DoubleVerify Holdings Inc

Previous wording

Our customers use our solutions to measure the effectiveness of their digital advertisements. We generate revenue from our advertising customers based on the volume of Media Transactions Measured on our software platform, and for supply-side customers, based on contracts with minimum guarantees or contracts that have tiered pricing after minimum guarantees are achieved. Our existing customer base has remained largely stable, and our gross revenue retention rate was over 95% for the three months ended March 31, 2024. We define our gross revenue retention rate as the total prior period revenue earned from advertiser customers, less the portion of prior period revenue attributable to lost advertiser customers, divided by the total prior period revenue from advertiser customers, excluding a portion of our revenues that cannot be allocated to specific advertiser customers.

Current wording

Our customers use our solutions to measure the effectiveness of their digital advertisements. We generate revenue from our advertising customers based primarily on the volume of Media Transactions Measured on our software platform, and for supply-side customers, based on contracts with minimum guarantees or contracts that have tiered pricing after minimum guarantees are achieved. Our existing customer base has remained largely stable, and our gross revenue retention rate was over 95% for the three months ended June 30, 2024. We define our gross revenue retention rate as the total prior period revenue earned from advertiser customers, less the portion of prior period revenue attributable to lost advertiser customers, divided by the total prior period revenue from advertiser customers, excluding a portion of our revenues that cannot be allocated to specific advertiser customers.

Previous wording

For each of the three months ended March 31, 2024 and March 31, 2023, we generated 91% of our revenue from advertiser customers. Advertisers can purchase our services to measure the quality and performance of ads after they are purchased directly from digital properties, including publishers and social media platforms, which we track as Measurement revenue. Advertisers can also purchase our services through programmatic and social media platforms to evaluate the quality of ad inventories before they are purchased, which we track as Activation revenue. We generate the majority of our revenue from advertisers by charging a Measured Transaction Fee based on the volume of Media Transactions Measured on behalf of our customers. We recognize revenue from advertisers in the period in which we provide our measurement and activation solutions.

Current wording

For the three months ended June 30, 2024 and June 30, 2023, we generated 91% and 92% of our revenue, respectively, from advertiser customers. For each of the six months ended June 30, 2024 and June 30, 2023, we generated 91% of our revenue from advertiser customers. Advertisers can purchase our services to measure the quality and performance of ads after they are purchased directly from digital properties, including publishers and social media platforms, which we track as Measurement revenue. Advertisers can also purchase our services through programmatic and social media platforms to evaluate the quality of ad inventories before they are purchased, which we track as Activation revenue. We generate the majority of our revenue from advertisers by charging a Measured Transaction Fee based on the volume of Media Transactions Measured on behalf of our customers. We recognize revenue from advertisers in the period in which we provide our measurement and activation solutions.

Previous wording

For each of the three months ended March 31, 2024 and March 31, 2023, we generated 9% of our revenue from supply-side customers who use our data analytics to validate the quality of their ad inventory and provide data to their customers to facilitate targeting and purchasing of digital ads, which we refer to as Supply-side revenue. We generate revenue for certain supply-side arrangements that include minimum guaranteed fees that reset monthly and are recognized on a straight-line basis over the access period, which is usually twelve months. For contracts that contain overages, once the minimum guaranteed amount is achieved, overages are recognized as earned over time based on a tiered pricing structure.

Current wording

For the three months ended June 30, 2024 and June 30, 2023, we generated 9% and 8% of our revenue, respectively, from supply-side customers who use our data analytics to validate the quality of their ad inventory and provide data to their customers to facilitate targeting and purchasing of digital ads, which we refer to as Supply-side revenue. For each of the six months ended June 30, 2024 and June 30, 2023, Supply-side revenue comprised 9% of revenue. We generate revenue for certain supply-side arrangements that include minimum guaranteed fees that reset monthly and are recognized on a straight-line basis over the access period, which is usually twelve months. For contracts that contain overages, once the minimum guaranteed amount is achieved, overages are recognized as earned over time based on a tiered pricing structure.

Previous wording

Comparison of the Three Months Ended March 31, 2024 and March 31, 2023

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and June 30, 2023

Previous wording

Total Advertiser revenue increased by $17.3 million, or 16%, in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, driven primarily by an 18% increase in Media Transactions Measured, partially offset by a 2% decrease in Measured Transaction Fees.

