Zeta Global Holdings Corp. 10-Q

Item 1. Financial Statements Condensed Unaudited Consolidated Balance Sheets (In thousands, except shares, per share and par values) As of June 30, 2021 As of December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 113,568 $ 50,725 Accounts receivable, net of allowance of $ 2,066 and $ 2,207 as of June 30, 2021 and December 31, 2020, respectively 72,044 79,366 Prepaid expenses 2,662 3,903 Other current assets 6,122 7,374 Total current assets 194,396 141,368 Property and equipment, net 5,738 6,117 Website and software development costs, net 38,615 32,891 Intangible assets, net 32,734 28,591 Goodwill 81,924 76,432 Deferred tax assets, 199 366 Other non-current assets 905 521 Total non-current assets 160,115 144,918 Total assets $ 354,511 $ 286,286 LIABILITIES AND STOCKHOLDERS’ EQUITY / (DEFICIT) Current liabilities: Accounts payable $ 30,869 $ 40,976 Accrued expenses 48,867 44,622 Acquisition related liabilities 6,275 6,018 Deferred revenue 3,612 4,053 Other current liabilities 7,356 8,310 Total current liabilities 96,979 103,979 Non-current liabilities: Long term borrowings 183,443 189,693 Acquisition related liabilities 18,446 17,137 Warrants and derivative liabilities — 58,100 Other non-current liabilities 2,585 2,387 Total non-current liabilities 204,474 267,317 Total liabilities 301,453 371,296 Commitments and contingencies (Note 8 ) Mezzanine equity: Redeemable convertible preferred stock $ 0.001 per share par value, up to 60,137,979 shares authorized and 39,223,194 shares issued and outstanding as of December 31, 2020 — 154,210 Stockholders’ equity / (deficit): Series A c ommon stock $ 0.001 per share value, up to 204,220,800 shares authorized, 112,012,693 shares issued and outstanding as of December 31, 2020 — 112 Treasury c ommon s tock, 8,195,464 shares repurchased at a weighted average price of $ 2.86 per share ( 23,469 ) ( 23,469 ) Series B c ommon s tock $ 0.001 per share par value, up to 3,400,000 shares authorized, 3,054,318 shares issued and outstanding as of December 31, 2020 — 3 Class A common stock, par value $ 0.001 per share par value, up to 3,750,000,000 shares authorized and 152,270,401 shares issued and outstanding as of June 30, 2021 152 — Class B common stock, par value $ 0.001 , up to 50,000,000 shares authorized and 37,856,095 shares issued and outstanding as of June 30, 2021 38 — Additional paid-in capital 439,999 28,425 Accumulated deficit ( 361,550 ) ( 242,254 ) Accumulated other comprehensive loss ( 2,112 ) ( 2,037 ) Total stockholders’ equity / (deficit) 53,058 ( 239,220 ) Total liabilities and stockholders’ equity / (deficit) $ 354,511 $ 286,286 See accompanying notes to condensed unaudited consolidated financial statements. 3 Table of Contents Condensed Unaudited Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share amounts) Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Revenues $ 106,896 $ 77,130 $ 208,359 $ 158,390 Operating expenses: Cost of revenues (excluding depreciation and amortization) (1) 42,212 29,296 81,184 59,825 General and administrative expenses (1) 65,907 17,327 85,039 36,120 Selling and marketing expenses (1) 82,845 16,842 103,415 36,090 Research and development expenses (1) 26,503 8,161 36,287 16,884 Depreciation and amortization 11,235 10,497 21,352 20,038 Acquisition related expenses 329 1,156 1,036 3,091 Restructuring expenses 150 498 437 1,691 Total operating expenses 229,181 83,777 328,750 173,739 Loss from operations ( 122,285 ) ( 6,647 ) ( 120,391 ) ( 15,349 ) Interest expense 1,402 4,382 4,363 8,725 Other (income s ) / expenses, net ( 749 ) ( 471 ) 535 ( 358 ) Gain on extinguishment of debt ( 10,000 ) — ( 10,000 ) — Change in fair value of warrants and derivative liabilities ( 18,600 ) 4,100 5,000 6,700 Total other (income s ) / expenses ( 27,947 ) 8,011 ( 102 ) 15,067 Loss before income taxes ( 94,338 ) ( 14,658 ) ( 120,289 ) ( 30,416 ) Income tax provision / (benefit) 584 396 ( 993 ) 1,018 Net loss $ ( 94,922 ) $ ( 15,054 ) $ ( 119,296 ) $ ( 31,434 ) Other comprehensive loss: Foreign currency translation adjustment ( 129 ) ( 47 ) ( 75 ) ( 788 ) Total comprehensive loss ( 95,051 ) ( 15,101 ) ( 119,371 ) ( 32,222 ) Net loss per share Net loss ( 94,922 ) $ ( 15,054 ) $ ( 119,296 ) $ ( 31,434 ) Cumulative redeemable convertible preferred stock dividends 3,166 3,716 7,060 7,376 Net loss available to common stockholders $ ( 98,088 ) $ ( 18,770 ) $ ( 126,356 ) $ ( 38,810 ) Basic loss per share $ ( 1.92 ) $ ( 0.58 ) $ ( 3.01 ) $ ( 1.19 ) Diluted loss per share $ ( 1.92 ) $ ( 0.58 ) $ ( 3.01 ) $ ( 1.19 ) Weighted average number of shares used to compute net loss per share Basic 51,202,335 32,362,610 41,973,595 32,607,382 Diluted 51,202,335 32,362,610 41,973,595 32,607,382 (1) The Company recorded the total stock-based compensation expense as follows: Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Cost of revenues (excluding depreciation and amortization) 266 — 266 — General and administrative expenses 42,625 27 42,625 53 Selling and marketing expenses 59,512 — 59,512 — Research and development expenses 16,867 — 16,867 — Tota l 119,270 27 119,270 53 See accompanying notes to condensed unaudited consolidated financial statements. 4 Table of Contents Condensed Unaudited Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity / (Deficit) (In thousands, except shares) Series A Series B Class A Class B Accumulated Other Comprehensive Loss Redeemable Convertible Preferred Stock Common Stock Common Stock Common Stock Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Total Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance as of January 1, 2021 39,223,194 $ 154,210 112,012,693 $ 112 3,054,318 $ 3 — $ — — $ — ( 8,195,464 ) $ ( 23,469 ) $ 28,425 $ ( 242,254 ) $ ( 2,037 ) $ ( 239,220 ) Shares issued in connection with an acquisition — — 613,497 1 — — — — — — — — 5,453 — — 5,454 Restricted stock grants — — 3,687,431 4 — — — — — — — — ( 4 ) — — — Restricted stock forfeitures — — ( 1,629,369 ) ( 2 ) — — — — — — — — 2 — — — Restricted stock cancelation — — ( 17,853,416 ) ( 18 ) — — — — — — — — 18 — — — Foreign currency translation adjustment — — — — — — — — — — — — — — 54 54 Net loss — — — — — — — — — — — — — ( 24,374 ) — ( 24,374 ) Balance as of March 31, 2021 39,223,194 $ 154,210 96,830,836 $ 97 3,054,318 $ 3 — $ — — $ — ( 8,195,464 ) $ ( 23,469 ) $ 33,894 $ ( 266,628 ) $ ( 1,983 ) $ ( 258,086 ) Conversion of Series A and Series B common shares into Class A and Class B common shares, respectively — — ( 96,830,836 ) ( 97 ) ( 3,054,318 ) ( 3 ) 60,421,367 60 39,463,787 39 — — 1 — — — Conversion of redeemable convertible preferred stock to Class A Common Stock ( 39,223,194 ) ( 154,210 ) — — — — 73,813,713 74 — — — — 193,136 — — 193,210 Warrants exercised — — — — — — 8,360,331 8 — — — — 24,132 — — 24,140 Shares issued in connection with the Initial Public Offering — — — — — — 14,773,939 15 — — — — 147,724 — — 147,739 Equity issuance cost — — — — — — — — — — — — ( 21,201 ) — — ( 21,201 ) Shares repurchased — — — — — — ( 4,138,866 ) ( 4 ) ( 2,307,692 ) ( 2 ) — — ( 64,462 ) — — ( 64,468 ) Restricted stock grants — — — — — — 1,155,598 1 700,000 1 — — ( 2 ) — — — Restricted stock forfeitures — — — — — — ( 2,334,753 ) ( 2 ) — — — — 2 — — — Restricted stock units vesting — — — — — — 219,072 — — — — — — — — — Stock-based compensation — — — — — — — — — — — — 126,775 — — 126,775 Foreign currency translation adjustment — — — — — — — — — — — — — — ( 129 ) ( 129 ) Net loss — — — — — — — — — — — — — ( 94,922 ) — ( 94,922 ) Balance as of June 30, 2021 — $ — — $ — $ — $ — 152,270,401 $ 152 37,856,095 $ 38 ( 8,195,464 ) $ ( 23,469 ) $ 439,999 $ ( 361,550 ) $ ( 2,112 ) $ 53,058 5 Table of Contents Series A Series B Class A Class B Accumulated Other Comprehensive