Earnings Call: Q1 2021

May 25, 2021

Greetings, and welcome to the Double Verify First Quarter 2021 Financial Results. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the call over to our host, Tejal Engman of Investor Relations. Thank you. You may begin. Good afternoon, and thank you for joining us to discuss Double Verify's Q1 2021 Financial Results. With me today is Mark Vygotsky, CEO and Nicola Elias, CFO. Before we begin, I'd like to remind everyone that statements made on this call and Q and A today contain forward looking statements. These forward looking statements are subject to inherent risks, uncertainties and And reflect our current expectations based on our beliefs, assumptions and information currently available to us as of today, May 25, 2021. Although we believe these expectations are reasonable, they are subject to change and we undertake no obligation to revise any statements to reflect changes that occur after this call. You can find more information about these risks, uncertainties and other factors that could cause actual results to differ materially from these forward looking statements in our SEC filings, including our S-one registration statement. In addition, our discussion today will include references to certain non GAAP financial measures. These non GAAP measures are presented for supplemental purposes and should be considered in addition to and not as a substitute for or in isolation from 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. With that, I'll turn it over to Mark. Thank you, Tejal. Good afternoon, everyone. I'm Mark Zagorski, CEO of Double Verify. I'm excited to welcome you to our first ever earnings call and to discuss our strong Q1 performance and optimistic outlook on the year ahead. Nicole will detail our business model and financial results as well as provide guidance. Since this is our inaugural earnings call, before we dive into the numbers, I wanted to take a few minutes To talk about Double Verify and the core value proposition that continues to propel the success of our business, DV's story is one of sustained organic growth helped along by sector tailwinds and a unique market leading position and platform that creates exceptional expansion opportunities in the mid and long term. Double Verify's mission is to make digital advertising We believe the advertising dollars that support the creation of diverse High quality content and make it accessible to the widest audience possible depend on a transactional environment that is based on transparency and trust. Via our media quality verification and performance solutions, Double Verify creates greater advertising transparency and therefore protects The fair value exchange in the digital marketplace. In the process, we not only drive ROI for our brands, we ultimately keep money out of the This is important not just for our advertiser partners, but for everyone who participates in the digital ecosystem. Speaking of advertisers, our analytics platform has become a core utility for hundreds of leading global brands from CPG companies Such as Mondelez and Unilever to media and tech innovators like Comcast and Vodafone, our tools help maximize digital ad Double Verify's authentic ad metric has become industry currency, Measuring whether digital advertising is displayed in a brand safe, fraud free environment is fully viewable and delivered in the desired geography. As an independent measurement company, we are un conflicted in our ability to verify everywhere. Our cookie free solutions are implemented across the open Internet and in the walled gardens in display, mobile, video, social and CTV and in direct and programmatic transactions. Our strong track record of driving bottom line ROI for advertisers, While creating a more secure digital ecosystem has not only directly benefited our customers, it has supported a thriving digital ad market that continues to grow at a According to Magna Global, digital ad spend excluding search is expected to grow by approximately 11% in 2021 and sectors such as CTV, social and programmatic are growing significantly faster. As the global market remains largely underpenetrated, Ample white space combined with sector and market tailwinds provide us with significant opportunities for expansion. Now let's dig into our strong results for the quarter. 1st quarter revenue grew 32% year over year, While adjusted EBITDA grew by a solid 41% year over year, our top line momentum continues to be driven by a focus on global expansion fueled by enterprise client wins, successful product adoption in fast growing new sectors and an ongoing focus on new solutions that leverage our deep dataset to capitalize on evolution in the digital marketplace. Let me discuss each of these three revenue drivers in greater detail. Beginning with global expansion, we continue to gain market share by closing new enterprise clients who are adopting our core verification solutions in both emerging and established media markets. In the past few months, we notched new business wins with Unilever, UPS, Fujifilm Japan, Arnott's in Australia and many others. When we win an enterprise client, most, if not all, of their measurable impressions run through our software platform, creating a sticky long term relationship that we continue to expand over time by upselling new solutions. These enterprise clients and many others contributed to our solid Q1 results and exceptionally strong revenue growth in both EMEA and APAC. We grew 1st quarter EMEA revenues by 65% year over year and APAC revenues by approximately 97% year over year. Overall, non Americas revenue grew nearly 76% year over year in the Q1, representing approximately 25% of direct revenue and exemplifying the expanding opportunity for the application of our software in markets around the globe. Driving this commercial success is our investment in people and go to market infrastructure as spearheaded by our newly appointed Global Chief Commercial Officer, Julie Edelman. Julie recently joined us from Google, where she managed some of their largest global clients, including P&G, Ford, GM, Chrysler and McDonald's. Since joining, Julie has led the launch of DV's global client and agencies partnerships team, which is responsible for driving growth with DB's largest customers and ensuring seamless delivery of DB's comprehensive solutions. In addition, The expansion of our self serve software tools and the launch of our DV University training program last quarter are helping to accelerate the Scalability of our platform and increase the stickiness of our offering with key customers. As of the end of 2020, Earlier this month, we expanded our business into the Middle East, North Africa and Turkey, also known as the MENA region. According to eMarketer, Digital advertising spend in the region is expected to grow by 54% over the next 2 years, and we are well positioned to take advantage of those local tailwinds. Moving on to our product successes in fast growing new sectors. CTV, social and programmatic continue to gain the lion's share of digital advertiser interest. Double Verify solutions have been focused on ensuring advertiser spend is securely optimized in these areas. In 2021, programmatic CTV ad spending is forecasted to grow by