuing members of Viant Technology LLC to exchange Class B units for shares of Class A common stock on a one-for-one basis or, at the election of Viant Technology Inc., for cash at the current fair value on the date of the exchange. Immediately following such reclassification, the continuing members held 48,935,559 Class B units. For each membership unit of Viant Technology LLC that was reclassified as a Class B unit, the Company issued 1 corresponding share of our Class B common stock to the continuing members, or 48,935,559 shares of Class B common stock in total; |
• | The Company issued and sold 10,000,000 shares of its Class A common stock to the underwriters at an IPO price of $25.00 per share, for gross proceeds of $250.0 million before deducting underwriting discounts and commissions of $17.5 million; |
• | The Company used the net proceeds of $232.5 million to acquire 10,000,000 newly issued Class A units of Viant Technology LLC at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock; |
• | The underwriters exercised their option to purchase 1,500,000 additional shares of Class A common stock from the selling stockholders. The Company did not receive any proceeds from the sale of shares by the selling stockholders. Pursuant to such exercise, the selling stockholders exchanged the corresponding number of Class B units for the shares of Class A common stock, the corresponding number of shares of Class B common stock were automatically retired, and 1,500,000 Class A units were issued to the Company; |
• | The Class B stockholders and Class A stockholders initially had 80.5% and 19.5%, respectively, of the combined voting power of the Company’s common stock. The Class A common stock outstanding represents 100% of the rights of the holders of all classes of the Company’s outstanding common stock to share in distributions from the Company, except for the right of Class B stockholders to receive the par value of the Class B common stock upon our liquidation, dissolution or winding up or an exchange of Class B units; |
• | The Company entered into a Registration Rights Agreement with the Class B stockholders to provide for certain rights and restrictions after the IPO; and |
88
• | Viant Technology LLC’s 2020 Equity Based Incentive Compensation Plan (the “Phantom Unit Plan”) was terminated and replaced with the Company’s 2021 Long Term Incentive Plan (the “LTIP”). |
Immediately following the closing of the IPO, Viant Technology LLC is the predecessor of the Company for financial reporting purposes. The Company is a holding company, and its sole material asset is its equity interest in Viant Technology LLC. As the sole managing member of Viant Technology LLC, the Company operates and controls all of the business and affairs of Viant Technology LLC. The Reorganization Transactions are accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements of the Company recognize the assets and liabilities received in the Reorganization Transactions at their historical carrying amounts, as reflected in the historical consolidated financial statements of Viant Technology LLC. The Company consolidates Viant Technology LLC in its consolidated financial statements and records a noncontrolling interest related to the Class B units held by the Class B stockholders on its consolidated balance sheets, statements of operations and statements of comprehensive income (loss).
2. Basis of Presentationand Summaryof SignificantAccounting Policies
Basis of Presentationand Principlesof Consolidation
Theaccompanying consolidated financial statements arepreparedinaccordancewithaccounting principlesgenerallyacceptedintheUnitedStatesofAmerica(“GAAP”)andincludetheoperationsoftheCompany, Viant Technology LLC anditswhollyownedsubsidiaries. Viant Technology LLC is considered a variable interest entity (“VIE”). The Company is the primary beneficiary and sole managing member of Viant Technology LLC and has decision making authority that significantly affects the economic performance obligations. These liabilities are classified as current ifof the respective performance obligations are anticipatedentity. As a result, the Company consolidates Viant Technology LLC. All intercompany balances and transactions have been eliminated in consolidation.
Viant Technology LLC has been determined to be satisfied during the succeeding 12-month period perpredecessor for accounting purposes and, accordingly, the terms ofconsolidated financial statements for periods prior to the contract,IPO and the remaining portion is recorded as non-current deferred revenuerelated Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes. Amounts for the period prior to February 12, 2021 presented in the consolidated balance sheets.
ASC 606 provides various optional practical expedients.financial statements and notes to consolidated financial statements herein represent the historical operations of Viant Technology LLC. The Company electedamounts as of December 31, 2021 and for the useperiod from February 12, 2021 reflect the consolidated operations of the practical expedient relating toCompany.
Management believes that the disclosureaccompanying consolidated financial statements reflect the adjustments necessary for the fair statement of remaining performance obligations within a contractits consolidated balance sheet as of December 31, 2021 and will not disclose remaining performance obligations2020, results of operations for contracts with an original expected duration of one year or less.the years ended December 31, 2021, 2020 and 2019, and cash flows for the years ended December 31, 202, 2020 and 2019.
Operating Expenses
We classify our operating expenses into the following four categories. Each expense category includes overhead such as rent and occupancy charges, which is allocated based on headcount.PlatformOperations
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Traffic acquisition costs |
| $ | 82,627 |
|
| $ | 54,735 |
|
| $ | 27,892 |
|
|
| 51 | % |
Other platform operations |
|
| 46,977 |
|
|
| 33,525 |
|
|
| 13,452 |
|
|
| 40 | % |
Total platform operations |
| $ | 129,604 |
|
| $ | 88,260 |
|
| $ | 41,344 |
|
|
| 47 | % |
Platform operations as a percentage of revenue |
|
| 58 | % |
|
| 53 | % |
|
|
|
|
|
|
|
|
64
Platform Operations. Platformoperationsexpenserepresentsour costincreasedby $41.3 million,or 47%, duringthe yearended December31, 2021 comparedto the yearended December31, 2020. The change wasprimarilydriven by a $27.9 millionincreasein TAC, a variable function of revenues,which consistsof TAC, hostingcosts,personnelcosts,depreciationof capitalizedsoftwaredevelopmentcostsrevenue, as well as an increase in other platform operations driven by a $13.1 million increase in stock-based compensation relatedto our platform,customersupportcosts2021 LTIP and allocatedoverhead.TACrecordedin platformoperationsconsistsof amountsincurredand payableto suppliersforcostsassociatedwith our fixedCPM pricingoption. Personnel costswithinplatformoperationsincludesalaries,bonuses,unit-basedcompensationexpenseand employee benefitcostsprimarilyattributableto personnelwho directlysupportour platform.
Sales and Marketing. Salesand marketingexpenseconsistsprimarilyof personnelcosts,including salaries,bonuses,unit-basedcompensationexpense,employeebenefitcostsand commissionsforour sales personnel.Salesand marketingexpensealsoincludescostsformarketdevelopmentprograms,advertising, promotionaland othermarketingactivitiesand allocatedoverhead.Commissionsareexpensedas incurred.
The Company incurredadvertisingcostsof $1.2 million,a $1.0 million andincrease in depreciation, partially offset by a decrease of $0.7 million forin cloud costs due to continued efforts to increase cloud infrastructure efficiencies.
Salesand Marketing
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Sales and marketing |
| $ | 65,042 |
|
| $ | 28,887 |
|
| $ | 36,155 |
|
|
| 125 | % |
Percentage of revenue |
|
| 29 | % |
|
| 17 | % |
|
|
|
|
|
|
|
|
Salesand marketingexpenseincreasedby $36.2 million,or 125%, duringtheyearsyearended December31, 2020, 2019 and 2018, respectively,related2021 comparedto thepromotionyearended December31, 2020. This increase was primarily due to a $25.6 million increase in stock-based compensation, a $6.4 million increase in personnel costs and overhead, which was allocated to sales and marketing as a result of theCompany, its brands,products departments’ increased headcount relative to other departments, a $2.9 million increase in advertising, a $0.2 million increase in facilities expense, a $0.2 increase in software license expenses and servicesto potentialcustomers.Advertisingcostsareexpensedas incurreda $0.8 million increase in travel and recordedin salesand marketingexpensewithintheconsolidatedstatementsof operationsand comprehensiveincome(loss).
entertainment expenses.
Technology and Development. Development
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Technology and development |
| $ | 25,372 |
|
| $ | 8,698 |
|
| $ | 16,674 |
|
|
| 192 | % |
Percentage of revenue |
|
| 11 | % |
|
| 5 | % |
|
|
|
|
|
|
|
|
Technologyand developmentexpenseconsistsincreasedby $16.7 million,or 192%, duringtheyear ended December31, 2021 comparedto theyearended December31, 2020. This increase was primarilyof attributable to a $12.4 million increase in stock-based compensation, a $3.8 million increase in personnel costsincludingsalaries,bonuses,unit-basedcompensationexpense as a result of an increase in headcount to support our continued investment in developed technology and employeebenefitcostsassociatedwith theongoing developmenta $0.4 million increase in software and maintenanceof our softwareplatformand allocatedoverhead.Technologyand developmentcostsareexpensedas incurred,exceptto theextentthatsuch costsareassociatedwith software developmentthatqualifiesforcapitalization,which arethenrecordedas capitalizedsoftware development costsincludedin property,equipmentand software,net,on theconsolidatedbalancesheets. We recorddepreciationexpensefor capitalizedsoftwarenot relatedto our platformwithintechnologyand developmentexpense.license expenses.
General and Administrative. Administrative
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
General and administrative |
| $ | 46,904 |
|
| $ | 17,639 |
|
| $ | 29,265 |
|
|
| 166 | % |
Percentage of revenue |
|
| 21 | % |
|
| 11 | % |
|
|
|
|
|
|
|
|
Generaland administrativeexpenseconsistsincreasedby $29.3 million,or 166%, duringtheyearended December31, 2021 comparedto the yearended December31, 2020. This increase was primarily attributable to a $17.7 million increase in stock-based compensation, a $5.6 million increase in insurance, legal and accounting expenses associated with being a publicly traded company, a $3.3 million increase in personnel costs due to the increase in headcount, a $1.4 million increase in recruiting expenses, a $0.5 million increase in bad debt expense due to recoveries of personnelcosts, includingsalaries,bonuses,unit-basedcompensationexpensebad debt in a prior year, a $0.2 million increase in dues and employeebenefitcostsassociatedsubscriptions and a $0.3 million increase in software and license expenses.
65
TotalOther Expense (Income), Net
|
| Year Ended December 31, |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Total other expense (income), net |
| $ | (5,186 | ) |
| $ | 1,129 |
|
| $ | (6,315 | ) |
|
| (559 | %) |
Percentage of revenue |
|
| (2 | %) |
|
| 1 | % |
|
|
|
|
|
|
|
|
Totalotherexpense (income),netdecreasedby $6.3 million,or 559%, duringtheyearended December31, 2021 comparedto theyearended December31, 2020. This decrease was primarily due to a $6.1 million gain on debt extinguishment as a result of the forgiveness of Company’s PPP Loan and related accrued interest and a $0.2 decrease in interest expense attributable to an amendment to our Loan Agreement with PNC Bank which decreased the applicable margin on the loan. For additional information regarding forgiveness of the Company’s PPP Loan and the amendment to the Loan Agreement, see Note 7 to our consolidated financial statements included elsewhere in this Annual Report.
QuarterlyResultsof Operations
The followingtablessetforthour unauditedquarterlyconsolidatedstatementsof operationsdatafor eachquarter of our fiscalyearsended December31, 2021 and 2020. The informationforeachof thesequartershas been preparedon a basisconsistentwith our executive,accounting,finance,legal,humanresources,consolidated financialstatementsand, otheradministrativepersonnel.Additionally,in our opinion,includesalladjustments, consistingonly of normalrecurringadjustmentsnecessaryforthefairpresentationof thefinancialinformation containedin thosestatements.The followingunauditedconsolidatedquarterlyfinancialdatashouldbe readin conjunctionwith our annual audited consolidatedfinancialstatementsand therelatednotes included elsewhere in this includesaccounting, legalAnnual Report.These quarterlyresultsarenot necessarilyindicativeof our operatingresultsfora fullyearor any futureperiod.
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands, except per share/unit data) |
| |||||||||||||||||||||||||||||
Revenue |
| $ | 82,715 |
|
| $ | 50,857 |
|
| $ | 50,411 |
|
| $ | 40,144 |
|
| $ | 56,461 |
|
| $ | 40,205 |
|
| $ | 30,425 |
|
| $ | 38,160 |
|
Operating expenses(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
|
| 44,578 |
|
|
| 28,967 |
|
|
| 31,715 |
|
|
| 24,344 |
|
|
| 25,944 |
|
|
| 20,124 |
|
|
| 18,589 |
|
|
| 23,603 |
|
Sales and marketing |
|
| 15,173 |
|
|
| 15,131 |
|
|
| 20,553 |
|
|
| 14,185 |
|
|
| 9,494 |
|
|
| 6,521 |
|
|
| 5,742 |
|
|
| 7,130 |
|
Technology and development |
|
| 4,851 |
|
|
| 6,590 |
|
|
| 8,031 |
|
|
| 5,900 |
|
|
| 2,618 |
|
|
| 1,946 |
|
|
| 1,984 |
|
|
| 2,150 |
|
General and administrative |
|
| 10,428 |
|
|
| 11,981 |
|
|
| 14,075 |
|
|
| 10,420 |
|
|
| 5,231 |
|
|
| 3,861 |
|
|
| 3,891 |
|
|
| 4,656 |
|
Total operating expenses |
|
| 75,030 |
|
|
| 62,669 |
|
|
| 74,374 |
|
|
| 54,849 |
|
|
| 43,287 |
|
|
| 32,452 |
|
|
| 30,206 |
|
|
| 37,539 |
|
Income (loss) from operations |
|
| 7,685 |
|
|
| (11,812 | ) |
|
| (23,963 | ) |
|
| (14,705 | ) |
|
| 13,174 |
|
|
| 7,753 |
|
|
| 219 |
|
|
| 621 |
|
Total other expense (income), net |
|
| 169 |
|
|
| 348 |
|
|
| (5,868 | ) |
|
| 165 |
|
|
| 313 |
|
|
| 275 |
|
|
| 249 |
|
|
| 292 |
|
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Less: Net income (loss) attributable to noncontrolling interests |
|
| 5,962 |
|
|
| (9,623 | ) |
|
| (14,440 | ) |
|
| (11,766 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net income (loss) attributable to Viant Technology Inc. |
| $ | 1,554 |
|
|
| (2,537 | ) |
|
| (3,655 | ) |
|
| (3,104 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
66
Earnings (loss) per Class A common stock/unit —basic(2) |
| $ | 0.11 |
|
| $ | (0.20 | ) |
| $ | (0.32 | ) |
| $ | (0.27 | ) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
Earnings (loss) per Class A common stock/unit —diluted(2) |
| $ | 0.11 |
|
| $ | (0.20 | ) |
| $ | (0.32 | ) |
| $ | (0.27 | ) |
| $ | 12.86 |
|
| $ | 7.48 |
|
| $ | (0.08 | ) |
| $ | 0.33 |
|
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (as a percentage of revenue*) |
| |||||||||||||||||||||||||||||
Revenue |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
|
| 54 | % |
|
| 57 | % |
|
| 63 | % |
|
| 61 | % |
|
| 46 | % |
|
| 50 | % |
|
| 61 | % |
|
| 62 | % |
Sales and marketing |
|
| 18 | % |
|
| 30 | % |
|
| 41 | % |
|
| 35 | % |
|
| 17 | % |
|
| 16 | % |
|
| 19 | % |
|
| 19 | % |
Technology and development |
|
| 6 | % |
|
| 13 | % |
|
| 16 | % |
|
| 15 | % |
|
| 5 | % |
|
| 5 | % |
|
| 7 | % |
|
| 6 | % |
General and administrative |
|
| 13 | % |
|
| 24 | % |
|
| 28 | % |
|
| 26 | % |
|
| 9 | % |
|
| 10 | % |
|
| 13 | % |
|
| 12 | % |
Total operating expenses |
|
| 91 | % |
|
| 123 | % |
|
| 148 | % |
|
| 137 | % |
|
| 77 | % |
|
| 81 | % |
|
| 99 | % |
|
| 98 | % |
Income (loss) from operations |
|
| 9 | % |
|
| (23 | %) |
|
| (48 | %) |
|
| (37 | %) |
|
| 23 | % |
|
| 19 | % |
|
| 1 | % |
|
| 2 | % |
Total other expense (income), net |
|
| 0 | % |
|
| 1 | % |
|
| (12 | )% |
|
| 0 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
Net income (loss) |
|
| 9 | % |
|
| -24 | % |
|
| (36 | )% |
|
| -37 | % |
|
| 23 | % |
|
| 19 | % |
|
| — |
|
|
| 1 | % |
Less: Net income (loss) attributable to noncontrolling interests |
|
| 7 | % |
|
| (19 | )% |
|
| (29 | )% |
|
| (29 | )% |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net income (loss) attributable to Viant Technology Inc. |
|
| 2 | % |
|
| (5 | )% |
|
| (7 | )% |
|
| (8 | )% |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
* | Percentagesmaynot sumdue to rounding |
67
(1) | The impact of stock-basedcompensation,depreciationand amortizationon each operating expense line item is set forth below: |
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
| $ | 1,253 |
|
| $ | 3,142 |
|
| $ | 5,540 |
|
| $ | 3,161 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Sales and marketing |
|
| 2,053 |
|
|
| 4,859 |
|
|
| 11,914 |
|
|
| 6,813 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| 1,390 |
|
|
| 3,015 |
|
|
| 5,029 |
|
|
| 2,939 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
General and administrative |
|
| 1,935 |
|
|
| 4,399 |
|
|
| 7,203 |
|
|
| 4,177 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total stock-based compensation |
| $ | 6,631 |
|
| $ | 15,415 |
|
| $ | 29,686 |
|
| $ | 17,090 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
| $ | 2,264 |
|
| $ | 2,080 |
|
| $ | 1,766 |
|
| $ | 1,578 |
|
| $ | 1,579 |
|
| $ | 1,619 |
|
| $ | 1,678 |
|
| $ | 1,762 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| 414 |
|
|
| 421 |
|
|
| 383 |
|
|
| 381 |
|
|
| 402 |
|
|
| 403 |
|
|
| 402 |
|
|
| 401 |
|
General and administrative |
|
| 132 |
|
|
| 164 |
|
|
| 168 |
|
|
| 161 |
|
|
| 163 |
|
|
| 171 |
|
|
| 153 |
|
|
| 144 |
|
Total depreciation |
| $ | 2,810 |
|
| $ | 2,665 |
|
| $ | 2,317 |
|
| $ | 2,120 |
|
| $ | 2,144 |
|
| $ | 2,193 |
|
| $ | 2,233 |
|
| $ | 2,307 |
|
Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
| $ | 175 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
General and administrative |
|
| 133 |
|
|
| 132 |
|
|
| 132 |
|
|
| 132 |
|
|
| 133 |
|
|
| 132 |
|
|
| 132 |
|
|
| 132 |
|
Total amortization |
| $ | 308 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 308 |
|
| $ | 307 |
|
| $ | 307 |
|
| $ | 307 |
|
See Note 4, Note 5 and otherprofessionalservicesfees, insuranceNote 9 to our consolidated financial statements included elsewhere in this Annual Report for more information regarding depreciation, amortization and stock-based compensation expense,bad debtexpense respectively.
(2) | See Note 2 to our consolidatedfinancialstatements included elsewhere in this Annual Reportfora descriptionof theearnings(loss)per share/unit—basic and dilutedcomputations. |
QuarterlyNon-GAAP Financial Measures
We monitor certain non-GAAP financial measures such ascontribution ex-TAC, adjusted EBITDA and allocatedoverhead.adjusted EBITDA as a percentage of contribution ex-TAC when evaluating our quarterly results of operations to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. Reconciliations of these non-GAAP financial measures for eachquarter of our fiscalyearsended December31, 2021 and 2020 to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables presented below. For a description of management’s use of each non-GAAP financial measure contained in this Annual Report, see “—KeyOperatingand FinancialPerformance Measures—Use of Non-GAAPFinancialMeasures.”
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Operating and Financial Performance Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
| $ | 38,137 |
|
| $ | 21,890 |
|
| $ | 18,696 |
|
| $ | 15,800 |
|
| $ | 30,517 |
|
| $ | 20,081 |
|
| $ | 11,836 |
|
| $ | 14,557 |
|
Contribution ex-TAC |
| $ | 48,483 |
|
| $ | 34,077 |
|
| $ | 32,199 |
|
| $ | 26,741 |
|
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Adjusted EBITDA |
| $ | 17,426 |
|
| $ | 6,454 |
|
| $ | 8,346 |
|
| $ | 4,882 |
|
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
Net income as a percentage of gross profit |
|
| 20 | % |
| N/A |
|
| N/A |
|
| N/A |
|
|
| 42 | % |
|
| 37 | % |
|
| 0 | % |
|
| 2 | % | |||
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 36 | % |
|
| 19 | % |
|
| 26 | % |
|
| 18 | % |
|
| 40 | % |
|
| 37 | % |
|
| 14 | % |
|
| 14 | % |
68
Unit-Based CompensationContribution ex-TAC
The Company adoptedfollowing table sets forth a reconciliation of revenue to gross profit to contribution ex-TAC for the Limited Liability Company Agreement (the “Viant Technology LLC Agreement”periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Revenue |
| $ | 82,715 |
|
| $ | 50,857 |
|
| $ | 50,411 |
|
| $ | 40,144 |
|
| $ | 56,461 |
|
| $ | 40,205 |
|
| $ | 30,425 |
|
| $ | 38,160 |
|
Less: Platform operations |
|
| (44,578 | ) |
|
| (28,967 | ) |
|
| (31,715 | ) |
|
| (24,344 | ) |
|
| (25,944 | ) |
|
| (20,124 | ) |
|
| (18,589 | ) |
|
| (23,603 | ) |
Gross profit |
|
| 38,137 |
|
|
| 21,890 |
|
|
| 18,696 |
|
|
| 15,800 |
|
|
| 30,517 |
|
|
| 20,081 |
|
|
| 11,836 |
|
|
| 14,557 |
|
Add: Other platform operations |
|
| 10,346 |
|
|
| 12,187 |
|
|
| 13,503 |
|
|
| 10,941 |
|
|
| 8,618 |
|
|
| 7,914 |
|
|
| 8,209 |
|
|
| 8,784 |
|
Contribution ex-TAC |
| $ | 48,483 |
|
| $ | 34,077 |
|
| $ | 32,199 |
|
| $ | 26,741 |
|
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
Adjusted EBITDA
The following table sets forth a reconciliation of net income (loss) to adjusted EBITDA for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 161 |
|
|
| 227 |
|
|
| 241 |
|
|
| 235 |
|
|
| 249 |
|
|
| 264 |
|
|
| 244 |
|
|
| 281 |
|
Depreciation and amortization |
|
| 3,118 |
|
|
| 2,972 |
|
|
| 2,624 |
|
|
| 2,427 |
|
|
| 2,452 |
|
|
| 2,500 |
|
|
| 2,540 |
|
|
| 2,614 |
|
Stock-based compensation |
|
| 6,631 |
|
|
| 15,415 |
|
|
| 29,686 |
|
|
| 17,090 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Adjusted EBITDA |
| $ | 17,426 |
|
| $ | 6,454 |
|
| $ | 8,346 |
|
| $ | 4,882 |
|
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
Adjusted EBITDA as a percentage of contribution ex-TAC
The following table sets forth a reconciliation of net income (loss) as a percentage of gross profit to adjusted EBITDA as a percentage of contribution ex-TAC for the periods presented:
|
| Three Months Ended |
| |||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
| June 30, 2020 |
|
| March 31, 2020 |
| ||||||||
|
| (in thousands, except for percentages) |
| |||||||||||||||||||||||||||||
Gross profit |
| $ | 38,137 |
|
| $ | 21,890 |
|
| $ | 18,696 |
|
| $ | 15,800 |
|
| $ | 30,517 |
|
| $ | 20,081 |
|
| $ | 11,836 |
|
| $ | 14,557 |
|
Net income (loss) |
| $ | 7,516 |
|
| $ | (12,160 | ) |
| $ | (18,095 | ) |
| $ | (14,870 | ) |
| $ | 12,861 |
|
| $ | 7,478 |
|
| $ | (30 | ) |
| $ | 329 |
|
Net income as a percentage of gross profit(1) |
|
| 20 | % |
| N/A |
|
| N/A |
|
| N/A |
|
|
| 42 | % |
|
| 37 | % |
|
| 0 | % |
|
| 2 | % | |||
Contribution ex-TAC (2) |
| $ | 48,483 |
|
| $ | 34,077 |
|
| $ | 32,199 |
|
| $ | 26,741 |
|
| $ | 39,135 |
|
| $ | 27,995 |
|
| $ | 20,045 |
|
| $ | 23,341 |
|
Adjusted EBITDA (3) |
| $ | 17,426 |
|
| $ | 6,454 |
|
| $ | 8,346 |
|
| $ | 4,882 |
|
| $ | 15,562 |
|
| $ | 10,242 |
|
| $ | 2,754 |
|
| $ | 3,224 |
|
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 36 | % |
|
| 19 | % |
|
| 26 | % |
|
| 18 | % |
|
| 40 | % |
|
| 37 | % |
|
| 14 | % |
|
| 14 | % |
(1) | Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
69
(2) | For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Contribution ex-TAC.” |
(3) | For a reconciliation of adjusted EBITDA to the most directly comparable financial measure calculated in accordance with GAAP, see “—Adjusted EBITDA.” |
KeyOperatingand FinancialPerformanceMeasures
Use of Non-GAAPFinancialMeasures
We monitor certain non-GAAP financial measures to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. We believe these measures enhance an overall understanding of our performance and investors’ ability to review our business from the same perspective as management and facilitate comparisons of this period’s results with prior periods on October 4, 2016,a consistent basis by excluding items that management does not believe are indicative of Viant’s ongoing operating performance. These non-GAAP financial measures include contribution ex-TAC, adjusted EBITDA, adjusted EBITDA as a percentage of contribution ex-TAC, non-GAAP net income (loss), non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted, and average contribution ex-TAC per active customer, each of which are discussed immediately following the table below, along with the operational performance measure active customers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables presented below. There are limitations in using non-GAAP financial measures which are not prepared in accordance with GAAP, as they may be different from non-GAAP financial measures used by other companies and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.
|
| Year Ended December 31, |
|
|
|
|
| |||||
|
| 2021 |
|
| 2020 |
|
| Change (%) |
| |||
|
| (in thousands, except for percentages, number of customers and per share data) |
|
|
|
|
| |||||
Operating and Financial Performance Measures |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
| $ | 94,523 |
|
| $ | 76,991 |
|
|
| 23 | % |
Contribution ex-TAC |
| $ | 141,500 |
|
| $ | 110,516 |
|
|
| 28 | % |
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
|
| (282 | %) |
Adjusted EBITDA |
| $ | 37,108 |
|
| $ | 31,782 |
|
|
| 17 | % |
Net income as a percentage of gross profit(1) |
| N/A |
|
|
| 27 | % |
| N/A |
| ||
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 26 | % |
|
| 29 | % |
|
| (9 | %) |
Non-GAAP net income |
| $ | 23,865 |
|
| $ | 20,638 |
|
|
| 16 | % |
Earnings (loss) per share/unit—basic |
| $ | (0.63 | ) |
| $ | 20.64 |
|
|
| (103 | %) |
Earnings (loss) per share/unit—diluted |
| $ | (0.63 | ) |
| $ | 20.64 |
|
|
| (103 | %) |
Non-GAAP earnings (loss) per share—basic(2) |
| $ | 0.31 |
|
| N/A |
|
| N/A |
| ||
Non-GAAP earnings (loss) per share—diluted(2) |
| $ | 0.30 |
|
| N/A |
|
| N/A |
| ||
Active customers(3) |
|
| 309 |
|
|
| 264 |
|
|
| 17 | % |
Average gross profit per active customer |
| $ | 306 |
|
| $ | 292 |
|
|
| 5 | % |
Average contribution ex-TAC per active customer |
| $ | 458 |
|
| $ | 419 |
|
|
| 9 | % |
(1) | Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
(2) | Non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted was not adjusted for the prior comparative periods presented. For a discussion on why prior periods were not adjusted, see “—Non-GAAP Earnings (loss) per Class A Common Stock/Unit—Basic and Diluted.” |
(3) | We define an active customer as a customer that had total aggregate contribution ex-TAC of at least $5,000 through our platform during the previous twelve months. Active customers is an operational metric calculated |
70
using contribution ex-TAC, a non-GAAP financial measure. For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Contribution ex-TAC.” |
Contribution ex-TAC
Contribution ex-TAC is a non-GAAP financial measure. Gross profit is the most comparable GAAP measurement, which is calculated as revenue less platform operations. In calculating contribution ex-TAC, we add back other platform operations expense to gross profit. Contribution ex-TAC is a key profitability measure used by our management and board of directors to understand and evaluate our operating performance and trends, develop short- and long-term operational plans and make strategic decisions regarding the allocation of capital. In particular, we believe that contribution ex-TAC can provide a measure of period-to-period comparisons for all pricing options within our business. Accordingly, we believe that this measure provides information to investors and the market in understanding and evaluating our operating results in the same manner as our management and board of directors.
Our use of contribution ex-TAC has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry that have similar business arrangements, may define contribution ex-TAC differently, which it issued common unit awards, subject to vestingmay make comparisons difficult. Because of these and other terms,limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, gross profit, net income (loss) and cash flows.
Activecustomers
We definean activecustomeras a customerthathad total aggregatecontribution ex-TAC of atleast$5,000 throughour platformduringtheprevioustwelvemonths. For purposesof thisdefinition,a customerthatoperatesunderany of our pricing options thatequalsor exceedsthe aforementionedcontribution ex-TAC thresholdisconsideredan activecustomer. Activecustomersis an operational metric calculated using contribution ex-TAC, a non-GAAP financial measure. For a reconciliationof contributionex-TAC to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—Contributionex-TAC.”
Average contribution ex-TAC per activecustomer
We defineaveragecontribution ex-TAC peractivecustomeras contribution ex-TAC forthetrailing12-monthperiodpresenteddividedby activecustomers. Average gross profit peractivecustomeris the most comparable GAAP measurement, which we define as gross profit forthetrailing12-monthperiodpresenteddividedby activecustomers. We believethatthe totalnumber of activecustomersand averagecontribution ex-TAC peractivecustomeraremeasuresof our abilityto increaserevenueand theeffectivenessof our salesforce,althoughwe expectthesemeasuresto fluctuatebased on theseasonalityin our business.Customersthatgeneratedlessthan$5,000 in contribution ex-TAC in thetrailing 12-monthperiodwere not materialin theaggregatein any period. For a reconciliationof contributionex-TAC to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—Contributionex-TAC.”
The followingtablesets forth a reconciliation of (i) revenue to gross profit to contribution ex-TAC and (ii) average gross profit per active customer to average contribution ex-TAC per active customer, in each case forthe periods presented:
71
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands) |
| |||||||||||||
Revenue |
| $ | 224,127 |
|
| $ | 165,251 |
|
| $ | 164,892 |
|
| $ | 108,355 |
|
Less: Platform operations |
|
| (129,604 | ) |
|
| (88,260 | ) |
|
| (94,060 | ) |
|
| (74,344 | ) |
Gross profit |
|
| 94,523 |
|
|
| 76,991 |
|
|
| 70,832 |
|
|
| 34,011 |
|
Add: Other platform operations |
|
| 46,977 |
|
|
| 33,525 |
|
|
| 33,608 |
|
|
| 30,515 |
|
Contribution ex-TAC |
| $ | 141,500 |
|
| $ | 110,516 |
|
| $ | 104,440 |
|
| $ | 64,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active customers(1) |
|
| 309 |
|
|
| 264 |
|
|
| 277 |
|
|
| 267 |
|
Average gross profit per active customer |
| $ | 306 |
|
| $ | 292 |
|
| $ | 256 |
|
| $ | 127 |
|
Average contribution ex-TAC per active customer |
| $ | 458 |
|
| $ | 419 |
|
| $ | 377 |
|
| $ | 242 |
|
(1)We define an active customer as a customer that had total aggregate contribution ex-TAC of at least $5,000 through our platform during the previous twelve months. Active customers is an operational metric calculated using contribution ex-TAC, a non-GAAP financial measure.
AdjustedEBITDA and adjusted EBITDA as a percentage of contribution ex-TAC
Adjusted EBITDA is a non-GAAP financial measure defined by us as net income (loss) before interest expense, net, income tax expense (benefit), depreciation, amortization, stock-based compensation and certain executivesother items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Net income (loss) is the most comparable GAAP measurement. Adjusted EBITDA as a percentage of contribution ex-TAC is a non-GAAP financial measure we calculate by dividing adjusted EBITDA by contribution ex-TAC for the period or periods presented.
Adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC are used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating adjusted EBITDA can provide a measure for period-to-period comparisons of our business. Adjusted EBITDA as a percentage of our non-GAAP measure, contribution ex-TAC, is used by our management and board of directors to evaluate adjusted EBITDA relative to our profitability after costs that are directly variable to revenues, which comprise TAC. Accordingly, we believe that adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC provide information to investors and the market in understanding and evaluating our operating results in the same manner as our management and board of directors.