Current wording

Total Advertiser revenue increased by $19.4 million, or 16%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, driven primarily by an 22% increase in Media Transactions Measured, partially offset by a 5% decrease in Measured Transaction Fees. Total Advertiser revenue increased by $36.7 million, or 16%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, driven primarily by an 20% increase in Media Transactions Measured, partially offset by a 4% decrease in Measured Transaction Fees.

Previous wording

Activation revenue increased by $9.4 million, or 13%, in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, driven primarily by greater adoption of our Authentic Brand Suitability (ABS) solution as well as our core (non-ABS) programmatic solutions, including Scibids Technology SAS (“Scibids”).

Current wording

Activation revenue increased by $9.5 million, or 12%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, driven primarily by greater adoption of our programmatic solutions, including Scibids Technology SAS (“Scibids”), as well as our Authentic Brand Suitability (ABS) solution. For the six months ended June 30, 2024, Activation revenue increased by $19.0 million, or 13%, compared to the same period in 2023 driven by the same factors.

Previous wording

Measurement revenue increased $7.9 million, or 19%, in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, driven primarily by the increased adoption of our social measurement solutions by existing and new customers both within and outside the United States.

Current wording

Measurement revenue increased $9.8 million, or 22%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, driven primarily by the increased adoption of our social measurement solutions by existing and new customers both within and outside the United States. For the six months ended June 30, 2024, Measurement revenue increased by $17.7 million, or 21%, compared to the same period in 2023 driven by the same factors.

Previous wording

Supply-side revenue increased $0.9 million, or 8%, in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, driven primarily by increased revenue from platform customers.

Current wording

Supply-side revenue increased $2.8 million, or 26%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, driven primarily by increased revenue from platform customers. For the six months ended June 30, 2024, Supply-side revenue increased by $3.7 million, or 17%, compared to the same period in 2023 driven by the same factors.

Previous wording

Cost of revenue increased by $2.7 million, or 11%, from $24.0 million in the three months ended March 31, 2023 to $26.6 million in the three months ended March 31, 2024. The increase was primarily due to growth in our Activation revenue which drove increases in partner costs from revenue-sharing arrangements, as well as continued investments in cloud services to provide scale and flexibility necessary to support future growth.

Current wording

Cost of revenue decreased by $0.1 million, or less than 1%, from $26.2 million in the three months ended June 30, 2023 to $26.1 million in the three months ended June 30, 2024. The decrease was primarily due to savings from eliminating duplicative costs as the Company migrated to cloud services for better scale and flexibility, along with efficiencies gained from DV’s AI-powered video classification technology, partially offset by growth in Activation revenue which drove increases in partner costs from revenue-sharing arrangements. Cost of revenue increased by $2.6 million, or 5%, from $50.1 million in the six months ended June 30, 2023 to $52.7 million in the six months ended June 30, 2024. The increase was primarily due to continued investments in cloud services to provide scale and flexibility necessary to support future growth, as well as growth in Activation revenue which drove increases in partner costs from revenue-sharing arrangements.

Previous wording

Product development expenses increased by $7.8 million, or 27%, from $28.6 million in the three months ended March 31, 2023 to $36.4 million in the three months ended March 31, 2024. The increase was primarily due to an increase in personnel costs, including stock-based compensation, of $6.3 million, and an increase in third-party software costs and professional fees of $1.2 million primarily to support product development efforts.

Current wording

Product development expenses increased by $7.9 million, or 25%, from $31.9 million in the three months ended June 30, 2023 to $39.8 million in the three months ended June 30, 2024. The increase was primarily due to an increase in personnel costs, including stock-based compensation, of $6.6 million, and an increase in third-party software costs and professional fees of $1.6 million primarily to support product development efforts. Product development expenses increased by $15.7 million, or 26%, from $60.5 million in the six months ended June 30, 2023 to $76.2 million in the six months ended June 30, 2024. The increase was primarily due to an increase in personnel costs, including stock-based compensation, of $12.9 million, and an increase in third-party software costs and professional fees of $2.8 million primarily to support product development efforts.

Previous wording

Sales, marketing and customer support expenses increased by $12.2 million, or 47%, from $25.7 million in the three months ended March 31, 2023 to $37.9 million in the three months ended March 31, 2024. The increase was primarily due to an increase in personnel costs, including stock-based compensation and sales commissions, of $9.7 million, an increase in marketing activities, including advertising, promotions, events and other activities of $0.2 million, and an increase in personnel travel and entertainment expenses to support marketing and sales activities of $0.8 million.

