Q1 2022 DoubleVerify Holdings Inc Earnings Call
Greetings and welcome to double verify is the first quarter of 2022 earnings call.
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A question and answer session will follow the formal presentation.
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Please note this conference is being recorded.
At this time I'll now turn the conference over to change out, England with Investor Relations occasionally you may now begin.
Good afternoon, and welcome to doubled verify first quarter 2022 earnings conference call with US today are mark the Gorski CEO and Nicola life 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.
More information please visit referred to the risk factors in our recent SEC filings, including our Form 10-Q, and the 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.
<unk> 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 doubled verified dot com also during the call today will be referring to the slide deck pitch no website with that alternative its mark.
Thanks, Pedro and thank you all for joining us today I'm excited to discuss our strong first quarter performance and optimistic outlook on the year ahead.
But before I do let me reiterate our support for all of those affected by the heartbreaking conflict in the Ukraine.
We continue support humanitarian relief efforts in Ukraine, and have voluntarily discontinued services with Russia based clients.
With information wars raging across the worldwide web we remain deeply committed to promoting truth and transparency and defunding misinformation as we work toward making digital advertising stronger safer and more secure.
Now turning to our results we had a strong start to 2022 with outstanding first quarter.
Building on the solid organic growth we achieved in the full year 2021, we delivered nearly $97 million of revenue in Q1, 2022, representing 43% year over year growth and the biggest first quarter in the history of the company.
What's even more exciting is that our revenue growth was broadly distributed driven by strong product upsell and geographic expansion momentum from existing clients as well as product activations by new clients, the resulting stronger than expected volume growth was the foundation for the outperformance relative to our revenue.
<unk> Act.
Activation revenues substantially outperformed our expectations driven by the continued adoption of authentic brand suitability with large advertisers such as model is growing their use of this industry, leading product and expanding number of international markets.
Other programmatic solutions outside of brand safety and suitability also delivered strong revenue growth due to new advertisers activating and ramping DB solutions on their programmatic media buys.
Profitability remains solid with nearly $25 million of adjusted EBITDA generated in the first quarter, we delivered 26% adjusted EBITDA margins, even as we continue to meaningfully invest in expanding our solutions growing our workforce and operational footprint and integrating two new businesses. In addition.
<unk> continues to achieve positive net income and net income margins a testament to the attractive economics of our high growth and high margin software solutions.
Our business has demonstrated strong and sustained revenue growth momentum year to date.
March delivered the highest year over year growth rate within the first quarter and the second quarter is off to a good start.
We have raised our internal expectations for second quarter performance, which gives us the confidence to raise full year revenue and adjusted EBITDA guidance beyond the first quarter beat.
I'd like to highlight the DD continues to demonstrate sustained business performance in an environment of macroeconomic and geopolitical uncertainty, while our business isn't immune to the marketplace challenges that our clients operate in there are numerous factors that set <unk> apart from our peers.
Our fixed transaction fee business model Insulates, our revenue from CPM volatility, but those in the media sales business space.
Our products serve to protect brand equity and meet reduced media waste, making them essential to advertisers.
Our verify everywhere product strategy diversifies, our revenue across platforms, making dv largely agnostic to shifts in AD spend and.
And finally, we remain in the early stages of global market penetration and have a vast untapped tam to sustain our long term growth as exemplified the fact that nearly 70% of our Q1 wins were greenfields.
Now I'd like to take a few minutes to discuss our revenue growth within the context of our three key differentiators our.
A rapidly growing market, leading scale, our focus on innovation and the deep level of trust that we built with our customers as an unbiased independent partner.
Beginning with scale, we're leveraging our extensive DSP coverage and wide ranging programmatic solutions to drive further scale in our activation business.
75% of our first quarter Advertiser revenue growth was driven by activation, which had 56% higher revenue year over year active.
Activation revenue now represents 61% of our advertiser revenue.
Advertiser revenue growth continues to be volume led in our first quarter outperformance was driven by stronger than expected organic AD impression volumes generated across our diversified client base.
We also drove incremental revenue growth through both the growth in premium product adoption and the implementation of enhanced pricing tiers across our programmatic integration.
These tiers allow us to bifurcate, our pricing for display and video impressions on dsp's, ensuring that each tiers price competitively.
Tiered structure has resulted in higher fixed fees for video impressions. These pricing is now in line with that of our competitors in.
In the long term, we believe there may be further opportunities to raise prices on higher CPM media such as CTV.
The enhanced pricing and more premium product mix in the quarter supported growth in our overall MTF or media transaction fees and in combination with stronger advertiser volumes delivered an exceptional start to the year.
Success in activation and measurement go hand in hand, as our measurement data fuels, a virtuous cycle in which post campaign insights inform continuous optimization opportunities that can be acted upon in pre bid applications.
When we engage a client we immediately introduce them to the performance opportunities embedded in this process.
Expanding our relationship with them across new geographies and new solutions that feed the cycle.
Advertisers are enthusiastically embracing the power of this combination.