Our use of adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC has limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these potential limitations include:
• | othercompanies,includingcompaniesin our industrythat have similarbusinessarrangements, mayreportadjustedEBITDAor adjustedEBITDAas a percentageof contribution ex-TAC, or similarlytitledmeasuresbut calculatethemdifferently,which reducestheirusefulnessas comparativemeasures; |
• | althoughdepreciationand amortizationarenon-cashcharges,theassetsbeingdepreciated and amortizedmayhave to be replacedin thefuture,and adjustedEBITDAdoes not reflectcash capitalexpenditurerequirementsforsuch replacementsor fornew capitalexpenditure requirements;and |
• | AdjustedEBITDAdoes not reflectchangesin, or cashrequirementsfor,our working capital needsor thepotentiallydilutiveimpactof stock-basedcompensation. |
72
Becauseof theseand otherlimitations,you shouldconsiderour non-GAAP financial measuresonly as supplementalto otherGAAP-based financialperformancemeasures,includingrevenue,netincome(loss)and cashflows.
The followingtablesets forth areconciliationof netincome (loss)to adjustedEBITDAforthe periods presented:
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands) |
| |||||||||||||
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 864 |
|
|
| 1,038 |
|
|
| 3,948 |
|
|
| 4,362 |
|
Depreciation and amortization |
|
| 11,141 |
|
|
| 10,106 |
|
|
| 10,155 |
|
|
| 10,628 |
|
Stock/unit-based compensation |
|
| 68,822 |
|
|
| — |
|
|
| 1,090 |
|
|
| 647 |
|
Restructuring expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 893 |
|
2019 Former Holdco transaction expense |
|
| — |
|
|
| — |
|
|
| 471 |
|
|
| 100 |
|
UK subsidiary closure |
|
| — |
|
|
| — |
|
|
| (933 | ) |
|
| 1,371 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Adjusted EBITDA |
| $ | 37,108 |
|
| $ | 31,782 |
|
| $ | 24,655 |
|
| $ | (7,534 | ) |
The following table sets forth a reconciliation of net income (loss) as a percentage of gross profit to adjusted EBITDA as a percentage of contribution ex-TAC for the periods presented:
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands, except for percentages) |
| |||||||||||||
Gross profit |
| $ | 94,523 |
|
| $ | 76,991 |
|
| $ | 70,832 |
|
| $ | 34,011 |
|
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Net income (loss) as a percentage of gross profit(1) |
| N/A |
|
|
| 27 | % |
|
| 14 | % |
| N/A |
| ||
Contribution ex-TAC(2) |
| $ | 141,500 |
|
| $ | 110,516 |
|
| $ | 104,440 |
|
| $ | 64,526 |
|
Adjusted EBITDA(3) |
| $ | 37,108 |
|
| $ | 31,782 |
|
| $ | 24,655 |
|
| $ | (7,534 | ) |
Adjusted EBITDA as a percentage of contribution ex-TAC |
|
| 26 | % |
|
| 29 | % |
|
| 24 | % |
|
| (12 | )% |
(1) | Management believes that in periods of net loss, primarily driven by the impact of stock-based compensation, this percentage is not comparable to the other periods presented. |
(2) | For a reconciliationof contributionex-TAC to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—Contributionex-TAC.” |
(3) | For a reconciliationof adjustedEBITDA to themostdirectlycomparablefinancialmeasurecalculatedin accordancewith GAAP,see“—AdjustedEBITDA.” |
Non-GAAP Net Income (Loss)
Non-GAAP net income (loss) is a non-GAAP financial measure defined by us as net income (loss) adjusted to eliminate the impact of stock-based compensation and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Net income (loss) is the most comparable GAAP measurement. Non-GAAP net income (loss) is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of stock-based compensation, gain on debt extinguishment, and certain other items that are not related to our core operations provides measures for period-to-period comparisons of our business and additional insight into our core controllable costs. Accordingly, we believe that non-GAAP net income (loss) provides information to investors and the market generally in
73
understanding and evaluating our results of operations in the same manner as our management and board of directors.
Our use of non-GAAP net income (loss) has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry that have similar business arrangements, may define non-GAAP net income (loss) differently, which may make comparisons difficult. Because of these and other limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, gross profit, net income (loss) and cash flows.
The following table sets forth a reconciliation of net income (loss) to non-GAAP net income (loss) for the periods presented:
|
| Year Ended December 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (in thousands) |
| |||||||||||||
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Add back: Stock-based compensation |
|
| 68,822 |
|
|
| — |
|
|
| 1,090 |
|
|
| 647 |
|
Less: Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Less: Income tax effect related to Viant Technology Inc.’s share of adjustments |
|
| (1,238 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Non-GAAP net income (loss) |
| $ | 23,865 |
|
| $ | 20,638 |
|
| $ | 11,014 |
|
| $ | (24,888 | ) |
Non-GAAPEarnings(loss)per Class A Common Stock/Unit—Basic and Diluted
Non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted is a non-GAAP financial measure defined by us as earnings (loss) per Class A common stock/unit—basic and diluted, adjusted to eliminate the impact of stock-based compensation and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Earnings (loss) per Class A common stock/unit—basic and diluted is the most comparable GAAP measurement. Non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted is used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of stock-based compensation, gain on extinguishment of debt and certain other items that are not related to our core operations provides measures for period-to-period comparisons of our business and provides additional insight into our core controllable costs. Accordingly, we believe that non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted provides information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.
Our use of Non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted has limitationsas an analyticaltool,and you shouldnot consideritin isolationor as a substituteforanalysisof our financialresultsas reportedunderGAAP.Some of thesepotentiallimitationsinclude:
• | othercompanies,includingcompaniesin our industrythat have similarbusinessarrangements, mayreportnon-GAAP earnings (loss) per Class A common stock/unit—basic and diluted or similarlytitledmeasures,but calculatethem differently,which reducestheirusefulnessas comparativemeasures; |
• | althoughthestock-based compensation related to the 2021 LTIPreferredto above isnon-cashin nature,non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted does not reflectitsimpacton netincome (loss)attributableto all common shareholders; and |
• | althoughthegain on debt extinguishment related to the forgiveness of our PPP Loan and related accrued interest isnon-cashin nature,non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted does not reflectitsimpacton netincome (loss)attributableto all common shareholders. |
74
Becauseof theseand otherlimitations,you shouldconsiderour non-GAAPmeasuresonly as supplementalto otherGAAP-based financialperformancemeasures,includingearnings(loss)perClass A common stock/unit—basic and diluted.
Basic non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted iscalculatedby dividingthe non-GAAP net income (loss)attributableto Class A common stockholdersby the number of weighted-average shares of Class A commonstock outstanding. Shares of our Class B common stock do not share in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted of Class B common stock under the two-class method has not been presented.
Diluted non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted adjuststhebasic non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted calculation forthepotentialdilutiveimpactof commonshares such as equity awardsusingthetreasury-stockmethod and Class B common stock using the if-converted method.Dilutedearnings(loss)pershare considerstheimpactof potentially dilutivesecuritiesexceptin periodsin which thereisa lossbecausetheinclusionof thepotentialcommonshares would have an anti-dilutiveeffect. Shares of our Class B common stock, RSUs and nonqualified stock options are considered potentially dilutive shares of Class A common stock. For the year ended December 31, 2021, Class B common stock and nonqualified stock options amounts have been excluded from the computation of diluted earnings (loss) per share of Class A common stock because the effect would have been anti-dilutive under the if-converted and treasury stock method, respectively.
The followingtablepresentsthereconciliationof earnings(loss)perClass A common stock/unit—basic and dilutedto non-GAAP earnings (loss) per Class A common stock/unit—basic and diluted for theyearended December 31, 2021. Earnings(loss)per share was not adjustedforthe year ended December 31, 2020 as there was no stock-based compensation or gain on debt extinguishment in that period.
75
|
| Year Ended |
| |||||||||
|
| December 31, 2021 |
| |||||||||
|
| Earnings |
|
|
|
|
|
| Non-GAAP |
| ||
|
| (Loss) per |
|
|
|
|
|
| Earnings (Loss) |
| ||
|
| Share |
|
| Adjustments |
|
| per Share |
| |||
|
| (in thousands, except per share data) |
| |||||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (37,609 | ) |
| $ | — |
|
| $ | (37,609 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Add back: Stock-based compensation |
|
| — |
|
|
| 68,822 |
|
|
| 68,822 |
|
Less: Gain on extinguishment of debt |
|
| — |
|
|
| (6,110 | ) |
|
| (6,110 | ) |
Less: Income tax effect related to Viant Technology Inc.'s share of adjustments (1) |
|
| — |
|
|
| (1,238 | ) |
|
| (1,238 | ) |
Non-GAAP net income (loss) |
|
| (37,609 | ) |
|
| 61,474 |
|
|
| 23,865 |
|
Less: Net income (loss) attributable to noncontrolling interests (2) |
|
| (29,867 | ) |
|
| 49,897 |
|
|
| 20,030 |
|
Net income (loss) attributable to Viant Technology, Inc.—basic |
|
| (7,742 | ) |
|
| 11,577 |
|
|
| 3,835 |
|
Add back: Reallocation of net loss attributable to noncontrolling interest from the assumed exchange of RSUs for Class A common stock |
|
| — |
|
|
| 253 |
|
|
| 253 |
|
Less: Income tax effect from the assumed exchange of RSUs for Class A common stock(1) |
|
| — |
|
|
| (62 | ) |
|
| (62 | ) |
Net income (loss) attributable to Viant Technology, Inc.—diluted |
| $ | (7,742 | ) |
| $ | 11,768 |
|
| $ | 4,026 |
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of Class A common stock outstanding —basic |
|
| 12,364 |
|
|
| — |
|
|
| 12,364 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
RSUs |
|
| — |
|
|
| 1,088 |
|
|
| 1,088 |
|
Nonqualified stock options |
|
| — |
|
|
| 8 |
|
|
| 8 |
|
Weighted-average shares of Class A common stock outstanding —diluted |
|
| 12,364 |
|
|
| 1,096 |
|
|
| 13,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of Class A common stock—basic |
| $ | (0.63 | ) |
| $ | 0.94 |
|
| $ | 0.31 |
|
Earnings (loss) per share of Class A common stock—diluted |
| $ | (0.63 | ) |
| $ | 0.93 |
|
| $ | 0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from earnings (loss) per share of Class A common stock—diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Class B common stock |
|
|
|
|
|
|
|
|
|
| 47,107 |
|
Total shares excluded from earnings (loss) per share of Class A common stock—diluted |
|
|
|
|
|
|
|
|
|
| 47,107 |
|
(1) | The estimated income tax effect of our share of non-GAAP reconciling items are calculated using an assumed blended tax rate of 24%, which represents our expected corporate tax rate, excluding discrete and non-recurring tax items. |
(2) | The adjustment to net income (loss) attributable to noncontrolling interests represents stock-based compensation and gain on extinguishment of debt attributed to the noncontrolling interests of our company outstanding during the period. |
Liquidityand CapitalResources
As of December31, 2021, we had cashof $238.5 millionand working capital,consistingof currentassets lesscurrentliabilities,of $269.1 million.
76
Our primary sources of cash are revenues derived from theprogrammaticpurchaseof advertisingon our platform and our existing cash balances, although we have, and may in the future, addressed our liquidity needs by utilizing our borrowing capacity under our revolving credit facility or raising additional funds by issuing equity.
Our primary uses of cash are capitalexpendituresto developour softwarein supportof enhancingour technologyplatform; purchasesof propertyand equipmentin supportof our expandingheadcountas a resultof our growth; the payment of debt obligations used to financeour operations,capitalexpenditures,platformdevelopmentand rapidgrowth; and future minimumpaymentsunderournon-cancelable operating leases.
We assess our liquidity in terms of our ability to generate cash sufficient to fund our short- and long-term cash requirements. As such, we project our anticipated cash requirements as well as cash flows generated from operating activities to meet those needs. We believeour existingcash, cash flow from revenues derived from theprogrammaticpurchaseof advertisingon our platform,and the undrawn availabilityunderour credit facilitywillbe sufficientto meetour cashrequirementsoverthenext12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of existingcash,cashflow fromoperations, the undrawn availabilityunderour credit facilityand issuances of equity securities or debt offerings. Our ability to fund longer-term operating needs will depend on our ability to generate positive cash flows through programmatic advertising purchases on our platform, our ability to access the capital markets, and other factors, including those discussed under the section titled “Risk Factors.”
As of December 31, 2021, our material cash requirements from known contractual obligations consisted of future minimumpaymentsunderournon-cancelable operating leases, which we estimate will be approximately $3.0 million in 2022, $4.0 million in 2023, $3.1 million in 2024 and $3.0 million in 2025. We did not have any otheroff-balance sheetarrangementsas of December31, 2021 otherthan the minimum payments under theseoperatingleasesand the indemnificationagreementsdescribedin Note 14 to our consolidatedfinancialstatements included elsewhere in this Annual Report.
We are a holdingcompanywith no operationsof ourown and are dependenton distributionsfromViant TechnologyLLC,includingpaymentsundertheTax ReceivableAgreement,to pay ourtaxesand satisfy any current or future cash requirements. The Loan Agreement, as defined below, imposes,and any futurecreditfacilitiesmayimpose,limitationson theabilityof Viant TechnologyLLC or Viant Technology Equity Plan LLC, which issued incentive unitsInc.to pay dividendsto third parties.
RevolvingCreditFacility
On October31, 2019, we enteredintothe Loan Agreement with PNC Bank.The Loan Agreementprovidesa seniorsecuredrevolvingcreditfacilityof up to $40.0 millionwith a maturitydateof October31, 2024. The Loan Agreementiscollateralizedby security interestsin substantiallyallof our assets.
Advances undertheLoan Agreementbearinterestthroughmaturityata variableratebasedupon our selectionof either,a DomesticRate or a LIBORrate,plusan applicablemargin(“DomesticRate Loans” and “LIBORRate Loans”).The DomesticRate isdefinedas a fluctuatinginterestrateequalto thegreaterof (1)the basecommerciallendingrateof PNCBank, (2)theovernightfederalfundsrateplus0.50% and (3)theDaily LIBORRate plus1.00%. The effectiveweightedaverageinterestrateas of December31, 2021 was 3.24%. The applicablemarginas ofDecember31, 2021 wasequalto 0.75% forDomestic Rate Loans and 1.75% forLIBORRate Loans. The applicablemarginthat commenced on October 15, 2021 isbetween0.75% to 1.25% forDomesticRate Loans and between1.75% and 2.25% forLIBOR Rate Loans basedon maintainingcertainundrawn availabilityratios.The facilityfeeforundrawn amountsunder theLoan Agreementis0.375% perannum.We willalsobe requiredto pay customaryletterof creditfees,as necessary.
The Loan Agreementcontainscustomaryconditionsto borrowings,eventsof defaultand covenants, includingcovenantsthatrestrictour abilityto sellassets,makechangesto thenatureof thebusiness,engagein mergersor acquisitions,incur,assumeor permitto existadditionalindebtednessand guarantees,createor permit to existliens,pay dividends,issueequityinstruments,makedistributionsor redeemor repurchasecapitalstock or makeotherinvestments,and engagein transactionswith affiliates.The Loan Agreementalsorequiresthatwe maintaincompliancewith a minimumFixed Charge CoverageRatio(asdefinedin theLoan Agreement)of 1.40 to 1.00 at
77
any timeundrawn availabilityundertheLoan Agreementislessthan25%. As of December31, 2021, we arein compliancewith allcovenants.
Cash Flows
Fiscal 2021 Changes in Cash Flows
Cash flows from operating, investing and financing activities for the fiscal years ended December 31, 2021 and 2020, as reflected in the formConsolidated Statements of profit interests Cash Flows included in Item 8 of this Annual Report, are summarized in the following table:
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Consolidated statements of cash flows data |
|
|
|
|
|
|
|
|
Cash flows provided by operating activities |
| $ | 28,665 |
|
| $ | 18,875 |
|
Cash flows used in investing activities |
|
| (7,372 | ) |
|
| (7,841 | ) |
Cash flows provided by (used in) financing activities |
|
| 207,558 |
|
|
| (6,220 | ) |
Increase in cash |
| $ | 228,851 |
|
| $ | 4,814 |
|
Cash Flows Provided by OperatingActivities
Our cashflowsfromoperatingactivitiesareprimarilyinfluencedby growth in our operations,increases or decreasesin collectionsfromour customersand relatedpaymentsto our suppliersof advertisingmediaand data.Cash flowsfromoperatingactivitieshave been affectedby changesin our working capital,particularly changesin accountsreceivable,accountspayableand accruedliabilities.The timingof cashreceiptsfrom customersand paymentsto supplierscan significantlyimpactour cashflowsfromoperatingactivities.We typicallypay suppliersin advanceof collectionsfromour customers.Our collectionand paymentcyclescan vary fromperiodto period.In addition,we expectseasonalityto impactcashflowsfromoperatingactivitieson a quarterlybasis.
Our cashflowsprovided byoperatingactivities for fiscal 2021 was $28.7 million, a net increase of $9.8 million, or 51.9%, from cashflowsprovided byoperatingactivities for fiscal 2020 of $18.9 million. The change in cash flows for fiscal 2021 were primarily due to:
• | a decrease of $37.6 million from net loss; |
• | an increase of $73.9 million due to noncash add back adjustments to net loss comprised of $68.8 million for stock-based compensation, $11.1 million for depreciation and amortization, loss on disposal of assets of $0.2 million, offset by $0.1 million recovery of doubtful accounts and gain on debt extinguishment of $6.1 million; |
• | a decrease of $6.2 million from changes in working capital (excluding deferred revenue and other liabilities) primarily related to an increase of $15.5 million in accounts payable, accrued liabilities and accrued compensation, net against a decrease of $21.6 million in accounts receivable and prepaid assets and other assets. |
• | a decrease in deferred revenue of $1.8 million; and |
• | an increase in other liabilities of $0.3 million. |
Cash Flows Used in InvestingActivities
Our primaryinvestingactivitieshave consistedof capitalexpendituresto developour softwarein supportof enhancingour technologyplatformand purchasesof propertyand equipmentin supportof our expandingheadcountas a resultof our growth. We capitalizecertaincostsassociatedwith creatingand enhancinginternallydevelopedsoftwarerelatedto our technologyinfrastructurethatarerecordedwithin property,equipmentand software,net.These costsincludepersonneland relatedemployeebenefitexpensesfor employeeswho aredirectlyassociatedwith and who devotetimeto softwaredevelopmentprojects.Purchasesof propertyand equipmentand capitalizedsoftwaredevelopmentcostsmayvaryfromperiod-to-perioddue to the timingof theexpansionof our operations,theadditionof headcountand our softwaredevelopmentcycles.As a result of capitalization of stock-based
78
compensation in future periods and the growth of our business, we expectour capitalexpendituresand our investmentactivityto continueto increase.
Our cashflowsused in investingactivities for fiscal 2021 was $7.4 million, a net decrease of $0.4 million, or 6.0%, from cashflowsused in investingactivities for fiscal 2020 of $7.8 million. The change in cash flows for fiscal 2021 were primarily due to:
• | $6.9 millionof investmentsin capitalizedsoftware;and |
• | $0.4 millionof purchasesof propertyand equipment. |
Cash Flows Provided by Financing Activities
Our financingactivitiesconsistedprimarilyof proceedsfromborrowingsand repaymentsof our debt, issuancesof our equityand paymentsof memberdistributions. Net cashprovidedby or used in financing activitieshas been and willbe used to financeour operations,capitalexpenditures,platformdevelopmentand rapidgrowth.
Our cashflowsprovided by financingactivities for fiscal 2021 was $207.6 million, a net increase of $213.8 million from cashflowsused in financingactivities for fiscal 2020 of $6.2 million. The change in cash flows for fiscal 2021 were primarily due to:
• | $232.5 million of IPO proceeds, net of underwriting discounts, partially offset by payments of $2.6 million in offering costs; |
• | $7.3 million in payments of member tax distributions; and |
• | $15.0 million in taxes paid related to the net share settlement of equity awards. |
Fiscal 2020 Changes in Cash Flows
For the comparison of fiscal 2021 to fiscal 2020, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" of our Form 10-K for our fiscal year ended December 31, 2020, filed with the SEC on March 23, 2021 under the subheading "Liquidity and Capital Resources".
CriticalAccounting Estimates
Our consolidatedfinancialstatementsarepreparedin accordancewith GAAP.The preparationof these consolidatedfinancialstatementsrequiresus to makeestimatesand assumptionsthataffectthereportedamounts of assets,liabilities,revenue,expensesand relateddisclosures.We evaluateour estimatesand assumptionson an ongoing basis.Our estimatesarebasedon historicalexperienceand variousotherassumptionsthatwe believeto be reasonableunderthecircumstances.Our actualresultscoulddifferfromtheseestimates.
An accountingpolicyisdeemedto be criticalifitrequiresan accountingestimateto be madeon assumptionsaboutmattersthatarehighlyuncertainatthetimetheestimateismade and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe that the assumptions and estimates associated with the evaluation of revenue recognition criteria, including the determination of revenue recognition net versus gross assessment in our revenuearrangements,theassumptionsused in thevaluationmodelsto determinethefairvalueof common unitsand stock/unit-basedcompensation,and internal usesoftwarehave thegreatestpotentialimpacton our consolidatedfinancialstatements.Therefore,we considertheseto be our criticalaccountingpoliciesand estimates.
See Note 2 to our consolidatedfinancialstatementsincluded elsewhere in this Annual Report foradditionalinformation on the significant accounting policies and methods used in the preparation of our consolidatedfinancialstatements.
Revenue Recognition
We generate our revenueby providingmarketersand advertisingagencieswith theabilityto plan,buy and measuretheirdigitaladvertisingcampaignsusingourpeople-basedDSP,Adelphic.Our platform enables marketers
79
to reach their target audience across desktop,mobile,connectedTV,linearTV, in-game, streamingaudio and digitalbillboards.
We applya five-stepapproachas definedin FinancialAccountingStandardsBoard (“FASB”) AccountingStandardsCodification(“ASC”) 606, Revenue fromContractswith Customers(“ASC 606”),in determiningtheamountand timingof revenueto be recognized:
• | Identificationof a contractwith a customer; |
• | Identificationof theperformanceobligationsin thecontract; |
• | Determinationof thetransactionprice; |
• | Allocationof thetransactionpriceto theperformanceobligationsin thecontract;and |
• | Recognitionof revenuewhen or as theperformanceobligationsaresatisfied. |
We makeour software platformavailablethroughdifferentpricingoptionsto tailorto multiplecustomer typesandneeds.These optionsconsistof a percentageof spend option, a monthly subscriptionpricing option and a fixedCPMpricingoption. “CPM” refersto a paymentoptionin which customerspay a priceforevery1,000 impressionsan ad receives.We generaterevenuewhen oursoftwareplatformisused on a self-service basis by charginga platformfeethatiseithera percentageof spend or a flatmonthlysubscriptionfeeas wellas feesforadditionalfeaturessuch as dataand advancedreporting.We alsoofferour customerstheabilityto use our servicesto aidin datamanagement,mediaexecutionand advancedreporting.When customersutilizeour services,we generaterevenueby charginga (1)separateservicefeethatrepresentsa percentageof spend in additionto theplatformfee;(2)a flatmonthly subscription feecoveringservicesin connectionwith datamanagementand advancedreporting;or (3)a fixedCPM thatisinclusiveof media,otherdirectcostsand services.Some of the Company.aforementionedofferingsarerelativelynew to themarketand arenot yetmaterialto our businessfroma financialperspective.
We maintainagreementswith our customersin theformof MSAsin connectionwith thepercentageof spend and monthlysubscriptionpricingoptions, as wellas instanceswhere we chargeour customersa flatmonthlyfeeforservicesin connectionwith datamanagementand advanced reporting. We maintain insertionorders(“IO”)in connectionwith thefixedCPM pricingoption, which setout theterms of therelationshipand use of our software platform.The natureof our performanceobligationsisto enablecustomersto plan,buy and measureadvertisingcampaignsusingourplatformand providecampaignexecution servicesas requested.
Forthepercentageof spend pricingoption, we typicallybillcustomersa platformfee,and in certaininstancesan additionalservicefee,which isbasedon a specifiedpercentageof the customer’spurchasesthroughtheplatform as well as fees for additional features such as data and advanced reporting,plusthecostof TAC. We recognizerevenueatthe pointin timewhen a purchaseby thecustomeroccursthroughour software platform.Forthe monthlysubscriptionpricingoption, we bill customers a platform fee represented by a fixed subscription amount, as well as fees for additional features such as data and advanced reporting, plus the cost of TAC. We recognizesubscriptionfees as revenue overtimeon a ratablebasisoverthetermof theagreement.
The determination of whether revenue for the percentage of spend pricing option should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in the transaction. In determining whether we are acting as the principal or an agent, we follow the accounting guidance for principal-agent considerations. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative.
In instances discussed above related to the percentage of spend pricing option,we typically act as an agent because we arrangeforthetransferof such costs fromthesupplierto thecustomerthroughtheuse of our software platformand do not controlsuch featurespriorto transferto thecustomer.We do not have primaryresponsibility formeetingcustomerspecificationsand do not have discretionin establishingtheprice of TAC related to this pricing option. As we act as the agent in these arrangements, we report revenue on a net basis.In certain arrangements, we act as a principal in percentage of spend arrangements because (i) we control the advertising inventory before it is transferred to our clients; (ii) we bear sole responsibility for fulfillment of the advertising
80
promise and inventory risks and (iii) we have full discretion in establishing prices. As we act as the principal in these arrangements, we report revenue and the related costs incurred on a gross basis.
For the fixed CPM pricing option,we typicallybillcustomersa fixedCPM pricebasedon advertisingimpressions deliveredthroughtheplatform and recognizerevenueatthepointin timewhen theadvertisingimpressionsare delivered.In certaincases,we alsoprovidethirdpartydatasegmentsand measurementreporting, which arerecognizedatthepointin timetheyaredeliveredto thecustomer.We have theprimaryresponsibilityformeetingcustomer specificationsand have discretionin establishingtheprice of TAC related to this pricing option. As we act as the principal in these arrangements, we report revenue and the related costs incurred on a gross basis.
We invoice our customerson a monthlybasisforall pricing options.Invoice paymentterms,negotiatedon a customer-by-customerbasis,aretypically30 to 60 days. Advertisingagency customerstypicallyhave sequentialliabilityterms,which meanspaymentsarenot due to us fromour advertisingagencycustomeruntiltheadvertisingagencycustomerhas receivedpaymentfromitscustomer, the advertiser.
Thereareno contractassetsrecordedon the consolidatedbalancesheetsbecauseourrightto any unbilledconsiderationforperformanceobligationssatisfiedisonly conditionalupon thepassageof time. Contractliabilities,or deferredrevenue,arerecordedforamountsthatarecollectedin advanceof thesatisfaction of performanceobligations.These liabilitiesareclassifiedas currentiftherespectiveperformanceobligationsare anticipatedto be satisfiedduringthesucceeding12-monthperiodperthetermsof thecontract,and theremaining portionisrecordedas non-currentdeferredrevenuein the consolidatedbalancesheets.
ASC606 providesvariousoptionalpracticalexpedients.We electedtheuse of thepractical expedientrelatingto thedisclosureof remainingperformanceobligationswithina contractand willnot disclose remainingperformanceobligationsforcontractswith an originalexpecteddurationof one yearor less.
Internal UseSoftware
We capitalizecertaincostsassociatedwith creatingand enhancinginternallydevelopedsoftware.These costsincludepersonneland relatedemployeebenefitsexpensesforemployeeswho aredirectlyassociatedwith and who devotetimeto softwaredevelopmentprojects.Softwaredevelopmentcoststhatdo not qualifyfor capitalizationareexpensedas incurredand recordedin technologyand developmentexpensein the consolidated statementsof operations.
Softwaredevelopmentactivitiestypicallyconsistof threestages:(1)theplanningphase;(2)the applicationand infrastructuredevelopmentstage;and (3)thepostimplementationstage.Costs incurredin the planningand postimplementationphases,includingcostsassociatedwith trainingand repairsand maintenance of thedevelopedtechnologies,areexpensedas incurred.We capitalizecostsassociatedwith softwaredeveloped when thepreliminaryprojectstageiscompleted,managementimplicitlyor explicitlyauthorizesand commitsto fundingtheprojectand itisprobablethattheprojectwillbe completedand performas intended.Costs incurred in theapplicationand infrastructuredevelopmentphases,includingsignificantenhancementsand upgrades,are capitalized.Capitalizationends once a projectissubstantiallycompleteand thesoftwareisreadyforitsintended purpose,atwhich pointthesoftwarebegins to bedepreciated over its estimated useful life.
JOBS Act Accounting Election
On April5, 2012, theJOBSAct was signedintolaw. The JOBSAct containsprovisionsthat,among otherthings,reducecertainreportingrequirementsforqualifyingpubliccompanies.As an “emerginggrowth company,”we may,underSection7(a)(2)(B)of theSecuritiesAct, delayadoptionof new or revised accountingstandardsapplicableto publiccompaniesuntilsuch standardswould otherwiseapplyto private companies.An “emerginggrowth company”isone with lessthan$1.07 billionin annualsales,has lessthan $700 millionin marketvalueof sharesof commonstockheldby non-affiliatesand issueslessthan$1 billion of non-convertibledebtovera three-yearperiod.We will remain an emerging growth company until December 31, 2026, or sooner if we no longer qualify. We maytakeadvantageof thisextendedtransitionperioduntil thefirstto occurof thedatethatwe (i)areno longeran “emerginggrowth company”or (ii)affirmativelyand irrevocablyoptout of thisextendedtransitionperiod.
81
We have electedto takeadvantageof thebenefitsof thisextendedtransitionperiod.Untilthedatethat we areno longeran “emerginggrowth company”or affirmativelyand irrevocablyoptout of theexemption providedby SecuritiesAct Section7(a)(2)(B),upon issuanceof a new or revisedaccountingstandardthatapplies to our consolidatedfinancialstatementsand thathas a differenteffectivedateforpublicand privatecompanies, theCompany willdisclosethedateon which adoptionisrequiredfornon-emerginggrowth companiesand the dateon which we willadopttherecentlyissuedaccountingstandard.As partof thiselection, we aredelayingthe adoptionof accountingguidancerelatedto leasesand implementationcostsincurredin cloudcomputing arrangementsthatcurrentlyappliesto publiccompanies.We areassessingtheimpactthisguidancewillhave on our consolidated financialstatements.See Note 2 to our consolidatedfinancialstatementsincluded elsewhere in this Annual Report foradditionalinformation.
RecentlyIssued Accounting Pronouncements
For informationregardingrecentlyissuedaccountingpronouncements,seeNote 2 to our consolidated financialstatements included elsewhere in this Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our operationsareprimarilywithintheUnitedStates,and we areexposedto marketrisksin the ordinarycourseof our business,includingtheeffectsof interestratechanges,foreigncurrencyfluctuationsand inflation.
InterestRate Risk
We areexposedto marketriskfromchangesin interestrateson our Loan Agreement,which accrues interestata variablerate.We have not used any derivativefinancialinstrumentsto manageour interestraterisk exposure.Based upon theprincipalbalanceowed on our revolvingcreditfacilityas of December31, 2021, a hypotheticalone percentagepointincreaseor decreasein theinterestrateunderour revolvingcreditfacilitywould resultin a de minimis change in interestexpense for the year ended December 31, 2021.
InflationRisk
We do not believethatinflationhas had a materialeffecton our business,financialconditionor results of operations.Ifour costswere to becomesubjectto significantinflationarypressures,we mightnot be ableto fullyoffsetsuch highercoststhroughpriceincreases.Our inabilityor failureto do so couldharmour business, financialconditionand resultsof operations.
82
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID No.34) | 78 |
79 | |
80 | |
82 | |
Consolidated Statements of Convertible Preferred Units and Equity (Deficit) | 83 |
86 | |
88 | |
77
REPORTOF INDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
To the Stockholders and the Board of Directors of Viant Technology Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Viant Technology Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), convertible preferred units and equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company records compensation expenseis not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for all common unit awards and incentive units granted to employeesthe purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte& Touche LLP
Costa Mesa, California
March 10, 2022
We have served as the Company's auditor since 2020.
