UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM 10-Q

__________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number: 001-36384

__________________

MAGNITE, INC.

(Exact name of registrant as specified in its charter)

__________________


Delaware									20-8881738
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

1250 Broadway, 15th Floor
New York, New York 10001
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code:
(212) 243-2769

______________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.00001 per share	MGNI	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.


Class						Outstanding as of November ~~3, 2022~~2, 2023
Common Stock, $0.00001 par value						~~133,384,717~~137,851,032

Table of Contents

MAGNITE, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page No.
Part I.	FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of ~~September~~Sept ember 30, ~~2022~~2023 and December 31, ~~2021~~2022	43
	Condensed Consolidated Statements of Operations for the Three and N ~~ine~~Nine Months Ended September 30, ~~2022~~2023 and ~~September~~Se ptember 30, ~~2021~~2022	54
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, ~~2022~~2023 and September 30, ~~2021~~2022	65
	Condensed Consolidated Statements of Stockholders' Equity for the Three and ~~Nin~~Nine e Months Ended September 30, ~~2022~~2023 and ~~September~~S e ptember 30, ~~2021~~2022	76
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~N ine Months Ended ~~September~~S eptember 30, ~~2022~~2023 and September 30, ~~2021~~2022	98
	Notes to Condensed Consolidated Financial Statements	1110
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3326
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5446
Item 4.	Controls and Procedures	5547
Part II.	OTHER INFORMATION	5548
Item 1.	Legal Proceedings	5548
Item 1A.	Risk Factors	5648
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5648
Item 6.	Exhibits	5850
Signatures		5951

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

~~Table of Contents~~

MAGNITE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par values)

(unaudited)


		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	253,552	$	230,401	Cash and cash equivalents	$	310,509	$	326,254

Accounts receivable, net	Accounts receivable, net	804,350		927,781		Accounts receivable, net	937,218		976,506
Prepaid expenses and other current assets	Prepaid expenses and other current assets	21,363		19,934		Prepaid expenses and other current assets	21,453		23,501
TOTAL CURRENT ASSETS	TOTAL CURRENT ASSETS	1,079,265		1,178,116		TOTAL CURRENT ASSETS	1,269,180		1,326,261
Property and equipment, net	Property and equipment, net	45,489		34,067		Property and equipment, net	46,112		44,969
Right-of-use lease asset	Right-of-use lease asset	74,409		76,986		Right-of-use lease asset	64,551		78,211
Internal use software development costs, net	Internal use software development costs, net	23,051		20,093		Internal use software development costs, net	21,630		23,671
Intangible assets, net	Intangible assets, net	322,547		426,615		Intangible assets, net	58,633		253,501
Goodwill	Goodwill	978,217		969,873		Goodwill	978,217		978,217
Other assets, non-current	Other assets, non-current	6,106		6,862		Other assets, non-current	6,686		7,383
TOTAL ASSETS	TOTAL ASSETS	$	2,529,084	$	2,712,612	TOTAL ASSETS	$	2,445,009	$	2,712,213
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	890,071	$	1,000,956	Accounts payable and accrued expenses	$	1,100,752	$	1,094,321
Lease liabilities, current	Lease liabilities, current	19,452		19,142		Lease liabilities, current	20,913		21,172
Debt, current	Debt, current	3,600		3,600		Debt, current	3,600		3,600
Other current liabilities	Other current liabilities	5,885		5,697		Other current liabilities	5,799		5,939
TOTAL CURRENT LIABILITIES	TOTAL CURRENT LIABILITIES	919,008		1,029,395		TOTAL CURRENT LIABILITIES	1,131,064		1,125,032
Debt, non-current, net of debt issuance costs	Debt, non-current, net of debt issuance costs	722,077		720,023		Debt, non-current, net of debt issuance costs	601,609		722,757
Lease liabilities, non-current						Lease liabilities, non-current	54,025		66,331
Deferred tax liability, net	Deferred tax liability, net	11,506		13,303		Deferred tax liability, net	4,400		5,072
Lease liabilities, non-current		64,288		66,487
Other liabilities, non-current	Other liabilities, non-current	1,703		2,647		Other liabilities, non-current	1,801		1,723
TOTAL LIABILITIES	TOTAL LIABILITIES	1,718,582		1,831,855		TOTAL LIABILITIES	1,792,899		1,920,915
Commitments and contingencies (Note 12)	Commitments and contingencies (Note 12)					Commitments and contingencies (Note 12)
STOCKHOLDERS' EQUITY	STOCKHOLDERS' EQUITY					STOCKHOLDERS' EQUITY
Preferred stock, $0.00001 par value, 10,000 shares authorized at September 30, 2022 and December 31, 2021; 0 shares issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock, $0.00001 par value; 500,000 shares authorized at September 30, 2022 and December 31, 2021; 133,349 and 132,553 shares issued at September 30, 2022 and December 31, 2021, respectively, and 133,349 and 132,204 shares outstanding at September 30, 2022 and December 31, 2021, respectively		2		2
Preferred stock, $0.00001 par value, 10,000 shares authorized at September 30, 2023 and December 31, 2022; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022						Preferred stock, $0.00001 par value, 10,000 shares authorized at September 30, 2023 and December 31, 2022; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022	—		—
Common stock, $0.00001 par value; 500,000 shares authorized at September 30, 2023 and December 31, 2022; 137,821 and 134,006 shares issued and outstanding at September 30, 2023 and December 31, 2022						Common stock, $0.00001 par value; 500,000 shares authorized at September 30, 2023 and December 31, 2022; 137,821 and 134,006 shares issued and outstanding at September 30, 2023 and December 31, 2022	2		2
Additional paid-in capital	Additional paid-in capital	1,304,182		1,282,589		Additional paid-in capital	1,370,619		1,319,221
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5,293)		(1,376)		Accumulated other comprehensive loss	(3,639)		(3,151)
Treasury stock at cost, 0 and 349 shares outstanding at September 30, 2022 and December 31, 2021, respectively		—		(6,007)

Accumulated deficit	Accumulated deficit	(488,389)		(394,451)		Accumulated deficit	(714,872)		(524,774)
TOTAL STOCKHOLDERS' EQUITY	TOTAL STOCKHOLDERS' EQUITY	810,502		880,757		TOTAL STOCKHOLDERS' EQUITY	652,110		791,298
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,529,084	$	2,712,612	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,445,009	$	2,712,213

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.

Table of Contents

MAGNITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenue	Revenue	$	145,815	$	131,871	$	401,670	$	307,127	Revenue	$	150,085	$	145,815	$	432,778	$	401,670
Expenses:	Expenses:									Expenses:
Cost of revenue	Cost of revenue	71,753		63,541		196,150		134,823		Cost of revenue	84,878		71,753		339,881		196,150
Sales and marketing	Sales and marketing	49,848		52,260		151,675		118,122		Sales and marketing	38,227		49,848		136,407		151,675
Technology and development	Technology and development	25,134		21,059		71,214		53,436		Technology and development	23,537		25,134		71,135		71,214
General and administrative	General and administrative	20,235		16,535		59,405		47,673		General and administrative	21,286		20,235		68,023		59,405
Merger, acquisition, and restructuring costs	Merger, acquisition, and restructuring costs	—		2,424		7,468		37,778		Merger, acquisition, and restructuring costs	—		—		7,465		7,468

Total expenses	Total expenses	166,970		155,819		485,912		391,832		Total expenses	167,928		166,970		622,911		485,912
Loss from operations	Loss from operations	(21,155)		(23,948)		(84,242)		(84,705)		Loss from operations	(17,843)		(21,155)		(190,133)		(84,242)
Other (income) expense:	Other (income) expense:									Other (income) expense:
Interest expense, net	Interest expense, net	7,016		7,280		21,273		12,595		Interest expense, net	7,574		7,016		24,269		21,273
Foreign exchange gain, net										Foreign exchange gain, net	(1,471)		(1,976)		(1,542)		(5,042)
Gain on extinguishment of debt										Gain on extinguishment of debt	(4,156)		—		(18,132)		—
Other income	Other income	(1,369)		(955)		(3,991)		(3,317)		Other income	(1,346)		(1,369)		(4,017)		(3,991)
Foreign exchange gain, net		(1,976)		(1,246)		(5,042)		(1,358)
Total other expense, net	Total other expense, net	3,671		5,079		12,240		7,920		Total other expense, net	601		3,671		578		12,240
Loss before income taxes	Loss before income taxes	(24,826)		(29,027)		(96,482)		(92,625)		Loss before income taxes	(18,444)		(24,826)		(190,711)		(96,482)
Benefit for income taxes	Benefit for income taxes	(435)		(4,708)		(2,544)		(92,237)		Benefit for income taxes	(967)		(435)		(613)		(2,544)
Net loss	Net loss	$	(24,391)	$	(24,319)	$	(93,938)	$	(388)	Net loss	$	(17,477)	$	(24,391)	$	(190,098)	$	(93,938)
Net loss per share:	Net loss per share:									Net loss per share:
Basic and Diluted		$	(0.18)	$	(0.18)	$	(0.71)	$	—
Basic and diluted										Basic and diluted	$	(0.13)	$	(0.18)	$	(1.40)	$	(0.71)

Weighted average shares used to compute net loss per share:	Weighted average shares used to compute net loss per share:									Weighted average shares used to compute net loss per share:
Basic and Diluted		133,144		131,501		132,611		124,325
Basic and diluted										Basic and diluted	137,372		133,144		136,084		132,611

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.

Table of Contents

MAGNITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Net loss	Net loss	$	(24,391)	$	(24,319)	$	(93,938)	$	(388)	Net loss	$	(17,477)	$	(24,391)	$	(190,098)	$	(93,938)
Other comprehensive loss:
Other comprehensive income (loss):										Other comprehensive income (loss):

Foreign currency translation adjustments	Foreign currency translation adjustments	(1,972)		(525)		(3,917)		(469)		Foreign currency translation adjustments	(962)		(1,972)		(488)		(3,917)
Other comprehensive loss	Other comprehensive loss	(1,972)		(525)		(3,917)		(469)		Other comprehensive loss	(962)		(1,972)		(488)		(3,917)
Comprehensive loss	Comprehensive loss	$	(26,363)	$	(24,844)	$	(97,855)	$	(857)	Comprehensive loss	$	(18,439)	$	(26,363)	$	(190,586)	$	(97,855)

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.

Table of Contents

MAGNITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(unaudited)


		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
		Shares	Amount								Shares	Amount					Shares	Amount								Shares	Amount
Balance at December 31, 2020		114,029	$	2	$	777,084	$	(957)	$	(394,516)				$	381,613
Balance at December 31, 2021																Balance at December 31, 2021	132,553	$	2	$	1,282,589	$	(1,376)	$	(394,451)	(349)	$	(6,007)	$	880,757
Exercise of common stock options	Exercise of common stock options	733	—		5,785		—		—		—	—		5,785		Exercise of common stock options	311	—		1,107		—		—		—	—		1,107

Issuance of common stock related to RSU vesting	Issuance of common stock related to RSU vesting	1,351	—		—		—		—		—	—		—		Issuance of common stock related to RSU vesting	783	—		—		—		—		—	—		—

Shares withheld related to net share settlement																Shares withheld related to net share settlement	(315)	—		(4,260)		—		—		—	—		(4,260)
Purchase of treasury stock																Purchase of treasury stock	—	—		—		—		—		(931)	(12,138)		(12,138)
Retirement of common stock																Retirement of common stock	(1,280)	—		(18,145)		—		—		1,280	18,145		—
Stock-based compensation	Stock-based compensation	—	—		7,108		—		—		—	—		7,108		Stock-based compensation	—	—		16,927		—		—		—	—		16,927
Capped call options		—	—		(38,960)		—		—		—	—		(38,960)
Other comprehensive loss		—	—		—		(313)		—		—	—		(313)

Other comprehensive income																Other comprehensive income	—	—		—		110		—		—	—		110
Net loss	Net loss	—	—		—		—		(12,877)		—	—		(12,877)		Net loss	—	—		—		—		(44,593)		—	—		(44,593)
Balance at March 31, 2021		116,113	$	2	$	751,017	$	(1,270)	$	(407,393)	—	$	—	$	342,356
Balance at March 31, 2022																Balance at March 31, 2022	132,052	$	2	$	1,278,218	$	(1,266)	$	(439,044)	—	$	—	$	837,910
Exercise of common stock options	Exercise of common stock options	384	—		1,480		—		—		—	—		1,480		Exercise of common stock options	164	—		501		—		—		—	—		501

Issuance of common stock related to employee stock purchase plan	Issuance of common stock related to employee stock purchase plan	121	—		1,154		—		—		—	—		1,154		Issuance of common stock related to employee stock purchase plan	238	—		2,141		—		—		—	—		2,141
Issuance of common stock related to RSU vesting	Issuance of common stock related to RSU vesting	2,208	—		—		—		—		—	—		—		Issuance of common stock related to RSU vesting	1,165	—		—		—		—		—	—		—

Issuance of common stock associated with the SpotX Acquisition		12,374	—		495,591		—		—		—	—		495,591

Shares withheld related to net share settlement																Shares withheld related to net share settlement	(462)	—		(5,198)		—		—		—	—		(5,198)
Purchase of treasury stock																Purchase of treasury stock	—	—		—		—		—		(312)	(3,525)		(3,525)
Retirement of common stock																Retirement of common stock	(312)	—		(3,525)		—		—		312	3,525		—
Stock-based compensation	Stock-based compensation	—	—		9,928		—		—		—	—		9,928		Stock-based compensation	—	—		16,559		—		—		—	—		16,559
Other comprehensive income		—	—		—		369		—		—	—		369
Net income		—	—		—		—		36,808		—	—		36,808
Balance at June 30, 2021		131,200	$	2	$	1,259,170	$	(901)	$	(370,585)	—	$	—	$	887,686
Other comprehensive loss																Other comprehensive loss	—	—		—		(2,055)		—		—	—		(2,055)
Net loss																Net loss	—	—		—		—		(24,954)		—	—		(24,954)
Balance at June 30, 2022																Balance at June 30, 2022	132,845	$	2	$	1,288,696	$	(3,321)	$	(463,998)	—	$	—	$	821,379
Exercise of common stock options	Exercise of common stock options	275	—		1,482		—		—		—	—		1,482		Exercise of common stock options	39	—		163		—		—		—	—		163

Issuance of common stock related to RSU vesting	Issuance of common stock related to RSU vesting	314	—		—		—		—		—	—		—		Issuance of common stock related to RSU vesting	722	—		—		—		—		—	—		—

Shares withheld related to net share settlement																Shares withheld related to net share settlement	(257)	—		(2,401)		—		—		—	—		(2,401)
Stock-based compensation	Stock-based compensation	—	—		12,441		—		—		—	—		12,441		Stock-based compensation	—	—		17,724		—		—		—	—		17,724
Other comprehensive loss	Other comprehensive loss	—	—		—		(525)		—		—	—		(525)		Other comprehensive loss	—	—		—		(1,972)		—		—	—		(1,972)
Net loss	Net loss	—	—		—		—		(24,319)		—	—		(24,319)		Net loss	—	—		—		—		(24,391)		—	—		(24,391)
Balance at September 30, 2021		131,789	$	2	$	1,273,093	$	(1,426)	$	(394,904)	—	$	—	$	876,765

Balance at September 30, 2022																Balance at September 30, 2022	133,349	$	2	$	1,304,182	$	(5,293)	$	(488,389)	—	$	—	$	810,502

Table of Contents


		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
		Shares	Amount								Shares	Amount					Shares	Amount								Shares	Amount
Balance at December 31, 2021		132,553	$	2	$	1,282,589	$	(1,376)	$	(394,451)	(349)	$	(6,007)	$	880,757
Exercise of common stock options		311	—		1,107		—		—		—	—		1,107

Issuance of common stock related to RSU vesting		783	—		—		—		—		—	—		—
Shares withheld related to net share settlement		(315)	—		(4,260)		—		—		—	—		(4,260)
Purchase of treasury stock		—	—		—		—		—		(931)	(12,138)		(12,138)
Retirement of common stock		(1,280)	—		(18,145)		—		—		1,280	18,145		—
Stock-based compensation		—	—		16,927		—		—		—	—		16,927

Other comprehensive income		—	—		—		110		—		—	—		110
Net loss		—	—		—		—		(44,593)		—	—		(44,593)
Balance at March 31, 2022		132,052	$	2	$	1,278,218	$	(1,266)	$	(439,044)	—	$	—	$	837,910
Exercise of common stock options		164	—		501		—		—		—	—		501
Issuance of common stock related to employee stock purchase plan		238	—		2,141		—		—		—	—		2,141
Issuance of common stock related to RSU vesting		1,165	—		—		—		—		—	—		—
Shares withheld related to net share settlement		(462)	—		(5,198)		—		—		—	—		(5,198)
Purchase of treasury stock		—	—		—		—		—		(312)	(3,525)		(3,525)
Retirement of common stock		(312)	—		(3,525)		—		—		312	3,525		—
Stock-based compensation		—	—		16,559		—		—		—	—		16,559
Other comprehensive loss		—	—		—		(2,055)		—		—	—		(2,055)
Net loss		—	—		—		—		(24,954)		—	—		(24,954)
Balance at June 30, 2022		132,845	$	2	$	1,288,696	$	(3,321)	$	(463,998)	—	$	—	$	821,379
Balance at December 31, 2022																Balance at December 31, 2022	134,006	$	2	$	1,319,221	$	(3,151)	$	(524,774)	—	$	—	$	791,298
Exercise of common stock options	Exercise of common stock options	39	—		163		—		—		—	—		163		Exercise of common stock options	303	—		1,486		—		—		—	—		1,486

Issuance of common stock related to RSU vesting	Issuance of common stock related to RSU vesting	722	—		—		—		—		—	—		—		Issuance of common stock related to RSU vesting	1,829	—		—		—		—		—	—		—
Shares withheld related to net share settlement	Shares withheld related to net share settlement	(257)	—		(2,401)		—		—		—	—		(2,401)		Shares withheld related to net share settlement	(700)	—		(9,046)		—		—		—	—		(9,046)

Stock-based compensation	Stock-based compensation	—	—		17,724		—		—		—	—		17,724		Stock-based compensation	—	—		19,856		—		—		—	—		19,856

Other comprehensive income																Other comprehensive income	—	—		—		367		—		—	—		367
Net loss																Net loss	—	—		—		—		(98,732)		—	—		(98,732)
Balance at March 31, 2023																Balance at March 31, 2023	135,438	$	2	$	1,331,517	$	(2,784)	$	(623,506)	—	$	—	$	705,229
Exercise of common stock options																Exercise of common stock options	74	—		610		—		—		—	—		610
Issuance of common stock related to employee stock purchase plan																Issuance of common stock related to employee stock purchase plan	202	—		1,922		—		—		—	—		1,922
Issuance of common stock related to RSU and PSU vesting																Issuance of common stock related to RSU and PSU vesting	1,215	—		—		—		—		—	—		—
Shares withheld related to net share settlement																Shares withheld related to net share settlement	(70)	—		(631)		—		—		—	—		(631)
Stock-based compensation																Stock-based compensation	—	—		19,230		—		—		—	—		19,230
Other comprehensive income																Other comprehensive income	—	—		—		107		—		—	—		107
Net loss																Net loss	—	—		—		—		(73,889)		—	—		(73,889)
Balance at June 30, 2023																Balance at June 30, 2023	136,859	$	2	$	1,352,648	$	(2,677)	$	(697,395)	—	$	—	$	652,578
Exercise of common stock options																Exercise of common stock options	15	—		60		—		—		—	—		60

Issuance of common stock related to RSU vesting																Issuance of common stock related to RSU vesting	947	—		—		—		—		—	—		—

Stock-based compensation																Stock-based compensation	—	—		17,911		—		—		—	—		17,911
Other comprehensive loss	Other comprehensive loss	—	—		—		(1,972)		—		—	—		(1,972)		Other comprehensive loss	—	—		—		(962)		—		—	—		(962)
Net loss	Net loss	—	—		—		—		(24,391)		—	—		(24,391)		Net loss	—	—		—		—		(17,477)		—	—		(17,477)
Balance at September 30, 2022		133,349	$	2	$	1,304,182	$	(5,293)	$	(488,389)	—	$	—	$	810,502
Balance at September 30, 2023																Balance at September 30, 2023	137,821	$	2	$	1,370,619	$	(3,639)	$	(714,872)	—	$	—	$	652,110

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.

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MAGNITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)


		Nine Months Ended					Nine Months Ended
		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net loss	Net loss	$	(93,938)	$	(388)	Net loss	$	(190,098)	$	(93,938)
Adjustments to reconcile net loss to net cash provided by operating activities:	Adjustments to reconcile net loss to net cash provided by operating activities:					Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	138,641		97,084		Depreciation and amortization	224,000		138,641
Stock-based compensation	Stock-based compensation	50,193		28,521		Stock-based compensation	55,462		50,193
Impairment of intangible assets	Impairment of intangible assets	3,320		—		Impairment of intangible assets	—		3,320
(Gain) loss on disposal of property and equipment		(59)		78
Provision for doubtful accounts		(357)		217

Gain on extinguishment of debt						Gain on extinguishment of debt	(18,132)		—
Gain on disposal of property and equipment						Gain on disposal of property and equipment	(49)		(59)
Provision for (recovery of) doubtful accounts						Provision for (recovery of) doubtful accounts	4,439		(357)
Amortization of debt discount and issuance costs	Amortization of debt discount and issuance costs	5,092		3,223		Amortization of debt discount and issuance costs	4,816		5,092
Non-cash lease expense	Non-cash lease expense	1,340		1,825		Non-cash lease expense	(804)		1,340
Deferred income taxes	Deferred income taxes	(1,626)		(91,540)		Deferred income taxes	(676)		(1,626)
Unrealized foreign currency gains, net		(5,231)		(2,578)

Unrealized foreign currency gain, net						Unrealized foreign currency gain, net	(3,734)		(5,231)
Other items, net						Other items, net	2,696		—
Changes in operating assets and liabilities, net of effect of business acquisitions:	Changes in operating assets and liabilities, net of effect of business acquisitions:					Changes in operating assets and liabilities, net of effect of business acquisitions:
Accounts receivable	Accounts receivable	125,268		(92,131)		Accounts receivable	19,033		125,268
Prepaid expenses and other assets	Prepaid expenses and other assets	(1,751)		(297)		Prepaid expenses and other assets	2,054		(1,751)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(116,575)		113,795		Accounts payable and accrued expenses	26,341		(116,575)
Other liabilities	Other liabilities	(472)		191		Other liabilities	(66)		(472)
Net cash provided by operating activities	Net cash provided by operating activities	103,845		58,000		Net cash provided by operating activities	125,282		103,845
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:
Purchases of property and equipment	Purchases of property and equipment	(18,004)		(13,985)		Purchases of property and equipment	(17,139)		(18,004)
Capitalized internal use software development costs	Capitalized internal use software development costs	(11,177)		(8,525)		Capitalized internal use software development costs	(8,200)		(11,177)
Mergers and acquisitions, net of cash acquired		(20,755)		(653,060)
Mergers and acquisitions, net						Mergers and acquisitions, net	—		(20,755)

Net cash used in investing activities	Net cash used in investing activities	(49,936)		(675,570)		Net cash used in investing activities	(25,339)		(49,936)
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
Proceeds from Convertible Senior Notes offering		—		400,000
Proceeds from issuance of debt, net of debt discount		—		349,200
Payment for capped call options		—		(38,960)
Payment for debt issuance costs		—		(30,378)

Proceeds from exercise of stock options	Proceeds from exercise of stock options	1,771		8,747		Proceeds from exercise of stock options	2,156		1,771
Proceeds from issuance of common stock under employee stock purchase plan	Proceeds from issuance of common stock under employee stock purchase plan	2,141		1,154		Proceeds from issuance of common stock under employee stock purchase plan	1,922		2,141
Repayment of debt	Repayment of debt	(2,700)		(900)		Repayment of debt	(2,700)		(2,700)
Repurchase of Convertible Senior Notes						Repurchase of Convertible Senior Notes	(104,793)		—
Repayment of financing lease	Repayment of financing lease	(602)		—		Repayment of financing lease	(276)		(602)
Purchase of treasury stock	Purchase of treasury stock	(15,663)		—		Purchase of treasury stock	—		(15,663)
Taxes paid related to net share settlement	Taxes paid related to net share settlement	(11,859)		—		Taxes paid related to net share settlement	(9,677)		(11,859)

Payment of indemnification claims holdback	Payment of indemnification claims holdback	(1,409)		—		Payment of indemnification claims holdback	(2,313)		(1,409)
Net cash (used in) provided by financing activities		(28,321)		688,863
Net cash used in financing activities						Net cash used in financing activities	(115,681)		(28,321)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(2,484)		(591)		EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(209)		(2,484)
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	23,104		70,702		CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(15,947)		23,104
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	230,693		117,731		CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	326,502		230,693
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	253,797	$	188,433	CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	310,555	$	253,797

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.

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MAGNITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)


		Nine Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021				September 30, 2023		September 30, 2022
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO CONSOLIDATED BALANCE SHEETS	RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO CONSOLIDATED BALANCE SHEETS						RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents	Cash and cash equivalents	$	253,552	$	188,182		Cash and cash equivalents	$	310,509	$	253,552
Restricted cash included in prepaid expenses and other current assets	Restricted cash included in prepaid expenses and other current assets	245		—			Restricted cash included in prepaid expenses and other current assets	46		245
Restricted cash included in other assets, non-current		—		251

Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	253,797	$	188,433		Total cash, cash equivalents and restricted cash	$	310,555	$	253,797

SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:						SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:
Cash paid for income taxes	Cash paid for income taxes	$	4,356	$	1,221		Cash paid for income taxes	$	4,601	$	4,356
Cash paid for interest	Cash paid for interest	$	18,624	$	7,671		Cash paid for interest	$	27,609	$	18,624
Capitalized assets financed by accounts payable and accrued expenses		$	10,195	$	1,513
Capitalized assets financed by accounts payable and accrued expenses and other liabilities							Capitalized assets financed by accounts payable and accrued expenses and other liabilities	$	3,226	$	10,195
Capitalized stock-based compensation	Capitalized stock-based compensation	$	1,017	$	956		Capitalized stock-based compensation	$	1,535	$	1,017
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	11,542	$	22,651		Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	3,797	$	11,542
Purchase consideration - indemnification claims holdback	Purchase consideration - indemnification claims holdback	$	2,293	$	1,409		Purchase consideration - indemnification claims holdback	$	—	$	2,293
Common stock and options issued for mergers and acquisitions		$	—	$	495,591

Debt discount, non-cash		$	—	$	10,800

The accompanying notes to unaudited condensed consolidated financial statements are an integral part of these statements.

