# Zeta Global Holdings Corp.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Zeta Global Holdings Corp.](/companies/zeta.md) (CIK 1851003)
- Form: 10-Q
- Filed: 2023-11-02
- Accepted by EDGAR: Nov 2, 2023, 08:00 ET
- Period: 2023-09-30
- Accession: 0000950170-23-057757
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1851003/000095017023057757/zeta-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1851003/000095017023057757/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $189.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $518.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $73.5m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $189.9m | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $18.1m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $53.9m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$37.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$135.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $2.9m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $8.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $590.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$43.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$152.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.27 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.99 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.27 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.99 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 158,055,789 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 154,262,386 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $63.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $14.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $120.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $269.5m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $511.3m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $162.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $361.6m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $184.0m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-09-30 | $149.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,789 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results and the timing of events may differ materially from those anticipated and discussed in the forward-looking statements as a result of various factors, including those set forth in Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 ("2022 Annual Report"), and in Part II, Item IA “Risk Factors” included in this Quarterly Report on Form 10-Q.*

### Overview

Zeta is a leading omnichannel data-driven cloud platform that provides enterprises with consumer intelligence and marketing automation software. We empower our customers to target, connect and engage consumers through software that delivers personalized marketing across all addressable channels, including email, social media, web, chat, Connected TV (“CTV”) and video, among others. We believe our actionable insights derived from consumer intent enable our customers to acquire, grow and retain consumer relationships more efficiently and effectively than the alternative solutions available in the market.

Our Zeta Marketing Platform, or ZMP, is the largest omnichannel marketing platform with identity data at its core. The ZMP can analyze billions of structured and unstructured data points to predict consumer intent by leveraging sophisticated machine learning algorithms and the industry’s largest opted-in data set for omnichannel marketing. The ZMP acts on these insights by connecting with consumers through native integration of marketing channels and application programming interface ("API") integration with third parties. The ZMP’s data-driven algorithms and processes learn and optimize each customer’s marketing program in real time, producing a ‘flywheel effect’ that enables our customers to test, learn and improve their marketing programs in real time.

The ZMP empowers our customers to personalize consumer experiences at scale across multiple touchpoints. Marketing programs are created and orchestrated by our customers through automated workflows and sophisticated dashboards. Our Consumer Data Platform, or CDP+, ingests, analyzes and distills disparate data points to generate a single view of a consumer, encompassing identity, profile characteristics, behaviors and purchase intent, which is then made accessible through a single console. Our Opportunity Explorer synthesizes Zeta’s proprietary data and data generated by our customers to uncover consumer insights that are translated into marketing programs designed for highly targeted audiences across digital channels, including email, SMS, websites, applications, social media, CTV and chat.

### Factors Affecting Results of Operations

For a discussion of the factors affecting our results of operations, please see “Factors Affecting Results of Operations” in Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part 1, Item 1A “Risk Factors” of our 2022 Annual Report as well as in Part II, Item 1A “Risk Factors” included in this Quarterly Report on Form 10-Q.

### Key Business Metrics

We review several key performance metrics, discussed below, to evaluate our business, track performance, identify trends, formulate plans and make strategic decisions. We believe that the presentation of such metrics provides investors with effective ways to measure and model the performance of companies such as ours, with recurring revenue streams.

Scaled customers increased 13%, to 440 as of September 30, 2023 compared to 389 as of September 30, 2022. Of our scaled customers, 124 and 106 were super-scaled customers as of September 30, 2023 and September 30, 2022, respectively.

Scaled customer ARPU increased 10%, to $418,373 for the three months ended September 30, 2023 compared to $381,734 for the three months ended September 30, 2022, primarily due to higher usage of our platform among scaled customers.

ARPU for our super-scaled customers increased 8%, to $1.2 million (across 124 customers) for the three months ended September 30, 2023 compared to $1.1 million (across 106 customers) for the three months ended September 30, 2022.

### Description of Certain Components of Financial Data

### Revenues

Our revenue primarily arises from use of our technology platform via subscription fees, volume-based utilization fees and fees for professional services. Our platform revenue is comprised of a mix of direct platform revenue and integrated platform revenue, which leverages API integrations with third parties. For the nine months ended September 30, 2023 and 2022, we derived 72% and 78% of our revenues from direct platforms, respectively, and 28% and 22% of our revenues from integrated platforms, respectively. Revenues are recognized when control of these services is transferred to our 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 us are excluded from revenue. Our revenue recognition policies are discussed in more detail under “Critical Accounting Policies and Estimates” in our "Management’s Discussion and Analysis of Financial Condition and Results of Operations" set forth in our 2022 Annual Report and which is also incorporated by reference further below.

