Viant Technology Inc. (DSP) FY 2023 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, the 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, 2023 compared to our fiscal year ended December 31, 2022 as well as discussions of our financial condition and results of operations for our fiscal year ended December 31, 2022 compared to our fiscal year ended December 31, 2021.

Overview

We are an advertising technology company. Our cloud-based demand side platform ("DSP") 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.

Our DSP 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.

Our DSP 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 return on advertising spend ("ROAS") across channels, a feature we believe helps us grow our customer base as more customers recognize its benefits.

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 additional service options to customers accessing our platform under an MSA or an IO, which enables them to use our services to aid them in data management, media execution and advanced reporting. When customers utilize these service options, 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; or (3) a fixed CPM.

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, 2023 and 2022, respectively, include:

•Revenue of $222.9 million and $197.2 million, representing an increase of 13.1%;

•Gross profit of $102.5 million and $80.4 million, representing an increase of 27.4%;

•Contribution ex-TAC(1) of $143.4 million and $124.7 million, representing an increase of 15.0%;

•Net loss of $9.9 million and $48.1 million, representing an improvement of 79.3%;

•Non-GAAP net income (loss)(1) of $21.7 million and $(15.8) million, representing an improvement of 237.5%; and

•Adjusted EBITDA(1) of $29.1 million and $(6.1) million, representing an improvement of 574.6%.

(1)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,

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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)

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

Attract, Retain and Grow our Customer Base

Our future growth depends on our ability to enhance and improve our offerings and platform to increase our customers' usage of our platform and add new customers. 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 we are well positioned to capture more of our customers’ programmatic budgets. We also continue to add functionality to our platform to encourage our customers to increase their usage. For instance, we continue to leverage artificial intelligence and machine learning in our platform to help our customers improve the efficiency and effectiveness of their advertising campaigns. Further, we intend to continue to grow our sales and marketing efforts to increase awareness of our DSP and highlight the advantages of our people-based framework as cookie-based options become increasingly limited.

We evaluate our customers' usage of our platform and assess our market penetration and scale based on changes in revenue, contribution ex-TAC and 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 that we charge customers. While we experienced customers reducing advertising budgets during the second half of 2022 due to adverse macroeconomic conditions, we saw stabilizing trends in 2023. For the year ended December 31, 2023 compared to the year ended December 31, 2022, our revenue grew 13%. We believe growing customer adoption of our newer products and platform features continued to drive incremental revenue, gross profit and contribution ex-TAC during the year. For a detailed discussion of our key operating measures, see “—Key Operating and Financial Performance Measures—Use of Non-GAAP Financial Measures.”

Historically, we reported our active customer count in our periodic filings with the Securities and Exchange Commission ("SEC") as it was a key measure used by our management and board of directors to understand and evaluate our business. An active customer was defined as a customer that had total aggregate contribution ex-TAC of at least $5,000 through our platform during the previous twelve months. This metric included many small, legacy customers that did not have the capacity to scale on our platform. As our business has begun to scale, we have shifted our focus to higher value customers that have the ability to scale on our platform, contributing to higher operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022. Due to this strategic shift, we believe active customer count no longer portrays the health of our business and is no longer a key measure used by our management or board of directors to understand and evaluate our business. We will no longer report active customer count in our periodic filings.

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 long-term 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.

Impact of Macroeconomic and Geopolitical Conditions

Macroeconomic conditions and geopolitical events, such as pandemics, inflation, rising interest rates, tightening of credit markets, recession risks, labor shortages, supply chain disruptions, and potential disruptions from international conflicts and acts of terrorism, have impacted and may continue to impact our business and the business of our customers, while also disrupting sales channels and advertising and marketing activities. 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. The extent to which these factors impact 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 macroeconomic conditions. This included a reduction of our employee headcount by approximately 13% resulting in restructuring charges of $1.4 million for the year ended December 31, 2022, consisting primarily of cash severance payments, employee benefits and related costs.

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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)

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 generally 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. In certain percentage of spend arrangements, revenue is reported on a gross basis because we control the advertising inventory before it is transferred to our customers.

For the fixed CPM pricing option, we recognize platform fees as 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.

See “Critical Accounting Policies and 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 and certain arrangements related to our percentage of spend 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.

