Q1 2021 DoubleVerify Holdings Inc Earnings Call
[music].
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.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note that this conference is being recorded.
I will now turn the call over to our host <unk> <unk> of Investor Relations. Thank you you may begin.
Good afternoon, and thank you for joining us to discuss doubled verify first quarter 2021 financial results with me today is mark Zagorski, CEO and Nikola and less CFO before we begin I'd like to remind everyone that statements made on this call and responses and Q&A today contain forward looking statements. These forward looking statements.
Subject to inherent risks uncertainties and changes 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 and certainties and other factors that could cause actual results to differ materially from these forward looking statements in our SEC filings, including an S..1 registration statements and addition to 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 and addition to and not as a substitute for or in isolation from on 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, Dr doubled verify dot com with that I'll turn it over to Mark.
Thank you tangible good afternoon, everyone on Mark Zagorski CEO of double verify I'm excited to welcome you to our first ever earnings call and to discuss our strong first quarter 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 thereby and the core value proposition that continues to propel the success of our business.
DB story is 1 of sustained organic growth helped along by sector tailwind and a unique market leading position and platform that creates exceptional expansion opportunities in the mid and long term.
<unk> mission is to make digital advertising stronger safer and more secure.
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 doubled verify creates greater advertising transparency and therefore protects the fair value exchange and the digital marketplace.
And the process, we not only drive ROI for our brands, we ultimately keep money out of the hands of Fraudsters, who often act to undermine free markets. Further we help advance social good bye defunding misinformation and hate speech.
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 model leaves and Unilever to media and Tech innovators like Comcast and Vodafone are tools help maximize digital ad spend and optimize ad delivery.
Double, thereby authentic add metric has become industry currency measuring whether digital advertising is displayed and a brand safe fraud free environment is fully viewable and delivered and the desire geography.
As an independent measurement company, we are unconfirmed at and our ability to verify everywhere.
Our cookie free solutions are implemented across the open internet and and the walled gardens and display mobile video, social and CTV and and direct and programmatic transactions.
Our strong track record of driving bottom line on a buy for advertisers, while creating a more secure digital ecosystem has not only directly benefited our customers and has supported a thriving digital AD market that continues to grow at a rapid pace.
According to Magna Global digital AD spend excluding search is expected to grow by approximately 11% and 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 tailwind provide us with significant opportunities for expansion.
Now, let's dig into our strong results for the quarter.
First quarter revenue grew 32% year over year, while adjusted EBITDA grew by a solid 41% year over year, our topline momentum continues to be driven by our focus on global expansion fueled by enterprise client wins.
Successful product adoption and fast growing new sectors, and and ongoing focus on new solutions that leverage our deep dataset to capitalize on evolution and the digital marketplace.
Let me discuss each of these 3 revenue drivers and greater detail.
Beginning with global expansion, we continue to gain market share by closing new enterprise clients, who are adopting our core verification solutions and both emerging and established media markets.
And the past few months, we notched new business wins, with Unilever, UBS, Fujifilm, Japan, Arnotts, and Australia and many others.
When we win and 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 first 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, and the first quarter, representing approximately 25% of direct revenue and exemplifying the expanding opportunity for the application of our software and markets around the globe.
Driving this commercial success is our investment and people and go to market infrastructure is spearheaded by our newly appointed global Chief Commercial Officer Julia Edelman.
Julie recently joined Us from Google, where she ran some of their largest global clients, including P&G Ford GM, Chrysler and Mcdonalds.
Since joining Julie has led the launch of <unk> Global client and agency partnerships team, which is responsible for driving growth with dd's largest customers and ensuring seamless delivery of Dd's comprehensive solutions. In addition, the expansion of our self serve software tools and the launch of our DD University training program last quarter.
We're helping to accelerate the scalability of our platform and increase the stickiness of our offering with key customers.
As of the end of 2020, we've enjoyed and average tenure of 5.6 years with our top 75 clients.
Additionally earlier this month, we expanded our business into the Middle East North Africa, and Turkey also known as the Mena region.
According to E marketer digital advertising spend and the region is expected to grow by 54% over the next 2 years and we are well positioned to take advantage of those local tailwind.
Moving onto our product successes and fast growing new sectors.
CTV, social and programmatic continue to gain the lion's share of digital advertiser interest.
<unk> solutions have been focused on ensuring advertiser spend is securely optimized in these areas.
And 2021 programmatic CTV AD spending is forecasted to grow by more than 40% year over year to nearly $11 billion and the United States. According to E marketer.
