Q2 2022 DoubleVerify Holdings Inc Earnings Call
Hello, and welcome to the double verified second quarter 2022 financial results conference call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded its now my pleasure to turn the call over to Tangela Admin Investor Relations. Please go ahead.
Good afternoon, and welcome to double verify second quarter 2022 earnings conference call with US today are Mark Sikorsky CEO Niccolo lease CFO.
Today's press release and this call may contain forward looking statements that are subject to inherent risks sunset season changes reflect our current expectations and information currently available to us and our actual results could differ materially for more information. Please refer to the risk factors in our recent SEC filings, including our Form 10-Q, and our annual <unk>.
Of course, a 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 IR.
A couple of verified dot com also during the call today, we will be referring to the slide deck Pesnell website with that alternative benchmark.
Thanks, Joe and thanks, everyone for joining us. This evening, we're excited to have delivered outstanding second quarter and first half results building on solid organic growth. We achieved in the first quarter, we delivered 43% revenue growth at 31% adjusted EBITDA margins in the second quarter significantly.
<unk> our guidance all three of our revenue lines delivered double digit growth as we continue to up sell premium products to existing clients drive activations by new clients expand across geographies and launch on new media platforms.
Additionally, our continued focus on innovation Howard further moves into the gaming and retail media sectors, both fast growing new areas of marketers' spend.
Our first half results exceeded our expectations and enabled us to raise our full year revenue and adjusted EBITDA guidance for the second time. This year, we remain confident in our ability to deepen our engagement with Blue Chip brand partners, who provide a solid foundation from which we can further expand into new sectors and geographies.
We continue to closely monitor ongoing macroeconomic and geopolitical uncertainty and engaged regularly with our advertisers to stay apprised of evolving ad spend patterns.
I've highlighted the resilience of our business on prior calls, but given the current macroeconomic climate, let me reiterate the business attributes that distinguish Stevie from most AD supported tech companies.
We are confident in our continued ability to win new customers and expand our relationship with current customers as the essential nature of our products protect brand equity and optimized media efficiency by reducing waste, thereby driving better outcomes and improving ROI on every dollar spent.
Next our fixed transaction fee business model Insulates, our revenues from CPM volatility, while our verify everywhere product strategy diversifies, our revenue across platforms and verticals, making dv largely agnostic to shifts in ad spend.
Our well diversified customer base comprises the world's largest and most trusted brands with no single verticals driving more than 20% of revenue last year.
And finally, we remain in the early stages of global market penetration with a vast and untapped Tam to sustain our long term growth.
I'd like to take a few minutes to discuss our second quarter growth drivers and catalysts for future momentum within the context of double verifies three key differentiators are rapidly growing scale.
Our focus on market defining innovation and the deep level of trust, we have built with our customers as an unbiased and independent partner.
Beginning with scale, our drive to verify everywhere is providing substantial market momentum as our ubiquitous platform and partner integrations provide opportunities for future expansion and upsell, particularly for our activation business.
On a year over year basis second quarter revenue from our two premium activation products authentic brand suitability and custom contextual grew 52% and over 200%, respectively and combined represented approximately 52% of our programmatic activation revenue.
Both products are unique to double their fi, providing dynamic identify our independent solutions for marketers that ensure brand alignment and drive better advertising outcomes.
As we've highlighted in prior quarters, our top 100 customers continue to activate authentic brand suitability across new geographies.
Santander Dell Amazon, John Lewis, Vodafone and model. These recently launched ABS and incremental international markets, including Brazil, Japan, The UK, Germany and France.
Custom contextual was activated in the second quarter by some of our large performance marketing advertisers such as Comcast as well as by mid market digitally native brands such as canvas.
Success, and activation and measurement go hand in hand, and 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.
By using a consistent measurement currency for pre and post campaign solutions, we drive better results for advertisers across everywhere. They invest their AD dollars. 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 <unk>.
New solutions that feed the cycle.
In the second quarter, we closed multiple cross sell upsell and new logo opportunities, including British Airways Taco Bell Universal Parks, Rosh friends as Deb, Carinthia farms, Infinity, and smile direct notably 64% of our top 500 customers <unk>.
<unk> DD for both measurement and activation in the second quarter up from 58% a year ago.
Our scale across key social media environment continues to grow in a sector that remains highly attractive to marketers.
According to Magna global advertisers are expected to spend approximately 57% of their digital AD budgets ex search on social media in 2022.
The demand for closer safer consumer connections is driving a broad based push for brand safety and suitability verification within social media is dynamic newsfeed environments, creating a meaningful growth opportunity for double their fi.
To support growth and investments in social media platforms. We have developed newsfeed content classification technology that is highly scalable across different user generated social feed environments.
<unk> recently launched unified social pipeline technology substantially decreases per platform engineering efforts and shortens the development timeline to integrate brand safety and suitability solution in news feed environments.
In the second quarter, our unified social pipeline technology helped us secure an exclusive partnership with <unk> one of the most visited websites in the United States comprising over 100000 active communities in a highly dynamic user led environment. We are excited to be ready its first full suite there.
Acacia partner, ensuring that AD campaigns meet quality criteria, while maximizing impact in performance for advertisers.
Unified social pipeline will also support development across the Linkedin audience network. We're excited to announce today that we just signed a platform wide agreement to provide brand safety and fraud prevention for all linked and native ads across desktop mobile web and in App.
This integration uses dd's technology and data to ensure that all campaigns activates the Linkedin audience network, our brand safe and fraud free.
In addition to these partnerships we continue to build momentum on Tech talk.
The number of global advertisers using our brand safety solution on Tictoc has grown by approximately 42% year over year and we continue to develop end to end in feed solutions in conjunction with the tick tock team.
