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PROSPECTUS SUPPLEMENT NO. 1 (to prospectus dated April 20, 2022) |
Filed Pursuant to Rule 424(b)(3) |
||||
AdTheorent Holding Company, Inc.
Up to 76,713,193 Shares of Common Stock
Up to 15,973,904 Shares of Common Stock Issuable Upon the Exercise of Warrants
Up to 5,432,237 Warrants
This prospectus supplement is being filed to update and supplement the information contained in the prospectus dated April 20, 2022 (the “Prospectus”), related to which consists of (i) up to 10,541,667 shares of Common Stock issuable upon the exercise of 10,541,667 warrants (the “Public Warrants”) originally issued in the initial public offering of MCAP Acquisition Corporation, a Delaware corporation (“MCAP”), by the holders thereof, and (ii) up to 5,432,237 shares of Common Stock issuable upon the exercise of 5,432,237 warrants (the “Private Warrants” and, together with the Public Warrants, the “Warrants”) originally issued in a private placement in connection with the initial public offering of MCAP with the information contained in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (“SEC”) on May 11, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.
This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.
AdTheorent Holding Company, Inc.’s Common Stock is quoted on The Nasdaq Capital Market LLC (“Nasdaq”) under the symbol, “ADTH”. On May 10, 2022, the closing price of our Common Stock was $7.32.
See the section entitled “Risk Factors” beginning on page 7 of the Prospectus to read about factors you should consider before buying our securities.
Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under the Prospectus or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is May 11, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 2022
OR
☐ |
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: 001-40116
AdTheorent Holding Company, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
85-3978415 |
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
330 Hudson Street, 13th Floor New York, New York |
10013 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (800) 804-1359
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 $0.0001 per share |
|
ADTH |
|
The Nasdaq Stock Market |
Warrants to purchase common stock |
|
ADTHW |
|
The Nasdaq Stock 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, 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 Exchange Act). Yes ☐ No ☒
As of May 6, 2022, the registrant had 85,743,994 shares of common stock outstanding.
Table of Contents
|
|
Page |
|
|
|
PART I. |
3 |
|
|
|
|
Item 1. |
3 |
|
|
Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 |
3 |
|
4 |
|
|
5 |
|
|
6 |
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
32 |
|
Item 4. |
32 |
|
|
|
|
PART II. |
32 |
|
|
|
|
Item 1. |
32 |
|
Item 1A. |
32 |
|
Item 2. |
33 |
|
Item 3. |
33 |
|
Item 4. |
33 |
|
Item 5. |
33 |
|
Item 6. |
33 |
|
|
||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
ADTHEORENT HOLDING COMPANY, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
63,717 |
|
|
$ |
100,093 |
|
Accounts receivable, net |
|
|
38,894 |
|
|
|
55,936 |
|
Income tax recoverable |
|
|
93 |
|
|
|
95 |
|
Prepaid expenses |
|
|
6,990 |
|
|
|
3,801 |
|
Total current assets |
|
|
109,694 |
|
|
|
159,925 |
|
Property and equipment, net |
|
|
478 |
|
|
|
409 |
|
Operating lease right-of-use assets |
|
|
6,276 |
|
|
|
— |
|
Investment in SymetryML Holdings |
|
|
861 |
|
|
|
— |