more than 40% year over year to nearly $11,000,000,000 in the United States, Because the cost per impression is relatively high on CTV compared to other formats, the incentives for fraud are obvious. Over the past 18 months, we've uncovered 7 different fraud schemes targeting CTV devices. These schemes were part of 1 large Coordinated fraud family identified as Octobot, which generated billions of ad calls and spoofed or imitated thousands of apps and millions of devices, all with the intention to defraud advertisers out of 1,000,000 in revenue. These schemes may have cost unprotected advertisers Tens of 1,000,000 of dollars. Through our software platform, DoubleVerify customers were fully protected from these issues and continue to be insulated against the new challenges that will likely emerge. With fraud being particularly rife in high growing emerging media such as CTV, Advertisers have increasingly turned to DV's sophisticated tools and algorithms to block new variants of fraud and to provide them with the confidence needed to make premium digital advertising investments. As a result, through our integrations with platforms such As Roku, Amazon and Hulu, Double Verify grew CTV volumes by approximately 75% year over year in the Q1 as advertisers and consumers continue to flock to the media. In addition to CTV, social continues to be a fast growing sector for the industry and for Our business, concern around brand safety across social networks has risen during the challenging social and political environment over the last 12 months Advertisers have become increasingly focused on brand equity and reputation online. DoubleVerify software platform delivers the widest set of MRC accredited brand safety and suitability solutions available on the largest social network, Facebook. Social represented approximately 30% of our direct revenue in 2020 and our leadership position in this sector helps grow Doubleverify's social product volume by nearly 75% year over year in the Q1 of 2021. With the potential for Additional coverage opportunities across social platform partners, we are optimistic about our prospects for continued growth in this sector. Finally, the success of our programmatic solutions has mirrored the rapid growth of our sector. In Q1, programmatic business grew at a rate of 42% year over year, driven by growth in our premium priced authentic brand safety solution, which grew at 124 With the recent launch of Authentic Brands Safety on Google's DV360 platform, our industry leading programmatic product is now available on programmatic buying platforms, which manage the vast majority of programmatic media buying in the U. S. The expansion of our solutions into CTV, social and programmatic sectors, as well as roadmapped investments into dynamic areas such as audio and gaming, Underscore the extendibility of our software platform into exciting emerging areas that require greater transparency and trust in order to confidently attract advertiser spend. Shifting to recent product launches and enhancements, Double Verify has had a strong track record of leveraging its incredibly valuable core data asset to innovate in new adjacencies. From programmatic authentic brand safety to CTV's video complete solution, we have repeatedly spun off successful solutions that help grow measured transaction fees, what we call MTF, and drive organic revenue growth from our existing client base. Our 2 newest product launches include Custom Contextual and DV Authentic Attention. Our Custom Contextual product for programmatic advertisers Delivers privacy safe cookie free targeting by aligning ads to relevant content in order to maximize user engagement and drive conversion. What's unique in the industry about our solution is that it leverages the same content classification expertise that advertisers rely on to ensure their digital ad spend is brand safe and secure and applies it towards positive targeting in order to optimize their The solution is now available on leading DSPs, including Media Map, Verizon Media and Xandr. And We expect it to be widely available on The Trade Desk later this quarter. As the industry shifts away from 3rd party targeting due to increased privacy regulation and the decline of third party cookies, alternative ways of driving performance are becoming increasingly critical. Through our custom contextual product and others in the pipeline, DV is well positioned to take advantage of this change. Our second recent premium product extension, DV Authentic Attention delivers a unique exposure plus engagement metric It enables global brands to benchmark top performing sites and apps, evaluate cost effective high performance private marketplace deals and focus on the ad units that deliver the most impact. Mondelez International recently used DV Authentic Attention to evaluate and optimize the performance of a cross platform display campaign for a popular snack brand. DB Authentic Attention Insights found that private marketplace packages flagged as high attention by our system Outperformed open exchange inventory by 143% on the same campaign. Vodafone, Another early adopter of DV Authentic Attention found that ads characterized by high double verify engagement scores drove over 3.5 times Higher rates of qualified traffic and sales conversion as compared with low engagement ads. It's exactly these kinds of positive ROI results that make us so essential to our customers and underscore the opportunity that exists with our new solutions. Although custom contextual and DV Authentic Attention have Only just debuted. We expect these products as well as other innovations that are currently in the pipeline to support future fee growth. In summary, Double Verify remains uniquely positioned to solve the digital advertising ecosystem's need for independent, integrated and standardized measurement of ads, particularly in post cookie world, where our proprietary dataset provides a unique value proposition. We had a great Q1, which continue to show the utility of our software solutions for the biggest brands in the world. Numerous additions to our roster of enterprise customers, Accelerating traction in key global markets and successful product investments in CTV, social and programmatic Continue to drive our ongoing growth story. Add to this the tailwinds from a post COVID advertiser recovery, and we see a future with strong momentum expected to build into 2021 and beyond. With that, let me turn the call over to Nicola. Thank you, Mark. I'm pleased to report our strong Q1 results as a newly public company, giving us confidence in providing a strong outlook for the year. Our impressive performance demonstrates the strength of our customer relationships and our attractive scalable operating model. This quarter, we continue to execute against our plan as we generated strong revenue growth, maintained high profitability while continuing to invest in the business. Before reviewing our quarter results, I want to quickly take you through our business model. DB generates revenue via transactional software model. Our customers use DV's software and data analytics to evaluate, target and measure the quality of their digital ad spend. For every media transaction we measure, an MTM, we are paid a measurement