Viant Technology Inc. (DSP) FY 2022 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viant Technology Inc. and its subsidiaries (“Viant,” “we,” “us,” “our” or the “Company”) should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements and the related notes included within this Annual Report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Special Note Regarding Forward-Looking Statements” and “Risk Factors” and discussed elsewhere in this Annual Report. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.

The following discusses our financial condition and results of operations for our fiscal year ended December 31, 2022 compared to our fiscal year ended December 31, 2021 as well as discussions of our financial condition and results of operations for our fiscal year ended December 31, 2021 compared to our fiscal year ended December 31, 2020.

Overview

We are an advertising technology company. Our cloud-based demand side platform ("DSP"), Adelphic, enables the programmatic purchase of advertising, which is the electronification of the digital advertising buying process. Programmatic advertising is rapidly taking market share from traditional ad sales channels, which require more staffing, offer less transparency and involve higher costs to buyers.

Adelphic is used by marketers and their advertising agencies to centralize the planning, buying and measurement of their digital advertising across most channels. Through our omni-channel platform, a marketer can easily buy ads on desktop, mobile, connected TV, linear TV, in-game, streaming audio and digital billboards.

Adelphic is an easy-to-use self-service platform that provides our customers with transparency and control over their advertising campaigns. Our platform offers customers unique visibility across a variety of inventory, allowing them to create customized audience segments and leverage our people-based and strategic partner data to reach target audiences at scale. Our platform delivers a full suite of forecasting, reporting and built-in automation that provides our customers with insights into available inventory based on the desired target audience. We offer advanced forecasting and reporting that empowers our customers with functionality designed to ensure they can accurately measure and improve their ROAS across channels.

We generate revenue by charging platform fees and service fees pursuant to agreements that enable a wide variety of marketers and their agencies to select the mix of pricing and service options that suits their unique business and advertising budget.

These options consist of a percentage of spend pricing option and a fixed cost per mille (“CPM”) pricing option. Customers who prefer to use our platform on a self-service basis to execute their advertising campaigns enter into master service agreements (“MSAs”) with us, and we generate revenue under these arrangements by charging a platform fee that is primarily a percentage of spend. Customers who prefer to use our fixed CPM pricing option enter into insertion order (“IO”) arrangements with us, and we generate revenue by charging these customers a platform fee at a price for every 1,000 impressions an ad receives. We also offer different service options to our customers accessing our platform under an MSA or an IO to enable them to use our services to aid them in data management, media execution and advanced reporting. When customers utilize our services, we generate revenue by charging a service fee separate from the platform fee consisting of (1) a fee that represents a percentage of spend; (2) a flat monthly fee covering services in connection with data management and advanced reporting; or (3) a fixed CPM that is inclusive of media, other direct costs and services.

We believe that offering a mix of pricing and service options provides greater flexibility and access to our platform for marketers and their advertising agencies seeking to plan, buy, and measure programmatic campaigns.

Our financial results for the fiscal years ended December 31, 2022 and 2021 include:

•Revenue of $197.2 million and $224.1 million for the years ended December 31, 2022 and 2021, respectively, representing a decrease of 12.0%;

•Gross profit of $80.4 million and $94.5 million for the years ended December 31, 2022 and 2021, respectively, representing a decrease of 14.9%;

•Contribution ex-TAC* of $124.7 million and $141.5 million for the years ended December 31, 2022 and 2021, respectively, representing a decrease of 11.9%;

•Net loss of $48.1 million and $37.6 million for the years ended December 31, 2022 and 2021, respectively;

•Non-GAAP net income (loss)* of $(15.8) million and $23.9 million for the years ended December 31, 2022 and 2021, respectively; and

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(tabular dollars in thousands, except for per share data)

•Adjusted EBITDA* of $(6.1) million and $37.1 million for the years ended December 31, 2022 and 2021, respectively.

*Contribution ex-TAC, non-GAAP net income (loss) and adjusted EBITDA are non-GAAP financial measures. For a detailed discussion of our key operating and financial performance measures and a reconciliation of contribution ex-TAC, non-GAAP net income (loss) and adjusted EBITDA to the most directly comparable financial measures calculated in accordance with GAAP, see “—Key Operating and Financial Performance Measures—Use of Non-GAAP Financial Measures.”

Factors Affecting Our Performance

Impact of Macroeconomic and Geopolitical Conditions

Macroeconomic conditions and geopolitical events, including the COVID-19 pandemic, inflation and monetary supply shifts, rising interest rates, tightening of credit markets, recession risks, labor shortages, shortages of goods and services, supply chain disruptions, and potential disruptions from the Russia-Ukraine conflict, continue to impact our business and the business of our customers, while also disrupting sales channels and advertising and marketing activities. While our number of active customers for the year ended December 31, 2022 has increased by nearly 6% compared to the year ended December 31, 2021, we have observed decreases in revenue that we attribute to marketers in certain industry verticals decreasing or pausing their advertising spend due to the impacts of these macroeconomic conditions. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows, and on our clients, partners, industry and employees, and have slowed the pace of further investments in sales and marketing as a result of these factors. The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, which are uncertain and cannot be predicted. Due to the nature of our business, the effect of these macroeconomic conditions and geopolitical events may not be fully reflected in our results of operations until future periods.

In the fourth quarter of 2022, we initiated a cost reduction plan aimed at reducing our operating expenses and sharpening our focus on key growth priorities in light of these macroeconomic conditions. This included a reduction of our global employee headcount by approximately 13% and total restructuring charges included in our consolidated statements of operations for the year ended December 31, 2022 of $1.4 million, consisting primarily of cash severance payments, employee benefits, and related costs.

See “Risk Factors—The effects of macroeconomic conditions and geopolitical events, such as economic recessions and the COVID-19 pandemic and other adverse market events have had, and could in the future have, an adverse impact on our business, operating results and financial condition” for further discussion of the potential impacts of macroeconomic and geopolitical events on our business, financial condition and results of operations.