|
Customer relationships, net |
|
|
7,831 |
|
|
|
8,986 |
|
Other intangible assets, net |
|
|
6,986 |
|
|
|
7,608 |
|
Goodwill |
|
|
34,842 |
|
|
|
35,778 |
|
Deferred income taxes, net |
|
|
1,459 |
|
|
|
434 |
|
Other assets |
|
|
365 |
|
|
|
402 |
|
Total assets |
|
$ |
168,792 |
|
|
$ |
213,542 |
|
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
8,857 |
|
|
$ |
12,382 |
|
Accrued compensation |
|
|
3,564 |
|
|
|
10,530 |
|
Accrued expenses |
|
|
3,293 |
|
|
|
4,664 |
|
Operating lease liabilities, current |
|
|
1,210 |
|
|
|
— |
|
Total current liabilities |
|
|
16,924 |
|
|
|
27,576 |
|
Revolver borrowings |
|
|
— |
|
|
|
39,017 |
|
SAFE Notes |
|
|
— |
|
|
|
2,950 |
|
Warrants |
|
|
28,102 |
|
|
|
12,166 |
|
Seller's Earn-Out |
|
|
42,737 |
|
|
|
18,081 |
|
Operating lease liabilities, non-current |
|
|
6,990 |
|
|
|
— |
|
Deferred rent |
|
|
— |
|
|
|
1,869 |
|
Total liabilities |
|
|
94,753 |
|
|
|
101,659 |
|
Stockholders’ equity |
|
|
|
|
|
|
||
Preferred Stock, $0.0001 per share, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021 |
|
|
— |
|
|
|
— |
|
Common Stock, $0.0001 par value, 350,000,000 shares authorized and 85,743,994 shares issued and outstanding as of March 31, 2022 and December 31, 2021 |
|
|
9 |
|
|
|
9 |
|
Additional paid-in capital |
|
|
73,258 |
|
|
|
70,778 |
|
Retained earnings |
|
|
772 |
|
|
|
42,512 |
|
Total stockholders’ equity attributable to AdTheorent Holding Company, Inc. |
|
|
74,039 |
|
|
|
113,299 |
|
Noncontrolling interests in consolidated subsidiaries |
|
|
— |
|
|
|
(1,416 |
) |
Total stockholders' equity |
|
|
74,039 |
|
|
|
111,883 |
|
Total liabilities and stockholders’ equity |
|
$ |
168,792 |
|
|
$ |
213,542 |
|
See accompanying notes to condensed consolidated financial statements.
3
ADTHEORENT HOLDING COMPANY, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Revenue |
|
$ |
34,241 |
|
|
$ |
30,967 |
|
Operating expenses: |
|
|
|
|
|
|
||
Platform operations |
|
|
17,772 |
|
|
|
14,888 |
|
Sales and marketing |
|
|
10,330 |
|
|
|
8,058 |
|
Technology and development |
|
|
4,285 |
|
|
|
2,463 |
|
General and administrative |
|
|
5,601 |
|
|
|
2,137 |
|
Total operating expenses |
|
|
37,988 |
|
|
|
27,546 |
|
(Loss) income from operations |
|
|
(3,747 |
) |
|
|
3,421 |
|
Interest expense, net |
|
|
(109 |
) |
|
|
(600 |
) |
Loss on change in fair value of Seller's Earn-Out |
|
|
(24,656 |
) |
|
|
— |
|
Loss on change in fair value of warrants |
|
|
(15,936 |
) |
|
|
— |
|
Gain on deconsolidation of SymetryML |
|
|
1,939 |
|
|
|
— |
|
Loss on change in fair value of SAFE Notes |
|
|
(788 |
) |
|
|
— |
|
Other expense, net |
|
|
(18 |
) |
|
|
— |
|
Total other expense, net |
|
|
(39,568 |
) |
|
|
(600 |
) |
Net (loss) income before benefit (provision) for income taxes |
|
|
(43,315 |
) |
|
|
2,821 |
|
Benefit (provision) for income taxes |
|
|
1,025 |
|
|
|
(988 |
) |
Net (loss) income |
|
$ |
(42,290 |
) |
|
$ |
1,833 |
|
Less: Net loss attributable to noncontrolling interest |
|
|
550 |
|
|
|
170 |
|
Net (loss) income attributable to AdTheorent Holding Company, Inc. |
|
$ |
(41,740 |
) |
|
$ |
2,003 |
|
Earnings per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
(0.49 |
) |
|
$ |
0.03 |
|
Diluted |
|
$ |
(0.49 |
) |
|
$ |
0.03 |
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
||
Basic |
|
|
85,743,994 |
|
|
|
59,853,506 |
|
Diluted |
|
|
85,743,994 |
|
|
|
60,297,546 |
|
See accompanying notes to condensed consolidated financial statements.
