Q1 2023 DoubleVerify Holdings Inc Earnings Call
Greetings and welcome to double their buys first quarter 2023 financial results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference.
These press Star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to T gel, England Investor Relations. Thank you you may begin.
Good afternoon, and welcome to double clarify basketball, it's much 23 earnings conference call with US Sandbox schools T C well collateralized.
Today's press release and this call may contain forward looking statements that are subject to inherent risks and uncertainties and changes in the unconscious expectations and information currently available to us and our actual results could differ materially.
More information please refer to risk factors in our recent SEC filings, including our Form 10-Q, and our annual report.
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 captisol.
Unleashing Smith comparable GAAP measures are available in today's earnings press release, which is available on Investor Relations website at IR <unk>.
<unk> Dot Com also joined the call today will be referring to slide deck, that's not websites with that alternative to smoke.
Thanks Angel and thank you all for joining us today I'm excited to discuss our strong first quarter performance and our optimistic outlook for the rest of the year. We started 2023 laser focus on a few key areas first launching innovative outcome driving products anchored in our deep expertise and legacy investments.
<unk> learning and data science second scaling our independently accredited core verification solutions across leading social and CTD platforms, and finally, expanding our partnerships with large advertisers and preeminent digital AD platforms around the globe.
On all three fronts, we can confidently state that we are executing ahead of our expectations.
In the face of a challenging macro environment, our performance remains resilient due to the efficacy and utility of our solutions and the deep Trust, we've built with all of our stakeholders as an unbiased independent analytics engine committed to making the digital advertising ecosystem stronger safer and more secure.
This steadfast vision continues to be Dd's Northstar core to the value, we deliver and proven to generate exceptional rois for our customers and partners.
Our first quarter results exemplify the impact of this commitment when it has embraced and empowered by a passionate group of DD team members in 21 locations around the world.
We grew first quarter revenue by 27% year over year to $123 million exceeding the top end of our guidance and significantly outpacing the growth rates of both the digital AD industry and our competitors.
We saw strong sustained and broad based demand for <unk> solutions with each of our three business lines delivering double digit growth.
Advertiser demand for both our premium priced authentic brand suitability programmatic solution and our social measurement solutions continue to grow resulting in strong business expansion with existing customers and new customer wins.
We won numerous rfps in the first quarter, representing meaningful expansions with existing clients, including Merck adopting DD measurement and ABS and 60 international markets Airbnb, making didi authentic add its measurement currency in multiple Latam markets and Amazon Prime video displays.
Gp's proprietary pre campaign activation and post campaign measurement solutions on Youtube.
On the customer acquisition front in addition to.
The previously announced Q1 wins, including air, France, and Swarovski and EMEA and mattress firm in the U S. We closed additional new logos in the first quarter, including evoke health and New York Presbyterian and the U S D.
Jacob and APAC and the public investment fund of Saudi Arabia, and the Middle East.
Our win rate across all opportunities remained above 80% with 67% of our first quarter wins being greenfield, which we define as wins, where the advertiser wasn't using third party tools for the business. The D V. One.
This steady weight rate of Greenfield wins exemplifies the underpenetrated Tam that geely continues to benefit from.
These new client wins play into our successful land and expand strategy through which we grew the number of advertiser customers generating more than $200000 over the last 12 months by 31% in the first quarter.
With 45% of our top 700 customers using less than half of our key products in 2022, the opportunity to expand within our existing customer base remains significant.
Our acquisition strategy also continues to pay dividends when it comes to client growth.
By focusing on M&A that accelerates our product roadmap.
As complementary new technologies and expands new local market coverage, we create growth opportunities across the <unk> portfolio and drive measurement currency ubiquity.
Since integrating our acquired social activation tools at the beginning of 2022 over 65, new customers have activated dd's pre campaign, social solutions on Youtube and or on meta.
Newly acquired resources helps drive growth across our international measurement customer base with over 60, new customers activating the DD authentic add in EMEA since the fourth quarter of 2021.
TD continues to outpace the industry and gained market share due to three key differentiators.
Our rapidly growing scale, our industry, leading innovation and a deep level of trust, we build with our customers as an unbiased independent partner.
Beginning with innovation Tvs innovation engine is fueled by the unparalleled scale and ubiquity of the data we capture it in which is brought to life by the proprietary data science that drives our machine learning technologies.