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, where part of 1 large coordinated fraud family identified as octa box, which generated billions of AD calls and spoofed or imitated.
<unk> of apps and millions of devices, all with the intention to defraud advertisers out of millions and revenue Beast.
<unk> schemes may have cost unprotected advertisers tens of millions of dollars.
Through our software platform double thereby 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 and high growing emerging media such as CTV advertisers have increasingly turned to DVS sophisticated tools and algorithms to block new variance of fraud and to provide them with the confidence needed to make premium digital advertising investments.
And as a result through our integrations with platforms, such as Roku, Amazon and Hulu double their Fi grew CTV volumes by approximately 75% year over year and the first quarter 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 and advertisers have become increasingly focused on brand equity and reputation online.
Double verify 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 and 2020 and our leadership position in this sector helps grow double verify social product volume by nearly 75% year over year and the first quarter 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 and.
And Q1, our programmatic business grew at a rate of 42% year over year, driven by growth and our premium priced authentic brand safety solution, which grew at 124%.
With the recent launch authentic brand safety on Google's, DB 360 platform, our industry, leading programmatic product is now available on programmatic buying platforms, which manage the vast majority of programmatic media buying and the U S.
The expansion of our solutions and the CTV, social and programmatic sectors as well as roadmap investments into dynamic areas, such as audio and gaming underscore the extend ability of our software platform and 2 exciting emerging areas that require greater transparency and trust and order to confidently attract advertiser spend.
And.
Shifting to recent product launches and enhancements double thereby has had a strong track record of leveraging its incredibly valuable core data asset to innovate a new adjacencies.
And from programmatic authentic brand safety to see Tvs video complete solution. We have repeatedly spun off successful solutions that help growth 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 on.
Our custom potential product for programmatic advertisers delivers privacy safe cookie free targeting by aligning adds to relevant content and order maximize user engagement and drive conversion.
What's unique and 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 AD delivery outcomes. The.
The solution is now available on leading DSP, including medium at Verizon media and Zander.
And we expect it to be widely available on the trade desk later this quarter.
As the industry shifts away from third party audience 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 and the pipeline DVA 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 that 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.
<unk> International recently used DB authentic attention to evaluate and optimize the performance of our cross platform display campaign for our popular snack brand.
D var. Thank 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 DD authentic attention.
And that adds 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 DVR thetic 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 thereby remains uniquely positioned to solve the digital advertising ecosystems need for independent integrated and standardized measurement of ads, particularly on a post cookie world, where our proprietary data set provides a unique value proposition.
We had a great Q1, which continued to show the utility of our software solutions for the biggest brands and the world.
Numerous additions to our roster of enterprise customers accelerating traction in key global markets and successful product investments and CTV, social and programmatic continue to drive our ongoing growth story.
Add to this the tailwind 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 Nicole.
Thank you Mark I am pleased to report a strong first quarter results as a newly public company, giving us confidence and providing a strong outlook for the year.
And our impressive performance demonstrates the strength of our customer relationships and our attractive scalable operating model. This quarter, we continued to execute against our plan as we generated strong revenue growth maintained high profitability, while continuing to invest and the business.
Before reviewing our quarter results I want to quickly take you through our business model.
<unk> generates revenue via transactional software model.
Our customers use the software and data analytics to evaluate target and measure the quality of their digital ad spend.
For every media transaction, we measure and empty and we are paid and measurement transaction fee and MTF. Our revenue model is and TM times MTF.
The MTF, we charge is a fixed fee per transaction, rather than and take rate based on our customers and media spend and we want to measure all impression for our customers regardless of format channel or media value.
We grow MTN 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.
And we grow MTF by adding premium products that provide additional monetization opportunities for each impression and we measure.
Our advertiser customers, who represent over 90% of our revenue purchase and implement these solutions in 2 ways.
The first way, which we track as advertiser direct revenue occurs when advertisers use our software platforms and measure the quality and performance of AD purchased directly from digital properties, including open web publishers, social media and television and CTV platform.
The second way, which we track as advertisers programmatic revenue occurs when advertisers leverages solutions through programmatic platforms to evaluate the quality of AD inventories before they're purchased through those platforms.
Since our transaction fee model is not a take rate based on the cost and media our business is not subject to large fluctuations in revenue when industry CPN dip and Serge.
This was evidenced in 2020, we're at the height of the market disruption and the second quarter, we achieved a 22% year over year revenue growth driven by the increased need for digital identification and an uncertain environment.