### Cost of revenues (excluding depreciation and amortization)

Cost of revenue excludes depreciation and amortization and consists primarily of media and marketing costs and certain employee-related costs. Media and marketing costs consist primarily of fees paid to third-party publishers, media owners or managers, and strategic partners that are directly related to revenue-generating events. We pay these third-party publishers, media owners or managers and strategic partners on a revenue-share, a cost-per-lead, cost-per-click, or cost-per-thousand-impressions basis. Expenses related to “internet traffic” associated with the viewing of available impressions or queries per second and costs of providing support to our customers are also included in the cost of revenues. Employee-related costs included in cost of revenues include salaries, bonuses, commissions, stock-based compensation and employee benefit costs primarily related to individuals directly associated with providing services to our customers. Our cost of revenues are dependent on the revenue mix and therefore can slightly increase or decrease in the future as a percentage of revenue over the long term.

### General and administrative expenses

General and administrative expenses primarily consist of computer and telecom expenses, employee-related costs, including salaries, bonuses, stock-based compensation and employee benefits costs associated with our executives, finance, legal, human resources and other administrative personnel, as well as accounting and legal professional services fees and platform and related infrastructure costs. We expect general and administrative expenses to increase in absolute dollars in future periods. We expect that general and administrative expenses to decrease as a percentage of revenue over the long term.

### Selling and marketing expenses

Selling and marketing expenses primarily consist of employee-related costs, including salaries, bonuses, employee benefits costs, stock-based compensation and commission costs for our sales and marketing personnel. Selling and marketing expenses also include costs for market development programs, advertising, promotional and other marketing activities. We intend to continue to invest in marketing initiatives and as a result we expect selling and marketing expenses to increase in absolute dollars in future periods. Selling and marketing expenses as a percentage of revenue may fluctuate from period to period based on revenue levels and the timing of our investments in these functions over the long term.

### Research and development expenses

Research and development expenses primarily consist of employee-related costs, including salaries, bonuses and employee benefit costs, stock-based compensation associated with engineering and IT services associated with the ongoing research and maintenance of internal use software. We expect to continue to invest in research and development in order to develop our technology platform to drive incremental value and growth and as a result we expect that research and development expenses may fluctuate from period to period as a percentage of revenue over the long term.

### Depreciation and amortization

Depreciation and amortization relate to property and equipment, website and software development costs as well as acquisition-related and other acquired intangible assets. We record depreciation and amortization using straight-line method over the estimated useful life of the assets.

### Acquisition-related expenses

Acquisition-related expenses primarily consist of legal fees associated with certain business combinations and address disputes related to those transactions. It also includes retention bonuses agreed to be paid to employees related to one-time events such as an acquisition or a significant transaction. We expect that acquisition-related expenses will be correlated with future acquisitions (if any), which could be greater than or less than our historic levels.

### Restructuring expenses

Restructuring expenses consists primarily of employee termination costs due to internal restructuring. We expect that restructuring expenses will be correlated with future restructuring activities (if any), which could be greater than or less than our historic levels. During the nine months ended September 30, 2023, we recognized $2.8 million of restructuring expenses.

### Interest expense

Interest expense primarily consists of interest payable on our long-term borrowings, net of interest earned on our short term investments in money market accounts and other short term deposits. We anticipate interest expense to be impacted by changes in variable interest rates.

### Other expenses

Other expense primarily consists of changes in fair value of acquisition-related liabilities, gains and losses on sale of assets and foreign exchange gains and losses. We expect that the magnitude of other income and expenses will depend on external factors such as foreign exchange rate and the remeasurement of acquisition-related liabilities, which depends on the performance of our acquisitions and could be greater than or less than our historic levels.

### Change in fair value of warrants and derivative liabilities

Change in fair value of warrants and derivative liabilities primarily relates to warrants to purchase shares of our common stock that we issued in connection with previous financing rounds. The change in fair value of warrants and derivative liabilities depends on external valuation-related factors. As of September 30, 2023 and 2022, the Company did not have any warrants and derivative liabilities on its condensed unaudited consolidated balance sheets.