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MAGNITE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1—Organization and Summary of Significant Accounting Policies

Company Overview

Magnite, Inc. ("Magnite" or the "Company")~~, formerly known as The Rubicon Project, Inc.,~~ was formed in Delaware and began operations on April 20, 2007. On April 1, 2020, Magnite completed a stock-for-stock merger with Telaria, Inc. ("Telaria" and such merger the "Telaria Merger"), a leading sell-side advertising platform and provider of connected television ("CTV") technology. On April 30, 2021, the Company completed its acquisition of SpotX, Inc. ("SpotX" and such acquisition the "SpotX Acquisition"), a leading CTV and video advertising platform. On July 1, 2021, the Company completed its acquisition of SpringServe, LLC ("SpringServe" and such acquisition the "SpringServe Acquisition"), a leading ad serving platform for CTV. Magnite has its principal offices in New York City, Los Angeles, Denver, London, and Sydney, and additional offices in Europe, Asia, North America, and South America.

The Company provides a technology solution to automate the purchase and sale of digital advertising inventory for buyers and sellers globally, across all channels, formats and auction types. The Company’s platform features applications and services for sellers of digital advertising inventory, or publishers, that own or operate websites, applications, CTV channels, and other digital media properties, to manage and monetize their inventory; applications and services for buyers, including advertisers, agencies, agency trading desks, and demand side platforms, to buy digital advertising inventory; and a transparent, independent marketplace that brings buyers and sellers together and facilitates intelligent decision making and automated transaction execution at scale. The Company's clients include many of the world's leading sellers and buyers of digital advertising inventory.

Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim period presented have been included. Operating results for the three and nine months ended September 30, ~~2022~~2023 are not necessarily indicative of the results that may be expected for any future interim period, the year ending December 31, ~~2022,~~2023, or for any future year.

The condensed consolidated balance sheet at December 31, ~~2021~~2022 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, ~~2021~~2022 included in its ~~2021~~2022 Annual Report on Form 10-K.

There have been no significant changes in the Company's accounting policies from those disclosed in its audited consolidated financial statements and notes thereto for the year ended December 31, ~~2021~~2022 included in its Annual Report on Form 10-K.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported and disclosed financial statements and accompanying footnotes. Due to the economic uncertainty of macroeconomic challenges, such as inflation, global conflict, capital market disruptions and instability of financial institutions, the risk of a ~~result of the COVID-19 pandemic, geopolitical events, including the conflict in Ukraine,~~recession, labor strikes, and ~~economic and~~other macroeconomic factors, ~~like labor shortages, supply chain disruptions, inflation, and recessionary concerns impacting the markets and communities in which the Company's clients operate,~~ it has become more difficult to apply certain assumptions and judgments into these estimates. The extent of the impact of these factors on the Company's operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted, including but not limited to the duration and how quickly and to what extent normal economic and operating conditions can resume. During the nine months ended September 30, ~~2022,~~2023, this uncertainty continued to result in a higher level of judgment related to its estimates and assumptions. As of the date of issuance of the condensed consolidated financial statements for the three and nine months ended September 30, ~~2022,~~2023, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, judgments, or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ materially from these estimates.

Recently Adopted Accounting Standards

~~In July 2021, the FASB issued Update No. 2021-05, Leases (Topic 842)—Lessors – Certain Leases with Variable Lease Payments~~ ~~("ASU 2021-05"). ASU 2021-05 requires a lessor to classify a lease with variable lease payments that do not depend on~~

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an index or rate as an operating lease if specified criteria are met. The Company adopted ASU 2021-05 on January 1, 2022 on a prospective basis, which did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

~~Recent Accounting Pronouncements Not Yet Adopted~~

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires the recognition and measurement of contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. Considerations to determine the amount of contract assets and contract liabilities to record at the acquisition date

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include the terms of the acquired contract, such as timing of payment, identification of each performance obligation in the contract and allocation of the contract transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception. ASU 2021-08 is effective for the Company beginning in the first quarter of 2023. ASU 2021-08 should be applied prospectively for acquisitions occurring on or after the effective date of the amendments. Early adoption of the proposed amendments would be permitted, including adoption in an interim period. The Company ~~is currently assessing the impact~~adopted this standard January 1, 2023 and will ~~have on~~apply the ~~Company’s consolidated financial statements.~~

~~The Company does not believe there are any other recently issued and effective or not yet effective pronouncements that would have or are expected~~guidance to ~~have any significant effect on the Company’s financial position, cash flows or results of operations.~~future acquisitions, if any.

Note 2—Net Loss Per Share

The following table presents the basic and diluted net loss per share:


		Three Months Ended				Nine Months Ended						Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021				September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
		(in thousands, except per share data)								(in thousands, except per share data)
Basic and Diluted Loss Per Share:	Basic and Diluted Loss Per Share:										Basic and Diluted Loss Per Share:
Net loss	Net loss	$	(24,391)	$	(24,319)	$	(93,938)	$	(388)		Net loss	$	(17,477)	$	(24,391)	$	(190,098)	$	(93,938)
Weighted-average common shares outstanding	Weighted-average common shares outstanding	133,144		131,501		132,611		124,325			Weighted-average common shares outstanding	137,372		133,144		136,084		132,611

Weighted-average common shares outstanding used to compute net loss per share	Weighted-average common shares outstanding used to compute net loss per share	133,144		131,501		132,611		124,325			Weighted-average common shares outstanding used to compute net loss per share	137,372		133,144		136,084		132,611
Basic and diluted loss per share	Basic and diluted loss per share	$	(0.18)	$	(0.18)	$	(0.71)	$	—		Basic and diluted loss per share	$	(0.13)	$	(0.18)	$	(1.40)	$	(0.71)

The following weighted-average shares have been excluded from the calculation of diluted net loss per share attributable to common stockholders for each period presented because they are anti-dilutive:


		Three Months Ended		Nine Months Ended			Three Months Ended		Nine Months Ended
		September 30, 2022	September 30, 2021	September 30, 2022	September 30, 2021		September 30, 2023	September 30, 2022	September 30, 2023	September 30, 2022
		(in thousands)		(in thousands)			(in thousands)		(in thousands)
Options to purchase common stock	Options to purchase common stock	1,280	4,116	1,985	4,712	Options to purchase common stock	1,656	1,280	1,702	1,985

Unvested restricted stock units	Unvested restricted stock units	903	4,253	1,600	5,876	Unvested restricted stock units	1,987	903	1,962	1,600
Unvested performance stock units	Unvested performance stock units	54	195	113	196	Unvested performance stock units	—	54	112	113
ESPP shares	ESPP shares	49	11	23	49	ESPP shares	84	49	37	23
Convertible Senior Notes	Convertible Senior Notes	6,262	6,262	6,262	4,499	Convertible Senior Notes	4,746	6,262	5,357	6,262
Total shares excluded from net loss per share	Total shares excluded from net loss per share	8,548	14,837	9,983	15,332	Total shares excluded from net loss per share	8,473	8,548	9,170	9,983

For the three and nine months ended September 30, ~~2022~~2023 and ~~September 30, 2021,~~2022, the Company excluded outstanding performance stock units ~~(as described in Note 9)~~ from the calculation of diluted net loss per share because they were anti-dilutive. As of September 30, 2023, the performance stock units granted in 2021, 2022, and 2023 had expected achievement levels of 0%, 50% and 32%, respectively. As of September 30, 2022, the performance stock units granted ~~during April~~in 2020, ~~April 2021, August~~ 2021, and ~~February~~ 2022 had expected achievement levels of 53%~~, 0%, 0%, and 0%, respectively. As of September 30, 2021, the performance stock units granted during April 2020, April 2021, and August 2021 had expected achievement levels of 150%~~, 0%, and 0% respectively. Refer to Note 9—"Stock-Based Compensation" for additional information related to performance stock units.

For the three and nine months ended September 30, ~~2022~~2023 and September 30, ~~2021,~~2022, shares that would be issuable assuming conversion of all of the Convertible Senior Notes (as defined in Note 13) were excluded from the calculation of diluted loss per share because they were anti-dilutive. Diluted earnings per share for the Convertible Senior Notes is calculated under the if-converted method in accordance with ASC 260, Earnings Per Share. The Convertible Senior Notes have an initial conversion rate of 15.6539 shares of common stock per $1,000 principal amount of the Convertible Senior Notes, which will be subject to ~~anti-~~

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~~dilution~~anti-dilution adjustments in certain circumstances. As of September 30, ~~2022~~2023 and ~~2021,~~2022, the number of shares that would be issuable assuming conversion of all of the Convertible Senior Notes is approximately ~~6,261,560.~~4,305,871 and 6,261,560, respectively. Refer to Note 13—"Debt" for additional information related to accounting for Convertible Senior Notes issued and associated Capped Call Transactions.

Note 3—Revenue

For the majority of transactions on the Company's platform, the Company reports revenue on a net basis as it does not act as the principal in the purchase and sale of digital advertising inventory because it does not have control of the digital advertising inventory and does not set prices agreed upon within the auction marketplace. For certain advertising campaigns that are transacted through insertion orders, the Company reports revenue on a gross basis, based primarily on its determination that the Company acts as the primary obligor in the delivery of advertising campaigns for buyers with respect to such transactions. ~~The Company does not disclose the value~~

Table of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.Contents

The following table presents ~~our~~the Company's revenue recognized on a net basis and on a gross basis for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
		September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021					September 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
		(in thousands, except percentages)																	(in thousands, except percentages)
Revenue:	Revenue:																	Revenue:
Net basis	Net basis	$	116,999	80	%	$	105,866	80	%	$	330,015	82	%	$	258,236	84	%	Net basis	$	123,703	82	%	$	116,999	80	%	$	355,088	82	%	$	330,015	82	%
Gross basis	Gross basis	28,816		20		26,005		20		71,655		18		48,891		16		Gross basis	26,382		18		28,816		20		77,690		18		71,655		18
Total	Total	$	145,815	100	%	$	131,871	100	%	$	401,670	100	%	$	307,127	100	%	Total	$	150,085	100	%	$	145,815	100	%	$	432,778	100	%	$	401,670	100	%

The following table presents ~~our~~the Company's revenue by channel for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
		September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021					September 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
		(in thousands, except percentages)																	(in thousands, except percentages)
Channel:	Channel:																	Channel:
CTV	CTV	$	71,604	49	%	$	57,885	44	%	$	187,619	47	%	$	115,040	38	%	CTV	$	67,765	45	%	$	71,604	49	%	$	198,604	46	%	$	187,619	47	%
Mobile																		Mobile	56,329		38		45,994		32		159,545		37		130,111		32
Desktop	Desktop	28,217		19		30,573		23		83,940		21		80,166		26		Desktop	25,991		17		28,217		19		74,629		17		83,940		21
Mobile		45,994		32		43,413		33		130,111		32		111,921		36
Total	Total	$	145,815	100	%	$	131,871	100	%	$	401,670	100	%	$	307,127	100	%	Total	$	150,085	100	%	$	145,815	100	%	$	432,778	100	%	$	401,670	100	%

The following table presents the Company's revenue disaggregated by geographic location, based on the location of the Company's sellers for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
		(in thousands)				(in thousands)					(in thousands)				(in thousands)
United States	United States	$	113,851	$	104,633	$	310,870	$	237,844	United States	$	111,281	$	113,851	$	322,923	$	310,870

International	International	31,964		27,238		90,800		69,283		International	38,804		31,964		109,855		90,800
Total	Total	$	145,815	$	131,871	$	401,670	$	307,127	Total	$	150,085	$	145,815	$	432,778	$	401,670

Payment terms are specified in agreements between the Company and the buyers and sellers on its platform. The Company generally bills buyers at the end of each month for the full purchase price of impressions filled in that month. The Company recognizes volume discounts as a reduction of revenue as they are incurred. Specific payment terms may vary by agreement, but are generally ~~seventy-five~~75 days or less. The Company's accounts receivable are recorded at the amount of gross billings to buyers, net of allowances for the amounts the Company is responsible to collect. The Company's accounts payable related to amounts due to sellers are recorded at the net amount payable to sellers (see Note 5). Accordingly, both accounts receivable and accounts payable appear large in relation to revenue reported on a net basis.

Accounts receivable are recorded at the invoiced amount, are unsecured, and do not bear interest. The allowance for doubtful accounts is reviewed quarterly, requires judgment, and is based on the best estimate of the amount of probable credit losses in existing accounts receivable. The Company reviews the status of the then-outstanding accounts receivable on a ~~customer-by-~~

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~~customer~~customer-by-customer basis, taking into consideration the aging schedule of receivables, its historical collection experience, current information regarding the client, subsequent collection history, and other relevant data, in establishing the allowance for doubtful accounts. Accounts receivable is presented net of an allowance for doubtful accounts of ~~$0.8~~$19.6 million at September 30, ~~2022,~~2023, and ~~$3.5~~$1.1 million at December 31, ~~2021.~~2022. Accounts receivable are written off against the allowance for doubtful accounts when the Company determines amounts are no longer collectible.

The Company reviews the associated payable to sellers for recovery of buyer receivable allowance and write-offs; in some cases, the Company can reduce the payable to sellers. The reduction of seller payables related to recovery of uncollected buyer receivables is netted against allowance expense. The contra seller payables related to recoveries were ~~$0.3~~$0.5 million and ~~$2.1~~$0.6 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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The following is a summary of activity in the allowance for doubtful accounts for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
		(in thousands)				(in thousands)					(in thousands)				(in thousands)
Allowance for doubtful accounts, beginning balance	Allowance for doubtful accounts, beginning balance	$	871	$	3,279	$	3,475	$	2,360	Allowance for doubtful accounts, beginning balance	$	19,643	$	871	$	1,092	$	3,475
Allowance for doubtful accounts, merger and acquisition-assumed		—		425		—		835

Write-offs	Write-offs	(518)		(14)		(527)		(35)		Write-offs	(30)		(518)		(773)		(527)
Increase (decrease) in provision for expected credit losses	Increase (decrease) in provision for expected credit losses	455		342		(2,227)		852		Increase (decrease) in provision for expected credit losses	(18)		455		19,276		(2,227)
Recoveries of previous write-offs	Recoveries of previous write-offs	—		—		87		20		Recoveries of previous write-offs	11		—		11		87
Allowance for doubtful accounts, ending balance	Allowance for doubtful accounts, ending balance	$	808	$	4,032	$	808	$	4,032	Allowance for doubtful accounts, ending balance	$	19,606	$	808	$	19,606	$	808

During the three and nine months ended September 30, 2023, the provision for expected credit losses associated with accounts receivable decreased by an immaterial amount and increased by $19.3 million, respectively, offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $0.2 million and $14.8 million, respectively, which resulted in $0.2 million of bad debt recoveries and $4.4 million of bad debt expense, respectively. The increase in the provision for expected credit losses was primarily attributed to one buyer filing for bankruptcy, resulting in $4.5 million of bad debt expense in the nine months ended September 30, 2023. During the three and nine months ended September 30, 2022, the provision for expected credit losses associated with accounts receivable increased by $0.5 million and decreased by $2.2 million, respectively, offset by increases of contra seller payables related to recoveries of uncollected buyer receivables of $0.1 million and decreases of $1.9 million, respectively, which resulted in $0.3 million of bad debt expense and $0.4 million of bad debt recoveries, respectively. During the three and nine months ended September 30, 2021, the provision for expected credit losses associated with accounts receivable increased by $0.3 million and $0.9 million, respectively, and was offset by decreases of contra seller payables related to recoveries of uncollected buyer receivables of an immaterial amount and $0.6 million, respectively, which resulted in $0.4 million and $0.2 million, respectively, of bad debt recoveries.

Note 4—Fair Value Measurements

Recurring Fair Value Measurements

Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Observable inputs are based on market data obtained from independent sources. The fair value hierarchy is based on the following three levels of inputs, of which the first two are considered observable and the last one is considered unobservable:

•Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•Level 3 – Unobservable inputs.

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The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at September 30, ~~2022:~~2023:

Total Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3)
(in thousands)
Cash equivalents $ 208,172 $ 208,172 $ — $ —


	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Cash equivalents	$	45,109	$	45,109	$	—	$	—

The table below sets forth a summary of financial instruments that are measured at fair value on a recurring basis at December 31, ~~2021:~~2022:


	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Cash equivalents	$	259,647	$	259,647	$	—	$	—

At September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, cash equivalents of ~~$208.2~~$45.1 million and ~~$7.9~~$259.6 million, respectively, consisted of money market funds and commercial paper, with original maturities of three months or less. The carrying amounts of cash equivalents are classified as Level 1 or Level 2 depending on whether or not their fair values are based on quoted market prices for identical securities that are traded in an active market.

At September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had Convertible Senior Notes and its Term Loan B Facility (as defined in Note 13) included in its balance sheets. The estimated fair value of the Company's Convertible Senior Notes was ~~$304.1~~$233.8 million and ~~$315.5~~$305.0 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The estimated fair value of Convertible Senior Notes is based on market rates and the closing trading price of the Convertible Senior Notes as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 and is classified as Level 2 in the fair value hierarchy. At September 30, 2023 and December 31, 2022, the estimated fair value of the Company's Term Loan B Facility was ~~$343.1~~$354.1 million and ~~at December 31, 2021, the estimated fair value of the Company's Term Loan B Facility approximated the carrying value.~~$333.3 million, respectively. The estimated fair value is based on borrowing rates currently available to the Company for financing with similar terms and is classified as Level 2 in the fair value hierarchy.

There were no transfers between Level 1 and Level 2 fair value measurements during the nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022.

Note 5—Other Balance Sheet Amounts

Accounts payable and accrued expenses included the following:


		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
		(in thousands)					(in thousands)
Accounts payable—seller	Accounts payable—seller	$	845,460	$	971,220	Accounts payable—seller	$	1,063,131	$	1,057,556
Accounts payable—trade	Accounts payable—trade	27,255		11,904		Accounts payable—trade	22,595		19,387
Accrued employee-related payables	Accrued employee-related payables	14,870		16,230		Accrued employee-related payables	15,026		15,065
Accrued holdback - indemnification claims	Accrued holdback - indemnification claims	2,486		1,602		Accrued holdback - indemnification claims	—		2,313
Total	Total	$	890,071	$	1,000,956	Total	$	1,100,752	$	1,094,321

Restricted cash was $0.2 million and $0.3 million at September 30, 2022 and December 31, 2021, respectively, which was included within prepaid expenses and other current assets and other assets, non-current.

Note 6—Goodwill, Intangible Assets, and ~~Capitalized~~Internal Use Software Development Costs ~~Incurred in Cloud Computing Arrangements~~

The Company's goodwill balance as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 was $978.2 ~~million and $969.9 million, respectively. The increase during the nine months ended September 30, 2022 was primarily a result of the Carbon Acquisition (see Note 7).~~million.

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The Company’s intangible assets as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 included the following:


		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
		(in thousands)					(in thousands)
Amortizable intangible assets:	Amortizable intangible assets:					Amortizable intangible assets:
Developed technology	Developed technology	$	390,136	$	378,958	Developed technology	$	109,736	$	390,136
Customer relationships	Customer relationships	136,000		173,950		Customer relationships	37,300		136,000
In-process research and development	In-process research and development	12,730		14,630		In-process research and development	8,830		12,730

Trademarks						Trademarks	900		900
Non-compete agreements	Non-compete agreements	900		2,270		Non-compete agreements	400		900
Trademarks		900		1,400
Total identifiable intangible assets, gross	Total identifiable intangible assets, gross	540,666		571,208		Total identifiable intangible assets, gross	157,166		540,666
Accumulated amortization—intangible assets:	Accumulated amortization—intangible assets:					Accumulated amortization—intangible assets:
Developed technology	Developed technology	(131,493)		(75,850)		Developed technology	(70,666)		(184,439)
Customer relationships	Customer relationships	(82,648)		(65,702)		Customer relationships	(22,536)		(97,316)
In-process research and development	In-process research and development	(3,154)		(1,250)		In-process research and development	(4,319)		(4,398)

Trademarks						Trademarks	(675)		(450)
Non-compete agreements	Non-compete agreements	(449)		(1,197)		Non-compete agreements	(337)		(562)
Trademarks		(375)		(594)
Total accumulated amortization—intangible assets	Total accumulated amortization—intangible assets	(218,119)		(144,593)		Total accumulated amortization—intangible assets	(98,533)		(287,165)
Total identifiable intangible assets, net	Total identifiable intangible assets, net	$	322,547	$	426,615	Total identifiable intangible assets, net	$	58,633	$	253,501

Amortization of intangible assets for the three months ended September 30, 2023 and 2022 ~~and 2021~~ was ~~$38.1~~$29.8 million and ~~$42.2~~$38.1 million, respectively, and ~~$115.3~~$194.9 million and ~~$79.3~~$115.3 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. During the first quarter of 2022, the Company abandoned certain in-process research and development projects and technology intangible assets. The abandonment resulted in $3.3 million of impairment costs in the nine months ended September 30, 2022, which was included within merger, acquisition, and restructuring costs in the condensed consolidated statement of operations.

During the fourth quarter of 2022, the Company reassessed the remaining estimated useful lives of the developed technology and in-process research and development related to the SpotX acquisition based on the remaining expected benefit from those assets. The change in the remaining estimated useful lives for developed technology and in-process research and development resulted in increased amortization expense of $7.8 million and $111.9 million for the three and nine months ended September 30, 2023, respectively. The increased amortization expense increased the basic and diluted loss per share by $0.06 and $0.82, net of tax, for the three and nine months ended September 30, 2023, respectively.

The estimated remaining amortization expense associated with the Company's intangible assets was as follows as of September 30, ~~2022:~~2023:


Fiscal Year	Fiscal Year	Amount		Fiscal Year	Amount
		(in thousands)			(in thousands)
Remaining 2022		$	34,369
2023		104,924
Remaining 2023				Remaining 2023	$	7,622
2024	2024	87,294		2024	30,134
2025	2025	70,834		2025	14,445
2026	2026	24,695		2026	6,001
Thereafter		431
2027				2027	431

Total	Total	$	322,547	Total	$	58,633

The Company capitalizes ~~costs related to arrangements for infrastructure as a service, platform as a service, and~~certain internal use software ~~as a service. As of September 30, 2022, $0.8 million of capitalized~~development costs associated with ~~these arrangements was included within prepaid expenses~~creating and ~~other current assets and $0.7 million was included within other assets, non-current. As~~enhancing internally developed software related to the Company’s technology infrastructure. During the fourth quarter of ~~December 31, 2021, $0.5 million~~2022, the Company reassessed the remaining estimated useful lives of capitalized ~~costs associated with these arrangements was included within prepaid expenses~~software projects related to integration of its technology platforms. The change in the remaining estimated useful lives for the related projects resulted in increased amortization expense of $0.1 million and ~~other current assets and $0.7~~$2.4 million ~~was included within other assets, non-current. The amortization of these agreements was immaterial~~ for the three and nine months ended September 30, ~~2022~~2023, respectively. The increased amortization expense, net of tax, did not impact basic and ~~2021.~~diluted loss per share for the three months ended September 30, 2023 and increased the basic and diluted loss per share by $0.02, net of tax, for the nine months ended September 30, 2023.

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Note 7—Business Combinations

~~2021 Acquisition—SpotX~~

On April 30, 2021, the Company completed the SpotX Acquisition, pursuant to a Stock Purchase Agreement, dated as of February 4, 2021 (the "Purchase Agreement"), by and between the Company and RTL US Holdings, Inc. ("RTL"). The initial purchase price for the SpotX Acquisition was $560 million in cash ("Cash Consideration") and 14,000,000 shares of the Company's common stock. Per the terms of the Purchase Agreement, at the completion of the Company’s offering of its Convertible Senior Notes, RTL elected to increase the Cash Consideration by an amount equal to 20% of the gross proceeds of the Convertible Senior Notes (which amount was equal to $80 million) and to reduce the number of shares of common stock it would otherwise receive by a number of shares of common stock equal to 20% of the gross proceeds of the proposed offering of notes ($80 million) divided by the closing price of a share of our common stock on the trading day immediately prior to the date of pricing of the proposed offering of notes ($49.21). As a result of this election, the adjusted purchase price was $1.1 billion, prior to customary working capital adjustments and other adjustments, consisting of $640.0 million in cash plus 12,374,315 shares of common stock (based on the fair value of the Company's common stock on April 30, 2021). The Cash Consideration was subject to customary working capital and other adjustments. The working capital was approximately $65.2 million, including cash balances acquired and other working capital adjustments, resulting in a total purchase price of $1.2 billion. The Company financed the Cash Consideration through borrowings under the Term Loan B Facility and the Convertible Senior Notes (Note 13).

In accordance with ASC 805, the Company recorded the acquisition based on the fair value of the consideration transferred and then allocated the purchase price to the identifiable assets acquired and liabilities assumed based on their respective fair values as of the acquisition date. The excess of the value of consideration transferred over the aggregate fair value of those net assets was recorded as goodwill. Any identified definite lived intangible assets will be amortized over their estimated useful lives and any identified intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually. All intangible assets and goodwill will be tested for impairment when certain indicators are present. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, and selection of comparable companies.

For purposes of measuring the estimated fair value, where applicable, of the assets acquired and the liabilities assumed, the Company has applied the guidance in ASC 820, Fair Value Measurement, which establishes a framework for measuring fair value. In accordance with ASC 820, fair value is an exit price and is defined as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Under ASC 805, acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.

~~The following table summarizes the total purchase consideration (in thousands):~~


~~Cash Consideration~~	$	~~640,000~~
~~Stock Consideration (Fair Value of Shares of Magnite common stock)~~	~~495,591~~
~~Working capital adjustment~~	~~65,152~~
~~Total purchase consideration~~	$	~~1,200,743~~

The purchase consideration for the SpotX Acquisition included 12,374,315 shares of the Company's common stock with a fair value of approximately $495.6 million, based on the close price of the Company's common stock at closing on April 30, 2021, which was $40.05 per share, and working capital adjustment of $65.2 million, mainly consisting of cash balances acquired on the date of the SpotX Acquisition and other opening balance sheet adjustments.

During the three months ended March 31, 2022, the Company adjusted the preliminary purchase price allocation for SpotX based on updated fair values associated with the acquired assets and liabilities. Adjustments impacted acquisition related accounts payable and tax accruals. The Company finalized the purchase price allocation of SpotX in the second quarter of 2022, resulting in no additional changes to the purchase price allocation.

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The fair value of the purchase price was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the SpotX Acquisition as set forth below (in thousands):


~~Cash~~	$	~~81,967~~
~~Restricted cash~~	~~199~~
~~Accounts receivable~~	~~199,649~~
~~Prepaid and other assets, current~~	~~12,308~~
~~Fixed assets~~	~~6,823~~
~~Intangible assets~~	~~429,600~~
~~Right-of-use lease asset~~	~~10,055~~
~~Goodwill~~	~~782,719~~

~~Total assets to be acquired~~	~~1,523,320~~
~~Accounts payable and accrued expenses~~	~~205,822~~

~~Other current liabilities~~	~~1,091~~
~~Lease liabilities~~	~~12,625~~
~~Deferred tax liability, net~~	~~103,039~~
~~Total liabilities to be assumed~~	~~322,577~~
~~Total purchase price~~	$	~~1,200,743~~

The Company believes the amount of goodwill resulting from the purchase price allocation is primarily attributable to expected synergies from the assembled workforce, an increase in development capabilities, increased offerings to customers, and enhanced opportunities for growth and innovation. Goodwill will not be amortized but instead will be tested for impairment at least annually or more frequently if certain indicators of impairment are present. In the event that goodwill has become impaired, the Company will record an expense for the amount impaired during the quarter in which the determination is made. The acquired intangibles and goodwill resulting from the SpotX Acquisition are not amortizable for tax purposes.

