Q4 2021 DoubleVerify Holdings Inc Earnings Call
Greetings and welcome to the double doors, I Q4, and fiscal year 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the call. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host occasional engman. Thank you you may begin.
Good afternoon, and welcome to double verifies fourth quarter and full year 2021 earnings conference call with US today are Mark <unk>, CEO and Nikola Elias CFO .
Today's press release and this call may contain forward looking statements that are subject to inherent risks uncertainties and changes and reflect our current expectations and information currently available to us and our actual results could differ materially for more information. Please refer to the risk factors in our recent SEC filings, including.
Our annual report on Form 10-K . In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is.
Available on our Investor Relations website at IR Dot double verified dot com.
Also during the call today, we will be referring to the slide deck. There's just no website with that I'll turn it over to Mark.
Thanks, Nigel and good afternoon, everybody I'm excited to share this update with all of you today, which continues to expand on our themes of exceptional growth and market leading innovation.
Before we begin I want to take a moment to acknowledge the global humanitarian crisis in Ukraine.
Our support for all of those affected and our unwavering commitment to our customers partners and colleagues around the world the Stanford truth and transparency.
First a quick snapshot of our recent growth in the fourth quarter of 2021, we delivered $106 million of revenue and 38% adjusted EBITDA margins ending a year of exceptionally strong execution on a high note in 2020 , one we measured four and a half trillion AD impressions, resulting in.
<unk> revenue of $333 million, an increase of 36% compared with a year ago.
We grew faster than the digital advertising industry and significantly outperformed the industry as programmatic, social and CTV growth trajectories, while generating 33% adjusted EBITDA margins.
We completed strategic acquisitions of matrix and open slate and successfully continuing to evolve our customer value proposition from protection to performance with the launch of two new identity independent performance solutions that do not rely on third party cookies or persistent identifiers custom contextual and.
And didi authentic attention.
Building on the update we provided at our Investor Day on February 25th I will discuss the current and future scaling of our business within the context of our five key growth drivers which are.
Product evolution.
Channel expansion international expansion.
Current client upsell and cross sell and new client acquisition and strategic M&A. Nikola will then discuss our fourth quarter and 2021 results as well as our outlook for 2022.
Beginning with product evolution or expansion of pre campaign activation solutions that drive performance continued to be led by authentic brand suitability or ABS.
<unk> was the largest driver of revenue growth for our advertiser programmatic business.
S revenue grew 77% in 2021 and contributed approximately $85 million to our top line.
For most of last year ABS revenue was fueled by continued customer adoption and volume expansion on major buying platforms, most notably Google's DD 360, and the trade desk, where it was launched in 2020.
Considerable ABS growth also came from upgrading current clients to ABS as well as selling ABS to new clients at the outset of their relationship with TV.
While the significant majority of our top 100 clients are now using ABS in some applications their usage of the product tends to be in North America, where programmatic buying is dominant there is a substantial and growing opportunity to upsell ABS to our biggest clients in their international markets, where adoption of this premium.
Performance product has just begun.
In the fourth quarter for example, we activate the ABS with Disney in Latin America, Colgate in EMEA and Nike in 'twenty, one global markets. We have just started to scratch the surface of ABS growth with current clients in markets outside of North America.
Beyond our top 100 customers approximately 40% of our top 500 clients still do not use ABS in any market, representing a solid expansion opportunity amongst this established customer base.
We are focused on making ABS and all of our performance solutions, an integral component of an unmatched suite of independently accredited pre campaign activation and post campaign measurement tools that drive better outcomes for advertisers.
While we're discussing dd's programmatic activation products I'd like to highlight our MRC pre bid accreditation announcements made last week, establishing dv as the only provider currently accredited for predictive view ability targeting as well as property level add verification include.
Give a brand suitability and contextual targeting within programmatic media campaigns.
To put it simply we have the only fully accredited programmatic suite in the market today.
We expect this unique differentiator of Dd's programmatic solutions, including ABS and Didi custom contextual to further drive our programmatic sales momentum and support DVS overall RFP win rate, which was 80% in 2021.
Beyond our core programmatic solutions, we're excited about the growth opportunities with our newest performance products authentic attention custom contextual opened slates pre campaigns social targeting tools.
And our audience verification solution with comp store.
Today, let's dig deeper into two of them authentic attention and audience verification.
D D authentic attention, which you'll be hearing a lot about over the next few quarters builds upon the baseline quality and safety metrics established by the divi authentic at.
For AD impressions that meet the standards of the authentic add attention measurement provides a real time impression level view of engagement and exposure, which allows advertisers to optimize media based on what's resonating most with audience as traditional performance metrics like reach and frequency.
Lose their efficacy due to privacy and policy changes, we believe that attention will be the next currency that advertisers rely on to drive outcomes.
Our go to market strategy for authentic attention Leverages Dd's established customer base over 1000, leading brands to drive ubiquitous uptake of these new datasets.
We essentially have a built in pool of trial customers.
In Q2, we will provide a preview of attention metrics through our software platform pinnacle to all customers that use the BD authentic at exposing the biggest brands on the planet to the performance solutions of the future.
Today, we are the only leading verification company to have built and launched a comprehensive attention solution.
We've already secured accreditation for fully onscreen measurement and attention metrics specific to CTV and will continue to expand our lead in accreditation of all our attention metrics over time.
Turning to our upcoming audience verification solution, we're excited to launch a market leading product in partnership with Comscore.