Loss Redeemable Convertible Preferred Stock Common Stock Common Stock Common Stock Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Total Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance as of January 1, 2020 39,223,194 154,210 99,339,942 $ 99 3,054,318 $ 3 — $ — — $ — ( 8,195,464 ) $ ( 23,469 ) $ 27,909 $ ( 189,029 ) $ ( 1,847 ) $ ( 186,334 ) Shares issued in connection with an agreement — — 154,560 — — — — — — — — — 423 — — 423 Restricted stock grants — — 3,975,634 4 — — — — — — — — ( 4 ) — — — Restricted stock forfeitures — — ( 997,094 ) ( 1 ) — — — — — — — — 1 — — — Stock-based compensation — — — — — — — — — — — — 26 — — 26 Foreign currency translation adjustment — — — — — — — — — — — — — — ( 741 ) ( 741 ) Net loss — — — — — — — — — — — — — ( 16,380 ) — ( 16,380 ) Balance as of March 31, 2020 39,223,194 $ 154,210 102,473,042 $ 102 3,054,318 $ 3 — $ — — $ — ( 8,195,464 ) $ ( 23,469 ) $ 28,355 $ ( 205,409 ) $ ( 2,588 ) $ ( 203,006 ) Restricted stock grants — — 1,148,962 1 — — — — — — — — ( 1 ) — — — Restricted stock forfeitures — — ( 383,695 ) — — — — — — — — — — — — — Stock-based compensation — — — — — — — — — — — — 27 — — 27 Foreign currency translation adjustment — — — — — — — — — — — — — — ( 47 ) ( 47 ) Net loss — — — — — — — — — — — — — ( 15,054 ) — ( 15,054 ) Balance as of June 30, 2020 39,223,194 154,210 103,238,309 $ 103 3,054,318 3 — $ — — $ — ( 8,195,464 ) $ ( 23,469 ) $ 28,381 $ ( 220,463 ) $ ( 2,635 ) $ ( 218,080 ) See accompanying notes to condensed unaudited consolidated financial statements. 6 Table of Contents Condensed Unaudited Consolidated Statements of Cash Flows (In thousands) Six months ended June 30, 2021 2020 Cash flows from operating activities: Net loss $ ( 119,296 ) $ ( 31,434 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortizatio n 21,352 20,038 Stock-based compensation 119,270 53 Deferred income taxes ( 1,641 ) 290 Change in fair value of warrant and derivative liabilities 5,000 6,700 Gain on extinguishment of debt ( 10,000 ) — Others, net 1,067 1,843 Changes in non-cash working capital (net of acquisitions): Account receivable 8,165 32,478 Prepaid expenses 1,241 641 Other current assets 1,252 1,025 Other non-current assets ( 384 ) 266 Deferred revenue ( 440 ) 446 Accounts payable ( 14,083 ) 8,324 Accrued expenses and other current liabilities 1,502 ( 31,503 ) Other non-current liabilities 198 504 Net cash provided by operating activities 13,203 9,671 Cash flows from investing activities: Capital expenditures ( 4,381 ) ( 1,024 ) Website and software development costs ( 9,529 ) ( 11,738 ) Business and asset acquisitions, net of cash acquired ( 2,159 ) — Net cash used for investing activities ( 16,069 ) ( 12,762 ) Cash flows from financing activities: Proceeds from initial public offering, net of issuance costs 127,363 — Cash paid for acquisition related liabilities ( 64 ) ( 496 ) Proceeds from term loan, net of issuance cost 183,311 — Proceeds from paycheck protection program loan — 10,000 Repurchase of restricted stock ( 64,130 ) — Exercise of warrants 41 — Repayments against the credit facilities ( 180,745 ) ( 3,500 ) Net cash provided by financing activities 65,776 6,004 Effect of exchange rate changes on cash and cash equivalents ( 67 ) ( 49 ) Net increase in cash and cash equivalents and restricted cash 62,843 2,864 Cash and cash equivalents and restricted cash, beginning of period 50,725 37,818 Cash and cash equivalents and restricted cash, end of period $ 113,568 $ 40,682 Supplemental cash flow disclosures including non-cash activities: Cash paid for interest $ 4,377 6,990 Cash paid for income taxes, net $ 941 $ 672 Contingent consideration liability established in connection with acquisitions $ 1,630 $ — Shares issued in connection with acquisitions and other agreements $ 5,454 $ 423 Dividends on redeemable convertible preferred stock settled in Company’s equity $ 60,082 $ — Non-cash settlement of warrants and derivative liabilities $ 63,100 $ — Capitalized stock-based compensation expense as website and software development costs $ 7,505 $ — See accompanying notes to condensed unaudited consolidated financial statements. 7 Table of Contents Notes to Condensed Unaudited Consolidated Financial Statements (In thousands, except share and per share amounts) 1. Organization and Background (a) Nature of Business Zeta Global Holdings Corp., a Delaware Corporation (“Zeta Global Holdings”), and Zeta Global Corp., the operating company of Zeta Global Holdings and a Delaware Corporation (“Zeta” individually, or collectively with Zeta Global Holdings and its consolidated entities, as context dictates, the “Company”), is a marketing technology company that combines proprietary data, artificial intelligence and software to create a technology platform that enables marketers to acquire, retain and grow customer relationships. The Company’s technology platform powers data-driven marketing programs for enterprises across a wide range of industries and utilizes all digital distribution channels including email, search, social, mobile, display and connected TV (“CTV”). Zeta was incorporated and began operations in October 2007. (b) Initial Public Offering (“IPO”) On June 9, 2021, the Company’s registration statement on Form S-1 relating to the initial public offering (“IPO”) of its Class A common stock was declared effective by the Securities and Exchange Commission (“SEC”). In connection with the IPO, on June 14, 2021, the Company issued and sold 14,773,939 shares of Class A common stock at a public offering price of $ 10 per share for net proceeds of $ 132.7 million, after deducting underwriters’ discounts and commissions (but excluding other offering expenses and reimbursements of $ 6.2 million). The Company used all of the proceeds from the IPO (i) to satisfy the tax withholding and remittance obligations of holders of its outstanding restricted stock and restricted stock units that ves t ed in connection with th e offering by repurchasing and cance ling 1,799,650 shares of Class A restricted stoc k, 197,490 shares of Class B restricted stock and 92,671 restricted stock units (the “Tax Withholding Repurchase”); (ii) to repurchase and cancel 2,158,027 shares of Class A restricted stock and 88,518 restricted units at the election of certain holders (the “Class A Stock Repurchase”); (iii) to repurchase and cancel 1,767,692 shares of Class B common stock and 342,510 shares of restricted Class B common stock from its Chief Executive Officer and Co-Founder, David Steinberg (the “Class B Stock Repurchase”); and (iv) for general corporate purposes, including working capital, operating expenses and capital expenditures, although the Company has not designated any specific uses. The Company may also use a portion of the net proceeds to fund possible investments in, or acquisitions of, complementary businesses, services or technologies. The Company has no current agreements or commitments with respect to any investment or acquisition. (c) Reorganization Transactions In connection with the IPO, the Company completed the following transactions (“Reorganization Transactions”): • As per the amended and restated certificate of incorporation, the authorized capital stock consists of 3,750,000,000 shares of Class A common stock, par value $ 0.001 per share, 50,000,000 shares of Class B common stock, par value $ 0.001 per share, and 200,000,000 shares of preferred stock, par value $ 0.001 per share. The number of shares outstanding as of June 30, 2021 was 152,270,401 shares of Class A common stock and 37,856,095 shares of Class B common stock, based on stock outstanding as of March 31, 2021, after giving effect to: • the conversion of 39,223,194 outstanding shares, and unpaid dividends on such outstanding