Teads Holding Co 10-Q for FY2022 Q3

Teads Holding Co. (TEAD)

10-Q 2022-11-10 For: 2022-09-30

Added on April 09, 2026

About this 10-Q

Teads Holding Co filed this 10-Q on November 10, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $229.02M; down 8.7% from $250.78M a year earlier
Net loss: $4.62M; compared with a net loss of $53.91M a year earlier
Diluted EPS: -$0.08; compared with -$1.13 a year earlier

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Delaware									20-5391629
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)


111 West 19th Street,	New York,	NY	10011
(Address of Principal Executive Offices) (Zip Code)


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☒


		Page
Part I - Financial Information
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Loss	6
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46
Part II - Other Information
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 5.	Other Information	48
Item 6.	Exhibits	49
Signatures		50


	September 30, 2022		December 31, 2021
	(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents	$	137,871	$	455,397
Short-term investments in marketable securities	136,263		—
Accounts receivable, net of allowances	165,526		192,814
Prepaid expenses and other current assets	42,551		27,873
Total current assets	482,211		676,084
Non-current assets:
Long-term investments in marketable securities	70,803		—
Property, equipment and capitalized software, net	35,059		28,008
Operating lease right-of-use assets, net	11,927		—
Intangible assets, net	25,976		5,719
Goodwill	63,063		32,881
Deferred tax assets	41,254		32,867
Other assets	22,906		20,331
TOTAL ASSETS	$	753,199	$	795,890

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	128,622	$	160,790
Accrued compensation and benefits	15,487		23,331
Accrued and other current liabilities	115,695		99,590
Deferred revenue	6,105		4,784
Total current liabilities	265,909		288,495
Non-current liabilities:
Long-term debt	236,000		236,000
Operating lease liabilities, non-current	9,012		—
Other liabilities	17,297		14,620
TOTAL LIABILITIES	$	528,218	$	539,115

Commitments and contingencies (Note 10)

STOCKHOLDERS’ EQUITY:
Common stock, par value of $0.001 per share — 1,000,000,000 shares authorized; 59,883,784 shares issued and 53,583,382 shares outstanding as of September 30, 2022 and 58,015,075 shares issued and 56,701,394 shares outstanding as of December 31, 2021	$	60	$	58
Preferred stock, par value of $0.001 per share — 100,000,000 shares authorized, none issued and outstanding as of September 30, 2022 and December 31, 2021	—		—
Additional paid-in capital	452,558		434,945
Treasury stock, at cost, 6,300,402 shares as of September 30, 2022 and 1,313,681 shares as of December 31, 2021	(42,394)		(16,504)
Accumulated other comprehensive loss	(11,161)		(4,474)
Accumulated deficit	(174,082)		(157,250)
TOTAL STOCKHOLDERS’ EQUITY	$	224,981	$	256,775
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	753,199	$	795,890


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(Unaudited)				(Unaudited)
Revenue	$	229,017	$	250,784	$	734,116	$	725,961
Cost of revenue:
Traffic acquisition costs	176,347		182,669		558,597		530,606
Other cost of revenue	10,756		7,846		30,955		22,555
Total cost of revenue	187,103		190,515		589,552		553,161
Gross profit	41,914		60,269		144,564		172,800
Operating expenses:
Research and development	9,911		10,659		30,858		27,561
Sales and marketing	26,852		26,047		82,369		67,101
General and administrative	12,224		29,979		41,215		52,619
Total operating expenses	48,987		66,685		154,442		147,281
(Loss) income from operations	(7,073)		(6,416)		(9,878)		25,519
Other income (expense), net:
Charges related to exchange of senior notes upon IPO	—		(42,049)		—		(42,049)
Interest expense	(1,924)		(1,656)		(5,748)		(2,015)
Interest income and other (expense) income, net	3,199		1,218		(1,710)		(1,978)
Total other income (expense), net	1,275		(42,487)		(7,458)		(46,042)
Loss before (benefit) provision for income taxes	(5,798)		(48,903)		(17,336)		(20,523)
(Benefit) provision for income taxes	(1,174)		5,003		(504)		7,436
Net loss	$	(4,624)	$	(53,906)	$	(16,832)	$	(27,959)

Weighted average shares outstanding:
Basic	55,232,611		47,859,056		56,679,302		27,645,471
Diluted	55,232,611		47,859,056		56,679,302		27,645,471

Net loss per common share:
Basic	($0.08)		($1.13)		($0.30)		($1.01)
Diluted	($0.08)		($1.13)		($0.30)		($1.01)


	Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount				Shares	Amount
Balance – January 1, 2022	58,015,075	$	58	$	434,945	(1,313,681)	$	(16,504)	$	(4,474)	$	(157,250)	$	256,775
Exercise of employee stock options, warrants and restricted stock awards, net of shares withheld for taxes	411,855	1		2,273		(95,138)	(1,425)		—		—		849
Vesting of restricted stock units, net of shares withheld for taxes	211,713	—		—		(22,499)	(293)		—		—		(293)
Acquisition consideration	355,786	—		4,190		—	—		—		—		4,190
Stock-based compensation	—	—		2,810		—	—		—		—		2,810
Other comprehensive loss	—	—		—		—	—		(741)		—		(741)
Net loss	—	—		—		—	—		—		(1,890)		(1,890)
Balance – March 31, 2022	58,994,429	59		444,218		(1,431,318)	(18,222)		(5,215)		(159,140)		261,700
Exercise of employee stock options, net of shares withheld for taxes	284,130	—		1,479		—	—		—		—		1,479
Vesting of restricted stock units, net of shares withheld for taxes	264,098	1		(1)		(38,864)	(353)		—		—		(353)
Shares repurchased under the share repurchase program	—	—		—		(1,388,317)	(7,501)		—		—		(7,501)
Stock-based compensation	—	—		3,586		—	—		—		—		3,586
Other comprehensive loss	—	—		—		—	—		(1,996)		—		(1,996)
Net loss	—	—		—		—	—		—		(10,318)		(10,318)
Balance – June 30, 2022	59,542,657	60		449,282		(2,858,499)	(26,076)		(7,211)		(169,458)		246,597
Exercise of employee stock options, net of shares withheld for taxes	88,966	—		191		—	—		—		—		191
Vesting of restricted stock units, net of shares withheld for taxes	252,161	—		—		(47,577)	(240)		—		—		(240)

Shares repurchased under the share repurchase program	—	—		—		(3,394,326)	(16,078)		—		—		(16,078)
Stock-based compensation	—	—		3,085		—	—		—		—		3,085
Other comprehensive loss	—	—		—		—	—		(3,950)		—		(3,950)
Net loss	—	—		—		—	—		—		(4,624)		(4,624)
Balance – September 30, 2022	59,883,784	$	60	$	452,558	(6,300,402)	$	(42,394)	$	(11,161)	$	(174,082)	$	224,981


	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ (Deficit) Equity
	Shares	Amount		Shares	Amount				Shares	Amount
Balance – January 1, 2021	27,652,449	$	162,444	17,439,488	$	17	$	95,055	(280,686)	$	(2,350)	$	(4,290)	$	(168,245)	$	(79,813)
Exercise of employee stock options, net of shares withheld for taxes	—	—		129,490	1		544		(26,344)	(249)		—		—		296
Vesting of restricted stock units	—	—		105,101	—		—		—	—		—		—		—
Stock-based compensation	—	—		—	—		1,539		—	—		—		—		1,539
Other comprehensive income	—	—		—	—		—		—	—		1,220		—		1,220
Net income	—	—		—	—		—		—	—		—		10,746		10,746
Balance – March 31, 2021	27,652,449	162,444		17,674,079	18		97,138		(307,030)	(2,599)		(3,070)		(157,499)		(66,012)
Exercise of employee stock options, net of shares withheld for taxes	—	—		292,745	—		1,238		—	—		—		—		1,238
Vesting of restricted stock units	—	—		104,470	—		—		—	—		—		—		—
Stock-based compensation	—	—		—	—		1,500		—	—		—		—		1,500
Other comprehensive income	—	—		—	—		—		—	—		(1,060)		—		(1,060)
Net income	—	—		—	—		—		—	—		—		15,201		15,201
Balance – June 30, 2021	27,652,449	162,444		18,071,294	18		99,876		(307,030)	(2,599)		(4,130)		(142,298)		(49,133)
Conversion of convertible preferred stock to common stock	(27,652,449)	(162,444)		28,091,267	28		162,416		—	—		—		—		162,444
Issuance of common stock from initial public offering, net of issuance costs	—	—		8,000,000	8		145,097		—	—		—		—		145,105
Exercise of employee stock options, net of shares withheld for taxes	—	—		1,458,797	1		3,209		(29,918)	(417)		—		—		2,793
Vesting of restricted stock units	—	—		182,805	—		—		—	—		—		—		—
Stock-based compensation	—	—		—	—		18,448		—	—		—		—		18,448
Other comprehensive income	—	—		—	—		—		—	—		(1,187)		—		(1,187)
Net loss	—	—		—	—		—		—	—		—		(53,906)		(53,906)
Balance – September 30, 2021	—	$	—	55,804,163	$	55	$	429,046	(336,948)	$	(3,016)	$	(5,317)	$	(196,204)	$	224,564


	January 5, 2022
	(In thousands)
Cash consideration paid on acquisition date	$	37,311
Fair value of deferred consideration payable in cash	10,936
Fair value of contingent consideration payable	547
Stock consideration	4,190
Total consideration	$	52,984