By using audience verification advertisers will be assured that the cross platform audiences. They are measuring are free of invalid traffic delivered in view and to the right geography.
And in the right brand environment.
This is an industry first measurement solution that combines media quality verification data with audience data to help advertisers maximize campaign performance and drive real business outcomes.
We expect to launch the first iterations of this evolving joint offering for a select group of customers as early as the second quarter of 2022.
Moving onto our second growth driver channel extension, we are excited about our continued growth in social and CTV.
Social revenue grew by nearly 50% in 2021 with strong performance across Facebook Youtube, Twitter, Snapchat, and Pinterest as more than 300, new advertisers activated TV social media verification solutions last year.
We believe the prospects for social growth in 2022 and beyond are exceptional for two key reasons.
First we are expanding our solutions in coverage on both emerging and leading social platforms, including Tictoc Twitter and several others.
And second we had accelerated our product roadmap and social due the successful integration of open slates pre campaigns, social activation solutions into our sales process, providing an expansion opportunity with all existing DB customers and prospects.
Beginning with Tic Toc, we continue to expand coverage of our visibility solution, which is now available in 67 countries. Our solution has been used by nearly 30 advertisers, resulting in average monetize impression growth of approximately 220% over the last six months.
On brand safety and Tic Toc Dd's Advertiser activated brand safety controls continue to expand have now been rolled out in North America, The U K, Australia, and the middle East with 82 advertisers using our solution.
In addition, we continue to develop end to end in feed solutions in conjunction with Tic Toc.
With coverage and view ability fraud, and NGL as well as our brand safety controls DD offers the most comprehensive measurement and activation product offering across tictoc today.
On Twitter, we're developing a brand safety and suitability measurement solution for Twitter newsfeed, known as timeline and expect to launch this in the first half of 2022.
Moving onto pre campaign, social solutions that we are integrating into our platform via the open slate acquisition, we're actively working to capitalize on both the immediate and long term revenue opportunities.
We have begun cross selling our combined pre campaign activation solution to Dd's expansive global customer base.
Our research demonstrates that when our pre campaign activation social solutions are paired with our post bid measurement products, we can deliver significantly improved outcomes for our customers.
On Youtube, we saw that when our pre campaign activation solutions are applied to campaign brand suitability instance are reduced by up to 50%.
We expect to be able to drive even better advertising outcomes for advertisers as the operational integration progresses.
On CTV, our impression volumes grew 57% in 2021 and by the fourth quarter, 25% of our tag based Advertiser video impressions where CTV.
So in essence, one of every four of DVS open Internet video impressions are attributable to CTV.
Over indexing relative to CTV share of the digital video across the industry and underscoring the growing importance of verification in this fast growing sector.
Our CTV products are becoming essential to advertisers because of fraud and variability are emerging as real challenges to advertiser immediate investment confidence.
Fraud continues to violate unprotected digital transactions with increasing incidences of counterfeit SS AI servers generating fake CTV inventory across countless apps Ips and devices.
As recently as last month DD discovered a new scheme that we've done <unk>.
Viper box, which strips the code that verifies AD impression and then can seals and redirect this code through real devices to hide the fraudulent activity and attempt to go undetected.
TD customers are fully protected from this scheme, which continues to spoof more than 5 million devices and over 80 million AD requests per day undercutting out investments in undermining performance.
In addition to fraud variability, which is generally been assumed by CTV advertisers is also being challenged in CTV.
In a recent study dv discovered that one in four annualized CTV environment, continuing to play programming content, including recording AD impressions. After the television was turned off.
The AD was delivered but certainly was not viewed rendering performance measurement and valid and diverting media investment.
To combat this latest view ability challenge last month, <unk> launched fully on screen pre bid targeting enabling connected advertisers to target inventory from sources that are tested and evaluated by dv to ensure adds are only displayed.
100% on screen and when the TV screen is turned on.
Through this first of a kind solution DD complements our postpaid measurement capabilities with pre bid targeting empower and programmatic advertisers to address CTV view ability challenges across the media transaction.
Didi fully onscreen prepaid segments are available on Amobi medium App, and Microsoft Zehnder with more media buying platforms coming.
In addition to these CTV solutions TD is the first and only verification provider to provide effective brand suitability controls and CTV environments.
We currently offer CTV app inclusion and exclusion lists and app level controls that are utilized in both monitoring and active pre bid avoidance and we will be launching content level classification in CTV in 2022.
Shifting to international expansion International revenue grew by almost 70% last year with APAC revenue, drawing by 84% and EMEA by 61%.
All outpacing the industry and our competitors into.
International now contributes 26% of our overall direct revenue.
We currently generate revenue in 93 countries and from our expanding base of 20 locations outside the United States, We will leverage our exceptional RFP win rate to take advantage of the expansion opportunity that exists markets around the world.
In 2021, 55% of our head count growth was driven by international hires as we continue to invest in expanding our global presence.
Turning to client Upsells and new client acquisition, we signed 176, new advertising customers in 2021, including brands such as target Geico D Ico, BMW Bumble and Apple services.
61% of our new logo wins for Greenfield, while 39% were competitive wins in.
In addition on the supply side of the business. We added numerous new platform clients, such as Amazon Tabbouleh add Theorin smart clip <unk> as well as 19, new publishers to the fold.
The platform and publisher businesses are additional great. Examples of how we can extend our core data assets and two entirely new revenue lines.
With regard to our final growth lever strategic M&A, the integrations of matrix and open slate are progressing well and we have received client and partner endorsement of the additional global breadth and product depth that they have delivered to dv.
