SEC Filing | Magnite, Inc.

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mgni-20220930

Table of Contents

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

☐ 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
Common Stock, $0.00001 par value						133,384,717

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MAGNITE, INC.

QUARTERLY REPORT ON FORM 10-Q

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		Page No.
Part I.	FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	4
	Condensed Consolidated Statements of Operations for the Three and N ine Months Ended September 30, 2022 and September 30, 2021	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2022 and September 30, 2021	6
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nin e Months Ended September 30, 2022 and September 30, 2021	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and September 30, 2021	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55
Part II.	OTHER INFORMATION	55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 6.	Exhibits	58
Signatures		59

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

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MAGNITE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par values)

(unaudited)


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

Accounts receivable, net	804,350		927,781
Prepaid expenses and other current assets	21,363		19,934
TOTAL CURRENT ASSETS	1,079,265		1,178,116
Property and equipment, net	45,489		34,067
Right-of-use lease asset	74,409		76,986
Internal use software development costs, net	23,051		20,093
Intangible assets, net	322,547		426,615
Goodwill	978,217		969,873
Other assets, non-current	6,106		6,862
TOTAL ASSETS	$	2,529,084	$	2,712,612
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	890,071	$	1,000,956
Lease liabilities, current	19,452		19,142
Debt, current	3,600		3,600
Other current liabilities	5,885		5,697
TOTAL CURRENT LIABILITIES	919,008		1,029,395
Debt, non-current, net of debt issuance costs	722,077		720,023
Deferred tax liability, net	11,506		13,303
Lease liabilities, non-current	64,288		66,487
Other liabilities, non-current	1,703		2,647
TOTAL LIABILITIES	1,718,582		1,831,855
Commitments and contingencies (Note 12)
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
Additional paid-in capital	1,304,182		1,282,589
Accumulated other comprehensive loss	(5,293)		(1,376)
Treasury stock at cost, 0 and 349 shares outstanding at September 30, 2022 and December 31, 2021, respectively	—		(6,007)
Accumulated deficit	(488,389)		(394,451)
TOTAL STOCKHOLDERS' EQUITY	810,502		880,757
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,529,084	$	2,712,612

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 OPERATIONS

(In thousands, except per share amounts)

(unaudited)


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

Total expenses	166,970		155,819		485,912		391,832
Loss from operations	(21,155)		(23,948)		(84,242)		(84,705)
Other (income) expense:
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
Loss before income taxes	(24,826)		(29,027)		(96,482)		(92,625)
Benefit for income taxes	(435)		(4,708)		(2,544)		(92,237)
Net loss	$	(24,391)	$	(24,319)	$	(93,938)	$	(388)
Net loss per share:
Basic and Diluted	$	(0.18)	$	(0.18)	$	(0.71)	$	—

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

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 COMPREHENSIVE LOSS

(In thousands)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net loss	$	(24,391)	$	(24,319)	$	(93,938)	$	(388)
Other comprehensive loss:

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

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 STOCKHOLDERS’ EQUITY

(In thousands)

(unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2020	114,029	$	2	$	777,084	$	(957)	$	(394,516)				$	381,613
Exercise of common stock options	733	—		5,785		—		—		—	—		5,785


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

Stock-based compensation	—	—		7,108		—		—		—	—		7,108
Capped call options	—	—		(38,960)		—		—		—	—		(38,960)
Other comprehensive loss	—	—		—		(313)		—		—	—		(313)
Net loss	—	—		—		—		(12,877)		—	—		(12,877)
Balance at March 31, 2021	116,113	$	2	$	751,017	$	(1,270)	$	(407,393)	—	$	—	$	342,356
Exercise of common stock options	384	—		1,480		—		—		—	—		1,480

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

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

Stock-based compensation	—	—		9,928		—		—		—	—		9,928
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
Exercise of common stock options	275	—		1,482		—		—		—	—		1,482

