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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 001-40557
https://cdn.kscope.io/3a95ed6ea3663d37cd2b024787aa1dca-IAS logo.jpg
INTEGRAL AD SCIENCE HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 83-0731995
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
12 E 49th Street, 20th Floor
New York, NY 10017
(Address of principal executive offices, including zip code)
(646) 278-4871
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading
symbol		 Name of each exchange
on which registered
Common Stock, $0.001 par value per share IAS The NASDAQ Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
On October 31, 2023, the Registrant had 157,850,631 shares of common stock, $0.001 par value, outstanding.


Table of Contents

  Page No.
PART I. 
Item 1. 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
PART II. 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 

2

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
INTEGRAL AD SCIENCE HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)September 30,
2023		December 31, 2022
ASSETS  
Current assets:  
Cash and cash equivalents$92,248 $86,877 
Restricted cash127 45 
Accounts receivable, net86,682 67,884 
Unbilled receivables41,857 41,550 
Prepaid expenses and other current assets18,853 24,761 
Due from related party20 29 
Total current assets239,787 221,146 
Property and equipment, net3,506 2,412 
Internal use software, net36,079 23,642 
Intangible assets, net188,402 217,558 
Goodwill673,755 674,094 
Operating lease right-of-use assets22,368 22,787 
Deferred tax asset, net1,673 2,020 
Other long-term assets4,705 5,024 
Total assets$1,170,275 $1,168,683 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses$59,748 $60,799 
Due to related party38 122 
Deferred revenue237 99 
Operating lease liabilities, current9,031 6,749 
Total current liabilities69,054 67,769 
Net deferred tax liability24,371 45,495 
Long-term debt173,609 223,262 
Operating lease liabilities, non-current20,299 22,875 
Other long-term liabilities4,296 1,066 
Total liabilities291,629 360,467 
Commitments and Contingencies (Note 13)
Stockholders’ Equity
Preferred Stock, $0.001 par value, 50,000,000 shares authorized at September 30, 2023; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022.
— — 
Common Stock, $0.001 par value, 500,000,000 shares authorized, 157,597,931 and 153,990,128 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively.
158 154 
Additional paid-in-capital883,386 810,186 
Accumulated other comprehensive loss(3,688)(2,899)
Retained earnings (accumulated deficit)(1,210)775 
Total stockholders’ equity878,646 808,216 
Total liabilities and stockholders’ equity$1,170,275 $1,168,683 


See notes to the unaudited condensed consolidated financial statements.

3


INTEGRAL AD SCIENCE HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

 
Three Months Ended September 30,
Nine Months Ended September 30,
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)2023202220232022
Revenue$120,331 $101,343 $340,074 $290,913 
Operating expenses:
Cost of revenue (excluding depreciation and amortization shown below)25,599 19,171 71,100 53,864 
Sales and marketing29,604 28,190 87,566 77,961 
Technology and development17,211 19,459 53,850 54,071 
General and administrative22,611 20,150 85,673 56,081 
Depreciation and amortization14,027 12,617 40,373 37,585 
Foreign exchange loss, net2,078 4,064 931 3,503 
Total operating expenses111,130 103,651 339,493 283,065 
Operating income (loss)9,201 (2,308)581 7,848 
Interest expense, net(3,109)(2,619)(9,747)(5,859)
Employee retention tax credit— 6,981 — 6,981 
Net income (loss) before income taxes6,092 2,054 (9,166)8,970 
Benefit (provision) from income taxes(19,841)(1,287)6,240 (5,083)
Net income (loss)$(13,749)$767 $(2,926)$3,887 
Net income (loss) per share:
Basic$(0.09)$0.00 $(0.02)$0.03 
Diluted$(0.09)$0.00 $(0.02)$0.02 
Weighted average shares outstanding:
Basic157,055,904 155,389,195 157,691,005 155,007,655 
Diluted157,055,904 156,696,754 157,691,005 157,581,569 
Other comprehensive loss:
Foreign currency translation adjustments(1,717)(3,248)(789)(11,218)
Total comprehensive loss$(15,466)$(2,481)$(3,715)$(7,331)

See notes to the unaudited condensed consolidated financial statements.

4


INTEGRAL AD SCIENCE HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)


Three Months Ended September 30, 2023
 Common Stock    
(IN THOUSANDS, EXCEPT SHARES)SharesAmountAdditional
paid-in
capital		Accumulated
other
comprehensive
loss		Retained earnings (accumulated deficit)Total
stockholders’
equity
Balance, July 1, 2023156,279,075 $156 $867,490 $(1,971)$12,539 $878,214 
RSUs and MSUs vested1,102,702 1 — — — 1 
Option exercises53,748 1 590 — — 591 
ESPP purchase162,406 — 1,424 — — 1,424 
Stock-based compensation— — 13,882 — — 13,882 
Foreign currency translation adjustment— — — (1,717)— (1,717)
Net loss— — — — (13,749)(13,749)
Balance, September 30, 2023157,597,931 $158 $883,386 $(3,688)$(1,210)$878,646 


Nine Months Ended September 30, 2023
 Common Stock    
(IN THOUSANDS, EXCEPT SHARES)SharesAmountAdditional
paid-in
capital		Accumulated
other
comprehensive
loss		Retained earnings (accumulated deficit)Total
stockholders’
equity
Balance, January 1, 2023153,990,128 $154 $810,186 $(2,899)$775 $808,216 
RSUs and MSUs vested2,692,984 3 — — — 3 
Option exercises641,250 1 5,583 — — 5,584 
ESPP purchase273,569 — 2,306 — — 2,306 
Stock-based compensation— — 65,311 — — 65,311 
Foreign currency translation adjustment— — — (789)— (789)
Adoption of ASC 326, net of tax
— — — — 941 941 
Net loss— — — — (2,926)(2,926)
Balance, September 30, 2023
157,597,931 $158 $883,386 $(3,688)$(1,210)$878,646 





See notes to the unaudited condensed consolidated financial statements.