Attract, Retain and Grow our Customer Base

Our recent growth has been driven by expanding the usage of our platform by our existing customers as well as adding new customers. We believe that our customers value our solutions, as our number of active customers for the year ended December 31, 2022 was 326, increasing by 17 active customers, or 6%, from the year ended December 31, 2021. We further evaluate our customers' usage of our platform and assess our market penetration and scale based on the percentage change in advertiser spend. We define advertiser spend as the total amount billed to our customers for activity on our platform inclusive of the costs of advertising media, third-party data, other add-on features and our platform fee we charge clients. Advertiser spend increased 15% for the year ended December 31, 2022 from the year ended December 31, 2021. While we observed strong growth in advertiser spend compared to the prior-year periods, we observed a deceleration in spending throughout the third and fourth quarters of 2022 due to challenging macroeconomic conditions. The deceleration, which was most pronounced in the retail industry vertical, may continue into future periods as macroeconomic and geopolitical conditions continue or worsen. The percentage change in advertiser spend is a key measure used by our management and our board of directors to evaluate the demand for our products and to assess whether we are increasing market share. Our management uses this key metric to develop short- and long-term operational plans and make strategic decisions regarding future enhancements to our software. We believe the percentage change in advertiser spend across our platform is a useful metric for investors because it allows investors to evaluate our operational performance in the same manner as our management and board of directors. For a detailed discussion of our key operating measures including the definition of active customers, see “—Key Operating and Financial Performance Measures—Use of Non-GAAP Financial Measures.”

We continue to add functionality to our platform to encourage our customers to increase their usage of our platform. We believe many advertisers are in the early stages of moving a greater percentage of their advertising budgets to programmatic channels. By providing solutions for the planning, buying and measuring of their media spend across most channels, we believe that we are well positioned to capture more of our customers’ programmatic budgets. Further, we intend to continue to grow our sales and marketing efforts to increase awareness of our DSP, Adelphic, and highlight the advantages of our people-based framework as cookie-based

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(tabular dollars in thousands, except for per share data)

options become increasingly limited. As a result, future revenue growth depends upon our ability to retain our existing customers and increase their usage of our platform as well as add new customers.

Investment in Growth

We believe that the advertising market is in the early stages of a shift toward programmatic advertising. We plan to invest for long-term growth. We anticipate that our operating expenses will continue to increase in the foreseeable future as we invest in platform operations, technology and development to enhance our product capabilities including the integration of new advertising channels, and in sales and marketing to acquire new customers and increase our customers’ usage of our platform. We believe that these investments will contribute to our long-term growth, although they may have a negative impact on our profitability in the near-term.

Growth of the Digital Advertising Market

We expect to continue to benefit from overall adoption of programmatic advertising by marketers and their agencies. Any material change in the growth rate of digital advertising or the rate of adoption of programmatic advertising, including expansion of new programmatic channels, could affect our performance. Recent years have shown that advertising spend is closely tied to advertisers’ financial performance, and a downturn, either generally or in one or more of the industries in which our customers operate, could adversely impact the digital advertising market and our operating results.

Seasonality

In the advertising industry, companies commonly experience seasonal fluctuations in revenue, as many marketers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing. Historically, the fourth quarter has reflected our highest level of advertising activity for the year. We generally expect the subsequent first quarter to reflect lower activity levels, but this trend may be masked due to the continued growth of our business. In addition, historical seasonality may not be predictive of future results given the potential for changes in advertising buying patterns and consumer activity due to the potential impacts of the evolving macroeconomic and geopolitical conditions discussed above. Political advertising could also cause our revenue to increase during election cycles and decrease during other periods, making it difficult to predict our revenue, cash flow, and operating results, all of which could fall below our expectations. We expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.

Components of Our Results of Operations

We have one primary business activity and operate in a single operating and reportable segment.

Revenue

We generate revenue by providing marketers and their advertising agencies with the ability to plan, buy and measure their digital advertising campaigns using our people-based DSP. We charge platform fees and service fees pursuant to agreements with our customers that enable them to select their preferred mix of pricing and service options.

We generate platform fees pursuant to MSAs, which allow customers to use our platform on a self-service basis in connection with our percentage of spend pricing option, and IOs, where we charge customers a platform fee at a price for every 1,000 impressions an ad receives in connection with the fixed CPM pricing option. We also generate service fees pursuant to MSAs and IOs for data management, media execution and advanced reporting service options that are available to customers under our percentage of spend and fixed CPM pricing options.

We recognize revenue when we transfer control of promised services directly to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those services. For the percentage of spend pricing option, we recognize platform fees as revenue at the point in time when a purchase by the customer occurs through our platform. Revenue is reported net of amounts incurred and payable to suppliers for the cost of advertising media, third-party data and other add-on features (collectively, “traffic acquisition costs” or “TAC”) since we arrange for the transfer of TAC from the supplier to the customer through the use of our platform and do not control such features prior to transfer to the customer.

For the fixed CPM pricing option, we recognize platform fees revenue at the point in time when the advertising impressions are delivered to the customer. This revenue is reported gross of any amounts incurred and payable to suppliers for TAC, since we control such features prior to transfer to the customer.

For data management, media execution and advanced reporting service options, we recognize service fees as revenue over time on a ratable basis over the term of the agreement.

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(tabular dollars in thousands, except for per share data)

We expect the portion of our revenue derived from the percentage of spend pricing option to increase in the aggregate over time, which would reduce the percentage of revenue that we recognize on a gross basis in connection with the fixed CPM pricing option.

See “Critical Accounting Estimates—Revenue Recognition” for a description of our revenue recognition policies.

Operating Expenses

We classify our operating expenses into the following four categories. Each expense category includes overhead such as rent and occupancy charges, which is allocated based on headcount.

Platform Operations. Platform operations expense represents our cost of revenues, which consists of TAC, hosting costs, personnel costs, depreciation of capitalized software development costs related to our platform, customer support costs and allocated overhead. TAC recorded in platform operations consist of amounts incurred and payable to suppliers for costs associated with our fixed CPM pricing option. Personnel costs within platform operations include salaries, bonuses, stock-based compensation and employee benefit costs primarily attributable to personnel who directly support our platform.

Other than TAC, many of the costs included in platform operations expense do not increase or decrease proportionately with increases or decreases in our revenue. We expect platform operations expenses to increase in future periods, including as a result of stock-based compensation and depreciation of capitalized software development costs as we continue to invest in the development of our platform to add new features and functions, increase the number of advertising media and data suppliers, ramp up the volume of advertising spend on our platform resulting in increased volumes of transactions, and hire additional personnel to support our customers.

Sales and Marketing. Sales and marketing expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation, employee benefit costs and commissions for our sales personnel. Sales and marketing expense also includes costs for market development programs, advertising, promotional and other marketing activities and allocated overhead. Commissions are expensed as incurred.

Our sales and marketing organization focuses on marketing our platform to increase its adoption by existing and new customers. As a result, we expect sales and marketing expenses to increase in future periods, including as a result of stock-based compensation, as we increase our sales and marketing team and our focus on market development programs. Sales and marketing expense as a percentage of revenue may fluctuate from period to period based on revenue levels and the timing of our investments in our sales and marketing functions as these investments may vary in scope and scale over time.