78
VIANT TECHNOLOGY INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share/unit data)
|
| As of December 31, |
| ||||||
|
| 2021 |
|
| 2020 |
| |||
Assets |
|
|
|
|
|
|
|
| |
Current assets: |
|
|
|
|
|
|
|
| |
Cash |
| $ | 238,480 |
|
| $ | 9,629 |
| |
Accounts receivable, net of allowances |
|
| 110,739 |
|
|
| 89,767 |
| |
Prepaid expenses and other current assets |
|
| 2,967 |
|
|
| 4,487 |
| |
Total current assets |
|
| 352,186 |
|
|
| 103,883 |
| |
Property, equipment, and software, net |
|
| 22,331 |
|
|
| 13,829 |
| |
Intangible assets, net |
|
| 1,786 |
|
|
| 3,015 |
| |
Goodwill |
|
| 12,422 |
|
|
| 12,422 |
| |
Other assets |
|
| 406 |
|
|
| 371 |
| |
Total assets |
| $ | 389,131 |
|
| $ | 133,520 |
| |
Liabilities, convertible preferred units and stockholders' equity/members' equity |
|
|
|
|
|
|
|
| |
Liabilities |
|
|
|
|
|
|
|
| |
Current liabilities: |
|
|
|
|
|
|
|
| |
Accounts payable |
| $ | 32,877 |
|
| $ | 29,763 |
| |
Accrued liabilities |
|
| 34,086 |
|
|
| 24,677 |
| |
Accrued compensation |
|
| 12,247 |
|
|
| 9,711 |
| |
Current portion of long-term debt |
|
| — |
|
|
| 3,353 |
| |
Current portion of deferred revenue |
|
| 1,317 |
|
|
| 2,725 |
| |
Accrued member tax distributions |
|
| 5 |
|
|
| 6,878 |
| |
Other current liabilities |
|
| 2,526 |
|
|
| 2,549 |
| |
Total current liabilities |
|
| 83,058 |
|
|
| 79,656 |
| |
Long-term debt |
|
| 17,500 |
|
|
| 20,182 |
| |
Long-term portion of deferred revenue |
|
| 5,234 |
|
|
| 5,612 |
| |
Other long-term liabilities |
|
| 765 |
|
|
| 453 |
| |
Total liabilities |
|
| 106,557 |
|
|
| 105,903 |
| |
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
|
| |
Convertible preferred units |
|
|
|
|
|
|
|
| |
2019 convertible preferred units, no par value; NaN issued and outstanding as of December 31, 2021 and 600,000 units authorized, issued and outstanding as of December 31, 2020; liquidation preference $5,444 as of December 31, 2020 |
|
| — |
|
|
| 7,500 |
| |
Members' equity |
|
|
|
|
|
|
|
| |
Common units, no par value; NaN issued and outstanding as of December 31, 2021 and 400,000 units authorized, issued and outstanding as of December 31, 2020 |
|
| — |
|
|
| — |
| |
Additional paid-in capital |
|
| — |
|
|
| 92,187 |
| |
Accumulated deficit |
|
| — |
|
|
| (72,070 | ) | |
Stockholders’ equity |
|
|
|
|
|
|
|
| |
Preferred stock, $0.001 par value, 10,000,000 shares authorized, NaN issued and outstanding as of December 31, 2021 |
|
| — |
|
|
| — |
| |
Class A common stock, $0.001 par value; 450,000,000 shares authorized and 13,920,868 shares issued and 13,704,638 shares outstanding as of December 31, 2021 |
|
| 14 |
|
|
| — |
| |
Class B common stock, $0.001 par value; 150,000,000 shares authorized and 47,107,130 shares issued and outstanding as of December 31, 2021 |
|
| 47 |
|
|
| — |
| |
Additional paid-in capital |
|
| 82,888 |
|
|
| — |
| |
Accumulated deficit |
|
| (20,139 | ) |
|
| — |
| |
Treasury stock, at cost; 216,230 shares as of December 31, 2021 |
|
| (2,648 | ) |
|
| — |
| |
Total stockholders' equity attributable to Viant Technology Inc./members' equity |
|
| 60,162 |
|
|
| 20,117 |
| |
Noncontrolling interests |
|
| 222,412 |
|
|
| — |
| |
Total equity |
|
| 282,574 |
|
|
| 20,117 |
| |
Total liabilities, convertible preferred units and stockholders' equity/members' equity |
| $ | 389,131 |
|
| $ | 133,520 |
| |
The accompanying notes are an integral part of these consolidated financial statements.
79
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share/unit data)
|
| Year Ended December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Revenue |
| $ | 224,127 |
|
| $ | 165,251 |
|
| $ | 164,892 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Platform operations |
|
| 129,604 |
|
|
| 88,260 |
|
|
| 94,060 |
|
Sales and marketing |
|
| 65,042 |
|
|
| 28,887 |
|
|
| 29,027 |
|
Technology and development |
|
| 25,372 |
|
|
| 8,698 |
|
|
| 9,240 |
|
General and administrative |
|
| 46,904 |
|
|
| 17,639 |
|
|
| 19,770 |
|
Total operating expenses |
|
| 266,922 |
|
|
| 143,484 |
|
|
| 152,097 |
|
Income (loss) from operations |
|
| (42,795 | ) |
|
| 21,767 |
|
|
| 12,795 |
|
Interest expense, net |
|
| 864 |
|
|
| 1,038 |
|
|
| 3,948 |
|
Other expense (income), net |
|
| 60 |
|
|
| 91 |
|
|
| (1,077 | ) |
Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
Total other expense (income), net |
|
| (5,186 | ) |
|
| 1,129 |
|
|
| 2,871 |
|
Net income (loss) |
|
| (37,609 | ) |
|
| 20,638 |
|
|
| 9,924 |
|
Less: Net loss attributable to noncontrolling interests |
|
| (29,867 | ) |
|
| — |
|
|
| — |
|
Net loss attributable to Viant Technology Inc. |
| $ | (7,742 | ) |
| $ | — |
|
| $ | — |
|
Earnings (loss) per Class A common stock/unit: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 31.31 |
|
Diluted |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 27.37 |
|
Weighted-average Class A common stock/units outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 12,364 |
|
|
| 400 |
|
|
| 274 |
|
Diluted |
|
| 12,364 |
|
|
| 1,000 |
|
|
| 1,000 |
|
The accompanying notes are an integral part of these consolidated financial statements.
80
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
|
| Year Ended December 31, 2021 |
|
| Year Ended December 31, 2020 |
|
| Year Ended December 31, 2019 |
| |||||||||||||||||||||||||||
|
| Viant |
|
| Noncontrolling |
|
|
|
|
|
| Viant |
|
| Noncontrolling |
|
|
|
|
|
| Viant |
|
| Noncontrolling |
|
|
|
|
| ||||||
|
| Technology Inc. |
|
| Interest |
|
| Total |
|
| Technology Inc. |
|
| Interest |
|
| Total |
|
| Technology Inc. |
|
| Interest |
|
| Total |
| |||||||||
Net income (loss) |
| $ | (7,742 | ) |
|
| (29,867 | ) |
| $ | (37,609 | ) |
| $ | — |
|
| $ | 20,638 |
|
| $ | 20,638 |
|
| $ | — |
|
| $ | 9,924 |
|
| $ | 9,924 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Total other comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Comprehensive income (loss) |
| $ | (7,742 | ) |
|
| (29,867 | ) |
| $ | (37,609 | ) |
| $ | — |
|
| $ | 20,638 |
|
| $ | 20,638 |
|
| $ | — |
|
| $ | 9,943 |
|
| $ | 9,943 |
|
The accompanying notes are an integral part of these consolidated financial statements.
82
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED UNITS AND EQUITY (DEFICIT)
(In thousands)
|
| Convertible Preferred Units |
|
|
| Common Units |
|
| Class A Common Stock |
|
| Class B Common Stock |
|
| Additional Paid-In |
|
| Accumulated |
|
| Members' |
|
| Treasury Stock |
|
| Noncontrolling |
|
| Total |
| ||||||||||||||||||||||||||||||
|
| Units |
|
| Amount |
|
|
| Units |
|
| Amount |
|
| Units |
|
| Amount |
|
| Units |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Equity |
| |||||||||||||||
Balance as of December 31, 2018 |
|
| 600 |
|
| $ | 45,000 |
|
|
|
| 240 |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | (83,197 | ) |
|
| — |
|
| $ | — |
|
| $ | — |
|
| $ | (83,197 | ) |
Unit-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,090 |
|
Vesting of common units |
|
|
|
|
|
|
|
|
|
|
| 160 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
Retirement of 2016 convertible preferred units held by related party |
|
| (600 | ) |
|
| (45,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 45,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 45,000 |
|
Forgiveness of long-term debt and accrued interest with related party, net of transaction costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 44,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 44,069 |
|
Issuance of 2019 convertible preferred units to a related party |
|
| 600 |
|
|
| 7,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Beneficial conversion feature on 2019 convertible preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,558 |
|
Deemed dividend related to beneficial conversion feature on 2019 convertible preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (27,558 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (27,558 | ) |
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,700 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,700 | ) |
83
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,924 |
|
Balance as of December 31, 2019 |
|
| 600 |
|
|
| 7,500 |
|
|
|
| 400 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,205 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,205 |
|
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,726 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,726 | ) |
Member dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,000 | ) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,638 |
|
Balance as of December 31, 2020 |
|
| 600 |
|
|
| 7,500 |
|
|
|
| 400 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,117 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,117 |
|
Net income prior to Reorganization Transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 669 |
|
Effect of Reorganization Transactions |
|
| (600 | ) |
|
| (7,500 | ) |
|
|
| (400 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
| 48,936 |
|
|
| 49 |
|
|
| 28,237 |
|
|
|
|
|
|
| (20,786 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,500 |
|
Issuance of Class A common stock in initial public offering, net of underwriting and offering costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,500 |
|
|
| 12 |
|
|
| (1,500 | ) |
|
| (2 | ) |
|
| 228,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 228,185 |
|
Exchange of Class B common stock for Class A common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 329 |
|
|
| — |
|
|
| (329 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Issuance of common stock in connection with equity- based compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,092 |
|
|
| 2 |
|
|
|
|
|
|
|
|
|
|
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Repurchase of treasury shares in connection with the taxes paid related to net share settlement of equity awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (915 | ) |
|
| (15,045 | ) |
|
|
|
|
|
| (15,045 | ) |
84
Reissuance of treasury stock in connection with equity- based compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (12,397 | ) |
|
|
|
|
|
| 699 |
|
|
| 12,397 |
|
|
|
|
|
|
| — |
|
Allocation of equity to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (252,948 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 252,948 |
|
|
| — |
|
Accrued member tax distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (413 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (413 | ) |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 79,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 79,839 |
|
Net loss subsequent to Reorganization Transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,742 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (30,536 | ) |
|
| (38,278 | ) |
Balance as of December 31, 2021 |
|
| — |
|
| $ | — |
|
|
|
| — |
|
| $ | — |
|
|
| 13,921 |
|
| $ | 14 |
|
|
| 47,107 |
|
| $ | 47 |
|
| $ | 82,888 |
|
| $ | (20,139 | ) |
| $ | — |
|
|
| (216 | ) |
| $ | (2,648 | ) |
| $ | 222,412 |
|
| $ | 282,574 |
|
The accompanying notes are an integral part of these consolidated financial statements.
85
VIANT TECHNOLOGY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
| Year Ended December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 11,141 |
|
|
| 10,106 |
|
|
| 10,155 |
|
Stock/Unit-based compensation |
|
| 68,822 |
|
|
| — |
|
|
| 1,090 |
|
Provision for (recovery of) doubtful accounts |
|
| (107 | ) |
|
| (584 | ) |
|
| 613 |
|
Loss on disposal of assets |
|
| 188 |
|
|
| 61 |
|
|
| 13 |
|
Gain on extinguishment of debt |
|
| (6,110 | ) |
|
| — |
|
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (20,865 | ) |
|
| (21,099 | ) |
|
| (20,200 | ) |
Prepaid expenses and other assets |
|
| (750 | ) |
|
| (252 | ) |
|
| (467 | ) |
Accounts payable |
|
| 3,404 |
|
|
| 8,995 |
|
|
| 2,745 |
|
Accrued liabilities |
|
| 9,728 |
|
|
| 1,736 |
|
|
| 15,827 |
|
Accrued compensation |
|
| 2,319 |
|
|
| 1,323 |
|
|
| (1,107 | ) |
Deferred revenue |
|
| (1,786 | ) |
|
| (1,694 | ) |
|
| (4,607 | ) |
Other liabilities |
|
| 290 |
|
|
| (355 | ) |
|
| (953 | ) |
Net cash provided by operating activities |
|
| 28,665 |
|
|
| 18,875 |
|
|
| 13,033 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (441 | ) |
|
| (434 | ) |
|
| (423 | ) |
Capitalized software development costs |
|
| (6,931 | ) |
|
| (7,407 | ) |
|
| (7,390 | ) |
Net cash used in investing activities |
|
| (7,372 | ) |
|
| (7,841 | ) |
|
| (7,813 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings on line of credit |
|
| — |
|
|
| — |
|
|
| 17,500 |
|
Proceeds from borrowings on debt with related party |
|
| — |
|
|
| — |
|
|
| 500 |
|
Proceeds from Paycheck Protection Program Loan |
|
| — |
|
|
| 6,035 |
|
|
| — |
|
Repayments of debt with related party |
|
| — |
|
|
| — |
|
|
| (25,000 | ) |
Proceeds from issuance of 2019 convertible preferred units to a related party |
|
| — |
|
|
| — |
|
|
| 7,500 |
|
Transaction costs paid on behalf of related party |
|
| — |
|
|
| — |
|
|
| (3,561 | ) |
Proceeds from issuance of common stock, net of underwriting discounts |
|
| 232,500 |
|
|
|
|
|
|
|
|
|
Payment of member tax distributions |
|
| (7,289 | ) |
|
| (5,547 | ) |
|
| — |
|
Payment of member dividends |
|
| — |
|
|
| (5,000 | ) |
|
| — |
|
Payment of offering costs |
|
| (2,608 | ) |
|
| (1,708 | ) |
|
| — |
|
Taxes paid related to net share settlement of equity awards |
|
| (15,045 | ) |
|
| — |
|
|
| — |
|
Net cash provided by (used in) financing activities |
|
| 207,558 |
|
|
| (6,220 | ) |
|
| (3,061 | ) |
Effect of exchange rate changes on cash |
|
| — |
|
|
| — |
|
|
| 1 |
|
Net increase in cash |
|
| 228,851 |
|
|
| 4,814 |
|
|
| 2,160 |
|
Cash at beginning of period |
|
| 9,629 |
|
|
| 4,815 |
|
|
| 2,655 |
|
Cash at end of period |
| $ | 238,480 |
|
| $ | 9,629 |
|
| $ | 4,815 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 660 |
|
| $ | 1,065 |
|
| $ | 12 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Additions of property and equipment paid by landlord pursuant to tenant improvement allowance |
|
| — |
|
|
| — |
|
|
| 355 |
|
Retirement of 2016 convertible preferred units with related party |
|
| — |
|
|
| — |
|
|
| 45,000 |
|
Forgiveness of long-term debt and accrued interest by related party |
|
| — |
|
|
| — |
|
|
| 47,630 |
|
Beneficial conversion feature and deemed dividend related to 2019 convertible preferred units |
|
| — |
|
|
| — |
|
|
| 27,558 |
|
Accrued member tax distributions |
|
| 5 |
|
|
| 6,878 |
|
|
| 1,700 |
|
86
Deferred offering costs recorded in accounts payable and accrued liabilities | — | 529 | — | |||||||||
Stock-based compensation included in capitalized software development costs | 11,017 | — | — | |||||||||
Capitalized assets financed by accounts payable and accrued liabilities | 356 | — | — | |||||||||
Noncash gain on extinguishment of debt related to Paycheck Protection Program loan | 6,110 | — | — |
The accompanying notes are an integral part of these consolidated financial statements.
87
VIANT TECHNOLOGY INC.
Notes to Consolidated Financial Statements
1. Nature of Operations
ViantTechnologyInc. (the“Company,”“we,” “us,”“our”or “Viant”)was incorporated in the State of Delawareon October9, 2020 for the purpose of facilitating an Initial Public Offering (“IPO”) and other related transactions. The Company operatesa demandsideplatform(“DSP”), Adelphic,an enterprisesoftwareplatformthatisused by marketers and theiradvertisingagenciesto centralizetheplanning,buying and measurementof theiradvertisingacross channels,includingdesktop,mobile,connectedTV,linearTV, in-game, streamingaudioand digitalbillboards.
On February 9, 2021, the Securities and Exchange Commission (“SEC”) declared effective the Company’s Form S-1 related to the IPO of its Class A common stock. The closing date of the IPO was February 12, 2021, and in connection with the closing and the corporate reorganization (the “Reorganization Transactions”), the following actions were taken:
• | The Company amended and restated its certificate of incorporation, under which the Company is authorized to issue up to 450,000,000 shares of Class A common stock, up to 150,000,000 shares of Class B common stock, and up to 10,000,000 shares of preferred stock; |
• | The limited liability company agreement of Viant Technology LLC was amended and restated (as amended and restated, the “Viant Technology LLC Agreement”) to, among other things, provide for Class A units and Class B units and appoint the Company as the sole managing member of Viant Technology LLC; |
• | The Viant Technology LLC Agreement classified the interests acquired by the Company as Class A units, reclassified the interests held by the continuing members of Viant Technology LLC as Class B units, and permits the continuing members of Viant Technology LLC to exchange Class B units for shares of Class A common stock on a one-for-one basis or, at the election of Viant Technology Inc., for cash at the current fair value on the date of the exchange. Immediately following such reclassification, the continuing members held 48,935,559 Class B units. For each membership unit of Viant Technology LLC that was reclassified as a Class B unit, the Company issued 1 corresponding share of our Class B common stock to the continuing members, or 48,935,559 shares of Class B common stock in total; |
• | The Company issued and sold 10,000,000 shares of its Class A common stock to the underwriters at an IPO price of $25.00 per share, for gross proceeds of $250.0 million before deducting underwriting discounts and commissions of $17.5 million; |
• | The Company used the net proceeds of $232.5 million to acquire 10,000,000 newly issued Class A units of Viant Technology LLC at a per-unit price equal to the per-share price paid by the underwriters for shares of our Class A common stock; |
• | The underwriters exercised their option to purchase 1,500,000 additional shares of Class A common stock from the selling stockholders. The Company did not receive any proceeds from the sale of shares by the selling stockholders. Pursuant to such exercise, the selling stockholders exchanged the corresponding number of Class B units for the shares of Class A common stock, the corresponding number of shares of Class B common stock were automatically retired, and 1,500,000 Class A units were issued to the Company; |
• | The Class B stockholders and Class A stockholders initially had 80.5% and 19.5%, respectively, of the combined voting power of the Company’s common stock. The Class A common stock outstanding represents 100% of the rights of the holders of all classes of the Company’s outstanding common stock to share in distributions from the Company, except for the right of Class B stockholders to receive the par value of the Class B common stock upon our liquidation, dissolution or winding up or an exchange of Class B units; |
• | The Company entered into a Registration Rights Agreement with the Class B stockholders to provide for certain rights and restrictions after the IPO; and |
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• | Viant Technology LLC’s 2020 Equity Based Incentive Compensation Plan (the “Phantom Unit Plan”) was terminated and replaced with the Company’s 2021 Long Term Incentive Plan (the “LTIP”). |
Immediately following the closing of the IPO, Viant Technology LLC is the predecessor of the Company for financial reporting purposes. The Company is a holding company, and its sole material asset is its equity interest in Viant Technology LLC. As the sole managing member of Viant Technology LLC, the Company operates and controls all of the business and affairs of Viant Technology LLC. The Reorganization Transactions are accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements of the Company recognize the assets and liabilities received in the Reorganization Transactions at their historical carrying amounts, as reflected in the historical consolidated financial statements of Viant Technology LLC. The Company consolidates Viant Technology LLC in its consolidated financial statements and records a noncontrolling interest related to the Class B units held by the Class B stockholders on its consolidated balance sheets, statements of operations and statements of comprehensive income (loss).
2. Basis of Presentationand Summaryof SignificantAccounting Policies
Basis of Presentationand Principlesof Consolidation
Theaccompanying consolidated financial statements arepreparedinaccordancewithaccounting principlesgenerallyacceptedintheUnitedStatesofAmerica(“GAAP”)andincludetheoperationsoftheCompany, Viant Technology LLC anditswhollyownedsubsidiaries. Viant Technology LLC is considered a variable interest entity (“VIE”). The Company is the primary beneficiary and sole managing member of Viant Technology LLC and has decision making authority that significantly affects the economic performance of the entity. As a result, the Company consolidates Viant Technology LLC. All intercompany balances and transactions have been eliminated in consolidation.
Viant Technology LLC has been determined to be the predecessor for accounting purposes and, accordingly, the consolidated financial statements for periods prior to the IPO and the related Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes. Amounts for the period prior to February 12, 2021 presented in the consolidated financial statements and notes to consolidated financial statements herein represent the historical operations of Viant Technology LLC. The amounts as of December 31, 2021 and for the period from February 12, 2021 reflect the consolidated operations of the Company.
Management believes that the accompanying consolidated financial statements reflect the adjustments necessary for the fair statement of its consolidated balance sheet as of December 31, 2021 and 2020, results of operations for the years ended December 31, 2021, 2020 and 2019, and cash flows for the years ended December 31, 202, 2020 and 2019.
Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
On an on-going basis, management evaluates its estimates, primarily those related to revenue recognition, stock-based compensation, income taxes, allowances for doubtful accounts, the useful lives of capitalized software development costs and other property, equipment and software and assumptions used in the impairment analyses of long-lived assets and goodwill. These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
As of December 31, 2021, the impact of the COVID-19 pandemic on our business continues to evolve. As a result, many of our estimates and assumptions consider macro-economic factors in the market, which require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.
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SegmentInformation
The Company has a singlereportableoperatingsegmentwhich operatesan enterprisesoftwareplatform, Adelphic,thatenablesmarketersand theiradvertisingagenciesto automateand centralizetheplanning,buying and measurementof theirvideo,audioand displayads acrossallchannels,includingdesktop,mobile,connected TV,linearTV, in-game, streamingaudioand digitalbillboardsin theUnitedStates.In reachingthisconclusion, managementconsidersthedefinitionof thechiefoperatingdecisionmaker(“CODM”), how thebusinessis definedby theCODM,thenatureof theinformationprovidedto theCODMand how thatinformationisused to makeoperatingdecisions,allocateresourcesand assessperformance.The Company’sCODMiscomprisedof thechiefexecutiveofficerand chiefoperatingofficer.The resultsof operationsprovidedto and analyzedby the CODMareattheconsolidatedleveland accordingly,key resourcedecisionsand assessmentof performanceare performedattheconsolidatedlevel.The Company assessesitsdeterminationof operatingsegmentsatleast annually.
Revenue Recognition
The Company generatesitsrevenueby providingmarketersand advertisingagencieswith theabilityto plan,buy and measuretheirdigitaladvertisingcampaignsusingitspeople-basedDSP,Adelphic.Our platform enables marketers to reach their target audience across desktop,mobile,connectedTV,linearTV, in-game, streamingaudio and digitalbillboards.
The Company appliesa five-stepapproachas definedin FinancialAccountingStandardsBoard (“FASB”) AccountingStandardsCodification(“ASC”) 606, Revenue fromContractswith Customers(“ASC 606”),in determiningtheamountand timingof revenueto be recognized:
• | Identificationof a contractwith a customer; |
• | Identificationof theperformanceobligationsin thecontract; |
• | Determinationof thetransactionprice; |
• | Allocationof thetransactionpriceto theperformanceobligationsin thecontract;and |
• | Recognitionof revenuewhen or as theperformanceobligationsaresatisfied. |
We makeour software platformavailablethroughdifferentpricingoptionsto tailorto multiplecustomer typesand customerneeds.These optionsconsistof a percentageof spend option, a monthly subscriptionpricing option and a fixedcostpermille(“CPM”)pricingoption. CPM refersto a paymentoptionin which customerspay a priceforevery1,000 impressionsan ad receives.We generaterevenuewhen oursoftwareplatformisused on a self-service basis by charginga platformfeethatiseithera percentageof spend or a flatmonthlysubscriptionfeeas wellas feesforadditionalfeaturessuch as dataand advancedreporting.We alsoofferour customerstheabilityto use our servicesto aidin datamanagement,mediaexecutionand advancedreporting.When customersutilizeour services,we generaterevenueby charginga (1)separateservicefeethatrepresentsa percentageof spend in additionto theplatformfee;(2)a flatmonthly subscription feecoveringservicesin connectionwith datamanagementand advancedreporting;or (3)a fixedCPM thatisinclusiveof media,otherdirectcostsand services.Some of the aforementionedofferingsarerelativelynew to themarketand arenot yetmaterialto our businessfroma financialperspective.
We maintainagreementswith our customersin theformof masterserviceagreements(“MSA”)in connectionwith thepercentageof spend and monthlysubscriptionpricingoptions, as wellas instanceswhere we chargeour customersa flatmonthlyfeeforservicesin connectionwith datamanagementand advanced reporting. We maintain insertionorders(“IO”)in connectionwith thefixedCPM pricingoption, which setout theterms of therelationshipand use of our software platform.The natureof our performanceobligationsisto enablecustomersto plan,buy and measureadvertisingcampaignsusingourplatformand providecampaignexecution servicesas requested.
Forthepercentageof spend pricingoption, we typicallybillcustomersa platformfee,and in certaininstancesan additionalservicefee,which isbasedon a specifiedpercentageof the customer’spurchasesthroughtheplatform as well as fees for additional features such as data and advanced reporting,plusthecostof TAC, as definedbelow. We recognizerevenueatthe pointin timewhen a purchaseby thecustomeroccursthroughour software platform.
90
Forthe monthlysubscriptionpricingoption, we bill customers a platform fee represented by a fixed subscription amount, as well as fees for additional features such as data and advanced reporting, plus the cost of TAC. We recognizesubscriptionfees as revenue overtimeon a ratablebasisoverthetermof theagreement.
The determination of whether revenue for the percentage of spend pricing option should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in the transaction. In determining whether we are acting as the principal or an agent, we follow the accounting guidance for principal-agent considerations. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative.
In instances discussed above related to the percentage of spend pricing option,we typically act as an agent because we arrangeforthetransferof such costs fromthesupplierto thecustomerthroughtheuse of our software platformand do not controlsuch featurespriorto transferto thecustomer.We do not have primaryresponsibility formeetingcustomerspecificationsand do not have discretionin establishingtheprice of TAC related to this pricing option. As we act as the agent in these arrangements, we report revenue on a net basis.In certain arrangements, we act as a principal in percentage of spend arrangements because (i) we control the advertising inventory before it is transferred to our clients; (ii) we bear sole responsibility for fulfillment of the advertising promise and inventory risks and (iii) we have full discretion in establishing prices. As we act as the principal in these arrangements, we report revenue and the related costs incurred on a gross basis.
For the fixed CPM pricing option,we typicallybillcustomersa fixedCPM pricebasedon advertisingimpressions deliveredthroughtheplatform and recognizerevenueatthepointin timewhen theadvertisingimpressionsare delivered.In certaincases,we alsoprovidethirdpartydatasegmentsand measurementreporting, which arerecognizedatthepointin timetheyaredeliveredto thecustomer.We have theprimaryresponsibilityformeetingcustomer specificationsand have discretionin establishingtheprice of TAC related to this pricing option. As we act as the principal in these arrangements, we report revenue and the related costs incurred on a gross basis.
The Company invoicesitscustomerson a monthlybasisforall pricing options.Invoice paymentterms,negotiatedon a customer-by-customerbasis,aretypically30 to 60 days. Advertisingagency customerstypicallyhave sequentialliabilityterms,which meanspaymentsarenot due to theCompany fromits advertisingagencycustomeruntiltheadvertisingagencycustomerhas receivedpaymentfromitscustomer, the advertiser.
Thereareno contractassetsrecordedon the consolidatedbalancesheetsbecausetheCompany’srightto any unbilledconsiderationforperformanceobligationssatisfiedisonly conditionalupon thepassageof time. Contractliabilities,or deferredrevenue,arerecordedforamountsthatarecollectedin advanceof thesatisfaction of performanceobligations.These liabilitiesareclassifiedas currentiftherespectiveperformanceobligationsare anticipatedto be satisfiedduringthesucceeding12-monthperiodperthetermsof thecontract,and theremaining portionisrecordedas non-currentdeferredrevenuein the consolidatedbalancesheets.
ASC606 providesvariousoptionalpracticalexpedients.The Company electedtheuse of thepractical expedientrelatingto thedisclosureof remainingperformanceobligationswithina contractand willnot disclose remainingperformanceobligationsforcontractswith an originalexpecteddurationof one yearor less.
OperatingExpenses
We classifyour operatingexpensesintothefollowingfourcategories.Each expensecategoryincludes overheadsuch as rentand occupancycharges,which isallocatedbasedon headcount.
PlatformOperations.Platformoperationsexpenserepresentsour costof revenues,which consistsof TAC, hostingcosts,personnelcosts,depreciationof capitalizedsoftwaredevelopmentcostsrelatedto our platform,customersupportcostsand allocatedoverhead.TACrecordedin platformoperationsconsistsof amountsincurredand payableto suppliersforcostsassociatedwith our fixedCPM pricingoption. Personnel costswithinplatformoperationsincludesalaries,bonuses, stock/unit-basedcompensationand employee benefitcostsprimarilyattributableto personnelwho directlysupportour platform.
91
Salesand Marketing.Salesand marketingexpenseconsistsprimarilyof personnelcosts,including salaries,bonuses, stock/unit-basedcompensation,employeebenefitcostsand commissionsforour sales personnel.Salesand marketingexpensealsoincludescostsformarketdevelopmentprograms,advertising, promotionaland othermarketingactivitiesand allocatedoverhead.Commissionsareexpensedas incurred.
The Company incurredadvertisingcostsof $4.1 million, $1.2 million, and $1.0 million fortheyearsended December31, 2021, 2020 and 2019, respectively,relatedto thepromotionof theCompany, its brands,productsand servicesto potentialcustomers.Advertisingcostsareexpensedas incurredand recordedin salesand marketingexpensewithinthe consolidatedstatementsof operations.
Technologyand Development.Technologyand developmentexpenseconsistsprimarilyof personnel costs,includingsalaries,bonuses, stock/unit-basedcompensationand employeebenefitcostsassociatedwith theongoing developmentand maintenanceof our softwareplatformand allocatedoverhead.Technologyand developmentcostsareexpensedas incurred,exceptto theextentthatsuch costsareassociatedwith software developmentthatqualifiesforcapitalization,which arethenrecordedas capitalizedsoftware development costsincludedin property,equipmentand software,net,on the consolidatedbalancesheets. We recorddepreciationfor capitalizedsoftwarenot relatedto our platformwithintechnologyand developmentexpense.
Generaland Administrative.Generaland administrativeexpenseconsistsprimarilyof personnelcosts, includingsalaries,bonuses, stock/unit-basedcompensationand employeebenefitcostsassociatedwith our executive,accounting,finance,legal,humanresources,and otheradministrativepersonnel.Additionally,this includesaccounting, legal and otherprofessionalservicesfees, insurance expense,bad debtexpenseand allocatedoverhead.
Stock-Based Compensation
Stock-based compensation relates to equity awards granted under the Company’s 2021 LTIP, which is measured and recognized on a graded-vesting attribution basis overin the requisite service periodconsolidated financial statements based on the fair value of the equity awards atgranted. Since inception of the grant date. The2021 LTIP, the Company has electedonly granted restricted stock units (“RSUs”) and nonqualified stock options. The fair value of RSUs is calculated using the accounting policy to account for forfeitures within unit-based compensation expense when they occur.
Duringclosing market price of the periods coveredCompany’s Class A common stock on the date of grant. The fair value of nonqualified stock options is estimated using the Black Scholes option pricing model. The Black Scholes option pricing model is impacted by these consolidated financial statements, the Company was privately held with no active public market for our common units. Therefore, in determining the fair value of the Company’s Class A common stock, as well as changes in certain assumptions, including but not limited to, the expected Class A common stock price volatility over the term of the nonqualified stock options, the expected term of the nonqualified stock options, the risk-free interest rate, and the expected dividend yield. The Company recordscompensation forallequityawardsunder the 2021 LTIPunder the straight-line attribution method over the requisite service period. The Company has electedtheaccountingpolicyto accountforforfeitureswithinstock-basedcompensationas theyoccur.
A portion of RSUs granted during the year ended December 31, 2021 to certain employees and board members, pursuant to the 2021 LTIP, vested upon expiration of the 180 day IPO lock-up period during the fiscal year ended December 31, 2021. The remainder of RSUs and nonqualified stock options granted to employees will vest through the applicable vesting dates. RSUs generally vest over a period of four years, contingent upon employment on the vesting date. RSUs awarded to board members upon their appointment will vest on the third anniversary of the grant date and RSUs awarded to board members annually will vest on the first anniversary of the grant date. Nonqualified stock options will generally vest based on 4 years of continuous service and have 10-year contractual terms.
Unit-BasedCompensation
The Company adoptedtheLimitedLiabilityCompany Agreement(the“ViantTechnologyLLC Agreement”)on October4, 2016, underwhich itissuedcommonunitawards,subjectto vestingand otherterms, to certainexecutivesof theCompany and to ViantTechnologyEquityPlan LLC,which issuedincentiveunitsin theformof profitintereststo certainemployeesof theCompany. The Company recordscompensation forallcommonunitawardsand incentiveunitsgrantedto employeesof theCompany, which ismeasuredand recognizedon a graded-
92
vestingattributionbasisovertherequisiteserviceperiodbasedon thefairvalueof the awardsatthegrantdate.The Company has electedtheaccountingpolicyto accountforforfeitureswithinunit-basedcompensationas theyoccur.
