DoubleVerify Holdings, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

Fair Value Measurement

9 Months Ended

Sep. 30, 2023

Fair Value Measurement

Fair Value Measurement

8. 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, 2023
	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	$	60,651	$	—	$	—	$	60,651
Liabilities:
Contingent consideration	$	—	$	—	$	1,193	$	1,193

As of December 31, 2022

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

11,710

—

11,710

Cash equivalents consisting of treasury bills and money market funds of $60.7 million and of money market funds of $11.7 million as of September 30, 2023 and December 31, 2022, respectively, were classified as Level 1 of the fair value hierarchy and valued using quoted market prices in active markets.

As of September 30, 2023, the amortized cost of the Company’s treasury bills approximates fair value. For the three and nine months ended September 30, 2023, the Company did not record any unrealized gains, unrealized losses, or credit losses.

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, 2023 is as follows:


(in thousands)
Balance at January 1, 2023	$	—
Fair value at date of acquisition		1,193
Fair value adjustments		—
Payments		—
Balance at September 30, 2023	$	1,193

The fair value of contingent consideration related to the achievement of certain performance metrics have been estimated using a Black-Scholes option pricing model where forecasted amounts for the Earn-Out Period were taken and discounted to the valuation date using a risk adjusted discount rate of 11.3%. Additional significant assumptions include volatility of 25.0% and operating leverage of 160%. Volatility was estimated based on asset volatilities of comparable companies, which were calculated based on observed equity volatilities, adjusted for financial leverage using the Merton Model. Operating leverage of the seller was calculated as the ratio of the present value of the forecasted fixed cost and EBITDA.

- 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.

+ References + Details