Technology and Development. Technology and development expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation and employee benefit costs associated with the ongoing development and maintenance of our platform and allocated overhead. Technology and development costs are expensed as incurred, except to the extent that such costs are associated with software development that qualifies for capitalization, which are then recorded as capitalized software included in "Property, equipment, and software, net", on the consolidated balance sheets. We record depreciation for capitalized software development costs not related to our platform within technology and development expense.

We believe that continued investment in our platform is critical to attaining our strategic objectives and long-term growth. We therefore expect technology and development expense to increase as we continue to invest in the development of our platform to support and maintain additional features and functions, increase the number of advertising media and data suppliers, and ramp up the volume of advertising spend on our platform.

General and Administrative. General and administrative expense consists primarily of personnel costs, including salaries, bonuses, stock-based compensation and employee benefit costs associated with our executive, accounting, finance, legal, human resources and other administrative personnel. Additionally, this includes accounting, legal and other professional services fees, insurance expense, bad debt expense and allocated overhead.

Total Other Expense (Income), Net

Interest expense (income), net. Interest expense (income), net primarily consists of interest income on our cash and cash equivalents and interest expense on our long-term debt and revolving credit facility under the Loan Agreement with PNC Bank.

Other expense (income), net. Other expense (income), net consists primarily of miscellaneous expenses not attributable to operations and foreign currency exchange gains and losses.

Gain on extinguishment of debt. Gain on extinguishment of debt consists of the gain recognized from the forgiveness of the PPP Loan in whole, including all accrued unpaid interest.

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(tabular dollars in thousands, except for per share data)

Results of Operations

The following tables set forth our consolidated results of operations, our consolidated results of operations as a percentage of revenue, and the impact of stock-based compensation, depreciation and amortization on each operating expense line item for the fiscal years ended December 31, 2022 and 2021:

*Percentages may not sum due to rounding

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(tabular dollars in thousands, except for per share data)

(1)Stock-based compensation, depreciation, and amortization factored into the operating expense line item as follows:

Comparison of the Fiscal Years Ended December 31, 2022, 2021 and 2020

Revenue

Revenue decreased by $27.0 million, or 12%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. This decrease in revenue was primarily due to certain marketers in the jobs, entertainment, retail, automotive, and consumer products industry verticals being impacted by the ongoing adverse effects of labor shortages, inflation and monetary supply shifts, rising interest rates, the tightening of credit markets, and other adverse macroeconomic and geopolitical developments potentially indicative of an economic slowdown or recession. This resulted in revenue decreasing across these industry verticals by a combined 32% from the prior-year period. Despite the uncertainty that comes with such an environment, we have continued to experience increased demand for our people-based advertising products and services, as evidenced by a 15% increase in revenue from the prior-year period from marketers in industry verticals other than jobs, entertainment, retail, automotive, and consumer products, the continued growth of several of our industry verticals including financial services, public services, travel and political, and an increase in our active customers to 326 for the year ended December 31, 2022 compared to 309 for the year ended December 31, 2021. Additionally, approximately 84% of our revenue for the year ended December 31, 2022 came from customers that had been customers in the year ended December 31, 2021.

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(tabular dollars in thousands, except for per share data)

Revenue increased by $58.9 million, or 36% during the year ended December 31, 2021 compared to the year ended December 31, 2020. In fiscal 2021, reduced COVID-19-related restrictions contributed to increased revenue and demand for our people-based advertising products and services, and our customers increased usage of our platform. During fiscal 2020, our revenue was adversely impacted by the COVID-19 pandemic, as certain marketers in the travel and tourism, automotive and retail industries decreased or paused their advertising spending, resulting in a 25% revenue decrease across these customer verticals compared to fiscal 2019. During fiscal 2021, the travel and tourism and retail industry verticals increased by 51% compared to fiscal 2020. Approximately 89% of our revenue for the year ended December 31, 2021 came from customers that had been customers in the fiscal year ended December 31, 2020.

Operating Expenses

Platform Operations

Platform operations expense decreased by $12.9 million, or 10%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. This decrease was primarily driven by a $10.2 million decrease in TAC, a variable function of revenue related to our fixed CPM pricing option and certain arrangements related to our percentage of spend pricing option and an $8.3 million decrease in stock-based compensation expense primarily driven by restricted stock units ("RSUs") that were granted in connection with our IPO, a portion of which became fully vested during the prior year. This decrease was partially offset by a $2.1 million increase in depreciation, a $1.8 million increase in cloud costs due to continued enhancements to our cloud infrastructure, a $1.3 million increase in third-party costs in support of our Adelphic platform, a $0.1 million increase in facilities expense, and a $0.1 million increase in travel and entertainment expenses.

Platform operations expense increased by $41.3 million, or 47%, during the year ended December 31, 2021 compared to the year ended December 31, 2020. The change was primarily driven by a $27.9 million increase in TAC, a variable function of revenue, as well as an increase in other platform operations driven by a $13.1 million increase in stock-based compensation related to our 2021 LTIP and a $1.0 million increase in depreciation, partially offset by a decrease of $0.7 million in cloud costs due to continued efforts to increase cloud infrastructure efficiencies.

Sales and Marketing

Sales and marketing expense decreased by $1.1 million, or 2%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. This decrease was primarily due to a $16.6 million decrease in stock-based compensation driven by RSUs that were granted in connection with our IPO, a portion of which became fully vested during the prior year, partially offset by a $7.4 million increase in personnel costs driven by increased headcount, a $5.2 million increase in advertising expense, a $1.8 million increase in travel and entertainment expenses, a $0.4 million increase in software license expenses, a $0.4 million increase in facilities expense, and a $0.2 million increase in consulting expenses.

Sales and marketing expense increased by $36.2 million, or 125%, during the year ended December 31, 2021 compared to the year ended December 31, 2020. This increase was primarily due to a $25.6 million increase in stock-based compensation, a $6.4 million increase in personnel costs and overhead, which was allocated to sales and marketing as a result of the departments’ increased headcount relative to other departments, a $2.9 million increase in advertising, a $0.2 million increase in facilities expense, a $0.2 increase in software license expenses and a $0.8 million increase in travel and entertainment expenses.

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(tabular dollars in thousands, except for per share data)

Technology and Development

Technology and development expense decreased by $4.1 million, or 16%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. This decrease was primarily attributable to a $7.0 million decrease in stock-based compensation driven by RSUs that were granted in connection with our IPO, a portion of which became fully vested during the prior year, partially offset by a $1.1 million increase in personnel costs driven by increased headcount, a $1.0 million increase in cloud infrastructure costs, a $0.5 million increase in consulting expenses, a $0.1 million increase in travel and entertainment expenses and a $0.1 million increase in facilities expense.

