DoubleVerify Holdings, Inc 10-Q for FY2022 Q3

DoubleVerify Holdings, Inc. (DV)

10-Q 2022-11-08 For: 2022-09-30

Added on April 04, 2026

About this 10-Q

DoubleVerify Holdings, Inc filed this 10-Q on November 8, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $112.25M; up 35.1% from $83.1M a year earlier
Net income: $10.33M; up 30.4% from net income of $7.92M a year earlier
Diluted EPS: $0.06; up 20.0% from $0.05 a year earlier

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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




Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☐	Emerging growth company	☒

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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, 2022 and December 31, 2021	4

	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2022 and 2021	5

	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements	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	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	36

Signatures		37


	As of		As of
(in thousands, except per share data)	September 30, 2022		December 31, 2021
Assets:
Current assets
Cash and cash equivalents	$	242,687	$	221,591
Trade receivables, net of allowances for doubtful accounts of $7,860 and $6,527 as of September 30, 2022 and December 31, 2021, respectively		141,444		122,938
Prepaid expenses and other current assets		21,215		23,295
Total current assets		405,346		367,824
Property, plant and equipment, net		42,511		17,575
Operating lease right-of-use assets, net		74,413		—
Goodwill		336,545		350,560
Intangible assets, net		140,841		153,395
Deferred tax assets		60		60
Other non-current assets		1,699		2,780
Total assets	$	1,001,415	$	892,194
Liabilities and Stockholders' Equity:
Current liabilities
Trade payables	$	12,489	$	3,853
Accrued expense		30,524		41,456
Operating lease liabilities, current		5,560		—
Income tax liabilities		—		1,321
Current portion of finance lease obligations		2,144		1,970
Contingent considerations, current		—		1,717
Other current liabilities		7,146		6,716
Total current liabilities		57,863		57,033
Operating lease liabilities, non-current		75,611		—
Finance lease obligations		1,120		2,579
Deferred tax liabilities		24,174		30,307
Other non-current liabilities		2,632		3,209
Total liabilities	$	161,400	$	93,128
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock, $0.001 par value, 1,000,000 shares authorized, 164,733 shares issued and 164,696 outstanding as of September 30, 2022; 1,000,000 shares authorized, 162,347 shares issued and 162,297 shares outstanding as of December 31, 2021		165		162
Additional paid-in capital		744,008		717,228
Treasury stock, at cost, 37 shares and 50 shares as of September 30, 2022 and December 31, 2021, respectively		(1,002)		(1,802)
Retained earnings		109,449		84,249
Accumulated other comprehensive loss, net of income taxes		(12,605)		(771)
Total stockholders’ equity		840,015		799,066
Total liabilities and stockholders' equity	$	1,001,415	$	892,194


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2022		2021		2022		2021
Revenue	$	112,254	$	83,098	$	318,782	$	227,208
Cost of revenue (exclusive of depreciation and amortization shown separately below)		19,323		13,435		55,036		35,929
Product development		23,932		16,359		68,742		45,658
Sales, marketing and customer support		27,118		19,539		78,535		54,653
General and administrative		19,395		14,465		60,599		58,317
Depreciation and amortization		8,089		7,492		25,446		21,989
Income from operations		14,397		11,808		30,424		10,662
Interest expense		226		249		681		936
Other expense, net		231		365		422		365
Income before income taxes		13,940		11,194		29,321		9,361
Income tax expense		3,609		3,270		4,121		8,361
Net income	$	10,331	$	7,924	$	25,200	$	1,000
Earnings per share:
Basic	$	0.06	$	0.05	$	0.15	$	0.01
Diluted	$	0.06	$	0.05	$	0.15	$	0.01
Weighted-average common stock outstanding:
Basic		164,297		158,045		163,512		144,305
Diluted		170,876		167,045		170,558		153,547
Comprehensive income:
Net income	$	10,331	$	7,924	$	25,200	$	1,000
Other comprehensive income:
Foreign currency cumulative translation adjustment		(4,630)		303		(11,834)		(141)
Total comprehensive income	$	5,701	$	8,227	$	13,366	$	859


														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, 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

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	5,190		5	(61,006)		(610)	(15,146)		260,686		(260,081)		—		—		—
Issuance of common stock upon initial public offering	9,977		10	—		—	—		—		269,380		—		—		269,390
Private placement stock issuance concurrent with 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