4
ADTHEORENT HOLDING COMPANY, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except for number of shares)
(unaudited)
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Additional |
|
|
Retained |
|
|
Noncontrolling |
|
|
Total |
|
||||||
December 31, 2021 |
|
|
85,743,994 |
|
|
$ |
9 |
|
|
$ |
70,778 |
|
|
$ |
42,512 |
|
|
$ |
(1,416 |
) |
|
|
111,883 |
|
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
1,988 |
|
|
|
— |
|
|
|
— |
|
|
|
1,988 |
|
Seller's Earn-Out equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
492 |
|
|
|
— |
|
|
|
— |
|
|
|
492 |
|
Conversion of SAFE Notes into SymetryML Preferred Stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,938 |
|
|
|
3,938 |
|
SymetryML Preferred Stock Issuance |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
400 |
|
|
|
400 |
|
Deconsolidation of SymetryML Holdings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,372 |
) |
|
|
(2,372 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(41,740 |
) |
|
|
(550 |
) |
|
|
(42,290 |
) |
March 31, 2022 |
|
|
85,743,994 |
|
|
$ |
9 |
|
|
$ |
73,258 |
|
|
$ |
772 |
|
|
$ |
— |
|
|
$ |
74,039 |
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Additional |
|
|
Retained |
|
|
Noncontrolling |
|
|
Total |
|
||||||
December 31, 2020 |
|
|
59,853,276 |
|
|
$ |
6 |
|
|
$ |
45,584 |
|
|
$ |
16,309 |
|
|
$ |
(632 |
) |
|
|
61,267 |
|
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
164 |
|
|
|
— |
|
|
|
— |
|
|
|
164 |
|
Exercises of options |
|
|
20,645 |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,003 |
|
|
|
(170 |
) |
|
|
1,833 |
|
March 31, 2021 |
|
|
59,873,921 |
|
|
$ |
6 |
|
|
$ |
45,758 |
|
|
$ |
18,312 |
|
|
$ |
(802 |
) |
|
$ |
63,274 |
|
See accompanying notes to condensed consolidated financial statements.
5
ADTHEORENT HOLDING COMPANY, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net (loss) income |
|
$ |
(42,290 |
) |
|
$ |
1,833 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Provision for bad debt |
|
|
94 |
|
|
|
2 |
|
Amortization expense |
|
|
2,044 |
|
|
|
2,067 |
|
Depreciation expense |
|
|
44 |
|
|
|
35 |
|
Amortization of debt issuance costs |
|
|
14 |
|
|
|
40 |
|
Loss on change in fair value of Seller's Earn-Out |
|
|
24,656 |
|
|
|
— |
|
Loss on change in fair value of warrants |
|
|
15,936 |
|
|
|
— |
|
Gain on deconsolidation of SymetryML |
|
|
(1,939 |
) |
|
|
— |
|
Loss on change in fair value of SAFE Notes |
|
|
788 |
|
|
|
— |
|
Deferred tax benefit |
|
|
(1,025 |
) |
|
|
(581 |
) |
Equity-based compensation |
|
|
1,988 |
|
|
|
164 |
|
Seller's Earn-Out equity-based compensation |
|
|
492 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
16,948 |
|
|
|
14,567 |
|
Income taxes recoverable |
|
|
2 |
|
|
|
84 |
|
Prepaid expenses and other assets |
|
|
(2,940 |
) |
|
|
(59 |
) |
Accounts payable |
|
|
(3,530 |
) |
|
|
(4,600 |
) |
Accrued expenses and other liabilities |
|
|
(8,452 |
) |
|
|
(5,126 |
) |
Net cash provided by operating activities |
|
|
2,830 |
|
|
|
8,426 |
|
Cash flows from investing activities |
|
|
|
|
|
|
||
Capitalized software development costs |
|
|
(626 |
) |
|
|
(554 |
) |
Purchase of property and equipment |
|
|
(94 |
) |
|
|
(40 |
) |
Decrease in cash from deconsolidation of SymetryML |
|
|
(69 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
(789 |
) |
|
|
(594 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Cash received for exercised options |
|
|
— |
|
|
|
10 |
|
Payment of revolver borrowings |
|
|
(39,017 |
) |
|
|
— |
|
Proceeds from SAFE Notes |
|
|
200 |
|
|
|
275 |
|
Proceeds from SymetryML preferred stock issuance |
|
|
400 |
|
|
|
— |
|
Payment of term loan |
|
|
— |
|
|
|
(606 |
) |
Net cash used in financing activities |
|
|
(38,417 |
) |
|
|
(321 |
) |
Net (decrease) increase in cash and cash equivalents |
|
|
(36,376 |
) |
|
|
7,511 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