~~The following table summarizes the components of the intangible assets and estimated useful lives as of the date of the SpotX Acquisition (dollars in thousands):~~


			~~Estimated Useful Life~~
~~Technology~~	$	~~280,400~~	~~5 years~~
~~Customer relationships~~	~~130,300~~		~~2 to 4 years~~
~~Backlog~~	~~11,100~~		~~<1 year~~
~~In-process research and development~~	~~5,800~~		3 years*
~~Non-compete agreements~~	~~1,500~~		~~1 year~~
~~Trademarks~~	~~500~~		~~<1 year~~
~~Total intangible assets acquired~~	$	~~429,600~~
* In-process research and development consists of six projects with a weighted-average useful life of 3 years. Amortization begins once associated projects are completed and it is determined the projects have alternative future use.

The fair value of the acquired technology and in-process research and development was valued using the Excess Earnings Method. This methodology included allocating future revenue projections to the existing technologies and applying decay rates and appropriate discount rates that reflect the respective intangible asset's relative risk profile when compared to other intangible assets as well as the discount rate for the overall business.

The Company used the Loss‐of‐Revenue and Income Method in its valuation of the existing customer relationships and non-compete agreements. To the extent that future cash flows of the business would be negatively affected in the absence of these relationships and non-compete agreements, they would be deemed to have economic value. This method attempts to quantify the scenario whereby the owner loses the right to the intangible asset and the resulting losses of revenue and income. Under this analysis, the value of the cash flows with the intangible asset is compared to the value of the cash flows without the intangible asset and the difference represents the value of the intangible asset. This methodology included applying a discount rate and the expected timing it would take to further enhance customer relationships.

The fair value of the backlog was based on the Excess Earnings Method, taking into consideration the existing contracts as of the date of the SpotX Acquisition and the respective cost to complete the servicing of the existing agreements. The resulting stream of after tax earnings were discounted to present value by applying an appropriate discount rate for the

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~~asset. The discount rate was selected based on the intangible asset’s relative risk profile when compared to the other intangible assets as well as the discount rate for the overall business.~~

The fair value of the trademarks was based on the Income Approach, specifically the Relief‐from‐Royalty Method. Under this method, data is obtained regarding actual royalty payments made for similar intangible assets. After the appropriate royalty rate is determined, the reasonable royalty savings is then discounted to its present value over the remaining technological, economic, or legal life of the intangible asset.

Intangible assets are generally amortized on a straight-line basis, which approximates the pattern in which the economic benefits are consumed, over their estimated useful lives. Amortization of developed technology is included in cost of revenues and the amortization of customer relationships, backlog, non-compete agreements, and trademarks is included in sales and marketing expenses in the condensed consolidated statements of operations. Once the projects associated with acquired in-process research and development are completed, amortization will be included in cost of revenues in the condensed consolidated statements of operations. The acquired intangible assets and goodwill resulting from the SpotX Acquisition are not tax deductible.

As part of the SpotX Acquisition, deferred tax liabilities were established. As a result of the deferred tax liability balance created by the acquisition, the Company reduced its deferred tax asset ("DTA") valuation allowance by $56.2 million for the year ended December 31, 2021. Such reduction was recognized as an income tax benefit in the post-acquisition consolidated statements of operations for the year ended December 31, 2021.

~~2021 Acquisition—SpringServe~~

On July 1, 2021, the Company, through its wholly-owned subsidiary, SpotX, completed the SpringServe Acquisition. As a result of the SpringServe Acquisition, SpringServe became a wholly-owned subsidiary of SpotX, and a wholly-owned indirect subsidiary of the Company.

~~The following table summarizes the total purchase consideration (in thousands):~~


~~Cash Consideration~~	$	~~31,136~~
~~SpotX initial cash investment in SpringServe~~	~~2,075~~
~~Fair value appreciation of SpotX purchase right~~	~~7,450~~
~~Indemnification claims - holdback~~	~~1,409~~
~~Total purchase consideration~~	$	~~42,070~~

In 2020, SpotX made a minority investment of $2.1 million in SpringServe in conjunction with a strategic partnership agreement between the two companies, which included an option agreement to purchase SpringServe. At the time of Magnite's acquisition of SpotX, the fair value of SpotX's minority investment and purchase right were valued at a combined $7.5 million for a total minority investment and purchase right of $9.5 million. In connection with the SpringServe Acquisition, $1.4 million of the purchase price was held back to cover possible indemnification claims.

The Company finalized the purchase price allocation of SpringServe in the third quarter of 2022, resulting in no additional changes to the purchase price allocation and the full payment of the $1.4 million holdback liability. The fair value of the purchase

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~~price was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the SpringServe Acquisition as set forth below (in thousands):~~


~~Cash~~	$	~~1,062~~
~~Accounts receivable~~	~~3,234~~
~~Prepaid and other assets, current~~	~~157~~
~~Fixed assets~~	25
~~Intangible assets~~	~~23,400~~
~~Right-of-use lease asset~~	~~1,879~~
~~Goodwill~~	~~24,156~~

~~Total assets to be acquired~~	~~53,913~~
~~Accounts payable and accrued expenses~~	~~2,475~~
~~Other current liabilities~~	35
~~Lease liabilities~~	~~3,179~~
~~Deferred tax liability, net~~	~~6,154~~
~~Total liabilities to be assumed~~	~~11,843~~
~~Total preliminary purchase price~~	$	~~42,070~~

~~The following table summarizes the components of the intangible assets and estimated useful lives as of the date of the SpringServe Acquisition (dollars in thousands):~~


			~~Estimated Useful Life~~
~~Technology~~	$	~~15,500~~	~~5 years~~
~~Customer relationships~~	~~5,700~~		~~2 years~~
~~Trademarks and Trade Names~~	~~900~~		~~3 years~~
~~In-process research and development~~	~~800~~		3 years*
~~Non-compete agreements~~	~~500~~		~~2 years~~
~~Total intangible assets acquired~~	$	~~23,400~~
* In-process research and development consists of two projects with a weighted-average useful life of 3 years. Amortization begins once associated projects are completed and it is determined the projects have alternative future use.

At the acquisition date, SpringServe had existing customer relationships. To the extent that future cash flows of the business would be negatively affected in the absence of these relationships, they would be deemed to have economic value. In addition, certain employees of SpringServe signed two year non-compete agreements. The Company used the Loss‐of‐Revenue and Income Method in its valuation of the existing customer relationships and non-compete agreements. This method attempts to quantify the scenario whereby the owner loses the right to the intangible asset and the resulting losses of revenue and income. Under this analysis, the value of the cash flows with the intangible asset is compared to the value of the cash flows without the intangible asset and the difference represents the value of the intangible asset. This methodology included applying a discount rate and the expected timing it would take to further enhance customer relationships.

The fair value of the trademarks and trade names were based on the Income Approach, specifically the Relief‐from‐Royalty Method. Under this method, data is obtained regarding actual royalty payments made for similar intangible assets. After the appropriate royalty rate is determined, the reasonable royalty savings is then discounted to its present value over the remaining technological, economic, or legal life of the intangible asset.

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the amortization of customer relationships, non-compete agreements, and trademarks is included in sales and marketing expenses in the condensed consolidated statements of operations. Once the projects associated with acquired in-process research and development are completed, amortization will be included in cost of revenues in the condensed consolidated statements of operations. The acquired intangibles and goodwill resulting from the SpringServe Acquisition are not tax deductible.

As part of the SpringServe Acquisition, deferred tax liabilities were established. As a result of this and the SpotX deferred tax liability balance, the Company recognized an income tax benefit in the post-acquisition consolidated statements of operations for the year ended December 31, 2021.

~~2021 Acquisition—Nth Party~~

The Company completed the acquisition of Nth Party, Ltd. ("Nth Party"), a developer of cryptographic software for secure audience data sharing and analysis, in December 2021 for a total purchase price of $9.0 million in cash. The Company acquired Nth Party as part of its strategy to further invest in the development and enhancement of industry leading identity and audience solutions. The allocation of purchase consideration resulted in approximately $5.4 million of developed technology intangible assets with an estimated useful life of 5 years, approximately $0.2 million non-compete intangible assets with an estimated useful life of 2 years, approximately $1.3 million of deferred tax liability, and goodwill of approximately $4.8 million, which is attributable to the workforce of Nth Party and revenue growth from the acquisition. Acquired intangibles and goodwill resulting from the Nth Party acquisition are not deductible for income tax purposes.

~~Unaudited Pro Forma Information~~

The following table provides unaudited pro forma information as if the SpotX and SpringServe Acquisitions had been acquired by the Company as of January 1, 2020. The unaudited pro forma information reflects adjustments for additional amortization resulting from the fair value adjustments to assets acquired and liabilities assumed, adjustments for alignment of accounting policies, and transaction expenses as if the SpotX and SpringServe Acquisitions occurred on January 1, 2020. The pro forma results do not include any anticipated cost synergies or other effects of the combined companies. Accordingly, pro forma amounts are not necessarily indicative of the results that actually would have occurred had the SpotX and SpringServe Acquisitions been completed on the dates indicated, nor is it indicative of the future operating results of the combined company. The table below excludes Nth Party as its impact on pro forma results were immaterial.

~~Nine Months Ended~~

~~September 30, 2021~~

~~(in thousands)~~

~~Pro Forma Revenue~~

~~379,180~~

~~Pro Forma Net Loss~~

~~(88,187)~~

2022 Acquisition—Carbon

The Company completed the acquisition ~~of the business~~ of Carbon (AI) Limited ("Carbon" and such acquisition the "Carbon Acquisition"), a platform that enables publishers to measure, manage, and monetize audience segments, in February 2022 for a total purchase price of $23.1 million in cash. Approximately $2.3 million of the purchase price was held back to cover possible indemnification claims, which ~~is expected to be~~was subsequently paid out in cash one year after the acquisition. The Company acquired Carbon as part of its strategy to further invest in the development and enhancement of industry leading identity and audience solutions. The allocation of purchase consideration resulted in an estimated $14.2 million of developed technology intangible assets with an estimated useful life of 5 years, $0.2 million non-compete intangible assets with an estimated useful life of 2 years, $0.2 million of customer relationships with an estimated useful life of 0.5 years, and goodwill of $8.5 million, which is attributable to the workforce of Carbon and revenue growth from the acquisition. For tax purposes, the Carbon Acquisition was treated as an asset acquisition. The acquisition of identified intangibles results in tax deductible amortization pursuant to IRC Section 197.February 2023.

Acquisition related costs associated with the Carbon Acquisition included in the "Merger, acquisition, and restructuring costs" in the Company's condensed consolidated statements of operations during the three and nine months ended September 30, 2022 were immaterial. In addition, Carbon's post-acquisition revenue and operating results on a standalone basis were immaterial.

Note 8—Merger, Acquisition, and Restructuring Costs

Merger, acquisition, and restructuring costs consist primarily of professional services fees and employee termination costs, including stock-based compensation charges, associated with the ~~Telaria Merger, the~~ SpotX Acquisition and restructuring activities.

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The following table summarizes merger, acquisition, and restructuring cost activity (in thousands):


		Three Months Ended			Nine Months Ended					Nine Months Ended
			September 30, 2021		September 30, 2022		September 30, 2021				September 30, 2023		September 30, 2022
		(in thousands)									(in thousands)
Professional services (investment banking advisory, legal and other professional services)			$	1,064	$	917	$	28,032
Personnel related (severance and one-time termination benefit costs)	Personnel related (severance and one-time termination benefit costs)		1,312		1,227		6,176		Personnel related (severance and one-time termination benefit costs)		$	3,218	$	1,227
Loss contracts (facilities related)									Loss contracts (facilities related)		2,190		—
Exit costs									Exit costs		1,408		—
Impairment of property and equipment, net									Impairment of property and equipment, net		506		—
Non-cash stock-based compensation (double-trigger acceleration and severance)	Non-cash stock-based compensation (double-trigger acceleration and severance)		48		2,004		1,070		Non-cash stock-based compensation (double-trigger acceleration and severance)		143		2,004
Impairment costs of abandoned technology	Impairment costs of abandoned technology		—		3,320		—		Impairment costs of abandoned technology		—		3,320
Loss contracts (lease related)			—		—		2,500
Professional services (investment banking advisory, legal and other professional services)									Professional services (investment banking advisory, legal and other professional services)		—		$	917
Total merger, acquisition, and restructuring costs	Total merger, acquisition, and restructuring costs		$	2,424	$	7,468	$	37,778	Total merger, acquisition, and restructuring costs		$	7,465	$	7,468

During the ~~three~~nine months ended September 30, 2023 and 2022, the Company incurred merger, acquisition, and restructuring costs of $7.5 million. During the nine months ended September 30, 2023, these activities included the Company's reduction of its global workforce primarily associated with the elimination of duplicative roles and other costs associated with the consolidation of its legacy CTV and SpotX CTV platforms following the SpotX Acquisition, including loss contracts for office facilities the Company does not plan to continue to occupy and impairment charges related to certain assets it no longer plans to utilize. During the nine months ended September 30, 2022 ~~and 2021,~~ the Company incurred restructuring costs ~~of zero and $7.5 million, respectively, and $2.4 million and $37.8 million, respectively, primarily related to restructuring expenses and costs associated with~~following the ~~acquisitions of~~ SpotX ~~and SpringServe.~~Acquisition.

Accrued restructuring costs related to mergers and acquisitions were ~~$1.4~~$1.6 million and ~~$2.7~~$1.2 million at September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and were primarily related to the ~~SpotX Acquisition, the SpringServe Acquisition,~~Company's consolidation of its platforms as mentioned above and the Telaria Merger. Accrued restructuring costs associated with personnel costs are included within accounts payable and accrued expenses and accruals related to ~~the assumed loss contracts~~exit costs are included within other current liabilities and other liabilities, non-current on the Company's condensed consolidated balance sheets.


	(in thousands)
Accrued restructuring costs at December 31, ~~2021~~2022	$	~~2,742~~1,222
~~Restructuring costs, personnel~~Personnel related and non-cash stock-based compensation	~~3,231~~3,361
~~Restructuring costs, impairments~~Loss contracts (facilities related)	~~3,320~~2,190
Exit costs	1,408
Impairment of property and equipment, net	506
Cash paid for restructuring costs	~~(2,571)~~(4,254)
Non-cash loss contracts (facilities related)	(2,190)
Non-cash impairments	~~(3,320)~~(506)
Non-cash stock-based compensation	~~(2,004)~~(143)
Accrued restructuring costs at September 30, ~~2022~~2023	$	~~1,398~~1,594

~~Note 9—Stock-Based Compensation~~

In connection with its IPO, the Company implemented its 2014 Equity Incentive Plan, which governs equity awards made to employees and directors of the Company since the IPO. Prior to the IPO, the Company granted equity awards under its 2007 Stock Incentive Plan, which governs equity awards made to employees and contractors prior to the IPO. In November 2014, the Company approved the 2014 Inducement Grant Equity Incentive Plan (the "Inducement Plan"), which governs certain equity awards made to certain employees in connection with commencement of employment. In connection with the Company's acquisitions of Chango Inc. ("Chango"), iSocket, Inc. ("iSocket"), and nToggle, Inc. ("nToggle") it assumed the existing employee equity award plans, the 2009 Chango Stock Option Plan (the "Chango Plan"), the iSocket 2009 Equity Incentive Plan (the "iSocket Plan"), and the nToggle 2014 Equity Incentive Plan (the "nToggle Plan"). In connection with the Merger with Telaria, the Company assumed Telaria's 2013 Equity Incentive Plan, as amended (the "Telaria Plan"); the 2008 Stock Plan, as amended (the "2008 Stock Plan"); and the ScanScout, Inc. 2009 Equity Incentive Plan, as amended (the "ScanScout Plan"). All compensatory equity awards outstanding at September 30, 2022 were issued pursuant to the 2014 Equity Incentive Plan, the nToggle Plan, the Telaria Plan, the 2008 Stock Plan, the Inducement Plan, or the Company's 2007 Stock Incentive Plan.

The Company’s equity incentive plans provide for the grant of equity awards, including non-statutory or incentive stock options, restricted stock awards ("RSAs"), restricted stock units that vest based on continuous service ("RSUs"), and restricted stock units that include performance criteria (“performance stock units” or "PSUs"), to the Company's employees, officers, directors, and consultants. The Company's board of directors administers the plans. Options vest based upon continued service at varying rates, but generally over four years from issuance with 25% vesting after one year of service and the remainder vesting monthly thereafter. RSAs and RSUs vest at varying rates, typically approximately 25% vesting after approximately one year of service and the remainder vesting annually, semi-annually, or quarterly thereafter. The restricted stock units granted in 2022 included 0.4 million

2216

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awards that vest 50% on each of the first and second anniversaries of the grant date. Options, RSAs, and RSUs granted under the plans accelerate under certain circumstances for certain participants upon a change in control, as defined in the governing plan. No further awards were granted under the iSocket Plan, the Chango Plan, or the nToggle Plan from the date of acquisition and no further awards were granted under the 2007 Stock Incentive Plan since the IPO. Available shares under the nToggle Plan and the Telaria Plan were rolled into the available share pool under the 2014 Equity Incentive Plan at the time of acquisition of each company, and available shares under the 2007 Stock Incentive Plan were rolled into the available share pool under the 2014 Equity Incentive Plan at the time of the IPO. An aggregate of 14,322,384 shares remained available for future grants at September 30, 2022 under the plans. The 2014 Equity Incentive Plan has an evergreen provision pursuant to which the share reserve will automatically increase on January 1st ~~of each year in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31~~st of the preceding calendar year, although the Company’s board of directors may provide for a lesser increase, or no increase, in any year. The 2014 Inducement Grant Equity Incentive Plan has a provision pursuant to which the share reserve may be increased at the discretion of the Company's board of directors.Note 9—Stock-Based Compensation

Stock Options

A summary of stock option activity for the nine months ended September 30, ~~2022~~2023 is as follows:

Shares Under Option Weighted- Average Exercise Price Weighted- Average Contractual Life Aggregate Intrinsic Value

(in thousands) (in thousands)
Outstanding at December 31, 2021 5,129 $ 7.25
Granted 699 $ 13.90
Exercised (514) $ 3.45
Expired (391) $ 5.72
Forfeited (123) $ 12.27
Outstanding at September 30, 2022 4,800 $ 8.62 5.7 years $ 6,100
Exercisable at September 30, 2022 3,583 $ 6.87 4.8 years $ 5,556


	Shares Under Option	Weighted- Average Exercise Price		Weighted- Average Contractual Life	Aggregate Intrinsic Value
	(in thousands)				(in thousands)
Outstanding at December 31, 2022	4,672	$	8.71
Granted	130	$	10.59
Exercised	(392)	$	5.49
Expired	(144)	$	21.08

Outstanding at September 30, 2023	4,266	$	8.65	5.6 years	$	8,281
Exercisable at September 30, 2023	3,550	$	7.36	5.1 years	$	8,026

The total intrinsic value of options exercised during the nine months ended September 30, ~~2022~~2023 was ~~$4.6~~$2.2 million. At September 30, ~~2022,~~2023, the Company had unrecognized employee stock-based compensation expense relating to nonvested stock options of approximately ~~$9.4~~$6.5 million, which is expected to be recognized over a weighted-average period of ~~2.5~~2.1 years. Total grant date fair value of options vested during the nine months ended September 30, ~~2022~~2023 was ~~$4.4~~$3.9 million.

The Company estimates the fair value of stock options that contain service and/or performance conditions using the Black-Scholes option pricing model. The grant date fair value of options granted during the nine months ended September 30, ~~2022~~2023 was ~~$8.93~~$7.27 per share. The weighted-average input assumptions used by the Company were as follows:

Three Months Ended Nine Months Ended
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
Expected term (in years) N/A 5.0 5.0 5.0
Risk-free interest rate N/A 0.90 % 1.63 % 0.88 %
Expected volatility N/A 79 % 79 % 79 %
Dividend yield N/A — % — % — %

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	Nine Months Ended
		September 30, 2023		September 30, 2022
Expected term (in years)		5.0		5.0
Risk-free interest rate		3.99	%	1.63	%
Expected volatility		84	%	79	%
Dividend yield		—	%	—	%

Restricted Stock Units

A summary of restricted stock unit ("RSU") activity for the nine months ended September 30, ~~2022~~2023 is as follows:

Number of Shares Weighted-Average Grant Date Fair Value
(in thousands)
Restricted stock units outstanding at December 31, 2021 6,634 $ 18.39
Granted 7,368 $ 13.43
Canceled (1,362) $ 15.71
Vested and released (2,670) $ 15.83
Restricted stock units outstanding at September 30, 2022 9,970 $ 15.78
Restricted stock units outstanding and unvested* 9,952 * $ 15.79
*At September 30, 2022, outstanding restricted stock units included 18,436 units that were vested but deferred.


	Number of Shares	Weighted-Average Grant Date Fair Value
	(in thousands)
Restricted stock units outstanding at December 31, 2022	10,000	$	15.06
Granted	7,244	$	10.81
Canceled	(1,300)	$	13.44
Vested and released	(3,853)	$	14.33
Restricted stock units outstanding at September 30, 2023	12,091	$	12.92

The weighted-average grant date fair value per share of restricted stock units granted during the nine months ended September 30, ~~2022~~2023 was ~~$13.43.~~$10.81. The ~~aggregate fair~~intrinsic value of restricted stock units that vested during the nine months ended September 30, ~~2022~~2023 was ~~$30.3~~$44.5 million. At September 30, ~~2022,~~2023, the intrinsic value of unvested restricted stock units was ~~$65.4~~$91.2 million. At September 30, ~~2022,~~2023, the Company had unrecognized stock-based compensation expense relating to unvested restricted stock units of approximately ~~$135.1~~$135.3 million, which is expected to be recognized over a weighted-average period of 2.8 years.

Performance Stock Units

~~In April 2020, April 2021, and February 2022, the~~The Company has granted ~~the Company's CEO 146,341, 26,291, and 86,806~~ performance stock units ("PSU") to select executive employees that vest based on share price metrics tied to total shareholder return relative to a peer group over a three-year ~~period with a fair value of $0.9 million, $1.4 million, and $1.5 million, respectively.~~period. The grant date fair value ~~per share of these grants was $6.15, $52.49, and $17.28, respectively, which~~for such PSUs was estimated using a Monte-Carlo ~~lattice model. At September 30, 2022,~~simulation model that incorporates option-pricing inputs covering the ~~Company had unrecognized employee stock-based compensation expense for~~period from the ~~April 2020, April 2021, and February 2022 grants~~grant date

Table of ~~approximately $0.2 million, $0.7 million, and $1.2 million, which is expected to be recognized over~~Contents

through the ~~remaining 0.5 years, 1.5 years, and 2.3 years, respectively.~~end of the performance period. Between 0% and 150% of the performance stock units will vest on the third anniversary of ~~its~~the respective grant date.

~~In August 2021, the~~The Company has additionally granted PSUs to the Company's CEO ~~379,635 performance stock units,~~ which are subject to both time-based and performance-based vesting conditions. The ~~performance stock units~~PSUs consist of three equal tranches (each, a "Performance Tranche"), based on achievement of a share price condition if the Company achieves share price targets of $60.00, $80.00, and $100.00, respectively, over 60 consecutive trading days during a performance period commencing on August 26, 2022 and ending on August 26, 2026. The grant date fair value for such PSUs was estimated using a Monte-Carlo simulation model that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. To the extent any of the performance-based requirements are met, the Company's CEO must also provide continued service to the Company through at least August 26, 2024 to receive any shares of common stock underlying the grant and through August 26, 2026 to receive all of the shares of common stock underlying the performance units that have satisfied the applicable performance-based requirement.

The fair value of each of the Performance Tranches was $3.0 million, $2.8 million, and $2.6 million, respectively, and have a grant date fair value per share of restricted stock of $23.94, $21.93, and $20.30, respectively, which was estimated using a Monte-Carlo lattice model. At September 30, 2022, the Company had unrecognized employee stock-based compensation expense of approximately $1.9 million, $2.0 million, and $2.0 million, which is expected to be recognized over the remaining 1.9 years, 2.9 years, and 3.9 years, respectively. Between 0% and 100% of the performance stock units will vest on each of the tranche dates.

During the three months ended September 30, 2022 and 2021, the Company recognized $0.9 million and $0.4 million, respectively, of stock-based compensation related to these performance stock units. During the nine months ended September 30, 2022 and 2021, the Company recognized $2.6 million and $0.7 million, respectively, of stock-based compensation related to these performance stock units. Stock-based compensation expense for ~~these awards~~PSUs is based on a performance measurement of 100%. The compensation expense will not be reversed if the performance metrics are not met.

~~Employee Stock Purchase Plan~~A summary of performance stock units activity for the nine months ended September 30, 2023 is as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value
	(in thousands)
Outstanding at December 31, 2022	639	$	19.02
Granted	474	$	13.32
Vested	(138)	$	6.15
Forfeited	(8)	$	6.15
Outstanding at September 30, 2023	967	$	18.17

~~In November 2013,~~The grant date fair value for the PSUs was estimated using a Monte-Carlo simulation model. The weighted-average input assumptions used by the Company ~~adopted the Company's 2014 Employee Stock Purchase Plan ("ESPP").~~ were as follows:


	Nine Months Ended
		September 30, 2023		September 30, 2022
Expected term (in years)		3.0		3.0
Risk-free interest rate		4.19	%	1.39	%
Expected volatility of Magnite		94	%	84	%
Expected volatility of selected peer companies		64	%	63	%
Expected correlation coefficients of Magnite		0.62		0.56
Expected correlation coefficients of selected peer companies		0.54		0.52
Dividend yield		—	%	—	%

The ESPP is designed to enable eligible employees to periodically purchase shares of the Company's common stock at a discount through payroll deductions of up to 10% of their eligible compensation, subject to any plan limitations. At the end of each six-month offering period, employees are able to purchase shares at a price per share equal to 85% of the lower of the fair marketintrinsic value of performance stock units that vested during the

~~Table~~ nine months ended September 30, 2023 was $1.2 million. At September 30, 2023, the intrinsic value of ~~Contents~~

~~Company's common~~unvested performance stock units based on ~~the first trading day of the offering period or on the last trading day of the offering period. Offering periods generally commence and end in May and November of each year.~~

expected achievement levels was $1.5 million. As of September 30, ~~2022,~~2023, the Company ~~has reserved 4,018,635 shares~~had unrecognized stock-based compensation expense relating to outstanding PSUs of ~~its common stock for issuance under the ESPP. The ESPP has an evergreen provision pursuant to~~approximately $9.4 million, which ~~the share reserve~~ will ~~automatically increase on January 1st~~be recognized over a weighted-average period of each year in an amount equal to 1% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year, although the Company’s board of directors may provide for a lesser increase, or no increase, in any year.2.4 years.

