INTEGRAL AD SCIENCE HOLDING CORP. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes appearing elsewhere in this Quarterly Report on
Form 10-Q. The following discussion and analysis contains forward-looking
statements that involve risks and uncertainties. When reviewing the discussion
below, you should keep in mind the substantial risks and uncertainties that
could impact our business. In particular, we encourage you to review the risks
and uncertainties described in the section titled "Forward-Looking Statement"
included in this Quarterly Report on Form 10-Q and the sections titled"Risk
Factors" and "Forward-Looking Statements" included in our Annual Report on Form
10-K for the year ended December 31, 2021. These risks and uncertainties could
cause actual results to differ materially from those projected in
forward-looking statements contained in this report or implied by past results
and trends. Our historical results are not necessarily indicative of the results
that may be expected for any period in the future, and our interim results are
not necessarily indicative of the results we expect for the full fiscal year or
any other period. Unless the context otherwise requires, the terms "Company,"
"Integral Ad Science Holding Corp.," "IAS," "we," "us," "our," or similar terms
refer to Integral Ad Science Holding LLC and its consolidated subsidiaries
before the corporate conversion, and Integral Ad Science Holding Corp. and,
where appropriate, its subsidiaries after the Corporate Conversion.

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                                    Overview

We are a leading digital media quality company by revenue. With our cloud-based
technology platform and the actionable insights it provides, we deliver
independent measurement and verification of digital advertising across all
devices, channels, and formats, including desktop, mobile, connected TV ("CTV"),
social, display, and video. Our proprietary and Media Rating Council (the "MRC")
accredited Quality Impressions® metric is designed to verify that digital ads
are served to a real person rather than a bot, viewable on-screen, and appear in
a brand-safe and suitable environment in the correct geography.

Without an independent evaluation of digital advertising quality, brands and
their agencies previously relied on a wide range of publishers and ad platforms
to self-report and measure the effectiveness of campaigns without a global
benchmark to understand success. We are an independent, trusted partner for
buyers and sellers of digital advertising to increase accountability,
transparency, and effectiveness in the market. We help advertisers optimize
their ad spend and better measure consumer engagement with campaigns across
platforms, while enabling publishers to improve their inventory yield and
revenue.

As a leading media quality partner, we have deep integrations with all the major
advertising and technology platforms including Amazon, Facebook, Google,
Instagram, LinkedIn, Microsoft, Pinterest, Snap, Spotify, TikTok, The Trade
Desk, Twitter, Xandr, Yahoo, and YouTube. Our platform uses advanced artificial
intelligence ("AI") and machine learning ("ML") technologies to process over 100
billion daily web transactions on average. With this data, we deliver real-time
insights and analytics to our global customers through our easy-to-use reporting
platform, IAS Signal™, helping brands, agencies, publishers, and platform
partners improve media quality and campaign performance.

Our pre-bid and post-bid verification solutions enable advertisers to measure
campaign performance and value across viewability, ad fraud prevention, brand
safety and suitability, and contextual targeting for ads on desktop, mobile
in-app, social, and CTV platforms. Our pre-bid programmatic solution is directly
integrated with DSPs to help optimize return on ad spend ("ROAS") by directing
budget to the best available inventory. With our Context Control solution,
advertisers can leverage more than 300 contextual segments from the Company on a
pre-bid basis to avoid undesirable content or target towards content that is
more suitable for their campaigns. Additionally, our Total Visibility® offering
provides marketers with actionable insights to optimize their campaign spend and
drive higher yield by focusing on the most efficient and cost effective
pathways. Our solutions help hundreds of publishers globally deliver high
quality ad inventory that is fraud free, viewable, brand safe and suitable, and
geographically targeted.

                   Macroeconomic and Geopolitical Conditions

Current adverse macroeconomic and geopolitical conditions, including the
conflict in Ukraine, heightened inflation, slower growth or recession, changes
to fiscal and monetary policy, higher interest rates, currency fluctuations,
challenges in the supply chain and the ongoing effects of the COVID-19 pandemic
may adversely affect our results.

Our business depends on the overall demand for advertising and on the economic
health of advertisers that benefit from our platform. Economic downturns or
unstable market conditions may cause advertisers to decrease their advertising
budgets, which could reduce spend though our platform and adversely affect our
business, financial condition and results of operations.

Throughout the COVID-19 pandemic, we have had sufficient liquidity and capital
resources to continue to meet our operating needs and service our debt. However,
if macroeconomic conditions deteriorate or there are unforeseen developments
with respect to the current COVID-19 pandemic our results of operations may be
adversely affected.

                               Our Business Model

We generate revenue based on the volume of purchased digital ads that our
solution measures. Advertisers use our digital marketing solutions for ad
viewability, brand safety, optimization, context control, and ad fraud
prevention. Advertisers pay us based on the total volume of impressions, which
is our primary contracting model. Certain contracts with advertisers have
pricing with a minimum commitment and/or fixed fee, plus overage, based on a
predetermined number of impressions. We maintain an expansive set of
integrations across the digital advertising ecosystem, including with leading
programmatic and social platforms, which enables us to cover all key channels,
formats and devices. We generate revenue from sell-side customers from contracts
that are generally for twelve-month terms (with auto renew), and a fixed fee
each month (tied to a total number of impressions), and an overage cost per
thousand impressions ("CPM") that is applied when impressions exceed the
impression threshold for a particular tier.

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Key factors affecting our performance

Our historical financial performance has been, and we expect our financial performance going forward to be, driven by our ability to:

Innovate and develop new products for key high-growth segments

•Programmatic. Our goal is to provide transparency in programmatic ad buying through innovative solutions including contextual targeting, safety and brand appropriateness.

•Social. We plan to develop deeper integrations with social platforms, also
known as Walled Gardens, including feed-based brand safety and suitability, to
be able to deliver continued transparency to our customers.