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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)

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, primarily as a result of depreciation of capitalized software development costs, hosting costs and personnel 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 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, business 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, net. Other expense, net primarily consists 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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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Results of Operations

The following tables present 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, 2023 and 2022:

*Percentages may not sum due to rounding

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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)

(1)Stock-based compensation, depreciation and amortization included in operating expenses are as follows:

Comparison of the Fiscal Years Ended December 31, 2023, 2022 and 2021

Revenue

Revenue increased by $25.8 million, or 13%, during the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily due to a 57% increase in revenue from marketers in the retail and public services industry verticals and a 4% decrease in all other industry verticals.

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, offset by a 15% increase in all other industry verticals.

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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)

Operating Expenses

Platform Operations

Platform operations expense increased by $3.8 million, or 3%, during the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase was driven by a $7.1 million increase 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. The increase was partially offset by a decrease in other platform operations expense due to a $2.0 million decrease in personnel costs, a $1.1 million decrease in third-party costs in support of our DSP, a $0.7 million decrease in cloud costs due to recognized cloud infrastructure efficiencies, a $0.7 million decrease in stock-based compensation and a $0.3 million decrease related to disposals in the prior period, partially offset by a $1.6 million increase in depreciation and amortization, net, related to our continued investment in developed technology.

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 initial public offering ("IPO"), a portion of which became fully vested during the year ended December 31, 2021. 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 DSP, a $0.1 million increase in facilities expense and a $0.1 million increase in travel and entertainment expenses.

Sales and Marketing

Sales and marketing expense decreased by $13.3 million, or 21%, during the year ended December 31, 2023 compared to the year ended December 31, 2022. This decrease was due to an $8.8 million decrease in personnel costs and a $5.9 million decrease in advertising expense, partially offset by a $0.7 million increase in stock-based compensation and a $0.6 million increase in travel and entertainment expense.

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 year ended December 31, 2021, 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.

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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)

Technology and Development

Technology and development expense increased by $3.5 million, or 16%, during the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase was due to a $2.8 million increase in personnel costs, a $0.5 million increase in facilities expense and a $0.4 million increase in stock-based compensation, partially offset by a $0.2 million decrease in cloud costs due to recognized cloud infrastructure efficiencies.

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 year ended December 31, 2021, 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.

General and Administrative

General and administrative expense increased by $0.9 million, or 2%, during the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase was due to a $2.9 million increase in stock-based compensation and a $1.7 million increase in personnel costs, offset by a $1.9 million decrease in business insurance and tax, accounting, legal, and consulting expenses associated with general corporate and compliance matters, a $1.2 million decrease in bad debt reserves and a $0.7 million decrease in recruiting services.

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 year ended December 31, 2021, 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.

Total Other Expense (Income), Net

Total other income, net increased by $7.3 million during the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase was primarily attributable to higher interest income on cash and cash equivalents driven by higher interest rates and lower interest expense as a result of paying off the full outstanding balance under our Amended Loan Agreement (as defined below) with PNC Bank.

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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)

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 gain on debt extinguishment in 2021, which was a result of the forgiveness of our Paycheck Protection Program Loan (the “PPP Loan”), partially offset by a $1.9 million increase in interest income.

During the years ended December 31, 2023, 2022 and 2021, interest expense incurred was $0.4 million, $0.5 million and $0.9 million, respectively. Interest costs capitalized during the years ended December 31, 2023, 2022 and 2021 were de minimis.

Provision For Income Taxes

The U.S. federal statutory tax rate was 21% for the years ended December 31, 2023 and 2022. The provision for income taxes increased by $0.2 million during the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase was attributable to current federal and state taxes resulting from Viant Technology Inc.'s pro-rata share of taxable income from Viant Technology LLC.

The U.S. federal statutory tax rate was 21% for the years ended December 31, 2022 and 2021. There was no provision for income taxes for the years ended December 31, 2022 and 2021.

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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 Results of Operations

The following tables present our unaudited quarterly condensed consolidated statements of operations data for each quarter of our fiscal years ended December 31, 2023 and 2022. 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 quarterly condensed consolidated 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

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

*Percentages may not sum due to rounding

(1)Depreciation, amortization, and stock-based compensation included in operating expenses for each quarter of our fiscal years ended December 31, 2023 and 2022 are as follows:

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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)

See Note 4, Note 6 and Note 9 to our consolidated financial statements included elsewhere in this Annual Report for more information regarding depreciation, amortization and stock-based compensation expense, respectively.

