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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 10-Q
_____________________________________________
 (Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
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: 001-33520
_____________________________________________
COMSCORE, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________
Delaware   54-1955550
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification Number)

11950 Democracy Drive, Suite 600
Reston, Virginia 20190
(Address of Principal Executive Offices)
(703) 438-2000
(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, par value $0.001 per share SCOR 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 
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of November 4, 2022, there were 92,009,609 shares of the registrant's Common Stock outstanding.


COMSCORE, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2022
TABLE OF CONTENTS
 



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We may make certain statements, including in this Quarterly Report on Form 10-Q, or 10-Q, including the information contained in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and the information incorporated by reference in this 10-Q, that constitute forward-looking statements within the meaning of federal and state securities laws. Forward-looking statements are all statements other than statements of historical fact. We attempt to identify these forward-looking statements by words such as "may," "will," "should," "could," "might," "expect," "plan," "anticipate," "believe," "estimate," "target," "goal," "predict," "intend," "potential," "continue," "seek" and other comparable words. Similarly, statements that describe our business strategy, goals, prospects, opportunities, outlook, objectives, plans or intentions are also forward-looking statements. These statements may relate to, but are not limited to, expectations of future operating results or financial performance; expectations regarding the impact on our business of the coronavirus ("COVID-19") pandemic and global measures to mitigate the spread of the virus; expectations regarding our restructuring activities and cost-reduction initiatives; macroeconomic trends that we expect may influence our business, including any recession or changes in consumer behavior resulting from the COVID-19 pandemic; plans for financing and capital expenditures; expectations regarding liquidity, customer payments and compliance with debt and financing covenants and other payment obligations; expectations regarding enhanced commercial relationships and the development and introduction of new products; potential limitations on our net operating loss carryforwards and other tax assets; regulatory compliance and expected changes in the regulatory or privacy landscape affecting our business; expected impact of litigation and regulatory proceedings; and plans for growth and future operations, as well as assumptions relating to the foregoing.
Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These statements are based on expectations and assumptions as of the date of this 10-Q regarding future events and business performance and involve known and unknown risks, uncertainties and other factors that may cause actual events or results to be materially different from any future events or results expressed or implied by these statements. These factors include those set forth in the following discussion and within Item 1A, "Risk Factors" of this 10-Q and elsewhere within this report; those identified within Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021; and those identified in other documents that we file from time to time with the U.S. Securities and Exchange Commission, or SEC.
We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should not place undue reliance on forward-looking statements, which apply only as of the date of this 10-Q. You should carefully review the risk factors described in this 10-Q and in other documents that we file from time to time with the SEC. Except as required by applicable law, including the rules and regulations of the SEC, we undertake no obligation, and expressly disclaim any duty, to publicly update or revise forward-looking statements, whether as a result of any new information, future events or otherwise. Although we believe the expectations reflected in the forward-looking statements are reasonable as of the date of this 10-Q, our statements are not guarantees of future results, levels of activity, performance, or achievements, and actual outcomes and results may differ materially from those expressed in, or implied by, any of our statements.
i


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMSCORE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of As of
September 30, 2022 December 31, 2021
(In thousands, except share and par value data) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 25,086  $ 21,854 
Restricted cash 425  425 
Accounts receivable, net of allowances of $677 and $1,173, respectively ($1,335 and $3,606 of accounts receivable attributable to related parties, respectively)
48,223  72,059 
Prepaid expenses and other current assets 15,207  14,769 
Total current assets 88,941  109,107 
Property and equipment, net 36,661  36,451 
Operating right-of-use assets 25,422  29,186 
Deferred tax assets 2,636  2,811 
Intangible assets, net 19,622  39,945 
Goodwill 386,245  435,711 
Other non-current assets 11,546  10,263 
Total assets $ 571,073  $ 663,474 
Liabilities, Convertible Redeemable Preferred Stock and Stockholders' Equity
Current liabilities:
Accounts payable ($12,809 and $6,575 attributable to related parties, respectively)
$ 28,763  $ 23,575 
Accrued expenses ($4,420 and $4,122 attributable to related parties, respectively)
41,642  45,264 
Contract liabilities ($1,729 and $3,553 attributable to related parties, respectively)
52,564  54,011 
Customer advances 10,633  11,613 
Current operating lease liabilities 7,667  7,538 
Warrants liability 2,049  10,520 
Other current liabilities ($3,953 and $7,863 attributable to related parties, respectively)
12,321  12,850 
Total current liabilities 155,639  165,371 
Non-current operating lease liabilities 31,184  36,055 
Non-current portion of accrued data costs ($14,066 and $7,843 attributable to related parties, respectively)
23,230  16,005 
Revolving line of credit 16,000  16,000 
Deferred tax liabilities 2,145  2,103 
Other non-current liabilities ($384 and $1,582 attributable to related parties, respectively)
13,035  16,879 
Total liabilities 241,233  252,413 
Commitments and contingencies
Convertible redeemable preferred stock, $0.001 par value; 82,527,609 shares authorized, issued and outstanding as of September 30, 2022 and December 31, 2021; aggregate liquidation preference of $207,953 as of September 30, 2022, and $211,863 as of December 31, 2021 (related parties)
187,885  187,885 
Stockholders' equity:
Preferred stock, $0.001 par value; 7,472,391 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued or outstanding as of September 30, 2022 or December 31, 2021
—  — 
Common stock, $0.001 par value; 275,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 98,774,405 shares issued and 92,009,609 shares outstanding as of September 30, 2022, and 97,172,086 shares issued and 90,407,290 shares outstanding as of December 31, 2021
92  90 
Additional paid-in capital 1,690,609  1,683,883 
Accumulated other comprehensive loss (21,736) (12,098)
Accumulated deficit (1,297,026) (1,218,715)
Treasury stock, at cost, 6,764,796 shares as of September 30, 2022 and December 31, 2021
(229,984) (229,984)
Total stockholders' equity 141,955  223,176 
Total liabilities, convertible redeemable preferred stock and stockholders' equity $ 571,073  $ 663,474 
See accompanying Notes to Condensed Consolidated Financial Statements.
