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 June 30, 2021

☐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: 001-40349

DoubleVerify Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

82-2714562

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

233 Spring Street

New York, NY, 10013

(Address of Principal Executive Offices)

(212) 631-2111

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading symbol	Name of Exchange on which registered
Common Stock, par value $0.001 per share	DV	New York Stock Exchange

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 ☒

As of July 26, 2021, there were 157,851,204 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

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Part I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4

	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	4

	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2021 and 2020	5

	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020	6

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4.	Controls and Procedures	31

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	35

Signatures		37

Note About Forward Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included in this Quarterly Report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs, savings and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct.

You should read the “Special Note Regarding Forward-Looking Statements” and “Risk Factors” sections of our final prospectus, dated April 20, 2021 and filed with the Securities and Exchange Commission (“SEC”), pursuant to Rule 424(b)(4) under the Securities Act, on April 22, 2021 (the “Prospectus”), for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. There may be other factors not presently known to us or which we currently consider to be immaterial that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this Quarterly Report and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

“DoubleVerify,” “the DV Authentic Ad,” “Authentic Brand Safety,” “DV Pinnacle” and other trademarks of ours appearing in this report are our property and we deem particularly important to the marketing activities conducted by each of our businesses. Solely for convenience, the trademarks, service marks and trade names referred to in this report are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names. This report contains additional trade names and trademarks of other companies. We do not intend our use or display of other companies' trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

Unless the context otherwise requires, the terms “DoubleVerify,” ‘‘we,’’ ‘‘us,’’ ‘‘our,’’ and the ‘‘Company,’’ as used in this report refer to DoubleVerify Holdings, Inc. and its consolidated subsidiaries. DoubleVerify Holdings, Inc. and its subsidiary DoubleVerify MidCo, Inc. changed their names from Pixel Group Holdings Inc. and Pixel Parent Inc., respectively, prior to the date of this report. All references to DoubleVerify Holdings, Inc. and DoubleVerify MidCo, Inc. are to these entities both prior to and after the name changes.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DoubleVerify Holdings, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	As of		As of
(in thousands, except per share data)	June 30, 2021		December 31, 2020
Assets:
Current assets
Cash and cash equivalents	$	330,355	$	33,354
Trade receivables, net of allowances for doubtful accounts of $6,889 and $7,049 as of June 30, 2021 and December 31, 2020 respectively		85,555		94,677
Prepaid expenses and other current assets		14,106		13,904
Total current assets		430,016		141,935
Property, plant and equipment, net		17,572		18,107
Goodwill		227,349		227,349
Intangible assets, net		112,780		121,710
Deferred tax assets		82		82
Other non-current assets		2,303		2,151
Total assets	$	790,102	$	511,334
Liabilities and Stockholders' Equity:
Current liabilities
Trade payables	$	4,122	$	3,495
Accrued expense		25,460		25,419
Income tax liabilities		670		1,277
Current portion of capital lease obligations		2,021		1,515
Contingent considerations current		1,717		1,198
Other current liabilities		2,101		1,116
Total current liabilities		36,091		34,020
Long-term debt		—		22,000
Capital lease obligations		3,618		3,447
Deferred tax liabilities		28,243		31,418
Other non-current liabilities		2,734		3,292
Contingent considerations non-current		—		462
Total liabilities	$	70,686	$	94,639
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock, $0.001 par value, 1,000,000 shares authorized, 157,768 shares issued and outstanding as of June 30, 2021; 700,000 shares authorized, 140,222 shares issued and 125,074 shares outstanding as of December 31, 2020		158		140
Preferred stock, $0.01 par value, 100,000 shares authorized and zero shares issued and outstanding as of June 30, 2021 and 61,006 shares authorized, issued, and outstanding as of December 31, 2020. Liquidation preference: $350,000 as of December 31, 2020		—		610
Additional paid-in capital		670,674		620,679
Treasury stock, at cost, zero shares and 15,146 shares as of June 30, 2021 and December 31, 2020, respectively		—		(260,686)
Retained earnings		48,017		54,941
Accumulated other comprehensive income, net of income taxes		567		1,011
Total stockholders’ equity		719,416		416,695
Total liabilities and stockholders' equity	$	790,102	$	511,334

