DoubleVerify Holdings, Inc.

Greetings and welcome to the Double Verify First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tejal Angman. Senior Vice President, Investor Relations. Thank you. You may begin.

Good afternoon and welcome to Double Verify's first quarter 2024 earnings conference call. With us today are Mark Zagorski, CEO, and Nicola Elias, CFO. Today's press release in 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 Form 10Q and our annual report of Form 10K. 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 comfortable gap 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 will be referring to the slide deck listed on our website. With that, I'll turn it over to Mark.

Thanks, Vajal. And thank you all for joining us today. I'm excited to discuss our solid first quarter performance and to share the substantial product and business development progress we've achieved so far this year, setting a robust foundation for future growth and success. From scaling our independently accredited core verification solutions across leading social and CTV environments to increasing customer adoption of our key performance solutions, side bids and authentic attention, DV is excelling across multiple growth factors. And in the process, we're evolving our core value proposition to include protection and performance of media spend, solidifying our market leadership and driving sustained business growth. In the first quarter, we exceeded the top end of our guidance ranges on revenue and adjusted EBITDA, achieving solid revenue growth, profitability, and cash flow. We grew first quarter revenue by 15% year-over-year to $141 million, with double-digit revenue growth across both activation and measurement. We delivered $38 million of adjusted EBITDA, representing a 27% margin, and grew net cash from operating activities by nearly 50% year-over-year to $32 million. I'd like to begin my comments today by highlighting an evolving trend that's become increasingly prominent in recent months. The role that digital video is playing in driving ad impression growth. More specifically, we're seeing ad spend increase in social video and CTV, which are two of DV's fastest growing media environments. Advertisers, ParticularDB's large brand advertisers value these environments for their audience addressability, expansive scale across the purchase funnel, and measurable performance outcomes. We're at a pivotal point where the ongoing increase in digital video has emerged as a key catalyst for digital advertising growth. As reported by Magna Global, although global programmatic ad spend grew 10% in 2023, this growth rate would have been 5% if you excluded CTV. Similarly, the Magna data highlights that video comprised nearly 70% of social content in 2023, and the IAB expects social video to grow by 20% year-over-year, faster than any other type of media. DeeDee is primed to capitalize on this trend in social media, where video comprises 81% of our social measurement impression volumes in Q1. Our AI-powered universal content intelligence technology excels in measuring video content with unmatched efficiency and accuracy and underpins our growth trajectory across all video environments. Today, social media is the leading driver of DD's impression volume and revenue growth. Our newly launched brand safety and suitability measurement capabilities on platforms like Meta, YouTube, and TikTok are accelerating this growth trajectory, particularly in international markets where our brand suitability language footprint continues to grow. We grew our social measurement revenue by 51% year-over-year in the first quarter, following 48% growth in the full year 2023. Most of our social media revenue growth was driven by existing DV advertisers who increased their usage of our social measurement solutions. In addition, we increased the number of top 100 customers leveraging our solutions across Meta, YouTube, TikTok, Pinterest, and Snap compared to last year. We're especially enthusiastic about the increase in ad spend on social media platforms, giving DVs strong competitive advantage in this media environment. In contrast to the open web, social platforms have limited partnerships with verification and measurement companies. In addition, the technical integrations required by social platforms are complex and demand substantial infrastructure and expertise to handle efficiency. DB distinguished itself by providing the most comprehensive, independently accredited solutions across social platforms, while simultaneously supporting the largest scale across the entire internet, spanning both social media platforms and the open web. We see multiple layers of growth in our social media business, starting with measurement and increasingly extending to activation. In measurement, there is ample opportunity to grow our social revenue by expanding our verification and performance products across new geographies and driving existing customer adoption. Let me take a moment to outline some recent developments in social measurement. On Meta, we currently have over 40 duty advertisers testing our recently expanded brand safety and suitability measurement solutions including nine of DD's top 100 customers who have never activated us on Meta. Our Meta volumes have expanded across large advertisers as we grow our scale and enhance our measurement capabilities across the platform. We launched DD's brand safety and suitability measurement on Facebook and Instagram feeds and reels in seven languages in January and expanded to 18 more languages later in the quarter. Together, these 25 languages cover markets representing over 90% of global digital ad spend ex-China. Furthermore, we expanded our viewability and fraud measurement coverage