Stock-Based Compensation Expense

Total stock-based compensation expense recorded in the condensed consolidated statements of operations was as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
		(in thousands)				(in thousands)					(in thousands)				(in thousands)
Cost of revenue	Cost of revenue	$	424	$	278	$	1,191	$	530	Cost of revenue	$	446	$	424	$	1,373	$	1,191
Sales and marketing	Sales and marketing	5,491		4,583		16,257		10,426		Sales and marketing	6,371		5,491		20,869		16,257
Technology and development	Technology and development	6,576		3,828		16,645		8,195		Technology and development	4,999		6,576		15,918		16,645
General and administrative	General and administrative	4,911		3,087		14,096		8,299		General and administrative	5,652		4,911		17,159		14,096
Merger, acquisition, and restructuring costs	Merger, acquisition, and restructuring costs	—		48		2,004		1,071		Merger, acquisition, and restructuring costs	—		—		143		2,004
Total stock-based compensation expense	Total stock-based compensation expense	$	17,402	$	11,824	$	50,193	$	28,521	Total stock-based compensation expense	$	17,468	$	17,402	$	55,462	$	50,193

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On January 1, 2023, pursuant to the evergreen provision in the Company's 2014 Equity Incentive Plan, the Company increased the aggregate number of shares of common stock that may be issued pursuant to stock awards by 6,700,286 shares. On June 14, 2023, the Company's stockholders approved the Magnite, Inc. Amended and Restated 2014 Equity Incentive Plan (the "Amended and Restated 2014 Equity Incentive Plan"), which, among other things, increased the aggregate maximum number of shares of common stock that may be issued pursuant to stock awards by 8,056,129, removed the prior evergreen provision, and extended the plan through April 2033. As of September 30, 2023, an aggregate of 23,056,794 shares remained available for future grants under the Company's Amended and Restated 2014 Equity Incentive Plan.

On January 1, 2023, pursuant to the evergreen provision in the Company's 2014 Employee Stock Purchase Plan, the Company increased the aggregate number of shares of common stock that may be issued pursuant to the Company's 2014 Employee Stock Purchase Plan by 1,340,057 shares. On June 14, 2023, the Company's stockholders approved the Magnite, Inc. Amended and Restated 2014 Employee Stock Purchase Plan (the "Amended and Restated 2014 Employee Stock Purchase Plan"), which, among other things, removed the evergreen provision and extended the plan through June 2033. As of September 30, 2023, the Company has reserved 4,968,034 shares of its common stock for issuance under the Company's Amended and Restated 2014 Employee Stock Purchase Plan ("ESPP").

Note 10—Income Taxes

In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date income. The Company's annual estimated effective tax rate differs from the statutory rate primarily as a result of state taxes, foreign taxes, deductible stock option expenses, nondeductible executive compensation, and changes in the Company's valuation allowance.

The Company recorded an income tax benefit of ~~$0.4~~$1.0 million and ~~$4.7~~$0.6 million for the three and nine months ended September 30, ~~2022 and 2021,~~2023, respectively, and an income tax benefit of ~~$2.5~~$0.4 million and ~~$92.2~~$2.5 million for the three and nine months ended September 30, 2022, ~~and 2021,~~ respectively. The tax benefit for the three and nine months ended September 30, 2023 and September 30, 2022 isare primarily the result of ~~recognizing~~ the ~~benefit of DTAs previously~~Company's ability to recognize deferred tax assets ("DTAs") subject to the domestic valuation allowance and the foreign income tax provision. The tax benefit for the three and nine months ended September 30, 2021 was primarily the result of the deferred tax liability associated with acquisitions that occurred during the year and the tax liability associated with foreign subsidiaries. The net deferred tax liabilities recorded in connection with the prior year acquisitions and our current year taxable income provided additional sources of taxable income to support the realizability of pre-existing DTAs. The Company continues to maintain a partial valuation allowance for the domestic DTAs.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law. The IRA includes a new corporate alternative minimum tax (the “Corporate AMT”) of 15% on the adjusted financial statement income (the “AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period. The Corporate AMT is effective for tax years beginning after December 31, 2022 and is not expected to impact the Company. Additionally, the IRA imposes an excise tax of 1% on the fair market value of net stock repurchases made after December 31, 2022. The ~~impact of this latter provision to~~Company has not repurchased shares during the ~~Company will be dependent upon the extent of share repurchases made in future periods.~~nine months ended September 30, 2023.

Due to uncertainty as to the realization of benefits from the Company's domestic and certain international DTAs, including net operating loss carryforwards and research and development tax credits, the Company has a partial valuation allowance reserved against such assets. The Company intends to continue to maintain a partial valuation allowance on the DTAs until there is sufficient evidence to support the reversal of all or some additional portion of these allowances.

Due to the net operating loss carryforwards, all of the Company's United States federal and a majority of its state returns are open to examination by the Internal Revenue Service and state jurisdictions for all years since inception. ~~The 2017 U.S. Income Tax Return for Telaria, Inc. was under examination by the IRS, which was closed during the period ended June 30, 2021 with no change to tax as reported.~~ For the Netherlands, Malaysia, India, Sweden, and the United Kingdom, all tax years remain open for examination by the local country tax authorities, for France only ~~2018~~2020 and forward are open, for ~~examination, for~~ Singapore ~~2017~~only 2019 and forward are open for examination, for Australia, Brazil, ~~Canada,~~ Germany, ~~Italy,~~and New Zealand 2018 and ~~Malaysia 2016~~forward are open for examination, for Canada 2017 and forward are open for examination, and for Japan ~~2014~~and Italy 2016 and forward remain open for examination.

Pursuant to Section 382 of the Internal Revenue Code, the Company and Telaria, Inc. both underwent ownership changes for tax purposes (i.e. a more than 50% change in stock ownership in aggregated 5% shareholders) on April 1, 2020 due to the

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Telaria Merger. As a result, the use of our total domestic NOL carryforwards and tax credits generated prior to the ownership change will be subject to annual use limitations under Section 382 and Section 383 of the Code and comparable state income tax laws. The Company believes that the ownership change will not impact our ability to utilize substantially all of our NOLs and state research and development carryforward tax credits to the extent it will generate taxable income that can be offset by such losses. The Company reasonably expects its pre-2021 federal research and development carryforward tax credits will not be recovered prior to expiration.

There was no material change to the Company's unrecognized tax benefits in the nine months ended September 30, ~~2022~~2023 and the Company does not expect to have any material changes to unrecognized tax benefits through the end of the fiscal year.

Note 11—Lease Obligations

For the three months ended September 30, 2022 and 2021, the Company recognized $5.9 million and $4.9 million, respectively, and $17.0 million and $15.7 million during the nine months ended September 30, 2022 and 2021, respectively, ofOperating lease expense ~~under ASC 842, which included operating lease expenses~~ associated with leases included in the lease liability and right of use ("ROU") asset on the condensed consolidated balance ~~sheets.~~sheets were $5.9 million and $5.9 million for the three months ended September 30, 2023 and 2022,

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respectively, and $18.8 million and $17.0 million, for the nine months ended September 30, 2023 and 2022, respectively. For ~~short-term leases~~lease expenses not included in the Company's ROU asset and lease liability balances, the Company recognized short term lease expense of $0.1 million and $0.3 million and ~~$0.4~~variable lease expense of $0.9 million and $0.7 million during the three months ended September 30, 2023 and 2022, ~~and 2021, respectively,~~respectively. The Company recognized short term lease expense of $0.4 million and $0.9 million and ~~$1.0~~variable lease expense of $2.7 million and $1.9 million during the nine months ended September 30, 2023 and 2022, and 2021, respectively, of lease expense. In addition, the Company recognized $15.1 million and $9.9 million during the three months ended September 30, 2022 and 2021, respectively, and $39.3 million and $24.6 million during the nine months ended September 30, 2022 and 2021, respectively, of variable and cloud-based services expense related to data centers that are not included in the ROU asset or lease liability balances.respectively.

The Company also received rental income of $1.3 million and ~~$1.0~~$1.3 million for real estate leases for which it subleases the property to third parties during the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$3.9~~$4.0 million and ~~$3.3~~$3.9 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

As of September 30, 2023 and December 31, 2022, a weighted average discount rate of ~~5.83%~~6.19% and 6.11%, respectively, has been applied to the remaining lease payments to calculate the lease liabilities included within the condensed consolidated balance sheet. The lease terms of the Company’s operating leases generally range from one year to ten years, and the weighted average remaining lease term of leases included in the lease liability is ~~5.9~~5.3 years and 5.6 years as of September 30, ~~2022.~~2023 and December 31, 2022, respectively.

The maturity of the Company's lease liabilities associated with leases included in the lease liability and ROU asset were as follows as of September 30, ~~2022~~2023 (in thousands):


Fiscal Year	Fiscal Year			Fiscal Year
Remaining 2022		$	6,183
2023		22,676
Remaining 2023				Remaining 2023	$	6,576
2024	2024	19,806		2024	23,534
2025	2025	12,057		2025	15,232
2026	2026	9,976		2026	12,217
2027				2027	7,664
Thereafter	Thereafter	28,164		Thereafter	22,152
Total lease payments (undiscounted)	Total lease payments (undiscounted)	98,862		Total lease payments (undiscounted)	87,375
Less: imputed interest	Less: imputed interest	(15,122)		Less: imputed interest	(12,437)
Lease liabilities—total (discounted)	Lease liabilities—total (discounted)	$	83,740	Lease liabilities—total (discounted)	$	74,938

In addition to the lease liabilities included in these condensed consolidated financial statements at September 30, 2022, during the nine months ended September 30, 2022, the Company entered into agreements for office space and data centers that have not commenced as of September 30, 2022; therefore, they are not included in the lease liability on the balance sheet as of September 30, 2022. The Company has future commitments totaling $6.8 million with a weighted average term of 3.2 years.

Note 12—Commitments and Contingencies

Commitments

The Company has commitments under non-cancelable operating leases for facilities, certain equipment, and its managed data center facilities (Note 11).

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~$5.3~~$5.2 million and ~~$5.1~~$5.3 million, respectively, of letters of credit associated with office leases available for borrowing, ofon which there were no outstanding borrowings as of either date.

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In the normal course of business, the Company enters into non-cancelable contractual obligations with various parties, primarily related to software services agreements and data center ~~providers that are not included in the Company's lease liability obligations and ROU assets.~~providers. As of September 30, ~~2022,~~2023, the Company's outstanding non-cancelable contractual obligations with a remaining term of one year or longer consist of the following (in thousands):


Fiscal Year	Fiscal Year			Fiscal Year
Remaining 2022		$	808
2023		7,509
Remaining 2023				Remaining 2023	$	21,268
2024	2024	5,478		2024	66,454
2025	2025	1,177		2025	23,667

Total	Total	$	14,972	Total	$	111,389

~~Additionally, as of September 30, 2022, the Company has an agreement for third-party~~The amounts above include commitments under a cloud-managed services ~~containing commitments that are variable in nature. Under this~~ agreement, under which the Company has a non-cancelable minimum spend commitment from July 2023 to June 2025 ~~based on actual spend, as defined~~of $57.6 million in ~~the agreement, with the third-party provider from July 2022 to June 2023. The estimated non-cancelable minimum obligation for~~each twelve-month period (i.e. July 2023 to June ~~2025 is $21 million based on spend in the three months ended September 30, 2022. Per the agreement, the commitment from~~2024 and July ~~2023~~2024 to June ~~2025 will generally increase as~~2025). The minimum spend commitment reflected above approximates the ~~amount of spend during the period from July 2022 to June 2023 increases. Because~~manner in which the Company expects to ~~continue to spend under this agreement through June 2023,~~fulfill the ~~Company also expects that the minimum future commitment will increase as a result~~obligations.

Table of ~~the higher level of spend.~~Contents

Guarantees and Indemnification

The Company’s agreements with sellers, buyers, and other third parties typically obligate the Company to provide indemnity and defense for losses resulting from claims of intellectual property infringement, damages to property or persons, business losses, or other liabilities. Generally, these indemnity and defense obligations relate to the Company’s own business operations, obligations, and acts or omissions. However, under some circumstances, the Company agrees to indemnify and defend contract counterparties against losses resulting from their own business operations, obligations, and acts or omissions, or the business operations, obligations, and acts or omissions of third parties. For example, because the Company’s business interposes the Company between buyers and sellers in various ways, buyers often require the Company to indemnify them against acts and omissions of sellers, and sellers often require the Company to indemnify them against acts and omissions of buyers. In addition, the Company’s agreements with sellers, buyers, and other third parties typically include provisions limiting the Company’s liability to the counterparty, and the counterparty’s liability to the Company. These limits sometimes do not apply to certain liabilities, including indemnity obligations. These indemnity and limitation of liability provisions generally survive termination or expiration of the agreements in which they appear. The Company has also entered into indemnification agreements with its directors, executive officers, and certain other officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No material demands have been made upon the Company to provide indemnification under such agreements and there are no claims that the Company is aware of that could have a material effect on the Company’s consolidated financial statements.

Litigation

The Company and its subsidiaries may from time to time be parties to legal or regulatory proceedings, lawsuits and other claims incident to their business activities and to the Company’s status as a public company. Such matters may include, among other things, assertions of contract breach or intellectual property infringement, claims for indemnity arising in the course of the Company’s business, regulatory investigations or enforcement proceedings, and claims by persons whose employment has been terminated. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, management is unable to ascertain the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance or recoverable from third parties, or the financial impact with respect to such matters as of September 30, ~~2022.~~2023. However, based on management’s knowledge as of September 30, ~~2022,~~2023, management believes that the final resolution of these matters known at such date, individually and in the aggregate, will not have a material adverse effect upon the Company’s consolidated financial position, results of operations or cash flows.

Employment Contracts

The Company has entered into severance agreements with certain employees and officers. The Company may be required to pay severance and accelerate the vesting of certain equity awards in the event of involuntary terminations.

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Note 13—Debt

Long term debt as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following:


		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
		(in thousands)					(in thousands)
Convertible Senior Notes	Convertible Senior Notes	$	400,000	$	400,000	Convertible Senior Notes	$	275,067	$	400,000
Less: Unamortized debt issuance cost	Less: Unamortized debt issuance cost	(7,927)		(9,643)		Less: Unamortized debt issuance cost	(3,878)		(7,355)
Net	Net	392,073		390,357		Net	271,189		392,645
Term Loan B Facility	Term Loan B Facility	355,500		358,200		Term Loan B Facility	351,900		354,600
Less: Unamortized discount and debt issuance cost	Less: Unamortized discount and debt issuance cost	(21,896)		(24,934)		Less: Unamortized discount and debt issuance cost	(17,880)		(20,888)
Net	Net	333,604		333,266		Net	334,020		333,712
Less: Current portion	Less: Current portion	(3,600)		(3,600)		Less: Current portion	(3,600)		(3,600)
Total non-current debt	Total non-current debt	$	722,077	$	720,023	Total non-current debt	$	601,609	$	722,757

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Maturities of the principal amount of the Company's long-term debt as of September 30, ~~2022~~2023 are as follows (in thousands):


Fiscal Year	Fiscal Year			Fiscal Year
Remaining 2022		$	900
2023		3,600
Remaining 2023				Remaining 2023	900
2024	2024	3,600		2024	3,600
2025	2025	3,600		2025	3,600
2026	2026	403,600		2026	278,667
2027				2027	3,600
Thereafter	Thereafter	340,200		Thereafter	336,600
Total	Total	$	755,500	Total	$	626,967

Amortization of the debt issuance cost and the discount associated with our indebtedness totaled $1.4 million and $4.5 million for the three and nine months ended September 30, 2023, respectively, and $1.6 million and $4.8 million for the three and nine months ended September 30, 2022, ~~respectively, and $1.6 million and $2.9 million for the three and nine months ended September 30, 2021,~~ respectively. Amortization of debt issuance costs is computed using the effective interest method and is included in interest expense. In addition, amortization of deferred financing costs was $0.1 million and $0.3 million for the three and nine months ended September 30, ~~2022,~~2023, respectively, and $0.1 million and $0.3 million for the three and nine months ended September 30, ~~2021,~~2022, respectively. Deferred financing costs are included ~~within~~in prepaid expenses and other current assets and other assets, non-current assets.

Convertible Senior Notes and Capped Call Transactions

In March 2021, the Company issued $400.0 million aggregate principal amount of 0.25% convertible senior notes in a private placement, including $50.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the initial purchasers (collectively, the "Convertible Senior Notes"). The Convertible Senior Notes will mature on March 15, 2026, unless earlier repurchased, redeemed or converted. The total net proceeds from the offering, after deducting debt issuance costs, paid by the Company, were approximately $388.6 million. The Company used approximately $39.0 million of the net proceeds from the offering to pay for the Capped Call Transactions (as described below).

The Convertible Senior Notes are senior, unsecured obligations and are (i) equal in right of payment with the existing and future senior, unsecured indebtedness; (ii) senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated to the Convertible Senior Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness, including amounts outstanding under our Loan Agreement or our new Credit Agreement (see section below); and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of the Company’s subsidiaries that do not guarantee the Convertible Senior Notes.

The Convertible Senior Notes accrue interest at 0.25% per annum payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2021. The Convertible Senior Notes will mature on March 15, 2026 unless they are redeemed, repurchased or converted prior to such date. The Convertible Senior Notes are convertible at the option of holders only during certain periods and upon satisfaction of certain conditions.

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Holders have the right to convert their notes (or any portion of a note in an authorized denomination), in the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the five consecutive business days immediately after any ten consecutive trading day period (such ten consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (iii) upon the occurrence of certain corporate events or distributions on the Company’s common stock; (iv) if the Company calls such Convertible Senior Notes for redemption; and (v) on or after September 15, 2025, until the close of business on the second scheduled trading day immediately before the maturity date, holders of the Convertible Senior Notes may, at their option, convert all or a portion of their Convertible Senior Notes regardless of the foregoing conditions at any time from, and including, September 15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date.

Upon conversion, the Convertible Senior Notes may be settled in shares of the Company’s common stock, cash or a combination of cash and shares of the Company’s common stock, at the Company’s election. All conversions with a conversion date

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that occurs on or after September 15, 2025 will be settled using the same settlement method, and the Company will send notice of such settlement method to noteholders no later than the open of business on September 15, 2025.

The Company may not redeem the Convertible Senior Notes at their option at any time before March 20, 2024. Subject to the terms of the indenture agreement, the Company has the right, at its election, to redeem all, or any portion (subject to the partial redemption limitation) in an authorized denomination, of the Convertible Senior Notes, at any time, and from time to time, on a redemption date on or after March 20, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, for cash, but only if the "last reported sale price," as defined under the Offering Memorandum, per share of common stock exceeds 130% of the “conversion price” on (i) each of at least 20 trading days, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date we send such notice. In addition, calling any note for redemption will constitute a "make-whole fundamental change" (as defined below) with respect to that note, in which case the conversion rate applicable to the conversion of that note will be increased in certain circumstances if it is converted after it is called for redemption. If the Company elects to redeem less than all of the outstanding notes, then the redemption will not constitute a make-whole fundamental change with respect to the notes not called for redemption, and holders of the notes not called for redemption will not be entitled to an increased conversion rate for such notes as described above on account of the redemption, except to the limited extent described further below. No sinking fund is provided for the Convertible Senior Notes, which means that the Company is not required to redeem or retire the Convertible Senior Notes periodically.

If a fundamental change occurs, then each noteholder will have the right to require the Company to repurchase its notes (or any portion thereof in an authorized denomination) for cash on a date (the "fundamental change repurchase date") of the Company’s choosing, which must be a business day that is no more than 45, nor less than 20, business days after the date the Company distributes the related fundamental change notice.

If an event of default, other than a reporting default remedied by special interest as defined in the indenture agreement, occurs with respect to the Company or any guarantor, then the principal amount of, and all accrued and unpaid interest on, all of the notes then outstanding will immediately become due and payable without any further action or notice by any person. If an event of default (other than a reporting event of default described above with respect to the Company or any guarantor and not solely with respect to a significant subsidiary of the Company’s or a guarantor, other than the Company or such guarantor) occurs and is continuing, then, the trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of notes then outstanding, by written notice to the Company and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the notes then outstanding to become due and payable immediately.

The Convertible Senior Notes have an initial conversion rate of 15.6539 shares of common stock per $1,000 principal amount of the Convertible Senior Notes, which will be subject to customary anti-dilution adjustments in certain circumstances.

In connection with the pricing of the Convertible Senior Notes, the Company entered into privately negotiated capped call transactions with various financial institutions (the "Capped Call Transactions"). The Capped Call Transactions were entered into with third party broker-dealers to limit the potential dilution that would occur if the Company has to settle the conversion value in excess of the principal in shares. This exposure will be covered (i.e., the Company will receive as many shares as are required to be issued between the conversion price of $63.8818 and the maximum price of $91.2600). Any shares required to be issued by the Company over this amount would have net earnings per share dilution impact. By entering into the Capped Call Transactions, the Company expects to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price under the Convertible Senior Notes. The Company paid $39.0 million for the Capped Call Transactions, which was recorded as additional paid-in capital, using a portion of the gross proceeds from the sale of the Convertible Senior Notes. The cost of the Capped Call

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Transactions is not expected to be tax deductible as the Company did not elect to integrate the capped call into the Convertible Senior Notes for tax purposes. The cost of the Capped Call Transaction was recorded as a reduction of the Company’s additional paid-in capital in the accompanying condensed consolidated financial statements.

The Company incurred debt issuance costs of $11.4 million in March 2021. The Convertible Senior Notes are presented net of issuance costs on the Company's condensed consolidated balance sheets. The debt issuance costs are amortized on an effective interest basis over the term of the Convertible Senior Notes and are included in interest expense and amortization of debt discount in the accompanying condensed consolidated statements of operations.

During the three and nine months ended September 30, 2023, the Company repurchased its Convertible Senior Notes in the open market with cash on hand for $29.8 million and $104.8 million, respectively. The Company recognized a gain on extinguishment of debt of $4.2 million and $18.1 million related to the repurchase of $34.5 million and $124.9 million of principal balance of Convertible Senior Notes and $0.5 million and $2.0 million, of unamortized debt issuance costs associated with the

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extinguished debt during the three and nine months ended September 30, 2023, respectively. The gain on extinguishment is included in other (income) expense in the Company's condensed consolidated statement of operations.

The following table sets forth interest expense related to the Convertible Senior Notes for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands, except interest rates):


		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021				September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022

Contractual interest expense	Contractual interest expense	$	250		$	250		$	750		$	536		Contractual interest expense	$	189		$	250		$	642		$	750
Amortization of debt issuance costs	Amortization of debt issuance costs	572			572			1,716			1,227			Amortization of debt issuance costs	434			572			1,470			1,716
Total interest expense	Total interest expense	$	822		$	822		$	2,466		$	1,763		Total interest expense	$	623		$	822		$	2,112		$	2,466
Effective interest rate	Effective interest rate	0.82		%	0.82		%	0.82		%	0.82		%	Effective interest rate	0.82		%	0.82		%	0.82		%	0.82		%

Amortization expense for the Company's debt issuance costs related to the Convertible Senior Notes for the fiscal years ~~2022~~2023 through 2026 is as follows (in thousands):


Fiscal Year	Fiscal Year	Debt Issuance Costs		Fiscal Year	Debt Issuance Costs
Remaining 2022		$	572
2023		2,288
Remaining 2023				Remaining 2023	394
2024	2024	2,288		2024	1,573
2025	2025	2,288		2025	1,573
2026	2026	491		2026	338
Total	Total	$	7,927	Total	$	3,878

Credit Agreement

On April 30, 2021, the Company entered into a credit agreement (the "Credit Agreement") with Goldman Sachs Bank USA as administrative agent and collateral agent, and other lender parties thereto. The Credit Agreement provides for a $360.0 million seven-year senior secured term loan facility ("Term Loan B Facility"), which matures in April 2028, and a $52.5 million senior secured revolving credit facility (the "Revolving Credit Facility")., which matures in December 2025. As part of the Term Loan B Facility, the Company received $325 million in proceeds, net of discounts and fees, which were used to finance the SpotX Acquisition and related transactions, and for general corporate purposes. Loans, if any, under the Revolving Credit Facility are expected to be used for general corporate purposes. The obligations under the Credit Agreement are secured by substantially all of the assets of the Company and those of its subsidiaries that are guarantors under the Credit Agreement.

Amounts outstanding under the Credit Agreement accrue interest at a rate equal to either, (1) for the Term Loan B Facility, at the Company’s election, the Eurodollar Rate (as defined in the Credit Agreement) plus a margin of 5.00% per annum, or ABR (as defined in the Credit Agreement) plus a margin of 4.00%, and (2) for the Revolving Credit Facility, at the Company’s election, the Eurodollar Rate plus a margin of 4.25% to 4.75%, or ABR plus a margin of 3.25% to 3.75%, in each case, depending on the Company’s first lien net leverage ratio. In June 2023, the Company amended its Credit Agreement to transition away from a variable interest rate based on the Eurodollar Rate towards a similar variable interest rate based on Adjusted Term SOFR, as defined in the amendment to the Credit Agreement, which is based on the Secured Overnight Financing Rate ("SOFR"). As of September 30, ~~2022,~~2023, the contractual interest rate related to the Term Loan B Facility was ~~8.17%~~10.53%.

The covenants of the Credit Agreement include customary negative covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and restricted payments. In addition, the Credit Agreement contains a financial covenant, tested on the last day of any fiscal quarter if utilization of the Revolving Credit Facility exceeds 35% of the total revolving commitments, that requires the Company to maintain a first lien net leverage ratio not greater than 3.25 to 1.00. As of September 30, ~~2022,~~2023, the Company was in compliance with its debt covenants.

The Credit Agreement includes customary events of default, and customary rights and remedies upon the occurrence of any event of default thereunder, including rights to accelerate the loans, terminate the commitments thereunder and realize upon the collateral securing the obligations under the Credit Agreement. The Credit Agreement calls for customary scheduled loan amortization payments of 0.25% of the initial principal balance payable quarterly (i.e. 1% in aggregate per year) as well as a provision that requires the Company to prepay the Term Loan B Facility based on an annual calculation of cumulative free cash flow

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(" ("Excess Cash Flow") generated by the company as defined within the terms of the Agreement. The Company was not required to make any such mandatory prepayment required by the Excess Cash Flow provision for the period ended September 30, ~~2022.~~2023. In addition, the Term Loan B Facility will mature in the event that any portion of the Convertible Senior Notes remains outstanding 91 days prior to the maturity date of the Convertible Senior Notes.

