UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended June 30, 2021
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-40464
ZETA GLOBAL HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware | 80-0814458 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
3 Park Ave, 33
New York, NY10016
(Address of principal executive offices) (Zip Code)
(212) 967-5055
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A common stock, par value $0.001 per share | ZETA | The New York Stock Exchange |
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. ☐ 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(§ (§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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
Large-accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated | ☒ | Smaller reporting company | ☐ | |||
Emerging growth company | ☒ |
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 is a shell company (as defined in Rule
As of July 30, 2021, 152,291,88929, 2022, 171,331,580 shares of the registrant’s Class A common stock and 37,856,09534,706,964 shares of registrant’s Class B common stock were
ZETA GLOBAL HOLDINGS CORP.
Quarterly Report on Form
For the Quarterly Period Ended June 30, 2021
TABLE OF CONTENTS
Page | ||||||
Item 1. | 3 | |||||
1 | 3 | |||||
4 | ||||||
1 | 5 | |||||
1 | 7 | |||||
8 | ||||||
Item 2. | 23 | |||||
Item 3. | 35 | |||||
Item 4. | 36 | |||||
Item 1. | 37 | |||||
Item 1A. | 37 | |||||
Item 2. | 38 | |||||
Item 3. | 38 | |||||
Item 4. | 38 | |||||
Item 5. | 38 | |||||
Item 6. | 39 | |||||
40 |
i
CAUTIONARY NOTE REGARDING
This Quarterly Report on FormProspectus,Company’s Annual Report on Form 10-K for the year ended December 31, 2021, may materially affect such forward-looking statements:
You should not place undue reliance on our forward-looking statements and you should not rely on forward-looking statements as predictions of future events. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Quarterly Report on Form
Unless the context otherwise requires, references in this Form 10-Q to “Zeta,” “Zeta Global,” “we,” “us,” “our” or “the Company” refer to Zeta Global Holdings Corp.
1
WHERE YOU CAN FIND MORE INFORMATION
The Company maintains a website addressat the following address: https://zetaglobal.com. The information on the Company’s website is https://zetaglobal.com (“Corporate Website”). The contents of,not incorporated by reference in, or information accessible through, our Corporate Website are nototherwise to be regarded as part of, this Form 10-Q.
We make available on Form 10-Q, Current Reports on Form 8-Kor through our website certain reports and all amendments to those reports we file with or furnish to the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Exchange Act. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. We make this information available on our website free of charge on our Investor Website as soon as reasonably practicable after we electronically file such reportsthe information with, or furnish such reportsit to, the SEC.
Investors and others should note that we routinely announce material information aboutto investors and the Company including throughmarketplace using SEC filings, press releases, investor presentations, sustainability reports,public conference calls, webcasts, and notices of upcoming events.the Zeta Global Investor Relations website at https://investors.zetaglobal.com. We intend to utilize our Investors Websiteuse these channels as a channel of distribution to reach public investorswell as social media channels (e.g., the Zeta Facebook account (facebook.com/ZetaGlobal); the Zeta Instagram account (instagram.com/zetaglobal); the Zeta Twitter account (twitter.com/zetaglobal); and the Zeta LinkedIn account (linkedin.com/company/zetaglobal)) as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD.
2
PART I
Item 1. Financial Statements
Condensed Unaudited Consolidated Balance Sheets
(In thousands, except shares, per share and par values)
As of June 30, 2021 | As of December 31, 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 113,568 | $ | 50,725 | ||||
Accounts receivable, net of allowance of $2,066 and $2,207 as of June 30, 2021 and December 31, 2020, respectively | 72,044 | 79,366 | ||||||
Prepaid expenses | 2,662 | 3,903 | ||||||
Other current assets | 6,122 | 7,374 | ||||||
Total current assets | 194,396 | 141,368 | ||||||
Property and equipment, net | 5,738 | 6,117 | ||||||
Website and software development costs, net | 38,615 | 32,891 | ||||||
Intangible assets, net | 32,734 | 28,591 | ||||||
Goodwill | 81,924 | 76,432 | ||||||
Deferred tax assets, | 199 | 366 | ||||||
Other non-current assets | 905 | 521 | ||||||
Total non-current assets | 160,115 | 144,918 | ||||||
Total assets | $ | 354,511 | $ | 286,286 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY / (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 30,869 | $ | 40,976 | ||||
Accrued expenses | 48,867 | 44,622 | ||||||
Acquisition related liabilities | 6,275 | 6,018 | ||||||
Deferred revenue | 3,612 | 4,053 | ||||||
Other current liabilities | 7,356 | 8,310 | ||||||
Total current liabilities | 96,979 | 103,979 | ||||||
Non-current liabilities: | ||||||||
Long term borrowings | 183,443 | 189,693 | ||||||
Acquisition related liabilities | 18,446 | 17,137 | ||||||
Warrants and derivative liabilities | — | 58,100 | ||||||
Other non-current liabilities | 2,585 | 2,387 | ||||||
Total non-current liabilities | 204,474 | 267,317 | ||||||
Total liabilities | 301,453 | 371,296 | ||||||
Commitments and contingencies (Note 8 ) | 0 | 0 | ||||||
Mezzanine equity: | ||||||||
Redeemable convertible preferred stock $0.001 per share par value, up to shares issued and outstanding as60,137,979 shares authorized and 39,223,194 of December 31, 2020 | — | 154,210 | ||||||
Stockholders’ equity / (deficit): | ||||||||
Series A c ommon stock $0.001 per share value, up to 204,220,800 sharesauthorized, 112,012,693 shares 2020 | — | 112 | ||||||
Treasury c ommons tock, 8,195,464 shares repurchased at a weighted averageprice of $2.86 per share | (23,469) | (23,469) | ||||||
Series B c ommons tock $0.001 per share par value, up to 3,400,000 sharesauthorized, 3,054,318 shares issued and outstanding as of December 31, 2020 | — | 3 | ||||||
Class A common stock, par value $0.001 per share par value, up to 3,750,000,000 shares authorized and outstanding as of June 30, 2021 | 152 | — | ||||||
Class B common stock, par value $0.001, up to 50,000,000 shares authorized and 37,856,095 shares issued and outstanding as of June 30, 2021 | 38 | — | ||||||
Additional paid-in capital | 439,999 | 28,425 | ||||||
Accumulated deficit | (361,550) | (242,254) | ||||||
Accumulated other comprehensive loss | (2,112) | (2,037) | ||||||
Total stockholders’ equity / (deficit) | 53,058 | (239,220) | ||||||
Total liabilities and stockholders’ equity / (deficit) | $ | 354,511 | $ | 286,286 | ||||
|
| As of |
| |||||
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 110,779 |
|
| $ | 103,859 |
|
Accounts receivable, net of allowance of $1,654 and $1,295 as of June 30, 2022 and December 31, 2021, respectively |
|
| 89,541 |
|
|
| 83,578 |
|
Prepaid expenses |
|
| 6,482 |
|
|
| 6,970 |
|
Other current assets |
|
| 1,906 |
|
|
| 1,649 |
|
Total current assets |
|
| 208,708 |
|
|
| 196,056 |
|
Non-current assets: |
|
|
|
|
|
| ||
Property and equipment, net |
|
| 5,538 |
|
|
| 5,630 |
|
Website and software development costs, net |
|
| 37,031 |
|
|
| 38,038 |
|
Intangible assets, net |
|
| 47,808 |
|
|
| 40,963 |
|
Goodwill |
|
| 133,029 |
|
|
| 114,509 |
|
Deferred tax assets, net |
|
| 1,230 |
|
|
| 956 |
|
Other non-current assets |
|
| 2,472 |
|
|
| 1,113 |
|
Total non-current assets |
| $ | 227,108 |
|
| $ | 201,209 |
|
Total assets |
| $ | 435,816 |
|
| $ | 397,265 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 38,069 |
|
| $ | 21,711 |
|
Accrued expenses |
|
| 53,213 |
|
|
| 63,979 |
|
Acquisition related liabilities (current) |
|
| 20,533 |
|
|
| 8,042 |
|
Deferred revenue |
|
| 5,864 |
|
|
| 6,866 |
|
Other current liabilities |
|
| 6,871 |
|
|
| 5,159 |
|
Total current liabilities |
|
| 124,550 |
|
|
| 105,757 |
|
Non-current liabilities: |
|
|
|
|
|
| ||
Long term borrowings |
|
| 183,783 |
|
|
| 183,613 |
|
Acquisition related liabilities (non-current) |
|
| 18,280 |
|
|
| 14,915 |
|
Other non-current liabilities |
|
| 2,298 |
|
|
| 2,492 |
|
Total non-current liabilities |
|
| 204,361 |
|
|
| 201,020 |
|
Total liabilities |
| $ | 328,911 |
|
| $ | 306,777 |
|
Commitments and contingencies (See Note 8) |
|
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
|
|
| ||
Class A common stock $ 0.001 per share par value, up to 3,750,000,000 shares authorized, 170,511,917 and 159,974,847 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively |
|
| 170 |
|
|
| 160 |
|
Class B common stock $ 0.001 per share par value, up to 50,000,000 shares authorized, 35,069,052 and 37,856,095 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively |
|
| 35 |
|
|
| 38 |
|
Additional paid-in capital |
|
| 759,311 |
|
|
| 584,208 |
|
Accumulated deficit |
|
| (649,863 | ) |
|
| (491,817 | ) |
Accumulated other comprehensive loss |
|
| (2,748 | ) |
|
| (2,101 | ) |
Total stockholders' equity |
|
| 106,905 |
|
|
| 90,488 |
|
Total liabilities and stockholders' equity |
| $ | 435,816 |
|
| $ | 397,265 |
|
See accompanying notes to condensed unaudited consolidated financial statements.
3
Condensed Unaudited Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenues | $ | 106,896 | $ | 77,130 | $ | 208,359 | $ | 158,390 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues (excluding depreciation and amortization) (1) | 42,212 | 29,296 | 81,184 | 59,825 | ||||||||||||
General and administrative expenses (1) | 65,907 | 17,327 | 85,039 | 36,120 | ||||||||||||
Selling and marketing expenses (1) | 82,845 | 16,842 | 103,415 | 36,090 | ||||||||||||
Research and development expenses (1) | 26,503 | 8,161 | 36,287 | 16,884 | ||||||||||||
Depreciation and amortization | 11,235 | 10,497 | 21,352 | 20,038 | ||||||||||||
Acquisition related expenses | 329 | 1,156 | 1,036 | 3,091 | ||||||||||||
Restructuring expenses | 150 | 498 | 437 | 1,691 | ||||||||||||
Total operating expenses | 229,181 | 83,777 | 328,750 | 173,739 | ||||||||||||
Loss from operations | (122,285) | (6,647) | (120,391) | (15,349) | ||||||||||||
Interest expense | 1,402 | 4,382 | 4,363 | 8,725 | ||||||||||||
Other (income s ) / expenses, net | (749) | (471) | 535 | (358) | ||||||||||||
Gain on extinguishment of debt | (10,000) | — | (10,000) | — | ||||||||||||
Change in fair value of warrants and derivative liabilities | (18,600) | 4,100 | 5,000 | 6,700 | ||||||||||||
Total other (income s ) / expenses | (27,947) | 8,011 | (102) | 15,067 | ||||||||||||
Loss before income taxes | (94,338) | (14,658) | (120,289) | (30,416) | ||||||||||||
Income tax provision / (benefit) | 584 | 396 | (993) | 1,018 | ||||||||||||
Net loss | $ | (94,922) | $ | (15,054) | $ | (119,296) | $ | (31,434) | ||||||||
Other comprehensive loss: | ||||||||||||||||
Foreign currency translation adjustment | (129) | (47) | (75) | (788) | ||||||||||||
Total comprehensive loss | (95,051) | (15,101) | (119,371) | (32,222) | ||||||||||||
Net loss per share | ||||||||||||||||
Net loss | (94,922) | $ | (15,054) | $ | (119,296) | $ | (31,434) | |||||||||
Cumulative redeemable convertible preferred stock dividends | 3,166 | 3,716 | 7,060 | 7,376 | ||||||||||||
Net loss available to common stockholders | $ | (98,088) | $ | (18,770) | $ | (126,356) | $ | (38,810) | ||||||||
Basic loss per share | $ | (1.92) | $ | (0.58) | $ | (3.01) | $ | (1.19) | ||||||||
Diluted loss per share | $ | (1.92) | $ | (0.58) | $ | (3.01) | $ | (1.19) | ||||||||
Weighted average number of shares used to compute net loss per share | ||||||||||||||||
Basic | 51,202,335 | 32,362,610 | 41,973,595 | 32,607,382 | ||||||||||||
Diluted | 51,202,335 | 32,362,610 | 41,973,595 | 32,607,382 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Cost of revenues (excluding depreciation and amortization) | 266 | — | 266 | — | ||||||||||||
General and administrative expenses | 42,625 | 27 | 42,625 | 53 | ||||||||||||
Selling and marketing expenses | 59,512 | — | 59,512 | — | ||||||||||||
Research and development expenses | 16,867 | — | 16,867 | — | ||||||||||||
Tota | 119,270 | 27 | 119,270 | 53 | ||||||||||||
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenues |
| $ | 137,301 |
|
| $ | 106,896 |
|
| $ | 263,569 |
|
| $ | 208,359 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenues (excluding depreciation and amortization) |
|
| 50,233 |
|
|
| 42,212 |
|
|
| 91,958 |
|
|
| 81,184 |
|
General and administrative expenses |
|
| 55,665 |
|
|
| 65,907 |
|
|
| 109,014 |
|
|
| 85,039 |
|
Selling and marketing expenses |
|
| 77,139 |
|
|
| 82,845 |
|
|
| 146,057 |
|
|
| 103,415 |
|
Research and development expenses |
|
| 18,038 |
|
|
| 26,503 |
|
|
| 35,269 |
|
|
| 36,287 |
|
Depreciation and amortization |
|
| 13,315 |
|
|
| 11,235 |
|
|
| 26,081 |
|
|
| 21,352 |
|
Acquisition related expenses |
|
| - |
|
|
| 329 |
|
|
| 344 |
|
|
| 1,036 |
|
Restructuring expenses |
|
| - |
|
|
| 150 |
|
|
| - |
|
|
| 437 |
|
Total operating expenses |
| $ | 214,390 |
|
| $ | 229,181 |
|
| $ | 408,723 |
|
| $ | 328,750 |
|
Loss from operations |
|
| (77,089 | ) |
|
| (122,285 | ) |
|
| (145,154 | ) |
|
| (120,391 | ) |
Interest expense |
|
| 1,666 |
|
|
| 1,402 |
|
|
| 2,964 |
|
|
| 4,363 |
|
Other expenses / (income) |
|
| 5,696 |
|
|
| (749 | ) |
|
| 10,969 |
|
|
| 535 |
|
Gain on extinguishment of debt |
|
| - |
|
|
| (10,000 | ) |
|
| - |
|
|
| (10,000 | ) |
Change in fair value of warrants and derivative liabilities |
|
| 1,215 |
|
|
| (18,600 | ) |
|
| 1,215 |
|
|
| 5,000 |
|
Total other expenses / (income) |
| $ | 8,577 |
|
| $ | (27,947 | ) |
| $ | 15,148 |
|
| $ | (102 | ) |
Loss before income taxes |
|
| (85,666 | ) |
|
| (94,338 | ) |
|
| (160,302 | ) |
|
| (120,289 | ) |
Income tax provision / (benefit) |
|
| 343 |
|
| $ | 584 |
|
| $ | (2,256 | ) |
| $ | (993 | ) |
Net loss |
| $ | (86,009 | ) |
| $ | (94,922 | ) |
| $ | (158,046 | ) |
| $ | (119,296 | ) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation adjustment |
| $ | 403 |
|
| $ | 129 |
|
| $ | 647 |
|
| $ | 75 |
|
Total comprehensive loss |
| $ | (86,412 | ) |
| $ | (95,051 | ) |
| $ | (158,693 | ) |
| $ | (119,371 | ) |
Net loss |
| $ | (86,009 | ) |
| $ | (94,922 | ) |
| $ | (158,046 | ) |
| $ | (119,296 | ) |
Cumulative redeemable convertible preferred stock dividends |
|
| - |
|
|
| 3,166 |
|
|
| - |
|
|
| 7,060 |
|
Net loss available to common stockholders |
| $ | (86,009 | ) |
| $ | (98,088 | ) |
| $ | (158,046 | ) |
| $ | (126,356 | ) |
Basic loss per share |
| $ | (0.63 | ) |
| $ | (1.92 | ) |
| $ | (1.17 | ) |
| $ | (3.01 | ) |
Diluted loss per share |
| $ | (0.63 | ) |
| $ | (1.92 | ) |
| $ | (1.17 | ) |
| $ | (3.01 | ) |
Weighted average number of shares used to compute net loss per share |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 135,903,592 |
|
|
| 51,202,335 |
|
|
| 134,835,401 |
|
|
| 41,973,595 |
|
Diluted |
|
| 135,903,592 |
|
|
| 51,202,335 |
|
|
| 134,835,401 |
|
|
| 41,973,595 |
|
The Company recorded following stock-based compensation under respective lines of the above unaudited consolidated statements of operations and comprehensive loss:
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Cost of revenues (excluding depreciation and amortization) |
| $ | 1,738 |
|
| $ | 266 |
|
| $ | 2,900 |
|
| $ | 266 |
|
General and administrative expenses |
|
| 30,905 |
|
|
| 42,625 |
|
|
| 60,680 |
|
|
| 42,625 |
|
Selling and marketing expenses |
|
| 42,090 |
|
|
| 59,512 |
|
|
| 78,897 |
|
|
| 59,512 |
|
Research and development expenses |
|
| 7,602 |
|
|
| 16,867 |
|
|
| 13,594 |
|
|
| 16,867 |
|
Total |
| $ | 82,335 |
|
| $ | 119,270 |
|
| $ | 156,071 |
|
| $ | 119,270 |
|
See accompanying notes to condensed unaudited consolidated financial statements.