Our solutions are considered mission critical for advertisers during periods of market fluctuations division has not historically experienced the negative revenue friction that normally occurs yet our model enables us to grow as our customers increase their volume with digital AD spend when conditions improve.
In addition to revenue from our advertiser customers, who generate supply side revenue from platforms and publishers, who use deviator to validate the quality of their own net 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 result, and the first quarter, our immediate transaction measured continue to ramp and where the main driver of our revenue growth first quarter total revenue was $67.6 million up 32% year over year, and what is historically, our lowest revenue quarter and the year based on seasonal Pat.
Turns of our customers' digital ad spend.
Advertiser direct revenue was $27.5 million up 24% year over year.
In addition to key new enterprise and 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 customers.
Media transaction, and measured group, particularly rapidly and social and CTV, each approximately 75% year over year contributing to the quarter growth.
Advertisers programmatic revenue was $33.9 million 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 and <unk> hundred 60, since the end of last year.
ABF now represent approximately 50% of our programmatic revenue.
Supply side revenue was $6.1 million up is steady and 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 and the quarter, even as we invest and our infrastructure for future growth, we're able to leverage our technology and extend our solution across new verticals, new geographies and new solutions and marginal incremental cost on.
On operating expenses, we are focused on scaling our operations globally and on accelerating our product roadmap into new verticals in particular first quarter product development costs increased by 37% year over year as we continued to improve and expand our solution.
Because our business model is very profitable, we're able to invest while maintaining high margin first quarter 2021, adjusted EBITDA was $21.7 million, representing a 32% margin as compared to $15.4 million or 30% margin and the first quarter of 2020.
In terms of balance sheet, and cash flow, we generated $19.5 million and cash from operating activities and the quarter and had $49.8 million of cash on our balance sheet and of the first quarter and.
After the quarter, we received aggregate net proceeds of $282 million from the IPO and and concurrent private placement.
This further strengthens our balance sheet and bolsters, our ability to expand our global footprint and accelerate our technology roadmap.
At the end of the first quarter, we had $22 million of outstanding debt, which we have since repaid.
Now turning to guidance.
We expect second quarter revenue and the range of $72 million to $74 million, which at the midpoint implies growth of 38% year over year as a reminder, due to the resilience of our business model, our second quarter of 2020 performance of 22% growth year over year with much stronger than the general.
Advertising technology market.
We expect second quarter, adjusted EBITDA, and the range of $20 million to $22 million, which at the midpoint implies an increase of 34% year over year, and and adjusted EBITDA margin of 29% and.
And the second quarter, we expect to ramp investments and hiring talent with a particular focus on engineering product and sales as we continue to invest and the tremendous growth opportunities that lie ahead.
Finally, we expect our second quarter weighted average diluted shares outstanding to range between 157 and 161 million shares.
For the full year 2021 guidance, we expect revenue and the range of $3.22 million to $326 million a year over year increase of 33% at the midpoint and adjusted EBITDA and the range of $103 million to $105 million, a year over year increase of 42% and and adjusted.
EBITDA margin of 32% at the midpoint.
Overall, we remain committed to delivering performance that exhibits the rule of 60 with high growth and high profitability.
Since the beginning of the year, our revenue growth expectations for the second half of the year have improved driven by a more favorable outlook for the fourth quarter, which tends to benefit from seasonally higher spending on advertising campaign.
In summary, we delivered a strong first quarter and are executing well against our 2021 plan were poised to continue to deliver consistent growth well above the expected digital advertising growth of 11% per the year.
And favorable conditions and your advertising marketplace will also drive our business as we participate and the economic reopening across numerous segments, including retail and travel.
We will take advantage of the tailwind and the industry via continued investments and global markets and enterprise client wins product successes and 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.
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Our first question comes from Chris Merwin with Goldman Sachs. Please state your question.
Okay. Thanks, so much for taking my question and congrats to you all from such a strong first quarter out of the gate.
And 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 socials and and how that could be a further catalyst for adoption for those products.
Hey, Chris Thanks for the question.
Yeah, we really had a strong quarter when it came to social and CTV volume growth and you know, we obviously love kind of seeing that in areas, which we think are going to have great tailwind is around it.
As you remember when we go on with the client we generally start with a core value proposition across as many as possible and continue to up sell them solutions over time.
So and the CTV and social space, social a bit more.
Mature of a product set that is usually kind of are the earlier sell throughs on <unk>.
<unk> is an area, which we just started entering and middle of last year and so we think we've got a good amount of on.
White space to upsell both of those solutions into both our current client base and new clients moving ahead and.
So we see a lot of potential growth and in both of those areas.
Down the road.
