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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, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-40349

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)

462 Broadway

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 6, 2023, there were 169,986,052 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

Table of Contents

DoubleVerify Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended September 30, 2023

TABLE OF CONTENTS

0

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Part I

FINANCIAL INFORMATION (Unaudited)

    

    

Page

Item 1.

Condensed Consolidated Financial Statements

4

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

4

Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2023 and 2022

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

7

Notes to Condensed Consolidated Financial Statements

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

30

Item 4.

Controls and Procedures

30

Part II

OTHER INFORMATION

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

Signatures

34

2

Table of Contents

Special Note Regarding 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,” “plan,” “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 Annual Report on Form 10-K, for the year ended December 31, 2022 and filed with the Securities and Exchange Commission (“SEC”), on March 1, 2023, 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 this report. 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 and in the Annual Report on Form 10-K for the year ended December 31, 2022. We undertake no obligation to publicly update or revise any 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 them 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.

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, 2023

December 31, 2022

Assets:

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

259,212

$

267,813

Trade receivables, net of allowances for doubtful accounts of $10,397 and $8,893 as of September 30, 2023 and December 31, 2022, respectively

190,673

167,122

Prepaid expenses and other current assets

 

19,473

 

10,161

Total current assets

 

469,358

 

445,096

Property, plant and equipment, net

 

55,764

 

47,034

Operating lease right-of-use assets, net

61,480

64,692

Goodwill

 

431,307

 

343,011

Intangible assets, net

 

147,306

 

135,429

Deferred tax assets

 

7,983

 

35

Other non-current assets

 

1,981

 

1,731

Total assets

$

1,175,179

$

1,037,028

Liabilities and Stockholders' Equity:

 

Current liabilities

 

Trade payables

$

9,638

$

6,675

Accrued expenses

 

41,751

 

33,085

Operating lease liabilities, current

9,080

7,041

Income tax liabilities

 

 

11,953

Current portion of finance lease obligations

 

3,101

 

1,846

Contingent consideration

1,193

Other current liabilities

 

9,987

 

8,310

Total current liabilities

 

74,750

 

68,910

Operating lease liabilities, non-current

72,802

74,086

Finance lease obligations

 

3,406

 

779

Deferred tax liabilities

 

9,334

 

12,890

Other non-current liabilities

 

3,602

 

3,504

Total liabilities

163,894

160,169

Commitments and contingencies (Note 14)

 

Stockholders’ equity

 

Common stock, $0.001 par value, 1,000,000 shares authorized, 169,918 shares issued and 169,905 outstanding as of September 30, 2023; 1,000,000 shares authorized, 165,448 shares issued and 165,417 outstanding as of December 31, 2022

170

165

Additional paid-in capital

857,561

756,299

Treasury stock, at cost, 13 shares and 31 shares as of September 30, 2023 and December 31, 2022, respectively

(397)

(796)

Retained earnings

 

165,878

 

127,517

Accumulated other comprehensive loss, net of income taxes

 

(11,927)

 

(6,326)

Total stockholders’ equity

 

1,011,285

 

876,859

Total liabilities and stockholders' equity

$

1,175,179

$

1,037,028

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

4

Table of Contents

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)

    

2023

    

2022

    

2023

    

2022

Revenue

$

143,974

$

112,254

$

400,312

$

318,782

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

 

26,466

19,323

 

76,609

 

55,036

Product development

 

32,315

23,932

 

92,811

 

68,742

Sales, marketing and customer support

 

32,971

27,118

 

90,220

 

78,535

General and administrative

 

23,280

19,395

 

63,223

 

60,599

Depreciation and amortization

 

10,706

8,089

 

29,365

 

25,446

Income from operations

 

18,236

 

14,397

 

48,084

 

30,424

Interest expense

 

288

226

 

791

681

Other (income) expense, net

 

(1,633)

231

 

(6,843)

422

Income before income taxes

 

19,581

13,940

 

54,136

 

29,321

Income tax expense

 

6,234

3,609

 

15,775

4,121

Net income

$

13,347

$

10,331

$

38,361

$

25,200

Earnings per share:

 

 

Basic

$

0.08

$

0.06

$

0.23

$

0.15

Diluted

$

0.08

$

0.06

$

0.22

$

0.15

Weighted-average common stock outstanding:

 

 

 

 

Basic

 