So far this year, we signed new logos, including best buy subway KFC Norwegian cruise lines travelers and Opal further fueling an average RFP win rate of nearly 80% since the first quarter of 2021, we also expanded across multiple additional geographies with meta and models.
As we capitalize on the vast untapped Tam for our solutions all around the world.
In addition, we continue to lean into our verify everywhere strategy by developing an exciting new growth opportunity within our retail client base. The emerging category of retail networks, which we are building a unique competency and differentiated leadership position.
Retail media networks leverage the footprint and relationships of some of the world's biggest retailers to create entirely new advertising opportunities for leading manufacturers and affiliates and net new AD dollars for the industry.
<unk> estimates that advertiser spend on our retail media to grow to $25 billion by 2023.
And just as our solutions drive a return on investment for the retailer on its own brand advertising spend our platform capabilities drive a yield on retail media networks by pre qualifying supply and ensuring a high quality advertising environment that sustains optimal ad pricing.
Today double verify is the independent measurement partner for some of the largest retail media networks in the world, including Amazon Walmart target Macy's and Kroger.
These partnerships are expected to grow impression volumes and revenues as well as expand the use of DB solutions for an entirely new sector of affiliated advertisers that include small and mid sized businesses that we traditionally have not had access to.
And today, we are announcing that Didi has closed an enterprise deal with best buy who will rely on BD suite of measurement and performance solutions for its ad campaigns.
In addition, Didi will provided services to best buy ads best buys in House Media company.
Turning to our second key differentiator D. These market, leading innovation, our leading edge solutions continue to drive our growth momentum.
Fully on screen pre bid targeting our activation attention metrics specific to CTV continues to gain traction while our CTV measurement products have delivered 55% impression volume growth year over year.
As highlighted last quarter over 25% of our tag based Advertiser video impressions are now CTV, which over indexes dv relative to CTV share of the overall market.
Although it's early days, we continue to see momentum for attention as an important metric and AD buy.
AH study released last week noted that over 50% of media buyers agree that their organizations will invest in media attention metrics within the next 12 months, while approximately 65% agree that attention will become a currency within three years.
There is clearly a market appetite for alternative currencies that power performance on premium media and.
And BD is well positioned to take advantage of this trend.
This summer, we will be leveraging our pinnacle platform, which currently connects DB data to thousands of the world's top brands to launch a free preview of authentic attention delivering these unique powerful analytics directly to dd's highly scaled customer base.
Year to date, we've measured over 225 billion authentic adds all of which have been benchmarked for attention, enabling our clients to contextualize their performance against specific industries.
Buying channels regions and markets and to uncover performance drivers in the context of their specific industry vertical.
We continue to believe that attention will be the next currency that advertisers rely on to drive outcomes and are excited to be the only leading verification company to have built and launched a comprehensive attention solution.
Moving on to innovation and social DD continues to have the most comprehensive and accredited suite of social solutions in the industry.
On meta we are the only provider of both pre screen brand safety and suitability protection.
And measurement for Facebook in stream instant articles and Facebook audience network on.
On Youtube, we recently announced that we are the first and only company to have earned accreditation by the media ratings Council for independent third party calculation and reporting of Youtube video view ability for desktop and mobile.
We remain excited about the opportunity to innovate new products on high growth social platforms, like Tictoc and to extend our industry, leading brand safety and suitability verification solutions to met as feed which remains one of the largest generators of AD impressions across social media.
Dv along with open slate is proud to represent two of them that is for Badged business partners and we look forward to the opportunity to work with metal on brand safety and suitability coverage on the feed following the alpha phase of their process.
Let me wrap on innovation with authentic brand suitability one of the industry's most innovative media quality solutions and an incredible growth driver for our business.
Revenue grew 52% year over year, driven by impression volume growth with current clients continued upsell momentum in international adoption.
Nearly 100 more clients to use ABS in the first quarter of 2022 compared with the prior year period.
ABS is performance superiority and reducing media waste, while safeguarding brand reputation and programmatic applications is rapidly evolving ABS and to not only an upsell opportunity for DB, but two competitive conquesting tool as well.
Our final differentiator is trust, which underpins our relationships with advertisers and platform partners and is core to the value we deliver to the digital advertising ecosystem.
We continue to be the only leading independent verification company that is not in the conflicted business of selling digital ads, we strongly believe that as a trusted objective verification and measure it partner to advertisers you can't be part of the media transaction.
We expect independents to remain a key differentiator across all channels and particularly in CTV were unconfirmed at accredited metrics are becoming more valuable.
We are well positioned to capture the accelerating shift of linear TV AD budgets, especially with large new streaming companies such as Netflix potentially adopting AD driven models.
To conclude we've had a strong start to the year and expect this strength to carry through to the second quarter. Consequently, we've raised our full year outlook and anticipate sustained business performance that outperforms digital advertising growth.
Our business remains resilient and as we lean into our three key Differentiators scale innovation and trust. We are excited about the opportunities that lie ahead for <unk> with that let me turn the call over to Nicola.