Finally, we remain on schedule for a summer launch of brand safety and suitability measurement for Twitter newsfeed known as timeline.
As we seek to scale our solutions into new sectors. We're excited to announce today, a significant expansion into the gaming sector and.
In the second quarter double there if I began working with Twitch ads on a solution to identify contextually brand safe and suitable livestream content for clients on Twitch and interactive live streaming service and global gaming community. The solution is currently in a closed beta.
And finally, we're continuing to scale on retail media networks, which are fast becoming the advertising venue of choice for outcome driven brands today DD partners with some of the largest retail media networks in the world, including Amazon Walmart target Macy's Bestbuy and Kroger.
In the second quarter, we have sold pre bid visibility products to the Walmart Media group and launched our solutions with <unk>, a leading supermarket chain with over 600 locations in the U K.
In the first half of 2022, we grew revenue from retail media networks by 160% year over year with the growth spread across all three revenue lines activation measurement and supply side.
Based on their increasing appeal to marketers, we expect the success of retail media networks to drive further volume increases across our solutions.
Turning to DBS market, leading innovation, our solutions continue to evolve delivering true ROI for advertisers throughout the media transaction from pre campaign activation to post campaign measurement.
A great example is our new suite of pre campaigns, social media activation tools powered by open slates brand suitability and contextual analysis engine.
In the second quarter 36, more brands adopted this new capability, providing early validation of the growth opportunity. We identified when we acquired the open slate technology late last year.
Cross selling pre campaign, social activation solutions to our existing post campaign, social measurement clients creates an optimization group within walled gardens that is similar to the optimization loop. We have created for the open internet with authentic brand suitability and postpaid measurement the combination drives better outcomes.
For advertisers and more opportunities for growth for Dv.
Moving on to innovation and measurement, we're announcing today that we have launched a closed beta for DBS campaign automated solution and expect this product to be generally available by the end of this year.
By fully automating advertising trafficking workflow Dd's campaign automaker Streamlines campaign verification management cross leading AD servers. This.
This capability lowers tag implementation costs for our clients and provides significant benefits relative to first generation tagging tools.
Designed to improve operational efficiency and minimize human error Dd's campaign, automate or will allow already stretched and operations teams to dedicate more of their time and resources to campaign activation strategy and optimization.
Continuing with our measurement suite, our new freemium preview of authentic attention named the divi authentic attention snapshot la.
Launch later this month and allow DB clients to dynamically review high level attention insights across their multi platform campaigns.
Didi authentic attention snapshot empowers clients to.
Hone in on top and bottom performing campaigns.
Benchmark performance against their specific industries by media type AD size duration and device.
And identify strategic campaign optimization opportunities all in real time.
Attention is rapidly emerging as a key measurement metric.
According to E marketer, 98% of marketers believed that deeper attention metrics would help improve campaign performance and advertising outcomes.
An example, about the next attention power to drive outcomes can be found in a recent trial with Vodafone Germany.
Vodafone used <unk> attention to measure and optimize the performance of their digital AD campaigns with the goal of increasing purchase intent.
By implementing authentic attention Vodafone identified in real time, which adds we're doing the heavy lifting to achieve their core kpis.
Is that excluded underperforming sites and optimize creative and device type in real time as a result, Vodafone found that high engagement ads drove over two five times higher qualified traffic and sales conversion rates compared to low engagement ads.
Another industry, leading measurement innovation launched last quarter was our exclusive partnership with scope three to provide advertisers with a detailed picture of how their digital campaigns contribute to cotwo emissions.
Concerns regarding the environmental impact of digital advertising are increasingly becoming top of mind for leading global brands.
Our new campaign based solution powered by scope three aims to assess the environmental impact of the extensive computing power involved in delivering programmatic ads.
Through this exclusive partnership TV will be the only company, providing carbon emissions data alongside foundational AD performance criteria.
To conclude on innovation. In addition to the exciting products that have just detailed we have a robust pipeline of unique solutions and strategic partnerships that are focused on creating customer value.
Including an optimized dv pinnacle user experience. The addition of cost data through Didi investment metrics and customer contextual support for CTV.
This brings me to our final differentiator trust, which is core to the value we deliver to our customers and underpins our important role in the digital advertising ecosystem at large.
We continue to focus solely on providing measurement and verification solutions to our customers.
<unk> not selling AD cloud services or other solutions, which may create bias in our engagements.
We believe our independents and accreditations are key drivers of our nearly 80% win rate of recent opportunities.
In the second quarter, 60% of our wins were Greenfield and 40% were competitive takeaways as advertisers opted to work with the verification company with the strongest and most of the credit products suite.
And zero conflicts of interest.
Advertisers Trust in DD is also evidenced by our gross retention rate.
Over 95% and the strong growth in our average revenue per customer.
We grew the total number of customers generating more than $200000 of revenue by 38% year over year on a trailing 12 month basis.
And a digital advertising environment that increasingly seek stability and transparency.
<unk> unmatched roster of accreditation and independent perspective has set us apart in the verification space and supported long term sticky client relationships that continue to grow.
To conclude we've had a strong first half of the year and remain confident that our growing global scale market defining innovation and a legacy of trust will continue to solidify our client relationships and fuel steady growth that will outperform our competitors and the broader digital AD industry in 2022 and beyond.
With that let me turn the call over to Nicole.
Thank you Mark and good afternoon, everyone.
We're pleased to have delivered strong revenue growth and profitability in the second quarter and first half of the year, while we have good visibility for the third quarter and are raising our full year revenue outlook by the magnitude of our outperformance in the second quarter. We continue to closely monitor the current macroeconomic and geopolitical.
<unk> and engage in regular dialogue with our advertisers.