shares, of its Series A preferred stock, Series B-1 preferred stock, Series B-2 preferred stock, Series C preferred stock, Series E preferred stock, Series E-1 preferred stock, Series F preferred stock, Series F-1 preferred stock, Series F-2 preferred stock, Series F-3 preferred stock and Series F-4 preferred stock into 73,813,713 shares of its Class A common stock immediately prior to the completion of the IPO (the “Preferred Conversion”); 8 Table of Contents • 8,360,331 shares of its Class A common stock issued in connection with the exercise of outstanding warrants (the “Warrant Exercise”); • the reclassification of 3,054,318 shares of its existing Series B common stock and 26,722,208 shares of Series A common stock into shares of Class A common stock and the reclassification of 70,108,628 shares of restricted Series A common stock into shares of restricted Class A common stock (of which 8,734,893 have vested in connection with the IPO and 4,138,866 shares repurchased by the Company); • the exchange of 39,463,787 shares of Class A common stock (after giving effect to the Preferred Conversion and the Reclassification) held by the Co-Founder and Chief Executive Officer and his affiliates for an equivalent number of shares of Class B common stock, which is effective upon the filing and effectiveness of our amended and restated certificate of incorporation pursuant to the terms of the exchange agreement entered into between its Co-Founder and Chief Executive Officer and his affiliates and us (the “Class B Exchange”); and • the repurchase of an aggregate of 4,138,866 shares of restricted Class A common stock and 2,307,692 shares of Class B common stock (of which 540,000 is restricted Class B common stock) as a result of the Stock Repurchase and the Tax Withholding Repurchase. 2. Basis of Presentation and Summary of Significant Accounting Policies (a) Principles of Consolidation The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by Rule 10-01 of Regulation S-X. Accordingly, the unaudited consolidated financial statements may not include all of the information and notes required by GAAP for audited financial statements. The year-end December 31, 2020 consolidated financial statements data included herein was derived from audited financial statements but does not include all disclosures required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of items of a normal and recurring nature, necessary to present fairly the Company’s financial position as of June 30, 2021, the results of operations, comprehensive income/(loss), stockholders’ equity, and cash flows for the three-month and six-month periods ended June 30, 2021 and 2020. The results of operations for the three-month and six-month periods ended June 30, 2021 and 2020 are not necessarily indicative of the results to be expected for the full year. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities, and related disclosures, as of the date of the financial statements, and the amounts of revenues and expenses reported during the period. Actual results could differ from estimates. The accompanying condensed unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended December 31, 2020, which are included in Zeta Global Holdings’ final prospectus dated June 9, 2021 and filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on June 14, 2021 (the “Prospectus”). The accompanying unaudited consolidated financial statements include the accounts of Zeta and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s management considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements (See Note 16 to the condensed unaudited consolidated financial statements below). (b) Revenue Recognition Revenue arises primarily from the Company’s technology platform via subscription fees, volume-based utilization fees and fees for professional services designed to maximize the customer usage of technology. 9 Table of Contents Revenues are recognized when control of these services is transferred to the customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. Sales and other taxes collected by the Company concurrent with revenue-producing activities are excluded from revenues. Contract assets and liabilities Contract assets represent revenue recognized for contracts that have not been invoiced to customers. Total contract assets were $ 2,894 and $ 1,709 as of June 30, 2021 and December 31, 2020, respectively, and are included in the account receivables, net, in the condensed unaudited consolidated balance sheets. Contract liabilities consists of deferred revenues that represents amounts billed to the customers in excess of the revenue recognized. Deferred revenues are subsequently recorded as revenues when earned in accordance with the Company’s revenue recognition policies. During the six months ended on June 30, 2021 and 2020, the Company billed and collected $ 22,119 and $ 11,589 in advance, respectively and recognized $ 22,559 and $ 11,143 , respectively as revenues out of those advance receipts. As of June 30, 2021 and December 31, 2020, the deferred revenues are $ 3,613 and $ 4,053 , respectively. Remaining Performance Obligations Transaction price allocated to the remaining performance obligations represents contracted revenues that have not yet been recognized, which includes unearned revenues and unbilled amounts that will be recognized as revenues in future periods. Transaction price allocated to the remaining performance obligations is influenced by several factors, including seasonality, the timing of renewals, average contract terms and foreign currency exchange rates. Unbilled portions of the remaining performance obligations are subject to future economic risks including bankruptcies, regulatory changes and other market factors. The Company excludes amounts related to performance obligations that are billed and recognized as the services are provided. This primarily consists of professional services contracts that are on a time-and-materials basis. Disaggregation of revenues from contract with customers The Company reports disaggregation of revenues based on primary geographical markets and delivery channels / platforms. Revenues by delivery channels / platforms are based on whether the customer requirements necessitate integration with platforms or delivery channels not owned by the Company. When the Company generates revenues entirely through the Company platform, the Company considers it Direct Platform Revenue . When the Company generates revenue by leveraging its platform’s integration with third parties, it is considered Integrated Platform Revenue. The following table summarizes disaggregation for the six months ended June 30, 2021, and June 30, 2020. Six months ended June 30, 2021 June 30, 2020 Direct platform revenues $ 157,556 $ 117,243 Integrated platform revenues 50,803 41,147 Total revenues $ 208,359 $ 158,390 Refer to the Company’s accounting policy on “Segments” below for more information about disaggregation based on primary geographical markets. (c) Stock-based compensation and other stock-based payments: The measurement of share-based compensation expense for all stock-based payment awards, including restricted shares and stock options granted to the employee, consultants or advisors and non-employee directors, is based on the estimated fair value of the awards on the date of grant or date of modification of such grants. The Company accounts for all stock options and restricted shares using a fair value-based method. The fair value of each stock option granted to employees is estimated on the date of the grant using the Black-Scholes-Merton option pricing model, and the related stock-based compensation expense is recognized over the expected life of the option. The fair value of the restricted shares is based on the Company’s stock price as of the date of the grants. The Company accounts for the forfeitures, as they occur. 