AI and machine learning that powers, it had become buzzwords, but little explanation of how they drive differentiation and build advantages for the companies that leverage them.
Let's discuss how this works for D V had.
Head to head tests show that Tvs ml supported prepaid brand safety and stability solutions consistently drive greater reductions in postpaid block rates than our competitor solutions do.
We believe this is due to our differentiated and proprietary text and video classification technologies that leverage sophisticated models that had been built and trained over the last decade.
The same is true for our fraud verification capabilities. The D V fraud lab consist of dedicated data scientists mathematicians and analysts from the cyber fraud prevention community, who have developed and trained geese proprietary algorithms, making them incredibly effective in identifying millions of bot and malware devices daily.
The growth of day I also may have an interesting impact on the utility and opportunity for our products suite as an increasing number of advertisers are wrestling with their approach to AI created content and their comfort with having ads associated with it.
<unk> currently identifies the low quality content that maybe algorithm to be generated and is working with clients to determine how we evolved classification to meet their new demands.
The data science rigor that powers. Our AI models is best in class extending from contextual classification to fraud detection and now to attention.
Today BD offers the industry's most robust cross platform attention solution, which uses impression level data not limited to panels to measure 50 unique data points related to the exposure and engagement of AD impressions that are first verified as viewable by DVS industry accredited standards.
Last week, we were thrilled to make the leap from attention to action by watching the Geely Universal attention segment. The industry's first automated attention to optimization solution for programmatic media buying.
Powered by <unk> global attention data, our prepaid universal attention segment enables brands to improve performance by optimizing away from low attention environments without sacrificing scale and reach.
Across numerous leading D. S. P's any advertiser can activate D. These universal attention segment, including those that use our competitors' measurement solutions.
Not only creating a vast long term activation opportunity, but also unlocking a large measurement upsell opportunity down the road.
Speaking of measurement D. D authentic attention measurement continues to gain momentum with first quarter test volumes dumpling and campaign Activations tripling year over year, nearly 80 advertisers have activated DD authentic attention campaign. So far in 2023 exceeding the number of advertisers that activated campaigns in all of <unk>.
'twenty two.
Our pioneering work in attention goes beyond thought leadership.
D V has real attention solution. They are at the forefront of driving attention as a currency and generating real results for our customers in market today.
Let's move onto one of Ge's, most successful and important product innovations authentic brand suitability Vince.
Since its release in 2018, we significantly enhanced the value ABS delivers through the release of new performance driving functionality, including brand suitability Cheers C. T V exclusion and inclusion list page exception lists and new content avoidance categories that strip any competitive offering.
On the heels of our successful price bifurcation for our standard programmatic products. In 2022. We've also started to implement a bifurcation of a b S as pricing by introducing a higher rate for a b S video, while maintaining the original price for display.
<unk> revenue grew 56% year over year in the first quarter.
Driven by a 55% increase in volume and a 1% increase in price.
Our ability to raise prices, even on our premium priced products, while continuing to deliver strong volume growth.
Peaks to the value of our solutions deliver to our customers and the long term potential for <unk> to evolve towards a more value based pricing model, particularly for higher C. P. M media such as C. T V.
On top of these great revenue generating innovation DD continues to launch self service automation tools like campaign, automate or and pinnacle to point out our upgraded client you are.
Which lower client overhead to employ DB solutions, making it easier than ever to efficiently drive results across a client's full portfolio of brands.
With our next differentiator scale, let me begin with social measurement, which delivered 33% year over year volume growth in the first quarter.
Our social measurement growth in dollar terms was led by advertisers leveraging our solutions on medicine platform, which generates almost half of our social measurement revenue followed by Youtube applications, and then D D tools on tick tock.
Existing social customers such as Monda leaves, an airbnb expanded their use of DD social solutions on meta and Youtube and activated the authentic add on chip talk for the first time with new logo wins also contributing to the social measurement growth.
Our customers are rapidly activating the D C authentic add on Tic Toc, where we have doubled the number of customers year over year and grown take talks first quarter revenue contribution by over 50% compared to the fourth quarter of 2022.
In fact, we generated nearly as much tic Toc revenue in Q1 as we did in the full year of 2022.
Tick tock supporting their badge measurement partners brand safety and suitability expansion to nearly 45 markets. We are scaling our coverage across key English Spanish French and Portuguese speaking markets. This year with a focus on maximizing market coverage for our top advertiser customers.