### Income tax provision / (benefit)

The Company’s income tax provision / (benefit) 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.

### Stock-based compensation

The measurement of stock-based compensation for all stock-based payment awards, including restricted stock, shares purchased under the ESPP, PSUs and stock options granted to employees, 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. See "Note 9. Stock-Based Compensation" of our condensed unaudited consolidated financial statements for further details.

We estimate the recognition of unrecognized stock-based compensation as follows, subject to future forfeitures:

| Remaining period of 2023 | 2024 | Year ended December 31, 2025 | 2026 | 2027 | Total |
| ---: | ---: | ---: | ---: | ---: | ---: |
| $52,789 | $137,880 | $65,222 | $24,870 | $7,435 | $288,196 |

23

### Results of Operations

We operate as a single reportable segment to reflect the way our Chief Operating Decision Officer (“CODM”) reviews and assesses the performance of the business. The Company’s CODM is the Chief Executive Officer.

|  | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | **$188,984** | $152,252 | **$518,403** | $415,821 |
| **Operating expenses:** |  |  |  |  |
| Cost of revenues (excluding depreciation and amortization) | **73,480** | 57,529 | **189,867** | 149,487 |
| General and administrative expenses | **50,706** | 53,584 | **154,022** | 162,598 |
| Selling and marketing expenses | **70,669** | 76,987 | **215,714** | 223,044 |
| Research and development expenses | **18,062** | 16,954 | **53,924** | 52,223 |
| Depreciation and amortization | **13,233** | 13,367 | **37,654** | 39,448 |
| Acquisition - related expenses | **—** | **—** | **203** | 344 |
| Restructuring expenses | **—** | — | **2,845** | — |
| **Total operating expenses** | **$226,150** | $218,421 | **$654,229** | $627,144 |
| **Loss from operations** | **(37,166)** | (66,169) | **(135,826)** | (211,323) |
| Interest expense | **2,894** | 2,038 | **8,139** | 5,002 |
| Other expenses | **2,436** | 1,142 | **7,138** | 12,111 |
| Change in fair value of warrants and derivative liabilities | **—** | (805) | **—** | 410 |
| Total other expenses | **$5,330** | $2,375 | **$15,277** | $17,523 |
| Loss before income taxes | **(42,496)** | (68,544) | **(151,103)** | (228,846) |
| Income tax provision/(benefit) | **590** | 896 | **1,097** | (1,360) |
| **Net loss** | **$(43,086)** | $(69,440) | **$(152,200)** | $(227,486) |

### Comparison of the Three Months Ended September 30, 2023 and 2022

#### Revenues

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenues | **$188,984** | $152,252 | $36,732 | 24.1% |

Revenues increased by $36.7 million, or 24.1%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. The increase in revenues is attributable to incremental revenues of $1.6 million from existing customers and $35.1 million from new customers.

#### Cost of revenues (excluding depreciation and amortization)

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues (excluding depreciation and amortization) | **$73,480** | $57,529 | $15,951 | 27.7% |

Cost of revenues (excluding depreciation and amortization) increased by $16.0 million, or 27.7%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This increase was primarily driven by $16.4 million in incremental media costs and other employee related costs of $0.6 million. This increase was partially offset by lower stock-based compensation of $1.0 million.

#### General and administrative expenses

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | **$50,706** | $53,584 | $(2,878) | (5.4)% |

General and administrative expenses decreased by $2.9 million, or 5.4%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This decrease was primarily driven by lower stock-based compensation of $7.0 million and other employee related costs of $0.2 million, which was partially offset by higher professional services fees of $2.3 million and computer and telecom related expenses of $2.0 million.

#### Selling and marketing expenses

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Selling and marketing expenses | **$70,669** | $76,987 | $(6,318) | (8.2)% |

Selling and marketing expenses decreased by $6.3 million, or 8.2%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This decrease was primarily driven by lower stock-based compensation of $9.6 million, which was partially offset by higher employee-related costs of $2.9 million and other sales and marketing-related expenses of $0.4 million.

#### Research and development expenses

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Research and development expenses | **$18,062** | $16,954 | $1,108 | 6.5% |

Research and development expenses increased by $1.1 million, or 6.5%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This increase was primarily driven by $1.0 million in incremental employee related costs.

#### Depreciation and amortization

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization | **$13,233** | $13,367 | $(134) | (1.0)% |

Depreciation and amortization decreased by $0.1 million, or 1%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This decrease was driven by lower amortization expense related to intangible assets.