transaction fee, an MTF. Our revenue model is The NTF we charge is a fixed fee per transaction rather than a take rate based on our customers' media We want to measure all impression for our customers regardless of format, channel or media value. We grow NTM by adding new customers, by measuring additional impressions for our customers as they increase their digital ad spend And as more digital media transactions are available for verification, we grow MTF by adding premium products that provide additional monetization opportunities for each impression we measure. Our advertiser customers, We represent over 90% of our revenue purchase and implement DV solutions in 2 ways. The first way, which we track as advertiser direct revenue, occurs when advertisers use our software platform to measure the quality and performance of ads purchased directly from digital properties, including open web publishers, social media and CTV platform. The second way, which we track as advertiser Programmatic revenue occurs when advertisers leverage our solutions through programmatic platforms to evaluate the quality of ad inventories before they are purchased through those Since our transaction fee model is not a take rate based on the cost of media, our business is not subject to large In the Q2, we achieved a 22% year over year revenue growth, driven by the increased need for digital Our solutions are considered mission critical for advertisers during periods of market fluctuations. DV has not historically experienced the negative revenue friction that normally occurs, yet our model enables us to grow as our In addition to revenue from our advertiser customers, we generate supply side revenue from platforms and publishers who use DV data to validate the quality of their own ad inventory before it is sold to their customers. This is a subscription revenue model, which represents approximately 9% of our total revenue. Now let's turn to our results. In the Q1, our media transaction measured continued to ramp and were the main driver of our revenue growth. 1st quarter total revenue was $67,600,000 up 32% year over year in what is historically our lowest revenue quarter in the year based on seasonal patterns of our customers' digital ad spend. Advertiser direct revenue was 27 point $5,000,000 up 24% year over year. In addition to key new enterprise wins in the quarter, which Mark mentioned, We maintained over 95% gross revenue retention rate, highlighting the recurring nature of our transactions where the majority of our revenue comes from existing Media transaction measured grew particularly rapidly in social and CTV, each approximately 75% year over year, contributing to the quarter growth. Advertiser programmatic revenue was $33,900,000 up 42% year over year As we benefited from the continued upsell of our premium products, including authentic brand safety, which is now available across All major platforms, including on Google, CV360, since the end of last year. ABS now represent approximately 50% of our programmatic revenue. Supply side revenue was $6,100,000 up a steady 18% year over year, primarily driven by increased uptake of our services from our existing customers. Turning to expenses. Cost of sales were 15% of revenue in the quarter. Even as we invest in our infrastructure for future growth, we're able to leverage our technology and extend our solution across new verticals, new geographies and new solutions at marginal incremental costs. On operating expenses, we're focused on scaling our operations globally and on accelerating our product road map into new verticals. In particular, 1st quarter product development costs increased by 37% year over year as we continue to improve and expand our solutions. Because our business model is very Profitable, we're able to invest while maintaining high margin. 1st quarter 2021 adjusted EBITDA was $21,700,000 representing a 32% margin as compared to $15,400,000 or 30% margin in the Q1 of 2020. In terms of balance sheet and cash flow, we generated $19,500,000 in cash from operating activities in the quarter and had $49,800,000 of cash on our balance sheet at the end of the Q1. After the quarter, we received Aggregate net proceeds of $282,000,000 from the IPO and a concurrent private placement. This further strengthens our balance sheet and bolsters our ability to expand our global footprint and accelerate a technology roadmap. At the end of the Q1, we had $22,000,000 of outstanding debt, which we have since repaid. Now turning to guidance. We expect 2nd quarter revenue in the range of $72,000,000 to $74,000,000 which at the midpoint implies growth of 38% year over year. As a reminder, due to the resilience of our business model, our Q2 2020 performance of 22% growth year over year was much stronger than the general advertising technology market. We expect 2nd quarter adjusted EBITDA in the range of $20,000,000 to $22,000,000 which at the midpoint implies an increase of 34% year over year an adjusted EBITDA margin of 29%. In the second quarter, we expect to ramp investments in hiring talent We are particularly focused on engineering, products and sales as we continue to invest in the tremendous growth opportunities that lie ahead. Finally, we expect our 2nd quarter weighted average diluted shares outstanding to range between 157,000,000 and 161,000,000 shares. For the full year 2021 guidance, we expect revenue in the range of $322,000,000 to $326,000,000 a year over year increase of 33 And adjusted EBITDA in the range of $103,000,000 to $105,000,000 a year over year increase of 42% and an adjusted EBITDA margin of 32% at the midpoint. Overall, we remain committed Since the beginning of the year, our revenue growth expectations for the second half of the year have improved, driven by more favorable outlook for the Q4, which tends to benefit from seasonally higher spending on advertising campaign. In summary, we delivered a strong Q1 and are executing well against our 2021 plan. We're poised to continue to deliver consistent growth well above the expected digital advertising growth of 11% for the year. And favorable conditions in the advertising marketplace will also drive our business as we participate In the economic reopening across numerous segments, including retail and travel, we will take advantage of these tailwinds in the industry We have continued investments in global markets and enterprise client wins, product successes in fast growing sectors and the introduction of new solutions for our customers. And with that, we will open the line for questions. Operator, Please go ahead. Thank you. And ladies and gentlemen, at this time, we will be conducting our question and answer session. Our first question comes from Chris Merwin with Goldman Sachs. Please state your question. Okay. Thanks so much for taking my question and congrats Thank you all for such a strong Q1 out of the gate. In the prepared remarks, you talked about some recent wins in social and CTV. Can you give us a sense of what type of uptake you're seeing for those products among the customer base? And can you also talk a bit about the opportunity for improved data sharing from the socials and how That could be a further catalyst for adoption for those products. Thanks. Hey, Chris. Thanks