What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-23 · 231 added, 277 removed, 1241 unchanged (29% of the section changed)

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Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment of internal control over financial reporting certain elements related to SpotX, Inc.

which was acquired on April 30, 2021.

The excluded elements of the SpotX business represented approximately 34% of the Company’s revenues and 10% of the Company’s total assets as of and for the year ended December 31, 2021.

Accordingly, our audit did not include the internal control over financial reporting for certain elements related to SpotX, Inc.

Basis for Opinions

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combinations – SpotX, Inc.

Acquisition– Technology, Customer Relationships, and Backlog Intangible Assets — Refer to Note 10 to the financial statements

Critical Audit Matter Description

On April 30, 2021, the Company completed its acquisition of SpotX, Inc.

for a purchase price of $1.2 billion, consisting of $640.0 million in cash plus 12,374,315 shares of the Company’s common stock ($495.6 million based on the fair value of the Company's common stock on April 30, 2021).

The Company accounted for the acquisition using the acquisition method of accounting for business combinations and the fair value of the purchase price of $1.2 billion was allocated to the assets acquired and liabilities assumed based on their respective fair values, including the technology, customer relationships, and backlog intangible assets of $280.4 million, $130.3 million, and $11.1 million, respectively.

Management estimated the fair value of the technology, customer relationships, and backlog intangible assets using a discounted cash flow approach, which included an analysis of future cash flows expected to be generated by each intangible asset.

The fair value of the acquired technology and backlog was valued using The Excess Earnings Method.

The Company used the Loss‐of‐Revenue and Income Method in its valuation of the existing Customer Relationships.

The fair value determination of these intangible assets required management to make significant, subjective estimates and assumptions related to forecasted future cash flows and the selected discount rate.

We identified the aforementioned intangible assets as a critical audit matter because of the significant estimates and assumptions management makes to determine the fair value of these intangible assets.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future cash flows and the selection of the discount rate for the technology, customer relationships, and backlog intangible assets included the following, among others:

• We tested the effectiveness of controls over the valuation of intangible assets, including management’s controls over forecasts of future cash flows and the determination of the discount rate.

• We assessed the reasonableness of management’s forecasts of future cash flows by comparing the revenue and disaggregated cost projections to historical results, certain peer companies, third-party industry forecasts, as well as performing inquiries with certain members of management.

• With the assistance of our fair value specialists, we evaluated the valuation methodology used to determined fair value along with the reasonableness of the discount rate including independently estimating the discount rate using a process consistent with generally accepted valuation practices.

• We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

Business Combinations – SpringServe, LLC Acquisition– Technology Intangible Asset — Refer to Note 10 to the financial statements

Critical Audit Matter Description

On July 1, 2021, the Company completed its acquisition of SpringServe, LLC through the Company's wholly-owned subsidiary, SpotX, pursuant to a definitive agreement entered into on July 1, 2021.

As a result of the acquisition, SpringServe has become a wholly-owned subsidiary of SpotX, and a wholly-owned indirect subsidiary of the Company.

The purchase price was approximately $31.1 million in cash, pursuant to a previously negotiated option agreement that the Company secured as part of the SpotX Acquisition.

At the time of the Company’s acquisition of SpotX, the fair value of SpotX's minority investment and purchase right were valued at a combined $9.5 million.

In connection with the SpringServe Acquisition, approximately $1.4 million of the purchase price was held back to cover possible indemnification claims, which is expected to be paid in cash one year after the

The Company accounted for the acquisition using the acquisition method of accounting for business combinations and the fair value of the total purchase price of $42.1 million was allocated to the assets acquired and liabilities assumed based on their respective fair values, including the technology intangible asset of $15.5 million.

Management estimated the fair value of the technology intangible asset using a discounted cash flow approach, which included an analysis of future cash flows expected to be generated by the intangible asset.

The fair value of the acquired technology was valued using the Excess Earnings Method.

The fair value determination of this intangible asset required management to make significant, subjective estimates and assumptions related to forecasted future cash flows and the selected discount rate.

We identified the aforementioned intangible asset as a critical audit matter because of the significant estimates and assumptions management makes to determine the fair value of this intangible asset.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future cash flows and the selection of the discount rate for the technology intangible asset included the following, among others:

• We tested the effectiveness of controls over the valuation of intangible assets, including management’s controls over forecasts of future cash flows and the determination of the discount rate.

• We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

Revenue — Highly Automated Systems to Process and Record Revenue - Refer to Note 4 to the financial statements .

Critical Audit Matter Description

The Company’s revenue consists of transaction-based fees and is made up of a significant volume of low-dollar transactions, sourced from multiple systems, databases, and other tools.

Due to the fact that revenue transactions do not consist of the transfer of physical goods but are derived from the purchase and sale of digital advertising inventory through their platform and related systems, the processing and recording of revenue is highly automated and is based on contractual terms with advertisers and publishers.

The Company’s revenues consist of transaction-based fees and is made up of a significant volume of low-dollar transactions, sourced from multiple systems, databases, and other tools.

Due to the fact that revenue transactions do not consist of the transfer of physical goods, but are derived from the purchase and sale of digital advertising inventory through their platforms, the processing and recording of revenue is highly automated and is based on contractual terms with advertisers and publishers.

Because of the nature of the Company’s transaction-based fees, the Company uses automated systems to process and record its revenue transactions.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to certain of the Company’s systems to process revenue transactions included the following, among others:

Our audit procedures related to the Company’s systems to process revenue transactions included the following, among others:

• With the assistance of our IT specialists, we:

◦ Identified the significant systems used to process revenue transactions and tested the effectiveness of general IT controls over the systems, including testing of user access controls, change management controls, and IT operations controls.

◦ We tested the effectiveness of system interface controls and automated controls within the revenue process, as well as controls designed to ensure the accuracy and completeness of revenue.

◦ For the relevant platform systems, in order to test that transactions are being processed and recorded completely and accurately, we independently created test impressions and traced them through the systems to final output for financial reporting.

• We tested the effectiveness of certain controls within the relevant revenue business processes, including those in place to reconcile the various systems to the Company’s general ledger.

• We tested revenue through the use of data analytics in order to:

◦ Evaluate recorded revenue and revenue trends

◦ Identify significant relationships in the revenue population

◦ Sufficiently understand identified significant relationships and related accounts affecting revenue.

◦ Identified the significant systems used to process revenue transactions and tested the design, implementation, effectiveness of general IT controls over the systems, including testing of user access controls, change management controls, and IT operations controls.

◦ We tested the design, implementation, and operating effectiveness of system interface controls and automated controls within the revenue process, as well as controls designed to ensure the accuracy and completeness of revenue.

◦ For the relevant platform systems, in order to test that transactions are being processed and recorded completely and accurately, we independently created test impressions and traced such impressions through the systems to final output for financial reporting.

• We tested the design, implementation, and operating effectiveness of controls within the relevant revenue business processes, including those in place to reconcile the various systems to the Company’s general ledger.

• We evaluated recorded revenue and revenue trends and used data analytics to analyze transactional revenue data.

• We tested revenue through the use of technology-based data analysis tools, to inspect journal entries to:

◦ Identify significant relationships in the revenue population and

◦ Sufficiently understand significant relationships and related accounts affecting revenue

• We performed audit procedures on those related accounts determined to have a significant relationship with revenue.

Such procedures included sending confirmations to customers for a selection of accounts receivable and making selections of cash receipts subsequent to year end and tracing them back to their associated invoices included in accounts receivable as of the balance sheet date.

We also performed a combination of audit procedures on publisher payables, which included subsequent disbursements testing, recalculations of selected publisher payable amounts, and substantive analytical procedure over publisher payables balances as of the balance sheet date.

Debt and Additional Paid-In Capital –Accounting for Convertible Senior Notes and Capped Call Transactions — Refer to Note 18 to the financial statements

Critical Audit Matter Description

In March 2021, the Company issued $400.0 million aggregate principal amount of 0.25% convertible senior notes in a private placement, including $50.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the initial purchasers (collectively, the “Convertible Senior Notes”).

The Convertible Senior Notes will mature on March 15, 2026, unless earlier repurchased, redeemed or converted.

The Company used approximately $39.0 million of the net proceeds from the offering to pay for the Capped Call Transactions.

We identified the accounting for the Convertible Senior Notes and Capped Call Transactions as a critical audit matter due to the complexity involved and the management judgment necessary to determine the accounting for the Convertible Senior Notes and Capped Call Transactions within the financial statements.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals having expertise in accounting for complex financial instruments, when performing audit procedures to evaluate management’s judgments and conclusions.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the accounting for the Convertible Senior Notes and Capped Call Transactions included the following, among others:

We tested the effectiveness of controls over management’s accounting treatment for the Convertible Senior Notes and Capped Call Transactions.

We read and analyzed the Convertible Senior Notes and Capped Call agreements to evaluate the accounting treatment for the convertible senior notes and capped call transactions.

With the assistance of professionals having expertise in accounting for complex financial instruments, we evaluated management’s conclusion that the Convertible Senior Notes should be recorded in debt and the Capped Call Transactions should be recorded in additional paid-in capital.

Such procedures included sending confirmations to customers for a selection of accounts receivable and tracing cash receipts received after year end back to accounts receivable as of the balance sheet date.

We also performed a combination of audit procedures on publisher payables, which included subsequent disbursements testing, recalculation of publisher payable amounts, and substantive analytical procedures.