Technology and development expense increased by $16.7 million, or 192%, during the year ended December 31, 2021 compared to the year ended December 31, 2020. This increase was primarily attributable to a $12.4 million increase in stock-based compensation, a $3.8 million increase in personnel costs as a result of an increase in headcount to support our continued investment in developed technology and a $0.4 million increase in software and license expenses.

General and Administrative

General and administrative expense decreased by $2.5 million, or 5%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. This decrease was primarily attributable to a $7.9 million decrease in stock-based compensation driven by RSUs that were granted in connection with our IPO, a portion of which became fully vested during the prior year, partially offset by a $1.5 million increase in personnel costs driven by increased headcount, a $1.4 million increase in bad debt reserves, a $1.3 million increase in travel and entertainment expenses, a $0.8 million increase in business insurance and tax, legal, and consulting expenses associated with general corporate and compliance matters, a $0.2 million increase in software license and subscription costs, a $0.1 million increase in recruiting expenses, and a $0.1 million increase in facilities expense.

General and administrative expense increased by $29.3 million, or 166%, during the year ended December 31, 2021 compared to the year ended December 31, 2020. This increase was primarily attributable to a $17.7 million increase in stock-based compensation, a $5.6 million increase in insurance, legal and accounting expenses associated with being a publicly traded company, a $3.3 million increase in personnel costs due to the increase in headcount, a $1.4 million increase in recruiting expenses, a $0.5 million increase in bad debt expense due to recoveries of bad debt in a prior year, a $0.2 million increase in dues and subscriptions and a $0.3 million increase in software and license expenses.

Total Other Expense (Income), Net

Total other income, net decreased by $4.0 million, or 77%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. The decrease from the prior year was primarily due to a $6.1 million prior-year gain on debt extinguishment which was a result of the forgiveness of our Paycheck Protection Program Loan (the “PPP Loan”), partially offset by a

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(tabular dollars in thousands, except for per share data)

$1.9 million increase in interest income. For additional information regarding the forgiveness of our PPP Loan, refer to Note 8—Revolving Credit Facility and PPP Loan to our consolidated financial statements included elsewhere in this Annual Report.

Total other expense (income), net decreased by $6.3 million, or 559%, during the year ended December 31, 2021 compared to the year ended December 31, 2020. This decrease was primarily due to a $6.1 million gain on debt extinguishment as a result of the forgiveness of Company’s PPP Loan and related accrued interest and a $0.2 decrease in interest expense attributable to an amendment to our Loan Agreement with PNC Bank which decreased the applicable margin on the loan.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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(tabular dollars in thousands, except for per share data)

Quarterly Results of Operations

The following tables set forth our unaudited quarterly consolidated statements of operations data for each quarter of our fiscal years ended December 31, 2022 and 2021. The information for each of these quarters has been prepared on a basis consistent with our consolidated financial statements and, in our opinion, includes all adjustments, consisting only of normal recurring adjustments necessary for the fair presentation of the financial information contained in those statements. The following unaudited consolidated quarterly financial data should be read in conjunction with our annual audited consolidated financial statements and the related notes included elsewhere in this Annual Report. These quarterly results are not necessarily indicative of our operating results for a full year or any future period.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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(tabular dollars in thousands, except for per share data)

•Percentages may not sum due to rounding

(1)The impact of stock-based compensation, depreciation and amortization on each operating expense line item for each quarter of our fiscal years ended December 31, 2022 and 2021 is set forth below:

See Note 4, Note 6 and Note 10 to our consolidated financial statements included elsewhere in this Annual Report for more information regarding depreciation, amortization and stock-based compensation expense, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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(tabular dollars in thousands, except for per share data)

(2)See Note 2 to our consolidated financial statements included elsewhere in this Annual Report for a description of the earnings (loss) per share/unit—basic and diluted computations.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for per share data)

Quarterly Non-GAAP Financial Measures

We monitor certain non-GAAP financial measures such as contribution ex-TAC, adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC when evaluating our quarterly results of operations to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. Reconciliations of these non-GAAP financial measures for each quarter of our fiscal years ended December 31, 2022 and 2021 to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables presented below. For a description of management’s use of each non-GAAP financial measure contained in this Annual Report, see “—Key Operating and Financial Performance Measures—Use of Non-GAAP Financial Measures.”

Contribution ex-TAC

The following table sets forth a reconciliation of revenue to gross profit to contribution ex-TAC for the periods presented:

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for per share data)

Adjusted EBITDA

The following table sets forth a reconciliation of net income (loss) to adjusted EBITDA for the periods presented:

(1)Restructuring charges consisted of non-recurring cash severance payments, employee benefits, and related costs in connection with a reduction in force implemented during the fourth quarter of 2022.

Adjusted EBITDA as a percentage of contribution ex-TAC

The following table sets forth a reconciliation of net income (loss) as a percentage of gross profit to adjusted EBITDA as a percentage of contribution ex-TAC for the periods presented:

(1)For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Contribution ex-TAC.”

(2)For a reconciliation of adjusted EBITDA to the most directly comparable financial measure calculated in accordance with GAAP, see “—Adjusted EBITDA.”

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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(tabular dollars in thousands, except for per share data)

Non-GAAP net income (loss)

The following table sets forth a reconciliation of net income (loss) to non-GAAP net income (loss) for the periods presented:

(1)The estimated income tax effect of our share of non-GAAP reconciling items are calculated using assumed blended tax rates of 45% and 24% for the years ended December 31, 2022 and 2021, respectively, which represent our expected corporate tax rates, excluding discrete and non-recurring tax items.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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(tabular dollars in thousands, except for percentages and per share data)

Key Operating and Financial Performance Measures

Use of Non-GAAP Financial Measures

We monitor certain non-GAAP financial measures to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. We believe these measures enhance an overall understanding of our performance and investors’ ability to review our business from the same perspective as management and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of our ongoing operating performance. These non-GAAP financial measures include contribution ex-TAC, average contribution ex-TAC per active customer, adjusted EBITDA, adjusted EBITDA as a percentage of contribution ex-TAC, non-GAAP net income (loss), non-GAAP earnings (loss) per share of Class A common stock—basic and diluted, and non-GAAP operating expenses, each of which are discussed immediately following the table below, along with the operational performance measure of active customers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables presented below. There are limitations in using non-GAAP financial measures which are not prepared in accordance with GAAP, as they may be different from non-GAAP financial measures used by other companies and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Contribution ex-TAC

Contribution ex-TAC is a non-GAAP financial measure. Gross profit is the most comparable GAAP financial measure, which is calculated as revenue less platform operations expense. In calculating contribution ex-TAC, we add back other platform operations expense to gross profit. Contribution ex-TAC is a key profitability measure used by our management and board of directors to understand and evaluate our operating performance and trends, develop short- and long-term operational plans and make strategic decisions regarding the allocation of capital. In particular, we believe that contribution ex-TAC can provide a measure of period-to-period comparisons for all pricing options within our business. Accordingly, we believe that this measure provides information to investors and the market in understanding and evaluating our operating results in the same manner as our management and board of directors.