As a batched met a business partner, we value met his ongoing commitment to providing advertisers with transparency through brand suitability controls and verification. We are excited to be in expanding our offerings over the coming months and remain in consultation with meta for brand suitability verification and measurement solutions on the feed.
Which will complement our view ability of invalid traffic solutions, enabling further expansion of dd's authentic add coverage to an even broader array of consumer engagement.
Turning to CTV scale, we grew CTD measurement volumes by 39% in the first quarter outpacing the 14% CTV revenue growth expected of the industry in 2023, According to Iab research.
We launched view ability verification and fraud protection coverage on Netflix and supported plan with Dd's verification on Netflix now available in 12 markets globally.
Television remains a strong differentiator for D V due to our comprehensive coverage industry, leading solutions and proprietary ability to identify CTV fraud.
Only didi covers all of the platforms that received the majority of CTV AD spend and our see our industry, leading solutions span all aspects of C. T D from pre bid avoided to postpaid blocking and monitoring.
Most importantly, we believe that no. Other company has made as comprehensive as an investment in people infrastructure and partnerships to ensure that CTV transactions our fraud free.
Let me wrap up on scale with a focus on our international business expansion, when we delivered 26% year over year measurement revenue growth in the fourth quarter with both the EMEA and APAC regions exhibiting double digit growth.
Since the beginning of 2021 we've nearly doubled our international sales marketing and client services head count, including appointing several new country leaders to cultivate local business with approximately 170 commercial personnel in the EMEA and APAC and a market growth plan that includes opening five new international markets, we will expand dd's.
Commercial footprint to 26 locations by year end, we couldnt be more excited about our prospects outside of North America in the coming years.
A great example of the payoff of our increased international investments is the deal. We recently closed with the T V S television network in Japan.
New sites opened by 28, Japan News network television broadcasting companies.
T. B S has adopted dd's publisher suite and analytics and automation solution that comprehensively supports AD quality control and revenue analysis for publishers and media companies globally.
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.
D. B has a comprehensive suite of accreditations and certifications and never lost an international accreditation or had one revoked.
Our globally recognized tag certifications and MRC accreditation demonstrates <unk> commitment to innovation and delivery against the highest possible industry standards.
This trust extends to how we approach privacy and data management as well D. D was recently ranked in the top 1% of over 1600 data providers scored by new Trulia and their latest transparency ratings report and has renewed its new trolling and Cookie was certification badge, which provides marketers with verification.
Can that be certified data provider is future proved for the deprecation of third party cookies are concerted action to uncover and publicize sophisticated global fraud schemes that attempt to siphon millions of dollars of AD spend across industry channels cements, our position as a trusted partner acting in the best interests of our.
And the industry aggressively.
Aggressively unearthing fraud is core to Tv's mission and the basis upon which any advertising outcomes should be measured.
Last year D. These fraud lab detected and mitigated dozens of fraud schemes in variance with new fraud schemes more than doubling over the last two years.
This year D V uncovered beat staying and audio fraud scheme and partner with Roku to expand its watermark technology to uncover many more fraud use cases, including sophisticated user spoofing that creates fake impressions. This was the case with smoke screen a fraud scheme that D. D identified that continues to generate.
More than 300 million AD requests and siphons over $6 million monthly from unprotected advertisers and publishers.
Just isn't only about accreditations reports, it's about people and relationships.
The day I joined nearly three years ago. My drive has been to build powerful diverse and stable leadership team made up of the most innovative customer centric minds in the space.
Our transparent commitment to a clear common goal has allowed us to attract the best talent, who become a consistent voice to all of our stakeholders and generate trust across the advertising ecosystem drip.
Driven by a common mission and belief in our long term vision our teams six together and based on our 95% gross revenue retention rate over the last three years. They are a big factor in why our clients stick with us too.
To conclude we often talk about how scale innovation and trust our three key differentiators execution is arguably the most critical to the success of any business D. V continues to win because we execute better period.
Our ability to successfully innovate drives better product performance that helps us win new clients, which in turn provides the data fuel that powers. The flywheel that ultimately grows our business.