10 Table of Contents Since the Company’s restricted stock and restricted stock units have both performance condition (i.e. initial public offering) and a service condition, the Company uses the graded vesting attribution method to amortize the stock-based compensation expense. (d) Segments The Company operates as one operating segment . Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM is the Chief Executive Officer. Since it operates as one operating segment, all required financial segment information can be found in the condensed unaudited consolidated financial statements. Revenues and long-lived assets by geographic region are based on the physical location of the customers being served or the assets are as follows: Revenues by geographical region consisted of the following; Six months ended June 30 2021 2020 US $ 193,514 $ 146,551 International 14,845 11,839 Total revenues $ 208,359 $ 158,390 Total long-lived assets by geographical region consisted of the following; As of June 30, 2021 December 31, 2020 US $ 43,692 $ 38,413 International 661 595 Total long-lived assets $ 44,353 $ 39,008 (e) Concentration of Credit Risk No customer accounted for more than 10% of the Company’s total revenues during the period ended June 30, 2021 and year ended December 31, 2020. Financial instruments that potentially subject the Company to concentration risk consist primarily of accounts receivable from customers. As of June 30, 2021 and December 31, 2020, the Company had receivables from one of its customers which represents 11 % and 14 % of the total account receivables balance as of that date, respectively. The Company continuously monitors whether there is an expected credit loss arising from this customer, and as of the year ended December 31, 2020 no provision was warranted or recorded. 3. Intangible Assets The details of intangible assets and related accumulated amortization are set forth below: As of June 30, 2021 As of December 31, 2020 Gross value Accumulated amortization Net value Gross value Accumulated amortization Net value Publisher and data supply relationships $ 6,250 $ 521 $ 5,729 $ — $ — $ — Tradenames 2,720 1,909 811 2,720 1,634 1,086 Completed technologies 20,292 15,270 5,022 20,292 13,037 7,255 Customer relationships 52,159 30,987 21,172 45,239 24,989 20,250 Total Intangible Assets $ 81,421 $ 48,687 $ 32,734 $ 68,251 $ 39,660 $ 28,591 11 Table of Contents Amortization expense was $ 4,948 and $ 9,028 for the three and six months ended June 30, 2021, respectively, and $ 3,913 and $ 7,841 for the three and six months ended June 30, 2020, respectively. Weighted average useful life of the unamortized intangibles as of June 30, 2021 was 2.23 years. Based on the amount of intangible assets subject to amortization, as of June 30, 2021, the Company’s estimated future amortization expense over the next five years and beyond are as follows: Total estimated future amortization expense is as follows: As of June 30, 2021 Year ended December 31, Remaining six months of 2021 $ 9,796 2022 14,915 2023 5,623 2024 1,793 2025 482 2026 and thereafter 125 Total $ 32,734 4. Goodwill The following is a summary of the carrying value of goodwill: Balance as of January 1, 2021 $ 76,432 Acquisition of Vital 3,910 Acquisition of Kinetic 1,578 Foreign currency translation 4 Balance as of June 30, 2021 $ 81,924 There were no events during the three months ended June 30, 2021 to which an impairment analysis would be warranted. 5. Acquisitions The Company’s acquisitions have been accounted for under the purchase method of accounting. The total purchase price of each acquisition was allocated to the fair value of assets acquired and liabilities assumed based on their fair values at the acquisition date, with any excess recorded as goodwill. The Company agreed to pay a portion of the purchase price for certain acquisitions in the form of contingent purchase price, the unpaid amounts of these liabilities are included in the acquisition related liabilities on the condensed unaudited consolidated balance sheets as of June 30, 2021 and December 31, 2020. On March 1, 2021 , the Company entered into a merger Agreement with the sellers of Kinetic Data Solutions, LLC (“Kinetic”) , an entity controlled by the Chief Executive Officer of the Company, to purchase all of the issued and outstanding stock of Kinetic. The fair value of the purchase consideration was estimated at $ 2,762 . The Company agreed to issue 306,749 shares of Series A common stock with a fair value of $ 2,738 and certain earn-outs based on the operating performance of the acquired business after the closing date. The earn-out was calculated based on the profits of the acquired business and the Company shall pay 10 % of such profits for a period of three years from the acquisition date in cash and in restricted shares of the Company. The Company has recorded this transaction based on the preliminary purchase price allocation. Accordingly, the Company recognized $ 1,600 as customer relationships intangibles, $ 1,578 as goodwill and $ 416 as deferred tax liabilities associated with this acquisition. On March 3, 2021 , the Company entered into a Stock Purchase Agreement with the sellers of Vital Digital, Corp (“Vital”) to purchase all of the issued and outstanding shares of common stock of Vital. The fair value of the purchase consideration for this transaction is determined as $ 7,894 , with $ 3,400 in cash, 306,748 shares of Series A common stock with a fair value of $ 2,710 , $ 1,206 in earnouts based on the operating performance of the acquired business after the closing date, and $ 578 in cash holdback. The Company has recorded this transaction based on the preliminary purchase price allocation. Accordingly, the Company has recognized $ 5,320 as customer relationship intangibles, $ 3,910 as goodwill, $ 1,385 as deferred tax liability and $ 49 as other net assets associated with this acquisition. Caivis, one of the Company’s related parties, owned 5 % interest in Vital as of the effective date of this stock purchase agreement (Refer to Note 1 3 for a description of relationship with Caivis). 12 Table of Contents The revenues and earnings from these acquisitions are not significant to the Company’s condensed unaudited consolidated financial statements for the three months and six months ending June 30, 2021. Goodwill acquired by the Company in these acquisitions is deductible for tax purposes. The pro forma results of the Company as if these acquisitions had taken place on the first day of 2020 were not materially different from the amounts reflected in the accompanying condensed unaudited consolidated financial statements. The Company has recorded the earn-outs related to these acquisitions based on the fair value determined on the date of the acquisition, however the Company believes that the actual payouts for these acquisitions could be lower than such recorded fair values. 