Total revenue growth of 43% was driven by 60% growth in activation revenue, 23% growth in measurement revenue and 49% growth in supply side revenue.
Advertiser revenue, which includes activation and measurement grew 43% year over year and continues to be volume lift in Q2, 2022, Mtm's were up 24% year over year Mtf's grew 10% year over year, primarily driven by improved premium product mix.
Followed by the impact of the programmatic display and video price bifurcation, which we initiated on our standard programmatic products in the first quarter of this year.
Activation revenue was led by our premium priced authentic brand suitability product, which delivered 52% revenue growth due to continued upsells to an international expansion with existing ABS users.
In addition, we continued to successfully sell ABS to new clients at the outset of our relationship with DB and drove a 20% year over year increase in the number of advertisers using the solution.
Growth in non ABS product revenue was the second largest contributor to activation revenue growth followed by the impact of the price bifurcation of programmatic display and video impressions that was implemented during the first quarter.
Similar to last quarter, our social activation solutions through open slate performed in line with expectations.
Turning to measurement revenue grew 23%, primarily driven by the ramping of new enterprise customers that were signed and highlighted last year and in the first quarter of 2022, including Gi, Joe Norwegian cruise lines and Philip Morris.
CTV and social measurement volumes grew 56% and 26% respectively.
CTV volumes continue to grow as we scale our industry, leading products such as our pioneering fully on screen certification offering an MRC accredited attention measurement solution launched in 2020, the tests and evaluate leading CTV devices and apps to ensure adds are only disk.
Played a 100% on screen and when the TV screen is turned on.
With regards to social measurement DVS volume growth was particularly strong in the first half of 2021, driven by two of the world's largest CPG advertisers activating and expanding their geographic usage on our social solution.
As Mark mentioned, our long term growth opportunities and social remains significant with new avenues for product expansion and coverage on platforms, such as tick Tock Twitter read it and Linkedin.
International measurement revenue grew 18% year over year with EMEA growth of 14% and APAC growth of 25% in.
In the second quarter International measurement revenue growth was particularly impacted by the relative strength of the U S. Dollar.
International represented only 26% of our full year 2021 measurement revenue and we continue to see it as an opportunity for future growth.
Supply side revenue grew 49% driven by the ramping of new platform clients that were signed last year, such as Yahoo, Japan, Amazon. The recently signed Twitch deal as well as new wins and expansion deals with publishers.
Year over year growth also includes the impact of publisher on platform revenue from open fleet and from metrics.
Overall, the acquisition of open slate continues to perform in line with expectations of generating between 15% to $18 million in revenue. This year, we have a seasonality similar to our overall business.
As Marc described we're building our cross sell momentum of our social activation solutions, which are expected to contribute more meaningfully in 2023.
Shifting to expenses cost of revenue increased by $6 $5 million, primarily driven by our revenue sharing arrangement with programmatic partners as activation revenue grew as a percentage of total revenue.
non-GAAP operating expenses for product development sales marketing and customer support and G&A, which exclude stock based compensation expenses and other items for comparability grew 32% versus our topline growth of 43%, reflecting the efficiency of our operating model as.
We scale.
This was further supported by faster than expected integration of acquisitions and our overall cost discipline in the second quarter.
As a result, adjusted EBITDA was $34 million and adjusted EBITDA margin of 31% exceeded the top end of our Q2 guidance.
We continue to manage our operating expenses in line with our expected revenue growth.
Most of our operating expense growth is due to increased head count costs in.
In the second quarter, we added 122 employees on a year over year basis.
Our expense management as agile and we plan to react swiftly should we see any significant changes in our operating environment.
Finally, we delivered approximately $10 million of net income a reflection of our attractive economics of our high growth and high margin software solution.
In the second quarter, we generated approximately $29 million of net cash from operating activities and ended the quarter with approximately $224 million of cash on hand with zero long term debt.
The strength of the balance sheet remains an advantage for dv as rising interest rates negatively impact more leveraged companies and decreasing valuations provide opportunities to accelerate long term growth through strategic investments, including M&A.
We'll advance our product and technology roadmap open up adjacencies, such as gaming and audio and expand our global footprint.
We remain disciplined with regards to our capital allocation and believe the investment climate is likely to become more favorable over time.
Now turning to guidance, we expect third quarter revenue in the range of $108 million to $110 million, which implies year over year growth of 31% at the midpoint.
We expect third quarter adjusted EBITDA in the range of $32 million to $34 million, which implies a year over year increase of 25% and an adjusted EBITDA margin of 30% at the midpoint.
For the third quarter, we expect stock based compensation to range between 10 and $11 million.
And weighted average diluted shares outstanding to range between 170, and 172 million shares.
For full year guidance, we expect revenue in the range of $448 million to $450 million, which implies a year over year growth of 35% at the midpoint.
We expect adjusted EBITDA in the range of $136 million to $140 million, which implies a year over year increase of 26% and an adjusted EBITDA margin of 31% at the midpoint.
Our guidance for the second half of the year reflects the potential impact of a pullback in digital AD spend in general Prudence regarding macroeconomic uncertainty.
As I mentioned earlier, we have raised our full year revenue guidance by the magnitude of our second quarter performance.
Given our expectations of strong revenue growth. This year, we intend to capitalize on a more favourable hiring environment in tech.
Engineering and sales talent and continue our consistent investments in enhancing our machine learning capabilities and further building out the infrastructure to support our growth.
As previously disclosed we expect capital expenditures 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.
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 second quarter and first half, which reflects the resilience of our business.
In this uncertain macroeconomic and geopolitical environment.
We continue to engage where our clients regularly to ascertain their commercial outlook and spend as we successfully execute our plan for continued growth for the rest of the year.
And with that we will open the line for questions.