4
Condensed Unaudited Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity / (Deficit)
(In thousands, except shares)
Series A | Series B | Class A | Class B | Accumulated Other Comprehensive Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable Convertible Preferred Stock | Common Stock | Common Stock | Common Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2021 | 39,223,194 | $ | 154,210 | 112,012,693 | $ | 112 | 3,054,318 | $ | 3 | — | $ | — | — | $ | — | (8,195,464) | $ | (23,469) | $ | 28,425 | $ | (242,254) | $ | (2,037) | $ | (239,220) | ||||||||||||||||||||||||||||||||||||||
Shares issued in connection with acquisition | — | — | 613,497 | 1 | — | — | — | — | — | — | — | — | 5,453 | — | — | 5,454 | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock grants | — | — | 3,687,431 | 4 | — | — | — | — | — | — | — | — | (4) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures | — | — | (1,629,369) | (2) | — | — | — | — | — | — | — | — | 2 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock cancelation | — | — | (17,853,416) | (18) | — | — | — | — | — | — | — | — | 18 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 54 | 54 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | — | — | (24,374) | — | (24,374) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2021 | 39,223,194 | $ | 154,210 | 96,830,836 | $ | 97 | 3,054,318 | $ | 3 | — | $ | — | — | $ | — | (8,195,464) | $ | (23,469) | $ | 33,894 | $ | (266,628) | $ | (1,983) | $ | (258,086) | ||||||||||||||||||||||||||||||||||||||
Conversion of Series A and Series B common shares into Class A and Class B common shares, respectively | — | — | (96,830,836) | (97) | (3,054,318) | (3) | 60,421,367 | 60 | 39,463,787 | 39 | — | — | 1 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of redeemable convertible preferred stock to Class A Common Stock | (39,223,194) | (154,210) | — | — | — | — | 73,813,713 | 74 | — | — | — | — | 193,136 | — | — | 193,210 | ||||||||||||||||||||||||||||||||||||||||||||||||
Warrants exercised | — | — | — | — | — | — | 8,360,331 | 8 | — | — | — | — | 24,132 | — | — | 24,140 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued in connection with the Initial Public Offering | — | — | — | — | — | — | 14,773,939 | 15 | — | — | — | — | 147,724 | — | — | 147,739 | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity issuance cost | — | — | — | — | — | — | — | — | — | — | — | — | (21,201) | — | — | (21,201) | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares repurchased | — | — | — | — | — | — | (4,138,866) | (4) | (2,307,692) | (2) | — | — | (64,462) | — | — | (64,468) | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock grants | — | — | — | — | — | — | 1,155,598 | 1 | 700,000 | 1 | — | — | (2) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures | — | — | — | — | — | — | (2,334,753) | (2) | — | — | — | — | 2 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock units vesting | — | — | — | — | — | — | 219,072 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | 126,775 | — | — | 126,775 | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | — | — | — | (129) | (129) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | — | — | (94,922) | — | (94,922) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2021 | — | $ | — | — | $ | — | $ | — | $ | — | 152,270,401 | $ | 152 | 37,856,095 | $ | 38 | (8,195,464) | $ | (23,469) | $ | 439,999 | $ | (361,550) | $ | (2,112 ) | $ | 53,058 | |||||||||||||||||||||||||||||||||||||
|
| Class A common stock |
| Class B common stock |
|
|
|
|
|
|
|
| ||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Additional Paid-in Capital |
| Accumulated Deficit |
| Accumulated Other Comprehensive Loss |
| Total |
Balance as of January 1, 20221 |
| 159,974,847 |
| $160 |
| 37,856,095 |
| $38 |
| $584,208 |
| $(491,817) |
| $(2,101) |
| $90,488 |
Shares issued in connection with certain agreements |
| 1,026,785 |
| 1 |
| - |
| — |
| 11,082 |
| - |
| - |
| 11,083 |
Restricted stock grants |
| 4,162,159 |
| 4 |
| — |
| — |
| (4) |
| - |
| - |
| - |
Restricted stock forfeitures |
| (717,505) |
| (1) |
| — |
| — |
| 1 |
| - |
| - |
| - |
Class B common stock transferred to Class A common stock |
| 1,000,000 |
| 1 |
| (1,000,000) |
| (1) |
| - |
| - |
| - |
| - |
Stock-based compensation |
| — |
| — |
| — |
| — |
| 74,990 |
| - |
| - |
| 74,990 |
Options exercised |
| 15,500 |
| — |
| — |
| — |
| 65 |
| - |
| - |
| 65 |
Foreign currency translation adjustment |
| — |
| — |
| — |
| — |
| - |
| - |
| (244) |
| (244) |
Net loss |
| — |
| — |
| — |
| — |
| - |
| (72,037) |
| - |
| (72,037) |
Balance as of March 31, 20222 |
| 165,461,786 |
| $165 |
| 36,856,095 |
| $37 |
| $670,342 |
| $(563,854) |
| $(2,345) |
| $104,345 |
Shares issued in connection with certain agreements |
| 434,237 |
| — |
| — |
| — |
| 3,853 |
| - |
| - |
| 3,853 |
Restricted stock grants |
| 2,568,346 |
| 3 |
| — |
| — |
| (3) |
| - |
| - |
| - |
Restricted stock forfeitures |
| (184,342) |
| — |
| — |
| — |
| - |
| - |
| - |
| - |
Class B common stock transferred to Class A common stock |
| 1,787,043 |
| 2 |
| (1,787,043) |
| (2) |
| - |
| - |
| - |
| - |
Stock-based compensation |
| — |
| — |
| — |
| — |
| 83,734 |
| - |
| - |
| 83,734 |
Options exercised |
| 221,530 |
| — |
| — |
| — |
| 65 |
| - |
| - |
| 65 |
Foreign currency translation adjustment |
| — |
| — |
| — |
| — |
| - |
| - |
| (403) |
| (403) |
Restricted stock units vesting |
| 26,932 |
| — |
| — |
| — |
| - |
| - |
| - |
| - |
Shares issued with connection with employee stock purchase plan |
| 196,385 |
| — |
| — |
| — |
| 1,320 |
| - |
| - |
| 1,320 |
Net loss |
| — |
| — |
| — |
| — |
| - |
| (86,009) |
| - |
| (86,009) |
Balance as of June 30, 20223 |
| 170,511,917 |
| $170 |
| 35,069,052 |
| $35 |
| $759,311 |
| $(649,863) |
| $(2,748) |
| $106,905 |
1. Includes 115,456,543 outstanding Class A common stock, 18,419,260 outstanding Class B common stock, 44,518,304 unvested Class A restricted stock and 19,436,835 unvested Class B restricted stock.
2. Includes 117,498,828 outstanding Class A common stock, 17,419,260 outstanding Class B common stock, 47,962,958 unvested Class A restricted stock and 19,436,835 unvested Class B restricted stock.
3. Includes 122,895,336 outstanding Class A common stock, 15,807,217 outstanding Class B common stock, 47,616,581 unvested Class A restricted stock and 19,261,835 unvested Class B restricted stock.
5
Series A | Series B | Class A | Class B | Accumulated Other Comprehensive Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable Convertible Preferred Stock | Common Stock | Common Stock | Common Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2020 | 39,223,194 | 154,210 | 99,339,942 | $ | 99 | 3,054,318 | $ | 3 | — | $ | — | — | $ | — | (8,195,464) | $ | (23,469) | $ | 27,909 | $ | (189,029 | ) | $ | (1,847) | $ | (186,334) | ||||||||||||||||||||||||||||||||||||||
Shares issued in connection with an agreement | — | — | 154,560 | — | — | — | — | — | — | — | — | — | 423 | — | — | 423 | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock grants | — | — | 3,975,634 | 4 | — | — | — | — | — | — | — | — | (4) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures | — | — | (997,094) | (1) | — | — | — | — | — | — | — | — | 1 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | 26 | — | — | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | — | — | — | (741) | (741) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | — | — | (16,380) | — | (16,380) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2020 | 39,223,194 | $ | 154,210 | 102,473,042 | $ | 102 | 3,054,318 | $ | 3 | — | $ | — | — | $ | — | (8,195,464) | $ | (23,469) | $ | 28,355 | $ | (205,409) | $ | (2,588) | $ | (203,006) | ||||||||||||||||||||||||||||||||||||||
Restricted stock grants | — | — | 1,148,962 | 1 | — | — | — | — | — | — | — | — | (1) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock forfeitures | — | — | (383,695) | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | 27 | — | — | 27 | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | — | — | — | (47) | (47) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | — | — | (15,054) | — | (15,054) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2020 | 39,223,194 | 154,210 | 103,238,309 | $ | 103 | 3,054,318 | 3 | — | $ | — | — | $ | — | (8,195,464) | $ | (23,469) | $ | 28,381 | $ | (220,463) | $ | (2,635) | $ | (218,080) | ||||||||||||||||||||||||||||||||||||||||
|
| Redeemable Convertible Preferred Stock |
| Series A common stock |
| Series B common stock |
| Class A common stock |
| Class B common stock |
|
|
|
|
|
|
| ||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount | Additional Paid-in Capital |
| Accumulated Deficit |
| Accumulated Other Comprehensive Loss |
| Total |
Balance as of January 1, 2021 |
| 39,223,194 |
| $154,210 |
| 112,012,693 |
| $112 |
| 3,054,318 |
| $3 |
| — |
| — |
| — |
| — | $4,956 |
| $(242,254) |
| $(2,037) |
| $(239,220) |
Restricted stock cancelation |
| — |
| — |
| (17,853,416) |
| (18) |
| — |
| — |
| — |
| — |
| — |
| — | 18 |
| — |
| — |
| — |
Shares issued in connection with certain agreements |
| — |
| — |
| 613,497 |
| 1 |
| — |
| — |
| — |
| — |
| — |
| — | 5,453 |
| — |
| — |
| 5,454 |
Restricted stock grants |
| — |
| — |
| 3,687,431 |
| 4 |
| — |
| — |
| — |
| — |
| — |
| — | (4) |
| — |
| — |
| — |
Restricted stock forfeitures |
| — |
| — |
| (1,629,369) |
| (2) |
| — |
| — |
| — |
| — |
| — |
| — | 2 |
| — |
| — |
| — |
Foreign currency translation adjustment |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | — |
| — |
| 54 |
| 54 |
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | — |
| (24,374) |
| — |
| (24,374) |
Balance as of March 31, 2021 |
| 39,223,194 |
| $154,210 |
| 96,830,836 |
| $97 |
| 3,054,318 |
| $3 |
| — |
| $— |
| — |
| $— | $10,425 |
| $(266,628) |
| $(1,983) |
| $(258,086) |
Conversion of Series A and Series B common shares into Class A and Class B common shares, respectively |
| — |
| — |
| (96,830,836) |
| (97) |
| (3,054,318) |
| (3) |
| 60,421,367 |
| 60 |
| 39,463,787 |
| 39 | 1 |
| — |
| — |
| — |
Conversion of convertible preferred stock to Class A common stock |
| (39,223,194) |
| (154,210) |
| — |
| — |
| — |
| — |
| 73,813,713 |
| 74 |
| — |
| — | 193,136 |
| — |
| — |
| 193,210 |
Warrant Exercise |
| — |
| — |
| — |
| — |
| — |
| — |
| 8,360,331 |
| 8 |
| — |
| — | 24,132 |
| — |
| — |
| 24,140 |
Shares issued in connection with the Initial Public Offering |
| — |
| — |
| — |
| — |
| — |
| — |
| 14,773,939 |
| 15 |
| — |
| — | 147,724 |
| — |
| — |
| 147,739 |
Equity issuance cost |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | (21,201) |
| — |
| — |
| (21,201) |
Shares repurchased |
| — |
| — |
| — |
| — |
| — |
| — |
| (4,138,866) |
| (4) |
| (2,307,692) |
| (2) | (64,462) |
| — |
| — |
| (64,468) |
Restricted stock grants |
| — |
| — |
| — |
| — |
| — |
| — |
| 1,155,598 |
| 1 |
| 700,000 |
| 1 | (2) |
| — |
| — |
| — |
Restricted stock forfeitures |
| — |
| — |
| — |
| — |
| — |
| — |
| (2,334,753) |
| (2) |
| — |
| — | 2 |
| — |
| — |
| — |
Restricted stock units vesting |
| — |
| — |
| — |
| — |
| — |
| — |
| 219,072 |
| — |
| — |
| — | — |
| — |
| — |
| — |
Stock based compensation |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | 126,775 |
| — |
| — |
| 126,775 |
Foreign currency translation adjustment |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | — |
| — |
| (129) |
| (129) |
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | — |
| (94,922) |
| — |
| (94,922) |
Balance as of June 30, 2021 |
| — |
| $— |
| — |
| $— |
| — |
| $— |
| 152,270,401 |
| $152 |
| 37,856,095 |
| $38 | $416,530 |
| $(361,550) |
| $(2,112) |
| $53,058 |
See accompanying notes to condensed unaudited consolidated financial statements.