1

COMSCORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(Unaudited)
  Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except share and per share data) 2022 2021 2022 2021
Revenues (2)
$ 92,783  $ 92,487  $ 278,183  $ 270,476 
Cost of revenues (1) (2) (3)
51,530  49,179  155,915  153,267 
Selling and marketing (1) (3)
17,199  15,212  51,850  49,569 
Research and development (1) (3)
8,741  9,051  28,190  29,536 
General and administrative (1) (3)
12,899  16,895  48,119  45,609 
Amortization of intangible assets 6,772  6,172  20,323  18,866 
Restructuring 5,784  —  5,784  — 
Impairment of goodwill 46,300  —  46,300  — 
Total expenses from operations 149,225  96,509  356,481  296,847 
Loss from operations (56,442) (4,022) (78,298) (26,371)
Other income (expense), net 1,477  5,713  8,467  (9,069)
Gain from foreign currency transactions 2,781  1,180  5,728  1,884 
Interest expense, net (2)
(284) (169) (660) (7,569)
Loss on extinguishment of debt (2)
—  —  —  (9,629)
(Loss) income before income taxes (52,468) 2,702  (64,763) (50,754)
Income tax benefit (provision) 86  (722) (1,945) (2,166)
Net (loss) income $ (52,382) $ 1,980  $ (66,708) $ (52,920)
Net loss available to common stockholders:
Net (loss) income $ (52,382) $ 1,980  $ (66,708) $ (52,920)
Convertible redeemable preferred stock dividends (2)
(3,910) (3,910) (11,603) (8,713)
Total net loss available to common stockholders: $ (56,292) $ (1,930) $ (78,311) $ (61,633)
Net loss per common share:
Basic and diluted $ (0.60) $ (0.02) $ (0.85) $ (0.77)
Weighted-average number of shares used in per share calculation - Common Stock:
Basic and diluted 93,347,017  82,185,009  92,380,984  79,951,857 
Comprehensive (loss) income:
Net (loss) income $ (52,382) $ 1,980  $ (66,708) $ (52,920)
Other comprehensive loss:
Foreign currency cumulative translation adjustment (4,553) (1,917) (9,638) (3,337)
Total comprehensive (loss) income $ (56,935) $ 63  $ (76,346) $ (56,257)
(1) Excludes amortization of intangible assets, which is presented as a separate line item.
(2) Transactions with related parties are included in the line items above as follows (refer to Footnote 9, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements for additional information):
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Revenues $ 3,527  $ 4,170  $ 12,125  $ 12,045 
Cost of revenues 7,938  8,109  23,379  26,143 
Interest expense, net —  —  —  4,692 
Loss on extinguishment of debt —  —  —  (9,608)
Convertible redeemable preferred stock dividends (3,910) (3,910) (11,603) (8,713)
2

(3) Stock-based compensation expense is included in the line items above as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Cost of revenues $ 155  $ 231  $ 877  $ 1,554 
Selling and marketing 132  208  804  1,679 
Research and development 116  170  627  1,162 
General and administrative 1,013  2,425  4,906  6,761 
Total stock-based compensation expense $ 1,416  $ 3,034  $ 7,214  $ 11,156 
See accompanying Notes to Condensed Consolidated Financial Statements.
3

COMSCORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands, except share data) Convertible Redeemable Preferred Stock Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Treasury stock, at cost Total
Stockholders'
Equity
Shares Amount Shares Amount
Balance as of December 31, 2021 82,527,609  $ 187,885  90,407,290  $ 90  $ 1,683,883  $ (12,098) $ (1,218,715) $ (229,984) $ 223,176 
Net loss —  —  —  —  —  —  (9,276) —  (9,276)
Convertible redeemable preferred stock dividends (1)
—  —  —  —  —  —  (3,825) —  (3,825)
Restricted stock units distributed —  —  212,246  —  —  —  —  —  — 
Exercise of Common Stock options —  —  86,941  102  —  —  —  103 
Payments for taxes related to net share settlement of equity awards —  —  (474) —  (1) —  —  —  (1)
Amortization of stock-based compensation —  —  —  —  1,908  —  —  —  1,908 
Settlement of restricted stock unit liability —  —  —  —  1,719  —  —  —  1,719 
Foreign currency translation adjustment —  —  —  —  —  (541) —  —  (541)
Other —  —  (661) —  (3) —  —  —  (3)
Balance as of March 31, 2022 82,527,609  $ 187,885  90,705,342  $ 91  $ 1,687,608  $ (12,639) $ (1,231,816) $ (229,984) $ 213,260 
Net loss —  —  —  —  —  —  (5,050) —  (5,050)
Convertible redeemable preferred stock dividends (1)
—  —  —  —  —  —  (3,868) —  (3,868)
Restricted stock units distributed —  —  958,594  —  —  —  — 
Exercise of Common Stock options —  —  745  —  —  —  —  —  — 
Payments for taxes related to net share settlement of equity awards —  —  (12,646) —  (23) —  —  —  (23)
Amortization of stock-based compensation —  —  —  —  2,011  —  —  —  2,011 
Foreign currency translation adjustment —  —  —  —  —  (4,544) —  —  (4,544)
Other     121,357  —  —    —  —  — 
Balance as of June 30, 2022 82,527,609  $ 187,885  91,773,392  $ 92  $ 1,689,596  $ (17,183) $ (1,240,734) $ (229,984) $ 201,787 
Net loss —  —  —  —  —  —  (52,382) —  (52,382)
Convertible redeemable preferred stock dividends (1)
—  —  —  —  —  —  (3,910) —  (3,910)
Restricted stock units distributed —  —  226,948  —  —  —  —  —  — 
Amortization of stock-based compensation —  —  —  —  1,013  —  —  —  1,013 
Foreign currency translation adjustment —  —  —  —  —  (4,553) —  —  (4,553)
Exercise of Common Stock options —  —  9,269  —  —  —  —  —  — 
Balance as of September 30, 2022 82,527,609  $ 187,885  92,009,609  $ 92  $ 1,690,609  $ (21,736) $ (1,297,026) $ (229,984) $ 141,955 
(1) Transactions for these line items were exclusively with related parties (refer to Footnote 5, Convertible Redeemable Preferred Stock and Stockholders' Equity, and Footnote 9, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements for additional information).
4

(In thousands, except share data) Convertible Redeemable Preferred Stock Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Treasury stock, at cost Total
Stockholders'
Equity
Shares Amount Shares Amount
Balance as of December 31, 2020   $   72,938,546  $ 73  $ 1,621,986  $ (7,030) $ (1,156,055) $ (229,984) $ 228,990 
Net loss —  —  —  —  —  —  (36,355) —  (36,355)
Convertible redeemable preferred stock, net of issuance costs (1)
82,527,609  188,183  —  —  —  —  —  —  — 
Convertible redeemable preferred stock dividends (1)
—  —  —  —  —  —  (935) —  (935)
Interest paid in Common Stock (1)
—  —  4,165,781  10,808  —  —  —  10,812 
Conversion shares issued as extinguishment cost on senior secured convertible notes (1)
—  —  3,150,000  9,605  —  —  —  9,608 
Restricted stock units distributed —  —  442,051  —  —  —  — 
Payments for taxes related to net share settlement of equity awards —  —  (10,231) —  (37) —  —  —  (37)
Settlement of restricted stock unit liability —  —  —  —  7,117  —  —  —  7,117 
Amortization of stock-based compensation —  —  —  —  1,358  —  —  —  1,358 
Foreign currency translation adjustment —  —  —  —  —  (2,151) —  —  (2,151)
Balance as of March 31, 2021 82,527,609  $ 188,183  80,686,147  $ 81  $ 1,650,837  $ (9,181) $ (1,193,345) $ (229,984) $ 218,408 
Net loss —  —  —  —  —  —  (18,545) —  (18,545)
Adjustment to issuance costs on convertible redeemable preferred stock —  (298) —  —  —  —  —  —  — 
Convertible redeemable preferred stock dividends (1)
—  —  —  —  —  —  (3,868) —  (3,868)
Restricted stock units distributed —  —  1,486,344  —  —  —  — 
Payments for taxes related to net share settlement of equity awards —  —  (414) —  (1) —  —  —  (1)
Amortization of stock-based compensation —  —  —  —  1,895  —  —  —  1,895 
Foreign currency translation adjustment —  —  —  —  —  731  —  —  731 
Balance as of June 30, 2021 82,527,609  $ 187,885  82,172,077  $ 82  $ 1,652,731  $ (8,450) $ (1,215,758) $ (229,984) $ 198,621 
Net income —  —  —  —  —  —  1,980  0 $ —  1,980 
Convertible redeemable preferred stock dividends (1)
    —  —  —  —  (3,910) —  (3,910)
Restricted stock units distributed —  —  28,989  —  —  —  —  —  — 
Amortization of stock-based compensation     —  —  2,563  —  —  —  2,563 
Foreign currency translation adjustment     —  —  —  (1,917) —  —  (1,917)
Payments for taxes related to net share settlement of equity awards     (1,840) —  (6) —  —  —  (6)
Balance as of September 30, 2021 82,527,609  $ 187,885  82,199,226  $ 82  $ 1,655,288  $ (10,367) $ (1,217,688) $ (229,984) $ 197,331 
(1) Transactions for these line items were exclusively with related parties (refer to Footnote 5, Convertible Redeemable Preferred Stock and Stockholders' Equity, Footnote 6, Debt, and Footnote 9, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements for additional information). Gross proceeds from related parties for the issuance of convertible redeemable preferred stock were $204.0 million.