(2)See Note 2 to our consolidated financial statements included elsewhere in this Annual Report for a description of the earnings (loss) per share—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, 2023 and 2022 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 presents the calculation of gross profit and reconciliation of 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)

Non-GAAP Operating Expenses

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

(1)Restructuring and other includes severance and other charges related to aligning our workforce with our strategic performance goals for the year ended December 31, 2023 and severance and other charges related to a reduction in force for the year ended December 31, 2022.

Adjusted EBITDA

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

(1)Restructuring and other includes severance and other charges related to aligning our workforce with our strategic performance goals for the year ended December 31, 2023 and severance and other charges related to a reduction in force for the year ended December 31, 2022.

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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 as a percentage of contribution ex-TAC

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 “—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."

Non-GAAP net income (loss)

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

(1)Restructuring and other includes severance and other charges related to aligning our workforce with our strategic performance goals for the year ended December 31, 2023 and severance and other charges related to a reduction in force for the year ended December 31, 2022.

(2)The estimated income tax effect of our share of non-GAAP reconciling items is calculated using quarterly assumed blended tax rates, which represent our expected corporate tax rates, excluding discrete and non-recurring tax items.

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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)

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 understanding of our overall 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, non-GAAP operating expenses, adjusted EBITDA, adjusted EBITDA as a percentage of contribution ex-TAC, non-GAAP net income (loss), and non-GAAP earnings (loss) per share of Class A common stock—basic and diluted, each of which are discussed immediately following the table below. 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 this and other potential 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.

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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 calculation of gross profit and reconciliation of gross profit to contribution ex-TAC for the periods presented:

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 and other 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 TAC, stock-based compensation, depreciation, amortization 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 core controllable 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 this and other potential 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:

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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)Restructuring and other includes severance and other charges related to aligning our workforce with our strategic performance goals for the year ended December 31, 2023 and severance and other charges related to a reduction in force for the year ended December 31, 2022.

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 and other 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 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 potential limitations, you should consider our non-GAAP financial measures only as supplemental to other GAAP-based financial performance measures, including revenue, net loss and cash flows.

The following table presents a reconciliation of net loss to adjusted EBITDA 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)

(1)Restructuring and other includes severance and other charges related to aligning our workforce with our strategic performance goals for the year ended December 31, 2023 and severance and other charges related to a reduction in force for the year ended December 31, 2022.

The following table presents the calculation of net 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 “—Contribution ex-TAC.”

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 and other charges, transaction expenses and the extinguishment of debt, as well as the income tax effect of these adjustments. Net income (loss) is the most comparable GAAP financial measure. Non-GAAP 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, restructuring and other charges, the 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 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 this and other potential 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 net loss to non-GAAP net income (loss) for the periods presented:

(1)Restructuring and other includes severance and other charges related to aligning our workforce with our strategic performance goals for the year ended December 31, 2023 and severance and other charges related to a reduction in force for the year ended December 31, 2022.

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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)

(2)The estimated income tax effect of our share of non-GAAP reconciling items for the years ended December 31, 2023, 2022 and 2021 is calculated using assumed blended tax rates of 21%, 45% and 24%, 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 and other charges, transaction expenses and the extinguishment of debt, as well as the income tax effect of such adjustments. 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 that aids in the understanding and evaluation of 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. A potential limitation of this non-GAAP financial measure is that 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. Because of this and other potential 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 year ended December 31, 2023, Class B common stock and nonqualified stock options 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. For the year ended December 31, 2022, Class B common stock, RSUs and nonqualified stock options 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.

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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 tables present the reconciliation 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, 2023, 2022 and 2021.

(1)Restructuring and other includes severance and other charges related to aligning our workforce with our strategic performance goals for the year ended December 31, 2023.

(2)The estimated income tax effect of our share of non-GAAP reconciling items for the year ended December 31, 2023 is calculated using an assumed blended tax rate of 21%, which represents our expected corporate tax rate, excluding discrete and non-recurring tax items.

(3)The adjustment to net income (loss) attributable to noncontrolling interests represents stock-based compensation and restructuring charges attributed to the noncontrolling interests 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)Restructuring and other includes severance and other charges related to a reduction in force for the year ended December 31, 2022.

(2)The estimated income tax effect of our share of non-GAAP reconciling items for the year ended December 31, 2022 is calculated using an assumed blended tax rate of 45%, which represents our expected corporate tax rate, excluding discrete and non-recurring tax items.