6. Acquisition Related Liabilities The following is a summary of acquisition related liabilities: eBay CRM Sizmek PlaceIQ Ignition One Kinetic Vital Total Balance as of January 1, 2021 $ 17,137 $ 4,402 $ 256 $ 1,360 $ — $ — $ 23,155 Additions — — — — 24 1,784 1,808 Payments made during the year — — ( 64 ) — — — ( 64 ) Change in fair value of earn-out — 14 ( 192 ) — — — ( 178 ) Balance as of June 30, 2021 $ 17,137 $ 4,416 $ — $ 1,360 $ 24 $ 1,784 $ 24,721 The changes in the fair value of the acquisition related liabilities are included in other income / (expenses) on the condensed unaudited consolidated statements of operations and comprehensive loss. The Company is a party to a litigation matter in relation to certain acquisition related liabilities for its eBay CRM acquisition dated November 2, 2015. The Company has accrued the full amount that it expects to pay to settle this liability, on its condensed unaudited consolidated balance sheets as of June 30, 2021. Further, the Company has provided a letter of credit amounting to $ 6,028 to the sellers, against these payable amounts. The amounts payable for eBay CRM has been contested by the Company in the court of law. In view of the numerous legal, technical and factual issues involved in these lawsuits, the Company may settle these liabilities in any amount lower than the book value as of June 30, 2021. 7. Credit Facilities The Company’s long-term borrowings are as follows: As of June 30, 2021 As of December 31, 2020 Credit facility $ 185,000 $ 137,950 Loan under paycheck protection program — 10,000 Revolving loan — 42,600 Total borrowings 185,000 190,550 Less: Unamortized discount on debt — ( 426 ) Unamortized deferred financing cost ( 1,557 ) ( 431 ) Long term borrowings $ 183,443 $ 189,693 In July 2016, the Company entered into a revolving credit, guaranty and security agreement with a financial institution and subsequently amended the agreement in May 2017. The agreement provides for a maximum revolving advance amount of $ 50,000 . Interest on the outstanding balance is charged at an annual rate of the financial institution’s Prime lending rate (“PLR”)+ 1.25 % or London Interbank Offered Rate (“LIBOR”)+ 2.25 %, as elected by the Company. As of December 31, 2020, the outstanding balance of the revolving loan was $ 42,600 . In addition, the Company also had an outstanding a letter of credit amounting to $ 7,272 against the available revolving credit facility as of December 31, 2020. The credit facility was fully secured by the financial institution with a first lien on the Company’s account receivables. The Senior Secured Credit Facility, availed by the Company on February 3, 2021, was used to fully repay and terminate this Credit Agreement with a total payoff amount of $ 42,792 . 13 Table of Contents In July 2015, the Company entered into a term loan facility with a financial institution that was also invested in the Company’s Series E-1 redeemable convertible preferred stock and subsequently invested in the Company’s Series F redeemable convertible preferred stock. The term loan facility, as amended, is for up to $ 142,950 , which consists of a $ 70,000 initial term loan that was drawn at closing date, a $ 32,950 delay draw term loan and $ 40,000 in an incremental term loan commitment. As of December 31, 2020, the Company has an undrawn facility of $ 5,000 , on the delay draw term loan. Interest on the outstanding balances is payable quarterly at an annual rate of LIBOR+ 7.5 % . Interest expense for the term loan is calculated using a LIBOR rate of no lower than 1.0 %. The extensions of credit may be used solely to (a) refinance indebtedness, (b) to pay any expenses associated with this line of credit agreement, (c) for working capital, capital expenditures, acquisitions and redemptions of equity interests and (d) for other general corporate purposes and shall not be used for purchases of margin stock. The Company was required to repay the principal balance and any unpaid accrued interest on the loans at the maturity date of July 29, 2022. The financial institution had a second lien on the account receivables of the Company and first lien on all the other assets. The Senior Secured Credit Facility, availed by the Company on February 3, 2021, was used to fully repay and terminate this Credit Agreement with a total payoff amount of $ 137,953 . On February 3, 2021, the Company entered into a $ 222,500 Senior Secured Credit Facility (“Senior Secured Credit Facility”) with a syndicate of financial institutions and institutional lenders led by BofA Securities, Inc., as a lead arranger and sole bookrunner, and Bank of America, N.A., as sole administrative agent. The Senior Secured Credit Facility is for up to $ 222,500 , which consists of (i) $ 73,750 initial Revolving Facility that was drawn at closing date, (ii) $ 111,250 Term Facility that was drawn at closing date, and (iii) $ 37,500 in incremental Revolving Facility commitment that remains undrawn. In addition, the Company has an outstanding letter of credit amounting to $ 7,272 against the available revolving credit facility. The credit facility was fully secured by the financial institution with a first lien on the Company’s account receivables. Interest on the current outstanding balances is payable quarterly and calculated using a LIBOR rate of no lower than LIBOR+ 2.125 % and no higher than LIBOR+ 2.625 % based on the Company’s consolidated net leverage ratio stated in the credit agreement. The extensions of credit may be used solely to (a) refinance existing indebtedness, (b) to pay any expenses associated with this line of credit agreement, (c) for acquisitions, and (d) for other general corporate purposes. The Company is required to repay the principal balance and any unpaid accrued interest on the Senior Secured Credit Facility on February 3, 2026 . The Company incurred $ 1,699 as debt issuance costs in the form of the legal fee, underwriter’s fee, etc., these costs are recognized as a reduction in the long-term borrowings in the condensed unaudited consolidated balance sheets, and are being amortized over the term of the contract on a straight-line basis. The Senior Secured Credit Facility contains certain financial maintenance covenants including consolidated net leverage ratio and consolidated fixed charge coverage ratio. In addition, this agreement contains restrictive covenants that may limit the Company’s ability to, among other things, acquire equity interest of the Company from its shareholders, repurchase / retire any of the Company’s securities, and pay dividends or distribute excess cash flow. Additionally, the Company is required to submit periodic financial covenant letters that would include current net leverage ratio and fixed charge coverage ratio, among others. As of June 30, 2021, applicable total leverage ratio and fixed charge coverage ratio was 4.0 and 1.25 , respectively and the Company was in compliance of these covenants. Since the time lag between the effective date of the new credit facility and the June 30, 2021 is minimal and the interest rates on the Company’s new credit facility approximates the current market rates, the fair value of the debt is approximately equal to the carrying amount as of June 30, 2021. On April 23, 2020, the Company received proceeds from a loan in the amount of $ 10,000 , bearing annual interest of 1 % and due April 24, 2022 (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Company evaluated the applicable accounting guidance relative to the PPP Loan and accounted for the proceeds of the PPP Loan as debt under ASC 470. On June 10, 2021 the Small Business Administration (“SBA”) approved the forgiveness for the full amount of the PPP Loan which included principal of $ 10,000 . The Company recognized the reversal of the debt liability upon forgiveness of the PPP Loan as “Gain on extinguishment of debt” in its condensed unaudited consolidated statements of operations and comprehensive loss during the three months ended June 30, 2021. 