6
Condensed Unaudited Consolidated Statements of Cash Flows
(In thousands)
Six months ended June 30, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (119,296) | $ | (31,434) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortizatio n | 21,352 | 20,038 | ||||||
Stock-based compensation | 119,270 | 53 | ||||||
Deferred income taxes | (1,641) | 290 | ||||||
Change in fair value of warrant and derivative liabilities | 5,000 | 6,700 | ||||||
Gain on extinguishment of debt | (10,000) | — | ||||||
Others, net | 1,067 | 1,843 | ||||||
Changes in non-cash working capital (net of acquisitions): | ||||||||
Account receivable | 8,165 | 32,478 | ||||||
Prepaid expenses | 1,241 | 641 | ||||||
Other current assets | 1,252 | 1,025 | ||||||
Other non-current assets | (384) | 266 | ||||||
Deferred revenue | (440) | 446 | ||||||
Accounts payable | (14,083) | 8,324 | ||||||
Accrued expenses and other current liabilities | 1,502 | (31,503) | ||||||
Other non-current liabilities | 198 | 504 | ||||||
Net cash provided by operating activities | 13,203 | 9,671 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (4,381) | (1,024) | ||||||
Website and software development costs | (9,529) | (11,738) | ||||||
Business and asset acquisitions, net of cash acquired | (2,159) | — | ||||||
Net cash used for investing activities | (16,069) | (12,762) | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from initial public offering, net of issuance costs | 127,363 | — | ||||||
Cash paid for acquisition related liabilities | (64) | (496) | ||||||
Proceeds from term loan, net of issuance cost | 183,311 | — | ||||||
Proceeds from paycheck protection program loan | — | 10,000 | ||||||
Repurchase of restricted stock | (64,130) | — | ||||||
Exercise of warrants | 41 | — | ||||||
Repayments against the credit facilities | (180,745) | (3,500) | ||||||
Net cash provided by financing activities | 65,776 | 6,004 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (67) | (49) | ||||||
Net increase in cash and cash equivalents and restricted cash | 62,843 | 2,864 | ||||||
Cash and cash equivalents and restricted cash, beginning of period | 50,725 | 37,818 | ||||||
Cash and cash equivalents and restricted cash, end of period | $ | 113,568 | $ | 40,682 | ||||
Supplemental cash flow disclosures including non-cash activities: | ||||||||
Cash paid for interest | $ | 4,377 | 6,990 | |||||
Cash paid for income taxes, net | $ | 941 | $ | 672 | ||||
Contingent consideration liability established in connection with acquisitions | $ | 1,630 | $ | — | ||||
Shares issued in connection with acquisitions and other agreements | $ | 5,454 | $ | 423 | ||||
Dividends on redeemable convertible preferred stock settled in Company’s equity | $ | 60,082 | $ | — | ||||
Non-cash settlement of warrants and derivative liabilities | $ | 63,100 | $ | — | ||||
Capitalized stock-based compensation expense as website and software development costs | $ | 7,505 | $ | — |
|
| Six months ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (158,046 | ) |
| $ | (119,296 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 26,081 |
|
|
| 21,352 |
|
Stock-based compensation |
|
| 156,071 |
|
|
| 119,270 |
|
Gain on debt extinguishment |
|
| - |
|
|
| (10,000 | ) |
Deferred income taxes |
|
| (3,090 | ) |
|
| (1,641 | ) |
Change in fair value of warrant and derivative liabilities |
|
| 1,215 |
|
|
| 5,000 |
|
Others, net |
|
| 11,365 |
|
|
| 1,067 |
|
Change in non-cash working capital (net of acquisitions): |
|
|
|
|
|
| ||
Accounts receivable |
|
| (4,740 | ) |
|
| 8,165 |
|
Prepaid expenses |
|
| 524 |
|
|
| 1,241 |
|
Other current assets |
|
| 271 |
|
|
| 1,252 |
|
Other non-current assets |
|
| (703 | ) |
|
| (384 | ) |
Deferred revenue |
|
| (1,016 | ) |
|
| (440 | ) |
Accounts payable |
|
| 18,703 |
|
|
| (14,083 | ) |
Accrued expenses and other current liabilities |
|
| (10,591 | ) |
|
| 1,502 |
|
Other non-current liabilities |
|
| (194 | ) |
|
| 198 |
|
Net cash provided by operating activities |
|
| 35,850 |
|
|
| 13,203 |
|
Cash flows from investing activities: |
|
|
|
|
|
| ||
Capital expenditures |
|
| (11,511 | ) |
|
| (4,381 | ) |
Website and software development costs |
|
| (8,586 | ) |
|
| (9,529 | ) |
Business acquisitions, net of cash acquired |
|
| (9,157 | ) |
|
| (2,159 | ) |
Net cash used for investing activities |
|
| (29,254 | ) |
|
| (16,069 | ) |
Cash flows from financing activities: |
|
|
|
|
|
| ||
Cash paid for acquisition-related liabilities |
|
| (1,292 | ) |
|
| (64 | ) |
Proceeds from credit facilities, net of issuance costs |
|
| 5,625 |
|
|
| 183,311 |
|
Proceeds from IPO, net of issuance cost |
|
| - |
|
|
| 127,363 |
|
Repurchase of RSAs and RSUs |
|
| - |
|
|
| (64,130 | ) |
Issuance under employee stock purchase plan |
|
| 1,320 |
|
|
| - |
|
Exercise of options |
|
| 130 |
|
|
| 41 |
|
Repayments against the credit facilities |
|
| (5,625 | ) |
|
| (180,745 | ) |
Net cash provided by financing activities |
|
| 158 |
|
|
| 65,776 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
| 166 |
|
|
| (67 | ) |
Net increase in cash and cash equivalents |
|
| 6,920 |
|
|
| 62,843 |
|
Cash and cash equivalents, beginning of period |
|
| 103,859 |
|
|
| 50,725 |
|
Cash and cash equivalents, end of period |
| $ | 110,779 |
|
| $ | 113,568 |
|
Supplemental cash flow disclosures including non-cash activities: |
|
|
|
|
|
| ||
Cash paid for interest |
| $ | 2,486 |
|
| $ | 4,377 |
|
Cash paid for income taxes, net |
| $ | 480 |
|
| $ | 941 |
|
Liability established in connection with acquisitions |
| $ | 18,334 |
|
| $ | 1,630 |
|
Capitalized stock-based compensation as website and software development costs |
| $ | 2,653 |
|
| $ | 7,505 |
|
Shares issued in connection with acquisitions and other agreements |
| $ | 14,936 |
|
| $ | 5,454 |
|
Dividends on redeemable convertible preferred stock settled in Company’s equity |
| $ | - |
|
| $ | 60,082 |
|
Non-cash settlement of warrants and derivative liabilities |
| $ | - |
|
| $ | 63,100 |
|
Non-cash consideration for website and software development costs |
| $ | 632 |
|
| $ | 689 |
|
See accompanying notes to condensed unaudited consolidated financial statements.
7
Notes to Condensed Unaudited Consolidated Financial Statements
(In thousands, except share and per share amounts)
1.Organization and Background
(a)Nature of Business
Zeta Global Holdings Corp., a Delaware Corporation (“Zeta("Zeta" or “Zeta Global Holdings”), and Zeta Global Corp., a Delaware Corporation and the operating company of (“Zeta Global Holdings and a Delaware Corporation (“Zeta”Global” individually, or collectively with Zeta Global Holdings Corp. and its consolidated entities, as context dictates, the “Company”), is a marketing technology company that combinesuses proprietary data, artificial intelligence and software to create a technology platform that enables marketers to acquire, retain and grow customer relationships. The Company’s technology platform powersTV (“CTV”).TV. Zeta Global was
(b)Initial Public Offering (“IPO”)
On June 9, 2021, the Company’s registration statement on
(c)Reorganization Transactions
In connection with the IPO, the Company completed the following transactions (“Reorganization Transactions”):
The number of shares outstanding as of June 30,14, 2021 was
8
•
2.Basis of Presentation and Summary of Significant Accounting Policies
(a)Principles of Consolidation
The accompanying condensed unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by20202021 consolidated financial statements data included herein was derived from audited financial statements but does not include all disclosures required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying condensed unaudited consolidated financial statements contain all adjustments, consisting of items of a normal and recurring nature, necessary to present fairly the Company’s financial position as of June 30, 2021,2022, the results of operations, comprehensive income/(loss),loss and stockholders’ equity for the three-month and six-month periods ended June 30, 2022 and 2021, respectively, and cash flows for the three-month andperiods period ended June 30, 2022 and 2021, and 2020.respectively. The results of operations for the three-month and six-month periods ended June 30, 2022 and 2021, and 2020respectively are not necessarily indicative of the results to be expected for the full year. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities, and related disclosures, as of the date of the financial statements, and the amounts of revenues and expenses reported during the period. Actual results could differ from estimates. The accompanying condensed unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended December 31, 2020,2021, which arewas included in Zeta Global Holdings’ final prospectus dated June 9, 2021 andForm 10-K filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on June 14, 2021 (the “Prospectus”).
The accompanying condensed unaudited consolidated financial statements include the accounts of Zeta and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
The Company’s management considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements (See Note 16 to the condensed unaudited consolidated financial statements below).
(b)Revenue Recognition
Revenue arises primarily from the Company’s technology platform via subscription fees,
Revenues are recognized when control of these services is transferred to the customers, in an amount that reflects the consideration we expectthat is expected to be entitled to inan exchange for thosethe services. Sales and other taxes collected by the Company concurrentin concurrence with
The Company enters into certain contracts with its vendors that involve both the purchase and sale of services with a single counterparty. The Company assesses each contract to determine if the revenue and expense should be presented gross or net. The Company recognizes revenue for these contracts to the extent that a standalone selling price is established for distinct services provided.
Contract assets and liabilities
Contract assets represent revenue
Contract liabilities consists of deferred
9
Remaining Performance Obligations
Transaction price allocated to the remaining performance obligations represents contracted revenues that have not yet been recognized, which includes unearned revenues and unbilled amounts that will be recognized as revenues in future periods. Transaction price allocated to the remaining performance obligations is influenced by several factors, including seasonality, the timing of renewals, average contract terms and foreign currency exchange rates. Unbilled portions of the remaining performance obligations are subject to future economic risks including bankruptcies, regulatory changes and other market factors.
The Company excludes amounts related to performance obligations that are billed and recognized as the services are provided. This primarily consists of professional services contracts that are on a
As of June 30, 2022, the Company's remaining performance obligation for the next twelve months and thereafter was $13,418 and $20,128, respectively.
Disaggregation of revenues from contract with customers
The Company reports disaggregation of revenues based on primary geographical markets and delivery channels / platforms. Revenues by delivery channels / platforms are based on whether the customer requirements necessitate integration with platforms or delivery channels not owned by the Company. When the Company generates revenues entirely through the Company platform, the Company considers it to be Direct Platform Revenue.
The following table summarizes disaggregation for the three and six months ended June 30, 2022 and 2021, and June 30, 2020.respectively.
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Direct platform revenues |
|
| 81 | % |
|
| 77 | % |
|
| 81 | % |
|
| 76 | % |
Integrated platform revenues |
|
| 19 | % |
|
| 23 | % |
|
| 19 | % |
|
| 24 | % |
Six months ended | ||||||||
June 30, 2021 | June 30, 2020 | |||||||
Direct platform revenues | $ | 157,556 | $ | 117,243 | ||||
Integrated platform revenues | 50,803 | 41,147 | ||||||
Total revenues | $ | 208,359 | $ | 158,390 | ||||
Refer to the Company’s accounting policy on “Segments” below for more information about disaggregation based on primary geographical markets.
(c)Stock-based compensation and other stock-based payments:
The measurement of share-basedstock-based compensation expense for all stock-based payment awards, including restricted stock, performance stock units (“PSUs”), shares purchased under its employee stock purchase plan and stock options granted to the employee,employees, consultants or advisors and
The Company accounts for all stock options and restricted shares granted prior to the IPO using a fair value-based method. The fair value of each stock option granted to employees is estimated on the date of the grant using the Black-Scholes-Merton option pricing model, and the related stock-based compensation expense is recognized over the expected life of the option. The fair value of the restricted shares granted post-IPO is based on the Company’s closing stock price as of the day prior to the date of the grants. The Company accounts for the forfeitures, as they occur.
The Company has issued PSUs to certain employees during the six months ended June 30, 2022 and during the year ended December 31, 2021. The Company also adopted an ESPP plan during the year ended December 31, 2021 (Refer to "Note 9. Stock-Based Compensation"). The fair value of PSU awards was determined using the Monte Carlo simulation method and for the ESPP plan using the Black-Scholes-Merton model, by a third-party valuation firm engaged by the Company. The Company recognizes the stock-based compensation expense.related to these plans on a straight-line basis over the vesting terms associated with these plans.
10
(d)Segments
The Company operates
Revenues by geographical region consisted of the following;
Six months ended June 30 | ||||||||
2021 | 2020 | |||||||
US | $ | 193,514 | $ | 146,551 | ||||
International | 14,845 | 11,839 | ||||||
Total revenues | $ | 208,359 | $ | 158,390 | ||||
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
US |
| $ | 131,942 |
|
| $ | 100,262 |
|
| $ | 251,930 |
|
| $ | 193,514 |
|
International |
|
| 5,359 |
|
|
| 6,634 |
|
|
| 11,639 |
|
|
| 14,845 |
|
Total revenues |
| $ | 137,301 |
|
| $ | 106,896 |
|
| $ | 263,569 |
|
| $ | 208,359 |
|
Total
|
| As of |
| |||||
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
US |
| $ | 41,708 |
|
| $ | 43,023 |
|
International |
|
| 861 |
|
|
| 645 |
|
Total long-lived assets |
| $ | 42,569 |
|
| $ | 43,668 |
|
As of | ||||||||
June 30, 2021 | December 31, 2020 | |||||||
US | $ | 43,692 | $ | 38,413 | ||||
International | 661 | 595 | ||||||
Total long-lived assets | $ | 44,353 | $ | 39,008 | ||||
(e)Concentration of Credit Risk
No customer accounted for more than 10%10% of the Company’s total revenues during the periodsix months ended June 30, 20212022 and year ended December 31, 2020.
Financial instruments
New accounting pronouncements
Recently adopted:
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)- Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). This amendment provides that for an entity that presents earnings per share (EPS) in accordance with Topic 260, the effects of a modification or an exchange of a freestanding equity-classified written call option that is recognized as a dividend should be an adjustment to net income (or net loss) in the basic EPS calculation. These amendments also require that an entity apply the guidance in Subtopic 470-50 to a modification or an exchange of a freestanding equity-classified written call option that is a part of or directly related to a modification or an exchange of an existing debt. An entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services in accordance with the guidance in Topic 718, Compensation—Stock Compensation. This update was effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted ASU 2021-04 on January 01, 2022. The adoption of this customer,standard did not have any material impact on the Company's condensed unaudited consolidated financial statements.
Not yet adopted:
InFebruary 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” (“ASU 2016-02”). The standard establishes a ROU model that requires a lessee to recognize a right of use (“ROU”) asset and a lease liability on the balance sheet for all leases with a term longer than 12 months (based on the practical expedient provided in the ASU that allows 12 months or less not to be presented on the balance sheet) and requires the disclosure of key information about leasing arrangements. Leases are classified as finance or operating, with classification affecting the subsequent expense pattern and presentation of expense recognition in the
11
income statement. Subsequently, the FASB issued the following standards related to ASU 2016-02: ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842”, ASU 2018-10, “Codification Improvements to Topic 842, Leases”, ASU 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”), ASU 2018-20, “Narrow-Scope Improvements for Lessors” and ASU 2019-01, “Leases (Topic 842): Codification Improvements”, which provided additional guidance and clarity to ASU 2016-02 (collectively, the “Lease Standard”). In 2021, the FASB further released ASU No. 2021-05, Leases (Topic 842) – Lessors – Certain Leases with Variable Lease Payments (“ASU 2021-05”), ASU No. 2021-09, Leased (Topic 842)- Discount Rate for Lessees That Are Not Public Business Entities (“non-PBE”) (“ASU 2021-09”). As per ASU 2020-05, issued by FASB, the new guidance is applicable to a non-PBE from fiscal year beginning after December 15, 2021 and interim periods beginning after December 15, 2022. As of December 31, 2021, the Company holds emerging growth company status, as such it is permitted to use non-PBE adoption of ASC 842 and therefore will present the impact of the new guidance in its annual statement as of December 31, 2022 and interim statements thereafter. The Company does not expect adoption of this new guidance to have a material impact on its results of operations, financial condition, and financial statement disclosures.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which was subsequently amended in November 2018 through ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses.” ASU No. 2016-13 will require entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financing receivables, debt securities and other instruments, which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for losses for receivables that are current with respect to their payment terms. ASU No. 2018-19 further clarifies that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment from receivables of operating leases should be accounted for in accordance with Topic 842, Leases. As per the latest ASU 2020-02, FASB deferred the timelines for certain small public and private entities, thus the new guidance will be adopted by the Company for the annual reporting period beginning January 1, 2023, including interim periods within that annual reporting period. The standard will apply as a cumulative-effect adjustment to retained earnings as of the year endedbeginning of the first reporting period in which the guidance is adopted. The Company does not expect adoption of this new guidance to have a material impact on its results of operations, financial condition, and financial statement disclosures.