<unk>. Please go ahead.
Thank you well now be conducting a question and answer session if you'd like to be placed in the question queue. 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 you'd like to remove your question from the queue for participants using speaker equipment may be necessary to pick up our hands.
<unk> said before pressing star one one moment, please while we poll for questions.
Our first question today is coming from Arjun Bhatia from William Blair. Your line is now live.
Sure.
Perfect. Thank you very much and congrats on a great quarter guys.
Mark maybe I just want to start with you. It seems like you've obviously been talking to your customers I'm curious what are they saying about their outlook on that.
Thanks Ben.
In the back half of the year have you seen any change.
In that town and maybe for Nicole.
And along those lines, how do you think about the visibility that you have just into your second half.
Guidance Robertson August here, so just a few months ago.
Would love to hear any color you can share there.
Yeah. Thanks, Thanks for the question of origin and it wasn't like we weren't expecting.
Around the macroeconomic environment can say how much talk there is look we came off an exceptionally strong first half.
We still think there's some strong momentum for our business going into the second half, which is why Q3 numbers that we guide to still remains nice and strong we've got relatively good visibility into the quarter into Q3 that we feel we feel good about that.
But look we're not as we've said we're super resilient, but we are not.
Totally immune to potential slowdowns in the space and that's why we've factored in.
Some increased probability of a moderate pullback.
Given the macroeconomic environment.
We are in regular conversations with our advertisers to get a sense of what their spend will be.
And the nice part for US just to be very direct is that we've got so much diversification across sectors across different marketplaces and across platforms that.
Even if there's a pullback in one type of spend whether it's social or premium CTV, our implementation across ROI driven platforms like programmatic like mobile and others I think puts us in a good position so.
We're going to we're going to weather the storm like other companies in this space, but we think we're in a really good position to do so based on.
Credit quality rating us that yes, the only thing I would say, Argentina, obviously things can move very quickly.
We're guiding based on what we're seeing today and I would I would qualify this as saying you can see it's an assumption of a moderate slowdown, but things can move very quickly and we could react to something that's that's cheaper than what we have in a number it's still at 35% growth rate for the year, which is which is a strong performance.
Got it. Thank you that's super helpful and then.
Just.
Another one if I could add on just a product pipeline market seems like Theres, obviously, a lot of innovation.
Going on you have a lot of you.
But our.
Early in their launch or coming in the back half of the year and into 'twenty three.
Keep your.
Customer facing teams and your customers as well up to date.
All the new stuff that you have a good.
Good problem to have but is there a sense of that.
Are there specific capabilities that you're prioritizing.
As youre talking to your customers.
That can drive growth and expansion with them.
Back half of the 23 here.
Yes, it's an excellent question.
You bring up a really relevant point, which is.
Our basket of goods continues to grow and that adds a layer of complexity to our relationships with our advertisers, but creates a great opportunity as well.
That basket of goods has new solutions like attention that actually look at building new metrics, but also includes <unk>.
<unk> coverage of new sectors like we'd like as we've done with gaming and as we continue.
When we move into new sectors, it's a relatively easier sell because we're taking core solutions and just expanding our coverage into new areas that makes a lot of sense for advertisers as.
As we launch new products.
That obviously is a new challenge because we're adding another layer another thing that an advertiser with one before and in that case, what we're finding is.
Our ability to continue to bundle and create simple bundles like we have with for example, ABS and measurement.
Which make a lot of sense working together is really to our advantage. So.
I think for us.
The making.
Full bundle our simple packages around that.
The ultimate outcome, which is driving a better outcome for an advertiser is how we approach it approach the market.
We found it's been incredibly successful for example, with the growth of Avs and how we package.
We think there is further opportunities to do that as we look at how our products work together.
Got it thank you very much and congrats guys.
Got it.
Thank you. Your next question is coming from Youssef Squali from <unk> Securities. Your line is now live.
I want to thank you very much and you guys seem to definitely be bucking the trend here, which is great to see so maybe a two part question for me first just on the visibility that you guys are seeing Niccolo you I think you mentioned this but how much visibility do you typically have into the.
The spend is it can you quantify that is it like 60 days 90 days 120 days any any any kind of quantification would be helpful.
The linearity that you've seen throughout the quarter and second it.
It seems like the outperformance was mostly from your core products ABS with custom contextual could you maybe discuss demand trends for your newer products like the <unk> solutions in particular, and your traction Youre seeing upselling and cross selling those thanks.
Yes, I'll take the first part of your question.
We've said in the past we have we have greater visibility on the measurement side of the business and Thats about three months out based on blueprint information that.
That our customers are providing to us so that we can actually tag and follow the campaign. So the visibility that we have into Q3 is really based on what we know the campaign flights.
Our for our customers on the measurement side activation is obviously a lot more transactional.
And so that's what we're basing our visibility on the.
<unk>.
The second part of your question was within the quarters. I mean, we basically are now six months into the year and we have two quarters at 43% growth each quarter. The intra month variability actually didn't impact the total topline revenue growth. So it's actually been fairly consistent.
Yeah, and maybe I'll pick up on the new product adoption and look I think.
We've got some really nice momentum.
With our new solutions, we mentioned.
<unk>.
That's early around Huston contextual growth year over year of about 200% off relatively small base, but still the kind of growth that we want to see there I think attention.
Ts to gain traction.
We measured 250 campaigns in Q2 alone.
We continue to measure about 50 billion impressions each month on attention.
We've done that and we're now benchmarking across 12 different verticals so attention getting there as we've always noted it is going to take time.
When we look at solutions like S&P textual that's taking our core.
Our core competency in a market that comfortable with that with contextual targeting.
Easier of a launch it's also an activation.