14 Table of Contents 8. Commitments and Contingencies (a) Purchase obligations The Company entered into non-cancelable vendor agreements to purchase services from certain customers. As of June 30, 2021, the Company was party to outstanding purchase contracts totaling $ 4,918 payable during the remaining six months of 2021 and $ 4,085 payable in 2022. There were no outstanding purchase contracts payable in 2023 and thereafter. (b) Lease commitments The Company maintains leased offices in the United States of America, United Kingdom, India and France. Deferred rent as of June 30, 2021 and December 31, 2020 was $ 2,605 and $ 2,652 , respectively for these leases and is included in other current liabilities and non-current liabilities on the condensed unaudited consolidated balance sheets. Commitments for the base rents as of June 30, 2021 are as follows: As of June 30, 2021 Year Ended December 31, Remaining six months of 2021 $ 1,815 2022 2,455 2023 2,030 2024 1,883 2025 1,790 2026 and thereafter 5,062 Total $ 15,035 The Company is a party to various litigation and administrative proceedings related to claims arising from its operations in the ordinary course of business including in relation to certain contingent purchase price obligations noted above. The Company records provisions for losses when claims become probable and the amounts are estimative. Although the outcome of these matters cannot be predicted with certainty, the Company’s management believes that the resolution of the matters will not have a material impact on the Company’s business, results of operations, financial condition, or cash flows. 9. Stock-Based Compensation Stock-based compensation plan In 2008, the Company adopted its 2008 Stock Option/Stock Issuance Plan, and, in 2017, adopted Zeta Global Holdings Corp. 2017 Incentive Plan (collectively, the “Plans”). The Plans permit the issuance of stock options, restricted stock and restricted stock units to employees, directors, and officers, consultants or advisors and non-employee directors of the Company. Options granted under the Plans expire no later than ten years from the grant date. The restricted stock and restricted stock units granted under the Plans generally did not vest until a change in control, which generally does not include an initial public offering. Upon a change in control, restricted stock and restricted stock units vest as to 25 % of the shares with the balance of the shares vesting in equal quarterly installments following the change in control over the remainder of a five -year term from the original date of grant. The restricted stock and restricted stock units will fully vest upon a change in control to the extent five years has passed from the original date of grant of the restricted stock or restricted stock units. Since the vesting of these awards was contingent upon the change of control event, which was not considered probable until it occurs, the Company did not record any stock-based compensation expense for such awards. The stock compensation expense has been recognized following the vesting of restricted stock, restricted stock units and options as described below. In the past, the Company has canceled certain restricted stock and in lieu of such cancellation has issued restricted stock units to the holders for those restricted stock, with the same vesting conditions as restricted stock. 15 Table of Contents Restricted Stock and Restricted Stock Units As noted above, the Company’s restricted stock and restricted stock units did not vest until the change of control. On March 24, 2021, the Company’s board of directors approved a modification in the vesting terms of its restricted stock and restricted stock unit awards. Pursuant to that approval, the existing restricted stock and restricted stock units were divided into three broad categories with different vesting conditions as follows: • For the first category of holders, terms of the modification provide the holders an option to tender up to 20 % of their outstanding awards to the Company in a buy-back program for a cash payout on the effective date of the IPO, with the remaining percentage of the awards subject to future vesting beginning at the end of the first quarter following the one -year anniversary of the IPO and extending for a period of four years thereafter. • For the second category of holders, terms of the modification provide for vesting upon the effective date of the IPO as follows: (i) 25 % of shares with an original grant date of less than 5 years prior to the IPO and (ii) 100 % of shares with a grant date of 5 years or older. Post the IPO additional vesting is deferred for one year . Thereafter the remaining shares shall vest in equal quarterly instalments at the end of each quarter until the fifth anniversary of the date of the original grant. • For the third category of holders, terms of the modification provide for vesting to begin at the end of the first quarter following the one -year anniversary of the IPO, with such shares vesting in equal quarterly instalments at the end of each quarter until the fifth anniversary of the date of the IPO. The revised terms were communicated to the restricted stock and restricted stock unit holders. The above modification was accounted for under the guidance in ASC 718-20-35-3. Given the vesting of the modified awards contained a performance condition associated with the IPO, the Company had determined that the modification was considered improbable-to-improbable under ASC 718-20-55-118 through 119. The restricted stock or restricted stock units that are tendered by the holders in the buy-back program for the first category of restricted stock and restricted stock units, were liability classified and as such the expense related to these grants has been recognized based on the settlement price as of the date of IPO. In connection with the other two categories of holders, the Company will recognize compensation expense over the modified vesting terms, based on the fair value as of the date of modification. The portion of the awards subject to future service would remain classified as equity awards and expense would be recognized over the remaining future service period. Following is the activity of restricted stock and restricted stock units granted by the Company: Shares Weighted Average Grant Date Fair Value Nonvested as of January 1, 2021 85,903,970 $ 2.80 Granted (1) 5,737,678 10.10 Vested ( 9,274,893 ) 11.04 Forfeited (2) ( 3,979,021 ) 9.12 Canceled (3) ( 16,655,197 ) 3.60 Modified ( 68,986,297 ) 2.78 Modified and reissued 68,986,297 11.36 Non-vested as of June 30, 2021 61,732,537 $ 11.21 (1) During the six months ended June 30, 2021, the Company granted 5,543,029 restricted stock and 194,849 restricted stock units to its employees and board members, of which 1,660,677 restricted stock and 98,993 restricted stock units were granted prior to March 12, 2021 and will be governed by the vesting rules described in a), b) and c) above. Remaining shares that were granted on or after March 12, 2021 shall vest over a period of 4 years, with 25 % vesting on the one -year anniversary of the IPO and the remainder vesting in equal quarterly installments thereafter through the 4th anniversary of the grant date. The Company also converted 1,198,219 restricted stock into restricted stock units for certain employee related grants included in the canceled grants in the statements of shareholders equity for the six months ending June 30, 2021. (2) During the six months ended June 30, 2021, the Company forfeited 3,964,122 restricted stock and 14,899 restricted stock units. (3) During the six months ended June 30, 2021, the Company also canceled 16,655,197 shares of restricted stock granted to holders of series A redeemable convertible preferred shares (see N ote 1 0 to the condensed unaudited consolidated financial statements below ). 16 Table of Contents The Company has $ 662,132 of unrecognized compensation expense related to its 61,732,537 unvested restricted stock and restricted stock units, that will be recognized over a weighted average of 1.48 years. 