Current wording

Sales, marketing and customer support expenses increased by $13.3 million, or 42%, from $31.5 million in the three months ended June 30, 2023 to $44.9 million in the three months ended June 30, 2024. The increase was primarily due to an increase in personnel costs, including stock-based compensation and sales commissions, of $9.9 million, an increase in marketing activities, including advertising, promotions, events and other activities of $0.7 million, and an increase in personnel travel and entertainment expenses to support marketing and sales activities of $1.3 million. Sales, marketing and customer support expenses increased by $25.5 million, or 45%, from $57.2 million in the six months ended June 30, 2023 to $82.7 million in the six months ended June 30, 2024. The increase was primarily due to an increase in personnel costs, including stock-based compensation and sales commissions, of $19.6 million, an increase in marketing activities, including advertising, promotions, events and other activities of $1.0 million, and an increase in personnel travel and entertainment expenses to support marketing and sales activities of $2.1 million.

Previous wording

General and administrative expenses increased by $1.9 million, or 9%, from $20.2 million in the three months ended March 31, 2023 to $22.1 million in the three months ended March 31, 2024. The increase was primarily due to an increase in personnel costs, including stock-based compensation, of $2.7 million, partially offset by a reduction in general corporate insurance costs of $0.7 million.

Current wording

General and administrative expenses increased by $3.3 million, or 17%, from $19.8 million in the three months ended June 30, 2023 to $23.1 million in the three months ended June 30, 2024. The increase was primarily due to an increase in personnel costs, including stock-based compensation, of $3.7 million, partially offset by a reduction in general corporate insurance costs of $0.3 million. General and administrative expenses increased by $5.2 million, or 13%, from $39.9 million in the six months ended June 30, 2023 to $45.1 million in the six months ended June 30, 2024. The increase was primarily due to an increase in personnel costs, including stock-based compensation, of $6.4 million, partially offset by a reduction in general corporate insurance costs of $0.9 million.

Previous wording

Depreciation and amortization increased by $1.9 million, or 22%, from $9.0 million in the three months ended March 31, 2023, to $10.9 million in the three months ended March 31, 2024. The increase was primarily due to an increase in intangible assets related to the acquisition of Scibids.

Current wording

Depreciation and amortization increased by $1.3 million, or 14%, from $9.7 million in the three months ended June 30, 2023, to $11.0 million in the three months ended June 30, 2024. The increase was primarily due to an increase in intangible assets related to the acquisition of Scibids. Depreciation and amortization increased by $3.3 million, or 18%, from $18.7 million in the six months ended June 30, 2023, to $21.9 million in the six months ended June 30, 2024. The increase was primarily due to an increase in intangible assets related to the acquisition of Scibids.

Previous wording

Other income, net decreased by $0.5 million, from income of $2.7 million in the three months ended March 31, 2023 to income of $2.3 million in the three months ended March 31, 2024. The decrease was primarily due to an increase in losses from changes in foreign exchange rates, partially offset by an increase in interest earned on interest-bearing monetary assets.

Current wording

Other income, net decreased by $0.4 million, from income of $2.5 million in the three months ended June 30, 2023 to income of $2.1 million in the three months ended June 30, 2024. The decrease was primarily due to an increase in losses from changes in foreign exchange rates, partially offset by an increase in interest earned on interest-bearing monetary assets. Other income, net decreased by $0.9 million, from income of $5.2 million in the six months ended June 30, 2023 to income of $4.3 million in the six months ended June 30, 2024. The decrease was primarily due to an increase in losses from changes in foreign exchange rates, partially offset by an increase in interest earned on interest-bearing monetary assets.

Previous wording

Income tax expense decreased by $3.7 million from a $5.5 million expense in the three months ended March 31, 2023 to a $1.8 million expense in the three months ended March 31, 2024. The decrease was primarily due to a decrease in pre-tax book income and permanent book-to-tax income adjustments.

Current wording

Income tax expense increased by $1.4 million from a $4.0 million expense in the three months ended June 30, 2023 to a $5.4 million expense in the three months ended June 30, 2024. The increase was primarily due to an increase in permanent book-to-tax income adjustments. Income tax expense decreased by $2.4 million from a $9.5 million expense in the six months ended June 30, 2023 to a $7.2 million expense in the six months ended June 30, 2024. The decrease was primarily due to a decrease in pre-tax book income and permanent book-to-tax income adjustments.

Previous wording

Our operations are financed primarily through cash generated from operations. As of March 31, 2024, we had cash and cash equivalents of $302.0 million and net working capital, consisting of current assets (excluding cash) less current liabilities, of $172.9 million.

