MAGNITE, INC. 10-K

Item 8. Financial Statements and Supplementary Data MAGNITE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 61 Consolidated Financial Statements: Consolidated Balance Sheets 63 Consolidated Statements of Operations 64 Consolidated Statements of Comprehensive Loss 65 Consolidated Statements of Stockholders' Equity 66 Consolidated Statements of Cash Flows 67 Notes to Consolidated Financial Statements 69 60 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Magnite, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Magnite, Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2023 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue — Refer to Notes 2 and 4 to the financial statements . Critical Audit Matter Description The Company generates revenue from transactions where it provides a platform for the purchase and sale of digital advertising inventory. The Company uses automated systems to process and record revenue based on contractual terms with buyers and publishers, and its revenue is comprised of a significant volume of low-dollar transactions. We identified revenue as a critical audit matter because the Company’s systems to process and record revenue are highly automated. This required increased extent of effort, including the need for us to involve professionals with expertise in Information Technology (IT) to identify, test, and evaluate the Company’s systems, software applications, and automated controls. How the Critical Audit Matter Was Addressed in the Audit 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: 61 Table of Contents ◦ Identified the significant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls. ◦ Performed testing of system interface controls and automated controls within the relevant revenue streams, as well as controls designed to ensure the accuracy and completeness of revenue. ◦ Independently created test transactions and traced such transactions through the systems to final output for financial reporting. • We tested internal 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 used technology-based data analysis tools to inspect journal entries to: ◦ Identify significant relationships in the revenue population. ◦ Sufficiently understand identified 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: ◦ For a sample of accounts receivable balances, evaluating responses to confirmations sent to customers or other evidence such as cash receipts received after year end. ◦ For a sample of accounts payables – seller balances, performing detail transaction testing by agreeing the amounts recognized to source documents. ◦ For a sample of cash disbursements made after year end, evaluating whether the amounts were appropriately included in accounts payable – seller as of the balance sheet date. ◦ Analytical procedures on the accounts payable – seller balance by developing an independent expectation for the recorded balance based on a historical relationship with revenue. /s/ Deloitte & Touche LLP Los Angeles, California February 28, 2024 We have served as the Company's auditor since 2018. 62 Table of Contents MAGNITE, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par values) December 31, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 326,219 $ 326,254 Accounts receivable, net 1,176,276 976,506 Prepaid expenses and other current assets 20,508 23,501 TOTAL CURRENT ASSETS 1,523,003 1,326,261 Property and equipment, net 47,371 44,969 Right of use lease asset 60,549 78,211 Internal use software development costs, net 21,926 23,671 Intangible assets, net 51,011 253,501 Goodwill 978,217 978,217 Other assets, non-current 6,729 7,383 TOTAL ASSETS $ 2,688,806 $ 2,712,213 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 1,372,176 $ 1,094,321 Lease liabilities, current 20,402 21,172 Debt, current 3,600 3,600 Other current liabilities 5,957 5,939 TOTAL CURRENT LIABILITIES 1,402,135 1,125,032 Debt, non-current, net of debt issuance costs 532,986 722,757 Lease liabilities, non-current 49,665 66,331 Deferred tax liabilities, net 680 5,072 Other liabilities, non-current 1,657 1,723 TOTAL LIABILITIES 1,987,123 1,920,915 Commitments and contingencies (Note 16) STOCKHOLDERS' EQUITY Preferred stock, $ 0.00001 par value, 10,000 shares authorized at December 31, 2023 and December 31, 2022; 0 shares issued and outstanding at December 31, 2023 and December 31, 2022 — — Common stock, $ 0.00001 par value; 500,000 shares authorized at December 31, 2023 and December 31, 2022; 138,577 and 134,006 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively 2 2 Additional paid-in capital 1,387,715 1,319,221 Accumulated other comprehensive loss ( 2,076 ) ( 3,151 ) Accumulated deficit ( 683,958 ) ( 524,774 ) TOTAL STOCKHOLDERS' EQUITY 701,683 791,298 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,688,806 $ 2,712,213 The accompanying notes to consolidated financial statements are an integral part of these statements. 63 Table of Contents MAGNITE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Revenue $ 619,710 $ 577,069 $ 468,413 Expenses: Cost of revenue 409,906 307,165 201,662 Sales and marketing 173,982 200,081 170,406 Technology and development 94,318 93,757 74,449 General and administrative 89,048 81,382 64,789 Merger, acquisition, and restructuring costs 7,465 7,468 38,177 Total expenses 774,719 689,853 549,483 Loss from operations ( 155,009 ) ( 112,784 ) ( 81,070 ) Other (income) expense: Interest expense, net 32,369 29,260 19,848 Foreign exchange (gain) loss, net 1,953 ( 1,129 ) ( 1,480 ) Gain on extinguishment of debt ( 26,480 ) — — Other income ( 5,304 ) ( 5,318 ) ( 4,450 ) Total other expense, net 2,538 22,813 13,918 Loss before income taxes ( 157,547 ) ( 135,597 ) ( 94,988 ) Provision (benefit) for income taxes 1,637 ( 5,274 ) ( 95,053 ) Net income (loss) $ ( 159,184 ) $ ( 130,323 ) $ 65 Net income (loss) per share: Basic $ ( 1.17 ) $ ( 0.98 ) $ — Diluted $ ( 1.17 ) $ ( 0.98 ) $ — Weighted average shares used to compute net income (loss) per share: Basic 136,620 132,887 126,294 Diluted 136,620 132,887 136,261 The accompanying notes to consolidated financial statements are an integral part of these statements. 64 Table of Contents MAGNITE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Net income (loss) $ ( 159,184 ) $ ( 130,323 ) $ 65 Other comprehensive income (loss): Foreign currency translation adjustments 1,075 ( 1,775 ) ( 419 ) Other comprehensive income (loss) 1,075 ( 1,775 ) ( 419 ) Comprehensive loss $ ( 158,109 ) $ ( 132,098 ) $ ( 354 ) The accompanying notes to consolidated financial statements are an integral part of these statements. 65 Table of Contents MAGNITE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Balance at December 31, 2020 114,029 $ 2 $ 777,084 $ ( 957 ) $ ( 394,516 ) — $ — $ 381,613 Exercise of common stock options 1,560 — 9,425 — — — — 9,425 Issuance of common stock related to employee stock purchase plan 255 — 3,714 — — — — 3,714 Issuance of common stock related to RSU vesting 4,624 — — — — — — — Shares withheld related to net share settlement ( 289 ) — ( 6,496 ) — — — — ( 6,496 ) Issuance of common stock associated with the 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 loss — — — ( 419 ) — — — ( 419 ) Net income — — — — 65 — — 65 Balance at December 31, 2021 132,553 2 1,282,589 ( 1,376 ) ( 394,451 ) ( 349 ) ( 6,007 ) 880,757 Exercise of common stock options 613 — 2,234 — — — — 2,234 Issuance of common stock related to employee stock purchase plan 426 — 3,744 — — — — 3,744 Issuance of common stock related to RSU vesting 3,276 — — — — — — — Shares withheld related to net share settlement ( 1,270 ) — ( 14,498 ) — — — — ( 14,498 ) Purchase of treasury stock — — — — — ( 1,243 ) ( 15,663 ) ( 15,663 ) 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 loss — — — — ( 130,323 ) — — ( 130,323 ) Balance at December 31, 2022 134,006 2 1,319,221 ( 3,151 ) ( 524,774 ) — — 791,298 Exercise of common stock options 395 — 2,166 — — — — 2,166 Issuance of common stock related to employee stock purchase plan 438 — 3,513 — — — — 3,513 Issuance of common stock related to RSU and PSU vesting 4,777 — — — — — — — Shares withheld related to net share settlement ( 1,039 ) — ( 11,814 ) — — — — ( 11,814 ) Stock-based compensation — — 74,629 — — — — 74,629 Other comprehensive income — — — 1,075 — — — 1,075 Net loss — — — — ( 159,184 ) — — ( 159,184 ) Balance at December 31, 2023 138,577 $ 2 $ 1,387,715 $ ( 2,076 ) $ ( 683,958 ) $ — $ — $ 701,683 The accompanying notes to consolidated financial statements are an integral part of these statements. 66 Table of Contents MAGNITE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 December 31, 2022 December 31, 2021 OPERATING ACTIVITIES: Net income (loss) $ ( 159,184 ) $ ( 130,323 ) $ 65 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 240,820 216,052 146,886 Stock-based compensation 72,617 64,118 40,735 Impairment of intangible assets — 3,320 — Gain on extinguishment of debt ( 26,480 ) — — (Gain) loss on disposal of property and equipment 311 ( 86 ) 130 Provision for (recovery of) doubtful accounts 4,666 ( 163 ) 49 Amortization of debt discount and issuance costs 6,279 6,785 4,925 Non-cash lease expense ( 1,712 ) 1,485 ( 350 ) Deferred income taxes ( 2,379 ) ( 8,802 ) ( 98,770 ) Unrealized foreign currency (gain) loss, net 1,266 ( 271 ) ( 2,259 ) Other items, net 2,696 — 3,292 Changes in operating assets and liabilities, net of effect of business acquisitions: Accounts receivable ( 220,102 ) ( 46,325 ) ( 254,368 ) Prepaid expenses and other assets 1,004 ( 4,228 ) 1,324 Accounts payable and accrued expenses 294,677 91,377 284,905 Other liabilities ( 112 ) ( 389 ) 25 Net cash provided by operating activities 214,367 192,550 126,589 INVESTING ACTIVITIES: Purchases of property and equipment ( 26,764 ) ( 30,815 ) ( 17,697 ) Capitalized internal use software development costs ( 10,619 ) ( 13,582 ) ( 11,431 ) Mergers and acquisitions, net of cash acquired and indemnification claims holdback — ( 20,755 ) ( 661,869 ) Net cash used in investing activities ( 37,383 ) ( 65,152 ) ( 690,997 ) FINANCING ACTIVITIES: Proceeds from Convertible Senior Notes offering — — 400,000 Proceeds from issuance of debt, net of debt discount — — 349,200 Payment for capped call options — — ( 38,960 ) Payment for debt issuance costs — — ( 30,378 ) Proceeds from exercise of stock options 2,166 2,234 9,425 Proceeds from issuance of common stock under employee stock purchase plan 3,513 3,744 3,714 Repayment of debt ( 3,600 ) ( 3,600 ) ( 1,800 ) Repurchase of Convertible Senior Notes ( 165,518 ) — — Repayment of financing lease ( 276 ) ( 807 ) ( 645 ) Purchase of treasury stock — ( 15,663 ) ( 6,007 ) Taxes paid related to net share settlement ( 11,814 ) ( 14,498 ) ( 6,496 ) Payment of indemnification claims holdback ( 2,313 ) ( 1,582 ) — Net cash provided by (used in) financing activities ( 177,842 ) ( 30,172 ) 678,053 EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH 575 ( 1,417 ) ( 683 ) CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 283 ) 95,809 112,962 CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period 326,502 230,693 117,731 CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period $ 326,219 $ 326,502 $ 230,693 The accompanying notes to consolidated financial statements are an integral part of these statements. 67 Table of Contents MAGNITE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued) (In thousands) Year Ended December 31, 2023 December 31, 2022 December 31, 2021 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO CONSOLIDATED BALANCE SHEETS: Cash and cash equivalents $ 326,219 $ 326,254 $ 230,401 Restricted cash included in prepaid expenses and other current assets — 248 240 Restricted cash included in other assets, non-current — — 52 Total cash, cash equivalents and restricted cash $ 326,219 $ 326,502 $ 230,693 SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: Cash paid for income taxes $ 5,357 $ 4,932 $ 2,141 Cash paid for interest $ 37,028 $ 26,320 $ 12,908 Capitalized assets financed by accounts payable and accrued expenses and other liabilities $ 1,690 $ 1,295 $ 2,171 Capitalized stock-based compensation $ 2,012 $ 2,704 $ 1,496 Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 4,017 $ 20,131 $ 42,013 Purchase consideration - indemnification claims holdback $ — $ 2,293 $ 1,602 Common stock and options issued for mergers and acquisitions $ — $ — $ 495,591 Debt discount, non-cash $ — $ — $ 10,800 The accompanying notes to consolidated financial statements are an integral part of these statements. 68 Table of Contents MAGNITE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1— Nature of Operations Company Overview Magnite, Inc. ("Magnite" or the "Company"), formerly known as The Rubicon Project, Inc., was formed in Delaware and began operations on April 20, 2007. The Company operates a sell side advertising platform that offers buyers and sellers of digital advertising a single partner for transacting globally across all channels, formats, and auction types. The Company's common stock is listed on the Nasdaq Global Select Market of The Nasdaq Stock Market LLC ("Nasdaq") under the symbol "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; applications and services for buyers, including advertisers, agencies, agency trading desks, and demand side platforms, to buy digital advertising inventory; and a transparent, independent marketplace that brings buyers and sellers together and facilitates intelligent decision making and automated transaction execution at scale. The Company's clients include many of the world's leading sellers and buyers of digital advertising inventory. Sellers monetize their inventory through the Company’s platform by seamlessly connecting to a global market of integrated buyers that transact through real-time bidding, which includes direct sale of premium inventory to a buyer, referred to as private marketplace, and open auction bidding, where buyers bid against each other in a real-time auction for the right to purchase a publisher’s inventory, referred to as open marketplace. At the same time, buyers leverage the Company’s platform to manage their advertising spending and reach their target audiences, simplify order management and campaign tracking, obtain actionable insights into audiences for their advertising, and access impression-level purchasing from thousands of sellers. Note 2— Organization and Summary of Significant Accounting Policies Basis of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and include the operations of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Segments Management has determined that the Company operates as one segment. The Company’s chief operating decision maker reviews financial information on an aggregated and consolidated basis, together with certain operating and performance measures principally to make decisions about how to allocate resources and to measure the Company’s performance. Use of Estimates 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. Actual results could differ materially from these estimates. 