With respect to the second part of your question around additional coverage and CTV I think there's 2 aspects of that it's going deeper into the social networks that we currently work with and expanding into new social networks down the road and we believe there are opportunities on both of those fronts late last year.
As a public announcement by Twitter on their interest and continuing to expand.
Partnerships with third party validation and verification companies naming <unk> as 1 of those companies and Sue.
We know there's opportunities there as well as with the other social networks that we work with and.
And as new social networks evolve and become introduced on.
And our drive to verify and measure everywhere.
It 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 have coverage and those new spaces.
Okay perfect. Thank you and maybe just 1 quick follow up on the outlook. It looks like came in well ahead of where the street is now. So can you just talk a bit about any factors that influence that whether it's on.
And 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.
The 2 points you just mentioned are what is driving sort of our outlook for the rest of the year, which is a positive 1.
There is clearly a cyclical component to the spend of our customers and so we anticipate that to help us.
And as you know the first quarter is our smallest quarter.
More importantly, I think the recovery is definitely something that we will participate and we're very diversified across industries, but as in particular and travel 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 and congratulations on your first.
Third quarter out of the gate.
I just wanted to ask a little bit more about the favorable trends you mentioned you as retail and travel open back up I think.
On the thinking was that that would be more of a sort of late 2021.
Impact, but are you seeing evidence that that might be benefiting you earlier than you may have thought.
Yes, Thanks, Matt.
Good 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 1 of the things that 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-19 as far as.
Media ingestion and the amount of media people are consuming kind of continued throughout the throughout this year as well. So we're benefiting from the tailwind of things like social engagement and CTD engagement that are continuing to increase over time. So.
And so I think on a on a on a.
Industrial sector basis, we still have lots of room for that come back and I think we're really looking at it as the second half of the year kind of factor.
Okay very helpful. And then I know because of the comprehensiveness of your platform. That's really helped you gain a foothold against some of the incumbents more.
Legacy competitors do you see any change and your ability with the sort of broadening of your platform to perhaps accelerate share gains.
And from your 2 largest competitors.
Yeah.
Another great question, I think as we've seen across lots of different parts of the industry there tends to be.
Consolidation into more complete platforms and more complete.
Solutions, we obviously fit that bill and as point solutions continued to lose favor with our advertiser clients. There is an opportunity for us to continue to take share there and.
And we do so not just because of the completeness of our solution, but 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 sales usually driven by.
A competitive RFP process, and which there was a head to head competition and the platform that delivers the best results is the 1 that gets the win and we continue to gain share because our platform not only is complete but delivers the best result as well.
Thank you.
Our next question comes from Raimo <unk> with Barclays. Please state your question.
Thanks, and congrats from me as well I have 2 quick questions.
And since it's your first 1 and call it maybe slightly more basic but I hope it is still very relevant to you or mark.
Mark can you talk a little bit about advertiser programmatic against Advertiser direct how do you see those true will kind of play out over time, and it's going to be a mix of fact, and what's driving it and and so just to get a better sense of when we start looking at the models.
And think about like where the growth is coming from and then second question for Nicola is like and as you can start investing again can you talk a little bit about that balance between growth and margin you talked about the rule of 60.
If I look at the margin this year, there and 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.
Alright.
Great question, Raimo and and.
Congrats on getting something out so quick your first day of getting some and some things out so hopefully that will help further comes out next on the <unk>.
Advertisers programmatic and direct I think you've got a couple of different factors. There are direct business includes social spend as well and we see that as a growing part of our business and particularly as we get more social networks and more coverage across the social network. So so we've got a strong growth catalyst there.
On the other hand, we've got a lot of room.
And to catch up to our advertiser spend on the programmatic side, if you look at.
Display and mobile AD spend and the U S.
Anywhere from 85% to 90% of that spend is done on programmatic platforms and currently if you look at our revenue breakout its 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.
Face 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.
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 a nice balance and both of those areas, mainly because our direct business is being driven by social expansion as well.
And Raimo on your question for the rule of 60, and our and our.
Perspective on investment.
Yes, we are.
And 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 of really the highly profitable way, we can grow our business.
We didn't really slow down our investments and 2 and 2020 right. We invested we added a lot of people and a year that was disrupted and the market, but where we still had growth on the topline that allowed us to continue our investment the way we think about trade off is really around the opportunity to accelerate investments for either the product roadmap.
GAAP or and expanding into new markets. If we see the opportunity. We will go after the opportunity that we see line of sight on and 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.
Outlook in the second quarters, our guidance actually reflects that.