/s/ Deloitte & Touche LLP

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Net income (loss) $ ( 130,323 ) $ 65 $ ( 53,432 )

Other comprehensive income (loss):

Unrealized gain (loss) on investments — — 2

Other comprehensive loss:

Foreign currency translation adjustments ( 1,775 ) ( 419 ) ( 912 )

Other comprehensive income (loss) ( 419 ) ( 912 ) 214

Other comprehensive loss ( 1,775 ) ( 419 ) ( 912 )

Comprehensive loss $ ( 132,098 ) $ ( 354 ) $ ( 54,344 )

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3,359 — 13,548 — — — — 13,548

Restricted stock awards, net

( 182 ) — — — — — — —

Issuance of common stock related to employee stock purchase plan 381 — 1,660 — — — — 1,660

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( 824 ) — ( 7,854 ) — — — — ( 7,854 )

Issuance of common stock associated with the Telaria Merger 52,099 1 275,772 — — — — 275,773

Exchange of stock options and RSU related to Telaria Merger — — 11,646 — — — — 11,646

Stock-based compensation

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( 289 ) — ( 6,496 ) — — — — ( 6,496 )

Issuance of common stock associated with the Telaria Merger 52,099 1 275,772 — — — — 275,773

Exchange of stock options and RSU related to Telaria Merger — — 11,646 — — — — 11,646

Issuance of common stock associated with SpotX Acquisition 12,374 — 495,591 — — — — 495,591

Purchase of treasury stock — — — — — ( 349 ) ( 6,007 ) ( 6,007 )

Capped call options — — ( 38,960 ) — — — — ( 38,960 )

Stock-based compensation

— — 42,231 — — — — 42,231

Other comprehensive income

Other comprehensive loss

— — — ( 419 ) — — — ( 419 )

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Shares withheld related to net share settlement ( 1,270 ) — ( 14,498 ) — — — — ( 14,498 )

Issuance of common stock associated with SpotX Acquisition 12,374 — 495,591 — — — — 495,591

Purchase of treasury stock — — — — — ( 1,243 ) ( 15,663 ) ( 15,663 )

Capped call options — — ( 38,960 ) — — — — ( 38,960 )

Retirement of common stock ( 1,592 ) — ( 21,670 ) — — 1,592 21,670 —

Stock-based compensation — — 66,822 — — — — 66,822

Other comprehensive loss — — — ( 1,775 ) — — — ( 1,775 )

Net income — — — — 65 — — 65

Net loss — — — — ( 130,323 ) — — ( 130,323 )

Balance at December 31, 2022 134,006

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Stock-based compensation 64,118 40,735 28,491

Impairment of intangible assets 3,320 — —

(Gain) loss on disposal of property and equipment ( 86 ) 130 ( 22 )

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Amortization of debt discount and issuance costs 6,785 4,925 —

Accretion of available for sale securities — — 24

Non-cash lease expense 1,485 ( 350 ) ( 784 )

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Capitalized internal use software development costs ( 13,582 ) ( 11,431 ) ( 7,667 )

Mergers and acquisitions, net of cash acquired ( 661,869 ) 54,595 ( 11,000 )

Maturities of available-for-sale securities — — 7,500

Mergers and acquisitions, net of cash acquired and indemnification claims holdback ( 20,755 ) ( 661,869 ) 54,595

Net cash provided by (used in) investing activities ( 65,152 ) ( 690,997 ) 32,636

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Taxes paid related to net share settlement ( 14,498 ) ( 6,496 ) ( 7,854 )

Payment of indemnification claims holdback ( 1,582 ) — —

Net cash provided by (used in) financing activities ( 30,172 ) 678,053 7,354

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On June 8, 2020, the Company voluntarily delisted its common stock from the New York Stock Exchange ("NYSE") and commenced listing on The Nasdaq Global Select Market of The Nasdaq Stock Market LLC ("Nasdaq").

On June 30, 2020, the Company changed its name from "The Rubicon Project, Inc." to "Magnite, Inc." In connection with the name change, the Company also changed its ticker symbol from "RUBI" to "MGNI." Magnite has its principal offices in New York City, Los Angeles, London, and Sydney, and additional offices in Europe, Asia, North America, and South America.

The Company provides a technology solution to automate the purchase and sale of digital advertising inventory for buyers and sellers.

On June 30, 2020, the Company changed its name from "The Rubicon Project, Inc." to "Magnite, Inc." In connection with the name change, the Company also changed its ticker symbol from "RUBI" to "MGNI." Magnite has its principal offices in New York City, Los Angeles, Denver, London, and Sydney, and additional offices in Europe, Asia, North America, and South America.

The Company provides a technology solution to automate the purchase and sale of digital advertising inventory for buyers and sellers globally, across all channels, formats and auction types.

The Company's platform features applications and services for sellers of digital advertising inventory, or publishers, that own or operate websites, applications, CTV channels, and other digital media properties, to manage and monetize their inventory;

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The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported and disclosed financial statements and accompanying footnotes.

Due to the economic uncertainty as a result of the COVID-19 pandemic, it has become more difficult to apply certain assumptions and judgments into these estimates.

The extent of the impact of COVID-19 pandemic on the Company's operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted, including but not limited to, the duration and spread of the pandemic, its severity, including any resurgence, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

During the year ended December 31, 2021, this uncertainty continued to result in a higher level of judgement related to its estimates and assumptions.

As of the date of issuance of

the consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, judgments, or revise the carrying value of its assets or liabilities.

Due to the economic uncertainty as a result of the COVID-19 pandemic, geopolitical events, including the conflict in Ukraine, and economic and macroeconomic factors like labor shortages, supply chain disruptions, inflation, and recessionary concerns impacting the markets and communities in which the Company's clients operate, it has become more difficult to apply certain assumptions and judgments into these estimates.

The extent of the impact of these factors on the Company's operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted, including but not limited to, the duration and how

quickly and to what extent normal economic and operating conditions can resume.

During the year ended December 31, 2022, this uncertainty continued to result in a higher level of judgment related to its estimates and assumptions.

As of the date of issuance of the consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, judgments, or revise the carrying value of its assets or liabilities.

These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known.

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On an ongoing basis, management evaluates its estimates, primarily those related to:

(i) revenue recognition criteria, including the determination of revenue reporting as net versus gross in the Company’s revenue arrangements, (ii) accounts receivable and allowances for doubtful accounts, (iii) the useful lives of intangible assets, internal use software development costs, and property and equipment, (iv) valuation of long-lived assets and their recoverability, including goodwill, (v) the realization of tax assets and estimates of tax liabilities, (vi) assumptions used in valuation models to determine the fair value of stock-based awards, (vii) fair value of financial instruments, (viii) the recognition and disclosure of contingent liabilities, and (ix) the assumptions used in valuing acquired assets and assumed liabilities in business combinations.

(i) revenue recognition criteria, including the determination of revenue reporting as net versus gross in the Company’s revenue arrangements, (ii) accounts receivable and allowances for doubtful accounts, (iii) amounts capitalized and the useful lives of intangible assets, internal use software development costs, and property and equipment, (iv) valuation of long-lived assets and their recoverability, including goodwill, (v) the realization of tax assets and estimates of tax liabilities, (vi) assumptions used in valuation models to determine the fair value of stock-based awards, (vii) fair value of financial instruments, (viii) the recognition and disclosure of contingent liabilities, and (ix) the assumptions used in valuing acquired assets and assumed liabilities in business combinations.

These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

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Generally, our revenue is based on a percentage of the ad spend that runs through our platform, although for certain clients or transaction types we may receive a fixed CPM for each impression sold, and for advertising campaigns that are transacted through insertion orders we earn revenue based on the full amount of ad spend that runs through our platform.

The Company also generates revenue from the fee it charges clients for use of its Demand Manager header-bidding product and SpringServe ad server product, which we acquired on July 1, 2021.

The Company also generates revenue from the SpringServe ad server and Demand Manager header-bidding product, where fees are either based on the number of impressions processed or a percentage of ad spend.

In addition, the Company may receive certain fixed monthly fees for the use of its platform or products.

The Company's platform dynamically connects sellers and buyers of advertising inventory in a digital marketplace.

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Cost of Revenue.

The Company's cost of revenue consists primarily of data center costs, bandwidth costs, ad protection

costs, depreciation and maintenance expense of hardware supporting the Company's revenue-producing platform, amortization of software costs for the development of the Company's revenue-producing platform, amortization expense associated with acquired developed technologies, personnel costs, facilities-related costs, and cloud computing costs.

The Company's cost of revenue consists primarily of data center costs, bandwidth costs, ad protection costs, depreciation and maintenance expense of hardware supporting the Company's revenue-producing platform, amortization of software costs for the development of the Company's revenue-producing platform, amortization expense associated with acquired developed technologies, personnel costs, facilities-related costs, and cloud computing costs.

In addition, for revenue booked on a gross basis, cost of revenue includes traffic acquisition costs.

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Sales and Marketing.

The Company's sales and marketing expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, as well as marketing expenses such as brand marketing, travel expenses, trade shows and marketing materials, professional services, and amortization expense associated with client relationships and backlog from the Company's business acquisitions and, to a lesser extent, facilities-related costs and depreciation and amortization.

The Company's sales and marketing expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, as well as marketing expenses such as brand marketing, travel expenses, trade shows and marketing materials, professional services, and amortization expense associated with client relationships, backlog, and non-compete agreements from the Company's business acquisitions and, to a lesser extent, facilities-related costs and depreciation and amortization.

The Company's sales organization focuses on increasing the adoption of the Company's solution by existing and new buyers and sellers.

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Merger, Acquisition, and Restructuring Costs.

The Company's merger, acquisition, and restructuring costs consist primarily of professional service fees associated with merger and acquisition activities, cash-based employee termination costs and stock-based compensation charges associated with mergers, acquisitions, or restructuring activities, and other restructuring activities, including facility closures and relocation costs.

The Company's merger, acquisition, and restructuring costs consist primarily of professional service fees associated with merger and acquisition activities, cash-based employee termination costs, related stock-based compensation charges associated with mergers, acquisitions, or restructuring activities, and other restructuring activities, including facility closures, relocation costs, and impairment costs of abandoned technology associated with restructuring activities.

Stock-Based Compensation

Compensation expense related to employee and non-employee stock-based awards is measured and recognized in the consolidated financial statements based on the fair value of the awards granted.

The Company granted awards to employees that vest based solely on continued service, or service conditions, awards that vest based on the achievement of performance targets, or performance conditions, and awards that vest based on our stock price exceeding a peer index, or market conditions.

The Company grants awards to employees that vest based solely on continued service, or service conditions, awards that vest based on the achievement of performance targets, or performance conditions, and awards that vest based on our stock price exceeding a peer index, or market conditions.

The fair value of each option award containing service and/or performance conditions is estimated on the grant date using the Black-Scholes option-pricing model.

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A valuation allowance is used to reduce some or all of the deferred tax assets if, based upon the weight of available evidence, it is more likely than not that those deferred tax assets will not be realized.

The Company has established a full valuation allowance to offset its domestic net deferred tax assets due to the uncertainty of realizing future tax benefits from the net operating loss carryforwards and other deferred tax assets.

The Company maintains a partial valuation allowance to offset its domestic net deferred tax assets due to the uncertainty of realizing future tax benefits from the net operating loss carryforwards and other deferred tax assets.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

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The Company has issued common stock, which is included in outstanding common stock on the Company's consolidated balance sheets.

During 2021, the Company also repurchased shares of common stock, which was recorded as treasury stock on the Company's consolidated balance sheets.

During 2021 and 2022, the Company repurchased shares of common stock, which was recorded as treasury stock on the Company's consolidated balance sheets.

In 2022, all repurchased shares, including any outstanding treasury stock from 2021, were subsequently retired.

