Integral Ad Science Holding Corp.

11/04/2025 | Press release | Distributed by Public on 11/04/2025 06:49

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
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 sections titled "Risk Factors" and "Forward-Looking Statements" included in our 2024 Form 10-K and in this Quarterly Report on Form 10-Q. 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 Corp. and, where appropriate, its subsidiaries.
Overview
We are a leading global media measurement and optimization platform. Through 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, video and emerging media like audio and gaming. 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 in a brand-safe and suitable environment within 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 or holistic reporting platform 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 global media measurement and optimization platform, we are deeply integrated with all the major advertising and technology platforms including Meta (which includes Facebook and Instagram), Google, YouTube, LinkedIn, Amazon, Microsoft, Pinterest, Snap, Spotify, TikTok, Reddit, The Trade Desk, X (formerly known as Twitter), and Yahoo. Our platform leverages customized, internally developed artificial intelligence and machine learning technologies to process over 280 billion digital interactions daily, on average, as of December 31, 2024. With this vast wealth of data, we provide actionable insights through our intuitive reporting tool, IAS Signal™, helping brands, agencies, publishers, and platform partners improve media quality.
Our pre-bid optimization and post-bid measurement and blocking solutions enable advertisers to measure campaign performance and value across viewability and attention, ad fraud prevention, brand safety and suitability, MFA, and contextual targeting for ads across platforms and environments like desktop, mobile in-app, social, and CTV platforms. Our pre-bid solution is directly integrated with DSPs to help optimize return on ad spend ("ROAS") by directing budget to the best available inventory. Our contextual ability is enabled through our deep integrations with all major DSPs. In addition, our targeting and pre-bid solutions extend to the social platforms. 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.
Pending Take-Private Merger
On September 24, 2025, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Igloo Group Parent, Inc., a Delaware corporation ("Parent"), and Igloo Group Acquisition Company, Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"). Parent and Merger Sub are affiliates of investment funds
managed by Novacap Management Inc. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent.
Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of common stock, par value $0.001 per share, of the Company (the "common stock") that is issued and outstanding as of immediately prior to the Effective Time (other than any shares of common stock held by the Company as treasury stock, held by any subsidiary of the Company or owned by Parent or any of its subsidiaries (including Merger Sub), or any shares of common stock as to which appraisal rights have been properly exercised in accordance with Delaware law) will be automatically cancelled, extinguished and converted into the right to receive cash in an amount equal to $10.30, without interest thereon.
The Merger Agreement contains certain customary termination rights for the Company and Parent, including (i) if the Merger is not consummated on or before March 24, 2026 (the "Termination Date"), (ii) if the other party breaches its representations, warranties or covenants in a manner that would cause the conditions to the closing of the transactions contemplated by the Merger Agreement to not be satisfied and fails to cure such breach within the applicable cure period, or (iii) if any law, order or judgment preventing or prohibiting the Merger has become final and non-appealable. If the Merger Agreement is terminated under certain circumstances, the Company would be required to pay Parent a termination fee of $52.5 million. Parent would be required to pay to the Company a termination fee of $100.0 million if the Merger Agreement is terminated under certain other circumstances.
The Merger is expected to close in the fourth quarter of 2025, subject to customary closing conditions and regulatory approvals, but not prior to November 23, 2025, without the prior written consent of Parent. Upon consummation of the Merger, the Company will become a privately held company and the common stock will no longer be listed on any public market.
The Company prepared and filed with the Securities and Exchange Commission ("SEC") on October 27, 2025, a Preliminary Information Statement on Schedule 14C, which contains additional information about the Merger Agreement and the Merger.
Macroeconomic and Geopolitical Conditions
During the first nine months of 2025, the U.S. economy experienced continued GDP growth, a modest increase in unemployment from prior periods, growth in real wages, and a modest deceleration in inflation. However, the macroeconomic environment remains uncertain, with the U.S. Federal Reserve reducing interest rates during the three months ended September 30, 2025. We have not experienced material impacts from macroeconomic conditions in the first nine months of 2025. Our operating expenses are denominated in the currencies of the countries in which our operations are located, and our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. In that regard, over the last few years, we incurred foreign exchange gains and losses resulting from fluctuations primarily attributable to the British Pound and Euro currency movements relative to the U.S. dollar.