Our use of contribution ex-TAC has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry that have similar business arrangements, may define contribution ex-TAC differently, which may make comparisons difficult. Because of these and other limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, gross profit, net income (loss) and

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(tabular dollars in thousands, except for percentages and per share data)

cash flows. For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Average contribution ex-TAC per active customer.”

Active customers

We define an active customer as a customer that had total aggregate contribution ex-TAC of at least $5,000 through our platform during the previous twelve months. For purposes of this definition, a customer that operates under any of our pricing options that equals or exceeds the aforementioned contribution ex-TAC threshold is considered an active customer. Active customers is a key measure used by our management and board of directors to understand and evaluate our operating performance and trends, develop short- and long-term operational plans and make strategic decisions regarding future enhancements to our platform. We believe active customers is a useful metric for investors because it allows investors to evaluate the Company’s operational performance in the same manner as our management and board of directors. Active customers is an operational metric calculated using contribution ex-TAC, a non-GAAP financial measure. For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Average contribution ex-TAC per active customer.”

Average contribution ex-TAC per active customer

We define average contribution ex-TAC per active customer as contribution ex-TAC for the trailing 12-month period presented divided by active customers. Average gross profit per active customer is the most comparable GAAP measure, which we define as gross profit for the trailing 12-month period presented divided by active customers. We believe that the total number of active customers and average contribution ex-TAC per active customer are measures of our ability to increase revenue and profitability and the effectiveness of our sales force, although we expect these measures to fluctuate based on the seasonality in our business. Customers that generated less than $5,000 in contribution ex-TAC in the trailing 12-month period were not material in the aggregate in any period.

The following table presents the calculation of gross profit, the reconciliation of gross profit to contribution ex-TAC, average gross profit per active customer, and average contribution ex-TAC per active customer in each case for the periods presented:

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

Non-GAAP Operating Expenses

Non-GAAP operating expenses is a non-GAAP financial measure. Total operating expenses is the most comparable GAAP financial measure. Non-GAAP operating expenses is defined by us as total operating expenses plus other expense (income), net less TAC, stock-based compensation, depreciation, amortization, and certain other items that are not related to our core operations, such as restructuring charges, and transaction expenses. Non-GAAP operating expenses is a key component in calculating adjusted EBITDA, which is one of the measures we use to provide our quarterly and annual business outlook to the investment community. Additionally, non-GAAP operating expenses is used by our management and board of directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. We believe that the elimination of depreciation, amortization, stock-based compensation, TAC and certain other items not related to our core operations provides another measure for period-to-period comparisons of our business, provides additional insight into our discretionary costs and is a useful metric for investors because it allows them to evaluate our operational performance in the same manner as our management and board of directors.

Our use of non-GAAP operating expenses has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry that have similar business arrangements, may define non-GAAP operating expenses differently, which may make comparisons difficult. Because of these and other limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, gross profit, net income (loss) and cash flows.

The following table presents a reconciliation of total operating expenses to non-GAAP operating expenses for the periods presented:

Adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC

Adjusted EBITDA is a non-GAAP financial measure defined by us as net income (loss) before interest expense (income), net, income tax benefit (expense), depreciation, amortization, stock-based compensation and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Net income (loss) is the most comparable GAAP financial measure. Adjusted EBITDA as a percentage of contribution ex-TAC is a non-GAAP financial measure we calculate by dividing adjusted EBITDA by contribution ex-TAC for the period or periods presented.

Adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC are used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating adjusted EBITDA can provide a measure for period-to-period comparisons of our business. Adjusted EBITDA as a percentage of contribution ex-TAC, a non-GAAP financial measure, is used by our management and board of directors to evaluate adjusted EBITDA relative to our profitability after costs that are directly variable to revenues, which comprise TAC. Accordingly, we believe

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

that adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC provide information to investors and the market in understanding and evaluating our operating results in the same manner as our management and board of directors.

Our use of adjusted EBITDA and adjusted EBITDA as a percentage of contribution ex-TAC 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. Some of these potential limitations include:

•other companies, including companies in our industry that have similar business arrangements, may report adjusted EBITDA or adjusted EBITDA as a percentage of contribution ex-TAC, or similarly titled measures but calculate them differently, which reduces their usefulness as comparative measures;

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; and

•adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs or the potentially dilutive impact of stock-based compensation.

Because of these and other limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, net income (loss) and cash flows.

The following table sets forth a reconciliation of net income (loss) to adjusted EBITDA for the periods presented:

(1)Restructuring charges consisted of non-recurring cash severance payments, employee benefits, and related costs in connection with a reduction in force implemented during the fourth quarter of 2022.

The following table presents the calculation of net income (loss) as a percentage of gross profit and the calculation of adjusted EBITDA as a percentage of contribution ex-TAC for the periods presented:

(1)For a reconciliation of contribution ex-TAC to the most directly comparable financial measure calculated in accordance with GAAP, see “—Average contribution ex-TAC per active customer.”

Non-GAAP net income (loss)

Non-GAAP net income (loss) is a non-GAAP financial measure defined by us as net income (loss) adjusted to eliminate the impact of stock-based compensation and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Net income (loss) is the most comparable GAAP financial measure. Non-GAAP

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

net income (loss) is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of stock-based compensation, gain on debt extinguishment, and certain other items that are not related to our core operations provides measures for period-to-period comparisons of our business and additional insight into our core controllable costs. Accordingly, we believe that non-GAAP net income (loss) provides information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

Our use of non-GAAP net income (loss) has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry that have similar business arrangements, may define non-GAAP net income (loss) differently, which may make comparisons difficult. Because of these and other limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, gross profit, net income (loss) and cash flows.

The following table sets forth a reconciliation of net income (loss) to non-GAAP net income (loss) for the periods presented:

(1)The estimated income tax effect of our share of non-GAAP reconciling items are calculated using assumed blended tax rates of 45% and 24% for the years ended December 31, 2022 and 2021, respectively, which represent our expected corporate tax rates, excluding discrete and non-recurring tax items.