Thanks, Mark and good afternoon, everyone. We're pleased to have delivered strong revenue growth and profitability in the first quarter.
And while we continue to monitor and discuss with our clients. This uncertain macroeconomic and geopolitical environment, our year to date business momentum and current visibility are enabling us to increase our full year 2022 outlook.
Total revenue growth of 43% was primarily driven by activation revenue growth of 56% active.
Activation revenue was led by our premium priced authentic brand suitability products with revenue growth of 52% and by a greater number of clients activating our other programmatic solutions.
Our social activation solutions through open fleet performed in line with expectation.
Finally, the programmatic display and video price bifurcation, which was implemented one quarter ahead of our initial plan also contributed to first quarter activation revenue growth.
Turning to measurement revenue grew 23%, primarily driven by the ramping of new enterprise customers that were signed and highlighted last year, including Yanzhou, Grupo Bimbo and Philip Morris.
CTV and social measurement volumes grew 55 and 22% respectively.
CTV volumes continued to grow due to the launch of our industry leading products.
With regards to social Dv's measurement volume growth was particularly strong in the first quarter of 2021, driven by two of the world's largest CPG advertisers activating and expanding their geographic usage of our social solution.
Our long term growth opportunities and social remains significant with new avenues for product expansion and coverage on platforms, such as Tictoc meta and others.
International remains a solid contributor to revenue growth and grew 40% in the first quarter now representing 27% of measurement revenue.
As Mark mentioned Advertiser revenue growth continues to be volume led in Q1, 'twenty two mtm's were up 27% year over year MTF grew 7% year over year, driven by improved premium product mix and by the impact of the programmatic display and video price.
Bifurcation.
Moreover, Advertiser revenue continues to benefit from our industry diversification.
In the first quarter revenue from our top 100 clients grew across all sectors with outsized growth from industries benefiting from a return to pre pandemic levels, including travel restaurants and media and entertainment.
Supply side revenue grew 61% driven by the ramping of new platform clients that were signed last year, such as Yahoo, Japan, and Amazon as well as new wins and expansion deals with publishers.
Year over year growth also includes the impact of publisher in platform revenue from open fleet and from metrics.
Overall, the acquisition of open slate is performing in line with expectations of generating between 15 and $18 million in revenue this year with the seasonality similar to our overall business.
Shifting to expenses cost of revenue increased by $6 $7 million, primarily due to an increase in cost from revenue sharing arrangements with programmatic partners.
The activation revenue grew as a percentage of total revenue.
In addition, the first quarter of 2022 captures a full quarter of higher cloud services call.
The increase in product development sales and marketing and G&A expenses is primarily due to higher people related costs as we added 160 employees year over year in the first quarter.
Again. It also includes a $1 million increase in bad debt reserves related to our advertising revenue exposure to Russia.
Adjusted EBITDA of $24 $7 million exceeded the top end of Q1 guidance Q1, adjusted EBITDA margin of 26% was higher than anticipated due to higher revenues as well as a faster reduction in duplicative overhead expenses related to the open.
Slade acquisition.
Net operating cash flow was negative $2 2 million.
Primarily driven by normal course of business timing factors related to cash collections are strong revenue growth led to an increase in trade receivables of $11 million in cash related to employee payroll liabilities that was collected in Q4, 'twenty, one and paid in Q1 'twenty two.
We continue to have zero debt outstanding.
We ended the quarter with $212 million in cash on hand, and have a $150 million unused revolving credit facility.
Strength of the balance sheet is an advantage for TV in a rising interest rate environment and provides the opportunity to accelerate long term growth through strategic investments, including M&A that will advance our product and technology roadmap open up adjacencies, such as gaming and audio and continue to expand.
Our global footprint.
Now turning to guidance, we expect second quarter revenue in the range of $101 million to $103 million, which implies year over year growth of 33% at the midpoint.
We expect second quarter adjusted EBITDA in the range of $27 million to $29 million, which implies a year over year increase of 32% and an adjusted EBITDA margin of 27% at the midpoint.
For the second quarter, we expect stock based compensation to range between nine and $10 million and weighted average diluted shares outstanding to range between 170 and 172 million shares.
For full year 2022 guidance, we expect revenue in the range of $439 million to $445 million, which implies a year over year growth of 33% at the midpoint.
We expect adjusted EBITDA in the range of $131 million to $137 million, which implies a year over year increase of 22% and an adjusted EBITDA margin of 30% at the midpoint.
We have raised our full year revenue and adjusted EBITDA guidance due to stronger than expected performance in the first quarter, which continues in the second quarter to date.
Quarterly share of full year revenue is expected to reflect normal seasonality with second and third quarter revenue, representing approximately 23% and 24% of full year revenue respectively.
We expect full year margins to remain unchanged at 30% as we have as we are accelerating investments in hiring engineering and sales talent enhancing machine learning capabilities and further building out the infrastructure to support our growth.