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On June 28, 2021, the Company entered into an Incremental Assumption Agreement (the "Incremental Agreement") to the Credit Agreement. Pursuant to the terms of the Incremental Agreement, the Company’s existing revolving credit facility under the Credit Agreement was increased by $12.5 million (the "Incremental Revolver"), and the letter of credit sublimit under the Credit Agreement was increased by $5.0 million. The Incremental Revolver bears the same interest rate as the existing revolving credit facility and has the same maturity date as the existing revolving credit facility. No other terms of the Credit Agreement were amended. As a result, amounts available under the Revolving Credit Facility were $65.0 million. At September 30, ~~2022,~~2023, amounts available under the Revolving Credit Facility were ~~$59.7~~$59.8 million, net of letters of credit outstanding in the amount of ~~$5.3~~$5.2 million.

The following table summarizes the amount outstanding under the Term Loan B Facility at September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022		December 31, 2021				September 30, 2023		December 31, 2022
		(in thousands)				(in thousands)
Term Loan B Facility	Term Loan B Facility	$	355,500	$	358,200		Term Loan B Facility	$	351,900	$	354,600
Unamortized debt discounts	Unamortized debt discounts	(8,552)		(9,738)			Unamortized debt discounts	(6,983)		(8,158)
Unamortized debt issuance costs	Unamortized debt issuance costs	(13,344)		(15,196)			Unamortized debt issuance costs	(10,897)		(12,730)
Debt, net of debt issuance costs	Debt, net of debt issuance costs	$	333,604	$	333,266		Debt, net of debt issuance costs	$	334,020	$	333,712

The Company incurred debt issuance costs of $27.7 million in April 2021, of which $10.8 million were associated with debt discount netted against the proceeds and $16.9 million were associated with other deferred financing costs associated with the Term Loan B Facility. Debt outstanding under the Term Loan B Facility are presented net of issuance costs on the Company's condensed consolidated balance sheets. The debt issuance costs are amortized on an effective interest basis over the term of the Term Loan B Facility and are included in interest expense and amortization of debt discount in the accompanying condensed consolidated statements of operations.

The following table sets forth interest expense related to the Term Loan B Facility for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands, except interest rates):


		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021				September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022

Contractual interest expense	Contractual interest expense	$	6,052		$	5,290		$	16,472		$	8,798		Contractual interest expense	$	9,372		$	6,052		$	26,799		$	16,472
Amortization of debt discount	Amortization of debt discount	394			399			1,186			664			Amortization of debt discount	391			394			1,175			1,186
Amortization of debt issuance costs	Amortization of debt issuance costs	616			622			1,852			1,036			Amortization of debt issuance costs	610			616			1,833			1,852
Total interest expense	Total interest expense	$	7,062		$	6,311		$	19,510		$	10,498		Total interest expense	$	10,373		$	7,062		$	29,807		$	19,510
Effective interest rate	Effective interest rate	7.93		%	7.00		%	7.28		%	7.00		%	Effective interest rate	11.76		%	7.93		%	11.24		%	7.28		%

Amortization expense for the Term Loan B Facility debt discount and debt issuance costs for fiscal years ~~2022~~2023 through 2028 is as follows (in thousands):


Fiscal Year	Fiscal Year	Debt Discount		Debt Issuance Costs		Fiscal Year	Debt Discount		Debt Issuance Costs
Remaining 2022		$	394	$	614
2023		1,564		2,441
Remaining 2023						Remaining 2023	$	389	$	608
2024	2024	1,548		2,416		2024	1,548		2,416
2025	2025	1,532		2,391		2025	1,532		2,391
2026	2026	1,516		2,366		2026	1,516		2,366
2027						2027	1,500		2,341
Thereafter	Thereafter	1,998		3,116		Thereafter	498		775
Total	Total	$	8,552	$	13,344	Total	$	6,983	$	10,897

~~Note 14—Subsequent Events~~

In December 2021, the Company's Board of Directors approved a share repurchase program (the "Program") under which the Company was authorized to purchase up to $50.0 million of its common stock from December 10, 2021 through December 10,

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2022. On November 4, 2022, the Board of Directors approved an extension of the Program through December 15, 2023. Subsequent to September 30, 2022, the Company has not repurchased additional shares through the Program, of which approximately $28.3 million remain available for future repurchases.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q and related statements by the Company contain forward-looking statements, including statements based upon or relating to our expectations, assumptions, estimates, and projections. In some cases, you can identify forward-looking statements by terms such as "may," "might," "will," "objective," "intend," "should," "could," "can," "would," "expect," "believe," "design," "anticipate," "estimate," "predict," "potential," "plan" or the negative of these terms, and similar expressions. Forward-looking statements may include, but are not limited to, statements concerning acquisitions by the Company, including the acquisition of SpotX, Inc. ("SpotX," and such acquisition the "SpotX Acquisition"), the acquisition of SpringServe, LLC ("SpringServe," and such acquisition the "SpringServe Acquisition"), and the merger with Telaria, Inc. ("Telaria," and such merger the "Telaria Merger"), or the anticipated benefits thereof; statements concerning potential synergies from the Company's acquisitions; statements concerning ~~the potential impacts of the COVID-19 pandemic on our business operations, financial condition, and results of operations and on the world economy; statements concerning~~ macroeconomic conditions ~~including inflation, supply chain issues or the occurrence of a recession,~~ or concerns related thereto; our anticipated financial performance; key strategic objectives; industry growth rates for ad-supported connected television ("CTV") and the shift in video consumption from linear TV to CTV; anticipated benefits of new ~~offerings;~~offerings, including the ~~impact~~introduction of our ~~traffic shaping technology on~~new Magnite Streaming platform and our ~~business;~~ClearLine solution; the success of the consolidation of our two CTV platforms; the effects of our cost reduction initiatives; scope and duration of client relationships; the fees we may charge in the future; business mix; sales growth; benefits from supply path optimization; the development of identity solutions; client utilization of our offerings; our competitive differentiation; our market share and leadership position in the industry; market conditions, trends, and opportunities; certain statements regarding future operational performance measures; and other statements that are not historical facts. These statements are not guarantees of future performance; they reflect our current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.

Risks that our business faces include, but are not limited to, the following:

•our ability to realize the anticipated benefits of the ~~Telaria Merger,~~ SpotX Acquisition, SpringServe Acquisition, and other acquisitions;

•the impact of macroeconomic challenges on the overall demand for advertising and the advertising marketplace, including as a result of global conflict, global pandemics and the responses to such pandemics by governments, inflation, supply chain issues, labor strikes, capital market disruptions and instability of financial institutions, the occurrence of a recession, or concerns relating to the foregoing;

•~~the severity, magnitude, and duration of the COVID-19 pandemic, including impacts of the pandemic and of responses to the pandemic by governments;~~

•CTV spend on our platform may grow more slowly than we expect if industry growth rates for ad supported CTV are not accurate, if CTV sellers fail to adopt programmatic advertising solutions or if we are unable to maintain or increase access to CTV advertising inventory;

•~~the growing percentage of digital advertising spend captured by closed “walled gardens” (such as Google, Facebook, Microsoft, Comcast, and Amazon);~~

•we may be unsuccessful in our supply path optimization ~~efforts;~~efforts with buyers;

•our ability to introduce new offerings and bring them to market in a timely manner and ~~otherwise adapt in response~~potential responses or reactions of clients, vendors, and competitors to ~~client demands~~the announcement of new products and ~~industry trends;~~offerings;

•uncertainty of our estimates and expectations associated with new offerings, including ~~the CTV~~our SpringServe ad server, ClearLine product, ~~that we acquired in the SpringServe Acquisition~~ and our developing identity solutions;

•potential negative impacts associated with the integration of our CTV platforms and the introduction of Magnite Streaming;

•we must increase the scale and efficiency of our technology infrastructure to support our ~~growth;~~growth and recent developments in artificial intelligence and machine learning may accelerate or exacerbate potential risks related to technological developments;

•the emergence of header bidding has increased competition from other demand sources and may cause infrastructure strain and added costs;

•our access to mobile inventory may be limited by third-party technology or lack of direct relationships with mobile sellers;

•we may experience lower take rates, which may not be offset by increases in ~~the volume of~~ ad ~~requests, improvements in fill-rate, and/or increases in the value of transactions through our platform;~~spend;

•the impact of requests for discounts, fee concessions, rebates, refunds or favorable payment terms;

•our business may be subject to sales and use tax, advertising and other taxes;

•failure by us or our clients to meet advertising and inventory content standards;

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•the freedom of buyers and sellers to direct their spending and inventory to competing sources of inventory and demand, and to establish direct relationships and integrations without the use of our ~~history~~platform;

•our reliance on large aggregators of ~~losses,~~advertising inventory, and the ~~fact~~concentration of CTV among a small number of large sellers that inenjoy significant negotiating leverage with respect to take rates and other terms;

•our ability to provide value to both buyers and sellers of advertising without being perceived as favoring one over the ~~past~~other or being perceived as competing with them through our ~~operating results~~service offerings;

•our reliance on large sources of advertising demand, including demand side platforms ("DSPs") that may have or develop high-risk credit profiles or fail to pay invoices when due;

•our sales efforts may require significant time and expense and may innot yield the ~~future fluctuate significantly,~~results we seek;

•we may be ~~difficult~~exposed to ~~predict, and fall below analysts' and investors' expectations;~~claims from clients for breach of contract;

•the effects of seasonal trends on our results of operations;

•we operate in an intensely competitive market that includes companies that have greater financial, technical and marketing resources than we do;

•the effects of consolidation in the ad tech industry or among our ~~media~~publisher clients;

•our ability to differentiate our offerings and compete effectively to combat commodification and disintermediation;

•potential limitations on our ability to collect or use data as a result of consumer tools, regulatory restrictions and technological limitations;

•the development and use of new identity solutions as a ~~replacement~~substitute for third-party cookies and other identifiers may disrupt the programmatic ecosystem, require additional investment and resources, and cause the performance of our platform to decline;

•the industry may not adopt or may be slow to adopt the use of first-party publisher segments as an alternative to third-party cookies;

•the impact of antitrust regulations or enforcement actions targeting the digital advertising ecosystem;

•our ability to comply with, and the effect on our business of, evolving legal standards and regulations, particularly concerning data protection and privacy;

•~~failure by us or our clients to meet advertising and inventory content standards;~~

•~~our reliance on large aggregators of advertising inventory, and the concentration of CTV among a small number of large sellers that enjoy significant negotiating leverage;~~

•~~our ability to provide value to both buyers and sellers of advertising without being perceived as favoring one over the other or being perceived as competing with them through our service offerings;~~

•~~our reliance on large sources of advertising demand, including demand side platforms ("DSPs") that may have or develop high-risk credit profiles or fail to pay invoices when due;~~

•~~we may be exposed to claims from clients for breach of contracts;~~

•errors or failures in the operation of our solution, interruptions in our access to network infrastructure or data, and breaches of our computer systems;

•our ability to ensure a high level of brand safety for our clients and to detect "bot" traffic and other fraudulent or malicious activity;

•~~the use of our net operating losses and tax credit carryforwards may be subject to certain limitations;~~

•~~our business may be subject to sales and use tax, advertising and other taxes;~~

•~~our ability to raise additional capital if needed;~~

•~~the impact of our share repurchase program on our stock price and cash reserves;~~

•~~volatility in the price of our common stock;~~

•~~the impact of negative analyst or investor research reports;~~

•our ability to attract and retain qualified employees and key personnel;

•costs associated with enforcing our intellectual property rights or defending intellectual property infringement;

•our ability to comply with the terms of our financing arrangements;

•restrictions in our Credit Agreement may limit our ability to make strategic investments, respond to changing market conditions, or otherwise operate our business;

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•increases in our debt leverage may put us at greater risk of defaulting on our debt obligations, subject us to additional operating restrictions and make it more difficult to obtain future financing on favorable terms;

•conversion of our Convertible Senior Notes would dilute the ownership interest of existing stockholders;

•the Capped Call Transactions subject us to counterparty risk and may affect the value of the Convertible Senior Notes and our common stock;

•the conditional conversion feature of the Convertible Senior Notes, if triggered, may adversely affect our financial condition and operating result;

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•failure to successfully execute our international growth plans;

•failure to maintain an effective system of internal control over financial reporting, which could adversely affect investor confidence;

•the use of our net operating losses and tax credit carryforwards may be subject to certain limitations;

•our ability to ~~identify future acquisitions~~raise additional capital if needed;

•volatility in the price of our common stock;

•the impact of our repurchase program on our stock price and cash reserves;

•competition for investors and the impact of negative analyst or ~~investments~~investor research reports; and

•provisions of our charter documents and Delaware law may inhibit a potential acquisition of the company and limit the ability of stockholders to cause changes in ~~complementary companies or technologies and our ability to consummate the acquisitions and integrate such companies or technologies.~~company management.

We discuss many of these risks and additional factors that could cause actual results to differ materially from those anticipated by our forward-looking statements under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this report and in other filings we have made and will make from time to time with the Securities and Exchange Commission, or SEC, including our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and subsequent filings. These forward-looking statements represent our estimates and assumptions only as of the date of the report in which they are included. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made. Without limiting the foregoing, any guidance we may provide will generally be given only in connection with quarterly and annual earnings announcements, without interim updates, and we may appear at industry conferences or make other public statements without disclosing material nonpublic information in our possession. Given these uncertainties, investors should not place undue reliance on these forward-looking statements.

Investors should read this Quarterly Report on Form 10-Q and the documents that we reference in this report and have filed or will file with the SEC completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

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Overview

Magnite, Inc., ~~formerly known as The Rubicon Project, Inc.~~ ("we," or "us"), provides technology solutions to automate the purchase and sale of digital advertising inventory.

On April 1, 2020, we completed a stock-for-stock merger with Telaria, Inc. ("Telaria" and such merger the "Telaria Merger"), a leading provider of connected television ("CTV") technology, and on April 30, 2021, we completed the acquisition of SpotX, Inc. ("SpotX" and such acquisition the "SpotX Acquisition"), a leading platform shaping CTV and video advertising globally. On July 1, 2021, we acquired SpringServe, LLC ("SpringServe"), a leading ad serving platform for CTV. SpringServe's ad serving technology manages multiple aspects of video advertising, including for CTV publishers, across both programmatic and direct-sold inventory, including forecasting, routing, customized ad experiences and ad formats, and advanced podding logic.

Following ~~the Telaria Merger and SpotX Acquisition,~~these acquisitions, we believe that we are the world’s largest independent omni-channel sell-side advertising platform ("SSP"), offering a single partner for transacting globally across all channels, formats and auction types, and the largest independent programmatic CTV marketplace, making it easier for buyers to reach CTV audiences at scale from industry-leading streaming content providers, broadcasters, platforms and device manufacturers.

Our platform features applications and services for sellers of digital advertising inventory, or publishers, that own and operate CTV channels, applications, websites and other digital media properties, to manage and monetize their inventory; applications and services for buyers, including advertisers, agencies, agency trading desks, and demand side platforms, ("DSPs"), to buy digital advertising inventory; and a transparent, independent marketplace that brings buyers and sellers together and facilitates intelligent decision making and automated transaction execution at scale. Our clients include many of the world’s leading buyers and sellers of digital advertising inventory. Our platform processes trillions of ad requests per month allowing buyers access to a global, scaled, independent alternative to "walled gardens," who both own and sell inventory and maintain control on the demand side.

We provide a full suite of tools for sellers to control their advertising business and protect the consumer viewing experience. These tools are particularly important to CTV sellers who need to ensure a TV-like viewing and advertising experience for consumers. For instance, our "ad-pod" feature provides publishers with a tool analogous to commercial breaks in traditional linear television so that they can request and manage several ads at once from different demand sources. Using this tool, publishers can establish business rules such as competitive separation of advertisers to ensure that competing brand ads do not appear during the same commercial break. ~~In addition,~~Other tools we offer include audio normalization tools to control for the volume of an ad relative to content, frequency capping to avoid exposing viewers to repetitive ad placements, and creative review so that a publisher can review and approve the ad units being served to its properties.

~~On July 1, 2021, we acquired SpringServe, LLC ("SpringServe"), a leading ad serving platform for CTV. SpringServe's ad serving technology manages multiple aspects~~ In addition, through the integration of ~~video advertising, including for CTV publishers, across both programmatic and direct-sold inventory, including forecasting, routing, customized ad experiences~~our SSP and ad ~~formats, and advanced podding logic. The integration of SpringServe’s ad serving technology with our existing programmatic SSP capabilities provides CTV publishers~~server we are able to offer a holistic work flow and yield management solution that dynamically allocates between direct-sold and programmatic inventory to drive value.

Buyers leverage our platform to manage their advertising spend and reach their target audiences on brand-safe premium inventory, simplify order management and campaign tracking, obtain actionable insights into audiences for their advertising, and access impression-level purchasing from thousands of sellers. We believe that our scale, platform features, and omni-channel offering makes us an essential partner for buyers.

We operate our business on a worldwide basis, with an established operating presence in North America, Australia and Europe, and a developing presence in Asia and South America. Our non-U.S. subsidiaries and operations perform primarily sales, marketing, and service functions.

Our global workforce maintained a work-from-home policy from March 2020 through April 2022 and, in most of our locations, have since returned to offices on a hybrid basis. We have approached our return with caution to prioritize the safety and health of our employees, and continue to monitor best practices and guidance. We believe our employees were able to work productively during the time period in which our global offices were shut down and will continue to do so in office. However, to the extent we must extend work from home requirements, or that work patterns are permanently altered, it is unclear how productivity may be impacted in the long-term.

How We Generate Revenue

Digital advertising inventory is created when consumers access sellers' content. Sellers provide digital advertising inventory to our platform in the form of advertising requests, or ad requests. When we receive ad requests from sellers, we send bid requests to buyers, which enable buyers to bid on sellers’ digital advertising inventory. Winning bids can create advertising, or paid impressions, for the seller to present to the consumer. The price that buyers pay for each thousand paid impressions purchased is

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measured in units referred to as CPM, or cost per thousand, and the total volume of spending between buyers and sellers on our platform is referred to as advertising spend.

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ad server and Demand Manager header-bidding product, where fees are generally based on the number of impressions processed. In addition, we may receive certain fixed monthly fees for the use of our platforms or products.

Industry Trends

Continued Shift Toward Digital Advertising

Consumers are rapidly shifting their viewing habits towards digital mediums and expect to be able to consume content seamlessly across multiple devices, including computers, tablets, smartphones, and CTVs whenever and wherever they want. As digital content consumption continues to proliferate, we believe the percentage of advertising dollars spent through digital channels will continue to grow.

Automation of Buying and Selling

Due to the size and complexity of the advertising ecosystem and purchasing process, manual processes cannot effectively manage digital advertising inventory at scale. In addition, both buyers and sellers are demanding more transparency, better controls and more relevant insights from their advertising inventory purchases and sales. This has created a need for software solutions, known as programmatic advertising, that automate the process for planning, buying, selling and measuring digital advertising across screens. Programmatic advertising allows buyers and sellers to transact on an impression-by-impression basis through the use of real-time bidding technology, and allows for the use of advanced data and identity solutions to better target ad campaigns. Programmatic transactions include open auctions, where multiple buyers bid against each other in a real-time auction for the right to purchase a publisher's inventory, as well as reserve auctions, where publishers establish direct deals or private marketplaces with select buyers. Programmatic is the dominant method of transacting for desktop, CTV, and mobile ~~inventory and has continued to grow as a percentage of CTV advertising, which represents a substantial majority of how CTV inventory is currently sold.~~inventory.

Convergence of TV and Digital

CTV viewership is growing rapidly and the pace of adoption is accelerating the transition of linear television to CTV programming. As the number of CTV channels continues to proliferate, we believe that ad-supported models or hybrid models that rely on a combination of subscription fees and advertising revenue will continue to gain traction. In turn, we believe brand advertisers looking to engage with streaming viewers will continue to shift their budgets from linear to CTV. Furthermore, as the CTV market continues to mature, we believe that a greater percentage of CTV advertising inventory will be sold programmatically, similar to trends that occurred in desktop and mobile. As such, we expect CTV to be a significant driver of our revenue growth for the foreseeable future. ~~We expect the acquisitions of SpotX and SpringServe to further fuel this growth.~~

Identity Solutions

A number of participants in the advertising technology ecosystem have taken or are expected to take action to eliminate or restrict the use of third-party cookies and other primary identifiers that have historically been used to deliver targeted advertisements. We believe that the elimination of third-party cookies has the potential to shift the programmatic ecosystem from an identity model powered by buyers that are able to aggregate and target audiences through cookies to one enabled by sellers that have direct relationships with consumers and are therefore better positioned to obtain user data and consent for implementing first party identifiers. In CTV, this identity model already largely exists with publishers more tightly controlling access to identifiers and user data, while offering proprietary first party data segments for reaching desired audiences. We believe that our ~~platform~~scale and ~~scale~~expertise in CTV position us well to take a leadership position in advancing this shift to a first party identity model and creating additional value opportunities for our clients. Accordingly, we have invested and intend to further invest in the development and enhancement of industry leading identity and audience solutions.

In ~~furtherance~~June 2023 we announced Magnite Access, a suite of ~~this goal, in December 2021, we acquired~~products designed to help publishers manage their data assets to generate more revenue. The Magnite Access suite leverages new, custom-built technologies as well as products from recent acquisitions including Nth Party, Ltd. ("Nth Party"), a developer of cryptographic software for secure audience data sharing and analysis, ~~and~~ in ~~February 2022, we acquired the business of~~December 2021, and Carbon (AI) Limited ("Carbon"), a platform that enables publishers to measure, manage, and monetize audience ~~segments.~~segments, in February 2022. Though portions of Magnite Access are already available to our clients, others are in testing and are expected to reach wider availability this year.

We support industry privacy initiatives and believe that the next generation of identity solutions need to be open and ubiquitous, with consumer privacy, transparency and control at the core. We further believe that these solutions will ultimately lead to greater trust and consumer confidence in digital advertising, which will be positive for the advertising ecosystem in the long term. In the short term, however, these changes could create some variability in our revenue across certain buyers or sellers, depending on the timing of changes and developed solutions.

Supply Path Optimization

Supply Path Optimization ("SPO") refers to efforts by buyers to consolidate the number of vendors with which they work to find the most effective and cost-efficient paths to procure media. SPO is important to buyers because it can increase the

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proportion of their advertising ultimately spent on working media, with the goal of increasing return on their advertising spend, and can help them gain efficiencies by reducing the number of vendors with which they work in a complex ecosystem. In furtherance of

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these goals, in April 2023 we announced the launch of ClearLine, a self-service solution that provides agencies direct access to premium advertising on our platform. This solution helps agencies maximize the spend going towards working media, makes it easier for sellers and agencies to securely share data, improves workflow for campaigns traditionally transacted manually, and helps publishers generate more revenue and develop new sources of unique demand. We believe we are well positioned to benefit from SPO in the long run as a result of our transparency, our broad and unique inventory supply across all channels and formats, including CTV, buyer tools, such as traffic shaping and ClearLine that reduce the cost of working with us, and our brand safety measures.

Header Bidding and Data Processing

Header bidding is a programmatic technique by which sellers offer inventory to multiple ad exchanges and supply side platforms, such as our platform, simultaneously. Header bidding has been rapidly adopted in recent years in the desktop and mobile channels and has experienced modest adoption in CTV. The adoption of header bidding has created a number of challenges and technical complexities for both sellers and buyers, which require sophisticated tools to manage. ~~Header~~In addition, header bidding has led to a significant increase in the number of ad impressions to be processed and analyzed through our platform as well as by DSPs, which can lead to increased costs if not properly addressed. We have invested in technology solutions, such as Demand Manager, to help desktop and mobile publishers manage their header-bidding inventory.

While header-bidding technologies have not been largely adopted by CTV sellers, such solutions or similar solutions geared towards increasing demand competition have become more prevalent. We have addressed this, in part, through our SpringServe ad server, which offers sellers a unified programmatic demand solution for CTV that leverages our existing programmatic SSP capabilities as well as connecting with third party programmatic demand sources.

Privacy Regulation

Our business is highly susceptible to existing and emerging privacy regulations and oversight concerning the collection, use and sharing of data. Data protection authorities in ~~a number of territories~~the United States and around the world have ~~expressed a desire to focus~~focused on the advertising technology ecosystem. Because we, and our clients, rely upon large volumes of such data, it is essential that we monitor developments in this area domestically and globally, and engage in responsible privacy practices.

We do not collect information ~~such as name, address, or phone number,~~ that can be used directly to identify a real person, such as name, address, or phone number, and we take steps ~~not~~ to ~~collect~~avoid collecting and ~~store~~storing such information. Instead, we rely on pseudonymous forms of data such as IP addresses, general geo-location information, and persistent identifiers about Internet users and do not attempt to associate this data with other data that can be used to identify real people. ~~This~~Increasingly, this type of information is considered "personal" ~~in some~~across various jurisdictions ~~or otherwise~~and is therefore governed by consumer privacy laws and may be the subject of future legislation or regulation.

There are also a number of specific laws and regulations governing the collection and use of certain types of consumer data relevant to our business. For example, the Children’s Online Privacy Protection Act ("COPPA"), imposes restrictions on the collection and use of data about users of child-directed websites.

~~The use and transfer of personal data in~~In the European Economic Area ("EEA") member states and the United Kingdom (“UK”), the use and transfer of personal data is ~~currently~~ governed by the General Data Protection Regulation and the UK General Data Protection Regulation (the "GDPR" and "UK GDPR"). The GDPR and UK GDPR set out ~~higher~~significant potential liabilities for certain data protection violations and establish significant regulatory requirements resulting in a greater compliance burden for us in the course of delivering our solution in the EEA and UK. ~~While data protection authorities have started to clarify certain requirements under GDPR and UK GDPR, significant uncertainty remains as to how the regulation will be applied and enforced.~~

In addition to the GDPR and UK GDPR, a number of ~~new~~recent privacy regulations will or have already come into ~~effect. The~~effect in the United States. California ~~legislature passed~~was the first state to enact an omnibus consumer privacy law in 2018, the California Consumer Privacy Act ("CCPA") ~~in 2018,~~, which became effective January 1, 2020. This law imposes ~~new~~substantial obligations on businesses that handle the personal information of California residents. The obligations imposed require us to maintain ongoing significant resources for compliance purposes. ~~Certain requirements remain unclear due to ambiguities in the drafting of or incomplete guidance. Adding~~In addition, amendments to the ~~uncertainty facing the ad tech industry, a new law, titled the California Privacy Rights Act ("CPRA"), which~~CCPA, along with broad-based consumer privacy laws in Connecticut, Colorado, Virginia, and Utah, will all take effect ~~in January~~by the end of 2023 and impose obligations that are similar to the CCPA. These new laws will cause us to incur additional compliance costs and impose additional restrictions on us and on our industry partners. In addition, other privacy bills have been introduced at both the state and federal level and certain international territories are imposing new or expanded privacy obligations. In the coming years, we expect further consumer privacy regulation worldwide.