With a strong and growing cash position and zero debt, we are exceptionally well positioned to take advantage of global market expansion product acceleration and solution extension opportunities that exist in the market.
Wrapping up with a quick take on our innovation story Dv continues to lead the industry with unique value driving solutions that set us apart from our competitors paving the road for additional growth ahead.
In the last 12 months Dv has launched or expanded the only widely available attention solution. The only comprehensively accredited programmatic suite, the only solution for measuring and filtering fully onscreen CTD impressions. The only certified CTV fraud program for programmatic partners.
And we are the only leading verification company to root out and publicize the numerous new fraud attacks that shake the confidence of digital advertisers around the globe.
And soon we will launch the only verified audience solution along with Comscore.
And now we are the only independent leading verification company that is not in the conflict the business of selling digital ads.
We lead and differentiate with innovation and earn our customers' trust through independents.
With that I'll turn it over to Nicola.
Thank you Mark and good afternoon, everyone. Let me begin with a review of our fourth quarter and full year 2021 performance before discussing our 2022 outlook.
Growth and profitability accelerated in the fourth quarter, we generated $106 million of revenue representing year over year growth of $27 million or 34%.
We grew fourth quarter, adjusted EBITDA to $40 million or 46% year over year, representing a 38% adjusted EBITDA margin.
For context, Dv generated more revenue and more adjusted EBITDA in the fourth quarter of 2021 than it did in all of 2018.
Fourth quarter results were ahead of our expectations as the impact of supply chain disruption on CPG and auto AD spend was lower than we had anticipated going into the quarter.
Stronger than expected growth from verticals, such as financial services retail and entertainment more than offset the slight weakness in CPG and auto demonstrating the benefits of a well diversified customer base.
The acquisition of <unk> completed at the end of November did not have a material impact on fourth quarter results and as previously mentioned, we anticipate the integration of open sleep solution to generate between 15 and $18 million in 2022.
Revenue growth was broad based across advertisers platforms and publishers and each revenue type grew sequentially from the third to the fourth quarter, which is our seasonally strongest quarter.
For the full year 2021, we delivered $333 million in revenue up 36% year over year, and adjusted EBITDA of $110 million up 50% year over year, and representing a 33% adjusted EBITA margin.
In 2021 Advertiser programmatic grew 45% driven by ABS, which grew 77% and represented 50% of advertiser programmatic revenue.
Advertiser direct revenue grew 27% driven by social revenue growth of 47%.
Social represented 33% of our advertiser direct revenue up from 29% in 2020.
Finally supply side revenue grew 38% in 2021, driven by new deals with large platforms, such as Yahoo, Japan, and Amazon as well as the 19, new publishers, we signed on during the year.
The basis for our strong advertiser revenue performance is an attractive set of Kpis, which drive the recurring nature of our business.
Our 2021 net revenue retention rate was 126% while gross revenue retention was 98%.
Our customer tenure was six nine years for our top 75 customers for our top 100 customers. We grew average revenue per customer from $1 $8 million in 2020 to $2 $2 million in 2021 and.
And finally, we increased the number of customers generating more than $1 million in revenue by 42% in 2021.
Shifting to cost our cost of revenue increased by $19 million year on year in 2021, primarily due to an increase in costs from revenue sharing arrangements with our programmatic partners as programmatic revenue grew as a percentage of total revenue.
In addition, we continue and intend to accelerate our investments in cloud based hosting solutions to provide the scale and flexibility necessary to support our geographic expansion.
GAAP product development and sales and marketing expenses, which include stock based compensation increased at a rate below our topline growth, reflecting the operating efficiency of our business model.
In 2021, we expanded adjusted EBITDA margins to 33%, while continuing to invest in the business.
We added over 200 employees during 2021, including approximately 100 from our two acquisitions.
In terms of cash flow and balance sheet, we generated $83 million in cash from operating activities in 2021, a nearly fourfold increase from the $21 million generated in 2020.
We had approximately $222 million of cash at the end of the year and zero debt on the balance sheet.
Turning to 2022 guidance, we expect to continue to deliver high revenue growth and high profitability in 2022.
We expect full year 2022 revenue in the range of $4 $29 million to $437 million a year over year increase of 30% at the midpoint.
And we expect full year 2022, adjusted EBITDA in the range of $126 million to $134 million.
Representing a 30% adjusted EBITDA margin at the midpoint.
We expect our quarterly share of full year revenue to be similar to the seasonal patterns that we achieved in 2021.
For the first quarter of 2022, we expect revenue in the range of $89 million to $91 million, which implies a 33% growth at the midpoint and.
And we expect first quarter adjusted EBITDA in the range of $21 million to $23 million, which represents a 24% adjusted EBITDA margin at the midpoint.
While we anticipate realizing synergies from the acquisitions of open slate of metrics by eliminating duplicative costs over time, we expect operating expenses to trend higher in the first half of 2022 and this is reflected in our first quarter EBITDA guidance.
Stock based.
Compensation expense for the first quarter of 2022 is expected in the range of $9 million to $10 million.
For the full year stock based compensation expense is expected in the range of $44 million to $49 million.
Shares outstanding for the first quarter are expected in the range of $170 million to $173 million.
As mentioned during Investor day, starting with first quarter 2022 Advertiser programmatic will be renamed activation revenue and will include programmatic revenue. In addition to pre campaign social revenue, including revenue contribution expected from selling open sleep solutions.