With added investments and margins that dips below 30, just for the quarter.
So we will continue to take that tradeoff, but ultimately our model is very profitable and the rule of 60, something we're committed to.
Very clear thank you congrats again.
Thank you.
Thank you. Our next question comes from Matt Hedberg with RBC capital markets. Please state your question.
Oh, Hey, guys. Thanks for taking my questions Congrats on the results.
I wanted to start with with the idea of cookies I mean, we've all seen the news around Google moving away from cookies, Apple is certainly making some changes with <unk>. It just makes it more challenging for Ed Tech companies are on data collection. Obviously, you guys operating a cookie free architecture could you talk about how this might impact the industry and maybe competitive.
How how it benefits you guys.
Yeah. Thanks for the question Matt.
Broadly speaking and what's going on and with cookies, and Universal Ids and tracking et cetera is something that from a from an operational perspective.
<unk>.
Largely isolated or insulated from right.
We have a system that is based on the what the where the how not to who and which gives us a lot of different ways of measuring without having to leveraged as device.
Those trackers.
I do think that the industry has done.
And the open Internet has done a really nice job addressing the challenges that they face in that space and and we'll continue to do so so ultimately I think it is 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.
And as measurement changes right from.
Our focus on reach and frequency and and individual level measurement 2 of other performance based proxies that are not based on <unk> or cookies, and Thats, where I think we have a great opportunity and we've launched solutions to take advantage of that so architectural targeting.
Solution, which was recently launched.
Average is our capabilities and understand and context for page to better align ad spend.
And thank attention is another measure of of user engagement that can be used as a proxy for performance and outcomes. So I think what we're seeing here is.
Innovation.
<unk> from from this activity as opposed to any degradation of the business and and innovation is spurring new ways of looking at performance is providing opportunities for companies like <unk> to play a bigger role and driving that performance. So.
So we think that this is it's not just for the most part and.
And total is good for our business moving ahead.
Got it that's super helpful. And then I'm going to ask about competition earlier kind of on the 2 big competitors, but but I wanted to kind of drill 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, and maybe just give us 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 its relative.
And so I think youre sort of your durable growth here.
Yes, so I think.
For both CTD and social we're relatively early days of both product development and product distribution and market penetration rate. So when we start off.
With our enterprise clients a lot of it has to do with focus and coverage on mobile and video and.
Display et cetera, using our core verification products, but over time as we continue to expand and they or their spend continues to expand into new sectors like CTV and further into new social applications.
And we follow them into those markets and provide solutions, which continue to kind of grow with them, we've done that with CTV and social and like I said I think we're relatively early days and continue to expand not just with our current clients, but with new clients as well and it's important to remember we so much of our growth comes from current or.
Gannett clients buying new solutions from us and up sell which means we still have a ton of white space to to introduce solutions and newer solutions to new.
New clients as well so I think both of those factors weigh into 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.
Thank you.
Our next question comes from Ron Josey with JMP Securities. Please state your question.
Thanks for taking the question I'll Echo Echo everyone's comments on just a great first quarter on the gate Marc I wanted to talk a little bit more on just maybe you mentioned it earlier the comes from contextual and authentic attention just the new products that are out there and specifically the go to market strategy is basically Tvs exposed to more performance AD budgets and I think you mentioned some written.
Turn some return rates there. So can you just talk a little bit more about just go to market strategies for both comes from contextual authentic attention and I have 1 follow up thank you.
Sue.
Great questions Rod, thanks for them and custom contextual and authentic.
And both have a core go to market around first introduction to current enterprise clients again, such a nice space for us to work from a war talking about folks like you.
Labor and modeling and all of these big global clients, who we work with and the hundreds of brands and of 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 leveraging data that they're already using to do verification and measurement. So a take that core dataset spin.
And off to different types of solutions, so that we can engage with our clients and multiple different ways right.
So that phase 1 of the go to market, the second which kind of makes it more seamless.
Opportunity for US if you think about custom contextual is employed and programmatic space, where we already have really strong distribution across so many of the leading DSP right.
And our enterprise clients, who are already buying our core programmatic product there now and the ability to buy another solution there on our custom contextual products. So.
And that's where distribution really helps out ratio if it starts with our core clients and our relationship there and next news to share.
Can they get that solution and that means our distribution across all the major DSP.
Become not only and advantage for us that a gating factor for other competitors.
And I think attention very similar.
It uses our core dataset and leverages that to provide a whole different level of engagement and retention metrics that helped drive better optimization of media spend.
And for their the go to market is.