Additionally, our compliance with our privacy policies and our general consumer privacy practices are also subject to review by the Federal Trade Commission, which may bring enforcement actions to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations therein. Certain State Attorneys General may also bring enforcement actions based on comparable state laws or federal laws that permit state-level enforcement. Outside of the United States, our privacy and data practices are subject to regulation by data protection authorities and other regulators in the countries in which we do business.

Beyond laws and regulations, we are members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data, including the Internet Advertising Bureau ("IAB"), the Digital Advertising

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Alliance, the Network Advertising Initiative, and the Europe Interactive Digital Advertising Alliance. Under the requirements of these self-regulatory bodies, in addition to other compliance obligations, we provide consumers with notice via our privacy policy about our use of cookies and other technologies to collect consumer data, and of our collection and use of consumer data to deliver personalized advertisements. We allow consumers to opt-out from the use of data we collect for purposes of behavioral advertising through a mechanism on our website, linked through our privacy policy as well as through portals maintained by some of these self-regulatory bodies.

We support privacy initiatives and believe they will be beneficial to consumers' confidence in advertising technology, which will ultimately be positive for the advertising ecosystem in the long term. However, until prevailing compliance practices

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standardize, the impact of worldwide privacy regulations on our business and, consequently, our revenue could be negatively impacted.

For additional information regarding regulatory risks to our business, see "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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Trends in Our Business

~~Telaria Merger, SpotX and SpringServe Acquisitions~~

On April 1, 2020, we completed the Telaria Merger, and on April 30, 2021, we completed the SpotX Acquisition. These transactions were transformative and have resulted in what we believe to be the world’s largest independent sell-side advertising platform and ad server, with scale, capabilities, and solutions exceeding those offered by competitors. We offer a single partner for transacting CTV, desktop display, video, audio and mobile inventory across all geographies and auction types.

As CTV viewership is growing rapidly and the pace of adoption is accelerating the shift of advertising budgets from linear television to CTV, ~~these transactions~~we believe we have strategically positioned usourselves to take advantage of this trend, and ~~we believe~~ that CTV will be our biggest growth driver in future periods.

The SpotX Acquisition resulted in a significant increase in our revenue and ~~Revenue~~Contribution ex-TAC (as defined in section "Key Operating and Financial Performance Metrics"), in particular in CTV and online video. Following the transaction, the percentage of our revenue attributable to CTV increased significantly, and because CTV is largely transacted through reserve auctions, these types of auctions have become a more significant portion of the transactions on our platform. In addition, as newer entrants to programmatic advertising, the largest publishers and broadcasters have tended to transact almost exclusively through reserve auctions and have lower overall take rates. These publishers have continued to increase their focus and investment in programmatic CTV, and in recent periods have grown as a percentage of our CTV business. Accordingly, the increase in share among these publishers on our platform has driven a decrease in our aggregate CTV take rates. The ~~acquisition~~SpotX Acquisition also resulted in an increase in related operating expenses, primarily associated with costs for personnel, data center and hosting costs, facilities, payments to sellers for revenue reported on a gross basis, and other ancillary costs to support the business. We have been able to offset some of these increases through cost saving activities and the achievement of acquisition synergies. Initially, we targeted in excess of $35 million in run rate operating cost synergies, over a two-year period, from the SpotX Acquisition, and have made significant progress towards this goal. Due to the evolving nature of our business since the acquisition we are no longer tracking synergies as a discrete cost saving activity. As part of our integration efforts, we ~~are in~~recently introduced our unified CTV platform, Magnite Steaming, which merges leading technology from the ~~process of consolidating our~~ legacy Magnite CTV and SpotX CTV ~~platforms, including~~platforms. We completed the migration to our unified platform early in the third quarter of ~~clients to the unified platform.~~2023.

The SpringServe Acquisition ~~which we completed in July 2021,~~ expanded our video and CTV offering to include ad server functionality in addition to our programmatic SSP capabilities. The SpringServe ad server manages multiple aspects of video advertising for both programmatic transactions and inventory sold directly by the publisher ~~including forecasting, routing, customized ad experiences~~ and, ~~ad formats, and advanced podding logic. Combined~~combined with our SSP, ~~the SpringServe ad server~~ provides publishers a holistic yield management solution that works across ~~their~~the publisher's entire video advertising business to drive value. This is of particular importance for CTV publishers, who still sell a large percentage of their inventory through their direct sales team. We believe the acquisition of SpringServe is highly strategic as it allows us to offer publishers an independent full-stack solution to the walled gardens, which can be leveraged across their entire video advertising business.

~~Impact~~During the three months ended March 31, 2023, we announced a reduction of ~~COVID-19 Pandemic~~our global workforce by approximately 6%. The reduction in force was primarily associated with the elimination of duplicative technology roles resulting from the integration of our CTV platforms and ~~Other~~ represent cost synergies related to our acquisition.

Macroeconomic Developments

Our business depends on the overall demand for advertising and on the economic health of our current and prospective sellers and buyers. Accordingly, our business and operations have been, and could in the future be, adversely affected by events beyond our control, such as health epidemics, including the COVID-19 pandemic, geopolitical events, including the conflict in Ukraine, and economic and macroeconomic factors like labor shortages, supply chain disruptions, inflation and recessionary concerns impacting the markets and communities in which our clients operate.

In response to the COVID-19 pandemic and associated economic challenges, a significant number of advertisers, in particular with respect to certain categories of advertising that were particularly impacted by the pandemic and resulting stay-at-home orders, reduced their advertising budgets, resulting in an overall decrease in advertising spend through our platform compared to our pre-COVID expectations. We believe the negative impact on our revenue from the COVID-19 pandemic has largely subsided, although we did experience some negative impacts due to pandemic-related supply chain disruptions during the first half of 2022. More recently, our business has been negatively impacted as a result of macroeconomic challenges, such as inflation, global ~~hostilities,~~conflict, capital market disruptions and instability of financial institutions, the risk of a recession, labor strikes, and other macroeconomic factors, which have generally negatively impacted ad budgets, and in turn has led to ~~reduced~~slower ad spend growth through our platform. Any worsening of macroeconomic conditions in future periods would likely have a negative effect on our financial results, the magnitude of which is difficult to predict. In addition, continued inflation could result in an increase in our cost base relative to our revenue.

Refer to Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for additional information related to risks associated with ~~the COVID-19 pandemic and other~~ macroeconomic challenges.

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Components of Our Results of Operations

We report our financial results as one operating segment. Our consolidated operating results are regularly reviewed by our chief operating decision maker, principally to make decisions about how we allocate our resources and to measure our consolidated operating performance.

Revenue

We generate revenue from the use of our platform for the purchase and sale of digital advertising inventory. Generally, our revenue is based on a percentage of the ad spend that runs through our platform, although for certain clients or transaction types we may receive a fixed CPM for each impression sold, and for advertising campaigns that are transacted through insertion orders, we earn revenue based on the full amount of ad spend that runs through our platform. We also generate revenue from our ~~SpringServe~~ ad server and Demand Manager header-bidding product, where fees are ~~generally~~either based on the number of impressions ~~processed.~~processed or a percent of ad spend. In addition, we may receive certain fixed monthly fees for the use of our ~~platforms~~platform or products. We recognize revenue upon the fulfillment of our contractual obligations in connection with a completed transaction, subject to satisfying all other revenue recognition criteria. For the majority of transactions executed through our platform, we act as an agent on behalf of the publisher that is monetizing its inventory, and revenue is recognized net of any advertising inventory costs that we remit to sellers. With respect to certain revenue streams for managed advertising campaigns that are transacted through insertion orders, we report revenue on a gross basis, based primarily on our determination that the Company acts as the primary obligor in the delivery of advertising campaigns for our buyer clients with respect to such transactions.

~~Following~~For the SpotX Acquisition, the percentage of our revenue reported on a gross basis increased significantly compared to pre-acquisition periods. During the first quarter of 2021 (prior to the SpotX Acquisition),three and nine months ended September 30, 2023, our revenue reported on a gross basis was ~~less than 3%~~18% and 18%, respectively, of total ~~revenue. For~~revenue, and for the three and nine months ended September 30, 2022, our revenue reported on a gross basis was 20% and 18%, respectively, of total ~~revenue, respectively, and for the three and nine months ended September 30, 2021, our revenue reported on a gross basis was 20% and 16% of total revenue, respectively.~~revenue. Any mix shift that causes an increase in the relative percentage of our revenue accounted for on a gross basis would result in a higher revenue contribution and an associated decrease in our gross margin percentage (with no underlying impact on gross profit or ~~Revenue~~Contribution ex-TAC, as defined in section "Key Operating and Financial Performance Metrics"). Our revenue recognition policies are discussed in more detail in our audited consolidated financial statements and notes thereto for the year ended December 31, ~~2021~~2022 included in our Annual Report on Form 10-K and in Note 3 of the accompanying Notes to the Condensed Consolidated Financial Statements.

Expenses

We classify our expenses into the following categories:

Cost of Revenue. Our cost of revenue consists primarily of cloud hosting, data center, ~~costs,~~and bandwidth costs, ad protection costs, depreciation and maintenance expense of hardware supporting our revenue-producing platform, amortization of software costs for the development of our revenue-producing platform, amortization expense associated with acquired developed technologies, personnel costs, ~~facilities-related costs,~~ and ~~cloud computing~~facilities-related costs. In addition, for revenue booked on a gross basis, cost of revenue includes traffic acquisition costs. Personnel costs included in cost of revenue include salaries, bonuses, and stock-based compensation, and are primarily attributable to personnel in our network operations group who support our platform. We capitalize costs associated with software that is developed or obtained for internal use and amortize the costs associated with our revenue-producing platform in cost of revenue over their estimated useful lives. We amortize acquired developed technologies over their estimated useful lives.

Sales and Marketing. Our sales and marketing expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, as well as marketing expenses such as brand marketing, travel expenses, trade shows and marketing materials, professional services, and amortization expense associated with client relationships, backlog, and non-compete agreements from our business acquisitions, and to a lesser extent, facilities-related costs and depreciation and amortization. Our sales and support organization focuses on increasing the adoption of our solution by existing and new buyers and ~~sellers.~~sellers and supports ongoing client relationships. We amortize acquired intangibles associated with client relationships and backlog from our business acquisitions over their estimated useful lives.

Technology and Development. Our technology and development expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, as well as ~~professional services~~outsourced resources associated with the ongoing development and maintenance of our solution, depreciation and amortization, and to a lesser extent, facilities-related costs. These expenses include costs incurred in the development, implementation, and maintenance of internal use software, including platform and related infrastructure. Technology and development costs are expensed as incurred, except to the extent that such costs are associated with internal use software development that qualifies for capitalization, which are then recorded as internal use software development costs, net, on our consolidated balance sheets. We amortize internal use software development costs that relate to our revenue-producing activities on our platform to cost of revenue and amortize other internal use software development costs to technology and development costs or general and administrative expenses, depending on the nature of the related project. We amortize acquired intangibles associated with technology and development functions from our business acquisitions over their estimated useful lives.

~~Table of Contents~~

General and Administrative. Our general and administrative expenses consist primarily of personnel costs, including salaries, bonuses, and stock-based compensation, associated with our executive, finance, legal, human resources, compliance, and other administrative personnel, as well as accounting and legal professional services fees, facilities-related costs and depreciation

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and amortization, and other corporate-related expenses. General and administrative expenses also include amortization of internal use software development costs and acquired intangible assets from our business acquisitions over their estimated useful lives that relate to general and administrative functions.

Merger, Acquisition, and Restructuring Costs. Our merger, acquisition, and restructuring costs consist primarily of professional service fees associated with the merger and acquisition activities, cash-based employee termination costs, related stock-based compensation charges, and other restructuring activities, including facility closures, relocation costs, contract termination costs, and impairment costs of abandoned technology associated with restructuring activities.

Other (Income) Expense

Interest (Income) Expense, Net. Interest expense consists of interest expense associated with our Term Loan B Facility (defined below) and Convertible Senior Notes (defined below), and their related amortization of debt issuance costs and debt discount. Interest income consists of interest earned on our cash equivalents.

Other Income. Other income consists primarily of rental income from commercial office space we hold under lease and have sublet to other tenants.

Foreign Currency Exchange (Gain) Loss, Net. Foreign currency exchange (gain) loss, net consists primarily of gains and losses on foreign currency transactions and remeasurement of monetary assets and liabilities on our balance sheet denominated in foreign currencies. Foreign currency monetary assets and liabilities consist primarily of cash and cash equivalents, accounts receivable, accounts payable, and various intercompany balances held between our subsidiaries. Our primary foreign currency exposures are currencies other than the U.S. Dollar, principally the Australian Dollar, British Pound, Canadian Dollar, Euro, Japanese Yen, and ~~Japanese Yen.~~New Zealand Dollar.

Gain on Extinguishment of Debt. Gain on extinguishment of debt consists of gains or losses associated with the repurchases of Convertible Senior Notes at a discount or premium, respectively, including unamortized issuance costs, accrued interest expense, and commissions associated with the extinguished debt.

Provision (Benefit) for Income Taxes

We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, administrative practices, principles, and interpretations in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as changes in our business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize related tax benefits, the applicability of special tax regimes, changes in foreign currency exchange rates, changes in our stock price, changes in our deferred tax assets ("DTAs") and liabilities and their valuation, changes in the laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions.

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Results of Operations

The following table sets forth our condensed consolidated results of operations:


		Three Months Ended				Change %			Nine Months Ended						Change %			Three Months Ended						Change %				Nine Months Ended							Change %
		September 30, 2022		September 30, 2021				September 30, 2022			September 30, 2021			September 30, 2023					September 30, 2022				September 30, 2023					September 30, 2022
		(in thousands)									(in thousands)									(in thousands)											(in thousands)
Revenue	Revenue	$	145,815	$	131,871	11	%		$	401,670		$	307,127		31	%	Revenue	$	150,085		$	145,815			3		%		$	432,778			$	401,670		8		%
Expenses (1)(2):	Expenses (1)(2):																Expenses (1)(2):
Cost of revenue	Cost of revenue	71,753		63,541		13	%		196,150			134,823			45	%	Cost of revenue	84,878			71,753			18		%		339,881				196,150			73		%
Sales and marketing	Sales and marketing	49,848		52,260		(5)	%		151,675			118,122			28	%	Sales and marketing	38,227			49,848			(23)		%		136,407				151,675			(10)		%
Technology and development	Technology and development	25,134		21,059		19	%		71,214			53,436			33	%	Technology and development	23,537			25,134			(6)		%		71,135				71,214			—		%
General and administrative	General and administrative	20,235		16,535		22	%		59,405			47,673			25	%	General and administrative	21,286			20,235			5		%		68,023				59,405			15		%
Merger, acquisition, and restructuring costs	Merger, acquisition, and restructuring costs	—		2,424		(100)	%		7,468			37,778			(80)	%	Merger, acquisition, and restructuring costs	—			—			—		%		7,465				7,468			—		%
Total expenses	Total expenses	166,970		155,819		7	%		485,912			391,832			24	%	Total expenses	167,928			166,970			1		%		622,911				485,912			28		%
Loss from operations	Loss from operations	(21,155)		(23,948)		12	%		(84,242)			(84,705)			1	%	Loss from operations	(17,843)			(21,155)			(16)		%		(190,133)				(84,242)			126		%
Other expense, net	Other expense, net	3,671		5,079		(28)	%		12,240			7,920			55	%	Other expense, net	601			3,671			(84)		%		578				12,240			(95)		%
Loss before income taxes	Loss before income taxes	(24,826)		(29,027)		14	%		(96,482)			(92,625)			(4)	%	Loss before income taxes	(18,444)			(24,826)			(26)		%		(190,711)				(96,482)			98		%
Benefit for income taxes	Benefit for income taxes	(435)		(4,708)		(91)	%		(2,544)			(92,237)			(97)	%	Benefit for income taxes	(967)			(435)			122		%		(613)				(2,544)			(76)		%
Net loss	Net loss	$	(24,391)	$	(24,319)	—	%		$	(93,938)		$	(388)		NM		Net loss	$	(17,477)		$	(24,391)		(28)		%		$	(190,098)			$	(93,938)		102		%


NM Not meaningful


(1) Stock-based compensation expense included in our expenses was as follows:	(1) Stock-based compensation expense included in our expenses was as follows:									(1) Stock-based compensation expense included in our expenses was as follows:
		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
		(in thousands)				(in thousands)					(in thousands)				(in thousands)
Cost of revenue	Cost of revenue	$	424	$	278	$	1,191	$	530	Cost of revenue	$	446	$	424	$	1,373	$	1,191
Sales and marketing	Sales and marketing	5,491		4,583		16,257		10,426		Sales and marketing	6,371		5,491		20,869		16,257
Technology and development	Technology and development	6,576		3,828		16,645		8,195		Technology and development	4,999		6,576		15,918		16,645
General and administrative	General and administrative	4,911		3,087		14,096		8,299		General and administrative	5,652		4,911		17,159		14,096
Merger, acquisition, and restructuring costs	Merger, acquisition, and restructuring costs	—		48		2,004		1,071		Merger, acquisition, and restructuring costs	—		—		143		2,004
Total stock-based compensation expense	Total stock-based compensation expense	$	17,402	$	11,824	$	50,193	$	28,521	Total stock-based compensation expense	$	17,468	$	17,402	$	55,462	$	50,193


(2) Depreciation and amortization expense included in our expenses was as follows:	(2) Depreciation and amortization expense included in our expenses was as follows:									(2) Depreciation and amortization expense included in our expenses was as follows:
		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
		(in thousands)				(in thousands)					(in thousands)				(in thousands)
Cost of revenue	Cost of revenue	$	27,455	$	24,764	$	80,639	$	52,108	Cost of revenue	$	36,328	$	27,455	$	198,055	$	80,639
Sales and marketing	Sales and marketing	18,759		23,569		56,815		44,037		Sales and marketing	2,620		18,759		24,956		56,815
Technology and development	Technology and development	240		190		697		468		Technology and development	199		240		591		697
General and administrative	General and administrative	161		179		490		471		General and administrative	119		161		398		490
Total depreciation and amortization expense	Total depreciation and amortization expense	$	46,615	$	48,702	$	138,641	$	97,084	Total depreciation and amortization expense	$	39,266	$	46,615	$	224,000	$	138,641

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The following table sets forth our condensed consolidated results of operations for the specified periods as a percentage of our revenue for those periods presented:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenue	Revenue	100	%	100	%	100	%	100	%	Revenue	100	%	100	%	100	%	100	%
Cost of revenue	Cost of revenue	49		48		49		44		Cost of revenue	57		49		79		49
Sales and marketing	Sales and marketing	34		39		38		39		Sales and marketing	25		34		32		38
Technology and development	Technology and development	17		16		18		17		Technology and development	16		17		16		18
General and administrative	General and administrative	14		13		15		16		General and administrative	14		14		16		15
Merger, acquisition, and restructuring costs	Merger, acquisition, and restructuring costs	—		2		2		12		Merger, acquisition, and restructuring costs	—		—		2		2
Total expenses	Total expenses	115		118		121		128		Total expenses	112		115		144		121
Loss from operations	Loss from operations	(15)		(18)		(21)		(28)		Loss from operations	(12)		(15)		(44)		(21)
Other expense, net		3		4		3		2
Other (income) expense, net										Other (income) expense, net	—		3		—		3
Loss before income taxes	Loss before income taxes	(17)		(22)		(24)		(30)		Loss before income taxes	(12)		(17)		(44)		(24)
Benefit for income taxes	Benefit for income taxes	—		(4)		(1)		(30)		Benefit for income taxes	(1)		—		—		(1)
Net loss	Net loss	(17)	%	(18)	%	(23)	%	—	%	Net loss	(12)	%	(17)	%	(44)	%	(23)	%
Note: Percentages may not sum due to rounding.	Note: Percentages may not sum due to rounding.									Note: Percentages may not sum due to rounding.

Comparison of the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

Revenue

Revenue increased ~~$13.9~~$4.3 million, or ~~11%~~3%, for the three months ended September 30, ~~2022~~2023 compared to the ~~three months ended September 30, 2021.~~prior year period. Our revenue growth was driven primarily by mobile, which increased by $10.3 million, or 22%. This increase was partially offset by a decline in revenue from CTV of $3.8 million, or 5% and desktop of $2.2 million, or 8%.

Revenue increased $31.1 million, or 8%, for the nine months ended September 30, 2023 compared to the prior year period. Our revenue growth inwas driven primarily by mobile, which increased by $29.4 million, or 23%, and CTV, which increased by ~~$13.7 million, or 24%, and mobile, which increased by $2.6~~$11.0 million, or 6%. These increases were partially offset by a decline in revenue from desktop of ~~$2.4~~$9.3 million, or 8%11%.

Revenue increased $94.5 million, or 31%, for the nine months ended September 30, 2022 compared to the prior year period primarily due to the inclusion in 2022 of full period results from the SpotX Acquisition, which was completed on April 30, 2021, and the SpringServe Acquisition, which was completed on July 1, 2021, in addition to increases driven by growth in CTV and mobile. Revenue from CTV and mobile increased by $72.6 million, or 63%, and $18.2 million, or 16%, respectively. On a pro forma basis, including SpotX and SpringServe during the relevant pre-acquisition period, revenue increased 6% for the nine months ended September 30, 2022 compared to the prior year.

~~We expect our revenue will increase year-over-year in the fourth quarter of 2022.~~ Our revenue is largely a function of the number of advertising transactions and the price, or CPM, at which the inventory is sold, which results in total advertising spend on our platform, and, with respect to our revenue reported on a net basis, the take rate we charge for our services. Because pricing and take rate vary across publisher, channel and transaction type, our revenue is ~~impacted by~~subject to changes in publisher-specific take rates, and shifts in the mix of advertising spend on our ~~platform. We believe that contributions~~platform among publishers and transaction types. For instance, managed services tend to ~~revenue from~~have higher take rates while reserve auctions ~~in particular with respect~~tend to ~~CTV which is largely transacted on a reserved basis, will continue to grow as a percentage~~have lower take rates. For the remainder of ~~our total revenue. In general,~~2023, we ~~expect this shift will have a positive impact on~~believe our revenue ~~due to both an~~will increase ~~in the volume of transactions and average CPM, despite the fact that reserve auctions generally carry a lower take rate~~ compared to ~~open auction transactions.~~the prior year period, primarily from increases in mobile partially offset by decreases in CTV.

Our business is dependent in part on the overall health of the advertising market. Our revenue growth has been tempered, and may be negatively impacted in the future, by reductions in revenue resulting from the ~~economic~~ impact of ~~the COVID-19 pandemic and other~~ macroeconomic challenges, such as another pandemic or health crisis, geopolitical events (including the conflict in Ukraine), and other macroeconomic factors like labor shortages, supply chain disruptions, recessionary concerns, and inflation impacting the markets and communities in which we operate.challenges. If economic conditions were to deteriorate further, we would likely experience a negative impact on our future revenue trends, and the magnitude of ~~this impact~~these impacts is difficult to predict depending on ~~the~~their scope and ~~duration of any recession.~~duration. Refer to Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for additional information related to these ~~risks.~~risks and the impact they may have on our business.

Cost of Revenue

Cost of revenue increased ~~$8.2~~$13.1 million, or ~~13%~~18%, for the three months ended September 30, ~~2022~~2023 compared to the ~~three~~prior year period, primarily due to an increase of $8.9 million in depreciation and amortization. This increase was driven by incremental amortization of $7.9 million due to the acceleration of the remaining lives of certain acquired intangible assets and capitalized software from the integration of our legacy CTV platforms into Magnite Streaming, which began during the fourth quarter of 2022 and was completed early in the third quarter of 2023. Compared to the prior year period, costs of revenue also included an increase of $5.8 million in cloud hosting, data center, and bandwidth expenses, which was partially offset by a decrease of $1.2 million in traffic acquisition costs associated with revenue recognized on a gross basis.

Cost of revenue increased $143.7 million, or 73%, for the nine months ended September 30, ~~2021,~~2023, compared to the prior year period, primarily due to ~~revenue growth.~~an increase of $117.4 million in depreciation and amortization. This increase was driven by incremental amortization of $114.3 million due to the same reasons above. Compared to the prior year period, cost of revenue ~~included increases of $5.6 million in data and bandwidth expenses and $2.7 million in depreciation and amortization.~~also

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For the nine months ended September 30, 2022, costs of revenue increased $61.3 million, or 45%, compared to the prior year period, primarily due to the inclusion in 2022 of full period results from the SpotX Acquisition, which was completed on April 30, 2021, and revenue growth. Compared to the prior year period, cost of revenue included increases of ~~$28.5~~$22.3 million in ~~depreciation and amortization, $17.9 million in~~cloud hosting, data center, and bandwidth expenses and ~~$10.9~~$5.2 million in traffic acquisition costs ~~driven by the increases in~~associated with revenue ~~reported~~recognized on a gross ~~basis as a result of the SpotX Acquisition.~~basis.

~~Our~~We expect cost of revenue ~~will continue~~ to ~~increase year-over-year in~~decrease through the ~~fourth quarter~~remainder of 2023 compared to 2022 in absolute dollars primarily due to the ~~expected increase in~~completion of the ~~size of our operations, including increases in hosting costs and other expenses to support the growth of our business.~~accelerated amortization expense as discussed above.

Cost of revenue may fluctuate from quarter to quarter and period to period, on an absolute dollar basis and as a percentage of revenue, depending on revenue levels and the volume of transactions we process supporting those revenues, and the timing and amounts of depreciation and amortization of equipment and software.

Sales and Marketing

Sales and marketing expenses decreased ~~$2.4~~$11.6 million, or 5%23%, for the three months ended September 30, ~~2022~~2023 compared ~~to the three months ended September 30, 2021. Compared~~ to the prior year period, ~~sales and marketing expenses included decreases~~primarily due to a decrease of ~~$4.8~~$16.1 million ~~related to~~in depreciation and amortization ~~primarily due~~related to certain acquired intangible assets becoming fully amortized ~~earlier~~ in ~~2022. The decreases were~~2022 and in April 2023, which was partially offset by ~~increases~~an increase of ~~$1.3~~$4.0 million related to ~~travel~~personnel expenses.

Sales and ~~industry events due to the lifting of travel restrictions during the year.~~

~~For~~marketing expenses decreased $15.3 million, or 10%, for the nine months ended September 30, ~~2022, sales and marketing expenses increased $33.6 million, or 28%,~~2023 compared to the prior year period, primarily due to ~~the addition~~a decrease of ~~headcount from the SpotX Acquisition~~$31.9 million in depreciation and ~~the~~ amortization ~~of acquired intangible assets and other assets associated with the transaction. Compared~~due to the ~~prior year period, sales and marketing expenses included increases~~same reason above, which was partially offset by an increase of ~~$14.7~~$13.2 million related to personnel expenses and ~~$12.8 million related to depreciation and amortization. Additionally, the change in sales and marketing expenses included increases~~an increase of ~~$2.8~~$1.2 million related to travel and ~~industry events for the same reason above.~~entertainment and marketing events.