In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01 Reference Rate Reform (Topic 848) (“ASU 2021-01)”. The amendments in this update clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU may be applied through December 31, 2020 no provision was warranted or recorded.
In October 2021, the FASB released ASU No.2021-08, Business Combinations (Topic 805)- Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require that an entity (acquirer) recognize, and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and require application of the new accounting guidance at the beginning of the earliest comparative period presented in the year of adoption, however early adoption is permitted. The Company does not expect adoption of this new guidance to have a material impact on its results of operations, financial condition, and financial statement disclosures.
3.Intangible Assets
The details of intangible assets and related accumulated amortization are set forth below:
|
| As of June 30, 2022 |
|
| As of December 31, 2021 |
| ||||||||||||||||||
|
| Gross |
|
| Accumulated |
|
| Net |
|
| Gross |
|
| Accumulated |
|
| Net |
| ||||||
Data supply relationships |
| $ | 17,032 |
|
| $ | 4,369 |
|
| $ | 12,663 |
|
| $ | 8,750 |
|
| $ | 1,875 |
|
| $ | 6,875 |
|
Tradenames |
|
| 2,720 |
|
|
| 2,433 |
|
|
| 287 |
|
|
| 2,720 |
|
|
| 2,171 |
|
|
| 549 |
|
Completed technologies |
|
| 28,792 |
|
|
| 20,203 |
|
|
| 8,589 |
|
|
| 23,092 |
|
|
| 17,568 |
|
|
| 5,524 |
|
Customer relationships |
|
| 71,099 |
|
|
| 44,830 |
|
|
| 26,269 |
|
|
| 65,999 |
|
|
| 37,984 |
|
|
| 28,015 |
|
Total intangible assets |
| $ | 119,643 |
|
| $ | 71,835 |
|
| $ | 47,808 |
|
| $ | 100,561 |
|
| $ | 59,598 |
|
| $ | 40,963 |
|
12
As of June 30, 2021 | As of December 31, 2020 | |||||||||||||||||||||||
Gross value | Accumulated amortization | Net value | Gross value | Accumulated amortization | Net value | |||||||||||||||||||
Publisher and data supply relationships | $ | 6,250 | $ | 521 | $ | 5,729 | $ | — | $ | — | $ | — | ||||||||||||
Tradenames | 2,720 | 1,909 | 811 | 2,720 | 1,634 | 1,086 | ||||||||||||||||||
Completed technologies | 20,292 | 15,270 | 5,022 | 20,292 | 13,037 | 7,255 | ||||||||||||||||||
Customer relationships | 52,159 | 30,987 | 21,172 | 45,239 | 24,989 | 20,250 | ||||||||||||||||||
Total Intangible Assets | $ | 81,421 | $ | 48,687 | $ | 32,734 | $ | 68,251 | $ | 39,660 | $ | 28,591 | ||||||||||||
Weighted average useful
|
| As of June 30, 2022 |
| |
Year ended December 31, |
|
|
| |
Remaining six months of 2022 |
| $ | 10,696 |
|
2023 |
|
| 14,347 |
|
2024 |
|
| 9,885 |
|
2025 |
|
| 4,919 |
|
2026 |
|
| 4,161 |
|
2027 and thereafter |
|
| 3,800 |
|
Total |
| $ | 47,808 |
|
4.Goodwill
As of June 30, 2021 | ||||
Year ended December 31, | ||||
Remaining six months of 2021 | $ | 9,796 | ||
2022 | 14,915 | |||
2023 | 5,623 | |||
2024 | 1,793 | |||
2025 | 482 | |||
2026 and thereafter | 125 | |||
Total | $ | 32,734 | ||
Following is a summary of the carrying value of goodwill:
Balance as of January 1, 2022 |
| $ | 114,509 |
|
Acquisition of ArcaMax |
|
| 18,548 |
|
Foreign currency translation |
|
| (28 | ) |
Balance as of June 30, 2022 |
| $ | 133,029 |
|
Balance as of January 1, 2021 | $ | 76,432 | ||
Acquisition of Vital | 3,910 | |||
Acquisition of Kinetic | 1,578 | |||
Foreign currency translation | 4 | |||
Balance as of June 30, 2021 | $ | 81,924 | ||
There were no events during the three months ended June 30, 20212022 to which an impairment analysis would be warranted.
5.Acquisitions
The Company’s acquisitions have been accounted for underCompany uses the purchase method of accounting. Theaccounting in accordance with ASC 805, Business Combinations. This standard requires that the total purchase pricecost of eachan acquisition wasbe allocated to the fair value oftangible and intangible assets acquired and liabilities assumed based on theirthe fair valuesvalue of the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates and assumptions used in assessing fair value are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with any excessthe corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as goodwill. of the acquisition date. Acquisition-related expenses are expensed when incurred.
The Company agreedmay also agree to pay a portion of the purchase price for certain acquisitions in the form of contingent purchase price,consideration, the unpaid amounts of these liabilities are included in the acquisition relatedacquisition-related liabilities on the condensed unaudited consolidated balance sheets as of June 30, 20212022 and December 31, 2020.
(a) ArcaMax Publishing, Inc. (ArcaMax)
On
13
Prior to the acquisition, ArcaMax was a leader in the development and distribution of more than 400 interest-based newsletters to consumers in the United States, distributing news and syndicating features to a growing opted-in subscriber audience of four million readers. Therefore, the Company paid a premium to acquire ArcaMax assets, which is represented as Goodwill in the above purchase price allocation. The Company incurred $344 as acquisition-related expenses related to this acquisition.
Goodwill acquired by the Company in its ArcaMax acquisition is not deductible for tax purposes.
(b) Apptness Media Group, LLC (“Apptness”):
On September 30, 2021, the Company entered into an asset purchase agreement with the sellers of Apptness to acquire its data platform business and hiring certain employees of Apptness who are engaged in the data platform business. This agreement was effective October 1, 2021. Since the assets acquired under the agreement with Apptness meets the definition of a business under ASC 805, Business Combinations, the Company concluded that it represents an acquisition of a business. The Company paid cash consideration of $17,934, issued 3,924,914 Class A common stock with a fair value of $23,000 and agreed to pay certain earn-outs valued at $7,748 based on the operating performance of the acquired business after the closing date and the Company shall pay such earn-out for a period of three years from the acquisition date in cash and in shares of the Company, and $1,396 in cash holdback. During the year ended December 31, 2021, the Company finalized the purchase price allocation for its Apptness acquisition. Accordingly, the Company recognized $13,530 as customer relationships intangibles, $2,740 as developed technology, $60 as database, $31,765 as goodwill and $1,983 as other net tangible assets associated with this acquisition. The Company amortizes the intangible assets over the weighted average life of 6.31 years.
Prior to the acquisition, Apptness operated a digital survey platform that provides comprehensive capabilities to engage consumers on sites across the open web, deliver proprietary insights and audiences to marketers, and providing publishers with new monetization opportunities. Therefore, the Company paid a premium to acquire Apptness assets, which is represented as Goodwill in the above purchase price allocation. The Company incurred $153 as acquisition-related expenses related to this acquisition
Goodwill acquired by the Company in its Apptness acquisition is deductible for tax purposes.
(c) Vital Digital, Corp (“Vital”):
On March 3, 2021, the Company entered into a stock purchase agreement with the sellers of Vital Digital, Corp (“Vital”) to purchase all of the issued and outstanding shares of common stock of Vital. The fair value of the purchase consideration for this transaction is determined as $8,950, with $3,400 in cash, 306,748 shares of Series A common stock with a fair value of $2,710, $2,262 in earnouts based on the operating performance of the acquired business after the closing date, and $578 in cash holdback. During the year ended December 31, 2021, the Company finalized the purchase price allocation for its Vital acquisition. Accordingly, the Company has recognized $5,630 as customer relationship intangibles, $4,736 as goodwill, $1,465 as deferred tax liability and $49 as other net assets associated with this acquisition. The Company amortizes the customer relationship over 3 years.
Prior to the acquisition, Vital delivered data-driven marketing solutions that were complementary to the Company’s business, and therefore the Company paid a premium to acquire Vital assets, which is represented as Goodwill in the above purchase price allocation.
Goodwill acquired by the Company in its Vital acquisition is not deductible for tax purposes.
(d) Kinetic Data Solutions, LLC (“Kinetic”):
On March 1, 2021Agreementagreement with the sellers ofprofitsoperating performance of the acquired business and the Company shall pay10% of such profitsearn-out for a period of three years from the acquisition date in cash and in restricted shares of the Company. TheDuring the year ended December 31, 2021, the Company has recorded this transaction based onfinalized the preliminary purchase price allocation.allocation for its Kinetic acquisition. Accordingly, the Company recognized $1,578416
Prior to the acquisition, Kinetic was engaged in the business of marketing solutions focused on homeowners. Kinetic had homeowner data that the Company entered intointegrated with its proprietary data to enhance its business and therefore paid a Stock Purchase Agreement withpremium to acquire Kinetic assets, which is represented as Goodwill in the sellers of Vital Digital, Corp (“Vital”) to purchase all of the issued and outstanding shares of common stock of Vital. The fair value of the purchase consideration for this transaction is determined as $7,894, with $3,400 in cash, 306,748 shares of Series A common stock with a fair value of $2,710, $1,206 in earnouts based on the operating performance of the acquired business after the closing date, and $578 in cash holdback. The Company has recorded this transaction based on the preliminaryabove purchase price allocation. Accordingly, the Company has recognized $5,320 as customer relationship intangibles, $3,910 as goodwill, $1,385 as deferred tax liability and $49 as other net assets associated with this acquisition. Caivis, one of the Company’s related parties, owned 5% interest in Vital as of the effective date of this stock purchase agreement (Refer to Note 13 for a description of relationshipwithCaivis).
Goodwill acquired by the Company in these acquisitionsits Kinetic acquisition is not deductible for tax purposes.
14
The following is a summary of
|
| eBay CRM |
|
| Sizmek |
|
| IgnitionOne |
|
| Kinetic |
|
| Vital |
|
| Apptness |
|
| ArcaMax |
|
| Total |
| ||||||||
Balance as of January 1, 2022 |
| $ | 8,000 |
|
| $ | 1,927 |
|
| $ | 1,360 |
|
| $ | 24 |
|
| $ | 2,840 |
|
| $ | 8,806 |
|
| $ | - |
|
| $ | 22,957 |
|
Additions |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7,539 |
|
|
| 7,539 |
|
Payments made during the period |
|
| - |
|
|
| (2,168 | ) |
|
| - |
|
|
| (205 | ) |
|
| (105 | ) |
|
| - |
|
|
| - |
|
|
| (2,478 | ) |
Change in fair value of earn-out |
|
| - |
|
|
| 241 |
|
|
| - |
|
|
| 791 |
|
|
| 337 |
|
|
| 8,160 |
|
|
| 1,266 |
|
|
| 10,795 |
|
Balance as of June 30, 2022 |
| $ | 8,000 |
|
| $ | - |
|
| $ | 1,360 |
|
| $ | 610 |
|
| $ | 3,072 |
|
| $ | 16,966 |
|
| $ | 8,805 |
|
| $ | 38,813 |
|
eBay CRM | Sizmek | PlaceIQ | Ignition One | Kinetic | Vital | Total | ||||||||||||||||||||||
Balance as of January 1, 2021 | $ | 17,137 | $ | 4,402 | $ | 256 | $ | 1,360 | $ | — | $ | — | $ | 23,155 | ||||||||||||||
Additions | — | — | — | — | 24 | 1,784 | 1,808 | |||||||||||||||||||||
Payments made during the year | — | — | (64) | — | — | — | (64) | |||||||||||||||||||||
Change in fair value of earn-out | — | 14 | (192) | — | — | — | (178) | |||||||||||||||||||||
Balance as of June 30, 2021 | $ | 17,137 | $ | 4,416 | $ | — | $ | 1,360 | $ | 24 | $ | 1,784 | $ | 24,721 | ||||||||||||||
The changes in the fair value of the acquisition related liabilities are included in other income / (expenses)expenses on the condensed unaudited consolidated statements of operations and comprehensive loss.
The Company is a party to a
On March 10, 2022, the Company entered into a settlement agreement with the sellers of Sizmek to resolve the dispute related to the contingent purchase consideration payable in connection with the Sizmek acquisition made during the year ended December 31, 2019. As such, the Company paid $1,085 in cash and issued 100,000shares of Class A common stock valued at $1,083, during the six months ended June 30, 2021.
7.Credit Facilities
The Company’s
|
| As of June 30, 2022 |
|
| As of December 31, 2021 |
| ||
Credit facility |
| $ | 185,000 |
|
| $ | 185,000 |
|
Less: |
|
|
|
|
|
| ||
Unamortized deferred financing cost |
|
| (1,217 | ) |
|
| (1,387 | ) |
Long-term borrowings |
| $ | 183,783 |
|
| $ | 183,613 |
|
Credit facility | $ | 185,000 | $ | 137,950 | ||||
Loan under paycheck protection program | — | 10,000 | ||||||
Revolving loan | — | 42,600 | ||||||
Total borrowings | 185,000 | 190,550 | ||||||
Less: | ||||||||
Unamortized discount on debt | — | (426) | ||||||
Unamortized deferred financing cost | (1,557) | (431) | ||||||
Long term borrowings | $ | 183,443 | $ | 189,693 | ||||
On February 3, 2021, the
Interest on the current outstanding
The Senior Secured Credit Facility contains certain financial maintenance covenants including consolidated net leverage ratio and consolidated fixed charge coverage ratio. In addition, this agreement contains restrictive covenants that may limit the Company’s ability to, among other things, acquire equity interestinterests of the Company from its shareholders,stockholders, repurchase / retire any of the
15
Company’s securities, and pay dividends or distribute excess cash flow. Additionally, the Company is required to submit periodic financial covenant letters that would include current net leverage ratio and fixed charge coverage ratio, among others. As of June 30, 2021,2022, the applicable total leverage ratio and fixed charge coverage ratio was
As of the new credit facility and the June 30, 2021 is minimal2022, the repayment schedule for the long-term borrowings was as follows:
|
| As of June 30, 2022 |
| |
Year ended December 31, |
|
|
| |
Remaining six months of 2022 |
| $ | 0 |
|
2023 |
|
| 11,250 |
|
2024 |
|
| 11,250 |
|
2025 |
|
| 16,875 |
|
2026 |
|
| 145,625 |
|
Total* |
| $ | 185,000 |
|
*Includes $5,625 repayable against the term loan facility within the twelve-month period ending June 30, 2023. The Company intends to draw against the available revolving facility to pay off term loan installments and therefore the interest ratestotal borrowings are included in “Long-term borrowings” on the Company’s new credit facility approximates the current market rates, the fair value of the debt is approximately equal to the carrying amountcondensed unaudited consolidated balance sheets as of June 30, 2021.