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) 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, and (v) the realization of tax assets and estimates of tax liabilities. 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. Estimates relating to the allowance for doubtful accounts, amounts capitalized and estimated useful lives of internal-use software development costs, estimated useful lives of long-lived assets, recoverability of intangible assets and goodwill, and income taxes, including the realization of tax assets and estimates of tax 69 Table of Contents liabilities require the selection of appropriate valuation methodologies and models, and judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ materially from those estimates under different assumptions or circumstances. Revenue Recognition The Company generates revenue from transactions where it provides a platform for the purchase and sale of digital advertising inventory. Generally, the Company's revenue is based on a percentage of the ad spend that runs through its platform, although for certain clients, services, or transaction types the Company may receive a fixed CPM for each impression sold, and for advertising campaigns that are transacted through insertion orders the Company earns revenue based on the full amount of ad spend that runs through its platform. 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. The Company's solution incorporates proprietary machine-learning algorithms, sophisticated data processing, high-volume storage, detailed analytics capabilities, and a distributed infrastructure. Digital advertising inventory is created when consumers access sellers’ content. Sellers provide digital advertising inventory to the Company's platform in the form of advertising requests, or ad requests. When the Company receives ad requests from sellers, it sends bid requests to buyers, which enable buyers to bid on sellers’ digital advertising inventory. Winning bids can create advertising, or paid impressions, for the seller to present to the consumer. The total volume of spending between buyers and sellers on the Company's platform is referred to as advertising spend. The Company keeps a percentage of that advertising spend as a fee, and remits the remainder to the seller. The fee that the Company retains from the gross advertising spend on its platform is recognized as revenue. The fee earned on each transaction is based on the pre-existing agreement between the Company and the seller and the clearing price of the winning bid. The Company recognizes revenue upon fulfillment of its performance obligation to a client, which occurs at the point in time an ad renders and is counted as a paid impression, subject to a contract existing with the client and a fixed or determinable transaction price. The Company does not have arrangements with multiple performance obligations. 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 Company considers the following when determining if a contract exists (i) contract approval by all parties, (ii) identification of each party’s rights regarding the goods or services to be transferred, (iii) specified payment terms, (iv) commercial substance of the contract, and (v) collectability of substantially all of the consideration is probable. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as the principal or an agent in the transaction. In determining whether the Company is acting as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative. Expenses The Company classifies its expenses into the following categories: Cost of Revenue. The Company's cost of revenue consists primarily of cloud hosting, data center, and 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, and personnel costs. In addition, for revenue booked on a gross basis, cost of revenue includes traffic acquisition costs. Personnel costs included in cost of revenue include salaries, bonuses, and stock-based compensation, and are primarily attributable to personnel in the Company's network operations group who support the Company's platform. The Company capitalizes costs associated with software that is developed or obtained for internal use and amortizes the costs associated with its revenue-producing platform in cost of revenue over their estimated useful lives. The Company amortizes acquired developed technologies over their estimated useful lives. 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, amortization expense associated with client relationships, backlog, and non-compete agreements from the Company's business acquisitions, professional services, facilities-related costs, and depreciation expense. The Company's sales and support organization focuses on increasing the adoption of the Company's solution by existing and new buyers and sellers and supports ongoing client relationships. The Company amortizes acquired intangibles associated with client relationships and backlog from its business acquisitions over their estimated useful lives. 70 Table of Contents Technology and Development. The Company's technology and development expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, as well as professional services associated with the ongoing development and maintenance of the Company's solution, third-party software license costs, facilities-related costs, and depreciation and amortization expense. These expenses include costs incurred in the development, implementation, and maintenance of internal use software, including platform and related infrastructure. Technology and development costs are expensed as incurred, except to the extent that such costs are associated with internal use software development that qualifies for capitalization, which are then recorded as internal use software development costs, net on the Company's consolidated balance sheets. The Company amortizes internal use software development costs that relate to its revenue-producing activities on the Company's platform to cost of revenue and amortize other internal use software development costs to technology and development costs or general and administrative expenses, depending on the nature of the related project. The Company amortizes acquired intangibles associated with technology and development functions from its business acquisitions over their estimated useful lives. General and Administrative. The Company's general and administrative expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, associated with the Company's executive, finance, legal, human resources, compliance, and other administrative personnel, as well as accounting and legal professional services fees, facilities-related costs, depreciation expense, bad debt expense, and other corporate-related expenses. 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, related stock-based compensation charges, and other restructuring activities, including facility closures, relocation costs, contract termination 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 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 the Company's stock price exceeding a peer index, or market conditions. The fair value of restricted stock units that vest based on continued service is equal to the closing price of the Company's common stock as reported on the Nasdaq on the grant date. The fair value of each option award containing service conditions is estimated on the grant date using the Black-Scholes option-pricing model. The fair value of awards containing market conditions is estimated using a Monte-Carlo simulation model. For service condition awards, stock-based compensation expense is recognized on a straight-line basis over the requisite service periods of the awards, which is generally four years . For performance condition and market condition awards, stock-based compensation expense is recognized using a graded vesting model over the requisite service period of the awards. For market condition awards, expense recognized is not subsequently reversed if the market conditions are not achieved. The assumptions and estimates used in the Black-Scholes pricing model are as follows: Fair Value of Common Stock. The fair value of common stock is based on the closing price of the Company's common stock as reported on the Nasdaq on the grant date. Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes option-pricing model on the yields of U.S. Treasury securities with maturities appropriate for the term of stock option awards. Expected Term. For employee stock options the expected term is determined based on historical trends. The expected term of employee stock options that contain performance conditions represents the weighted-average period that the stock options are estimated to remain outstanding. Volatility. The computation of the expected volatility assumption is based on the historical volatility of the Company’s common stock. Dividend Yield. The dividend yield assumption is based on the Company’s history and current expectations of dividend payouts. The Company has never declared or paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future, so the Company used an expected dividend yield of zero . Determining the fair value of stock-based awards with performance and market conditions requires judgment. The Company's use of the Monte-Carlo simulation model requires the input of subjective assumptions, such as the expected term of the award, the expected volatility of the price of the Company’s common stock, risk-free interest rates, the expected dividend yield of the Company’s common stock, in addition for those awards containing market conditions, which also include expected volatilities of selected peer companies, and expected correlation coefficients of the Company and those of the selected peer companies. The assumptions used in the Company’s valuation model represent management’s best estimates. These estimates involve inherent 71 Table of Contents uncertainties and the application of management’s judgment. If factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future. Income Taxes Deferred income tax assets and liabilities are determined based upon the net tax effects of the differences between the Company’s consolidated financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed. 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 maintains a partial valuation allowance to offset its domestic net deferred tax assets due to the uncertainty of realizing future income tax benefits from the net operating loss carryforwards and other deferred tax assets. The Company recognizes the income 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. The income tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized. The Company recognizes interest and penalties accrued related to its uncertain tax positions in its income tax provision (benefit) in the consolidated statements of operations. Capital Stock The Company has authorized capital stock of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock. The Company has issued common stock, which is included in outstanding common 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. The Company is required to reserve and keep available out of its authorized but unissued shares of common stock such number of shares sufficient to affect the conversion of all shares granted and available for grant under the Company’s stock award plans. The number of shares of the Company's stock reserved for these purposes at December 31, 2023 was 44,592,265 . The board of directors is authorized to establish, from time to time, the number of shares to be included in each series of preferred stock, and to fix the designation, powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each series of preferred stock, and any of its qualifications, limitations or restrictions. Net Income (Loss) Per Share Attributable to Common Stockholders Basic net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding. Diluted income per share considers adjustments to net income and the weighted-average number of shares of common stock outstanding for the effect of potentially dilutive securities during the period. Potentially dilutive securities consist of stock options, restricted stock units, performance stock units, potential shares issuable under the Company's Employee Stock Purchase Plan ("ESPP"), and potential shares issuable as part of the Convertible Senior Notes. Diluted income per share is computed utilizing the treasury method for options, restricted stock units, performance stock units, and potential ESPP shares. Diluted income per share for the Convertible Senior Notes is calculated under the if-converted method. Potential common share equivalents are excluded where their inclusion would be anti-dilutive. For periods in which the Company reports net loss, diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive securities would be anti-dilutive. Comprehensive Income (Loss) Comprehensive income (loss) encompasses all changes in equity other than those arising from transactions with stockholders, and consists of net income (loss), unrealized gains (losses) on investments and foreign currency translation adjustments. Cash and Cash Equivalents The Company invests excess cash primarily in money market funds, corporate debt securities, and highly liquid debt instruments of the U.S. government and its agencies. The Company classifies investments held in money market funds as cash equivalents because the money market funds have weighted-average maturities at the date of purchase of less than 