• Connected TV. We plan to continue to expand CTV-specific verification solutions and contextual capabilities to address the rapidly growing CTV segment.

•Expansion of adjacent products. We aim to expand our platforms to meet the new verification and measurement needs of our customers.

For example, with the introduction of our pre-bid contextual capability in 2020,
we not only enhanced our core verification offering, but we were also able to
expand into contextual targeting addressing new needs and providing new value to
our customers. Similarly, in 2019, our CTV solution expanded our presence into
this important and emerging digital channel. In 2021, we acquired Publica LLC, a
leading CTV ad platform and launched our brand safety solution for in-feed video
ads on TikTok.

Increase sales within our existing customer base

We aim to increase the use of our products among existing customers across more
campaigns and impressions. Given our comprehensive product portfolio, we believe
we can cross-sell additional or new solutions to provide end-to-end coverage to
more clients from pre-bid viewability to post-buy verification, fraud
prevention, safety, suitability, and targeting.

Acquire new customers and increase market share

Our ability to acquire new customers and increase our market share is dependent
upon a number of factors, including the effectiveness of our solutions,
marketing and sales to drive new business prospects and execution, client
digital marketing investment adoption, new products and feature offerings,
global reach and the growth of the market for digital ad verification. There is
a market opportunity to provide advertisers directly or through advertising
agencies with verification services, specifically around ad viewability, ad
fraud prevention and brand safety and suitability. Based on a March 2021
analysis by Frost & Sullivan, we estimate the global market opportunity for our
ad verification solutions to be $9.5 billion and expect it to grow at a 16.2%
CAGR from 2021 to 2025. We plan to work with the top 500 global advertisers by
targeting high-spend verticals and brands with a natural sensitivity for brand
safety, brand suitability, and ROAS needs. We believe we will increase our
market share by strengthening our work with the leading social platforms,
enhancing our programmatic solutions, deriving benefit from our broad global
position, and leveraging our differentiated data science and market-leading
contextual capabilities.

Developing international customers

Our ability to expand our customer base internationally is dependent upon a
number of factors, including effectively implementing our business processes and
go-to-market strategy, our ability to adapt to market or cultural differences,
the general competitive landscape, macroeconomic conditions, our ability to
invest in our sales and marketing channels, the maturity and growth trajectory
of our services by region and our brand awareness and perception. Global
marketers are becoming increasingly cognizant of the value of sophisticated
verification strategies and, as such, we believe there is growing demand for our
services internationally. We believe that Latin America and the APAC region may
represent substantial growth opportunities, and we are investing in developing
our business in those markets by way of expanded in-market customer service
investment and by leveraging our global relationships. We aim to continue to
grow outside the U.S. in Europe and other established markets such as Australia
and Japan, and view ourselves as best positioned to continue penetrating these
markets given our market-leading global footprint.

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Seasonality

We experience fluctuations in revenue that coincide with seasonal fluctuations
in the digital ad spending of our customers. The global advertising industry
experiences seasonal trends that affect the vast majority of participants in the
digital advertising ecosystem. Most notably, advertisers have historically spent
relatively more in the fourth quarter of the calendar year to coincide with the
holiday shopping season, and relatively less in the first quarter of each
calendar year. We expect these seasonality trends to continue, and our ability
to manage our resources in anticipation of these trends will affect our
operating results. Consequently, the fourth quarter usually reflects the highest
level of measurement activity, and the first quarter reflects the lowest level
of activity. Our revenue, cash flow, operating results and other key operating
and performance metrics may vary from quarter to quarter due to the seasonal
nature of our clients' spending on advertising campaigns and macroeconomic
conditions. While our revenue is highly re-occurring, seasonal fluctuations in
ad spend may impact quarter-over-quarter results. We believe that the
year-over-year comparison of results more appropriately reflects the overall
performance of the business.

Key Business Metrics

In addition to our U.S. GAAP financial information, we review a number of
operating and financial metrics, including the following key metrics, to
evaluate our business, measure our performance, identify trends affecting our
business, formulate business plans and make strategic decisions. The key
business metrics are presented based on our advertising customers, as revenue
from these customers represents substantially all the revenue.

The following table sets forth our key performance indicators for the periods
set forth below:

                                                                               June 30,
                                                                         

2022 2021 Retention of net revenue from advertiser clients (%) (at the end of the period)

                                                                121  %       126  %
Total advertising customers (as of the end of the period)                2,135        2,018
Total number of large advertising customers (as of the end of the
period)                                                                    173          187


Retention of net revenue from advertising clients

We define net revenue retention of advertising customers as a metric to reflect
the expansion or contraction of our advertising customers' revenue by measuring
the period-over-period change in trailing-twelve-month revenues from customers
who were also advertising customers in the prior trailing-twelve-month period.
As such, this metric includes the impact of any churned, or lost, advertising
customers from the prior trailing-twelve-month period as well as any increases
or decreases in their spend, including the positive revenue impacts of selling
new services to an existing advertising customer. The numerator and denominator
includes revenue from all advertising customers that we served and from which we
recognized revenue in the earlier of the two trailing-twelve-month periods being
compared. For purposes of discussing our key business metrics, we define an
advertising customer as any advertiser account that spends at least $3,000 in
the applicable trailing-twelve-month periods. We calculate our net revenue
retention of advertising customers as follows:

Numerator: The total revenue generated in the current twelve-month period by the advertiser client cohort during the previous twelve-month period.

Denominator: The total revenue generated during the twelve month period immediately preceding this cohort of advertising clients during this twelve month period.

The resulting quotient from this calculation is our Net Ad Client Revenue Retention Rate.

Our calculation of ad customer net revenue retention may differ from similarly titled measures presented by other companies.