Advertiser direct will be renamed measurement revenue and we will continue to include DVS post campaign measurement business on social CTV and the open web.
And with that we will open up the line for questions. Operator. Please go ahead.
Thank you at this time, we'll be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset.
Pressing the star Keys, one moment, please poll for questions.
Okay.
Okay.
Okay.
Our first question is from Youssef Squali of Suez.
Louis Securities. Please proceed with your question.
Great. Thank you very much I have just two quick questions first maybe the first one is for Nicola Niccolo as you look at the guide that you just provided for the 30% topline growth for 2022 I was wondering if maybe you can just flesh out a little bit the the main drivers for that growth between maybe established.
Looks like ABS versus some of the new products like authentic attention.
Customer contextual et cetera, and then maybe just for Mark and then any updates on on on the potential partnership with Facebook that you guys spoke to in the last.
I think.
Last quarter I'm, not sure exactly where there wasn't any earnings call or subsequent to that anyway, any any kind of update there would be super helpful. Thank you.
Yes, I'll take the first part of your question so our guidance.
We think our growth for 2022 is going to come from the sectors that we've been discussing all along which is.
New products.
New vectors, new platforms that we will integrate with but the overall under arching growth vector is really volume in our MTM growth.
We outlined in the Investor day deck MTM is really what has driven our growth in the last two years Mtf's. It remained fairly stable and thats, how we anticipate seeing 2022. So the volume is really what's going to grow what's going to be the biggest driver of the growth and then more specifically around established versus new products. We do.
We believe our new products are going to obviously grow but its early days on the ones that you mentioned.
So it's really going to be just an overall growth across the entire established products that we have.
And then you said regarding the Facebook question.
Obviously, we don't have any news to share at this point.
We continue to lean in on all of the social platforms that we work with and creating twittering.
Twitter and kicked off and several others in which we are continuing to expand our services around it against.
And as we saw with our social growth last year, we've got great core growth across the platforms that recovery.
An additional growth across platforms, like Twitter and Tic Toc and others that are going to be driving expansion in 2022. So.
Nothing to report on Facebook right now, but the.
The other drivers of social growth continue to remain really strong and our expansion across new platforms like Twitter tick tock are on schedule and continue to grow.
That's helpful. Thank you both.
Okay.
Our next question is from Raimo <unk> of Barclays. Please proceed with your question.
Thank you.
I stay on that subject a little bit like Mike what are you seeing from those walled gardens in terms of willingness to engage given the level of criticism they are facing and the need to be more open et cetera.
Do you see like a big sea change or is it just the same normal progression there.
And then the other thing is given that you had like two.
I mean, obviously small deals in very very good deals, but like how do you think about that build versus buy now going forward in terms of what's driving the business many things I'm.
Sure sure.
Sure. So on the first question.
I would like to think that we've had this strange black Swan event created brand safety and suitability issues over.
Over the last few years.
Those were one time deals.
Seem to be that every week is another event that pushes brand safety and brand suitability to the front of the mines with advertisers and in particular.
Across social networks, I think because of that.
Yes, there is an increasing interest.
And level of engagement of that we see with social platforms and wanting to bring in third party.
Suitability and safety company, So we've talked about tick tock, they've been especially.
Leaning in to work with other partners as they look at expanding the multibillion dollars of revenue they have an advertising really taking that to the next level.
As we noted Twitter, we're working with them on the on our product for their feet. So I would say that.
There was certainly a push two years ago, when we had a combined challenges of social unrest and COVID-19 hitting.
Those things have now been supplanted by other global credit disease, which has pushed of interest in the brand suitability brand safety to next level and that has kept the pressure on all the social platforms to open up even further.
We've seen that with their relationships with us in particular.
So that's the first question second question R&D have build versus buy as we look at our roadmap moving ahead.
We're always going to look for solutions that can accelerate our movement into areas that give us a differentiator in driving outcomes for our clients.
And if we can buy those faster than we can build them. Then that's what we're gonna do open slate was a great example of that where we had some of the pre campaign and.
The tree.
Pre buy filtering tools on our roadmap we had some that were partially built.
Particularly plugging into some of the social platform and the acquisitions, obviously, it really just accelerated that and kind of fill in that gap faster for us.
We're going to always look for those opportunities as.
As we've noted we've got a considerable amount of dry powder to do so I think the market pricing has adjusted out there for those types of solutions in the private markets as well.
So.
I would say that we've said this before we got three areas that we look at global expansion.
Roadmap acceleration.
And product Adjacencies and moving into new and adjacent products, we're going to continue to lean into those areas.
A lot of assets to move.
Yes to continue to invest in.
And our philosophy hasn't changed if we can move faster if we can get a differentiator by spending money, we're going to do it.
Yeah, Okay. Thank you.
Yes.
Our next question is from Arjun Bhatia of William Blair. Please proceed with your question.
Perfect. Thank you very much.
Mark I wanted to maybe follow up on that last one on M&A I'm curious, how you're thinking of.
It seems like there was a couple of avenues available to you.
Something that you laid out but do you view M&A as a way to double down on areas that you have that or maybe early like CTV and social or is there an opportunity for you to actually expand into new areas that are still very nice maybe like gaming audio or are those latter two.
Maybe that market has been developed I'm just curious how you think about M&A across those two axes so to speak.
Yeah. Thanks, Thanks, so much for the question it's a good one.
Our driving philosophy right is to is to ensure that our advertisers can optimize their outcomes.
To do that we need to verify and measure everywhere.