Non-GAAP earnings (loss) per share of Class A common stock—basic and diluted

Non-GAAP earnings (loss) per share of Class A common stock—basic and diluted is a non-GAAP financial measure defined by us as earnings (loss) per share of Class A common stock—basic and diluted, adjusted to eliminate the impact of stock-based compensation and certain other items that are not related to our core operations, such as restructuring charges, transaction expenses and the extinguishment of debt. Earnings (loss) per share of Class A common stock—basic and diluted is the most comparable GAAP financial measure. Non-GAAP earnings (loss) per share of Class A common stock—basic and diluted is used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of stock-based compensation, gain on extinguishment of debt and certain other items 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. Accordingly, we believe that non-GAAP earnings (loss) per share of Class A common stock—basic and diluted provides information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

Our use of non-GAAP earnings (loss) per share of Class A common stock—basic and diluted has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these potential limitations include:

•other companies, including companies in our industry that have similar business arrangements, may report non-GAAP earnings (loss) per share of Class A common stock—basic and diluted or similarly titled measures, but calculate them differently, which reduces their usefulness as comparative measures;

•although the stock-based compensation related to the LTIP referred to above is non-cash in nature, non-GAAP earnings (loss) per share of Class A common stock—basic and diluted does not reflect its impact on net income (loss) attributable to all common stockholders; and

•although the gain on debt extinguishment related to the forgiveness of our PPP Loan and related accrued interest is non-cash in nature, non-GAAP earnings (loss) per share of Class A common stock—basic and diluted does not reflect its impact on net income (loss) attributable to all common stockholders.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

Because of these and other limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including earnings (loss) per share of Class A common stock—basic and diluted.

Basic non-GAAP earnings (loss) per share of Class A common stock is calculated by dividing the non-GAAP net income (loss) attributable to Class A common stockholders by the number of weighted-average shares of Class A common stock outstanding. Shares of our Class B common stock do not share in our earnings or losses and are therefore not participating securities. As such, separate presentation of basic and diluted non-GAAP earnings (loss) of Class B common stock under the two-class method has not been presented.

Diluted non-GAAP earnings (loss) per share of Class A common stock adjusts the basic non-GAAP earnings (loss) per share for the potential dilutive impact of common shares such as equity awards using the treasury-stock method and Class B common stock using the if-converted method. Diluted non-GAAP earnings (loss) per share of Class A common stock considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. Shares of our Class B common stock, RSUs and nonqualified stock options are considered potentially dilutive shares of Class A common stock. For the years ended December 31, 2022 and 2021, Class B common stock and nonqualified stock options amounts have been excluded from the computation of diluted earnings (loss) per share of Class A common stock because the effect would have been anti-dilutive under the if-converted and treasury stock method, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

The following table presents the reconciliations of earnings (loss) per share of Class A common stock—basic and diluted to non-GAAP earnings (loss) per share of Class A common stock—basic and diluted for the years ended December 31, 2022 and 2021.

(1)The estimated income tax effect of our share of non-GAAP reconciling items are calculated using an assumed blended tax rate of 45%, which represents our expected corporate tax rate, excluding discrete and non-recurring tax items.

(2)The adjustment to net income (loss) attributable to noncontrolling interests represents stock-based compensation and restructuring charges attributed to the noncontrolling interests of our company outstanding during the period.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

(1)The estimated income tax effect of our share of non-GAAP reconciling items are calculated using an assumed blended tax rate of 24%, which represents our expected corporate tax rate, excluding discrete and non-recurring tax items.

(2)The adjustment to net income (loss) attributable to noncontrolling interests represents stock-based compensation and gain on extinguishment of debt attributed to the noncontrolling interests of our company outstanding during the period.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

Liquidity and Capital Resources

As of December 31, 2022, we had cash and cash equivalents of $206.6 million and working capital, consisting of current assets less current liabilities, of $227.7 million.

Our primary sources of cash are revenues derived from the programmatic purchase of advertising on our platform and our existing cash and cash equivalents, although we have, and may in the future, address our liquidity needs by utilizing our borrowing capacity under our Loan Agreement with PNC Bank, obtaining debt financing from other sources, or raising additional funds by issuing equity.

Our primary uses of cash are capital expenditures to develop our software in support of enhancing our technology platform; purchases of property and equipment in support of our expanding headcount as a result of our growth; the payment of debt obligations used to finance our operations, capital expenditures, platform development and rapid growth; and future minimum payments under our non-cancelable operating leases. We intend to continue investing in critical areas of our business in 2023 to further accelerate demand for our product and growth across the platform.

As of December 31, 2022, our material cash requirements from known contractual obligations included future minimum payments under our non-cancelable operating leases, which we estimate will be approximately $4.6 million in 2023, $4.4 million in 2024, $4.3 million in 2025, $4.3 million in 2026, and $4.2 million in 2027, as well as non-cancelable contractual agreements related to the hosting of our data storage processing, storage, and other computing services. As of December 31, 2022, we had $6.7 million in hosting commitments due by the first quarter of 2024.

On February 9, 2021, in connection with our IPO, we entered into the Tax Receivable Agreement with Viant Technology LLC, continuing members of Viant Technology LLC and the TRA Representative, as described under Note 11—Income Taxes and Tax Receivable Agreement to our consolidated financial statements included elsewhere in this Annual Report. As of December 31, 2022, we concluded that it was more likely than not that our deferred tax assets subject to the Tax Receivable Agreement would not be realized. Therefore, we currently do not expect to make payments under our Tax Receivable Agreement based on our estimates of future taxable income. As of December 31, 2022, the total unrecorded liability for our Tax Receivable Agreement is approximately $10.3 million.

We assess our liquidity in terms of our ability to generate cash sufficient to fund our short- and long-term cash requirements. As such, we project our anticipated cash requirements as well as cash flows generated from operating activities to meet those needs. We believe our existing cash and cash equivalents, cash flow from revenues derived from the programmatic purchase of advertising on our platform, and the undrawn availability under our revolving credit facility from the Loan Agreement with PNC Bank will be sufficient to meet our cash requirements over the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations beyond the next 12 months through a combination of existing cash and cash equivalents, cash flow from operations, the undrawn availability under our credit facility and issuances of equity securities or debt offerings. Our ability to fund longer-term operating needs will depend on our ability to generate positive cash flows through programmatic advertising purchases on our platform, our ability to access the capital markets, and other factors, including those discussed under the section titled “Risk Factors.”

We did not have any other off-balance sheet arrangements as of December 31, 2022 other than the minimum payments under the operating leases, hosting arrangements, and the indemnification agreements described in Note 15—Guarantees and Indemnities to our consolidated financial statements included elsewhere in this Annual Report.