#### Interest expense

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest expense | **$2,894** | $2,038 | $856 | 42.0% |

Interest expense increased by $0.9 million, or 42.0%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily as a result of increases in interest rates in recent periods. This increase was partially offset by higher income earned on our money market accounts and short term deposits.

#### Other expenses

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Other expenses | **$2,436** | $1,142 | $1,294 | 113.3% |

Other expenses increased by $1.3 million, or 113.3%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This increase was primarily driven by changes in fair value of acquisition-related liabilities recorded during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

#### Change in fair value of warrants and derivative liabilities

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of warrants and derivative liabilities | **$—** | $(805) | $805 | (100.0)% |

25

We did not record any change in fair value of warrants and derivative liabilities during the three months ended September 30, 2023. The change in fair value of warrants and derivative liabilities during the three months ended September 30, 2022 was primarily due to the change in fair value of certain derivative instruments issued by the Company.

#### Income tax provision / (benefit)

|  | Three months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Income tax provision | **$590** | $896 | $(306) | (34.2)% |

For the three months ended September 30, 2023, the income tax provision decreased by $0.3 million, or 34.2%. The effective tax rate for the three months ended September 30, 2023 and 2022 was negative 1.4% and 1.3%, respectively. The effective tax rate for both interim periods was different than the U.S. statutory rate primarily related to limited tax benefit being recorded for U.S. operating losses as the Company maintains a full valuation allowance against its U.S. deferred tax assets.

### Comparison of the Nine Months Ended September 30, 2023 and 2022

#### Revenues

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenues | **$518,403** | $415,821 | $102,582 | 24.7% |

Revenues increased by $102.6 million, or 24.7%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. The increase in revenues is attributable to incremental revenues of $35.5 million from existing customers and $67.1 million from new customers.

#### Cost of revenues (excluding depreciation and amortization)

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues (excluding depreciation and amortization) | **$189,867** | $149,487 | $40,380 | 27.0% |

Cost of revenues (excluding depreciation and amortization) increased by $40.4 million, or 27.0%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This increase was primarily driven by $41.1 million in incremental media costs and other employee related costs of $1.6 million. This increase was partially offset by lower stock-based compensation of $2.3 million.

#### General and administrative expenses

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | **$154,022** | $162,598 | $(8,576) | (5.3)% |

General and administrative expenses decreased by $8.6 million, or 5.3%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This decrease was primarily driven by lower stock-based compensation of $22.7 million, which was partially offset by higher professional services fees of $6.1 million, computer and telecom related expenses of $5.8 million, other employee related costs of $1.8 million and an incremental provision for doubtful debt of $0.9 million.

#### Selling and marketing expenses

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Selling and marketing expenses | **$215,714** | $223,044 | $(7,330) | (3.3)% |

Selling and marketing expenses decreased by $7.3 million, or 3.3%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This decrease was primarily driven by lower stock-based compensation of

$24.8 million, which was partially offset by higher employee-related costs of $16.5 million and other sales and marketing-related expenses of $1.0 million.

#### Research and development expenses

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Research and development expenses | **$53,924** | $52,223 | $1,701 | 3.3% |

Research and development expenses increased by $1.7 million, or 3.3%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This increase was primarily driven by an increase in employee-related costs of $2.5 million and consulting fees of $0.9 million, which was partially offset by lower stock-based compensation of $1.7 million.

#### Depreciation and amortization

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization | **$37,654** | $39,448 | $(1,794) | (4.5)% |

Depreciation and amortization decreased by $1.8 million, or 4.5%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This decrease was driven by lower amortization expense of $1.9 million related to intangible assets.

#### Restructuring expenses

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Restructuring expenses | **$2,845** | $— | $2,845 | 100.0% |

We recorded restructuring expenses of $2.8 million during the nine months ended September 30, 2023 related to employee termination cost due to internal restructuring. We did not have any such restructuring expenses during the nine months ended September 30, 2022.

#### Acquisition-related expenses

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Acquisition related expenses | **$203** | $344 | $(141) | (41.0)% |

Acquisition-related expenses decreased by $0.1 million, or 41.0%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily driven by lower legal and professional fees incurred for our business combinations.