5




INTEGRAL AD SCIENCE HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)


Three Months Ended September 30, 2022
 Common Stock    
(IN THOUSANDS, EXCEPT SHARES)
SharesAmountAdditional
paid-in
capital		Accumulated
other
comprehensive loss		Accumulated
deficit		Total
stockholders’
equity
Balance, July 1, 2022155,498,704 $155 $804,175 $(8,285)$(11,479)$784,566 
RSUs vested471,995 — — — — — 
Option exercises603,670 1 2,526 — — 2,527 
Stock-based compensation— — 14,225 — — 14,225 
Foreign currency translation adjustment— — — (3,248)— (3,248)
Repurchase of common stock(3,080,061)(3)(23,652)— — (23,655)
Net income— — — — 767 767 
Balance, September 30, 2022153,494,308 $153 $797,274 $(11,533)$(10,711)$775,183 

Nine Months Ended September 30, 2022
 Common Stock    
(IN THOUSANDS, EXCEPT SHARES)
SharesAmountAdditional
paid-in
capital		Accumulated
other
comprehensive loss		Accumulated
deficit		Total
stockholders’
equity
Balance, January 1, 2022154,398,495 $154 $781,951 $(315)$(14,600)$767,190 
RSUs vested761,208 1 — — — 1 
Option exercises1,414,666 1 5,907 — — 5,908 
Stock-based compensation— — 33,068 — — 33,068 
Foreign currency translation adjustment— — — (11,218)— (11,218)
Repurchase of common stock(3,080,061)(3)(23,652)— — (23,655)
Net income— — — — 3,887 3,887 
Balance, September 30, 2022153,494,308 $153 $797,274 $(11,533)$(10,711)$775,183 






See notes to the unaudited condensed consolidated financial statements.

6


INTEGRAL AD SCIENCE HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Nine Months Ended September 30,
(IN THOUSANDS)20232022
Cash flows from operating activities:  
Net income (loss)$(2,926)$3,887 
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization40,373 37,585 
Stock-based compensation65,641 33,107 
Foreign currency loss, net571 3,503 
Deferred tax benefit(17,974)(657)
Amortization of debt issuance costs348 348 
Allowance for credit losses2,223 647 
Employee retention tax credit— (6,981)
Impairment of assets — 55 
Changes in operating assets and liabilities:
Increase in accounts receivable(19,936)(8,031)
Increase in unbilled receivables(370)(289)
Decrease (increase) in prepaid expenses and other current assets5,851 (6,757)
Decrease (increase) in operating leases, net139 (502)
Increase in other long-term assets(27)(330)
Increase (decrease) in accounts payable and accrued expenses148 (8,226)
Increase in deferred revenue150 127 
Increase (decrease) in due to/from related party(93)74 
Net cash provided by operating activities74,118 47,560 
Cash flows from investing activities:
Payment for acquisitions, net of acquired cash— (1,603)
Purchase of property and equipment(1,954)(917)
Acquisition and development of internal use software and other(23,539)(9,952)
Net cash used in investing activities(25,493)(12,472)
Cash flows from financing activities:
Proceeds from the Revolver75,000 15,000 
Repayment of long-term debt(125,000)(25,000)
Repayment of short-term debt— (1,836)
Proceeds from exercise of stock options5,584 5,908 
Payments for repurchase of common stock— (23,655)
Cash received from Employee Stock Purchase Program2,236 388 
Net cash used in financing activities(42,180)(29,195)
Net increase in cash, cash equivalents and restricted cash6,445 5,893 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,330)(5,396)
Cash, cash equivalents and restricted cash at beginning of period89,671 76,078 
Cash, cash equivalents and restricted cash at end of period$94,786 $76,575 
Supplemental Disclosures:
Cash paid during the period for:
Interest$8,880 $5,548 
Taxes$10,361 $11,817 
Non-cash investing and financing activities:
Property and equipment acquired included in accounts payable$17 $145 
Internal use software acquired included in accounts payable$1,012 $1,385 
Lease liabilities arising from right of use assets$29,330 $26,214 

See notes to the unaudited condensed consolidated financial statements.

7


INTEGRAL AD SCIENCE HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED) 


1.    Description of business

Integral Ad Science Holding Corp. and its wholly-owned subsidiaries (together, the “Company” or "IAS"), formerly known as Kavacha Topco, LLC, is a leading global media measurement and optimization platform. The Company’s mission is to be the global benchmark for trust and transparency in digital media quality for the world’s leading brands, publishers, and platforms. The Company’s global media measurement and optimization platform provides actionable data and delivers independent measurement and verification of digital advertising across all devices, channels, and formats, including desktop, mobile, connected TV (“CTV”), social, display, audio, gaming, and video. The Company’s Quality Impressions® is a proprietary metric that helps ensure media quality standards. To be counted as a Quality Impression, a digital ad must be viewable, by a real person rather than a bot, in a brand-safe and suitable environment within the correct geography. The viewability and invalid traffic filtration aspects of Quality Impression are accredited by the Media Rating Council across desktop and mobile platforms. The Company is an independent, trusted partner for buyers and sellers of digital advertising to increase accountability, transparency, and effectiveness in the market. The Company helps advertisers optimize their ad spend and better measure consumer engagement with campaigns across platforms, while enabling publishers to improve their inventory yield and revenue.