Our net revenue retention of advertising customers decreased from 126% as of
June 30, 2021 to 121% as of June 30, 2022. The decrease in the net revenue
retention of advertising customers as of June 30, 2021 compared to June 30, 2022
was primarily due lower revenue growth during the trailing-twelve-month period
of 26% in 2022 compared to 33% in 2021.

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Total number of advertising clients

We view the number of advertising customers as a key indicator of our scale and
growth and the adoption of our platform. We determine our number of advertising
customers by counting the total number of advertiser accounts who have spent at
least $3,000 in the trailing-twelve-months. The total number of advertising
customers has limitations as an operating metric as it does not reflect the
product mix chosen by our advertising customers, the order frequency, or the
purchasing behavior of our advertising customers. Because of these and other
limitations, we consider, and you should consider, advertising customers in
conjunction with our other metrics, including net revenue retention, net income
(loss), adjusted EBITDA, and average revenue per advertising customer.

Total number of large advertising clients

Historically, our revenue has been driven primarily by a subset of large
advertising customers who have leveraged our platform substantially from a usage
standpoint. We determine our number of large advertising customers by counting
the total number of advertising accounts who have spent at least $200,000 in the
trailing-twelve-month period. We believe the recruitment and cultivation of
large advertising customers contributes to our long-term success. Our total
number of large advertising customers decreased from 187 as of June 30, 2021 to
173 as of June 30, 2022, reflecting several customers that fell just below the
$200,000 trailing-twelve-month threshold that had previously been above. Despite
the lower count, strong performance from our top customers contributed to our
second quarter revenue results.


Components of operating results

Revenue

We derive revenue primarily from advertisers and programmatic services offered
through a demand side platform to our customers across the digital advertising
platform, which is our performance obligation. Fees associated with our
contracts include impression-based fees driven by impression volume and a CPM.

We deliver our products and solutions to serve two customer types (i) buy-side
(advertisers and agencies) and (ii) sell-side (publishers, advertising/audience
networks, and supply side platforms). We generally generate revenue by charging
a CPM based on the volume of purchased digital ads that we measure and optimize
on behalf of these customers. There are no separate fees to access our platform.
Depending on our customer needs, our contracts have (i) usage-based pricing, or
(ii) monthly, quarterly or annual minimum commitments, or (iii) fixed fees.
Usage based pricing is our primary contracting model. For these minimum
commitment contracts, if a customer uses fewer impressions than the minimum,
there are no discounts or prorating to adjust the minimum fees, and if a
customer uses more impressions than the minimum, then an overage fee is applied
on such usage.

We recognize revenue when control of the promised services is transferred to
customers. Revenue from the cloud-based technology platform is primarily
recognized based on impressions delivered to customers. An "impression" is
delivered when an advertisement appears on pages viewed by users. A significant
majority (i.e., over 90%) of the Company's contracts are usage-based contracts
with no substantive minimum commitments. We have certain contracts for which
pricing is variable through tiered pricing arrangements or include annual base
fees that do not coincide with the calendar year, requiring an estimate of the
transaction price attributable to each year. The majority of our contracts have
a duration of one year or less.

Functionnary costs

Cost of revenue. Cost of revenue consists of data center costs, hosting fees,
revenue share with our DSP partners and personnel costs. Personnel costs include
salaries, bonuses, equity-based compensation, and employee benefit costs,
primarily attributable to our customer operations group. Our customer operations
group is responsible for onboarding, integration of new clients and providing
support for existing customers, including technical support for our technology
platform and product offering. We allocate overhead such as rent and occupancy
and information technology infrastructure charges based on headcount.

Sales and marketing. Sales and marketing expense consists primarily of personnel
costs, including salaries, bonuses, equity-based compensation, employee benefits
costs and commission costs, for our sales and marketing personnel. Sales and
marketing expense also includes costs for advertising, promotional and other
marketing activities. We allocate overhead such as rent and occupancy and
information technology infrastructure charges based on headcount. Sales
commissions are expensed as incurred.
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Technology and development. Technology and development expense consists
primarily of personnel costs of our engineering, product, and data sciences
activities, as well as software licenses. Personnel costs including salaries,
bonuses, equity-based compensation and employee benefits costs, third-party
consultant costs associated with the ongoing development and maintenance of our
technology platform and product offering. We allocate overhead such as rent and
occupancy and information technology infrastructure charges based on headcount.
Technology and development costs are expensed as incurred, except to the extent
that such costs are associated with software development that qualifies for
capitalization, which are then recorded as capitalized software development
costs included in internal use software, net on our consolidated balance sheet.

General and administrative. General and administrative expense consist of
personnel costs, including salaries, bonuses, equity-based compensation, and
employee benefits costs for our executive, finance, legal, human resources,
information technology, and other administrative employees. General and
administrative expenses also include outside consulting, legal and accounting
services, allocated facilities costs, and travel and entertainment primarily
related to intra-office travel and conferences.

Depreciation and amortization. Depreciation and amortization expense consists
primarily of depreciation and amortization expenses related to customer
relationships, developed technologies, trademarks, favorable leases, equipment,
leasehold improvements and other tangible and intangible assets. We depreciate
and amortize our assets in accordance with our accounting policies. Maintenance
and repairs, which do not extend the useful life of the respective assets, are
charged to expense as incurred. Intangible assets are amortized on a
straight-line basis over their estimated useful lives or using an accelerated
method. Useful lives of intangible assets range from four years to fifteen
years.

Interest expense, net

Interest expense, net. Interest expense consists primarily of interest payments
on our outstanding borrowings under our Prior Credit Agreement (as defined
below), New Credit Agreement (as defined below) and amortization of related debt
issuance costs net of interest income.

Provision (benefit) of income tax

Provision (benefit) from income taxes. The provision (benefit) from income taxes
resulted primarily from the current period book income (loss) multiplied by the
effective tax rate.