#### Interest expense

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest expense | **$8,139** | $5,002 | $3,137 | 62.7% |

Interest expense increased by $3.1 million, or 62.7%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily as a result of increases in interest rates in recent periods. This increase was partially offset by higher income earned on our money market accounts and short term deposits.

#### Other expenses

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Other expenses | **$7,138** | $12,111 | $(4,973) | (41.1)% |

Other expenses decreased by $5.0 million, or 41.1%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This decrease was primarily driven by lower changes in fair value of acquisition-related liabilities recorded during the nine months ended September, 2023 as compared to the nine months ended September 30, 2022.

#### Change in fair value of warrants and derivative liabilities

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of warrants and derivative liabilities | **$—** | $410 | $(410) | (100.0)% |

We did not record any change in fair value of warrants and derivative liabilities during the nine months ended September 30, 2023. The change in fair value of warrants and derivative liabilities during the nine months ended September 30, 2022 was primarily due to the change in fair value of certain derivative instruments issued by the Company.

#### Income tax provision / (benefit)

|  | Nine months ended September 30, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Income tax provision/(benefit) | **$1,097** | $(1,360) | $2,457 | 180.7% |

For the nine months ended September 30, 2023, the income tax provision increased by $2.5 million, or 180.7%. The effective tax rate for the nine months ended September 30, 2023 and 2022 was negative 0.7% and 0.6%, respectively. The effective tax rate for both interim periods was different than the U.S. statutory rate primarily related to limited tax benefit being recorded for U.S. operating losses as the Company maintains a full valuation allowance against its U.S. deferred tax assets.

### Non-GAAP Financial Measures

We use the following non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. Non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from similarly titled non-GAAP measures used by other companies. Whenever we use a non-GAAP financial measure, a reconciliation is provided to the most closely applicable financial measure stated in accordance with generally accepted accounting principles. We believe that these non-GAAP financial measures may be useful to investors in analyzing our financial and operational performance.

### Adjusted EBITDA and adjusted EBITDA margin

Adjusted EBITDA is a non-GAAP financial measure defined as net loss adjusted for interest expense, depreciation and amortization, stock-based compensation, income tax (benefit) / provision, acquisition-related expenses, restructuring expenses, change in fair value of warrants and derivative liabilities, certain dispute settlement expenses, gain on extinguishment of debt, certain non-recurring IPO related expenses, including the payroll taxes related to vesting of restricted stock and restricted stock units upon the completion of our IPO, and other expenses. Acquisition-related expenses primarily consist of legal fees associated with certain business combinations and restructuring expenses are severance and other employee-related costs which we do not expect to incur in the future, which may distort the comparability of the results of operations. Change in fair value of warrants and derivative liabilities is a non-cash expense related to periodically recording “mark-to-market” changes in the valuation of derivatives and warrants. Other (income) / expenses consists of non-cash expenses such as changes in fair value of acquisition-related liabilities, gains and losses on sales of assets and foreign exchange gains and losses. In particular, we believe that the exclusion of stock-based compensation, certain dispute settlement expenses and non-recurring IPO related expenses that are not related to our core operations provides measures for period-to-period comparisons of our business and provides additional insight into our core controllable costs. Adjusted EBITDA margin is a non-GAAP metric defined as adjusted EBITDA divided by the total revenues for the same period. Adjusted EBITDA and adjusted EBITDA margin provide us with a useful measure for period-to-period comparisons of our business as well as comparison to our peers. Our use of adjusted EBITDA and adjusted EBITDA margin has limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our financial results as reported under GAAP. Because of these and other limitations, you should consider our non-GAAP measures only as supplemental to other GAAP-based financial performance measures, including revenues and net loss.

The following table reconciles adjusted EBITDA and adjusted EBITDA margin to net loss and net loss margin, the most directly comparable financial measure calculated and presented in accordance with GAAP.

|  | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Net loss** | **$(43,086)** | **$(69,440)** | **$(152,200)** | **$(227,486)** |
| **Net loss margin** | **22.8%** | **45.6%** | **29.4%** | **54.7%** |
| Add back: |  |  |  |  |
| Depreciation and amortization | 13,233 | 13,367 | 37,654 | 39,448 |
| Restructuring expenses | - | - | 2,845 | - |
| Acquisition related expenses | - | - | 203 | 344 |
| Stock-based compensation | 57,672 | 75,218 | 179,746 | 231,289 |
| Other expenses | 2,436 | 1,142 | 7,138 | 12,111 |
| Change in fair value of warrants and derivative liabilities | - | (805) | - | 410 |
| Interest expense | 2,894 | 2,038 | 8,139 | 5,002 |
| Income tax provision / (benefit) | 590 | 896 | 1,097 | (1,360) |
| **Adjusted EBITDA** | **$33,739** | **$22,416** | **$84,622** | **$59,758** |
| **Adjusted EBITDA margin** | **17.9%** | **14.7%** | **16.3%** | **14.4%** |