The Company operates within the United States ("U.S.") in New York, California, and Illinois. Operations outside the U.S. include but are not limited to the United Kingdom ("U.K."), Ireland, France, Germany, Italy, Spain, Singapore, Australia, Japan, India, and the Nordics.

2.    Basis of presentation and summary of significant accounting policies

This summary of significant accounting policies is presented to assist in understanding the Company’s condensed consolidated financial statements. These accounting policies have been consistently applied in the preparation of the condensed consolidated financial statements.

(a) Basis of presentation

The Company’s condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the financial position, results of operations and cash flows for all periods presented. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

The accompanying interim Condensed Consolidated Balance Sheets as of September 30, 2023, the Condensed Consolidated Statements of Operations and Comprehensive Loss, of Cash Flows and of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022, and the related footnote disclosures are unaudited. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in management’s opinion, include all adjustments necessary to state fairly the consolidated financial position of the Company. All adjustments made were of a normal recurring nature. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or for any future period.

The Company’s significant accounting policies are discussed in Note 2 to the consolidated financial statements for the years ended December 31, 2022, 2021 and 2020. There have been no significant changes to these policies, except for the adoption of Accounting Standards Update ("ASU") No. 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," as disclosed in Note 2(g) and Note 2(i), that have had a material impact on the Company’s condensed consolidated financial statements and related notes for the nine months ended September 30, 2023. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 2, 2023.

8

During the year ended December 31, 2022, the Company reclassified foreign exchange loss, net from "General and administrative" expenses within the Condensed Consolidated Statements of Operations and Comprehensive Loss as a separate line item "Foreign exchange loss, net" presented on the Condensed Consolidated Statements of Operations and Comprehensive Loss. Corresponding prior period amounts have also been reclassified to conform to current period presentation.

The Company is an Emerging Growth Company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, Emerging Growth Companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an Emerging Growth Company or (ii) it affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. On June 30, 2023, the last day of our second fiscal quarter in 2023, the market value of our common stock held by non-affiliates exceeded $700,000. Accordingly, we will be deemed a large accelerated filer as of December 31, 2023. As such, we will no longer (i) qualify as an Emerging Growth Company, (ii) be able to take advantage of the extended timeline to comply with new or revised accounting standards applicable to public companies beginning with our Annual Report on Form 10-K for the year ending December 31, 2023 and (iii) be exempt from providing an auditor's attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.

(b) Basis of consolidation

The condensed consolidated financial statements include the accounts of Integral Ad Science Holding Corp. and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

(c) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include fair value of assets acquired in business combinations, including assumptions with respect to future cash inflows and outflows, discount rates, assets useful lives, market multiples, the allocation of purchase price consideration in the business combination valuation of acquired assets and liabilities, the estimated useful lives of intangible assets and internal use software, the allowance for doubtful accounts, goodwill impairment testing, assumptions used to calculate equity-based compensation, and the realization of deferred tax assets. The Company bases its estimates on past experience, market conditions, and other assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis. Actual results may differ from these estimates due to risks and uncertainties, including the continued uncertainty surrounding rapidly changing market and economic conditions due to high inflation, changes to fiscal and monetary policy, high interest rates, currency fluctuations, instability in the financial markets and disruptions in European economies as a result of the war in Ukraine and other geopolitical issues.

(d) Employee retention tax credit

The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") provided an employee retention credit which was a refundable tax credit against certain employment taxes. The Consolidated Appropriations Act (the "Appropriations Act") extended and expanded the availability of the employee retention credit through December 31, 2021. The Appropriations Act amended the employee retention credit to be equal to 70% of qualified wages paid to employees during the 2021 fiscal year. The Company qualified for the employee retention credit beginning in March 2020 for qualified wages through June 2021 and filed a cash refund claim during the year ended December 31, 2022. The employee retention credit totaling $6,981 was included within Prepaid expenses and other current assets on the Company's Condensed Consolidated Balance Sheets as of December 31, 2022. As of September 30, 2023, substantially all of the tax credit receivable has been received.

(e) Foreign currency

The reporting currency of the Company is the U.S. dollar. The functional currency of our foreign subsidiaries is the currency of the primary economic environment in which they operate, which is their local currency. The financial statements of these subsidiaries are translated into U.S. dollars using month-end rates of exchange for assets and liabilities, and average rates of exchange for revenue, costs and expenses. Translation gains and losses are recorded in accumulated other comprehensive loss in stockholders’ equity. Transaction gains and losses including those on intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in foreign exchange loss, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
9


For the three months ended September 30, 2023, and 2022, foreign exchange loss, net consists of unrealized foreign exchange losses of $1,810 and $4,311, respectively, and realized transaction losses of $268 and gains of $247, respectively. For the nine months ended September 30, 2023, and 2022, foreign exchange loss, net consists of unrealized foreign exchange losses of $571 and $3,985, respectively, and realized transaction losses of $360 and gains of $482, respectively.