And in that everywhere includes geographies everywhere includes.
Sectors.
Everywhere includes platforms right. So we.
We have an opportunity to move into new geographies through a partner through acquisition, that's something we're going to take a look at if we can move faster into CTV audio through an acquisition, we're going to we're going to look at that as well and if there is an opportunity for us to start poking into new.
Platforms or new areas of measurement E audience or higher levels of performance around attention.
We're going to look at that too.
There is no specific criteria, saying, we're going to buy something and audio tomorrow, because we want to get into audio what we do is we follow our clients direction of where they want broader verification broader measurement to accelerate their outcomes at that means a new sector into new geography or new type.
Platform or a new type of business, we're going ahead there.
So I think.
Its really clear when we do M&A, it's not about just throwing new dollars onto our revenue into our income statement for businesses that are really associated with what we do they have to be a measurement has to keep us independent they have to keep us unbiased and <unk>.
To drive outcomes for our advertisers if they do that they sit our bill and if they help if it has to do with new sector, new geography or product suite, we will go after.
Got it got it that's very helpful and then.
One more.
A lot of your prepared remarks, and even given the analyst day it seemed like yes.
The solution and the platform has expanded so much that now you're adding a lot more value.
For customers right youre going into activation as opposed to the spectrum that youre doing that with APE yesterday I think attention.
Do you think that with the CTV investments, you're making maybe help us think through.
How you're approaching pricing power with your customers.
You would drive more ROI for them.
How do you think your pricing evolves longer term, maybe not what are you going to do tomorrow or the next quarter, but how do you view the value adding.
As a way for you to capture some of that value.
Longer term and what role maybe pricing plays in discussions with your customers today.
Yes, I think.
About pricing and pricing power.
Kind of level it backup one different level, which is.
I always think about kind of revenue per impression.
How can we increase revenue per impression and that's a combination.
On Investor Day, layering new solutions on top of each other right. So that we're up selling different types of metrics. So that someone starts with core safety and verification and remove all the way up to the performance scheme. We know we can charge them on the same impression.
Outwards, that's 10 times, what we started with so the first way we look at kind of revenue generation per client in revenue generation per impression is selling new solutions. The second way is.
More akin to the question you asked which is what can we do with pricing.
And I think the pricing starts to be an element.
Our overall value prop to our customers as we're providing more value, we have more flexibility and increasing pricing.
When you look at immediate like you mentioned CTV the value that we're adding.
Becoming increasingly is increasing right because we're saving them from fraud on a $40 impression not a one dollar impression.
Ensuring brand safety odd impression that is a large screen experience and someone's living room, not an AD that runs on it on a mobile phone someplace. So we note that the value proposition there is higher and we believe that over time as advertisers begin to realize that our.
80 to have more pricing power will grow so we mentioned that one out of every four of our video impressions now.
The Internet is a CTV impression.
That's reaching a tipping point, where we can say.
Not only we provide a huge level of value for a large number of impressions out there, but we're becoming important to advertisers and driving that value proposition that will have some pricing power. So I think CTD is still a relatively small piece of our overall puzzle.
But when you look at the proportion of impressions that we're driving.
And supporting their how valuable those are and the value prop that we're driving for those advertisers CTV. For example, we do believe that we have long term pricing power in that space as well.
Perfect. Thank you my congrats guys.
Our next question is from Laura Martin of Needham. Please proceed with your question.
Hi, there so I'll ask them one at a time, so you announced the Comscore data at your Analyst day, 10 days ago and from your comments today. It sounds like Youre going to do more of these types of partnerships. My my question is how does the money where if your typical fee is about eight.
Eight per thousand impressions is this an upsell.
Or this score get a part of your fee or do they get a fee on top of your fee. When you do these partnership deals. That's my first question.
Thanks, Laura for questions.
And I think.
The first thing to always consider as we look at any new partnerships as an opportunity for incremental revenue right. So its revenue on top of that stacking of what we can sell our client which is always good.
And in the case of Comscore or any other partnership that we do.
There is obviously a valuable asset data asset that theyre, bringing to the table and valuable data asset that we're bringing to the table.
Look at pricing.
We think it's a premium solution.
And that premium solution is going to have some component of costs that comes from us. Some component that comes at a cost that comes with a partner so there'll be a share that comes out of this so at the end of the day.
We're still in the midst of putting together the pricing model for for example, our comscore solution, but that solution will be a premium solution that will have a share that goes back to each partner and.
It is a premium solution will likely be above the average the average returns of that solution will be above where our current.
Standardized products are we.
We do think that there are opportunities down the road for us to partner with other companies as we move further into performance and as some of the traditional performance metrics become challenged without a core verification element to them.
So look we're going to we're going to try some things out we're going to see how they work, but we are.
We're really optimistic about our ability to kind of start moving into some of these adjacencies like audience, where I think there are gaps today.
Fantastic that's Super helpful building on your performance portion of the answer you just gave the new information you gave us today is it C. T V was one and for impressions and <unk>. My question is performance based advertising is one of the most powerful advantages of connected TV ads if your core <unk>.
Verify that and AD reach the right person, which is sort of a proxy for effectiveness.
Let's see TV actually allows the advertiser close the loop between making it out in an online purchase.
It feels like that maybe is better than TV solution, which is a proxy. So can you talk about how did the growth in that environment with so much the TV now in your impression base.
Yeah, Sue I think taking a step back if you look at that.
A couple of the core value propositions in CTV.
And that we deliver.