8.Commitments and due April 24, 2022 (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Company evaluated the applicable accounting guidance relative to the PPP Loan and accounted for the proceeds of the PPP Loan as debt under ASC 470. On June 10, 2021 the Small Business Administration (“SBA”) approved the forgiveness for the full amount of the PPP Loan which included principal of $10,000.Contingencies
(a)Purchase obligations
The Company entered intonon-cancelable
|
| As of June 30, 2022 |
| |
Year Ended December 31, |
|
|
| |
Remaining six months of 2022 |
| $ | 16,724 |
|
2023 |
|
| 34,172 |
|
2024 |
|
| 27,730 |
|
2025 |
|
| 5,790 |
|
2026 |
|
| 1,425 |
|
Total |
| $ | 85,841 |
|
(b)Lease commitments
The Company maintains leased offices
|
| As of June 30, 2022 |
| |
Year Ended December 31, |
|
|
| |
Remaining six months of 2022 |
| $ | 1,663 |
|
2023 |
|
| 2,400 |
|
2024 |
|
| 2,062 |
|
2025 |
|
| 1,854 |
|
2026 |
|
| 1,680 |
|
2027 and thereafter |
|
| 3,484 |
|
Total |
| $ | 13,143 |
|
As of June 30, 2021 | ||||
Year Ended December 31, | ||||
Remaining six months of 2021 | $ | 1,815 | ||
2022 | 2,455 | |||
2023 | 2,030 | |||
2024 | 1,883 | |||
2025 | 1,790 | |||
2026 and thereafter | 5,062 | |||
Total | $ | 15,035 | ||
(c)Other contingencies
The Company is a party to various litigationlitigations and administrative proceedings related to claims arising from its operations in the ordinary course of business including in relation to certain contingent purchase price obligations noted above. The Company records provisions for losses when claims become probable, and the amounts are estimative.estimable. Although the outcome of these matters
16
cannot be predicted with certainty, the Company’s management believes that the resolution of the matters will not have a material impacteffect on the Company’s business, results of operations, financial condition, or cash flows.
9.Stock-Based Compensation
Stock-based
In 2008, the Company adopted its 2008 Stock Option/Stock Issuance Plan and, in 2017, the Company adopted the Zeta Global Holdings Corp. 2017 Incentive Plan (collectively, the “Plans”).
The Plans permitpermitted the issuance of stock options, restricted stock and restricted stock units to employees, directors and officers, consultants or advisors andThePrior to the IPO, the restricted stock and restricted stock units granted under the Plans generally did not vest until a change in control, which generally does not include an initial public offering.control. Upon a change in control, restricted stock and restricted stock units vest as
In the past, the Company has canceledcancelled certain restricted stock and in lieu ofconnection with such cancellation has issued restricted stock units to the holders for thoseof that restricted stock, with the same vesting conditions as the cancelled restricted stock.
Restricted Stock and Restricted Stock Units
As noted above, the Company’s restricted stock and restricted stock units granted prior to the IPO did not vest until thea change of control. On March 24, 2021, the Company’s board of directors approved a modification in the vesting terms of its restricted stock and restricted stock unit awards. Pursuant to that approval, the existing restricted stock and restricted stock units were divided into three broad categories with different vesting conditions as follows:
The restricted stock or restricted stock units that arewere tendered by the holders in thethe first category ofcertain restricted stock and restricted stock units were liability classified and as such the expense related to these grants has been recognized based on the settlement price as of the date of IPO. In connection with the other two categories of holders, the Company will recognize compensation expense over the modified vesting terms, based on the fair value as of the date of modification. The portion of the awards subject to future service would remain classified as equity awards and expense would be recognized over the remaining future service period.
During the six months ended June 30, 2022, the Company's board of directors approved the modification of the vesting schedule of certain awards granted prior to the IPO. The modification will have an impact of accelerating the vesting of those grants such that certain grants that were scheduled to cliff vest in September and December of 2022, will now vest from July to December of 2022 in equal monthly instalments. The modification was accounted for in accordance with ASC 718-20-35-3. The impact of such modification did not have any material impact on the stock-based compensation during the six months ended June 30, 2022.
The following is the activity of restricted stock and restricted stock units granted by the Company:
|
| Shares |
|
| Weighted Average |
| ||
Non-vested as of January 1, 2022 |
|
| 65,208,870 |
|
| $ | 10.86 |
|
Granted (1) |
|
| 6,901,773 |
|
|
| 10.57 |
|
Vested |
|
| (2,932,313 | ) |
|
| 11.12 |
|
Forfeited (2) |
|
| (960,790 | ) |
|
| 10.60 |
|
Non-vested as of June 30, 2022 (3) |
|
| 68,217,540 |
|
| $ | 10.82 |
|
Shares | Weighted Average Grant Date Fair Value | |||||||
Nonvested as of January 1, 2021 | 85,903,970 | $ | 2.80 | |||||
Granted (1) | 5,737,678 | 10.10 | ||||||
Vested | (9,274,893) | 11.04 | ||||||
Forfeited (2) | (3,979,021) | 9.12 | ||||||
Canceled (3) | (16,655,197) | 3.60 | ||||||
Modified | (68,986,297) | 2.78 | ||||||
Modified and reissued | 68,986,297 | 11.36 | ||||||
Non-vested as of June 30, 2021 | 61,732,537 | $ | 11.21 | |||||
17
Stock options
Following is the summary of transactions under the Company’s stock option plan:
|
| Number of |
|
| Weighted |
|
| Weighted |
|
| Aggregate |
| ||||
Outstanding options as of January 1, 2021 |
|
| 1,150,893 |
|
| $ | 3.61 |
|
|
| 5.31 |
|
| $ | 3.89 |
|
Exercised |
|
| (31,985 | ) |
|
| 3.29 |
|
|
| — |
|
|
| 0 |
|
Forfeited |
|
| (231,246 | ) |
|
| 3.96 |
|
|
| — |
|
|
| — |
|
Outstanding options as of December 31, 2021 |
|
| 887,662 |
|
| $ | 3.53 |
|
|
| 4.19 |
|
| $ | 5.28 |
|
Granted |
|
| 574,250 |
|
|
| 10.83 |
|
|
|
|
|
|
| ||
Exercised |
|
| (237,030 | ) |
|
| 0.55 |
|
|
|
|
|
|
| ||
Forfeited |
|
| (18,500 | ) |
|
| 10.83 |
|
|
|
|
|
|
| ||
Outstanding options as of June 30, 2022 |
|
| 1,206,382 |
|
| $ | 7.48 |
|
|
| 6.88 |
|
| $ | (2.89 | ) |
The Company engaged a third-party valuation firm to determine the estimated fair value of the options using the Black-Scholes-Merton method, which was determined as $7.46 for the options issued during the three months ended June 30, 2022 using the following assumptions:
As of | ||
June 30, 2022 | ||
Dividend yield | 0.0% | |
Volatility | 77.0% | |
Risk-free rate of interest | 2.93% |
During the three months and six months ended June 30, 2022, the Company recognized stock-based compensation expense of $397 as a result of issuance of new stock option grants.
Performance Stock Unit (“PSU”) Award
On February 24, 2021,23, 2022, the Company’sCompensation Committee of the Board
20 Day VWAP of Class A common |
| Below $13.84 |
| $ | 13.84 |
|
| $ | 16.34 |
|
| $ | 18.84 |
|
| $ | 22.34 |
|
| $ | 25.34 |
|
| $ | 38.09 |
|
Percentage of target PSUs |
| 0% |
| 25% |
|
| 50% |
|
| 100% |
|
| 150% |
|
| 200% |
|
| * |
|
* The percentage of target PSUs earned at $38.09 for each participant ranges between 300% and 500%.
Earned PSUs vest in three equal annual installments, with the first installment vesting on the date the Company determines the number of PSUs that are eligible to vest for such quarter, and the second and third installments vesting on the first and second anniversaries of such determination date, subject to accelerated vesting in connection with certain qualifying terminations of employment or a change in control.
18
Following is the summary of PSUs under the Company’s 2021 Incentive Award Plan:
|
| Number of |
|
| Weighted Average |
| ||
Outstanding as of January 1, 2022 |
|
| 1,500,000 |
|
| $ | 1.95 |
|
Granted |
|
| 1,979,500 |
|
|
| 9.10 |
|
Outstanding as of June 30, 2022 |
|
| 3,479,500 |
|
| $ | 6.02 |
|
The Company engaged a third-party valuation firm to determine the estimated fair value of the warrants and derivative liabilitiesPSUs using the Monte Carlo simulation method, which was determined as of$9.10 per PSU issued during the six months ended June 30, 2022 using the following assumptions:
As of | ||
June 30, 2022 | ||
Dividend yield | 0.0% | |
Volatility | 78.0% | |
Risk-free rate of interest | * | |
* For each simulation trial, the risk-free rate of interest was estimated based on the treasury securities with a similar term. |
During the three and six months ended June 30, 2022, the Company recognized an expense of $1,107 and $1,663, respectively, related to the target PSUs.
2021 Employee Stock Purchase Plan (“ESPP”)
On July 28, 2021, the Compensation Committee of the Board of Directors approved the Company’s first offering period under the ESPP, which commenced on August 1, 2021 and December 31, 2020:
As of June 30, 2021 | As of December 31, 2020 | |||||||
Stock price | $ | — | $ | 7.56 | ||||
Exercise price | $ | — | $ | 0.01 | ||||
Risk-free interest rate | — | 0.09% | ||||||
Expected volatility | — | 64.0% | ||||||
Time to maturity (in years) | — | 0.63 |
During the three months ended June 30, 20212022, the Company issued 196,385 shares of Class A common stock related to the ESPP offering that ended on May 31, 2022.
During the three and 2020,six months ended June 30, 2022, the Company recognized an income of $18,600 and an expense of 4,100,
Unrecognized compensation expense
The Company has $467,831 of unrecognized compensation expense related to its 68,217,540 unvested restricted stock and restricted stock units, 3,479,500 performance stock units, 555,750 unvested options and 293,879 shares of Class A common stock to be issued under the ESPP. This unrecognized stock-based compensation will be recognized over a weighted average period of 1.17 years.
10.Stockholders’ Equity
Conversion of Common Class B to Class A
During the three and six months ended June 30, 2022, respectively, 1,787,043 and 2,787,043 shares of Class B common stock were converted into shares of Class A common stock upon transfer pursuant to the terms of our amended and restated certificate of incorporation.
Issuance of Class A common stock
During the six months ended June 30, 2021 and 2020,2022, the Company recognized an expenseissued 926,785 shares of Class A common stock valued at $10,000 for its ArcaMax acquisition and 12,931 shares of Class A common stock valued at $103 against the earnout payments related to changesits Kinetic acquisition.
During the six months ended June 30, 2022, the Company also issued 521,306 shares of Class A common stock valued at $4,833 pursuant to certain agreements. Out of these certain shares have a stock price downward protection right and accordingly this right has been accounted for as a derivative liability fair valued at $1,215, which is included in the fair value of such warrants and derivativeother current liabilities of $5,000 and $6,700, respectively.
19
unaudited condensed consolidated balance sheets as of June 30, 2021, the2022. The Company does
11.Fair Value Disclosures
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:
Level 1 is defined as observable inputs such as quoted prices in active markets for identical assets;
Level 2 is defined as observable inputs other than Level 1 prices
Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The following table represents the fair value of the financial instruments measured at fair value on a recurring basis:
As of June 30, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents* | $ | 5,764 | $ | — | $ | — | $ | 5,764 | ||||||||
Total assets measured at fair value | $ | 5,764 | $ | — | $ | — | $ | 5,764 | ||||||||
Liabilities | ||||||||||||||||
Derivative liability | $ | — | $ | — | $ | — | $ | — | ||||||||
Warrant liability | — | — | — | — | ||||||||||||
Acquisition related liabilities | — | — | 24,721 | 24,721 | ||||||||||||
Total liabilities measured at fair value | $ | — | $ | — | $ | 24,721 | $ | 24,721 | ||||||||
As of December 31, 2020 | ||||||||||||||||
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash and cash equivalents* | $ | 12,257 | $ | — | $ | — | $ | 12,257 | ||||||||
Total assets measured at fair value | $ | 12,257 | $ | — | $ | — | $ | 12,257 | ||||||||
Liabilities | ||||||||||||||||
Derivative liability | $ | — | $ | — | $ | 38,400 | $ | 38,400 | ||||||||
Warrant liability | — | — | 19,700 | 19,700 | ||||||||||||
Acquisition related liabilities | — | — | 23,155 | 23,155 | ||||||||||||
Total liabilities measured at fair value | $ | — | $ | — | $ | 81,255 | $ | 81,255 | ||||||||
* Includes cash invested by |
The following table reconciles the changes in the fair value of the liabilities categorized within Level 3 of the fair value hierarchy for the six months ended June 30, 2021 and year ended December 31, 2020:2022:
|
| Acquisition |
| Derivative liabilities |
| ||
Balance as of January 1, 2022 |
| $ | 22,957 |
| $ | — |
|
Additions, net of payments |
|
| 5,061 |
|
| — |
|
Change in fair value |
|
| 10,795 |
|
| 1,215 |
|
Balance as of June 30, 2022 |
| $ | 38,813 |
| $ | 1,215 |
|
Warrant liability | Acquisition related liabilities | Derivative liability | ||||||||||
Balance as of January 1, 2021 | $ | 19,700 | $ | 23,155 | $ | 38,400 | ||||||
Additions, net of payments | — | 1,744 | — | |||||||||
Change in fair value | 4,400 | (178) | 600 | |||||||||
Extinguishment of the warrant and derivative liabilities | (24,100) | — | (39,000) | |||||||||
Balance as of June 30, 2021 | $ | 0— | $ | 24,721 | $ | 0— | ||||||
In connection with certain business combinations, the Company may owe additional purchase consideration (contingent consideration included in the acquisition relatedacquisition-related liabilities) based on the financial performance of the acquired entities after their acquisition. The fair value of the contingent consideration was determined using an unobservable input such as projected revenues, collections of accounts receivables.receivables, etc. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value of the contingent consideration’s fair value.consideration.
20
12.Related Party Transactions Casting Made Simple Corp. (“CMS”) is an entity owned by the Caivis Group (the Company's Chief Executive Officer owns a controlling interest in the Caivis Group) and the Chief Executive Officer’s spouse. On December 28, 2018, |
Prior to the acquisition, Kinetic Data Solutions, LLC (“Kinetic”) was an entity in which Caivis Group was the majority shareholder. On September 9, 2020, the Company entered into an agreement with Kinetic, wherein the Company appointed Kinetic as a reseller of its email marketing services to Kinetic’s customers. The Company recognized revenues of $129 during the three months ended March 31, 2021. There were 0 outstanding amounts from Kinetic as of June 30, 2022 and December 31, 2021.
13.Income Taxes
The Company’s income tax provision consists of federal, foreign, and state taxes necessary to align the Company’s
For the interim period ended June 30, 2020,2022, the Company utilized the annual effective tax rate methodology to determine its income tax provision. For the interim period ended June 30, 2021, the Company departed from the annual effective tax rate methodology and computed its income tax provision using a discrete method. The use of the discrete method was made in accordance with authoritative accounting guidance, which allows for the use of a discrete method when there are significant changes to the projected annual effective tax rate as a result of minor adjustments to projected
For the three and six months ended June 30, 2022, the Company recorded an income tax provision of $343 and income tax benefit of $2,256, respectively. The effective tax rate for the three months ended June 30, 2022 was negative 0.4% on a pre-tax loss of $85,666 and 1.41% on a pre-tax loss of $160,302, for the six months ended June 30, 2022.
For the three and six months ended June 30, 2021, the Company recorded an income tax provision of $584. The income tax provision relates primarily to current foreign taxes$584 and an increase in the valuation allowance related to certain foreign deferred tax assets. For the three months ended June 30, 2020, the Company recorded an income tax provisionbenefit of $396 related primarily to foreign taxes.