100,093 |
|
|
|
16,767 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
63,717 |
|
|
$ |
24,278 |
|
Cash and cash equivalents |
|
|
63,717 |
|
|
|
24,179 |
|
Restricted cash |
|
|
— |
|
|
|
99 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
63,717 |
|
|
$ |
24,278 |
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Increase in lease liabilities from obtaining right-of-use assets - ASC 842 adoption |
|
$ |
8,376 |
|
|
|
— |
|
Non-cash investing and financial activities |
|
|
|
|
|
|
||
Capitalized software and property and equipment, net included in accounts payable |
|
$ |
53 |
|
|
$ |
9 |
|
See accompanying notes to condensed consolidated financial statements.
6
ADTHEORENT HOLDING COMPANY, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except shares/units and per share/unit data)
(unaudited)
AdTheorent Holding Company Inc. and its subsidiaries (the “Company”, “AdTheorent”), is a digital media platform which focuses on performance-first, privacy-forward methods to execute programmatic digital advertising campaigns, serving both advertising agency and brand customers. The Company uses machine learning and advanced data science to organize, analyze and operationalize non-sensitive data to deliver real-world value for customers. Central to its ad-targeting and campaign optimization methods, the Company builds custom machine learning models for each campaign using historic and real-time data to predict future consumer conversion actions for every digital ad impression. The Company’s machine learning models are customized for every campaign and the platform “learns” over the course of each campaign as it processes more data related to post media view conversion experience. AdTheorent is a Delaware corporation headquartered in New York, New York.
Basis of Presentation and Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the operations of the Company. All intercompany transactions have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of March 31, 2022 and for the three months ended March 31, 2022. The Condensed Consolidated Balance Sheet as of December 31, 2021, has been derived from the Company's audited consolidated financial statements as of that date. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, which include a complete set of footnote disclosures, including the Company's significant accounting policies. The results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.
Retroactive Application of Recapitalization
As discussed in Note 3 – Business Combination included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, the business combination that occurred on December 22, 2021 (“Business Combination”) was accounted for as a reverse recapitalization ("Reverse Recapitalization") of equity structure, whereby at the Closing of the Business Combination, the outstanding Class A, B and C units of AdTheorent Holding Company, LLC, a Delaware limited liability company (“Legacy AdTheorent”) and the outstanding stock options and Restricted Interest Units of Legacy AdTheorent were exchanged for the Company’s Common Stock and equity awards using a ratio (“Exchange Ratio”) of 1.376 and 1.563, respectively. Accordingly, pursuit to GAAP, the Condensed Consolidated Financial Statements and the related notes have been recast and are presented on an if-converted basis using the respective Exchange Ratio. In addition, the Exchange Ratio is utilized for calculating earnings per share in all prior periods presented.
Summary of Significant Accounting Policies
There have been no material changes in the Company's significant accounting policies during the three months-ended March 31, 2022, as compared to the significant accounting policies described in Note 2 to the Consolidated Financial Statements for the year ended December 31, 2021, except as detailed below.