During the years ended December 31, 2020 and 2019,theCompany was privatelyheldwith no activepublicmarketforour commonunits.Therefore,in determiningthefairvalueof equity-basedawards,the Company utilizedvaluationspreparedby an independentthirdparty.The independentthirdpartyperformedthe valuationsin a mannerconsistentwith theAmericanInstituteof CertifiedPublicAccountantsPracticeAid, Valuationof Privately-HeldCompany EquitySecuritiesIssuedas Compensation (“(“PracticeAid”).In conducting thevaluations,theCompany consideredallobjectiveand subjectivefactorsthatitbelievedto be relevantin the valuationconducted,includingmanagement’sbestestimateof our businesscondition,prospectsand operating performanceatthevaluationdates.Therearesignificantjudgmentsand estimatesinherentin thesevaluations. These judgmentsand estimatesincludeassumptionsregardingour futureoperatingperformance,industry growth, averagesellingprice,and thetimingof a potentialinitialpublicofferingor otherliquidityevent.
The Company determinedthefairvalueof equityawardsusinga combinationof themarketand income approach.The marketapproachand theincomeapproachareboth acceptablevaluationmethodsin accordance with thePracticeAid. Therearetwo generalmethodologiesunderthemarketapproach:(i)guidelinepublic companymethod,and (ii)guidelinemergedand acquiredcompanymethod.Both methodsgeneratea marketable equityfairvalueindicationusingmarket-basedinformationavailableto marketparticipants.Under theincome approach,theenterprisevaluecan be estimatedusingthediscountedcashflow method, which involves estimatingthefuturecashflowsof a businessfora discreteperiodand discountingthemto theirpresentvalue.
As providedin thePracticeAid, thereareseveralapproachesforallocatingenterprisevalueof a privatelyheld companyto theoutstandingequityof theCompany. The Company selectedtheOption PricingModel(“OPM”) which treatscommonequityand preferredequityas calloptionson theenterprise’svalue.The exerciseprices associatedwith thesecalloptionsvaryaccordingto theliquidationpreferenceof thepreferredequity,the preferredequityconversionprice,theexercisepricesof commonequityoptionsand otherfeaturesof a company’sequitycapitalstructure.
Earnings (Loss)Per Share
Basicearnings(loss)pershareiscalculatedby dividingthe earnings (loss)attributableto Class A common equitystockholdersby the number of weighted-average shares of Class A commonstock outstanding. The Company’s RSUs, nonqualified stock options and preferred equity as call options onshares of Class B common stock do not share in the enterprise’s value. The exercise prices associated with these call options vary according to the liquidation preferenceearnings or losses of the preferred equity, the preferred equity conversion price, the exercise pricesCompany and are therefore not participating securities. As such, separate presentation of common equitybasic and diluted earnings (loss) per share of RSUs, nonqualified stock options and other features Class B common stock under the two-class method has not been presented.
Dilutedearningspershare adjuststhebasicearnings(loss)per share calculation forthepotentialdilutiveimpactof commonshares such as equity awardsusingthetreasury-stockmethod.Dilutedearningspershare considerstheimpactof potentially dilutivesecuritiesexceptin periodsin which thereisa company’s equity capital structure.lossbecausetheinclusionof thepotentialcommonshares would have an anti-dilutiveeffect. Shares of our Class B common stock, RSUs, and nonqualified stock options are considered potentially dilutive shares of Class A common stock; however, related amounts have been excluded from the computation of diluted earnings per share of Class A common stock because the effect would have been anti-dilutive under the if-converted method and treasury-stock method.
Earnings (Loss)Per Unit
Basic earnings (loss) per unit is calculated by dividing the earnings (loss) attributable to common unitholders by the number of weighted-average common units outstanding. The Company applies the two-class method to allocate earnings between common and convertible preferred units.
Diluted earnings (loss) per unit adjusts the basic earnings (loss) per unit attributable to common unitholders and the weighted-average number of units of common units outstanding for the potential dilutive impact of common units, using the treasury-stock method, and convertible preferred units using the as-if-convertedif-converted method. Diluted earnings (loss) per
93
unit considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common units would have an anti-dilutive effect.
Cash
The carryingamountsreflectedin the consolidatedbalancesheetsforcashapproximatethefairvalue, consistingof cashon hand and atthebank.
Accounts Receivable,Net of Allowances
Accountsreceivablearerecordedattheinvoicedamount,netof an allowancefordoubtfulaccounts,and areunsecuredand do not bearinterest.The Company performscreditevaluationsof itscustomersand certain advertiserswhen theCompany’sagreementswith itscustomerscontainsequentialliabilitytermsthatprovide thatthecustomerpaymentsarenot due to theCompany untilthecustomerhas receivedpaymentfromits customers(advertisers).The allowancefordoubtfulaccountsisbasedon thebestestimateof theamountof probablecreditlossesin existingaccountsreceivable.The allowancefordoubtfulaccountsisdeterminedbased on historicalcollectionexperienceand thereviewin eachperiodof thestatusof thethen-outstandingaccounts receivable,whiletakingintoconsiderationcurrentcustomerinformation,subsequentcollectionhistoryand other relevantdata.Account balancesarechargedoffagainsttheallowancewhen theCompany believesitisprobable thereceivablewillnot be recovered.Recoveriesof accountsreceivablepreviouslywrittenoffarerecordedwhen received.
The followingtablepresentschangesin theallowancefordoubtfulaccounts:
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Beginning balance |
| $ | 1,528 |
|
| $ | 1,340 |
|
| $ | 335 |
|
| $ | 1,528 |
|
Provision for (recovery of) doubtful accounts |
|
| (584 | ) |
|
| 613 |
|
|
| (107 | ) |
|
| (584 | ) |
Write-offs, net of recoveries |
|
| (609 | ) |
|
| (425 | ) |
|
| (174 | ) |
|
| (609 | ) |
Ending balance |
| $ | 335 |
|
| $ | 1,528 |
|
| $ | 54 |
|
| $ | 335 |
|
DeferredOfferingCosts
Deferredofferingcosts consist consistedprimarilyof accounting,legal,and othercostsrelatedto our IPO. Upon consummationAs of December 31, 2020, the IPO which occurred in February 2021, the deferred offering costs will be reclassified to stockholders’ equity of Viant Technology Inc and recorded against the proceeds from the offering. The Company capitalized $2.2 million of deferredofferingcostswithinprepaidexpensesand other currentassets in the consolidated balance sheet. Upon consummationof theIPO in February 2021, totaldeferredofferingcosts of $4.3 million were reclassifiedas of December 31, 2020. No offering costs were capitalized as of December 31, 2019.additional paid-in capital within stockholders’equity and recordedagainsttheproceedsfromtheIPO.
Property,Equipmentand Software,Net
Property,equipmentand softwarearerecordedathistoricalcost,lessaccumulateddepreciation. Depreciationiscomputedusingthestraight-linemethodbasedupon thefollowingestimatedusefullives:
|
| Years |
| |
Computer equipment |
| 3-5 |
| |
Purchased software |
|
| 3 |
|
Capitalized software development costs |
|
| 3 |
|
Furniture, fixtures and office equipment |
|
| 10 |
|
Leasehold improvements |
| * |
| |
* | Leaseholdimprovementsaredepreciatedon a straight-linebasisoverthetermof thelease,or theusefullifeof theassets,whicheverisshorter. |
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Repairand maintenancecostsarechargedto expenseas incurred,whilereplacementsand improvementsare capitalized.When assetsareretiredor otherwisedisposedof, thecostand relatedaccumulateddepreciationare removedfromtheaccountsand any resultinggainor lossisrecordedin otherexpense(income),netwithin the consolidatedstatementsof operations and comprehensive income (loss).operations.
CapitalizedSoftwareDevelopmentCosts
The Company capitalizescertaincostsassociatedwith creatingand enhancinginternallydeveloped softwarerelatedto theCompany’stechnologyinfrastructureand such costsarerecordedwithinproperty, equipmentand software,net.These costsincludepersonneland relatedemployeebenefitexpensesforemployees who aredirectlyassociatedwith and who devotetimeto softwaredevelopmentprojects.Softwaredevelopment coststhatdo not qualifyforcapitalizationareexpensedas incurredand recordedin technologyand development expensein the consolidatedstatementsof operations and comprehensive income (loss).
Softwaredevelopmentactivitiestypicallyconsistof threestages:(1)theplanningphase;(2)the applicationand infrastructuredevelopmentstage;and (3)thepostimplementationstage.Costs incurredin the planningand postimplementationphases,includingcostsassociatedwith trainingand repairsand maintenance of thedevelopedtechnologies,areexpensedas incurred.The Company capitalizescostsassociatedwith software developedwhen thepreliminaryprojectstageiscompleted,managementimplicitlyor explicitlyauthorizesand commitsto fundingtheprojectand itisprobablethattheprojectwillbe completedand performas intended. Costs incurredin theapplicationand infrastructuredevelopmentphases,includingsignificantenhancementsand upgrades,arecapitalized.Capitalizationends once a projectissubstantiallycompleteand thesoftwareisready foritsintendedpurpose.Softwaredevelopmentcostsaredepreciatedusinga straight-linemethodoverthe estimatedusefullife,commencingwhen thesoftwareisreadyforitsintendeduse. The straight-linerecognition methodapproximatesthemannerin which theexpectedbenefitwillbe derived.
CapitalizedInterest
The Company capitalizesintereston borrowingsrelatedto eligiblecapitalexpendituresincluding developmentcostsrelatedto internaluse softwarewhich isrecordedwithinproperty,equipmentand software, net.Capitalizedinterestisadded to thecostof thequalifiedassetsand depreciatedovertheestimatedusefullives of theassets.
Impairmentof Long-LivedAssets
Long-livedassetsconsistof property,equipmentand softwareand intangibleassetswith estimable usefullivessubjectto depreciationand amortization.The Company reviewslong-livedassetsforimpairment whenevereventsor changesin circumstancesindicatethatthecarryingamountof an assetor assetgroup maynot be recoverable.Recoverabilityof an assetor assetgroup to be heldand used ismeasuredby a comparisonof the carryingamountof an assetor assetgroup to theestimatedundiscountedfuturecashflowsexpectedto be generatedby theassetor assetgroup. Ifthecarryingamountof theassetor assetgroup exceedsitsestimated futurecashflows,an impairmentchargeisrecognizedin theamountby which thecarryingamountof theassetor assetgroup exceedsthefairvalueof theassetor assetgroup.
Goodwill
Goodwill istestedatleastannuallyforimpairmentas of thefirstday of thefourthfiscalquarter,or more frequentlyifindicatorsof impairmentexistduringthefiscalyear.Eventsor circumstanceswhich couldtriggeran impairmentreviewincludea significantadversechangein legalfactorsor in thebusinessclimate,lossof key customers,an adverseactionor assessmentby a regulator,unanticipatedcompetition,a lossof key personnel, significantchangesin themannerof theCompany’suse of theacquiredassetsor thestrategyfortheCompany’s overallbusiness,significantnegativeindustryor economictrends,or significantunderperformancerelativeto expectedhistoricalor projectedfutureresultsof operations.The Company assessesitsconclusionregarding reportingunitsin conjunctionwith itsannualgoodwillimpairmenttestand has determinedthatit has one reportingunitforthepurposesof allocatingand testinggoodwill.
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When testinggoodwillforimpairment,theCompany firstperformsa qualitativeassessment.Ifthe Company determinesitismorelikelythannot thata reportingunit’sfairvalueislessthanitscarryingamount, thena one-stepimpairmenttestisrequired.IftheCompany determinesitisnot morelikelythannot a reporting unit’sfairvalueislessthanitscarryingamount,thenno furtheranalysisisnecessary.To identifywhethera potentialimpairmentexists,theCompany comparestheestimatedfairvalueof thereportingunitwith its carryingamount,includinggoodwill.Iftheestimatedfairvalueof thereportingunitexceedsitscarryingamount, goodwillisnot consideredto be impaired.If,however, thefairvalueof thereportingunitislessthanitscarrying amount,thensuch balancewould be recordedas an impairmentloss.Any impairmentlossislimitedto the carryingamountof goodwillwithintheentity.
Paycheck ProtectionProgramLoan
On April14, 2020, theCompany receivedtheproceedsfroma loanin theamountof approximately $6.0$6.0 million (the “PPP(the“PPP Loan”)fromPNCBank, as lender,pursuantto thePaycheckProtectionProgram (“PPP”)of theCoronavirusAid, Relief,and EconomicSecurityAct (the “CARES “CARESAct”).The Company accountedforthePPPLoan as a financialliabilityin accordancewith ASCTopic 470, Debt. Accordingly,the PPPLoan was recognizedwithinlong-termdebtand currentportionof long-termdebtin theCompany’s consolidatedbalancesheet and the related accruedinterestwasincludedwithinaccruedliabilitiesin the Company’s consolidatedbalancesheet as of December 31, 2020. In June 2021, the Company received a notice of forgiveness of the PPP Loan wasin whole, including all accrued unpaid interest. The forgiveness of the loan is recognized within long-termas a gain on extinguishment of debt and current portionon the consolidated statement of long-term debt inoperations for the Company’s consolidated balance sheet. In addition, related accrued interest is included within accrued liabilities in the Company’s consolidated balance sheet. year ended December 31, 2021.Referto Note 7 foradditionalinformation.
Fair Value of FinancialInstruments
The frameworkformeasuringfairvalueand relateddisclosurerequirementsaboutfairvalue measurementsareprovidedin ASC820, FairValue Measurement (“(“ASC 820”).This pronouncementdefinesfair valueas thepricethatwould be receivedto sellan assetor paidto transfera liability (an (anexitprice)in the principalor mostadvantageousmarketfortheassetor liabilityin an orderlytransactionbetweenmarket participantson themeasurementdate.The fairvaluehierarchyprescribedby ASC820 containsthreeinputlevels as follows:
Level 1: Unadjustedquotedpricesin activemarketsforidenticalassetsor liabilitiesaccessibleto thereportingentityatthemeasurementdate.
• | Level 1: Unadjustedquotedpricesin activemarketsforidenticalassetsor liabilitiesaccessibleto thereportingentityatthemeasurementdate. |
Level 2: Otherthanquotedpricesincludedin Level1 inputsthatareobservablefortheassetor liability,eitherdirectlyor indirectly,forsubstantiallythefulltermof theassetor liability.
• | Level 2: Otherthanquotedpricesincludedin Level1 inputsthatareobservablefortheassetor liability,eitherdirectlyor indirectly,forsubstantiallythefulltermof theassetor liability. |
Level 3: Unobservableinputsfortheassetor liabilityused to measurefairvalueto theextentthat observableinputsarenot available,therebyallowingforsituationsin which thereislittle,ifany, marketactivityfortheassetor liabilityatthemeasurementdate.
• | Level 3: Unobservableinputsfortheassetor liabilityused to measurefairvalueto theextentthat observableinputsarenot available,therebyallowingforsituationsin which thereislittle,ifany, marketactivityfortheassetor liabilityatthemeasurementdate. |
The carryingamountsof theCompany’scash,accountsreceivable,accountspayable,accrued compensationand accruedliabilitiesapproximatefairvaluedue to theshort-termnatureof theseinstruments.
FinancialInstrumentsNot Recordedat Fair Value on a RecurringBasis
Certainfinancialinstruments,includingdebt,arenot measuredatfairvalueon a recurringbasisin the consolidatedbalancesheets.The fairvalueof debtwas estimatedusingprimarilylevel2 inputsincludingquoted marketpricesor discountedcashflow analyses,based onestimatedincrementalborrowingratesfor similartypesof borrowingarrangements.
Assetsand LiabilitiesRecorded at Fair Value on a Non-Recurring Basis
Certainassetsand liabilities,includinggoodwilland intangibleassets,aresubjectto measurementatfair valueon a non-recurringbasisifthereareindicatorsof impairmentor iftheyaredeemedto be impairedas a resultof an impairmentreview.
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Therewere no assetsor liabilitiesmeasuredatfairvalueusingLevel3 inputsfortheperiodspresented.
Leases
Rent expenseon operatingleasesof $4.4 million, $4.2 millionand $4.7 million and $4.6 million fortheyearsended December31, 2020, 2019 and 2018, respectively, is recorded on a straight-line basis over the lease term. The difference between cash payments for rent and the expense recorded is reported as current and non-current deferred rent in the accompanying consolidated balance sheets. The current portion of deferred rent of $0.4 million and $0.4 million as of December 31,2021, 2020 and 2019, respectively,is included recordedon a straight-linebasisovertheleaseterm.The differencebetweencashpaymentsforrentand theexpenserecordedisreportedas currentand non-current deferredrentin othertheaccompanying consolidated balancesheets.The current liabilities. The non-current portionof deferredrentof $0.5$0.2 million and $0.8$0.4 millionas of December31, 20202021 and 2019, 2020,respectively,isincludedin othercurrentliabilities.The non-currentportionof deferredrentof $0.8 million and $0.5 millionas of December31, 2021 and 2020,respectively,isincludedin otherlong-termliabilities.
Concentrationof Risk
FinancialinstrumentsthatpotentiallysubjecttheCompany to concentrationof creditriskconsist principallyof cashand accountsreceivable.The Company maintainsitscashwith financialinstitutionsand its cashlevelsexceedtheFederalDepositInsuranceCorporation(FDIC) federallyinsuredlimits.Accounts receivableincludeamountsdue fromcustomerswith principaloperationsprimarilyin theUnitedStates.
As of December 31, 2020, one2021, 2 individual customercustomers accounted for 13.7% 13.2% and 12.3% of consolidated accounts receivable. As of December 31, 2019, no2020, 1 individual customerscustomer accounted for more than 10%13.7% of consolidated accounts receivable. For the years ended December 31, 2021, 2020, and 2019, and 2018, no0 individual customers accounted for more than 10% of consolidated revenue. For
The following table provides the year ended December 31, 2020, twoCompany’s concentrations of credit risk with respect to advertising agency holding companies represented 13.3% and 13.2%as a percentage of revenue, respectively. For the year endedCompany’s total revenues:
|
| Year Ended December 31, |
| |||||
Advertising Agency Holding Company |
| 2021 |
|
| 2020 |
| ||
A |
|
| 15.5 | % |
| * |
| |
B |
|
| 14.2 | % |
|
| 13.2 | % |
C |
| * |
|
|
| 13.3 | % | |
* Less than 10% of total revenues.
As of December 31, 2019, two advertising agency holding companies represented 16.6%2021, 1 individual supplier accounted for 16.8% of consolidated accounts payable and 12.6% of revenue, respectively. For the year ended December 31, 2018, two advertising agency holding companies represented 18.7% and 11.8% of revenue, respectively.accrued liabilities. As of December 31, 2020, three3 suppliers accounted for 15.5%, 11.5%, and 10.9% of consolidated accounts payable and accrued liabilities, respectively. As of December 31, 2019, no individual suppliers accounted for more than 10% of consolidated accounts payable and accrued liabilities.
Foreign Currency Transactionsand Translation
The Company’sUKsubsidiaryhad a non-U.S. dollarfunctionalcurrency.The UKsubsidiarywas dissolvedin 2019. The Company translatesassetsand liabilitiesof non-U.S. dollarfunctionalcurrency subsidiariesintoU.S.dollarsusingexchangeratesin effectattheend of eachperiodand members’equityat historicalrates.Revenue and expensesforthesubsidiaryaretranslatedusingratesthatapproximatethosein effectduringtheperiod.Foreigncurrencygainsand lossesfromtranslationarerecordedin cumulative translationadjustmentwithinthe consolidatedbalancesheets.
The Company remeasuresmonetaryassetsor liabilitiesdenominatedin currenciesotherthanthe functionalcurrencyusingexchangeratesprevailingon thebalancesheetdate,and non-monetaryassetsand liabilitiesathistoricalrates.
Foreigncurrencyremeasurementand transactiongainsand lossesareincludedin otherexpense (income),netwithinthe consolidated statements of operations and statements of comprehensiveincome(loss) and were de minimis during theyearsended December31, 2021, 2020 2019 and 2018.2019.
RelatedPartyRelationships
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Four Brothers2 LLC,theholderof Class B common stockas of December31, 2021,iscontrolledby theCompany’s previously outstanding long-term debt was a long-term promissory note owed to the Former Holdco, co-founders,TimVanderhook and Chris Vanderhook, and thereforeisconsidereda related party who previously held a 60% equity interest in the Company prior to the 2019 Former Holdco transaction. The Former Holdco’s outstanding units of the Company were retired in conjunction with the Company’s settlement of the promissory note on October 31, 2019, in accordance with the Unit Repurchase Agreement between the Company, the Former Holdco and other parties thereto. As of December 31, 2019, no outstanding amounts remained under the promissory note, and the Former Holdco was no longer a related party of the Company. party.Referto Note 7, Note 8 and Note 1315 forfurther information.
Four Brothers 2 LLC, the holder of the 2019 convertible preferred units as of December 31, 2020 and 2019, is controlled by the Company’s co-founders, Tim Vanderhook and Chris Vanderhook, and therefore is considered a related party. Refer to Note 7, Note 8 and Note 13 for further information.
IncomeTaxes
The Company is the managing member of Viant Technology LLC and, as a limited liability company thatresult, consolidates the financial results of Viant Technology LLC in the consolidated financial statements. Viant Technology LLC is treateda pass-through entity for U.S. federal and most applicable state and local income tax purposes following a corporate reorganization effected in connection with our initial public offering. As an entity classified as a partnership for federal income tax purposes, Viant Technology LLC is not subject to U.S. federal and does not paycertain state and local income taxes on its taxable income. Itstaxes. Any taxable income or loss generated by Viant Technology LLC is passed through to and included in the taxable income or loss of its members. In addition,members, including us. The Company is taxed as a corporation and pays corporate federal, state and local taxes with respect to income allocated from Viant Technology LLC, based on Viant Technology Inc.'s 22.5% interest in Viant Technology LLC.
The Company accounts for income taxes under the members are liableasset and liability method, which requires the recognition of deferred tax assets and liabilities (“DTAs” and “DTLs”) for federalthe expected future tax consequences of events that have been included in the financial statements. Under this method, we determine DTAs and state taxesDTLs on the Company’sbasis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date. We recognize DTAs to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable income. temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law and results of recent operations. If we determine that we would be able to realize our DTAs in the future in excess of their net recorded amount, we would make an adjustment to the DTA valuation allowance, which would reduce the provision for income taxes.
The Company may disburse funds necessary to satisfyrecords uncertain tax positions in accordance with ASC 740 on the members’ estimatedbasis of a two-step process in which (1) we determine whether it is more likely than not that the tax liabilities. Amounts estimatedpositions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be disbursedrealized upon ultimate settlement with the related tax authority.
Tax Receivable Agreement
The Company expects to membersobtain an increase in its share of tax basis in the net assets of Viant Technology LLC when Class B units are exchanged by the holders of Class B units for shares of Class A common stock of the Company and upon other qualifying transactions. Each change in outstanding shares of Class A common stock of the Company results in a corresponding increase or decrease in the Company's ownership of Class A units of Viant Technology LLC. The Company intends to satisfytreat any exchanges of Class B units as direct purchases of LLC interests for U.S. federal income tax purposes. These increases in tax basis may reduce the members’ estimatedamounts that the Company would otherwise pay in the future to various taxing authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax liabilitiesbasis is allocated to those capital assets.
In connection with the IPO, the Company entered into a Tax Receivable Agreement (“TRA”) with Viant Technology LLC and the holders of Class B units of Viant Technology LLC. In the event that such parties exchange any or all of their Class B units for Class A common stock, the TRA requires the Company to make payments to such holders for 85% of the tax benefits realized, or in some cases deemed to be realized, by the Company by such exchange as a result of (i) increases in the Company’s tax basis of its ownership interest in the net assets of Viant Technology LLC resulting from any redemptions or exchanges of noncontrolling interest, (ii) tax basis increases attributable to payments made under the TRA and (iii) deductions attributable to imputed interest pursuant to the TRA (the “TRA Payments”). The annual tax benefits are computed by calculating the income taxes due, including
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such tax benefits and the income taxes due without such benefits. The Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. The TRA Payments are not conditioned upon any continued ownership interest in Viant Technology LLC or the Company. To the extent that the Company is unable to timely make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid.
The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Company generates each year and the tax rate then applicable. The Company calculates the liability under the TRA using a TRA model, which includes an assumption related to the fair market value of assets. The payment obligations under the TRA are obligations of the Company and not of Viant Technology LLC. Payments are generally due under the TRA within a specified period of time following the filing of the Company’s tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of the Secured Overnight Financing Rate plus 500 basis points from the due date (without extensions) of such tax return.
The TRA provides that if (i) certain mergers, asset sales, other forms of business combinations, or other changes of control were to occur, (ii) there is a material breach of any material obligations under the TRA; or (iii) the Company elects an early termination of the TRA, then the TRA will terminate and the Company's obligations, or the Company's successor’s obligations, under the TRA will accelerate and become due and payable, based on certain assumptions, including an assumption that the Company would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA and that any Class B units that have not been exchanged are deemed exchanged for the fair market value of the Company's Class A common stock at the time of termination.
Treasury Stock
We account for treasury stock under the cost method. When treasury stock is re-issued at a price higher than its cost, the difference is recorded as a component of additional paid-in-capital in our consolidated balance sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a component of additional paid-in-capital to accrued member tax distributions and represent a reductionthe extent that there are previously recorded gains to offset the losses. If there are no treasury stock gains in members’ equity.additional paid-in-capital, the losses upon re-issuance of treasury stock are recorded as an increase in accumulated deficit in our consolidated balance sheets.
RecentRecently IssuedAccounting Pronouncements
On April5, 2012, theJumpstartOur BusinessStartupsAct (the “JOBS “JOBSAct”)was signedintolaw. The JOBSAct containsprovisionsthat,amongotherthings,reducecertainreportingrequirementsforqualifying publiccompanies.As an “emerginggrowth company,”theCompany may,underSection7(a)(2)(B)of the SecuritiesAct, delayadoptionof new or revisedaccountingstandardsapplicableto publiccompaniesuntilsuch standardswould otherwiseapplyto privatecompanies.An “emerginggrowth company”isone with lessthan $1.07 billionin annualsales,has lessthan $700$700 millionin marketvalueof itssharesof commonstockheldby non-affiliatesand issueslessthan $1$1 billionof non-convertibledebtovera threeyearperiod.The Company may takeadvantageof thisextendedtransitionperioduntilthefirstto occurof thedatethatit(i)isno longeran “emerginggrowth company”or (ii)affirmativelyand irrevocablyoptsout of thisextendedtransitionperiod.
The Company has electedto takeadvantageof thebenefitsof thisextendedtransitionperiod.Untilthe datethattheCompany isno longeran “emerginggrowth company”or affirmativelyand irrevocablyoptsout of theexemptionprovidedby SecuritiesAct Section7(a)(2)(B),upon issuanceof a new or revisedaccounting standardthatappliesto itsconsolidatedfinancialstatementsand thathas a differenteffectivedateforpublicand privatecompanies,theCompany willdisclosethedateon which itwilladopttherecentlyissuedaccounting standard.As partof thiselection, we aredelayingtheadoptionof accountingguidancerelatedto leasesand implementationcostsincurredin cloudcomputingarrangementsthatcurrentlyappliesto publiccompanies.We areassessingtheimpactthisguidancewillhave on our financialstatements.
In February2016, the FASB issued Financial Accounting Standards Board (“FASB”)issuedAccountingStandardsUpdate (“ASU”) No. 2016-02, Leases (Topic(Topic 842), which requiresan entityto recognizeright-of-useassetsand leaseliabilitieson itsbalancesheetand disclosekey informationaboutleasingarrangements.The guidanceoffersspecificaccountingguidancefora lessee,lessor,and saleand leasebacktransactions.Lesseesand lessorsarerequiredto disclosequalitativeand quantitativeinformationaboutleasingarrangementsto enablea userof thefinancial
99
statementsto assessthe amount,timingand uncertaintyof cashflowsarisingfromleases.Leaseswillbe classifiedas eitherfinanceor operating,with theclassificationaffectingthepatternof expenserecognitionin theincomestatement.In March 2019, theFASBissuedASUNo. 2019-01 which madefurthertargetedimprovementsincludingclarification regardingthedeterminationof fairvalueof leaseassetsand liabilitiesand statementof cashflowsand presentationguidance.In June 2020, FASBissuedASU2020-05, which extendedtheeffectivedateof this guidancefornon-publicentitiesto fiscalyearsbeginningafterDecember15, 2021. As a part of the Company’s election under the JOBS Act, the guidance is effective for theCompany’sannualreportingperiodbeginningafterDecember15, 2021 and interim reporting periods within the annual period beginning after December 15, 2022. The Company adopted Topic 842 effective January 1, 2022 utilizing the modified retrospective transition method. We expect the adoption of Topic 842 to have a material impact on the Company’s consolidated balance sheet because certain of our operating lease commitments will be recognized as right-of-use assets and lease liabilities. This new guidance is not expected to have a material impact upon the Company’s consolidated statement of operations. We have elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of Topic 842. Additionally, we elected to not separate lease and non-lease components for all of our leases. For leases with a term of 12 months or less, we elected the short-term lease exemption, which allowed us to not recognize right-of-use assets or lease liabilities on its balance sheetfor qualifying leases existing at transition and disclose key information about leasing arrangements. The guidance offers specific accounting guidance for a lessee, lessor, and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognitionnew leases we may enter into in the income statement. future.
In March 2019,June 2016, theFASBissuedASUNo. 2016-13, FinancialInstruments—CreditLosses(Topic326). ASU2016-13 revisestheimpairmentmodelto utilizean expectedlossmethodologyin placeof thecurrently used incurredlossmethodology,which willresultin moretimelyrecognitionof losseson financialinstruments, including,but not limitedto, availableforsaledebtsecuritiesand accountsreceivable.The guidanceiseffective fortheCompany’sannualreportingperiodbeginningafterDecember15, 2022 and interim reporting periods within that annual reporting period. The Company does not expect theadoptionof thisASUto have a materialimpacton the consolidatedfinancialstatements.
In October 2020, the FASB issued ASU No. 2019-01 2020-10, Codification Improvements, which made further targeted improvements including clarification regardingupdates various codification topics by clarifying disclosure requirements to align with the determination of fair value of lease assetsSEC's regulations. The guidanceiseffectivefor theCompany’sannualreportingperiodbeginningafterDecember15, 2021 and liabilities and statement of cash flows and presentation guidance. In June 2020, FASB issued ASU 2020-05, which extendedinterim reporting periods within the effective date of this guidance for non-public entities to fiscal yearsannual period beginning after December 15, 2021.2022. The Company iscurrentlyassessing theimpactthisguidancewillhave on the consolidatedfinancialstatements.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The purpose of ASU 2021-04 is to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The ASU requires issuers to account for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. In accordance with ASU 2021-04, an issuer determines the accounting for the modification or exchange based on whether the transaction was done to issue equity, to issue or modify debt, or for other reasons. The guidance is effective for the Company’s annual reporting period beginning after December 15, 2021.2021 and interim reporting periods within that annual reporting period. The Company is currently assessing the impact this guidance will have on the consolidated financial statements.
Recently AdoptedAccounting Pronouncements
In June 2016,September2018, theFASBissuedASUNo. 2018-15, Intangibles—Goodwilland Other—Internal UseSoftware(Subtopic350-40):Customer’sAccountingforImplementationCosts Incurredin a Cloud ComputingArrangementThat Isa ServiceContract(aconsensusof theFASBEmergingIssuesTask Force), which alignstherequirementsforcapitalizingimplementationcostsincurredin a hostingarrangementthatisa servicecontractwith therequirementsforcapitalizingimplementationcostsincurredto developor obtain internal usesoftware.Earlyadoptionispermittedand can be appliedprospectivelyto allimplementationcosts incurredafterthedateof adoptionor retrospectively.The Company adoptedthisASU prospectively on January1, 2021, and the adoptionof thisASUdid not have a materialimpacton the consolidatedfinancialstatements.
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In December 2019, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses2019-12, Income Taxes (Topic 326)740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2016-13 revises2019-12 removes certain exceptions to the impairment modelgeneral principles in Topic 740 and also clarifies and amends existing guidance to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to, available for sale debt securities and accounts receivable. The guidance is effective for the Company’s annual reporting period beginning after December 15, 2022. The Company does not expect the adoption of this ASU to have a material impact on the consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement—Disclosure Framework (Topic 820). The updated guidance modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted for any removed or modified disclosures.improve consistent application. The Company adopted this ASU 2019-12 prospectively on January 1, 2020,2021, and the adoption of this ASU did not have a material impact on the consolidated financial statements.
In September 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Early adoption is permitted and can be applied prospectively to all implementation costs incurred after the date of adoption or retrospectively. This guidance is effective for the Company annual reporting period beginning after December 15, 2020. The Company does not expect the adoption of this ASU to have a material impact on the consolidated financial statements.