(f) Cash, cash equivalents, and restricted cash

Cash equivalents includes amounts invested in money market accounts. The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows.
 September 30, 2023December 31, 2022
Cash and cash equivalents$92,248 $86,877 
Short term restricted cash$127 $45 
Long term restricted cash (held in other long-term assets)$2,411 $2,749 
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows$94,786 $89,671 

(g) Accounts receivable, net

Accounts receivable are carried at the original invoiced amount less an allowance for credit losses. The allowance is estimated by pooling accounts receivables based on similar risk characteristics, and expected credit loss exposure is evaluated for each accounts receivable pool. Invoices are typically issued with net 30-days to net 90-days terms. Account balances are considered delinquent if payment is not received by the due date, and the receivables are written off when deemed uncollectible. These costs are recorded in general and administrative expenses within the Condensed Consolidated Statements of Operations and Comprehensive Loss.

The activity in our allowance for credit losses consists of the following as of:

 September 30, 2023September 30, 2022
Balance, beginning of period$6,691 $5,883 
Additional provision$2,223 $647 
Receivables written off and impact of exchange rates$(406)$(1,129)
Adoption of ASC 326$(1,271)$— 
Balance, end of period$7,237 $5,401 
(h) Stock-based compensation

Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period. The Company accounts for forfeitures as they occur. The Company used the following assumptions in valuing its market stock units ("MSUs"), shares granted under the Company's 2021 Employee Stock Purchase Program ("ESPP"), time-based service options, which vest over a period of time subject to continued employment ("Time-Based Options"), and return target options ("Return-Target Options"), which vest upon a realized cash return of the equity investment of funds affiliated with Vista Equity Partners ("Vista"), the Company’s largest shareholder.

Expected term — For time-based awards, the estimated expected term of options granted is generally calculated as the vesting period plus the midpoint of the remaining contractual term, as the Company does not have sufficient historical information to develop reasonable expectations surrounding future exercise patterns and post-vesting employment termination behavior. For awards subject to market and performance conditions, the expected term represents the period of time that the options granted are expected to be outstanding.

Expected volatility — Volatility is estimated based upon observed option-implied volatilities for the Company in addition to a group of peer companies. The Company believes this is the best estimate of the expected volatility over the weighted-average expected term of its option grants.
10


Risk-free interest rate — The risk-free interest rate is based on the implied yield currently available on U.S. Treasury instruments with terms approximately equal to the expected term of the option.

Expected dividend — The expected dividend assumption was based on the Company’s history and expectation of dividend payouts. The Company currently has no history or expectation of paying cash dividends on its common stock.

Fair value — Following the pricing of the Initial Public Offering, the Company’s shares have traded publicly, and accordingly the Company uses the applicable closing price of its common stock to determine fair value.

The Company used the following assumptions in valuing its stock-based compensation:

 September 30, 2023
September 30, 2022
Estimated fair value$3.35-$38.36$3.26-$14.43
Expected volatility (%)50%-65%65%-80%
Expected term (in years)0.26-4.000.50-10.00
Risk-free interest rate (%)3.63%-5.55%0.46%-3.35%
Dividend yield——

(i) Recently adopted accounting pronouncements

In February 2016, the FASB issued ASU 2016-2, “Leases (Topic 842)” (“ASU No. 2016-2”). Under ASU No. 2016-2, lessees are required to put most leases on their balance sheets but to recognize expenses in the income statement in a manner similar to current accounting. ASU No. 2016-2 also eliminated the current real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs, and lease executory costs for all entities. The updated guidance is effective for the Company beginning January 1, 2022. Upon adoption, entities are required to use the modified retrospective approach for leases that exist, or are entered into, after the beginning of the earliest comparative period in the financial statements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows entities to not apply the new leases standard, including its disclosure requirements, in the comparative periods they present in their financial statements in the year of adoption.

The Company adopted ASU No. 2016-2 on January 1, 2022 using the modified retrospective transition approach, which resulted in the recognition of right-of-use assets ("ROU assets") of $21,666 and lease liabilities of $29,361. Differences between ROU assets and lease liabilities are attributed to deferred rent, lease incentive obligations and cease-use liability previously recognized under Accounting Standards Codification ("ASC") 420 Exit or Disposal Cost Obligations. The Company elected the package of practical expedients not to reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. In addition, the Company elected the expedient permitting the combination of lease and non-lease components into a single lease component. The Company made a policy election to not recognize ROU assets and lease liabilities for short-term leases for all asset classes.

The adoption of ASU No. 2016-2 did not have a material impact on the Consolidated Statements of Operations and Comprehensive Loss or the Consolidated Statements of Cash Flows.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” ("ASU No. 2016-13") which is intended to provide more decision-useful information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU No. 2016-13 revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to accounts receivable.

The Company adopted ASU No. 2016-13 on January 1, 2023, utilizing the modified retrospective approach requiring a cumulative-effect adjustment to the opening accumulated deficit in the first quarter of 2023, and the adoption resulted in $941 adjustment to retained earnings on January 1, 2023, net of tax. Refer to Note 2(g), Accounts receivables, net, for details on the Company’s accounting policy in accordance with ASU 2016-13.

11

In March 2020, the FASB issued ASU 2020-4, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” (“ASU No. 2020-4”) which was intended to address accounting consequences that could result from the global markets’ anticipated transition away from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The amendments in ASU No. 2020-4 provide operational expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU No. 2020-4 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. On December 21, 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,” which defers the sunset date of ASC 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in ASC 848.