to include Explore on Instagram, an area within the Instagram app that is dedicated to content discovery. We offer media quality measurement across key areas on Facebook and Instagram and are continually improving our coverage across some of the most engaging user-generated content environments in the world. On TikTok, where nearly half our first quarter revenue came from EMEA and APAC markets, we're scaling our solutions across the platform by expanding our brand safety and suitability measurement capabilities to additional languages and markets. This year, we've already introduced brand safety and suitability measurement in key TikTok markets like Japan and Brazil, and broadened our Spanish coverage to include our four Central American countries where TikTok is launched. As a result, we now provide brand safety and suitability solutions on TikTok in 36 markets, representing over 90% of total digital ad spend ex-China and India. Moreover, we've introduced 16 new brand safety and suitability categories to complement TikTok's latest inventory filters, vertical sensitivity, and category exclusion. With our expanded coverage and solutions on TikTok, advertisers can confidently verify and protect their ad spend allocation across all regions. While our social media revenue is currently driven by measurement, the progress we've made in extending our industry-leading free screen activation and optimization solutions across social platforms points to a substantial opportunity to monetize social impressions further. This trajectory mirrors DV's business evolution on the open web 15 years ago, where we started enabling measurement solutions and progressively introduced premium-priced activation solutions. Measurement data feeds our activation solutions, enabling advertisers to optimize media spend effectively. We are excited to continue to build upon our robust social media measurement data foundation, which, when coupled with our activation capabilities, will establish closed-loop verification and optimization that's tailored for the expansive social media market. Shifting focus to CTV, the IAB predicts CTV advertising to grow by 12% in 2024 to $22.7 billion, outpacing total media growth by 32%. DV's CTV measurement growth continues to outperform the market, with CTV impression volumes growing by 45% year-over-year in the first quarter. In activation, we see a significant portion of programmatic spend growth being driven by CTV and online video. However, our attachment rate to CTV activation impression volumes has room to grow because this premium price inventory is largely acquired through private marketplaces or within programmatic guarantees or programmatic direct deals, where DV solutions are implemented more selectively To take advantage of this dynamic, DV is focused on increasing the attachment rate of our solutions to programmatic CTV impressions at scale and maximizing their monetization potential. We've been working on enhancing our value proposition for CTV by driving greater transparency for key DV data sets, namely brand safety, suitability, viewability, and fraud at the show level. Show-level transparency has been limited in programmatic CTV purchases, both in direct data deals and, to a greater extent, in programmatic auctions until now. Driven by advertiser demands, streaming publishers are warming up to selectively providing the more granular data and transparency needed to satisfy advertisers and significantly amplify DB's value in this premium-priced media landscape. As we mentioned on our last call, we partnered with a leading streaming network to introduce a pioneering program-level measurement solution for advertisers on OTT devices, including CTV. This groundbreaking development in streaming verification will empower advertisers to measure and optimize for brand safety and suitability, as well as content performance at the granular level. This is a win-win for all involved. Advertisers gain invaluable transparency and insights, DV, CTV, and OTT solutions see broader attachment rates, and the streaming companies receive increased, more premium budget allocations. As major streaming companies adopt this level of transparency, it will catalyze others to follow suit swiftly. We believe that achieving content transparency at scale will not only drive widespread adoption of brand suitability measurement on CTD and the broader OTT market, which spans all devices, but will also fuel our CTD and OTT activation volumes in the future. Ultimately, this progress will also enable DD to better align our fees for CTD activation and measurement with the higher value of CTD ad impressions. Today, DV leads the market with its premier CTD activation measurement solutions. We've achieved MRC accreditation for video viewability in CTD and broadened accreditation for our CTD pre-bid data segments to include property-level brand suitability, contextual and fully on-screen segments, Moreover, DV has the widest CT coverage, including media quality authentication on Amazon's owned and operated ad-supported OTT and CTV inventory. Brands can leverage DV's fraud detection, NGO measurement, and app-level suitability across devices, including desktop, mobile, and CTV. Additionally, TD enables marketers to gauge viewability and attention on Amazon's owned and operated and supported CTD inventory. Finally, we continue to innovate rapidly in CTD where attention measurement is gaining traction. Recognizing its value, platforms are leveraging attention data as a selling point, similar to how ratings are used to sell TD inventory. With DB's authentic attention metrics, platforms can emphasize not only impression level verification and attention data, but also exposure and engagement across CTV content. This approach