See accompanying Notes to Condensed Consolidated Financial Statements.
5

COMSCORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Nine Months Ended September 30,
(In thousands) 2022 2021
Operating activities:
Net loss $ (66,708) $ (52,920)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization of intangible assets 20,323  18,866 
Depreciation 12,542  11,873 
Stock-based compensation expense 7,214  11,156 
Non-cash operating lease expense 4,540  3,952 
Change in fair value of contingent consideration liability 2,447  — 
Amortization expense of finance leases 1,875  1,485 
Deferred tax (benefit) provision (90) 652 
Change in fair value of warrants liability (8,471) 10,938 
Loss on extinguishment of debt —  9,629 
Non-cash interest expense on senior secured convertible notes (1)
—  4,692 
Impairment of goodwill 46,300  — 
Other 1,456  660 
Changes in operating assets and liabilities:
Accounts receivable 22,143  (12,661)
Prepaid expenses and other assets (1,081) 283 
Accounts payable, accrued expenses and other liabilities 3,159  6,632 
Contract liabilities and customer advances (3,448) (12,563)
Operating lease liabilities (5,665) (3,795)
Net cash provided by (used in) operating activities 36,536  (1,121)
Investing activities:
Capitalized internal-use software costs (12,402) (10,925)
Purchases of property and equipment (823) (744)
Net cash used in investing activities (13,225) (11,669)
Financing activities:
Payments for dividends on convertible redeemable preferred stock (1)
(15,512) (4,760)
Principal payments on finance leases (2,004) (1,475)
Principal payment and extinguishment costs on senior secured convertible notes (1)
—  (204,014)
Principal payment and extinguishment costs on secured term note —  (14,031)
Proceeds from borrowing on revolving line of credit —  16,000 
Proceeds from issuance of convertible redeemable preferred stock, net of issuance costs (1)
—  188,183 
Other (61) (429)
Net cash used in financing activities (17,577) (20,526)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (2,502) (691)
Net increase (decrease) in cash, cash equivalents and restricted cash 3,232  (34,007)
Cash, cash equivalents and restricted cash at beginning of period 22,279  50,741 
Cash, cash equivalents and restricted cash at end of period $ 25,511  $ 16,734 
As of September 30,
2022 2021
Cash and cash equivalents $ 25,086  $ 15,940 
Restricted cash 425  794 
Total cash, cash equivalents and restricted cash $ 25,511  $ 16,734 

6

Nine Months Ended September 30,
2022 2021
Supplemental disclosures of non-cash investing and financing activities:
Settlement of restricted stock unit liability $ 1,719  $ 7,117 
Right-of-use assets obtained in exchange for finance lease liabilities 1,106  2,041 
Change in accounts payable and accrued expenses related to capital expenditures 810  494 
Right-of-use assets obtained in exchange for new operating lease liabilities 847  5,211 
Interest paid in Common Stock (1)
—  10,812 
Conversion shares issued as extinguishment cost on senior secured convertible notes (1)
—  9,608 
Convertible redeemable preferred stock dividends accrued but not yet paid (related parties) 3,953  3,953 
(1) Transactions for these line items were exclusively with related parties (refer to Footnote 5, Convertible Redeemable Preferred Stock and Stockholders' Equity, Footnote 6, Debt, and Footnote 9, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements for additional information). Gross proceeds from related parties for the issuance of convertible redeemable preferred stock were $204.0 million.
See accompanying Notes to Condensed Consolidated Financial Statements.
7

COMSCORE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.Organization
comScore, Inc., together with its consolidated subsidiaries (collectively, "Comscore" or the "Company"), headquartered in Reston, Virginia, is a global information and analytics company that measures audiences, consumer behavior and advertising across media platforms.
Operating segments are defined as components of a business that can earn revenues and incur expenses for which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker ("CODM"). The Company's CODM is its Chief Executive Officer, who decides how to allocate resources and assess performance. The Company has one operating segment. A single management team reports to the CODM, who manages the entire business. The Company's CODM reviews consolidated results of operations to make decisions, allocate resources and assess performance and does not evaluate the profit or loss from any separate geography or product line.
Management Changes
On July 5, 2022, the Company's Board of Directors ("Board") appointed Jonathan Carpenter as the Company's Chief Executive Officer, effective July 6, 2022. In connection with Mr. Carpenter's appointment, William Livek retired as the Company's Chief Executive Officer. Also on July 5, 2022, the Board of Directors appointed Mary Margaret Curry as the Company's Chief Financial Officer and Treasurer, effective July 6, 2022. Ms. Curry continues to serve as the Company's principal accounting officer.
2.Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned domestic and foreign subsidiaries. All intercompany transactions and balances are eliminated upon consolidation.
Reclassification
Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. Specifically, change in fair value of financing derivatives, accretion of debt discount, and amortization of deferred financing costs have been aggregated within other operating activities on the Condensed Consolidated Statements of Cash Flows. In addition, principal payments on software license arrangements, revolving line of credit issuance costs, and payments for taxes related to net share settlement of equity awards have been aggregated within other financing activities on the Condensed Consolidated Statements of Cash Flows.
Unaudited Interim Financial Information
The interim Condensed Consolidated Financial Statements included in this quarterly report have been prepared by the Company and are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained in this quarterly report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a quarterly report on Form 10-Q and are adequate to make the information presented not misleading. The interim Condensed Consolidated Financial Statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. These interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 10-K"). The Condensed Consolidated Results of Operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2022 or thereafter. All references to September 30, 2022 and 2021 in the Notes to Condensed Consolidated Financial Statements are unaudited.