Pete prepaid product so it's a little more seamless something like attention. We're building an entirely new category, which is super exciting.
And if it can be really big for us. It just takes a lot longer time, but we're super confident on attention.
The leaders in that space, we like.
Kind of interest that we're getting from advertisers on it and I think although the dollars are small and the days early it shows a huge amount of potential for us.
Great. Thank you.
Got it.
The next question is coming from Laura Martin from Needham. Your line is now live.
Hi can you hear me, Okay, you guys.
Yeah can you hear me all fantastic I have Ken I'll ask you.
The first one is I wanted to talk about CTV.
Or would you say that CTV grew 52%, 56% Fabulous.
And how big it is added in the quarter up to 20% of revenue or is it smaller than that.
Let's start with that question.
Okay.
Yes, Laura this isn't it's single digit share of revenue, it's still very small the entire.
Digital advertising share on CTV is also in the sort of 10%, 12%, 13% and we are we are lower than that at this point.
Okay. So that's how that sets up to be part of my question better which is we held the measurement conferences you guys know and I've bought TV came out and said, they're doing $100 million in verification for CTV instrument. So my question is are you guys getting outflanked in connected TV.
<unk> by a private guy Who's got exclusive LG CTV data plus you've got vizio data. So can you talk about your competitive position going forward in CTV place.
Yes.
First off it probably question how much of that $100 million is true measurement versus actual.
We're doing $100 million in revenue.
Okay.
But beyond that I think.
The core value prop here to <unk> and we've always said this is a single verification currency across multiple points.
Alright.
And so we work with advertisers they want to verify across social across.
Display across mobile across CTV.
So we look at this is it's a small part of our business, but a big asset and the fact that it's the ability for us to have one measurement metric one verification metric across all platforms, which I don't think.
Single point solutions have whether if youre in the CTV measurement and verification business.
So you got right and I think advertisers are.
Looking for something that's more broad based.
It can allow them to verify everywhere and I think we're in a good spot to do that so.
We also have to look at the approach that different companies are taking in the verification space.
Whether it's using single sources like in capture or other types.
We look to drive the credited.
Consistent metrics across every platform.
CTV is one of several.
Yes.
But also one of several of our important advertisers so severe.
It's a very long answer to you.
Not getting outflank them.
If anything we're only in the broader space across multiple different types of platforms and delivering his team.
Excellent answer Mark My other one is on cookies, just tomorrow, so Mike here from an expert so.
Got pushed off cookie deprecation for another year until the second half of 2024 is that good for you is it bad for you and also stepping back from just double thereby can you talk about how you feel is that good for the ecosystem or does that elongate the uncertainty of what happens after cookies I'm just interested in your lap.
Thoughts on cookies for the entire open internet. Thank you.
Yeah. So I think we've gotten this question before and we've always said cookie deprecation is neutral to positive to us.
We our system works.
<unk>.
Identifiers.
Cookie identifiers to build our metrics.
So they are going away it doesn't have an operational impact on us, but could have a positive.
Impact on solutions like custom contextual targeting and other types of metrics like attention, which don't rely on individual trackers.
Pushing that off of it does it does it hurt our business.
Really because it ultimately will happen.
And at the end of the day, whether through government intervention or commercial changes identifiers and trackers across either.
From a macro perspective, it's a great question because so many even at our Investor day, if you've ever hearing like so many advertisers.
I've already been preparing for this and building systems around.
Clean rooms, and first party data and the ability to use other metrics they feel like.
Only delaying the inevitable inevitable of what they are already planning to do right, which is start to move away from individual cookie based targeting.
Move away from audience based targeting into areas, where that are more comfortable from a privacy perspective.
Do I think people are going to take advantage of cookie being able to use cookies up until the last day. They can use them absolutely I mean, theres no doubt because if something works and you can still use it and you don't have to do additional work to make something else happen you're going to do it so but I do think so much groundwork has been.
Wade.
Actually.
Work without cookies.
Some of that is already in motion and people are going to start.
Thanks, very much I appreciate it.
Got it.
Thank you next question is coming from Michael Graham from Canaccord. Your line is now behind us.
Thank you and congrats on the quarter everyone. I just wanted to ask two the first is on is on ABS I know you mentioned that.
A lot of the expansion and MTF was due to.
That product applying to some of your international customers and I just wonder if you could update us on sort of where we are in the arc of.
<unk> penetration in your overall business.
Kind of second but related Youre activation revenue grew.
<unk> as fast as measurement and that's kind of unusual for that kind of growth rate disparity to stay so high after activation has become the bigger part of your revenue mix I'm. Just wondering if you could share any thoughts on how long you expect activation revenue to grow so much faster than the measurement.
Yeah. So look I think we continue to love ABS as the.
Little engine that keeps on driving growth.
We.
Are excited about the fact that although we look at.
Over 90% of our top 100 customers are using ABS and measurement, we still have a huge amount of opportunity.
And the next.
100, plus 64% of our top 500 customers use activation and measurement up from 58% a year ago.
That still leaves a big chunk of advertisers.
In that in that.
100, plus customer base to go after that I think we've seen a significant amount of growth in there and I think one of the things that we've really loves about ABS is initially we thought hey, this is a premium product for big brands were incredibly sophisticated.
Once we tapped that out.
We'll start to see that slow however.
We're starting to see this now being an awesome product for mid sized advertisers, it's growing globally as advertisers move dollars around the world and expand their usage around the world. So we.
We still see a good amount of runway.
With ABS.
Of growth to come from ABS. So.
We certainly are not don't want to be considered activation as a one trick pony because we've got other things in activation that also continue to grow like custom contextual and other things in the pipeline.
But I think we have ABS, we still have a good amount of room there.
With regard to the activation growth versus measurement I think.
Activation is.