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

DoubleVerify Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2021		2020		2021		2020
Revenue	$	76,524	$	53,020	$	144,110	$	104,239
Cost of revenue (exclusive of depreciation and amortization shown separately below)		12,291		7,655		22,494		14,965
Product development		15,120		10,906		29,299		21,237
Sales, marketing and customer support		19,580		12,833		35,114		25,152
General and administrative		32,017		8,262		43,852		18,958
Depreciation and amortization		7,440		6,146		14,497		12,080
(Loss) income from operations		(9,924)		7,218		(1,146)		11,847
Interest expense		297		936		687		2,100
Other expense (income), net		49		198		—		(122)
(Loss) income before income taxes		(10,270)		6,084		(1,833)		9,869
Income tax expense		2,298		2,006		5,091		3,351
Net (loss) income	$	(12,568)	$	4,078	$	(6,924)	$	6,518
(Loss) earnings per share:
Basic	$	(0.08)	$	0.03	$	(0.05)	$	0.05
Diluted	$	(0.08)	$	0.03	$	(0.05)	$	0.04
Weighted-average common stock outstanding:
Basic		149,596		139,756		137,355		139,748
Diluted		149,596		146,541		137,355		146,927
Comprehensive (loss) income:
Net (loss) income	$	(12,568)	$	4,078	$	(6,924)	$	6,518
Other comprehensive (loss) income:
Foreign currency cumulative translation adjustment		355		231		(444)		78
Total comprehensive (loss) income	$	(12,213)	$	4,309	$	(7,368)	$	6,596

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

DoubleVerify Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


														Accumulated
														Other
														Comprehensive
										Additional				Income (Loss)		Total
	Common Stock			Preferred Stock			Treasury Stock			Paid-in		Retained		Net of		Stockholders’
(in thousands)	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Earnings		Income Taxes		Equity
Balance as of January 1, 2021	140,222	$	140	61,006	$	610	15,146	$	(260,686)	$	620,679	$	54,941	$	1,011	$	416,695
Foreign currency translation adjustment	—		—	—		—	—		—		—		—		(799)		(799)
Stock-based compensation expense	—		—	—		—	—		—		2,538		—		—		2,538
Common stock issued upon exercise of stock options	180		—	—		—	—		—		538		—		—		538
Net income	—		—	—		—	—		—		—		5,644		—		5,644
Balance as of March 31, 2021	140,402	$	140	61,006	$	610	15,146	$	(260,686)	$	623,755	$	60,585	$	212	$	424,616
Foreign currency translation adjustment	—		—	—		—	—		—		—		—		355		355
Stock-based compensation expense	—		—	—		—	—		—		4,714		—		—		4,714
Common stock issued upon exercise of stock options	871		2	—		—	—		—		2,907		—		—		2,909
RSU vested	217		—	—		—	—		—		—		—		—		—
Conversion of Series A preferred stock to common stock in connection with initial public offering	5,190		5	(61,006)		(610)	(15,146)		260,686		(260,081)		—		—		—
Issuance of common stock in connection with initial public offering	9,977		10	—		—	—		—		269,380		—		—		269,390
Issuance of common stock in connection with the private placement concurrent with the initial public offering	1,111		1	—		—	—		—		29,999		—		—		30,000
Net loss	—		—	—		—	—		—		—		(12,568)		—		(12,568)
Balance as of June 30, 2021	157,768	$	158	—	$	—	—	$	—	$	670,674	$	48,017	$	567	$	719,416

