DoubleVerify Holdings, Inc. General form of registration statement for all companies including face-amount certificate companies

General form of registration statement for all companies including face-amount certificate companies

Fair Value Measurement

Fair Value Measurement

9 Months Ended

12 Months Ended

Sep. 30, 2021

Dec. 31, 2020

Fair Value Measurement

Fair Value Measurement

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 September 30, 2021
	Quoted Market
	Prices in Active				Significant
	Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs		Total Fair Value
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Measurements
Assets:
Cash equivalents	$	11,725		—		—		11,725
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
	Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs		Tota1 Fair Value
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Measurements
Assets:
Cash equivalents	$	2,474	$	—	$	—	$	2,474
Liabilities:
Contingent consideration current		—		—		1,198		1,198
Contingent consideration non-current		—		—		462		462
Total contingent consideration	$	—	$	—	$	1,660	$	1,660

Cash equivalents consisting of money market funds of $11.7 million and money market funds and time deposits of $2.5 million as of September 30, 2021 and December 31, 2020, respectively, were classified as Level 1 of the fair value hierarchy and valued using quoted market prices in active markets.

Contingent consideration relates to potential payments that the Company may be required to make associated with a business combination. To the extent that the valuations of these liabilities are based on inputs that are less observable or not observable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for measures categorized in Level 3.

Rollforward of the fair value measurements of the contingent consideration categorized with Level 3 inputs as of September 30, 2021 is as follows:


(in thousands)
Balance at January 1, 2021	$	1,660
Fair value adjustments		57
Payments during the year		—
Balance at September 30, 2021	$	1,717

The fair value of the component of contingent consideration related to achievement of revenue targets have been estimated using a Monte Carlo model to simulate future performance of the acquired business under a risk-neutral framework; significant assumptions include a risk-adjusted discount rate of 13.5% and revenue volatility of 29.0%. The fair value of the component of contingent consideration related to achievement of four technical milestones have been estimated using situation-based modeling, which considers the probability-weighted present value of the expected payout amount.

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 December 31, 2020
	Quoted Market
	Prices in Active				Significant
	Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs		Total Fair Value
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Measurements
Assets:
Cash equivalents:	$	2,474	$	—	$	—	$	2,474
Liabilities:
Contingent consideration current		—		—		1,198		1,198
Contingent consideration non‑current		—		—		462		462
Contingent consideration	$	—	$	—	$	1,660	$	1,660


	As of December 31, 2019
	Quoted Market
	Prices in Active				Significant
	Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs		Total Fair Value
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Measurements
Assets:
Cash equivalents:	$	2,473	$	—	$	—	$	2,473
Liabilities:
Contingent consideration current		—		—		2,014		2,014
Contingent consideration non‑current		—		—		1,196		1,196
Contingent consideration	$	—	$	—	$	3,210	$	3,210

Cash equivalents, consisting of money market funds and time deposits, of $2.5 million and $2.5 million as of December 31, 2020 and December 31, 2019, respectively, were classified as Level 1 of the fair value hierarchy and valued using quoted market prices in active markets.

Rollforward of the fair value measurements of the contingent consideration categorized with Level 3 inputs for the years ended December 31, 2020 and December 31, 2019 is as follows:


Balance at January 1, 2019	$	—
Fair value at date of acquisition		4,689
Fair value adjustments		(1,079)
Payments during the year		(601)
Accretion expense		201
Balance at December 31, 2019	$	3,210
Fair value adjustments		(949)
Payments during the year		(601)
Balance at December 31, 2020	$	1,660

The fair value of the component of contingent consideration related to achievement of revenue targets have been estimated using a Monte Carlo model to simulate future performance of the acquired business under a risk-neutral framework; significant assumptions include a risk-adjusted discount rate of 12.7% and revenue volatility of 30.0% for December 31, 2020 and a risk-adjusted discount rate of 14.8% and revenue volatility of 23.0% for December 31, 2019. The fair value of the component of contingent consideration related to achievement of four technical milestones have been estimated using situation-based modeling, which considers the probability-weighted present value of the expected payout amount.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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