What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-13 · 153 added, 198 removed, 213 unchanged (62% of the section changed)

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This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “ Risk Factors ” in our Annual Report on Form 10-K or in other parts of this Quarterly Report on Form 10-Q.

See “ – Cautionary Note Regarding Forward-Looking Statements ” below.

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All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements.

Accordingly, any such statements are qualified in their entirety by reference to the information described under the caption “ Risk Factors ” in our Annual Report on Form 10-K and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Accordingly, any such statements are qualified in their entirety by reference to the information described under the caption “ Risk Factors ” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and elsewhere in this Quarterly Report on Form 10-Q (including in Item 1A herein).

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances.

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• ineligibility to file short-form registration statements on Form S-3, which may impair our ability to raise capital;

• failure to satisfy applicable listing standards of the Nasdaq Capital Market resulting in a potential delisting of our common stock;

• our failure to satisfy applicable listing standards of the Nasdaq Capital Market resulting in a potential delisting of our common stock;

• costs, risks and uncertainties related to the restatement of certain prior period financial statements;

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• any changes or developments in legislative, judicial, regulatory or cultural environments related to information collection, use and processing;

• challenges related to our buy-side clients that are destination marketing organizations and that operate as public/private partnerships;

• challenges related to our buy-side clients that are destination marketing organizations (“DMOs”) and that operate as public/private partnerships;

• any strain on our resources or diversion of our management’s attention as a result of being a public company;

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Direct Digital Holdings, Inc.

and its subsidiaries (collectively the “Company,” “DDH,” “we,” “us” and “our”), headquartered in Houston, Texas, is an end-to-end, full-service programmatic advertising platform primarily focused on providing advertising technology, data-driven campaign optimization and other solutions intended for underserved and less efficient markets on both the sell- and buy-side of the digital advertising ecosystem.

and its subsidiaries (collectively the “Company,” “DDH,” “we,” “us” and “our”), headquartered in Houston, Texas, is an end-to-end, full-service advertising and marketing platform primarily focused on providing advertising technology, data-driven campaign optimization and other solutions to help brands, agencies and middle market businesses deliver successful marketing results that drive return on investment ("ROI") across both the sell- and buy-side of the digital advertising ecosystem.

Direct Digital Holdings, Inc.

is the holding company that, since the completion of our initial public offering on February 15, 2022, owns certain common units, and serves as the manager of DDH LLC, which operates the business formed in 2018 through the acquisition of Colossus Media, LLC ("Colossus Media"), a sell-side marketing platform, and Huddled Masses, LLC (“Huddled Masses™” or “Huddled Masses”), a buy-side marketing platform.

In late September 2020, DDH LLC acquired Orange142, LLC (“Orange 142”) to further bolster its overall programmatic buy-side advertising platform and enhance its offerings across multiple industry verticals such as travel, education, healthcare, financial services, consumer products and other sectors, with particular emphasis on small- and mid-sized businesses transitioning into digital with growing digital media budgets.

is the holding company for DDH LLC the business formed by the Company's founders in 2018 through acquisitions of Colossus Media, LLC ("Colossus Media") and Huddled Masses, LLC (“Huddled Masses™” or “Huddled Masses”).

Colossus Media operates the Company’s proprietary sell-side programmatic platform operating under the trademarked banner of Colossus SSP.

In September 2020, DDH LLC acquired Orange142, LLC ("Orange 142") to further bolster its overall programmatic buy-side advertising platform and to enhance its offerings across multiple industry verticals.

In February 2022, the Company completed an initial public offering of its securities and, together with DDH LLC, effected the Organizational Transactions whereby Direct Digital Holdings, Inc.

became the sole managing member of DDH LLC, the holder of 100% of the voting interest of DDH LLC and the holder of 19.7% of the economic interests of DDH LLC, commonly referred to as an “Up-C” structure.

See Note 6 — Related Party Transactions to our condensed consolidated financial statements.

In October 2024, the Company announced the unification of its buy-side businesses, Orange 142 and Huddled Masses.

All of the subsidiaries are incorporated in the state of Delaware, except for DDH LLC, which was formed under the laws of the State of Texas.

Direct Digital Holdings, Inc.

owns 100% of the voting interest in Direct Digital Holdings, LLC.

As of September 30, 2024, DDH owns 25.9% of the economic interest in Direct Digital Holdings, LLC.

See further discussion of the Up-C structure in Note 6 of our condensed consolidated financial statements.

Direct Digital Holdings, LLC was formed on June

21, 2018 and acquired by DDH on February 15, 2022 in connection with the Organizational Transactions.

Direct Digital Holdings, LLC’s wholly-owned subsidiaries are as follows:

Subsidiary Current %

Ownership Business

owns 100% of the voting interest in DDH LLC and as of March 31, 2025, DDH owns 39.6% of the economic interest in DDH LLC.

DDH LLC was formed on June 21, 2018 and acquired by the Company on

February 15, 2022 in connection with the Organizational Transactions.

DDH LLC’s wholly-owned subsidiaries are as follows:

Subsidiary Business

Segment Date of Formation Date of

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Huddled Masses, LLC Buy-side November 13, 2012 June 21, 2018

Colossus Media operates our proprietary sell-side programmatic platform operating under the trademarked banner of Colossus SSP™ (“Colossus SSP”).

Colossus SSP is a stand-alone sell-side platform ("SSP") intended to deliver targeted advertising to diverse and multicultural audiences as well as to general audiences, including African Americans, Latin Americans, Asian Americans and LGBTQIA+ customers, as well as general audiences.

Both buy-side advertising businesses, Orange 142 and Huddled Masses, offer technology-enabled advertising solutions and consulting services to clients through demand side platforms (“DSPs”).

Providing both the front-end, buy-side advertising businesses coupled with our proprietary sell-side operations enables us to curate the first through the last mile in the ad tech ecosystem execution process to drive higher results.

Operating segments are components of an enterprise for which separate financial information is available and evaluated regularly by our chief operating decision maker (“CODM”) for purpose of allocating resources and assessing performance.

Our sell-side advertising business, operated through Colossus Media, provides advertisers of all sizes a programmatic advertising platform that automates the sale of ad inventory between advertisers and marketers leveraging proprietary technology.

Our platform reaches across a wide array of media partners to help brands, media holding companies, independent agencies or emerging businesses reach audiences, curated creators and helps publishers find the right brands for their readers, as well as drive advertising yields across all channels:

web, mobile, and connected TV ("CTV").

Our platform offers advertising inventory and creator content that aligns with brands, media holding companies and mid-market agencies focusing on key growth audiences.

Our buy-side advertising business, now operating as Orange 142, provides technology-enabled advertising solutions and consulting services to clients through multiple leading demand side platforms (“DSPs”), across multiple industry verticals such as travel and tourism, higher education, energy, healthcare, financial services, consumer products and other sectors with particular emphasis on small and mid-sized businesses transitioning into digital with growing digital media budgets.

In the digital advertising space, buyers, particularly small and mid-sized businesses, can potentially achieve significantly higher ROI on their advertising spend compared to traditional media advertising by leveraging data-driven over-the-top/connected TV ("OTT/CTV"), video and display, in-app, native including programmatic, search, social, influencer marketing and audio advertisements that are delivered both at scale and on a highly targeted basis.