Leases
The Company adopted Accounting Standards Codification ("ASC") Topic 842, Leases (“ASC 842”) on January 1, 2022 using the cumulative effect transition method for leases in existence as of the date of adoption. The reported results for 2022 reflect the application of ASC 842 guidance while the reported results for 2021 were prepared under the previous guidance of ASC 840, Leases (“ASC 840”). The adoption of ASC 842 represents a change in accounting principle that
7
recognizes right-of-use (“ROU”) assets and lease liabilities arising from all leases based on the present value of future minimum lease payments over the lease term. Consistent with ASC 840, lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company’s adoption of ASC 842 had no impact on the Condensed Consolidated Statements of Operations or the Condensed Consolidated Statement of Cash Flows.
The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which allows for the following: (i) to carry forward the historical lease classification, (ii) not to reassess whether any existing contract contains a lease and (iii) not to reassess initial direct costs for existing leases.
The Company categorizes leases at their inception as either operating or finance leases. Operating leases are classified as non-current operating lease right-of-use assets and current and non-current operating lease liabilities on the Condensed Consolidated Balance Sheet. The Company does not have any finance leases as of March 31, 2022.
Adoption of ASC 842 resulted in the recognition of operating right-of-use assets of $6,507, along with associated operating lease liabilities of $8,376 as of January 1, 2022. The difference between the operating lease ROU assets and total operating lease liabilities is the reclassification of previously recognized deferred rent liabilities against operating lease ROU assets. The adoption of ASC 842 did not result in an adjustment to retained earnings and it did not impact the Company's deferred tax assets or liabilities.
The Company’s operating leases are primarily for real property in support of its business operations. Although the Company's leases may contain renewal options, the Company is generally not reasonably certain to exercise these options at the commencement date. Accordingly, renewal options are generally not included in the lease term for determining the ROU asset and lease liability at commencement.
The Company has elected to account for lease components and non-lease components as a single lease component. Payments to lessors for reimbursement of real estate taxes, common area maintenance costs or insurance as applicable are generally variable in nature and are also expensed as incurred as variable lease costs and not included in the right-of-use assets or lease liabilities.
Variable lease payment amounts that cannot be determined at lease commencement such as increases in lease payments based on changes in index rates or usage, are not included in the right-of-use assets or liabilities. Such variable payments are expensed as incurred.
Discount rates are determined based on the Company’s incremental borrowing rate as the Company’s leases generally do not provide an implicit rate.
See Note 21 – Leases for further details.
Fair Value Option Investments
The fair value option provides an option to elect fair value as an alternative measurement for selected financial instruments. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. The Company has investments in the common stock of SymetryML Holdings, LLC (“SymetryML Holdings”) for which it has the ability to exercise significant influence. The Company has made an irrevocable election to account for those investments at fair value. Estimating the fair values of these investments requires significant judgment regarding of the assumptions that market participants would use in pricing those assets.
The fair value measurements involve significant unobservable inputs, which include total equity value of SymetryML, volatility, risk-free rate, equity holder required rate of return, and discount for lack of marketability (“DLOM”). The total equity value of SymetryML was calculated using the Backsolve Method under the Market Approach. The volatility was based on guideline public companies and adjusted for differences in size and leverage. The risk-free rate was based on U.S. Treasury securities with a term commensurate with the time to exit. The equityholder required rate of return was based on private equity and venture capital rate of return studies. The DLOM was estimated based on put option models and series volatility.
See Note 20 – SymetryML and SymetryML Holdings for further details.
8
Liquidity
As of March 31, 2022, the Company had cash of $63,717 and working capital, consisting of current assets, less current liabilities, of $92,770. The Company believes its existing cash and cash flow from operations will be sufficient to meet the Company’s working capital requirements for at least the next 12 months.
Emerging Growth Company
From time to time, new accounting pronouncements, or Accounting Standard Updates (“ASU”) are issued by the Financial Accounting Standards Board ("FASB"), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.