The effective tax rate for the three months ended June 30, 2020 was (2.70)% on apre-taxloss of $14,658. The effective tax rate for both interim periods was different thandiffers from the U.S. statutory rate primarily related to limited tax benefit being recordingrecorded for U.S. operating losses as the Company maintains a full valuation allowance against its U.S. deferred tax assets.
Basic net loss per share is computed using therestrictedperformance stock units as of June 30, 2022 and 2021 of 71,697,040and 2020 of
21
The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented:
|
| Three months ended June 30, |
| Six months ended June 30, | ||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
Numerator: |
|
|
|
|
|
|
|
|
Net loss |
| $(86,009) |
| $(94,922) |
| $(158,046) |
| $(119,296) |
Cumulative redeemable convertible preferred stock dividends |
| — |
| 3,166 |
| — |
| 7,060 |
Numerator for Basic and Dilutive loss per share - loss available to common stockholders |
| $(86,009) |
| $(98,088) |
| $(158,046) |
| $(126,356) |
Denominator: |
|
|
|
|
|
|
|
|
Class A common stock |
| 118,559,851 |
| 20,761,219 |
| 117,402,411 |
| 10,323,885 |
Class B common stock |
| 17,343,741 |
| 3,440,961 |
| 17,432,990 |
| 1,711,079 |
Series A common stock |
| — |
| 21,730,147 |
| — |
| 24,005,629 |
Series B common stock |
| — |
| 2,483,731 |
| — |
| 2,770,584 |
Warrants |
| — |
| 2,786,277 |
| — |
| 3,162,418 |
Denominator for Basic and Dilutive loss per share-weighted-average common stock |
| 135,903,592 |
| 51,202,335 |
| 134,835,401 |
| 41,973,595 |
Basic loss per share |
| $(0.63) |
| $(1.92) |
| $(1.17) |
| $(3.01) |
Dilutive loss per share |
| $(0.63) |
| $(1.92) |
| $(1.17) |
| $(3.01) |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net loss | $ | (94,922) | $ | (15,054) | $ | (119,296) | $ | (31,434) | ||||||||
Cumulative redeemable convertible preferred stock dividends | 3,166 | 3,716 | 7,060 | 7,376 | ||||||||||||
Numerator for Basic and Dilutive loss per share - Loss available to common stockholders | $ | (98,088) | $ | (18,770) | $ | (126,356) | $ | (38,810) | ||||||||
Denominator: | ||||||||||||||||
Class A common stock | 20,761,219 | — | 10,323,885 | — | ||||||||||||
Class B common stock | 3,440,761 | — | 1,711,079 | — | ||||||||||||
Series A common stock | 21,730,147 | 26,108,711 | 24,005,629 | 26,108,736 | ||||||||||||
Series B common stock | 2,483,731 | 3,054,318 | 2,770,584 | 3,054,318 | ||||||||||||
Warrants (convertible to Series A common stock) | 2,786,277 | 3,199,581 | 3,162,418 | 3,444,328 | ||||||||||||
Denominator for Basic and Dilutive Loss per share-Weighted-average | 51,202,335 | 32,362,610 | 41,973,595 | 32,607,382 | ||||||||||||
Basic Loss per Share | $ | (1.92) | $ | (0.58) | $ | (3.01) | $ | (1.19) | ||||||||
Dilutive Loss per Share | $ | (1.92) | $ | (0.58) | $ | (3.01) | $ | (1.19) |
Since the Company was in a net loss position for all periods presented, basic loss per share calculation excludes redeemable convertible preferred stock as it does not participate in net losses of the Company. Additionally, net loss per share attributable to common shareholdersstockholders was the same on a basic and diluted basis, as the inclusion of all potential common equivalent shares outstanding would have been anti-dilutive.
Anti-dilutive weighted-average common equivalent shares were as follows:
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Options |
|
| 1,158,622 |
|
|
| 950,235 |
|
|
| 1,020,501 |
|
|
| 950,235 |
|
Restricted stock and restricted stock units |
|
| 70,068,129 |
|
|
| — |
|
|
| 67,341,087 |
|
|
| — |
|
Performance stock units |
|
| 3,479,500 |
|
|
| — |
|
|
| 2,888,931 |
|
|
| — |
|
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Options (convertible to Series A c ommons tock) | 950,235 | 1,159,995 | 950,235 | 1,159,995 | ||||||||||||
Warrants (convertible to Series A c ommons tock) | — | 1,973,763 | — | 1,973,763 | ||||||||||||
Redeemable convertible preferred stock | — | 39,223,194 | — | 39,223,194 | ||||||||||||
Restricted stock and restricted stock units | 61,732,537 | 76,224,208 | 61,732,537 | 76,224,208 |
15.Subsequent Events
On July 28, 2021, the Compensation Committee of the Board of Directors approved the launch of the Zeta Global Holdings Corp. 2021 Employee Stock Purchase Plan (the “ESPP”) pursuant to which eligible employees may acquire14, 2022, 362,088 shares of the Company’sClass B common stock were converted into shares of Class A common stock at a discounted price through payroll deductionsupon transfer pursuant to assist such employees in acquiring a stock ownership interest in the Company, subject to and in accordance with the terms of our amended and restated certificate of incorporation.
On August 3, 2022, the ESPP.
On August 3, 2022, the Company’s Board of Directors authorized withholding as an alternative to purchase Zeta’s shares at a 15% discountmarket sales by executives to the lowersatisfy tax withholding requirements upon vesting of the price on the applicable offering period start daterestricted stock awards (the “RSA Withholding Program).
22
Item 2.Management’s Discussion and the purchase date, which is the last dayAnalysis of the offering period. Employees may elect to contribute up to 15%Financial Condition and Results of their base compensation to the ESPP, subject to certain limitations set forth in the ESPP.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Formunder the headingin Part 1, Item 1A “Risk Factors” in the Prospectus filed withCompany’s Annual Report on Form 10-K for the SECyear ended December 31, 2021 and in Part II, Item IA “Risk Factors” and the “Cautionary Note Regarding Forward-Looking Statements” included in this Quarterly Report on June 14, 2021 pursuant to Rule 424(b)(4) under the Securities Act.
Overview
Zeta develops and marketsis a leading omnichannel data-driven cloud platform that provides enterprises with consumer intelligence and marketing automation software. We empower our customers to target, connect and engage consumers through software that delivers personalized marketing across all addressable channels, including email, social media, web, chat, connected TV (“CTV”)CTV and video, among others. We believe our actionable insights derived from consumer intent enable our customers to acquire, grow and retain consumer relationships more efficiently and effectively than the alternative solutions available in the market.
Ourtop-rated“ZMP”"ZMP") is the largest omnichannel marketing platform with identity data at its core. The ZMP analyzescan analyze billions of structured and unstructured data points to predict consumer intent by leveraging sophisticated machine learning algorithms and the industry’s largestconnectsacts on these insights by connecting with consumers through native integration of marketing channels and API integration with third parties. The ZMP’s data-driven algorithms and processes learn and optimize each customer’s marketing program in real time, producing a ‘flywheel effect’ that enables our customers to test, learn and improve their marketing programs in real time. Over time, thisThis continuous learning loop provides greater efficiency and effectiveness for our customers and creates a competitive advantage for Zeta.
The ZMP empowers our customers to personalize consumer experiences at scale across multiple touchpoints. Marketing programs are created and orchestrated by our customers through automated workflows and sophisticated dashboards. Our CDP+ ingests, analyzes and distills disparate data points to generate a single view of a consumer, encompassing identity, profile characteristics, behaviors and purchase intent, which is then made accessible through a single console. Our Opportunity Explorer synthesizes Zeta’s proprietary data and data generated by our customers to uncover consumer insights that are translated into marketing programs designed for highly targeted audiences across digital channels, including email, SMS, websites, applications, social media, CTV and chat.
Factors Affecting Results of Operations
For a discussion of the factors affecting our results of operations, please see “Factors Affecting Results of Operations” in the Management’sPart II, Item 7 "Management’s Discussion and Analysis sectionof Financial Condition and theResults of Operations” and Part 1, Item 1A “Risk Factors” section of our Prospectus.
Key Business Metrics
We review several key performance metrics, we usediscussed below, to evaluate our business, track performance, identify trends, formulate plans and make strategic decisions, please see “Key Business Metrics” indecisions. We believe that the Management’s Discussionpresentation of such metrics provides investors with effective ways to measure and Analysis section andmodel the “Risk Factors” sectionperformance companies such as ours, with recurring revenue streams.
Scaled customers increased 9%, from 343 as of June 30, 2021 to 373 as of June 30, 2022. Scaled customer ARPU increased 19%, from $299,315 for the three months ended June 30, 2021 to $355,411 for the three months ended June 30, 2022, primarily due to higher usage of our Prospectus.
Description of Certain Components of Financial Data
Revenues
Our revenue is primarily derivedarises from use of our technology platform via subscription fees, volume-based utilization fees and fees for professional services related to customers’ useservices. Our platform revenue comprises of our marketing platform. Our revenue is comprised from a mix of direct platform revenue and integrated platform
23
revenue, which leverages application programming interface (“API”) integrations with third parties. For the six months ended June 30, 20212022 and 2020,2021, we derived 76%81% and 74%76% of our revenues from direct platform revenue, respectively, and 19% and 24% and 26% of our revenues from integrated platform revenue, respectively. Revenues are recognized when control of these products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products and services. Sales and other taxes collected by us are excluded from revenue. Our revenue recognition policies are discussed in more detail below under “Critical Accounting Policies and Estimates.”
Cost of revenues (excluding depreciation and amortization)
Cost of revenue excludes depreciation and amortization and consists primarily of media and marketing costs and certain personnelemployee-related costs. Media and marketing costs consist primarily of fees paid to third-party publishers, media owners or managers, or toand strategic partners that are directly related to a revenue-generating event. We pay these third-party publishers, media owners or managers and strategic partners on a revenue-share, aPersonnelExpenses related to “internet traffic” associated with the viewing of available impressions or queries per second and costs of providing support to our customers are also included in the cost of revenues. Employee-related costs included in cost of revenues include salaries, bonuses, commissions, stock-based compensation and employee benefit costs primarily related to individuals directly associated with providing services to our customers. We expect costs of revenues will generally decrease in the future as a percentage of revenue will generally decrease from current levels over the long term.
General and administrative expenses
General and administrative expenses primarily consist of computer and telecom expenses, personnelemployee-related costs, including salaries, bonuses, stock-based compensation and employee benefits costs associated with our executive, finance, legal, human resources and other administrative personnel, as well as accounting and legal professional services fees.fees and platform and related infrastructure costs. We expect general and administrative expenses to increase in absolute dollars in future periods. We expect that general and administrative expenses, excluding the impact of stock-based compensation which is being recognized on an accelerated basis as discussed below, will stay consistent as a percentage of revenue over the long term.
Selling and marketing expenses
Selling and marketing expenses primarily consist of personnelemployee-related costs, including salaries, bonuses, employee benefits costs, stock-based compensation and commission costs for our sales and marketing personnel. Selling and marketing expenses also include costs for market development programs, advertising, promotional and other marketing activities. We intend to continue to invest in marketing initiatives and as a result we expect selling and marketing expenses to increase in absolute dollars in future periods. Selling and marketing expense as a percentage of revenue may fluctuate from period to period based on revenue levels and the timing of our investments in these functions over the long term.
Research and development expenses
Research and development expenses primarily consistsconsist of personnelemployee-related costs, including salaries, bonuses and employee benefit costs, stock-based compensation associated with engineering and IT services associated with the ongoing research and maintenance of internal use software, including platform and related infrastructure.software. We expect to continue to invest in research and development in order to develop our technology platform to drive incremental value and growth and as a result we expect that research and development expenses will increase as a percentage of revenue in the long term.
Depreciation and amortization
Depreciation and amortization relate to property and equipment, website and software development costs as well as acquisition-related and other acquired intangible assets. We record depreciation and amortization when appropriate using straight-line method over the estimated useful life of the assets.
Acquisition related expenses
Acquisition related expenses primarily consistsconsist of legal fees associated with certain business combinations and addressing disputes related to those transactions. It also includes retention bonuses agreed to be paid to employees related to
24
Restructuring expenses
Restructuring expenses consists primarily consist of employee termination costs due to internal restructuring. We expect that restructuring expenses will be correlated with future restructuring activities (if any), which could be greater than or less than our historic levels.
Interest expense
Interest expense primarily consists of interest paidpayable on our long-term borrowings.
Other (income) / expense
Other (income) / expense primarily consistconsists of changes in fair value of acquisition related liabilities, gains and losses on sale of assets gains and losses on extinguishment of acquisition related liabilities and foreign exchange gains and losses. We expect that the magnitude of other income and expenses will depend on external factors such as foreign exchange rate and the remeasurement of acquisition related liabilities, which could be greater than or less than our historic levels.
Change in fair value of warrants and derivative liabilities
Change in fair value of warrants and derivative liabilities primarily relates to warrants to purchase shares of our common stock that we issued in connection with previous financing rounds. The change in fair value of warrants and derivative liabilities depends on external valuation-related factors. As of June 30, 2021,2022, the Company does not have any warrants and derivative liabilities on its condensed unaudited consolidated balance sheets.
Income tax provision
The Company’s income tax provision consists of federal, foreign, and state taxes necessary to align the Company’s For
Stock-based compensation
The measurement of stock-based compensation for all stock-based payment awards, including restricted stock and restricted stock units, employee’s stock purchase plan (“ESPP”), performance stock units (“PSUs”) and stock options granted to employees, consultants or advisors and non-employee directors, is based on the interim periodestimated fair value of the awards on the date of grant or date of modification of such grants.
We will expense the unrecognized stock-based compensation as follows, subject to future forfeitures:
|
|
|
|
| Year ended December 31, |
|
|
|
|
|
|
| ||||||||||
Remaining period of 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Total |
| ||||||
$ | 143,571 |
|
| $ | 180,944 |
|
| $ | 95,046 |
|
| $ | 40,067 |
|
| $ | 8,204 |
|
| $ | 467,831 |
|
See "Note 9. Stock-Based Compensation" to our condensed unaudited consolidated financial statements for further details.
25
Results of Operations
We operate as a single reportable segment to reflect the way our Chief Operating Decision Officer (“CODM”) reviews and assesses the performance of the business. The Company’s CODM is the Chief Executive Officer.
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenues |
| $ | 137,301 |
|
| $ | 106,896 |
|
| $ | 263,569 |
|
| $ | 208,359 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenues (excluding depreciation and amortization) |
|
| 50,233 |
|
|
| 42,212 |
|
|
| 91,958 |
|
|
| 81,184 |
|
General and administrative expenses |
|
| 55,665 |
|
|
| 65,907 |
|
|
| 109,014 |
|
|
| 85,039 |
|
Selling and marketing expenses |
|
| 77,139 |
|
|
| 82,845 |
|
|
| 146,057 |
|
|
| 103,415 |
|
Research and development expenses |
|
| 18,038 |
|
|
| 26,503 |
|
|
| 35,269 |
|
|
| 36,287 |
|
Depreciation and amortization |
|
| 13,315 |
|
|
| 11,235 |
|
|
| 26,081 |
|
|
| 21,352 |
|
Acquisition - related expenses |
|
| — |
|
|
| 329 |
|
|
| 344 |
|
|
| 1,036 |
|
Restructuring expenses |
|
| — |
|
|
| 150 |
|
|
| — |
|
|
| 437 |
|
Total operating expenses |
| $ | 214,390 |
|
| $ | 229,181 |
|
| $ | 408,723 |
|
| $ | 328,750 |
|
Loss from operations |
|
| (77,089 | ) |
|
| (122,285 | ) |
|
| (145,154 | ) |
|
| (120,391 | ) |
Interest expense |
|
| 1,666 |
|
|
| 1,402 |
|
|
| 2,964 |
|
|
| 4,363 |
|
Other expenses / (income) |
|
| 5,696 |
|
|
| (749 | ) |
|
| 10,969 |
|
|
| 535 |
|
Gain on extinguishment of debt |
|
| — |
|
|
| (10,000 | ) |
|
| — |
|
|
| (10,000 | ) |
Change in fair value of warrants and derivative liabilities |
|
| 1,215 |
|
|
| (18,600 | ) |
|
| 1,215 |
|
|
| 5,000 |
|
Total other expenses / (income) |
| $ | 8,577 |
|
| $ | (27,947 | ) |
| $ | 15,148 |
|
| $ | (102 | ) |
Loss before income taxes |
|
| (85,666 | ) |
|
| (94,338 | ) |
|
| (160,302 | ) |
|
| (120,289 | ) |
Income tax provision / (benefit) |
|
| 343 |
|
|
| 584 |
|
|
| (2,256 | ) |
|
| (993 | ) |
Net loss |
| $ | (86,009 | ) |
| $ | (94,922 | ) |
| $ | (158,046 | ) |
| $ | (119,296 | ) |
Comparison of the Three Months Ended June 30, 2022 and 2021
Revenues
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Revenues |
| $ | 137,301 |
|
| $ | 106,896 |
|
| $ | 30,405 |
|
|
| 28.4 | % |
Revenues increased by $30.4 million, or 28.4%, for the three months ended June 30, 2020,2022 as compared to the Company utilizedthree months ended June 30, 2021. This increase in revenues is attributable to incremental revenues of $7.1 million from existing customers and $23.3 million from new customers.
