AdTheorent(ADTH) - 2024 Q1 - Quarterly Report

Merger Agreement - The company entered into a Merger Agreement on April 1, 2024, with Cadent, LLC, where the company will merge and become a wholly-owned subsidiary of Cadent [119]. - Each share of the company's Common Stock will be converted into the right to receive $3.21 in cash upon the effective time of the Merger [120]. - The Merger Agreement includes a termination fee of approximately $11.4 million, which may be reduced to $6.5 million under certain conditions [126]. - The Merger is not subject to a financing condition, as Parent has secured equity and debt financing commitments to fund the transaction [127]. - General and administrative expenses surged by $1.835 million or 46.6% to $5.771 million, largely due to professional fees related to a Merger Agreement [147]. Financial Performance - Total revenue for the three months ended March 31, 2024, was $34.857 million, an increase of $2.183 million or 6.7% compared to the same period in 2023 [140]. - The net loss for the three months ended March 31, 2024, was $9.852 million, compared to a net loss of $5.223 million in the same period of 2023, reflecting an increase in loss of 88.5% [140]. - Revenue for the three months ended March 31, 2024, was $34.9 million, an increase from $32.7 million in the same period of 2023, representing a growth of 6.7% [157]. - Adjusted Gross Profit for the three months ended March 31, 2024, was $22.4 million, compared to $20.9 million in the same period of 2023, indicating an increase of 7.1% [157]. - Adjusted EBITDA for the three months ended March 31, 2024, was $0.2 million, down from $0.5 million in the same period of 2023, reflecting a decrease of 50% [160]. - The net loss for the three months ended March 31, 2024, was $9.9 million, compared to a net loss of $5.2 million in the same period of 2023, representing an increase in loss of 89.5% [160]. - Gross Profit as a percentage of Revenue for the three months ended March 31, 2024, was 40.9%, down from 43.7% in the same period of 2023 [163]. - Adjusted Gross Profit as a percentage of Revenue for the three months ended March 31, 2024, was 64.2%, slightly up from 64.0% in the same period of 2023 [163]. Operating Expenses - Operating expenses rose by $4.535 million or 12.6% to $40.456 million for the three months ended March 31, 2024, compared to $35.921 million in the same period of 2023 [141]. - Platform operations expenses increased by $2.214 million or 12.0% to $20.601 million, driven by higher traffic acquisition costs and hosting expenses [142]. - Sales and marketing expenses increased by $0.555 million or 5.4% to $10.862 million, primarily due to increased employee expenses and costs related to meetings and events [145]. Customer Metrics - Active customers decreased from 346 as of March 31, 2023, to 331 as of March 31, 2024, representing a decline of 4% year over year, while average revenue per active customer increased by 3.5% [135]. - The company anticipates that macroeconomic factors such as inflation and rising interest rates may impact future customer acquisition and retention efforts [130]. Cash Flow and Liquidity - As of March 31, 2024, the company had $69.2 million in cash and cash equivalents, with working capital of $107.1 million, indicating sufficient liquidity for operational needs [164]. - The company has a Revolving Credit Facility of up to $40.0 million, with a commitment termination date of December 22, 2026 [166]. - Net cash provided by operating activities decreased by $2.9 million to $1.232 million for the three months ended March 31, 2024, compared to $4.111 million for the same period in 2023 [172][173]. - Cash paid for campaign costs increased by $6.7 million, while cash collected for revenue increased by $2.9 million during the same period [173]. - Net cash used in investing activities increased by $0.3 million to $1.481 million for the three months ended March 31, 2024, primarily due to increased software development costs [174]. - Net cash used in financing activities was $0.8 million for the three months ended March 31, 2024, compared to $0.2 million for the same period in 2023 [175]. - The company expects to continue generating strong positive cash flows as operations scale [171]. Advertising Technology and Strategy - The company utilizes machine learning to score up to 1 million digital ad impressions per second, totaling 75 billion to 85 billion impressions per day [114]. - The company's predictive platform aims to optimize advertising spend, delivering on approximately 0.001% of evaluated advertising requests [115]. - The company has launched the Predictive Audience Builder ("ABi") to create customizable, machine learning-based predictive audiences for various verticals [118]. - The programmatic advertising market's growth is crucial for the company's operating results, with recent macro-economic factors impacting advertiser spending [128]. - The company adheres to privacy-forward advertising methods, avoiding reliance on individualized profiles or cookies [117]. - The company’s health-focused advertising solutions comply with HIPAA and utilize de-identified health data for targeted campaigns [118]. - The company aims to expand into international markets, leveraging its privacy-forward approach to ad targeting to differentiate itself in regulated markets like the European Union [132]. Tax and Accounting - The benefit for income taxes was $0.7 million for the three months ended March 31, 2024, compared to a provision of $2.4 million in the same period of 2023, reflecting a change of $3.1 million [152]. - The company evaluates the creditworthiness of customers regularly, with standard payment terms ranging from 30 to 60 days [171]. - The company has not identified any critical accounting estimates other than those related to the valuation of Private Placement Warrants and Seller's Earn-out liabilities [176]. - The expected term for the Private Placement Warrants and Seller's Earn-out is based on the time until expiration, with a dividend yield anticipated to remain at zero [176].