Comprised of both treated tools in programmatic as well as activation tools that we're using and blending in social from open slate. So we've got.
A good array of solutions, there that I think.
We've probably done just a bit more innovation on that side, which is allowing us to kind of drive growth there a bit faster measurement tends to be stickier longer sales cycles.
Our consistent and growth so that we like to keep that number.
It's probably more of a steady growth number that's a bit less fluid, but a bit more sticky activation, which tends to be a lot of campaign driven programmatic type implementations can grow faster.
Does it bit more fluid and more flexible so.
I don't think that.
We still see strong runway on activation in on programmatic tools will that multiple of growth be that large moving ahead.
I could see that slowing down at some point.
As measurement and starts to stabilize and sticks, where it is and as and as activation does as well.
Call it anything else.
I would say Michael is.
The walled garden measurement.
Part of the business, we are still underpenetrated that right.
There is there isn't there is a large tam.
Tam there that still needs to be measured.
If you think about tick talk just starting if you think about opportunities on meta so.
I think we obviously follow wherever the dollars are going from our advertiser perspective, but I think there's quite a bit still untapped on the measurement side.
Alright, it sounds good thanks, a lot guys.
For sure.
The next question is coming from Andrew Boone from JMP Securities. Your line is now live.
Good afternoon, and thanks for taking my questions I'd like to start off with just performance products with customer contextual ramping and authentic attention to begin testing it sounds like weather. This month can you talk about how this widens for opportunity this already bringing in clients with more lower funnel out objectives are how do we think about that potential for that going.
Forward and then secondly on international you guys made significant personnel investments last year understood FX was a headwind. This quarter can you talk about the progress in international with and helping you to take share or how do we think about the return on those investments today. Thanks, so much.
Sure.
So on the on the performance tools.
It's interesting because it.
It's a little it actually plays in two different ways for us, it's definitely allowed us to bring in and attract some new clients right. So those particularly around attention.
And contextual and which some folks that we haven't talked to you before who are looking to drive more as you noted bottom funnel results, they're looking to have more different ways to qualify content and.
Placements to drive outcomes and I think as we've always talked about we've got this evolution of our business moving from protection to performance and things like Avs are really good protective tools. They ultimately drive performance by getting the garbage out of the system, but things like custom contextual attention really look to refine what's left.
Yes.
Optimize the spend against what works by going out further down the funnel we are attracting more.
New breed of Advertiser, who is concerned not just with how safe their brand is but with how well they are out their ads perform ultimately overall and using our tools to do so so it's the cool part about that is is it just it does open us up to a new type of advertiser.
And while we get in there it allows us to sell all of our other stuff to them too, which I think is which is great.
Additionally, we look at these as add on solutions to our core advertisers, who are maybe less lower funnel.
But still looking to optimize performance so brand suitability brand safety is still maybe their number one goal and maybe driving brand. However, if they can continue to.
Refine the performance of those campaigns by using this tool.
It's a great add on for them. So I think our performance tools have both attracted new types of customers, which we can then sell our broader basket of goods and allowed us to appeal to some of our current customers who are saying, yes. This is great. We've always relied on you guys for verification safety now I can look at you as.
So, helping refine and drive a better outcome. So.
It's a great insight.
I think we benefited both from current clients and attracting new clients by pushing these new tools and Thats why product innovation is so important to us as we continue to grow over time.
The second part of your question on International investment I think.
You nailed it with the fact that last year, we leaned pretty heavily into sales and marketing resources.
Particularly outside of the U S. We are definitely seeing.
The.
Results of that in our continued growth in win rate and our Greenfield win rate right. So when we look at a lot of our deals.
Theyre not only outside the U S.
But they are global companies, and which having a support and sales force outside the U S have been critical for us in closing the deals. So I think when you look at our growth.
Outside of U S growth is probably not even the best indicator of the return on.
Return on investment from those from those resources, it's the size and scope and scale of some of the.
The deals that we've done or that we've closed in the last quarter and you look at some of the names.
On our list of new deals.
No.
Folks like <unk>.
British Airways, right and Banco Santander.
These are huge global clients that were supported by our global sales team, but they're also.
Domestic clients as well too.
I think the investments paid off well.
And I think we've always said we were kind of under invested outside the U S. I think we're at the right size of investment now.
Take advantage of bigger global deals support those bigger global deals.
As well.
Yes, the only other thing I would add on the internationally.
Yes. They are there are headwinds in the second quarter related to FX, which is not particular to us, but if you think longer term if.
Our view is that over 50% of spend is outside of the U S. Excluding search and.
Outside of the U S revenues last year was 26% of measurement. So there is a gap there that we see as an opportunity as Mark said the investments are made and it remains a very large opportunity for us.
Thanks, guys nice quarter.
Alright, Andrew.
The next question today is coming from Vasu <unk> from Cannibal research a lot of their lives.
Thank you good afternoon I wanted to ask a couple of questions about the new relationship you mentioned with the Walmart Media group.
So question number one do I understand correctly that the relationship would fall into the measurement.
Right.
If.
That's not correct can you. Please explain the nature of the relationship and the second question is.
So retail media, yes, you talked about how what a great growth opportunity. It is for you.
As you know one of your partners. The trade desk is also doing.
A lot of work with Walmart media weights.
With programmatic shopper marketing. So I was wondering if that's something that you see is on a per ticket too.
If you could tell us how you think about it in terms of yes.
We are positioning.
And are your prospects there.
Yeah, So just in quality qualifying the Walmart Meteogroup expansion it was.
It was it falls into our activation revenues to the system.
<unk> ability solutions with them, so that that falls into activation revenue.