90 days, are 72 Table of Contents freely redeemable into cash and have a constant net asset value. Investments held in U.S. government and agency bonds and corporate debt securities with stated maturities of less than one year are classified as short-term investments. Restricted Cash The Company classifies certain restricted cash balances within prepaid expenses and other current assets and other assets, non-current on the consolidated balance sheets based upon the term of the remaining restrictions. Accounts Receivable Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount, are unsecured, and do not bear interest. The allowance for doubtful accounts is based on the best estimate of the amount of probable credit losses in existing accounts receivable. The allowance for doubtful accounts is determined based on historical collection experience and the review in each period of the status of the then-outstanding accounts receivable, while taking into consideration current client information, subsequent collection history and other relevant data. The Company reviews the allowance for doubtful accounts on a quarterly basis. Account balances are charged off against the allowance when the Company believes it is probable the receivable will not be recovered. Property and Equipment, Net Property and equipment are recorded at historical cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method based upon the estimated useful lives of the assets. The estimated useful lives of the Company’s property and equipment are as follows: Years Computer equipment and network hardware 3 Furniture, fixtures and office equipment 5 to 7 Leasehold improvements Shorter of useful life or life of lease Repair and maintenance costs are charged to expense as incurred, while renewals and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the Company’s results of operations. Internal Use Software Development Costs The Company capitalizes certain internal use software development costs associated with creating and enhancing internally developed software related to the Company’s technology infrastructure. These costs include personnel and related employee benefits expenses for employees who are directly associated with and who devote time to software projects, and external direct costs of materials and services consumed in developing or obtaining the software. Software development costs that do not meet the qualification for capitalization, as further discussed below, are expensed as incurred and recorded in technology and development expenses in the results of operations. Software development activities generally consist of three stages, (i) the planning stage, (ii) the application and infrastructure development stage, and (iii) the post implementation stage. Costs incurred in the planning and post implementation stages of software development, including costs associated with the post-configuration training and repairs and maintenance of the developed technologies, are expensed as incurred. The Company capitalizes costs associated with software developed for internal use when the planning stage is completed, management has authorized further funding for the completion of the project, and it is probable that the project will be completed and perform as intended. Costs incurred in the application and infrastructure development stages, including significant enhancements and upgrades, are capitalized. 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, 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. Intangible Assets Intangible assets primarily consist of acquired developed technology, client relationships, and in-process research and development projects resulting from business combinations, which are recorded at acquisition-date fair value, less accumulated amortization. The Company determines the appropriate useful life of its intangible assets by performing an analysis of expected cash 73 Table of Contents flows of the acquired assets. Intangible assets are amortized over their estimated useful lives using a straight-line method, which approximates the pattern in which the economic benefits are consumed. The Company’s intangible assets are being amortized over their estimated useful lives as follows: Years Developed technology 5 In-process research and development 3 to 5 Customer relationships 0.5 to 4 Backlog 0.75 Non-compete agreements 1 to 2 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. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For intangible assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows at the asset group level that represents the lowest level of independent cash flows. The Company measures the impairment loss based on the difference between the carrying amount and estimated fair value. Impairment of Long-Lived Assets including Internal Use Capitalized Software Costs The Company assesses the recoverability of its long-lived assets when events or changes in circumstances indicate their carrying value may not be recoverable. Such events or changes in circumstances may include: a significant adverse change in the extent or manner in which a long-lived asset is being used, significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company assesses recoverability of a long-lived asset by determining whether the carrying value of the asset group can be recovered through projected undiscounted cash flows over their remaining lives. If the carrying value of the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized, measured as the amount by which the carrying amount exceeds estimated fair value. An impairment loss is charged to operations in the period in which management determines such impairment. Business Combinations The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. The Company allocates the purchase price of a business combination, which is the sum of the consideration provided, which may consist of cash, equity or a combination of the two, to the identifiable assets and liabilities of the acquired business at their acquisition date fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. 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. When the Company issues stock-based or cash awards to an acquired company’s stockholders, the Company evaluates whether the awards are contingent consideration or compensation for post-business combination services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the selling stockholder beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as expense over the requisite service period. The Company estimates the fair value of intangible assets acquired generally using a discounted cash flow approach, which includes an analysis of the future cash flows expected to be generated by the asset and the risk associated with achieving these cash flows. The key assumptions used in the discounted cash flow model include the discount rate that is applied to the forecasted future 74 Table of Contents cash flows to calculate the present value of those cash flows and the estimate of future cash flows attributable to the acquired intangible asset, which include revenue, expenses and taxes. The carrying value of acquired working capital assets and liabilities approximates its fair value, given the short-term nature of these assets and liabilities. Acquisition-related transaction costs are not included as a component of consideration transferred, but are accounted for as an expense in the period in which the costs are incurred. Goodwill Goodwill represents the excess of the aggregate fair value of the consideration transferred in a business combination over the fair value of the assets acquired, net of liabilities assumed. Goodwill is not amortized, but is subject to impairment testing conducted annually during the fourth quarter or more frequently if events or changes in circumstances indicate that goodwill may be impaired. In accordance with guidance related to impairment testing, the Company has the option to first assess qualitative factors to determine whether or not it is necessary to perform the quantitative goodwill impairment test. If the qualitative assessment option is not elected, or if the qualitative assessment indicates that it is more likely than not that the fair value is less than its carrying amount, a quantitative analysis is then performed. The quantitative analysis, if performed, compares the estimated fair value of the Company with its respective carrying amount, including goodwill. If the estimated fair value of the Company exceeds its carrying amount, including goodwill, goodwill is considered not to be impaired and no additional steps are necessary. If the fair value is less than the carrying amount, including goodwill, then an impairment adjustment must be recorded up to the carrying amount of goodwill. The Company operates as a single operating segment and has identified a single reporting unit. Operating Leases The Company determines if an arrangement is a lease at inception. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company's classes of assets that are leased include office facilities, data centers, and equipment. The Company has elected not to recognize short-term leases on the balance sheet, nor separate lease and non-lease components for data center leases. In addition, the Company utilized the portfolio approach to group leases with similar characteristics together. For identified leases, the Company used its incremental borrowing rate to discount the related future payment obligations, which represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The Company records rent expense for operating leases, including leases of office locations, data centers, and equipment, on a straight-line basis over the lease term. The straight-line calculation of rent expense includes rent escalations on certain leases, as well as lease incentives provided by the landlords, including payments for leasehold improvements and rent-free periods. The Company begins recognition of rent expense on the commencement date, which is generally the date that the asset is made available for use. Lease liability, which represents the present value of the Company's obligation related to the estimated future lease payments, is included in lease liabilities, current and lease liabilities, non-current within the consolidated balance sheets. These liability balances are reduced as lease related payments are made. For operating leases, the right of use ("ROU") asset is amortized on a periodic basis over the expected term of the lease (see Note 15). Fair Value of Financial Instruments The carrying amounts of the Company's cash equivalents, accounts receivable, accounts payable, accrued expenses, and seller payables approximate fair value due to the short-term nature of these instruments. Certain assets of the Company are recorded at their fair value, using the fair value hierarchy, on a recurring basis, and other assets and liabilities, including goodwill and intangible assets are subject to measurement at fair value on a non-recurring basis if they are deemed to be impaired as a result of an impairment review (see Note 5). Concentration of Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, restricted cash and accounts receivable. Cash maintained with financial institutions typically exceeds applicable federally insured limits in the U.S. and may not be covered by similar local depositor insurance schemes for cash held in foreign currencies or in bank accounts outside of the U.S. Cash equivalents, primarily money market fund investments, are not insured by federal insurance schemes and are exposed to other potential risks linked to high concentration among major custodial banks. 75 Table of Contents Accounts receivable include amounts due from buyers with principal operations primarily in the United States. The Company performs ongoing credit evaluations of its buyers. At December 31, 2023, two buyers accounted for 48 % and 11 %, respectively, of consolidated accounts receivable, net. At December 31, 2022, two buyers accounted for 45 % and 9 %, respectively, of accounts receivable, net. The Company recognizes revenue from its contracts with sellers. No seller of advertising inventory accounted for 10% or more of revenue during the years ended December 31, 2023, 2022, and 2021. At December 31, 2023, one seller of advertising inventory accounted for 29 % of accounts payable and accrued expenses and at December 31, 2022, one seller of advertising inventory accounted for 28 % of accounts payable and accrued expenses. Foreign Currency Transactions and Translation 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 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. Dollar, the financial statements have then been translated into U.S. Dollars using period-end exchange rates for assets and liabilities and average exchange rates for the results of operations. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets. Recently Adopted Accounting Standards 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"). ASU 2021-08 requires the recognition and measurement of contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers . Considerations to determine the amount of contract assets and contract liabilities to record at the acquisition date include the terms of the acquired contract, such as timing of payment, identification of each performance obligation in the contract and allocation of the contract transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception. ASU 2021-08 is effective for the Company beginning in the first quarter of 2023. The Company adopted this standard January 1, 2023 and will apply the guidance to future acquisitions, if any. Recent Accounting Pronouncements Not Yet Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures ("ASU 2023-09") to enhance income tax information primarily through changes in the rate reconciliation and income taxes paid information. ASU 20203-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. The Company is evaluating the impact of adopting this new accounting guidance on its disclosures. 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. 