168,606

164,297

166,937

163,512

Diluted

 

173,980

170,876

172,812

170,558

Comprehensive income:

 

 

Net income

$

13,347

$

10,331

$

38,361

$

25,200

Other comprehensive loss:

 

 

Foreign currency cumulative translation adjustment

 

(6,417)

 

(4,630)

 

(5,601)

 

(11,834)

Total comprehensive income

$

6,930

$

5,701

$

32,760

$

13,366

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

5

Table of Contents

DoubleVerify Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

Accumulated

    

Other

Comprehensive

Additional

Income (Loss)

Total

Common Stock

Treasury Stock

Paid-in

Retained

Net of

Stockholders’

(in thousands)

  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

  

Earnings

  

Income Taxes

  

Equity

Balance as of January 1, 2023

165,448

$

165

31

$

(796)

$

756,299

$

127,517

$

(6,326)

$

876,859

Foreign currency translation adjustment

 

 

 

 

 

1,193

 

1,193

Shares repurchased for settlement of employee tax withholdings

30

(787)

(787)

Stock-based compensation expense

 

 

 

11,992

 

 

 

11,992

Common stock issued upon exercise of stock options

527

1

1,765

1,766

Common stock issued upon vesting of restricted stock units

182

 

 

 

 

 

 

Treasury stock reissued upon settlement of equity awards

(35)

914

(914)

Net income

 

 

 

 

12,175

 

 

12,175

Balance as of March 31, 2023

166,157

$

166

26

$

(669)

$

769,142

$

139,692

$

(5,133)

$

903,198

Foreign currency translation adjustment

(377)

(377)

Shares repurchased for settlement of employee tax withholdings

57

(1,966)

(1,966)

Stock-based compensation expense

15,399

15,399

Common stock issued under employee purchase plan

49

1,138

1,138

Common stock issued upon exercise of stock options

711

1

3,990

3,991

Common stock issued upon vesting of restricted stock units

333

Treasury stock reissued upon settlement of equity awards

(67)

2,107

(2,107)

Net income

12,839

12,839

Balance as of June 30, 2023

167,250

$

167

16

$

(528)

$

787,562

$

152,531

$

(5,510)

$

934,222

Foreign currency translation adjustment

(6,417)

(6,417)

Shares repurchased for settlement of employee tax withholdings

28

(945)

(945)

Issuance of common stock as consideration for acquisition

1,642

2

52,935

52,937

Stock-based compensation expense

16,088

16,088

Common stock issued upon exercise of stock options

653

1

2,052

2,053

Common stock issued upon vesting of restricted stock units

373

Treasury stock reissued upon settlement of equity awards

(31)

1,076

(1,076)

Net income

13,347

13,347

Balance as of September 30, 2023

169,918

$

170

13

$

(397)

$

857,561

$

165,878

$

(11,927)

$

1,011,285

Balance as of January 1, 2022

162,347

$

162

50

$

(1,802)

$

717,228

$

84,249

$

(771)

$

799,066

Foreign currency translation adjustment

 

 

 

 

 

(1,570)

 

(1,570)

Shares repurchased for settlement of employee tax withholdings

 

41

 

(1,058)

 

 

 

 

(1,058)

Stock-based compensation expense

 

 

 

10,994

 

 

 

10,994

Common stock issued to non-employees

4

Common stock issued upon exercise of stock options

572

1

1,677

1,678

Common stock issued upon vesting of restricted stock units

195

Net income

 

 

 

 

4,579

 

 

4,579

Balance as of March 31, 2022

163,118

$

163

91

$

(2,860)

$

729,899

$

88,828

$

(2,341)

$

813,689

Foreign currency translation adjustment

(5,634)

(5,634)

Shares repurchased for settlement of employee tax withholdings

320

(8,133)

(8,133)

Stock-based compensation expense

9,517

9,517

Common stock issued under employee purchase plan

41

768

768

Common stock issued upon exercise of stock options

176

838

838

Common stock issued upon vesting of restricted stock units

798

1

(1)

Treasury stock reissued upon settlement of equity awards

(128)

3,447

(3,447)

Net income

10,290

10,290

Balance as of June 30, 2022

164,133

$

164

283

$

(7,546)

$

737,574

$

99,118

$

(7,975)

$

821,335

Foreign currency translation adjustment

(4,630)

(4,630)