Two of which are focused around elimination of fraud.
<unk>.
Insurance view ability and both of those things can impact the measurement of any type of closed loop.
Attribution that CTG would allow so basically what I'm, saying is before you even kind of are able to determine whether or not our CTV I can help someone close the loop you have to determine whether or not youre working with good data.
So what you don't want is a bad denominator right youre looking at the wrong number of impressions, because theyre actually fraudulent, yes, youre able to show performance or are you showing the right level of performance because half the TV sets were not turned off or another percentage of TV sets.
We're actually not real TV, they werent real devices, they're fraudulent devices. So I think.
It's a great.
Which as CTV is this first large screen sight sound and motion of advertising application that can actually be connected to a transaction, but you always have to remember that data needs to be.
That needs to be.
Ladies the confidence that day to begin with.
And the core proposition that we've gone out with is eliminate fraud from that transaction EBIT when that transaction is a direct transaction remember there can be fraught present.
Because of the way SSA AI works.
Ads are pulled from other places and delivered so theres two issues there as well as ensure that it's truly viewable. If you can do those two things that the second part of the equation, which is measuring the effectiveness of that closed loop transaction is truly valued so I think we all that's a long way of saying that.
We always have a place in that and the evaluation of that transaction and the valuation of that performance because people want to ensure that the data that they're working with when they do that closed loop is actually good data.
Super helpful. Thank you.
Of course.
Our next question is from Michael Graham of Canaccord. Please proceed with your question.
Hi, Thank you just a quick one on.
Some of the metrics and then another.
It looks like MTS was under a little bit of pressure year over year and sequentially.
Very modest.
But I just wonder if you could kind of.
Let us know if there's anything going on there was it just more impression growth.
Towards the end of the quarter or are there any sort of underlying dynamics that we should be aware of there and then just.
At a higher level, Mark you talked a bunch about authentic attention, which seems like it has.
A really great opportunity ahead of it.
Can you just talk about what.
What you expect in terms of the pace of shedding that developed and integrated.
It cannot go faster now than something like ABS did given the scale of your platform.
Yes.
I'll take the first question on the on MTF.
The underlying dynamics of what drives MTF.
<unk> not changed for us in the past few years.
Our drivers.
Growth that will bring mcf down including <unk>.
Global expansion, which is something that we're doing intentionally and there will be drivers.
Growth in MTF, which is the <unk>.
Upsell premium solutions.
What you saw especially around Investor day, Youll see the MTF over the last few years basically up 2%. It was as you say it was down a little bit in 'twenty. One it was up a little bit in 2020, I think it is going to hover around the same levels.
What's really driving the growth, it's volume as well with say right MTM and particularly what we saw in Q4 is just frankly, just a continuation of the expansion internationally and Thats, just bringing down Mcf a little bit.
<unk> four <unk>.
2021, as a whole right.
Just having an impact which is more than offset by volumes Theres nothing thats changed in terms of the underlying dynamics of what you see on MGM and MTF.
And are you.
Your second question, Michael So I think.
We obviously talk a lot about attention because we're very bullish about it and the reason why we.
We stated over and over again, we think that a lot of the common metrics used for driving outcomes have been our central lose efficacy because of the inability to track users right. So things like attention, we can become that much important.
And when we think about the road map to becoming essential so I think the path to essentially right, which is which is what we wanted to and we talked about our investor day. Our continued drivers we are becoming essential to our customers. If you think about what's essential to them. It's essential that they know that they're spending money not on fraud, it's esque.
So for them to know that their ads are viewed these criteria, so fraud and view ability.
And they went through a process that's really three steps socialization standardization and then scale socialization is introduction of the concept to buyers right we need to understand what his attention what is it all about what does it mean.
The stage, we're in right now.
The next stage after that standardization to the industry starts to understand what that that metric is and then they build rules around it so groups like the iab and others come in and say Hey here what the standards are around detection and then finally is scale an acceptance rate, which as everyone understands what it is the industry knows what it is.
Create rules around it the second part.
Buyers start using it as a currency we saw this with view ability eight to 10 years ago right view ability went through the same level of phases now view ability is essential.
It's used on almost every impression and almost every digital buy and whether it's GDP or somebody else view ability is key to an advertiser. We think attention follows that same track as I started and your question around how do you make it go faster.
All the way to make the first two stages go faster as you expand socialization and that's why we're launching attention metrics to our entire base of customers that use the authentic ad.
In an effort to get them used to seeing attached metrics right in their UI everyday and pinnacle. So we can accelerate that standardization you can't accelerate but you can certainly be part of the dialogue and thats. What we are everyday with our involvement with the industry accreditation groups as well as the industry standards groups like the iab the standardization.
<unk>, we can accelerate by being part of that group.
Socialization.
By launching it across our platform and the first part which is scale is once you do the first two things we already have the ability the salesforce and the the breadth global breadth to actually start scaling. So it certainly is a long term investment for us to build out an entirely new metric.
But we feel that we're in a great spot from a customer perspective, our ability to socialize a great spot from our industry relationships from our ability to standardize and a great spot from our ability to scale that business because of what we've been able to do with other solutions like Avs, where we have a built in customers and it built in launching system in our <unk>.
Platform.
Okay. Thanks, so much mark.
Got it.
Our next question is from Vasily <unk> of Cannonball research.
Please proceed with your question.
Thank you good afternoon I wanted to ask you to talk about the the resistance of your business model to potential macro downturn. So if I look at let's say Q2 of 'twenty to 'twenty.