It is similar to programmatic, but with the fact that if we go to our core clients first but it's a little bit more.
Little bit more bespoke and the fact that it is a tool set that can be used across direct buys as well right. So it's not just going to be on the programmatic world it can be across CTV and.
And their social buys there. Consequently, so so both of them leverage. The fact that we have got great customer relationships both of them leverage that core dataset to spin out and make it a unique application for each of them, but 1 of them is used predominantly on direct buys and the other is a programmatic.
As the program programmatic implementation.
And maybe just a quick follow up on that Mark you mentioned in your prepared remarks and authentic attention model you saw data outperformed results by 143% versus prior Vodafone had 3.5 times higher rates on transactions and I think so is this a newer AD buy and newer AD budget that may be D. V is exposed to or just to your point, it's a land and expand strategy.
And with newer products. Thank you.
Yeah, I mean look it's a it's definitely a land and expand right. So it's the same AD budget, but making sure that same AD budget is even more.
Optimally spent which is really cool for us too because it means that we can continue to sell services across the same spend and.
And drive our MTF right that those transaction fees without having those advertisers have to spend more.
And for us to take advantage of driving more revenue for ourselves.
It really is the true qualification of and upsell.
We don't need their volume or them to spend and new sectors, which we can certainly take advantage of down the road as well to sell them. These additional solution and so their budgets don't need to increase for us to make more money.
Got it thank you Mark I appreciate it.
You got it wrong.
Our next question comes from Laura Martin with Needham and company. Please state your question.
Okay.
Are you guys.
Thanks, Paul and I think Mark.
Great great good job I.
I think you said, the CTV and grew 75% year over year and a 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 and are you gaining share of CTV and what do you think.
Hey, Laura it's Nikola yes, so we're definitely.
Yes, we can confirm the number 75 per cent on the volume.
And we look it's off of a small base.
We think we are entering the market aggressively and doing very well with the customer and our and distributors. So we do think we're growing very fast and CTV for sure.
Right, but do you think you're growing we are CTV numbers and the last guys to report I'd CTV numbers, ranging from 32% growth to 120% growth I'm wondering as an expert how fast you guys think CTV is growing.
And again off of a small base I think it's probably growing and the range that we are growing on.
Okay, Great and then my second question was on.
On the hardest question I get from investors is eye on.
And they understand that you have no cookies risk however, what percent of your total adoption runs through platforms like DSP like trade desk that actually has a lot of cookies risks potentially if the universal I'd is that widely adopted by consumers and how much of your revenues risks through that.
P channel.
And.
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.
But we don't have transparency on how much of and it actually uses cookies and targeting because remember some of that programmatic business, maybe private marketplace packages. Some of it may be automated guarantee packages, which don't use a lot of identifiers or targets targeting to use.
However, I.
I think at the end of the day.
And some of it actually may be mobile too because remember there is mobile and theres lots of different areas, where programmatic plays a role without cookies today. So.
Look we we feel like a theres opportunities for us to continue to grow and programmatic based on contextual targeting starting to become more and more to the forefront for programmatic buyers and we're playing in that space too. So we get a chance to have double dip on on programmatic growth and but ultimately I think there's a good opportunity.
<unk> for the continued use and expansion of lots of different identifiers on the programmatic platforms to 2 to compete against the walled gardens. Nonetheless, we are and both spaces.
And we take advantage of growth opportunities, both and walled gardens and the open internet.
So I think we're in a good position either way and things go.
Super helpful. Thank you.
Absolutely and floor.
Our next question comes from Arjun Bhatia with William Blair. Please state your question.
Alright. Thanks, 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 was.
Thank you.
Quite impressive given how new <unk> solutions.
Can you maybe just talk a little bit about how we should expect penetration and brand 50 to continue and then more qualitatively. How do you think of authentic brand safety as a competitive differentiator when you look across the landscape and our customers actually coming to you and saying Hey, I want on adopt double verify because of.
And the authentic brand safety capabilities.
And that you have maybe that are difficult to find elsewhere on the market.
Yes, Thanks art and its a great take and and I'll start with the second half of that question first because it's the easiest 1 day answer which is.
And 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.
And that that Theres, just nothing comparable out there. So we've seen that rapid acceleration of that product.
It is also a premium priced product for us as well so not only does it contribute to you now.
And with all our MTM growth volume growth and it also continues to support our fee growth because it is a premium priced product. So we've got a really nice.
Advantage and the marketplace, there and its spurred a significant amount of growth.
And I think as far as.
As far as longer term trajectory of that product and the color you want to talk a little bit.
