10-Q 1 dv-20220930x10q.htm 10-Q
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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, 2022

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 October 31, 2022, there were 164,875,087 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

DoubleVerify Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended September 30, 2022

TABLE OF CONTENTS

0

`

    

    

    

    

 

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

2

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,” “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, 2021 and filed with the Securities and Exchange Commission (“SEC”), on March 8, 2022, 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, 2021. 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, 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

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

4

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)

    

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

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

5

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, 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

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

6

DoubleVerify Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

 

See accompanying Notes to unaudited Condensed Consolidated Financial Statements.

7

Table of Contents

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, Germany, Singapore, Australia, Canada, Brazil, Belgium, Mexico, France, Japan, Spain, and Finland, 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, 2022 and December 31, 2021, the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2022 and 2021, the Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 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, 2021.

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Table of Contents

DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

In the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021, the Company changed the presentation in describing the changes in operating assets and liabilities by combining the lines for Accrued expenses, Other current liabilities, and Other non-current liabilities into a single line item. The Company further combined Prepaid expenses and other current assets and Other non-current assets into a single line item. Both the original and new presentations are in accordance with the applicable financial reporting framework and the change was applied retrospectively solely to enhance the comparability with the current Condensed Consolidated Statements of Cash Flows.

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.

Recently Adopted Accounting Pronouncements

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU No. 2016-02”). This guidance amends the existing accounting considerations and treatments for leases through the creation of Topic 842, Leases, to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from such leases.

In July 2018, the 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. The 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 practical expedient offers an option to not separate non-lease components from the associated lease components when certain criteria are met.

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, and allow for modified retrospective adoption with early adoption permitted. The Company adopted the amendments on January 1, 2022 using the modified retrospective approach and elected the transition relief package of practical expedients by applying previous accounting conclusions under ASC 840 to all leases that existed prior to the transition date. There was no impact to retained earnings upon the adoption of ASC 842. As a result of the adoption, the Company did not reassess 1) whether existing or expired contracts contain leases, 2) lease classification for any existing or expired leases, and 3) whether lease origination costs qualified as initial direct costs. The Company did not elect the practical expedient to use hindsight in determining a lease term and impairment of the ROU assets at the adoption date. Additionally, the Company did not separate lease components from non-lease components for the specified asset classes. Furthermore, the Company did not apply the recognition requirements under ASC 842 to short-term leases, generally defined as a lease term of less than one year.

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Table of Contents

DoubleVerify Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The Company has operating and financing leases for corporate offices, data centers, and certain equipment. The leases have remaining lease terms ranging from less than one year to seventeen years, some of which include the options to extend the leases, and some of which include the options to terminate the leases. Upon adoption, extension and termination options were not considered in the calculation of the ROU assets and lease liabilities as the Company determined it was not reasonably certain that it will exercise those options.

The Company determines if an arrangement is a lease at inception and does not recognize an ROU asset or lease liability with a term shorter than 12 months. An ROU asset represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are to be recognized at commencement date based on the present value of lease payments not yet paid over the lease term. As the Company’s operating leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the adoption date in determining the present value of lease payments not yet paid. The incremental borrowing rate for United States dollar denominated leases was calculated by considering current market yields and the Company’s existing debt rates to determine a yield. In order to assess a premium or discount for the lease tenor and develop an incremental borrowing rate curve, the analysis compared the Company’s existing debt yield to the appropriate market yield curve corresponding to the Company’s secured rating. The curve one notch higher was used as the incremental borrowing rate focuses on secured borrowing rates, which tend to carry higher credit ratings when issued. The corporate yield curve was adjusted based on the Company’s implied incremental borrowing rate premium or discount at each tenor to reach a concluded incremental borrowing rate curve. Using the calculated United States dollar incremental borrowing rate, the international incremental borrowing rates were determined by adjusting for specific country risk.

The operating lease ROU assets include any lease payments made prior to the rent commencement date and exclude lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Operating lease transactions are included in Operating lease right-of-use assets, net, and Operating lease liabilities, current and noncurrent, within the accompanying Condensed Consolidated Balance Sheets. Finance leases, formerly known as (“f/k/a”) capital leases, are included in Property, plant and equipment, net, Current portion of finance lease obligations, and Finance lease obligations within the accompanying Condensed Consolidated Balance Sheets. Refer to Note 7, Leases, for further information.

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