	September 30, 2022
	Level I		Level II		Level III		Total
	(In thousands)
Financial Assets:
Cash equivalents and investments(1)	$	71,287	$	234,865	$	—	$	306,152
Restricted time deposit (2)	$	—	$	169	$	—	$	169
Severance pay fund deposits (2)	$	—	$	5,346	$	—	$	5,346

Total financial assets	$	71,287	$	240,380	$	—	$	311,667
Financial Liabilities:
Foreign currency forward contract (3)	$	—	$	2,908	$	—	$	2,908
Total financial liabilities	$	—	$	2,908	$	—	$	2,908


	September 30, 2022				December 31, 2021
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
			(In thousands)
Convertible Notes	$	236,000	$	183,679	$	236,000	$	234,348


		September 30, 2022
(in thousands)	Fair Value Level	Amortized cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cash Equivalents		Short-term investments		Long-term investments
Money market funds	1	$	71,287	$	—	$	—	$	71,287	$	71,287	$	—	$	—
U.S. Treasuries	2	41,070		—		(325)		40,745		—		30,106		10,639
U.S. government bonds	2	92,878		—		(806)		92,072		10,978		42,688		38,406
Commercial paper	2	41,794		—		(127)		41,667		16,821		24,846		—
U.S. Corporate bonds	2	61,060		—		(679)		60,381		—		38,623		21,758
Total cash equivalents and investments		$	308,089	$	—	$	(1,937)	$	306,152	$	99,086	$	136,263	$	70,803


	September 30, 2022
	(in thousands)
Within 1 year	$	235,349
After 1 year through 2 years	70,803
Total fair value	$	306,152


	Nine Months Ended September 30,
	2022		2021
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(16,832)	$	(27,959)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Charges related to exchange of senior notes upon IPO	—		42,049
Depreciation and amortization of property and equipment	8,061		5,068
Amortization of capitalized software development costs	7,061		6,241
Amortization of intangible assets	4,694		2,687
Stock-based compensation	8,795		21,396
Non-cash operating lease expense	3,224		—
Provision for credit losses	2,209		2,190
Deferred income taxes	(8,363)		(918)
Other	1,339		2,002
Changes in operating assets and liabilities:
Accounts receivable	16,793		602
Prepaid expenses and other current assets	(8,954)		(10,386)
Other assets	1,890		(191)
Accounts payable and accrued and other current liabilities	(32,417)		17,516
Operating lease liabilities	(3,042)		—
Deferred revenue	1,904		31
Other	371		749
Net cash (used in) provided by operating activities	(13,267)		61,077

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, net of cash acquired	(45,151)		—
Purchases of property and equipment	(10,851)		(3,885)
Capitalized software development costs	(9,493)		(7,434)
Purchases of marketable securities	(209,004)		—

Other	(83)		(41)
Net cash used in investing activities	(274,582)		(11,360)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from IPO issuance of common stock, net of underwriting costs	—		148,800
Payment of initial public offering transaction costs	—		(3,695)
Proceeds from issuance of debt	—		200,000
Payment of deferred financing costs	—		(6,067)


	Nine Months Ended September 30, 2022		Year Ended December 31, 2021
	(In thousands)
Allowance for credit losses, beginning balance	$	4,402	$	4,174
Provision for credit losses, net of recoveries	1,913		2,601
Write-offs	(1,187)		(2,373)
Allowance for credit losses, ending balance	$	5,128	$	4,402


	September 30, 2022		December 31, 2021
	(In thousands)
Computer equipment	$	54,092	$	43,316
Capitalized software development costs	64,412		54,233
Software	2,407		2,817
Leasehold improvements	855		1,547
Furniture and fixtures	216		83
Property, equipment and capitalized software, gross	121,982		101,996
Less: accumulated depreciation and amortization	(86,923)		(73,988)
Total property, equipment and capitalized software, net	$	35,059	$	28,008


Year	Operating Leases		Finance Leases
	(in thousands)
Remainder of 2022	$	1,415	$	630
2023	3,675		1,741
2024	3,250		257
2025	2,900		—
2026	1,724		—
Thereafter	1,173		—
Total minimum payments required	$	14,137	$	2,628
Less: imputed interest	(1,479)		(31)
Total present value of lease liabilities	$	12,658	$	2,597


	Condensed Consolidated Balance Sheet Location	September 30, 2022
		(In thousands)
Lease assets
Operating leases	Operating lease right-of-use assets, net	$	11,927
Finance leases	Property, equipment and capitalized software, net	2,416
Total lease assets		$	14,343

Lease liabilities
Current liabilities:
Operating leases	Accrued and other current liabilities	$	3,646
Finance leases	Accrued and other current liabilities	2,004

Non-current liabilities:
Operating leases	Operating lease liabilities, non-current	9,012
Finance leases	Other liabilities	593
Total lease liabilities		$	15,255