10. Stockholders’ Equity / (Deficit) On February 24, 2021, the Company’s Board of Directors approved the correction of the conversion price of Series A redeemable convertible preferred shares held by certain shareholders and cancelation of 16,655,197 shares of restricted stock granted to these holders of Series A redeemable convertible preferred shares. The board of directors determined that the restricted shares were issued to those shareholders in order to avoid dilution of their ownership in the Company as a result of other grants of shares. It was further determined that the dilutive effect of those other restricted shares should have been addressed by an adjustment to the conversion price of the Series A redeemable convertible preferred shares. Therefore, the issuance of the restricted shares to these holders of the Series A redeemable convertible preferred shares was determined to be an error and were duplicative with the corrected calculation of the conversion price of Series A redeemable convertible preferred shares. The conversion price of these Series A redeemable convertible preferred stock was adjusted to $ 0.073587 from $ 0.59 . The number of shares outstanding as of June 30, 2021 was 152,270,401 shares of our Class A common stock and 37,856,095 shares of our Class B common stock, based on stock outstanding as of March 31, 2021, after giving effect to each of the Reorganization Transactions described in Note 1, as a result of the Company’s IPO. Rights of Class A and Class B common stock holders: The Company’s amended and restated Certificate of Incorporation defines the rights of the different classes of common stock as under: • Equal Status- Except as otherwise provided in the Certificate of Incorporation or required by applicable law, shares of Class A common stock and Class B common stock shall have the same rights, privileges and powers, rank equally (including as to dividends and distributions, and upon any liquidation, dissolution, distribution of assets or winding up of the Company), share ratably and be identical in all respects and as to all matters. • Voting- Except as otherwise required by applicable law, at all meetings of stockholders and on all matters submitted to a vote of stockholders of the Corporation generally, each holder of Class A common stock, as such, shall have the right to one (1) vote per share of Class A common stock held of record by such holder and each holder of Class B common stock, as such, shall have the right to ten (10) votes per share of Class B common stock held of record by such holder. • Dividend Rights- Shares of Class A common stock and Class B common stock shall be treated equally, identically and ratably, on a per share basis, with respect to any dividends as may be declared and paid from time to time by the Board of Directors of the Company. • Liquidation, Dissolution or Winding Up- Subject to the preferential or other rights of any holders of Preferred Stock then outstanding, upon the dissolution, distribution of assets, liquidation or winding up of the Corporation, whether voluntary or involuntary, holders of Class A common stock and Class B common stock will be entitled to receive ratably all assets of the Company available for distribution to its stockholders unless disparate or different treatment of the shares of each such class with respect to distributions upon any such liquidation, dissolution, distribution of assets or winding up is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A common stock and Class B common stock, each voting separately as a class. 17 Table of Contents 11. Warrants and Derivative Liabilities The following assumptions were used to determine the fair value of the warrants and derivative liabilities as of June 30, 2021 and December 31, 2020: As of June 30, 2021 As of December 31, 2020 Stock price $ — $ 7.56 Exercise price $ — $ 0.01 Risk-free interest rate — 0.09 % Expected volatility — 64.0 % Time to maturity (in years) — 0.63 As of December 31, 2020, the fair value of the warrants and derivative liabilities was $ 58,100 . In connection with the Company’s IPO, all the outstanding warrants were exercised by holders of those warrants and redeemable convertible preferred stock were converted to Class A common stock of the Company. The derivative liability, that represented the conversion feature of certain redeemable convertible preferred stock has been settled in the additional paid in capital. For the three months ended June 30, 2021 and 2020, the Company recognized an income of $ 18,600 and an expense of 4,100 , respectively related to the changes in the fair value of warrants and derivate liabilities. For the six months ended June 30, 2021 and 2020, the Company recognized an expense related to changes in the fair value of such warrants and derivative liabilities of $ 5,000 and $ 6,700 , respectively. As of June 30, 2021, the Company does no t have any warrants and derivative liabilities on its condensed unaudited consolidated balance sheets. 12. Fair Value Disclosures Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include: Level 1 is defined as observable inputs such as quoted prices in active markets for identical assets; Level 2 is defined as observable inputs other than Level 1 prices such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The following table represents the fair value of the financial instruments measured at fair value on a recurring basis: As of June 30, 2021 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents* $ 5,764 $ — $ — $ 5,764 Total assets measured at fair value $ 5,764 $ — $ — $ 5,764 Liabilities Derivative liability $ — $ — $ — $ — Warrant liability — — — — Acquisition related liabilities — — 24,721 24,721 Total liabilities measured at fair value $ — $ — $ 24,721 $ 24,721 18 Table of Contents As of December 31, 2020 Assets Level 1 Level 2 Level 3 Total Cash and cash equivalents* $ 12,257 $ — $ — $ 12,257 Total assets measured at fair value $ 12,257 $ — $ — $ 12,257 Liabilities Derivative liability $ — $ — $ 38,400 $ 38,400 Warrant liability — — 19,700 19,700 Acquisition related liabilities — — 23,155 23,155 Total liabilities measured at fair value $ — $ — $ 81,255 $ 81,255 * Includes cash invested by the Company in certain money market accounts with a financial institution . As noted above in Note 7, as of June 30, 2021 and December 31, 2020, the Company determined that the Term Loan is classified as Level 3 and the relevant fair values were approximately equal to the book value as of June 30, 2021 and $ 152,538 as of December 31, 2020 . The following table reconciles the changes in the fair value of the liabilities categorized within Level 3 of the fair value hierarchy for the six months ended June 30, 2021 and year ended December 31, 2020: Warrant liability Acquisition related liabilities Derivative liability Balance as of January 1, 2021 $ 19,700 $ 23,155 $ 38,400 Additions, net of payments — 1,744 — Change in fair value 4,400 ( 178 ) 600 Extinguishment of the warrant and derivative liabilities ( 24,100 ) — ( 39,000 ) Balance as of June 30, 2021 $ — $ 24,721 $ — In connection with certain business combinations, the Company may owe additional purchase consideration (contingent consideration included in the acquisition related liabilities) based on the financial performance of the acquired entities after their acquisition. The fair value of the contingent consideration was determined using an unobservable input such as projected revenues, collections of accounts receivables. Changes in any of the assumptions related to the unobservable inputs identified above may change the contingent consideration’s fair value. 