E part about just to take a step back the interesting thing about our retail media network relationships. They really span all three revenue line items that we have so some of these relationships our platform relationships in which we're providing a solution directly for the retail media network that then they used for people buying into them.
Some of them are directly with the retailers themselves and ensuring that their spend that goes across the board.
<unk> that they do to.
<unk> target or or.
To re target clients are safe and secure.
And some of them are real measurement deals as well. So we've got the nice thing about our Arsenal for folks who are in the retail media space.
Their needs are varied and our ability to supply all aspects of them then as buyers sellers and then as platforms.
All covered with our solution set which is which is great and thats why we get so excited about the space with regard to the specific trade desk implementation I think I think.
All of our solutions work really well with.
The activation or.
Programmatic tools that are out there.
And as I noted earlier, because where we're able to implement data in programmatic platforms as a as a stand alone in the platform itself, whereas a measurement.
Metric that can be used across those retail media networks.
We've got a lot of flexibility in how we work with each one of these advertisers. So we're not working directly with trade desk on on what Theyre doing with with Walmart, but we certainly have a great relationship with trade desk, a great relationship with Walmart and I think obviously the strategy of those folks is to coordinate tools.
Like ours with platforms like trade desk to drive the best outcomes, they possibly can.
Thank you.
Got it.
Thank you next question today is coming from Mark Murphy from Jpmorgan. Your line is now live.
Hey, guys. This is already on for Mark Murphy. Thanks for taking my question and congrats on the quarter first question when we look across the.
Macro environment, we've heard from a lot of other software companies that they are experiencing some headwinds with new logo acquisition.
Are you guys seeing any change in the trajectory of its been the land and expand motion.
It's a great question I mean, obviously when you are.
We're heading into potentially challenging times, the ability to close new clients is more challenging than the ability to upsell clients and the key is that expand.
Can you balance the value of the expand with the challenges that you have with the land right because customers become a bit less.
Adventurous, which is great for us if we have a relationship with them because theyre more willing to buy our solutions to drive more volume through a solution that they have confidence with than they have in actually trying something totally new so the fact that we've got these really sticky relationships with over 1000 global brands I think.
There is a blue chip brands really gives us a bulwark against.
Heavy switching.
The ability for those advertisers to switch, particularly.
In a challenging time does it make selling new customers on the on the flip side does it make selling new customers a little tougher it does right.
But the key is can you leverage your expand so that it's greater than or equal to.
Any declines in your land and I think we're in a good position to do so we've seen strong recurring revenue growth. The first half of the year, we continue to grow with our current customers as we've noted with Upselling activation solutions to a larger percentage of them year over year. So I think we're in a good position to take advantage of maybe some of the the <unk>.
<unk> caution of advertisers switching solutions.
Sticking with the with a singular platform that can they can continue to expand width. So yes, I think it's a good it's a good insight I think we're well positioned to two.
To weather any slowdowns in.
And new acquisitions.
Got it thanks for the color and then for the second one given the broad industry exposure you guys have are you guys seeing any divergences in terms of some.
Vertical is performing better than others.
So far what we've seen is.
The return from very low points for CPG and travel. So those are comparatively are performing better for us versus low points last year, where it was still sort of COVID-19 impacted.
The one industry, where we're not seeing as much of a pickup as auto it remains it is growing but not as fast as the others.
More generally for us not a single industries is above 20% of our revenue. So it's not a huge one.
<unk>, one way or the other but to answer your question auto is the one that seems to still be sort of.
Lower growth.
Got it thank you.
Thank you next question is coming from Eric Sheridan from Goldman Sachs. Your line is now live.
Thanks, so much for taking the questions maybe two if I can.
If you were to continue to put up this kind of revenue outperformance between now and the end of the year can you help us better understand how you think philosophically about allowing money to drop to the bottom line versus finally, getting real time ways to like invest it back in the business as we look out over the next couple of quarters, and then zooming out how should we be thinking about that.
The decision process for either organically investing in the business in 'twenty, three and beyond versus the comments you made about maybe inorganically doing some M&A that could speed up some of your longer term agenda is as we move out of this year and into next thanks. So much.
Yeah, So Eric I'll start the.
We haven't changed our point of view that we are still in a very growth mode and so.
The first priority will be to reinvest into the business. We do feel strongly that the results that we're showing this year are in part due to the investments that we made the year before and the year before even through Covid, we continue to invest so.
Falling to the bottom line. It is certainly not our priority in terms of additional revenue growth. It is more about investing in the investments change right, but they remain consistent.
In terms of dollars, we do keep our eye on a 30% margin and it feels like it gives us enough.
Way, if things were to change quickly.
To change to change trajectory, but we are looking to continue to invest in.
In terms of M&A versus.
Operational investments, yes of course, we keep looking at it we have as you know.
Over $220 million of cash.
It does feel like the market is going to become.
A more favorable environment for acquisitions, but we're going to remain very disciplined as to which acquisition. We go after because the organic growth is so strong and it gives us such an opportunity to continue.
Yes, just to add one little bit of color. There is I think the keyword Niccolo mentioned this scale.
And we're going to continue to lean in this opportunity to scale the business I think we've mentioned before that.
Scale drive is a virtuous cycle, where as we grow bigger as a company we get smarter as we get smarter, we're able to deliver better results for our advertisers and we deliver better results, we're able to retain and grow the advertiser base, which drives scale right and I think that virtuous cycle is something we're going to.
To feed and.
And we will do so on a pragmatic basis, but we're certainly not going to stop that wheel from spinning. So I think scale is really important to us we drive scale through acquiring new customers and buying being innovative and covering new sectors and those are innovations that are those are investments that will continue to make.
As long as they make sense for us and for right now.
As for the foreseeable future.
Thank you. Your next question is coming from Mark Kelley from Stifel. Your line is now live.