Current wording

Our operations are financed primarily through cash generated from operations. As of June 30, 2024, we had cash and cash equivalents of $256.1 million and net working capital, consisting of current assets (excluding cash and cash equivalents) less current liabilities, of $224.0 million.

Previous wording

For the three months ended March 31, 2024, cash provided by operating activities was $31.8 million, attributable to net income of $7.2 million, adjusted for non-cash charges of $30.5 million and $5.9 million use of cash from changes in operating assets and liabilities. Non-cash charges primarily consisted of $10.9 million in depreciation and amortization and $20.2 million in stock-based compensation, offset by $4.0 million in deferred taxes. The main drivers of the changes in operating assets and liabilities were a $4.4 million decrease in trade receivables, prepaid assets and other assets, and a $10.3 million decrease in trade payables, accrued expenses and other liabilities primarily related to the timing of payments for accrued expenses.

Current wording

For the six months ended June 30, 2024, cash provided by operating activities was $67.7 million, attributable to net income of $14.6 million, adjusted for non-cash charges of $60.9 million and $7.9 million use of cash from changes in operating assets and liabilities. Non-cash charges primarily consisted of $21.9 million in depreciation and amortization and $45.0 million in stock-based compensation, offset by $11.5 million in deferred taxes. The main drivers of the changes in operating assets and liabilities were a $0.8 million increase in trade receivables, prepaid expenses and other assets due mainly to increases in prepayments, and a $7.1 million decrease in trade payables, accrued expenses and other liabilities primarily related to the timing of income tax payments.

Previous wording

For the three months ended March 31, 2023, cash provided by operating activities was $21.4 million, attributable to net income of $12.2 million, adjusted for non-cash charges of $18.4 million and $9.2 million use of cash from changes in operating assets and liabilities. Non-cash charges primarily consisted of $9.0 million in depreciation and amortization and $11.8 million in stock-based compensation. The main drivers of the changes in operating assets and liabilities were a $14.9 million increase in trade receivables, prepaid assets and other assets due mainly to an increase in sales and the timing of collections, and a $5.7 million increase in trade payables and accrued expenses primarily related to the timing of vendor payments.

Current wording

For the six months ended June 30, 2023, cash provided by operating activities was $32.2 million, attributable to net income of $25.0 million, adjusted for non-cash charges of $36.4 million and $29.2 million use of cash from changes in operating assets and liabilities. Non-cash charges primarily consisted of $18.7 million in depreciation and amortization and $27.0 million in stock-based compensation, offset by $16.6 million in deferred taxes. The main drivers of the changes in operating assets and liabilities were a $23.4 million increase in trade receivables, prepaid assets and other assets due mainly to increases in sales and prepayments, and a $5.9 million decrease in trade payables, accrued expenses and other liabilities primarily related to income tax payments.

Previous wording

For the three months ended March 31, 2024, cash used in investing activities was $38.6 million, including $32.2 million attributable to investments in short-term financial instruments and $6.4 million attributable to purchases of property, plant and equipment, and capitalized software development costs. For the three months ended March 31, 2023, cash used in investing activities of $4.1 million was attributable to purchases of property, plant and equipment, and capitalized software development costs.

Current wording

For the six months ended June 30, 2024, cash used in investing activities was $95.5 million, including $81.9 million attributable to investments in short-term financial instruments and $13.6 million attributable to purchases of property, plant and equipment, and capitalized software development costs. For the six months ended June 30, 2023, cash used in investing activities of $7.7 million was attributable to purchases of property, plant and equipment, and capitalized software development costs.

Previous wording

For the three months ended March 31, 2024, cash used in financing activities of $0.9 million was primarily due to $1.7 million proceeds from common stock issued upon exercise of stock options, offset by $1.8 million related to shares repurchased for settlement of employee tax withholding and $0.8 million related to finance lease payments. For the three months ended March 31, 2023, cash provided by financing activities of $0.5 million was primarily due to $1.8 million proceeds from common stock issued upon exercise of stock options, offset by $0.8 million of shares repurchased for settlement of employee tax withholding and by $0.5 million of finance lease payments.

Current wording

For the six months ended June 30, 2024, cash used in financing activities of $24.6 million was primarily due to $25.0 million related to shares repurchased under the Repurchase Program. For the six months ended June 30, 2023, cash provided by financing activities of $3.1 million was primarily due to $5.8 million proceeds from common stock issued upon exercise of stock options, offset by $2.8 million related to shares repurchased for settlement of employee tax withholding.