Balance as of January 1, 2020	139,721	$	140	—	$	—	—	$	—	$	283,457	$	34,488	$	(67)	$	318,018
Foreign currency translation adjustment	—		—	—		—	—		—		—		—		(153)		(153)
Stock-based compensation expense	—		—	—		—	—		—		802		—		—		802
Common stock issued upon exercise of stock options	32		—	—		—	—		—		70		—		—		70
Net income	—		—	—		—	—		—		—		2,440		—		2,440
Balance as of March 31, 2020	139,753	$	140	—	$	—	—	$	—	$	284,329	$	36,928	$	(220)	$	321,177
Foreign currency translation adjustment	—		—	—		—	—		—		—		—		231		231
Stock-based compensation	—		—	—		—	—		—		1,140		—		—		1,140
Common stock issued upon exercise of stock options	58		—	—		—	—		—		51		—		—		51
Net income	—		—	—		—	—		—		—		4,078		—		4,078
Balance as of June 30, 2020	139,811	$	140	—	$	—	—	$	—	$	285,520	$	41,006	$	11	$	326,677

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

DoubleVerify Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended
	June 30,
(in thousands)	2021		2020
Operating activities:
Net (loss) income	$	(6,924)	$	6,518
Adjustments to reconcile net (loss) income to net cash provided by operating activities
Bad debt expense		199		1,748
Depreciation and amortization expense		14,496		12,080
Amortization of debt issuance costs		147		142
Accretion of acquisition liabilities		—		36
Deferred taxes		(3,175)		(3,096)
Stock-based compensation expense		7,252		1,942
Interest expense (income)		9		(42)
Change in fair value of contingent consideration		57		(899)
Offering costs		21,801		1,058
Other		62		621
Changes in operating assets and liabilities net of effect of business combinations
Trade receivables		8,518		(47)
Prepaid expenses and other current assets		(284)		855
Other non-current assets		(299)		3
Trade payables and other liabilities		541		2,057
Accrued expenses		121		(2,978)
Other current liabilities		827		(2,680)
Other non-current liabilities		(1,120)		148
Net cash provided by operating activities		42,228		17,466
Investing activities:
Purchase of property, plant and equipment		(3,513)		(4,562)
Net cash (used in) investing activities		(3,513)		(4,562)
Financing activities:
Payments of long-term debt		(22,000)		(189)
Deferred payment related to Leiki acquisition		—		(2,033)
Deferred payment related to Zentrick acquisition		(50)		(50)
Payment of contingent consideration related to Zentrick acquisition		—		(601)
Proceeds from common stock issued upon exercise of stock options		3,447		121
Proceeds from issuance of common stock upon initial public offering		269,390		—
Proceeds from issuance of common stock in connection with concurrent private placement		30,000		—
Payments related to offering costs		(21,708)		(1,107)
Capital lease payments		(804)		(874)
Net cash provided by (used in) financing activities		258,275		(4,733)
Effect of exchange rate changes on cash and cash equivalents and restricted cash		13		(80)
Net increase in cash, cash equivalents, and restricted cash		297,003		8,091
Cash, cash equivalents, and restricted cash - Beginning of period		33,395		11,342
Cash, cash equivalents, and restricted cash - End of period	$	330,398	$	19,433

Cash and cash equivalents		330,355		19,038
Restricted cash (included in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets)		43		395
Total cash and cash equivalents and restricted cash	$	330,398	$	19,433
Supplemental cash flow information:
Cash paid for taxes		3,305		7,777
Cash paid for interest		525		1,654
Non-cash investing and financing activities:
Conversion of Series A preferred stock to common stock in connection with the initial public offering		610		—
Treasury stock reissued upon the conversion of Series A preferred stock to common stock		260,686		—
Acquisition of equipment under capital lease		1,518		973
Capital assets financed by accounts payable		—		76
Offering costs included in accounts payable and accrued expense		89		100

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands, except per share data, unless otherwise stated)