Our business depends on the overall demand for advertising and on the economic health of advertisers that benefit from our platform. Economic downturns, recessions or unstable market conditions, including as a result of global trade uncertainty, are difficult to predict and could cause advertisers to decrease their advertising budgets, which in turn reduces spend through our platform, or could impair the ability of advertisers to pay for services they purchased from us, in each case impacting our results.
Our Business Model
We generate revenue based on the volume of purchased digital ads that our solution measures. Advertisers and publishers use our media quality solutions for ad viewability, brand safety and suitability, optimization, context control, and ad fraud prevention. Our customers primarily pay us based on usage, where the customer pays a fee based on the total volume of ads measured. Certain contracts with customers utilize other pricing arrangements, including minimum commitments, overages based on tiered pricing, or flat fees. 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.
Key Factors Affecting Our Performance
Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to:
Innovate and Develop New Products for Key High-Growth Segments
•Optimization. We aim to deliver greater performance on programmatic ad buying via innovative solutions including, contextual targeting and brand safety and suitability. These solutions include traditional open-web media buying and select retail-media platforms.
•Social. Our objective is to develop deeper integrations with social platforms, also known as Walled Gardens, including video-based brand safety and suitability, to deliver continued transparency and actionability to our customers through both measurement and optimization solutions.
•CTV. We are committed to meeting the evolving needs of advertisers and publishers in the CTV segment. For advertisers, IAS aims to deliver transparency, brand safety, and performance-driven insights, including industry-first MRC accreditations for viewability and invalid traffic detection in CTV. For publishers, our Publica by IAS CTV Ad Server is designed for streaming platforms to maximize yield and deliver seamless, high-quality ad experiences. Together, these solutions aim to drive trust and efficiency across the CTV ecosystem.
•Adjacent Product Expansion. We continue to expand our platforms and integrations to address new media protection and performance needs for our clients.
Increase Sales Within Our Existing Customer Base
We strive 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 our existing customers in order to better provide end-to-end coverage to more clients from pre-bid protection and targeting post-bid verification, fraud prevention, safety, suitability, and other media quality reporting.
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, macroeconomic conditions that impact advertising spending budgets, global reach and the growth of the market for digital ad verification. In 2024, we invested resources to pursue new accounts that were previously serviced by Oracle who announced their exit from the advertising business.
Expand Customer Base Internationally
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, 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. Our investments in international markets resulted in a 13% growth in international revenue year-over-year for the year ended December 31, 2024. We believe that Latin America, EMEA and APAC regions may represent substantial growth opportunities, and we are continually 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 expand our international operations in other established markets such as China, Australia and Japan and view ourselves as best positioned to continue penetrating these markets given our market-leading global footprint.
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. We expect 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. 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 financial information prepared in conformity with the generally accepted accounting principles in the United States ("GAAP"), 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 presented are based on our advertising customers, as revenue from these customers represents substantially all of our revenue.
The following table sets forth our key performance indicators for the periods set forth below:
September 30,
2025 2024
Net revenue retention of advertising customers (%) (as of the end of the period) 111 % 108 %
Total number of large advertising customers (as of the end of the period) 248 232
Net revenue retention of advertising customers
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 include 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 earned during the current trailing-twelve-month period from the cohort of advertising customers in the prior trailing-twelve-month period.
Denominator: The total revenue earned during the immediately preceding trailing-twelve-month period from such cohort of advertising customers in such trailing-twelve-month period.
The quotient obtained from this calculation is our net revenue retention rate of advertising customers. Our calculation of net revenue retention of advertising customers may differ from similarly titled metrics presented by other companies.
Our net revenue retention of advertising customers increased to 111% for the trailing-twelve-month period ended September 30, 2025 from 108% for the trailing-twelve-month period ended as of September 30, 2024, primarily due to higher advertising revenue growth during the trailing-twelve-month period of 13% in 2025 compared to 12% revenue growth in 2024.