Use of Estimates and Judgments in the Preparation of the Condensed Consolidated Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expense during the reporting periods. Significant estimates and judgments are inherent in the analysis and the measurement of management's standalone selling price, principal versus agent revenue recognition, determination of performance obligations, determination of transaction price, including the determination of variable consideration and allocation of transaction price to performance obligations, deferred tax assets and liabilities, including the identification and quantification of income tax liabilities due to uncertain tax positions, the valuation and recoverability of goodwill, intangible and other long-lived assets, the determination of appropriate discount rates for lease accounting, the probability of exercising either lease renewal or termination clauses, the assessment of potential loss from contingencies, the fair value determination of contingent consideration from business combinations, financing-related liabilities and warrants, and the valuation of options, performance-based and market-based stock awards. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances.
8

Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. The Company evaluates its estimates and assumptions on an ongoing basis.
Business Combination
In December 2021, the Company and two newly formed, wholly owned subsidiaries of the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Shareablee, Inc. ("Shareablee"), pursuant to which the Company acquired Shareablee (the "Merger"). Total consideration paid or payable by the Company related to the Merger (valued as of the closing date of the Merger) was $31.4 million, which included $5.6 million for the fair value of contingent consideration payable based on the achievement of certain contractual milestones or future revenue performance. The maximum amount of contingent consideration payable under the Merger is $8.6 million.
The contingent consideration is classified as a liability due to the fact it will be settled in cash or a variable number of shares of the Company's common stock, par value $0.001 ("Common Stock") (or a combination thereof), and the amount of the payment is not dependent upon the fair value of the Common Stock. The contingent consideration liability is measured at fair value on a recurring basis until the contingency is resolved.
The fair value of the contingent consideration liability is estimated using a combination of valuation techniques. One technique is an option pricing model within a Monte Carlo simulation that determines an average projected payment value across numerous iterations. This technique determines projected payments based on simulated revenues derived from an internal forecast, adjusted for a selected revenue volatility and risk premium based on market data for comparable guideline public companies. The other technique is a discounted cash flow model that assumes achievement of the contractual milestones, resulting in payment of the full deferred amount. In both techniques, the projected payments are then discounted back to the valuation date at the Company's cost of debt using a term commensurate with the contractual payment dates.
In March 2022, the Company determined sufficient achievement of the milestones had been demonstrated and the full amount of the contingent consideration was reasonably certain to be payable. In April 2022, the contingency was resolved and the full amount was deemed payable, subject to reduction for any pending indemnification claims and other terms set forth in the Merger Agreement. The resolution of this contingency eliminated the option pricing model as a valuation technique, and as a result the fair value was remeasured using only the discounted cash flow model. The Company expects to settle the liability in three installments of $3.7 million, $3.7 million and $1.2 million payable in any combination of cash and Common Stock (at the Company's election) in December 2022, 2023 and 2024, respectively.
The estimated fair value of the contingent consideration liability as of September 30, 2022 was $8.0 million. The loss due to change in fair value of $2.4 million for the nine months ended September 30, 2022 was classified within general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. The loss due to change in fair value for the three months ended September 30, 2022 was negligible.
Refer to Footnote 7, Fair Value Measurements, for additional information on the fair value of the contingent consideration.
Goodwill
Goodwill is evaluated for impairment at least annually, as of October 1, by comparing the fair value of a reporting unit to its carrying value including goodwill recorded by the reporting unit.
The Company has a single reporting unit. Accordingly, the impairment assessment for goodwill is performed at the enterprise level. Goodwill is reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company initially assesses qualitative factors to determine if it is necessary to perform the goodwill impairment review. Goodwill is reviewed for impairment if, based on an assessment of the qualitative factors, it is determined that it is more likely than not that the fair value of its reporting unit is less than its carrying value, or the Company decides to bypass the qualitative assessment. The carrying value of the reporting unit is reviewed utilizing a discounted cash flow model, and a market value approach is utilized to supplement the discounted cash flow model. The estimated fair value of a reporting unit is determined based on assumptions regarding estimated future cash flows, discount rates, long-term growth rates and market values. Additionally, the Company considers income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss.
The Company monitors for events and circumstances that could negatively impact the key assumptions in determining fair value, including long-term revenue growth projections, profitability, discount rates, volatility in the Company's market capitalization, and general industry, market and macro-economic conditions.
As of September 30, 2022, the Company concluded that it was more likely than not that the estimated fair value of its reporting unit was less than its carrying value. In its assessment, the Company considered the decline in the Company's stock price and market capitalization among other factors. The Company performed a quantitative goodwill impairment test in conjunction with the annual test using a discounted cash flow model, supported by a market approach. The Company's reporting unit did not pass the goodwill impairment test, and as a result the Company recorded a $46.3 million non-cash impairment charge.
The Company completed its annual analysis for the year ended December 31, 2021 and determined that there was no impairment of goodwill at that time.
For further information refer to Footnote 4, Goodwill.
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Preferred Stock
In January 2021, the Company entered into separate Securities Purchase Agreements with each of Charter Communications Holding Company, LLC ("Charter"), Qurate Retail, Inc. ("Qurate") and Pine Investor, LLC ("Pine") (the "Securities Purchase Agreements") for the issuance and sale of shares of Series B Convertible Preferred Stock, par value $0.001 ("Preferred Stock") described in Footnote 5, Convertible Redeemable Preferred Stock and Stockholders' Equity. The issuance of the Preferred Stock pursuant to the Securities Purchase Agreements (the "Transactions") and related matters were approved by the Company's stockholders on March 9, 2021 and completed on March 10, 2021.
The Preferred Stock is contingently redeemable upon certain deemed liquidation events, such as a change in control. Because a deemed liquidation event could constitute a redemption event outside of the Company's control, all shares of Preferred Stock have been presented outside of permanent equity in mezzanine equity on the Condensed Consolidated Balance Sheets. The instrument was initially recognized at fair value net of issuance costs. The Company reassesses whether the Preferred Stock is currently redeemable, or probable to become redeemable in the future, as of each reporting date. If the instrument meets either of these criteria, the Company will accrete the carrying value to the redemption value. The Preferred Stock has not been adjusted to its redemption amount as of September 30, 2022 because a deemed liquidation event is not considered probable.
The Preferred Stock includes a change of control put option which allows the holders of the Preferred Stock to require the Company to repurchase such holders' shares in cash in an amount equal to the initial purchase price plus accrued dividends. The change of control put option was determined to be a derivative liability. As of September 30, 2022, the probability of a change of control was determined to be remote and the fair value of the change of control derivative was determined to be negligible.
Warrants Liability
In June 2019, the Company issued warrants to CVI Investments, Inc. ("CVI") in connection with the private placement described in Footnote 5, Convertible Redeemable Preferred Stock and Stockholders' Equity. The warrants were determined to be freestanding financial instruments that qualify for liability treatment as a result of net cash settlement features associated with a cap on the issuance of shares, under certain circumstances, or upon a change of control. Changes in the fair value of these instruments are recorded in other income (expense), net in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.
The fair value of each warrant is estimated utilizing an option pricing model. Significant valuation inputs include the price and expected volatility of the Company's Common Stock, risk-free rate, and the remaining term of the warrants. As of September 30, 2022, the probability of a change of control was determined to be remote and did not require an enhancement to the valuation technique.
