DoubleVerify Holdings, Inc.

Greetings. Welcome to the Double Verify Q4 and Fiscal Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Tejal Angman. Thank you. You may begin.

Good afternoon and welcome to Double Verify's fourth quarter and full year 2021 earnings conference call. With us today are Mark Zagorski, CEO, and Nicola Elias, CFO. Today's press release and this call may contain forward-looking statements that are subject to inherent risks, uncertainties, and changes, and reflect our current expectations and information currently available to us. And our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings, including our annual report or Form 10-K. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on our investor relations website at ir.doubleverify.com. Also, during the call today, we'll be referring to the slide deck posted on our website. With that, I'll turn it over to Mark.

Thanks, Sejal. And good afternoon, everybody. I'm excited to share this update with all of you today, which continues to expand on our themes of exceptional growth and market-leading innovation. Before we begin, I want to take a moment to acknowledge the global humanitarian crisis in Ukraine. And note our support for all those affected and our unwavering commitment to our customers, partners, and colleagues around the world to stand for truth and transparency. First, as a quick snapshot of our recent growth, in the fourth quarter of 2021, we delivered $106 million of revenue and 38% adjusted EBITDA margins, ending a year of exceptionally strong execution on a high note. In 2021, we measured 4.5 trillion ad impressions, resulting in record revenue of $333 million, an increase of 36% compared with a year ago. We grew faster than the digital advertising industry and significantly outperformed the industry's programmatic, social, and CTV growth trajectories, while generating 33% adjusted EBITDA margins. We completed strategic acquisitions of Metrix and OpenSlate and successfully continued to evolve our customer value proposition from protection to performance, with the launch of two new identity-independent performance solutions that do not rely on third-party cookies or persistent identifiers, Custom Contextual and DV Authentic Attention. Building on the update we provided at our Investor Day on February 25th, I will discuss the current and future scaling of our business within the context of our five key growth drivers, which are product evolution, channel extension, international expansion, current client upsell and cross-sell, and new client acquisition, and strategic M&A. Nicola will then discuss our fourth quarter and 2021 results, as well as our outlook for 2022. Beginning with product evolution, our expansion of pre-campaign activation solutions that drive performance continue to be led by authentic brand suitability, or ABS. ABS was the largest driver of revenue growth for our advertiser programmatic business. ABS revenue grew 77% in 2021 and contributed approximately $85 million to our top line. For most of last year, ABS revenue was fueled by continued customer adoption and volume expansion on major buying platforms, most notably Google's DV360 and the Trade Desk, where it was launched in 2020. Considerable ABS growth also came from upgrading current clients to ABS, as well as selling ABS to new clients at the outset of their relationship with DV. While a significant majority of our top 100 clients are now using ABS in some applications, their usage of the product tends to be in North America, where programmatic buying is dominant. There is a substantial and growing opportunity to upsell ABS to our biggest clients in their international markets where adoption of this premium performance product has just begun. In the fourth quarter, for example, we activated ABS with Disney in Latin America, Colgate in EMEA, and Nike in 21 global markets. We have just started to scratch the surface of ABS growth with current clients in markets outside of North America. Beyond our top 100 customers, approximately 40% of our top 500 clients still do not use ABS in any market, representing a solid expansion opportunity amongst this established customer base. We are focused on making ABS and all of our performance solutions an integral component of an unmatched suite of independently accredited pre-campaign activation and post-campaign measurement tools that drive better outcomes for advertisers. While we're discussing DV's programmatic activation products, I'd like to highlight our MRC pre-bid accreditation announcement made last week, establishing DV as the only provider currently accredited for predictive viewability targeting, as well as property level ad verification, inclusive of brand suitability and contextual targeting within programmatic media campaigns. To put it simply, we have the only fully accredited programmatic suite in the market today. We expect this unique differentiator of DV's programmatic solutions, including ABS and DV custom contextual to further drive our programmatic sales momentum and support DV's overall RFP win rate, which was 80% in 2021. Beyond our core programmatic solutions, We're