29

### Liquidity and Capital Resources

We have financed our operations and capital expenditures primarily through utilization of cash generated from operations, as well as borrowings under our credit facilities. As of September 30, 2023, we had cash and cash equivalents of $120.8 million and net working capital, consisting of current assets less current liabilities, of $107.0 million. As of September 30, 2023, we had an accumulated deficit of $923.3 million.

We believe our existing cash and anticipated net cash provided by operating activities, together with available borrowings under our credit facility, will be sufficient to meet our working capital requirements for at least the next 12 months and thereafter for the foreseeable future. However, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under "Risk Factors" in our 2022 Annual Report. In the future, we may attempt to raise additional capital through sales of equity securities or through equity-linked or debt financing arrangements. Any future indebtedness we incur may result in terms that could be unfavorable to our equity investors. We cannot guarantee that we will be able to raise additional capital in the future on favorable terms, or at all. Any inability to raise capital could adversely affect our ability to achieve our business objectives.

### Cash flows

The following table summarizes our cash flows for the periods presented:

| Net cash provided by / (used for): | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Cash provided by operating activities | **$63,561** | $55,389 |
| Cash used for investing activities | **(45,476)** | (39,194) |
| Cash used for financing activities | **(18,406)** | (5,117) |
| Effect of exchange rate changes on cash and cash equivalents | **7** | (129) |
| **Net (decrease) / increase in cash and cash equivalents** | **$(314)** | $10,949 |

#### Cash Flows from Operating Activities

For the nine months ended September 30, 2023, net cash provided by operating activities of $63.6 million resulted primarily from adjusted non-cash items of $225.2 million, an amount in excess of our net loss of $152.2 million. Non-cash items include stock-based compensation of $179.7 million, depreciation and amortization of $37.7 million, and a change in fair value of acquisition-related liabilities of $6.7 million. Changes in working capital were primarily driven by an increase in accounts receivable of $33.3 million, other assets of $0.6 million and a decrease in deferred revenue of $0.3 million, partially offset by an increase in accounts payable of $22.6 million, accrued expenses and other current liabilities of $1.2 million and a decrease in prepaid expenses of $0.9 million.

For the nine months ended September 30, 2022, net cash provided by operating activities of $55.4 million resulted primarily from adjusted noncash items of $280.1 million, more than offsetting our net loss of $227.5 million. Changes in working capital were primarily driven by an increase in accounts payable of $7.3 million and increase in accrued expenses and other current liabilities of $1.8 million, partially offset by an increase in accounts receivable of $4.6 million, prepaid and other current assets of $0.7 million and a decrease in deferred revenues of $0.8 million.

#### Cash Flows from Investing Activities

For the nine months ended September 30, 2023, we used $45.5 million of cash in investing activities, primarily consisting of capital expenditures of $14.9 million (including a $11.7 million investment in data and partnership agreements), acquisitions and other investments, net of cash acquired of $18.3 million and website and software development costs of $12.3 million.

For the nine months ended September, 2022, we used $39.2 million of cash in investing activities, primarily consisting of capital expenditures of $17.2 million (including a $14.4 million investment in data and partnership agreements), business and asset acquisitions of $9.2 million and website and software development costs of $12.8 million.

#### Cash Flows from Financing Activities

For the nine months ended September 30, 2023, we used $18.4 million of cash in financing activities, primarily due to the repurchase of $11.5 million of our common stock under our share repurchase and RSA withholdings program and payment of acquisition related liabilities of $8.7 million, partially offset by $1.6 million paid by certain employees under the Company's employee stock purchase plan.

For the nine months ended September 30, 2022, we used $5.1 million of cash in financing activities, primarily due to the repurchase of $4.3 million of common stock under our repurchase and RSA withholdings program and payment of acquisition related liabilities of $2.3 million, partially offset by $1.3 million paid by certain employees under the Company's employee stock purchase plan.