highlights high attention shows, maximizing the efficacy of TV inventory. Recently, DV partnered with Netflix to deliver a CTV attention measurement report using DV's CTV Authentic Attention to compare Netflix to other AVOD apps and fast chains. This exciting development is just the beginning of DV Authentic Attention's pioneering advancements in CTV, which fueled a tripling of attention revenue and advertiser adoption in the first quarter compared to Q1 last year. We are gaining solid momentum with this differentiated measurement offering and look forward to updating all of you on our ongoing progress. We see significant potential for unlocking value with DV solutions in the CTV space. By expanding our solutions at the show level, we expect higher attach rates and a more rewarding value prop for DV in an underpenetrated segment that accounts for a large share of programmatic revenue growth. Moving on to the topic of accelerating customer wins, we won numerous RFPs in the first quarter and have a robust new customer acquisition pipeline. DV boasts an impressive list of blue-chip clients, working with nearly half of the top 1,000 advertisers in the world. In addition to our previously announced first quarter wins, which included the global advertising business of Pepsi and Halion, we closed additional new logos in the first quarter, including McAfee, Mars, Heineken, Levi Strauss, and Dolce & Gabbana in the United States, Carlsberg in Europe, and SoftBank, New Balance, and Aon Financial in Japan. We've also signed meaningful expansions with existing clients, including Vodafone, Audible by Amazon, Pepsi, and Bacardi, adopting ADS across global markets, as well as Sanofi and Buyer's Door, scaling our social solutions. Our win rate across all opportunities remains above 80%, with 62% of our first quarter wins being greenfield, which we define as wins where the advertiser wasn't using third-party tools for the business that DV won. New client wins play into our successful land and expand strategy, through which we grew the number of advertiser customers generating more than $200,000 over the last 12 months by 12% in the first quarter. With nearly 60% of our top 700 customers using less than half of our seven core products, the opportunity to expand within our existing customer base remains significant. Having covered social and CTV, let's move to the open web and touch upon retail media and cybers AI. Our global scale and connectivity across retail media environments continues to expand. DV's measurement tags are now accepted on 82 of the key global retail media networks and sites, including 15 of the top retail media platforms and 67 major retailers. Approximately half support DV measurement on their owned and operated sites, while two-thirds support DV measurement on their off-site networks. As a result, we grew our first quarter retail meter measurement revenue by more than 45% year-over-year. Finally, on Sybiz AI, we're at an exciting inflection point where the adoption of custom bidding solutions to drive scalability and performance in optimizing programmatic advertising campaigns is gaining real traction. Since acquiring Sybiz AI, we have successfully sold the solution to 19 DD customers, of which eight are among DD's top 100 advertisers. Moreover, we've engaged numerous large advertisers who, until now, weren't DD customers. Currently, we are in discussions with most DD customers and global prospects, leveraging our global sales team to cross-sell this powerful solution that can utilize DD core verification assets. This early success is rooted in DVCybid's AI's capability to consistently deliver strong advertising returns with an average return on investment of $4 for every $1 invested in Cybid. Moreover, it delivers an average media cost savings of nearly 40%. It's also worth noting that marketers currently spend nearly a quarter of their time manually optimizing campaigns. A task that Sybiz AI can significantly streamline and improve, thereby enhancing overall marketing efficiency and effectiveness. Like its authentic attention, DV Sybiz represents another important step in DV's evolution to expand our client engagements to not only protect their media spend, but help it to perform as well. To conclude, we are witnessing strong growth in digital video, including CTV, social video, and online video. We see this growth characterized by increasing ad spend on social video and CTV, which is primarily acquired through private marketplace for programmatic guaranteed and direct deals. For advertisers, this has meant navigating through more closed ecosystems, leading to greater fragmentation, complexity, and challenges in implementing scalable strategies, interpreting data, evaluating performance, and establishing trust across various networks. Strong independent verification of closed ecosystems is essential to maintaining accountability and sustaining buyer confidence. DB has extensive experience in harnessing the power of AI, machine learning, and data science, as well as building trusted, scalable solutions integrated across all platforms, whether open or closed. We measure data that correlates with the business outcomes advertisers aim to achieve, and we can activate that measurement data to help advertisers drive better outcomes. All of this leaves DB well-positioned to play a pivotal role in shaping the evolving future of digital advertising. Our growth drivers of product upsell, channel expansion, customer acquisition and growth, and international expansion remain intact. And we continue to see a large growing business opportunity for our expanding set of verification and performance solutions across new markets, platforms, and customers. With that, let me hand the call over to Nicole.