1. Description of Business

DoubleVerify is a software platform for digital media measurement, data and analytics. The Company’s solutions provide advertisers with a single measure of digital ad quality and effectiveness, the DV Authentic Ad, which ensures that a digital ad was delivered in a brand-safe environment, fully viewable, by a real person and in the intended geography. The Company’s software interface, DV Pinnacle, provides customers with access to data on all of their digital ads and enables them to make changes to their ad strategies on a real-time basis. The Company’s software solutions are integrated across the entire digital advertising ecosystem, including programmatic platforms, Connected TV (“CTV”), social media channels and digital publishers. The Company’s solutions are accredited by the Media Rating Council, which allows the Company’s data to be used as a single-source standard in the evaluation and measurement of digital ads.

The Company was incorporated on August 16, 2017, is registered in the state of Delaware and is the parent company of DoubleVerify Midco, Inc. (“MidCo”), which is in turn the parent company of DoubleVerify Inc. On August 18, 2017, DoubleVerify Inc. entered into an agreement and plan of merger (the “Agreement”), whereby the Company, formerly known as Pixel Group Holdings, Inc. and Pixel Merger Sub, Inc. (“Merger Sub”), a wholly owned subsidiary of the Company, agreed to provide for the merger of the Merger Sub with DoubleVerify Inc. pursuant to the terms and conditions of the Agreement.

On the effective date, Merger Sub was merged with and into DoubleVerify Inc. whereupon the separate corporate existence of Merger Sub ceased and DoubleVerify Inc. continued as the surviving corporation.

Through the merger, the Company acquired 100% of the outstanding equity instruments of DoubleVerify Inc. resulting in a change of control at the parent level. The merger resulted in the application of acquisition accounting under the provisions of Financial Accounting Standards Board (“FASB”) Topic Accounting Standards Codification (“ASC”) 805, Business Combinations.

The Company has wholly owned subsidiaries in numerous jurisdictions including Israel, the United Kingdom, Germany, Singapore, Australia, Canada, Brazil, Belgium, Mexico, France, Japan, Spain, and Finland, and operates in one reportable segment.

On April 23 2021, the Company completed an initial public offering of its common stock (“IPO”). See Footnote 12, Stockholders’ Equity.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Preparation and Principles of Consolidation

The accompanying Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2021 and 2020, the Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020, and the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair presentation of the results for the periods shown in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the applicable rules and regulations of the SEC for interim financial reporting periods. Accordingly, certain information and footnote disclosures have been condensed or omitted pursuant to SEC rules that would ordinarily be required under GAAP for complete financial statements. These unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements as of December 31, 2020 and 2019 and for the years then ended and the accompanying notes thereto included in the Company’s Prospectus.

DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands, except per share data, unless otherwise stated)

On March 29, 2021, the Company effected a 1-for-3 reverse stock split (‘‘reverse stock split’’) of its outstanding common stock, par value $0.001 per share (“common stock”), and a proportional adjustment to the existing conversion ratio of its then-outstanding Series A Preferred Stock, par value $0.01 per share (“preferred stock”). Accordingly, all share and per share amounts for all periods presented in these Condensed Consolidated Financial Statements and notes thereto, have been adjusted retrospectively, where applicable, to reflect this reverse stock split.

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 measurement of items include, but not limited to: revenue recognition criteria including the determination of principal versus agent revenue considerations, income taxes, the valuation and recoverability of goodwill and intangible assets, the assessment of potential loss from contingencies, the allowance for doubtful accounts, and assumptions used in determining the fair value of stock-based compensation. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. These estimates are based on the information available as of the date of the Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards.

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which is intended to provide more decision-useful information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to accounts receivable. This guidance is effective for annual reporting periods beginning after December 15, 2022 for non-public entities, including interim periods within that reporting period. Early adoption is permitted and the update allows for a modified retrospective method of adoption. The Company is currently in process of evaluating the impact of this standard on the Company’s Condensed Consolidated Financial Statements.