Providing both the front-end, buy-side advertising operations coupled with our proprietary sell-side operations enables us to curate the first through the last mile in the ad tech ecosystem execution process to drive higher results.

Our CODM is our Chairman and Chief Executive Officer.

Revenues and operating income (loss) are used by our CODM to assess performance of our operating segments and allocate resources.

We operate as two reportable segments:

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On October 18, 2024, we received a deficiency letter (the “Letter”) from the Listing Qualifications Department of Nasdaq (the "Staff") notifying the Company that it was not in compliance with the minimum stockholders’ equity requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5550(b)(1).

Nasdaq Listing Rule 5550(b)(1) requires companies listed on Nasdaq to maintain stockholders’ equity of at least $2.5 million (the “Stockholders’ Equity Requirement”).

This rule requires companies listed on the Nasdaq Capital Market to maintain stockholders’ equity of at least $2.5 million (the “Stockholders’ Equity Requirement”).

The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024 reported a stockholders’ deficit of $8.77 million.

The Letter further noted that as of the letter date, the Company did not have a market value of listed securities of $35 million, or net income from continued operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years, which are the alternative quantitative standards to the Stockholders’ Equity Requirement for continued listing on Nasdaq.

In accordance with the Nasdaq Listing Rules, the Company was provided 45 calendar days, or until December 2, 2024, to submit a plan to regain compliance (the “Compliance Plan”).

If the Compliance Plan is acceptable to the Staff, the Staff may grant an extension of up to 180 calendar days from the date of the Letter.

If the Staff does not accept the Compliance Plan, the Staff will provide written notification to the Company that the Compliance Plan has been rejected.

At that time, the Company may appeal the Staff’s determination to a Nasdaq Hearings Panel.

The Company intends to submit a Compliance Plan on or before December 2, 2024.

Further, the Company intends to take all reasonable measures available to regain compliance under the Nasdaq Listing Rules and remain listed on Nasdaq, including by capital-raising activities such as through the Purchase Agreement, defined below, for the equity reserve facility described in Note 4 — Stockholders’ Deficit and Stock-Based Compensation.

However, there can be no assurance that Nasdaq will approve the Compliance Plan or that the Company will ultimately regain compliance with all applicable requirements for continued listing.

Neither the Letter nor the Company’s non-compliance have an immediate effect on the listing or trading of the Company’s Class A Common Stock.

The Letter further noted that as of the letter date, the Company did not have a market value of listed securities of $35.0 million, or net income from continued operations of $0.5 million in the most recently completed fiscal year or in two of the last three most recently completed fiscal years, which are the alternative quantitative standards to the Stockholders’ Equity Requirement for continued listing on Nasdaq Capital Market.

Following the Staff’s review of the Company’s compliance plan (the “Plan”), on February 4, 2025, the Staff notified the Company that it had granted the Company an extension (the “Extension”) through March 31, 2025, and later extended to April 16, 2025, to complete the Plan and evidence compliance with the Stockholders’ Equity Requirement.

As of April 16, 2025, the Company had not gained compliance with the Stockholders’ Equity Requirement.

Accordingly, on April 17, 2025, the Company received a Staff determination letter from the Staff stating that the Company did not meet the terms of the extension because it did not complete its capital raising initiative and demonstrate compliance with the Stockholders’ Equity Requirement, and therefore that trading of the Company’s Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”) would be suspended at the opening of business on April 28, 2025 and subsequently delisted.

The Company has filed an appeal and request a Hearing before a Nasdaq Hearings Panel (the “Panel”) which Hearing request was granted and set for late May 2025.

At the hearing, the Company will present its plan for regaining and sustaining compliance with the Stockholders’ Equity Requirement for continued listing.

However, there can be no assurance that the Hearings Panel will grant the Company an extension of time to regain compliance, or that the Company will be able to regain compliance during any extension period.

During the appeal process, there is a stay on Nasdaq's delisting and the Company’s Class A Common Stock will continue to trade on The Nasdaq Capital Market under the symbol “DRCT.” If the Company is not able to regain compliance with Nasdaq’s continued listing requirements within the time period permitted by Nasdaq, then the Company’s securities will be delisted from Nasdaq.

See “Risk Factors” in Item 1A herein.

Equity Reserve Facility.

On October 18, 2024, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with New Circle Principal Investments LLC, a Delaware limited liability company (“New Circle”), pursuant to which New Circle has committed to purchase, subject to certain limitations, up to $20 million (the “Total Commitment”) of the Company’s Class A common stock, par value $0.001 per share (the “Class A Common Stock”).

Under the applicable Nasdaq rules, the Company may not issue to New Circle under the Purchase Agreement more than 19.99% of the shares of all classes of the Company’s common stock outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange Cap”), unless (i) the Company obtains stockholder approval to issue shares of its Class A Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average purchase price per share paid by New Circle for all shares of the Company’s Class A Common Stock, if any, that the Company elects to sell to New Circle under the

Purchase Agreement equals or exceeds certain minimums permitted under the rules of the Nasdaq Stock Market.

On October 18, 2024, the Company entered into a Share Purchase Agreement (the “Purchase Agreement and the facility as a whole, the “Equity Reserve Facility”) with New Circle Principal Investments LLC, a Delaware limited liability company (“New Circle”), pursuant to which New Circle has committed to purchase, subject to certain limitations, up to $20 million (the “Total Commitment”) of the Company’s Class A Common Stock.

The purchase price of the shares that may be sold to New Circle under the Purchase Agreement will be based on an agreed upon fixed discount to the market price of our Class A Common Stock as computed under the Purchase Agreement.

As consideration for New Circle’s irrevocable commitment to purchase shares of the Company’s Class A Common Stock upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, the Company paid New Circle structuring and legal fees of less than $0.1 million.

In addition, the Company will pay a commitment fee of $150,000 to New Circle, which we may issue in the form of the Company’s Class A Common Stock (the “Commitment Fee”), the market value of which shall be determined based on the closing price of the Class A Common Stock on the date the Registration Statement is declared effective by the SEC;

provided, however, that the Company may, in its sole discretion, elect to pay any portion of the Commitment Fee in cash, so long as such amount is paid on or prior to the day of filing of the Registration Statement filed in order to register the Company’s Class A Common Stock sold under the Purchase Agreement.

The Company sold 1,580,000 shares of the Company's Class A Common Stock for $3.0 million during the year ended December 31, 2024.

During the three months ended March 31, 2025, the Company sold 1,539,351 shares of the Company's Class A Common Stock for $2.0 million.

Subsequently and through the date of this report, the Company sold an additional 1,020,000 shares of the Company's Class A Common Stock for $0.5 million.

The Purchase Agreement will automatically terminate on the earliest of (i) the 36-month anniversary of the Purchase Agreement, (ii) the date on which New Circle shall have made payment to the Company for Class A Common Stock equal to the Total Commitment or (iii) the date any statute, rule, regulation, executive order, decree, ruling or injunction that would prohibit any of the transactions contemplated by the Purchase Agreement goes into effect.

The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty, upon five trading days’ prior written notice to New Circle so long as (a) there are no outstanding purchase notices under which our Class A Common Stock have yet to be issued and (b) the Company has paid all amounts owed to New Circle pursuant to the Purchase Agreement.

Relationship with Sell-Side Customer.

On May 10, 2024, the Company was the subject of a defamatory article / blog post which the Company believes was part of a coordinated misinformation campaign.