We are a holding company with no operations of our own and are dependent on distributions from Viant Technology LLC to pay our taxes and satisfy any current or future cash requirements. Our Loan Agreement with PNC Bank imposes, and any future credit facilities may impose, limitations on our ability and the ability of Viant Technology LLC to pay dividends to third parties.

Revolving Credit Facility

Our Loan Agreement with PNC Bank provides us with access to a $40.0 million senior secured revolving credit facility through October 31, 2024 and is collateralized by security interests in substantially all of our assets. As of December 31, 2022, there was no outstanding balance and up to $39.6 million of undrawn availability under the Loan Agreement. As of December 31, 2021, we had a balance of $17.5 million of outstanding borrowings and up to $22.5 million of undrawn availability under the Loan Agreement. We repaid all outstanding borrowings under our revolving credit facility as of December 31, 2022.

The Loan Agreement contains customary conditions to borrowings, events of default and covenants, and also contains a financial covenant requiring us not to exceed a maximum leverage ratio at any time our undrawn availability under the Loan Agreement is less than 25%. As of December 31, 2022, we were in compliance with this covenant, and we do not believe this covenant or any other provision in the Loan Agreement will materially impact our liquidity or otherwise restrict our ability to execute on our business plan during or beyond the next 12 months.

For further discussion of our Loan Agreement with PNC Bank, refer to Note 8—Revolving Credit Facility and PPP Loan to our consolidated financial statements included elsewhere in this Annual Report.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

Cash Flows

Fiscal 2022 Changes in Cash Flows

Cash flows from operating, investing and financing activities for the fiscal years ended December 31, 2022 and 2021, as reflected in the consolidated statements of cash flows included in Item 8 of this Annual Report, are summarized in the following table:

Cash Flows Provided by (Used in) Operating Activities

Our cash flows from operating activities have been primarily influenced by growth in our operations, increases or decreases in collections from our customers and related payments to our suppliers of advertising media and data. Cash flows from operating activities have been affected by changes in our working capital, particularly changes in accounts receivable, accounts payable and accrued liabilities. The timing of cash receipts from customers and payments to suppliers can significantly impact our cash flows from operating activities. We typically pay suppliers in advance of collections from our customers. Our collection and payment cycles can vary from period to period. In addition, we expect seasonality to impact cash flows from operating activities on a quarterly basis.

Our cash flows used in operating activities for fiscal 2022 was $3.5 million, a net decrease of $32.2 million, or 112%, from cash flows provided by operating activities for fiscal 2021 of $28.7 million. Cash flows used in operating activities during fiscal 2022 resulted primarily from:

•a decrease of $48.1 million from net loss;

•an increase of $46.7 million due to non-cash add back adjustments to net loss primarily comprised of $28.9 million for stock-based compensation, $13.1 million for depreciation and amortization, and $2.9 million of amortization of operating lease assets;

•an increase of $6.1 million from changes in working capital (excluding deferred revenue, other liabilities, and operating lease liabilities), including a net increase of $4.2 in accounts receivable, prepaid assets and other assets primarily related to lower sales and timing of customer collections due to seasonal fluctuations, as well as an increase of $2.0 million in accounts payable, accrued liabilities and accrued compensation primarily related to timing of payments;

•a decrease in deferred revenue of $6.4 million primarily related to a modification agreement with a customer whereby we paid a sum to the customer in exchange for the full, final and immediate termination of certain deferred revenue liabilities;

•a decrease in operating lease liabilities of $1.6 million; and

•a decrease in other liabilities of $0.3 million.

During the year ended December 31, 2021, cash provided by operating activities of $28.7 million resulted primarily from a net loss of $37.6 million offset by non-cash add back adjustments to net loss of $68.8 million for stock-based compensation, $11.1 million for depreciation and amortization, $0.3 million in other liabilities, $0.2 million in a loss on disposal of assets, $0.1 million in recovery of doubtful accounts, and a gain on debt extinguishment of $6.1 million, offset by a decrease in net working capital (excluding deferred revenue and other liabilities) of $6.2 million and deferred revenue of $1.8 million.

Cash Flows Used in Investing Activities

Our primary investing activities have consisted of capital expenditures to develop our software in support of enhancing our technology platform and purchases of property and equipment in support of our growth. We capitalize certain costs associated with creating and enhancing internally developed software related to our technology infrastructure that are recorded within property, equipment and software, net. These costs include personnel and related employee benefit expenses for employees who are directly associated with and who devote time to software development projects. Purchases of property and equipment and capitalized software development costs may vary from period-to-period due to the timing of the expansion of our operations, the addition or reduction of

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

headcount and our software development cycles. As a result of capitalization of stock-based compensation in future periods and the growth of our business, we expect our capital expenditures and our investment activity to continue to increase.

Our cash flows used in investing activities for fiscal 2022 was $8.8 million, a net increase of $1.5 million, or 20%, from cash flows used in investing activities for fiscal 2021 of $7.4 million. Cash flows used in investing activities during fiscal 2022 resulted primarily from:

•$8.1 million of investments in capitalized software to develop our software in support of enhancing our technology platform; and

•$0.8 million of purchases of property and equipment.

During the year ended December 31, 2021, cash used in investing activities of $7.4 million resulted primarily from investments in capitalized software development costs.

Cash Flows Provided by (Used in) Financing Activities

Our financing activities consisted primarily of proceeds from borrowings and repayments of our debt, issuances of our equity, and payments of member distributions. Net cash provided by or used in financing activities has been and will be used to finance our operations, capital expenditures, platform development, and our growth.

Our cash flows used in financing activities for fiscal 2022 was $19.6 million, a net decrease of $227.1 million, or 109%, from cash flows provided by financing activities for fiscal 2021 of $207.6 million. The decrease in cash flows for the year ended December 31, 2022 compared to the prior period in 2021 is primarily a result of the $232.5 million of proceeds from our IPO that closed in February 2021, net of underwriting discounts and commissions and the $17.5 million repayment of our revolving credit facility during the year ended December 31, 2022.

During the year ended December 31, 2021, cash provided by financing activities of $207.6 million resulted primarily from $232.5 million of IPO proceeds, net of underwriting discounts and commissions, partially offset by payments of $2.6 million in related offering costs, $7.3 million in payments of member tax distributions and $15.0 million in taxes paid related to the net share settlement of equity awards.

Fiscal 2021 Changes in Cash Flows

For the comparison of fiscal 2021 to fiscal 2020, refer to Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources" included in our Annual Report on Form 10-K for our fiscal year ended December 31, 2021, filed with the SEC on March 10, 2022 under the subheading "Liquidity and Capital Resources".