Cost of revenues (excluding depreciation and amortization)
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Cost of revenues (excluding depreciation and amortization) |
| $ | 50,233 |
|
| $ | 42,212 |
|
| $ | 8,021 |
|
|
| 19.0 | % |
Cost of revenues (excluding depreciation and amortization) increased by $8.0 million, or 19.0%, for the annual effective tax rate methodologythree months ended June 30, 2022 as compared to determine its income tax provision. For the interim periodthree months ended June 30, 2021. This increase was primarily driven by $6.5 million in incremental media costs and higher stock-based compensation of $1.5 million.
General and administrative expenses
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
General and administrative expenses |
| $ | 55,665 |
|
| $ | 65,907 |
|
| $ | (10,242 | ) |
|
| (15.5 | )% |
General and administrative expenses decreased by $10.2 million, or 15.5%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. This decrease was primarily driven by lower stock-based compensation of $11.7 million and employee-related costs of $1.1 million. This decrease was partially offset by an increase in legal and professional fees of $2.4 million.
26
Selling and marketing expenses
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Selling and marketing expenses |
| $ | 77,139 |
|
| $ | 82,845 |
|
| $ | (5,706 | ) |
|
| (6.9 | )% |
Selling and marketing expenses decreased by $5.7 million, or 6.9%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. This decrease was primarily driven by lower stock-based compensation of $17.4 million. This decrease was partially offset by an increase in employee-related costs of $9.8 million and other marketing-related expenses of $1.8 million.
Research and development expenses
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Research and development expenses |
| $ | 18,038 |
|
| $ | 26,503 |
|
| $ | (8,465 | ) |
|
| (31.9 | )% |
Research and development expenses decreased by $8.5 million, or 31.9%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. This decrease was primarily driven by lower stock-based compensation of $9.3 million, partially offset by an increase in IT consulting expenses of $0.8 million.
Depreciation and amortization
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Depreciation and amortization |
| $ | 13,315 |
|
| $ | 11,235 |
|
| $ | 2,080 |
|
|
| 18.5 | % |
Depreciation and amortization increased by $2.1 million, or 18.5%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. This increase was driven by an increase in amortization of intangible assets of $1.5 million. Further, there was an increase in depreciation expense of $0.6 million primarily due to incremental website and software development-related capitalization over the recent periods.
Acquisition related expenses
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Acquisition related expenses |
| $ | — |
|
| $ | 329 |
|
| $ | (329 | ) |
|
| (100.0 | )% |
Acquisition related expenses decreased by $0.3 million, or 100%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily driven by lower professional fees.
Restructuring expenses
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Restructuring expenses |
| $ | — |
|
| $ | 150 |
|
| $ | (150 | ) |
|
| (100.0 | )% |
Restructuring expenses decreased by $0.2 million, or 100%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, due to the reorganization expenses incurred by the Company departed fromduring the annualthree months ended June 30, 2021.
27
Interest expense
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Interest expense |
| $ | 1,666 |
|
| $ | 1,402 |
|
| $ | 264 |
|
|
| 18.8 | % |
Interest expense increased by $0.3 million, or 18.8%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, due to increases in interest rates.
Other expenses / (income)
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Other expenses / (income) |
| $ | 5,696 |
|
| $ | (749 | ) |
| $ | 6,445 |
|
|
| (860.5 | )% |
Other expenses increased by $6.4 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily driven by an incremental change in the fair value of acquisition related liabilities, related to the Company's prior acquisitions.
Change in fair value of warrants and derivative liabilities
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Change in fair value of warrants and derivative liabilities |
| $ | 1,215 |
|
| $ | (18,600 | ) |
| $ | 19,815 |
|
|
| (106.5 | )% |
Change in fair value of warrants and derivative liabilities expense decreased by $19.8 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, this is primarily due to the extinguishment of warrants and derivative liabilities upon the Company’s initial public offering ("IPO") on June 14, 2021.
Income tax provision
|
| Three months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Income tax provision |
| $ | 343 |
|
| $ | 584 |
|
| $ | (241 | ) |
|
| (41.3 | )% |
For the three months ended June 30, 2022 and 2021, the Company recorded an income tax provision of $0.3 million and $0.6 million, respectively, yielding an effective tax rate methodologyof negative 0.40% and computed its income tax provision using a discrete method.0.62%, respectively. The use of the discrete method was made in accordance with authoritative accounting guidance which allows for the use of a discrete method when there are significant changes to the projected annual effective tax rate for both interim periods was different than the U.S. statutory rate primarily related to limited tax benefit being recording for U.S. operating losses as the Company maintains a resultfull valuation allowance against its U.S. deferred tax assets.
Comparison of minor adjustmentsthe Six Months Ended June 30, 2022 and 2021
Revenues
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Revenues |
| $ | 263,569 |
|
| $ | 208,359 |
|
| $ | 55,210 |
|
|
| 26.5 | % |
Revenues increased by $55.2 million, or 26.5%, for the six months ended June 30, 2022 as compared to projectedpre-taxearnings.
Cost of revenues (excluding depreciation and amortization)
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Cost of revenues (excluding depreciation and amortization) |
| $ | 91,958 |
|
| $ | 81,184 |
|
| $ | 10,774 |
|
|
| 13.3 | % |
28
Cost of revenues (excluding depreciation and amortization) increased by $10.8 million, or 13.3%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This increase was primarily driven by $8.2 million in incremental media costs and higher stock-based compensation of $2.6 million.
General and administrative expenses
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
General and administrative expenses |
| $ | 109,014 |
|
| $ | 85,039 |
|
| $ | 23,975 |
|
|
| 28.2 | % |
General and administrative expenses increased by $24.0 million, or 28.2%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This increase was primarily driven by higher stock-based compensation of $18.1 million, legal and professional fees of $4.0 million and computer and telecom-related expenses of $1.9 million.
Selling and marketing expenses
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Selling and marketing expenses |
| $ | 146,057 |
|
| $ | 103,415 |
|
| $ | 42,642 |
|
|
| 41.2 | % |
Selling and marketing expenses increased by $42.6 million, or 41.2%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This increase was primarily driven by higher stock-based compensation of $19.4 million, employee-related costs of $19.2 million and other marketing-related expenses of $4.0 million.
Research and development expenses
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Research and development expenses |
| $ | 35,269 |
|
| $ | 36,287 |
|
| $ | (1,018 | ) |
|
| (2.8 | )% |
Research and development expenses decreased by $1.0 million, or 2.8%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This decrease was primarily driven by lower stock-based compensation of $3.3 million, partially offset by an increase in IT consulting expenses of $1.5 million and employee-related costs of $0.8 million.
Depreciation and amortization
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Depreciation and amortization |
| $ | 26,081 |
|
| $ | 21,352 |
|
| $ | 4,729 |
|
|
| 22.1 | % |
Depreciation and amortization increased by $4.7 million, or 22.1%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This increase was driven by an increase in amortization of intangible assets of $3.2 million and an increase in depreciation expense of $1.5 million primarily due to incremental website and software development-related capitalization over the recent periods.
Acquisition related expenses
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Acquisition related expenses |
| $ | 344 |
|
| $ | 1,036 |
|
| $ | (692 | ) |
|
| (66.8 | )% |
Acquisition related expenses decreased by $0.7 million, or 66.8%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This decrease was primarily driven by lower legal and professional fees incurred during the six months ended June 30, 2022.
29
Restructuring expenses
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Restructuring expenses |
| $ | — |
|
| $ | 437 |
|
| $ | (437 | ) |
|
| (100.0 | )% |
Restructuring expenses decreased by $0.4 million, or 100%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, due to the reorganization expenses incurred by the Company during the six months ended June 30, 2021.
Interest expense
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Interest expense |
| $ | 2,964 |
|
| $ | 4,363 |
|
| $ | (1,399 | ) |
|
| (32.1 | )% |
Interest expense decreased by $1.4 million, or 32.1%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This decrease was primarily driven by a lower interest rate on the new debt facility entered into during February 2021.
Other expenses
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Other expenses |
| $ | 10,969 |
|
| $ | 535 |
|
| $ | 10,434 |
|
|
| 1,950.3 | % |
Other expenses increased by $10.4 million, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily driven by an incremental change in the fair value of acquisition related liabilities, related to the Company's prior acquisitions.
Change in fair value of warrants and derivative liabilities
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Change in fair value of warrants and derivative liabilities |
| $ | 1,215 |
|
| $ | 5,000 |
|
| $ | (3,785 | ) |
|
| (75.7 | )% |
Change in fair value of warrants and derivative liabilities expense decreased by $3.8 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, this is primarily due to the extinguishment of warrants and derivative liabilities upon the Company’s initial public offering ("IPO") on June 14, 2021.
Income tax benefit
|
| Six months ended June 30, |
|
| Change |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| % |
| ||||
Income tax benefit |
| $ | (2,256 | ) |
| $ | (993 | ) |
| $ | (1,263 | ) |
|
| 127.2 | % |
For the six months ended June 30, 2022 and 2021, the Company recorded an income tax benefit of $2.3 million and $1.0 million, respectively, yielding an effective tax rate of 1.41% and 0.83%, respectively. The effective tax rate for both interim periods was different than the U.S. statutory rate primarily related to limited tax benefit being recording for U.S. operating losses as the Company maintains a full valuation allowance against its U.S. deferred tax assets.
30
Non-GAAP
We use the following
Adjusted EBITDA and adjusted EBITDA margin
Adjusted EBITDA isacquisition relatedacquisition-related expenses, restructuring expenses, change in fair value of warrants and derivative liabilities, certain(income) / expense. Acquisition relatedexpenses. Acquisition-related expenses and restructuring expenses primarily consist of severance and other personnel-relatedemployee-related costs which we do not expect to incur in the future as acquisitions of businesses may distort the comparability of the results of operations. Change in fair value of warrants and derivative liabilities isexpense consist of acquisition related liabilities, gains and losses on extinguishment of acquisition-related liabilities, gains and losses on sales of assets and foreign exchange gains and losses. In particular, we believe that the exclusion of stock-based compensation, certain dispute settlement expenses andaremay be useful to investors in analyzing our financial and operational performance. Our use of adjusted EBITDA and adjusted EBITDA margin 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 U.S. GAAP. Because of these and other limitations, you should consider
The following table reconciles adjusted EBITDA and adjusted EBITDA margin to net loss and net loss margin, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net loss | $ | (94,922) | $ | (15,054) | $ | (119,296) | $ | (31,434) | ||||||||
Net income (loss) margin | (88.9)% | (19.5)% | (57.3)% | (19.9)% | ||||||||||||
Add back: | ||||||||||||||||
Interest expense | 1,402 | 4,382 | 4,363 | 8,725 | ||||||||||||
Depreciation and amortization | 11,235 | 10,497 | 21,352 | 20,038 | ||||||||||||
Stock-based compensation | 119,270 | 27 | 119,270 | 53 | ||||||||||||
IPO related expenses | 2,705 | — | 2,705 | — | ||||||||||||
Gain on extinguishment of debt | (10,000) | — | (10,000) | — | ||||||||||||
Income tax provision / (benefit) | 584 | 396 | (993) | 1,018 | ||||||||||||
Acquisition related expenses | 329 | 1,156 | 1,036 | 3,091 | ||||||||||||
Restructuring expenses | 150 | 498 | 437 | 1,691 | ||||||||||||
Change in fair value of warrants and derivative liabilities | (18,600) | 4,100 | 5,000 | 6,700 | ||||||||||||
Other incomes / (expense) | (749) | (471) | 535 | (358) | ||||||||||||
Adjusted EBITDA | $ | 11,404 | $ | 5,531 | $ | 24,409 | $ | 9,524 | ||||||||
Adjusted EBITDA margin | 10.7% | 7.2% | 11.7% | 6.0% |
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net loss |
| $ | (86,009 | ) |
| $ | (94,922 | ) |
| $ | (158,046 | ) |
| $ | (119,296 | ) |
Net loss margin |
|
| 62.6 | % |
|
| 88.8 | % |
|
| 60.0 | % |
|
| 57.3 | % |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
|
| 13,315 |
|
|
| 11,235 |
|
|
| 26,081 |
|
|
| 21,352 |
|
Restructuring expenses |
|
| - |
|
|
| 150 |
|
|
| - |
|
|
| 437 |
|
Acquisition related expenses |
|
| - |
|
|
| 329 |
|
|
| 344 |
|
|
| 1,036 |
|
Stock-based compensation |
|
| 82,335 |
|
|
| 119,270 |
|
|
| 156,071 |
|
|
| 119,270 |
|
Other expenses / (income) |
|
| 5,696 |
|
|
| (749 | ) |
|
| 10,969 |
|
|
| 535 |
|
Gain on extinguishment of debt |
|
| - |
|
|
| (10,000 | ) |
|
| - |
|
|
| (10,000 | ) |
IPO related expenses |
|
| - |
|
|
| 2,705 |
|
|
| - |
|
|
| 2,705 |
|
Change in fair value of warrants and derivative liabilities |
|
| 1,215 |
|
|
| (18,600 | ) |
|
| 1,215 |
|
|
| 5,000 |
|
Interest expense |
|
| 1,666 |
|
|
| 1,402 |
|
|
| 2,964 |
|
|
| 4,363 |
|
Income tax provision / (benefit) |
|
| 343 |
|
|
| 584 |
|
|
| (2,256 | ) |
|
| (993 | ) |
Adjusted EBITDA |
| $ | 18,561 |
|
| $ | 11,404 |
|
| $ | 37,342 |
|
| $ | 24,409 |
|
Adjusted EBITDA margin |
|
| 13.5 | % |
|
| 10.7 | % |
|
| 14.2 | % |
|
| 11.7 | % |
31
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Condensed Consolidated Statements of Operations Data: | ||||||||||||||||
Revenues | $ | 106,896 | $ | 77,130 | $ | 208,359 | $ | 158,390 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues (excluding depreciation and amortization) | 42,212 | 29,296 | 81,184 | 59,825 | ||||||||||||
General and administrative expenses | 65,907 | 17,327 | 85,039 | 36,120 | ||||||||||||
Selling and marketing expenses | 82,845 | 16,842 | 103,415 | 36,090 | ||||||||||||
Research and development expenses | 26,503 | 8,161 | 36,287 | 16,884 | ||||||||||||
Depreciation and amortization | 11,235 | 10,497 | 21,352 | 20,038 | ||||||||||||
Acquisition related expenses | 329 | 1,156 | 1,036 | 3,091 | ||||||||||||
Restructuring expenses | 150 | 498 | 437 | 1,691 | ||||||||||||
Total operating expenses | $ | 229,181 | $ | 83,777 | $ | 328,750 | $ | 173,739 | ||||||||
Loss from operations | (122,285) | (6,647) | (120,391) | (15,349) | ||||||||||||
Interest expense | 1,402 | 4,382 | 4,363 | 8,725 | ||||||||||||
Other (incomes) / expenses, net | (749) | (471) | 535 | (358) | ||||||||||||
Gain on extinguishment of debt | (10,000) | — | (10,000) | — | ||||||||||||
Change in fair value of warrants and derivative liabilities | (18,600) | 4,100 | 5,000 | 6,700 | ||||||||||||
Total other expenses / (other incomes) | $ | (27,947) | $ | 8,011 | $ | (102) | $ | 15,067 | ||||||||
Loss before income taxes | (94,338) | (14,658) | (120,289) | (30,416) | ||||||||||||
Income tax provision / (benefit) | 584 | 396 | (993) | 1,018 | ||||||||||||
Net loss available to common stockholders | $ | (94,922) | $ | (15,054) | $ | (119,296) | $ | (31,434) | ||||||||
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Revenues | $ | 106,896 | $ | 77,130 | $ | 29,766 | 38.6% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Cost of revenues (excluding depreciation and amortization) | $ | 42,212 | $ | 29,296 | $ | 12,916 | 44.1% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
General and administrative expenses | $ | 65,907 | $ | 17,327 | $ | 48,580 | 280.4% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Selling and marketing expenses | $ | 82,845 | $ | 16,842 | $ | 66,003 | 391.9% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Research and development expenses | $ | 26,503 | $ | 8,161 | $ | 18,342 | 224.8% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Depreciation and amortization | $ | 11,235 | $ | 10,497 | $ | 738 | 7.0% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 �� | Amount | % | |||||||||||||
Acquisition related expenses | $ | 329 | $ | 1,156 | $ | (827) | (71.5)% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Restructuring expenses | $ | 150 | $ | 498 | $ | (348) | (69.9)% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Interest expense | $ | 1,402 | $ | 4,382 | $ | (2,980) | (68.0)% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Other incomes | $ | (749) | $ | (471) | $ | (278) | 58.7% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2021 | Amount | % | |||||||||||||
Change in fair value of warrants and derivative liabilities | $ | (18,600) | $ | 4,100 | $ | (22,700) | (553.6)% |
Three months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Income tax provision | $ | 584 | $ | 396 | $ | 188 | 47.5% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Revenues | $ | 208,359 | $ | 158,390 | $ | 49,969 | 31.5% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Cost of revenues (excluding depreciation and amortization) | $ | 81,184 | $ | 59,825 | $ | 21,359 | 35.7% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
General and administrative expenses | $ | 85,039 | $ | 36,120 | $ | 48,919 | 135.4% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Selling and marketing expenses | $ | 103,415 | $ | 36,090 | $ | 67,325 | 186.5% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Research and development expenses | $ | 36,287 | $ | 16,884 | $ | 19,403 | 114.9% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Depreciation and amortization | $ | 21,352 | $ | 20,038 | $ | 1,314 | 6.6% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Acquisition related expenses | $ | 1,036 | $ | 3,091 | $ | (2,055) | (66.5)% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Restructuring expenses | $ | 437 | $ | 1,691 | $ | (1,254) | (74.2)% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Interest expense | $ | 4,363 | 8,725 | $ | (4,362) | (50.0)% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Other expenses / (incomes) | $ | 535 | $ | (358) | $ | 893 | 249.4% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Change in fair value of warrants and derivative liabilities | $ | 5,000 | $ | 6,700 | (1,700) | (25.4)% |
Six months ended June 30, | Change | |||||||||||||||
2021 | 2020 | Amount | % | |||||||||||||
Income tax (benefit) / provision | $ | (993) | $ | 1,018 | $ | (2,011) | (197.5)% |
Liquidity and Capital Resources
We have financed our operations and capital expenditures primarily through utilization of cash generated from operations, as well as borrowings under our credit facilities. As of June 30, 2021,2022, we had cash and cash equivalents of $113.6 million. The$110.8 million and net working capital, consisting of current assets less current liabilities, as of June 30, 2021 was $97.4$84.2 million. As of June 30, 2021,2022, we had an accumulated deficit of $361.6$649.9 million.