Loss on Extinguishment of Debt
In March 2021, the Company recorded a $9.6 million loss on debt extinguishment related to the payoff of its senior secured convertible notes (the "Notes") and a foreign secured promissory note (the "Secured Term Note"). Loss on extinguishment of debt represents the difference between the carrying value of the Company's debt instruments and any consideration paid to its creditors in the form of cash or shares of the Company's Common Stock on the extinguishment date. These transactions are described in Footnote 6, Debt.
Other Income (Expense), Net
Other income (expense), net represents income and expenses incurred that are generally not recurring in nature or are not part of the Company's normal operations. The following is a summary of the significant components of other income (expense), net:
  Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2022 2021 2022 2021
Change in fair value of warrants liability $ 1,476  $ 5,582  $ 8,471  $ (10,938)
Change in fair value of financing derivatives —  —  —  1,800 
Other 131  (4) 69 
Total other income (expense), net
$ 1,477  $ 5,713  $ 8,467  $ (9,069)
Loss Per Share
The Company uses the two-class method to calculate net loss per share. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. Under the two-class method, earnings for the period are allocated between common stockholders and participating security holders based on their respective rights to receive dividends as if all undistributed book earnings for the period were distributed.
Basic loss per share is computed by dividing total net loss available to common stockholders by the weighted-average number of common shares outstanding for the period. This includes the effect of vested and deferred restricted stock units granted to members of the Company's Board and certain employees. These awards are expected to be settled in shares of Common Stock and generally distributed upon the earlier of the individual's separation from service or a change of control. Diluted loss per share includes the effect of potential common shares, such as the Company's Preferred Stock, Notes, warrants, stock options and restricted stock units, and contingent consideration liability to the extent the effect
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is dilutive. In periods with a net loss available to common stockholders, the anti-dilutive effect of these potential common shares is excluded and diluted net loss per share is equal to basic net loss per share.
The following is a summary of the Common Stock equivalents for the securities outstanding during the respective periods that have been excluded from the computation of diluted net loss per common share, as their effect would be anti-dilutive:
  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Preferred stock (1)
82,544,802  82,527,609  85,708,361  61,895,707 
Warrants 5,457,026  5,457,026  5,457,026  5,457,026 
Stock options and restricted stock units 5,244,552  4,865,544  4,899,973  5,065,139 
Contingent consideration (2)
5,212,121  —  5,212,121  — 
Senior secured convertible notes —  —  —  1,629,914 
Total 98,458,501  92,850,179  101,277,481  74,047,786 
(1) Includes the effect of potential Common Stock that would be issued to settle unpaid dividends accrued to holders of the Preferred Stock if they elected to convert their shares at the beginning of the period (or at the time of issuance, if later).
(2) A contingent consideration liability was recognized as part of the Shareablee acquisition described in Footnote 2, Summary of Significant Accounting Policies. The liability payments may be settled in any combination of cash or shares of Common Stock (at the Company's election) based on the volume-weighted average trading price of the Common Stock for the ten trading days prior to the date of each payment. Settlement of this liability in Common Stock could potentially dilute basic earnings per share in future periods. The Company calculated a potential anti-dilutive share count based on the expected payments totaling $8.6 million and the $1.65 per share closing price of the Company's Common Stock on the Nasdaq Global Select Market on September 30, 2022.
Income Taxes
A significant portion of the Company's net operating loss carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code. The Company anticipates the Transactions may have triggered further limitations but has not yet reached a final conclusion as to whether an ownership change occurred and to what extent its net operating loss carryforwards are further limited. If an ownership change occurred as a result of the Transactions, the annual limitation under Section 382 may cause a significant portion of the Company's net operating loss carryforwards to expire prior to use. Due to the Company's valuation allowance position in the United States, the required revaluation of its deferred tax assets related to these limited U.S. federal and state net operating loss carryforwards is not expected to have a material impact on the Condensed Consolidated Financial Statements or related disclosures.
3.Revenue Recognition
The following table presents the Company's revenue disaggregated by solution group, geographical market and timing of transfer of products and services. The Company has one reportable segment in accordance with ASC 280, Segment Reporting; as such, the disaggregation of revenue below reconciles directly to its unique reportable segment.
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2022 2021 2022 2021
By solution group:
Digital Ad Solutions $ 52,360  $ 57,039  $ 157,127  $ 162,581 
Cross Platform Solutions 40,423  35,448  121,056  107,895 
Total $ 92,783  $ 92,487  $ 278,183  $ 270,476 
By geographical market:
United States $ 83,780  $ 81,187  $ 249,493  $ 236,593 
Europe 4,497  6,312  14,179  20,025 
Canada 1,675  1,914  5,668  5,475 
Latin America 1,839  1,947  5,765  5,227 
Other 992  1,127  3,078  3,156 
Total $ 92,783  $ 92,487  $ 278,183  $ 270,476 
By timing of revenue recognition:
Products and services transferred over time $ 77,264  $ 72,660  $ 231,946  $ 210,432 
Products and services transferred at a point in time 15,519  19,827  46,237  60,044 
Total $ 92,783  $ 92,487  $ 278,183  $ 270,476 
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Contract Balances
The following table provides information about receivables, contract assets, contract liabilities and customer advances from contracts with customers:
As of As of
(In thousands) September 30, 2022 December 31, 2021
Accounts receivable, net $ 48,223  $ 72,059 
Current and non-current contract assets 6,991  4,875 
Current contract liabilities 52,564  54,011 
Current customer advances 10,633  11,613 
Non-current contract liabilities 516  1,262 
Significant changes in the current contract liabilities balance are as follows:
Nine Months Ended September 30,
(In thousands) 2022 2021
Revenue recognized that was included in the opening contract liabilities balance $ (47,662) $ (46,734)
Cash received or amounts billed in advance and not recognized as revenue 46,969  41,160 
Remaining Performance Obligations
As of September 30, 2022, approximately $195.0 million of revenue is expected to be recognized from remaining performance obligations that are unsatisfied (or partially unsatisfied) for non-cancelable contracts with an original expected duration of longer than one year. The Company expects to recognize revenue on approximately 17% of these remaining performance obligations during the remainder of 2022, approximately 45% in 2023, and approximately 19% in 2024, with the remainder recognized thereafter.
4.Goodwill
As of September 30, 2022, the Company concluded that it was more likely than not that the estimated fair value of its reporting unit was less than its carrying value. In its assessment, the Company considered the decline in the Company's stock price and market capitalization, among other factors. Accordingly, in conjunction with its annual test as of October 1, 2022, the Company performed a quantitative goodwill impairment test as of September 30, 2022, relying in part on the work of an independent valuation firm engaged by the Company to provide inputs as to the fair value of the reporting unit and to assist in the related calculations and analysis.
The fair value of the reporting unit was determined using a discounted cash flow model, supported by a market approach. The Company's reporting unit did not pass the goodwill impairment test, and as a result the Company recorded a $46.3 million impairment charge for the three months ended September 30, 2022.