for the question. We really had a strong quarter when it came to social and CTV volume growth. And we obviously love Seeing that in areas which we think are going to have great tailwinds around it. As you remember, when we go in with a client, We generally start with a core value proposition across as many media as possible and continue to upsell them solutions over time. So in the CTV and social space, social is a bit more mature of a product set. Those usually kind of are the earlier sell throughs. CTV is an area which we just started entering in the middle of last year. So we think we've got a good amount of White space to upsell both of those solutions into both our current client base and new clients moving ahead. So we see a lot of think there's 2 aspects of that. It's going deeper into the social networks that we currently work with and expanding into We believe there are opportunities on both of those fronts. Late last year, there was a public announcement By Twitter, on their interest in continuing to expand partnerships with 3rd party validation and verification companies, naming Double Verify as So we know there's opportunities there as well as with the other social networks that we work with. And then as new social networks Evolve and become introduced, our drive to verify and measure everywhere means that we will work with those folks to get coverage there as well. It's important to note that we are really a customer driven enterprise And wherever our customers and the big brands need us to be, we're going to make sure that we get coverage in those new spaces. Okay, perfect. Thank you. Maybe just one quick follow-up on the outlook. It looks like Kevin, well ahead of where the Street is now. So can you just talk a bit about any factors that influence That, whether it's a better than expected cyclical recovery or just stronger pipeline growth, anything you can share about the outlook there would be great. Thanks. Yes. Chris, it's Nicola. I think the two points you just mentioned are what is driving sort of our outlook for the rest of the year, which is a positive one. There's clearly a cyclical component to the spend of our customers. And so we anticipate that To help us, as you know, the Q1 is our smallest quarter. More importantly, I think the recovery is definitely something that we will participate in. We're very diversified across But as in particular travel and entertainment comes back, we're poised to take advantage of that recovery as well. Great. Thank you. Thanks, Chris. Our next question comes from Mark Murphy with JPMorgan. Please state your question. Hi, Good afternoon. This is Matt Coss on behalf of Mark Murphy. Congratulations on your first public quarter out of the gate. I just wanted to ask a little bit more about the favorable trends. You mentioned as retail and travel open back up. I think The thinking was that, that would be more of a sort of late 2021 impact. But are you seeing evidence that, that Good question. I think we're still kind of looking at that as a latter part of the year bounce back, particularly when it comes to kind of travel and retail. But one of the things I think it's But one of the things I think it's important to kind of lean into is the fact that a lot of the habits that were developed over during COVID as far as media ingestion and the amount of media people are consuming kind of continued throughout this year as well. So we're benefiting from the tailwinds of things like social engagement and CTV engagement that are continuing to increase over time. So I think on an industrial sector basis, we still have lots of room for that come back. And I think we're really looking at that as the second half of the year kind of factor. Okay, very helpful. And then I know because The comprehensiveness of your platform that's really helped you sort of gain a foothold against some of the incumbents or legacy competitors. Do you see any change in your ability with the sort of broadening of your platform to perhaps accelerate share gains And from your 2 largest competitors? It's another great question. I think As we've seen across lots of different parts of the industry, there tends to be consolidation We obviously And as point solutions continue to lose favor with our advertiser clients, there's an opportunity for us to continue to take share there. And we do so not just because of the completeness of our solution, but the efficacy and the power of our solution. I mean, to Put it frankly, as we've discussed in the past, this is a software sale and that software sale is usually driven by A competitive RFP process in which there is a head to head competition and the platform that delivers the best results The one that gets the win and we continue to gain share because our platform not only is complete, but delivers the best results as well. Thank you. Our next question comes from Raimo Lenschow with Barclays. Please state your question. Thanks and congrats from me as well. I have two quick questions. First, since it's like your first earnings call, it's maybe slightly more basic, But I hope it's still very relevant here. Mark, can you talk a little bit about advertiser programmatic against advertiser direct? How do you think those 2 will kind of play out over time? Is it going to be a mix effect? And what's driving it? And so just to get a better sense of When we start looking at the models to think about like where the growth is coming from? And then second question for Nicolas, like As you start investing again, can you talk a little bit about the balance between growth and margins? You talked about the rule of 60. If I look at the margins this year, they're kind of you're guiding for higher than last year, but it's still below historic. Just how do you think about that dynamic? Thank you. All right. Thanks. Great question, Raimo. And congrats on getting something out so quick. You're first to the draw of getting Some things out there. Hopefully, this will help for what comes out next. On the advertiser programmatic and direct, Our business, particularly as we get more social networks and more coverage across those social networks. So we've got a strong growth catalyst there. On the other hand, we've got a lot of room to catch up to our advertisers spend on the programmatic side. If you look at Display and mobile ad spend in the U. S. Anywhere from 85 Percent to 90% of that spend is done on programmatic platforms. And currently, if you look at our revenue breakout, About evenly split between direct and programmatic. So I think we've got a lot of room for additional programmatic growth to start to fill in Space there and catch up. So I think programmatic is still going to have really nice growth trajectory. But as social Continues to grow as well. We're going to have a balance there. So I think the answer is we've got growth on both sides of that business. Programmatic, I think growth is going to outpace direct growth just due to the fact that there's so much additional white space for us to catch up there. But we see Nice balance in both of those areas, mainly because our direct business is being driven by social expansion as well. Yes. And Raimo, on your question for the rule of 60 and our perspective on investments, yes, We're