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Operating results

The following table sets forth our consolidated statement of operations for the
periods indicated:

                                 Three Months Ended June 30,              Six Months Ended June 30,
                                    2022                2021              2022                   2021
(in thousands except percentages)
Revenue                       $     100,328         $  75,075       $    189,570             $ 142,027
Operating expenses:
Cost of revenue (excluding
depreciation and
amortization shown below)            18,132            12,925             34,693                24,344
Sales and marketing                  26,482            27,268             49,539                43,813
Technology and development           17,624            20,176             34,611                32,944
General and administrative           18,834            33,044             35,603                41,592
Depreciation and
amortization                         12,510            14,603             24,968                28,998
Total operating expenses             93,582           108,016            179,414               171,691
Operating income (loss)               6,746           (32,941)            10,156               (29,664)
Interest expense, net                (1,814)           (5,167)            (3,240)              (12,126)
Net income (loss) before
income taxes                          4,932           (38,108)             6,916               (41,790)
(Provision) benefit from
income taxes                         (2,971)            3,045             (3,796)                3,958
Net income (loss)             $       1,961         $ (35,063)      $      3,120             $ (37,832)
Net income (loss) margin                  2   %           (47) %               2   %               (27) %



The following table presents the consolidated data of our income statement expressed as a percentage of total sales for the periods indicated:

                                               Three Months Ended June 30,  

Semester completed June 30th,

                                                     2022            2021            2022           2021
Revenue                                                   100  %     100  %              100  %     100  %
Operating expenses:
Cost of revenue (excluding depreciation and
amortization shown below)                                  18  %      17  %               18  %      17  %
Sales and marketing                                        26  %      36  %               26  %      31  %
Technology and development                                 18  %      27  %               18  %      23  %
General and administrative                                 19  %      44  %               19  %      29  %
Depreciation and amortization                              12  %      19  %               13  %      20  %
Total operating expenses                                   93  %     144  %               95  %     121  %
Operating income (loss)                                     7  %     (44) %                5  %     (21) %
Interest expense, net                                      (2) %      (7) %               (2) %      (9) %
Net income (loss) before income taxes                       5  %     (51) %                4  %     (29) %
(Provision) benefit from income taxes                      (3) %       4  %               (2) %       3  %
Net income (loss)                                           2  %     (47) %                2  %     (27) %




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Comparison of the three months ended June 30, 2022 and 2021

                                                                  Three Months Ended June 30,
                                                                                        $            %
                                                         2022           2021          change       change
(in thousands except percentages)
Revenue                                               $ 100,328      $  75,075      $ 25,253         34  %
Operating expenses:
Cost of revenue (excluding depreciation and
amortization shown below)                                18,132         12,925         5,207         40  %
Sales and marketing                                      26,482         27,268          (786)        (3) %
Technology and development                               17,624         20,176        (2,552)       (13) %
General and administrative                               18,834         33,044       (14,210)       (43) %
Depreciation and amortization                            12,510         14,603        (2,093)       (14) %
Total operating expenses                                 93,582        108,016       (14,434)       (13) %
Operating income (loss)                                   6,746        (32,941)       39,687       (120) %
Interest expense, net                                    (1,814)        (5,167)        3,353        (65) %
Net income (loss) before income taxes                     4,932        (38,108)       43,040       (113) %
(Provision) benefit from income taxes                    (2,971)         3,045        (6,016)      (198) %
Net income (loss)                                     $   1,961      $ (35,063)     $ 37,024       (106) %



Revenue

Total revenue increased by $25.3 millionor 34%, for the three months ended
June 30, 2022 compared to the three months ended June 30, 2021.

                                                      Three Months Ended June 30,
                                                                            $            %
                                              2022           2021         change       change
           (in thousands)
           Programmatic revenue           $   47,894      $ 31,793      $ 16,101         51  %
           Advertiser direct revenue          36,641        35,281         1,360          4  %
           Supply side revenue                15,793         8,001         7,792         97  %
           Total revenue                  $  100,328      $ 75,075      $ 25,253         34  %



Total revenue increased primarily due to a significant increase in our
programmatic revenue of $16.1 million, or 51%, attributable to growth in volume
of impressions of 27% and an increase of 19% in average CPMs. The increase in
average CPMs was attributable to significant growth of our Context Control
solution. Revenue from our advertiser direct customers increased $1.4 million,
or 4%, reflecting growth in volume of impressions of 2%, average CPM growth of
2%, as well as the acquisition of a number of new large customers. Revenue from
our supply side customers increased $7.8 million, or 97%, primarily due to the
impact of the acquisition of Publica.

Operating Expenses

Cost of Revenue. Cost of revenue increased by $5.2 million, or 40%, for the
three months ended June 30, 2022 as compared to the three months ended June 30,
2021. This increase was driven by a $2.2 million increase in data center and
hosting fees resulting from overall revenue growth and migration of data centers
to Amazon Web Services cloud and an increase of $2.9 million in revenue share to
our DSP partners on account of our growth in programmatic revenue.

Sales and marketing. Sales and marketing expenses decreased by $0.8 million, or
3%, for the three months ended June 30, 2022 as compared to the three months
ended June 30, 2021. This decrease was primarily due to a decrease of $7.1
million stock-based compensation expense, which was higher in the three months
ended June 30, 2021 due to the modification of the Company's stock awards at the
time of the IPO and the charge recognized for all vested options. This was
offset by an increase in sales commissions of $0.6 million due to higher revenue
growth, an increase in compensation expenses of $3.3 million to support our
growth and international expansion, an increase in restructuring severance costs
of $0.7 million, an increase of $1.1 million in marketing and advertising
expenses, and an increase of $0.5 million in travel expenses.