Shares repurchased for settlement of employee tax withholdings

19

(492)

(492)

Stock-based compensation expense

11,080

11,080

Common stock issued upon exercise of stock options

490

1

2,390

2,391

Common stock issued upon vesting of restricted stock units

110

Treasury stock reissued upon settlement of equity awards

(265)

7,036

(7,036)

Net income

10,331

10,331

Balance as of September 30, 2022

164,733

$

165

37

$

(1,002)

$

744,008

$

109,449

$

(12,605)

$

840,015

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)

    

2023

    

2022

Operating activities:

 

  

 

  

Net income

$

38,361

$

25,200

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

 

Bad debt expense

 

6,901

 

3,629

Depreciation and amortization expense

 

29,365

 

25,446

Amortization of debt issuance costs

 

221

 

221

Non-cash lease expense

4,899

5,534

Deferred taxes

 

(19,721)

 

(5,974)

Stock-based compensation expense

 

42,771

 

31,224

Interest expense

 

176

 

7

Loss on disposal of fixed assets

5

1,353

Impairment of long-lived assets

 

 

1,510

Other

874

318

Changes in operating assets and liabilities, net of effects of business combinations

 

Trade receivables

 

(25,787)

 

(23,842)

Prepaid expenses and other assets

 

(9,370)

 

(2,110)

Trade payables

 

2,475

 

3,452

Accrued expenses and other liabilities

 

(3,484)

 

(7,607)

Net cash provided by operating activities

 

67,686

 

58,361

Investing activities:

 

 

Purchase of property, plant and equipment

 

(12,309)

 

(27,719)

Acquisition of businesses, net of cash acquired

(67,240)

Net cash (used in) investing activities

 

(79,549)

 

(27,719)

Financing activities:

 

 

Proceeds from revolving credit facility

50,000

Payments to revolving credit facility

(50,000)

Payment of contingent consideration related to Zentrick acquisition

(3,247)

Proceeds from common stock issued upon exercise of stock options

7,810

4,907

Proceeds from common stock issued under employee purchase plan

1,138

768

Payments related to offering costs

(6)

Finance lease payments

(1,605)

(1,286)

Shares repurchased for settlement of employee tax withholdings

(3,698)

(9,683)

Net cash provided by (used in) financing activities

 

3,645

 

(8,547)

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

 

(389)

 

(1,015)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

(8,607)

 

21,080

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

 

267,938

 

221,725

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

$

259,331

$

242,805

Cash and cash equivalents

$

259,212

$

242,687

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

 

119

 

118

Total cash and cash equivalents and restricted cash

$

259,331

$

242,805

Supplemental cash flow information:

 

 

Cash paid for taxes

$

52,738

$

10,210

Cash paid for interest

$

427

$

519

Non-cash investing and financing activities:

 

 

Right-of-use assets obtained in exchange for new operating lease liabilities, net of impairments and tenant improvement allowances

$

2,017

$

80,060

Acquisition of equipment under finance lease

$

5,479

$

Capital assets financed by accounts payable and accrued expenses

$

$

5,305

Stock-based compensation included in capitalized software development costs

$

708

$

367

Common stock issued in connection with acquisition

$

52,937

$

Liabilities for contingent consideration

$

1,193

$

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 Holdings, Inc. (the “Company”) is a leading software platform for digital media measurement and analytics. Our mission is to create stronger, safer, more secure digital transactions that drive optimal outcomes for global advertisers. Through our software platform and the metrics it provides, we help preserve the fair value exchange between buyers and sellers of digital media. The Company’s solutions provide advertisers unbiased data analytics that enable advertisers to increase the effectiveness, quality and return on their digital advertising investments. The DV Authentic Ad is our proprietary metric of digital media quality, which measures whether a digital ad was delivered in a brand suitable environment, fully viewable, by a real person and in the intended geography. The Company’s software interface, DV Pinnacle, delivers these metrics to our customers in real time, allowing them to access critical performance data on their digital transactions. The Company’s software solutions are integrated across the entire digital advertising ecosystem, including programmatic platforms, 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 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., (the “Acquisition”) 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 is headquartered in New York, New York and has wholly-owned subsidiaries in numerous jurisdictions, including Israel, the United Kingdom, the United Arab Emirates, Germany, Singapore, Australia, Canada, Brazil, Belgium, Mexico, France, Japan, Spain, Finland, Italy, and India, and operates in one reportable segment.  