In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, which updates various codification topics by clarifying disclosure requirements to align with the SEC's regulations. The guidanceiseffectivefor theCompany’sannualreportingperiodbeginningafterDecember15, 2021. The Company iscurrentlyassessing theimpactthisguidancewillhave on theconsolidatedfinancialstatements.
3. Revenue
The Company adopted the newrecognizes revenue recognition accounting standard, in accordance withASC 606, effective January 1, 2018 on a full retrospective basis. 606.Referto Note 2 of thesenotesto our consolidatedfinancialstatementsfora descriptionof our ASC606 revenuerecognitionaccountingpolicies.Although theCompany maintains agreementswith itscustomersin multiplecontractualforms,theoverallpromisewithineachof thecontracttypes isto providecustomerstheabilityto plan,buy and measuretheirdigitaladvertisingcampaignsusingour platform.
For purposes ofThe disaggregationof revenue was as follows:
|
| Year Ended December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Revenue |
| (in thousands) |
| |||||||||
Over time |
| $ | 3,880 |
|
| $ | 4,612 |
|
| $ | 6,237 |
|
Point in time |
|
| 220,247 |
|
|
| 160,639 |
|
|
| 158,655 |
|
Total revenue |
| $ | 224,127 |
|
| $ | 165,251 |
|
| $ | 164,892 |
|
Remainingperformanceobligationsfor the years ended December 31, 2020, 2019 and 2018, the Company recognized $4.6 million, $6.2 million and $6.3 million, respectively, for over time performance obligations and $160.6 million, $158.7 million and $102.1 million, respectively, for point in time performance obligations. Remaining performance obligations for contractswith an originalexpecteddurationof greaterthanone yearamountedto $6.6 million and $9.2 million and $10.9 millionas of December31, 20202021 and 2019, 2020,respectively,which primarily relateto deferredrevenueand datamanagementand advancedreportingservices.As of December31, 20202021 and 2019,2020, $1.3 million and $3.6 million and $6.2 million, respectively,isexpectedto be recognizedwithinone year,with theremainingamountsexpectedto be recognized thereafter.
ContractLiabilities
The followtablesummarizesthechangesin deferredrevenuebalances:
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Beginning balance |
| $ | 10,030 |
|
| $ | 14,636 |
|
| $ | 8,337 |
|
| $ | 10,030 |
|
Recognition of deferred revenue |
|
| (1,693 | ) |
|
| (4,606 | ) |
|
| (1,786 | ) |
|
| (1,693 | ) |
Deferral of revenue |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Ending balance |
| $ | 8,337 |
|
| $ | 10,030 |
|
| $ | 6,551 |
|
| $ | 8,337 |
|
The revenuerecognizedfromthecontractliabilitiesconsistedof theCompany satisfyingperformance obligationsduringthenormalcourseof business.Deferredrevenuethatisanticipatedto be recognizedduringthe succeeding12-monthperiodisrecordedin currentportionof deferredrevenueand theremainingamountis recorded in current as non-currentportionof deferredrevenue and the remaining amount is recorded as non-current portion of deferred revenue withinthe consolidatedbalancesheets.
4. Property,Equipment and Software,Net
Majorclassesof property,equipmentand softwarewere as follows:
101
|
| As of December 31, |
|
| As of December 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Capitalized software development costs |
| $ | 43,627 |
|
| $ | 36,865 |
|
| $ | 61,490 |
|
| $ | 43,627 |
|
Computer equipment |
|
| 1,575 |
|
|
| 1,198 |
|
|
| 1,823 |
|
|
| 1,575 |
|
Purchased software |
|
| 32 |
|
|
| 513 |
|
|
| 32 |
|
|
| 32 |
|
Furniture, fixtures and office equipment |
|
| 1,087 |
|
|
| 1,204 |
|
|
| 1,159 |
|
|
| 1,087 |
|
Leasehold improvements |
|
| 2,115 |
|
|
| 2,108 |
|
|
| 2,178 |
|
|
| 2,115 |
|
Total property, equipment and software |
|
| 48,436 |
|
|
| 41,888 |
|
|
| 66,682 |
|
|
| 48,436 |
|
Less: Accumulated depreciation |
|
| (34,607 | ) |
|
| (26,964 | ) |
|
| (44,351 | ) |
|
| (34,607 | ) |
Total property, equipment and software, net |
| $ | 13,829 |
|
| $ | 14,924 |
|
| $ | 22,331 |
|
| $ | 13,829 |
|
Depreciation expense recordedin the consolidatedstatementsof operations and comprehensive income (loss) was as follows:
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||
Platform operations |
| $ | 6,638 |
|
| $ | 6,832 |
|
| $ | 6,441 |
|
| $ | 7,688 |
|
| $ | 6,638 |
|
| $ | 6,832 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| 1,608 |
|
|
| 1,537 |
|
|
| 1,314 |
|
|
| 1,599 |
|
|
| 1,608 |
|
|
| 1,537 |
|
General and administrative |
|
| 631 |
|
|
| 554 |
|
|
| 718 |
|
|
| 625 |
|
|
| 631 |
|
|
| 554 |
|
Total |
| $ | 8,877 |
|
| $ | 8,923 |
|
| $ | 8,473 |
|
| $ | 9,912 |
|
| $ | 8,877 |
|
| $ | 8,923 |
|
Interestcostrecordedin the consolidatedbalancesheetsand consolidatedstatementsof operations and comprehensive income (loss) was as follows:
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||
Amount charged to expense |
| $ | 1,055 |
|
| $ | 4,105 |
|
| $ | 865 |
|
| $ | 1,055 |
|
| $ | 4,105 |
|
Amount capitalized within property, equipment and software, net |
|
| 31 |
|
|
| 44 |
|
|
| 20 |
|
|
| 31 |
|
|
| 44 |
|
Total interest cost |
| $ | 1,087 |
|
| $ | 4,149 |
|
| $ | 885 |
|
| $ | 1,087 |
|
| $ | 4,149 |
|
5. Goodwilland IntangibleAssets,Net
The Company’sgoodwillbalanceof $12.4 millionas of December31, 20202021 and 20192020,was recordedas partof theCompany’sFebruary2017 acquisitionof Adelphic. The goodwillbalancewas determinedbasedon theexcessof thepurchasepricepaidoverthefairvalueof the identifiablenetassetsacquired,and representsitsfuturerevenueand earningspotentialand certainotherassets acquiredthatdo not meettherecognitioncriteria,such as assembledworkforce.
The Company performedan impairmenttestof itsgoodwillas of thefirstday of thefourthfiscalquarter in accordancewith itsaccountingpolicy.The resultsof thistestindicatedthattheCompany’sgoodwillwas not impaired. NoNaN goodwillimpairmentwas recordedfortheyearsended December31, 2021, 2020 2019 or 2018.2019.
Intangibleassetsprimarilyconsistof acquireddevelopedtechnology,customerrelationships,trade namesand trademarksresultingfrombusinesscombinationsand acquiredpatentintangibleassets,which are recordedatacquisition-datefairvalue,lessaccumulatedamortization.The Company determinestheappropriate usefullifeof itsintangibleassetsby performingan analysisof expectedcashflowsof theacquiredassets. Intangibleassetsareamortizedovertheirestimatedusefullivesusinga straight-linemethod,which approximates thepatternin which
102
theeconomicbenefitsareconsumed. No NaNimpairmentwas recordedfor intangible assets or other long lived assets during theyearsended December31, 2021, 2020 2019 or 2018.2019.
The balancesof intangiblesassetsand accumulatedamortizationareas follows:
|
| As of December 31, 2020 |
|
| As of December 31, 2021 |
| ||||||||||||||||||||||||||
|
| Remaining Weighted Average Useful Life |
|
| Gross Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
|
| Remaining Weighted Average Useful Life |
|
| Gross Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| ||||||||
|
| (in years) |
|
| (in thousands) |
|
| (in years) |
|
| (in thousands) |
| ||||||||||||||||||||
Developed technology |
|
| 2.1 |
|
| $ | 4,927 |
|
| $ | (3,469 | ) |
| $ | 1,458 |
|
|
| 1.1 |
|
| $ | 4,927 |
|
| $ | (4,169 | ) |
| $ | 758 |
|
Customer relationships |
|
| 3.1 |
|
|
| 2,300 |
|
|
| (1,287 | ) |
|
| 1,013 |
|
|
| 2.1 |
|
|
| 2,300 |
|
|
| (1,615 | ) |
|
| 685 |
|
Trademarks/tradenames |
|
| 4.2 |
|
|
| 1,400 |
|
|
| (856 | ) |
|
| 544 |
|
|
| 4.0 |
|
|
| 1,400 |
|
|
| (1,057 | ) |
|
| 343 |
|
Total |
|
|
|
|
| $ | 8,627 |
|
| $ | (5,612 | ) |
| $ | 3,015 |
|
|
|
|
|
| $ | 8,627 |
|
| $ | (6,841 | ) |
| $ | 1,786 |
|
|
| As of December 31, 2019 |
|
| As of December 31, 2020 |
| ||||||||||||||||||||||||||
|
| Remaining Weighted Average Useful Life |
|
| Gross Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
|
| Remaining Weighted Average Useful Life |
|
| Gross Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| ||||||||
|
| (in years) |
|
| (in thousands) |
|
| (in years) |
|
| (in thousands) |
| ||||||||||||||||||||
Developed technology |
|
| 3.1 |
|
| $ | 4,927 |
|
| $ | (2,769 | ) |
| $ | 2,158 |
|
|
| 2.1 |
|
| $ | 4,927 |
|
| $ | (3,469 | ) |
| $ | 1,458 |
|
Customer relationships |
|
| 4.1 |
|
|
| 2,300 |
|
|
| (958 | ) |
|
| 1,342 |
|
|
| 3.1 |
|
|
| 2,300 |
|
|
| (1,287 | ) |
|
| 1,013 |
|
Trademarks/tradenames |
|
| 4.8 |
|
|
| 1,400 |
|
|
| (657 | ) |
|
| 743 |
|
|
| 4.2 |
|
|
| 1,400 |
|
|
| (856 | ) |
|
| 544 |
|
Total |
|
|
|
|
| $ | 8,627 |
|
| $ | (4,384 | ) |
| $ | 4,243 |
|
|
|
|
|
| $ | 8,627 |
|
| $ | (5,612 | ) |
| $ | 3,015 |
|
Amortization expense recordedin the consolidatedstatementsof operations and comprehensive income (loss) was as follows:
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||
Platform operations |
| $ | 700 |
|
| $ | 703 |
|
| $ | 1,626 |
|
| $ | 700 |
|
| $ | 700 |
|
| $ | 703 |
|
Sales and marketing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Technology and development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
General and administrative |
|
| 529 |
|
|
| 529 |
|
|
| 529 |
|
|
| 529 |
|
|
| 529 |
|
|
| 529 |
|
Total |
| $ | 1,229 |
|
| $ | 1,232 |
|
| $ | 2,155 |
|
| $ | 1,229 |
|
| $ | 1,229 |
|
| $ | 1,232 |
|
Estimatedfutureamortizationof intangibleassetsas of December 31, 20202021 isas follows:
Year ended December 31, |
| (in thousands) |
| |||||
2021 |
| $ | 1,230 |
| ||||
Year ending December 31, |
| (in thousands) |
| |||||
2022 |
|
| 1,119 |
|
| $ | 1,119 |
|
2023 |
|
| 467 |
|
|
| 467 |
|
2024 |
|
| 107 |
|
|
| 107 |
|
2025 |
|
| 80 |
|
|
| 80 |
|
2026 |
|
| 13 |
| ||||
Thereafter |
|
| 12 |
|
|
| — |
|
Total |
| $ | 3,015 |
|
| $ | 1,786 |
|
103
6. Accrued Liabilities
The Company’saccruedliabilitiesconsistedof thefollowing:
|
| As of December 31, |
|
| As of December 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Accrued traffic acquisition costs |
| $ | 22,667 |
|
| $ | 18,707 |
|
| $ | 30,942 |
|
| $ | 22,667 |
|
Other accrued liabilities |
|
| 2,010 |
|
|
| 3,990 |
|
|
| 3,144 |
|
|
| 2,010 |
|
Total accrued liabilities |
| $ | 24,677 |
|
| $ | 22,697 |
|
| $ | 34,086 |
|
| $ | 24,677 |
|
7. Long-Term Debt and Revolving CreditFacility
The Company’sdebtand revolvingcreditfacilitiesconsistedof thefollowing:
|
| As of December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
| (in thousands) |
| |||||
Revolving credit facility |
| $ | 17,500 |
|
| $ | 17,500 |
|
Paycheck Protection Program Loan |
|
| 6,035 |
|
|
| — |
|
Total debt |
|
| 23,535 |
|
|
| 17,500 |
|
Less: Current portion of long-term debt |
|
| (3,353 | ) |
|
| — |
|
Total long-term debt |
| $ | 20,182 |
|
| $ | 17,500 |
|
As of December 31, 2020, the current portion of long-term debt related to the PPP Loan. The carrying value of debt as of December 31, 2020 and 2019 approximated its fair value.
2019 Former Holdco Transaction
On March 2, 2016, the Company entered into a secured loan agreement with its related party, the Former Holdco, which at that time was a 60% stakeholder of the Company. The notes accrued interest at a rate of 7% per year, payable quarterly. Any interest not paid when due was compounded as a component of the principal amount then outstanding. The notes were subject to an original maturity of March 2, 2021, unless earlier purchased, redeemed or otherwise settled.
On October 4, 2016, certain members of the Company and the Former Holdco entered into a put/call agreement in which certain employees received the right, but not the obligation to cause the Former Holdco to purchase all or a portion of the employees’ unrestricted common units beginning on March 31, 2019 and on each annual anniversary of that date. The Company was not a party to this put/call agreement and did not account for this agreement within its consolidated financial statements. No call or put rights were exercised during the years ended December 31, 2019 or 2018.
On September 15, 2019, the Company’s co-founders entered into a Unit Repurchase Agreement (the “Agreement”) in connection with the 2019 Former Holdco transaction with the Former Holdco to repay a portion of the outstanding principal amount, to cancel any remaining loan obligations, cancel all outstanding put/call options and to retire the outstanding equity interest in the Company held by the Former Holdco.
Under the terms of the Agreement, on October 31, 2019, the Company paid the Former Holdco $25.0 million, deemed the “purchase price,” toward the repayment in full of principal, interest or other amounts owed by the Company to the Former Holdco and its affiliates. Additionally, the Company paid approximately $3.5 million for professional service fees associated with the transaction paid on behalf of the Former Holdco. In return, the Former Holdco, on behalf of itself and its affiliates, cancelled and forgave any additional amounts owed by the Company pursuant to the March 2, 2016 loan agreement or any other loans. The Agreement also resulted in the termination of all outstanding put/call agreements. Upon closing of this transaction, the Former Holdco’s ownership in the Company was automatically transferred to the Company.
In accordance with the Agreement, the purchase price consisted of $17.5 million of cash generated from the execution of the PNC Bank line of credit and $7.5 million of cash received from the sale of the 2019 convertible preferred units to Four Brothers 2 LLC, representing 100% of the Company’s outstanding convertible preferred units. As a result of this transaction, along with the payment of approximately $3.5 million in professional services paid on behalf of the Former Holdco, the Company settled $72.6 million of outstanding principal and accrued interest on the long-term promissory note and recorded additional paid-in capital of $47.6 million representing the forgiveness of outstanding debt and $45.0 million representing the retirement of the 2016 convertible preferred units resulting from the cancellation of the Company’s equity interest held by the Former Holdco.
RevolvingCreditFacility
On October 31, 2019, the Company entered into an asset-based revolving credit and security agreement with PNC Bank (the “Loan Agreement”). The Loan Agreement provides a senior secured revolving credit facility of up to $40.0 million with a maturity date of October 31, 2024. The Loan Agreement is collateralized by security interests in substantially all of the Company’s assets.
Advances under the Loan Agreement bear interest through maturity at a variable rate based upon, at the Company’s option, an annual rate of either a Domestic Rate or a LIBOR rate, plus an applicable margin (“Domestic Rate Loans” and “LIBOR Rate Loans”). The Domestic Rate is defined as a fluctuating interest rate equal to the greater of (1) the base commercial lending rate of PNC Bank, (2) the overnight federal funds rate plus 0.50% and (3) the Daily LIBOR Rate plus 1.00%. The applicable margin through December 31, 2020 was equal to 2.00% for Domestic Rate Loans and 4.00% for LIBOR Rate Loans. The effective weighted average interest rate as of December 31, 2020 and 2019 was 4.15% and 5.92%, respectively. The applicable margin commencing January 1, 2021 is between 1.50% to 2.25% for Domestic Rate Loans and between 3.50% and 4.25% for LIBOR Rate Loans based on the Company maintaining certain undrawn availability ratios. The facility fee for undrawn amounts under the Loan Agreement is 0.375% per annum. The Company will also be required to pay customary letter of credit fees, as necessary.
As of December 31, 2020 and 2019, the Company had an outstanding debt balance of $17.5 million under the Loan Agreement and availability was $22.5 million.
The Loan Agreement contains customary conditions to borrowings, events of default and covenants, including covenants that restrict the Company’s ability to sell assets, make changes to the nature of the business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, and engage in transactions with affiliates. The Loan Agreement also requires the Company to maintain compliance with a minimum Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of 1.40 to 1.00 when undrawn availability under the Loan Agreement is less than 25%. As of December 31, 2020 and 2019, the Company was in compliance with all covenants.
|
| As of December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Revolving credit facility |
| $ | 17,500 |
|
| $ | 17,500 |
|
PPP Loan |
|
|
|
|
|
|
| |
Total debt | 17,500 | 23,535 | ||||||
Less: Current portion of |
|
|
|
|
|
| (3,353 | ) |
Total long-term debt | $ | 17,500 | $ | 20,182 | ||||
As of December 31, 2020,thecurrentportionof long-termdebtrelatedto thePPP Loan. The carryingvalueof the revolving credit facility as of December 31, 2021 and December31, 2020approximated itsfairvalue as the interest rate is variable and approximates prevailing market interest rates for similar debt arrangements. The carryingvalueof the PPP Loan as of December31, 2020approximated itsfairvalue, which was estimated using quoted marketprices,based onestimatedincrementalborrowingratesfor similartypesof borrowingarrangements.
2019 FormerHoldcoTransaction
On March2, 2016, Viant Technology LLC enteredintoa securedloanagreementwith itsrelatedparty,the FormerHoldco, which atthattimewas a 60% stakeholderof Viant Technology LLC. The notesaccruedinterestata rateof 7% peryear,payablequarterly.Any interestnot paidwhen due was compoundedas a componentof theprincipal amountthenoutstanding.The noteswere subjectto an originalmaturityof March2, 2021, unlessearlier purchased,redeemedor otherwisesettled.
On October4, 2016, certainmembersof Viant Technology LLC and theFormerHoldco enteredintoa put/call agreementin which certainemployeesreceivedtheright,but not theobligationto causetheFormerHoldco to purchaseallor a portionof theemployees’unrestrictedcommonunitsbeginningon March31, 2019 and on each annualanniversaryof thatdate.Viant Technology LLC was not a partyto thisput/callagreementand did not accountfor thisagreementwithinits consolidatedfinancialstatements.No callor put rightswere exercisedduringtheyear ended December31, 2019.
On September15, 2019, Viant Technology LLC’sco-foundersenteredintoa UnitRepurchase Agreement (the “Agreement”) in connection with the 2019 Former Holdco transaction with the Former Holdco to repay a portion of the outstanding principal amount, to cancel any remaining loan obligations, cancel all outstanding put/call options and to retire the outstanding equity interest in Viant Technology LLC held by the Former Holdco.
Under thetermsof theAgreement,on October31, 2019, Viant Technology LLC paidtheFormerHoldco $25.0 million,deemedthe“purchaseprice,”towardtherepaymentin fullof principal,interestor otheramounts owed by Viant Technology LLC to theFormerHoldco and itsaffiliates.Additionally,Viant Technology LLC paidapproximately $3.5 millionforprofessionalservicefeesassociatedwith thetransactionpaidon behalfof theFormerHoldco. In return,theFormerHoldco, on behalfof itselfand itsaffiliates,cancelledand forgaveany
104
additionalamounts owed by Viant Technology LLC pursuantto theMarch2, 2016 loanagreementor any otherloans.The Agreementalso resultedin theterminationof alloutstandingput/callagreements. Upon closingof thistransaction,theFormer Holdco’sownershipin Viant Technology LLC was automaticallytransferredto Viant Technology LLC.
In accordancewith theAgreement,thepurchasepriceconsistedof $17.5 millionof cashgeneratedfrom theexecutionof thePNCBank lineof creditand $7.5 millionof cashreceivedfromthesaleof the2019 convertiblepreferredunitsto Four Brothers2 LLC, representing100% of Viant Technology LLC’soutstandingconvertible preferredunits.As a resultof thistransaction,alongwith thepaymentof approximately$3.5 millionin professionalservicespaidon behalfof theFormerHoldco, Viant Technology LLC settled$72.6 millionof outstanding principaland accruedintereston thelong-termpromissorynoteand recordedadditionalpaid-incapitalof $47.6 millionrepresentingtheforgivenessof outstandingdebtand $45.0 millionrepresentingtheretirementof the2016 convertiblepreferredunitsresultingfromthecancellationof Viant Technology LLC’sequityinterestheldby the FormerHoldco.
RevolvingCreditFacility
On October 31, 2019, we entered into an asset-based revolving credit and security agreement with PNC Bank (the “Loan Agreement”). The Loan Agreement provides a senior secured revolving credit facility of up to $40.0 million with a maturity date of October 31, 2024. The Loan Agreement is collateralized by security interests in substantially all of our assets.
Advances under the Loan Agreement bear interest through maturity at a variable rate based upon our selection of either a Domestic Rate or a LIBOR Rate, plus an applicable margin (“Domestic Rate Loans” and “LIBOR Rate Loans”). The Domestic Rate is defined as a fluctuating interest rate equal to the greater of (1) the base commercial lending rate of PNC Bank, (2) the overnight federal funds rate plus 0.50% and (3) the Daily LIBOR Rate plus 1.00%. The effective weighted average interest rate for the year ended December 31, 2021 was 3.24%. The applicablemarginas ofDecember31, 2021 wasequalto 0.75% forDomestic Rate Loans and 1.75% forLIBORRate Loans. The applicable margin that commenced October 15, 2021 is between 0.75% to 1.25% for Domestic Rate Loans and between 1.75% and 2.25% for LIBOR Rate Loans based on maintaining certain undrawn availability ratios. The facility fee for undrawn amounts under the Loan Agreement is 0.375% per annum. We will also be required to pay customary letter of credit fees, as necessary.
The Loan Agreement contains customary conditions to borrowings, events of default and covenants, including covenants that restrict our ability to sell assets, make changes to the nature of the business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, and engage in transactions with affiliates. The Loan Agreement also requires that we maintain compliance with a minimum Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of 1.40 to 1.00 at any time undrawn availability under the Loan Agreement is less than 25%. As of December 31, 2021, we are in compliance with all covenants.
PPPLoan
On April14, 2020, theCompany receivedtheproceedsfromthePPPLoan in theamountof approximately$6.0 millionfromPNCBank, as lender,pursuantto thePPPof theCARESAct. The PPPLoan, which isevidencedby a notedatedApril11, 2020, bearsinterestatan annualrateof 1.0% and matureson April11, 2022. No interestor principalisdue duringthefirstfifteenmonthsafterApril11, 2020, althoughinterestwillcontinueto accrueoverthisfifteen-monthdeferralperiod.The PPPLoan maybe prepaid withoutpenalty,attheoptionof theCompany, atany timepriorto maturity.The promissorynoteevidencingthe PPPLoan containscustomaryeventsof defaultrelatingto, amongotherthings,paymentdefaults,breachof representationsand warranties,or otherprovisionsof thepromissorynote.The occurrenceof an eventof default maytriggertheimmediaterepaymentof allamountsoutstanding,collectionof allamountsowing fromthe Company, and/orfilingsuitand obtaininga judgmentagainsttheCompany.
105
ProceedsfromloansgrantedundertheCARESAct areto be used forpayroll,coststo continue employeegroup healthcarebenefits,rent,utilitiesand certainotherqualifiedcosts(collectively,“qualifying expenses”).The Company has used thePPPLoan proceedsforqualifyingexpenses.In June 2021, the Company received notice of forgiveness of the PPP Loan in whole, including all accrued unpaid interest. The Company recorded the forgiveness of approximately $6.0 million of principal and $0.1 million of accrued interest, which is included in gain on extinguishment of debt on the consolidated statement of operations for the year ended December 31, 2021.
8. ConvertiblePreferredUnits and Common Units
2016 and 2019 ConvertiblePreferredUnits
Pursuantto theUnit RepurchaseAgreementcompletedon October31, 2019, the600,000 2016 convertiblepreferredunitsrepresentingtheFormerHoldco’sownershipinterestwere retiredby Viant Technology LLC, and Viant Technology LLC sold600,000 2019 convertiblepreferredunitsto Four Brothers2 LLC.
The 2016 convertiblepreferredunitsheldby theFormerHoldco had a liquidationpreferenceof $190.65 perunit.Each preferredunitwas convertibleattheoptionof theholderatany timeinto1 commonunitby writtennoticeto Viant Technology LLC.
The liquidationpreferenceprovisionsof the2016 convertiblepreferredunitsheldby theFormerHoldco were consideredcontingentredemptionprovisionsbecausetherewere certainelementsthatwere not solelywithinthecontrolof Viant Technology LLC, such as a changein controlof Viant Technology LLC. Accordingly,Viant Technology LLC has presentedthese2016 convertiblepreferredunitswithinthemezzanineportionof theaccompanying consolidated balancesheets.
The 2019 convertiblepreferredunitsheldby Four Brothers2 LLChave a liquidationpreferenceequalto theinitialcapitalcontributionplusan annualpreferredreturnavailableto theholdersonly upon liquidation,which iscalculatedon a dailybasisby multiplyingtheaccruedstatedvalueof theuniton thefirstday of each calendarquarterby 0.028% (10%dividedby 360). The accruedstatedvalueiscalculatedas $12.50 perpreferred unitplustheaccruedreturn.Each preferredunitmaybe convertedattheoptionof theholderatany timeinto1 commonunitby writtennoticeto Viant Technology LLC.
The liquidationpreferenceprovisionsof the2019 convertiblepreferredunitsheldby Four Brothers2LLCareconsideredcontingentredemptionprovisionsbecausetherearecertainelementsthatarenot solely withinthecontrolof Viant Technology LLC, such as a changein controlof Viant Technology LLC. Accordingly,the Company has presentedthe2019 convertiblepreferredstockwithinthemezzanineportionof theaccompanying consolidated balancesheets.
The 2019 convertiblepreferredunitswere issuedatan implieddiscountof $27.6 million,representinga beneficialconversionfeaturerecordedin additionalpaid-incapitalof thesameamount.A beneficialconversion featureismeasuredas thedifferencebetweentheeffectiveconversionpriceof the2019 convertiblepreferred units, $12.50 perunit,and thefairvalueof thecommonunitsintowhich thepreferredunitsareconvertibleat issuance, $58.43 perunit. Sincethe2019 convertiblepreferredunitsareperpetualin thattheyhave no stated maturitydateand areimmediatelyconvertibleatany time,thediscountupon issuancewas immediatelyand fully amortizedas a deemeddividendon theissuancedate.
The fairvalueof commonunitswas derivedusingtheBlack-Scholes-Mertonoptionvaluationmodel, which incorporateda combinationof themarketapproachand incomeapproachweightedat50% to each approach.The valuationmodelrequirestheCompany to makeassumptionsand judgmentsregardingthe variablesused in thecalculation.These variablesincludetheexpectedterm,expectedvolatility,expectedrisk-freeinterestrateand otherrelevantinputs.Expectedtermisbasedon theestimatedliquidationeventoccurrence.
Expectedvolatilityisbasedon 3.25-yearhistoricalvolatilityof guidelinecompaniescommensuratewith thetime period.The expectedrisk-freerateisbasedon theyieldof 3-yearU.S.Treasurynotesas of thevaluationdate.
106
The followingoutlinestheoptionvaluationassumptionsused in thefairvaluecalculationof common units:
Risk-free interest rate |
|
| 2.28 | % |
Volatility | 70 | % | ||
Expected term | < 2 years | |||
Discount for lack of marketability | 29 | % | ||
|
|
| ||
|
| |||
|
|
| ||
Common Units
There were 400,000 common units authorized, issued and outstanding as of December 31, 2020 and 2019. Distributions to members, as determined and approved by the board, are made to holders of preferred and common units in proportion to their holdings of common units then outstanding on an as-converted basis. All profit and loss allocations, including those made as a result of a capital transaction, will be made pursuant to the provisions of the Viant Technology LLC
Common Units
Therewere 400,000 commonunitsauthorized, issued and outstandingas of December31, 2020 and 2019.Distributionsto members,as determinedand approvedby theboard of managers, aremadeto holdersof preferredand commonunitsin proportionto theirholdingsof commonunitsthenoutstandingon an as-converted basis.All profitand lossallocations,includingthosemadeas a resultof a capitaltransaction,willbe made pursuantto theprovisionsof theViantTechnologyLLCAgreement.
Member Dividend Distributions
In October 2020, the Company’sViant Technology LLC’s board of managers declared and approved a distribution of $5.0 million to the holders of preferred and common units in accordance with the provisions of the Viant Technology LLC Agreement, resulting in payment of $3.0 million to the preferred unitholders and $2.0 million to the common unitholders.
In connection with the IPO in February 2021, the preferred and common units of Viant Technology LLC were converted to Class B units and thus have no balance as of December 31, 2021. See Note 11—Earnings (Loss) Per Share/Unit for additional information regarding the conversion.
9. Stock/Unit-Based Compensation
During the years ended December 31, 2020 and 2019, employeesand otherserviceproviderswereeligibleto be grantedprofitinterestsin theformof common unitsunderan equityincentiveplanor otherarrangementapprovedby theboard of managers. The recipientsof thecommon unitswerenot requiredto makeany capitalcontributionsin exchangefortheirunits.
Stock/Unit-basedcompensationrecordedin the consolidatedstatementsof operationswas as follows:
|
| Year Ended December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
|
| (in thousands) |
| |||||||||
Platform operations |
| $ | 13,096 |
|
| $ | — |
|
| $ | 42 |
|
Sales and marketing |
|
| 25,639 |
|
|
| — |
|
|
| 44 |
|
Technology and development |
|
| 12,373 |
|
|
| — |
|
|
| 82 |
|
General and administrative |
|
| 17,714 |
|
|
| — |
|
|
| 922 |
|
Total |
| $ | 68,822 |
|
| $ | — |
|
| $ | 1,090 |
|
Unit-Based Compensation
Incentive Units
Employees and other service providers are eligible to be granted profit interests in the formThe board of common units under an equity incentive plan or other arrangement approved by managers determinedthe board. The recipients of the common units are not required to make any capital contributions in exchange for their units.
The board determines the termsof eachgrantincludingvestingrequirements.Incentiveunitsgenerally vested overa four-yearperiodfromthedateof grant.
107
The followingtablesummarizestheincentiveunitactivityfortheperiodspresented:
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| ||||||
Incentive units outstanding, beginning of period |
|
| — |
|
|
| 160,000 |
|
|
| 300,000 |
|
|
| — |
|
|
| — |
|
|
| 160,000 |
|
Granted |
|
| — |
|
|
| 4,000 |
|
|
| 4,685 |
|
|
| — |
|
|
| — |
|
|
| 4,000 |
|
Forfeited |
|
| — |
|
|
| (4,000 | ) |
|
| (4,685 | ) |
|
| — |
|
|
| — |
|
|
| (4,000 | ) |
Vested |
|
| — |
|
|
| (160,000 | ) |
|
| (140,000 | ) |
|
| — |
|
|
| — |
|
|
| (160,000 | ) |
Incentive units outstanding, end of period |
|
| — |
|
|
| — |
|
|
| 160,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
The weightedaveragegrantdatefairvalueforallunitsgranted,forfeited,vestedand outstandingas presentedin thetableabove was $7.80 perunit.As of December31, 2019, theCompany had recognizedallunit-basedcompensation expense relatedto incentiveunits.
In accordancewith thetermsof theViantTechnologyLLCAgreement,any commonunitsthatfailto vestor areforfeitedshallbe reallocatedto theCompany’s two 2 executivedirectors,providedtheexecutive directors provided the executive directors remainemployedby theCompany or itsaffiliates.In 2019, and 2018, certaingranteesforfeited4,000 units and 4,685 units, respectively, thatwere thenreallocatedto theCompany’sexecutivedirectorsin accordance with thetermsof theViantTechnologyLLCAgreement.