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Technology and development. Technology and development expenses decreased by
$2.6 million, or 13%, for the three months ended June 30, 2022 as compared to
the three months ended June 30, 2021. This decrease was primarily due to a
decrease of $4.7 million stock-based compensation expense, which was higher in
the three months ended June 30, 2021 due to the modification of the Company's
stock awards at the time of the IPO and the charge recognized for all vested
options, a decrease related to migration of data center costs of $0.6 million,
and a decrease in restructuring severance costs of $1.5 million. This was offset
by an increase in compensation expenses of $2.8 million, an increase in hosting
and license fees of $0.8 million to support our growth, an increase of $0.2
million due to lower allocation of overhead costs, and an increase in
professional fees of $0.4 million.

General and administrative. General and administrative expenses decreased by
$14.2 million, or 43%, for the three months ended June 30, 2022 as compared to
the three months ended June 30, 2021. This decrease was primarily due to a $19.0
million stock-based compensation expense, which was higher in the three months
ended June 30, 2021 due to the modification of the Company's stock awards at the
time of the IPO and the charge recognized for all vested options, a decrease of
$0.5 million related to acquisition costs, and a decrease for bad debt reserves
of $0.2 million. This was offset by an increase in compensation expenses of $1.1
million due to increased headcount, an increase in insurance costs of $1.3
million related to public company costs, an increase of $1.4 million in
professional fees incurred for audit, tax, legal and other services, an increase
in travel and entertainment costs of $0.2 million, an increase of $0.3 million
for software licenses and computer maintenance, and restructuring severance
costs of $1.0 million.

Depreciation and amortization. Depreciation and amortization expenses decreased
by $2.1 million, or 14%, for the three months ended June 30, 2022 as compared to
the three months ended June 30, 2021. This decrease results from decreased
depreciation of our property and equipment of $0.2 million and decreased
amortization of our intangible assets of $1.9 million, resulting from the use of
the accelerated method to amortize the asset. Amortization expense related to
our internal-use software were consistent for the three months ended June 30,
2022 as compared to the three months ended June 30, 2021.

Interest expense, net

Interest expense, net. Interest expense decreased by $3.4 million, or 65%, for
the three months ended June 30, 2022 as compared to the three months ended
June 30, 2021. The decrease in interest expense was primarily attributable to
partial repayment of our long-term debt of $110 million and a reduction in the
interest rates as a result of refinancing our debt.

(Provision) benefit from income taxes

(Provision) benefit from income taxes. Provision (benefit) from income taxes
increased by $6.0 million, or 198%, for the three months ended June 30, 2022 as
compared to the three months ended June 30, 2021. The tax provision increased
mainly due to higher book income for the three months ended June 30, 2022,
executive compensation as the Company became subject to the provisions of
Section 162(m) of the Internal Revenue Code as a result of becoming a public
company and discrete items, including stock-based compensation.

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Comparison of the six months ended June 30, 2022 and 2021

                                                              Six Months Ended June 30, 2022
                                                                                        $            %
                                                       2022             2021          change       change
(in thousands except percentages)
Revenue                                          $   189,570         $ 142,027      $ 47,543         33  %
Operating expenses:
Cost of revenue (excluding depreciation and
amortization shown below)                             34,693            24,344        10,349         43  %
Sales and marketing                                   49,539            43,813         5,726         13  %
Technology and development                            34,611            32,944         1,667          5  %
General and administrative                            35,603            41,592        (5,989)       (14) %
Depreciation and amortization                         24,968            28,998        (4,030)       (14) %
Total operating expenses                             179,414           171,691         7,723          4  %
Operating income (loss)                               10,156           (29,664)       39,820       (134) %
Interest expense, net                                 (3,240)          (12,126)        8,886        (73) %
Net income (loss) before income taxes                  6,916           (41,790)       48,706       (117) %
(Provision) benefit from income taxes                 (3,796)            3,958        (7,754)      (196) %
Net income (loss)                                $     3,120         $ (37,832)     $ 40,952       (108) %



Revenue

Total revenue increased by $47.5 millionor 33%, for the three months ended
June 30, 2022 compared to the half-year ended June 30, 2021.

                                                       Six Months Ended June 30,
                                                                            $            %
                                             2022           2021          change       change
           (in thousands)
           Programmatic revenue           $  88,469      $  58,367      $ 30,102         52  %
           Advertiser direct revenue         71,256         67,880         3,376          5  %
           Supply side revenue               29,845         15,780        14,065         89  %
           Total revenue                  $ 189,570      $ 142,027      $ 47,543         33  %



Total revenue increased primarily due to a significant increase in our
programmatic revenue of $30.1 million, or 52%, attributable to growth in volume
of impressions of 30% and an increase of 17% in average CPMs. The increase in
average CPMs was attributable to significant growth of our Context Control
solution. Revenue from our advertiser direct customers increased $3.4 million,
or 5%, reflecting growth in volume of impressions of 5% as well as the
acquisition of a number of new large customers. Revenue from our supply side
customers increased $14.1, or 89%, primarily due to the impact of the
acquisition of Publica.

Operating Expenses

Cost of Revenue. Cost of revenue increased by $10.3 million, or 43%, for the six
months ended June 30, 2022 as compared to the six months ended June 30, 2021.
This increase was driven by a $4.5 million increase in data center and hosting
fees resulting from overall revenue growth and migration of data centers to
Amazon Web Services cloud and an increase of $5.7 million in revenue share to
our DSP partners on account of our growth in programmatic revenue.