On June 23, 2023, the Company entered into the First Amendment to Credit Agreement, which changed the market interest rate indices that the Company can elect to accrue interest on outstanding borrowings from LIBOR to the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (“SOFR”). First Amendment to Credit Agreement became effective at the end of the applicable interest period for any LIBOR borrowings outstanding on the amendment effective date, which was June 30, 2023. As a result, as of June 30, 2023, the Company no longer had any contracts that referenced LIBOR. The Company adjusted the effective interest rate on outstanding borrowings on a prospective basis, which did not have a material impact on the condensed consolidated financial statements.

(j) Accounting pronouncements not yet adopted

In October 2021, the FASB issued ASU 2021-08, "Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," ("ASU No. 2021-08") which is intended to improve the accounting for acquired revenue contracts with customers in a business combination and create consistency in practice related to (i) the recognition of an acquired contract liability, and (ii) payment terms and their effect on subsequent revenue recognized by the acquirer. ASU No. 2021-08 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2023. The Company will evaluate the impact of this guidance on future acquisitions as transactions occur.

3.    Property and equipment, net

Property and equipment consisted of the following:
 Estimated
useful life
(in years)		September 30, 2023December 31, 2022
Computer and office equipment1-3 years$3,920 $3,761 
Computer software3-5 years$218 $218 
Leasehold improvementsVarious$2,136 $1,060 
Furniture5 years$559 $308 
Total property and equipment$6,833 $5,347 
Less: accumulated depreciation$(3,327)$(2,935)
Total property and equipment, net$3,506 $2,412 

Depreciation expense of property and equipment for the three months ended September 30, 2023 and 2022 was $287 and $234, respectively. Depreciation expense of property and equipment for the nine months ended September 30, 2023 and 2022 was $772 and $669, respectively.

12

4.    Internal use software, net

Internal use software consisted of the following:
 Estimated
useful life
(in years)		September 30, 2023December 31, 2022
Internal use software3-5 years$70,556 $47,658 
Less: Assets written off— (199)
Less: Accumulated amortization(34,477)(23,817)
Total internal use software, net$36,079 $23,642 

Amortization expense related to internal use software for the three months ended September 30, 2023 and 2022 was $4,032 and $2,453, respectively. Amortization expense for the nine months ended September 30, 2023 and 2022 was $10,477 and $7,000, respectively.

5.    Intangible assets, net

The gross book value, accumulated amortization, net book value and amortization periods of the intangible assets were as follows:
 September 30, 2023
 Estimated
useful life (in years)		Gross book
value		Accumulated
amortization		Net book valueWeighted
average
remaining
useful life
Customer relationships5-15 years$301,944 $(134,716)$167,228 8.8 years
Developed technology5 years137,042 (123,636)13,406 2.8 years
Trademarks5-9 years19,700 (11,958)7,742 3.6 years
Favorable leases6 years198 (172)26 0.8 years
Total$458,884 $(270,482)$188,402 
 December 31, 2022
 Estimated
useful life		Gross book
value		Accumulated
amortization		Net book valueWeighted
average
remaining
useful life
Customer relationships5-15 years$301,955 $(112,589)$189,366 9.5 years
Developed technology4-5 years137,112 (118,650)18,462 3.5 years
Trademarks5-9 years19,700 (10,021)9,679 4.4 years
Favorable leases6 years198 (147)51 1.5 years
Total$458,965 $(241,407)$217,558 

Amortization expense related to intangibles for the three months ended September 30, 2023 and 2022 was $9,708 and $9,930, respectively. Amortization expense related to intangibles for the nine months ended September 30, 2023 and 2022 was $29,124 and $29,916, respectively.

6.    Goodwill

The following table provides a roll forward of the changes in the goodwill balance:
Goodwill as of December 31, 2022
$674,094 
Impact of exchange rates(339)
Goodwill as of September 30, 2023
$673,755 
  


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7.    Accounts payable and accrued expenses and other long-term liabilities

Accounts payable and accrued expenses consisted of the following:
 September 30, 2023December 31, 2022
Accounts payable$8,201 $10,487 
Accrued payroll8,249 12,623 
Accrued professional fees3,941 3,150 
Accrued bonuses and commissions15,294 16,527 
Accrued revenue sharing5,467 3,522 
Taxes payable3,803 3,130 
Accrued hosting fees4,597 5,949 
Other accrued expenses10,196 5,411 
Total accounts payable and accrued expenses$59,748 $60,799 

Other long-term liabilities consisted of the following:
 September 30, 2023December 31, 2022
Security deposit received$672 $672 
Fin 48 liability3,624 394 
Total Other long-term liabilities$4,296 $1,066 

8.    Long-term debt

On September 29, 2021, the Company entered into a credit agreement with various lenders, which was amended on June 23, 2023 (as amended, the "Credit Agreement”). The Credit Agreement provides for an initial $300,000 in commitments for revolving credit loans (the “Revolver”), which amount may be increased or decreased under specific circumstances, with a $30,000 letter of credit sublimit and a $100,000 alternative currency sublimit. In addition, the Credit Agreement provides for the ability to request incremental term loan facilities, in a minimum amount of $5,000 for each facility. Borrowings pursuant to the Credit Agreement may be used for working capital and other general corporate purposes, including for acquisitions permitted under the Credit Agreement. During the nine months ended September 30, 2023, the Company drew down $75,000 and paid down $125,000 on the Revolver.