The change in the carrying value of goodwill is as follows:
(In thousands)
Balance as of December 31, 2020 $ 418,327 
Goodwill recognized from acquisition 19,202 
Translation adjustments (1,818)
Balance as of December 31, 2021 $ 435,711 
Translation adjustments (3,166)
Impairment charge (46,300)
Balance as of September 30, 2022 $ 386,245 
5.Convertible Redeemable Preferred Stock and Stockholders' Equity
2021 Issuance of Preferred Stock
On March 10, 2021, the Company issued and sold 82,527,609 shares of Preferred Stock in exchange for aggregate gross proceeds of $204.0 million. Net proceeds from the Transactions totaled $187.9 million after deducting issuance costs.
The Preferred Stock is convertible at the option of the holders at any time into shares of Common Stock based on a conversion rate set in accordance with the Certificate of Designations of the Preferred Stock. The conversion right is subject to certain anti-dilution adjustments and customary provisions related to partial dividend periods. As of September 30, 2022, each share of Preferred Stock would have been convertible into 1.019375 shares of Common Stock, with such assumed conversion rate scheduled to return to 1.00 upon payment of accrued dividends on June 30, 2023.
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As of September 30, 2022, no shares of Preferred Stock have been converted into Common Stock.
The holders of Preferred Stock are entitled to participate in all dividends declared on the Common Stock on an as-converted basis and are also entitled to a cumulative dividend at the rate of 7.5% per annum, payable annually in arrears and subject to increase under certain circumstances. In addition, such holders are entitled to request, and the Company will take all actions reasonably necessary to pay, a one-time dividend ("Special Dividend") equal to the highest dividend that the Company's Board determines can be paid at the applicable time (or a lesser amount agreed upon by the holders), subject to additional conditions and limitations set forth in a Stockholders Agreement entered into by the Company and the holders on March 10, 2021 (the "Stockholders Agreement"). As set forth in the Stockholders Agreement, the Company may be obligated to obtain debt financing in order to effectuate the Special Dividend.
2019 Issuance and Sale of Common Stock and Warrants
On June 23, 2019, the Company entered into a Securities Purchase Agreement with CVI, pursuant to which CVI agreed to purchase (i) 2,728,513 shares of Common Stock (the "Initial Shares"), at a price of $7.33 per share and (ii) Series A Warrants, Series B-1 Warrants, Series B-2 Warrants and Series C Warrants, for aggregate gross proceeds of $20.0 million (the "Private Placement"). The Private Placement closed on June 26, 2019 (the "CVI Closing Date"). The Series B-1 Warrants and Series B-2 Warrants expired in 2020.
The Series C Warrants were exercised on October 10, 2019. As a result of this exercise, the Company issued 2,728,513 shares of Common Stock to CVI on October 14, 2019. In addition, the number of shares issuable under the Company's Series A Warrants was increased by 2,728,513.
The Series A Warrants are exercisable by the holders for a period of five years from the CVI Closing Date and are currently exercisable into 5,457,026 shares of Common Stock. The Series A Warrants may be exercised for cash or through a net settlement feature under certain circumstances.
The exercise price for the Series A Warrants is subject to anti-dilution adjustment in certain circumstances, including upon certain issuances of capital stock. Upon the issuance of the Preferred Stock, the Company adjusted the exercise price of the Series A Warrants from $12.00 to $2.4719 per share, the closing price of the Transactions.
CVI will not have the right to exercise any warrant that would result in CVI beneficially owning more than 4.99% of the outstanding Common Stock after giving effect to such exercise. CVI has the right, in its discretion, to raise this threshold up to 9.99% with 60 days' notice to the Company. In addition, if and to the extent the exercise of any warrants would, together with the issuances of the Initial Shares and the shares issued pursuant to the exercise of any other warrants, result in the issuance of 20.0% or more of the outstanding Common Stock of the Company on the CVI Closing Date, the Company intends to, in lieu of issuing such shares, settle the obligation to issue such shares in cash.
The estimated fair value of the Series A Warrants as of September 30, 2022 was $2.0 million. Refer to Footnote 7, Fair Value Measurements, for information on the Level 3 inputs utilized for the determination of the fair value of the warrants.
6.Debt
Revolving Credit Agreement
On May 5, 2021, the Company entered into a senior secured revolving credit agreement (the "Revolving Credit Agreement") among the Company, as borrower, certain subsidiaries of the Company, as guarantors, Bank of America N.A., as administrative agent (in such capacity, the "Agent"), and the lenders from time to time party thereto.
The Revolving Credit Agreement had an original borrowing capacity equal to $25.0 million and bore interest on borrowings at a Eurodollar Rate (as defined in the Revolving Credit Agreement) that was based on LIBOR. The Company may also request the issuance of letters of credit under the Revolving Credit Agreement in an aggregate amount up to $5.0 million, which reduces the amount of available borrowings by the amount of such issued and outstanding letters of credit. The facility has a maturity of three years from the closing date of the agreement.
On February 25, 2022, the Company entered into an amendment (the "Amendment") to the Revolving Credit Agreement to expand its aggregate borrowing capacity from $25.0 million to $40.0 million. The Amendment also replaced the Eurodollar Rate with a SOFR-based interest rate and modified the Applicable Rate definition in the Revolving Credit Agreement to increase the Applicable Rate payable on SOFR-based loans to 2.50% until the date a compliance certificate is received for the quarter ending March 31, 2023, with such Applicable Rate thereafter reducing to 2.25%.
The Amendment also modified certain financial covenants under the Revolving Credit Agreement. As amended, the Revolving Credit Agreement requires the Company to maintain:
minimum Consolidated EBITDA (as defined in the Revolving Credit Agreement) of not less than $20.0 million for the most recently ended four fiscal quarter period, tested as of the last day of each fiscal quarter ending on or before December 31, 2022;
a minimum Consolidated Asset Coverage Ratio (as defined in the Revolving Credit Agreement) of not less than 1.5 to 1.0, tested as of the last day of each fiscal quarter ending on or before December 31, 2022; and
a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Revolving Credit Agreement) of not less than 1.25 to 1.0 for the most recently ended four fiscal quarter period, tested as of the last day of each fiscal quarter ending on or after March 31, 2023.
Additionally, the Revolving Credit Agreement contains restrictive covenants that limit the Company's ability to, among other things, incur additional indebtedness or liens, make investments and loans, enter into mergers and acquisitions, make or declare dividends and other payments,
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enter into certain contracts, sell assets and engage in transactions with affiliates. The Revolving Credit Agreement is also subject to customary events of default, including a change in control. If an event of default occurs and is continuing, the Agent or the Required Lenders may accelerate any amounts outstanding and terminate lender commitments. The Company is in compliance with the covenants under the amended Revolving Credit Agreement as of September 30, 2022.
The Revolving Credit Agreement is guaranteed by the Company and its domestic subsidiaries (other than Excluded Subsidiaries (as defined in the Revolving Credit Agreement)) and is secured by a first lien security interest in substantially all assets of the Company and its domestic subsidiaries (other than Excluded Subsidiaries), subject to certain customary exclusions.
As of September 30, 2022, the Company had outstanding borrowings of $16.0 million, and issued and outstanding letters of credit of $3.4 million, under the amended Revolving Credit Agreement, with remaining borrowing capacity of $20.6 million.