In connection with this post, one of the Company’s sell-side customers paused its connection to the Company while the allegations were investigated.

This customer reconnected the Company on May 22, 2024 and sell-side volumes have resumed but not yet at the levels experienced prior to the pause in May 2024.

The Company is actively working with its partners to achieve prior volume levels.

On May 14, 2024, the Company filed a lawsuit against the author of the defamatory article and is vigorously pursuing its rights.

The Company cannot make any predictions about the final outcome of this litigation matter or the timing thereof.

Buy-side Unification.

On October 31, 2024, the Company announced the unification of its buy-side businesses, Orange 142 and Huddled Masses.

The unification did not have a material impact on the Company's business operations nor on the Company's condensed consolidated financial statements.

Key Factors Affecting Our Performance

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Our customers (or buyers) include ad exchanges, DSPs, agencies and individual advertisers.

We have broad exposure to the ecosystem of buyers, reaching on average approximately 176,000 advertisers per month in the three months ended September 30, 2024, an increase of 71% over the 103,000 advertisers per month in the three months ended September 30, 2023.

We have broad exposure to the ecosystem of buyers, reaching on average approximately 160,000 advertisers per month in the three months ended March 31, 2025, an increase of 19,000 over the 141,000 advertisers per month in the three months ended March 31, 2024.

As spending on programmatic advertising increasingly becomes a larger share of the overall ad spend, advertisers and agencies are seeking greater control of their digital advertising supply chains.

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We also strive to retain existing publishers and add new publishers.

Establishing multiple header bidding integrations by leveraging our technology capabilities allows us to maximize our access to publishers’ ad formats, devices and various properties that a publisher may own.

We may also up-sell additional products including our header bidding management, identity, and audience solutions.

We enter into master service agreements with our publishers which, among other terms, set a fixed rate for content to be sold on Colossus SSP.

Our strategy on the sell-side advertising business represents growth

potential, and we believe we are well positioned to be able to bring underserved multicultural publishers into the advertising ecosystem, thereby increasing our value proposition across all customers, including large advertisers and agencies.

Our proprietary Colossus SSP platform was custom developed with a view towards the specific challenges facing small and mid-sized publishers with the belief that smaller publishers often offer a more engaged, highly-valued, unique following but experience technological and budgetary constraints on the path to monetization.

Our business strategy on the sell-side also presents significant growth potential, as we believe we are well positioned to provide advertisers of all sizes with extensive market reach connecting partners with curated creators and audiences, optimizing the entire media chain to drive better results for clients.

We believe that our technology curates unique, highly optimized audiences informed by data analytics, artificial intelligence and algorithmic machine-learning technology, resulting in increased campaign performance.

Monetizing ad impressions for publishers and buyers

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In case of real-time bidding (“RTB”) media buys, many DSPs would place bids to the impressions being offered by the publisher during the auction.

The advertiser that bids a higher amount compared to other advertisers will win the bid and pay the second highest price for the winning impression to serve the ads.

The advertiser that bids a higher amount compared to other advertisers will win the bid.

We continuously review our available inventory from existing publishers across every format (mobile, desktop, digital video, OTT, CTV, and rich media).

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In the advertising industry, inventory quality is assessed in terms of invalid traffic (“IVT”) which can be impacted by fraud such as “fake eyeballs” generated by automated technologies set up to artificially inflate impression counts.

Through our platform design and proactive IVT mitigation efforts, we address and minimize IVT on a number of fronts, including sophisticated technology, which detects and avoids IVT on the front end;

direct publisher and inventory relationships, for supply path optimization;

and ongoing campaign and inventory performance review, to ensure inventory quality and brand protection controls are in place.

Through our platform design and proactive IVT mitigation efforts, including our accredited verification process, we address IVT on a number of fronts, including sophisticated technology, which detects and avoids IVT on the front end and back end, direct publisher and inventory relationships for supply path optimization and ongoing campaign and inventory performance reviews to ensure inventory quality and brand protection controls are in place.

Growing access to valuable ad impressions

Historically, our growth has been driven by a variety of factors including increased access to mobile web (display and video) and mobile app (display and video) impressions and desktop video impressions.

Our performance is affected by our ability to maintain and grow our access to valuable ad impressions from current publishers as well as through new relationships with publishers.

For the three months ended September 30, 2024, we processed over 513.3 billion average monthly bid requests, down 51% from 2023, reflecting the pause in service by one of our sell-side customers in May 2024 which has not yet returned to pre-pause levels.

Historically, our growth has been driven by a variety of factors including increased access to a variety of impressions.

Advertisers and agencies often have a large portfolio of brands requiring a variety of campaign types and support for a wide array of inventory formats and devices, including OTT/CTV, video and display, in-app, native and audio.

Our omni-channel proprietary technology platform is designed to maximize these various advertising channels, which we believe is a further driver of efficiency for our buyers.

The platform is comprised of publishers across multiple channels including OTT/CTV, display, native, in-app, online video (“OLV”), audio and digital out of home (“DOOH").

In the three months ended March 31, 2025, we processed approximately 188 billion average monthly impressions across many unique audiences including multicultural growth audiences at scale with 61 billion, or 33% , of those impressions from growing multicultural-focused audiences.

The Colossus SSP continues to expand its capabilities to give our content providers more avenues to distribute ad inventory such as OTT/CTV, digital audio, DOOH, etc.

and inform our publishers to enhance their ad selling needs by distributing content in various forms to meet the rising demands of the ad buying community.

Expanding and managing investments

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New Customer Acquisitions

On the buy-side of our business, our customers consist of purchasers of programmatic advertising inventory (ad space) looking to place their advertisements.

On the buy-side of our business, our customers consist of purchasers of programmatic advertising inventory (ad space).

We serve the needs of over 220 small and mid-sized clients, consisting of advertising space buyers, including small and mid-sized companies, large advertising holding companies (which may manage several agencies), independent advertising agencies and mid-market advertising service organizations.

We serve a variety of customers across multiple industries including travel/tourism (including destination marketing organizations (“DMOs”)), education, energy, consumer packaged goods, healthcare, financial services (including cryptocurrency technologies) and other industries.

We serve a variety of customers across multiple industries including travel/tourism (including DMOs), education, energy, consumer packaged goods, healthcare, financial services and other industries.

We are focused on increasing the number of customers that use our buy-side advertising businesses as their advertising partner.

Our long-term growth and results of operations will depend on our ability to attract more customers, including DMOs, across multiple geographies.

Our long-term growth and results of operations will depend on our ability to attract more customers, including DMOs, educational institutions and energy companies across multiple geographies.

Expand Sales to Existing Customers

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Our value proposition is complete alignment across our entire digital supply platform beginning with the first dollar in and last dollar out.

We are technology, DSP and media agnostic, and we believe our clients trust us to provide the best opportunity for success of their brands and businesses.

As a result, our clients have been loyal, with approximately 88% client retention amongst the clients that represent approximately 80% of our revenue during the nine months ended September 30, 2024.

We are technology and media agnostic, and we believe our clients trust us to provide the best opportunity for success of their brands and businesses.

As a result, our clients have been loyal, with approximately 81% client retention amongst the clients that represent approximately 80% of our revenue during the three months ended March 31, 2025.