The Company is an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. This means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company has the option to adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company has elected to use the extended transition period for complying with new or revised accounting standards unless the Company otherwise early adopts select standards.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
ASU No. 2016-02, Leases (Topic 842)
In February 2016, the FASB issued ASC 842, which sets out the principles for the recognition, measurement, and presentation of all leases on the balance sheet as well as provides for additional lease disclosure requirements. The Company adopted ASC 842 on January 1, 2022 using the cumulative effect transition method for leases in existence as of the date of adoption. See above for the Company's accounting policy for leases under ASC 842 and the impact from adoption.
ASU No. 2020-04, Reference Rate Reform (Topic 848)
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), subsequently clarified in January 2021 by ASU No. 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”). The main provisions of this update provide optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022. The Company adopted ASU 2020-04 on January 1, 2022. The adoption did not have a material effect on the Company's Condensed Consolidated Financial Statements.
Accounting Pronouncements Issued Not Yet Adopted
ASU No. 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740)
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) (“ASU 2019-12”), which is part of the FASB’s overall simplification initiative to reduce the costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 simplifies accounting guidance for intra-period allocations, deferred tax liabilities, year-to-date losses in interim periods, franchise taxes, step-up in tax basis of goodwill, separate entity financial statements, and interim recognition of tax laws or rate changes. ASU 2019-12 is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the new guidance to determine the impact it will have on the Condensed Consolidated Financial Statements.
9
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326)
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the new guidance to determine the impact it will have on the Condensed Consolidated Financial Statements.
ASC 606, Revenue from Contracts with Customers
Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company measures revenue based on the consideration specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement are satisfied. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation.
The Company’s revenue streams include Managed Programmatic revenue and Direct Access revenue. Direct Access revenue is new to the market and not yet material to the Company from a financial reporting perspective.
The Company has elected to expense the costs to obtain or fulfill a contract as incurred because the amortization period of the asset that the Company otherwise would have recognized is one year or less. Therefore, there were no contract cost assets recognized as of March 31, 2022 or December 31, 2021.
The Company has elected not to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period for performance obligations with a remaining performance obligation that is part of a contract that has an original expected duration of one year or less.
Contract assets and contract liabilities related to the Company’s revenue streams were not significant to these Condensed Consolidated Financial Statements.
Receivables related to revenue from contracts with customers are described in Note 4— Accounts Receivable, Net.
Accounts receivable, net consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Accounts receivables |
|
|
38,957 |
|
|
|
56,180 |
|
Other receivables |
|
|
396 |
|
|
|
121 |
|
|
|
|
39,353 |
|
|
|
56,301 |
|
Less: allowance for doubtful accounts |
|
|
(459 |
) |
|
|
(365 |
) |
Accounts receivable, net |
|
|
38,894 |
|
|
|
55,936 |
|
The provision for bad debt expense on accounts receivable was $94 and $2 for the three months ended March 31, 2022 and 2021, respectively.
10
The following table presents changes in the allowance for doubtful accounts:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Beginning balance |
|
$ |
365 |
|
|
$ |
457 |
|
Reserve for doubtful accounts |
|
|
100 |
|
|
|
89 |
|
Write-offs, net of recoveries |
|
|
(6 |
) |
|
|
(98 |
) |
Ending balance |
|
$ |
459 |
|
|
$ |
448 |
|
Prepaid expenses consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Income taxes |
|
$ |
3,047 |
|
|
$ |
2,683 |
|
Insurance |
|
|
2,453 |
|
|
|
— |
|
Software |
|
|
658 |
|
|
|
747 |
|
Other |
|
|
832 |
|
|
|
371 |
|
Total |
|
$ |
6,990 |
|
|
$ |
3,801 |
|
Property and Equipment, net consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Computers and equipment |
|
$ |
859 |
|
|
$ |
798 |
|
Less: accumulated depreciation |
|
|
(381 |
) |
|
|
(389 |
) |
Total |
|
$ |
478 |
|
|
$ |
409 |
|
Depreciation expense on Property and Equipment was $44 and $35 for the three months ended March 31, 2022 and 2021, respectively.