committed to the rule of 60 just because it really reflects the highly profitable business model that we have and it's sort of the outcome Really the highly profitable way we can grow our business. We didn't really slow down our investments in 2020, right. We invested, we We added a lot of people in the year that was disrupted in the market, but where we still had growth on the top line that allowed us to continue our investments. The way we think about trade offs is really around the opportunity to accelerate investments for either the product roadmap or in expanding into new markets. If we see the opportunity, we will go after the opportunity To the extent that we see a line of sight on accelerated revenue growth. So we're very focused on the top line, making sure we can verify everywhere our customers are. And if that means We accelerate investments to get there. That's what we will do. Our outlook in the second quarter's guidance actually Reflects that, right, with added investments and margins that dips below 30 just for the quarter. So we will continue to take that Trade off, but ultimately our model is very profitable on the rule of 60, something we're committed to. Very clear. Thank you. Congrats again. Our next question comes from Matt Hedberg with RBC Capital Markets. Hi, guys. Thanks for taking my questions. Congrats on the results. I wanted to start with the idea of cookies. I mean, we've all seen the news around Google moving away Cookies, Apple is certainly making some changes with IDFA that just make it more challenging for ad tech companies around data collection. Obviously, you guys operate in a cookie free architecture. Could you talk about though how this might impact the industry and maybe competitively how it benefits Yes. Thanks for the question, Matt. Broadly speaking, what's going on with cookies and universal IDs and tracking etcetera is something that from an operational perspective, we're Largely isolated or insulated from, right? We have a system that is based on the what, the where, the how, not the who, which Gives us a lot of different ways of measuring without having to leverage those device those trackers. I do think that the industry has done the open Internet has done a really nice job addressing the challenges that they face in that space and will continue to do so. So ultimately, I think it's going to become a non factor down the road for the open Internet. For us, We do look at this as a really nice opportunity to continue to leverage the solutions that we have. As measurement changes, Right. From a focus on reach and frequency and an individual level measurement to other Performance based proxies that are not based on UIDs or cookies. And that's where I think we have a great opportunity and we've launched solutions to take advantage of So our contextual targeting solution, which was recently launched, leverages our capabilities and understanding context of a page To better align ad spend, authentic attention is another measure of user engagement So I think what we're seeing here is innovation Coming from this activity as opposed to any degradation of the business. And innovation is new ways of looking at performance. It's providing opportunities for companies like DV to play a bigger role in driving that performance. So we think that this is not just for the most part, but in total is good for our business moving ahead. Got it. That's super helpful. And then someone asked about competition earlier kind of on the 2 big competitors. But I wanted to kind of down into some of the faster growing aspects of your model and that is social and CTV. Are these deals Still largely greenfield in nature. Maybe just give me a little bit more color on sort of where you guys think you are from a tech perspective for those 2 emerging categories, just given Relative importance, so I think you're sort of your durable growth here. Yes. So I think for both CTV and social We're relatively early days of both product development and product distribution and market penetration, right. So when we start off With our enterprise clients, a lot of it has to do with focusing coverage on mobile and video and display, etcetera, using our core verification products. But over time, as we continue to expand and their Spend continues to expand into new sectors like CTV and further into new social applications. We follow them into those markets early days and continue to expand not just with our current clients, but with new clients as well. And it's important to remember, when we So much of our growth comes from current organic clients buying new solutions from us and upsell, which means we still have a ton of white space to introduce solutions and newer solutions to new clients as well. So I think both of those factors Weighing to the point where I think we've got considerable growth opportunities on both social and CTV, both with new clients and current clients, driven by Product growth and introductions and continued coverage and partnerships to verify and measure more across both of those areas. That's great. Thanks a lot, Mark, and congrats again. Absolutely. Thank you. Our next question comes from Ron Josey with JMP Securities. Please state your question. Thanks for taking the question. I'll echo Everyone's comments on just a great Q1 out of the gate. Mark, I wanted to talk a little bit more on just maybe you mentioned it earlier, the custom contextual and authentic attention, just the new products that are out there And specifically, the go to market strategy as basically DV is exposed to more performance ad budgets, and I think you mentioned some return rates there. So can you just talk a little bit more about just go to market strategies for both custom contextual and authentic attention? And I have one follow-up. Thank you. Yes. So Great questions, Ron. Thanks for them. Custom contextual and authentic attention both have A core go to market around 1st introduction to current enterprise clients. Again, such a nice space for us to work from. When we're talking about folks like Unilever and Mondelez and all these big global clients who we work with and the hundreds of brands that gives us this Amazing launching pad for new solutions. So the overarching is we go to the folks that know us first, right, and trust our data because both of those Products leverage data that they're already using to do verification and measurement. So a, take that core data set, Spin it off to different types of solutions so that we can engage with our clients in multiple different ways, right. So that's Phase 1 of the go to market. The second, which kind of makes a more seamless opportunity for us, if you think about custom contextual is employed in the programmatic space, Where we already have really strong distribution across so many of the leading DSPs, right? So Our enterprise clients who are already buying our core programmatic product there now have the ability to buy another solution there, our custom contextual products. So A, that's where distribution really helps out, right? So if it starts with our core clients and our relationships there, it next moves to Where can they get that solution? And that means our distribution across all the major DSPs becomes not only an advantage