	Condensed Consolidated Statements of Operations Location	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
		(In thousands)
Operating lease cost
Fixed lease costs	Cost of revenue and operating expenses	$	1,091	$	3,224
Variable lease costs	Operating Expenses	54		116
Short-term lease costs	Cost of revenue and operating expenses	137		411
Financing lease cost:
Depreciation	Cost of revenue	657		2,403
Interest	Interest expense	56		215
Total lease cost		$	1,995	$	6,369


						September 30, 2022
Weighted-average remaining lease term (in years)
Operating leases						3.99 years
Finance leases						1.25 years
Weighted-average discount rate
Operating leases						5.81%
Finance leases						7.35%


	Nine Months Ended September 30, 2022
	(In thousands)
Cash paid for amounts included in measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,042
Cash flows from finance leases	$	2,582
New operating lease assets obtained in exchange for new lease obligations	$	1,153


Year Ending December 31:	Operating Leases		Capital Leases
	(In thousands)
2022	$	4,214	$	3,329
2023	3,128		1,741
2024	2,768		257
2025	2,630		—
2026	1,399		—
Thereafter	929		—
Total minimum payments required	$	15,068	$	5,327


	As of September 30, 2022
	Weighted Average Amortization Period	Gross Value		Accumulated Amortization		Net Carrying Value
	(In thousands)
Developed technology	5.8 years	$	18,411	$	(9,340)	$	9,071
Customer relationships	4.1 years	5,518		(4,445)		1,073
Publisher relationships	6.3 years	18,053		(7,349)		10,704
Tradenames	8.7 years	5,144		(932)		4,212
Content Provider Relationships	5.0 years	284		(42)		242
Other	14.0 years	883		(209)		674
Total intangible assets, net		$	48,293	$	(22,317)	$	25,976


	As of December 31, 2021
	Weighted Average Amortization Period	Gross Value		Accumulated Amortization		Net Carrying Value
	(In thousands)
Developed technology	3.2 years	$	8,425	$	(8,425)	$	—
Customer relationships	4.0 years	5,345		(4,050)		1,295
Publisher relationships	4.0 years	8,403		(5,777)		2,626
Tradenames	8.0 years	1,665		(572)		1,093
Other	14.0 years	876		(171)		705
Total intangible assets, net		$	24,714	$	(18,995)	$	5,719


	Stock Options
	Number of Shares	Weighted- Average Exercise Price
Outstanding—December 31, 2021	3,482,900	$8.11
Granted	—	$—
Exercised	(596,716)	$4.15
Forfeited	(112,386)	$8.46
Outstanding—September 30, 2022	2,773,798	$8.95
Exercisable	2,220,626	$8.43


	RSUs
	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding—December 31, 2021	1,848,142	$11.61
Granted	2,066,513	$9.39
Vested	(727,972)	$10.78
Forfeited	(243,041)	$11.14
Outstanding—September 30, 2022	2,943,642	$10.32


Period	(a) Total number of shares (or units) purchased (1)	(b) Average price paid per share (or unit) (2)	(c) Total number of shares (or units) purchased as part of publicly announced plans or programs	(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (in thousands)
July 2022	983,391	$5.33	951,057	$17,498
August 2022	1,071,048	$5.25	1,066,854	$11,835
September 2022	1,387,464	$3.94	1,376,415	$6,421
TOTAL	3,441,903		3,394,326


Exhibit No.						Description
10.1						Executive Employment Agreement, dated August 3, 2022, by and between the Company and Jason Kiviat (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K/A filed with the SEC on August 5, 2022).
10.2*						First Amendment to Amended and Restated Employment Agreement, dated August 25, 2022, by and between the Company and Elise Garofalo.
31.1*						Certification of Principal Executive Officer Pursuant To Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Principal Executive Officer Pursuant To Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3*						Certification of Principal Financial Officer Pursuant To Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*v						Certification of the Principal Executive Officers and Principal Financial Officer Pursuant To 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						XBRL Instance Document
101.SCH*						XBRL Taxonomy Extension Schema Document
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


OUTBRAIN INC.

By:			/s/ David Kostman
			Name: David Kostman
			Title: Co-Chief Executive Officer

By:			/s/ Jason Kiviat
			Name: Jason Kiviat
			Title: Chief Financial Officer (Principal Financial Officer)


COMPANY		EMPLOYEE
Outbrain Inc.
By:	/s/ David Kostman	/s/ Elise Garofalo
Name:	David Kostman	Elise Garofalo
Title:	CO-CEO


By:			/s/ Yaron Galai
			Name: Yaron Galai
			Title: Co-Chief Executive Officer
			(Principal Executive Officer)


By:			/s/ Jason Kiviat
			Name: Jason Kiviat
			Title: Chief Financial Officer
			(Principal Financial Officer)