We are pleased with the strong start to the year and remain laser focused on growing and realizing a solid pipeline of new and expansionary deals that will further drive our market share and create an even stronger long term growth trajectory with that let me hand, 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. The outperformance relative to our expectations was primarily driven by stronger than expected measurement growth, which gives us the confidence to raise our full year 2023 revenue and adjusted EBITDA guidance.
Total revenue grew 27% in Q1 $23 million to $123 million, primarily driven by advertiser revenue growth of 28%, which continues to be volume later in the first quarter MTM is we're up 25% year over year, while MTF grew 3% year over year.
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Activation revenue continues to be driven by our premium a b S programmatic solution, which is now in its fifth year since launch.
S delivered 56% revenue growth and comprised 56% of activation revenue compared to 48% in the prior year period.
As Mark mentioned ABS volumes were up 55% and the a b S 60 was 1% higher as we rolled out a bifurcated ABS pricing for display and video impressions. Following the implementation of a similar price bifurcation for standard programmatic products in the first quarter of last year.
Yes price bifurcation was assumed in our original full year 2023 guidance and most of the ABS as first quarter growth came from volume expansion by existing customers, who continue to deploy this industry leading solution across additional markets.
Turning to measurement revenue grew 22% driven by existing customer expansion on social and by the ramp of new enterprise customers that we signed last year.
Social measurement growth was led by met up and buy tick tock, which almost achieve its full year 2022 revenue contribution in the first quarter alone.
International growth of 26% in the first quarter outpaced the overall measurement growth and now represents 26% of total measurement revenue.
Supply side revenue grew 15% driven in particular by continued platform revenue growth from Amazon and Lincoln.
Shifting to expenses cost of revenue increased by approximately $7 million, primarily due to higher costs from revenue sharing arrangements with programmatic partners tied to higher programmatic revenue and also due to an increase in cloud services costs.
Revenue less cost of sales of 80% in Q1 'twenty three is expected to remain relatively stable for the remainder of the year as we continue to invest in scaling the infrastructure needed to support our growth.
First quarter research and development expenses increased due to investments in AI and machine learning engineering resources.
And marketing and G&A expenses combined remained relatively stable year over year as our growing scale is driving leverage on these two operating expense lines.
Adjusted EBITDA of $36 million in Q1, 'twenty three represented a 29% margin and was ahead of plan due to higher revenue as well as a moderated pace of hiring which we expect to accelerate in the second quarter.
Net operating cash flow was $21 million, primarily driven by higher year over year net income and stronger cash collections.
We ended the quarter with nearly $286 million in cash on hand, and continue to have zero debt outstanding.
Turning to guidance, we expect second quarter revenue in the range of $131 million to $135 million, which implies year over year growth of 21% at the midpoint.
The sequential growth implied by our revenue guidance reflects a tough comparison with the second quarter of 2022, when large new advertisers significantly ramp their revenue contribution and wonder standard programmatic price bifurcation was fully rolled out.
We expect second quarter adjusted EBITDA in the range of $37 million to $39 million, which implies a 29% margin at the midpoint.
For the second quarter, we expect stock based compensation to range between 14, and $16 million and weighted average diluted shares outstanding to a range between 171 and 173 million shares.
For full year 2023 guidance, we expect revenue in the range of $557 million to $569 million, which implies a year over year growth of 24% at the midpoint and.
And we expect adjusted EBITDA in the range of $171 million to $179 million, which implies a 31% margin at the midpoint.
We have raised full year revenue and adjusted EBITDA guidance due to a stronger first quarter performance and an expectation that the positive business trends, particularly measurement will continue.
We expect full year adjusted EBITDA margins of 31% based on the strength in the first quarter profitability, while reflecting our plan to continue to invest 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 the third quarter to represent a little less than 25% of full year revenue and we expect third quarter adjusted EBITDA margins to remain consistent with the second quarter.
To close we delivered a strong first quarter with double digit revenue growth across all of our business lines and are focused on successfully executing against our plan for the rest of the year.
And with that we will open the line for questions.
Greater please go ahead thank.
Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
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Our first question is from Michael Graham with Canaccord Genuity. Please proceed.
Hey, congrats on the strong numbers I just wanted to focus on the international measurement growth for a minute because you know the last couple of quarters that growth rate has really slowed down and in U U accelerated to 26% growth this quarter.
Against a tough comp in Q1 of last year, a 40% growth. So yeah really just wanted to hear a little bit more about how you're achieving that.
What sort of growth rebound internationally.