In addition, we cultivate client relationships through our pipeline of managed and moderate serve clients that conduct campaigns through our platform.

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Only recently have small and mid-sized businesses begun to leverage the power of digital media in meaningful ways, as emerging technologies have enabled advertising across multiple channels in a highly localized nature.

Campaign efficiencies yielding measurable results and higher advertising ROI have prompted these companies to begin utilizing digital advertising on an accelerated pace.

Campaign efficiencies yielding measurable results and higher advertising ROI, as well as the needs driven by global economic and supply chain challenges, have prompted these companies to begin utilizing digital advertising on an accelerated pace.

We believe this market is rapidly expanding, and that small-to-mid-sized advertisers will continue to increase their digital spend.

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Based upon this analysis and our specific facts and circumstances, we concluded that we are a principal for the goods or services sold through both our sell-side advertising segment and our buy-side segment because we control the specified good or service before it is transferred to the customer and we are the primary obligor in the agreement with the customer.

Therefore, we report revenue on a gross basis inclusive of all supplier costs.

We pay suppliers for the cost of digital media, advertising inventory, data and any add-on services or features.

Therefore, we report revenue on a gross basis inclusive of all supplier costs and we pay suppliers for the cost of digital media, advertising inventory, data and any add-on services or features.

Our revenue recognition policies are discussed in more detail under “ —Critical Accounting Estimates and Related Policies ” set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

Cost of revenues

For cost of revenues for our sell-side advertising segment, we pay publishers a fee, which is typically a percentage of the value of the ad impressions monetized through our platform.

For the sell-side advertising segment, we pay publishers a fee, which is typically a percentage of the value of the ad impressions monetized through our platform.

Cost of revenues consists primarily of publisher media fees and data center co-location costs.

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Operating expenses consist of compensation expenses related to our executive, sales, finance and administrative personnel (including salaries, commissions, stock-based compensation, bonuses, benefits and taxes);

general and administrative expenses (including rent expense, professional fees, independent contractor costs, selling and marketing fees, administrative and operating system subscription costs, insurance, amortization expense related to our intangible assets);

and other expenses (including transactions that are unusual in nature or which are occurring infrequently).

Other income (expense), net

general and administrative expenses (including rent expense, professional fees, independent contractor costs, selling and marketing fees, administrative and operating system subscription costs, insurance and amortization expense related to our intangible assets);

and other expense (including transactions that are unusual in nature or which are occurring infrequently).

Other income (expense)

Other income.

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Interest expense is mainly related to our debt as further described below in “ —Liquidity and Capital Resources.

Loss on early termination of line of credit.

In January 2023, we entered into a Loan and Security Agreement (the “Loan Agreement”), by and among Silicon Valley Bank (“SVB”), which provided for a revolving credit facility (the “Credit Facility”).

In March 2023, we issued a notice of termination and recognized a loss on the write-off of the deferred financing fees.

Derecognition of tax receivable agreement liability.

The Company derecognized its tax receivable agreement liability in connection with the full valuation allowance recorded on the Company's deferred tax assets.

Expenses for Equity Reserve Facility.

Expenses are is mainly related to our Equity Reserve Facility as further described below in “ —Liquidity and Capital Resources.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

Comparison of the Three Months Ended March 31, 2025 and 2024

The following tables set forth our condensed consolidated results of operations for the periods presented (in thousands).

The period-to-period comparison of results is not necessarily indicative of results for future periods.

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2024 2023 Amount % 2024 2023 Amount %

Three Months Ended March 31, Change

2025 2024 Amount %

Sell-side advertising $ 2,028 $ 16,500 $ (14,472) (88) %

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Operating expenses 6,317 7,805 (1,488) (19) %

(Loss) income from operations (3,658) 4,494 (8,152) (181) % (8,529) 6,607 (15,136) (229) %

Other income (expense), net 3,887 (977) 4,864 (498) % 1,323 (3,229) 4,552 (141) %

Income (loss) before income taxes 229 3,517 (3,288) (93) % (7,206) 3,378 (10,584) (313) %

Income tax expense 6,606 166 6,440 3880 % 6,132 166 5,966 3594 %

Net (loss) income $ (6,377) $ 3,351 $ (9,728) (290) % $ (13,338) $ 3,212 $ (16,550) (515) %

Loss from operations (3,924) (2,807) (1,117) 40 %

Other expense, net (2,016) (1,212) (804) 66 %

Loss before income taxes (5,940) (4,019) (1,921) 48 %

Income tax benefit — (200) 200 (100) %

Net loss $ (5,940) $ (3,819) $ (2,121) 56 %

Adjusted EBITDA (1)

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

Our revenues of $9.1 million for the three months ended September 30, 2024 decreased by $50.4 million, or 85%, from $59.5 million for the three months ended September 30, 2023.

Sell-side advertising revenue decreased $49.4 million, or 96%, primarily due to a decrease in impression inventory.

This decrease was primarily caused by one of the Company’s sell-side customers pausing its connection to the Company during the second quarter while it investigated allegations made against the Company in a defamatory article / blog post which the Company believes was part of a coordinated misinformation campaign.

This customer reconnected the Company on May 22, 2024 and sell-side volumes have resumed but not yet at the levels experienced prior to the pause in May 2024, which affected the entirety of the quarter ended September 30, 2024.

The Company sold approximately 0.2 billion average monthly impressions over the three months ended September 30, 2024, a decrease of 97% from the prior period.

Buy-side revenue decreased $1.0 million, or 12%, over the three months ended September 30, 2023 due to a $0.7 million decrease in spending from our existing customer base, a $0.7 million decrease from completion of certain one-time campaigns in 2023 partially offset by growth from existing and new customers.

Our revenues of $53.2 million for the nine months ended September 30, 2024 decreased by $62.9 million, or 54%, from $116.1 million for the nine months ended September 30, 2023.

Sell-side advertising revenue decreased $56.0 million, or 63%, primarily due to a decrease in impression inventory, resulting from the customer suspension that occurred during May 2024, which negatively affected revenue in the second and third quarters of 2024.

The Company sold approximately 1.4 billion average monthly impressions over the nine months ended September 30, 2024, a decrease of 64% from the prior period.

Buy-side revenue decreased $6.9 million, or 25%, over the nine months ended September 30, 2023 due to a $4.5

million decrease in spending from our existing customer base and a $3.6 million decrease from completion of certain one-time campaigns in 2023 partially offset by growth from existing and new customers.

Our revenues of $8.2 million for the three months ended March 31, 2025 decreased by $14.1 million, or 63%, from $22.3 million for the three months ended March 31, 2024.

Sell-side advertising revenue decreased $14.5 million, or 88% while buy-side revenue increased $0.4 million, or 6%, compared to the prior year period.

The decrease in sell-side advertising revenue was primarily due to a decrease in impression inventory.

Management attributes the cause of this decrease to unexpected business disruption amongst our partners, advertisers and clients caused by multiple short attacks and a market-discredited blog post against our supply-side platform, Colossus SSP, in mid May 2024.

Sell-side volumes have resumed but not yet at the levels experienced prior to the post in May 2024, which negatively affected revenue in the first quarter of 2025.

The Company sold approximately 188 million average monthly impressions in the first quarter of 2025, a decrease of 90% from the prior period.