Sales and marketing. Sales and marketing expenses increased by $5.7 million, or
13%, for the six months ended June 30, 2022 as compared to the six months ended
June 30, 2021. This increase was primarily due to an increase in sales
commissions of $1.4 million due to higher revenue growth, an increase in
compensation expenses of $5.2 million to support our growth and international
expansion, an increase in restructuring severance costs of $1.2 million, an
increase of $1.6 million in marketing and advertising expenses, increase in
professional fees of $0.2 million and an increase of $0.7 million in travel
expenses. These increases were partially offset by a decrease due to a $4.6
million stock-based compensation expense, which was higher in the six months
ended June 30, 2021 due to the modification of the Company's stock awards at the
time of the IPO and the charge recognized for all vested options.
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Technology and development. Technology and development expenses increased by
$1.7 million, or 5%, for the six months ended June 30, 2022 as compared to the
six months ended June 30, 2021. This increase was primarily due to an increase
in compensation expenses of $4.4 million, an increase in hosting and license
fees of $2.1 million to support our growth, an increase in professional fees of
$0.8 million, and $0.2 million due to higher allocation of overhead costs. These
increases were partially offset by a decrease due to a $3.1 million stock-based
compensation expense, which was higher in the six months ended June 30, 2021 due
to the modification of the Company's stock awards at the time of the IPO and the
charge recognized for all vested options, a decrease of $1.3 million related to
restructuring severance costs, and a decrease of $1.4 million related to
migration of data center costs.

General and administrative. General and administrative expenses decreased by
$6.0 million, or 14%, for the six months ended June 30, 2022 as compared to the
six months ended June 30, 2021. This decrease was primarily due to a $14.9
million stock-based compensation expense, which was higher in the six months
ended June 30, 2021 due to the modification of the Company's stock awards at the
time of the IPO and the charge recognized for all vested options, a decrease in
facilities expenses of $0.9 million due to the sublease of the facility
previously used as our New York Corporate headquarters, and a decrease in IPO
related professional fees of $1.2 million incurred during the six months ended
June 30, 2021. This decrease was offset by increases in compensation expenses of
$2.8 million due to increased headcount, an increase in insurance costs of $2.7
million related to public company costs, an increase of $3.2 million in
professional fees incurred for audit, tax, legal and other services, an increase
of $0.8 million for software licenses and computer maintenance, an increase of
$1.0 million for restructuring severance costs, and an increase in reserves for
bad debts of $0.4 million

Depreciation and amortization. Depreciation and amortization expenses decreased
by $4.0 million, or 14%, for the six months ended June 30, 2022 as compared to
the six months ended June 30, 2021. This decrease results from decreased
depreciation of our property and equipment of $0.5 million and decreased
amortization of our intangible assets of $4.3 million, resulting from the use of
the accelerated method to amortize the asset. These decreases were offset by an
increase in amortization expense related to our internal-use software of $0.8
million.

Interest expense, net

Interest expense, net. Interest expense decreased by $8.9 million, or 73%, for
the six months ended June 30, 2022 as compared to the six months ended June 30,
2021. The decrease in interest expense was primarily attributable to reduced
Paid in Kind ("PIK") interest expense of $0.4 million and a decrease in interest
expense by $8.5 million due to partial repayment of our long-term debt of $110.0
million and a reduction in the interest rates as a result of refinancing our
debt.

(Provision) benefit from income taxes

(Provision) benefit from income taxes. (Provision) benefit from income taxes
increased by $7.8 million, or 196%, for the six months ended June 30, 2022 as
compared to the six months ended June 30, 2021. The tax provision increased
mainly due to higher book income for the six months ended June 30, 2022,
non-deductible executive compensation as the Company became subject to the
provisions of Section 162(m) of the Internal Revenue Code as a result of
becoming a public company, and discrete items, including executive compensation.

Non-GAAP Financial Measures

We use supplemental measures of our performance, which are derived from our
consolidated financial information, but which are not presented in our
consolidated financial statements prepared in accordance with U.S. GAAP.
Adjusted EBITDA is the primary financial performance measure used by management
to evaluate our business and monitor ongoing results of operations. Adjusted
EBITDA is defined as income (loss) before depreciation and amortization,
stock-based compensation, interest expense, income taxes, acquisition,
restructuring and integration costs, IPO readiness costs, foreign exchange gains
and losses, and other one-time, non-recurring costs. Adjusted EBITDA margin
represents the Adjusted EBITDA for the applicable period divided by the revenue
for that period presented in accordance with U.S. GAAP.

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We use non-GAAP financial measures to supplement financial information presented
on a U.S. GAAP basis. We believe that excluding certain items from our U.S. GAAP
results allows management to better understand our consolidated financial
performance from period to period and better project our future consolidated
financial performance as forecasts are developed at a level of detail different
from that used to prepare U.S. GAAP-based financial measures. Moreover, we
believe these non-GAAP financial measures provide our shareholders with useful
information to help them evaluate our operating results by facilitating an
enhanced understanding of our operating performance and enabling them to make
more meaningful period-to-period comparisons. Although we believe these measures
are useful to investors and analysts for the same reasons they are useful to
management, as discussed below, these measures are not a substitute for, or
superior to, U.S. GAAP financial measures or disclosures. Our non-GAAP financial
measures may not be comparable to similarly titled measures of other companies.
Other companies, including companies in our industry, may calculate non-GAAP
financial measures differently than we do, limiting the usefulness of those
measures for comparative purposes.

The non-GAAP financial measures are not meant to be considered as indicators of
performance in isolation from or as a substitute for net income (loss) prepared
in accordance with U.S. GAAP and should be read only in conjunction with
financial information presented on a U.S. GAAP basis. Reconciliation of Adjusted
EBITDA and corresponding margin to their most directly comparable U.S. GAAP
financial measures, net income (loss) and corresponding margin, are presented
below. We encourage you to review the reconciliations in conjunction with the
presentation of the non-GAAP financial measures for each of the periods
presented. In future fiscal periods, we may exclude such items and may incur
income and expenses similar to these excluded items.