Our revenue was still growing at 22% in that quarter, whereas.
We'll be at that company has in my universe declines of double digits right. So I wanted to ask you to talk about the drivers of that and why that is happening I understand that your charge per transaction, but at a certain point that transaction velocity in a crisis should decelerate enough too.
To sort of potentially drive a negative revenue.
So if you could talk in more detail about that if your counterparts. Both of the revenues Champs kept those behave but not in a macro downturn.
Yes, so I'll take that question first.
Youre right and Thats, what youre pointing to the one quarter that was sort of a proof point for a few of the threat actors.
Our revenue model resilient, one is very diversified across.
Most of the industries, we don't have a single industry, that's more than 20% of the revenue for the company, which means that if some sectors are hit more than others.
We are sufficiently diversified and thats kind of what we saw in Q4 of 21.
When some supply chain issues.
Auto, but we werent doing much better than some other industries. So diversification as a first proof point that we signed that one quarter.
Secondly, it is worth mentioning is as you pointed out.
We are flat fixed fee per transaction, so the ups and downs on CPM will not impact us as much as it would for companies are more on a take rate basis.
And the third one I think it's just a proof point that we are just a must have product.
In situations, where the market becomes more uncertain.
That is the moment, where you would want to use our products. If you're an advertiser you would want to make sure you are in the right place brand safe.
It's viewed and not subject to fraud I think those three those three components are why we grew 22% in that one quarter will mostly hit by.
Covid with the entire industry was hit by Covid.
And we believe that those will carry us are likely to help us through future periods as well.
Thank you.
Okay.
Our next question is from Matt Hedberg of RBC capital markets. Please proceed with your question.
Yeah. Thank you this is actually Matt Swanson on for Matt.
I just wanted to double click on a couple of metrics you gave that 61% to 30.
9% breakout of the Greenfield versus competitive so it's really interesting.
Mark do you have any context on maybe how that compares to prior years, and then especially in light of the 80% win rate in competitive deals. How do you run your business relative to those two metrics. For example are you more focused I know what time IPO, we talked about 75% of the market being greenfield.
Or is it those displacement opportunities and getting in front of more deals.
Yes, it's a great question so.
When we look at the proportion of Greenfield customers over the last several quarters, we've seen it actually increase and that prescriptive. That's what we want to have happen because the reason why it's increasing.
As our investments in additional global markets and a desk and our investment in sales resources are playing out right. So when you have more people that are able to spread out to more places and attack more markets where.
There isn't anybody there to begin with so.
It is it is part of our sales strategy to go after new markets new folks.
And continue to win in those places where.
The opportunity is greatest so we have seen a trend to more greenfield overtime.
It doesn't mean, we don't back down from a fight we absolutely will.
Get engaged when we need to but obviously the opportunity the pricing opportunities.
At the stickiness, our greatest where we can get into a greenfield opportunity and it's a testament to our continued investment in particular in our global markets, where are we now at a 55% of our head count last year was outside of North America.
Again part of our plan to continue to look for untapped opportunities around the globe.
<unk> sales and marketing resources in those places and push that high win ratio that we have.
Wherever we can.
That's great and then if I could just add one more we've always talked about the diversity of our platform I think people listening to Facebooks earnings calls, we'll talk a little Facebook investor there are growing concerns around some of those other platforms like tech talk or Twitter taking share.
You highlighted your solutions in those spaces as well, but I guess more directly do preference among the social players about where spend moves is there a situation that's better or worse for D. B.
Or is it kind of core to your platform too.
Being different I guess.
It's a great question and I think.
As a parent I can say, we love all of our children equally but suddenly love a little bit more right and I think it's less for.
I'll answer the fact that.
Any one platform.
More monetize it or higher margin. The fact that some platforms are just easier to work with right.
At the end of the day, we have to be everywhere.
It's important for us to have parity and to be on the key key places where advertisers are going.
I would say if any of that to become.
More interesting for us that another it's really driven by our advertiser demand right. We talked a lot about take talk because advertisers are very interested in getting a tick tock today.
Is it really untapped space.
There are clearly.
Going after other social platforms business.
And they know that one of the biggest.
Barriers for them to do so is third party validation, so obviously getting being everywhere being on all social platforms is important and we will continue to endeavor to do so.
At the end of the day.
We follow where our customers want to spend and.
And lean into those places.
Thank you.
Sure.
Our next question is from Yun Kim of loop capital markets. Please proceed with your question.
Hey, Mark following up on Matts last question, how do you balance your sales and go to market efforts between new customer acquisition versus expansion with existing customers, especially now that you have new products on the campaign side and also the continued attach opportunity around social and CTV.
Yes, yes.
It's a great question and to address that we actually just went through.
A pretty significant sales and commercial team reward as we looked at how we balance our growing opportunities with new customers, but the.
The significant growth that we have by introducing new products to our current customers.
First stage of that was when we brought in a new commercial leader at Giulia, Julia Edelman and combined the client service teams with our sales teams to allow for.
The people who are talking to our current customers everyday to be under the same umbrella is that people that.
As new business acquisition, the second phase of that was actually too.
Verticalizing sales teams so that.
One client group was working.
But.
On each client set so that they can upsell and.
Upsell all of our solutions into our current clients getting.
The hunters more room to go out and sell totally new clients. So basically.
<unk> into a vertical structure and which are current clients were up sold by a team that was both servicing and selling them, giving.