76 Table of Contents Note 3— Net Income (Loss) Per Share The following table presents the basic and diluted net income (loss) per share: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands, except per share amounts) Basic Income (Loss) Per Share: Net income (loss) $ ( 159,184 ) $ ( 130,323 ) $ 65 Weighted-average common shares outstanding used to compute net income (loss) per share - basic 136,620 132,887 126,294 Basic net income (loss) per share $ ( 1.17 ) $ ( 0.98 ) $ — Diluted Income (Loss) Per Share: Net income (loss), diluted income (loss) $ ( 159,184 ) $ ( 130,323 ) $ 65 Denominator: Weighted-average common shares used in basic income (loss) per share 136,620 132,887 126,294 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 ESPP shares — — 41 Weighted-average shares used to compute diluted net income (loss) per share 136,620 132,887 136,261 Diluted net income (loss) per share $ ( 1.17 ) $ ( 0.98 ) $ — The following weighted-average shares have been excluded from the calculation of diluted net income (loss) per share attributable to common stockholders for each period presented because they are anti-dilutive: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands) Unvested restricted stock units 1,608 1,506 — Options to purchase common stock 1,566 1,864 — Unvested performance stock units 84 124 — ESPP shares 31 18 — Convertible Senior Notes 4,981 6,262 4,940 Total shares excluded from net income (loss) per share 8,270 9,774 4,940 For the years ended December 31, 2023 and December 31, 2022, 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, 2023, the performance stock units granted during 2021, 2022, and 2023 had expected achievement levels of 0 %, 58 %, and 46 %, respectively. As of December 31, 2022, the performance stock units granted during 2020, 2021, and 2022 had expected achievement level of 116 %, 0 %, and 81 %, respectively. 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 2020 and 2021 had expected achievement levels of 150 % and 0 %, respectively. Refer to Note 12 —"Stock-Based Compensation" for additional information related to performance stock units. For the years ended December 31, 2023, 2022, and 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. 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, 2023, 2022, and 2021, the number of shares that would be issuable assuming conversion of all of the Convertible Senior Notes is approximately 3,210,098 , 6,261,560 , and 6,261,560 , respectively. 77 Table of Contents Note 4— Revenues For the majority of transactions on the Company's platform, the Company reports revenue on a net basis as it does not act as the principal in the purchase and sale of digital advertising inventory because it does not have control of the digital advertising inventory and does not set prices agreed upon within the auction marketplace. 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. The following table presents the Company's revenue recognized on a net basis and on a gross basis for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands, except percentages) Revenue: Net basis $ 508,478 82 % $ 475,633 82 % $ 389,358 83 % Gross basis 111,232 18 101,436 18 79,055 17 Total $ 619,710 100 % $ 577,069 100 % $ 468,413 100 % The following table presents the Company's revenue by channel for the years ended December 31, 2023, 2022, 2021: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands, except percentages) Channel: CTV $ 282,126 46 % $ 268,572 47 % $ 185,254 40 % Mobile 232,495 37 192,803 33 164,977 35 Desktop 105,089 17 115,694 20 118,182 25 Total $ 619,710 100 % $ 577,069 100 % $ 468,413 100 % The following table presents the Company's revenue disaggregated by geographic location, based on the location of the Company's sellers: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands) United States $ 462,167 $ 447,634 $ 365,161 International 157,543 129,435 103,252 Total $ 619,710 $ 577,069 $ 468,413 Payment terms are specified in agreements between the Company and the buyers and sellers on its platform. The Company generally bills buyers at the end of each month for the full purchase price of impressions filled in that month. The Company recognizes volume discounts as a reduction of revenue as they are incurred. Specific payment terms may vary by agreement, but are generally seventy-five days or less. The Company's accounts receivable are recorded at the amount of gross billings to buyers, net of allowances for the amounts the Company is responsible to collect. The Company's accounts payable related to amounts due to sellers are recorded at the net amount payable to sellers (see Note 10). Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis. Accounts receivable are recorded at the invoiced amount, are unsecured, and do not bear interest. The allowance for doubtful accounts is reviewed quarterly, requires judgment, and is based on the best estimate of the amount of probable credit losses in existing accounts receivable. 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 are presented net of an allowance for doubtful accounts of $ 20.4 million at December 31, 2023, and $ 1.1 million at December 31, 2022. Accounts receivable are written off against the allowance for doubtful accounts when the Company determines amounts are no longer collectible. 78 Table of Contents The Company reviews the associated payable to sellers for recovery of buyer receivable allowance and write-offs; in some cases, the Company can reduce the payable to sellers. The reduction of seller payables related to recovery of uncollected buyer receivables is netted against allowance expense. The contra seller payables related to recoveries were $ 1.1 million and $ 0.6 million as of December 31, 2023 and December 31, 2022, respectively. The following is a summary of activity in the allowance for doubtful accounts for the years ended December 31, 2023, 2022, and 2021, respectively: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands) Allowance for doubtful accounts, beginning balance $ 1,092 $ 3,475 $ 2,360 Allowance for doubtful accounts, assumed from mergers or acquisitions — — 835 Write-offs ( 856 ) ( 751 ) ( 337 ) Increase (decrease) in provision for expected credit losses 20,115 ( 1,719 ) 597 Recoveries of previous write-offs 12 87 20 Allowance for doubtful accounts, December 31 $ 20,363 $ 1,092 $ 3,475 During the years ended December 31, 2023, 2022, and 2021, 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, 2023, the increase in the provision for expected credit losses associated with accounts receivable of $ 20.1 million was offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $ 15.4 million, which resulted in an $ 4.7 million amount of bad debt expense. The increase in the provision for expected credit losses was primarily attributed to one buyer filing for bankruptcy, resulting in $ 4.2 million of bad debt expense during the year ended December 31, 2023. 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. Note 5— Fair Value Measurements Recurring Fair Value Measurements Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Observable inputs are based on market data obtained from independent sources. The fair value hierarchy is based on the following three levels of inputs, of which the first two are considered observable and the last one is considered unobservable: • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. • Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. • Level 3 – Unobservable inputs. The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at December 31, 2023: Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) Cash equivalents $ 281,162 $ 281,162 $ — $ — 79 Table of Contents The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at December 31, 2022: Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) Cash equivalents $ 259,647 $ 259,647 $ — $ — At December 31, 2023 and 2022, cash equivalents of $ 281.2 million and $ 259.6 million, respectively, consisted of money market funds and commercial paper, with original maturities of three months or less. 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, 2023 and 2022, 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 $ 174.3 million and $ 305.0 million, as of December 31, 2023 and 2022, 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, 2023 and 2022 and is classified as Level 2 in the fair value hierarchy. At December 31, 2023 and 2022, the estimated fair value of the Company's Term Loan B Facility was $ 352.3 million and $ 333.3 million, respectively. 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, 2023 and 2022. Note 6— Property and Equipment Major classes of property and equipment were as follows: December 31, 2023 December 31, 2022 (in thousands) Purchased software $ 1,124 $ 1,250 Computer equipment and network hardware 154,821 150,405 Furniture, fixtures and office equipment 4,031 3,659 Leasehold improvements 3,893 3,368 Gross property and equipment 163,869 158,682 Accumulated depreciation ( 116,498 ) ( 113,713 ) Net property and equipment $ 47,371 $ 44,969 Depreciation expense on property and equipment totaled $ 24.0 million, $ 19.0 million, and $ 16.1 million for the years ended December 31, 2023, 2022, and 2021, respectively. There was impairment changes to property and equipment related to restructuring activities of $ 0.5 million for the year ended December 31, 2023 and there were no impairment charges to property and equipment for the years ended December 31, 2022 and 2021. The Company's property and equipment, net by geographical region was as follows: December 31, 2023 December 31, 2022 (in thousands) United States $ 32,161 $ 31,036 International 15,210 13,933 Total $ 47,371 $ 44,969 80 Table of Contents Note 7— Internal Use Software Development Costs Internal use software development costs were as follows: December 31, 2023 December 31, 2022 (in thousands) Internal use software development costs, gross 82,932 $ 77,151 Accumulated amortization ( 61,006 ) ( 53,480 ) Internal use software development costs, net $ 21,926 $ 23,671 During the years ended December 31, 2023, 2022, and 2021, the Company capitalized $ 12.6 million, $ 16.2 million, and $ 12.9 million, respectively, of internal use software development costs. Amortization expense was $ 14.3 million, $ 12.6 million, and $ 9.0 million for the years ended December 31, 2023, 2022, and 2021, respectively. In the years ended December 31, 2023, 2022, and 2021, amortization expense included the write-off of software development costs of $ 0.4 million, $ 1.5 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, which were revised to end during the third quarter of 2023. The change in the remaining estimated useful lives for the related projects resulted in increased amortization expense of $ 1.9 million and $ 0.7 million for the years ended December 31, 2023 and 2022, respectively. The increased amortization expense increased the basic and diluted loss per share by $ 0.01 and $ 0.01 , net of tax, for the years ended December 31, 2023 and 2022, respectively. Based on the Company’s internal use software development costs at December 31, 2023, excluding projects that are not ready for their intended use with a value of $ 3.9 million, estimated amortization expense of $ 9.3 million, $ 6.6 million, and $ 2.2 million is expected to be recognized in 2024, 2025, and 2026, respectively. Note 8— Goodwill and Intangible Assets Details of the Company’s goodwill were as follows (in thousands): Total Beginning balance at December 31, 2021 $ 969,873 Additions for Acquisition of Carbon (Note 9) 8,456 Adjustments to the Acquisition of SpotX (Note 9) ( 112 ) Ending balance at December 31, 2022 978,217 Additions or adjustments — Ending balance at December 31, 2023 $ 978,217 81 Table of Contents The Company’s intangible assets as of December 31, 2023 and 2022 included the following: December 31, 2023 December 31, 2022 (in thousands) Amortizable intangible assets: Developed technology $ 109,736 $ 390,136 Customer relationships 37,300 136,000 In-process research and development 8,830 12,730 Trademarks 900 900 Non-compete agreements 200 900 Total identifiable intangible assets, gross 156,966 540,666 Accumulated amortization—intangible assets: Developed technology ( 75,321 ) ( 184,439 ) Customer relationships ( 24,867 ) ( 97,316 ) In-process research and development ( 4,832 ) ( 4,398 ) Trademarks ( 750 ) ( 450 ) Non-compete agreements ( 185 ) ( 562 ) Total accumulated amortization—intangible assets ( 105,955 ) ( 287,165 ) Total identifiable intangible assets, net $ 51,011 $ 253,501 Amortization of intangible assets for the years ended December 31, 2023, 2022, and 2021 was $ 202.5 million, $ 184.4 million, and $ 121.9 million, respectively. For the years ended December 31, 2023, 2022, and 2021, the Company wrote off fully amortized intangible assets with a historical cost of $ 383.7 million, $ 40.5 million and $ 11.1 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, which were revised to end during the third quarter of 2023. The change in the remaining estimated useful lives for developed technology and in-process research and development resulted in increased amortization expense of $ 97.6 million and $ 34.7 million for the years ended December 31, 2023 and 2022. The increased amortization expense increased the basic and diluted loss per share by $ 0.71 and $ 0.27 , net of tax, for the years ended December 31, 2023 and 2022. The estimated remaining amortization expense associated with the Company's intangible assets was as follows as of December 31, 2023: Fiscal Year Amount (in thousands) 2024 $ 30,134 2025 14,445 2026 6,001 2027 431 Total $ 51,011 The Company's qualitative assessment in the fourth quarter of 2023 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. 