for us, but a gating factor for other competitors. Authentic attention, very similar. It uses our core data set and leverages that to Provide a whole different level of engagement and attention metrics that help drive better optimization of media spend. And for there, the go to market It's similar to programmatic, but with the fact that we go to our core clients first. But it's A little bit more bespoke in the fact that it is a toolset that can be used across direct buys as well, right. So it's not just going to be in the programmatic world, it could be across CTV and their social buys there consequently. So both of them leverage the fact that we have got great customer relationships. Both of them leverage that core data set to spin out and make it a unique application for each of them. But one of them is used predominantly on DirectVise and the other It is a programmatic implementation. And maybe just a quick follow-up on that, Mark. You mentioned in your prepared remarks that authentic attention Mondelez saw data outperformed results by 143 percent versus prior. Vodafone had 3.5 times higher rates on transactions, I think. So is this a newer ad buy, a newer ad budget that maybe DV is exposed to? Or just to your point, it's a land and expand strategy with newer products? Thank you. Yes. I mean, look, it's definitely a land and expand, right? So it's the same ad budget, but making sure that That budget is even more optimally spent, which is it's really cool for us too because It means that we can continue to sell services across the same spend and Drive our MTF, right, that those transaction fees without having those advertisers have to spend more For us to take advantage of driving more revenue for ourselves. So it really is the true qualification of an upsell. It's We don't need their volume or them to spend in new sectors, which we can certainly take advantage of down the road as well, to sell them these additional solutions. So Our next question comes from Laura Martin with Needham and Company. Please state your question. I'm going to write numbers you guys. Thank you. I think Mark yes, great, great. Good job. So I think you said that CTV grew 75% year over year in the quarter. So could you confirm that you actually said that on the call? And then secondly, what I'm really interested in on that is, do you think that was faster than the market or Slower than the CTV market. Did you hold share or are you gaining share of CTV? What do you think? Hey, Laura, it's Nicole. Yes, so we're definitely yes, we can confirm the number, 75% on the volume. And we look, it's off of a small base. We think we are entering the market We're aggressively and doing very well with the customer and our distributors. So we do think we're growing very fast in CTV for sure. Right. But do you think you're growing? We have CTV numbers all you're the last guys to report. I have CTV numbers ranging from 32% growth to 120% I'm wondering as an expert, how fast do you guys think CTV is growing? Again, off of a small base, I think it's probably growing in the range that we are growing in. Okay, great. And then my second question was, the hardest question I get from investors is They understand that you have no cookies risk. However, what percent of your total adoption runs through platforms Like DSPs, like Trade Desk that actually has a lot of cookies risk potentially, if Universal ID isn't widely adopted by consumers. How much of your revenue is risked through that through those DSP channels? It's a great question, Laura. If you think about our business currently, About 50% of our business is programmatic and 50% direct. Of that programmatic business, we Don't have transparency on how much of it actually uses cookie to do targeting because remember some of that programmatic business may be Marketplace packages, some of it may be automated guarantee packages, which don't use a lot of identifiers or targets targeting to use. However, though, I think at the end of the day, and some of it actually may be mobile too, because remember there's mobile, There's lots of different areas where programmatic plays a role without cookies today. So, look, we feel like, A, There's opportunities for us to continue to grow in programmatic based on contextual targeting, starting to become more and more to the forefront And we're playing in that space too. So we get a chance to kind of double dip on programmatic growth. But also I think There's a good opportunity for the continued use and expansion of lots of different identifiers on the programmatic Nonetheless, we are in both spaces. We take advantage of Growth opportunities both in walled gardens and the open Internet. So I think we're in a good position either way things go. Super helpful. Thank you. Absolutely. Thanks, Laura. Our next question comes from Arjun Bhatia with William Blair. Please state your question. Thank you for taking my questions and I'll echo my congrats on a great quarter. I think I heard in the prepared remarks that authentic brand safety was at 50% of your programmatic Revenue, which is, I think, quite impressive given how new that solution is. Can you maybe just talk a little bit about How we should expect penetration of Authentic Brand Safety to continue? And then more qualitatively, how do you think of Authentic brand safety as a competitive differentiator when you look across the landscape, you think our customers are actually coming to you and saying, hey, I want to adopt Double verify because of the authentic brand safety capabilities that you have maybe that are difficult to find elsewhere in the market. Yes. Thanks, Arjun. It's a great take. And I'll start with the second half of that question first because it's the easiest one to answer, which is Nobody has a comparable solution. And I think that's why we've seen such stellar growth of that product, which is Again, a customized programmatic application of verification data That there's just nothing comparable out there. So we've seen the rapid acceleration of that product, which is also a premium price product For us as well. So not only does it contribute to what we call our MTM growth, so volume growth, but it also Continues to support our fee growth because it is a premium price product. So we've got a really nice advantage in the marketplace there and it's I think as far as longer term trajectory of that product, Nicole, you want to talk a little bit about that? Yes. Arjun, the way we think about it, first of all, I'm going to reiterate a little bit of what Mark said, which is What authentic brand safety did for us is it was a proof point for a premium price product and how well it was going to be Taken up by the programmatic, advertisers the advertiser that buys from programmatic. So it was a proof point that premium price products do work. In terms of how much where it will end up, what I will say is it just launched On Google DV360 platform, that was a Q4 late Q4 2020 launch. So there There is still opportunity there for people to understand the product and buy it on that platform specifically, Plus the overall general growth in programmatic, I could see new customers taking out TENGR brand safety just because it's such a powerful product. I would say thinking ahead, going back