Giving that focus and taking our new business folks away from trying to upsell current clients and focusing them on total hunting and fishing.
And white space.
No.
It's a great question.
It's the evolution of our business and Youll see an obvious easy it's a lot of companies, whereas we grow as we have more solutions, we're able to we look at creating a different type of commercial and sales structure to address those challenges and we literally just got done with that process less than a month ago.
Okay great.
And Nicola.
With the.
Increasing international mix and perhaps newer solutions.
I may have a lower initial gross margins how should we think about the gross margin to trend in 2022.
So I think the main driver of our margins in 2022 is really going to be the integration of our two acquisitions, that's really what's going to drive what we.
Discussing our in our prepared remarks, which is sort of a.
A lowering of our EBITDA margins in the first half of the year before we get back to a more normalized EBITDA margin in the second half that is the main driver for what Youre going to see in terms of EBITDA margin in terms of gross margin, which was really your question.
That is cost of sales of about 16% or so of revenue.
That is going to move because of two things one is more revenue moving to programmatic just because there is a rev share to our programmatic partners that goes.
Into that number and the second one is our intention to continue to invest in the infrastructure of the business, that's not necessarily an international versus.
U S driven decision is just an overall decision for the overall infrastructure of the business.
There will be some investments, but cost of sales as a percent of revenue will remain fairly consistent below 20%.
Okay, great. Thank you so much.
Ladies and gentlemen, we ask that you limit yourself to one question each in the interest of time.
Our next question is from Matt Condon JMP Securities. Please proceed with your question.
Hi, guys. Thanks for the question just wanted to ask on Avs, the Avs integration with <unk> hundred 60, <unk> being lapped in <unk>, just how should we think about growth on a go forward basis. There. Thank you.
Yes.
Start there so yes, we're not we're not fully integrated in all of the platforms about 50% of our revenue growth. This is obviously a premium very attractive product to the drivers for the growth going forward are going to be it is it is a cornerstone of all of our new sales.
Also.
Product that we need to start selling to declines that are below our top 100. There is an opportunity. There now that we know its a successful product to go deeper into our client base with the product.
And then thirdly, even.
Clients that have it currently but not necessarily using it on their international business.
We are now as Mark mentioned in his remarks, you're seeing upsell of ABS on existing clients for their international business. So those are three vectors that we think we will continue to help drive the growth of avs.
Yeah.
Our next question is from Dan Salmon of BMO capital markets. Please proceed with your question.
Hi, This is Steven coming off it Dan.
Yes, I just didn't see that strong and there are a number that you gave out and I know, it's still early innings and <unk> given some good commentary around upsell.
Upsell motions and even customer outcomes from these.
But I was just seeing if you can provide any specific color around let's say adoption rates attach rate specifically around the open sleep pre campaign solution or attention.
Or if you can just provide any other metric that can help us quantify demand right now thank you.
I mean, what I would say is.
The way the way we think about these products these product introductions are.
How well is it sold into our existing base and we know that open slate product just not well sold into our existing base that is the opportunity that we have there.
So rather than an attach rate is just it's a new solution, we're able to sell it into our customers and the overlap is very minimal.
That's kind of how we think about it.
And we know that we just don't have that much.
We have a lot of opportunity to up sell those products into our existing base, that's what I would say on open slate.
Yes.
On attention again, we kind of went through the <unk>.
The lifecycle of a product that we believe can be a real groundbreaker.
Right now that that product is.
Managed over 1500 campaigns in 10 different verticals.
We benchmark 49 billion impressions.
And about 40 clients are currently using the product. So if you think about that 40 out of the.
Brands that we work with it's still Super early days that we've got a significant about runway.
With regard to attention to continue to expand again so.
Yes look I think as those get the solutions get bigger we'll have more metrics to start putting against them, but for super optimistic about the initial uptake.
Great very helpful. Thanks, so much.
Sure.
Our next question is from Mark Murphy of Jpmorgan. Please proceed with your question.
Yes. Thank you I'm just wondering if you can comment on how the signaling is from pandemic impacted industries, such as travel and.
Hospitality restaurants retailers.
You look at it today, because you're fairly deep into the quarter.
Are they jittery about inflation in energy prices or supply chains, or the Ukraine conflict or do you feel that there are are they moving ahead. We're ahead in a fairly normal way just in terms of how they're thinking about advertising volumes for this year.
Yes, so mark what I would say is.
Unlike what we heard at the beginning of the fourth quarter, where we did hear specific concerns around supply chain disruptions, which ultimately we were able to offset because we're sufficiently diversified.
We're not hearing we're certainly not hearing similar comments right now around the supply chain.
Marco macro events are moving very fast.
So obviously, we are in contact with our customers, but I would say right now we're not hearing anything.
Typically telling us the volumes will.
We will be materially different than what we thought at the beginning of the year when we set our guidance and one thing we do see.
Through.
Part of our clinical platform called blueprint, where they lay out their campaigns.
Moving ahead.
Usually a little indicator on what the quarter is going to look like and what the next few quarters, you're going to look like as it right now we have not seen kind of any strange abnormalities and therefore retrans moving ahead.
Excellent that's great to hear thank you very much.
We have reached the end of the question and answer session I will now turn the call back over to Mark Zagorski for closing remarks.
Thanks, everybody for your questions.
Here at Dd's extremely enthusiastic about what the future holds for us.
Continuing to deliver high growth and profitability and look forward to keeping you apprised on our five key growth drivers, which fuel our long term growth trajectory have a great evening everybody.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
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