In conjunctionwith theunitrepurchaseand long-termdebtsettlementdiscussedin Note 7, allunvested incentiveunitsimmediatelyvestedon October31, 2019 and theCompany recognized$0.6 millionof accelerated unit-basedcompensationexpenseon thatdate.As of December31, 2020 and 2019,all 400,000 incentiveunitswere vestedand outstanding. In connection with the IPO during the year ended December 31, 2021, the incentive units converted to Class B common stock.
Unit-based compensation expense recorded in the consolidated statements of operations and comprehensive income (loss) was as follows:
|
| Year Ended December 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
|
| (in thousands) |
| |||||||||
Platform operations |
| $ | — |
|
| $ | 42 |
|
| $ | 25 |
|
Sales and marketing |
|
| — |
|
|
| 44 |
|
|
| 26 |
|
Technology and development |
|
| — |
|
|
| 82 |
|
|
| 49 |
|
General and administrative |
|
| — |
|
|
| 922 |
|
|
| 547 |
|
Total |
| $ | — |
|
| $ | 1,090 |
|
| $ | 647 |
|
The valuationof commonincentiveunitawardsincorporatedtheincomeapproachand themarketapproachin determiningthefairvalue.The Company applieda 50% weightto eachapproach,utilizedutilizingtheOPM to allocate valueto differentclassesof equity.The followingoutlinestheoptionvaluationassumptionsused in thefairvalue calculationof commonincentiveunits:
Risk-free interest rate |
|
| 0.9 | % |
Volatility |
|
| 55.4 | % |
Expected Term |
| 2.5 years |
| |
Discount for lack of marketability |
|
| 55 | % |
Phantom Unit Plan and 2021 LTIP
On January1, 2020, Viant Technology LLC formalizedthe Company formalized the 2020 EquityBased IncentiveCompensationPlan (the “Phantom Unit Plan”),underwhich the Company is Viant Technology LLC wasauthorizedto issue12,500,000 phantomunits.Upon theoccurrenceof a liquidationevent,theunitswillparticipatein any increasein thefairvalueof theentityabove thestated distributionthresholdof $100 million.The unitsveston a quarterlybasisoverfouryears,and allunitsgrantedto an employee,whethervestedor unvested,automaticallyforfeitupon terminationof employmentforany reason. Based on thetermsof the Phantom Unit Plan and unitaward grants, no0 compensationcost has beenwas recordedin the consolidatedstatementof operations and comprehensive income (loss) fortheyearended December 31, 2020. The Phantom Unit Plan was terminated in
In connection with the IPO, which occurred on February 12, 2021, the Phantom Unit Plan was replaced by the 2021 LTIP. The aggregate maximum number of shares of the Company’s Class A common stock that may be issued pursuant to stock awards under the 2021 LTIP, or the Share Reserve, is 11,787,112 shares of Class A common stock. The Share Reserve will automatically increase on January 1 of each year commencing on January 1, 2022 and ending with a final increase on January 1, 2031 in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year; provided, however, that the Company’s board
108
of directors may provide that there will not be a January 1st increase in the Share Reserve in a given year or that the increase will be less than 5% of the shares of capital stock outstanding on the preceding December 31st.
On February 12, 2021, 6.2 million RSUs were granted under the Company’s 2021 LTIP. The Company is authorized to grant RSUs, incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, and performance stock awards under its 2021 LTIP. As of December 31, 2021, the Company has currently only granted RSUs and nonqualified stock options. Under the Company’s 2021 LTIP, 6.7 million shares remained available for grant as of December 31, 2021.
Stock-Based Compensation
RSUs
The following summarizes RSU activity:
|
| Number of Shares |
|
| Weighted-Average Grant-Date Fair Value |
|
| Weighted-Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| ||||
|
| (in thousands) |
|
|
|
|
| (in years) |
|
| (in thousands) |
| ||||
RSUs outstanding as of December 31, 2020 |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
Granted |
|
| 6,488 |
|
|
| 24.62 |
|
|
|
|
|
|
|
|
|
Vested |
|
| (2,792 | ) |
|
| 24.88 |
|
|
|
|
|
|
|
|
|
Canceled/forfeited |
|
| (663 | ) |
|
| 25.02 |
|
|
|
|
|
|
|
|
|
RSUs outstanding as of December 31, 2021 |
|
| 3,033 |
|
|
| 24.29 |
|
|
| 1.22 |
|
| $ | 29,433 |
|
The total fair value of RSUs, as of their respective vesting dates, during the year ended December 31, 2021 was $45.2 million. As of December 31, 2021, the Company had unrecognized stock-based compensation relating to RSUs of approximately $63.5 million, which is expected to be recognized over a weighted-average period of 2.2 years.
Nonqualified Stock Options
The following summarizes nonqualified stock option activity:
|
| Number of Options |
|
| Weighted-Average Exercise Price |
|
| Weighted-Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| ||||
|
| (in thousands) |
|
|
|
|
|
| (in years) |
|
| (in thousands) |
| |||
Options outstanding as of December 31, 2020 |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
Granted |
|
| 235 |
|
|
| 16.52 |
|
|
|
|
|
|
|
|
|
Exercised |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
Canceled |
|
| (15 | ) |
|
| 25.86 |
|
|
|
|
|
|
|
|
|
Expired |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
Options outstanding as of December 31, 2021 |
|
| 220 |
|
|
| 15.88 |
|
|
| 9.7 |
|
| $ | 20 |
|
As of December 31, 2021, there were 0 nonqualified stock options vested or exercisable. The weighted-average grant date fair value of options granted during the year ended December 31, 2021 was $8.79 per share. The Company had unrecognized stock-based compensation relating to unvested nonqualified stock options of approximately $1.8 million, which is expected to be recognized over a weighted-average period of 3.6 years, as of December 31, 2021.
109
The following table presents the assumptions used in the Black-Scholes model to determine the fair value of nonqualified stock options for the year ended December 31, 2021. See Note 14Black-Scholes assumptions have not been disclosed for additional information.any other periods presented in relation to nonqualified stock options as there were no nonqualified stock options granted in those periods.
Year Ended December 31, | ||||
2021 | ||||
Risk free interest rate | 1.2 | % | ||
Expected volatility | 61.1 | % | ||
Expected term (in years) | 5.9 | |||
Expected dividend yield | 0.0 | % | ||
Risk-Free Interest Rate. The Company bases the risk-free interest rate assumption for equity awards on the rates for U.S. Treasury securities with maturities similar to those of the expected term of the award being valued.
Expected Volatility. Due to the limited trading history of the Company’s common stock, the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of the Company’s own stock price becomes available.
Expected Term. Given the insufficient historical data relating to nonqualified stock option exercises, the expected term assumption is based on expected terms of a peer group of similar companies whose expected terms are publicly available. The Company will continue to apply this process until a sufficient amount of historical information regarding the Company’s nonqualified stock option exercises becomes available.
Expected Dividend Yield. The Company’s expected dividend yield assumption is 0 as it has never paid dividends and has no present intention to do so in the future.
Issuance of Shares
Upon vesting of shares under the LTIP, we will issue treasury stock. If treasury stock is not available, Class A common stock will be issued.
10. Earnings (Loss) Per UnitIncome Taxes and Tax Receivable Agreement
BasicThe provision for income taxes differs from the amount of income tax computed by applying the applicable U.S. statutory federal income tax rate of 21% to income before provision of income taxes due to Viant Technology LLC’s pass-through structure for U.S. income tax purposes and diluted earningsthe valuation allowance against the deferred tax asset. The Company did not recognize an income tax expense/(benefit) on its share of pre-tax book income (loss) per unit, exclusive of the noncontrolling interest of 77.5% due to the full valuation allowance against its deferred tax assets, resulting in an effective tax rate ("ETR") of 0.0% for the 12 months ended December 31, 2021.
The Company is presentedthe managing member of Viant Technology LLC and, as a result, consolidates the financial results of Viant Technology LLC in conformitythe consolidated financial statements. Viant Technology LLC is a pass-through entity for U.S. federal and most applicable state and local income tax purposes following a corporate reorganization effected in connection with the two-class method requiredIPO. As an entity classified as a partnership for participating securitiestax purposes, Viant Technology LLC is not subject to U.S. federal and multiple classescertain state and local income taxes. Prior to the IPO during 2021, the Company did not exist and thus 0 income tax expense was recognized for Viant Technology LLC for the periods ended December 31, 2020 and 2019 and 0 deferred tax assets or liabilities existed as of units. BasedDecember 31, 2020. Subsequent to the IPO, any taxable income or loss generated by Viant Technology LLC is passed through to and included in the taxable income or loss of its members, including the Company. The Company is taxed as a corporation and pays corporate federal, state and local taxes with respect to income allocated from Viant Technology LLC, based on Viant Technology, Inc.'s 22.5% economic interest in Viant Technology LLC.
110
The provision for income taxes attributable to the termsCompany consisted of the respective operating agreements,following for the year ended December 31, 2021:
Year Ended December 31, | ||||
2021 | ||||
(in thousands) | ||||
Current: | $ | — | ||
U.S. federal income tax | — | |||
State and local income tax | — | |||
Foreign income tax | — | |||
Deferred: | ||||
U.S. federal income tax | — | |||
State and local income tax | — | |||
Foreign income tax | — | |||
Income tax (benefit) provision | $ | — | ||
The effective tax rate for the year ended December 31, 2021 was 0.0%. A reconciliation of the statutory tax rate to the effective tax rate for the period presented is as follows:
Year Ended December 31, | ||||
2021 | ||||
Income tax expense at federal statutory rate | 21.0 | % | ||
Income passed through to noncontrolling interests | (16.7 | )% | ||
State and local taxes, net of federal benefit | 0.6 | % | ||
Permanent items | 0.7 | % | ||
Stock-based compensation | (3.2 | )% | ||
Valuation allowance | (2.4 | )% | ||
Total effective rate | 0.0 | % | ||
Set forth below are the tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and deferred tax liabilities:
111
|
| Year Ended December 31, |
| |
|
| 2021 |
| |
|
| (in thousands) |
| |
Deferred tax assets |
|
|
|
|
Net operating loss carryforwards |
| $ | 1,321 |
|
Investment in Partnership |
|
| 7,909 |
|
Other, net |
|
| 108 |
|
Subtotal |
|
| 9,338 |
|
Valuation allowance |
|
| (9,338 | ) |
Total deferred tax assets |
|
| — |
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
Other, net |
|
| — |
|
Total deferred tax liabilities |
|
| — |
|
Net deferred tax (liabilities) assets |
| $ | — |
|
In assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred taxes are realizable, the Company considers the 2016period of expiration of the tax asset, historical and 2019projected taxable income, and tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances are provided to reduce the amounts of deferred tax assets to an amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. As of December 31, 2021, the Company has recorded a valuation allowance against its deferred tax assets of $9.3 million, as management cannot conclude whether it is more likely than not that these deferred tax assets will be realized.
As of December 31, 2021, the Company has federal net operating losses of approximately $5.5 million. As of December 31, 2021, the Company has state net operating losses of approximately $8.1 million. The federal net operating losses carry forward indefinitely and state net operating losses begin to expire in 2031.
As of December 31, 2021, the Company has no significant unrecognized tax benefits and has not recorded interest and penalties related to uncertain tax positions.
The Company is subject to U.S. federal and state income taxes. The Company's U.S. federal and state returns are open to examination for all periods ending December 31, 2020 and thereafter. However, to the extent allowed by law the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carry forward amount.
11. Earnings (Loss)Per Share/Unit
Prior to the Reorganization Transactions that occurred on February 12, 2021, the Viant Technology LLC membership structure included certain convertible preferred units and common units. As a result of the Reorganization Transactions, Class B units of Viant Technology LLC are exchangeable in the future for Class A common stock of the Company. As the conversion of Viant Technology LLC preferred and common units to be participating securities.Class B units was not done in a proportionate manner with respect to the rights and economic interests of the former Viant Technology LLC unit holders compared to those of the new Class B unit/shareholders in Viant Technology LLC and Viant Technology Inc., we do not believe it is appropriate to retrospectively adjust these units. Accordingly, the earnings per unit calculation presented for the years ended December 31, 2020 and 2019 reflect units of the membership structure prior to the Reorganization Transactions.
For anythe year ended December 31, 2021, basic net loss per share has been calculated by dividing net loss attributable to Class A common stockholders for the period subsequent to the Reorganization Transactions, by the weighted average number of shares of Class A common stock outstanding for the same period. Shares of Class A
112
common stock are weighted for the portion of the period in which the Company records net income, undistributed earnings allocated to the convertible preferred units are subtracted from net income in determining earnings attributable to common unitholders. For periods in which the Company recognizes ashares were outstanding. Diluted net loss undistributed losses are allocated only toper share has been calculated in a manner consistent with that of basic net loss per share while considering all potentially dilutive shares of Class A common units as the convertible preferred units do not contractually participate in the Company’s losses. Basic earnings (loss) per unit is computed by dividing the earnings (loss) attributable to common unitholders by the number of weighted-average common unitsstock outstanding during the period. As participating securities,
For the convertible preferred units are excluded from basic weighted-average common units outstanding.
For thepurpose of calculatingbasicearnings(loss)perunitfortheyearyears ended December31, 2020 and 2019, theCompany adjustednet incomeforthedeemedcontributionrelatedto theretirementof the2016 convertiblepreferredunitson October 31, 2019 and thedeemeddividendupon issuanceof the2019 convertiblepreferredunitson October31, 2019. The firstadjustmentisa deemedcapitalcontributionand representsthedifferencebetweenthefairvalueof considerationtransferredfortheconvertiblepreferredunitsand thecarryingamountof theconvertiblepreferred unitson theCompany’sbalancesheeton thetransactiondate.The secondadjustmentisa deemeddividendto the 2019 convertiblepreferredunitholdersand representsthefullamortizationof thediscountrelatedto the beneficialconversionfeatureupon issuanceof the2019 convertiblepreferredunits.The discountiscalculatedas thedifferencebetweenthefairvalueof thecommonunitsand theeffectiveconversionpriceof the2019 convertiblepreferredunits.Referto Note 7 and Note 8 foradditionalinformation.
Dilutedbasic earnings (loss) per unit represents net income (loss) attributable to all unitholders divided by the weighted-average number of units outstanding. Diluted net income (loss) per share has been computed in a manner consistent with that of basic net loss per share while considering all shares of potentially dilutive common units that were outstanding during the period, inclusive of the convertible preferred units using the as-if-convertedif-converted method and the incentive common units using the treasury stock method, if dilutive. For the year ended December 31, 2020, there were no potential dilutive units related to incentive common units as they were all issued as of the beginning of the year.
The potential dilutive units related to the convertible preferred units were included in the computation of dilutiveundistributed earnings per unit. For thefor year ended December 31, 2019, the potential dilutive units related to the convertible preferred units and incentive common units were included in the computation of diluted earnings per unit. For the year ended December 31, 2018, the potential dilutive units related to the convertible preferred units and incentive common units were not included in the computation of diluted loss per unit as the effect of including these units in the calculation would have been anti-dilutive.
The undistributed earnings2020 have been allocated based on the participation rights of the convertible preferred and common units as if the earnings for the yearperiod have been distributed. As the participation in distributed and undistributed earnings is identical for both classes, the distributed and undistributed earnings are allocated on a proportionate basis.
BasicThe following table presents the calculation of basic and diluted net earnings(loss)per share/unitand theweighted-averageunitsoutstandinghave been computedforallperiodsshown below to giveeffectto payments of dividends to unitholders during 2020, issuancesof commonunits,theretirementof the2016 convertiblepreferredunitsand theissuanceof the2019 convertiblepreferredunits.The reconciliationsof the numeratorsand denominatorsof thebasicand dilutedearnings(loss)persharecomputationsareas follows:
|
| Year Ended December 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
|
| (in thousands, except per unit data) |
| |||||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 20,638 |
|
| $ | 9,924 |
|
| $ | (25,535 | ) |
Deemed contribution of 2016 convertible preferred unit interest |
|
| — |
|
|
| 45,000 |
|
|
| — |
|
Deemed dividend upon issuance of 2019 convertible preferred units |
|
| — |
|
|
| (27,558 | ) |
|
| — |
|
Adjusted net income (loss) attributable to all unitholders |
| $ | 20,638 |
|
| $ | 27,366 |
|
| $ | (25,535 | ) |
Less: Dividend paid to preferred unitholders |
|
| (3,000 | ) |
|
| — |
|
|
| — |
|
Adjusted net income (loss) attributable to common unitholders |
|
| 17,638 |
|
|
| 27,366 |
|
|
| (25,535 | ) |
Less: Dividend paid to common unitholders |
|
| (2,000 | ) |
|
| — |
|
|
| — |
|
Undistributed earnings (loss) attributable to all unitholders |
|
| 15,638 |
|
|
| 27,366 |
|
|
| (25,535 | ) |
Less: Undistributed earnings attributable to participating securities |
|
| (9,383 | ) |
|
| (18,787 | ) |
|
| — |
|
Earnings (loss) attributable to common unitholders |
| $ | 6,255 |
|
| $ | 8,579 |
|
| $ | (25,535 | ) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units outstanding—basic |
|
| 400 |
|
|
| 274 |
|
|
| 186 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred units |
|
| 600 |
|
|
| 600 |
|
|
| — |
|
Incentive common units |
|
| — |
|
|
| 126 |
|
|
| — |
|
Weighted average units outstanding—diluted |
|
| 1,000 |
|
|
| 1,000 |
|
|
| 186 |
|
Earnings (loss) per unit—basic |
|
|
|
|
|
|
|
|
|
|
|
|
Distributed earnings (loss) per unit—basic |
| $ | 5.00 |
|
| $ | — |
|
| $ | — |
|
Undistributed earnings (loss) per unit—basic |
|
| 15.64 |
|
|
| 31.31 |
|
|
| (137.28 | ) |
Total earnings (loss) per unit—basic |
| $ | 20.64 |
|
| $ | 31.31 |
|
| $ | (137.28 | ) |
Earnings (loss) per unit—diluted |
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings (loss) per unit—diluted |
| $ | 20.64 |
|
| $ | 27.37 |
|
| $ | (137.28 | ) |
Anti-dilutive units excluded from diluted earnings (loss) per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred units |
|
| — |
|
|
| — |
|
|
| 600 |
|
Incentive common units |
|
| — |
|
|
| — |
|
|
| 214 |
|
Total units excluded from diluted earnings (loss) per unit |
|
| — |
|
|
| — |
|
|
| 814 |
|
11. Commitments and Contingencies
Lease Commitments
Future minimum payments under the Company’s non-cancelable operating leases, which are primarily related to building leases, as ofyear ended December 31, 2020 are as follows:
Year Ended December 31, |
| (in thousands) |
| |
2021 |
| $ | 3,552 |
|
2022 |
|
| 2,002 |
|
2023 |
|
| 991 |
|
2024 |
|
| 124 |
|
2025 and thereafter |
|
| — |
|
Total minimum payments |
| $ | 6,669 |
|
Legal Matters
From time to time,2021, the Company is subject to various legal proceedings and claims, either asserted or unasserted, that arise inperiod following the ordinary course of business. Although the outcome of the various legal proceedings and claims cannot be predicted with certainty, management does not believe that any of these proceedings or other claims will have a material effect on the Company’s business, financial condition, results of operations or cash flows.
12. Guarantees and Indemnities
The Company has made no significant contractual guarantees for the benefit of third parties. However, in the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. The Company is not aware of indemnification claims that could have a material effect on the Company’s consolidated financial statements. Accordingly, no amounts for any obligation have been recorded as of December 31, 2020 and 2019.
13. Related Parties
The Company derives a small percentage of its revenue from Meredith Corporation and its subsidiaries (“Meredith Corporation”), which previously held equity interests in the Company through the Former Holdco. The Company also purchases certain inventory from Meredith Corporation. These purchases and sales are made under standard customer agreements that outline the terms of the transactions. As discussed in Note 7, the Company retired all outstanding shares held by this related party on October 31, 2019 and, as of such date, Meredith Corporation ceased to be a related party to the Company. Accordingly, the Company has excluded all transactions with Meredith Corporation subsequent to October 31, 2019 from the amounts disclosed below. There were no purchases, sales or amounts due to or from Four Brothers 2 LLC as ofReorganization Transactions, and for the years ended December 31, 2020 orand 2019.
The Company recorded no revenue from its transactions with related parties during year ended December 31, 2020, and $3.7 million and $5.0 million during the years ended December 31, 2019 and 2018, respectively. The Company recorded no purchases from related parties during year ended December 31, 2020, and $0.3 million and $0.7 million during the years ended December 31, 2019 and 2018, respectively.
As of December 31, 2020 and 2019, no amounts were due to or due from related parties.
14. Subsequent Events
The Company has assessed subsequent events through the date of this report and has concluded the following required disclosure in the consolidated financial statements.
Initial Public Offering
On February 9, 2021, the Form S-1 of Viant Technology Inc. was declared effective by the SEC See Note 2 for additional information related to the IPO of its Class A common stock. The closing date of the IPO was February 12, 2021,basic and in connection with the closing, the following actions were taken as it relates to the Company:diluted earnings (loss) per share/unit.
113
|
| Year Ended December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
|
| (in thousands, except per unit data) |
| |||||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (37,609 | ) |
| $ | 20,638 |
|
| $ | 9,924 |
|
Deemed contribution of 2016 convertible preferred unit interest |
|
| — |
|
|
| — |
|
|
| 45,000 |
|
Deemed dividend upon issuance of 2019 convertible preferred units |
|
| — |
|
|
| — |
|
|
| (27,558 | ) |
Adjusted net income (loss) attributable to all unitholders |
|
| (37,609 | ) |
|
| 20,638 |
|
|
| 27,366 |
|
Less: Dividend paid to preferred unitholders |
|
| — |
|
|
| (3,000 | ) |
|
| — |
|
Adjusted net income (loss) attributable to common unitholders |
|
| (37,609 | ) |
|
| 17,638 |
|
|
| 27,366 |
|
Less: Dividend paid to common unitholders |
|
| — |
|
|
| (2,000 | ) |
|
| — |
|
Undistributed earnings (loss) attributable to all unitholders |
|
| (37,609 | ) |
|
| 15,638 |
|
|
| 27,366 |
|
Less: Undistributed earnings attributable to participating securities |
|
| — |
|
|
| (9,383 | ) |
|
| (18,787 | ) |
Less: Net loss attributable to noncontrolling interests |
|
| (29,867 | ) |
|
| — |
|
|
| — |
|
Net income (loss) attributable to Viant Technology Inc./common unitholders |
| $ | (7,742 | ) |
| $ | 6,255 |
|
| $ | 8,579 |
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of Class A common stock/units outstanding—basic |
|
| 12,364 |
|
|
| 400 |
|
|
| 274 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred units |
|
| — |
|
|
| 600 |
|
|
| 600 |
|
Incentive common units |
|
| — |
|
|
| — |
|
|
| 126 |
|
Weighted-average shares of Class A common stock/units outstanding—diluted |
|
| 12,364 |
|
|
| 1,000 |
|
|
| 1,000 |
|
Earnings (loss) per Class A common stock/unit—basic |
|
|
|
|
|
|
|
|
|
|
|
|
Distributed earnings per unit—basic |
| $ | — |
|
| $ | 5.00 |
|
| $ | — |
|
Undistributed earnings (loss) per unit—basic |
|
| (0.63 | ) |
|
| 15.64 |
|
|
| 31.31 |
|
Total earnings (loss) per Class A common stock/unit—basic |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 31.31 |
|
Earnings (loss) per Class A common stock/unit—diluted |
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings (loss) per Class A common stock/unit—diluted |
| $ | (0.63 | ) |
| $ | 20.64 |
|
| $ | 27.37 |
|
Anti-dilutive shares/units excluded from earnings (loss) per share of Class A common stock/unit—diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred units |
|
| — |
|
|
| — |
|
|
| — |
|
Incentive common units |
|
| — |
|
|
| — |
|
|
| — |
|
Restricted stock units |
|
| 3,033 |
|
|
| — |
|
|
| — |
|
Nonqualified stock options |
|
| 220 |
|
|
| — |
|
|
| — |
|
Shares of Class B common stock |
|
| 47,107 |
|
|
| — |
|
|
| — |
|
Total shares excluded from earnings (loss) per share of Class A common stock/unit—diluted |
|
| 50,360 |
|
|
| — |
|
|
| — |
|
Viant Technology Inc. amended and restated its certificate of incorporation, under which Viant Technology Inc. is authorized to issue up to 450,000,000 shares of Class A common stock, up to 150,000,000 shares of Class B common stock, and up to 10,000,000 shares of preferred stock;
The limited liability company agreement of the Company was amended and restated (the “Amended and Restated Viant Technology LLC Agreement”) to, among other things, provide for Class A units and Class B units and appoint Viant Technology Inc. as12. Noncontrolling Interests
We are the sole managing member of Viant Technology LLC and, as a result, consolidate the Company;
financial results of Viant Technology LLC. We report noncontrolling interests representing the economic interests in Viant Technology LLC held by the other members of Viant Technology LLC. TheAmended and Restated Viant Technology LLC Agreement classifies the interests acquired by Viant Technology Inc.the Company as Class A units, and reclassified the interests held by the continuing
114
members of the CompanyViant Technology LLC as Class B units and permits the continuing members of the CompanyViant Technology LLC to exchange Class B units for shares of Class A common stock on a one-for-oneone-for-1 basis or, at the election of Viant Technology Inc., for cash at the Company, for cash. Immediately following such reclassification,current fair value on the continuing members held 48,935,559 Class B units. For each membership unitdate of the Company that is reclassified as a Class B unit, exchange. Changes in the Company’s ownership interest in Viant Technology Inc. issued one corresponding shareLLC while retaining control of its Class B common stock to the continuing members,Viant Technology LLC will be accounted for as equity transactions. As such, future redemptions or 48,935,559 sharesdirect exchanges of Class B common stockunits in total;
Viant Technology Inc. issued and sold 10,000,000 shares of its Class A common stock to the underwriters at an initial public offering price of $25.00 per share, for gross proceeds of $250.0 million before deducting underwriting discounts and commissions of $17.5 million;
Viant Technology Inc. used the net proceeds of $232.5 million to acquire 10,000,000 newly issued Class A units of the Company at a per-unit price equal to the per-share price paidLLC by the underwriters for shares of its Class A common stock;
The underwriters exercised their option to purchase 1,500,000 additional sharesother members and future issuances of Class A common stock fromunder the selling stockholders. 2021 LTIP will result in a change in ownership, where the Company will rebalance the noncontrolling interest balance as of the reporting date, offset by a change in additional-paid-in-capital.
The following table summarizes the ownership of Viant Technology Inc. did not receive any proceeds fromLLC:
|
| As of December 31, 2021 |
|
| As of February 12, 2021 |
| ||||||||||
Owner |
| Units Owned |
|
| Ownership Percentage |
|
| Units Owned |
|
| Ownership Percentage |
| ||||
Viant Technology Inc. |
|
| 13,704,638 |
|
|
| 22.5 | % |
|
| 11,500,000 |
|
|
| 19.5 | % |
Noncontrolling interests |
|
| 47,107,130 |
|
|
| 77.5 | % |
|
| 47,435,559 |
|
|
| 80.5 | % |
Total |
|
| 60,811,768 |
|
|
| 100.0 | % |
|
| 58,935,559 |
|
|
| 100.0 | % |
During the sale of shares by the selling stockholders. Pursuant to such exercise, the selling stockholdersyear ended December 31, 2021, noncontrolling interests exchanged the corresponding number of0.3 million Class B units of Viant Technology, LLC for the0.3 million shares of the Company’s Class A common stock, which also resulted in the corresponding numbercancellation of 0.3 million shares of the Company’s Class B common stock were automatically retired, and 1,500,000 Class A units were issued to that was previously held by noncontrolling interests with no additional consideration provided.
The following table presents the effect of changes in the Company’s ownership interest in Viant Technology Inc.;
Immediately following the closing of the IPO, the Company is the predecessor of Viant Technology Inc. for financial reporting purposes. Viant Technology Inc. is a holding company, and its sole material asset is its equity interest in the Company. As the sole managing member of the Company, Viant Technology Inc. operates and controls all of the business and affairs of the Company. This reorganization is accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements of Viant Technology Inc. will recognize the assets and liabilities received in the reorganization at their historical carrying amounts, as reflected in the historical consolidated financial statements of the Company.
Phantom Unit Plan
In connection with the IPO,LLC on the Company’s Phantom Unit Plan was replaced in conjunction withequity for the adoptionperiod indicated:
|
| Year Ended December 31, 2021 |
| |
|
| (in thousands) |
| |
Net loss attributable to Viant Technology Inc. |
| $ | (7,742 | ) |
Transfers to noncontrolling interests: |
|
|
|
|
Decrease in the additional-paid-in-capital of Viant Technology Inc. as a result of ownership changes in Viant Technology LLC |
|
| (44,361 | ) |
Net decrease in equity of Viant Technology Inc. due to equity interest transactions with noncontrolling interests |
| $ | (52,103 | ) |
13. Commitmentsand Contingencies
Lease Commitments
FutureminimumpaymentsundertheCompany’snon-cancelable operating leases, which are primarily related to building leases,as of the Viant Technology Inc.December31, 2021 Long Term Incentive Plan.areas follows:
Year Ending December 31, |
| (in thousands) |
| |
2022 |
| $ | 3,039 |
|
2023 |
|
| 3,953 |
|
2024 |
|
| 3,060 |
|
2025 |
|
| 2,991 |
|
2026 and thereafter |
|
| 16,713 |
|
Total minimum payments |
| $ | 29,756 |
|
115
Legal Matters
Fromtimeto time,theCompany issubjectto variouslegalproceedingsand claims,eitherassertedor unasserted,thatarisein theordinarycourseof business.Although theoutcomeof thevariouslegalproceedings and claimscannotbe predictedwith certainty,managementdoes not believethatany of theseproceedingsor otherclaimswillhave a materialeffecton theCompany’sbusiness,financialcondition,resultsof operationsor cashflows.
14. Guaranteesand Indemnities
The Company has madeno significantcontractualguaranteesforthebenefitof thirdparties.However, in theordinarycourseof business,theCompany mayprovideindemnificationsof varyingscopeand termsto customers,vendors,lessors,businesspartnersand otherpartieswith respectto certainmatters,including,but not limitedto, lossesarisingout of breachof such agreements,servicesto be providedby theCompany or from intellectualpropertyinfringementclaimsmadeby thirdparties.In addition,theCompany has enteredinto indemnificationagreementswith directorsand certainofficersand employeesthatwillrequiretheCompany, amongotherthings,to indemnifythemagainstcertainliabilitiesthatmayariseby reasonof theirstatusor service as directors,officersor employees.The Company isnot awareof indemnificationclaimsthatcouldhave a materialeffecton theCompany’s consolidatedfinancialstatements.Accordingly,0 amountsforany obligation have been recordedas of December31, 2021 and 2020.
15. RelatedParties
The Company derivesa smallpercentageof itsrevenuefromMeredithCorporationand itssubsidiaries (“MeredithCorporation”),which previouslyheldequityinterestsin theCompany throughtheFormerHoldco. The Company alsopurchasescertaininventoryfromMeredithCorporation.These purchasesand salesaremade understandardcustomeragreementsthatoutlinethetermsof thetransactions.As discussedin Note 8, the Company retiredalloutstandingsharesheldby thisrelatedpartyon October31, 2019 and, as of such date, MeredithCorporationceasedto be a relatedpartyto theCompany. Accordingly,theCompany has excludedall transactionswith MeredithCorporationsubsequentto October31, 2019 fromtheamountsdisclosedbelow.
Related parties incurred a total of $0.3 million in expenses on our behalf during the year ended December 31, 2021 and $0.3 million of these expenses were unpaid and recorded within accounts payable and accrued liabilities as of December 31, 2021.
The Company recorded 0 revenuefromitstransactionswith relatedparties during year ended December 31, 2021 and 2020, and $3.7 millionduringtheyearended December31, 2019.The Company recorded 0 purchasesfromrelatedparties during years ended December 31, 2021 and 2020, and $0.3 millionduringtheyearended December31, 2019.
As of December31, 2021 and 2020, 0 amounts were due to or due from related parties, other than those mentioned above.
116
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our CEOchief executive officer and CFO,chief 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)Act), as of the end of the period covered by this Annual Report. Based on such evaluation, our CEOchief executive officer and CFOchief financial officer have concluded that as of December 31, 2020,2021, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEOchief executive officer and CFO,chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). We maintain internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Internal control over financial reporting includes maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on the consolidated financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected.
Under the supervision and with the participation of our chief executive officer and chief financial officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, our management concluded that our internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2021.
Attestation Report of the Independent Registered Public Accounting Firm
This Annual Report does not include aan attestation report of management's assessmentour registered public accounting firm regarding internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies” and because we qualify as a “non-accelerated filer” (i.e., we do not qualify as either an “accelerated filer” or an attestation of our independent registered public accounting firma “large accelerated filer” as permitteddefined in this transition periodRule 12b-2 under the rules of the SEC for newly public companies.Exchange Act).