On a sequential basis, we expect adjusted EBITDA margins to remain stable in the second and third quarters and to return to more normalized levels in the fourth quarter, which typically contribute the largest share of full year revenue.
As previously disclosed we expect capital expenditure to range between $25 million to $35 million in 2022, including investments in office space around the world as we return to office with a significantly larger employee base, which grew from 500 employees two years ago too.
Over 800 employees today.
We're consolidating our footprint in New York into a single global headquarters and are taking advantage of the opportunity to build a new approach to a collaborative hybrid environment.
Our investments in people will enable <unk> to attract and retain the best talent anywhere in the world.
Based on the timing of spending on office renovations and relocations, we expect to incur most of our full year capital expenditures by the end of the third quarter.
To close we delivered a strong first quarter and are ahead of our initial full year 2022 plan.
We continue to monitor the impact of the macroeconomic and geopolitical environment on our clients' AD budgets and to engage them in regular dialogue as we successfully execute our plan for the rest of the year.
And with that we will open the line for questions.
Operator, Please go ahead.
Thank you we will now be conducting a question and answer session.
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One moment. Please so you pull for questions, what's Gonna Star one thank you.
Thank you. Our first question is from the line of arguing <unk> with William Blair. Please proceed with your question.
Perfect. Thank you so much and congrats on a great Q1, guys.
The business is going well.
The first thing I wanted to touch on was the pricing bifurcation I thought that was.
Really interesting announcements mark I'd be curious to hear that.
Across all solutions.
Both.
The premium side than the standard solutions and then how do you think about rolling that out to other channels.
I know you mentioned CTV right now it seems like display and video, but what about social is that another area, where you could potentially.
Introduced in other pricing levers in the model here given the ROI of our solution.
Okay.
Great. Thanks, Thanks for the question Arjun.
Look at it just to be clear, we look at the growth in our MTF for our overall fees that were delivered in the quarter.
Yeah.
Vast majority of that came from our product mix right. We had a small uptake from the increase in prices. As you know is a bifurcation of price, but we also have to note that we had a much.
Stronger positive momentum around our premium product mix on the premium side.
But specifically to the bifurcation.
It currently is across two categories display and video.
And across our entire solution set more or less on the activation side. So it gives us the ability to align pricing on those two types of components across activation in our key platform partners. So.
It's relatively broad based.
And again it gives us some flexibility when it comes to different types of categorization of content.
Buyers.
The question regarding further segmentation down the road I think this does kind of exhibited that opportunity for us. When we think the scale is there and the opportunity is there for us to create even further bifurcation or trifurcation at that point.
Of pricing into specific media types down the road. So right now its display video we could see a point in the future where we would want to go display video and then potentially CTV.
And I think that.
We are treading lightly here, because we know that we want to continue to focus on volume as our key revenue driver, but as we've always said, where we think theres opportunities become more.
War market parity or take opportunities, where we think there are pricing.
Yes, there is pricing.
Flexibility, we're going to do so.
That's very helpful. Thank you Mark and then.
One more just on the broader macro environment I know, there's a lot of uncertainties uncertainties out there with inflation.
Europe et cetera, I was wondering if you could maybe put a finer point on the model and how that might play out at.
Advertising spend does come under pressure or is it a scenario where.
Given your transactional revenue model, where Cpm's may go lower which May drive transaction volume actually higher.
How are how do you anticipate that this could play out for for double barrel.
Yes, another good one and it's something we're monitoring very closely when we look back to the pandemic.
Q2 of 2020 is the best reference point for looking at supply demand imbalances.
In that case, we saw CPM to collapse, yes, we saw volumes remained steady or increase and because of our model.
Loud us to continue to grow at a time in which most of the macro market and advertising was shrinking by 10% to 20% and we were growing at 20% kind of showing a pretty big Delta there between a 20% decrease in our 20% growth during that period, So I think when.
When we look at that.
A good representation.
A volume driven business.
First as a CPM or take rate driven business, which is what we are we also noted in the script.
Beyond the actual nature of the model itself. There's a couple of other key aspects that keep us from being as pummeled by those headwinds is a lot of other companies. So the essential nature of our products, particularly around protecting brand safety and suitability when we see things like <unk>.
<unk> is coming up continued conflicts around the world. There's just make our solution that much more important to the folks that are leveraging it as.
As well as the fact that.
Even in the cases of individual advertiser volume being depressed or revenue being depressed as been being depressed.
A significant amount of greenfield opportunities that we're chasing and we look at the deals that we closed and even in the first quarter.
Almost 70% of them were new customers. So you know.
We're not relying on.
Got it.
Basket of customers that we have already fully penetrated the market to drive spend we've got lots of new customers to close too. So we look at the combination of all those things.
Not making our business entirely immune to macro challenges, but really having.
Strong position in the face of a lot of those issues that some other AD based companies are facing.
Perfect very helpful. Thank you Mark.
Absolutely.
Our next.
She comes from the line of Youssef Squali with Trust Securities. Please proceed with your question great. Thank you very much two questions from me one.