Borrowings under the Credit Agreement are scheduled to mature on September 29, 2026. The Credit Agreement contains certain customary events of default including failure to make payments when due thereunder, and failure to observe or perform certain covenants.

The initial proceeds of the Revolver in September 2021, together with cash on hand, were used to repay the outstanding balance of the term loan and revolving loan under the prior credit agreement. In connection with the entry into the Revolver, the Company incurred costs of $2,318 that are included in Long-term debt, net, in the Condensed Consolidated Balance Sheets.

The interest rates for the Revolver under the Credit Agreement (i) for U.S. dollar loans are equal to the applicable rate for base rate loans ranging from 0.75% to 1.50% per annum, (ii) for Term SOFR Loans (as defined in the Credit Agreement) ranging from 1.75% to 2.50% per annum, (iii) for RFR Loans (as defined in the Credit Agreement) denominated in sterling ranging from 1.7826% to 2.5326%, and (iv) for RFR Loans denominated in euro range from 1.7956% to 2.5456%, in each case, based on the Senior Secured Net Leverage Ratio (as defined in the 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 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. The interest rate on September 30, 2023 was 7.3%.

Any borrowings under the Credit Agreement may be repaid, in whole or in part, at any time and from time to time without premium or penalty other than customary breakage costs, and any amounts repaid may be reborrowed. No mandatory prepayments will be required other than when borrowings and letter of credit usage exceed the aggregate commitment of all lenders.
14


The Credit Agreement contains covenants requiring certain financial information to be submitted quarterly and annually. In addition, the Company is 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, 2023, the Company was in compliance with all covenants contained in the Credit Agreement.

September 30, 2023December 31, 2022
Revolver$175,000 $225,000 
Less: Unamortized debt issuance costs(1,391)(1,738)
Total carrying amount$173,609 $223,262 

Amortization of debt issuance costs for the three months ended September 30, 2023 and 2022 were $116, respectively. Amortization of debt issuance costs for the nine months ended September 30, 2023 and 2022 were $348, respectively. Amortization of debt issuance costs is recorded to interest expense, net on the Company's Condensed Consolidated Statements of Operations and Comprehensive Loss.

The Company recognized interest expense of $3,639 and $2,592 during the three months ended September 30, 2023 and 2022, respectively. The Company recognized interest expense of $11,326 and $5,615 during the nine months ended September 30, 2023 and 2022, respectively. Future principal payments of long-term debt as of September 30, 2023 are as follows:

Year Ending 
2023 (remaining three months)$— 
2024— 
2025— 
2026175,000 
 $175,000 

9.    Income taxes

At the end of each interim period, the Company estimates the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which they occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or unrecognized tax benefits is recognized in the interim period in which the change occurs.

The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realization of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or the Company’s tax environment changes. To the extent that the expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision in the quarter in which the change occurs.

For the three months ended September 30, 2023 and 2022, the Company recorded an income tax provision of $19,841 and $1,287, respectively. The Company’s effective tax rate for the three months ended September 30, 2023 and 2022 was 325.7% and 62.7%, respectively. The Company's effective tax rate for the three months ended September 30, 2023 is higher than for the respective three months ended September 30, 2022, primarily due to non-deductible stock-based compensation and other permanent tax differences and discrete items.

15

For the nine months ended September 30, 2023 and 2022, the Company recorded an income tax benefit of $6,240 and income tax provision of $5,083, respectively. The Company’s effective tax rate for the nine months ended September 30, 2023 and 2022 was 68.1% and 56.7%, respectively. The Company's effective tax rate for the nine months ended September 30, 2023 is higher than for the respective nine months ended September 30, 2022, primarily due to non-deductible executive compensation and other permanent tax differences and discrete items.

The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. The Company is not currently under audit in any taxing jurisdiction.

10.    Segment data

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer is the CODM.

The Company manages its operations as a single segment for the purpose of assessing and making operating decisions. The CODM allocates resources and assesses performance based upon financial information at the consolidated level. Since the Company operates in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

The following table summarizes revenue by geographic area:
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Revenue
North and South America (“Americas”)$83,419 $69,786 $236,610 $199,078 
Europe, Middle East and Africa (“EMEA”)27,649 23,110 78,201 68,368 
Asia and Pacific Rim (“APAC”)9,263 8,447 25,263 23,467 
Total$120,331 $101,343 $340,074 $290,913 

For the three months ended September 30, 2023 and 2022, revenue in the U.S. was $78,777 and $65,725, respectively. For the nine months ended September 30, 2023 and 2022, revenue in the U.S. was $224,743 and $188,193, respectively.