excited about the growth opportunities with our newest performance products, Authentic Attention, Custom Contextual, OpenSlate's pre-campaign social targeting tools, and our audience verification solution with ComStore. Today, let's dig deeper into two of them, Authentic Attention and Audience Verification. DV Authentic Attention, which you'll be hearing a lot about over the next few quarters, builds upon the baseline quality and safety metrics established by the DV Authentic Ad. For ad impressions that meet the standards of the authentic ad, attention measurement provides a real-time impression-level view of engagement and exposure, which allows advertisers to optimize media based on what's resonating most with audience. As traditional performance metrics like reach and frequency lose their efficacy due to privacy and policy changes, we believe that attention will be the next currency that advertisers rely on to drive outcomes. Our go-to-market strategy for authentic attention leverages DV's established customer base of over 1,000 leading brands to drive ubiquitous uptake of these new data sets. We essentially have a built-in pool of trial customers. In Q2, we will provide a preview of attention metrics through our software platform, Pinnacle, to all customers that use the DV authentic ad, exposing the biggest brands on the planet to the performance solution of the future. Today, we are the only leading verification company to have built and launched a comprehensive attention solution. We've already secured accreditation for fully on-screen measurement and attention metrics specific to CTV, and we'll continue to expand our lead in accreditations of all our attention metrics over time. Turning to our upcoming audience verification solution, we're excited to launch a market-leading product in partnership with Comscore. By using audience verification, Advertisers will be assured that the cross-platform audiences they are measuring are free of invalid traffic, delivered in view and to the right geography, and in the right brand environment. This is an industry-first measurement solution that combines media quality verification data with audience data to help advertisers maximize campaign performance and drive real business outcomes. we expect to launch the first iterations of this evolving joint offering for a select group of customers as early as the second quarter of 2022. Moving on to our second growth driver, channel extension, we are excited about our continued growth in social and CTV. Social revenue grew by nearly 50% in 2021, with strong performance across Facebook, YouTube, Twitter, Snapchat, and Pinterest, as more than 300 new advertisers activated DB's social media verification solutions last year. We believe the prospects for social growth in 2022 and beyond are exceptional for two key reasons. First, we are expanding our solutions and coverage on both emerging and leading social platforms, including TikTok, Twitter, and several others. And second, we've accelerated our product roadmap in social, through the successful integration of OpenSlate's pre-campaign social activation solutions into our sales process, providing an expansion opportunity with all existing DB customers and prospects. Beginning with TikTok, we continue to expand coverage of our viewability solution, which is now available in 67 countries. Our solution has been used by nearly 30 advertisers, resulting in average monetized impression growth of approximately 220% over the last six months. On brand safety in TikTok, Deedee's advertiser-activated brand safety controls continue to expand and have now been rolled out in North America, the UK, Australia, and the Middle East, with 82 advertisers using the solution. In addition, we continue to develop end-to-end in-feed solutions in conjunction with TikTok. With coverage of viewability, fraud, and in-geo, as well as our brand safety controls, DV offers the most comprehensive measurement and activation product offering across TikTok today. On Twitter, we're developing a brand safety and suitability measurement solution for Twitter's newsfeed, known as Timeline, and expect to launch this in the first half of 2022. Moving on to pre-campaign social solutions that we are integrating into our platform via the OpenSlate acquisition, we're actively working to capitalize on both immediate and long-term revenue opportunities. We have begun cross-selling our combined pre-campaign activation solution to DV's expansive global customer base. Our research demonstrates that when our pre-campaign activation social solutions are paired with our post-bid measurement products, we can deliver significantly improved outcomes for our customers. On YouTube, we saw that when our pre-campaign activation solutions are applied to campaigns, brand suitability incidents are reduced by up to 50%. We expect to be able to drive even better advertising outcomes for advertisers as the operational integration progresses. On CTV, our impression volumes grew 57% in 2021. And by the fourth quarter, 25% of our tag-based advertiser video impressions were CTV. So in essence, one of every four of DV's open