The increase in buy-side revenue of $0.4 million was due to growth from new and existing customers of $2.6 million, including $1.2 million from customers in new verticals, partially offset by a $2.2 million decrease in spending from customers, including a $1.0 million decrease from customers no longer actively purchasing from the Company.

Cost of revenues

Consistent with the overall decrease in revenues, cost of revenues of $5.6 million for the three months ended September 30, 2024 decreased by $42.2 million, or 88%, from $47.7 million for the three months ended September 30, 2023.

Sell-side advertising cost of revenues decreased $42.0 million, to $2.7 million, or 121% of revenue for the three months ended September 30, 2024, compared to $44.6 million, or 86% of revenue, for the same period in 2023.

The decrease in costs was primarily due to the related decrease in revenue, while the increase as a percentage of revenue was due to fixed costs remaining at a level consistent with the prior year.

Buy-side advertising cost of revenues decreased $0.2 million, to $2.9 million, or 42% of revenue for the three months ended September 30, 2024, compared to $3.1 million, or 40% of revenue, for the same period in 2023.

Consistent with the overall decrease in revenues, cost of revenues of $38.8 million for the nine months ended September 30, 2024 decreased by $49.1 million, or 56% from $87.8 million for the nine months ended September 30, 2023.

Sell-side advertising cost of revenues decreased $46.5 million, to $30.7 million, or 93% of revenue for the nine months ended September 30, 2024, compared to $77.2 million, or 87% of revenue, for the same period in 2023.

The decrease in costs was primarily due to the related decrease in revenue, while the 6% increase as a percentage of revenue was due to an increase in fixed costs of approximately $0.5 million related to an increase in server capacity and approximately $1.1 million related to new analytic and technology-related costs to support the growth as well as the mix and concentration of publishers and the related costs.

Buy-side advertising cost of revenues decreased $2.6 million, to $8.1 million, or 40% of revenue for the nine months ended September 30, 2024, compared to $10.7 million, or 39% of revenue, for the same period in 2023.

Gross profit was $3.5 million, or 39% of revenue, for the three months ended September 30, 2024, compared to $11.8 million, or 20% of revenue, for the same period in 2023, reflecting a decrease of $8.2 million, or 70%.

The change in margin for the three months ended September 30, 2024 is attributable to the mix in revenue between our business segments as our sell-side segment has higher cost of revenues compared to our buy-side segment, as well as the consistent level of fixed costs not covered by current period sell-side revenue.

Sell-side advertising gross profit decreased $7.5 million for the three months ended September 30, 2024 as compared to the same period in 2023, primarily due to a consistent level of fixed costs not covered by current period sell-side revenue.

Sell-side advertising gross margin was (21)% and 14% for the three months ended September 30, 2024 and 2023, respectively.

Buy-side advertising gross profit decreased $0.8 million for the three months ended September 30, 2024, as compared to the same period in the prior year, primarily due to the decrease in revenue.

Buy-side advertising gross margin was 58% and 60% for the three months ended September 30, 2024 and 2023, respectively.

Gross profit was $14.4 million, or 27% of revenue, for the nine months ended September 30, 2024, compared to $28.3 million, or 24% of revenue, for the same period in 2023, reflecting a decrease of $13.8 million or 49%.

The change in margin for the nine months ended September 30, 2024 is attributable to the mix in revenue between our business segments as our sell-side segment has higher cost of revenues compared to our buy-side segment, as well as the additional sell-side fixed costs related to an increase in server capacity and new analytic and technology-related costs.

Sell-side advertising gross profit decreased $9.5 million for the nine months ended September 30, 2024 as compared to the same period in 2023, primarily due to the increase in fixed costs of approximately $1.6 million related to our servers and analytic and technology-related costs and the decrease in revenues.

Sell-side advertising gross margin was 7% and 13% for the nine months ended September 30, 2024 and 2023, respectively.

Buy-side advertising gross profit decreased $4.3 million for the nine months ended September 30, 2024, as compared to the same period in the prior year, primarily due to the decrease in revenue.

Buy-side advertising gross margin was 60% and 61% for the nine months ended September 30, 2024 and 2023, respectively.

Cost of revenues of $5.8 million for the three months ended March 31, 2025 decreased by $11.5 million, or 67% from $17.3 million for the three months ended March 31, 2024.

Sell-side advertising cost of revenues decreased $12.2 million, to $2.6 million, or 130% of sell-side revenue for the three months ended March 31, 2025, compared to $14.8 million, or 90% of revenue of sell-side revenue, for the same period in 2024.

The decrease in costs was primarily due to the related decrease in revenue, while the 40% increase as a percentage of revenue was due to fixed costs not decreasing at the same

proportionate rate as the revenue decline.

Fixed cost of sell-side revenues for the three months ended March 31, 2025 of $0.9 million decreased by $0.3 million, or 25%, from fixed cost of sell-side revenues of $1.2 million for the same period in 2024.

Buy-side advertising cost of revenues increased $0.7 million, to $3.1 million, or 51% of buy-side revenue for the three months ended March 31, 2025, compared to $2.5 million, or 43% of buy-side revenue, for the same period in 2024.

Gross profit was $2.4 million, or 29% of revenue, for the three months ended March 31, 2025, compared to $5.0 million, or 22% of revenue, for the same period in 2024, reflecting a decrease of $2.6 million, or 52%.

The change in gross profit margin percentage for the three months ended March 31, 2025 is attributable to the mix in revenue between our business segments as our sell-side segment has higher cost of revenues compared to our buy-side segment, as well as the lower sell-side fixed costs related to server capacity, analytic, development and technology-related costs.

Sell-side advertising gross profit decreased $2.3 million for the three months ended March 31, 2025 as compared to the same period in 2024, primarily due to the decrease in revenue partially offset by lower fixed costs.

Sell-side advertising gross margin percentage was (30)% and 10% for the three months ended March 31, 2025 and 2024, respectively.

Buy-side advertising gross profit decreased $0.3 million for the three months ended March 31, 2025, as compared to the same period in the prior year.

Buy-side advertising gross margin percentage was 49% and 57% for the three months ended March 31, 2025 and 2024, respectively, with the decrease in gross margin percentage due to higher cost to provide services to customers and the mix of services provides.

Operating expenses

The following table sets forth the components of operating expenses for the periods presented (in thousands):

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2024 2023 Amount % 2024 2023 Amount %

Three Months Ended March 31, Change

2025 2024 Amount %

Compensation, tax and benefits $ 3,664 $ 4,524 $ (860) (19) %

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Compensation, taxes and benefits

Compensation, taxes and benefits of $3.5 million, decreased by $1.2 million, or 26%, for the three months ended September 30, 2024 from $4.7 million for the same period in 2023.

The decrease is due primarily to a decrease in bonus and commissions expense related to the decrease in revenue.

Sequentially, compensation, taxes and benefits decreased by $0.6 million, or 15%, from $4.2 million for the three months ended June 30, 2024 primarily due to lower payroll costs resulting from headcount reductions made effective July 1, 2024.

Compensation, taxes and benefits of $12.2 million, decreased by $0.7 million, or 6%, for the nine months ended September 30, 2024 from $12.9 million for the same period in 2023.

The decrease is primarily due to a decrease in bonus and commission expense related to the decrease in revenue.

On July 1, 2024, we executed an internal reorganization plan that included a staff reduction, a pause on hiring and cost savings measures, which we anticipate will lower certain ongoing expenses, especially as the Company incurs additional one-time expenses to regain compliance with respect to delinquent SEC filings.