Cloud Computing

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”). This update was issued to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments in ASU 2018-15 are effective for annual periods beginning after December 15, 2020 for non-public entities, and interim periods within annual periods beginning after December 15, 2021. The update allows for a retrospective or prospective method of adoption. The Company is currently in process of evaluating the impact of this standard on the Company’s Condensed Consolidated Financial Statements.

DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands, except per share data, unless otherwise stated)

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases Topic 842 (“ASU 2016-02”). The guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC 840, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. In July 2018, FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ("ASU No. 2018-10") to further clarify, correct and consolidate various areas previously discussed in ASU 2016-02. FASB also issued ASU No. 2018-11, Leases: Targeted Improvements ("ASU 2018-11") to provide entities another option for transition and lessors with a practical expedient. The transition option allows entities to not apply ASU No. 2016-02 in comparative periods in the financial statements in the year of adoption. The amendments in ASU No. 2016-02, ASU No. 2018-10 and ASU No. 2018-11 are effective for fiscal years beginning after December 15, 2021 for non-public entities and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently in process of evaluating the impact of this standard on the Company’s Condensed Consolidated Financial Statements.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“ASU 2019-12”). ASU 2019-12 issued guidance on the accounting for income taxes that, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. For non-public entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. Certain amendments included in the update allows for a retrospective, modified retrospective, or prospective methods of adoption. The adoption of this guidance is not expected to have a material impact on the Company’s Condensed Consolidated Financial Statements.

3. Revenue

The following table disaggregates revenue between advertiser customers, where revenue is generated based on number of ads measured for Direct or measured and purchased for Programmatic, and supply-side customers, where revenue is generated based on contracts with minimum guarantees or contracts that contain overages after minimum guarantees are achieved.

Disaggregated revenue by customer type is as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2021		2020		2021		2020
Advertiser - direct	$	31,662	$	23,707	$	59,203	$	45,894
Advertiser - programmatic		37,880		24,128		71,792		47,979
Supply-side customer		6,982		5,185		13,115		10,366
Total revenue	$	76,524	$	53,020	$	144,110	$	104,239

Contract assets relate to the Company’s conditional right to consideration for completed performance under the contract (e.g., unbilled receivables). Trade receivables, net of allowance for doubtful accounts, include unbilled receivable balances of $26.6 million and $44.9 million as of June 30, 2021 and December 31, 2020, respectively.

DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands, except per share data, unless otherwise stated)

4. Business Combinations

On February 15, 2019, the Company acquired all of the outstanding stock of Zentrick NV (“Zentrick”). Zentrick, headquartered in Ghent, Belgium is a digital video technology company that provides middleware solutions that increase the performance of online video advertising for brand advertisers, advertising platforms and publishers. This acquisition integrates technology into the Company’s suite of products related to advertising viewability specifically on video formats, a growing segment of the advertising market and critical for the delivery of verification services to social platforms and CTV. The aggregate purchase price consists of 1) $23.2 million paid in cash at closing, which excluded closing adjustments of approximately $0.2 million paid in April 2019 2) $0.1 million in holdback payment of which 50% was payable 12 months after the closing date, and the remaining 50% was payable 24 months after the closing date and 3) up to $17.3 million of performance-based deferred payments that comprises two components. The first component has a $4.0 million maximum payment related to four milestone tranches of $1.0 million each based on achievement of certain product milestones (“technical milestones”). The second component has a total maximum payment of $13.0 million and varies based upon certain revenue targets in fiscal 2019, 2020, and 2021 (“revenue targets”).

Under the terms of the deferred payment, a portion of the technical milestones and revenue targets have been accounted at fair value as contingent consideration in the business combination with the remaining portion being accounted for as compensation expense under ASC 710, Compensation - General.

