DoubleVerify Holdings, Inc. Quarterly Report on Form 10-Q For the Quarter Ended March 31, 2025

Company Overview

We are one of the industry’s leading media effectiveness platforms that leverages AI to drive superior outcomes for global brands. By creating more effective, transparent ad transactions, we make the digital advertising ecosystem stronger, safer and more secure, thereby preserving the fair value exchange between buyers and sellers of digital media.

Our software platform is integrated across the entire digital advertising ecosystem, including programmatic platforms, social media channels, and digital publishers. We deliver unique data analytics through our customer interface, DV Pinnacle, to provide detailed insights into our customers’ media performance on both direct and programmatic media buying platforms and across all key digital media channels, formats, and devices. In 2024, our coverage spanned 110 countries where our customers activate our solutions. Our customers include many of the largest global advertisers and digital ad platforms and publishers. We provide a consistent, cross-platform measurement standard across all major forms of digital media, making it easier for advertisers and supply-side customers to benchmark performance across all of their digital ads and optimize business outcomes in real-time.

We derive revenue primarily from our advertiser customers based on the volume of media transactions, or ads, that our software platform measures (“Media Transactions Measured”). Advertisers utilize the DV Authentic Ad, our definitive metric of digital media quality, to evaluate the existence of fraud, brand safety, viewability and geography for each digital ad. Advertisers pay us an analysis fee (“Measured Transaction Fee”) per thousand impressions based on the volume of Media Transactions Measured on their behalf. The price of most of our solutions is fixed. On platforms that charge based on percent of media spend, our pricing includes caps which effectively mirror our standard fixed fees. We maintain an expansive set of direct integrations across the entire digital advertising ecosystem, including with leading programmatic, CTV, and social platforms, which enable us to deliver our metrics to the platforms where our customers buy ads. Further, our solutions are not reliant on any single source of impressions and we can service our customers as their digital advertising needs change.

We generate revenue from supply-side customers based on monthly or annual contracts with minimum guarantees and tiered pricing when guarantees are met.

Components of Our Results of Operations

We manage our business operations and report our financial results in a single segment.

Revenue

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 March 31, 2025. 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.

For the three months ended March 31, 2025 and March 31, 2024, we generated 90% and 91% of our revenue, respectively, from advertiser customers. Advertisers can purchase our solutions through programmatic and social media platforms to evaluate the quality of ad inventories before they are purchased, which we track as Activation revenue. Advertisers can also purchase our solutions to measure the quality and performance of ads after they are purchased directly or programmatically from digital properties, including publishers and social media platforms, which we track as Measurement 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.

For the three months ended March 31, 2025 and March 31, 2024, we generated 10% and 9% 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. 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.

The following table disaggregates revenue between advertiser customers, where revenue is primarily generated based on number of ads measured and purchased for Activation or measured for Measurement, and Supply-side.

Operating Expenses

Our operating expenses consist of the following categories:

Cost of revenue: Cost of revenue consists primarily of costs from revenue-sharing arrangements with our partners, platform hosting fees, data center costs, software and other technology expenses, other costs directly associated with data infrastructure, and personnel costs, including salaries, bonuses, stock-based compensation and benefits, directly associated with the support and delivery of our software platform and data solutions.

Product development: Product development expenses consist primarily of personnel costs, including salaries, bonuses, stock-based compensation and benefits, third party vendors and outsourced engineering services, and allocated overhead. Overhead costs such as information technology infrastructure, rent and occupancy charges are allocated based on headcount. Product development expenses are expensed as incurred, except to the extent that such costs are associated with software development that qualifies for capitalization, which are then recorded as capitalized software development costs included in Property, plant and equipment, net on our Condensed Consolidated Balance Sheets. Capitalized software development costs are amortized to depreciation and amortization.

Sales, marketing, and customer support: Sales, marketing, and customer support expenses consist primarily of personnel costs directly associated with sales, marketing, and customer support departments, including salaries, bonuses, commissions, stock-based compensation and benefits, and allocated overhead. Overhead costs such as information technology infrastructure, rent and occupancy charges are allocated based on headcount. Sales and marketing expense also includes costs for promotional marketing activities, advertising costs, and attendance at events and trade shows. Sales commissions are expensed as incurred.

General and administrative: General and administrative expenses consist primarily of personnel expenses associated with our executive, finance, legal, human resources and other administrative employees. General and administrative expenses also include professional fees for external accounting, legal, investor relations and other consulting services, expenses to operate as a public company, including costs to comply with rules and regulations applicable to companies listed on a U.S. securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, other overhead expenses including insurance, as well as third-party costs related to acquisitions.

Interest expense: Interest expense consists primarily of the amortization of debt issuance costs, commitment fees associated with the unused portion of the New Revolving Credit Facility and Prior Revolving Credit Facility and interest on finance leases. The New Revolving Credit Facility bears interest at an option of SOFR or ABR plus an applicable margin per annum.