The following table summarizes long lived assets, net by geographic area:
 September 30, 2023December 31, 2022
Long lived assets  
Americas$15,301 $16,016 
EMEA8,597 6,419 
APAC1,976 2,764 
Total$25,874 $25,199 

11.    Stock-based compensation

Total stock-based compensation expense for all equity arrangements for the three and nine months ended September 30, 2023 and 2022 were as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Cost of revenue$118 $101 $328 $258 
Sales and marketing5,714 4,457 17,859 10,650 
Technology and development2,902 3,168 13,434 6,979 
General and administrative5,166 6,521 34,020 15,220 
Total$13,900 $14,247 $65,641 $33,107 
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The Company maintains multiple stock-based incentive compensation plans. Expense relating to outstanding awards under such plans is summarized as follows:

Three Months Ended September 30,Nine Months Ended September 30,Unamortized Expense as ofWeighted
Average Vesting Term
 2023202220232022September 30, 2023
Time Based Options
2018 Plan$1,727 $3,234 $3,544 $10,970 
2021 Plan536 672 1,740 2,417 
Total Time Based Options Expense$2,263 $3,906 $5,284 $13,387 $4,977 1.5 years
Return Target Options
2018 Plan$(2,111)$— $18,215 $— 
2021 Plan— — 3,124 — 
Total Return Target Options Expense$(2,111)$— $21,339 $— $— 0.0 years
LTIP Expense (2018 Plan)$16 $— $333 $— 
Other equity awards under 2021 Plan
Restricted Stock Units ("RSUs")$8,760 $7,552 $25,483 $16,524 $104,381 3.1 years
Market Stock Units ("MSUs")4,632 2,657 12,194 3,065 23,845 3.5 years
Other equity awards under 2021 Plan expense
$13,392 $10,209 $37,677 $19,589 $128,226 
Employee Stock Purchase Plan "ESPP"$340 $131 $1,008 $131 
Total Stock-Based Compensation Expense
$13,900 $14,247 $65,641 $33,107 $133,203 

Integral Ad Science Holding Corp. Amended and Restated 2018 Non-Qualified Stock Option Plan

On August 1, 2018, the Company adopted the 2018 Non-Qualified Stock Option Plan (“2018 Plan”). Under the 2018 Plan, the Company issued (i) Time-Based Options that vest over four years with 25% vesting after twelve months and an additional 6.25% vesting at the end of each successive quarter thereafter; and (ii) Return-Target Options that were to vest upon the first to occur of sale of the Company, or, sale or transfer to any third party of shares, as a result of which, any person or group other than Vista, obtains possession of voting power to elect a majority of the Board or any other governing body and the achievement of a total equity return multiple of 3.0 or greater.

The 2018 Plan contained a provision wherein, the Time-Based Options could be repurchased by the Company at cost upon resignation of the employee. Due to this repurchase feature, the Time-Based Options did not provide the employee with the potential benefits associated with a stock award holder, and therefore, these awards were not accounted for as a stock-based award under ASC 718, Compensation - Stock Compensation but instead, compensation cost was recognized when the benefit to the employee was determined to be probable.

The Return-Target Options were considered to contain both market (total stockholder return threshold) and performance (exit event) conditions. As such, the award was measured on the date of grant. Since the conditions for vesting related to the Return-Target Options were not met prior to the IPO, no stock-based compensation was recognized in the pre-IPO financial statements of the Company. During the three months ended June 30, 2023, with the filing of a “shelf” registration statement on Form S-3, the market condition and the implied performance condition relating to the Return-Target Options were deemed to be probable.


17

In connection with the IPO, the 2018 Plan was amended and restated (the “Amended and Restated 2018 Plan”) with the following modifications: (i) the provision to repurchase the Time-Based Options at cost upon resignation of the employee was removed and (ii) the Return-Target Options were modified to include vesting upon a sale of shares by Vista following the IPO resulting in Vista realizing a cash return on its investment in the Company equaling or exceeding $1.17 billion.

As a result of the modification to the Time-Based Options, the awards became subject to the guidance in ASC 718, Compensation - Stock Compensation. As the return multiple and vesting conditions associated with the Return-Target Options were also modified, the Company fair valued the Return-Target Options using a Monte Carlo simulation model. The Return-Target Options become exercisable following both (i) a registration of shares of common stock held by Vista and (ii) Vista realizing a cash return on its investment in the Company equaling or exceeding $1.17 billion.

Vesting of the Time-Based Options accelerates when the Return-Target Options vest and therefore, recognition of the remaining unamortized stock compensation expense related to the Time-Based Options will accelerate when the Return-Target Options vest.

The total number of Time-Based Options and Return Target Options outstanding under the Amended and Restated 2018 Plan as of September 30, 2023 were 2,656,023 and 1,342,092, respectively. The Company does not expect to issue any additional awards under the Amended and Restated 2018 Plan.

2021 Omnibus Incentive Plan (“2021 Plan”)

On June 29, 2021, the Company adopted the 2021 Plan to incentivize executive officers, management, employees, consultants and directors of the Company and to align the interests of the participants with those of the Company’s shareholders. As of September 30, 2023, there were 35,121,308 shares reserved for issuance under the 2021 Plan. The total number of shares reserved for issuance under the 2021 Plan is increased on January 1 of each of the first 10 calendar years during the term of the 2021 Plan, by the lesser of (i) 5% of the total number of shares of common stock outstanding on each December 31st immediately prior to the date of increase or (ii) such number of shares of common stock determined by our Board or compensation committee.

As of September 30, 2023, there were 1,147,846 total options outstanding under the 2021 Plan, consisting of 764,908 Time-Based Options and 382,938 Return-Target Options. The vesting conditions for the options issued under the 2021 Plan are identical to those described under the Amended and Restated 2018 Plan.