The Company has not issued any shares of its preferred stock subsequent to the Company's initial public offering ("IPO") and does not have any preferred stock outstanding.

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government and agency bonds and corporate debt securities with stated maturities of less than one year are classified as short-term investments included in marketable securities and prepaid expenses and other current assets.

Investments held in U.S.

government and agency bonds and corporate debt securities with stated maturities of over a year are classified as long-term investments included in other assets, non-current on the Company’s consolidated balance sheets, as the Company does not expect to redeem or sell these securities within one year from the balance sheet date.

The Company determines the appropriate classification of investments in marketable securities at the time of purchase and reevaluates such designation at each balance sheet date.

The Company classifies and accounts for the Company’s marketable securities as available-for-sale, and as a result carries the securities at fair value and reports the unrealized gains and losses in the consolidated statements of comprehensive income (loss) and as a component of stockholders’ equity.

The Company determines any realized gains or losses on the sale of marketable securities on a specific identification method, and the Company records such gains and losses as a component of other income, net on the Company’s consolidated statements of operations.

Restricted Cash

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Capitalization ends once a project is substantially complete and the software and technologies are ready for their intended purpose.

Internal use software development costs are amortized using a straight-line method over the estimated useful life of three years, commencing when the software is ready for its intended use.

Internal use software development costs are amortized using a straight-line method over the estimated useful life, which is generally three years , commencing when the software is ready for its intended use.

The straight-line recognition method approximates the manner in which the expected benefit will be derived.

On an ongoing basis, the Company assesses the remaining estimated useful lives of internal use software projects.

If remaining useful lives are revised, the change is accounted for as a change in estimate.

The Company does not transfer ownership of its software, or lease its software, to third parties.

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If a cloud computing arrangement does not include a software license, the service element of the arrangement is accounted for as a service contract.

The Company capitalized certain implementation costs for its cloud computing arrangements that are service contracts, which are included within prepaid expenses and other current assets and other assets, non-current within the consolidated balance sheets.

The Company capitalized certain implementation costs for its cloud computing arrangements that are service contracts, which are included in prepaid expenses and other current assets and other assets, non-current within the consolidated balance sheets.

The Company amortizes capitalized implementation costs in a cloud computing arrangement over the life of the service contract, which generally is three years .

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Other intangible assets 0.25 to 1.5

On an ongoing basis, the Company assesses the remaining estimated useful lives of intangible assets.

If remaining useful lives are revised, the change is accounted for as a change in estimate.

Intangible assets are reviewed for impairment indicators at least annually and whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable.

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Transactions in foreign currencies are translated into the functional currency of the applicable entity at the rates of exchange in effect at the date of the transaction.

Foreign exchange gains or losses were included in foreign exchange (gain) loss, net in the accompanying consolidated statements of operations.

Foreign exchange gains or losses are included in foreign exchange (gain) loss, net in the accompanying consolidated statements of operations.

To the extent that the functional currency is different from the U.S.

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Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12— Simplifying the Accounting for Income Taxes ("ASU 2019-12").

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and clarifies and amends existing guidance for clarity and consistent application.

This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020 including interim reporting periods within those fiscal years.

The Company adopted ASU 2019-12 as of January 1, 2021.

The standard did not have a material impact on its consolidated financial statements and related disclosures.

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) ("ASU 2020-01"), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815.

This guidance is effective for fiscal years beginning after December 15, 2020, including interim reporting periods within those fiscal years.

The Company adopted ASU 2020-01 as of January 1, 2021.

The standard did not have a material impact on its consolidated financial statements and related disclosures.

On January 1, 2021, the Company adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU "2020-06") on a prospective basis, which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments that require separating embedded conversion features from convertible instruments.

This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method.

The adoption of this standard is included in the financial statements as of and for the year ended December 31, 2021.

Refer to Note 18—"Debt" for additional information related to accounting for convertible debt issued during the year.

Recent Accounting Pronouncements Not Yet Adopted

In July 2021, the FASB issued Update No.

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ASU 2021-05 requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease if specified criteria are met.

This guidance will be effective on January 1, 2022, either retrospectively to leases that commenced or were modified on or after our adoption of ASU 2016-02 on January 1, 2019, or on a prospective basis, with early adoption permitted.

The Company will adopt this standard prospectively and does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements.

The Company adopted ASU 2021-05 on January 1, 2022 on a prospective basis, which did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08").

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ASU 2021-08 is effective for the Company beginning in the first quarter of 2023.

ASU 2021-08 should be applied prospectively for acquisitions occurring on or after the effective date of the amendments.

Early adoption of the proposed amendments would be permitted, including adoption in an interim period.

The Company is currently assessing the impact this standard will have on the Company’s consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the SEC did not or are not expected to have a material impact on our present or future consolidated financial statements.

The Company will adopt this standard prospectively and apply the guidance to future acquisitions, if any.

The Company does not believe there are any other recently issued and effective or not yet effective pronouncements that would have or are expected to have a material impact on the Company’s present or future consolidated financial statements.

Note 3— Net Income (Loss) Per Share

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Weighted-average common shares used in basic EPS 132,887 126,294 96,700

Dilutive effect of weighted-average restricted stock units — 5,294 —

Dilutive effect of weighted-average common stock options — 4,435 —

Dilutive effect of weighted-average performance stock units — 197 —

Dilutive effect of weighted-average restricted stock units 5,294 — —

Dilutive effect of weighted-average ESPP shares — 41 —

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(in thousands)

Options to purchase common stock — 2,317 793

Unvested restricted stock awards — — 13

Unvested restricted stock units 1,506 — 4,713

Options to purchase common stock 1,864 — 2,317

Unvested performance awards 124 — 40

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Total shares excluded from net income (loss) per share 9,774 4,940 7,120

For the year ended December 31, 2021, diluted shares used to compute diluted earnings per share included outstanding performance stock units granted during April 2020, April 2021, and August 2021 based on a current achievement level of 150 %, 0 %, and 0 %, respectively.

For the years ended December 31, 2022 and December 31, 2020, the Company excluded outstanding performance stock units from the calculation of diluted net loss per share because they were anti-dilutive.

As of December 31, 2022, the performance stock units granted during April 2020, April 2021, August 2021, and February 2022 had expected achievement levels of 116 %, 0 %, 0 %, and 81 %, respectively.

As of December 31, 2020, the performance stock units granted during April 2020 had expected achievement level of 150 %.

As of December 31, 2021, the Company included outstanding performance stock units in the calculation of diluted net income per share.

As of December 31, 2021, the performance stock units granted during April 2020, April 2021, and August 2021 had expected achievement levels of 150 %, 0 %, and 0 %, respectively.

Refer to Note 12 —"Stock-Based Compensation" for additional information related to performance stock units.

For the year ended December 31, 2021, diluted shares used to compute diluted earnings per share excluded the shares that would be issuable assuming conversion of all of the Convertible Senior Notes (as defined in Note 18) because they are anti-dilutive.

For the years ended December 31, 2022 and December 31, 2021, shares that would be issuable assuming conversion of all of the Convertible Senior Notes (as defined in Note 17) were excluded from the calculation of diluted loss per share because they were anti-dilutive.

Diluted earnings per share for the Convertible Senior Notes is calculated under the if-converted method in accordance with ASC 260, Earnings Per Share .

The Convertible Senior Notes have an initial conversion rate of 15.6539 shares of common stock per $1,000 principal amount of the Convertible Senior Notes, which will be subject to anti-dilution adjustments in certain circumstances.

As of December 31, 2021, the number of shares that would be issuable assuming conversion of all of the Convertible

Senior Notes is approximately 6,261,560 .

As of December 31, 2022 and 2021, the number of shares that would be issuable assuming conversion of all of the Convertible Senior Notes is approximately 6,261,560 .

Refer to Note 17—"Debt" for additional information related to accounting for Convertible Senior Notes issued and associated Capped Call Transactions.

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For certain advertising campaigns that are transacted through insertion orders, the Company reports revenue on a gross basis, based primarily on its determination that the Company acts as the primary obligor in the delivery of advertising campaigns for buyers with respect to such transactions.

For periods prior to the SpotX Acquisition, revenue reported on a gross basis was generally less than 3 % of the Company's total revenue.

As a result of the SpotX Acquisition, an increased percentage of the Company's revenue is reported on a gross basis.

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

The following table presents our revenue recognized on a net basis and on a gross basis for the years ended December 31, 2022, 2021, and 2020:

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CTV $ 268,572 47 % $ 185,254 40 % $ 34,319 15 %

Desktop 118,182 25 78,956 36 68,302 44

Mobile 192,803 33 164,977 35 108,353 49

Desktop 115,694 20 118,182 25 78,956 36

Total $ 577,069 100 % $ 468,413 100 % $ 221,628 100 %

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The Company reviews the status of the then-outstanding accounts receivable on a customer-by-customer basis, taking into consideration the aging schedule of receivables, its historical collection experience, current information regarding the client, subsequent collection history, and other relevant data, in establishing the allowance for doubtful accounts.

Accounts receivable is presented net of an allowance for doubtful accounts of $ 3.5 million at December 31, 2021, and $ 2.4 million at December 31, 2020.

Accounts receivable are presented net of an allowance for doubtful accounts of $ 1.1 million at December 31, 2022, and $ 3.5 million at December 31, 2021.

Accounts receivable are written off against the allowance for doubtful accounts when the Company determines amounts are no longer collectible.

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Write-offs ( 751 ) ( 337 ) ( 3,054 )

Increase in provision for expected credit losses 597 870 5,328

Increase (decrease) in provision for expected credit losses ( 1,719 ) 597 870

Recoveries of previous write-offs 87 20 111

Allowance for doubtful accounts, December 31 $ 1,092 $ 3,475 $ 2,360

During the year ended December 31, 2021, 2020, and 2019, the provision for expected credit losses associated with accounts receivable and the offset by increases of contra seller payables related to recoveries of uncollected buyer receivables resulted in a net amount of bad debt each year.

During the years ended December 31, 2022, 2021, and 2020, the provision for expected credit losses associated with accounts receivable and the offset by increases of contra seller payables related to recoveries of uncollected buyer receivables resulted in a net amount of bad debt each year.

During the year ended December 31, 2022, the decrease in the provision for expected credit losses associated with accounts receivable of $ 1.7 million was offset by decreases of contra seller payables related to recoveries of uncollected buyer receivables of $ 1.6 million, which resulted in an $ 0.2 million amount of bad debt recoveries.

During the year ended December 31, 2021, the provision for expected credit losses associated with accounts receivable of $ 0.6 million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $ 0.5 million, which resulted in an immaterial amount of bad debt expense.