(3)The adjustment to net income (loss) attributable to noncontrolling interests represents stock-based compensation and restructuring charges attributed to the noncontrolling interests 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 for the year ended December 31, 2021 is 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 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, 2023, we had cash and cash equivalents of $216.5 million and working capital, consisting of current assets less current liabilities, of $231.6 million, compared to cash and cash equivalents of $206.6 million and working capital of $227.7 million as of December 31, 2022.

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 addressed, and may in the future address, our liquidity needs by utilizing our borrowing capacity under the asset-based revolving credit and security agreement we have with PNC Bank (as amended in April 2023) (the "Amended Loan Agreement"), obtaining debt financing from other sources or raising additional funds by issuing equity.

Our primary uses of cash are capital expenditures to develop our technology in support of enhancing our 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 2024 to further accelerate demand for our product and growth across the platform.

As of December 31, 2023, our material cash requirements from non-cancelable contractual obligations with an original duration of over one year included future minimum payments under our non-cancelable operating leases, which we estimate will be approximately $4.6 million in 2024, $4.4 million in 2025, $4.4 million in 2026, $4.3 million in 2027, and $3.2 million in 2028, and non-cancelable contractual agreements primarily related to the hosting of our data storage processing, storage, and other computing services, which we estimate will be approximately $7.1 million in 2024, $5.9 million in 2025, and $1.5 million in 2026.

On February 9, 2021, in connection with our IPO, we entered into a tax receivable agreement (the "Tax Receivable Agreement") with Viant Technology LLC, continuing members of Viant Technology LLC (our "pre-IPO owners") and the TRA Representative (as defined in the Tax Receivable Agreement), as described under Note 10—Income Taxes and Tax Receivable Agreement to our consolidated financial statements included elsewhere in this Annual Report. From time to time, our subsidiary, Viant Technology LLC, makes cash distributions on a pro rata basis to its members to the extent necessary to cover the members' tax liabilities with respect to their share of earnings of Viant Technology LLC. These payments are reflected within "Payment of member tax distributions" on the consolidated statements of cash flows. As of December 31, 2023, 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, 2023, 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 Amended Loan Agreement 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” in this Annual Report.

We did not have any other off-balance sheet arrangements as of December 31, 2023 other than the minimum payments under the operating leases, hosting arrangements, and the indemnification agreements described in Note 13—Commitments and Contingencies 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 Amended Loan Agreement 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

As of December 31, 2023, our Amended Loan Agreement provided us with access to a $75.0 million senior secured revolving credit facility with a maturity date of April 4, 2028 that is collateralized by security interests in substantially all of our assets. As of December 31, 2023, there was no outstanding balance and up to $74.1 million of undrawn availability under the Amended Loan Agreement. As of December 31, 2022, there was no outstanding balance and up to $39.6 million of undrawn availability under the Loan Agreement.

The Amended Loan Agreement contains customary conditions to borrowings, events of default and covenants, and also contains a financial covenant requiring us to maintain a minimum fixed charge coverage ratio of 1.40 to 1 when undrawn availability

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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)

under the Amended Loan Agreement is less than 25%. As of December 31, 2023, we would have been in compliance with this covenant, if applicable, and we do not believe this covenant or any other provision in the Amended 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 Amended Loan Agreement, refer to Note 8—Revolving Credit Facility and PPP Loan to our consolidated financial statements included elsewhere in this Annual Report.

Cash Flows

Cash flows from operating, investing and financing activities for the fiscal years ended December 31, 2023 and 2022, 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 provided by operating activities for the year ended December 31, 2023 was $37.8 million, a net increase of $41.3 million from cash flows used in operating activities for the year ended December 31, 2022 of $3.5 million. Cash flows provided by operating activities during the year ended December 31, 2023 resulted primarily from:

•a decrease of $9.9 million from net loss;

•an increase of $51.2 million due to non-cash add back adjustments to net loss primarily comprised of $32.3 million for stock-based compensation, $14.7 million for depreciation and amortization and $4.0 million of amortization of operating lease assets;

•a decrease of $0.6 million from changes in working capital (excluding deferred revenue, other liabilities, and operating lease liabilities), including a net decrease of $16.2 million in accounts receivable, prepaid assets and other assets primarily related to higher sales and timing of customer collections due to seasonal fluctuations as well as an increase of $15.6 million in accounts payable, accrued liabilities and accrued compensation primarily related to timing of payments;

•an increase in deferred revenue of $0.2 million;

•a decrease in operating lease liabilities of $3.8 million; and

•an increase in other liabilities of $0.7 million.