As of June 30, 2021, the technical milestone and revenue target components of the contingent consideration had a fair value of $1.2 million and $0.5 million, respectively, and is recorded in Contingent Considerations Current in the Condensed Consolidated Balance Sheets. The Company recorded a $0.1 million unrealized loss for the change in fair value in the Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2021, respectively. The Company recorded a $0.1 million unrealized loss and $0.9 million unrealized gain for the change in fair value in the Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2020, respectively.

As of June 30, 2021, the technical milestone and revenue target components treated as compensation cost total $1.1 million included in Other Current Liabilities in the Condensed Consolidated Balance Sheets. $0.1 million and less than $0.1 million were charged to the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2021, respectively. Less than $0.1 million and $0.2 million were charged to the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2020, respectively.

5. Goodwill and Intangible Assets

There were no changes to the goodwill carrying value from December 31, 2020 through June 30, 2021. The foreign exchange impact on goodwill was immaterial for the period.

The following table summarizes the Company’s intangible assets and related accumulated amortization:


(in thousands)	June 30, 2021						December 31, 2020
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Trademarks and brands		11,690		(2,985)		8,705		11,690		(2,562)		9,128
Customer relationships		102,220		(32,006)		70,214		102,220		(27,720)		74,500
Developed technology		63,205		(29,344)		33,861		63,210		(25,128)		38,082
Total intangible assets	$	177,115	$	(64,335)	$	112,780	$	177,120	$	(55,410)	$	121,710

Amortization expense for three months ended June 30, 2021 and June 30, 2020 is $4.4 million and $4.5 million, respectively. Amortization expense related to intangible assets amounted to $8.9 million and $9.0 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands, except per share data, unless otherwise stated)

Estimated future expected amortization expense of intangible assets as of June 30, 2021, is as follows:


(in thousands)
2021	$	8,930
2022		17,860
2023		17,825
2024		16,205
2025		14,273
2026		9,777
Thereafter		27,910
Total	$	112,780

The weighted-average remaining useful life by major asset classes as of June 30, 2021 is as follows:


		(In years)
Trademarks and brands		11
Customer relationships		8
Developed technology		4

There were no impairments identified during the six months ended June 30, 2021 or June 30, 2020.

6. Property, Plant and Equipment

Property, plant and equipment, including equipment under capital lease obligations and capitalized software development costs, consists of the following:


	As of
(in thousands)	June 30, 2021		December 31, 2020
Computers and peripheral equipment	$	16,695	$	14,577
Office furniture and equipment		1,115		1,124
Leasehold improvements		9,266		9,267
Capitalized software development costs		11,247		8,382
Less accumulated depreciation and amortization		(20,751)		(15,243)
Total property, plant and equipment, net	$	17,572	$	18,107

For the three months ended June 30, 2021 and 2020, total depreciation expense was $3.0 million and $1.7 million, respectively. For the six months ended June 30, 2021 and 2020, total depreciation expense was $5.6 million and $3.1 million, respectively.

Property and equipment financed through capital lease obligations, consisting of computer equipment, totaled $12.3 million and $10.7 million on June 30, 2021 and December 31, 2020, respectively. As of June 30, 2021 and December 31, 2020, accumulated depreciation related to property and equipment financed through capital leases totaled $8.9 million and $7.6 million, respectively. Refer to Note 13, Commitments and Contingencies.

DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands, except per share data, unless otherwise stated)

7. Fair Value Measurement

The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis:


	As of June 30, 2021
	Quoted Market
	Prices in Active				Significant
(in thousands)	Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs		Total Fair Value
	(Level 1)		(Level 2)		(Level 3)		Measurements
Assets:
Cash equivalents:	$	9,808		—		—		9,808
Liabilities:
Contingent consideration current		—		—		1,717		1,717
Contingent consideration non-current		—		—		—		—
Total contingent consideration	$	—	$	—	$	1,717	$	1,717

As of December 31, 2020

Quoted Market

Prices in Active

Significant

(in thousands)

Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Tota1 Fair Value

(Level 1)

(Level 2)

(Level 3)

Measurements

Assets:

Cash equivalents:

2,474