During the year ended December 31, 2020, the provision for expected credit losses associated with accounts receivable of $ 0.9 million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $ 1.0 million, which resulted in $ 0.1 million of bad debt recoveries.

During the year ended December 31, 2019, the provision for expected credit losses associated with accounts receivable of $ 5.3 million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $ 4.1 million, which resulted in bad debt expense of $ 1.2 million.

Note 5— Fair Value Measurements

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The carrying amounts of cash equivalents are classified as Level 1 or Level 2 depending on whether or not their fair values are based on quoted market prices for identical securities that are traded in an active market.

At December 31, 2021, the Company had Convertible Senior Notes (as defined in Note 18) included in its balance sheet.

The estimated fair value of the Company's Convertible Senior Notes was $ 315.5 million as of December 31, 2021.

The estimated fair value of Convertible Senior Notes is based on market rates and the closing trading price of the Convertible Senior Notes as of December 31, 2021 and is classified as Level 2 in the fair value hierarchy.

At December 31, 2022 and 2021, the Company had Convertible Senior Notes and its Term Loan B Facility (as defined in Note 17) included in its balance sheets.

The estimated fair value of the Company's Convertible Senior Notes was $ 305.0 million and $ 315.5 million, as of December 31, 2022 and 2021,respectively.

The estimated fair value of Convertible Senior Notes is based on market rates and the closing trading price of the Convertible Senior Notes as of December 31, 2022 and 2021 and is classified as Level 2 in the fair value hierarchy.

At December 31, 2022, the estimated fair value of the Company's Term Loan B Facility was $ 333.3 million and at December 31, 2021, the estimated fair value of the Company's Term Loan B Facility approximated the carrying value.

The estimated fair value is based on borrowing rates currently available to the Company for financing with similar terms and is classified as Level 2 in the fair value hierarchy.

There were no transfers between Level 1 and Level 2 fair value measurements during the years ended December 31, 2022 and 2021.

Note 6— Investments

The Company had no investments in marketable securities at December 31, 2021 and December 31, 2020.

During the year ended December 31, 2019, $ 7.5 million of available-for-sale investments matured, on which the realized gains were de minimis and there were no unrealized holding gains (losses) reclassified out of accumulated other comprehensive loss into the consolidated statements of operations.

The Company had no sales of available-for-sale investments in 2019.

Note 6— Property and Equipment

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As part of the April 30, 2021 acquisition of SpotX, the Company acquired finance leases related primarily to network hardware.

The accumulated depreciation related to assets under finance leases was approximately $ 0.5 million as of December 31,

2021, and was included in depreciation expense when recognized.

The accumulated depreciation related to assets under finance leases was approximately $ 1.3 million and $ 0.5 million as of December 31, 2022 and 2021, respectively, and was included in depreciation expense when recognized.

See Note 15 for more information regarding the related finance lease obligation.

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In the years ended December 31, 2022, 2021, and 2020, amortization expense included the write-off of software development costs of $ 1.5 million, $ 0.1 million, and $ 0.1 million, in the respective periods, related to the abandonment of the associated projects.

During the fourth quarter of 2022, the Company reassessed the remaining estimated useful lives of capitalized software projects related to integration of its technology platforms.

The change in the remaining estimated useful lives for the related projects resulted in increased amortization expense of $ 0.7 million for the year ended December 31, 2022.

The increased amortization expense increased the basic and diluted loss per share by $ 0.01 , net of tax, for the year ended December 31, 2022.

Based on the Company’s internal use software development costs at December 31, 2022, excluding projects that are not ready for their intended use with a value of $ 7.5 million, estimated amortization expense of $ 10.7 million, $ 4.1 million, and $ 1.4 million is expected to be recognized in 2023, 2024, and 2025, respectively.

There were no impairment charges to internal use software development costs for the years ended December 31, 2021, 2020 and 2019 with the exception of the write-offs mentioned above.

Note 8— Goodwill, Intangible Assets, and Capitalized Costs Incurred in Cloud Computing Arrangements

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Beginning balance at December 31, 2020

Additions for Merger with Telaria (Note 10) 150,755

Ending balance at December 31, 2020

Additions for Acquisition of SpotX (Note 9) 782,831

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Ending balance at December 31, 2021

Additions for Acquisition of Carbon (Note 9) 8,456

Adjustments to the Acquisition of SpotX (Note 9) ( 112 )

Ending balance at December 31, 2022

The Company’s intangible assets as of December 31, 2022 and 2021 included the following:

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( 562 ) ( 1,197 )

( 450 ) ( 594 )

Total accumulated amortization—intangible assets

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For the years ended December 31, 2022, 2021, and 2020 the Company wrote off fully amortized intangible assets with a historical cost of $ 40.5 million, $ 11.1 million and $ 1.1 million, respectively.

During the year ended December 31, 2022, the Company abandoned certain in-process research and development projects and technology intangible assets.

The abandonment resulted in $ 3.3 million of impairment costs, which was included in merger, acquisition, and restructuring costs in the consolidated statements of operations.

During the fourth quarter of 2022, the Company reassessed the remaining estimated useful lives of the developed technology and in-process research and development related to the SpotX acquisition based on the remaining expected benefit from those assets.

The change in the remaining estimated useful lives for developed technology and in-process research and development resulted in increased amortization expense of $ 34.7 million for the year ended December 31, 2022.

The increased amortization expense increased the basic and diluted loss per share by $ 0.27 , net of tax, for the year ended December 31, 2022.

The estimated remaining amortization expense associated with the Company's intangible assets was as follows as of December 31, 2022:

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Total $ 253,501

During the years ended December 31, 2021 and 2020, the Company capitalized $ 0.8 million and $ 0.9 million, respectively, related to cloud computing arrangements.

These costs are related to arrangements for infrastructure as a service, platform as a service, and software as a service.

As of December 31, 2021 and 2020, capitalized costs associated with these arrangements are included within prepaid expenses and other current assets in the amounts of $ 0.5 million and $ 0.7 million, respectively, and within other assets, non-current in the amounts of $ 0.7 million and $ 0.2 million, respectively.

The amortization of these agreements was $ 0.4 million for the year ended December 31, 2021 and an insignificant amount for the year ended December 31, 2020.

The Company capitalizes costs related to arrangements for infrastructure as a service, platform as a service, and software as a service.

As of December 31, 2022 and 2021, capitalized costs associated with these arrangements was included in prepaid expenses and other current assets in the amounts of $ 0.7 million and $ 0.5 million, respectively, and within other assets, non-current in the amounts of $ 0.5 million and $ 0.7 million, respectively.

The amortization of these agreements was $ 0.7 million and $ 0.4 million for the years ended December 31, 2022 and 2021, respectively, and an insignificant amount for the year ended December 31, 2020.

The Company's qualitative assessment in the fourth quarter of 2022 did not indicate that it is more likely than not that the fair value of its goodwill, intangible assets, and other long-lived assets is less than the aggregate carrying amount.

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As a result, the Company issued 52,098,945 shares of Magnite common stock.

In connection with the Telaria Merger,

Magnite also assumed Telaria’s 2013 Equity Incentive Plan, as amended;

In connection with the Telaria Merger, Magnite also assumed Telaria’s 2013 Equity Incentive Plan, as amended;

2008 Stock Plan, as amended;

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Accordingly, pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on the dates indicated, nor is it indicative of the future operating results of the combined company.

December 31, 2020 December 31, 2019

December 31, 2020

(in thousands)

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Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, and selection of comparable companies.

Management's purchase price allocation is preliminary and subject to change pending finalization of the valuation, including finalization of tax attributes and tax related liabilities.

Under the acquisition method of accounting for business combinations, if the Company identifies changes to acquired deferred tax asset ("DTA") valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they are related to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement-period adjustment, and the Company will record the offset to goodwill.

The Company records all other changes to DTA valuation allowances and liabilities related to uncertain tax positions in current- period income tax expense.

For purposes of measuring the estimated fair value, where applicable, of the assets acquired and the liabilities assumed, the Company has applied the guidance in ASC 820, Fair Value Measurement, which establishes a framework for measuring fair value.

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The purchase consideration for the SpotX Acquisition included 12,374,315 shares of the Company's common stock with a fair value of approximately $ 495.6 million, based on the close price of the Company's common stock at closing on April 30, 2021, which was $ 40.05 per share, and working capital adjustment of $ 65.2 million, mainly consisting of cash balances acquired on the date of the SpotX Acquisition and other opening balance sheet adjustments.

During the three months ended December 31, 2021, the Company adjusted the preliminary purchase price allocation for SpotX based on updated fair values associated with the acquired assets and liabilities.

Adjustments primarily impacted acquisition related tax accruals, deferred tax liabilities and classification of lease assets.

During the first quarter of 2022, the Company adjusted the preliminary purchase price allocation for SpotX based on updated fair values associated with the acquired assets and liabilities.

Adjustments impacted acquisition related accounts payable and tax accruals.

The Company finalized the purchase price allocation of SpotX in the second quarter of 2022, resulting in no additional changes to the purchase price allocation.

The fair value of the purchase price was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the SpotX Acquisition as set forth below (in thousands):

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Once the projects associated with acquired in-process research and development are completed, amortization will be included in cost of revenues in the consolidated statements of operations.

The intangible assets generated in the SpotX Acquisition are not tax deductible.

The acquired intangible assets and goodwill resulting from the SpotX Acquisition are not tax deductible.

As part of the SpotX Acquisition, deferred tax liabilities were established.

As a result of the deferred tax liability balance created by the acquisition, the Company reduced its deferred tax asset valuation allowance by $ 56.2 million.

Such reduction was recognized as an income tax benefit in the consolidated statements of operations for the year ended December 31, 2021.

As a result of the deferred tax liability balance created by the acquisition, the Company reduced its deferred tax asset ("DTA") valuation allowance by $ 56.2 million for the year ended December 31, 2021.

Such reduction was recognized as an income tax benefit in the post-acquisition consolidated statements of operations for the year ended December 31, 2021.

The Company recognized approximately $ 27.9 million of acquisition related costs included in the merger, acquisition, and restructuring costs in the Company's consolidated statements of operations during the year ended December 31, 2021 related to the SpotX Acquisition.

2021 Acquisition—SpringServe

On July 1, 2021, the Company completed the acquisition of ServeMotion, Inc., a Delaware corporation (including its wholly owned subsidiary, SpringServe, LLC, "SpringServe"), through the Company's wholly-owned subsidiary, SpotX, pursuant to a definitive agreement entered into on July 1, 2021.

As a result of the SpringServe Acquisition, SpringServe has become a wholly-owned subsidiary of SpotX, and a wholly-owned indirect subsidiary of the Company.