General and administrative expenses

General and administrative (“G&A”) expenses of $3.6 million for the three months ended September 30, 2024 increased from $2.5 million for the same period in 2023.

G&A expenses as a percentage of revenue was 40% and 4% for the three months ended September 30, 2024 and 2023, respectively.

During the three months ended September 30, 2024, we incurred $1.1 million in costs to regain compliance with respect to delinquent SEC filings as well as $0.3 million higher legal expenses compared to the prior year.

Sequentially, G&A expenses decreased by $0.2 million, or 5%, from $3.8 million for the three months ended June 30, 2024 primarily due to lower sales and marketing expenses, travel and franchise tax expense, partially offset by $0.9 million of higher compliance and legal costs.

General and administrative (“G&A”) expenses of $10.8 million for the nine months ended September 30, 2024 increased from $8.7 million for the same period in 2023.

G&A expenses as a percentage of revenue was 20% and 8% for the nine months ended September 30, 2024 and 2023, respectively.

During the nine months ended September 30, 2024, we incurred $1.3 million in costs to regain compliance with respect to delinquent SEC filings, $0.4 million higher legal expenses and $0.4 million higher franchise tax expense.

We expect to continue to invest in and incur additional expenses associated with our operation as a public company, including increased professional fees, investment in automation, and compliance costs associated with developing the requisite infrastructure required for internal controls.

However, on July 1, 2024, we executed an internal reorganization plan that included a staff reduction, a pause on hiring and cost savings measures, which we anticipate will lower certain ongoing expenses, especially as the Company ceases incurring additional one-time expenses to regain compliance with respect to delinquent SEC filings, which have now all been filed.

Other income (expense), net

The following table sets forth the components of other income (expense), net for the periods presented (in thousands).

Three Months Ended

September 30, Change Nine Months Ended September 30, Change

2024 2023 Amount % 2024 2023 Amount %

Compensation, taxes and benefits of $3.7 million, decreased by $0.9 million, or 19%, for the three months ended March 31, 2025 from $4.5 million for the same period in 2024 primarily due to lower payroll costs resulting from a staff reduction made effective July 1, 2024 when we began to execute an internal reorganization plan that included a staff reduction, a pause on hiring and cost savings measures, which has lowered certain ongoing expenses that positively affected the current period.

General and administrative expense

General and administrative (“G&A”) expenses of $2.7 million for the three months ended March 31, 2025 decreased by $0.6 million for the same period in 2024.

G&A expenses as a percentage of revenue was 33% and 15% for the three months ended March 31, 2025 and 2024, respectively.

The decrease in G&A expenses was primarily due to lower professional fees and sales and marketing expenses.

We expect to continue to invest in and incur additional expenses associated with our operation as a public company, including professional fees, inve stment in automation, and compliance costs associated with developing the requisite infrastructure required for internal controls.

However, on July 1, 2024, we executed an internal reorganization plan that included a staff reduction, a pause on hiring and cost savings measures, which have lowered certain ongoing expenses, especially as the Company ceased incurring additional one-time expenses to regain compliance with respect to delinquent SEC filings, which were filed in the fourth quarter of 2024.

Other expense, net

The following table sets forth the components of other expense, net for the periods presented (in thousands):

Three Months Ended March 31, Change

2025 2024 Amount %

Interest expense $ (1,846) $ (1,297) $ (549) 42 %

Expenses for Equity Reserve Facility (198) — $ (198) nm

Other income 28 85 (57) (67) %

Loss on early termination of line of credit — — — nm — (300) 300 nm

Derecognition of tax receivable agreement liability 5,201 — 5,201 nm 5,201 — 5,201 nm

Total other income (expense), net $ 3,887 $ (977) $ 4,864 nm $ 1,323 $ (3,229) $ 4,552 nm

Total other expense, net $ (2,016) $ (1,212) $ (804) 66 %

nm – not meaningful

Other income (expense), net primarily includes $5.2 million relating to the derecognition of tax receivable agreement liability in connection with the full valuation allowance recorded on the Company’s deferred tax assets during the three months ended September 30, 2024.

Other income (expense), net for the three months ended September 30, 2024 and 2023 also consists of $1.4 million and $1.1 million, respectively, of interest expense.

Interest expense increased by $0.4 million due to additional net borrowings of $12.7 million under the Company’s credit facilities, as well as higher interest rates.

Other income (expense), net for the nine months ended September 30, 2024 primarily includes $5.2 million relating to the derecognition of tax receivable agreement liability in connection with the full valuation allowance recorded on the Company’s deferred tax assets.

Other income (expense), net also consists of $4.1 million and $3.1 million, respectively, of interest expense.

Interest expense increased by $1.0 million due to additional net borrowings of $12.7 million under the Company’s credit facilities, as well as higher interest rates.

Lastly, other income (expense), net for the nine months ended September 30, 2023 also includes $0.3 million related to the loss on early termination of the line of credit with SVB.

Total other expense, net for the three months ended March 31, 2025 and 2024 primarily consists of $1.8 million and $1.3 million, respectively, of interest expense.

Interest expense increased by $0.5 million compared to the prior period primarily due to the debt discount amortization partially offset by lower interest rates.

Liquidity and Capital Resources

Going Concern

As discussed in Note 9 to the condensed consolidated financial statements, on May 10, 2024, the Company was the subject of a defamatory article / blog post which the Company believes was part of a coordinated misinformation campaign.

As discussed in Note 9 — Commitments and Contingencies to our condensed consolidated financial statements, on May 10, 2024, the Company was the subject of a defamatory article / blog post which the Company believes was part of a coordinated misinformation campaign.

In connection with this post, one of the Company’s sell-side customers paused its connection to the Company for a couple of weeks in May 2024, which reduced sell-side sales volumes.

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However, there can be no assurance that the Company will be able to achieve prior volume levels with its partners or on the timing of achieving such volume levels.

Additionally, the Company (1) incurred a net loss of $13.3 million for the nine months ended September 30, 2024 reflecting the impact of the sell-side disruption described above and a decrease in customer spend on the buy-side, (2) reported an accumulated deficit of $6.6 million as of September 30, 2024, (3) reported cash and cash equivalents of $4.1 million as of September 30, 2024, (4) has borrowed $9.7 million and $8.7 million, respectively, as of September 30, 2024 and the date of this report, under the Credit Agreement which matures in July 2025, (5) was notified on April 17, 2024 that the Company’s auditor had resigned, (6) was unable to timely file its 2023 annual report and quarterly reports for the first two quarters of 2024 and (7) was notified by Nasdaq on October 18, 2024 that it was not in compliance with Nasdaq's minimum stockholders' equity requirement.

The delay in filing the Company’s annual and quarterly reports disrupted existing capital-raising efforts and created additional audit, legal and other expenses.

Additionally, the Company (1) incurred a net loss of $5.9 million for the three months ended March 31, 2025 including the impact of the sell-side disruption described above, (2) reported an accumulated deficit of $11.1 million as of March 31, 2025, (3) reported cash and cash equivalents of $1.8 million as of March 31, 2025, (4) has borrowed $3.7 million as of March 31, 2025 and the date of this report, under the Credit Agreement (as amended, the “Credit Agreement”), dated July 7, 2023, with East West Bank (“EWB”), as lender, which matures in July 2025, (5) was notified by Nasdaq on October 18, 2024 that it was not in compliance with Nasdaq's minimum stockholders' equity requirement and is currently subject to a delisting letter and a hearings and appeal process.