	Nine Months Ended
	September 30,
(in thousands)	2022		2021
Operating activities:
Net income	$	25,200	$	1,000
Adjustments to reconcile net income to net cash provided by operating activities
Bad debt expense (recovery)		3,629		(1,186)
Depreciation and amortization expense		25,446		21,989
Amortization of debt issuance costs		221		221
Non-cash lease expense		5,534		—
Deferred taxes		(5,974)		(4,572)
Stock-based compensation expense		31,224		12,100
Interest expense		7		130
Loss on disposal of fixed assets		1,353		—
Impairment of long-lived assets		1,510		—
Change in fair value of contingent consideration		—		57
Offering costs		—		21,797
Other		318		661
Changes in operating assets and liabilities net of effect of business combinations
Trade receivables		(23,842)		690
Prepaid expenses and other assets		(2,110)		4,428
Trade payables		3,452		425
Accrued expenses and other liabilities		(7,607)		694
Net cash provided by operating activities		58,361		58,434
Investing activities:
Purchase of property, plant and equipment		(27,719)		(5,499)
Acquisition of business, net of cash acquired		—		(24,323)
Net cash (used in) investing activities		(27,719)		(29,822)
Financing activities:
Payments of long-term debt		—		(22,000)
Deferred payment related to Zentrick acquisition		—		(50)
Payment of contingent consideration related to Zentrick acquisition		(3,247)		—
Proceeds from common stock issued upon exercise of stock options		4,907		5,514
Proceeds from common stock issued under employee purchase plan		768		—
Proceeds from issuance of common stock upon initial public offering		—		269,390
Proceeds from issuance of common stock in connection to concurrent private placement		—		30,000
Payments related to offering costs		(6)		(21,797)
Finance lease payments		(1,286)		(1,222)
Shares repurchased for settlement of employee tax withholdings		(9,683)		(1,802)
Net cash (used in) provided by financing activities		(8,547)		258,033
Effect of exchange rate changes on cash and cash equivalents and restricted cash		(1,015)		(173)
Net increase in cash, cash equivalents, and restricted cash		21,080		286,472
Cash, cash equivalents, and restricted cash - Beginning of period		221,725		33,395
Cash, cash equivalents, and restricted cash - End of period	$	242,805	$	319,867

Cash and cash equivalents		242,687		319,825
Restricted cash (included in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets)		118		42
Total cash and cash equivalents and restricted cash	$	242,805	$	319,867
Supplemental cash flow information:
Cash paid for taxes		10,210		5,586
Cash paid for interest		519		580
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities, net of impairments		80,060		—
Acquisition of equipment under finance lease		—		1,518
Capital assets financed by accounts payable		5,305		41
Conversion of Series A preferred stock to common stock		—		610
Treasury stock reissued upon the conversion of Series A preferred stock for common stock		—		260,686
Stock-based compensation included in capitalized software development costs		367		—


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2022		2021		2022		2021
Measurement (f/k/a Advertiser - direct)	$	38,847	$	34,057	$	111,584	$	93,260
Activation (f/k/a Advertiser - programmatic)		62,170		41,902		175,696		113,694
Supply-side customer		11,237		7,139		31,502		20,254
Total revenue	$	112,254	$	83,098	$	318,782	$	227,208


(in thousands)
Goodwill at December 31, 2021	$	350,560
Measurement period adjustments		(6,915)
Foreign exchange impact		(7,100)
Goodwill at September 30, 2022	$	336,545


(in thousands)
2022 (for remaining three months)	$	6,157
2023		24,589
2024		23,202
2025		21,100
2026		16,036
2027		13,827
Thereafter		35,930
Total	$	140,841


		(In years)
Trademarks and brands		10
Customer relationships		8
Developed technology		3
Non-compete agreements		1


(in thousands)	December 31, 2021		Adjustments due to ASC 842		January 1, 2022
Prepaid expenses and other current assets	$	23,295	$	(229)	$	23,066
Other non-current assets	$	2,780	$	(496)	$	2,284
Operating lease right-of-use assets, net	$	—	$	78,827	$	78,827
Operating lease liabilities, current	$	—	$	4,885	$	4,885
Operating lease liabilities, non-current	$	—	$	74,677	$	74,677
Other current liabilities	$	6,716	$	(614)	$	6,102
Other non-current liabilities	$	3,209	$	(847)	$	2,362