to my first point, because premium price products have worked for us, especially on Authentic Brands Safety, I think the next layer of Products, including Custom Contextual, will have a similar pattern for us. It's premium price. It will be on top of everything else and will drive our growth as well. Wonderful. That's great to hear and very helpful. And then just another one, if I can. Mark, I think you mentioned some great new customer wins from 2020, including I think I heard in Pinalever and VisiFilm. Can you Just maybe help us understand how much of these new customers you're getting from competitors that maybe used a verification solution in the past versus Greenfield opportunities in market from customers that are maybe just starting to realize the importance of verification and measurement in the digital advertising ecosystem. Yes, it's a great question. I think we've got a nice balance of both. And so there are definitely some new wins there of folks that mostly were using point solutions Or relying on kind of baked in solutions into platforms, but really decided based Increased brand safety concerns and the prevalence of fraud that they're continuing to see in certain sectors that it was important for them to kind of look at a more cohesive complete So, we've seen a nice balance of both. And even in the cases where We're winning competitive against our competitors. What's been nice is we're not only In most, if not all cases, where we're winning a competitor's business, it's not just for the current business they have, It's for some additional pieces of coverage. So they also want coverage in social or they're looking for additional extension into CTV or they want additional programmatic coverage. I think that's really important to note because The completeness of our solution also helps us win deals. So the fact that we've got more MRC accreditations across social or across any other all the other media means that when someone's looking to do a competitive RFP, Pete, it's not just who has the best solution, I. E, like who delivers best results, which we win against. But it's also the fact that, hey, we're looking to Expand into these new areas, which platform is going to give us coverage there? And that is a great that's a great aspect of The power of the breadth of our platform, right? We're winning because it's a better platform, but also in these head to head deals, When those advertisers in a majority of the cases they're saying, hey, we are doing this today, we want to expand to this, so the RFP is going to include these new areas, We cover those better than anybody else. So that's helped things along as well. Perfect. That's very helpful and congrats again on the quarter. You got it. Thank you. Our next question comes from Justin Patterson with KeyBanc. Please state your question. Great. Thank you very much for taking the questions and congratulations. Mark, you mentioned audio and gaming in your prepared remarks. Could you talk about the investment need to succeed in new channels and how we should think about the timeline between investment and monetization? And then I'll pause there and I have a follow-up for Nicola after that. Yes. Hey, thanks Justin So we're really excited about where we think we can take our core platform as different emerging media start to Catch the attention of our advertisers. And I think audio and gaming are 2 of the most that we hear from those advertisers. And as we've noted before, we really use our customers as the leads for where we go next, right? They're the ones who are driving us based on their spend, Based on what they say is important to them down the road. So we use their cues. We don't want to get too far ahead of them, Right. Because we want to make sure that we're aligned with where their dollars are going. But we do get into those markets before they do. In the case of kind of audio and gaming, we're just starting to lean into those investments today. We know that the first Stage of what we do is to leverage what we currently have in our core verification and measurement solutions and extend them to the new media. Then it comes down to what are the unique aspects of that media that we need to build either adjacent products for or different levels of functionality. And that obviously takes longer than just taking the core and extending it. So we're in early days in both of those areas. I would say This is a 2022 opportunity for us to really start to think about monetization of those areas. But Product cycle is usually around 12 months or so. So I think check back in next year and we'll have a really solid update on both those areas. Very helpful. Thank you. Sure. And for Nicole, Q1 was a somewhat unusual quarter where brands got off to a late start, COVID affected advertisers also came back at various points of time. So I'm curious if you could talk about linearity, whether there were any factors that Actually tempered the Q1 growth rate, prevented from being even stronger. And then how we should think about that Q2 guide in the context of Modest acceleration, but you're also facing a 20 point easier comparison. Thank you. Yes. So You're right. I think in Q1, we are not not all of our customers are spending back at the pre COVID levels, right? That's clear. And I think the start of the year was slower for some, try to understand exactly how the year was going to play out. What we and that obviously impacted Q1, even though it was a strong quarter at 32% growth rate. What we're hearing from our customers is More favorable outlook, feeling stronger about certainly the second half of the year and the fourth quarter, which is seasonally strong. In terms of our second quarter guidance, We had a strong quarter last year, right, 22% growth, while many of our peers didn't show growth at all. So as compared to the 22% last year, 38% at the midpoint is a continuation of the recovery that we're seeing And a large enterprise wins of Q1 starting to scale. So it fits the story of Slow Start. We intend to show consistent growth, right? We have a transactional software model. It's highly repeatable. We have a 95% gross retention rate. So We wouldn't expect huge spikes on the growth rates and that's kind of what you're seeing. The reason why Q2 is where it's at because last year's Q2 was more muted than the other quarters. Great. Thank you. Thanks. Our next question comes from Michael Graham with Canaccord. Please state your question. Yes. Hey, guys, and thanks for squeezing me in. I just wanted to maybe quantify a little bit some of the questions around the product opportunity. And Looking back to 2019 2020, you had really good expansion in your MTF because of some of the new products around brand And maybe some of that was paused a little bit during COVID. So can you just maybe mention Your outlook in terms of the puts and takes around MTF expansion, I mean, we're sort of modeling it flat, but it Sounds like there's a good case for that to expand. And maybe could you just help us understand some of the products that you have That you're working on like authentic attention that maybe we haven't seen yet. Can you just at a high level help us understand sort of How impactful some of that stuff could be? Do you have stuff in the