DoubleVerify Holdings, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; FY2021 results include the fourth quarter, but the filing does not provide a separate Q4 narrative. The company provides digital advertising measurement and analytics, earning most revenue from advertisers based on measured ad activity. Figures below are in U.S. dollars.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $332.7 million | $243.9 million | +36% |
| Operating income | $26.7 million | $21.4 million | +25% |
| Net income | $29.3 million | $20.5 million | +43% |
| Diluted EPS | $0.18 | $0.14 | +29% |
| Adjusted EBITDA (non-GAAP) | $109.7 million | $73.2 million | +50% |
| Adjusted EBITDA margin (non-GAAP) | 33% | 30% | +3 percentage points |
| Cash from operating activities | $82.7 million | $21.2 million | +$61.5 million |
| Cash and cash equivalents, year-end | $221.6 million | $33.4 million | +$188.2 million |
| Debt, year-end | $0 | $22.0 million | Repaid in 2021 |
Operating margin was approximately 8.0% versus 8.8% in 2020; net margin was approximately 8.8% versus 8.4%. Cost of revenue excluding depreciation and amortization rose to $54.4 million from $35.8 million, or 52%, and was 16% of revenue versus 15%. The filing’s stated 33% Adjusted EBITDA margin is a non-GAAP measure, not a GAAP operating margin.
- Advertiser revenue was 91% of total revenue; supply-side revenue was 9%.
- Advertiser-direct revenue increased 27% to $135.5 million; advertiser-programmatic increased 45% to $167.8 million; supply-side increased 38% to $29.4 million.
- Advertiser revenue growth reflected 41% more measured transactions, partly offset by a 4% decline in measured transaction fees.
- Year-end trade receivables were $122.9 million, versus $94.7 million. Net working capital, as defined by the company excluding cash, was $89.2 million versus $74.6 million.
- Cash used in investing activities was $158.6 million, mainly for acquisitions; financing activities provided $264.4 million, principally from the IPO and concurrent private placement.
Material changes and unusual items
- The company completed its IPO in April 2021, receiving $253.2 million in net proceeds, and raised approximately $29.0 million net in a concurrent private placement. It repaid the remaining $22.0 million revolving-credit balance.
- It acquired Meetrics for approximately $24.3 million net cash and OpenSlate for $147.4 million, comprising $124.9 million net cash and $22.5 million in stock. Preliminary purchase accounting added $124.2 million of goodwill; year-end goodwill totaled $350.6 million. Acquisition allocations remained subject to finalization.
- General and administrative expense rose 53% to $81.4 million, including $18.6 million more IPO-related transaction costs, $3.5 million more M&A and restructuring costs, and $2.8 million related to early termination of Zentrick deferred payment terms.
- FY2021 income tax benefit was $3.5 million despite $25.8 million of pretax income. The fourth quarter recorded a $11.8 million tax benefit and $28.3 million net income; the filing attributes the annual tax benefit mainly to tax credits and book-tax items. Q4 earnings therefore warrant review for tax effects.
- In February 2022, the company paid $5.6 million to settle and terminate Zentrick contingent payment terms; $2.8 million of additional expense was recorded in FY2021 because it was deemed probable at year-end.
- Stock-based compensation was $21.9 million, compared with $20.5 million in 2020; $91.3 million remained unrecognized at year-end, expected to be recognized over a weighted-average 1.5 years.
Outlook, risks and contingencies
- The filing gives no formal revenue, earnings or margin guidance. Management described continued investment in product development, sales and marketing, international expansion, new channels such as connected TV, and potential acquisitions.
- Management expected 2022 capital expenditures, including capitalized software, of $25–35 million. It also estimated approximately $8 million of 2022 operating lease payments including capitalized leases. Separately, a new New York office lease beginning in 2022 runs through July 2038 and carries $106.8 million of undiscounted future commitments.
- Management said cash, operating cash generation and the undrawn $150 million revolving facility should be sufficient for working-capital and capital needs. The facility matures in October 2025, is secured by substantially all Credit Group assets subject to exceptions, and includes financial and other covenants; the company reported compliance at year-end.
- Key risks include dependence on advertising budgets and platform integrations; competition; changes in privacy laws and platform policies; cyber incidents or service interruptions; acquisition integration and valuation; collection/payment timing; and economic or geopolitical disruption, including COVID-19 and Russia’s invasion of Ukraine. Two programmatic platforms each collected approximately 17% and 12% of 2021 revenue on advertisers’ behalf, although no individual customer exceeded 10% of revenue.
- Advertising seasonality makes Q4 typically the strongest measurement quarter and Q1 the weakest. Management reported gross revenue retention above 95% in 2021 and net revenue retention of 126%; these are company-defined operating metrics, not guarantees of future results.
- No material legal proceeding or material off-balance-sheet arrangement was reported. The company said it remediated previously identified material weaknesses in internal control as of December 31, 2021; the auditor did not provide an internal-control attestation due to the company’s transition status.
Important facts for investors to verify
- Whether transaction growth can continue despite the 4% decline in measured transaction fees, and whether growth is increasingly concentrated in programmatic, social and brand-suitability products.
- The sustainability of operating cash flow and the effect of rising receivables, partner collection timing and payment concentration.
- How Meetrics and OpenSlate perform after integration, and whether the preliminary acquisition valuations and substantial goodwill are supported by future results.
- The drivers and repeatability of the FY2021 tax benefit, including the unusually large Q4 benefit, and the impact of stock compensation and IPO-related costs on reported earnings.
- The full cash and balance-sheet impact of the new office lease, capital spending plans, and any future use of the revolving facility or additional acquisitions.