### Debt

As of September 30, 2023, we have $184.0 million (net of $1.0 million of unamortized debt acquisition costs) of outstanding long-term borrowings.

On February 3, 2021, we entered into a $222.5 million Senior Secured Credit Facility, which was used to fully repay and terminate our previous credit agreement. On March 23, 2023, we entered into a $25.0 million incremental revolving facility commitment (the “2023 Incremental Revolving Commitment”), thereby increasing our total credit facility to $247.5 million. Borrowings under the debt are $185 million and bear interest payable quarterly ranging from SOFR plus 2.125% to SOFR plus 2.625% based on our consolidated net leverage ratio stated in the credit agreement. We are required to repay the principal balance and any unpaid accrued interest on the Senior Secured Credit Facility on February 3, 2026.

We are currently in compliance with our financial maintenance covenants under the Senior Secured Credit Facility and, based upon our current expectations, believe that we will continue to comply with our financial maintenance covenants for the next 12 months. The Senior Secured Credit Facility contains restrictive covenants that place restrictions on us and may limit our ability to, among other things, incur additional debt and liens, purchase our securities, undertake transactions with affiliates, make other investments, pay dividends or distribute excess cash flow.

During the three and nine months ended September 30, 2023, we borrowed nil and $11.3 million, respectively, against the revolver facility and repaid the same amount against the term loan under the credit facility.

### Contractual obligations

There have been no material changes to our contractual obligations as compared to the contractual obligations described in our "Management’s Discussion and Analysis of Financial Condition and Results of Operations" set forth in our 2022 Annual Report.

### Share Repurchase and RSA Withholding Program

In August 2022, the Company's Board of Directors authorized a share repurchase and withholding program (the “2022 SRP”) authorizing the repurchase up to $50 million of our outstanding Class A common stock through December 31, 2024 and authorizing withholding as an alternative to market sales by executives to satisfy tax withholding requirements upon vesting of restricted stock awards (“RSAs”). As such, we may use corporate cash to make required tax payments associated with the vesting of certain executive RSAs and withhold a corresponding number of shares from such executives. The actual timing, number and value of shares repurchased will be determined by the Company at its discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs, and whether there is a better alternative use of capital. Repurchases and withholdings during any given fiscal period under the 2022 SRP will reduce the number of weighted-average common shares outstanding for the period. Refer to Part II, Item 2 for details of repurchases made under the 2022 SRP during the three month ended September 30, 2023.

### Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates are based on management’s judgment and the best available information, and as such actual results could differ from those estimates.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our "Management’s Discussion and Analysis of Financial Condition and Results of Operations" set forth in our 2022 Annual Report.

### JOBS Act Accounting Election

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

### Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

## Market risk

As filed, 2,096 characters.

We are exposed to market risk in the ordinary course of business. Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange risks. We do not hold or issue financial instruments for speculative or trading purposes.

### Interest Rate Risk

We are exposed to market risk from changes in interest rates on our loan term borrowings, which accrue interest at a variable rate. As of September 30, 2023, we have not entered into any derivative financial instrument contracts to mitigate the interest rate risk on our $185.0 million debt, and as a result, we are subject to the potential impact of rising interest rates, which could negatively impact our profitability and cash flows. Based upon the principal balance owed on our long-term borrowings as of September 30, 2023, a hypothetical one percentage point increase or decrease in the interest would increase or decrease our annual interest expenses by $1.9 million. There were no material changes in market risk exposures as of September 30, 2023.

### Foreign Currency Risk

We have foreign currency risks related to a certain number of our foreign subsidiaries in the UK, France, Belgium and India. We do not believe that a 10% change in the relative value of the U.S. dollar to other foreign currencies would have a material effect on our cash flows and operating results in currencies other than the U.S. dollar.

### Inflation Risk

In 2022, inflation increased significantly in the United States and overseas, resulting in rising wages and other costs. We do not believe that inflation has had a material effect on our business, financial condition or results of operations. However, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset higher costs through price increases and our inability or failure to do so could potentially harm our business, financial condition, and results of operations.

## Controls and procedures

As filed, 1,487 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q.

Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2023.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 137 characters.

There have been no material changes to the risk factors previously disclosed in Part 1, Item 1A “Risk Factors” in our 2022 Annual Report.

Filed Nov 2, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-057757. Last ingested by Listed: Oct 27, 2026, 17:29 ET. No prices; not investment advice.