Intangible assets, net consisted of the following:
|
|
|
|
|
March 31, 2022 |
|
||||||||||
|
|
Remaining Weighted Average Useful Life (in years) |
|
|
Gross amount |
|
|
Accumulated amortization |
|
|
Net carrying amount |
|
||||
Software |
|
|
— |
|
|
$ |
6,038 |
|
|
$ |
(6,038 |
) |
|
$ |
— |
|
Capitalized software costs |
|
|
1.0 |
|
|
|
8,021 |
|
|
|
(5,867 |
) |
|
|
2,154 |
|
Customer relationships |
|
|
1.8 |
|
|
|
31,492 |
|
|
|
(23,661 |
) |
|
|
7,831 |
|
Trademarks/tradename |
|
|
4.8 |
|
|
|
10,195 |
|
|
|
(5,363 |
) |
|
|
4,832 |
|
Total |
|
|
|
|
$ |
55,746 |
|
|
$ |
(40,929 |
) |
|
$ |
14,817 |
|
|
11
|
|
|
|
|
December 31, 2021 |
|
||||||||||
|
|
Remaining Weighted Average Useful Life (in years) |
|
|
Gross amount |
|
|
Accumulated amortization |
|
|
Net carrying amount |
|
||||
Software |
|
|
1.0 |
|
|
$ |
9,124 |
|
|
$ |
(8,653 |
) |
|
$ |
471 |
|
Capitalized software costs |
|
|
1.0 |
|
|
|
7,366 |
|
|
|
(5,335 |
) |
|
|
2,031 |
|
Customer relationships |
|
|
2.0 |
|
|
|
31,726 |
|
|
|
(22,740 |
) |
|
|
8,986 |
|
Trademarks/tradename |
|
|
5.0 |
|
|
|
10,240 |
|
|
|
(5,134 |
) |
|
|
5,106 |
|
Total |
|
|
|
|
$ |
58,456 |
|
|
$ |
(41,862 |
) |
|
$ |
16,594 |
|
|
Amortization expense was included in the Company’s Condensed Consolidated Statements of Operations as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Platform operations |
|
$ |
532 |
|
|
$ |
608 |
|
Sales and marketing |
|
|
1,370 |
|
|
|
1,380 |
|
Technology and development |
|
|
140 |
|
|
|
— |
|
General and administrative |
|
|
2 |
|
|
|
79 |
|
Total |
|
$ |
2,044 |
|
|
$ |
2,067 |
|
Amortization expense for Capitalized software costs for the three months ended March 31, 2022 and 2021 was $532 and $479, respectively.
Estimated future amortization of intangible assets as of March 31, 2022 is as follows:
|
|
As of March 31, 2022 |
|
|
Remainder of 2022 |
|
$ |
5,401 |
|
2023 |
|
|
6,318 |
|
2024 |
|
|
1,058 |
|
2025 |
|
|
1,016 |
|
2026 |
|
|
1,016 |
|
Thereafter |
|
|
8 |
|
Balance as of December 31, 2021 |
|
$ |
35,778 |
|
Deconsolidation of SymetryML |
|
|
(936 |
) |
Balance as of March 31, 2022 |
|
$ |
34,842 |
|
Accrued expenses consisted of the following:
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
Campaign costs |
|
$ |
1,486 |
|
|
$ |
2,718 |
|
Professional services |
|
|
539 |
|
|
|
648 |
|
Deferred revenues |
|
|
397 |
|
|
|
207 |
|
Sales and use taxes |
|
|
11 |
|
|
|
233 |
|
Other |
|
|
860 |
|
|
|
858 |
|
Total |
|
$ |
3,293 |
|
|
$ |
4,664 |
|
12
On December 22, 2021, the Company entered into a senior secured credit facilities credit agreement (the “Senior Secured Agreement”) with SVB. The Company is subject to customary representations, warranties, and covenants. The Senior Secured Agreement requires that the Company meet certain financial and non-financial covenants which include, but are not limited to, (i) delivering audited consolidated financial statements to the lender within 90 days after year-end commencing with the fiscal year ending December 31, 2022 financial statements, (ii) delivering unaudited quarterly consolidated financial statements within 45 days after each fiscal quarter, commencing with the quarterly period ending on March 31, 2022 and (iii) maintaining certain leverage ratios and liquidity coverage ratios. As of March 31, 2022, the Company was in full compliance with the terms of the Senior Secured Agreement.