Adjusted EBITDA

                                 Three Months Ended June 30,              Six Months Ended June 30,
(in thousands)                      2022                2021              2022                   2021
Net income (loss)             $       1,961         $ (35,063)      $      3,120             $ (37,832)
Depreciation and
amortization                         12,510            14,603             24,968                28,998
Stock-based compensation             10,721            41,531             18,860                41,531
Interest expense, net                 1,814             5,167              3,240                12,126
Provision (benefit) from
income taxes                          2,971            (3,045)             3,796                (3,958)
Acquisition, restructuring
and integration costs                 2,129             2,408              2,878                 2,578
IPO readiness costs                       -                93                  -                 1,038
Foreign currency
transaction gains                      (512)                -               (512)                    -
Loss on disposal of assets                -                 -                 49                     -
Adjusted EBITDA               $      31,594         $  25,694       $     56,399             $  44,481
Revenue                       $     100,328         $  75,075       $    189,570             $ 142,027
Net income (loss) margin                  2   %           (47) %               2   %               (27) %
Adjusted EBITDA margin                   31   %            34  %              30   %                32  %



Cash and capital resources

General

As of June 30, 2022, our principal sources of liquidity were cash and cash
equivalents totaling $77.4 million, which was held for working capital purposes,
as well as the available balance under our New Revolver, described further
below. We expect that our cash and cash equivalents on hand at June 30, 2022
will enable us to continue to make investments in the future. We expect our
operating cash flows to further improve as we increase our operational
efficiency and experience economies of scale.

We believe our existing cash and cash equivalents, availability under our New
Revolver and cash provided by operations will be sufficient to meet our working
capital and capital expenditure needs for at least the next twelve months and
beyond. Our future capital requirements will depend on many factors including
our growth rate, the timing and extent of spending to support development
efforts, the expansion of sales and marketing activities, the introduction of
new and enhanced products and services offerings, the continuing market
acceptance of our products. In the future, we may enter into arrangements to
acquire or invest in complementary businesses, services and technologies,
including intellectual property rights.
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We may be required to seek additional equity or debt financing. In the event
that additional financing is required from outside sources, we may not be able
to raise it on terms acceptable to us, or at all. If we are unable to raise
additional capital or generate cash flows necessary to expand our operations and
invest in new technologies, it could reduce our ability to compete successfully
and harm our results of operations.

Some of our customers pay in advance for subscriptions, a portion of which is
recorded as deferred revenue. Deferred revenue consists of the unearned portion
of billed fees for our subscriptions, which is later recognized as revenue in
accordance with our revenue recognition policy. As of June 30, 2022 and December
31, 2021, we had deferred revenue of $0.4 million and $0.2 million,
respectively, all of which was recorded as a current liability and is expected
to be recorded as revenue in the next twelve months, provided all other revenue
recognition criteria have been met.

Credit facilities

On July 19, 2018, we entered into a Credit Agreement (the "Prior Credit
Agreement") with a syndicate of lenders, comprised of the $325.0 million (the
"Term Loan") and the $25.0 million (the "Revolving Loan"), with maturity dates
of July 19, 2024 and July 19, 2023, respectively. Pursuant to the Incremental
Facility Assumption Agreement No. 1, dated as of November 19, 2019, the Term
Loan was increased to $345.0 million. As explained below, on September 29, 2021,
the Company repaid the outstanding balances and terminated the Prior Credit
Agreement.

In addition to the cash pay interest, the Prior Credit Agreement included PIK
interest at a rate of 1.25% per annum. All PIK interest due was paid by
capitalizing such interest and adding such applicable PIK interest to the
principal amount of the outstanding Term Loan. Effective February 1, 2021, and
subject to maintaining a total leverage ratio less than 6.50 to 1.00, additional
PIK interest was not accrued pursuant to the Prior Credit Agreement. The
interest rate during the period prior to the repayment was 6.0%.

On September 29, 2021, we entered into a new credit agreement with various
lenders (the "New Credit Agreement" or the "New Revolver"), which provides for
an initial $300.0 million in commitments for revolving credit loans, which
amount may be increased or decreased under specific circumstances, with a $30.0
million letter of credit sublimit and a $100.0 million alternative currency
sublimit. In addition, the New Credit Agreement provides for the ability to
request incremental term loan facilities, in a minimum amount of $5.0 million
for each facility. Borrowings under to the New Credit Agreement may be used for
working capital and other general corporate purposes, including for acquisitions
permitted under the New Credit Agreement.

The interest rates applicable to revolving borrowings under the New Credit
Agreement are, at our option, either (i) in the case of U.S. dollar loans, (x) a
base rate, which is equal to the greater of (a) the Prime Rate, (b) the Federal
Funds Effective Rate plus 0.5%, and (c) the Adjusted LIBOR (subject to a floor
of 0.0%) for a one month Interest Period (each term as defined in the New Credit
Agreement) plus 1%, or (y) the Adjusted LIBOR (subject to a floor of 0.0%) equal
to the LIBOR (as defined in the New Credit Agreement) for the applicable
Interest Period multiplied by the Statutory Reserve Rate (each term as defined
in the New Credit Agreement) or (ii) in the case of RFR Loans (as defined in the
New Credit Agreement) denominated in sterling or euro, (x) the applicable RFR
(as defined in the New Credit Agreement) or (y) the applicable Term RFR (as
defined in the New Credit Agreement), plus in the case of each of clauses (i)
and (ii), the Applicable Rate (as defined in the New Credit Agreement). The
Applicable Rate (i) for base rate loans range from 0.75% to 1.50% per annum,
(ii) for LIBOR loans range from 1.75% to 2.50% per annum, (iii) for RFR Loans
denominated in sterling range from 1.7826% to 2.5326%, and (iv) for RFR Loans
denominated in euro range from 1.7965% to 2.5456%, in each case, based on the
Senior Secured Net Leverage Ratio (as defined in the New Credit Agreement). Base
rate borrowings may only be made in dollars. The Company is required to pay a
commitment fee during the term of the New Credit Agreement ranging from 0.20% to
0.35% per annum of the average daily undrawn portion of the revolving
commitments based on the Senior Secured Net Leverage Ratio (as defined in the
New Credit Agreement). The interest rate at June 30, 2022 was 3.1%.