These factors raise substantial doubt about the Company’s ability to continue as a going concern over the next twelve months.

The Company anticipates sources of liquidity to include cash on hand and cash flow from operations and has taken several actions to address liquidity concerns.

These actions include (1) a plan to reduce expenses through a staff reduction, a pause on hiring and cost savings measures that were executed on July 1, 2024, (2) working with lenders to provide temporary various relief from debt covenants (see Note 3 — Long-Term Debt in the condensed consolidated financial statements) while rebuilding sell-side volumes, (3) putting in place a program to raise capital through an equity reserve facility (see Note 4 - Stockholders' Deficit and Stock-Based Compensation in the condensed consolidated financial statements), (4) regaining compliance with respect to delinquent SEC filings on October 15, 2024 which will allow the Company to access the capital markets as well as other financing sources and (5) a plan to achieve compliance with

Nasdaq's minimum stockholders' equity requirement.

The Company anticipates sources of liquidity to include cash on hand, cash flow from operations and cash generated from its sales under the Company's Equity Reserve Facility and has taken several actions to address liquidity concerns.

These actions include (1) a plan to reduce expenses through a staff reduction, a pause on hiring and cost savings measures that were executed on July 1, 2024 with continuing cost saving impacts through March 31, 2025, (2) working with lenders to provide temporary various relief from debt covenants via amendments on October 15, 2024 and December 27, 2024 (see Note 3 — Long-Term Debt to our condensed consolidated financial statements) while rebuilding sell-side volumes, (3) putting in place a program to raise capital through an Equity Reserve Facility with stock sales continuing into 2025 (see Note 4 — Stockholders’ Deficit and Stock-Based Compensation to our condensed consolidated financial statements ) , and (4) a plan to achieve compliance with Nasdaq's minimum stockholders' equity requirements by raising additional funds in a registered or private offering.

There can be no assurance that the Company’s actions will be successful or that additional financing will be available when needed or on acceptable terms.

Sources of Liquidity

The following table summarizes our cash and cash equivalents, working capital, and availability under our Credit Agreement (as defined below) on September 30, 2024 and December 31, 2023 (in thousands):

September 30, 2024 December 31, 2023

The following table summarizes our cash and cash equivalents, and working capital deficit on March 31, 2025 and December 31, 2024 (in thousands):

March 31, 2025 December 31, 2024

Cash and cash equivalents $ 1,789 $ 1,445

Working capital (1)

Working capital deficit

$ (6,597) $ (4,815)

Availability under Credit Agreement $ 300 $ 7,000

(1) Working capital as of September 30, 2024 includes all amounts owed to Lafayette Square, which is shown as current portion of long term debt until a waiver or amendment is finalized with Lafayette Square.

See Note 3 — Long-Term Debt in the notes to the condensed consolidated financial statements.

To fund our operations and service our debt thereafter and depending on our growth and results of operations, we may raise additional capital through the issuance of additional equity and/or debt, which could have the effect of diluting our stockholders.

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Equity Reserve Facility

The terms and conditions of the equity reserve facility we entered into with New Circle are further described in Note 4 — Stockholders’ Deficit and Stock-Based Compensation in the notes to the condensed consolidated financial statements.

The terms and conditions of the Equity Reserve Facility are further described in Note 4 — Stockholders’ Deficit and Stock-Based Compensation in the notes to the condensed consolidated financial statements.

Historical Cash Flows:

The following table sets forth our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

Nine Months Ended September 30,

Net cash (used in) provided by operating activities $ (7,095) $ 4,481

The following table sets forth our cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended March 31,

Net cash used in operating activities $ (2,708) $ (5,704)

Net cash used in investing activities (15) —

Net cash provided by (used in) financing activities 6,083 (2,909)

Net (decrease) increase in cash and cash equivalents $ (1,029) $ 1,435

Our cash and cash equivalents at September 30, 2024 were held for working capital and general corporate purposes.

The decrease in cash and cash equivalents compared with September 30, 2023, primarily resulted from $7.1 million in cash flows used in operating activities partially offset by $6.1 million in cash flows provided by financing activities.

Net cash provided by financing activities 3,067 3,922

Net increase (decrease) in cash and cash equivalents $ 344 $ (1,782)

Our cash and cash equivalents at March 31, 2025 were held for working capital and general corporate purposes.

The increase in cash and cash equivalents compared with December 31, 2024, primarily resulted from $3.1 million in cash flows provided by financing activities partially offset by $2.7 million in cash flows used in operating activities.

Operating Activities

For the Nine Months Ended September 30, 2024 and 2023

For the Three Months Ended March 31, 2025 and 2024

Cash provided by operating activities has typically been generated from net income and by changes in our operating assets and liabilities, particularly in the areas of accounts receivable and accounts payable and accrued expenses, adjusted for certain non-cash and non-operating expense items such as depreciation, amortization, stock-based compensation and deferred income taxes.

For the nine months ended September 30, 2024, net cash flows used in operating activities were $7.1 million and consisted of net loss of $13.3 million, offset by $4.1 million in adjustments for non-cash and non-operating items and

$2.1 million of cash inflows from working capital.

Adjustments for non-cash and non-operating items mainly consisted of depreciation and amortization expense of $2.3 million, stock-based compensation expense of $0.8 million and deferred tax expense of $6.1 million partially offset by $5.2 million of derecognition of tax receivable agreement liability in connection with the full valuation allowance recorded on the Company’s deferred tax assets.

The $2.1 million increase in cash resulting from changes in working capital primarily consisted of a $30.9 million decrease in accounts receivable, partially offset by a $27.5 million decrease in accounts payable and a $1.5 million decrease in accrued expenses such as payroll and payroll related expenses.

The decrease in accounts payable and accounts receivable is mainly due to the May 2024 temporary disconnection by a significant customer as a result of a customer investigating a defamatory article / blog post against the Company, as well as a payment of $8.8 million to a few publishers associated with a charge recorded in 2023 related to a disputed short pay from a customer.

For the nine months ended September 30, 2023, net cash flows provided by operating activities were $4.5 million and mainly consisted of net income of $3.2 million and $3.2 million in adjustments for noncash and non-operating items, partially offset by $2.0 million of cash outflows from working capital.

Adjustments for non-cash and non-operating items primarily consisted of depreciation and amortization expense of $2.2 million, stock-based compensation expense of $0.5 million and loss on early termination of line of credit of $0.3 million.

The $2.0 million decrease in cash resulting from changes in working capital consisted primarily of a $28.4 million increase in accounts receivable and a $0.8 million decrease in accrued liabilities, offset by a $27.3 million increase in accounts payable.

The increase in accounts receivable and accounts payable is mainly due to the seasonal nature of the sell-side segment of the business.

For the three months ended March 31, 2025, net cash flows used in operating activities were $2.7 million and consisted of net loss of $5.9 million, offset by $2.9 million in adjustments for non-cash and non-operating items and $0.3 million of cash inflows from working capital.

Adjustments for non-cash and non-operating items mainly consisted of depreciation and amortization expense of $2.4 million, stock-based compensation expense of $0.3 million and expenses for the equity reserve facility of $0.2 million.

