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Table of Contents

 

 

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, 2021

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: 001-40349

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 November 05, 2021, there were 158,638,068 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

Table of Contents

TABLE OF CONTENTS

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Page

Part I

FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

4

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

4

Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2021 and 2020

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 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

23

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

33

Item 4.

Controls and Procedures

33

Part II

OTHER INFORMATION

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

Signatures

38

2

Table of Contents

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 Suitability,” “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.

3

Table of Contents

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)

September 30, 2021

December 31, 2020

Assets:

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

319,825

$

33,354

Trade receivables, net of allowances for doubtful accounts of $5,246 and $7,049 as of September 30, 2021 and December 31, 2020 respectively

95,509

94,677

Prepaid expenses and other current assets

 

9,326

 

13,904

Total current assets

 

424,660

 

141,935

Property, plant and equipment, net

 

16,693

 

18,107

Goodwill

 

244,672

 

227,349

Intangible assets, net

 

117,705

 

121,710

Deferred tax assets

 

82

 

82

Other non-current assets

 

2,185

 

2,151

Total assets

$

805,997

$

511,334

Liabilities and Stockholders' Equity:

 

Current liabilities

 

Trade payables

$

4,105

$

3,495

Accrued expense

 

25,127

 

25,419

Income tax liabilities

 

540

 

1,277

Current portion of capital lease obligations

 

2,140

 

1,515

Contingent considerations current

 

1,717

 

1,198

Other current liabilities

 

3,986

 

1,116

Total current liabilities

 

37,615

 

34,020

Long-term debt

 

 

22,000

Capital lease obligations

 

3,106

 

3,447

Deferred tax liabilities

 

29,732

 

31,418

Other non-current liabilities

 

2,788

 

3,292

Contingent considerations non-current

 

 

462

Total liabilities

$

73,241

$

94,639

Commitments and contingencies (Note 13)

 

Stockholders’ equity

 

Common stock, $0.001 par value, 1,000,000 shares authorized, 158,524 shares issued and 158,474 outstanding as of September 30, 2021; 700,000 shares authorized, 140,222 shares issued and 125,074 shares outstanding as of December 31, 2020

159

140

Preferred stock, $0.01 par value, 100,000 shares authorized, zero shares issued and outstanding as of September 30, 2021; 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

677,588

620,679

Treasury stock, at cost, 50 shares and 15,146 shares as of September 30, 2021 and December 31, 2020, respectively

(1,802)

(260,686)

Retained earnings

 

55,941

 

54,941

Accumulated other comprehensive income, net of income taxes

 

870

 

1,011

Total stockholders’ equity

 

732,756

 

416,695

Total liabilities and stockholders' equity

$

805,997

$

511,334

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

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DoubleVerify Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended September 30, 

Nine Months Ended September 30, 

(in thousands, except per share data)

    

2021

    

2020

    

2021

    

2020

Revenue

$

83,098

$

61,037

$

227,208

$

165,276

Cost of revenue (exclusive of depreciation and amortization shown separately below)

 

13,435

 

8,998

 

35,929

 

23,963

Product development

 

16,359

 

13,087

 

45,658

 

34,324

Sales, marketing and customer support

 

19,539

 

16,728

 

54,653

 

41,880

General and administrative

 

14,465

 

10,369

 

58,317

 

29,327

Depreciation and amortization

 

7,492

 

6,087

 

21,989

 

18,167

Income from operations

 

11,808

 

5,768

 

10,662

 

17,615

Interest expense

 

249

 

858

 

936

 

2,958

Other expense, net

 

365

 

481

 

365

 

359

Income before income taxes

 

11,194

 

4,429

 

9,361

 

14,298

Income tax expense (benefit)

 

3,270

 

(1,376)

 

8,361

 

1,975

Net income

$

7,924

$

5,805

$

1,000

$

12,323

Earnings per share:

 

 

Basic

$

0.05

$

0.04

$

0.01

$

0.09

Diluted

$

0.05

$

0.04

$

0.01

$

0.08

Weighted-average common stock outstanding:

 

 

 

 

Basic

 

158,045

139,841

144,305

139,779

Diluted

 

167,045

146,554

153,547

146,843

Comprehensive income:

 

 

Net income

$

7,924

$

5,805

$

1,000

$

12,323

Other comprehensive income:

 

 

Foreign currency cumulative translation adjustment

 

303

 

410

 

(141)

 

488

Total comprehensive income

$

8,227

$

6,215

$

859

$

12,811

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

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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

Common stock issued upon vesting of restricted stock units

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

Foreign currency translation adjustment

303

303

Shares repurchased for settlement of employee tax withholdings

50

(1,802)

(1,802)

Stock-based compensation expense

4,848

4,848

Common stock issued upon exercise of stock options

651

1

2,066

2,067

Common stock issued upon vesting of restricted stock units

105

Net income

7,924

7,924

Balance as of September 30, 2021

158,524

$

159

$

50

$

(1,802)