Thanks, Michael for the question and Yeah, we're really pleased with the progress we've made and and in markets outside the U S. EMEA grew at 23% year over year for the quarter APAC at 31%.
And I think a lot of that had to do with something we've been talking about for the last few quarters, which is.
Our continued investment and commercial resources outside of the U S and our commercial reward, which we started at the beginning of last year, which really starting to close out at the end of the year. Those two things gave us a lot of confidence in the fact that we have the right people in the right places.
Outside of the U S and they have the right, Michigan try that.
Because of that you know we saw a really strong pipeline coming out of Q4, which we mentioned earlier this year on our first call on that pipeline really came to fruition in Q1. So it was a lot of hard work by our team there's a lot of investment in.
And people planning and ultimately targeting.
Better sales and better sales better pipeline and that pipeline team there in Q1 of this year.
Okay. Thanks for the color Mike.
Got it.
Our next question is from Iran batter with William Blair. Please proceed.
Hey, guys. Thanks.
Thanks, and congrats on the strong quarter here.
That's making you optimistic on them on the rest of the year here.
Thanks for the question.
You know.
We've always said that kind of measurements and the core measurement business, what it wasn't that the backbone of the workhorse of the business and a lot of our success. There is related to what I mentioned, just a question for Michael.
Investing in sales resources and sales planning.
And reorganization of that sales team.
Those are the guys that go out and close the deals and measurement as he said it's not core.
Warrants you spin that flywheel.
They are upselling into programmatic upselling into performance solution, so when that base.
It's great news for us for the year.
I wouldn't I wouldn't totally equated to a SaaS business, where they get a big chunk of their meat upsizing that LTE yourself look like but we know measurement customers when they buy and they buy in a sick that sticks with there.
Throughout the year. So I think we've got complex. The fact that those customers that have come in our Michigan customers. Those dollars are not as fluid as activation dollars, which tend to agree with programmatic spend.
So that gives us a good amount of confidence that yeah. We're in the right place where they need to be.
To raise the guide for the year, and we got good basis from which to sell.
Perfect. Thanks, Mark that's that's very helpful. And then I wanted to touch on attention are it seems like that product is starting to.
Get some good traction here or are we crossing the chasm with that solution and and maybe just would love to hear how you think the pre bid capabilities, but he launched with universal attention might help advance some of our adoption of the pension solution here.
Yeah, I think it's.
It's a great question and we do talk a lot about attention I think.
I don't know if you'd call it a CASM, but let's call. It a mountain to climb and you know, where we started making our way up that mountain and I think where we're getting some good traction.
We saw it two kinds of volumes a test year over year two times the volume of revenue in Q1 year over year.
Three times the volume of campaigns.
So the attention.
It's we're getting there right scales getting there I think a big part of it and I think we also mentioned this on our last call was we love the we love the value prop of having treated and posted worked together we've seen the power of that with our core verification solutions, we've seen the power of that with a b S.
Working with measurement and I think the.
The ability for us to kind of throw the attach a category as a whole.
We will also benefit from having created a posted working together so you.
You know I think we always say, it's still early days, even though it's been.
It was a long period of early days, but it has the industry catches up with standardization.
And those things get locked in and you've got competition, just greater I think competition is okay. In this space, because actually kind of justifies and the idea that potentially matters it matters to advertisers.
We're gonna see more traction there. So we love the introduction of a prepaid solution, we think that's going to help.
Driving optimization cycle and you know this is just the beginning for freedom on attach we think there is an evolution of that youre, even more powerful solution on the premium side. The same way, we evolved standard brand safety and brand suitability and dropped bank branch suitability, which as you know arguably now.
One of the most powerful products I think we've got a long way to go but we're taking the steps to go one by one and the introduction that's really the first scaled optimization.
Segment out there is a great step towards that.
Thank you Mark and congrats again on the quarter guys.
Thank you.
Our next question is from Justin Patterson with Keybanc capital markets. Please proceed.
Oh, great. Thank you too.
Two questions. The first one follow up after I just wanted to touch on a B S.
It's been your biggest the lose share in five years and launch and now still growing 56% and I think most of that was driven by volume this quarter.
Talk about how you see that volume expansion potential from from existing customers going forward and then but I'll definitely follow up after.
Yes, I care about the ABS continues to be a real powerhouse for us.