13. Related Party Transactions 1. Caivis Acquisition Corp. II, Caivis Acquisition Corp. IV, Caivis Investment Company V, LLC and Caivis Investment Company VI, LLC, (collectively, the “Caivis Group”) are entities owned by many of the same stockholders of the Company. In addition, the Chief Executive Officer of the Company owns a controlling interest in Caivis Group. On April 9, 2012, the Company amended its agreement with Caivis Group, whereby Caivis Group will provide support for general administrative and corporate development activities, including sourcing and evaluating potential partners and acquisition targets to the Company for $ 2,000 per year. This agreement with Caivis Group was terminated on December 31, 2019 and therefore no such expenses are incurred during FY2020 and the six months ended on June 30, 2021. As of December 31, 2020, the Company had outstanding payables of $ 533 to Caivis Group included in the “accounts payable and accrued expenses” in the condensed unaudited consolidated balance sheets. During the six months ended on June 30, 2021, the Company paid an amount of $ 533 and as such there is no outstanding payable to Caivis as of June 30, 2021. 2. Casting Made Simple Corp. (“CMS”) is an entity owned by Caivis group and the Chief Executive Officer’s spouse. On December 28, 2018, the Company entered into an agreement with CMS to monetize traffic generated through websites owned by CMS and give a profit share to CMS. During the three and six months ended June 30, 2021, the Company recognized $ 66 and $ 162 , respectively and during the three and six months ended June 30, 2020, the Company recognized $ 89 and $ 153 , respectively, as direct cost of revenues in the condensed unaudited consolidated statements of operations and comprehensive loss, representing the profit shared by the Company with CMS. As of June 30, 2021 and December 31, 2020, the Company had outstanding payables of $ 57 and $ 70 , respectively to CMS and included in the “accounts payable and accrued expenses” in the condensed unaudited consolidated balances sheets. 19 Table of Contents 14. Income Taxes The Company’s income tax provision consists of federal, foreign, and state taxes necessary to align the Company’s year-to-date tax provision with the annual effective rate that it expects to achieve for the full year. At each interim period, the Company updates its estimate of the annual effective tax rate and records cumulative adjustments, as necessary. For the interim period ended June 30, 2020, the Company utilized the annual effective tax rate methodology to determine its income tax provision. For the interim period ended June 30, 2021, the Company departed from the annual effective tax rate methodology and computed its income tax provision using a discrete method. The use of the discrete method was made in accordance with authoritative accounting guidance which allows for the use of a discrete method when there are significant changes to the projected annual effective tax rate as a result of minor adjustments to projected pre-tax earnings. For the three months ended June 30, 2021, the Company recorded an income tax provision of $ 584 . The income tax provision relates primarily to current foreign taxes and an increase in the valuation allowance related to certain foreign deferred tax assets. For the three months ended June 30, 2020, the Company recorded an income tax provision of $ 396 related primarily to foreign taxes. The effective tax rate for the three months ended June 30, 2021 was ( 0.62 )% on a pre-tax loss of $ 94,338 . The effective tax rate for the three months ended June 30, 2020 was ( 2.70 )% on a pre-tax loss of $ 14,658 . The effective tax rate for both interim periods was different than the U.S. statutory rate primarily related to limited tax benefit being recording for U.S. operating losses as the Company maintains a full valuation allowance against its U.S. deferred tax assets. 15. Net Loss Per Share Attributable to Common Stockholders Basic net loss per share is computed using the two-class method, by dividing the net loss by the weighted-average number of shares of common stock of the Company outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock of the Company, including redeemable convertible preferred stock, outstanding stock options, warrants, to the extent dilutive, and reduced by the amount of cumulative dividends earned on the preferred shares. However, the unvested restricted stock and restricted stock units as of June 30, 2021 and 2020 of 61,732,537 and 76,224,208 , respectively, are not considered as participating securities and are anti-dilutive and as such are excluded from the weighted average number of shares used for calculating basic and diluted net loss per share. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential shares of common stock of the Company outstanding would have been anti-dilutive. The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented: Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Net loss $ ( 94,922 ) $ ( 15,054 ) $ ( 119,296 ) $ ( 31,434 ) Cumulative redeemable convertible preferred stock dividends 3,166 3,716 7,060 7,376 Numerator for Basic and Dilutive loss per share - Loss available to common stockholders $ ( 98,088 ) $ ( 18,770 ) $ ( 126,356 ) $ ( 38,810 ) Denominator: Class A common stock 20,761,219 — 10,323,885 — Class B common stock 3,440,761 — 1,711,079 — Series A common stock 21,730,147 26,108,711 24,005,629 26,108,736 Series B common stock 2,483,731 3,054,318 2,770,584 3,054,318 Warrants (convertible to Series A common stock) 2,786,277 3,199,581 3,162,418 3,444,328 Denominator for Basic and Dilutive Loss per share-Weighted-average Common Stock 51,202,335 32,362,610 41,973,595 32,607,382 Basic Loss per Share $ ( 1.92 ) $ ( 0.58 ) $ ( 3.01 ) $ ( 1.19 ) Dilutive Loss per Share $ ( 1.92 ) $ ( 0.58 ) $ ( 3.01 ) $ ( 1.19 ) 20 Table of Contents Since the Company was in a net loss position for all periods presented, basic loss per share calculation excludes redeemable convertible preferred stock as it does not participate in net losses of the Company. Additionally, net loss per share attributable to common shareholders was the same on a basic and diluted basis, as the inclusion of all potential common equivalent shares outstanding would have been anti-dilutive. Anti-dilutive common equivalent shares were as follows: Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Options (convertible to Series A c ommon s tock) 950,235 1,159,995 950,235 1,159,995 Warrants (convertible to Series A c ommon s tock) — 1,973,763 — 1,973,763 Redeemable convertible preferred stock — 39,223,194 — 39,223,194 Restricted stock and restricted stock units 61,732,537 76,224,208 61,732,537 76,224,208 16. Subsequent Event On July 28, 2021, the Compensation Committee of the Board of Directors approved the launch of the Zeta Global Holdings Corp. 2021 Employee Stock Purchase Plan (the “ESPP”) pursuant to which eligible employees may acquire shares of the Company’s Class A common stock at a discounted price through payroll deductions to assist such employees in acquiring a stock ownership interest in the Company, subject to and in accordance with the terms of the ESPP. The ESPP provides that employees may contribute to the ESPP through regular after-tax payroll deductions over offering periods that are typically six months in length. However, the first offering period is four months in length and ends on November 30, 2021. At the end of the offering period, the accumulated funds will be used to purchase Zeta’s shares at a 15% discount to the lower of the price on the applicable offering period start date and the purchase date, which is the last day of the offering period. Employees may elect to contribute up to 15% of their base compensation to the ESPP, subject to certain limitations set forth in the ESPP. 21 Table of Contents