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made on assumptions about matters that are highly uncertain at the time the estimate is made and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe that the assumptions and estimates associated with the evaluation of revenue recognition criteria, including the determination of revenue recognition net versus gross assessment in our revenue arrangements, the assumptions used in the valuation models to determine the fair value of common units and stock-based compensation, and internal use software have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

See Note 2—Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report for additional information on the significant accounting policies and methods used in the preparation of our consolidated financial statements.

Revenue Recognition

We generate our revenue by providing marketers and advertising agencies with the ability to plan, buy and measure their digital advertising campaigns using our people-based DSP, Adelphic. Our platform enables marketers to reach their target audience across desktop, mobile, connected TV, linear TV, in-game, streaming audio and digital billboards.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

We apply a five-step approach as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), in determining the amount and timing of revenue to be recognized:

•Identification of a contract with a customer;

•Identification of the performance obligations in the contract;

•Determination of the transaction price;

•Allocation of the transaction price to the performance obligations in the contract; and

•Recognition of revenue when or as the performance obligations are satisfied.

We make our platform available through different pricing options to tailor to multiple customer types and needs. These options consist of a percentage of spend option and a fixed CPM pricing option. “CPM” refers to a payment option in which customers pay a price for every 1,000 impressions an ad receives. We generate revenue when our platform is used on a self-service basis by charging a platform fee that is a percentage of spend as well as fees for additional features such as data and advanced reporting. We also offer our customers the ability to use our services to aid in data management, media execution and advanced reporting. When customers utilize our services, we generate revenue by charging a (1) separate service fee that represents a percentage of spend in addition to the platform fee; or (2) a fixed CPM that is inclusive of media, other direct costs and services.

We maintain agreements with our customers in the form of MSAs in connection with the percentage of spend pricing option, as well as instances where we charge our customers a flat monthly fee for services in connection with data management and advanced reporting. We maintain IOs in connection with the fixed CPM pricing option, which set out the terms of the relationship and use of our platform. The nature of our performance obligations is to enable customers to plan, buy and measure advertising campaigns using our platform and provide campaign execution services as requested.

For the percentage of spend pricing option, we typically bill customers a platform fee, and in certain instances an additional service fee, which is based on a specified percentage of the customer’s purchases through the platform as well as fees for additional features such as data and advanced reporting, plus the cost of TAC. We recognize revenue at the point in time when a purchase by the customer occurs through our platform.

The determination of whether revenue for the percentage of spend pricing option should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in the transaction. In determining whether we are acting as the principal or an agent, we follow the accounting guidance for principal-agent considerations. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative.

In instances discussed above related to the percentage of spend pricing option, we typically act as an agent because we arrange for the transfer of such costs from the supplier to the customer through the use of our platform and do not control such features prior to transfer to the customer. We do not have primary responsibility for meeting customer specifications and do not have discretion in establishing the price of TAC related to this pricing option. As we act as the agent in these arrangements, we report revenue on a net basis. In certain arrangements, we act as a principal in percentage of spend arrangements because (i) we control the advertising inventory before it is transferred to our clients; (ii) we bear sole responsibility for fulfillment of the advertising promise and inventory risks and (iii) we have full discretion in establishing prices. As we act as the principal in these arrangements, we report revenue and the related costs incurred on a gross basis.

For the fixed CPM pricing option, we typically bill customers a fixed CPM price based on advertising impressions delivered through the platform and recognize revenue at the point in time when the advertising impressions are delivered. In certain cases, we also provide third party data segments and measurement reporting, which are recognized at the point in time they are delivered to the customer. We have the primary responsibility for meeting customer specifications and have discretion in establishing the price of TAC related to this pricing option. As we act as the principal in these arrangements, we report revenue and the related costs incurred on a gross basis.

We invoice our customers on a monthly basis for all pricing options. Invoice payment terms, negotiated on a customer-by-customer basis, are typically 30 to 60 days. Advertising agency customers typically have sequential liability terms, which means payments are not due to us from our advertising agency customer until the advertising agency customer has received payment from its customer, the advertiser.

There are no contract assets recorded on the consolidated balance sheets because our right to any unbilled consideration for performance obligations satisfied is only conditional upon the passage of time. Contract liabilities, or deferred revenue, are recorded for amounts that are collected in advance of the satisfaction of performance obligations. These liabilities are classified as current if the respective performance obligations are anticipated to be satisfied during the succeeding 12-month period per the terms of the contract, and the remaining portion is recorded as non-current deferred revenue in the consolidated balance sheets.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(tabular dollars in thousands, except for percentages and per share data)

ASC 606 provides various optional practical expedients. We elected the use of the practical expedient relating to the disclosure of remaining performance obligations within a contract and will not disclose remaining performance obligations for contracts with an original expected duration of one year or less.

Internal Use Software

We capitalize certain costs associated with creating and enhancing internally developed software. These costs include personnel and related employee benefits expenses for employees who are directly associated with and who devote time to software development projects. Software development costs that do not qualify for capitalization are expensed as incurred and recorded in technology and development expense in the consolidated statements of operations.

Software development activities typically consist of three stages: (1) the planning phase; (2) the application and infrastructure development stage; and (3) the post implementation stage. Costs incurred in the planning and post implementation phases, including costs associated with training and repairs and maintenance of the developed technologies, are expensed as incurred. We capitalize costs associated with software developed when the preliminary project stage is completed, management implicitly or explicitly authorizes and commits to funding the project and it is probable that the project will be completed and perform as intended. Costs incurred in the application and infrastructure development phases, including significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete and the software is ready for its intended purpose, at which point the software begins to be depreciated over its estimated useful life.

JOBS Act Accounting Election

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we may, under Section 7(a)(2)(B) of the Securities Act, delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise apply to private companies. An “emerging growth company” is one with less than $1.235 billion in annual sales, has less than $700.0 million in market value of shares of common stock held by non-affiliates and issues less than $1.0 billion of non-convertible debt over a three-year period. We will remain an emerging growth company until December 31, 2026, or sooner if we no longer qualify. We may take advantage of this extended transition period until the first to occur of the date that we (i) are no longer an “emerging growth company” or (ii) affirmatively and irrevocably opt out of this extended transition period.

We have elected to take advantage of the benefits of this extended transition period. Until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a)(2)(B), upon issuance of a new or revised accounting standard that applies to our consolidated financial statements and that has a different effective date for public and private companies, the Company will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard. As part of this election, we are delaying the adoption of accounting guidance related to leases and implementation costs incurred in cloud computing arrangements that currently applies to public companies. We are assessing the impact this guidance will have on our consolidated financial statements. See Note 2—Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report for additional information.

Recently Issued Accounting Pronouncements

For information regarding recently issued accounting pronouncements, see Note 2—Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report.

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