		September 30, 2022
Weighted-average remaining lease term - operating leases (in years)		14.2
Weighted-average remaining lease term - finance leases (in years)		1.8
Weighted-average discount rate - operating leases		4.5%
Weighted-average discount rate - finance leases		3.7%


	September 30, 2022
(in thousands)	Operating Leases		Finance Leases
2022 (for remaining three months)	$	1,426	$	665
2023		6,825		1,938
2024		7,805		598
2025		7,097		169
2026		6,463		—
2027		6,337		—
2028 and thereafter		80,610		—
Total lease payments		116,563		3,370
Less amount representing interest		(35,392)		(106)
Present value of total lease payments	$	81,171	$	3,264


	Year Ending
(in thousands)	December 31,
2022	$	5,463
2023		4,381
2024		681
2025		439
2026		294
Thereafter		76
	$	11,334


(in thousands)	September 30, 2022						December 31, 2021
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Trademarks and brands	$	11,729	$	(4,080)	$	7,649	$	11,735	$	(3,422)	$	8,313
Customer relationships		145,263		(46,343)		98,920		143,728		(36,831)		106,897
Developed technology		75,886		(41,641)		34,245		72,065		(33,937)		38,128
Non-compete agreements		59		(32)		27		68		(11)		57
Total intangible assets	$	232,937	$	(92,096)	$	140,841	$	227,596	$	(74,201)	$	153,395


	Stock Option
				Weighted Average
				Remaining
	Number of	Weighted Average		Contractual Life		Aggregate
	Options	Exercise Price		(Years)		Intrinsic Value
Outstanding as of December 31, 2021	12,117	$	10.84	7.53	$	274,684
Options granted	498		26.08
Options exercised	(1,303)		3.81
Options forfeited	(315)		24.68
Outstanding as of September 30, 2022	10,997	$	11.96	7.08	$	181,736
Options expected to vest as of September 30, 2022	3,792	$	21.35	8.46	$	32,252
Options exercisable as of September 30, 2022	7,006	$	6.44	6.29	$	148,735


		2022
Risk - free interest rate (percentage)		2.0
Expected term (years)		6.1
Expected dividend yield (percentage)		—
Expected volatility (percentage)		42.8


	Restricted Stock Units
	Number of	Weighted Average
	Shares	Grant Date Fair Value
Outstanding as of December 31, 2021	3,250	$	24.20
Granted	1,279		24.02
Vested	(1,430)		15.81
Forfeited	(240)		28.56
Outstanding as of September 30, 2022	2,859	$	27.94


	As of September 30, 2022
	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	$	10,446	$	—	$	—	$	10,446
Liabilities:
Contingent consideration current		—		—		—		—
Contingent consideration non-current		—		—		—		—
Total contingent consideration	$	—	$	—	$	—	$	—


	As of December 31, 2021
	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	$	12,324	$	—	$	—	$	12,324
Liabilities:
Contingent consideration current		—		—		1,717		1,717
Contingent consideration non-current		—		—		—		—
Total contingent consideration	$	—	$	—	$	1,717	$	1,717


	Three Months Ended September 30,				Change		Change		Nine Months Ended September 30,				Change		Change
	2022		2021		$		%		2022		2021		$		%

	(In Thousands)								(In Thousands)
Revenue by customer type:
Measurement (f/k/a Advertiser - direct)	$	38,847	$	34,057	$	4,790	14	%	$	111,584	$	93,260	$	18,324	20	%
Activation (f/k/a Advertiser - programmatic)		62,170		41,902		20,268	48			175,696		113,694		62,002	55
Supply-side customer		11,237		7,139		4,098	57			31,502		20,254		11,248	56
Total revenue	$	112,254	$	83,098	$	29,156	35	%	$	318,782	$	227,208	$	91,574	40	%


Exhibit No.		Description

31.1†		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2†		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1†*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2†*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS†		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH†		XBRL Taxonomy Extension Schema Document

101.CAL†		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB†		XBRL Taxonomy Extension Label Linkbase Document

101.PRE†		XBRL Taxonomy Extension Presentation Linkbase Document
104†		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)


	DOUBLEVERIFY HOLDINGS, INC.

	By:	/s/ Mark Zagorski
	Name:	Mark Zagorski
	Title:	Chief Executive Officer and Director
		(Principal Executive Officer)

	By:	/s/ Nicola Allais
	Name:	Nicola Allais
	Title:	Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Date:	November 8, 2022	/s/ Mark Zagorski
		Mark Zagorski
		Chief Executive Officer
		(Principal Executive Officer)