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) during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
110
Limitations on the Effectiveness of Disclosure Controls and Procedures
Our management, including our Chief Executive Officerchief executive officer and Chief Financial Officer,chief financial officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be 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 within a company are detected. The inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
111
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth certain information regarding our directors and executive officers as of the date ofrequired by this Annual Report.
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
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|
| ||||
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|
| ||||
Our Executive Officers
Tim Vanderhook has servedas our chiefexecutiveofficersinceOctober9, 2020 and has servedon our boardof directorssinceOctober16, 2020 and has servedas chairmanof our boardof directorssince February 2021.HehasservedasthechiefexecutiveofficerandboardmemberofViantTechnology LLCsinceheco-foundedtheViantTechnologybusinessin1999.Mr.Vanderhook’squalificationstoserveon theboardofdirectorsincludehisdigitaladvertisingexpertiseandinnovation,andhisexperienceasourchief executiveofficerforover20years,whichcontributesvaluablemanagementandtechnologicalexpertisetothe board’scollectiveknowledge.
Chris Vanderhook has servedas our chiefoperatingofficersinceOctober9, 2020 and has servedon our boardof directorssinceOctober16, 2020. He has servedas thechiefoperatingofficerand boardmemberof ViantTechnologyLLCsincehe co-foundedtheViantTechnologybusinessin 1999. Mr.Vanderhook’s qualificationsto serveon theboardof directorsincludehisextensiveexperiencein thedigitaladvertising industry,and hisexperienceas our chiefoperatingofficerforover20 years,which contributesvaluable managementexpertiseto theboard’scollectiveknowledge. Mr.Vanderhook receiveda BSdegreein Business AdministrationattheMarshallSchool of BusinessfromtheUniversityof SouthernCalifornia.
Larry Madden has servedas our chieffinancialofficersinceOctober9, 2020 and has servedas thechief financialofficerof ViantTechnologyLLCsinceSeptember2012. BeforejoiningViantTechnologyLLC, Mr.Maddenservedas chieffinancialofficerof a numberof mediaand technologycompaniesstartingin 1995. Mr.Maddenhas extensivepubliccompanyexperience,includingas chieffinancialofficerof two Nasdaq-listed companiesand as a boardmemberof a thirdNasdaq-listedcompany. Mr.MaddenstartedhiscareeratErnst& Young where he spentnearlyeightyears.Mr.Maddenisa CPA(inactive)and earnedan MBAin financeand strategicmanagementfromNewYork University.
Our Directors
Please see “— Our ExecutiveOfficers” above for the biographical information of Tim Vanderhook and Chris Vanderhook.
Max Valdes has servedon our boardof directors since February 9, 2021anditem is chairof theauditcommittee.Mr.Valdesisa formerChiefFinancialOfficerand ExecutiveVice Presidentof First AmericanFinancialCorporation,a NewYork Stock Exchange-listedcompany.Priorto hisretirement, Mr.Valdesheldnumerousfinancialpositionsoverhis25 yearsatFirstAmericanFinancialCorporation, includingControllerand ChiefAccountingOfficer.He currentlyserveson theboardof directorsand audit committeeof FirstAmericanTrustCompany. Mr.Valdesbringsa significantlevelof financialand management expertiseto theboardof directors.This experiencealsoprovidesinsightregardingpubliccompanyreporting matters,as wellas an understandingof theprocessof an auditcommittee’sinteractionswith theboardof directorsand management.Mr.Valdesisa CPAand earneda BAdegreein BusinessAdministrationatthe CaliforniaStateUniversity,Fullerton.
Elizabeth Williams has served on our board of directors since February 9, 2021 and is chair of the compensation committee. Ms. Williams has served as Chief Executive Officer of Drybar Holdings, LLC, an owner of hair salons providing blowouts and hair styling products and accessories, since June 2020. Previously, Ms. Williams was President of Taco Bell International from January 2018 to January 2020, Chief Financial Officer of Taco Bell Corp. from October 2013 to January 2018, and Vice President, Financial Planning & Analysis of Taco Bell Corp. from 2011 to 2013. Ms. Williams currently serves on the board of directors and audit committee of Stitch Fix, Inc., a Nasdaq-listed company. Ms. William’s experience leading a global business and service on other public company boards brings important insight and guidanceincorporated by reference to the board regarding its responsibilities as a public company, as well as best practices in corporate governance. Ms. Williams earned a BA degree in Business Administration from Universitydefinitive Proxy Statement for our 2022 Annual Meeting of Texas in Austin and an MBA from the Kellogg School of Management at Northwestern University.
Family Relationships
Tim Vanderhook and Chris Vanderhook are brothers. No other family relationship exists by or among our executive officers.
Controlled Company Exemption
Through their ownership of Class B common stock, the Vanderhook Parties control 74.9% of the voting power of our common stock in the election of directors. Accordingly, we have availed ourselves of the “controlled company” exception available under Nasdaq rules,Stockholders, which eliminates certain requirements, such as the requirements that a company have a majority of independent directors on its board of directors, that compensation of executive officers be determined, or recommended to the board of directors for determination, by a compensation committee composed solely of independent directors, and that director nominees be selected, or recommended for the board of directors’ selection, by a nominations committee composed solely of independent directors. In the event that we cease to be a controlled company, we will be required to comply with these provisions within the transition periods specified in the applicable rules. These exemptions do not modify the independence requirements for our audit committee, and we intend to complyfiled with the applicable requirements of the SEC and Nasdaq with respect to our audit committee within the applicable time frame.
Director Independence
The board of directors has determined that each of Max Valdes and Elizabeth Williams is an “independent director” as such term is defined by the applicable rules and regulations of Nasdaq. As allowed under the applicable rules and regulations of the SEC and Nasdaq, we intend to appoint a third independent director within a yearno later than 120 days after the closing of our IPO.
Board Composition
Our board of directors consists of four directors. In accordance with our amended and restated certificate of incorporation and bylaws, the number of directors on our board of directors will be determined from time to time by the board of directors but shall not be less than three persons nor more than eleven persons.
Each director is to hold office until the next election of the class for which such director shall have been chosen and until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. Vacancies and newly created directorships on the board of directors may be filled at any time by the remaining directors or our stockholders, provided that, after the Vanderhook Parties cease to beneficially own a majority of the combined voting power of our common stock (the “Triggering Event”), vacancies on our board of directors, whether resulting from an increase in the number of directors or the death, removal or resignation of a director, will be filled only by our board of directors and not by stockholders.
Our amended and restated certificate of incorporation provides that the board of directors will be divided into three classes of directors, with staggered three-year terms, with the classes to be as nearly equal in number as possible. As a result, approximately one-third of the board of directors will be elected each year. The classification
of directorshas theeffectof makingitmoredifficultforstockholdersto changethecompositionof theboardof directors.Our Class I director isMax Valdes, our Class II director is Chris Vanderhook, and our Class III directors are TimVanderhook and Elizabeth Williams.
Board Leadership Structure
Our board of directors has designated Tim Vanderhook to serve as chairman of the board. Our board of directors believes that it should maintain flexibility to select the chairman of our board of directors and adjust our board leadership structure from time to time. Our board of directors determined that having our chief executive officer also serve as the chairman of our board of directors provides us with optimally effective leadership and is in our best interests and those of our stockholders. Mr. Vanderhook co-founded and has led our company since its inception. Our board of directors believes that Mr. Vanderhook’s strategic vision for our business, his in-depth knowledge of our platform and operations, the ad tech industry, and his experience serving as our chief executive officer since our inception make him well qualified to serve as both chairman of our board of directors and chief executive officer.
The role given to the lead independent director helps ensure a strong independent and active board of directors. In 2021, our board of directors appointed Max Valdes to serve as our lead independent director. As lead independent director, Mr. Valdes will preside over periodic meetings of our independent directors, serve as a liaison between the chairperson of our board of directors and the independent directors, and perform such additional duties as our board of directors may otherwise determine and delegate.
Role of our Board in Risk Oversight
We face a number of risks, including those described under the section titled “RiskFactors” included elsewhere in this Annual Report. Our board of directors believes that risk management is an important part of establishing, updating and executing on the Company’s business strategy. Our board of directors, as a whole and at the committee level, has oversight responsibility relating to risks that could affect the corporate strategy, business objectives, compliance, operations and the financial condition and performance of the Company. Our board of directors focuses its oversight on the most significant risks facing the Company and on its processes to identify, prioritize, assess, manage and mitigate those risks. Our board of directors and its committees receive regular reports from members of the Company’s senior management on areas of material risk to the Company, including strategic, operational, financial, legal and regulatory risks. While our board of directors has an oversight role, management is principally tasked with direct responsibility for management and assessment of risks and the implementation of processes and controls to mitigate their effects on the Company.
Board Committees December 31, 2021.
We have three board committees: an audit committee,adopted a compensation committeewritten Code of Business Conduct and a nominatingEthics (our “Code of Conduct”) that applies to all officers, directors and corporate governance committee.
Audit Committee
The primary responsibilities ofemployees, including our audit committee are to oversee theprincipal executive officer, principal financial and accounting and financial reporting processes of our company, and to oversee the internal and external audit processes. The audit committee also assists the board of directors in fulfilling its oversight responsibilities by reviewing the financial information provided to stockholders and others, and the system of internal controls established by management and the board of directors. The audit committee oversees the independent auditors, including their independence and objectivity. However, committee members will not act as professional accountantsofficer, or auditors, and their functions are not intended to duplicate or substitute for the activities of management, or the independent auditors. The audit committee is empowered to retain independent legal counsel and other advisors as it deems necessary or appropriate to assist it in fulfilling its responsibilities, and to approve the fees and other retention terms of its advisors.
Max Valdes, Elizabeth Williams and Tim Vanderhook are the members of our audit committee. The board of directors has determined that Mr. Valdes qualifies as an “audit committee financial expert” as such term is defined
undertherulesof theSEC implementingSection407 of theSarbanes-OxleyAct of 2002, or Sarbanes-Oxley,and that each of Mr.Valdes and Ms. Williamsisan “independent”directorforpurposesof Rule 10A-3 of theExchange Act and underthelistingstandardsof Nasdaq. Accordingly,we arerelyingon thephase-inprovisionsof Rule 10A-3 of theExchange Act and Nasdaq transitionrulesapplicableto companiescompletingan initialpublicoffering,and we planto have an audit committeecomprised solelyof independentdirectorsthatareindependentforpurposesof servingon an audit committeewithinone yearof our listing.We believethatthefunctioningof our auditcommitteecomplieswith theapplicablerequirementsof theSECand Nasdaq.
Compensation Committee
The primary responsibilities of our compensation committee are to periodically review and approve the compensation and other benefits for our employees, officers and independent directors. This includes reviewing and approving corporate goals and objectives relevant to the compensation of our executive officers in light of those goals and objectives, and setting compensation for these officers based on those evaluations. Our compensation committee also administers and has discretionary authority over the issuance of equity awards under our equity incentive plans. The compensation committee may delegate authority to review and approve the compensation of our employees to certain of our executive officers, including with respect to awards made under our equity incentive plans. Even where the compensation committee does not delegate authority, our executive officers will typically make recommendations to the compensation committee regarding compensation to be paid to our employees and the size of equity grants under our equity incentive plans.
Elizabeth Williams and Chris Vanderhook are the members of our compensation committee. Because we are a “controlled company” under the rules of Nasdaq, our compensation committee is not required to be fully independent, although if such rules change in the future or we no longer meet the definition of a controlled company under the current rules, we will adjust the composition of the compensation committee accordingly in order to comply with such rules.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee oversees all aspects of our corporate governancepersons performing similar functions. The committee makes recommendations to our board of directors regarding director candidates and assists our board of directors in determining the composition of our board of directors and its committees. Tim Vanderhook and Chris Vanderhook are the members of our nominating and corporate governance committee. Because we are a “controlled company” under the rules of Nasdaq, our nominating and corporate governance committee is not required to be fully independent, although if such rules change in the future or we no longer meet the definition of a controlled company under the current rules, we will adjust the composition of the nominating and corporate governance committee accordingly in order to comply with such rules.
Code of Conduct and Ethics
Our board of directors has adopted a code of conduct and ethics that establishes the standards of ethical conduct applicable to all directors, officers and employees of our company. The code addresses, among other things, conflicts of interest, compliance with disclosure controls and procedures and internal control over financial reporting, corporate opportunities and confidentiality requirements. The audit committee is responsible for applying and interpreting our code of conduct and ethics in situations where questions are presented to it. We expect that any amendments to the code or any waivers of its requirements applicable to our principal executive, financial or accounting officer, or controller will be disclosedavailable on our website at www.viantinc.com. Information containedIf we make any substantive amendments to the Code of Conduct or grant any waiver from a provision of the Code of Conduct to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website or linked therein or otherwise connected thereto does not constitute part of nor is it incorporated by reference into the registration statementin a Current Report on Form S-1 (No. 333-252117).8-K.
Compensation Committee Interlocks and Insider Participation
Our compensation committee is composed Elizabeth Williams and Chris Vanderhook. None of our executive officers currently serves, or has served during the last completed fiscal year, as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who
servedon our boardof directors.For a descriptionof thetransactionsbetweenus and membersof thecompensationcommittee,and entitiesaffiliatedwith such members,seethetransactions describedunderthesectionentitled“CertainRelationshipsand RelatedPerson Transactions.”
Item 11. Executive Compensation.
We are providing compensation disclosure that satisfies the requirements applicable to EGCs, as defined in the JOBS Act. As an EGC, we disclose the compensation of our principal executive officer and the two most highly compensated executive officers other than our principal executive officer.
Summary Compensation Table
The following table sets forth the compensation earned during the years ended December 31, 2019 and 2020information required by our principal executive officer and our next two most highly compensated executive officers, who collectively comprise our named executive officers.
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| Bonus |
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| Total |
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Name and principal position |
| Year |
| ($) |
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| ($) |
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| ($) |
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Tim Vanderhook |
| 2020 |
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| 700,000 |
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| 700,000 |
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| 1,400,000 |
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Chief Executive Officer & Co-Founder |
| 2019 |
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| 700,000 |
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| 700,000 |
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| 1,400,000 |
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Chris Vanderhook |
| 2020 |
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| 700,000 |
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| 700,000 |
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| 1,400,000 |
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Chief Operating Officer & Co-Founder |
| 2019 |
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| 700,000 |
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| 700,000 |
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| 1,400,000 |
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Larry Madden |
| 2020 |
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| 645,840 |
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| 200,000 |
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| 845,840 |
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Chief Financial Officer |
| 2019 |
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| 645,840 |
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| 264,584 |
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| 910,424 |
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Executive Compensation Arrangements
We do not have any employment or change in control arrangements with our named executive officers other than Mr. Madden. We entered into an employment agreement with Mr. Madden on March 27, 2017, which was subsequently amended on November 15, 2018 (the “Madden Employment Agreement”). The agreement provides for an initial base salary and an annual bonus opportunity. Such bonusthis item is in the Company’s sole and absolute discretion and conditioned on Mr. Madden remaining employed through the end of the applicable annual bonus period. Subject to Mr. Madden’s execution and delivery of a general release of claims against the Company, Mr. Madden is entitled to base salary continuation for a period of 12 months in the event his employment is terminatedincorporated by the Company without Cause or due to his resignation for Good Reason (each as defined in the Madden Employment Agreement). Mr. Madden is also eligible to receive COBRA continuation coverage at company-cost for a period of twelve months following such a termination of employment.
Upon a change in control, our equity and non-equity incentive plans provide for accelerated vesting of outstanding awards held by participants, including our named executive officers. We do not currently expect to enter into employment, severance or change in control arrangements with our named executive officers.
Common Units in Viant Technology LLC and the Equity Plan LLC
Priorreference to the IPO, Messrs. Vanderhook and Vanderhook have each had been issued common units in Viant Technology LLC. These common units were full-value awards that were previously subject to time-based vesting conditions. Such vesting conditions lapsed in connection with Viant Technology LLC’s retirementdefinitive Proxy Statement for our 2022 Annual Meeting of 600,000 common units from the Former Holdco in 2019. In connection with the IPO, Class B units of Viant Technology LLC and shares of Class B common stock of Viant Technology Inc. were issued in exchange for these previously issued units.
Certain of our employees, including Mr. Madden, were granted common units by the Viant Technology Equity Plan LLC (the “Equity Plan LLC.”) Such units were issued to certain of our directors, officers, employees and consultants in consideration for bona fide services provided to us. Common units issued by the Equity Plan LLC are considered “profits interests” within the meaning of U.S. federal and state tax rules. Recipients of such units are
not immediately entitledupon grantto receivedistributionsupon a liquidation.Instead,theholdersof such unitsareentitledto receivean allocationof a portionof our profitsarisingafterthedateof thegrantand, subjectto vesting conditions,distributionsmadeout of a portionof our profitsarisingafterthegrantdateof such units.
Prior to the IPO, each common unit of the Equity Plan LLC corresponded to a common unit of Viant Technology LLC granted to the Equity Plan LLC by Viant Technology LLC. In connection with the IPO, Class B units of Viant Technology LLC and shares of Class B common stock of Viant Technology Inc. were issued to Equity Plan LLC in exchange for these previously issued units, The common units issued by the Equity Plan LLC to our service providers thatStockholders, which will remain outstanding will represent an indirect interest in the Class B units of Viant Technology LLC and the Class B common stock of Viant Technology Inc. held by Equity Plan LLC
Viant Technology LLC 2020 Equity Based Incentive Compensation Plan
Mr. Madden was granted 1,000,000 phantom units under the Viant Technology LLC 2020 Equity Based Incentive Compensation Plan (the “Phantom Unit Plan”). The Phantom Unit Plan provides for grants of phantom units to employees, officers, and directors of Viant Technology LLC. Each phantom unit provides a participant with a contractual right to receive a payment with respect to his or her vested phantom units upon the consummation of a “Deemed Liquidation Event.” The value of each phantom unit is based on the amount that a hypothetical member who holds common units in Viant Technology LLC would receive in connection with a Deemed Liquidation Event in excess of the distribution threshold applicable to the phantom unit. Such distribution threshold is established at the time of grant. We replaced awards under this plan with awards issued pursuant to the 2021 LTIP in connection with the IPO.
Viant Technology Inc. 2021 Long-Term Incentive Plan
Our board of directors adopted the 2021 LTIP, a new omnibus long-term incentive plan, and the 2021 LTIP was approved by our stockholders in connection with our IPO. We granted under the 2021 LTIP equity awards in connection with our Phantom Unit Plan consisting of restricted stock units (“RSUs”) to certain employees, including certain of our named executive officers, as well as equity awards consisting of RSUs to certain of our non-employee directors, with an aggregate grant date fair value of $155 million. Mr. Madden received 510,000 RSUs as replacement of his interests in the Phantom Unit Plan. A portion of these RSUs will be vested at the time of release of the lock-up agreements entered into in connection with our IPO and the remainder of the RSUs will continue to vest following grant, subject to continued employment through the applicable vesting date.
Purpose. The 2021 LTIP isintendedto helptheCompany secureand retaintheservicesof eligible award recipients,provideincentivesforsuch personsto exertmaximumeffortsforthesuccessof theCompany and itsaffiliatesand providea meansby which theeligiblerecipientsmaybenefitfromincreasesin thevalueof our commonstock.
Eligibility. Equityawards,includingRSUs,maybe grantedto employees,includingofficers, non-employeedirectors,and consultantsof theCompany and itsaffiliates.Only our employeesand thoseof our affiliatesareeligibleto receiveincentivestockoptions.
Types of Equity Awards. The 2021 LTIP providesforthegrantof incentivestockoptionswithinthe meaningof Section422 of theCode, nonqualifiedstockoptions,stockappreciationrights(“SARs”), restricted stockawards(“RSAs”), RSUsand performancestockawards.
AuthorizedShares. Subjectto adjustmentforcertaindilutiveor relatedevents,theaggregatemaximum numberof sharesof our ClassA commonstockthatmaybe issuedpursuantto stockawardsunderthe2021 LTIP, or theShareReserve,is11,787,112 sharesof ClassA commonstock.The ShareReservewill automaticallyincreaseon January1 of eachyearcommencingon January1, 2022 and endingwith a final increaseon January1, 2031 in an amountequalto 5% of thetotalnumberof sharesof capitalstockoutstanding on December31stof theprecedingcalendaryear;provided,however, thatour boardof directorsmayprovide thattherewillnot be a January1stincreasein theShareReservein a givenyearor thattheincreasewillbe less than5% of thesharesof capitalstockoutstandingon theprecedingDecember31st.
The Share Reserve will not be reduced if an award or any portion thereof (i) expires, is canceled, is forfeited or otherwise terminates without all of the shares covered by such award having been issued or (ii) is settled in cash. If any shares of common stock issued under an equity award are forfeited back to, or repurchased by, the Company, such shares will revert to and again be made available for issuance under the 2021 LTIP. Any shares retained or reacquired by the Company in satisfaction of tax withholding obligations, as consideration for the exercise or purchase price of an equity award, or with the proceeds paid by the participant under the terms of an equity award, will also again become available for issuance under the 2021 LTIP. If the Company repurchases shares of Class A common stock with stock option exercise or stock purchase proceeds, such shares will be added to the Share Reserve.
Shares issued under the 2021 LTIP may consist of authorized but unissued or reacquired Class A common stock of the Company, including shares repurchased by the Company on the open market or otherwise or shares classified as treasury shares.
Plan Administration. Our boardof directorshas theauthorityto administerthe2021 LTIP, includingthe powers to:(i)determinewho willbe grantedequityawardsand what typeof equityaward, when and how each equityaward willbe granted,theprovisionsof eachequityaward (whichneed not be identical),thenumberof sharesor cashvaluesubjectto an equityaward and thefairmarketvalueapplicableto an equityaward; (ii)construeand interpretthe2021 LTIP and equityawardsgrantedthereunderand establish,amendand revoke rulesand regulationsforadministrationof the2021 LTIP and equityawards,includingtheabilityto correctany defect,omissionor inconsistencyin the2021 LTIP or any equityaward document;(iii)settleallcontroversies regardingthe2021 LTIP and equityawardsgrantedthereunder;(iv)accelerateor extend,in whole or in part,the timeduringwhich an equityaward maybe exercisedor vestedor atwhich cashor sharesmaybe issued; (v)suspendor terminatethe2021 LTIP; (vi)amendthe2021 LTIP; (vii)submitany amendmentto the2021 LTIP forstockholderapproval;(viii)approveformsof award documentsforuse underthe2021 LTIP and to amendthetermsof any one or moreoutstandingequityawards;(ix)generallyexercisesuch powers and perform such actsas theboardof directorsmaydeemnecessaryor expedientto promotethebestinterestsof the Company and thatarenot in conflictwith theprovisionsof the2021 LTIP or any equityaward documents;and (x)adoptproceduresand sub-plansas arenecessaryor appropriate.
Subject to the provisions of the 2021 LTIP, our board of directors may delegate all or some of the administration of the 2021 LTIP to a committee of one or more directors and may delegate to one or more officers the authority to designate employees who are not officers to be recipients of options and SARs (and, to the extent permitted by applicable law, other equity awards) and, to the extent permitted by applicable law, to determine the terms of such equity awards and the number of shares of Class A common stock to be subject to such equity awards granted to such employees. Unless otherwise provided by the board of directors, delegation of authority by the board of directors to a committee or an officer will not limit the authority of the board. All determinations, interpretations and constructions made by the board (or another authorized committee or officer exercising powers delegated by the board) in good faith will be final, binding and conclusive on all persons. Pursuant to the provisions of the 2021 LTIP, the board will delegate administration of the 2021 LTIP to the compensation committee.
StockOptions. A stockoptionmaybe grantedas an incentivestockoptionor a nonqualifiedstock option.The optionexercisepricemaynot be lessthanthefairmarketvalueof thestocksubjectto theoptionon thedatetheoptionisgrantedor, with respectto incentivestockoptions,lessthan110% of thefairmarketvalue iftherecipientowns stockpossessingmorethan10% of thetotalcombinedvotingpower of allclassesof stock of theCompany or any affiliateunlesstheoptionwas grantedpursuantto an assumptionor substitutionfor anotheroptionin a mannersatisfyingtheprovisionsof Section409A and, ifapplicable,Section424(a)of the Code. Optionswillnot be exercisableaftertheexpirationof tenyearsfromthedateof grant(orfiveyears,in the caseof an incentivestockoptionissuedto a stockholderpossessingmorethan10% of thetotalcombinedvoting power of allclassesof stockof theCompany or any affiliate).Each equityaward agreementwillsetforththe numberof sharessubjectto eachoption.The purchasepriceof any sharesacquiredpursuantto an optionmaybe payablein cash,check,bank draft,moneyorder,netexerciseor as otherwisedeterminedby theboardand set forthin theaward agreement,includingthroughan irrevocablecommitmentby a brokerto pay oversuch amount froma saleof thesharesissuableundertheoptionand thedeliveryof previouslyowned shares.The vesting scheduleapplicableto any option,includingany performanceconditions,willbe as setforthin theequityaward agreement.
Stock Appreciation Rights. A SARisa rightthatentitlestheparticipantto receive,in cashor sharesof stockor a combinationthereof,as determinedby theboard,valueequalto or otherwisebasedon theexcessof (i)thefairmarketvalueof a specifiednumberof sharesatthetimeof exerciseover(ii)theexercisepriceof the right,as establishedby theboardon thedateof grant.Upon exercisinga SAR,theparticipantisentitledto receivetheamountby which thefairmarketvalueof thestockatthetimeof exerciseexceedstheexerciseprice of theSAR.The exercisepriceof eachSARmaynot be lessthanthefairmarketvalueof thestocksubjectto the equityaward on thedatetheSARisgranted,unlesstheSARwas grantedpursuantto an assumptionof or substitutionforanotheroptionin a mannersatisfyingtheprovisionsof Section409A of theCode. SARswillnot be exercisableaftertheexpirationof tenyearsfromthedateof grant.Each equityaward agreementwillsetforth thenumberof sharessubjectto theSAR.The vestingscheduleapplicableto any SAR,includingany performanceconditions,willbe as setforthin theequityaward agreement.
Provisions Applicable to Both Options and SARs
Transferability. The boardmay,in itssolediscretion,imposelimitationson thetransferabilityof options and SARs.Unlesstheboardprovidesotherwise,an optionor SARwillnot be transferableexceptby willor the laws of descentand distributionand willbe exercisableduringthelifetimeof a participantonly by such participant.The boardmaypermittransferof an optionor SARin a mannernot prohibitedby applicablelaw. Subjectto approvalby theboard,an optionor SARmaybe transferredpursuantto thetermsof a domestic relationsorderor similarinstrumentor pursuantto a beneficiarydesignation.An optionor SARmayalsobe transferredto certainfamilymembersor trustsin accordancewith theprovisionsof the2021 LTIP.
Termination of Service. Exceptas otherwiseprovidedin an applicableaward documentor other agreementbetweena participantand theCompany or any affiliate,upon a terminationforany reasonotherthan forcauseor due to deathor disability,a participantmayexercisehisor heroptionor SAR(totheextentsuch award was exercisableas of thedateof termination)fora periodof three(3)monthsfollowingthetermination dateor, ifearlier,untiltheexpirationof thetermof such equityaward. Upon a terminationdue to a participant’s disability,unlessotherwiseprovidedin an applicableaward or otheragreement,theparticipantmayexercisehis or heroptionor SAR(totheextentthatsuch equityaward was exercisableas of thedateof termination)fora periodof twelve(12)monthsfollowingtheterminationdateor, ifearlier,untiltheexpirationof thetermof such equityaward. Upon a terminationdue to a participant’sdeath,unlessotherwiseprovidedin an applicableaward or otheragreement,theparticipant’sestatemayexercisetheoptionor SAR(totheextentsuch award was exercisableas of theterminationdate)fora periodof twelve(12)monthsfollowingtheterminationdateor, if earlier,untiltheexpirationof thetermof such equityaward. Unlessprovidedotherwisein an equityaward or otheragreement,an optionor SARwillterminateon thedatethata participantisterminatedforcauseand the participantwillnot be permittedto exercisesuch equityaward.
Awards Other ThanOptions and SARs
Restricted Stock Awards and Restricted Stock Units. RSAsareawardsof shares,thegrant,issuance, retention,vestingand/ortransferabilityof which issubjectduringspecifiedperiodsof timeto such conditions (includingcontinuedemployment)and termsas theboarddeemsappropriate.RSUsareequityawards denominatedin unitsunderwhich theissuanceof shares(orcashpaymentin lieuthereof)issubjectto such conditions(includingcontinuedemployment)and termsas theboarddeemsappropriate.Each equityaward documentevidencinga grantof RSAsor RSUswillsetforththetermsand conditionsof eachequityaward, includingvestingand forfeitureprovisions,transferabilityand, ifapplicable,rightto receivedividendsor dividendequivalents.
Performance Stock Awards. A performancestockaward isan equityaward thatispayablecontingent upon theattainmentduringa performanceperiodof certainperformancegoals.A performancestockaward may, but need not, requirethecompletionof a specifiedperiodof service.The lengthof any performanceperiod,the applicableperformancegoals,and themeasurementof whetherand to what degreesuch performancegoalshave been attainedwillbe as determinedby thecompensationcommitteeor theboard.The compensationcommittee or theboardretainsthediscretionto reduceor eliminatethecompensationor economicbenefitupon the attainmentof any performancegoalsand to definethemannerof calculatingtheperformancecriteriaitselectsto use fora performanceperiod.
Certain Adjustments. In theeventof any changein thecapitalizationof theCompany, theboardwill appropriatelyand proportionatelyadjust:(i)theclass(es)and maximumnumberof securitiessubjectto the2021 LTIP; (ii)theclass(es)and maximumnumberof securitiesthatmaybe issuedpursuantto theexerciseof incentivestockoptions;and (iii)theclass(es)and numberof securitiesor otherpropertyand value(including pricepershareof stock)subjectto outstandingequityawards.The boardwillmakesuch adjustments,and its determinationwillbe final,binding,and conclusive.Unlessprovidedotherwisein an equityaward or other agreement,in theeventof a dissolutionor liquidationof theCompany, alloutstandingequityawards(otherthan equityawardsconsistingof vestedand outstandingsharesof Company commonstocknot subjectto a forfeiture conditionor theCompany’srightof repurchase)willterminateimmediatelypriorto thecompletionof such dissolutionor liquidation,and thesharesof commonstocksubjectto theCompany’srepurchaserightsor subject to forfeituremaybe repurchasedor reacquiredby theCompany notwithstandingthefactthattheholderof such equityaward isprovidingcontinuousservice;provided,however, thattheboardmay,in itssolediscretion, providethatsomeor allequityawardswillbecomefullyvested,exercisableand/orno longersubjectto repurchaseor forfeiture(totheextentnot alreadyexpiredor terminated)beforethedissolutionor liquidationis completedbut contingentupon itscompletion.
Change in Control. Unlessprovidedotherwisein an equityaward agreementor otheragreement betweenus or an affiliateand theparticipant,in theeventof Change in Control(asdefinedin the2021 LTIP), our boardof directorswilltakeone or moreof thefollowingactionswith respectto eachoutstandingequity award, contingentupon theclosingor completionof theChange in Control:
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Our board of directors need not take the same action or actions with respect to all equity awards or portions thereof or with respect to all participants and may take different actions with respect to the vested and unvested portions of an equity award. In the absence of any affirmative determination by our board of directors at the time of a Change in Control, each outstanding equity award will be assumed or an equivalent equity award will be substituted by such successor corporation or a parent or subsidiary of such successor corporation (“Successor Corporation”) unless the Successor Corporation does not agree to assume the equity award or to substitute an equivalent equity award, in which case the vesting of such equity award will accelerate in its entirety (along with, if applicable, the time at which the equity award may be exercised) to a date prior to the effective time of such Change in Control as our board of directors will determine (or, if our board of directors does not determine such a date, to the date that is five (5) days prior to the effective date of the Change in Control), with such award terminating if not exercised (if applicable) at or prior to the effective time of the Change in Control, and with such exercise reversed if the Change in Control does not become effective.
Acceleration of Equity Awards upon a Change in Control. An equityaward maybe subjectto additional accelerationof vestingand exercisabilityupon or aftera Change in Controlas maybe providedin theaward agreementforsuch award or as maybe providedin any otherwrittenagreementbetweenus or an affiliateand theparticipant,but in theabsenceof such provision,no such accelerationwilloccur.
Termination and Amendment. Our boardof directorsor thecompensationcommitteemaysuspendor terminatethe2021 LTIP atany time.No incentivestockoptionsmaybe grantedunderthe2021 LTIP afterthe tenthanniversaryof thedateour boardof directorsadoptedthe2021 LTIP. No equityawardsmaybe granted underthe2021 LTIP whilethe2021 LTIP issuspendedor afteritisterminated.
We filed with the SEC a registration statement on Form S-8 covering the Class A common stock issuable under the 2021 LTIP. Shortly thereafter, we made a grant of RSUs or other equity awards under the 2021 LTIP to our active employees. Because we value our culture, a significant component of which is our broad employee equity ownership, we believe this grant will further align the interests of our non-management employees with those of our stockholders.no later than 120 days after December 31, 2021.