We believe our existing cash and anticipated net cash provided by operating activities, together with available borrowings under our credit facility, will be sufficient to meet our working capital requirements for at least the next 12 months.months and for the foreseeable future. However, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected.
Cash flows
The following table summarizes our cash flows:
Six months ended June 30, | ||||||||
2021 | 2020 | |||||||
Net cash provided by / (used for): | ||||||||
Cash provided by operating activities | $ | 13,203 | $ | 9,671 | ||||
Cash used in investing activities | (16,069) | (12,762) | ||||||
Cash provided by financing activities | 65,776 | 6,004 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (67) | (49) | ||||||
Net increase in cash, cash equivalents and restricted cash | $ | 62,843 | $ | 2,864 | ||||
|
| Six months ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net cash provided by / (used for): |
|
|
|
|
|
| ||
Cash provided by operating activities |
| $ | 35,850 |
|
| $ | 13,203 |
|
Cash used for investing activities |
|
| (29,254 | ) |
|
| (16,069 | ) |
Cash provided by financing activities |
|
| 158 |
|
|
| 65,776 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
| 166 |
|
|
| (67 | ) |
Net increase in cash and cash equivalents |
| $ | 6,920 |
|
| $ | 62,843 |
|
Cash Flows from Operating Activities
For the six months ended June 30, 2022, net cash provided by operating activities of $35.9 million resulted primarily from adjusted non-cash items of $191.6 million, more than offsetting our net loss of $158.0 million. Changes in working capital were primarily driven by an increase in accounts payable of $18.7 million, partially offset by an increase in accounts receivable of $4.7 million, a decrease in accrued expenses and other current liabilities of $10.6 million and deferred revenues of $1.0 million.
For the six months ended June 30, 2021, net cash provided by operating activities of $13.2 million resulted primarily from adjusted million and resulting in a net cash income of $15.8 million. Changes in working capital were primarily driven by a decrease in accounts receivable of $8.2 million, decrease in prepaid and other current assets of $2.5 million and increase in accrued expenses and other current liabilities of $1.5 million, partially offset by a decrease in accounts payable of $14.1 million and deferred revenues of $0.4 million, for net changes in working capital of $2.5 million.
Cash Flows from Investing Activities
For the six months ended June, 30, 2020, net2022, we used $29.3 million of cash provided by operatingin investing activities, primarily consisting of $9.7business and asset acquisitions of $9.2 million, resulted primarily from changescapital expenditures of $11.5 million (including a $10.3 million investment in working capital driven by a decrease in accounts receivabledata and partnership agreements) and website and software development costs of $32.5 million, increase in accounts payable of $8.3 million, decrease in prepaid and other current assets of $1.7 million, offset by increase in accrued expenses and other current liabilities of $31.5 million, for net changes in working capital of $12.2$8.6 million. This increase was partially offset by net loss of $31.4 million adjusted fornon-cashitems of $28.9 million, resulting in a net cash loss of $2.5 million.
For the six months ended June 30, 2021, we used $16.1 million of cash in investing activities, primarily consisting of website and software development costs of $9.5 million, capital expenditure of $4.4 million and business and asset acquisitions, net of cash acquired, of $2.2 million.
Cash Flows used for / provided by Financing Activities
For the six months ended June 30, 2020, we used $12.82022, net cash provided by financing activities of $0.2 million was primarily due to exercise of cash in investing activities, primarily consisting of website and software development costs of $11.7 million.
32
For the six months ended June 30, 2021, net cash provided by financing activities of $65.8 million was primarily due to IPO proceeds (net of issuance cost) of $127.4 million, new credit facility of $183.3 million (net of financing cost), partially offset by repayments against credit lines of $42.8 million and term loan of $138.0 million. Further, in connection with our IPO, we repurchased and canceled certain stock from our employees, including restricted stock and restricted stock units with a total repurchase amount of $64.1 million.
Debt
As of June 30, 2021,2022, we have $183.4$183.8 million (net of $1.2 million of unamortized debt acquisition costs) of outstanding long-term borrowings.
On February 3, 2021, we completed our debt refinancing and as a result, of such debt refinancing, we entered into a $222.5 million Senior Secured Credit Facility. The Senior Secured Credit Facility which was used to fully repay and terminate our existing Credit Agreement.previous credit agreement. Borrowings under the debt are expected to be in an amount of $185.0$185 million and bear interest payable quarterly ranging from LIBOR plus 2.125% to LIBOR plus 2.625% based on our consolidated net leverage ratio stated in the credit agreement. We are required to repay the principal balance and any unpaid accrued interest on the Senior Secured Credit Facility on February 3, 2026. We do not expect any other significant changes in liquidity as a result of this refinancing.
We are currently in compliance with our financial maintenance covenants under the Senior Secured Credit Facility and, based upon our current expectations, believe that we will continue to comply with our financial maintenance covenants for the next 12 months. The Senior Secured Credit Facility contains restrictive covenants that place restrictions on us and may limit our ability to, among other things, incur additional debt and liens, purchase our securities, undertake transactions with affiliates, make other investments, pay dividends or distribute excess cash flow.
During the six months ended June 30, 2022, we entered into a promissory note evidencing an unsecured $10,000borrowed $5,625 million against the revolver facility and repaid the same amount against the term loan under the Paycheck Protection Program (“PPP loan”) of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The loan was made through Radius Bank. We accounted for the loan as a financial liability in accordance with ASC Topic 470, Debt. Accordingly, the loan was recognized within long-term debt. We used the proceeds from the loan for payroll, rent and utilities and certain other approved expenses during the eight-week period commencing on the loan effective date. On June 10, 2021, the Company received a notice from SBA stating full forgiveness of the principal amount of $10 million and the related interest therein.
Contractual obligations
There have been no material changes to our contractual obligations as compared to the contractual obligations described in our Management’s"Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations" set forth in our Annual Report on Form 10-K for the Prospectus related to our recent IPO.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates are based on managementmanagement’s judgment and the best available information, and as such actual results could differ from those estimates.
There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Management’s"Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations" set forth in our Annual Report on Form 10-K for the Prospectus related to our recent IPO.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
33
Off-Balance
We have not entered into any
34
Item 3.Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk in the ordinary course of business. Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange risks. We do not hold or issue financial instruments for speculative or trading purposes.
Interest Rate Risk
We are exposed to market risk from changes in interest rates on our loan term borrowings, which accrue interest at a variable rate. Based upon the principal balance owed on our long-term borrowings as of June 30, 2021,2022, a hypothetical one percentage point increase or decrease in the interest would increase or decrease our annual interest expenses by $1.9 million. There were no other material changes in market risk exposures as of June 30, 2021.
Foreign Currency Risk
We have foreign currency risks related to a certain number of our foreign subsidiaries in the UK, France, Belgium and India. We do not believe that a 10% change in the relative value of the U.S. dollar to other foreign currencies would have a material effect on our cash flows and operating results in currencies other than the U.S. dollar.
Inflation Risk
We do not believe that inflation had a material effect on our business, financial condition or results of operations.
35
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer has(“CFO”), evaluated the effectiveness of our disclosure controls and procedures (asas defined in RulesAct),Act as of the end of the period covered by this Quarterly Report on Form
Our disclosure controls and procedures were effectiveare designed to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms,forms. Based on this evaluation, our CEO and CFO have concluded that such information is accumulatedour disclosure controls and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,procedures were effective at the reasonable assurance level as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control
There were no changes in our internal control over financial reporting in connection with the evaluation required by Rule13a-15(d)Rules 13a-15(d) and15d-15(d) 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form
36
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
From time to time, we are involved in various legal proceedings arising from the normal course of business activities. 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 1A.Risk Factors
Except to the extent updated below or previously updated or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q related to such risk factors (including, without limitation, the matters discussed in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operation”), there have been no material changes to the risk factors previously disclosed under the headingin Part 1, Item 1A “Risk Factors” in the ProspectusForm 10-K for the year ended December 31, 2021 filed with the SEC on June 14, 2021 pursuant to Rule 424(b)(4) under the Securities Act.
Substantial future sales of |
Sales of a substantial number of shares of our Class A common stock, particularly sales by our directors, executive officers and significant stockholders, or the perception that these sales might occur, could depress the market price of our Class A common stock. On June 10, 2022, the lock-up agreements that previously restricted certain holders of our capital stock from transferring or selling our shares expired. Additionally, our directors, executive officers, employees and, in certain instances, service providers, hold shares of common stock subject to outstanding options, restricted stock awards and restricted stock units under our equity incentive plans. Those shares and the shares reserved for future issuance under our equity incentive plans are and will become eligible for sale in the public market, subject to certain legal and contractual limitations. Further, certain holders of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that vested in connectionwe may file for ourselves or our stockholders. We are unable to predict the effect that such sales related to the foregoing may have on the prevailing market price of our common stock.
In addition, on August 3, 2022, the Company’s board of directors authorized withholding as an alternative to market sales by executives to satisfy tax withholding requirements upon vesting of restricted stock awards (“RSAs”). As such, we may begin using corporate cash as early as the third quarter of 2022 to make required tax payments associated with the offering by repurchasing and canceling 1,799,650 shares of Class A restricted stock, 197,490 shares of Class B restricted stock and 92,671 restricted stock units (the “Tax Withholding Repurchase”); (ii) to repurchase and cancel 2,158,027 shares of Class A restricted stock and 88,518 restricted units at the electionvesting of certain holders (the “Class A Stock Repurchase”); (iii)executive RSAs and withhold a corresponding number of shares from such executives. We anticipate that if we utilize the withholding alternative, we will spend substantial funds to satisfy tax withholding and remittance obligations when we settle executive RSAs, which may have an adverse effect on our financial condition and results of operations.
We cannot guarantee that our share repurchase and cancel 1,767,692 sharesprogram will be fully consummated or that it will enhance long-term stockholder value. Share repurchases could also increase the volatility of Class Bthe trading price of our common stock and 342,510 sharescould diminish our cash reserves.
In August 2022, our Board of restrictedDirectors authorized a share repurchase program to repurchase up to $50 million of our outstanding Class BA common stock fromthrough December 31, 2024. Although our Chief Executive Officer andCo-Founder,David Steinberg (the “Class B Stock Repurchase”); and (iv) for general corporate purposes, including working capital, operating expenses and capital expenditures, although we haveBoard of Directors has authorized this repurchase program, the program does not designatedobligate us to repurchase any specific uses.
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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3.Defaults Upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not applicable.
Item 5.Other Information
None.
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Item 6.Exhibits
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Exhibit Number
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3.1 | Amended and Restated Certificate of Incorporation of Zeta Global Holdings Corp. | 8-K | 001-40464 | 3.1 | 6/15/2021 |
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3.2 | 8-K | 001-40464 | 3.2 | 6/15/2021 |
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31.1 |
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31.2 | X | ||||||
32.1* | X | ||||||
32.2* | X | ||||||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | |||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | |||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | |||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | |||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | |||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | |||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL And contained in Exhibit 101) |
* The certifications attached as Exhibit Index32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the SEC and are not to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act whether made before or after the date of this Quarterly Report on Formare incorporated by reference or are filed with this Quarterly Report on Form10-Q,each case as indicated therein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Zeta Global Holdings Corp. | ||||||
Date: August | By: | /s/ David A. Steinberg | ||||
David A. Steinberg | ||||||
President, Chief Executive Officer and Chairperson ( | ||||||
Date: August | By: | /s/ Christopher Greiner | ||||
Christopher Greiner | ||||||
Chief Financial Officer (Principal |
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