82 Table of Contents Note 9— Business Combinations 2021 Acquisition—SpotX On April 30, 2021, the Company completed the SpotX Acquisition, pursuant to a Stock Purchase Agreement, dated as of February 4, 2021 (the "Purchase Agreement"), ("SpotX" and such acquisition the "SpotX Acquisition"), by and between the Company and RTL US Holdings, Inc. ("RTL"). The initial purchase price for the SpotX Acquisition was $ 560 million in cash ("Cash Consideration") and 14,000,000 shares of the Company's common stock. Per the terms of the Purchase Agreement, at the completion of the Company’s offering of its Convertible Senior Notes, RTL elected to increase the Cash Consideration by an amount equal to 20 % of the gross proceeds of the Convertible Senior Notes (which amount was equal to $ 80 million) and to reduce the number of shares of common stock it would otherwise receive by a number of shares of common stock equal to 20 % of the gross proceeds of the proposed offering of notes ($ 80 million) divided by the closing price of a share of the Company's common stock on the trading day immediately prior to the date of pricing of the proposed offering of notes ($ 49.21 ). As a result of this election, the adjusted purchase price was $ 1.1 billion, prior to customary working capital adjustments and other adjustments, consisting of $ 640.0 million in cash plus 12,374,315 shares of common stock (based on the fair value of the Company's common stock on April 30, 2021). The Cash Consideration is subject to customary working capital and other adjustments. The working capital was approximately $ 65.2 million, including cash balances acquired and other working capital adjustments, resulting in a total purchase price of $ 1.2 billion. The Company financed the Cash Consideration through borrowings under the Term Loan B Facility and the Convertible Senior Notes (Note 17). 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. The excess of the value of consideration transferred over the aggregate fair value of those net assets was recorded as goodwill. Any identified definite lived intangible assets will be amortized over their estimated useful lives and any identified intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually. All intangible assets and goodwill will be tested for impairment when certain indicators are present. 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. 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. 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. The following table summarizes the total purchase consideration (in thousands): Cash Consideration $ 640,000 Stock Consideration (Fair Value of Shares of Magnite common stock) 495,591 Working capital adjustment 65,152 Total purchase consideration $ 1,200,743 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 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. 83 Table of Contents 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): Cash $ 81,967 Restricted cash 199 Accounts receivable 199,649 Prepaid and other assets, current 12,308 Fixed assets 6,823 Intangible assets 429,600 Right-of-use lease asset 10,055 Goodwill 782,719 Total assets to be acquired 1,523,320 Accounts payable and accrued expenses 205,822 Other current liabilities 1,091 Lease liabilities 12,625 Deferred tax liability, net 103,039 Total liabilities to be assumed 322,577 Total purchase price $ 1,200,743 The Company believes the amount of goodwill resulting from the purchase price allocation is primarily attributable to expected synergies from the assembled workforce, an increase in development capabilities, increased offerings to customers, and enhanced opportunities for growth and innovation. Goodwill will not be amortized but instead will be tested for impairment at least annually or more frequently if certain indicators of impairment are present. In the event that goodwill has become impaired, the Company will record an expense for the amount impaired during the quarter in which the determination is made. The acquired intangibles and goodwill resulting from the SpotX Acquisition are not amortizable for tax purposes. The following table summarizes the components of the intangible assets and estimated useful lives as of the date of the SpotX Acquisition (dollars in thousands): Estimated Useful Life Technology $ 280,400 5 years Customer relationships 130,300 2 to 4 years Backlog 11,100 < 1 year In-process research and development 5,800 3 years* Non-compete agreements 1,500 1 year Trademarks 500 < 1 year Total intangible assets acquired $ 429,600 * In-process research and development consists of six projects with a weighted-average useful life of 3 years. Amortization begins once associated projects are completed and it is determined the projects have alternative future use. The fair value of the acquired technology and in-process research and development was valued using the Excess Earnings Method. This methodology included allocating future revenue projections to the existing technologies and applying decay rates and appropriate discount rates that reflect the respective intangible asset's relative risk profile when compared to other intangible assets as well as the discount rate for the overall business. The Company used the Loss‐of‐Revenue and Income Method in its valuation of the existing customer relationships and non-compete agreements. To the extent that future cash flows of the business would be negatively affected in the absence of these relationships and non-compete agreements, they would be deemed to have economic value. This method attempts to quantify the scenario whereby the owner loses the right to the intangible asset and the resulting losses of revenue and income. Under this analysis, the value of the cash flows with the intangible asset is compared to the value of the cash flows without the intangible asset and the difference represents the value of the intangible asset. This methodology included applying a discount rate and the expected timing it would take to further enhance customer relationships. 84 Table of Contents The fair value of the backlog was based on the Excess Earnings Method, taking into consideration the existing contracts as of the date of the SpotX Acquisition and the respective cost to complete the servicing of the existing agreements. The resulting stream of after tax earnings were discounted to present value by applying an appropriate discount rate for the asset. The discount rate was selected based on the intangible asset’s relative risk profile when compared to the other intangible assets as well as the discount rate for the overall business. The fair value of the trademarks was based on the Income Approach, specifically the Relief‐from‐Royalty Method. Under this method, data is obtained regarding actual royalty payments made for similar intangible assets. After the appropriate royalty rate is determined, the reasonable royalty savings is then discounted to its present value over the remaining technological, economic, or legal life of the intangible asset. Intangible assets are generally amortized on a straight-line basis, which approximates the pattern in which the economic benefits are consumed, over their estimated useful lives. Amortization of developed technology is included in cost of revenues and the amortization of customer relationships, backlog, non-compete agreements, and trademarks is included in sales and marketing expenses in the consolidated statements of operations. 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 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 ("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, through its wholly-owned subsidiary, SpotX, completed the acquisition of SpringServe, LLC ("SpringServe" and such acquisition 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 SpotX initial cash investment in SpringServe 2,075 Fair value appreciation of SpotX purchase right 7,450 Indemnification claims - holdback 1,409 Total purchase consideration $ 42,070 In 2020, SpotX made a minority investment of $ 2.1 million in SpringServe in conjunction with a strategic partnership agreement between the two companies, which included an option agreement to purchase SpringServe. 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, $ 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. The excess of the value of consideration transferred over the aggregate fair value of those net assets was recorded as goodwill. Any identified definite lived intangible assets will be amortized over their estimated useful lives and any identified intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually. All intangible assets and goodwill will be tested for impairment when certain indicators are present. 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. 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. 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- 85 Table of Contents 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): Cash $ 1,062 Accounts receivable 3,234 Prepaid and other assets, current 157 Fixed assets 25 Intangible assets 23,400 Right-of-use lease asset 1,879 Goodwill 24,156 Total assets to be acquired 53,913 Accounts payable and accrued expenses 2,475 Other current liabilities 35 Lease liabilities 3,179 Deferred tax liability, net 6,154 Total liabilities to be assumed 11,843 Total preliminary purchase price $ 42,070 The Company believes the amount of goodwill resulting from the purchase price allocation is primarily attributable to expected synergies from the assembled workforce, an increase in development capabilities, increased offerings to customers, and enhanced opportunities for growth and innovation. Goodwill will not be amortized but instead will be tested for impairment at least annually or more frequently if certain indicators of impairment are present. In the event that goodwill has become impaired, the Company will record an expense for the amount impaired during the quarter in which the determination is made. The following table summarizes the components of the intangible assets and estimated useful lives as of the date of the SpringServe Acquisition (dollars in thousands): Estimated Useful Life Technology $ 15,500 5 years Customer relationships 5,700 2 years Trademarks and Trade Names 900 3 years In-process research and development 800 3 years* Non-compete agreements 500 2 years Total intangible assets acquired $ 23,400 * In-process research and development consists of two projects with a weighted-average useful life of 3 years. Amortization begins once associated projects are completed and it is determined the projects have alternative future use. The fair value of the acquired technology and in-process research and development was valued using the Excess Earnings Method. This methodology included allocating future revenue projections to the existing technologies and applying decay rates and appropriate discount rates that reflect the respective intangible asset's relative risk profile when compared to other intangible assets as well as considering the risk associated with the overall business. At the acquisition date, SpringServe had existing customer relationships. To the extent that future cash flows of the business would be negatively affected in the absence of these relationships, they would be deemed to have economic value. In addition, certain employees of SpringServe signed two year non-compete agreements. The Company used the Loss‐of‐Revenue and Income Method in its valuation of the existing customer relationships and non-compete agreements. This method attempts to quantify the scenario whereby the owner loses the right to the intangible asset and the resulting losses of revenue and income. Under this analysis, the value of the cash flows with the intangible asset is compared to the value of the cash flows without the intangible asset and the difference represents the value of the intangible asset. This methodology included applying a discount rate and the expected timing it would take to further enhance customer relationships. 86 Table of Contents The fair value of the trademarks and trade names were based on the Income Approach, specifically the Relief‐from‐Royalty Method. Under this method, data is obtained regarding actual royalty payments made for similar intangible assets. After the appropriate royalty rate is determined, the reasonable royalty savings is then discounted to its present value over the remaining technological, economic, or legal life of the intangible asset. Intangible assets are generally amortized on a straight-line basis, which approximates the pattern in which the economic benefits are consumed, over their estimated useful lives. Amortization of developed technology is included in cost of revenues and the amortization of customer relationships, non-compete agreements, and trademarks is included in sales and marketing expenses in the consolidated statements of operations. 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 acquired intangibles and goodwill resulting from the SpringServe Acquisition are not tax deductible. 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 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. Acquired intangibles and goodwill resulting from the Nth Party acquisition are not deductible for income tax purposes. Unaudited Pro Forma Information The following table provides unaudited pro forma information as if the SpotX and SpringServe Acquisitions had been acquired by the Company as of January 1, 2020. The unaudited pro forma information reflects adjustments for additional amortization resulting from the fair value adjustments to assets acquired and liabilities assumed, adjustments for alignment of accounting policies, and transaction expenses as if the SpotX and SpringServe Acquisitions occurred on January 1, 2020. The pro forma results do not include any anticipated cost synergies or other effects of the combined companies. 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. Year Ended December 31, 2021 (in thousands) Pro Forma Revenue $ 540,466 Pro Forma Net Loss $ ( 86,621 ) 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 was subsequently paid out in February 2023. 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. 