The following table summarizes the total estimated purchase consideration (in thousands):

On July 1, 2021, the Company, through its wholly-owned subsidiary, SpotX, completed the SpringServe Acquisition.

As a result of the SpringServe Acquisition, SpringServe became a wholly-owned subsidiary of SpotX, and a wholly-owned indirect subsidiary of the Company.

The following table summarizes the total purchase consideration (in thousands):

Cash Consideration $ 31,136

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At the time of Magnite's acquisition of SpotX, the fair value of SpotX's minority investment and purchase right were valued at a combined $ 7.5 million for a total minority investment and purchase right of $ 9.5 million.

In connection with the SpringServe Acquisition, approximately $ 1.4 million of the purchase price was held back to cover possible indemnification claims, which is expected to be paid in cash one year after the acquisition.

In connection with the SpringServe Acquisition, $ 1.4 million of the purchase price was held back to cover possible indemnification claims.

In accordance with ASC 805, the Company recorded the acquisition based on the fair value of the consideration transferred and then allocated the purchase price to the identifiable assets acquired and liabilities assumed based on their respective fair values as of the acquisition date.

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Management's purchase price allocation is preliminary and subject to change pending finalization of the valuation, including finalization of tax attributes and tax related liabilities.

Under the acquisition method of accounting for business combinations, if the Company identifies changes to acquired DTA valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they are related to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement-period adjustment, and the Company will record the offset to goodwill.

The Company records all other changes to DTA valuation allowances and liabilities related to uncertain tax positions in current-period income tax expense.

In accordance with ASC 820, fair value is an exit price and is defined as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Under ASC 805, acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.

related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.

The Company finalized the purchase price allocation of SpringServe in the third quarter of 2022, resulting in no additional changes to the purchase price allocation and the full payment of the $ 1.4 million holdback liability.

The fair value of the purchase price was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the SpringServe Acquisition as set forth below (in thousands):

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As part of the SpringServe Acquisition, deferred tax liabilities were established.

As a result of this and the SpotX deferred tax liability balance, the Company recognized an income tax benefit in the consolidated statements of operations for the year ended December 31, 2021.

SpringServe Acquisition related costs included in the "Merger, acquisition, and restructuring costs" in the Company's consolidated statements of operations during the year ended December 31, 2021 were immaterial .

The Company completed the acquisition of Nth Party in December 2021 by acquiring all outstanding shares for a total purchase price of $ 9.0 million, consisting of cash consideration.

The Company acquired Nth Party, Ltd.

(“Nth Party”), developer of cryptographic software for secure audience data sharing and analysis, to reinforce the Company’s ongoing commitment to build leading identity and audience solutions for sellers and buyers.

As a result of this and the SpotX deferred tax liability balance, the Company recognized an income tax benefit in the post-acquisition consolidated statements of operations for the year ended December 31, 2021.

SpringServe Acquisition related costs included in merger, acquisition, and restructuring costs in the Company's consolidated statements of operations during the year ended December 31, 2021 were immaterial.

2021 Acquisition—Nth Party

The Company completed the acquisition of Nth Party, Ltd.

(“Nth Party”), a developer of cryptographic software for secure audience data sharing and analysis in December 2021 for a total purchase price of $ 9.0 million, in cash.

The Company acquired Nth Party as part of its strategy to further invest in the development and enhancement of industry leading identity and audience solutions.

The allocation of purchase consideration resulted in approximately $ 5.4 million of developed technology intangible assets with an estimated useful life of five years , approximately $ 0.2 million non-compete intangible assets with an estimated useful life of two years , approximately $ 1.3 million of deferred tax liability, and goodwill of approximately $ 4.8 million, which is attributable to the workforce of Nth Party and revenue growth from the acquisition.

Goodwill was not considered deductible for income tax purposes.

Acquired intangibles and goodwill resulting from the Nth Party acquisition are not deductible for income tax purposes.

Unaudited Pro Forma Information

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Accordingly, pro forma amounts are not necessarily indicative of the results that actually would have occurred had the SpotX and SpringServe Acquisitions been completed on the dates indicated, nor is it indicative of the future operating results of the combined company.

The table below excludes Nth Party as its impact on pro forma results were immaterial.

December 31, 2021 December 31, 2020

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Pro Forma Revenue $ 540,466 $ 400,039

Pro Forma Net Income (Loss) $ ( 86,621 ) $ ( 156,638 )

Pro Forma Net Loss $ ( 86,621 ) $ ( 156,638 )

During the year ended December 31, 2021, due to the process of integrating the operations of SpotX into the operations of the Company, the determination of SpotX's post-acquisition revenue and operating results on a standalone basis was impracticable.

The SpringServe post-acquisition revenue and operating results on a standalone basis were immaterial.

2022 Acquisition—Carbon

The Company completed the acquisition of the business of Carbon (AI) Limited ("Carbon" and such acquisition the "Carbon Acquisition"), a platform that enables publishers to measure, manage, and monetize audience segments, in February 2022 for a total purchase price of $ 23.1 million in cash.

Approximately $ 2.3 million of the purchase price was held back to cover possible indemnification claims, which is expected to be paid in cash one year after the acquisition.

The Company acquired Carbon as part of its strategy to further invest in the development and enhancement of industry leading identity and audience solutions.

The allocation of purchase consideration resulted in an estimated $ 14.2 million of developed technology intangible assets with an estimated useful life of five years , $ 0.2 million non-compete intangible assets with an estimated useful life of two years , $ 0.2 million of customer relationships with an estimated useful life of six months , and goodwill of $ 8.5 million, which is attributable to the workforce of Carbon and revenue growth from the acquisition.

For tax purposes, the Carbon Acquisition was treated as an asset acquisition.

The acquisition of identified intangibles results in tax deductible amortization pursuant to IRC Section 197.

Acquisition related costs associated with the Carbon Acquisition included in merger, acquisition, and restructuring costs in the Company's consolidated statements of operations during the year ended December 31, 2022 were immaterial.

In addition, Carbon's post-acquisition revenue and operating results on a standalone basis were immaterial.

Note 10— Accounts Payable and Accrued Expenses

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Total $ 1,094,321 $ 1,000,956

Note 12— Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) were as follows (in thousands):

Unrealized Gain (Loss) on Investments, net of tax Foreign Currency Translation Accumulated Other Comprehensive Income (Loss)

Note 11— Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, which relate to foreign currency translation, were as follows (in thousands):

Accumulated Other Comprehensive Loss

Balance at December 31, 2019 $ ( 45 )

Other comprehensive income 2 212 214

Other comprehensive loss ( 912 )

Balance at December 31, 2020 ( 957 )

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In connection with the Merger with Telaria, the Company assumed Telaria's 2013 Equity Incentive Plan, as amended (the "Telaria Plan");

2008 Stock Plan, as amended (the "2008 Stock Plan");

the 2008 Stock Plan, as amended (the "2008 Stock Plan");

and the ScanScout, Inc.

2009 Equity Incentive Plan, as amended (the "ScanScout Plan").

All compensatory equity awards outstanding at December 31, 2021 were issued pursuant to the 2014 Equity Incentive Plan, the iSocket Plan, the Chango Plan, the nToggle Plan, the Telaria Plan, the 2008 Stock Plan, the ScanScout Plan, the Inducement Plan, or the Company's 2007 Stock Incentive Plan.

The Company’s equity incentive plans provide for the grant of equity awards, including non-statutory or incentive stock options, restricted stock awards ("RSAs"), and restricted stock units ("RSUs"), to the Company's employees, officers, directors, and consultants.

All compensatory equity awards outstanding at December 31, 2022 were issued pursuant to the 2014 Equity Incentive Plan, the nToggle Plan, the Telaria Plan, the 2008 Stock Plan, the Inducement Plan, or the Company's 2007 Stock Incentive Plan.

The Company’s equity incentive plans provide for the grant of equity awards, including non-statutory or incentive stock options, restricted stock awards ("RSAs"), restricted stock units that vest based on continuous service ("RSUs"), and restricted stock units that include performance criteria (“performance stock units” or "PSUs"), to the Company's employees, officers, directors, and consultants.

The Company's board of directors administers the plans.

Options outstanding vest based upon continued service at varying rates, but generally over four years from issuance with 25 % vesting after one year of service and the remainder vesting monthly thereafter.

Options vest based upon continued service at varying rates, but generally over four years from issuance with 25 % vesting after one year of service and the remainder vesting monthly thereafter.

RSAs and RSUs vest at varying rates, typically approximately 25 % vesting after approximately one year of service and the remainder vesting annually, semi-annually, or quarterly thereafter.

The restricted stock units granted in 2021, 2020, and 2019, included 0.4 million, 0.7 million, and 1.8 million, respectively, of restricted stock units that vest 50 % on each of the first and second anniversaries of the grant date.

The restricted stock units granted in 2022, 2021, and 2020, included 0.7 million, 0.4 million, and 0.7 million, respectively, awards that vest 50 % on each of the first and second anniversaries of the grant date.

Options, RSAs, and RSUs granted under the plans accelerate under certain circumstances for certain participants upon a change in control, as defined in the governing plan.

No further awards were granted under the iSocket Plan, the Chango Plan, or the nToggle Plan from the date of acquisition and no further awards were granted under the 2007 Stock Incentive Plan since the IPO.

Available shares under the iSocket Plan, the Chango Plan, and the nToggle Plan were rolled into the available share pool under the 2014 Equity Incentive Plan at the time of acquisition of each company, and available shares under the 2007 Stock Incentive Plan were rolled into the available share pool under the 2014 Equity Incentive Plan at the time of the IPO.

An aggregate of 13,323,449 shares remained available for future issuance at December 31, 2021 under the plans.

No further awards were granted under the iSocket Plan, the Chango Plan,

or the nToggle Plan from the date of acquisition and no further awards were granted under the 2007 Stock Incentive Plan since the IPO.

Available shares under the nToggle Plan and the Telaria Plan were rolled into the available share pool under the 2014 Equity Incentive Plan at the time of acquisition of each company, and available shares under the 2007 Stock Incentive Plan were rolled into the available share pool under the 2014 Equity Incentive Plan at the time of the IPO.

An aggregate of 13,926,252 shares remained available for future grants at December 31, 2022 under the plans.

The 2014 Equity Incentive Plan has an evergreen provision pursuant to which the share reserve will automatically increase on January 1 st of each year in an amount equal to 5 % of the total number of shares of capital stock outstanding on December 31 st of the preceding calendar year, although the Company’s board of directors may provide for a lesser increase, or no increase, in any year.