The New Credit Agreement contains covenants requiring certain financial
information to be submitted quarterly and annually. In addition, we are also
required to comply with certain financial covenants such as maintaining a Net
Leverage Ratio (as defined in the New Credit Agreement) of 3.50 to 1.00 or lower
and maintaining a minimum Interest Coverage Ratio (as defined in the New Credit
Agreement) of 2.50 to 1.00. As of June 30, 2022, the Company was in compliance
with all covenants contained in the New Credit Agreement. Based upon current
facts and circumstances, we believe existing cash coupled with the cash flows
generated from operations will be sufficient to meet our cash needs and comply
with covenants.

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Cash flow

The table below presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated.

                                                                Six Months 

Ended June 30th,

                                                                    2022               2021
Net cash provided by operating activities                   $      23,205           $ 33,056
Net cash used in investing activities                              (8,188)  

(8,096)

Net cash used in financing activities                              (8,504)  

(3,115)

Net increase in cash and cash equivalents, and
restricted cash                                             $       6,513           $ 21,845
Effect of exchange rate changes on cash and cash
equivalents, and restricted cash                                   (2,246)              (553)
Cash, cash equivalents, and restricted cash, at
beginning of period                                                76,078   

54,721

Cash, cash equivalents and restricted cash, at end of
period                                                      $      80,345           $ 76,013



Operating Activities

For the six months ended June 30, 2022, net cash provided by operating
activities was $23.2 million, resulting from a net income of $3.1 million
adjusted for non-cash expenses of depreciation and amortization of
$25.0 million, stock-based compensation of $18.9 million, bad debt expense of
$0.5 million, partially offset by a decrease in working capital of
$23.9 million, a decrease in net operating leases of $0.2 million and a deferred
tax benefit of $0.7 million.

For the six months ended June 30, 2021net cash provided by operating activities was $33.0 millionresulting from a net loss of $37.8 million
adjusted for non-cash charges for depreciation and amortization of $29.0 millionstock-based compensation of $41.5 millionthe amortization of loan issue costs of $0.7 millionnon-cash interest expense of $0.4 millionand an increase in working capital of $5.8 millionoffset by a deferred tax provision of $6.6 million.

Investing activities

Cash used in investing activities was $8.2 million for the six months ended June
30, 2022, reflecting capitalized costs related to our internal use software of
$6.1 million, payment of $1.6 million for Context and Amino acquisitions, and
the purchase of property and equipment of $0.5 million.

Cash allocated to investing activities was $8.1 million for the six months ended
June 30, 2021reflecting our purchase of internal-use software assets for $6.4 million in January 2021and the purchase of goods and equipment $0.3 million.

Fundraising activities

Cash used in financing activities was $8.5 million for the six months ended June
30, 2022, reflecting a repayment of outstanding short-term debt of $1.9 million,
repayment of outstanding long-term debt of $10.0 million, offset by proceeds of
$3.4 million in stock options exercised.

Cash used in financing activities was $3.1 million for the six months ended
June 30, 2021reflecting $1.2 million in the context of repurchases of ordinary shares, $2.8 million
in IPO fee payments, and $0.2 million primarily on our capital leases, offset by $1.1 million stock options exercised.

Contractual obligations and commitments

Our principal commitments consist of obligations under operating leases for
office space, our purchase commitments related to hosting and data services and
repayments of long-term debt. We lease office space under operating leases,
which expire on various dates through March 2027 and the total non-cancelable
payments under these leases were $30.8 million as of June 30, 2022. Total
non-cancelable purchase commitments related to hosting services as of June 30,
2022 were $109.0 million for periods through 2026. The New Revolver matures in
2026.

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Indemnification agreements

In the ordinary course of business, we enter into agreements of varying scope
and terms pursuant to which we agree to indemnify customers, including, but not
limited to, losses arising out of the breach of such agreements, services to be
provided by us or from intellectual property infringement claims made by third
parties. In addition, in connection with the completion of this offering we
intend to enter into indemnification agreements with our directors and certain
officers and employees 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 have been made upon us
to provide indemnification under such agreements and there are no claims that we
are aware of that could have a material effect on our consolidated balance
sheets, consolidated statements of operations and comprehensive loss, or
consolidated statements of cash flows.

Employment Act

We qualify as an "emerging growth company" pursuant to the provisions of the
Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). For as long as we
are an "emerging growth company," we may take advantage of certain exemptions
from various reporting requirements that are applicable to other public
companies that are not "emerging growth companies," including, but not limited
to, not being required to comply with the auditor attestation requirements of
Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements,
exemptions from the requirements of holding advisory "say-on-pay" votes on
executive compensation and shareholder advisory votes on golden parachute
compensation.

The JOBS Act also permits an emerging growth company like us to take advantage
of an extended transition period to comply with new or revised accounting
standards applicable to public companies. We have elected to "opt-in" to this
extended transition period for complying with new or revised accounting
standards and, therefore, we will not be subject to the same new or revised
accounting standards as other public companies that comply with such new or
revised accounting standards on a non-delayed basis.

Critical accounting estimates

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with U.S. GAAP. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets and liabilities, revenue and expenses and related disclosures
of contingent assets and liabilities at the date of our financial statements.
Actual results may differ from these estimates under different assumptions or
conditions, impacting our reported results of operations and financial condition

There have been no material changes to our critical accounting policies and
estimates as compared to the critical accounting estimates described in "Note
2-Basis of presentation and summary of significant accounting policies" to our
consolidated financial statements appearing in our Annual Report on Form 10-K
for the year ended December 31, 2021.

Recent accounting pronouncements

For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see Note 2 to our condensed consolidated financial statements: “Basis of Presentation and Summary of Significant Accounting Policies – Accounting Pronouncements Not Yet Adopted ” included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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