Total number of large advertising customers
Historically, our revenue has been primarily driven by large advertising customers. Increasing awareness of our solutions, further developing our sales and marketing expertise, and continuing to build solutions that address the unique needs of the top 500 global advertisers have increased our number of large advertising customers. We determine our number of large advertising customers by counting the total number of advertising accounts who have spent at least $200,000 per year. We believe our ability to recruit and cross-sell our products to large advertising customers is critical to our long-term success. Our total number of large advertising customers increased to 248 as of September 30, 2025 from 232 as of September 30, 2024. Revenue from large advertising customers represented 87% of our total advertising revenue (measurement and optimization revenue) for the trailing-twelve-month period ended September 30, 2025, 85% for the trailing-twelve-month period ended December 31, 2024, and 85% for the trailing-twelve-month period ended September 30, 2024. As macroeconomic conditions
remain uncertain withinflation, global trade conditions, changes to fiscal and monetary policy, and currency fluctuations, there is no guarantee that we will continue to see an increase of large advertising customers.
Components of Results of Operations
Revenue
We derive revenue primarily from advertisers (buy-side) and publishers (sell-side). Our post-bid measurement solutions enable advertisers to measure campaign performance and value across viewability, ad fraud prevention, brand safety and suitability for ads on desktop, mobile, CTV, social, display, audio, gaming and video platforms. Our pre-bid optimization solutions are directly integrated with DSPs to help optimize return on ad spend by directing budgets to the best available inventory. Our publisher solutions drive yield by identifying high quality ad inventory that is fraud free, viewable, brand safe and suitable, and geographically targeted on a global basis.
We recognize revenue when control of the promised services are transferred to customers. We recognize revenue by multiplying the cost per thousand impressions ("CPM") and the number of impressions measured. An impression is measured by the platform when a digital ad is served to a real person rather than a bot in a brand-safe and suitable environment within the correct geography. Contracts with our customers primarily utilize a usage-based structure, where the customer pays a fee to the Company based on the total ads measured. Depending on our customer needs, our contracts may utilize other pricing arrangements, including minimum commitments, overages based on tiered pricing, or flat fees. As our business continues to evolve, we are seeing an increase in the mix of pricing arrangements, including minimum commitments, overages based on tiered pricing, or flat fees that provide greater flexibility and access to our platforms.
Operating Expenses
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.
Technology and development. Technology and development expenses consist primarily of personnel costs of our engineering, product, and data sciences activities. 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 expenses 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 and allocated facilities costs.
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 five years to fifteen years.
Foreign exchange loss (gain), net.Foreign exchange loss (gain), net, is impacted by fluctuations in exchange rates and the amount of foreign-currency denominated cash, receivables, intercompany balances, and payables.
Interest income (expense), net
Interest income (expense), net .Interest income (expense) consists primarily of interest income earned on cash accounts. Interest expense relates to payments on our outstanding borrowings under our Credit Agreement (as defined below under "Liquidity and Capital Resources"), commitment fees on the undrawn portion of the Revolver and amortization of related debt issuance costs.
Provision for income taxes
Provision for income taxes. The income tax provision resulted from pre-tax book income multiplied by statutory tax rate, increased by non-deductible expenses relating to stock-based compensation, other discrete items and offset by research and development and other tax credits.
Results of Operations
The following table sets forth our consolidated statement of operations for the periods indicated:
(in thousands, except percentages) Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Revenue $ 154,358 $ 133,528 $ 437,628 $ 377,063
Operating expenses:
Cost of revenue 35,553 27,373 100,028 80,628
Sales and marketing 36,317 30,144 104,243 91,541
Technology and development 22,632 16,840 62,431 52,305
General and administrative 33,715 25,348 86,457 71,407
Depreciation and amortization 17,900 16,243 51,605 47,032
Foreign exchange loss (gain), net 667 (2,607) (7,113) (723)
Total operating expenses 146,784 113,341 397,651 342,190
Operating income 7,574 20,187 39,977 34,873
Interest income (expense), net 595 (1,325) 680 (4,787)
Net income before income taxes 8,169 18,862 40,657 30,086
Provision for income taxes (1,124) (2,773) (9,211) (7,562)