Stepping back to where we were 90 days ago. When you guys gave guidance guidance for Q1 can you maybe just double click on that one or two and I think I covered a little bit.
This in your prepared remarks, but maybe just.
Flesh out the one or two areas or products specifically.
Specifically that contributed to the to the biggest upside to the biggest surprise to you.
And then.
On the.
On on timing for <unk>.
For the the meta relationship as it is.
It.
With regards to the news feed I was wondering if there is any update there and lastly last quarter you had talked about maybe rolling out.
On a Twitter and direct platforms, maybe you can just provide an update on that as well. Thanks, yes sure. Thanks Youssef.
The Q1, I think we mentioned that Theres a couple of key drivers.
First is.
We've been really impressed with our sales team and that's given us a ton of credit on their ability too.
To cross sell and up sell our solutions, even more quickly in better than we expected we talked a bit I think in our.
When we did our Investor day.
About the reorganization that we put together over the last several quarters of our sales team and how that would focus on bringing together.
People, who are selling measurement and people, who are saying our activation or programmatic solutions.
Into one unit.
We did that late last year rolling into early this year and we saw the benefits of it almost immediately so in Q1. If you saw a lot of our growth came from activation that over delivery.
That was the product.
Really strong cross selling.
The ability for us to sell measurement and activation to new clients and as we noted we had 100 new clients almost 100, new clients on ABS in Q1 of 2022 versus Q1 of 2000 22021, right. So big.
Big jump, there and our ability to upsell new solutions and then the other part of it is the new solutions that we're upselling where <unk>.
Yep.
So our product mix increased which gave us a stronger MTF profile than we had originally planned for so.
And I want to give credit where credit is due is our commercial team's ability to actually lean into the cross sell upsell opportunities and then push more premium priced product. So although we certainly benefited from increased volume a lot of that volume came from.
The new users of our solutions this quarter and I think thats it.
Wasn't a passive growth it was an active growth so I would look at them as being real drivers.
Second and third questions.
Timing for meta no real update there I mean, they made their public announcement a few months ago.
They are working on the alpha with be Batched partners of which we mentioned we are to have met as official batched partners in this space.
The work to be done with us.
Sometime later this year I think is the framework they've given they have not changed our position.
And then finally on Twitter slash Red at Twitter is ready to rollout.
This summer.
I think probably.
We'll be able to have that subtype, Sharon and read it is still a work in progress.
Okay, that's awesome.
Congrats.
Alright, Thanks, you said.
Our next question is coming from the line of Andrew Boone with JMP Securities. Please proceed with your question.
Good afternoon, and thanks for taking my questions.
Two please the first is Mark you mentioned this a couple of times in your responses is just a really strong new client adds that you guys experienced in the quarter can you just double click on that in terms of sales execution or is that just.
Just more residents in the product just given the kind of the overall environment help us understand what's driving the new adds and then secondly can you talk about the expectations that you have kind of following the rollout of authentic attention as we think beyond these initial tests right lay out kind of what you think this could be in terms of the edition.
The overall suite for DB. Thanks, so much.
For sure for sure.
On the new client adds.
We've been really impressed again on how the team has focused on this virtuous cycle or the synergistic relationship between our post campaign measurement solutions at our pre campaign activation solutions.
Thank you.
The power of those is exhibited in ABS ABS is unlike any other solution out there it's unique in how it leverages our measurement data to create a higher performance and optimize the buy side programmatic.
Applications and I think it's it's just clicking.
There is no other way to put it other than of advertisers are buying into that combination of understanding what happens after freshness purchased using that data to fuel.
We're targeting and filtering solutions on the programmatic side and looking at the return on the yield on those two tools together and buying them together.
Oh.
As we've talked about in the past.
We're a software implementation that in many cases in most cases is done with an RFP head to head competition.
The power of our programmatic solutions is winning those competition.
We noted in the script.
Since Q1 last year, So I think we've had at 80%.
Plus.
RFP win ratio that continues to move ahead.
That's based on the power of the product. So I would love to say there is some magic out there, it's great salespeople and really really good products that are beating the competition when they go head to head in an RFP, that's where we're seeing the pick up.
We're beating facts and out in the marketplace and the nice part is we're beating them with not just measurement, but the measurement and activation tools working together.
So that's that's where we see new client growth coming from.
On expectations around authentic attention. We've always said we are still early days there, but we like a couple of things that are going on around attention. The first is continued client uptake and continued client volume around the solutions themselves around measurement.
We get we've got some folks who are becoming big fans of this and that we know that with advertisers there's very much a herd mentality. Once one sector one category gets it they're going to continue to push it.
And others will follow so EBITDA, we like the uptake be we like the market sentiment around it and this is probably the most important if.
If you look what's going on with alternative currencies.
Horizon Media I think did a press release a couple of weeks ago that said they were going to do over 20% of their upfront buys on TV using alternative currencies those currencies can be everything from ROI metrics to things like attention. So we think that the marketplace is starting to really.