internet video impressions are attributable to CTV. over-indexing relative to CTV's share of the digital video across the industry, and underscoring the growing importance of verification in this fast-growing sector. Our CTV products are becoming essential to advertisers because fraud and viewability are emerging as real challenges to advertiser media investment confidence. Fraud continues to violate unprotected digital transactions with increasing incidences of counterfeit SSAI servers generating fake CTV inventory across countless apps, IPs, and devices. As recently as last month, DD discovered a new scheme that we've dubbed ViperBot, which strips the code that verifies ad impressions and then conceals and redirects this code through real devices to hide the fraudulent activity and attempt to go undetected. DV customers are fully protected from this scheme, which continues to spoof more than 5 million devices and over 80 million ad requests per day, undercutting ad investments and undermining performance. In addition to fraud, viewability, which has generally been assumed by CTV advertisers, is also being challenged in CTV. In a recent study, DV discovered that one in four analyzed CTV environments continued to play programming content, including recording ad impressions after the television was turned off. The ad was delivered, but certainly was not viewed, rendering performance measurement invalid and diverting media investment. To combat this latest viewability challenge, last month, DV launched fully on-screen pre-bid targeting, enabling connected advertisers to target inventory from sources that are tested and evaluated by DV to ensure ads are only displayed 100% on screen and when the TV screen is turned on. Through this first-of-a-kind solution, DV complements our post-bid measurement capabilities with pre-bid targeting, empowering programmatic advertisers to address CTV viewability challenges across the media transaction. DV fully on-screen pre-bid segments are available on Amovi, MediaMath, and Microsoft Xander, with more media buying platforms coming. In addition to these CTV solutions, DV is the first and only verification provider to provide effective brand suitability controls in CTV environments. We currently offer CTV app inclusion and exclusion lists and app-level controls that are utilized in both monitoring and active pre-bid avoidance. And we will be launching content-level classification in CTV in 2022. Shifting to international expansion, international revenue grew by almost 70% last year, with APAC revenue growing by 84% and EMEA by 61%, all outpacing the industry and our competitors. International now contributes 26% of our overall direct revenue. We currently generate revenue in 93 countries, and from our expanding base of 20 locations outside the United States, we will leverage our exceptional RFP win rate to take advantage of the expansion opportunity that exists in markets around the world. In 2021, 55% of our headcount growth was driven by international hires as we continue to invest in expanding our global presence. Turning to client upsells and new client acquisition, we signed 176 new advertising customers in 2021, including brands such as Target, Geico, Diageo, BMW, Bumble, and Apple Services. 61% of our new logo wins were Greenfield, while 39% were competitive wins. In addition, on the supply side of the business, we added numerous new platform clients such as Amazon, Taboola, Adtheorant, SmartClip, and Verve, as well as 19 new publishers to the fold. The platform and publisher businesses are additional great examples of how we can extend our core data assets into entirely new revenue lines. With regard to our final growth lever, strategic M&A, the integrations of Metrix and OpenSlate are progressing well, and we have received client and partner endorsement of the additional global breadth and product depth that they have delivered to DV. With a strong and growing cash position and zero debt, we are exceptionally well positioned to take advantage of global market expansion, product acceleration, and solution extension opportunities that exist in the market. Wrapping up with a quick take on our innovation story, DV continues to lead the industry with unique value-driving solutions that set us apart from our competitors, paving the road for additional growth ahead. In the last 12 months, DV has launched or expanded the only widely available attention solution, the only comprehensively accredited programmatic suite, the only solution for measuring and filtering fully on-screen CTV impressions, the only certified CTV fraud program for programmatic partners. And we are the only leading verification company to root out and publicize the numerous new fraud attacks that shake the confidence of digital advertisers around the globe. And soon we will launch the only verified audience solution along with CompScore. And now we are the only independent leading verification company that is not in the conflicted business of selling digital ads. We lead and differentiate with innovation and earn our customers' trust through independence. With that, I'll turn it over to Nicola.