And the way the way, we think about it first of all I'm going to I'm going to reiterate a little bit of what Mark said, which is.
Thank you Brent and safety did for US It was approved for a premium priced product and how well it was going to be taken up by the programmatic advertisers advertise on advisor programmatic. So it was a proof point that premium price products do work in.
In terms of how much.
And where it will end up.
And we'll say it just launched on Google Dvds and $3.60 platform that was a Q4 late Q4.2020 launch. So there's there's still opportunity there for people to understand the product and and and buy it on that platform, specifically plus the overall general growth and program magnet.
And I could see new customers, taking authentic brand and safety because it is such a powerful product I would say thinking ahead going back from my first point because premium priced products have worked for us, especially on on putting brand safety I think the next layer of products, including customer 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.
Yeah.
Wonderful and that's great to hear and very helpful. And then just on.
Another 1 if I can.
Mark I think you mentioned, some great new customer wins from.
And from from 2020, including I think I heard over and visit volume.
Can you just maybe help us understand how much of these new customers you're getting from <unk>.
Competitors that may be used.
Verification solution and the past versus greenfield opportunities and market from customers that are maybe just starting to realize the importance of verification and measurement and.
On the digital advertising.
And your system.
Yes, it's a great question I think I think we've got a nice balance of both.
And so there are definitely some new wins there are folks that.
Mostly we're using point solutions or relying on kind of baked in and solutions into platforms.
But really decided based on.
Increased brand safety concerns and the prevalence of fraud that theyre, continuing to see and certain sectors that it was important for them to kind of look at it more cohesive complete solution. 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 kind of winning the competitive business, but we're expanding on that business as well so I would say.
And most if not all cases, where we're winning our competitors' business. It's not just for the current business. They have it's for some additional pieces of coverage. So they also want coverage and social are theyre looking for additional extension and to CTV or they want and additional programmatic coverage and I think that's really important.
No because.
The completeness of our solution also helps us win deals. So the fact that we've got more MRC accreditation across social or across any other all the other media. It means it means that when someone's looking to do a competitive RFP. 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 <unk>.
Breath of our platform right, we're winning because its a better platform, but also in these head to head deals when those advertisers and a <unk>.
Majority of the cases, they are saying Hey, we're doing this today, we wanted to expand to this so the rfps going to include these new areas. We cover that is better than anybody else. So thats help things along as well.
Perfect very helpful and congrats again on the quarter.
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 and you mentioned audio and gaming and your prepared remarks could you talk about the investment need speed and 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 from Nicole after that.
Yeah, Hey, Thanks, Joseph for the question. 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 the most that we hear.
From from those advertisers and 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 and based on their spend and 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 their where their dollars are going but we do get into those markets before they do.
And the cases 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 and 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.
And are adjacent products for or different levels of functionality.
And that that obviously it takes longer than just taking the core and extending it. So we're in early days and 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 you know check back in next year, and we'll have a really solid update on both of those areas.
Very helpful. Thank you share Nicola Q.
Q1 was somewhat unusual quarter, where brands got off to a late start COVID-19 effective 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 prevent it from being even stronger and on how we should think about that Q2 guide and the.
Context of modest acceleration, but you're also facing a 20 point easier comparison. Thank you.
Yeah. So.
And Youre right I think in Q1.
We are not not all of our customers are.
Spending back at pre Covid levels, right and Thats clear and I think the start of the year was slower for some tried to understand exactly how the year was going to play out we and and that obviously impacted Q1, even though it was a strong quarter at 32% growth rate.
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 and 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.
And we intend to show consistent growth right. We have a transactional software model, it's highly repeatable, we have and 95% gross retention rate. So we wouldn't expect huge spikes on the growth rates and thats kind of what Youre seeing the reason why Q2 is where it's at because last year's Q2 was more muted and the other quarters.
Great. Thank you.
Okay.
Thanks. Our next question comes from Michael Graham with Canaccord. Please state your question.
Yeah, 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 and 2020 you had.
Really good expansion and your MTF because of some of the new products around brand safety.
And maybe some of that was paused a little bit during COVID-19. So can you just maybe mentioned your outlook in terms of the puts and takes around MTF.
And I mean, we're sort of modeling it flat, but it sounds like there's a good case for that too to expand and 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 you have stuff and the pipeline that could be as important as the brand product for example.
And.
Yes, Michael let me call on so.
And so.
I'm going to start by saying you know the main driver of our growth is MTM right. The more volume. We can we can verify that's the main driver for that growth on the MTF side of the equation I think the bands around movements and MTS is twofold, you mentioned, the 1 around premium priced products, increasing MTF theirs against that.