Net income $ 7,045 $ 16,089 $ 31,446 $ 22,524
Net income margin 5 % 12 % 7 % 6 %
The following table sets forth our consolidated statement of operations data expressed as a percentage of total revenue for the periods indicated:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Revenue 100 % 100 % 100 % 100 %
Operating expenses:
Cost of revenue 23 % 20 % 23 % 21 %
Sales and marketing 24 % 23 % 24 % 24 %
Technology and development 15 % 13 % 14 % 14 %
General and administrative 22 % 19 % 20 % 19 %
Depreciation and amortization 12 % 12 % 12 % 12 %
Foreign exchange loss (gain), net - % (2) % (2) % - %
Total operating expenses 95 % 85 % 91 % 91 %
Operating income 5 % 15 % 9 % 9 %
Interest income (expense), net - % (1) % - % (1) %
Net income before income taxes 5 % 14 % 9 % 8 %
Provision for income taxes (1) % (2) % (2) % (2) %
Net income 5 % 12 % 7 % 6 %
Comparison of the Three Months Ended September 30, 2025 and September 30, 2024
(in thousands, except percentages) Three Months Ended September 30,
2025 2024 $
change 		%
change
Revenue $ 154,358 $ 133,528 $ 20,830 16 %
Operating expenses:
Cost of revenue 35,553 27,373 8,180 30 %
Sales and marketing 36,317 30,144 6,173 20 %
Technology and development 22,632 16,840 5,792 34 %
General and administrative 33,715 25,348 8,367 33 %
Depreciation and amortization 17,900 16,243 1,657 10 %
Foreign exchange loss (gain), net 667 (2,607) 3,274 (126) %
Total operating expenses 146,784 113,341 33,443 30 %
Operating income 7,574 20,187 (12,613) (62) %
Interest income (expense), net 595 (1,325) 1,920 (145) %
Net income before income taxes 8,169 18,862 (10,693) (57) %
Provision for income taxes (1,124) (2,773) 1,649 (59) %
Net income $ 7,045 $ 16,089 $ (9,044) (56) %
Revenue
Total revenue increased by $20.8 million, or 16%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.
(in thousands, except percentages) Three Months Ended September 30,
2025 2024 $
change 		%
change
Optimization revenue $ 73,716 $ 61,118 $ 12,598 21 %
Measurement revenue 57,134 52,903 4,231 8 %
Publisher revenue 23,508 19,507 4,001 21 %
Total revenue $ 154,358 $ 133,528 $ 20,830 16 %
Total revenue increased for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 primarily due to an increase in our optimization revenue of $12.6 million, or 21%, reflecting an increase of 15% in average CPMs. Volume of impressions were consistent for optimization when compared to the three months ended September 30, 2024. Measurement revenue increased $4.2 million, or 8%, reflecting growth in volume of impressions of 20%, offset in part by a 9% decline in average CPMs. Publisher revenue increased by $4.0 million, or 21%, primarily due to the growth of Publica, for the three months ended September 30, 2025.
Operating expenses
Cost of Revenue.Cost of revenue increased by $8.2 million, or 30%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. This increase was primarily driven by an increase in hosting fees of $5.1 million and an increase in revenue share to our DSP partners related to our growth in optimization revenue of $3.1 million.
Sales and marketing. Sales and marketing expenses increased by $6.2 million, or 20%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. This increase was due to an increase in compensation and related expenses of $3.2 million to support revenue growth and an increase in stock-based compensation expense of $2.4 million. The remaining change in sales and marketing expenses is aggregated from several other immaterial items.
Technology and development. Technology and development expenses increased by $5.8 million, or 34%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. This increase was due to an increase in stock-based compensation expense of $3.5 million, an increase in compensation and related expenses of $2.0 million and an increase in software application expenses of $0.9 million, partially offset by a decrease in professional services of $0.1 million. The remaining change in technology and development expenses is aggregated from several other immaterial items.
General and administrative. General and administrative expenses increased by $8.4 million, or 33%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. This increase was due to an increase of $7.5 million related to professional services, of which $6.1 million related to the Merger, a $1.0 million increase in compensation related expenses and a $0.2 million increase in stock-based compensation expense. These increases were partially offset by a $0.3 million decrease in bad debt expense.
Depreciation and amortization. Depreciation and amortization expenses increased by $1.7 million, or 10%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. This increase was primarily due to an increase in amortization expense related to capitalization of internal-use software of $2.4 million, partially offset by a decrease in amortization expense for intangible assets of $0.8 million.
Foreign exchange loss (gain), net.Foreign exchange loss, net increased $3.3 million, or 126% for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The loss in the current period resulted from fluctuations primarily attributable to the Euro and British Pound currency movements relative to the U.S. Dollar.