We expect sales and marketing expenses to decrease ~~year-over-year in~~through the ~~fourth quarter~~remainder of 2023 compared to 2022 in absolute dollars primarily due to decreases in amortization of acquired intangible ~~assets, which we~~assets. We expect these decreases to be partially offset by increases in personnel ~~costs as a result of new hiring to support our revenue growth~~related expenses and increases in ~~event,~~ travel and entertainment ~~expenses.~~expenses compared to the prior year period.

Sales and marketing expenses may fluctuate quarter to quarter and period to period, on an absolute dollar basis and as a percentage of revenue, based on revenue levels, the timing of our investments and seasonality in our industry and business.

Technology and Development

Technology and development expenses ~~increased $4.1~~decreased $1.6 million, or ~~19%~~6%, for the three months ended September 30, ~~2022~~2023 compared to the ~~three months ended September 30, 2021,~~prior year period, primarily due ~~primarily~~ to ~~increases~~a decrease of ~~$2.8~~$1.9 million in personnel ~~costs as a result of increased headcount.~~expenses.

~~For~~Technology and development expenses decreased $0.1 million, or 0%, for the nine months ended September 30, ~~2022, technology and development expenses increased $17.8 million, or 33%,~~2023 compared to the prior year ~~period, due primarily to increases of $15.1 million in personnel costs as a result of the increased headcount associated with the SpotX Acquisition.~~period.

We expect technology and development expenses to ~~increase year-over-year in~~remain relatively flat through the ~~fourth quarter~~remainder of 2023 compared to 2022 in absolute ~~dollars primarily due to increases in compensation expense and increases in event, travel and entertainment expenses.~~dollars.

The timing and amount of our capitalized development and enhancement projects may affect the amount of development costs expensed in any given period. As a percentage of revenue, technology and development expense may fluctuate from quarter to quarter and period to period based on revenue levels, the timing and amounts of technology and development efforts, the timing and the rate of the amortization of capitalized projects and the timing and amounts of future capitalized internal use software development costs.

General and Administrative

General and administrative expenses increased ~~$3.7~~$1.1 million, or ~~22%~~5%, for the three months ended September 30, ~~2022~~2023 compared to the ~~three months ended September 30, 2021, primarily due to increases of $2.6~~prior year period.

General and administrative expenses increased $8.6 million, ~~in personnel expenses due to increases in compensation expense driven by a more competitive labor market.~~

~~For~~or 15%, for the nine months ended September 30, ~~2022, general and administrative expenses increased $11.7 million, or 25%,~~2023, compared to the prior year period, primarily due to ~~increases~~an increase of ~~$7.6~~$4.8 million in ~~personnel expenses mainly due~~bad debt expense. Bad debt expense was primarily a result of a buyer defaulting on payment obligations and subsequently filing for bankruptcy during the second quarter of 2023, resulting in bad debt expense of $4.5 million. Compared to ~~a more competitive labor market, increases of $1.6 million in facilities related expenses due to return to office work environment, and increases of $1.5 million in business insurance and taxes.~~

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~~We expect~~the prior year period, general and administrative expenses toalso included an increase ~~year-over-year~~of $3.7 million in the fourth quarter of 2022 in absolute dollars primarily due to the additional costs for a return to office work environment, new office leases, and increases in event, travel and entertainment expenses.personnel costs.

General and administrative expenses may fluctuate from quarter to quarter and period to period based on the timing and amounts of expenditures in our general and administrative functions as they vary in scope and scale over periods. Such fluctuations may not be directly proportional to changes in revenue.

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Merger, Acquisition, and Restructuring Costs

Merger, acquisition, and restructuring costs decreased $2.4 million, or 100%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. There were no merger, acquisition, and restructuring costs incurred in the three months ended September 30, 2022. Costs incurredremained relatively flat during the three months ended September 30, 2021 of $2.4 million were primarily due to the SpotX Acquisition, which was completed on April 30, 2021, which included investment banking advisory, legal, and other professional services fees, one-time cash-based employee termination benefit costs, and non-cash stock-based compensation expense associated with equity accelerations due to severance benefits.

~~Merger, acquisition, and restructuring costs decreased by $30.3 million, or 80%, for~~ the nine months ended September 30, ~~2022~~2023 compared to the prior year period. ~~Costs~~Merger, acquisition, and restructuring costs incurred during the nine months ended September 30, ~~2022~~2023 included $3.4 million of ~~$7.5~~severance related expenses, $2.2 million ~~were primarily~~of facilities related loss contracts, and $1.4 million of exit costs, all due to restructuring activities ~~from~~as a result of consolidating our legacy CTV and SpotX CTV platforms following the SpotX ~~Acquisition, which included $3.3 million of impairment~~Acquisition. Merger, acquisition, and restructuring costs associated with abandoned technology, $2.0 million non-cash stock-based compensation expense associated with the acceleration of unvested equity awards, and $1.2 million of one-time cash-based employee termination costs. Costs incurred during the nine months ended September 30, 2021 of $37.8 million were primarily due to the SpotX Acquisition as well as facility closure costs associated with office space restructuring activities.

~~Other (Income) Expense, Net~~

Three Months Ended Nine Months Ended
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
(in thousands) (in thousands)
Interest expense, net $ 7,016 $ 7,280 $ 21,273 $ 12,595
Other income (1,369) (955) (3,991) (3,317)
Foreign exchange gain, net (1,976) (1,246) (5,042) (1,358)
Total other expense, net $ 3,671 $ 5,079 $ 12,240 $ 7,920

Interest expense, net decreased $0.3 million during the three months ended September 30, 2022 compared to the same period in the prior year primarily due to increases of interest income of $1.0 million offset by increases of interest expense of $0.7 million.

~~Interest expense, net increased $8.7 million~~ during the nine months ended September 30, 2022 included $3.3 million of impairment costs of abandoned technology and $3.2 million of severance related expenses, both related to restructuring activities from the SpotX Acquisition.

Other (Income) Expense, Net


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
	(in thousands)				(in thousands)
Interest expense, net	$	7,574	$	7,016	$	24,269	$	21,273
Foreign exchange gain, net	(1,471)		(1,976)		(1,542)		(5,042)
Gain on debt extinguishment	(4,156)		—		(18,132)		—
Other income	(1,346)		(1,369)		(4,017)		(3,991)
Total other expense, net	$	601	$	3,671	$	578	$	12,240

Interest expense, net increased $0.6 million for the three months ended September 30, 2023 compared to the ~~same period in the~~ prior year period, primarily due to increased interest expense ~~associated with the Term Loan B Facility (defined below), which the Company entered into during April 2021, and~~of $3.2 million as a result of increased interest expense associated with the Convertible Senior Notes (defined below), which the Company entered into during March 2021. The increase in interest expense was partially offset by increases of interest income of $1.0 million.

~~We do not expect interest expense, net to significantly change year-over-year in the fourth quarter of 2022 as interest expense on Convertible Senior Notes are not dependent on changing interest~~ rates ~~and although interest expense~~ on our Term Loan B Facility, ~~will increase as the underlying borrowing rates have increased in response to changes in monetary policy, we expect this to be largely~~partially offset by an increase in interest income of $2.6 million generated from cash ~~equivalents and short-term investments.~~equivalents.

Interest expense, net, increased $3.0 million for the nine months ended September 30, 2023 compared to the prior year period, primarily due to increased interest expense of $10.0 million, partially offset by an increase in interest income of $7.0 million, both for the reasons described above.

Foreign exchange gain, net ~~is impacted by~~decreased $0.5 million and $3.5 million for the three and nine months ended September 30, 2023 compared to the prior year periods, respectively, due to movements in foreign currency exchange rates and the amount of foreign currency-denominated cash, receivables, and payables, which ~~are~~were impacted by our billings to buyers, payments to sellers, and intercompany balances. ~~The foreign exchange gain, net~~

Gain on debt extinguishment increased $4.2 million and $18.1 million during the three and nine months ended September 30, ~~2022 was primarily~~2023 compared to the prior year periods, respectively, due to ~~the currency movements between the British Pound, Australian Dollar, Canadian Dollar, and Euro relative to the U.S. Dollar.~~our Convertible Senior Notes repurchases.

Provision (Benefit) for Income Taxes

We recorded an income tax benefit of ~~$0.4~~$1.0 million and ~~$4.7~~$0.6 million for the three and nine months ended September 30, ~~2022 and 2021,~~2023, respectively, and an income tax benefit of ~~$2.5~~$0.4 million and ~~$92.2~~$2.5 million for the three and nine months ended September 30, 2022, ~~and 2021,~~ respectively. The tax benefit for the three and nine months ended September 30, 2023 and September 30, 2022 isare primarily the result of ~~recognizing~~ the ~~benefit of~~Company's ability to recognize DTAs ~~previously~~ subject to the domestic valuation allowance and the foreign income tax provision. ~~The tax benefit~~

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for the three and nine months ended September 30, 2021 was primarily the result of the deferred tax liability associated with acquisitions that occurred during the year and the tax liability associated with foreign subsidiaries. The net deferred tax liabilities recorded in connection with the prior year acquisitions and our current year taxable income provided sources of taxable income to support the realizability of pre-existing DTAs. We continue to maintain a partial valuation allowance for our domestic DTAs.

Key Operating and Financial Performance Metrics

In addition to our GAAP results, we review non-GAAP financial measures, including ~~Revenue~~Contribution ex-TAC and Adjusted EBITDA, to help us evaluate our business on a consistent basis, measure our performance, identify trends affecting our business, establish budgets, measure the effectiveness of investments in our technology and development and sales and marketing, and assess our operational efficiencies. Our non-GAAP financial measures are discussed below. Revenue and net income (loss) are discussed above under the headings "Components of Our Results of Operations" and "Results of Operations."

Three Months Ended Nine Months Ended
September 30, 2022 September 30, 2021 Change
Favorable/ (Unfavorable) September 30, 2022 September 30, 2021 Change
Favorable/ (Unfavorable)
(in thousands) (in thousands)
Financial Measures and non-GAAP Financial Measures:
Revenue $ 145,815 $ 131,871 11% $ 401,670 $ 307,127 31%
Revenue ex-TAC 127,650 114,064 12% 357,998 274,356 30%
Gross profit 74,062 68,330 8% 205,520 172,304 19%
Net loss (24,391) (24,319) —% (93,938) (388) (24,111)%
Adjusted EBITDA 44,400 39,966 11% 114,562 81,121 41%

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~~Revenue~~


	Three Months Ended					Nine Months Ended
	September 30, 2023		September 30, 2022		Change Favorable/ (Unfavorable)	September 30, 2023		September 30, 2022		Change Favorable/ (Unfavorable)
	(in thousands)					(in thousands)
Financial Measures and non-GAAP Financial Measures:
Revenue	$	150,085	$	145,815	3%	$	432,778	$	401,670	8%
Gross profit	65,207		74,062		(12)%	92,897		205,520		(55)%
Contribution ex-TAC	133,136		127,650		4%	383,867		357,998		7%
Net loss	(17,477)		(24,391)		28%	(190,098)		(93,938)		(102)%
Adjusted EBITDA	40,289		44,400		(9)%	100,958		114,562		(12)%

Contribution ex-TAC

~~Revenue~~Contribution ex-TAC is calculated as gross profit plus cost of revenue, excluding traffic acquisition cost ("TAC"). Traffic acquisition cost, a component of cost of revenue, represents what we must pay sellers for the sale of advertising inventory through our platform for revenue reported on a gross basis. ~~In calculating Revenue ex-TAC, we add back the cost of revenue, excluding TAC, to gross profit, the most comparable GAAP measurement. Revenue~~Contribution ex-TAC is a non-GAAP financial ~~measure.~~measure that is most comparable to gross profit. Our management believes ~~Revenue~~Contribution ex-TAC is a useful measure in assessing the performance of Magnite ~~as a combined company following the SpotX Acquisition~~ and facilitates a consistent comparison against our core business without considering the impact of traffic acquisition costs related to revenue reported on a gross basis.

Our use of ~~Revenue~~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 which have similar business arrangements, may define ~~Revenue~~Contribution ex-TAC differently, which may make comparisons difficult. Because of these and other limitations, you should consider our non-GAAP measures only as supplemental to GAAP-based financial performance measures, including revenue, net income (loss) and cash flows.

The following table presents the calculation of gross profit and reconciliation of gross profit to ~~Revenue~~Contribution ex-TAC for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended Nine Months Ended
September 30, 2022 September 30, 2021 Change % September 30, 2022 September 30, 2021 Change %
(in thousands) (in thousands)
Revenue $ 145,815 $ 131,871 11 % $ 401,670 $ 307,127 31 %
Less: Cost of revenue 71,753 63,541 13 % 196,150 134,823 45 %
Gross Profit 74,062 68,330 8 % 205,520 172,304 19 %
Add back: Cost of revenue, excluding TAC 53,588 45,734 17 % 152,478 102,052 49 %
Revenue ex-TAC $ 127,650 $ 114,064 12 % $ 357,998 $ 274,356 30 %

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	Three Months Ended						Nine Months Ended
	September 30, 2023		September 30, 2022		Change %		September 30, 2023		September 30, 2022		Change %
	(in thousands)						(in thousands)
Revenue	$	150,085	$	145,815	3	%	$	432,778	$	401,670	8	%
Less: Cost of revenue	84,878		71,753		18	%	339,881		196,150		73	%
Gross Profit	65,207		74,062		(12)	%	92,897		205,520		(55)	%
Add back: Cost of revenue, excluding TAC	67,929		53,588		27	%	290,970		152,478		91	%
Contribution ex-TAC	$	133,136	$	127,650	4	%	$	383,867	$	357,998	7	%

We track the breakdown of ~~Revenue~~Contribution ex-TAC across channels to better understand how our clients are transacting on our platform, which informs decisions as to business strategy and the allocation of resources and capital. The following table presents ~~Revenue~~Contribution ex-TAC by channel:


		Revenue ex-TAC													Contribution ex-TAC
		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		September 30, 2022		September 30, 2021		Change %		September 30, 2022		September 30, 2021		Change %			September 30, 2023		September 30, 2022		Change %		September 30, 2023		September 30, 2022		Change %
		(in thousands)						(in thousands)							(in thousands)						(in thousands)
Channel:	Channel:													Channel:
CTV	CTV	$	55,761	$	43,142	29	%	$	150,180	$	89,382	68	%	CTV	$	52,468	$	55,761	(6)	%	$	154,964	$	150,180	3	%
Mobile														Mobile	54,971		44,734		23	%	155,260		126,999		22	%
Desktop	Desktop	27,155		29,192		(7)	%	80,819		76,566		6	%	Desktop	25,697		27,155		(5)	%	73,643		80,819		(9)	%
Mobile		44,734		41,730		7	%	126,999		108,408		17	%
Total	Total	$	127,650	$	114,064	12	%	$	357,998	$	274,356	30	%	Total	$	133,136	$	127,650	4	%	$	383,867	$	357,998	7	%

~~Revenue~~

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Contribution ex-TAC increased ~~$13.6~~$5.5 million, or ~~12%~~4%, for the three months ended September 30, ~~2022~~2023 compared to the three months ended September 30, ~~2021.~~2022. The increase in ~~Revenue~~Contribution ex-TAC was primarily due to growth in ~~CTV and~~ mobile. This was partially offset by a ~~7% year-over-year~~ decline in our CTV and desktop ~~business.~~businesses.

~~Revenue~~Contribution ex-TAC increased ~~$83.6~~$25.9 million, or ~~30%~~7%, for the nine months ended September 30, ~~2022~~2023 compared to the nine months ended September 30, ~~2021.~~2022. The increase in ~~Revenue~~Contribution ex-TAC was primarily due to ~~incremental revenue from the SpotX Acquisition, which was completed on April 30, 2021, and the SpringServe Acquisition, which was completed on July 1, 2021, and~~ growth in ~~CTV~~mobile and ~~mobile.~~

~~We expect Revenue ex-TAC to increase through the remainder of 2022 as compared to the same period~~CTV. This was partially offset by a decline in the prior year. We believe that CTV will be our biggest growth driver in future periods and continue to represent a higher percentage of our overall Revenue ex-TAC, with mobile as our second biggest driver. Our mobile business consists of two components, mobile web and mobile applications. Initially our mobile business consisted primarily of mobile web, which is similar to our desktop ~~business, but our mobile application business has been the growth driver behind our mobile~~ business. ~~We therefore expect our growth within mobile to come largely from our mobile applications business and, in particular, mobile in-app video.~~

Lower industry growth rates in desktop will make growing desktop Revenue ex-TAC more challenging; however, in future periods we believe we will be able to grow our desktop business in excess of industry projections by capturing market share through SPO and expansion of publisher relationships. We expect our desktop business to decline as an overall percentage of our revenue in future periods. However, we expect that it will continue to represent a significant part of our Revenue ex-TAC in the near term. Therefore, the mix of our desktop business will continue to dampen our overall growth rate.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) adjusted to exclude stock-based compensation expense, depreciation and amortization, amortization of acquired intangible assets, impairment charges, interest income or expense, and other cash and non-cash based income or expenses that we do not consider indicative of our core operating performance, including, but not limited to foreign exchange gains and losses, acquisition and related items, gains or losses on extinguishment of debt, non-operational real estate and other expense (income), net, and provision (benefit) for income taxes. We believe Adjusted EBITDA is useful to investors in evaluating our performance for the following reasons:

•Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s performance without regard to items such as those we exclude in calculating this measure, which can vary substantially from company to company depending upon their financing, capital structures, and the method by which assets were acquired.

•Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of performance and the effectiveness of our business strategies, and in communications with our board of directors concerning our performance. Adjusted EBITDA may also be used as a metric for determining payment of cash incentive compensation.

•Adjusted EBITDA provides a measure of consistency and comparability with our past performance that many investors find useful, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.

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Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results of operations as reported under GAAP. These limitations include:

•Stock-based compensation is a non-cash charge and will remain an element of our long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period.

•Depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future, but Adjusted EBITDA does not reflect any cash requirements for these replacements.

•Impairment charges are non-cash charges related to goodwill, intangible assets and/or long-lived assets.

•Adjusted EBITDA does not reflect certain cash and non-cash charges related to acquisition and related items, such as amortization of acquired intangible assets, merger, acquisition, or restructuring related severance costs, and changes in the fair value of contingent consideration.

•Adjusted EBITDA does not reflect cash and non-cash charges and changes in, or cash requirements for, acquisition and related items, such as certain transaction expenses and expenses associated with earn-out amounts.

•Adjusted EBITDA does not reflect changes in our working capital needs, capital expenditures, non-operational real estate expenses or income, or contractual commitments.

•Adjusted EBITDA does not reflect cash requirements for income taxes and the cash impact of other income or expense.

•Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Our Adjusted EBITDA is influenced by fluctuations in our revenue, cost of revenue, and the timing and amounts of the cost of our operations. Adjusted EBITDA should not be considered as an alternative to net income (loss), income (loss) from operations, or any other measure of financial performance calculated and presented in accordance with GAAP.

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The following table presents a reconciliation of net loss, the most comparable GAAP measure, to Adjusted EBITDA for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Net loss	Net loss	$	(24,391)	$	(24,319)	$	(93,938)	$	(388)	Net loss	$	(17,477)	$	(24,391)	$	(190,098)	$	(93,938)
Add back (deduct):	Add back (deduct):									Add back (deduct):
Depreciation and amortization expense, excluding amortization of acquired intangible assets	Depreciation and amortization expense, excluding amortization of acquired intangible assets	8,548		6,518		23,293		17,771		Depreciation and amortization expense, excluding amortization of acquired intangible assets	9,507		8,548		29,132		23,293
Amortization of acquired intangibles	Amortization of acquired intangibles	38,067		42,184		115,348		79,313		Amortization of acquired intangibles	29,759		38,067		194,868		115,348
Stock-based compensation expense	Stock-based compensation expense	17,402		11,824		50,193		28,521		Stock-based compensation expense	17,468		17,402		55,462		50,193
Merger, acquisition, and restructuring costs, excluding stock-based compensation expense	Merger, acquisition, and restructuring costs, excluding stock-based compensation expense	—		2,376		5,464		36,707		Merger, acquisition, and restructuring costs, excluding stock-based compensation expense	—		—		7,322		5,464
Non-operational real estate expense, net		169		57		515		197
Non-operational real estate and other expense, net										Non-operational real estate and other expense, net	52		169		290		515
Interest expense, net	Interest expense, net	7,016		7,280		21,273		12,595		Interest expense, net	7,574		7,016		24,269		21,273
Foreign exchange gain, net	Foreign exchange gain, net	(1,976)		(1,246)		(5,042)		(1,358)		Foreign exchange gain, net	(1,471)		(1,976)		(1,542)		(5,042)

Gain on extinguishment of debt										Gain on extinguishment of debt	(4,156)		—		(18,132)		—
Benefit for income taxes	Benefit for income taxes	(435)		(4,708)		(2,544)		(92,237)		Benefit for income taxes	(967)		(435)		(613)		(2,544)
Adjusted EBITDA	Adjusted EBITDA	$	44,400	$	39,966	$	114,562	$	81,121	Adjusted EBITDA	$	40,289	$	44,400	$	100,958	$	114,562

Adjusted EBITDA ~~increased~~decreased by ~~$4.4~~$4.1 million during the three months ended September 30, ~~2022~~2023 compared to the ~~three months ended September 30, 2021,~~prior year period, primarily due to increases in cloud hosting, data center, and bandwidth costs, and personnel expenses, which exceeded increases in revenue ~~which are discussed~~year-over-year. Refer to discussion in section "Comparison of the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021.~~2022."

Adjusted EBITDA ~~increased~~decreased by ~~$33.4~~$13.6 million during the nine months ended September 30, ~~2022,~~2023 compared to the prior year period, primarily due to ~~incremental revenue growth from the SpotX Acquisition~~increases in cloud hosting, data center, and ~~organic growth.~~

~~We expect Adjusted EBITDA to continue to increase through the remainder of 2022 as compared to the same period in the prior year as a result of continued growth~~bandwidth costs, personnel expenses, traffic and acquisitions costs, and bad debt expense, which exceeded increases in revenue year-over-year. Refer to discussion in section "Comparison of the Three and ~~ongoing operating leverage.~~Nine Months Ended September 30, 2023 and 2022."

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Liquidity and Capital Resources

Liquidity

As of September 30, ~~2022,~~2023, we had cash and cash equivalents of ~~$253.6~~$310.5 million, of which ~~$40.2~~$38.3 million was held in foreign currency denominated cash accounts, and an aggregate gross principal amount of ~~$755.5~~$627.0 million of indebtedness outstanding under our Term Loan B Facility (as defined below) and our Convertible Senior Notes (as defined below). In addition, we are party to a $65.0 million Revolving Credit Facility (as defined below), of which approximately ~~$5.3~~$5.2 million is assigned to outstanding but undrawn letters of credit. See "Capital Resources" below for further information about our outstanding debt.

Our principal cash requirements for the twelve-month period following this report primarily consist of personnel costs, contractual payment obligations, including office leases, data center costs and cloud hosting costs, capital expenditures, payment of interest and required principal payments on our Convertible Senior Notes and Term Loan B Facility, ~~taxes paid related to net share settlement associated with vesting of stock-based compensation awards,~~ cash outlays for income taxes, and cash requirements to fund working capital. In the longer term, we would expect to have similar cash requirements, with increases in absolute dollars associated with the continued growth of our business and expansion of operations. See "Contractual Obligations and Known Future Cash Requirements" for a further discussion of our known material contractual obligations.

Our working capital needs and cash conversion cycle, which is influenced by seasonality and may be negatively impacted as a result of ~~COVID-19,~~pandemics, inflationary, recessionary and other macroeconomic challenges, can have large fluctuations due to the timing of receipts from buyers and timing of disbursements to sellers. In addition, in the event a buyer defaults on payment, we may still be required to pay sellers for the inventory purchased. Our capital expenditure investments tend to be higher in the second half of the year. The impacts from changes in working capital and capital expenditures can significantly impact our cash flows and therefore, our liquidity during any period presented.

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We have historically relied upon cash and cash equivalents, cash generated from operations, borrowings under credit facilities and issuance of debt for our liquidity needs. Our ability to meet our cash requirements depends on, among other things, our operating performance, competitive developments, and financial market conditions, all of which are significantly affected by business, financial, economic, political, global health-related and other factors, many of which we may not be able to control or influence.

We believe our existing cash and cash equivalents, cash generated from operating activities, and amounts available to borrow under our Revolving Credit Facility will be sufficient to meet our working capital requirements for at least the next twelve months from the issuance of our financial statements. However, there are multiple factors that could impact our cash balances in the future, including the factors described above with respect to working capital and cash conversion cycles, as well as the duration and severity of events beyond our control ~~such as health epidemics, including the COVID-19 pandemic, geopolitical events, including the evolving conflict in Ukraine, and economic~~ and macroeconomic ~~factors like labor shortages, supply chain disruptions, and inflation impacting the markets and communities in which our clients operate and the~~ factors set forth in Part ~~II,~~I, Item 1A: "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Capital Resources

In March 2021, we sold convertible senior notes ("Convertible Senior Notes") for gross proceeds of $400.0 million. The Convertible Senior Notes are senior, unsecured obligations with interest payable semi-annually in cash at a rate of 0.25% per annum in arrears on March 15 and September 15. The Convertible Senior Notes will mature on March 15, 2026, unless earlier converted, redeemed, or repurchased. The initial conversion rate is 15.6539 shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $63.88 per share of the Company’s common stock and is subject to adjustment as described in the Offering Memorandum. At September 30, ~~2022,~~2023, the balance of the Convertible Senior Notes was ~~$392.1~~$271.2 million, net of unamortized debt issuance costs of ~~$7.9~~$3.9 million. Accrued interest for the Convertible Senior Notes at September 30, ~~2022~~2023 was immaterial.

In conjunction with the issuance of the Convertible Senior Notes, we entered into capped call transactions to reduce the Company's exposure to additional cash payments above principal balances in the event of a cash conversion of the Convertible Senior Notes. The Company may owe additional cash or shares to the holders of the Convertible Senior Notes upon early conversion if our stock price exceeds $91.260 per share, which is subject to certain adjustments. Although the Company’s incremental exposure to the additional cash payment above the principal amount of the Convertible Senior Notes is reduced by the capped calls, conversion of the Convertible Senior Notes by the holders may cause dilution to the ownership interests of existing stockholders. See Note 13 "Debt" in the notes to unaudited condensed consolidated financial statements included in this Quarterly Report for more information regarding terms and conditions of the Convertible Senior Notes and the capped call transactions.