Senior Secured Convertible Notes and Financing Derivatives
During 2018, the Company entered into certain agreements with funds affiliated with or managed by Starboard Value LP (collectively, "Starboard"), pursuant to which the Company issued and sold to Starboard a total of $204.0 million in Notes, as well as warrants to purchase shares of the Company's Common Stock. The warrants were exercised in full by Starboard in 2019.
The Notes contained, among other features, an interest rate reset feature which the Company determined represented an embedded derivative that must be bifurcated and accounted for separately from the Notes. This feature reset the interest rate on the Notes based on the trading price of the Company's Common Stock.
Interest on the Notes was payable on a quarterly basis in arrears, at the option of the Company, in cash, or, subject to certain conditions, through the issuance by the Company of additional shares of Common Stock ("PIK Interest Shares"). On January 25, 2021, the Company paid quarterly accrued interest of $6.1 million through the issuance of 2,802,454 PIK Interest Shares.
In connection with the Transactions described in Footnote 5, Convertible Redeemable Preferred Stock and Stockholders' Equity, the Company used cash proceeds of $204.0 million from the issuance of shares of its Preferred Stock to extinguish the Notes and related financing derivatives on March 10, 2021. The Company also issued 3,150,000 additional shares to Starboard (the "Conversion Shares"), as additional creditor consideration, which were valued at $9.6 million. Lastly, the Company paid interest accrued of $4.7 million for the period from January 1, 2021 to March 10, 2021 through the issuance of 1,363,327 PIK Interest Shares.
The Company recorded a loss on extinguishment of the Notes of $9.3 million during the three months ended March 31, 2021.
Secured Term Note
During 2019, the Company's wholly owned subsidiary, Rentrak B.V., entered into an agreement with several third parties for the Secured Term Note in exchange for gross proceeds of $13.0 million.
The Secured Term Note included a redemption feature which, upon the occurrence of certain fundamental transactions, would require the Company to redeem the Secured Term Note in full, plus accrued interest, and remit a prepayment premium equal to the remaining contractual interest cash flows (the "interest make-whole redemption"). The Company determined this feature represented an embedded derivative that must be bifurcated and accounted for separately from the Secured Term Note.
In connection with the Transactions described in Footnote 5, Convertible Redeemable Preferred Stock and Stockholders' Equity, the Company used restricted cash from its balance sheet to extinguish the Secured Term Note and interest make-whole redemption on March 10, 2021, of which $13.0 million and $1.0 million were for principal repayments and settlement of the interest make-whole redemption, respectively.
The Company recorded a loss on extinguishment of the Secured Term Note of $0.3 million during the three months ended March 31, 2021.    
7.Fair Value Measurements
The Company's financial instruments measured at fair value in the accompanying Condensed Consolidated Balance Sheets on a recurring basis consist of the following:
As of As of
  September 30, 2022 December 31, 2021
(In thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets
Money market funds (1)
$ 447  $ —  $ —  $ 447  $ 2,429  $ —  $ —  $ 2,429 
Liabilities
Contingent consideration liability (2)
$ —  $ 8,047  $ —  $ 8,047  $ —  $ —  $ 5,600  $ 5,600 
Warrants liability (3)
—  —  2,049  2,049  —  —  10,520  10,520 
Total liabilities $ —  $ 8,047  $ 2,049  $ 10,096  $ —  $ —  $ 16,120  $ 16,120 
(1) Level 1 cash equivalents are invested in money market funds that are intended to maintain a stable net asset value of $1.00 per share by investing in liquid, high quality U.S. dollar-denominated money market instruments with maturities less than three months.
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(2) The fair value of this liability as of September 30, 2022 is derived from a technique which utilizes market-corroborated inputs that result in classification as a Level 2 fair value measurement as of such date. The fair value of this liability as of December 31, 2021 was derived from techniques which utilize inputs, certain of which are significant and unobservable, that result in classification as a Level 3 fair value measurement as of such date. The current and non-current portions of the contingent consideration liability are classified within other current and non-current liabilities in the Condensed Consolidated Balance Sheets. The current portion of the contingent consideration liability was $3.6 million and $1.0 million as of September 30, 2022 and December 31, 2021, respectively. The non-current portion of the contingent consideration liability was $4.4 million and $4.6 million as of September 30, 2022 and December 31, 2021, respectively.
(3) The fair value of this liability is derived from a technique which utilizes inputs, certain of which are significant and unobservable, that result in classification as a Level 3 fair value measurement. Warrants liability includes only the Series A warrants as of September 30, 2022 and December 31, 2021.
For the quarter ended September 30, 2022, the Company recorded a goodwill impairment charge of $46.3 million. Refer to Footnote 4, Goodwill for further details. The remeasurement of goodwill is classified as a non-recurring Level 3 fair value assessment due to the significance of unobservable inputs developed in the determination of the fair value. The Company used a discounted cash flow model to determine the estimated fair value of the reporting unit. The Company made estimates and assumptions regarding future cash flows, discount rates, long-term growth rates and market values to determine the reporting unit's estimated fair value. It is possible that future changes in such circumstances, or in the variables associated with the judgments, assumptions and estimates used in assessing the fair value of the reporting unit, would require the Company to record additional non-cash impairment charges.
The elimination of the option pricing model used to value the contingent consideration liability reflected a change in the Company's valuation technique during the three months ended June 30, 2022. There were no other changes to the Company's valuation techniques or methodologies during the three and nine months ended September 30, 2022 or 2021.
The following tables present the changes in the Company's recurring Level 3 fair valued instruments for the nine months ended September 30, 2022 and 2021, respectively:
(In thousands) Contingent Consideration Liability Warrants Liability
Balance as of December 31, 2021 $ 5,600  $ 10,520 
Total loss (gain) recognized due to remeasurement (1)
2,348  (8,471)
Transfer to Level 2 (2)
(7,948) — 
Balance as of September 30, 2022 $ —  $ 2,049 
(1) The loss due to remeasurement of the contingent consideration liability was recorded in general and administrative expense, and the gain on remeasurement of the warrants liability was recorded in other income (expense), net, in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.
(2) The transfer was due to the resolution of the contingency regarding the amount of consideration payable. Transfers between levels of the fair value hierarchy are recognized at the beginning of the reporting period.
(In thousands) Interest Make-whole Derivative Liability Financing Derivative Liabilities Warrants Liability
Balance as of December 31, 2020 $ 871  $ 11,300  $ 2,831 
Total loss (gain) recognized due to remeasurement (1)
150  (1,800) 10,938 
Settlement or derecognition upon extinguishment of host debt (2)
(1,021) (9,500) — 
Balance as of September 30, 2021 $ —  $ —  $ 13,769 
(1) All losses and gains were recorded in other income (expense), net in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.
(2) Refer to Footnote 6, Debt for additional information on the extinguishment of the Notes and Secured Term Note.
The following table displays the valuation technique and the significant inputs, certain of which are unobservable, for the Company's Level 3 liabilities that existed as of September 30, 2022 and December 31, 2021 that are measured at fair value on a recurring basis:
Fair Value Measurements
Significant Valuation Technique Significant Valuation Inputs September 30, 2022 December 31, 2021
Warrants liability Option pricing Stock price $1.65 $3.34
Exercise price $2.47 $2.47
Volatility 65.0% 85.0%
Term
1.74 years
2.49 years
Risk-free rate 4.2%
0.9%
The primary sensitivities in the valuation of the warrants liability are driven by the Common Stock price at the measurement date and the expected volatility of the Common Stock over the remaining term.
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8.Accrued Expenses
As of As of
(In thousands) September 30, 2022 December 31, 2021
Accrued data costs $ 16,171  $ 18,116 
Payroll and payroll-related 12,730  16,272 
Professional fees 1,989  2,978 
Restructuring accrual 4,504  — 
Other 6,248  7,898 
Total accrued expenses $ 41,642  $ 45,264 
9.Related Party Transactions
Transactions with WPP plc
As of September 30, 2022 (based on public filings), WPP plc and its affiliates ("WPP") owned 11,319,363 shares of the Company's outstanding Common Stock, representing 12.3% of the outstanding Common Stock. The Company provides WPP, in the normal course of business, services amongst its different product lines and receives various services from WPP supporting the Company's data collection efforts.
The Company's results from transactions with WPP, as reflected in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income, are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2022 2021 2022 2021
Revenues $ 2,782  $ 3,467  $ 9,492  $ 10,080 
Cost of revenues 2,417  2,580  6,791  9,673 
The Company has the following balances related to transactions with WPP, as reflected in the Condensed Consolidated Balance Sheets:
As of As of
(In thousands) September 30, 2022 December 31, 2021
Assets
Accounts receivable, net $ 867  $ 3,506 
Liabilities
Accounts payable $ 2,117  $ 1,395 
Accrued expenses 337  740 
Contract liabilities 1,476  3,403 
Other non-current liabilities 384  1,582 
Transactions with Charter, Qurate and Pine
Charter, Qurate (through an affiliate) and Pine each hold 33.3% of the outstanding shares of Preferred Stock, which are entitled to convert into shares of Common Stock and to vote as a single class with the holders of the Common Stock as set forth in the Certificate of Designations. As of September 30, 2022 (based on public filings), Pine also owned 438,088 shares of the Company's outstanding Common Stock, representing 0.5% of the outstanding Common Stock. In addition, Charter, Qurate and Pine each designated two members of the Company's Board in accordance with the Stockholders Agreement.
As of September 30, 2022 and December 31, 2021, Charter, Qurate and Pine each owned 27,509,203 shares of the Company's outstanding Preferred Stock. On June 30, 2022, in accordance with the Certificate of Designations, the Company made cash dividend payments totaling $15.5 million to the holders of the Preferred Stock, representing dividends accrued for the period from June 30, 2021 through June 29, 2022. Accrued dividends to the holders of Preferred Stock as of September 30, 2022 were $4.0 million. The next scheduled dividend payment date for the Preferred Stock is June 30, 2023.
Concurrent with the closing of the Transactions on March 10, 2021, the Company entered into a ten-year Data License Agreement ("DLA") with Charter Communications Operating, LLC ("Charter Operating"), an affiliate of Charter. Under the DLA, Charter Operating will bill the Company for license fees according to a payment schedule that gradually increases from $10.0 million in the first year of the term to $32.3 million in the tenth year of the term. The Company recognizes expense for the license fees ratably over the term. On November 6, 2022, the Company and Charter Operating entered into an amendment to the DLA, pursuant to which the Company will receive license fee credits totaling $7.0 million. Refer to Footnote 12, Subsequent Events for additional information about the amendment.
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The Company's results from transactions with Charter and its affiliates, as reflected in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income, are detailed below:
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2022 2021 2022 2021
Revenues $ 501  $ 487  $ 1,773  $ 1,366 
Cost of revenues 5,521  5,529  16,588  16,471 
The Company has the following liability balances related to transactions with Charter and its affiliates, as reflected in the Condensed Consolidated Balance Sheet:
As of As of
(In thousands) September 30, 2022 December 31, 2021
Accounts payable $ 10,692  $ 5,180 
Accrued expenses 4,083  3,377 
Non-current portion of accrued data costs 14,066  7,843 
The Company recognized revenues of $0.2 million during the three months ended September 30, 2022 and 2021, and $0.6 million and $0.6 million during the nine months ended September 30, 2022 and 2021, respectively, from transactions with Qurate and its affiliates in the normal course of business as reflected in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.
The Company had no transactions, other than the issuance of shares of Preferred Stock and related matters, with Pine for the three and nine months ended September 30, 2022 and 2021.
Transactions with Starboard
In 2018, the Company entered into certain agreements with Starboard, then a beneficial owner of more than 5.0% of the Company's outstanding Common Stock. Refer to Footnote 6, Debt, for further information regarding these agreements and the Company's issuance of Notes to Starboard in 2018. As a result of these agreements and the transactions contemplated thereby, Starboard ceased to be a beneficial owner of more than 5.0% of the Company's outstanding Common Stock in January 2018. In addition, pursuant to a prior agreement with Starboard, the Company provided Starboard the right to designate certain members to the Company's Board. As of December 31, 2018, Starboard had no remaining right to designate any directors to the Board. As of September 30, 2022, there were no directors remaining on the Board who were designated by Starboard.
In connection with the extinguishment of the Notes on March 10, 2021, the Company issued 3,150,000 Conversion Shares to Starboard valued at $9.6 million as discussed in Footnote 6, Debt, which amount was included as a component of loss on extinguishment of debt in the Condensed Consolidated Statement of Operations and Comprehensive Loss.
The Company recorded interest expense, inclusive of non-cash accretion of issuance discount and deferred financing costs, related to the Notes of $6.6 million during the three months ended March 31, 2021.
The Company had no outstanding balances related to Starboard as of September 30, 2022 or December 31, 2021.
10.Organizational Restructuring
On September 29, 2022, the Company communicated a workforce reduction as part of its broader efforts to improve cost efficiency and better align its operating structure and resources with strategic priorities (collectively, the "Restructuring Plan"). In addition to employee terminations, the Restructuring Plan is expected to include the reallocation of commercial and product development resources; reinvestment in and modernization of key technology platforms; consolidation of data storage and processing activities to reduce the Company's data center footprint; and reduction of other operating expenses, including software and facility costs. The Company may also determine to exit certain activities in certain geographic regions in order to more effectively align resources with business priorities. In connection with the Restructuring Plan, which was authorized by the Board on September 19, 2022, the Company will incur certain exit-related costs. These costs are currently estimated to range between $13 million and $18 million. The Company expects implementation of the Restructuring Plan, including cash payments, to be substantially complete in the fourth quarter of 2023.
The table below summarizes the balance of the restructuring liability as of September 30, 2022, which is recorded in accrued expenses in the Condensed Consolidated Balance Sheets, and the changes in the accrued amounts for the nine months ended September 30, 2022:
(In thousands) Severance and Related Costs Other Total Restructuring Expense
Restructuring expense $ 4,552  $ 1,232  $ 5,784 
Payments —  (250) (250)
Foreign exchange (48) —  (48)
Balance as of September 30, 20221
$ 4,504  $ 982  $ 5,486 
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