Interest income (expense), net
Interest income (expense), net. Interest income (expense), net decreased by $1.9 million, or 145%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The decrease was primarily driven by a $1.7 million decrease in interest expense attributable to having no borrowings on the Revolver during the three months ended September 30, 2025, compared to a higher average outstanding balance on the Revolver in the prior year period. Also contributing to the decrease is a $0.2 million increase in interest income on our cash balances.
Provision for income taxes
Provision for income taxes. Provision for income taxes decreased by $1.6 million, or 59%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The tax provision in the current year resulted mainly from lower net income generated during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, and non-deductible stock-based compensation, offset by R&D and other tax credits and discrete items.
Comparison of the Nine Months Ended September 30, 2025 and September 30, 2024
(in thousands, except percentages) Nine Months Ended September 30,
2025 2024 $
change 		%
change
Revenue $ 437,628 $ 377,063 $ 60,565 16 %
Operating expenses:
Cost of revenue 100,028 80,628 19,400 24 %
Sales and marketing 104,243 91,541 12,702 14 %
Technology and development 62,431 52,305 10,126 19 %
General and administrative 86,457 71,407 15,050 21 %
Depreciation and amortization 51,605 47,032 4,573 10 %
Foreign exchange gain, net (7,113) (723) (6,390) 884 %
Total operating expenses 397,651 342,190 55,461 16 %
Operating income 39,977 34,873 5,104 15 %
Interest income (expense), net 680 (4,787) 5,467 (114) %
Net income before income taxes 40,657 30,086 10,571 35 %
Provision for income taxes (9,211) (7,562) (1,649) 22 %
Net income $ 31,446 $ 22,524 $ 8,922 40 %
Revenue
Total revenue increased by $60.6 million, or 16%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.
(in thousands, except percentages) Nine Months Ended September 30,
2025 2024 $
change 		%
change
Optimization revenue $ 206,378 $ 172,053 $ 34,325 20 %
Measurement revenue 162,551 151,904 10,647 7 %
Publisher revenue 68,699 53,106 15,593 29 %
Total revenue $ 437,628 $ 377,063 $ 60,565 16 %
Total revenue increased for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 primarily due to an increase in our optimization revenue of $34.3 million, or 20%, reflecting growth in volume of impressions of 9% and an increase in average CPMs of 8%. Measurement revenue increased $10.6 million, or 7%, reflecting growth in volume of impressions of 22%, offset in part by an 9% decline in average CPMs. Publisher revenue increased by $15.6 million, or 29%, primarily due to the growth of Publica, for the nine months ended September 30, 2025.
Operating expenses
Cost of Revenue.Cost of revenue increased by $19.4 million, or 24%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. This increase was driven by an increase in hosting fees of $11.2 million, an increase of $7.6 million in revenue share to our DSP partners commensurate with growth in optimization revenue, a $0.4 million increase in compensation related expenses and a $0.3 million increase in professional services. The remaining change in cost of revenue expenses is aggregated from several other immaterial items.
Sales and marketing. Sales and marketing expenses increased by $12.7 million, or 14%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. This increase was due to an increase in compensation expenses of $7.1 million to support revenue growth, an increase in stock-based compensation expense of $4.4 million and increases in advertising and travel expenses of $0.6 million. The remaining change in sales and marketing expenses is aggregated from several other immaterial items.
Technology and development. Technology and development expenses increased by $10.1 million, or 19% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. This increase was due to an increase in stock-based compensation expense of $4.6 million, an increase in compensation and related expenses of $4.5 million and an increase in software application expenses of $1.6 million. These increases were partially offset by a decrease in professional services of $0.3 million. The remaining change in technology and development expenses is aggregated from several other immaterial items.
General and administrative. General and administrative expenses increased by $15.1 million, or 21%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. This increase was due to a $10.7 million increase related to professional services, of which $6.1 million related to the Merger, an increase of $4.3 million in compensation related expenses, an increase in software application expenses of $1.2 million and an increase in stock-based compensation expense of $0.9 million. These increases were partially offset by a $3.1 million decrease in bad debt expense. The remaining change in general and administrative expenses is aggregated from several other immaterial items.
Depreciation and amortization. Depreciation and amortization expenses increased by $4.6 million, or 10%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. This increase results from an increase in amortization expense related to capitalization of internal-use software of $7.1 million and an increase in depreciation expense for property and equipment of $0.1 million, partially offset by a decrease in amortization expense for intangible assets of $2.7 million.