Stock option activity for the three months ended September 30, 2023 is as follows:

Time-Based Options
 Stock optionsWeighted
average
exercise price		Weighted average
remaining
contractual life
(years)		Aggregate
intrinsic
value
Outstanding as of July 1, 20233,499,594 $7.68 6.32$36,049 
Conversion of Return-Target Options to Time-Based Options9,112 8.58 — — 
Canceled or forfeited(34,027)12.40 — — 
Exercised(53,748)10.98 — — 
Outstanding at September 30, 2023
3,420,931 $7.59 5.72$19,393 
Vested and expected to vest at September 30, 2023
3,420,931 $7.59 5.72$19,393 
Exercisable as of September 30, 2023
2,968,006 $6.47 5.45$18,726 


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Return-Target Options
 Stock optionsWeighted
average
exercise price		Weighted average
remaining
contractual life
(years)		Aggregate
intrinsic
value
Outstanding as of July 1, 20231,909,715 $7.66 6.39$19,724 
Conversion of Return-Target Options to Time-Based Options(9,112)8.58 — — 
Canceled or forfeited(175,573)9.43 — — 
Exercised— — — — 
Outstanding at September 30, 2023
1,725,030 $7.47 6.03$9,963 
Vested and expected to vest at September 30, 2023
1,725,030 $7.47 6.03$9,963 
Exercisable as of September 30, 2023
— — — — 

Stock option activity for the nine months ended September 30, 2023 is as follows:

Time-Based Options
 Stock optionsWeighted
average
exercise price		Weighted average
remaining
contractual life
(years)		Aggregate
intrinsic
value
Outstanding at January 1, 20234,251,290 $8.07 6.97$12,163 
Conversion of Return-Target Options to Time-Based Options9,112 8.58 — — 
Canceled or forfeited(198,221)14.43 — — 
Exercised(641,250)8.71 — — 
Outstanding at September 30, 2023
3,420,931 $7.59 5.72$19,393 
Vested and expected to vest at September 30, 2023
3,420,931 $7.59 5.72$19,393 
Exercisable as of September 30, 2023
2,968,006 $6.47 5.45$18,726 

Return-Target Options
 Stock optionsWeighted
average
exercise price		Weighted average
remaining
contractual life
(years)		Aggregate
intrinsic
value
Outstanding at January 1, 20232,153,264 $8.03 6.97$6,190 
Conversion of Return-Target Options to Time-Based Options(9,112)8.58 — — 
Canceled or forfeited(419,122)10.34 — — 
Exercised— — — — 
Outstanding at September 30, 2023
1,725,030 $7.47 6.03$9,963 
Vested and expected to vest at September 30, 2023
1,725,030 $7.47 6.03$9,963 
Exercisable as of September 30, 2023
— — — — 

19

Restricted Stock Units ("RSUs")

RSUs under the 2021 Plan granted prior to May 2022 vest 25% each year and become fully vested after four years of service. RSUs under the 2021 Plan granted during or after May 2022 vest 6.25% at the end of each successive quarter and become fully vested after four years of service.

RSU activity for the three months ended September 30, 2023 is as follows:

RSUs
Number of SharesWeighted Average
Grant Date Fair Value
Outstanding as of July 1, 20239,792,184 $12.42 
Granted614,174 14.54 
Canceled or forfeited(329,852)13.06 
Vested(996,715)13.35 
Outstanding as of September 30, 2023
9,079,791 $12.44 
Expected to vest as of September 30, 2023
9,079,791 

RSU activity for the nine months ended September 30, 2023 is as follows:

RSUs
Number of SharesWeighted Average Grant Date Fair Value
Outstanding as of January 1, 20238,085,367 $11.88 
Granted3,915,070 13.89 
Canceled or forfeited(659,753)13.11 
Vested(2,260,893)12.74 
Outstanding as of September 30, 2023
9,079,791 $12.44 
Expected to vest as of September 30, 2023
9,079,791 

Market Stock Units ("MSUs")

The Company granted MSUs under the 2021 Plan to certain executive officers. MSUs vest over four years, 25% on the first anniversary of the vesting commencement date and 6.25% at the end of each quarter thereafter. The number of MSUs eligible to vest is based on the performance of the Company's common stock over each applicable vesting period. The number of shares eligible to vest is calculated based on a payout factor. The payout factor is calculated by dividing (i) the average closing price of the Company's stock during the ten trading days immediately preceding the applicable vesting date by (ii) the closing price of the Company's stock on the vesting commencement date. The payout factor is zero if such quotient is less than 0.60 and is capped at 2.25. Such quotient is then multiplied by the target number of MSUs granted to the relevant officer to determine the number of shares to be issued to the officer at vesting. The grant date fair value of the MSUs was determined using a Monte-Carlo simulation. The Company uses the accelerated attribution method to account for these awards.

20

MSU activity for the three months ended September 30, 2023 is as follows:

MSUs
Number of SharesWeighted Average Grant Date Fair Value
Outstanding as of July 1, 20232,156,449 $18.83 
Granted36,792 19.44 
Canceled or forfeited(235,411)18.37 
Change in awards based on performance43,273 14.88 
Vested(105,987)14.43 
Outstanding as of September 30, 2023
1,895,116 $19.07 
Expected to vest as of September 30, 2023
1,895,116 

MSU activity for the nine months ended September 30, 2023 is as follows:

MSUs
Number of SharesWeighted Average
Grant Date Fair Value
Outstanding as of January 1, 20231,209,262 $14.55 
Granted1,446,396 21.01 
Canceled or forfeited(444,979)16.52 
Change in awards based on performance116,528 14.89 
Vested(432,091)