Other income, net: Other income, net consists primarily of interest earned on interest-bearing monetary assets and gains and losses on foreign currency transactions.

Results of Operations

Comparison of the Three Months Ended March 31, 2025 and March 31, 2024

The following table shows our Condensed Consolidated Results of Operations:

| | Three Months Ended March 31, | Change | Change |

The following table sets forth our Condensed Consolidated Results of Operations for the specified periods as a percentage of our revenue for those periods presented:

| | Three Months Ended March 31, |

Revenue

Total revenue increased by $24.3 million, or 17%, from $140.8 million in the three months ended March 31, 2024 to $165.1 million in the three months ended March 31, 2025.

Total Advertiser revenue increased by $20.0 million, or 16%, in the three months ended March 31, 2025 as compared to the same period in 2024, driven primarily by a 22% increase in Media Transactions Measured, partially offset by a 6% decline in Measured Transaction Fees, excluding the impact of an introductory fixed fee deal for one large customer.

Activation revenue increased by $15.9 million, or 20%, in the three months ended March 31, 2025 as compared to the same period in 2024, driven primarily by new customers activating our core programmatic solutions, including Scibids Technology SAS (“Scibids”), as well as greater adoption of our Authentic Brand Suitability (ABS) solution.

Measurement revenue increased $4.2 million, or 8%, in the three months ended March 31, 2025 as compared to the same period in 2024, driven primarily by new customers activating our open web and CTV solutions and by the addition of Rockerbox, Inc. (“Rockerbox”).

Supply-side revenue increased $4.3 million, or 35%, in the three months ended March 31, 2025 as compared to the same period in 2024, driven primarily by increased revenue from existing and new platform customers.

Cost of Revenue (exclusive of depreciation and amortization shown below)

Cost of revenue increased by $4.3 million, or 16%, from $26.6 million in the three months ended March 31, 2024 to $31.0 million in the three months ended March 31, 2025. The increase was due primarily to growth in Activation revenue which drove increases in partner costs from revenue-sharing arrangements, as well as investments in cloud services to provide the scale and flexibility necessary to support future growth.

Product Development Expenses

Product development expenses increased by $8.3 million, or 23%, from $36.4 million in the three months ended March 31, 2024 to $44.7 million in the three months ended March 31, 2025. The increase was due primarily to an increase in personnel costs, including stock-based compensation, of $6.1 million and an increase in third party software costs and outsourced consulting and engineering services of $1.7 million to support our product development efforts.

Sales, Marketing and Customer Support Expenses

Sales, marketing and customer support expenses increased by $5.8 million, or 15%, from $37.9 million in the three months ended March 31, 2024 to $43.7 million in the three months ended March 31, 2025. The increase was due primarily to an increase in personnel costs, including stock-based compensation and sales commissions, of $5.0 million, and an increase in third party professional fees to support marketing and sales activities of $0.3 million.

General and Administrative Expenses

General and administrative expenses increased by $4.5 million, or 20%, from $22.1 million in the three months ended March 31, 2024 to $26.5 million in the three months ended March 31, 2025. The increase was due primarily to a $2.4 million increase in personnel costs, including stock-based compensation, a $1.0 million increase in third party professional fees, and $1.2 million of third party professional services costs related to the acquisition of Rockerbox.

Depreciation and Amortization

Depreciation and amortization increased by $1.5 million, or 13%, from $10.9 million in the three months ended March 31, 2024, to $12.4 million in the three months ended March 31, 2025. The increase was due primarily to an increase in capitalized software development costs.

Interest Expense

Interest expense increased by $0.2 million, from $0.2 million in the three months ended March 31, 2024 to $0.4 million in the three months ended March 31, 2025.

Other Income, Net

Other income, net increased by $0.9 million, from income of $2.3 million in the three months ended March 31, 2024 to income of $3.2 million in the three months ended March 31, 2025. The increase was due primarily to gains from changes in foreign exchange rates, slightly offset by a decrease in interest earned on interest-bearing monetary assets.

Income Tax Expense

Income tax expense increased by $5.4 million from a $1.8 million expense in the three months ended March 31, 2024 to a $7.2 million expense in the three months ended March 31, 2025. The increase was due primarily to an increase in unfavorable permanent tax adjustments, including non-deductible executive compensation and stock-based compensation.

Adjusted EBITDA

In addition to our results determined in accordance with GAAP, management believes that certain non-GAAP financial measures, including Adjusted EBITDA and Adjusted EBITDA Margin, are useful in evaluating our business. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenue. The following table presents a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to the most directly comparable financial measure prepared in accordance with GAAP.

| | Three Months Ended March 31, |

(a) M&A and restructuring costs for the three months ended March 31, 2025 consist of transaction costs related to the acquisition of Rockerbox. M&A and restructuring costs for the three months ended March 31, 2024 consist of transaction costs related to the acquisition of Scibids. (b) Offering and secondary offering costs for the three months ended March 31, 2024