Federal Income Tax Consequences Relating to Equity Awards Granted Pursuant to the 2021 LTIP
The following discussion addresses certain federal income tax consequences relating to equity awards that may be granted under the 2021 LTIP. This discussion does not cover federal employment tax or other federal tax consequences that may be associated with the 2021 LTIP, nor does it cover state, local or non-U.S. taxes.
IncentiveStockOptions(“ISOs”). Thereareno federalincometaxconsequenceswhen an ISO is granted.A participantwillalsogenerallynot recognizetaxableincomewhen an ISO isexercised,providedthat theparticipantwas our employeeduringtheentireperiodfromthedateof grantuntilthedatetheISO was exercised.IftheparticipantterminatesservicebeforeexercisingtheISO, theemploymentrequirementwillstill be metiftheISO isexercisedwithinthreemonthsof theparticipant’sterminationof employmentforreasons otherthandeathor disability,withinone yearof terminationof employmentdue to disability,or beforethe expirationof theISO in theeventof death.Upon a saleof theshares,theparticipantrealizesa long-termcapital gain(orloss),equalto thedifferencebetweenthesalespriceand theexercisepriceof theshares,ifhe or she sells thesharesatleasttwo yearsaftertheISO grantdateand has heldthesharesforatleastone year.Ifthe participantdisposesof thesharesbeforetheexpirationof theseperiods,thenhe or she recognizesordinary incomeatthetimeof thesale(orotherdisqualifyingdisposition)equalto thelesserof (i)thegainhe or she realizedon thesale,and (ii)thedifferencebetweentheexercisepriceand thefairmarketvalueof theshareson theexercisedate.We receivea correspondingtaxdeductionin thesameamountthattheparticipantrecognizesas income.Iftheemploymentrequirementdescribedabove isnot met,thetaxconsequencesrelatedto NQSOs, discussedbelow, willapply.
Nonqualified Stock Options (“NQSOs”). In general,a participanthas no taxableincomeatthetimea NQSOisgrantedbut realizesincomeatthetimehe or she exercisesa NQSO,in an amountequalto theexcessof thefairmarketvalueof thesharesatthetimeof exerciseovertheexerciseprice.We receivea correspondingtax deductionin thesameamountthattheparticipantrecognizesas income.Any gainor lossrecognizedupon a subsequentsaleor exchangeof thesharesisgenerallytreatedas capitalgainor lossforwhich we arenot entitled to a deduction.
SARs. A participanthas no taxableincomeatthetimea SARisgrantedbut realizesincomeatthetime he or she exercisesa SAR,in an amountequalto theexcessof thefairmarketvalueof thesharesatthetimeof exerciseoverthefairmarketvalueof theshareson thedateof grantto which theSARrelates.We receivea correspondingtaxdeductionin thesameamountthattheparticipantrecognizesas income.Ifa participant receivesshareswhen he or she exercisesa SAR,any gainor lossrecognizedupon a subsequentsaleor exchange of thesharesisgenerallytreatedas capitalgainor lossforwhich we arenot entitledto a deduction.
Restricted Stock Awards (including Performance Stock Awards). Unlessa participantmakesan election to acceleratetherecognitionof incometo thedateof grantas describedbelow, theparticipantwillnot recognize incomeatthetimean RSAisgranted.When therestrictionslapse,theparticipantwillrecognizeordinaryincome equalto thefairmarketvalueof thesharesas of thatdate,lessany amountpaidforthestock,and we willbe alloweda correspondingtaxdeductionatthattime.Iftheparticipanttimelyfilesan electionunderSection83(b) of theCode, theparticipantwillrecognizeordinaryincomeas of thedateof grantequalto thefairmarketvalue of thesharesas of thatdate,lessany amounttheparticipantpaidfortheshares,and we willbe alloweda correspondingtaxdeductionatthattime.Any gainor lossrecognizedupon a subsequentsaleor exchangeof the sharesisgenerallytreatedas capitalgainor lossforwhich we arenot entitledto a deduction.
Restricted Stock Units (including Performance Stock Units). A participantdoes not recognizeincomeat thetimea RSUisgranted.When sharesaredeliveredto a participantundera RSU,theparticipantwillrecognize ordinaryincomein an amountequalto thefairmarketvalueof theshareson thedateof delivery,and we willbe alloweda correspondingtaxdeductionatthattime.Any gainor lossrecognizedupon a subsequentsaleor exchangeof thesharesisgenerallytreatedas capitalgainor lossforwhich we arenot entitledto a deduction.
Dividend Equivalents. A participantrecognizesordinaryincomeon thedateon which dividend equivalentsarepaidand we areentitledto a correspondingdeductionatthattime.
Tax Withholding. When a participantrecognizesordinaryincomewith respectto exerciseof a stock optionor SAR,vestingof restrictedstock(orgrantingof such award, iftheparticipantmakesan 83(b)election), deliveryof sharesundera RSUaward, or upon thepaymentof dividendequivalents,federaltaxregulations requirethatwe collectincometaxesatwithholdingrates.
Code Section162(m) and 409A. Section162(m)of theCode deniesa federalincometaxdeductionfor certaincompensationin excessof $1,000,000 peryearpaidto certainexecutiveemployees.Section409A of the Code providesadditionaltaxrulesgoverningnonqualifieddeferredcompensation,which mayimposeadditional taxeson participantsforcertaintypesof nonqualifieddeferredcompensationthatisnot in compliancewith Section409A. The 2021 LTIP isdesignedto preventawardsfrombeingsubjectto therequirementsof Section409A.
Director Compensation
Our policy is to not pay director compensation to directors who are also our employees. We intend to establish compensation practices for our non-employee directors. Such compensation may be paid in the form of cash, equity or a combination of both. We may also pay additional fees to the chairs of each committee of the board of directors. All directors will be reimbursed for reasonable costs and expenses incurred in attending meetings of our board of directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table presents information concerningrequired by this item is incorporated by reference to the beneficial ownershipdefinitive Proxy Statement for our 2022 Annual Meeting of the shares of our Class A common stock and Class B common stock as of the date of this Annual Report by (1) each person known to us to beneficially own more than 5% of the outstanding shares of our Class A common stock or our Class B common stock, (2) each of our directors and named executive officers and (3) all of our directors and executive officers as a group.
The number of shares of Class A common stock listed in the table below represents shares of Class A common stock directly owned, and assumes no exchange of Class B units for Class A common stock. Each Class B stockholder is entitled to have their Class B units exchanged for Class A common stock on a one-for-one basis, or, at our election, for cash. In connectionStockholders, which will be filed with the IPO, we issued to each Class B stockholder one share of Class B common stock for each Class B unit it beneficially owns. As a result, the number of shares of Class B common stock listed in the first table below correlates to the number of Class B units each Class B stockholder beneficially owns.SEC no later than 120 days after December 31, 2021.
Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power over securities. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder. As of the date hereof, none of the stockholders listed below holds any options or warrants that are exercisable or exercisable within 60 days of the date of this Annual Report. The address of each individual or entity listed below is c/o Viant Technology Inc., 2722 Michelson Drive, Suite 100, Irvine, CA 92612.
|
| Class A Common Stock |
|
| Class B Common Stock |
|
| Total Voting Power |
| |||
Name of Beneficial Owner |
| Number |
|
| Number |
|
| % |
| |||
Named Executive Officers and Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
Tim Vanderhook(1) |
|
| — |
|
|
| 7,833,774 |
|
|
| 13.3 | % |
Chris Vanderhook(2) |
|
| — |
|
|
| 7,833,774 |
|
|
| 13.3 | % |
Larry Madden(3) |
|
| — |
|
|
| — |
|
|
| — |
|
Max Valdes |
|
| 750 |
|
|
| — |
|
|
| — |
|
Elizabeth Williams |
|
| 25,000 |
|
|
| — |
|
|
| — |
|
All executive officers and directors as a group (5 persons) |
|
| 25,750 |
|
|
| 15,667,548 |
|
|
| 26.6 | % |
Other 5% Beneficial Owners: |
|
|
|
|
|
|
|
|
|
|
|
|
Four Brothers 2 LLC(4) |
|
| — |
|
|
| 28,451,103 |
|
|
| 48.3 | % |
Viant Technology Equity Plan LLC |
|
| — |
|
|
| 3,316,908 |
|
|
| 5.6 | % |
|
|
|
|
|
|
|
|
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Other than compensation arrangements, including employment, termination of employment and change in control arrangements, with our directors and executive officers, including those discussed in the sections titled “Management” and “ExecutiveCompensation,” the followingThe information required by this item is a description of certain relationships and transactions since January 1, 2018, involving our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with them.
The following are summaries of certain provisions of our related party agreements, which are qualified in their entiretyincorporated by reference to allthe definitive Proxy Statement for our 2022 Annual Meeting of the provisions of such agreements. Because these descriptions are only summaries of the applicable agreements, they do not necessarily contain all of the information that you may find useful. We therefore encourage you to review the agreements in their entirety. Copies of the agreements (or forms of the agreements) have been filed as exhibits to the registration statement on Form S-1 (No. 333-252117), and are available electronically on the website of the SEC at www.sec.gov.
Tax Receivable Agreement
The members of Viant Technology LLC (not including Viant Technology Inc.) may exchange their Class B units for shares of Viant Technology Inc.’s Class A common stock on a one-for-one basis or, at our election, for cash. Any beneficial holder exchanging Class B units must ensure that the applicable corresponding number of shares of Class B common stock are delivered to us for cancellation as a condition of exercising its right to exchange Class B units for shares of our Class A common stock or, at our election, for cash. As a result of this initial purchase and any subsequent exchanges, we will become entitled to a proportionate share of the existing tax basis of the assets of Viant Technology LLC. In addition, Viant Technology LLC will have in effect an election under Section 754 of the Code for the taxable year of the offering and each taxable year in which an exchange occurs, which is expected to result in increases to the tax basis of the tangible and intangible assets of Viant Technology LLCStockholders, which will be allocated to Viant Technology Inc. These increases in tax basis are expected to increase Viant Technology Inc.’s depreciation and amortization deductions for tax purposes and create other tax benefits and may also decrease gains (or increase losses) on future dispositions of certain assets and therefore may reduce the amount of tax that Viant Technology Inc. would otherwise be required to pay.
Viant Technology Inc. entered into the Tax Receivable Agreement with Viant Technology LLC, continuing members of Viant Technology LLC and the TRA Representative on February 9, 2021. The Tax Receivable Agreement provides for payment by us to certain continuing members of Viant Technology LLC (not including Viant Technology Inc.) of 85% of the amount of the net cash tax savings, if any, that we realizes (or, under certain circumstances, are deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) Viant Technology Inc.’s acquisition of Viant Technology LLC units from pre-IPO members of Viant Technology LLC in connectionfiled with the IPO and in future exchanges and (ii) any payments we make under the Tax Receivable Agreement (including tax benefits related to imputed interest).
We will retain the benefit of the remaining 15% of these net cash tax savings. The obligations under the Tax Receivable Agreement are our obligations and not obligations of Viant Technology LLC. For purposes of the Tax Receivable Agreement, the benefit deemed realized by us will be computed by comparing our U.S. federal, state and local income tax liability to the amount of such U.S. federal, state and local taxes that we would have been required to pay had we not been able to utilize any of the benefits subject to the Tax Receivable Agreement. The actual tax benefits we realize may differ from tax benefits calculated under the Tax Receivable Agreement as a result of the use of certain assumptions in the Tax Receivable Agreement, including the use of an assumed weighted-average state and local income tax rate to calculate tax benefits. In addition, the Viant Technology LLC Agreement provides that Viant Technology LLC may elect to apply an allocation method with respect to certain of Viant Technology LLC investment assets that are held at the time of the closing of the IPO that is expected to result in the future, solely for tax purposes, in certain items of loss being specially allocated to us and corresponding items of gain being specially allocated to the other members of Viant Technology LLC.
The termof theTax ReceivableAgreementwillcontinueuntilalltaxbenefitsthataresubjectto theTax ReceivableAgreementhave been utilizedor have expired,unlessweexerciseourrightto terminatetheTax ReceivableAgreement(ortheTax ReceivableAgreementisterminateddue to a changein controlor our breachof a materialobligationthereunder), in which case,wewillbe requiredto maketheterminationpaymentspecifiedin theTax ReceivableAgreement,as specifiedbelow. We expectthatallof theintangibleassets,includinggoodwill,of ViantTechnologyLLCallocableto ViantTechnologyLLCunitsacquiredor deemedacquiredby usfromexistingmembersof ViantTechnologyLLCwillbe amortizablefortaxpurposes.
Estimating the amount and timing of payments that may be made under the Tax Receivable Agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors and future events. The actual increase in tax basis and utilization of tax attributes, as well as the amount and timing of any payments under the agreement, will vary depending upon a number of factors, including:
thetimingof purchasesor futureexchanges—forinstance,theincreasein any taxdeductionswill varydependingon thefairmarketvalue,which mayfluctuateovertime,of thedepreciableor amortizableassetsof ViantTechnologyLLCatthetimeof eachpurchaseof unitsfromthe continuingmembersof ViantTechnologyLLC;
thepriceof sharesof our ClassA commonstockatthetimeof thepurchaseor exchange—thetax basisincreasein theassetsof ViantTechnologyLLCisdirectlyrelatedto thepriceof sharesof our ClassA commonstockatthetimeof thepurchaseor exchange;
theextentto which such purchasesor exchangesaretaxable—iftheexchangeisnot taxableforany reason,increasedtaxdeductionswillnot be available;
theamountof theexchangingunitholder’staxbasisin itsunitsatthetimeof therelevantexchange;
theamount,timingand characterof ourincome—weexpectthattheTax ReceivableAgreementwillrequireViantTechnologyInc.to pay 85% of thenetcashtaxsavingsas and when deemedrealized.Ifwedo not have taxableincomeduringa taxable year,wegenerallywillnot be required(absenta changein controlor other circumstancesrequiringan earlyterminationpayment)to makepaymentsundertheTax Receivable AgreementforthattaxableyearbecauseSEC no benefitwillhave been realized.However, any tax benefitsthatdo not resultin netcashtaxsavingsin a giventaxyearmaygeneratetaxattributesthat maybe used to generatenetcashtaxsavingsin previousor futuretaxableyears.The use of any such taxattributeswillgeneratenetcashtaxsavingsthatwillresultin paymentsundertheTax ReceivableAgreement;and
U.S.federal,stateand localtaxratesin effectatthetimethatwe realizetherelevanttaxbenefits.
In addition, the amount of each continuing member’s tax basis in its Viant Technology LLC units at the time of the exchange, the depreciation and amortization periods that apply to the increases in tax basis, the timing and amount of any earlier payments that we may have made under the Tax Receivable Agreement and the portion of our payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis are also relevant factors.
Wehave therightto terminatetheTax ReceivableAgreement,in whole or in part,atany time.The Tax ReceivableAgreementprovidesthatif(i)weexercisesour rightto earlyterminationof theTax ReceivableAgreementin whole (thatis,with respectto allbenefitsdue to allbeneficiariesundertheTax ReceivableAgreement)or in part(thatis,with respectto somebenefitsdue to all beneficiariesundertheTax ReceivableAgreement),(ii)weexperiencecertainchangesin control,(iii)theTax ReceivableAgreementisrejectedin certainbankruptcyproceedings,(iv)wefail(subjectto certainexceptions)to makea paymentundertheTax ReceivableAgreementwithin180later than 120 days afterthedue dateor (v)wemateriallybreachourobligationsundertheTax Receivable Agreement,wewillbe obligatedto makean earlyterminationpaymentto thebeneficiaries undertheTax ReceivableAgreementequalto thepresentvalueof allpaymentsthatwould be requiredto be paid by usundertheTax ReceivableAgreement.The amountof such paymentswillbe determinedon thebasisof certainassumptionsin theTax ReceivableAgreement,including(i)theassumption thatwewould have enough taxableincometo fullyutilizethetaxbenefitresultingfromthe taxassetswhich arethesubjectof theTax ReceivableAgreement,(ii)theassumptionthatany itemof loss deductionor creditgeneratedby a basisadjustmentor imputedinterestarisingin a taxableyearprecedingthe taxableyearthatincludesan earlyterminationwillbe used by usratablyfromsuch taxable yearthroughtheearlierof (x)thescheduledexpirationof such taxitemor (y)15 years;(iii)theassumptionthat any non-amortizableassetsaredeemedto be disposedof in a fullytaxabletransactionon thefifteenth anniversaryof theearlierof thebasisadjustmentand theearlyterminationdate;(iv)theassumptionthatU.S. federal,stateand localtaxrateswillbe thesameas in effecton theearlyterminationdate,unlessscheduledto change;and (v)theassumptionthatany units(otherthanthoseheldby us)outstandingon theterminationdatearedeemedto be exchangedforan amountequalto themarketvalueof thecorresponding numberof sharesof ClassA commonstockon theterminationdate.The amountof theearlytermination paymentisdeterminedby discountingthepresentvalueof allpaymentsthatwould be requiredto be paidby usundertheTax ReceivableAgreementata rateequalto thelesserof (a)6.5% and (b)the SOFRplus400 basispoints. ThepaymentsthatwewillberequiredtomakeundertheTaxReceivableAgreementareexpectedtobe substantial. December 31, 2021.
See “RiskFactors—RisksRelatingto GovernmentalRegulationand Tax Matters—Incertain circumstances,paymentsunder theTax ReceivableAgreementmay be acceleratedand/orsignificantlyexceed theactualtaxbenefits,ifany, thatViantTechnologyInc.actuallyrealizes.”
Decisions made in the course of running our business, such as with respect to mergers and other forms of business combinations that constitute changes in control, may influence the timing and amount of payments we make under the Tax Receivable Agreement in a manner that does not correspond to our use of the corresponding tax benefits. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative effect on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control.
Payments are generally due under the Tax Receivable Agreement within a specified period of time following the filing of our tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of SOFR plus 300 basis points from the due date (without extensions) of such tax return. Late payments generally accrue interest at a rate of SOFR plus 500 basis points. Because of our structure, our ability to make payments under the Tax Receivable Agreement is dependent on the ability of Viant Technology LLC to make distributions to us. The ability of Viant Technology LLC to make such distributions will be subject to, among other things, restrictions in the agreements governing our debt. If we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid.
Additionally, we shall be required to indemnify and reimburse the TRA Representative for all costs and expenses, including legal and accounting fees and any other costs arising from claims in connection with the TRA Representative’s duties under the Tax Receivable Agreement, provided, the TRA Representative has acted reasonably and in good faith in incurring such expenses and costs.
PaymentsundertheTax ReceivableAgreementwillbe basedon thetaxreportingpositionsthatwe determine.Although we arenot awareof any materialissuethatwould causetheIRS to challengea taxbasis increase,ViantTechnologyInc.willnot, in theeventof a successfulchallenge,be reimbursedforany payments previouslymadeundertheTax ReceivableAgreement(althoughViantTechnologyInc.would reducefuture amountsotherwisepayableto a holderof rightsundertheTax ReceivableAgreementto theextentsuch holder has receivedexcesspayments).No assurancecan be giventhattheIRS willagreewith our taxreporting positions,includingtheallocationof valueamongour assets.In addition,therequiredfinaland binding determinationthata holderof rightsundertheTax ReceivableAgreementhas receivedexcesspaymentsmaynot be madefora numberof yearsfollowingcommencementof any challenge,and wewillnot be permittedto reduceourpaymentsundertheTax ReceivableAgreementuntiltherehas been a finaland binding determination,by which timesufficientsubsequentpaymentsundertheTax ReceivableAgreementmaynot be availableto offsetpriorpaymentsfordisallowedbenefits.As a result,in certaincircumstances,paymentscould be madeundertheTax ReceivableAgreementsignificantlyin excessof thebenefitthatwe actuallyrealizein respectof theincreasesin taxbasis(andutilizationof certainothertaxbenefits)resulting from (i)ouracquisitionof ViantTechnologyLLCunitsfromcontinuingmembersof Viant TechnologyLLCin futureexchangesand (ii)any paymentsViantTechnologyInc.makesundertheTax ReceivableAgreement.Wemaynot be ableto recoupthosepayments,which couldadversely affectourfinancialconditionand liquidity.
The obligation to make payments under the Tax Receivable Agreement generally will be senior to any similar obligation under any tax receivable agreement that may be entered into in the future. No holder of rights under the Tax Receivable Agreement (including the right to receive payments) may transfer its rights to another person without the written consent of Viant Technology Inc., except that all such rights may be transferred to another person to the extent that the corresponding Viant Technology LLC units are transferred in accordance with the Viant Technology LLC Agreement.
Viant Technology LLC Agreement
In connection with the IPO, the members of Viant Technology LLC amended and restated the Viant Technology LLC Agreement. In its capacity as the sole managing member, Viant Technology Inc. controls all of Viant Technology LLC’s business and affairs. We hold all of the Class A units of Viant Technology LLC. Holders of Class A units and Class B units are generally entitled to one vote per unit with respect to all matters as to which members are entitled to vote under the Viant Technology LLC Agreement. Class A units and Class B units will have the same economic rights per unit.
Any time we issue a share of Class A common stock for cash, the net proceeds we receive will be promptly used to acquire a Class A unit unless used to settle an exchange of a Class B unit for cash. Any time we issue a share of Class A common stock upon an exchange of a Class B unit or settles such an exchange for cash, as described below, we will contribute the exchanged unit to Viant Technology LLC and Viant Technology LLC will issue to Viant Technology Inc. a Class A unit. If we issue other classes or series of equity securities (other than pursuant to our incentive compensation plans), Viant Technology LLC will issue to Viant Technology Inc. an equal amount of equity securities of Viant Technology LLC with designations, preferences and other rights and terms that are substantially the same as Viant Technology Inc.’s newly issued equity securities. If at any time we issue a share of its Class A common stock pursuant to our 2021 LTIP or other equity plan, we will contribute to Viant Technology LLC all of the proceeds we receive (if any) and Viant Technology LLC will issue to Viant Technology Inc. an equal number of its Class A units, having the same restrictions, if any, as are attached to the shares of Class A common stock issued under the plan. If we repurchase, redeem or retire any shares of Class A common stock (or equity securities of other classes or series), Viant Technology LLC will, immediately prior to such repurchase, redemption or retirement, repurchase, redeem or retire an equal number of Class A units (or its equity securities of the corresponding classes or series) held by Viant Technology Inc., upon the same terms and for the same consideration, as the shares of our Class A common stock (or equity securities of such other classes or series) are repurchased, redeemed or retired. In addition, membership units of Viant Technology LLC, as well as our common stock, will be subject to equivalent stock splits, dividends, reclassifications and other subdivisions. In the event we acquire Class A units without issuing a corresponding number of shares of Class A common stock, we will make appropriate adjustments to the exchange ratio of Class B units to Class A common stock.
Wehave therightto determinewhen distributionswillbe madeto holdersof unitsand theamountof any such distributions,otherthanwith respectto taxdistributionsas describedbelow. If a distributionisauthorized,exceptas describedbelow, such distributionwillbe madeto theholdersof ClassA unitsand ClassB unitson a pro ratabasisin accordancewith thenumberof unitsheldby such holder.
The holders of units, including us, will incur U.S. federal, state and local income taxes on their proportionate share of any taxable income of Viant Technology LLC. Net profits and net losses of Viant Technology LLC will generally be allocated to holders of units (including Viant Technology Inc.) on a pro rata basis in accordance with the number of units held by such holder; however, under applicable tax rules, Viant Technology LLC will be required to allocate net taxable income disproportionately to its members in certain circumstances. The Viant Technology LLC Agreement will provide for quarterly cash distributions, which we refer to as “tax distributions,” to the holders of the units generally equal to the taxable income allocated to each holder of units (with certain adjustments) multiplied by an assumed tax rate. Generally, these tax distributions will be computed based on our estimate of the net taxable income of Viant Technology LLC allocable per unit (based on the member which is allocated the largest amount of taxable income on a per unit basis) multiplied by an assumed tax rate equal to the highest combined U.S. federal and applicable state and local tax rate applicable to any natural person residing in, or corporation doing business in Los Angeles, California that is taxable on that income (taking into account certain other assumptions, and subject to adjustment to the extent that state and local taxes are deductible for U.S. federal income tax purposes). The Viant Technology LLC Agreement will generally require tax distributions to be pro rata based on the ownership of Viant Technology LLC units, however, if the amount of tax distributions to be made exceeds the amount of funds available for distribution, Viant Technology Inc. shall receive a tax distribution calculated using the corporate tax rate, before the other members receive any distribution and the balance, if any, of funds available for distribution shall be distributed first to the other members pro rata in accordance with their assumed tax liabilities (also using the corporate tax rate), and then to all members (including Viant Technology Inc.) pro rata until each member receives the full amount of its tax distribution using the individual tax rate. Viant Technology LLC will also make non-pro rata payments to us to reimburse it for corporate and other overhead expenses (which payments from Viant Technology LLC will not be treated as distributions under the Viant Technology LLC Agreement). Notwithstanding the foregoing, no distribution will be made pursuant to the Viant Technology LLC Agreement to any unitholder if such distribution would violate applicable law or result in Viant Technology LLC or any of its subsidiaries being in default under any material agreement.
The Viant Technology LLC Agreement provides that Viant Technology LLC may elect to apply an allocation method with respect to certain of its investment assets that are held at the time of the IPO that is expected to result in the future, solely for tax purposes, in certain items of loss being specially allocated to us and corresponding items of gain being specially allocated to the other members of Viant Technology LLC. In conjunction herewith, the Tax Receivable Agreement provides that we will pay over to the certain other members of Viant Technology LLC 85% of the net tax savings to Viant Technology Inc. attributable to those tax losses.
The Viant Technology LLC Agreement provides that it may generally be amended, supplemented, waived or modified by us in our sole discretion without the approval of any other holder of units, except in the case of amendments that would modify the limited liability of a member or increase the obligation of a member to make capital contributions, adversely affect the right of a member to receive distributions or cause Viant Technology LLC to be treated as a corporation for tax purposes.
The Viant Technology LLC Agreement also entitles certain continuing members (and certain permitted transferees thereof) to exchange their Class B units together with an equal number of shares of Class B common stock, for shares of Class A common stock on a one-for-one basis or, at our election, for cash. The exchange ratio is subject to appropriate adjustment by us in the event Class A units are issued to us without issuance of a corresponding number of shares of Class A common stock or in the event of certain reclassifications, reorganizations, recapitalizations or similar transactions.
The Viant Technology LLC Agreement permits the Class B unitholders to exercise their exchange rights subject to certain reasonable timing procedures and other conditions. The Viant Technology LLC Agreement provides that an owner will not have the right to exchange Class B units if we determine that such exchange would be prohibited by law or regulation or would violate other agreements with the us, Viant Technology LLC or any of our subsidiaries to which the Viant Technology LLC unitholder is subject. We intend to impose additional restrictions on exchanges that we determine to be necessary or advisable so that Viant Technology LLC is not treated as a “publicly traded partnership” for U.S. federal income tax purposes.
The ViantTechnologyLLCAgreementalsoprovidesformandatoryexchangesundercertain circumstances,includingatouroption, ifthenumberof unitsoutstanding(otherthan thoseheldby us)islessthana minimumpercentageand in ourdiscretion,with theconsentof holdersof atleast50% of theoutstandingClassB units.
Any beneficial holder exchanging Class B units must ensure that the applicable corresponding number of shares of Class B common stock are delivered to us for retirement as a condition of exercising its right to exchange Class B units for shares of our Class A common stock, or, at our election, for cash.
Registration Rights Agreement
In connection with the IPO, we entered into the Registration Rights Agreement with the Vanderhook Parties and the Equity Plan LLC. This agreement provides these holders with certain registration rights whereby, at any time following the lockup period described in the S-1 filed in connection with our IPO, they will have the right to require us to register under the Securities Act the shares of Class A common stock issuable upon exchange of Class B units. The Registration Rights Agreement also provides for piggyback registration rights for the holders party thereto, subject to certain conditions and exceptions.
Limitations on Liability and Executive Officer and Director Indemnification Agreements
Our directors and officers will not be personally liable for our debts, obligations or liabilities, whether that liability or obligation arises in contract, tort or otherwise, solely by reason of being a director or an officer of us. In addition, our amended and restated bylaws require us to indemnify our executive officers and directors to the fullest extent permitted by law, subject to limited exceptions. We have entered into indemnification agreements with each of our executive officers and directors that provide, in general, that we will indemnify them to the fullest extent permitted by law in connection with their service to us or on our behalf.
Review and Approval of Related Person Transactions
We have implemented a written policy pursuant to which the audit committee will review and approve transactions with our directors, officers and holders of more than 5% of our voting securities and their affiliates. Prior to approving any transaction with a related party, the audit committee will consider the material facts as to the related party’s relationship with us or interest in the transaction. Related person transactions will not be approved unless the audit committee has approved of the transaction. We did not have a formal review and approval policy for related person transactions at the time of any transaction described above.
Director Independence
The board of directors has determined that Max Valdes and Elizabeth Williams are “independent directors” as such term is defined by the applicable rules and regulations of Nasdaq. As allowed under the applicable rules and regulations of the SEC and Nasdaq, we intend to appoint a third independent director within a year after the closing of our IPO.
Item 14. Principal AccountingAccountant Fees and Services.
The following table sets forthinformation required by this item is incorporated by reference to the aggregate feesdefinitive Proxy Statement for professional service provided by our independent registered public accounting firm, Deloitte& Touche LLP, for2022 Annual Meeting of Stockholders, which will be filed with the year endedSEC no later than 120 days after December 31, 2020:2021.
|
| (in thousands) |
| |
Audit Fees(1) |
| $ | 1,612 |
|
Audit-Related Fees |
|
| — |
|
Tax Fees(2) |
| 224 |
| |
All Other Fees |
|
| — |
|
Total |
| $ | 1,836 |
|
|
|
|
|
The audit committee has adopted a pre-approval policy under which the audit committee approves in advance all audit and permissible non-audit services to be performed by the independent accountants (subject to a de minimis exception). These services may include audit services, audit-related services, tax services, and other non-audit services. As part of its pre-approval policy, the audit committee considers whether the provision of any proposed non-audit services is consistent with the SEC’s rules on auditor independence. In accordance with its pre-approval policy, the audit committee has pre-approved certain specified audit and non-audit services to be provided by our independent auditor. If there are any additional services to be provided, a request for pre-approval must be submitted to the audit committee for its consideration under the policy. The audit committee generally pre-approves particular services or categories of services on a case-by-case basis. Finally, in accordance with the pre-approval policy, the audit committee has delegated pre-approval authority to the chair of the audit committee. The chair must report any pre-approval decisions to the audit committee at its next meeting.
Item 15. Exhibits and Financial Statement Schedules.
| (a) | The following documents are filed as a part of this |
| (1) | Financial Statements |
See Index to Consolidated Financial Statements at Part II, Item 8 “Financial Statements and Supplementary Data.”of this Annual Report.
| (2) | Financial Statement Schedules |
The financial statement schedules are omitted as they are either not applicable or the information required is presented in the financial statements and notes thereto under Part II, Item 8. “Financial Statements and Supplementary Data.”8 of this Annual Report.
| (3) | Exhibits: |
112
The documents listed in the following Exhibit Index of this Annual Report are incorporated by reference or are filed with this Annual Report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
Exhibit Index
Exhibit Number |
| Description |
|
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| ||
10.5+ | ||
10.6 |
| |
10.7 |
| |
10.8 |
|
113
10.9 |
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10.10 |
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10.11 |
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10.12+ | ||
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10.14 |
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10.16+ | ||
10.17+ | ||
10.18+ | ||
21.1 | ||
23.1* |
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31.2* |
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32.1*† |
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32.2*† |
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101.INS |
| Inline XBRL Instance Document |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document |
114
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
+Indicates management contract or compensatory plan, contract or arrangement.
†The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.
Item 16. Form 10-K SummarySummary.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrantregistrant has duly caused this Reportreport to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: March |
| By: | /s/ Tim Vanderhook |
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| Tim Vanderhook |
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| Chief Executive Officer and Chairman |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Reportreport has been signed below by the following persons on behalf of the Registrantregistrant in the capacities and on the dates indicated.
Name |
| Title |
| Date |
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/s/ Tim Vanderhook |
| Chief Executive Officer and Chairman (principal executive officer) |
| March |
Tim Vanderhook |
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/s/ Larry Madden |
| Chief Financial Officer (principal financial and accounting officer) |
| March |
Larry Madden |
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/s/ Chris Vanderhook |
| Chief Operating Officer and Director |
| March |
Chris Vanderhook |
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/s/ Max Valdes |
| Director |
| March |
Max Valdes |
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/s/ Elizabeth Williams |
| Director |
| March |
Elizabeth Williams | ||||
/s/ Vivian Yang | Director | March 10, 2022 | ||
Vivian Yang |
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135
116