87 Table of Contents 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 Accounts payable and accrued expenses included the following: December 31, 2023 December 31, 2022 (in thousands) Accounts payable—seller $ 1,333,242 $ 1,057,556 Accounts payable—trade 23,844 19,387 Accrued employee-related payables 15,090 15,065 Accrued holdback - indemnification claims — 2,313 Total $ 1,372,176 $ 1,094,321 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, 2020 $ ( 957 ) Other comprehensive loss ( 419 ) Balance at December 31, 2021 ( 1,376 ) Other comprehensive loss ( 1,775 ) Balance at December 31, 2022 ( 3,151 ) Other comprehensive income 1,075 Balance at December 31, 2023 $ ( 2,076 ) Note 12— Stock-Based Compensation In connection with its IPO, the Company implemented its 2014 Equity Incentive Plan, which governs equity awards made to employees and directors of the Company since the IPO. Prior to the IPO, the Company granted equity awards under its 2007 Stock Incentive Plan, which governs equity awards made to employees and contractors prior to the IPO. In November 2014, the Company approved the 2014 Inducement Grant Equity Incentive Plan (the "Inducement Plan"), which governs certain equity awards made to certain employees in connection with commencement of employment. In connection with the Company's acquisitions of Chango Inc. ("Chango"), iSocket, Inc. ("iSocket"), and nToggle, Inc. ("nToggle") it assumed the existing employee equity award plans, the 2009 Chango Stock Option Plan (the "Chango Plan"), the iSocket 2009 Equity Incentive Plan (the "iSocket Plan"), and the nToggle 2014 Equity Incentive Plan (the "nToggle Plan"). In connection with the merger with Telaria, the Company assumed Telaria's 2013 Equity Incentive Plan, as amended (the "Telaria Plan"); the 2008 Stock Plan, as amended (the "2008 Stock Plan"); and the ScanScout, Inc. 2009 Equity Incentive Plan, as amended (the "ScanScout 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 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. On January 1, 2023, pursuant to the evergreen provision in the Company's 2014 Equity Incentive Plan, the Company increased the aggregate number of shares of common stock that may be issued pursuant to stock awards by 6,700,286 shares. On June 14, 2023, the Company's stockholders approved the Magnite, Inc. Amended and Restated 2014 Equity Incentive Plan (the "Amended and Restated 2014 Equity Incentive Plan"), which, among other things, increased the aggregate maximum number of shares of common stock that may be issued pursuant to stock awards by 8,056,129 shares, removed the prior evergreen provision, and extended the plan through April 2033. All compensatory equity awards outstanding at December 31, 2023 were issued pursuant to the Amended and Restated 2014 Equity Incentive Plan, the 2014 Equity Incentive Plan, the nToggle Plan, the Telaria Plan, the Inducement Plan, or the Company's 2007 Stock Incentive Plan. 88 Table of Contents 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 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 2023, 2022, and 2021, included 0 , 0.7 million, and 0.4 million, respectively, awards that vest 50 % on each of the first and second anniversaries of the grant date. In addition, each Director of the Company's Board of Directors receives an annual grant which vests at the earlier of the one year anniversary of the grant date and the following annual shareholder meeting in addition to an initial equity awards in the first year of their election into the Board of Directors. 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. As of December 31, 2023, an aggregate of 23,180,894 shares remained available for future grants. Stock Options A summary of stock option activity for the year ended December 31, 2023 is as follows: Shares Under Option Weighted- Average Exercise Price Weighted- Average Contractual Life Aggregate Intrinsic Value (in thousands) (in thousands) Outstanding at December 31, 2022 4,672 $ 8.71 Granted 130 $ 10.59 Exercised ( 395 ) $ 5.49 Expired ( 145 ) $ 21.02 Outstanding at December 31, 2023 4,262 $ 8.65 5.3 years $ 13,806 Exercisable at December 31, 2023 3,649 $ 7.53 4.9 years $ 13,534 The total intrinsic value of options exercised during the year ended December 31, 2023 was $ 2.2 million. At December 31, 2023, the Company had unrecognized employee stock-based compensation expense relating to nonvested stock options of approximately $ 5.6 million, which is expected to be recognized over a weighted-average period of 2.0 years. Total fair value of options vested during the year ended December 31, 2023 was $ 4.7 million. The Company estimates the fair value of stock options that contain service conditions using the Black-Scholes option pricing model. The grant date fair value of options granted during the year ended December 31, 2023 was $ 7.27 per share. The weighted-average input assumptions used by the Company were as follows: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Expected term (in years) 5.0 5.0 5.0 Risk-free interest rate 3.99 % 1.63 % 0.88 % Expected volatility 84 % 79 % 79 % Dividend yield — % — % — % 89 Table of Contents Restricted Stock Units A summary of restricted stock unit activity for the year ended December 31, 2023 is as follows: Number of Shares Weighted-Average Grant Date Fair Value (in thousands) Restricted stock units outstanding at December 31, 2022 10,000 $ 15.06 Granted 7,560 $ 10.67 Canceled ( 1,471 ) $ 13.48 Vested and released ( 4,639 ) $ 14.42 Restricted stock units outstanding at December 31, 2023 11,450 $ 12.63 Restricted stock units outstanding and unvested at December 31, 2023 11,450 $ 12.63 The weighted-average grant date fair value per share of restricted stock units granted during the year ended December 31, 2023 was $ 10.67 . The intrinsic value of restricted stock units that vested during the year ended December 31, 2023 was $ 50.7 million. At December 31, 2023, the intrinsic value of unvested restricted stock units was $ 107.0 million. At December 31, 2023, the Company had unrecognized stock-based compensation expense relating to unvested restricted stock units of approximately $ 120.3 million, which is expected to be recognized over a weighted-average period of 2.6 years. Performance Stock Units The Company has granted PSUs to select executive employees that vest based on share price metrics tied to total shareholder return relative to a peer group over a three-year period. These PSUs are also subject to a time-based service component. The grant date fair value for such PSUs was estimated using a Monte-Carlo simulation model that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. Between 0 % and 150 % of the performance stock units will vest at the end of the performance period, which is generally on the third anniversary of the PSU grant date. The Company has additionally granted 379,635 PSUs to the Company's CEO in August 2021, (the "August 2021 PSUs"), which are subject to both time-based and performance-based vesting conditions. The PSUs 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. The grant date fair value for such PSUs was estimated using a Monte-Carlo simulation model that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. 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. Stock-based compensation expense for PSUs is based on a performance measurement of 100 %. The compensation expense will not be reversed if the performance metrics are not met. A summary of PSU activity for the year ended December 31, 2023 is as follows: Number of Shares Weighted-Average Grant Date Fair Value (in thousands) Outstanding at December 31, 2022 639 $ 19.02 Granted 474 $ 13.32 Vested and released ( 138 ) $ 6.15 Forfeited ( 8 ) $ 6.15 Outstanding at December 31, 2023 967 $ 18.17 90 Table of Contents The grant date fair value for the PSUs was estimated using a Monte-Carlo simulation model. The weighted-average input assumptions used by the Company were as follows: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Performance period (in years) 3.0 3.0 4.9 Risk-free interest rate 4.19 % 1.39 % 0.81 % Expected volatility of Magnite 94 % 84 % 79 % Expected volatility of selected peer companies* 64 % 63 % 61 % Expected correlation coefficients of Magnite* 0.62 0.56 0.54 Expected correlation coefficients of selected peer companies* 0.54 0.52 0.54 Dividend yield — % — % — % *For the year ended December 31, 2021, weighted-average input assumptions exclude the August 2021 PSUs as these were not assumptions used in the Monte-Carlo simulation model for this grant. The intrinsic value of PSUs that vested during the year ended December 31, 2023 was $ 1.2 million. At December 31, 2023, the intrinsic value of unvested performance stock units based on expected achievement levels was $ 2.5 million. As of December 31, 2023, the Company had unrecognized stock-based compensation expense relating to outstanding PSUs of approximately $ 8.1 million, which will be recognized over a weighted-average period of 2.1 years. Employee Stock Purchase Plan In November 2013, the Company adopted the Company's 2014 Employee Stock Purchase Plan ("ESPP"). The ESPP is designed to enable eligible employees to periodically purchase shares of the Company's common stock at a discount through payroll deductions of up to 10 % of their eligible compensation, subject to any plan limitations. At the end of each six-month offering period, employees are able to purchase shares at a price per share equal to 85 % of the lower of the fair market value of the Company's common stock on the first trading day of the offering period or on the last trading day of the offering period. Offering periods generally commence and end in May and November of each year. On January 1, 2023, pursuant to the evergreen provision in the Company's 2014 Employee Stock Purchase Plan, the Company increased the aggregate number of shares of common stock that may be issued pursuant to the Company's 2014 Employee Stock Purchase Plan by 1,340,057 shares. On June 14, 2023, the Company's stockholders approved the Magnite, Inc. Amended and Restated 2014 Employee Stock Purchase Plan (the "Amended and Restated 2014 Employee Stock Purchase Plan"), which, among other things, removed the evergreen provision and extended the plan through June 2033. As of December 31, 2023, the Company has reserved 4,730,838 shares of its common stock for issuance under the Company's Amended and Restated 2014 Employee Stock Purchase Plan. Stock-Based Compensation Expense Total stock-based compensation expense recorded in the consolidated statements of operations was as follows: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands) Cost of revenue $ 1,809 $ 1,666 $ 792 Sales and marketing 27,263 21,558 15,718 Technology and development 20,542 19,961 11,857 General and administrative 22,860 18,929 11,297 Merger, acquisition, and restructuring costs 143 2,004 1,071 Total stock-based compensation expense $ 72,617 $ 64,118 $ 40,735 For the year ended December 31, 2023, the Company recognized $ 5.5 million of income tax expense on stock-based compensation expense related to 2023, which was reflected in the provision (benefit) for income taxes in the consolidated statements of operations. For the year ended December 31, 2023, income tax benefit realized related to awards vested or exercised during 2023 was $ 12.5 million. For the year ended December 31, 2022, the Company recognized $ 6.4 million of income 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, income tax benefit realized related to awards vested 91 Table of Contents or exercised during 2022 and years prior was $ 9.6 million. For the year ended December 31, 2021, the Company recognized $ 151.6 million of income 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, income tax benefit realized related to awards vested or exercised during 2021 and years prior was $ 40.5 million. 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 SpotX Acquisition, the SpringServe Acquisition, and restructuring activities. During the year ended December 31, 2023, these activities included the Company's reduction of its global workforce primarily associated with the elimination of duplicative roles and other costs associated with the consolidation of its legacy CTV and SpotX CTV platforms following the SpotX Acquisition, including loss contracts for office facilities the Company does not plan to continue to occupy and impairment charges related to certain assets it no longer plans to utilize. The following table summarizes merger, acquisition, and restructuring cost activity: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands) Personnel related (severance and one-time termination benefit costs) $ 3,218 $ 1,227 $ 6,184 Loss contracts (facility related) 2,190 — 2,500 Exit costs 1,408 — — Impairment of property and equipment, net (Note 6) 506 — — Non-cash stock-based compensation (double trigger acceleration and severance) 143 2,004 1,071 Impairment costs of abandoned technology (Note 8) — 3,320 — Professional services (investment banking advisory, legal and other professional services) — 917 28,422 Total merger, acquisition, and restructuring costs $ 7,465 $ 7,468 $ 38,177 Accrued restructuring costs related to mergers, acquisition, and restructuring activities were primarily related to the SpotX Acquisition and the SpringServe Acquisition. 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. Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands) Accrued merger, acquisition, and restructuring costs at beginning of period $ 1,222 $ 2,742 $ 2,935 Personnel related and non-cash stock-based compensation 3,361 3,231 7,255 Loss contracts (facility related) 2,190 — 2,500 Exit costs 1,408 — — Impairment of property and equipment, net 506 — — Impairment costs of abandoned technology — 3,320 — Cash paid for restructuring costs ( 4,521 ) ( 2,747 ) ( 6,377 ) Non-cash loss contracts (lease related) ( 2,190 ) — ( 2,500 ) Non-cash impairments ( 506 ) ( 3,320 ) — Non-cash stock-based compensation ( 143 ) ( 2,004 ) ( 1,071 ) Accrued merger, acquisition, and restructuring costs at end of period $ 1,327 $ 1,222 $ 2,742 92 Table of Contents Note 14— Income Taxes The following are the domestic and foreign components of the Company’s income (loss) before income taxes for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands) Domestic $ ( 165,311 ) $ ( 145,480 ) $ ( 105,168 ) International 7,764 9,883 10,180 Loss before income taxes $ ( 157,547 ) $ ( 135,597 ) $ ( 94,988 ) The following are the components of the provision (benefit) for income taxes for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (in thousands) Current: Federal $ 218 $ ( 186 ) $ 128 State 1,994 1,056 1,515 Foreign 1,707 2,735 2,275 Total current provision 3,919 3,605 3,918 Deferred: Federal 763 ( 2,039 ) ( 89,404 ) State ( 5,317 ) ( 6,324 ) ( 8,296 ) Foreign 2,272 ( 516 ) ( 1,271 ) Total deferred benefit ( 2,282 ) ( 8,879 ) ( 98,971 ) Total provision (benefit) for income taxes $ 1,637 $ ( 5,274 ) $ ( 95,053 ) 93 Table of Contents The Company recorded an income tax expense of $ 1.6 million for the year ended December 31, 2023 compared to an income tax benefit of $ 5.3 million and $ 95.1 million for the years ended December 31, 2022 and 2021, respectively. The income tax expense for the year ended December 31, 2023 was primarily the result of the domestic valuation allowance on the Company's deferred tax assets and the federal, state, and foreign income tax liabilities. The income tax benefit for the year ended December 31, 2022 was primarily the result of recognizing the benefit of deferred tax assets previously subject to the domestic valuation allowance and the income tax liability associated with foreign subsidiaries. The net deferred tax liabilities recorded in connection with the prior year’s acquisitions and current taxable income for the year provided sources of taxable income to support the realization of pre-existing deferred tax assets. The income tax benefit for the year ended December 31, 2021 was primarily the result of realizing the benefit of deferred tax assets previously subject to the domestic valuation allowance as a result of the deferred tax liabilities associated with acquisitions that occurred during the year and the income 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. federal statutory rate of 21% for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 U.S. federal statutory income tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 1.7 % 3.1 % 5.6 % Foreign loss at other than U.S. rates ( 0.3 ) % ( 0.1 ) % ( 0.5 ) % Stock-based compensation expense ( 2.4 ) % ( 2.4 ) % 31.7 % Meals and entertainment ( 0.3 ) % ( 0.1 ) % ( 0.1 ) % Other permanent items ( 0.2 ) % ( 0.7 ) % ( 1.6 ) % Change in valuation allowance ( 17.8 ) % ( 15.5 ) % 58.0 % Sec 162(m) officers' compensation ( 3.3 ) % ( 4.1 ) % ( 14.2 ) % Provision to return adjustments 0.2 % 0.3 % 0.2 % Research and development tax credits 0.4 % 2.5 % — % Foreign withholding taxes — % ( 0.1 ) % — % Effective income tax rate ( 1.0 ) % 3.9 % 100.1 % Set forth below are the tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and deferred tax liabilities as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 (in thousands) Deferred Tax Assets: Allowance for doubtful accounts $ 5,959 $ — Accrued liabilities 1,133 1,308 Lease liabilities 12,623 15,679 Stock-based compensation 3,803 4,830 Net operating loss carryovers 91,716 111,587 Tax credit carryovers 10,005 9,131 Other 2,384 2,460 Total deferred tax assets 127,623 144,995 Less valuation allowance ( 107,017 ) ( 76,772 ) Deferred tax assets, net of valuation allowance 20,606 68,223 Deferred Tax Liabilities: Fixed assets ( 4,380 ) ( 2,132 ) Intangible assets ( 6,185 ) ( 56,022 ) Right of use lease asset ( 10,356 ) ( 12,763 ) Total deferred tax liabilities ( 20,921 ) ( 70,917 ) Net deferred tax liabilities $ ( 315 ) $ ( 2,694 ) 94 Table of Contents As of December 31, 2023, the net deferred tax liabilities of $ 0.3 million is presented in the Company's consolidated balance sheets as deferred tax liabilities, net of $ 0.7 million and other assets, non-current of $ 0.4 million. As of December 31, 2022, the net deferred tax liabilities 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. The valuation allowance was increased by $ 30.2 million for the year ended December 31, 2023, and increased by $ 20.7 million, and reduced by $ 53.9 million for the years ended December 31, 2022 and 2021, respectively. At December 31, 2023, the Company had U.S. federal net operating loss carryforwards, or NOLs, of approximately $ 324.1 million, which will begin to expire in 2027. At December 31, 2023, the Company had state NOLs of approximately $ 227.9 million, which will begin to expire in 2025. At December 31, 2023, the Company had foreign NOLs of approximately $ 23.3 million, which will begin to expire in 2026. At December 31, 2023, the Company had acquired federal research and development tax credit carryforwards of approximately $ 4.4 million which will begin to expire in 2028, and state research and development tax credits of approximately $ 10.5 million, the majority of which carry forward indefinitely. 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 the Company's tax liabilities. The Company is monitoring new legislation and evaluating the potential tax implications of these measures globally. Pursuant to Section 382 of the Internal Revenue Code, the Company and Telaria, Inc. both underwent ownership changes for tax purposes (i.e. a more than 50% change in stock ownership in aggregated 5% shareholders) on April 1, 2020 due to the merger with Telaria. 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 reasonably expects its federal research and development carryforward tax credits will not be recovered prior to expiration. Additionally, for tax years beginning after December 31, 2017, the Tax Cuts and Jobs Act limits the NOL deduction to 80% of taxable income, repeals carryback of all NOLs arising in a tax year ending after 2017, and permits indefinite carryforward for all such NOLs. NOL’s arising in a tax year ending in or before 2017 can offset 100% of taxable income, are available for carryback, and expire 20 years after they arise. At December 31, 2023, unremitted earnings of the subsidiaries outside of the United States were approximately $ 30.8 million. The Company’s intention is to indefinitely reinvest these earnings outside the United States. Upon distribution of those earnings in the form of a dividend or otherwise, the Company would be subject to withholding taxes payable to various foreign countries and, potentially, various state taxes. The amounts of such tax liabilities that might be payable upon actual repatriation of foreign earnings, after consideration of corresponding foreign tax credits, are not material. The following table summarizes the activity related to the unrecognized tax benefits (in thousands): Amount Balance as of December 31, 2021 $ 3,715 Increases related to current year tax positions 398 Decreases related to prior year tax positions ( 634 ) Increases related to prior year tax positions 772 Balance as of December 31, 2022 4,251 Increases related to current year tax positions 230 Decreases related to prior year tax positions ( 98 ) Increases related to prior year tax positions 60 Balance as of December 31, 2023 $ 4,443 Interest and penalties related to the Company’s unrecognized tax benefits accrued at December 31, 2023, 2022, and 2021 were not material. 95 Table of Contents Due to the net operating loss carryforwards, the Company's United States federal and a majority of its state returns are open to examination by the Internal Revenue Service and state jurisdictions for all years since inception. For the Netherlands, India, Sweden, and the United Kingdom, all tax years remain open for examination by the local country tax authorities, for France only 2021 and forward are open, for Singapore only 2019 and forward are open for examination, for New Zealand, Australia, Brazil, and Germany 2019 and forward are open for examination, for Canada, Italy, and Malaysia 2018 and forward are open for examination, and for Japan 2017 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. Note 15— Leases The Company has operating leases for office facilities and data centers. 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 5.2 years and 5.6 years as of December 31, 2023 and December 31, 2022, respectively. As of December 31, 2023 and December 31, 2022, a weighted average discount rate of 6.19 % and 6.11 %, respectively, were applied to the remaining lease payments to calculate the lease liabilities included within the consolidated balance sheets. Operating lease expense associated with leases included in the lease liability and right of use ("ROU") asset on the consolidated balance sheets were $ 24.5 million, $ 23.3 million and $ 20.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. For lease expenses not included in the Company's ROU asset and lease liability balances, the Company recognized short term lease expense of $ 0.5 million, $ 1.2 million and $ 1.2 million and variable lease expense of $ 3.8 million, $ 3.1 million, and $ 2.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. The maturity of the Company's lease liabilities associated with leases included in the lease liability and ROU asset were as follows as of December 31, 2023 (in thousands): Fiscal Year 2024 $ 23,890 2025 15,367 2026 12,282 2027 7,697 2028 7,841 Thereafter 14,366 Total lease payments (undiscounted) 81,443 Less: imputed interest ( 11,376 ) Lease liabilities—total (discounted) $ 70,067 The Company also received rental income of $ 5.3 million, $ 5.2 million, and $ 4.4 million for real estate leases for which it subleased the property to a third party during the years ended December 31, 2023, 2022, and 2021, respectively. Rental income is included in other income in the consolidated statements of operations. Note 16— Commitments and Contingencies Commitments The Company has commitments under non-cancelable operating leases for facilities, certain equipment, and its managed data center facilities (Note 15). As of December 31, 2023 and 2022, the Company had $ 5.3 million and $ 5.3 million, respectively, of letters of credit associated with office leases available for borrowing, on which there were no outstanding borrowings as of either date. 96 Table of Contents 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. As of December 31, 2023, the Company's outstanding non-cancelable contractual obligations with a remaining term of one year or longer consist of the following (in thousands): Fiscal Year 2024 $ 62,038 2025 23,963 2026 241 2027 241 2028 241 Total $ 86,724 The amounts above include commitments under a cloud-managed services agreement, under which the Company has a non-cancelable minimum spend commitment from July 2023 to June 2025 of $ 57.6 million in each twelve-month period (i.e. July 2023 to June 2024 and July 2024 to June 2025). The minimum spend commitment reflected above approximates the manner in which the Company expects to fulfill the obligations. Guarantees and Indemnification The Company’s agreements with sellers, buyers, and other third parties typically obligate the Company to provide indemnity and defense for losses resulting from claims of intellectual property infringement, damages to property or persons, business losses, or other liabilities. Generally, these indemnity and defense obligations relate to the Company’s own business operations, obligations, and acts or omissions. However, under some circumstances, the Company agrees to indemnify and defend contract counterparties against losses resulting from their own business operations, obligations, and acts or omissions, or the business operations, obligations, and acts or omissions of third parties. For example, because the Company’s business interposes the Company between buyers and sellers in various ways, buyers often require the Company to indemnify them against acts and omissions of sellers, and sellers often require the Company to indemnify them against acts and omissions of buyers. In addition, the Company’s agreements with sellers, buyers, and other third parties typically include provisions limiting the Company’s liability to the counterparty, and the counterparty’s liability to the Company. These limits sometimes do not apply to certain liabilities, including indemnity obligations. These indemnity and limitation of liability provisions generally survive termination or expiration of the agreements in which they appear. The Company has also entered into indemnification agreements with its directors, executive officers and certain other officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No material demands have been made upon the Company to provide indemnification under such agreements and there are no claims that the Company is aware of that could have a material effect on the Company’s consolidated financial statements. Litigation The Company and its subsidiaries may from time to time be parties to legal or regulatory proceedings, lawsuits and other claims incident to their business activities and to the Company’s status as a public company. Such matters may include, among other things, assertions of contract breach or intellectual property infringement, claims for indemnity arising in the course of the Company’s business, regulatory investigations, audits by taxing authorities, or enforcement proceedings, and claims by persons whose employment has been terminated. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. 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, 2023. However, based on management’s knowledge as of December 31, 2023, 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 The Company has entered into severance agreements with certain employees and officers. The Company may be required to pay severance and accelerate the vesting of certain equity awards in the event of involuntary terminations. 97 Table of Contents Note 17— Debt Long term debt as of December 31, 2023 and 2022 consisted of the following: December 31, 2023 December 31, 2022 (in thousands) Convertible Senior Notes $ 205,067 $ 400,000 Less: Unamortized debt issuance cost ( 2,598 ) ( 7,355 ) Net 202,469 392,645 Term Loan B Facility 351,000 354,600 Less: Unamortized discount and debt issuance cost ( 16,883 ) ( 20,888 ) Net 334,117 333,712 Less: Current portion ( 3,600 ) ( 3,600 ) Total non-current debt $ 532,986 $ 722,757 Maturities of the principal amount of the Company's long-term debt as of December 31, 2023 are as follows (in thousands): Fiscal Year 2024 $ 3,600 2025 3,600 2026 208,667 2027 3,600 2028 336,600 Total $ 556,067 Amortization of the debt issuance cost and the discount associated with the Company's indebtedness totaled $ 5.8 million, $ 6.3 million, and $ 4.5 million for the years ended December 31, 2023, 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, $ 0.5 million, and $ 0.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. Deferred financing costs are included in prepaid expenses and other current assets and other assets, non-current assets. Convertible Senior Notes and Capped Call Transactions 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 total net proceeds from the offering, after deducting debt issuance costs paid by the Company, were approximately $ 388.6 million. 