<unk>.
Move into this and accept this concept of alternative currencies. Besides beyond region frequencies. So that's the second thing and the third is the continued traction that we're getting by launching new tools and new attention tools.
Fully on screen in the CTV space and the revenue and volume that we're getting across those so if we look at current clients using this marketplace adoption in true innovation I think.
We feel good about attention.
We've said before that we think our performance suite around attachment contextual.
So at some point rival the size of our our basic programmatic solutions and I think thats still the case, you've got a runway to get there. So it's not.
A quarter or two it's multiple quarters, but at the end of the day.
We are we are very bullish on attention. We believe it will be an alternative currency in the future and the more types of tools that we launch across <unk> I think the more opportunities we will have there.
Alright, thank you.
The next question is coming from the line of Justin Patterson with Keybanc. Please proceed with your questions.
Great. Thank you very much two if I can mark could you talk about the.
Our steps to fixate on retail media, how does this compare to entering other channels.
Really what investments do you need that make that get this up and running and then secondly, perhaps for Nicola She talks about just how we should think about the political environment impacting the second half.
There's clearly some big dollars being thrown around this year it looks like a contentious election is this something that could be an opportunity for you in the second half with the product suite. Thank you.
But.
Thanks, Justin so.
We spent a little time talking about retail media and the prepared remarks, and it is a sector where.
We're really excited about the opportunity there.
You are hearing more and more about it I think there are multiple studies, saying anywhere from $25 billion to upwards of $50 billion over the next several years in these retail media networks.
Yes, I'd love to say that we had the foresight two years or three years ago to predict the power of these things but.
The reality of it is we built a very strong competency in the retail media measurement sector. So just retailers are supporting their brands.
That strength in our support of those retail companies, so folks like Macy's and folks like.
Walmart and target really start to translate into them also approaching asset support their networks with tools now.
We didn't have to do a ton of new development to support those retail media networks because of two reasons. The first is we've had a platform business and which we sold which we've supported sell side platforms for a while.
9% of our business or so that support sellers of media both publishers.
Ssp's et cetera, so the types of tools that we work there.
Faired well as well as the implementations we've done on the programmatic side, which allow us to filter out impressions or manage impressions.
For buyers across different types of networks. So the tools, we had were more or less repurposed for retail media networks and retail media buyers across those networks.
Which is I think a testament to the application of our data.
So many different types of environments that core brand safety suitability of fraud protection view ability data can be applied in lots of different ways.
For lots of different advertisers and the last thing I'll say about retail media. The other thing that we love about this is it opens up an entirely new sector of advertisers to US right. We would never go out and try to sell measurement.
A small mom and pop retailer a direct seller of sometimes because they just don't have the scale to do so but these retail media networks provide a channel for us to do so in the same way that programmatic platforms like the trade desk or <unk> hundred 60, <unk> give us a channel to distribute that same those same types of metrics too.
Small to mid size programmatic buyers. So it does it has opened up a new market for us we like it it's growing very quickly.
But the best part is doesn't need to leverage any additional investment on our side for mutual's, new types of development et cetera.
It shows the kind of flexibility of our datasets.
Yeah, and Justin I'll take the second question on the political environment.
I mean, just to be claim prior cycles.
We havent works directly with political campaigns.
But obviously to the extent that political campaigns use our activation services, we will benefit from that and more broadly thinking about your question around the opportunity for a product suite that is where the opportunity is right.
Any election cycle, if there is a creation of some sort of.
And Cindy Aerie content type environment.
We'll lead advertisers to use our services more advertisers in the brand. So it is obviously an opportunity for our products to shine.
We have not since we haven't had a history of.
Benefiting from those campaigns it is not factored into our forecast for the second half of the year.
Perfect. Thank you.
Our next question comes from the line of Raimo <unk> with Barclays. Please proceed with your questions.
Hi, This is Greg on for Raimo, Congrats on the quarter I wanted to ask one on the meta announcement I know, there's obviously still a lot to sort out here, but has this serve to further validate the need for independent brand safety. So far I mean have you seen any increased urgency or awareness from customers around adopting or going deeper with those offerings since the announcement.
It's great question I think the interesting part is the key.
Customers have always wanted this so if anything it's validated there their demands for a while.
Where it has kind of pushed others is the rest of the ecosystem.
Do either was somewhat reluctant of the closed marketing because that closed our walled garden ecosystem, who are somewhat reluctant to work with us or has said hey.
If Facebook is youre going to need to do it or that is not going to I'm not going to.
I mentioned earlier, so folks like Twitter if lead into April we'll be launching a brexit ability and safety solutions with them and feed over the next.
In the next few months.
We've mentioned Arctic top relationship and how that continues to grow.
So I think.
It's really kind of driven is everybody else in the space had been somewhat sitting on the fence, saying do I really need third party validation.
And theyre embracing of it kind of said the whole market is going to do it.
From an advertiser perspective, there they are all in.
Great. Thank you very much.
Sure.