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Exercised ( 613 ) $ 3.64

Expired ( 418 ) $ 5.84

Forfeited ( 125 ) $ 12.14

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The weighted-average grant date fair value per share of restricted stock units granted during the year ended December 31, 2022 was $ 12.69 .

The aggregate fair value of restricted stock units that vested during the year ended December 31, 2021 was $ 142.8 million.

The intrinsic value of restricted stock units that vested during the year ended December 31, 2022 was $ 37.0 million.

At December 31, 2022, the intrinsic value of unvested restricted stock units was $ 105.7 million.

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Performance Stock Units

In April 2020 and April 2021, the Company granted the Company's CEO 146,341 and 26,291 restricted stock units that vest based on certain stock price performance metrics with a fair value of $ 0.9 million and $ 1.4 million, respectively.

The grant date fair value per share of restricted stock was $ 6.15 and $ 52.49 , respectively, which was estimated using a Monte-Carlo lattice model.

At December 31, 2021, the Company had unrecognized employee stock-based compensation expense for the April 2020 and April 2021 grants of approximately $ 0.4 million and $ 1.0 million, which is expected to be recognized over the remaining 1.3 years and 2.3 years, respectively.

In April 2020, April 2021, and February 2022, the Company granted the Company's CEO 146,341 , 26,291 , and 86,806 performance stock units that vest based on share price metrics tied to total shareholder return over a three-year period with a fair value of $ 0.9 million, $ 1.4 million, and $ 1.5 million, respectively.

The grant date fair value per share of these grants was $ 6.15 , $ 52.49 , and $ 17.28 , respectively, which was estimated using a Monte-Carlo lattice model.

At December 31, 2022, the Company had unrecognized employee stock-based compensation expense for the April 2020, April 2021, and February 2022 grants of approximately $ 0.1 million, $ 0.6 million, and $ 1.0 million which is expected to be recognized over the remaining 0.3 years, 1.3 years, and 2.1 years, respectively.

Between 0 % and 150 % of the performance stock units will vest on the third anniversary of its grant date.

In August 2021, the Company granted the Company's CEO 379,635 restricted stock units, which are subject to both time-based and performance-based vesting conditions.

The performance stock units consist of three equal tranches (each, a "Performance Tranche"), based on achievement of a share price condition if the Company achieves share price targets of $ 60.00 , $ 80.00 , and $ 100.00 over 60 consecutive trading days during a performance period commencing on August 26, 2022 and ending on August 26, 2026.

In August 2021, the Company granted the Company's CEO 379,635 performance stock units, which are subject to both time-based and performance-based vesting conditions.

The performance stock units consist of three equal tranches (each, a "Performance Tranche"), based on achievement of a share price condition if the Company achieves share price targets of $ 60.00 , $ 80.00 , and $ 100.00 , respectively over 60 consecutive trading days during a performance period commencing on August 26, 2022 and ending on August 26, 2026.

To the extent any of the performance-based requirements are met, the Company's CEO must also provide continued service to the Company through at least August 26, 2024 to receive any shares of common stock underlying the grant and through August 26, 2026 to receive all of the shares of common stock underlying the performance units that have satisfied the applicable performance-based requirement.

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Between 0 % and 100 % of the performance stock units will vest on each of the tranche dates.

During the years ended December 31, 2021 and December 31, 2020, the Company recognized $ 1.4 million and $ 0.2 million, respectively, of stock-based compensation related to these performance stock units based on a performance measurement of 100 %.

For the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 3.4 million, $ 1.4 million, and $ 0.2 million, respectively, of stock-based compensation related to these performance stock units.

Stock-based compensation expense for these awards is based on a performance measurement of 100 %.

The compensation expense will not be reversed if the performance metrics are not met.

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Total stock-based compensation expense $ 64,118 $ 40,735 $ 28,491

For the year ended December 31, 2022, the Company recognized $ 6.4 million of tax expense on stock-based compensation expense related to 2022, which was reflected in the provision (benefit) for income taxes in the consolidated statements of operations.

For the year ended December 31, 2022, tax benefit realized related to awards vested or exercised during 2022 was $ 9.6 million.

For the year ended December 31, 2021, the Company recognized $ 151.6 million of tax benefit on stock-based compensation expense related to 2021 and years prior, which was reflected in the provision (benefit) for income taxes in the consolidated statements of operations.

For the year ended December 31, 2021, tax benefit realized related to awards vested or exercised during 2021 and years prior was $ 40.5 million.

Due to the full valuation allowance provided on its net deferred tax assets, the Company had no t recorded any tax benefit attributable to stock-based awards for the years ended December 31, 2020 and 2019.

Due to the full valuation allowance provided on its net deferred tax assets, the Company had no t recorded any tax benefit attributable to stock-based awards for the year ended December 31, 2020.

Note 13— Merger, Acquisition, and Restructuring Costs

Merger, acquisition, and restructuring costs consist primarily of professional services fees and employee termination costs, including stock-based compensation charges, associated with the Telaria Merger, the SpotX Acquisition, and restructuring activities.

The following table summarizes merger, acquisition, and restructuring cost activity (in thousands):

The following table summarizes merger, acquisition, and restructuring cost activity:

December 31, 2022 December 31, 2021 December 31, 2020

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Non-cash stock-based compensation (double-trigger acceleration and severance) 2,004 1,071 1,870

Impairment costs of abandoned technology 3,320 — —

Loss contracts (lease related) — 2,500 —

Total merger, acquisition, and restructuring costs $ 7,468 $ 38,177 $ 17,552

During the years ended December 31, 2021, 2020 and 2019, the Company incurred costs of $ 38.2 million, $ 17.6 million and $ 2.0 million, respectively, primarily related to the acquisitions of SpotX and SpringServe and the merger with Telaria.

All of the expenses incurred in the year ended December 31, 2019 were incurred during the fourth quarter.

Accrued restructuring costs related to mergers and acquisitions were $ 1.2 million and $ 2.7 million at December 31, 2022 and December 31, 2021, respectively and were primarily related to the SpotX Acquisition, the SpringServe Acquisition, and the Telaria Merger.

Accrued restructuring costs associated with personnel costs are included within accounts payable and accrued expenses and accruals related to assumed loss contracts are included within other current liabilities and other liabilities, non-current on the Company's consolidated balance sheets.

Accrued restructuring costs associated with personnel costs are included in accounts payable and accrued expenses and accruals related to assumed loss contracts are included in other current liabilities and other liabilities, non-current on the Company's consolidated balance sheets.

December 31, 2022 December 31, 2021 December 31, 2020

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Restructuring activity, merger and acquisition loss contracts — 2,500 3,543

Restructuring activity, impairments 3,320 — —

Cash paid for restructuring costs ( 2,747 ) ( 6,377 ) ( 6,355 )

Non-cash loss contracts (lease related) — ( 2,500 ) —

Non-cash impairments ( 3,320 ) — —

Non-cash stock-based compensation ( 2,004 ) ( 1,071 ) ( 1,870 )

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Total provision (benefit) for income taxes $ ( 5,274 ) $ ( 95,053 ) $ 693

The Company recorded an income tax benefit of $ 95.1 million for the year ended December 31, 2021 compared to an income tax expense of $ 0.7 million and income tax benefit of $ 1.5 million for the years ended December 31, 2020 and 2019, respectively.

The Company recorded an income tax benefit of $ 5.3 million for the year ended December 31, 2022 compared to an income tax benefit of $ 95.1 million and income tax expense of $ 0.7 million for the years ended December 31, 2021 and 2020, respectively.

The tax benefit for the year ended December 31, 2022 was primarily the result of the domestic valuation allowance on the Company's deferred tax asset and the tax liability associated with foreign subsidiaries.

The tax benefit for the year ended December 31, 2021 was primarily the result of the deferred tax liability associated with acquisitions that occurred during the year and the tax liability associated with foreign subsidiaries.

The tax expense for the year ended December 31, 2020 was primarily the result of the domestic valuation allowance and the tax liability associated with the foreign subsidiaries.

The tax benefit for the year ended December 31, 2019 was the result of a deferred tax liability associated with the RTK.io acquisition, the release of a foreign valuation allowance resulting from a change to a cost-plus arrangement for a foreign subsidiary, the domestic valuation allowance, and the tax liability associated with foreign subsidiaries.

Set forth below is a reconciliation of the components that caused the Company’s provision (benefit) for income taxes to differ from amounts computed by applying the U.S.

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Provision to return adjustments 0.3 % 0.2 % 0.4 %

Research and development tax credits 2.5 % — % — %

Foreign withholding taxes ( 0.1 ) % — % — %

Effective income tax rate 3.9 % 100.1 % ( 1.3 ) %

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As of December 31, 2022, the net deferred tax liability of $ 2.7 million is presented in the Company's consolidated balance sheets as deferred tax liabilities, net of $ 5.1 million and other assets, non-current of $ 2.4 million.

As of December 31, 2020, the net deferred tax asset of $ 0.2 million is presented in the Company's consolidated balance sheets as other assets, non-current of $ 0.4 million and deferred tax liability, net of $ 0.2 million.

The valuation allowance was reduced by $ 53.9 million for the year ended December 31, 2021, and increased by $ 16.4 million, and $ 2.7 million for the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2021, the net deferred tax liability of $ 11.5 million is presented in the Company's consolidated balance sheets as deferred tax liabilities, net of $ 13.3 million and other assets, non-current of $ 1.8 million.

The valuation allowance was increased by $ 20.7 million for the year

ended December 31, 2022, and reduced by $ 53.9 million, and increased by $ 16.4 million for the years ended December 31, 2021 and 2020, respectively.

At December 31, 2022, the Company had U.S.

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No amounts for any federal or state research and development tax credits for the years ended December 31, 2020, 2021, or 2022 related to business operations are included herein.

On March 11, 2021, the U.S.

President signed into law the American Rescue Plan Act of 2021 ("ARP Act")—a $1.9 trillion coronavirus disease 2019 ("COVID-19") relief package.

The ARP Act had limited income tax provisions.

The Company has determined that the ARP Act did not have a material impact on the Company for the year ended December 31, 2021.

On December 27, 2020, the U.S.

President signed into law the Consolidated Appropriations Act, 2021 ("CAA").

The CAA was meant to provide additional relief and support to those impacted by the COVID-19 pandemic.

The CAA included provisions relating to payroll tax deferrals, family leave, and a five-year extension of a myriad of tax provisions that were set to expire.

The Company has determined that the tax implications of the CAA will not be material.

On March 27, 2020, the U.S.

President signed into law the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), in response to the COVID-19 pandemic.

The CARES Act is meant to infuse negatively affected companies with various tax cash benefits to ease the impact of the COVID-19 pandemic.

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer-side social security payments, and net operating loss carryback periods.