$

677,588

$

55,941

$

870

$

732,756

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

Foreign currency translation adjustment

410

410

Stock-based compensation

1,619

1,619

Common stock issued under employee purchase plan

61

423

423

Common stock issued upon exercise of stock options

44

263

263

Common stock issued upon vesting of restricted stock units

19

Net income

5,805

5,805

Balance as of September 30, 2020

139,935

$

140

$

$

$

287,825

$

46,811

$

421

$

335,197

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

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DoubleVerify Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended

September 30, 

(in thousands)

    

2021

    

2020

Operating activities:

 

  

 

  

Net income

$

1,000

$

12,323

Adjustments to reconcile net income to net cash provided by operating activities

 

Bad debt (recovery) expense

 

(1,186)

 

3,041

Depreciation and amortization expense

 

21,989

 

18,167

Amortization of debt issuance costs

 

221

 

211

Accretion of acquisition liabilities

 

 

36

Deferred taxes

 

(4,572)

 

(3,912)

Stock-based compensation expense

 

12,100

 

3,561

Interest expense (income)

 

130

 

(36)

Change in fair value of contingent consideration

 

57

 

(949)

Offering costs

21,797

1,852

Other

 

661

 

742

Changes in operating assets and liabilities net of effect of business combinations

 

Trade receivables

 

690

 

(11,633)

Prepaid expenses and other current assets

 

4,590

 

(3,457)

Other non-current assets

 

(162)

 

(9)

Trade payables

 

425

 

1,881

Accrued expenses

 

(684)

 

2,081

Other current liabilities

 

2,747

 

(7,143)

Other non-current liabilities

 

(1,369)

 

1,082

Net cash provided by operating activities

 

58,434

 

17,838

Investing activities:

 

 

Purchase of property, plant and equipment

 

(5,499)

 

(6,545)

Acquisition of business, net of cash acquired

(24,323)

Net cash (used in) investing activities

 

(29,822)

 

(6,545)

Financing activities:

 

 

  

Payments of long-term debt

(22,000)

(563)

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

5,514

383

Proceeds from common stock issued under employee purchase plan

425

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

(21,797)

(1,230)

Capital lease payments

(1,222)

 

(1,242)

Shares repurchased for settlement of employee tax withholdings

(1,802)

Net cash provided by (used in) financing activities

 

258,033

 

(4,911)

Effect of exchange rate changes on cash and cash equivalents and restricted cash

 

(173)

 

(38)

Net increase in cash, cash equivalents, and restricted cash

 

286,472

 

6,344

Cash, cash equivalents, and restricted cash - Beginning of period

 

33,395

 

11,342

Cash, cash equivalents, and restricted cash - End of period

$

319,867

$

17,686

Cash and cash equivalents

319,825

17,289

Restricted cash (included in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets)

 

42

 

397

Total cash and cash equivalents and restricted cash

$

319,867

$

17,686

Supplemental cash flow information:

 

 

  

Cash paid for taxes

 

5,586

 

14,901

Cash paid for interest

 

580

 

2,692

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

 

41

 

1,313

Offering costs included in accounts payable and accrued expense

772

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

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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 September 30, 2021 and December 31, 2020, the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2021 and 2020, the Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 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.

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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 including, 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 the 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 intends to adopt amendment ASU No. 2018-15 on December 31, 2021 using a prospective approach. The Company is currently in the process of evaluating the impact of this standard and its adoption is not expected to have a material impact on the Company’s Condensed Consolidated Financial Statements.

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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 the 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 method of adoption. The Company is currently in the process of evaluating the impact of this standard and its adoption 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

    

Nine Months Ended

September 30, 

September 30, 

(in thousands)

    

2021

    

2020

    

2021

    

2020

Advertiser - direct

$

34,057

$

27,582

$

93,260

$

73,476

Advertiser - programmatic

 

41,902

 

28,044

 

113,694

 

76,023

Supply-side customer

 

7,139

 

5,411

 

20,254

 

15,777

Total revenue

$

83,098

$

61,037

$

227,208

$

165,276

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 $36.1 million and $44.9 million as of September 30, 2021 and December 31, 2020, respectively.

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DoubleVerify Holdings, Inc.

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

4.    Business Combinations

Meetrics GmbH

On August 31, 2021, the Company acquired all of the outstanding stock of Meetrics GmbH (“Meetrics”). Meetrics was founded in 2008 in Berlin, Germany and is a European-based ad verification provider – offering comprehensive media quality measurement solutions across viewability, fraud, brand safety and suitability. The aggregate net cash purchase price was $24.3 million. This acquisition expands DoubleVerify’s international presence as substantially all of Meetrics’ customer base and business operations are based in Europe, the Middle East, and Africa.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:

(in thousands)

    

Acquisition Date

Assets:

 

  

Cash and cash equivalents

$

1,007

Trade receivables

 

948

Other assets