Great. Thank you very much.
My first question was just on some of the newer channels that you are starting to accommodate I guess, what do you think most of the dial near term, whether it's gaming audio et cetera.
And then the second question is on the authentic attention snapshot.
And then you talked about it.
Is that something that you plan on offering indefinitely, the premium product or something that.
You'll do near to medium term just to.
I guess, some folks interested in that product and then.
And then.
Not really offer that thank you.
Yeah, some great questions. Thanks for that Mark.
So we look at it is interesting that we look at sectors and roughly speaking in game advertising and audio advertising are about the same size in billions.
As an advertising opportunity for <unk>.
Us.
All of them, it's kind of like the sum of the parts is greater than what did they say that some of the whole is greater than the individual parts right. So when we look at our solution.
Having coverage across all of those different areas, whether it's gaming audio CTV social mobile desktop.
All of them together drive.
Credibly high value proposition for our solution.
So we don't look at any individual one as being okay, we're going to make X million dollars off of the gaming space. So we're going to make X million dollars of audio they become part of the bigger value prop that just says as we look to verify everywhere our solution becomes more and more valuable it's used in more and more places and it just makes us stickier with our clients.
So I think of each move into a new sector as both being something that is strategic because it creates a stickier relationship with our advertisers, but also adds to that hole and that whole pie just gets bigger and bigger and it gets bigger.
Not just from the fact that we added a new sector, but the value proposition to our clients goes up incrementally as well and it makes it harder to lose to shake us So I think.
We're excited about gaming, we're excited about moving into audio as Nicole mentioned earlier in the call. Another question CTV is still small, but it's important part of that matrix and it's like if you don't have the Cte coverage and you don't have gaming coverage, you're probably not going to end up getting a deal are staying with the customer over time. So there are essential to us.
I think it's important for us to be everywhere all of them add something to the overall revenue trajectory that each one is not something in itself I think is valuable and Thats why I was look at point solutions that only cover one sector has been incredibly short lived right. If you're only doing measurement in CTV or you're only doing measurement across social.
<unk>.
Verification across social like Youre going to be youre, not going to have a long tenure in this space and for US. It's about stickiness tenure covering everywhere. So I think thats. The first the first part of your question. The second is on on snapshot.
I think the.
We're going to roll this out we're going to see uptake on it and really this is a vehicle, it's an upsell vehicle for us to move to get attention.
Socialized.
As it gets.
As it gets more.
Standardized in the space.
I think there is probably an option for us at some point to take snapshot.
And enhanced even further and move it from a freemium solution to a paid solution, but I think for now we're looking at as a marketing investment to two.
Get attention metrics in front of our customers and sell them the full fledged premium product down the road.
Perfect makes sense. Thank you.
Got it.
Thank you next question is coming from Justin Patterson from Keybanc. Your line is now live.
Great. Thank you and good afternoon to if I can.
Yeah.
The market bolt.
Curious to hear how you heard about the.
The pipeline for M&A.
<unk> I imagine there is some companies that might be looking more for these days that more attractive.
And secondly, I just wanted to tease out a little bit more about the campaign to automate or I realized closed beta.
But it seems like across liberate a lot of two advertisers add some efficiencies.
One that one that can deepen your relationships within there.
Curious to hear how you're thinking about that thing things.
Things like that.
Or excuse me MTM, just number of transactions flowing through customers and potentially offset the sales opportunities over time. Thank you.
Yeah, I'll talk a little bit on the M&A front and Nicole please chime in but I think.
Yes.
The choppy markets.
Great opportunities for buyers and particularly when we're looking at.
What we call kind of road map accelerators. These may be little technical tuck ins.
That arent really businesses, but are really cool features or things that we want to do to accelerate our move into a certain sector. A lot of those tend to be overvalued, because they don't make a lot of money, but they are really essential in a larger kind of platform at.
And in markets like this.
Their expectations of value declined rapidly because they run out of funding because most of the time they don't make much money. So I think in that sector. It provides a really interesting opportunity and then as I noted earlier. Another question, which is like you know single point solutions that allow us to extend.
Our entire basket of goods.
That become increasingly challenging for an advertiser to just buy multiple of if.
There's one thing that happens in choppy markets is that.
Advertisers look to reduce overhead and managing multiple solutions.
<unk> overhead.
So if you are a point solution and advertisers looking at Hey, after match sticks things are I could imagine three.
Youre going to get cut.
Our ability to bundle those point solutions into our package make it easier for them to manage I think it is a big advantage for us and also puts them those point solutions in a challenging position.
Actually dovetails into the second part of your question, which is campaign automate or wait.
We think there's no better time for us to be launching this solution.
Because it is all about creating a more low overhead implementation of tags across ad servers.
That really it's much more of a self surface proposition.
It not only lowers the advertisers engagement, but it actually lowers our costs too.
The amount of handholding, we have to do with tag creation Tag management goes down the amount of troubleshooting goes down. So I think this is a win for everybody. It's a win for the advertisers to streamline workflow give them more self service tools, it's a win for us because it takes less management to do so so we're excited about it.
You said, it's early but we're hoping for a general launch in the second half of this year later in the second half of this year.
But we're really optimistic about its ability to.
Lower the overhead costs and streamline the implementation process of our measurement tax.
Anything to add on the M&A front.
Mark Mark captured it I think it is it is obviously going to be a better a better a better environment. The key for US is to remain just.
And the right solutions.
They're going to just accelerated roadmap.
Great.
Thank you we reached end of our question and answer session I would like to turn the floor back over for any further or closing comments.
Thank you I just want to thank everyone for joining us today, we are super excited about our results in the first half of the year and looking forward to performance in the second half year as well we will talk to you all soon thank you.
Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.