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


Stock-based compensation	—	—		12,441		—		—		—	—		12,441
Other comprehensive loss	—	—		—		(525)		—		—	—		(525)
Net loss	—	—		—		—		(24,319)		—	—		(24,319)
Balance at September 30, 2021	131,789	$	2	$	1,273,093	$	(1,426)	$	(394,904)	—	$	—	$	876,765

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	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
	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
Exercise of common stock options	39	—		163		—		—		—	—		163


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


Stock-based compensation	—	—		17,724		—		—		—	—		17,724
Other comprehensive loss	—	—		—		(1,972)		—		—	—		(1,972)
Net loss	—	—		—		—		(24,391)		—	—		(24,391)
Balance at September 30, 2022	133,349	$	2	$	1,304,182	$	(5,293)	$	(488,389)	—	$	—	$	810,502

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
	September 30, 2022		September 30, 2021
OPERATING ACTIVITIES:
Net loss	$	(93,938)	$	(388)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	138,641		97,084
Stock-based compensation	50,193		28,521
Impairment of intangible assets	3,320		—
(Gain) loss on disposal of property and equipment	(59)		78
Provision for doubtful accounts	(357)		217
Amortization of debt discount and issuance costs	5,092		3,223
Non-cash lease expense	1,340		1,825
Deferred income taxes	(1,626)		(91,540)
Unrealized foreign currency gains, net	(5,231)		(2,578)

Changes in operating assets and liabilities, net of effect of business acquisitions:
Accounts receivable	125,268		(92,131)
Prepaid expenses and other assets	(1,751)		(297)
Accounts payable and accrued expenses	(116,575)		113,795
Other liabilities	(472)		191
Net cash provided by operating activities	103,845		58,000
INVESTING ACTIVITIES:
Purchases of property and equipment	(18,004)		(13,985)
Capitalized internal use software development costs	(11,177)		(8,525)
Mergers and acquisitions, net of cash acquired	(20,755)		(653,060)



Net cash used in investing activities	(49,936)		(675,570)
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	1,771		8,747
Proceeds from issuance of common stock under employee stock purchase plan	2,141		1,154
Repayment of debt	(2,700)		(900)
Repayment of financing lease	(602)		—
Purchase of treasury stock	(15,663)		—
Taxes paid related to net share settlement	(11,859)		—

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

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
	September 30, 2022		September 30, 2021
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents	$	253,552	$	188,182
Restricted cash included in prepaid expenses and other current assets	245		—
Restricted cash included in other assets, non-current	—		251
Total cash, cash equivalents and restricted cash	$	253,797	$	188,433

SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:
Cash paid for income taxes	$	4,356	$	1,221
Cash paid for interest	$	18,624	$	7,671
Capitalized assets financed by accounts payable and accrued expenses	$	10,195	$	1,513
Capitalized stock-based compensation	$	1,017	$	956
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	11,542	$	22,651
Purchase consideration - indemnification claims holdback	$	2,293	$	1,409
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 are not necessarily indicative of the results that may be expected for any future interim period, the year ending December 31, 2022, or for any future year.

The condensed consolidated balance sheet at December 31, 2021 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 included in its 2021 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 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 as a result of 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 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, 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, 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 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 this standard will have on 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 to have any significant effect on the Company’s financial position, cash flows or results of operations.

Note 2—Net Loss Per Share

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


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


Weighted-average common shares outstanding used to compute net loss per share	133,144		131,501		132,611		124,325
Basic and diluted loss per share	$	(0.18)	$	(0.18)	$	(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
	September 30, 2022	September 30, 2021	September 30, 2022	September 30, 2021
	(in thousands)		(in thousands)
Options to purchase common stock	1,280	4,116	1,985	4,712

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

For the three and nine months ended September 30, 2022 and September 30, 2021, 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, 2022, the performance stock units granted during April 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 and September 30, 2021, 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 adjustments in certain circumstances. As of September 30, 2022 and 2021, the number of shares that would be issuable assuming conversion of all of the Convertible Senior Notes is approximately 6,261,560. 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 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.

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


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

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

Three Months Ended

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

(in thousands, except percentages)

Channel:

CTV