Foreign exchange gain, net. Foreign exchange gain, net increased $6.4 million, or 884% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The gain in the current period resulted from fluctuations primarily attributable to the Euro and British Pound currency movements relative to the U.S. Dollar.
Interest income (expense), net
Interest income (expense), net. Interest income (expense), net decreased by $5.5 million, or 114%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The decrease was due to a $5.7 million decrease in interest expense resulting from a lower average outstanding balance on the Revolver combined with a decrease in the interest rate on the Revolver. The decrease in interest expense was partially offset by a $0.2 million decrease in interest income, as compared to the prior year period.
Provision for income taxes
Provision for income taxes. Provision for income taxes increased by $1.6 million, or 22%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The tax provision in the current year resulted mainly from higher net income generated during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, and non-deductible stock-based compensation, offset by R&D and other tax credits and discrete items.
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. We define Adjusted EBITDA as net income before depreciation and amortization, stock-based compensation, interest income (expense), net, provision for income taxes, acquisition, restructuring and integration costs, foreign exchange gains and losses, asset impairments 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.
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 stockholders 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, these measures are not a substitute for, or superior to, U.S. GAAP financial measures or disclosures and should be read only in conjunction with financial information presented on a U.S. GAAP basis. 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.
A reconciliation of Adjusted EBITDA to its most directly comparable U.S. GAAP financial measure, net income, is 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
(in thousands, except percentages) Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net income $ 7,045 $ 16,089 $ 31,446 $ 22,524
Depreciation and amortization 17,900 16,243 51,605 47,032
Stock-based compensation 22,625 16,443 56,994 47,185
Interest (income) expense, net (595) 1,325 (680) 4,787
Provision for income taxes 1,124 2,773 9,211 7,562
Acquisition, restructuring and integration costs 411 290 760 1,465
Foreign exchange loss (gain), net 667 (2,607) (7,113) (723)
Merger related costs 6,093 - 6,093 -
Asset impairments and other costs - 90 48 90
Adjusted EBITDA $ 55,270 $ 50,646 $ 148,364 $ 129,922
Revenue $ 154,358 $ 133,528 $ 437,628 $ 377,063
Net income margin 5 % 12 % 7 % 6 %
Adjusted EBITDA margin 36 % 38 % 34 % 34 %
Liquidity and Capital Resources
General
As of September 30, 2025, our principal sources of liquidity were cash and cash equivalents totaling $129.2 million, which was held for working capital purposes, as well as the available balance on our Revolver, as defined below.
Our principal commitments consist of obligations under operating leases for office space and our purchase commitments related to hosting and data services. We lease office space under operating leases, which expire on various dates through November 2032 and the total noncancellable payments under these leases were $26.3 million as of September 30, 2025, $12.4 million of which will be paid within the next 12 months and $13.9 million thereafter. Total noncancellable rentals under subleases were $4.5 million as of September 30, 2025, $3.0 million will be received in the next 12 months and $1.5 million thereafter. Total noncancellable purchase commitments related to hosting services as of September 30, 2025 were $376.8 million for periods through 2029, of which $89.0 million is committed for the next 12 months and $287.8 million thereafter.
We have financed our operations primarily through cash on our balance sheet and debt financing. We believe our existing cash and cash equivalents, our Revolver and cash provided by operations will continue to be sufficient to meet our working capital and capital expenditure and cash needs for the next twelve months and the foreseeable future. Our future capital requirements will depend on many factors including the timing and closing of the Merger, the costs related to the Merger, 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, and global trade and market conditions. In the future, we may enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights.
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, which is recognized as revenue in accordance with our revenue recognition policy. As of September 30, 2025, we had deferred revenue of $1.8 million, 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 Agreement
On June 17, 2025, we amended our credit agreement with various lenders (as amended, the "Credit Agreement"), which provides for $300.0 million in commitments for revolving credit loans (the "Revolver"), which amount may be increased to at least $550.0 million pursuant to the accordion feature, or decreased under specific circumstances, with a $30.0 million letter of credit sublimit, a $100.0 million alternative currency sublimit and a $30.0 million swingline loan sublimit, with a maturity date of June 17, 2030. In addition, the 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 the Credit Agreement may be used for working capital, capital expenditures and other general corporate purposes, including for acquisitions permitted under the Credit Agreement.