As we expand internationally, which.
Contributors a lot too MTM and the MTF there might be a little discounted to the U S. M. TFS. So that's that creates the band around where MTF is going to be our expectations on MTF is going to remain fairly steady.
Because of those 2 factors.
In terms of what you're discussing in terms of new products, we do see those new products as being premium priced.
Which in which case and those would actually contribute to our growth and MTF, but our general outlook is we're very focused on MTM and we think that the 2 factors that I mentioned on MTF, we'll keep it fairly stable for us.
Okay. Thank you.
Yes, Thanks, Michael.
Our next question comes from Youssef Squali with <unk> Securities. Please state your question.
Great. Thank you very much and congrats guys on a on your inaugural conference call and as a public company. So I guess just a follow up on on a on a couple of other questions that were asked around just growth I was wondering either mark or and you called out if you guys can speak to growth from existing versus new.
Summers and just stepping back a little bit you've had some changes.
Or you've added more bandwidth to your management team et cetera can you maybe speak to the sales efficiency that you see and sales cycle, particularly on the enterprise side and just kind of gating factors that are preventing that business.
And from growing even faster just considering the huge Tammy and front of you.
Yeah. 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.
And traditional media into digital as well as our ability to 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.
And for solutions with New partners and I think a lot of that has to do with our fact that as you noted and the second part of your question are we starting to lean in more heavily into investing in sales forces and.
Around the world as well as additional new sales leadership and a restructuring of our sales organization I think that will play.
Significant role over the coming quarters, and our ability to continue to expand into that white space that there is globally right and if there is.
And we don't see a lot of gating factors with our ability to do that other than you know.
Literally our our ability to hire.
Great salespeople and local markets.
What we've done and what are our success has been to date is 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 and clothing and folks like <unk>, which is 1 of the largest advertisers and India open 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 and give us a launching pad to close new local clients in those markets. So we can see what we're going to continue to see great organic growth tomorrow.
Our core customer base, but I think youll see.
As we lean into getting more enterprise clients those enterprise clients help us open up new markets those new markets gives us an opportunity to sell new customers youre going to see a and increased focus and success rates outside of <unk>.
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, the congratulations on the first quarter out of the box.
2 questions on custom contextual was this your first quarter that you generated revenue from it and.
And how big is the opportunity for cost and contextual could it be as big or bigger than ABS and then the second question more on Monday after about where you guys are the only ones that were able to uncover and on that front.
Yeah, I'll take the second half first of all thanks for the questions I'll take the second half of that first okta bot.
And we're the first company to detect.
And that that level of fraud, I think there was some subsequent and other companies out there that may have covered pieces of it.
And we uncovered the first aspects of the fraud and we also string them altogether.
And determined that it was all part of the same family.
And it was something that occurred over 18 months. So it really is.
Such a credibly interesting space I mean this is.
A lot of the fraud detection is technology and automation and there's also an investigative and human element to this that over time, having a really strong data science team to string these altogether 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 <unk>.
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 and fighting fraud across traditional video and mobile and display played a role and that's because it was all very soon.
<unk> and <unk>.
And in a way that it was approach so and I think again. This is another example of where our scale and breadth of solution.
Really contribute to our ability to provide a safe and secure.
Ecosystem for our partners and to play.
Leading into the first question and I'll, let Nicola kind of get on that and it's Nicole on the.
On the cost and contextual it is early days so.
The contribution of the product and the first quarter numbers is small.
The opportunity for the product.
And so you see it as large we do see it as part of this idea of being able to provide premium product on top of the basic suite of products.
And also come to the right time with all the discussions that we've had around cookie deprecation and et cetera.
Perfect product for the time.
But it is early days.
We were hopeful on the product we are seen as a huge opportunity there but.
It's really too early to tell.
Okay. Thanks for taking the questions.
Yes.
Thank you there are no further questions today I'll turn it back to Mark Zagorski for closing remarks. Thank you.
Alright. Thank you all for joining us on the very long call today and we appreciate your time.
Ben and exciting few months, a double verify and we appreciate all the support of our investors clients partners and board and provided I'd also like to take this opportunity to thank the global double verify team has done such an incredible job over the past decade, and getting us to this point. The team has been the driving force behind our success to date and our continued success and the future again, we appreciate the opportunity.
<unk> first quarter results with you and look forward to talking with many of you over the coming weeks.
Thank you. This concludes today's call all parties may disconnect have a good evening.