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 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; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness, including amounts outstanding under the Credit Agreement (see section below); and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries that do not guarantee the Convertible Senior Notes. The Convertible Senior Notes accrue interest at 0.25 % per annum payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2021. The Convertible Senior Notes will mature on March 15, 2026 unless they are redeemed, repurchased or converted prior to such date. The Convertible Senior Notes are convertible at the option of holders only during certain periods and upon satisfaction of certain conditions. 98 Table of Contents 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; (ii) during the five consecutive business days immediately after any ten consecutive trading day period (such ten consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (iii) upon the occurrence of certain corporate events or distributions on the Company’s common stock; (iv) if the Company calls such Convertible Senior Notes for redemption; and (v) on or after September 15, 2025, until the close of business on the second scheduled trading day immediately before the maturity date, holders of the Convertible Senior Notes may, at their option, convert all or a portion of their Convertible Senior Notes regardless of the foregoing conditions at any time from, and including, September 15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date. Upon conversion, the Convertible Senior Notes may be settled in shares of the Company’s common stock, cash or a combination of cash and shares of the Company’s common stock, at the Company’s election. All conversions with a conversion date that occurs on or after September 15, 2025 will be settled using the same settlement method, and the Company will send notice of such settlement method to noteholders no later than the open of business on September 15, 2025. The Company may not redeem the Convertible Senior Notes at their option at any time before March 20, 2024. Subject to the terms of the indenture agreement, the Company has the right, at its election, to redeem all, or any portion (subject to the partial redemption limitation) in an authorized denomination, of the Convertible Senior Notes, at any time, and from time to time, on a redemption date on or after March 20, 2024 and on or before the 40 th scheduled trading day immediately before the maturity date, for cash, but only if the "last reported sale price," as defined under the Offering Memorandum, per share of common stock exceeds 130 % of the “conversion price” on (i) each of at least 20 trading days, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. 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 below. 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 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 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. In connection with the pricing of the Convertible Senior Notes, the Company entered into privately negotiated capped call transactions with various financial institutions (the "Capped Call Transactions"). The Capped Call Transactions were entered into with third party broker-dealers to limit the potential dilution that would occur if the Company has to settle the conversion value in excess of the principal in shares. This exposure will be covered (i.e., the Company will receive as many shares as are required to be issued between the conversion price of $ 63.8818 and the maximum price of $ 91.2600 ). Any shares required to be issued by the Company over this amount would have net earnings per share dilution impact. By entering into the Capped Call Transactions, the Company expects to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price under the 99 Table of Contents Convertible Senior Notes. The Company paid $ 39.0 million for the Capped Call Transactions, which was recorded as additional paid-in capital, using a portion of the gross proceeds from the sale of the Convertible Senior Notes. The cost of the Capped Call Transactions is not expected to be tax deductible as the Company did not elect to integrate the capped call into the Convertible Senior Notes for tax purposes. 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. The Company incurred debt issuance costs of $ 11.4 million in March 2021. The Convertible Senior Notes are presented net of issuance costs on the Company's consolidated balance sheets. 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. During the year ended December 31, 2023, the Company repurchased part of its Convertible Senior Notes in the open market with cash on hand for $ 165.5 million. The Company recognized a gain on extinguishment of debt of $ 26.5 million related to the repurchase of $ 194.9 million of principal balance of Convertible Senior Notes and $ 2.9 million of unamortized debt issuance costs associated with the extinguished debt during the year ended December 31, 2023. The gain on extinguishment is included in other (income) expense in the Company's consolidated statement of operations. The following table sets forth interest expense related to the Convertible Senior Notes for the years ended December 31, 2023, 2022, and 2021: December 31, 2023 December 31, 2022 December 31, 2021 (in thousands, except interest rates) Contractual interest expense $ 797 $ 1,000 $ 786 Amortization of debt issuance costs 1,823 2,288 1,798 Total interest expense $ 2,620 $ 3,288 $ 2,584 Effective interest rate 0.82 % 0.82 % 0.82 % Amortization expense for the Company's debt issuance costs related to the Convertible Senior notes for fiscal years 2024 through 2026 is as follows (in thousands): Fiscal Year Debt Issuance Costs 2024 $ 1,173 2025 1,173 2026 252 Total $ 2,598 Credit Agreement On April 30, 2021, the Company entered into a credit agreement (the "Credit Agreement") with Goldman Sachs Bank USA as administrative agent and collateral agent, and other lender parties thereto. The Credit Agreement provides for a $ 360.0 million seven-year senior secured term loan facility ("Term Loan B Facility"), which matures in April 2028, and a $ 52.5 million senior secured revolving credit facility (the "Revolving Credit Facility"), which matures in December 2025. As part of the Term Loan B Facility, the Company received $ 325 million in proceeds, net of discounts and fees, which were used to finance the SpotX Acquisition and related transactions, and for general corporate purposes. 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. 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. In June 2023, the Company amended its Credit Agreement to transition away from a variable interest rate based on the Eurodollar Rate towards a similar variable interest rate based on Adjusted Term SOFR, as defined in the amendment to the Credit Agreement, which is based on the Secured Overnight Financing Rate ("SOFR"). As of December 31, 2023, the contractual interest rate related to the Term Loan B Facility was 10.56 %. The covenants of the Credit Agreement include customary negative covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and 100 Table of Contents restricted payments. In addition, the Credit Agreement contains a financial covenant, tested on the last day of any fiscal quarter if utilization of the Revolving Credit Facility exceeds 35 % of the total revolving commitments, that requires the Company to maintain a first lien net leverage ratio not greater than 3.25 to 1.00. As of December 31, 2023, the Company was in compliance with its debt covenants. The Credit Agreement includes customary events of default, and customary rights and remedies upon the occurrence of any event of default thereunder, including rights to accelerate the loans, terminate the commitments thereunder and realize upon the collateral securing the obligations under the Credit Agreement. The Credit Agreement calls for customary scheduled loan amortization payments of 0.25 % of the initial principal balance payable quarterly (i.e. 1 % in aggregate per year) as well as a provision that requires the Company to prepay the Term Loan B Facility based on an annual calculation of cumulative free cash flow ("Excess Cash Flow") generated by the Company as defined within the terms of the Credit Agreement. The Company was not required to make any such mandatory prepayment required by the Excess Cash Flow provision for the period ended December 31, 2023. In addition, the Term Loan B Facility 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. Pursuant to the terms of the Incremental Agreement, the Company’s existing revolving credit facility under the Credit Agreement was increased by $ 12.5 million (the "Incremental Revolver"), and the letter of credit sublimit under the Credit Agreement was increased by $ 5.0 million. The Incremental Revolver bears the same interest rate as the existing revolving credit facility and has the same maturity date as the existing revolving credit facility. No other terms of the Credit Agreement were amended. As a result, amounts available under the Revolving Credit Facility were $ 65.0 million. At December 31, 2023, 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 amount outstanding under the Term Loan B Facility as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 (in thousands) Term Loan B Facility $ 351,000 $ 354,600 Unamortized debt discounts ( 6,594 ) ( 8,158 ) Unamortized debt issuance costs ( 10,289 ) ( 12,730 ) Debt, net of debt discounts and issuance costs $ 334,117 $ 333,712 The Company incurred debt issuance costs of $ 27.7 million in April 2021, of which $ 10.8 million were associated with debt discount netted against the proceeds and $ 16.9 million were associated with other deferred financing costs associated with the Term Loan B Facility. Debt outstanding under the Term Loan B Facility are presented net of issuance costs on the Company's consolidated balance sheets. 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 years ended December 31, 2023, 2022, and 2021: December 31, 2023 December 31, 2022 December 31, 2021 (in thousands, except interest rates) Contractual interest expense $ 36,261 $ 24,322 $ 14,074 Amortization of debt discount 1,564 1,580 1,062 Amortization of debt issuance costs 2,441 2,466 1,657 Total interest expense $ 40,266 $ 28,368 $ 16,793 Effective interest rate 11.40 % 7.95 % 7.00 % 101 Table of Contents Amortization expense for the Term Loan B Facility debt discount and debt issuance costs for fiscal years 2024 through 2028 is as follows (in thousands): Fiscal Year Debt Discount Debt Issuance Costs 2024 $ 1,548 $ 2,416 2025 1,532 2,391 2026 1,516 2,366 2027 1,500 2,341 2028 498 775 Total $ 6,594 $ 10,289 Note 18— Stockholders' Equity 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, 2023 for a total of approximately $ 21.7 million at an average of $ 13.61 per share. In February 2023, the Board of Directors approved a repurchase plan (the “February 2023 Repurchase Plan”), pursuant to which the Company was authorized to repurchase common stock or Convertible Senior Notes, with an aggregate market value of up to $ 75.0 million, through February 16, 2025. The repurchase program allowed 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 February 2023 Repurchase Plan was completed during the second quarter of 2023. On August 4, 2023, the Board of Directors approved a new repurchase plan (the "August 2023 Repurchase Plan"), pursuant to which the Company is authorized to repurchase common stock or Convertible Senior Notes, with an aggregate market value of up to $ 100.0 million, through August 4, 2025. As of December 31, 2023, $ 9.5 million remains available under the August 2023 Repurchase Plan. For accounting purposes, common stock repurchases under the Company's repurchase programs are recorded based upon the purchase date of the applicable trade. 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, 2023, 2022, and 2021, 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 On January 1, 2024, the Company granted 6,352,327 restricted stock units, 129,870 stock options, and 486,431 performance stock units to the Company's employees. The RSUs granted will vest over four years from issuance with approximately 25 % after one year , and the remainder vesting quarterly thereafter. The options granted will vest over four years from grant date, with 25 % vesting after one year and the remainder vesting monthly thereafter. The PSUs will vest on the three-year anniversary of the grant date based on certain stock price performance metrics to be measured on each anniversary date. The award is eligible to vest as to 0 % to 150 % of the target number of PSUs. On February 1, 2024, the Company’s Board of Directors approved a repurchase program (the "February 2024 Repurchase Plan"), under which the Company is authorized to purchase up to $ 125.0 million of its common stock or Convertible Senior Notes through February 1, 2026. The February 2024 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 February 2024 Repurchase Plan does not obligate us to repurchase any particular amount of common stock or Convertible Senior Notes and may be suspended, modified or discontinued at any time at the Company's discretion. On February 6, 2024, the Company entered into a $ 540.0 million senior secured credit agreement (the "New Credit Agreement"). The New Credit Agreement includes a $ 365.0 million senior secured term loan facility that matures in February 2031, as well as a $ 175.0 million senior secured revolving credit facility that matures in February 2029. Proceeds from the New Credit Agreement were used to fully refinance the Company’s existing senior secured Term Loan B Facility and Revolving Credit Facility, and to pay fees and expenses associated with the transaction. The new senior secured term loan facility bears interest at Term SOFR 102 Table of Contents + 4.50 % and was issued with a 99.0 % original issue price. Loans under the new secured revolving credit facility will bear interest at Term SOFR plus a margin ranging from 3.50 % - 4.00 %. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.