The market interest rate on outstanding borrowings is based on SOFR with an applicable rate ranging from 1.50% to 2.25% per annum. We also pay a commitment fee during the term of the Credit Agreement ranging from 0.175% to 0.30% per annum of the average daily undrawn portion of the revolving commitments based on the Total Net Leverage Ratio (as defined in the Credit Agreement).
The 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 Total Net Leverage Ratio (as defined in the Credit Agreement) of 3.50 to 1.00 or lower and maintaining a minimum Interest Coverage Ratio (as defined in the Credit Agreement) of 2.50 to 1.00. As of September 30, 2025, the Company was in compliance with all covenants contained in the 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.
Restrictions on Subsidiaries under the Credit Agreement
The Company is a holding company that conducts substantially all its activities through its subsidiaries and has no material operations of its own or direct outstanding debt obligations. The Company's wholly-owned subsidiaries are subject to the terms and restrictions set forth in the Credit Agreement, which among other things, limit the ability of the Company's subsidiaries to make loans or advances or to pay dividends or distributions. As is customary, these restrictions are subject to specific exceptions set forth in the Credit Agreement. The restrictions placed on the Company's subsidiaries under the Credit Agreement have not had, nor are they expected to have, an impact on the Company's ability to meet its cash obligations because substantially all of the Company's consolidated cash obligations are obligations of the Company's subsidiaries, which payment is generally permitted under the terms of the Credit Agreement.
Cash Flows
The table below presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated.
(in thousands) Nine Months Ended September 30,
2025 2024
Net cash provided by operating activities $ 109,719 $ 50,250
Net cash used in investing activities (33,081) (30,462)
Net cash used in financing activities (34,397) (87,358)
Net increase (decrease) in cash, cash equivalents, and restricted cash $ 42,241 $ (67,570)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
2,364 (113)
Cash, cash equivalents and restricted cash, at beginning of period 87,335 127,290
Cash, cash equivalents and restricted cash, at end of period $ 131,940 $ 59,607
Operating Activities
For the nine months ended September 30, 2025, net cash provided by operating activities was $109.7 million, resulting from a net income of $31.4 million adjusted for non-cash expenses of depreciation and amortization of $51.6 million, stock-based compensation of $57.0 million, a deferred tax provision of $5.1 million and amortization of debt issuance costs of $0.4 million, partially offset by a decrease in working capital of $26.0 million, unrealized foreign currency gains of $7.7 million, and a $2.1 million reversal of credit losses. The decrease in working capital primarily reflects unfavorable timing of payments for operating expenses and taxes, as well as the payment of the annual employee bonus liability.
For the nine months ended September 30, 2024, net cash provided by operating activities was $50.3 million, resulting from a net income of $22.5 million adjusted for non-cash expenses of depreciation and amortization of $47.0 million, stock-based compensation of $47.2 million, bad debt expense of $0.9 million and amortization of debt issuance costs of $0.3 million, partially offset by a decrease in working capital of $50.6 million and a deferred tax benefit of $15.5 million, and unrealized foreign currency gains of $1.8 million. The decrease in working capital primarily reflects unfavorable timing of payments for operating expenses and taxes, as well as the payment of the annual employee bonus liability.
Investing Activities
Cash used in investing activities was $33.1 million for the nine months ended September 30, 2025, reflecting capitalized costs related to our internal use software of $32.2 million, and the purchase of property and equipment of $0.9 million.
Cash used in investing activities was $30.5 million for the nine months ended September 30, 2024, reflecting capitalized costs related to our internal use software of $28.9 million, and the purchase of property and equipment of $1.6 million.
Financing Activities
Cash used in financing activities was $34.4 million for the nine months ended September 30, 2025, due to a repayment of outstanding long-term debt of $35.0 million and debt issuance costs of $1.8 million, partially offset by proceeds of $2.3 million for share purchases under the ESPP and $0.2 million for stock options exercised.
Cash used in financing activities was $87.4 million for the nine months ended September 30, 2024, due to repayments of outstanding long-term debt of $90.0 million, partially offset by proceeds of $2.3 million for share purchases under the ESPP and $0.3 million for stock options exercised.
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, we have entered 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 Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Comprehensive Income, or Condensed Consolidated Statements of Cash Flows.
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 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 2024 Form 10-K.
Recent Accounting Pronouncements
For a description of recently issued accounting pronouncements not yet adopted, see Note 2(h) to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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