The Company has determined the tax implications of the CARES Act will not be material.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law.

The IRA includes a new corporate alternative minimum tax (the “Corporate AMT”) of 15% on the adjusted financial statement income (the “AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period.

The Corporate AMT is effective for tax years beginning after December 31, 2022 and is not expected to impact the Company.

Additionally, the IRA imposes an excise tax of 1% on the fair market value of net stock repurchases made after December 31, 2022.

The impact of this latter provision to the Company will be dependent upon the extent of share repurchases made in future periods.

In addition, various foreign jurisdictions where the Company has activity have enacted or are considering enacting a variety of measures that could impact our tax liabilities.

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As a result, the use of the Company’s total domestic NOL carryforwards and tax credits generated prior to the ownership change will be subject to annual use limitations under Section 382 and Section 383 of the Code and comparable state income tax laws.

The Company believes that the ownership change will not impact its ability to utilize substantially all of its NOLs

and state research and development carryforward tax credits to the extent it will generate taxable income that can be offset by such losses.

The Company believes that the ownership change will not impact its ability to utilize substantially all of its NOLs and state research and development carryforward tax credits to the extent it will generate taxable income that can be offset by such losses.

The Company reasonably expects its federal research and development carryforward tax credits will not be recovered prior to expiration.

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Increases related to current year tax positions 200

Decreases related to current year tax positions ( 2,294 )

Decreases related to prior year tax positions ( 41 )

Increases related to prior year tax positions 342

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The 2017 U.S.

Income Tax Return for Telaria was under examination by the IRS, which was closed during the period ended June 30, 2021 with no change to tax as reported.

Return for Telaria was under examination by the IRS, which was closed during the period ended June 30, 2021 with no change to tax as reported.

The IRS is currently conducting a Form 1042 Withholding Tax Audit for Telaria for 2017.

The Company has not received IRS findings related to this audit.

For the Netherlands, New Zealand, Malaysia, and the United Kingdom, all tax years remain open for examination by the local country tax authorities, for France only 2019 forward are open for examination, for Singapore 2018 and forward are open for examination, for Australia, Brazil, and Germany 2017 and forward are open for examination, for Canada 2016 and forward are open for examination, and for Japan and Italy 2015 and forward remain open for examination.

The Company settled the audit during the quarter ended December 31, 2022.

Tax due was not material.

For the Netherlands, Malaysia, India, Sweden, and the United Kingdom, all tax years remain open for examination by the local country tax authorities, for France only 2020 and forward are open, for Singapore only 2019 and forward are open for examination, for New Zealand, Australia, Brazil, and Germany 2018 and forward are open for examination, for Canada 2017 and forward are open for examination, and for Japan and Italy 2016 and forward remain open for examination.

The Company does not expect its uncertain income tax positions to have a material impact on its consolidated financial statements within the next twelve months.

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The Company has operating and finance leases for office facilities, data centers, and equipment.

The lease terms of the Company’s leases generally range from 1.0 year to 10.0 years, and the weighted average remaining lease term of leases included in the lease liability is 6.3 years as of December 31, 2021.

As of December 31, 2021, a weighted average discount rate of 5.09 % has been applied to the remaining lease payments to calculate the lease liabilities included within the consolidated balance sheets.

The lease terms of the Company’s leases generally range from 1.0 year to 10.0 years.

The weighted average remaining lease term of leases included in lease liabilities is 5.6 years and 6.3 years as of December 31, 2022 and December 31, 2021, respectively.

As of December 31, 2022 and December 31, 2021, a weighted average discount rate of 6.11 % and 5.09 %, respectively, were applied to the remaining lease payments to calculate the lease liabilities included within the consolidated balance sheets.

For the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 23.3 million, $ 20.7 million and $ 13.4 million of lease expense, respectively, which included operating lease expenses associated with leases included in the lease liability and ROU asset on the consolidated balance sheets.

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Rental income is included in other income in the consolidated statements of operations.

In addition to the lease liabilities included in these consolidated financial statements at December 31, 2021, during the three months ended December 31, 2021, the Company entered into an agreement for an office lease in Canada which has not commenced as of December 31, 2021, and is therefore, not included in the lease liability on the balance sheet.

The Company has future commitments totaling $ 0.7 million over the course of 5.0 years for this office lease.

In addition to the lease liabilities included in these consolidated financial statements at December 31, 2022, during 2022, the Company entered into agreements for office space that have not commenced as of December 31, 2022, and is therefore, not included in the lease liability on the balance sheet.

The Company has future commitments totaling $ 2.2 million with a weighted average term of 10.1 years.

As part of the April 30, 2021 acquisition of SpotX, the Company acquired finance leases related primarily to computer equipment and network hardware.

These finance leases are included within lease liabilities - current portion and lease liabilities, non-current in the amounts of $ 0.8 million and $ 0.3 million, respectively, as of December 31, 2021.

These finance leases are included in lease liabilities - current portion for $ 0.3 million and $ 0.8 million as of December 31, 2022 and December 31, 2021, respectively, and lease liabilities, non-current in the amount of $ 0.3 million as of December 31, 2021.

There were no amounts of lease liabilities, non-current as of December 31, 2022.

Note 16— Commitments and Contingencies

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As of December 31, 2022 and 2021, the Company had $ 5.3 million and $ 5.1 million, respectively, of letters of credit associated with office leases available for borrowing, on which there were no outstanding borrowings as of either date.

In the normal course of business, the Company enters into non-cancelable contractual obligations with various parties, primarily related to software services agreements and data center providers that are not included in the Company's lease liability obligations and ROU assets.

As of December 31, 2022, the Company's outstanding non-cancelable contractual obligations with a remaining term of one year or longer consist of the following (in thousands):

Total $ 16,069

Additionally, as of December 31, 2022, the Company has an agreement for third-party cloud-managed services containing commitments that are variable in nature.

Under this agreement, the Company has a non-cancelable minimum spend commitment from July 2023 to June 2025 based on actual spend, as defined in the agreement, with the third-party provider from July 2022 to June 2023.

The estimated non-cancelable minimum annual obligation is approximately $ 27 million in each twelve-month period (i.e., July 2023 to June 2024 and July 2024 to June 2025), based on spend in the six months ended December 31, 2022.

Per the agreement, the commitment from July 2023 to June 2025 will generally increase as the amount of spend during the period from July 2022 to June 2023 increases.

Because the Company expects to continue to spend under this agreement through June 2023, the Company also expects that the minimum future commitment will likely increase as a result of the higher level of spend.

Guarantees and Indemnification

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Consequently, management is unable to ascertain the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance or recoverable from third parties, or the financial impact with respect to such matters as of December 31, 2022.

However, based on management’s knowledge as of December 31, 2021, management believes that the final resolution of these matters known at such date, individually and in the aggregate, will not have a material adverse effect upon the Company’s consolidated financial position, results of operations or cash flows.

However, based on management’s knowledge as of December 31, 2022, management believes that the final resolution of these matters known at such

date, individually and in the aggregate, will not have a material adverse effect upon the Company’s consolidated financial position, results of operations or cash flows.

Employment Contracts

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Note 17— Debt

Long term debt as of December 31, 2021 consisted of the following:

Long term debt as of December 31, 2022 and 2021 consisted of the following:

December 31, 2022

December 31, 2021

(in thousands)

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Unamortized debt issuance cost ( 7,355 ) ( 9,643 )

Net 392,645 390,357

Term Loan B Facility 354,600 358,200

Unamortized discount and debt issuance cost ( 20,888 ) ( 24,934 )

Net 333,712 333,266

Current portion ( 3,600 ) ( 3,600 )

Total non-current debt $ 722,757 $ 720,023

The Company did not have any debt outstanding as of December 31, 2020.

Maturities of the principal amount of the Company's long-term debt as of December 31, 2022 are as follows (in thousands):

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Total (discounted) $ 754,600

Amortization of the debt issuance cost and the discount associated with our indebtedness totaled $ 4.9 million for the year ended December 31, 2021 and were immaterial for the years ended December 31, 2020 and 2019.

Amortization of the debt issuance cost and the discount associated with our indebtedness totaled $ 6.3 million and $ 4.5 million for the years ended December 31, 2022 and 2021, respectively.

Amortization of debt issuance costs is computed using the effective interest method and is included in interest expense.

In addition, amortization of deferred financing costs was $ 0.5 million and $ 0.4 million for the years ended December 31, 2022 and 2021, respectively.

Deferred financing costs are included in prepaid expenses and other current assets and other assets, non-current assets.

Amortization of debt issuance cost and discount as well as amortization of deferred financing costs were immaterial for the year ended December 31, 2020.

On September 25, 2020, the Company amended and restated its loan and security agreement with Silicon Valley Bank ("SVB") (the "Loan Agreement"), which was scheduled to expire on September 26, 2020.

The Loan Agreement provides a senior secured revolving credit facility of up to the lesser of $ 60.0 million and 85 % of eligible accounts receivable, with a maturity date of September 25, 2022.

The Loan Agreement includes a letter of credit, foreign exchange and cash management facility with a sublimit

up to $ 10.0 million.

The Loan Agreement includes a letter of credit, foreign exchange and cash management facility with a sublimit up to $ 10.0 million.

On April 30, 2021, the Company entered into the Credit Agreement.

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The Company used approximately $ 39.0 million of the net proceeds from the offering to pay for the Capped Call Transactions (as described below).

The Convertible Senior Notes are senior, unsecured obligations and (i) will be equal in right of payment with the existing and future senior, unsecured indebtedness;

The Convertible Senior Notes are senior, unsecured obligations and are (i) equal in right of payment with the existing and future senior, unsecured indebtedness;

(ii) senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated to the Convertible Senior Notes;

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The Convertible Senior Notes are convertible at the option of holders only during certain periods and upon satisfaction of certain conditions.

Holders will have the right to convert their notes (or any portion of a note in an authorized denomination), in the following circumstances:

Holders have the right to convert their notes (or any portion of a note in an authorized denomination), in the following circumstances:

(i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

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In addition, calling any note for redemption will constitute a "make-whole fundamental change" (as defined below) with respect to that note, in which case the conversion rate applicable to the conversion of that note will be increased in certain circumstances if it is converted after it is called for redemption.

If the Company elects to redeem less than all of the outstanding notes, then the redemption will not constitute a make-whole fundamental change with respect to the notes not called for redemption, and holders of the notes not called for redemption will not be entitled to an increased conversion rate for such notes as described above on account of the redemption, except to the limited extent described further

No sinking fund is provided for the Convertible Senior Notes, which means that the Company is not required to redeem or retire the Convertible Senior Notes periodically.