The $0.3 million increase in cash resulting from changes in working capital primarily consisted of a $0.6 million decrease in accounts receivable and a $0.3 million increase in accrued expenses such as payroll and payroll related expenses, partially offset by a $0.6 million decrease in accounts payable.

The decrease in accounts payable and accounts receivable is mainly due to the continued impact from the May 2024 temporary disconnection by a significant customer as a result of a customer investigating a defamatory article / blog post against the Company.

For the three months ended March 31, 2024, net cash flows used in operating activities were $5.7 million and consisted of net loss of $3.8 million, offset by $1.1 million in adjustments for non-cash and non-operating items and $3.0 million of cash outflows from working capital.

Adjustments for non-cash and non-operating items mainly consisted of depreciation and amortization expense of $0.8 million, stock-based compensation expense of $0.5 million and partially offset by deferred tax benefit of $0.2 million.

The $3.0 million decrease in cash resulting from changes in working capital primarily consisted of a $18.1 million decrease in accounts payable and a $0.7 million decrease in accrued expenses

partially offset by a $15.8 million decrease in accounts receivable.

The decrease in accounts payable and accounts receivable is mainly due to the typical seasonal decrease in revenue in the first quarter compared to the fourth quarter.

Investing Activities

For the Nine Months Ended September 30, 2024 and 2023

For the Three Months Ended March 31, 2025 and 2024

Our investing activities to date have consisted primarily of purchases of software, office furniture and leasehold improvements.

For the nine months ended September 30, 2024 and 2023, net cash flows used in investing activities of less than $0.1 million and $0.1 million, respectively, were primarily related to office furniture and leasehold improvements.

For the three months ended March 31, 2025 and 2024, net cash flows used in investing activities of less than $0.1 million were primarily related to office furniture and leasehold improvements.

Financing Activities

For the Nine Months Ended September 30, 2024 and 2023

For the nine months ended September 30, 2024, net cash provided by financing activities was $6.1 million mainly resulting from $6.7 million of proceeds from line of credit and $0.2 million proceeds from warrants exercised partially offset by $0.6 million for payments on shares withheld for taxes and $0.4 million paid on term loan.

For the nine months ended September 30, 2023, net cash used in financing activities was $2.9 million mainly resulting from $2.0 million for distributions paid to LLC holders, $0.5 million paid on the term loan and $0.4 million for deferred financing costs.

For the Three Months Ended March 31, 2025 and 2024

For the three months ended March 31, 2025, net cash provided by financing activities was $3.1 million mainly resulting from $3.3 million of proceeds from issuance of Class A Common Stock under the Equity Reserve Facility partially offset by $0.2 million for payments on deferred financing costs.

For the three months ended March 31, 2024, net cash provided by financing activities was $3.9 million mainly resulting from $4.0 million of proceeds from line of credit.

Contractual Obligations and Future Cash Requirements

As of September 30, 2024, our principal contractual obligations expected to give rise to material cash requirements consist of the 2021 Credit Facility, the Credit Agreement and non-cancelable leases for our various facilities.

After giving effect to the October 2024 amendments to the Company's debt facilities, we anticipate that the future minimum payments related to our current indebtedness over the next five years will be $1.0 million in 2024, $8.7 million in 2025, $28.2 million in 2026, less than $0.1 million in 2027, less than $0.1 million in 2028, and $0.1 million thereafter, assuming we do not refinance our indebtedness, enter into a new revolving credit facility or make any further draws under the revolving facility.

The leases will require minimum payments of $0.1 million in 2024, $0.3 million in 2025, $0.3 million in 2026, $0.3 million in 2027, $0.2 million in 2028, and $0.2 million thereafter.

As of September 30, 2024, we had cash and cash equivalents of $4.1 million.

As of March 31, 2025, our principal contractual obligations expected to give rise to material cash requirements consist of the 2021 Credit Facility, the Credit Agreement and non-cancelable leases for our various facilities.

We anticipate that the future minimum payments related to our current indebtedness over the next five years will be $3.7 million in 2025, $37.4 million in 2026, less than $0.1 million in each of 2027, 2028, and 2029, and $0.1 million thereafter, assuming we do not refinance our indebtedness or enter into a new credit facility.

The leases will require minimum payments of $0.2 million in 2025, $0.3 million in 2026, $0.3 million in 2027, $0.2 million in 2028, $0.2 million in 2029, and less than $0.1 million thereafter.

As of March 31, 2025, we had cash and cash equivalents of $1.8 million.

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S.

generally accepted accounting principles (“GAAP”), including, in particular operating income, net cash provided by operating activities, and net income, we believe that earnings before interest, taxes, depreciation and amortization, as adjusted for loss on early termination of line of credit, derecognition of tax receivable agreement liability and stock-based compensation (“Adjusted EBITDA”), a non-GAAP measure, is useful in evaluating our operating performance.

generally accepted accounting principles (“GAAP”), including, in particular operating income, net cash provided by operating activities, and net income, we believe that earnings before interest, taxes, depreciation and amortization, as adjusted for expenses for the Equity Reserve Facility and stock-based compensation (“Adjusted EBITDA”), a non-GAAP measure, is useful in evaluating our operating performance.

The most directly comparable GAAP measure to Adjusted EBITDA is net income.

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

The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods presented (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net (loss) income $ (6,377) $ 3,351 $ (13,338) $ 3,212

Net loss $ (5,940) $ (3,819)

Add back (deduct):

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Depreciation and amortization of property, equipment and software 68 71

Loss on early termination of line of credit — — — 300

Income tax expense 6,606 166 6,132 166

Derecognition of tax receivable agreement liability (5,201) — (5,201) —

Expenses for Equity Reserve Facility 198 —

Income tax benefit — (200)

Adjusted EBITDA $ (3,024) $ (1,659)

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We believe that this non-GAAP financial measure is useful to investors for period-to-period comparisons of our business and in understanding and evaluating our operating results for the following reasons:

• Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as depreciation and amortization, interest expense, provision for income taxes, stock-based compensation, derecognition of tax receivable agreement liability, and certain one-time items such as acquisition transaction costs, losses from early termination or redemption of credit agreements or preferred units and gains from settlements or loan forgiveness that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;

• Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as depreciation and amortization, interest expense, provision for income taxes, stock-based compensation, and certain one-time items such as acquisition transaction costs and costs for the Equity Reserve Line that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;

• Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of operating performance and the effectiveness of our business strategies and in communications with our board of directors concerning our financial performance;

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The Company bases its estimates on past experiences, market conditions, and other assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis.

The Company uses estimates to determine many reported amounts, including but not limited to gross vs net assessment in revenue recognition, recoverability of goodwill and long-lived assets, useful lives used in amortization of intangibles, income taxes and valuation allowances, stock-based compensation and fair values of assets and liabilities acquired in business combinations.

There have been no material changes to our critical accounting estimates and related policies as compared to the critical accounting estimates and related policies described in our "Management’s Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Pronouncements

See Note 2 to our condensed consolidated financial statements for accounting pronouncements recently adopted and accounting pronouncements not yet adopted.

See Note 2 — Basis of Presentation and Consolidation and Summary of Significant Accounting Policies to our condensed consolidated financial statements for accounting pronouncements recently adopted and accounting pronouncements not yet adopted.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis