filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally relate to future events or our future financial or operating performance and may include statements concerning, among other things, our business strategy (including anticipated trends and developments in, and management plans for, our business and the markets in which we operate), financial results, the impact of the COVID-19 pandemic on our business, operations, and the markets and communities in which we, our clients, and partners operate, results of operations, revenues, operating expenses, and capital expenditures, sales and marketing initiatives and competition. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “suggests,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements are not guarantees of future performance; they reflect our current views with respect to future events and are based on assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.
We discuss many of these risks in Part II of this Quarterly Report on Form 10-Q in greater detail under the heading “Risk Factors” and in other filings we make from time to time with the Securities and Exchange Commission (the “SEC”). Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q, which are inherently subject to change and involve risks and uncertainties. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made. Given these uncertainties, investors should not place undue reliance on these forward-looking statements.
Investors should read this Quarterly Report on Form 10-Q and the documents that we reference in this report and have filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2021, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
References to “Notes” are notes included in our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a global technology company that empowers buyers of advertising. Through our self-service, cloud-based platform, ad buyers can create, manage and optimize more expressive data-driven digital advertising campaigns across ad formats, including display, video, audio, native and social, on a multitude of devices, such as computers, mobile devices and connected TV (“CTV”). Our platform’s integrations with major data, inventory and publisher partners provide ad buyers reach and decisioning capabilities, and our enterprise application programming interfaces enable our clients to develop on top of the platform.
We commercially launched our platform in 2011, targeting the display advertising channel and have continued to add additional advertising channels. The gross spend on our platform comes from multiple channels including mobile, video (which includes CTV), display, audio, native, digital-out-of-home and social channels.
Our clients are primarily the advertising agencies and other service providers for advertisers, with whom we enter into ongoing master services agreements. We generate revenue by charging our clients a platform fee based on a percentage of a client’s total spend on advertising. We also generate revenue from providing data and other value-added services and platform features.
Executive Summary
Highlights
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| Dollars | Change | Dollars | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 376,962 | $ | 279,967 | $ | 96,995 | 35 | % | $ | 692,285 | $ | 499,778 | $ | 192,507 | 39 | % | |||||||||||||||||||||||||||||||
| Net income (loss) | $ | (19,073) | $ | 47,697 | $ | (66,770) | (140) | % | $ | (33,671) | $ | 70,339 | $ | (104,010) | (148) | % |
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Note: Amounts in thousands, except percentages.
Trends, Opportunities and Challenges
The growing digitization of media and fragmentation of audiences has increased the complexity of advertising and thereby increased the need for automation in ad buying, which we provide on our platform. In order to grow, we will need to continue to develop our platform’s programmatic capabilities and advertising inventory. We believe that key opportunities include our ongoing global expansion, continuing development of our CTV, video, audio and native ad inventory, and continuing development of the data usage, measurement and targeting capabilities provided by our platform.
We believe that growth of the programmatic advertising market is important for our ability to grow our business. Adoption of programmatic advertising by advertisers allows us to acquire new clients and grow revenue from existing clients. Although our clients include some of the largest advertising agencies in the world, we believe there is significant room for us to expand further within these clients and gain a larger amount of their advertising spend through our platform. We also believe that the industry trends noted above will lead to advertisers adopting programmatic advertising through platforms such as ours.
Similarly, the adoption of programmatic advertising by inventory owners and content providers allows us to expand the volume and type of advertising inventory that we present to our clients. For example, we have expanded our CTV, native and audio advertising offerings through our integrations with supply-side partners.
We invest for long-term growth. We anticipate that our operating expenses will continue to increase significantly in the foreseeable future as we invest in platform operations and technology and development to enhance our product features, including programmatic buying of CTV ad inventory, and in sales and marketing to acquire new clients and reinforce our relationships with existing clients. In addition, we expect to continue making investments in our infrastructure, including our information technology, financial and administrative systems and controls, to support our growing operations.
We believe the markets outside of the United States, and in particular across Europe, China and India for example, offer opportunities for growth, although such markets may also pose challenges related to compliance with local laws and regulations, restrictions on foreign ownership or investment, uncertainty related to trade relations and a variety of additional risks. We intend to make additional investments in sales and marketing and product development to expand in international markets where we are making significant investments in our platform and growing our team.
We believe that these investments will contribute to our long-term growth, although they may negatively impact profitability in the near term.
Our business model has allowed us to grow significantly, and we believe that our operating leverage enables us to support future growth profitably.
COVID-19
The worldwide spread of COVID-19, including the emergence of variants and subvariants, as well as global economic and geopolitical developments have resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by our clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of
time until the COVID-19 pandemic is contained, or economic activity normalizes. As a result of the current uncertainty in economic activity, we are unable to predict the size and duration of the impact on our revenue and our results of operations. The extent of the impact of these macro-economic factors on our operational and financial performance will depend on a variety of factors, including the duration and spread of COVID-19 and its variants and the duration and extent of geopolitical and global economic disruption and their respective impacts on our clients, partners, industry and employees, all of which are uncertain at this time and cannot be accurately predicted. See “Item 1A. Risk Factors” in Part II. Other Information for further discussion of the adverse impacts of the COVID-19 pandemic on our business.
Results of Operations for the Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
The following tables set forth our consolidated results of operations for the periods presented.
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) | (% of Revenue) | (in thousands) | (% of Revenue) | ||||||||||||||||||||
| Revenue | $ | 376,962 | 100 | % | $ | 279,967 | 100 | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Platform operations | 67,490 | 18 | % | 50,809 | 18 | % | |||||||||||||||||
| Sales and marketing | 89,420 | 24 | % | 61,755 | 22 | % | |||||||||||||||||
| Technology and development | 83,483 | 22 | % | 53,536 | 19 | % | |||||||||||||||||
| General and administrative | 134,826 | 36 | % | 51,919 | 19 | % | |||||||||||||||||
| Total operating expenses | 375,219 | 100 | % | 218,019 | 78 | % | |||||||||||||||||
| Income from operations | 1,743 | — | % | 61,948 | 22 | % | |||||||||||||||||
| Total other expense (income), net | (339) | — | % | 398 | — | % | |||||||||||||||||
| Income before income taxes | 2,082 | 1 | % | 61,550 | 22 | % | |||||||||||||||||
| Provision for income taxes | 21,155 | 6 | % | 13,853 | 5 | % | |||||||||||||||||
| Net income (loss) | $ | (19,073) | (5) | % | $ | 47,697 | 17 | % |
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) | (% of Revenue) | (in thousands) | (% of Revenue) | ||||||||||||||||||||
| Revenue | $ | 692,285 | 100 | % | $ | 499,778 | 100 | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Platform operations | 131,380 | 19 | % | 101,309 | 20 | % | |||||||||||||||||
| Sales and marketing | 160,108 | 23 | % | 117,519 | 24 | % | |||||||||||||||||
| Technology and development | 155,482 | 22 | % | 107,454 | 22 | % | |||||||||||||||||
| General and administrative | 260,625 | 38 | % | 103,764 | 21 | % | |||||||||||||||||
| Total operating expenses | 707,595 | 102 | % | 430,046 | 86 | % | |||||||||||||||||
| Income (loss) from operations | (15,310) | (2) | % | 69,732 | 14 | % | |||||||||||||||||
| Total other expense (income), net | (58) | — | % | 90 | — | % | |||||||||||||||||
| Income (loss) before income taxes | (15,252) | (2) | % | 69,642 | 14 | % | |||||||||||||||||
| Provision for (benefit from) income taxes | 18,419 | 3 | % | (697) | — | % | |||||||||||||||||
| Net income (loss) | $ | (33,671) | (5) | % | $ | 70,339 | 14 | % |
Note: Percentages may not sum due to rounding.
Revenue
Revenue increased by $97 million, or 35%, and $193 million, or 39%, for the three and six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021, respectively. The increase was primarily due to increases in gross spend in the current year on our platform, which was primarily driven by increases in the number of advertising campaigns executed per client.
Platform Operations
Platform operations expense increased by $17 million, or 33%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The increase was primarily due to increases of $7 million in personnel costs, which included $1 million in stock-based compensation; $4 million in data-related costs; $3 million in facilities costs and allocated overhead; and $2 million in hosting costs. The increase in personnel costs was due to an increase in headcount, as well as employee engagement costs, including in-person events that did not occur in the prior year. The increase in data-related costs was primarily attributable to investments in new data providers. The increase in facilities costs was primarily driven by new data centers and leases for additional office space to support our future growth. The increase in hosting costs was primarily attributable to support related to the increased use of our platform by our clients.
Platform operations expense increased by $30 million, or 30%, for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase was primarily due to increases of $11 million in personnel costs, which included $2 million in stock-based compensation; $8 million in data-related costs; $5 million in facilities costs and allocated overhead; and $4 million in hosting costs. The increase in personnel costs was primarily due to an increase in headcount. The increase in data-related costs was primarily attributable to investments in new data providers. The increase in facilities costs was primarily driven by new data centers and leases for additional office space to support our future growth. The increase in hosting costs was primarily attributable to support related to the increased use of our platform by our clients.
We expect platform operations expenses to increase in absolute dollars in future periods as we continue to experience increased volumes of media impressions through our platform and hire additional personnel to support our clients.
Sales and Marketing
Sales and marketing expense increased by $28 million, or 45%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The increase was primarily due to increases of $18 million in personnel costs, which included $3 million of stock-based compensation; $7 million in advertising and marketing costs; and $2 million in allocated facilities costs. The increase in personnel costs was primarily due to an increase in headcount in order to support our sales efforts and to continue to develop and maintain relationships with our clients, as well as employee engagement costs, including in-person events that did not occur in the prior year. The increase in advertising and marketing costs was primarily due to an increase in marketing campaigns, events and sponsorships. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth.
Sales and marketing expense increased by $43 million, or 36%, for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase was primarily due to increases of $30 million in personnel costs, which included $6 million of stock-based compensation; $10 million in advertising and marketing costs; and $3 million in allocated facilities costs. The increase in personnel costs was primarily due to an increase in headcount in order to support our sales efforts and continue to develop and maintain relationships with our clients, as well as an increase in incentive compensation. The increase in advertising and marketing costs was primarily due to an increase in marketing campaigns, events and sponsorships. The increase in allocated facilities costs was primarily driven by new leases for additional office space to support our future growth.
We expect sales and marketing expenses to increase in absolute dollars in future periods, as we focus on increasing the adoption of our platform with existing and new clients and expanding our international business.
Technology and Development
Technology and development expense increased by $30 million, or 56%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The increase was primarily due to increases of $28 million in personnel costs, which included $8 million of stock-based compensation. The increase in personnel costs was primarily attributable to increased headcount to maintain and support further development of our platform, as well as employee engagement costs, including in-person events that did not occur in the prior year.
Technology and development expense increased by $48 million, or 45%, for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase was primarily due to increases of $46 million in personnel costs, which included $15 million of stock-based compensation. The increase in personnel costs was primarily attributable to increased headcount to maintain and support further development of our platform.
We expect technology and development expense to increase in absolute dollars as we continue to invest in the development of our platform to support additional features and functions, increase the number of advertising and data inventory suppliers and support the increase in volume of advertising spending by our customers on our platform. We also intend to invest in technology to further automate our business processes.
General and Administrative
General and administrative expense increased by $83 million, or 160%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, primarily due to a $66 million increase in stock-based compensation related to the CEO Performance Option granted in the fourth quarter of the prior year, and a $10 million increase in payroll costs related to hiring to support our growth.
General and administrative expense increased by $157 million, or 151%, for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, primarily due to a $131 million increase in stock-based compensation related to the CEO Performance Option granted in the fourth quarter of the prior year, and an $18 million increase in payroll costs related to hiring to support our growth.
We expect general and administrative expenses to increase primarily due to an increase in stock-based compensation expense associated with the Performance Option and continued investment in corporate infrastructure to support growth.
Total Other Expense (Income), Net
Total other expense (income), net increased by $1 million for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The increase was primarily due to higher interest income on our short-term investments, partially offset by credit loss expense on available-for-sale securities.
Total other expense (income), net increased by $0.1 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase was primarily due to higher interest income on our short-term investments, partially offset by credit loss expense on available-for-sale securities.
Provision for (benefit from) Income Taxes
The U.S. federal statutory tax rate was 21% for the three and six months ended June 30, 2022 and 2021, respectively.
The provision for income taxes increased by $7 million for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The increase was primarily attributable to higher nondeductible stock-based compensation, which is primarily related to the CEO Performance Option, and lower tax benefits associated with employee stock-based awards.
The provision for income taxes increased by $19 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase was primarily attributable to higher nondeductible stock-based
compensation, which is primarily related to the CEO Performance Option, and lower tax benefits associated with employee stock-based awards.
Liquidity and Capital Resources
As of June 30, 2022, we had cash and cash equivalents of $933 million, including cash of $33 million held by our international subsidiaries, short-term investments in marketable securities of $280 million, working capital of $1,531 million and $444 million of availability under our Credit Facility (refer to the “Credit Facility” section below). For the six months ended June 30, 2022, we generated $238 million in cash flows from operating activities.
We believe our existing cash and cash equivalents, cash flow from operations, and our undrawn available balance under our Credit Facility will be sufficient to meet our working capital requirements for at least the next 12 months. Further, in November 2020, we filed a shelf registration statement on Form S-3 with the SEC (the “Shelf Registration”), which permits us to issue equity securities and equity-linked securities from time to time, subject to certain limitations. The Shelf Registration is intended to provide us with additional flexibility to access capital markets for general corporate purposes, subject to market conditions and our capital needs. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in *“*Item 1A. Risk Factors” within this Quarterly Report on Form 10-Q.
In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt-financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of additional indebtedness, we may be subject to increased fixed payment obligations and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors.
There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives. In addition, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected. We are closely monitoring the effect that current macro-economic factors may have on our working capital requirements.
Credit Facility
On June 15, 2021, we and a syndicate of banks, led by JPMorgan Chase Bank, N.A., as agent, entered into a Loan and Security Agreement (the “Credit Facility”). This Credit Facility replaced our prior credit facility, which was scheduled to terminate in May 2022. The Credit Facility consists of a $450 million revolving loan facility, with a $20 million sublimit for swingline borrowings and a $15 million sublimit for the issuance of letters of credit. Under certain circumstances, we have the right to increase the Credit Facility by an amount not to exceed $300 million.
On December 17, 2021, we amended the Credit Facility to expand the process for issuing letters of credit and the related invoicing, particularly with respect to letters of credit not denominated in U.S. Dollars.
As of June 30, 2022, we did not have an outstanding debt balance under the Credit Facility. Availability under the Credit Facility was $444 million as of June 30, 2022, which is net of outstanding letters of credit of $6 million. The Credit Facility matures, and all outstanding amounts become due and payable, on June 15, 2026. As of June 30, 2022, we were in compliance with all covenants.
For additional information regarding the Credit Facility, refer to Note 6—Debt.
Cash Flows
The following table summarizes our cash flows for the periods presented:
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (in thousands) | |||||||||||
| Net cash provided by operating activities | $ | 237,958 | $ | 85,441 | |||||||
| Net cash used in investing activities | $ | (93,575) | $ | (63,897) | |||||||
| Net cash provided by financing activities | $ | 34,146 | $ | 18,010 |
Operating Activities
Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our clients and related payments to our suppliers for advertising inventory and data. We typically pay suppliers in advance of collections from our clients. Our collection and payment cycles can vary from period to period. In addition, we expect seasonality to impact cash flows from operating activities on a sequential quarterly basis during the year.
For the six months ended June 30, 2022, cash provided by operating activities of $238 million resulted primarily from net income adjusted for non-cash items of $273 million, and a net decrease in our operating assets and liabilities of $35 million. The net decrease in working capital was primarily due to a $130 million decrease in accounts payable, a $24 million decrease in operating lease liabilities and a $22 million decrease in accrued expenses and other liabilities, partially offset by a $112 million decrease in accounts receivable and a $29 million decrease in prepaid expenses and other assets. The decrease in accounts payable was due to seasonality and the timing of payments to suppliers. The decrease in operating lease liabilities was due primarily to rent payments. The decrease in accrued expenses and other liabilities was due primarily to payments of taxes associated with stock-based awards, bonus payments and reduction of the liability related to the ESPP due to the purchase of shares in accordance with the plan. The decrease in accounts receivable was due to seasonality and the timing of cash receipts from clients. The decrease in prepaid expenses and other assets was primarily due to a decrease in the income tax receivable including the receipt of an income tax refund, partially offset by current year estimated income tax payments.
For the six months ended June 30, 2021, cash provided by operating activities of $85 million resulted primarily from net income adjusted for non-cash items of $223 million and a net decrease in our operating assets and liabilities of $137 million. The net decrease in working capital was primarily due to a $134 million decrease in accounts payable, partially offset by a $50 million decrease in accounts receivable. The decrease in accounts payable was due to the timing and seasonality of payments to suppliers. The decrease in accounts receivable was due to seasonality and the timing of cash receipts from clients.
Investing Activities
Our primary investing activities consist of investing in short-term marketable securities, purchases of property and equipment for the expansion of our new facilities in support of our expanding headcount as a result of our growth, and capital expenditures to develop our software in support of enhancing our technology platform. As our business grows, we expect our capital expenditures and our investment activity to continue to increase.
For the six months ended June 30, 2022, we used $94 million of cash in investing activities, consisting of $78 million of net purchases of short-term investments, $13 million to purchase property and equipment and $3 million of investments in capitalized software.
For the six months ended June 30, 2021, we used $64 million of cash in investing activities, consisting of $43 million of net purchases of short-term investments, $18 million to purchase property and equipment and $3 million of investments in capitalized software.
Financing Activities
For the six months ended June 30, 2022, cash provided by financing activities of $34 million was primarily due to $32 million proceeds from stock option exercises and $26 million proceeds from our employee stock purchase plan, partially offset by $23 million of taxes paid for restricted stock award settlements.
For the six months ended June 30, 2021, cash provided by financing activities of $18 million was primarily due to $26 million proceeds from stock option exercises and $23 million proceeds from our employee stock purchase plan, partially offset by $29 million of taxes paid for restricted stock award settlements.
Off-Balance Sheet Arrangements
We do not have any relationships with other entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We did not have any other off-balance sheet arrangements at June 30, 2022 other than the indemnification agreements described below.
Contractual Obligations
Our principal commitments consist of our non-cancelable operating leases for our various office facilities and other contractual commitments consisting of obligations to our hosting services providers, marketing contracts and providers of software as a service. In certain cases, the terms of the lease agreements provide for rental payments on a graduated basis.
The following table summarizes our non-cancelable contractual obligations at June 30, 2022 (in thousands):
| Payments Due by Period | ||||||||||||||||||||
| Less than One Year | One Year or More | Total | ||||||||||||||||||
| Operating lease commitments | $ | 28,747 | $ | 281,355 | $ | 310,102 | ||||||||||||||
| Other contractual commitments | 125,990 | 471,674 | 597,664 | |||||||||||||||||
| Total | $ | 154,737 | $ | 753,029 | $ | 907,766 |
In the ordinary course of business, we enter into agreements in which we may agree to indemnify clients, suppliers, vendors, lessors, business partners, lenders, stockholders and other parties with respect to certain matters, including losses resulting from claims of intellectual property infringement, damages to property or persons, business losses or other liabilities. Generally, these indemnity and defense obligations relate to our own business operations, obligations and acts or omissions. However, under some circumstances, we agree to indemnify and defend contract counterparties against losses resulting from their own business operations, obligations and acts or omissions, or the business operations, obligations and acts or omissions of third parties. These indemnity provisions generally survive termination or expiration of the agreements in which they appear. In addition, we have entered into indemnification agreements with our directors, executive officers and other officers that will require us to indemnify them against liabilities that may arise by reason of their status or service as directors, officers or employees. In the ordinary course of business, demands have been made upon us to provide indemnification under such agreements, but we are not aware of any claims that could have a material effect on our balance sheet, statement of operations or statement of cash flows. Accordingly, no amounts for any obligation have been recorded at June 30, 2022.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the assumptions and estimates associated with the evaluation of revenue recognition criteria, including the determination of revenue recognition as net versus gross in our revenue arrangements, stock-based
compensation expense and income taxes have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
Recently Issued Accounting Pronouncements
Refer to Note 2**—** Basis of Presentation and Summary of Significant Accounting Policies of our condensed consolidated financial statements.
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