As of March 31, 2022 and December 31, 2021, the Company had one letter of credit for approximately $983. As of December 31, 2021 the remainder of $39,017 was drawn on the revolving credit facility. The total amount drawn as of December 31, 2021 was repaid in January 2022. As of March 31, 2022 there were no amounts drawn on the revolving credit facility.
During the three months ended March 31, 2022 and 2021, the Company raised $200 and $275, respectively, to fund Symetry operations, by entering into Simple Agreements for Future Equity Notes (“SAFE Notes”) with several parties. The SAFE Notes resulted in cash proceeds to the Company in exchange for the right to stock of SymetryML, Inc, ("SymetryML") a subsidiary of the Company, or cash at a future date in the occurrence of certain events, as detailed in the Company’s 10-K.
The SAFE Notes were classified as marked-to-market liabilities pursuant to ASC 480, Distinguishing Liabilities from Equity. The fair value of the SAFE Notes was determined to be $3,938 as of March 31, 2022 representing a recognized loss of $788 due to the change in fair value of the SAFE Notes during the period. There was no change in fair value of the SAFE Notes as of March 31, 2021.
As a result of the series seed preferred financing transaction described in Note 20 – SymetryML and SymetryML Holdings, all outstanding SAFE Notes converted to series seed preferred stock in SymetryML, Inc. on March 31, 2022 in accordance with the existing terms of the SAFE Notes. As described in Note 20 – SymetryML and SymetryML Holdings.
For the three months ended March 31, 2022 and 2021, the Company recorded an income tax benefit (provision) of $1,025 and ($988), respectively. The annual effective income tax rates before discrete items (“AETR”) for the three months ended March 31, 2022 and 2021 was 33.0% and 35.1%, respectively. The AETR for the three months ended March 31, 2022 was more than the statutory rate of 21% primarily due to state and local income taxes, meals and entertainment, and executive equity-based compensation not deductible for tax purposes. Additionally, the Company did not include any fair value adjustments not reasonably estimable for the full year in the calculation of its AETR as we cannot project the full-year impact of these specific items. Refer to Note 15 – Seller's Earn-out and Note 16 – Warrants for further detail on fair value adjustments for the Seller's Earn-Out and warrant liabilities, respectively.
As of each reporting date, the Company considers new evidence, both positive and negative, that could impact its view with regard to future realization of deferred tax assets. As of March 31, 2022, the Company had not recorded a valuation allowance on the Company's deferred tax assets after considering all of the available evidence. As of December 31, 2021, a valuation allowance was previously recorded on the deferred tax assets of SymetryML, however, as of March 31, 2022, SymetryML was deconsolidated from the Company. Refer to Note 19 – Noncontrolling Interests for further detail.
Equity Award Activity
For the three months ended March 31, 2022, there were no stock options granted, exercised, or forfeited.
On March 11, 2022, the Company granted 3,287,721 RSUs at a fair value of $9.57 per share to employees and Board members. The vesting conditions for the RSUs are a mix of time-based and performance-based vesting conditions. The RSUs with performance-based vesting conditions are based on achievement of revenue or certain annual Adjusted Earnings Before Interest, Income Tax, Depreciation and Amortization (“Adjusted EBITDA”) targets. Compensation expense of $477 was
13
recognized on the RSUs in the three months ended March 31, 2022 for service based awards. No compensation expense has been recognized on the RSUs with performance-based vesting conditions for the three months ended March 31, 2022 on the basis that achievement of the specified performance targets is not yet considered probable to be met. No restricted stock units were exercised or forfeited during this period.
Equity-Based Compensation Expense
The following table summarizes the total equity-based compensation expense included in the Condensed Consolidated Statements of Operations:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|||