pipeline that could be as important as the brand product, for example? Yes. Michael, it's Nicola. So I'm going to start by saying the main driver Our growth is MTMs, right? The more volume we can verify, that's the main driver for that growth. On the MTF side of the equation, I think the bands around movements in MTFs is twofold. You mentioned the one around premium priced products increasing MTF, there's against that. As we expand internationally, which contributes a lot to NTM, The MTF there might be a little discounted to the U. S. MTF. So that creates the band around where MTF is Our expectation is that MTF is going to remain fairly steady, because of those two factors. In terms of what You're discussing into the new products. We do see those new products as being premium priced, which in which case those would actually But our general outlook is we're very focused on MTM and we think that the two factors that I mentioned around MTF will keep it fairly stable for us. Okay. Thank you. Yes. Thanks, Michael. Our next question comes from Youssef Squali with Churit Securities. Please state your question. Great. Thank you very much and Congrats guys on your inaugural conference call as a public company. So I guess just a follow-up on A couple of other questions that were asked around just growth. I was wondering, either Mark or Nikolay, if you guys can speak to growth from existing versus New customers and just stepping back a little bit, you've had some changes or you've added more bandwidth management team, etcetera, can you maybe speak to the sales efficiency that you're seeing, sales cycle, particularly on the enterprise side and just kind of Gating factors that are preventing that business from growing even faster, just considering the huge TAM in front of you? Thanks. Yes. Thanks for the question, Youssef. I think when we look at traditionally how the business has grown, A lot of that has come organically from current clients. And we always know that that's the easiest place for us to drive growth, both based on Their continued spend and transition of their spend from traditional media into digital, as well as our ability Continue to expand coverage and upsell them new products, right? So we still continue I think we'll continue to see a majority of our growth coming from Same store sales by their volume growth, continued upsell of new solutions to them and our expanded coverage. However, we are seeing really nice broader uptake outside of our core client set for solutions with new partners. And I think a lot of that has to do with our fact that as you noted in the second part of your question, we start to lean in more heavily into investing Sales forces around the world as well as additional new sales leadership and a restructuring of our sales organization. I think that will a significant role over the coming quarters in our ability to continue to expand into that white space that there is globally, right. And if there's We don't see a lot of gating factors with our ability to do that other than Literally, our ability to hire great salespeople in local markets. What we've done and what our success has been to date It's closing enterprise clients that give us a launching pad to roll into new global markets. We did that with Yahoo! Japan, which opened up The Japanese market for us, closing folks like Mondelez, which is one of the largest advertisers in India, opened India for us. And we're going to continue to see that as we close those new enterprise clients, they help us open up new markets and those new markets then give us a launching pad to Close new local clients in those markets. So we're going to continue to see great organic growth from our core customer base. But I think you'll see as we But I think you'll see as we lean into getting more enterprise clients, Those enterprise clients help us open up new markets. Those new markets give us an opportunity to sell new customers. You're going to see an increased Focus and success rates outside of our core business and growth coming from that area too. Okay. Thanks, Mark. Got it. Our next question comes from Alan Gould with Loop Capital. Please state your question. Thanks for taking the question and likewise, congratulations on the Q1 out of the box. Two questions. On Custom Contextual, was this your Q1 that you generated revenue from it? And how big is the opportunity for Custom Contextual? Could it be as big or bigger than ABS? And then the second question is more mundane. Octobot, were you guys the only ones that were able to uncover and find that for us? Yes. I'll take the second half. First of all, thanks for the question. I'll take the second half of that first. Octobot, we were the 1st company to detect that level of fraud. I think there were some subsequent other companies out there that may have covered pieces of it. But A, we uncovered the first aspects of the fraud and we also string them all together to determine that it was all part of the same family. And it's something that occurred over 18 months. So it really is it's an such an incredibly interesting space. I mean, this is A lot of the fraud detection is technology and automation. There's also an investigative and human element to this that over time having Really strong data science team to string these all together to determine they all came from the same of the same family or different types of fraud is it was really unique and it's unique To the way we operate and it's a testament to our broad view of all different media, right? Because even though this is a CTV fraud implementation, our experience in finding fraud across traditional video and mobile and display Played a role in this because it was all very similar in the way that So A, I think again, this is another example of where our scale and breadth of solution really Our ability to provide a safe and secure ecosystem for our partners into play. Leading into the first question, I'll let Nicola kind of comment on that. Yes. Hey, Alan, it's Nicola. On the Custom Contextual, it is early days. So the contribution of the product in the Q1 numbers is small. The opportunity for the product, We actually see it as large. We do see it as part of this idea of being able to provide premium products on top of the basic suite of products. It also comes at the right time with all the discussions that we've had around cookie deprecations and etcetera. It's a perfect product for the time, But it is early days. We're hopeful on the product. We think there's a huge opportunity there, but it's really too early to tell. Thank you. All right. Thank you all for joining us on the very long call today. We appreciate your time. It's been an exciting few months at Double Verify. We appreciate all the support of our investors, clients, partners and Board have provided. I'd also like to take this opportunity to thank the global DoubleVerify team who's done such an incredible job over the past decade getting us to this point. The team has been the driving force behind our success to date and our continued success in the future. Again, we appreciate the opportunity to discuss the Q1 results with you and look forward to talking with many Thank you. This concludes today's call. All parties may disconnect. Have a good evening.