During the year ended December 31, 2022, cash used in operating activities of $3.5 million resulted primarily from a net loss of $48.1 million offset by non-cash add back adjustments to net loss of $28.9 million for stock-based compensation, $13.1 million for depreciation and amortization, $2.9 million of amortization of operating lease assets and an increase in net working capital (excluding deferred revenue, operating lease liabilities and other liabilities) of $6.1 million, offset by a decrease in deferred revenue of $6.4 million, a decrease in operating lease liabilities of $1.6 million and a decrease in other liabilities of $0.3 million.

Cash Flows Used in Investing Activities

Our primary investing activities have consisted of capital expenditures to develop our technology in support of enhancing our 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,

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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)

and who devote time to, platform 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 headcount and our platform 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 the year ended December 31, 2023 was $13.5 million, a net increase of $4.7 million, or 53%, from cash flows used in investing activities for the year ended December 31, 2022 of $8.8 million. Cash flows used in investing activities for the year ended December 31, 2023 resulted primarily from:

•$12.3 million of investments in capitalized software to develop our technology in support of enhancing our platform; and

•$1.2 million of purchases of property and equipment.

During the year ended December 31, 2022, cash used in investing activities of $8.8 million resulted from $8.1 million of investments in capitalized software development costs and $0.8 million of purchases of property and equipment.

Cash Flows Used in Financing Activities

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

Our cash flows used in financing activities for the year ended December 31, 2023 was $14.4 million, a net decrease of $5.2 million, or 26%, from cash flows used in financing activities for the year ended December 31, 2022 of $19.6 million. Cash flows used in financing activities for the year ended December 31, 2023 resulted primarily from $10.2 million for payments for member tax distributions and $4.2 million for taxes paid related to the net share settlement of equity awards.

During the year ended December 31, 2022, cash used in financing activities of $19.6 million resulted primarily from the $17.5 million repayment of our revolving credit facility and $2.0 million of taxes paid related to the net share settlement of equity awards.

Fiscal 2022 Changes in Cash Flows

For the comparison of fiscal 2022 to fiscal 2021, 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, 2022, filed with the SEC on March 2, 2023 under the subheading "Liquidity and Capital Resources".

Critical Accounting Policies and 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 stock 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. Our platform enables marketers and their advertising agencies 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 customer needs. These options consist of a percentage of spend option and a fixed CPM 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. We also offer our customers the ability to use our services to aid in data management, media execution and advanced reporting. When customers utilize these services, we generate revenue by charging (1) a separate service fee that represents a percentage of spend in addition to the platform fee; (2) a flat monthly fee; or (3) a fixed CPM.

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. 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 percentage of spend arrangements, we act as a principal because we control the advertising inventory before it is transferred to the customer and we bear sole responsibility for fulfillment of the advertising promise and inventory risks. 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 stage; (2) the application and infrastructure development stage; and (3) the post-implementation stage. Costs incurred in the planning and post-implementation stages, 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 stages, 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.

Stock-Based Compensation

Stock-based compensation relates to equity awards granted under the Company’s 2021 Long-Term Incentive Plan (the “LTIP”), which is measured and recognized in the consolidated financial statements based on the fair value of the equity awards granted. Since inception of the LTIP, the Company has only granted restricted stock units (“RSUs”) and nonqualified stock options. The fair value of RSUs is calculated using the closing market price of the Company’s Class A common stock on the date of grant. The fair value of nonqualified stock options is estimated using the Black-Scholes option pricing model. The Black-Scholes option pricing model is impacted by the fair value of the Company’s Class A common stock, as well as changes in certain assumptions, including but not limited to, the expected Class A common stock price volatility over the term of the nonqualified stock options, the expected term of the nonqualified stock options, the risk-free interest rate, and the expected dividend yield. The Company records compensation for all equity awards under the LTIP under the straight-line attribution method over the requisite service period. The Company has elected the accounting policy for stock-based compensation to account for forfeitures as they occur.

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 of 1933, as amended (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 gross revenues, has issued less than $1 billion of non-convertible debt over a three-year period and is not deemed to be a large accelerated filer under the rules of the SEC. 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.

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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