Our next question is from the line of Michael Graham with Canaccord. Please proceed with your questions.
Yes, Thanks, a lot and awesome awesome quarter, guys, just two if I could one on.
And you talked a lot about the pricing bifurcation I was just wondering if you could give us an update on international pricing.
I know that's sort of structurally lower than.
And then the U S pricing, but just wanted to kind of get an update on where we were in terms of the evolution there and then.
I just wanted to also asked about how youre thinking about the model.
The balance between growth and profitability you have this.
A nice rule of 60 profile. It was more like rule of 70, this quarter, which is great.
Just wondering how you're thinking about if.
If revenue growth stage stays high.
No.
Do you have enough projects and initiatives to invest in.
And on the on the Congress of that if you do start to decelerate, how you're feeling about being able to modulate the business on the others on the other side of that too. Thanks.
Yes.
Michael I'll start with the first one.
International pricing for international one MTF on the on the measurement side in particular.
The patterns remained the same which is there is a discount that is.
<unk>, just because cpm's are lower outside of the U S versus the U S.
Is that driving factor has not changed and we haven't seen a change if anything.
As we.
As we sign larger enterprise deal that also include activation with measurement, we're able to kind of come up with it.
Broader solution across all of our services.
The assumption that there is a bit of a discount for the international expansion is still the same.
In terms of growth versus profitability I'll start and I'm sure Mark will.
I would say.
Well, we announced today is that as you can see we are reinvesting into the business as we see the opportunity.
Especially with the strong first quarter.
<unk> that we've shown.
So when you mentioned do we have enough projects yes.
I'd say its still early days from our perspective, the revenue growth is still there for us to continue to invest against it yes, now I mean, just to reiterate that.
We're doing great on revenue top line, we're doing great on growth and I think this is the perfect time for us to lean into investments because we've got room to do so right and what we want is we know there is macroeconomic factors out there that are that are hitting the industry a little bit.
Not.
<unk> been largely immune to those but.
What better time for us to start.
Investing is when the market comes roaring back to becoming Roaring back that much harder because we've got new solutions, because we've got great people and great places because we've got sales force expansion in global markets like I think this is the Thailand smart companies invest and that's what we're doing.
Alright, Thanks, a lot guys and congrats you got it.
Our next question is from the line of Dan Salmon with BMO capital markets. Please proceed with your questions.
Hey, great good evening everyone.
I've got a couple of questions, maybe a little bit more technical and admittedly. It does not seem like these are showing up in your numbers, but.
First issue it seems like there's a little bit more noise in the ecosystem lately about.
Media quality companies create their products such as for example, a contextual targeting product.
How you may be using publisher data for that.
Whether you have the rights to use that intellectual property.
Mark I'd love to hear your thoughts on that issue is there is a curfew circular elements to it in any sort of legal elements to it that you think are important to highlight for your company and how you build your products.
And then the second one.
Again, a little under the Hood, but it's increasingly clear that most platforms are removing IP address from their ecosystems largely in the push towards more privacy and we know you don't tend to measure the COO, but rather than what the how but could you remind us how you use IP address.
On your methodologies for your products and how removal of it from the ecosystem may or may not impact here.
For sure for sure so.
Good deep questions Dan shows your understanding of this space, which is which is.
Which is great.
So on the <unk>.
On the publisher side, so a couple of things to note.
I think we have a good relationship with the sell side of that there is a published business because of the fact that we actually provide them with tools that help to drive and optimize performance of their ads. So we've all we've had a relationship with publishers for years.
And we've seen really zero conflict with.
With them or or based on the relationship that we have.
With regard to how we build our products.
We build them based on all publicly available data that we get both from the open Internet and from walled garden right to allow us and actually work with us to pull data together so.
Our solutions are a combination of things that are.
Available via the <unk>.
The relationships that we have yet.
Correct, Lee with social networks, CTV networks et cetera, as well as whats available publicly on the Internet. So we don't see a conflict there as a matter of fact, we believe that everything that we do around context, whether it's protecting advertisers' interest are helping direct them to.
Premium.
Sectors or premium protection sites actually help legitimate publishers period.
So I think there is there is a synergistic positive relationship with publishers that we lean into.
On the on the IP address side.
We've talked about we don't look at we look at the the the where the how the works.
We're really only leverage IP.
For our fraud and invalid traffic solutions right and.
And when we look at IP is being blocked it is a lot that can be done on iOS devices and issues are out of iOS devices, which has had a relatively low penetration.
Those are kind of around the edges that the big part of this though too to really dive into is.
We've built.
Solutions that IP address is just one factor of many many criteria that we look at.
In deciding whether something is invalid traffic and deciding what the geography of where.
User comes from and whether or not it's a bot.
IP is one part of a very very rich and complex recipe that we put together to build our fraud solutions.
And one which we can certainly if we had to live without.
Okay. That's great. Thank you Mark.
Got it.
Thank you. Our next question is from the line of Mark Kelly with Stifel. Please proceed with your question.