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, 2023 and December 31, 2022, the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2023 and 2022, the Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 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 Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2022.

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DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except per share data, unless otherwise stated)

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, assumptions in valuing acquired assets and liabilities assumed in business combinations, 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.

Cash and Cash Equivalents

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. Pursuant to the Company’s investment policy, its surplus funds are kept as cash or cash equivalents in treasury bills, money market funds and savings accounts to reduce the Company’s exposure to market risk.

3.     Revenue

The following table disaggregates revenue between advertiser customers, where revenue is generated based on number of ads measured for Measurement or measured and purchased for Activation, 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)

    

2023

    

2022

    

2023

    

2022

Activation

$

81,700

$

62,170

$

229,534

$

175,696

Measurement

 

51,263

 

38,847

 

137,637

 

111,584

Supply-side customer

 

11,011

 

11,237

 

33,141

 

31,502

Total revenue

$

143,974

$

112,254

$

400,312

$

318,782

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 $51.9 million and $52.7 million as of September 30, 2023 and December 31, 2022, respectively.

4.      Business Combinations

Scibids Technology SAS

On August 14, 2023, the Company acquired all of the outstanding stock of Scibids Technology SAS (“Scibids”), a global leader in artificial intelligence (“AI”) technology for digital campaign optimization. The acquisition combines DoubleVerify’s proprietary data with Scibids’ AI-powered optimization technology to provide advertiser customers with enhanced insights and control over their advertising performance.

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DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except per share data, unless otherwise stated)

The following table summarizes the components of the purchase price that constitutes the consideration transferred:

(in thousands)

    

Cash, net of cash acquired

$

67,240

Common stock issued in connection with the acquisition

 

52,937

Fair value of contingent consideration

1,193

Total

$

121,370

The fair value of the Company’s common stock issued (1,642 shares of common stock) as consideration in the transaction was determined on the basis of market prices of our common stock available on August 14, 2023, the trading day on the acquisition date.

The purchase price includes a performance-based deferred payment that has a total maximum payout of $25.0 million (“Scibids Contingent Payment”) and varies based upon the achievement of certain performance metrics in fiscal year 2023 (“Earn-Out Period”). If the performance metrics during the Earn-Out Period do not exceed a certain threshold, no payment shall be made. The Scibids Contingent Payment has been accounted for at fair value as contingent consideration in the business combination. The settlement of the Scibids Contingent Payment would consist of both cash and common stock consideration.

As of September 30, 2023, Scibids Contingent Payment had a fair value of $1.2 million and is recorded in Contingent consideration in the Condensed Consolidated Balance Sheets. There were no changes in fair value in the Condensed Consolidated Statement of Operations and Comprehensive Income for the three and nine months ended September 30, 2023.

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

$

1,705

Trade receivables

 

5,197

Prepaid expenses

 

50

Other assets

1,382

Intangible assets:

 

Technology

 

18,000

Customer relationships

 

15,000

Total intangible assets

 

33,000

Goodwill

 

92,053

Total assets acquired

$

133,387

Liabilities:

 

  

Trade payables

$

530

Other liabilities

 

1,259

Deferred tax liability

 

8,523

Total liabilities assumed

 

10,312

Total purchase consideration

$

123,075

Cash acquired

(1,705)

Purchase consideration, net of cash acquired

$

121,370

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DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except per share data, unless otherwise stated)

The acquired intangible assets of Scibids will be amortized over their estimated useful lives. Accordingly, customer relationships will be amortized over ten years and developed technology will be amortized over four years. The weighted-average useful life of the acquired intangible assets is 6.7 years. The Company recognized a deferred tax liability of $8.5 million in relation to the intangible assets acquired.

The goodwill and identified intangible assets are not deductible for tax purposes. The Company incurred acquisition-related transaction costs of $0.9 million and $1.6 million included in General and administrative expenses in the Condensed Consolidated Statement of Operations and Comprehensive Income for the three and nine months ended September 30, 2023, respectively.

The goodwill associated with Scibids includes the acquired assembled work force, the value associated with the opportunity to leverage the work force to continue to develop the future generations of AI technology assets, as well as the ability to grow the Company through adding additional customer relationships or new solutions in the future.

The preliminary allocations of the purchase price for Scibids are subjec