On April 30, 2021, and in conjunction with the SpotX Acquisition, we entered into a credit agreement (the "Credit Agreement") with Goldman Sachs Bank USA as administrative and collateral agent, and other lending parties thereto for a $360.0 million seven-year senior secured term loan facility ("Term Loan B Facility") and a $52.5 million senior secured revolving credit facility (the "Revolving Credit Facility"), which was subsequently increased to $65.0 million in June 2021. Amounts outstanding under the Credit Agreement accrue interest at a rate equal to either, (1) for the Term Loan B Facility, at the Company’s election, the Eurodollar Rate (as defined in the Credit Agreement) plus a margin of 5.00% per annum, or ABR (as defined in the Credit Agreement) plus a margin of 4.00%, and (2) for the Revolving Credit Facility, at the Company’s election, the Eurodollar Rate plus a margin of 4.25% to 4.75%, or ABR plus a margin of 3.25% to 3.75%, in each case, depending on the Company’s first lien net leverage ratio. As part of the Term Loan B Facility, the Company received $325 million in proceeds, net of discounts and fees, which were used to finance the SpotX

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Acquisition and related transactions and for general corporate purposes. In June 2023, the Company amended its Credit Agreement to transition away from a variable interest rate based on the Eurodollar Rate towards a similar variable interest rate based on Adjusted Term SOFR, as defined in the amendment to the Credit Agreement, which is based on the Secured Overnight Financing Rate ("SOFR"). At September 30, ~~2022,~~2023, amounts available under the Revolving Credit Facility were ~~$59.7~~$59.8 million, net of letters of credit outstanding in the amount of ~~$5.3~~$5.2 million. Accrued interest for the Term Loan B Facility at September 30, ~~2022~~2023 was ~~$0.7~~$0.9 million.

In ~~December 2021, the~~February 2023, our Board of Directors approved a ~~share~~ repurchase ~~program, under~~plan (the “February 2023 Repurchase Plan”), pursuant to which the ~~company is~~Company was authorized to ~~purchase~~repurchase common stock or Convertible Senior Notes, with an aggregate market value of up to ~~$50.0~~$75.0 million, ~~of its common stock from December 10, 2021~~ through ~~December 10, 2022.~~February 16, 2025. The repurchase program ~~allows~~allowed the ~~company~~Company to repurchase its common stock or Convertible Senior Notes using open market stock purchases, privately negotiated transactions, block trades or other means in accordance with U.S. securities laws. ~~Approximately $28.3 million remained available for purchase under this share repurchase program as~~The February 2023 Repurchase Plan was completed during the second quarter of ~~September 30, 2022.~~2023. On ~~November~~August 4, ~~2022, the~~2023, our Board of Directors approved a new repurchase plan (the "August 2023 Repurchase Plan"), pursuant to which the Company is authorized to repurchase common stock or Convertible Senior Notes, with an ~~extension~~aggregate market value of up to $100.0 million, through August 4, 2025. As of September 30, 2023, $70.2 million remains available under the ~~share repurchase program through December 15, 2023.~~August 2023 Repurchase Plan.

In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders ~~will~~may be diluted. If we raise additional financing by incurring indebtedness, we will be subject to increased fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and

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other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors.

An inability to raise additional capital could adversely affect our ability to achieve our business objectives. In addition, if our operating performance during the next twelve months is below our expectations, our liquidity and ability to operate our business could be adversely affected.

Our cash and cash equivalents balance is affected by our results of operations, the timing of capital expenditures which are typically greater in the second half of the year, and by changes in our working capital, particularly changes in accounts receivable and accounts payable. The timing of cash receipts from buyers and payments to sellers can significantly impact our cash flows from operating activities and our liquidity for, and within, any period presented. Our collection and payment cycle can vary from period to period depending upon various circumstances, including seasonality, and may be negatively impacted by certain macroeconomic challenges, such as ~~a result~~capital market disruptions and instability of ~~COVID-19.~~financial institutions.

Cash Flows

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


		Nine Months Ended					Nine Months Ended
		September 30, 2022		September 30, 2021			September 30, 2023		September 30, 2022
		(in thousands)					(in thousands)
Cash flows provided by operating activities	Cash flows provided by operating activities	$	103,845	$	58,000	Cash flows provided by operating activities	$	125,282	$	103,845
Cash flows used in investing activities	Cash flows used in investing activities	(49,936)		(675,570)		Cash flows used in investing activities	(25,339)		(49,936)
Cash flows (used in) provided by financing activities		(28,321)		688,863
Cash flows used in financing activities						Cash flows used in financing activities	(115,681)		(28,321)
Effects of exchange rate changes on cash, cash equivalents and restricted cash	Effects of exchange rate changes on cash, cash equivalents and restricted cash	(2,484)		(591)		Effects of exchange rate changes on cash, cash equivalents and restricted cash	(209)		(2,484)
Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	$	23,104	$	70,702	Change in cash, cash equivalents and restricted cash	$	(15,947)	$	23,104

Operating Activities

Our cash flows from operating activities are primarily driven by ~~revenues generated~~revenue from transactions of advertising ~~activity,~~on our platform, offset by the cash costs of operations, and are significantly influenced by the timing of and fluctuations in receipts from buyers and related payments to sellers. Our future cash flows will be diminished if we cannot increase our revenue levels and manage costs appropriately.

For the nine months ended September 30, ~~2022,~~2023, net cash provided by operating activities was ~~$103.8~~$125.3 million compared to net cash provided by operating activities of ~~$58.0~~$103.8 million for the nine months ended September 30, ~~2021.~~2022. Our operating activities included our net loss of ~~$93.9~~$190.1 million and ~~$0.4~~$93.9 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, which were offset by non-cash adjustments of ~~$191.3~~$268.0 million and ~~$36.8~~$191.3 million, respectively. Net changes in our working capital resulted in ~~increases of~~$47.4 million and $6.5 million ~~and $21.6 million in~~of cash provided by operating activities for the nine months ended September 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively. The net changes in working capital for both periods are primarily due to the timing of cash receipts from buyers and the timing of payments to sellers.

We believe that cash flows from operations will continue to fluctuate, but in general will increase over time as our business continues to grow.

Investing Activities

Our ~~primary~~ investing activities have primarily consisted of acquisitions of businesses, purchases of property and equipment, capital expenditures in support of creating and enhancing our technology infrastructure, and investments in, and maturities of, available-for-sale securities. Purchases of property and equipment and investments in internal use software development may vary from ~~period-~~

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~~to-period~~period-to-period due to the timing of the expansion of our operations, changes to headcount, and the cycles of our internal use software development. We anticipate investment in internal use software development ~~to slightly increase compared to past years' investment levels as we continue to innovate new solutions on our platform. As the business continues to grow, we expect our investment in~~and purchases of property and equipment to ~~increase~~decrease in 2023 compared to ~~2021.~~2022. Historically, a majority of our purchases in property and equipment have occurred in the latter half of the year in preparation for the peak volumes of the fourth quarter and early in the first quarter of the following ~~year. We~~year; however, in 2023, we expect ~~those trends~~these investments to ~~continue, with higher levels of property and equipment spend in~~occur more evenly throughout the ~~latter half of this year compared to the first half of the~~ year. ~~Investments in, and maturities of, available-for-sale securities and acquisitions of businesses vary from period-to-period.~~

During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, our investing activities used net cash of ~~$49.9~~$25.3 million and ~~$675.6~~$49.9 million, respectively. During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we used cash for purchases of property and equipment of ~~$18.0~~$17.1 million and ~~$14.0~~$18.0 million, respectively, and used cash for investments in our internally developed software of ~~$11.2~~$8.2 million and ~~$8.5~~$11.2 million, respectively. The nine months ended September 30, 2022 ~~and 2021~~ included net cash used of $20.8 million to acquire ~~Carbon and $653.1 million to acquire SpotX and SpringServe, respectively.~~Carbon.

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We believe that cash flows used in our investing activities will generally increase in order to support our overall growth, in particular with respect to investments in property and equipment and internally developed software. In addition, our cash flows from investing activities may fluctuate depending on future acquisition activity.

Financing Activities

Our financing activities have primarily consisted of our Convertible Senior Notes transactions, repayment of amounts borrowed under our Term Loan B Facility, transactions related to our equity plans, and stock and convertible note purchases under the ~~share~~ repurchase ~~plan.~~plans.

For the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, net cash used by financing activities was ~~$28.3~~$115.7 million ~~compared to net cash provided by financing activities of $688.9~~and $28.3 million, respectively. Cash outflows from financing activities for the nine months ended September 30, 2023 primarily included $104.8 million of payments related to repurchasing our Convertible Senior Notes, $9.7 million for taxes paid related to net share settlement of stock-based awards, $2.7 million of repayments related to our Term Loan B Facility, and a $2.3 million payment of our indemnification claims holdback. The outflows were partially offset by cash proceeds from stock options exercised of $2.2 million and cash proceeds from issuance of common stock from the employee stock purchase plan of $1.9 million.

Cash outflows from financing activities for the nine months ended September 30, 2022 primarily included $15.7 million ~~payment~~of payments related to share repurchases, $11.9 million for taxes paid related to net share settlement of stock-based awards, and $2.7 million ~~repayment of~~for repayments related to our Term Loan B.B Facility. The outflows were ~~partially~~ offset by cash proceeds from issuance of common stock from the employee stock purchase plan of $2.1 million and cash proceeds from stock options exercised of $1.8 million.

~~Cash inflows~~ In general, our cash flows from financing activities for the nine months ended September 30, 2021 included $400.0 million in net proceeds from our Convertible Senior Notes offering, $349.2 million in net proceeds from our Term Loan B Facility, cash proceeds from stock options exercised of $8.7 million,may fluctuate depending on future financing and $1.2 million cash proceeds from issuance of common stock from the employee stock purchase plan. These increases were partially offset by a $39.0 million payment for capped call transactions entered into in connection with the Convertible Notes offering, debt issuance cost payments of $30.4 million, and $0.9 million repayment of our Term Loan B.refinancing activity.

Off-Balance Sheet Arrangements

We do not have any relationships with other entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We did not have any other off-balance sheet arrangements at September 30, ~~2022~~2023 other than the short-term operating leases and the indemnification agreements described below, and commitments mentioned in Note 12 - "Commitments Contingencies."

Contractual Obligations and Known Future Cash Requirements

As of September 30, ~~2022,~~2023, our principal commitments consist of obligations under our Convertible Senior Notes, Term Loan B Facility, Revolving Credit Facility, leases for our various office facilities, including our corporate headquarters in New York, New York and ~~offices~~office in Los Angeles, California, operating lease agreements, including data centers, and cloud hosting services that expire at various times through ~~2032, and indemnification holdback associated with the Carbon acquisition.~~2033. In certain cases, the terms of the lease agreements provide for rental payments on a graduated basis.

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The following table summarizes our future lease obligations, payments of principal and interest under our debt agreements, sublease income, and other future payments due under non-cancelable agreements at September 30, ~~2022~~2023 (in thousands):

Remaining 2022 2023 2024 2025 2026 Thereafter Total
Lease liabilities associated with leases included Right of Use Asset as of September 30, 2022 $ 6,183 $ 22,676 $ 19,806 $ 12,057 $ 9,976 $ 28,164 $ 98,862
Obligations for leases not included in Lease liabilities as of September 30, 2022 299 2,096 2,244 1,931 88 107 6,765
Convertible Senior Notes — — — — 400,000 — 400,000
Interest, Convertible Senior Notes — 1,000 1,000 1,000 500 — 3,500
Term Loan B (1)
900 3,600 3,600 3,600 3,600 340,200 355,500
Interest, Term Loan B (2)
8,085 29,273 29,054 28,676 28,378 37,321 160,787
Operating sublease income (1,262) (4,926) (4,767) (1,751) (260) — (12,966)
Other non-cancelable obligations 1,001 9,802 5,478 1,177 — — 17,458
Total $ 15,206 $ 63,521 $ 56,415 $ 46,690 $ 442,282 $ 405,792 $ 1,029,906
(1) Includes only scheduled amortization of payments and excludes currently unknown prepayment amounts that may be required, per terms of the Credit Agreement, after the end of each fiscal year.
(2) Interest payments are based on an assumed rate of 8.17%, which was the rate as of September 30, 2022 for the associated Term Loan B Facility.

Obligations for leases not included in the lease liabilities as of September 30, 2022 include commitments under agreements for office space and data centers that have not commenced as of September 30, 2022.


	Remaining 2023		2024		2025		2026		2027		Thereafter		Total
Lease liabilities associated with leases included Right of Use Asset as of September 30, 2023	$	6,576	$	23,534	$	15,232	$	12,217	$	7,664	$	22,152	$	87,375

Convertible Senior Notes	—		—		—		275,067		—		—		275,067
Interest, Convertible Senior Notes	—		688		688		344		—		—		1,720
Term Loan B Facility (1)	900		3,600		3,600		3,600		3,600		336,600		351,900
Interest, Term Loan B Facility (2)	10,401		37,439		36,952		36,567		36,183		11,908		169,450
Operating sublease income	(1,226)		(4,819)		(1,751)		(260)		—		—		(8,056)
Other non-cancelable obligations	21,268		66,454		23,667		—		—		—		111,389
Total	$	37,919	$	126,896	$	78,388	$	327,535	$	47,447	$	370,660	$	988,845
(1) Includes only scheduled amortization of payments and excludes currently unknown prepayment amounts that may be required, per terms of the Credit Agreement, after the end of each fiscal year.
(2) Interest payments are based on an assumed rate of 10.53%, which was the rate as of September 30, 2023 for the associated Term Loan B Facility.

Payments associated with our Convertible Senior Notes are based on contractual terms and intended timing of repayments of long-term debt and associated interest and do not assume conversion prior to the maturity date.

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Other non-cancelable obligations include agreements in the normal course of business and purchase ~~consideration~~considerations that extend beyond a year as of September 30, ~~2022 and indemnification holdback obligations associated with acquisitions. Other~~2023. The amounts above include commitments under a cloud-managed services agreement, under which the Company has a non-cancelable ~~obligations above excludes a variable~~minimum spend commitment from ~~an agreement for third-party cloud-managed services. The variable commitment begins in~~ July 2023 ~~and ends in~~to June ~~2025. The future obligation under this agreement will be~~2025 based on actual spend, as defined in the agreement, with the third-party provider from July 2022 ~~through~~to June ~~2023. We estimate the future minimum annual obligation to be between $40~~2023 of $57.6 million ~~and $50 million in~~for each twelve-month ~~period.~~period (i.e. July 2023 to June 2024 and July 2024 to June 2025). The minimum spend commitment reflected above approximates the manner in which we expect to fulfill the obligation.

In the ordinary course of business, we enter into agreements with sellers, buyers, and other third parties pursuant to which we agree to indemnify buyers, sellers, vendors, lessors, business partners, lenders, stockholders, and other parties with respect to certain matters, including, but not limited to, losses resulting from claims of intellectual property infringement, damages to property or persons, business losses, or other liabilities. Generally, these indemnity and defense obligations relate to our own business operations, obligations, and acts or omissions. However, under some circumstances, we agree to indemnify and defend contract counterparties against losses resulting from their own business operations, obligations, and acts or omissions, or the business operations, obligations, and acts or omissions of third parties. These indemnity provisions generally survive termination or expiration of the agreements in which they appear. In addition, we have entered into indemnification agreements with our directors, executive officers and certain other officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No demands for indemnification have been made as of September 30, ~~2022.~~2023.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed 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. By their nature, estimates are subject to an inherent degree of uncertainty. Certain of our estimates and assumptions require increased judgment and carry a higher degree of variability and volatility that could result in material changes to our estimates in future periods. Our actual results could differ from these estimates.

We believe that the following assumptions and estimates have the greatest potential impact on our condensed consolidated financial statements: (i) the determination of revenue recognition as net versus gross in our revenue arrangements, (ii) the determination of amounts to capitalize and the estimated useful lives of internal-use software development costs, (iii) the recoverability of intangible ~~asset~~assets and

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~~goodwill,~~the estimated useful lives of intangible assets, (iv) assumptions used in the valuation models to determine the fair value of stock options, awards with market and performance conditions, and stock-based compensation expense, (v) the assumptions used in the valuation of acquired assets and liabilities in business combinations, and (vi) income taxes, including the realization of tax assets and estimates of tax liabilities. Besides the adoption of new accounting pronouncements, as included within "Note 1—Organization and Summary of Significant Accounting Policies" to the condensed consolidated financial statements in this report, there have been no significant changes in our accounting policies or estimates from those disclosed in our audited consolidated financial statements and notes thereto for the year ended December 31, ~~2021~~2022 included in our Annual Report on Form 10-K.

Recently Issued Accounting Pronouncements

For information regarding recent accounting pronouncements, refer to Note 1 "Organization and Summary of Significant Accounting Policies" to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

We have operations both in the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks include primarily interest rate, foreign exchange, and inflation risks. The risks below may be further exacerbated by the effects of ~~the COVID-19 pandemic on~~certain global macroeconomic challenges and market conditions.

Interest Rate Fluctuation Risk

Our cash and cash equivalents consist of cash and money market funds, but may from time to time also include commercial paper, with original maturities of three months or less. Our investments may consist of repurchase agreements, U.S. government agency debt, and U.S. treasury debt. The primary objective of our investment activities is to preserve the value of our cash without significantly increasing risk. Because our cash, cash equivalents, and investments have a short maturity, our portfolio’s fair value is relatively insensitive to interest rate changes, however, interest income earned will vary as interest rates change.

We do not have economic interest rate expense exposure on our Convertible Senior Notes due to their fixed interest rate nature. The amount paid upon redemption or maturity, before considering any potential additional amount owed due to increases in our underlying share price above the conversion price, is not based on changes in any interest rate index or ~~changing~~underlying market ~~rates.~~interest rate. It is fixed at 100% of the principal amount of the Convertible Senior Notes plus unpaid interest. Since the Convertible

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Senior Notes bear a fixed interest rate, ~~coupon,~~ we are not exposed to interest rate risk on those notes, however, the fair value of those notes will change as market interest rates change.

We have a Term Loan B Facility under the Credit Agreement which bears a floating rate of interest that resets periodically, subject to a 0.75% floor on that floating rate, according to the terms of the ~~agreement.~~agreement (the "SOFR Floor"). Our financial results have been exposed to changes in the underlying base interest rate on that debt because the underlying base interest rate has now reset above the floor on such underlying interest rate. The fair value of Term Loan B Facility may fluctuate when the underlying base interest rate fluctuates below the floor or when the rate of return demanded by our loan investors ~~increases~~changes relative to when the loans were issued. As of September 30, ~~2022,~~2023, the Company had no outstanding borrowings under the Revolving Credit Facility. Should the company borrow under the Revolving Credit Facility at any point in the future, any associated borrowings would have a floating underlying base rate of interest that would expose the Company to interest rate risk.

We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. The annualized impact to interest expense for each 100 basis points increase above the ~~LIBOR~~SOFR Floor on our Term Loan B Facility is approximately ~~$3.6~~$3.5 million. The actual impact to our financial results of the same increase in interest rates is expected to be lower than ~~$3.6~~$3.5 million depending on the timing and magnitude of such rate changes relative to our ~~LIBOR~~SOFR Floor, and will be partially offset by higher interest income earned on our cash and cash equivalent balances over the same period. In future periods, we will continue to evaluate our investment opportunities and policy relative to our overall objectives.

With regard to all debt currently outstanding, the company is potentially exposed to refinancing risk, should the Company seek to refinance existing debt or raise new debt in the future. As such, the type, cost and terms of any new debt potentially raised in the future ~~and the prevailing cost or terms for~~may differ from that ~~debt differs from terms in~~of our ~~current~~existing debt agreements.

Foreign Currency Exchange Risk

WeAs a U.S. based company that does business around the globe, we have foreign currency risks related to our revenue and expenses denominated in currencies other than the U.S. Dollar, principally the Australian Dollar, British Pound, ~~Australian Dollar,~~ Canadian Dollar, Euro, Japanese Yen, and ~~Euro. The~~New Zealand Dollar. Foreign exchange rate volatility ~~of exchange rates depends on~~is influenced by many factors that we cannot forecast with reliable accuracy. WeIn the event our non-U.S. Dollar denominated revenue and expenses increase, or the volatility of the foreign currencies that we transact in increases, our operating results may be more greatly affected by fluctuations in the exchange rates of those foreign currencies. In addition, we have experienced and will continue to experience fluctuations in our net income (loss) as a result of transaction gains and losses related to translating certain cash balances, trade accounts receivable and payable balances and intercompany balances that are denominated in currencies other than the U.S. Dollar. The effect of an

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immediate 10% adverse change in foreign exchange rates on ~~foreign-denominated accounts~~foreign currency-denominated monetary assets and liabilities at September 30, 2023 and December 31, 2022, including intercompany balances, would result in a foreign currency loss of approximately ~~$6.5 million. In the event our non-U.S. Dollar denominated sales~~$6.9 million and ~~expenses increase, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business.~~$10.5 million, respectively. At this time we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. ~~It is difficult to predict the impact hedging activities would have on our results of operations.~~

Inflation Risk

We do not believe that cost inflation has had a material effect on our business, financial condition, or results of operations. If our costs were to become subject to significant inflationary pressures, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations. This risk of cost inflation is distinct from the risk that inflation throughout the broader economy could lead to reduced ad spend and indirectly harm our business, financial condition, and results of operations. For a discussion of the indirect results of inflation on our business, see ~~"Impact of COVID-19 Pandemic and Other Macroeconomic~~"Macroeconomic Developments."

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. There is no assurance that our disclosure controls and procedures will operate effectively under all circumstances. Based upon the evaluation described above, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, ~~2022,~~2023, our disclosure controls and procedures were effective at the reasonable assurance level.

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Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three months ended September 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Management recognizes that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We and our subsidiaries may from time to time be parties to legal or regulatory proceedings, lawsuits and other claims incident to our business activities and to our status as a public company. Such routine matters may include, among other things, assertions of contract breach or intellectual property infringement, claims for indemnity arising in the course of our business, regulatory investigations or enforcement proceedings, and claims by persons whose employment has been terminated. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance or recoverable from third parties, or the financial impact with respect to such matters as of September 30, ~~2022.~~2023. However, based on our knowledge as of September 30,

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~~2022,~~ 2023, we believe that the final resolution of such matters pending at the time of this report, individually and in the aggregate, will not have a material adverse effect upon our condensed consolidated financial position, results of operations or cash flows.

Refer to Note 12—"Commitments and Contingencies" for additional information related to legal proceedings.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. We describe risks associated with our business below and in Part I, Item 1A: "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the "Risk Factors"). Each of the risks described in our Risk Factors may be relevant to decisions regarding an investment in or ownership of our stock. The occurrence of any such risks could have a significant adverse effect on our reputation, business, financial condition, revenue, results of operations, growth, or ability to accomplish our strategic objectives, and could cause the trading price of our common stock to decline. You should carefully consider such risks and the other information contained in this report, including our condensed consolidated financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations, before making investment decisions related to our common stock.

There are no additional material changes to the Risk Factors of which we are currently aware; but our Risk Factors cannot anticipate and fully address all possible risks of investing in our common stock, the risks of investing in our common stock may change over time, and additional risks and uncertainties that we are not aware of, or that we do not consider to be material, may emerge. In addition, the economic impact of ~~the COVID-19 pandemic and other~~ macroeconomic challenges, such as ~~another pandemic or health crisis, geopolitical events (including~~inflation, global conflict, capital market disruptions and the ~~conflict in Ukraine),~~instability of financial institutions, the risk of a recession, and other macroeconomic factors ~~like labor shortages, supply chain disruptions, recessionary concerns, and inflation~~ may amplify many of the risks described in our risk factors. Accordingly, you are advised to consider additional sources of information and exercise your own judgment in addition to the information we provide.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Recent Sales of Unregistered Securities

None (except as previously disclosed).

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(b) Use of Proceeds

Not Applicable.

~~Common~~The Company did not repurchase any shares of common stock ~~repurchases~~ during the quarter ended September 30, ~~2022~~2023.

Item 5. Other Information

Trading Plans

In the third quarter of 2023, the following trading plans were ~~as follows (in thousands, except per share amounts):~~adopted or terminated by our Section 16 officers or directors:

Period Total Number of Shares Purchased Average Price per Share Total number of shares purchased as part of a Publicly Announced Program Maximum Approximate Dollar Value that May Yet be Purchased Under the Program
July 1 - July 31, 2022
Equity withholding(1)
43 $ 9.02 — $ —
Repurchase program(2)
— $ — — $ 28,330
August 1 - August 31, 2022
Equity withholding(1)
179 $ 9.79 — $ —
Repurchase program(2)
— $ — — $ 28,330
September 1 - September 30, 2022
Equity withholding(1)
35 $ 7.42 — $ —
Repurchase program(2)
— $ — — $ 28,330
257 —

~~(1)~~ Upon vesting of most restricted stock units, we are required to deposit minimum statutory employee withholding taxes on behalf of the holders of the vested awards. As reimbursement for these tax deposits, we have the option to withhold from shares otherwise

Officer Name

Officer Title

Date Plan Adopted/Terminated

Duration of Plan

Shares to be Purchased or Sold

Intended to Satisfy Rule 10b5-1(c)?

Paul Caine

Director

Adopted September 7, 2023

December 11, 2023 - June 28, 2024

Sell up to 50,000, subject to certain conditions

Yes

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issuable upon vesting a portion of those shares with a fair market value equal to the amount of the deposits we paid. Withholding of shares in this manner is accounted for as a repurchase of common stock.

~~(2)~~ Our Board of Directors approved a share repurchase program (the "Program") under which the Company is authorized to purchase up to $50.0 million of its common stock during the period from December 10, 2021 to December 10, 2022. On November 4, 2022, the Board of Directors approved an extension of the Program through December 15, 2023. Shares repurchased under the Program have all been subsequently retired, which was recorded as a reduction in additional paid in capital. The average price paid per share purchased under the Program includes broker commission costs.

5749

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Item 6. Exhibits


Number						Description

31.1*						Certification of Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*(1)						Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.ins *						Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.sch *						XBRL Taxonomy Schema Linkbase Document
101.cal *						XBRL Taxonomy Calculation Linkbase Document
101.def *						XBRL Taxonomy Definition Linkbase Document
101.lab *						XBRL Taxonomy Label Linkbase Document
101.pre *						XBRL Taxonomy Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

(1) The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended (the "Exchange Act"), and is not to be incorporated by reference into any filing of Magnite, Inc. under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			MAGNITE, INC. (Registrant)
			/s/ David Day
			David Day
			Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)
Date November ~~9, 2022~~8, 2023


Period	Total Number of Shares Purchased	Average Price per Share		Total number of shares purchased as part of a Publicly Announced Program	Maximum Approximate Dollar Value that May Yet be Purchased Under the Program
July 1 - July 31, 2022
Equity withholding(1)	43	$	9.02	—	$	—
Repurchase program(2)	—	$	—	—	$	28,330
August 1 - August 31, 2022
Equity withholding(1)	179	$	9.79	—	$	—
Repurchase program(2)	—	$	—	—	$	28,330
September 1 - September 30, 2022
Equity withholding(1)	35	$	7.42	—	$	—
Repurchase program(2)	—	$	—	—	$	28,330
	257			—