Hey, great. Thanks, very much for taking my questions. Two quick ones first one is on the meta feed announcement.
I guess given that it's a private competitor thats. The initial partner do you anticipate any incremental changes.
Changes that you need to make to your solution.
As a result of that.
That's the first question.
The second one is.
Tick Tock I know you guys have a nice relationship there and they've had a lot of recent announcements like pulse.
Sexual product that Theyre rolling out.
Just curious if the broadening of their platform even if they do have some homegrown solutions does that mean that your opportunities also expand along with the broadening of their platform as well. Thank you.
Sure.
So first off on the <unk> question.
The reality of it is.
<unk>.
We know that we have.
We've built an incredible relationship with them over the years with an extensive suite of solutions.
And we've been plugged into that.
Into that company for.
Several years looking at data across numerous parts.
Meta.
And because of that.
And because of the extension nature of our platform and our solution set.
Sure.
There always will be incremental work to do but I don't think it will be incremental work based on the fact that competitor has something that we don't if anything.
The partner that they chose to start off with is probably was a much more limited in their purview of both social networks and the broader internet as a whole right. So I think.
Not to say that anyone who will work with meta on the feed is going to have to do some work, but we're in a good position to leverage what we've already built out there and I don't see any.
Distinct advantage of the partners if they chose to work with.
Anything special that we didn't have so I think from there I think we're in good shape.
With regard to Tictoc anyway, we.
We continue to be really impressed.
With how quickly they are not only expanding their business and kind of meeting the needs of what advertisers are looking for but how open they have been to third parties.
Third parties being part of that great. They have certainly learned the lessons of.
How do you appeal to advertisers how to address concerns that they have and how do we ensure that they can build a long term productive relationship with advertisers and a big part of that is isn't insuring advertisers can bring in.
They're trusted third party solutions into that ecosystem.
So we feel like as they continue to expand as they continue to grow their business globally. It just provides more and more opportunities for us to take part of that as well.
Yeah.
Perfect. Thank you very much mark.
Got it.
The next question is from the line of Mark Murphy with Jpmorgan. Please proceed with your questions.
Yes. Thank you very much I'll add my congrats on a very solid top line in Q1.
So mark I had noticed that several of your enterprise wins are in a pandemic impacted industries you had best buy in.
The original cruise lines and subway and KFC should we interpret that as kind of a return to health for.
For those industries or is it more of a sign I am not sure. How many were competitive displacements, but is it more of a sign that they're seeing your independence as a differentiator and it may be causing some of the switchover over two two double verify.
But it's a great question Mark.
Hi.
The way you would categorize them as pandemic kind of cutbacks I never really thought about that way.
But it's a good observation I think.
What I think we've all we keep leaning in on the fact is that we're pretty diversified when you look at our client base right.
Have a high reliance on automotive, we don't have a high reliance on.
A lot of the supply chain constricted.
Companies out there so.
Theres certainly if these guys have made a comeback.
A chunk of them work.
Competitive takeaways I think that was a.
All right.
That was a key factor in.
Then moving to Austin.
Our independence.
It's always part of that.
To say that it's the power of the solutions that always wins and independence is like the icing on the cake. If we've got a good recipe they liked the solutions.
They are driving better returns based on filtering out more impressions.
They are creating a more comfortable situation for our brand suitability safety perspective, when you layer that when you put on top of that the idea that we are independent we're on conflicted theres a significant amount trust because of the accreditations. We have I think that is the thing that in some cases kicks it over the wall and I think we feel good about that we can continue to lean into.
That is a part of our differentiated set of.
Attributes that really is it comes down to the power of the tool sets.
Okay got it and I appreciate that Marc and then Nicole a quick one for you.
Can you help us I guess regarding the bridge between four.
43% revenue growth I think it's 14%.
EBITDA growth and so we look at that and as we've said, it's a good time to invest.
The margins are down I think something like 500 to 600 basis points year over year can you split it between what is a structural kind of margin pressure such as the programmatic revenue share or you mentioned the.
The higher cloud services costs versus maybe how much is temporary.
Timing of hires or the some of the M&A dilution at that type of effect.
Yes, Mark I would I would I'll go straight to the answer which is this is temporary.
You can see that from the fact that we are guiding back to a 30% margin for the full year and in the temporary items are as you mentioned M&A.
Acquisition of open slate is.
Smaller operation that was not.
Operating at margin levels similar to ours.
We're actually ahead of where we thought we would be in terms of identifying and reducing the duplicative cost in.
And G&A for that for that transaction, which is why actually.
Our Q1.
Margins were ahead of where we thought we would be in terms of guidance for the first quarter. So the integration is going very well and it is temporary and by the end of the year, we will be back to more normalized margins.
That's really what's driving the way you mentioned on the margins.
Thank you.
Thank you at this time, if we just didn't have a question and answer session I will now turn the call over to Mark Sikorsky for closing remarks.
Thank you all for joining we appreciate your time and attention today I look forward to updating you on our successes in the quarters ahead.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Okay.