If a fundamental change occurs, then each noteholder will have the right to require the Company to repurchase its notes (or any portion thereof in an authorized denomination) for cash on a date (the "fundamental change repurchase date") of the Company’s choosing, which must be a business day that is no more than 45 , nor less than 20 , business days after the date Magnite distributes the related fundamental change notice.

If a fundamental change occurs, then each noteholder will have the right to require the Company to repurchase its notes (or any portion thereof in an authorized denomination) for cash on a date (the "fundamental change repurchase date") of the Company’s choosing, which must be a business day that is no more than 45 , nor less than 20 , business days after the date the Company distributes the related fundamental change notice.

If an event of default, other than a reporting default remedied by special interest as defined in the indenture agreement, occurs with respect to the Company or any guarantor, then the principal amount of, and all accrued and unpaid interest on, all of the notes then outstanding will immediately become due and payable without any further action or notice by any person.

If an event of default (other than a reporting event of default described above with respect to Magnite or any guarantor and not solely with respect to a significant subsidiary of the Company’s or a guarantor, other than the Company or such guarantor) occurs and is continuing, then the trustee, by notice to the Company, or noteholders of at least 25 % of the aggregate principal amount of notes then outstanding, by written notice to the Company and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the notes then outstanding to become due and payable immediately.

If an event of default (other than a reporting event of default described above with respect to the Company or any guarantor and not solely with respect to a significant subsidiary of the Company’s or a guarantor, other than the Company or such guarantor) occurs and is continuing, then, the trustee, by notice to the Company, or noteholders of at least 25 % of the aggregate principal amount of notes then outstanding, by written notice to the Company and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the notes then outstanding to become due and payable immediately.

The Convertible Senior Notes have an initial conversion rate of 15.6539 shares of common stock per $1,000 principal amount of the Convertible Senior Notes, which will be subject to customary anti-dilution adjustments in certain circumstances.

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The cost of the Capped Call Transaction was recorded as a reduction of the Company’s additional paid-in capital in the accompanying consolidated financial statements.

As noted in Note 2, the Company early adopted ASU 2020-06 effective January 1, 2021.

The Company has not elected the fair value option, the embedded conversion features are not required to be bifurcated under the accounting guidance, and the convertible debt was not issued with a substantial premium.

As such, the Company accounted for the Convertible Senior Notes as a liability in its entirety.

Under the guidance, all the embedded features of the Convertible Senior Notes met the definition of a derivative.

These features included a contingent call option, contingent put options, and conversion features.

The contingent call option and contingent put options are clearly and closely related to the debt host and, therefore, do not require bifurcation.

As the conversion features are indexed to the Company’s own equity and would be equity classified if they were freestanding instruments, the scope exception in ASC 815-10-15-74(a) applies and these conversion features will not be bifurcated under ASC 815.

The new accounting guidance also eliminated the bifurcation models of ASC 470-20 and eliminated the treasury method approach to earnings per share.

Accordingly, earnings per share on convertible debt instruments should only be calculated under the If-Converted method.

Under the guidance above, the Company will assume settlement in shares.

The Company incurred debt issuance costs of $ 11.4 million in March 2021.

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The debt issuance costs are amortized on an effective interest basis over the term of the Convertible Senior Notes and are included in interest expense and amortization of debt discount in the accompanying consolidated statements of operations.

The following table sets forth interest expense related to the Convertible Senior Notes for the year ended December 31, 2021:

The following table sets forth interest expense related to the Convertible Senior Notes for the years ended December 31, 2022 and 2021:

December 31, 2022

(in thousands)

December 31, 2021

(in thousands, except interest rates)

Contractual interest expense $ 1,000 $ 786

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Effective interest rate 0.82 % 0.82 %

Amortization expense for the Company's debt issuance costs for fiscal years 2022 through 2026 is as follows (in thousands):

Amortization expense for the Company's debt issuance costs related to the Convertible Senior notes for fiscal years 2023 through 2026 is as follows (in thousands):

Fiscal Year Debt Issuance Costs

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Loans, if any, under the Revolving Credit Facility are expected to be used for general corporate purposes.

The obligations under the Credit Agreement are secured by substantially all of the assets of the Company and those of its subsidiaries that are guarantors under the Credit Agreement.

The obligations under the

Credit Agreement are secured by substantially all of the assets of the Company and those of its subsidiaries that are guarantors under the Credit Agreement.

Amounts outstanding under the Credit Agreement accrue interest at a rate equal to either, (1) for the Term Loan B Facility, at the Company’s election, the Eurodollar Rate (as defined in the Credit Agreement) plus a margin of 5.00 % per annum, or ABR (as defined in the Credit Agreement) plus a margin of 4.00 %, and (2) for the Revolving Credit Facility, at the Company’s election, the Eurodollar Rate plus a margin of 4.25 % to 4.75 %, or ABR plus a margin of 3.25 % to 3.75 %, in each case, depending on the Company’s first lien net leverage ratio.

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The Company was not required to make any such mandatory prepayment required by the Excess Cash Flow provision for the period ended December 31, 2022.

In addition, the Credit Agreement will mature in the event that any portion of the Convertible Senior Notes remains outstanding 91 days prior to the maturity date of the Convertible Senior Notes.

On June 28, 2021, the Company entered into an Incremental Assumption Agreement (the "Incremental Agreement") to the Credit Agreement.

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At December 31, 2022, amounts available under the Revolving Credit Facility were $ 59.7 million, net of letters of credit outstanding in the amount of $ 5.3 million.

The following table summarizes the Term Loan B Facility at December 31, 2021:

December 31, 2021

The following table summarizes the amount outstanding under the Term Loan B Facility as of December 31, 2022 and 2021:

December 31, 2022 December 31, 2021

(in thousands)

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The debt issuance costs are amortized on an effective interest basis over the term of the Term Loan B Facility and are included in interest expense and amortization of debt discount in the accompanying consolidated statements of operations.

The following table sets forth interest expense related to the Term Loan B Facility for the year ended December 31, 2021:

The following table sets forth interest expense related to the Term Loan B Facility for the years ended December 31, 2022 and 2021:

December 31, 2022

December 31, 2021

(in thousands.

except interest rates)

Contractual interest expense 24,322 14,074

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Note 18— Stockholders' Equity

On December 13, 2021, the Board of Directors approved a share repurchase program, under which the Company is authorized to purchase up to $ 50.0 million of its common stock over the twelve month period commencing December 10, 2021.

The repurchase program allows the Company to repurchase its common stock using open market stock purchases, privately negotiated transactions, block trades or other means in accordance with U.S.

securities laws.

The number of shares repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, share price, trading volume and general market conditions, along with working capital requirements, general business conditions, other opportunities that the Company may have for the use or investment of its capital and other factors.

The share repurchase program does not obligate the Company to repurchase any particular amount of common stock and may be suspended, modified or discontinued at any time at the Company’s discretion.

The Company intends to finance the share repurchase program through cash on hand.

Under the share repurchase program, 349,245 shares were purchased in open market purchases through December 31, 2021 for a total of approximately $ 6.0 million at an average of $ 17.20 per share.

Approximately $ 44.0 million worth of shares may yet be purchased under the plan.

In December 2021, the Board of Directors approved a repurchase program (the "2021 Repurchase Plan"), under which the Company was authorized to purchase up to $ 50.0 million of its common stock over the twelve month period commencing December 10, 2021.

In November 2022, the Board of Directors approved an extension of the 2021 Repurchase Plan through December 15, 2023.

Under the 2021 Repurchase Plan, 1,592,257 shares were purchased in open market purchases through December 31, 2022 for a total of approximately $ 21.7 million at an average of $ 13.61 per share.

In February 2023, the 2021 Repurchase Plan was replaced by the 2023 Repurchase Plan (Note 20).

For accounting purposes, common stock repurchases under our stock repurchase program are recorded based upon the purchase date of the applicable trade.

Repurchased shares are accounted for as treasury stock in the consolidated balance sheets.

Repurchased shares are accounted for as treasury stock in the consolidated balance sheets and have all been subsequently retired.

Note 19— Related Party Transactions

During the years ended December 31, 2021, 2020, and 2019, the Company did not enter into any transactions with its related parties or affiliates of its related parties requiring disclosure pursuant to the applicable rules of the Financial Accounting Standards Boards or the U.S.

During the years ended December 31, 2022, 2021, and 2020, the Company did not have material transactions with its related parties or affiliates of its related parties requiring disclosure pursuant to the applicable rules of the Financial Accounting Standards Boards or the U.S.

Securities and Exchange Commission.

Note 20— Subsequent Events

In January 2022, the Company retired 349,245 shares of treasury stock, which was recorded as a reduction in additional paid in capital.

Additionally in January 2022, the Company repurchased and retired 377,000 shares of common stock through open market purchases under the share repurchase program for $ 5.6 million at an average price of $ 14.94 , which was also recorded as a reduction in additional paid in capital.

On February 1, 2022, the Company granted 5,918,007 restricted stock units, 699,194 stock options, and 86,806 performance stock units to the Company's employees.

On January 1, 2023, the Company granted 6,429,784 restricted stock units, 129,870 stock options, and 456,092 performance stock units to the Company's employees.

The options granted will vest over four years from grant date, with 25 % vesting after one year and the remainder vesting monthly thereafter.

The RSUs granted will generally vest over four years from issuance with 25 % after one year , and the remainder vesting quarterly thereafter.

The RSUs granted will vest over four years from issuance with 25 % after one year , and the remainder vesting quarterly thereafter.

Between 0 % and 150 % of the performance stock units will vest on the third anniversary of its grant date based on certain stock price performance metrics.

On January 19, 2023, the Company announced that it would be reducing its global workforce by approximately 6 %.

The reduction in force is primarily associated with the elimination of duplicative roles resulting from the integration of the Company's CTV platforms and the realization of acquisition operating cost synergies.

On February 16, 2023, the Company's Board of Directors approved a repurchase plan (the "2023 Repurchase Plan"), pursuant to which the Company is authorized to purchase up to an aggregate of $ 75.0 million of common stock or Convertible Senior Notes through February 16, 2025.

The 2023 Repurchase Plan allows the Company to repurchase its common stock or Convertible Senior Notes using open market stock purchases, privately negotiated transactions, block trades or other means in accordance with U.S.

securities laws.

The number of shares or notes repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, price, trading volume and general market conditions, along with working capital requirements, general business conditions, other opportunities that the Company may have for the use or investment of its capital and other factors.

The repurchase program does not obligate the Company to repurchase any particular amount of common stock or notes and may be suspended, modified or discontinued at any time at the Company’s discretion.

The Company intends to finance the repurchase program through cash on hand.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data