A majority of the growth that we had from ABS at the revenue growth came from existing customers this quarter.
94 of our top 100 customers are using a b S. Right now in Q1, so what that shows to me is that even with pretty significant penetration of our top 100 customers to be able to grow at a 56% year over year growth rate means ABS works clients are using it in more markets.
Are you seeing a lot more brands and you know it still got legs. So are we continuing to lead with our programmatic solutions in many pension we continue to have opportunities below the top 100 clients to continue to grow them and yep.
Yes.
To drive growth for us even after as we noted a price bifurcation in which we raised the price on video we saw very little friction from that price increase so it not only shows the utility of the product, but the value that we're creating for advertisers to show that growth.
Great. Thanks, unless the second question I wanted to touch on social measurement a bit more meta in tech talk almost achieving their 22 revenue contribution and just the first quarters are very impressive would love to hear more about just how you're thinking about social progressing in the year.
Whether that could actually turn into a channel that brings net new advertisers into the broader D V ecosystem. Thank you.
Yeah, Doug I'll take this one.
So just to clarify it is tic toc revenue that achieved all of 'twenty to revenue in Q1 'twenty three.
That is a much larger base than we've had products with metaphor for a much longer period of time.
But your points around social.
Or are the right ones. We were we were very pleased with how our how strong the uptick is on the tech talk product.
It is not already our third largest social platform remains small if you compare it to met on Youtube, but it is an indicator of that.
Our products are really resonating in the social channel social about 38% of our measurement business in the quarter and that was up from where it was last year. So we felt very strongly that we will continue to see traction on the social a walled gardens as well.
As we continue to put more products out there and going to new markets.
And I'll throw in one other point there too Justin which is you mentioned does it have the ability to attract new customers and she wanted Turkey. It is that 40% of our revenue growth was from new customers and of course.
And social social measurement.
I'll list for new customers and you know.
And as folks like Mars, Paramount Bumblebee Firestorm Conagra, a big brands, we're activating across social.
They talk is certainly helping on that front.
Moving there.
So again social is a place that we're going to feel very comfortable continuing to focus on growth. There and then she was asked as well.
Thank you both.
Okay.
Our next question is from Andrew Boone with JMP Securities. Please proceed.
Alright, Thanks for taking my questions. Mark you took the EBITDA guide up a point and earlier you mentioned the investments that you made last year in International I guess my question is are you notice scale with resources that you can get more upside flow through to EBITDA and profitability and then for my second.
You guys mentioned, 45% of the top 700 clients are using less than half of the key products. In 2022 can you just talk about that upsell cycle. What's left that you guys really want to push as you think about 'twenty three and 'twenty four.
What do you think its the low hanging fruit from here on the on the upsell. Thanks, so much.
Sure I'll take the second half of that question and let Nicole I'll take the first half anything outside of EBITDA.
The CFO is much better than those numbers are but when we look at it would be up sell cycle and you're right. We've got.
Still a pretty decent amount.
Product upsells to make across the board.
Talk about Evs, although we've yes, it's pretty high penetration and our top 100 clients, we still got a lot of room in our next several hundreds to go after it and that's always going to be our first go to you. When we look at the up sell cycle is move anybody is using standard brand safety of brand suitability, yes right.
I think that that's a big one.
The second one is when we look at our social.
Social measurement continues to be.
Great growth engine for us, but we look at social as a separate category. So just because youre doing measurement for us.
And the overlap or easy programmatic designee.
It doesn't mean, you're a client that's using us for measurement on social so when we think of like the first two things were going to walk into a customer to do and we're going to have so it's gonna be a b S.
And then social and I think we.
We've got room on both of those products as we look at the potential upsell, but we know that they're both great March drivers for a straight growth drivers for us, particularly in opportunities outside the U S.
Yeah, and in terms of EBITDA margins and expectations and how we how we think about it for the future of the business.
We did have a strong first quarter around profitability I think that the numbers that make us feel very strongly that we havent business that can scale is really where the investments were so we were able to essentially have virtually a year on year flat on sales and marketing and G&A and we've spoken about the fact that we've already invested in.
SG&A in prior years, and a quarter, where for example, you see 26% growth in international it's not as though we have to invest additional resources to achieve that growth. So there is inherent scale coming from those two lines. It doesn't become a larger company. However, we are continuing to choose to invest in R&D and that is the one area, where you will see.
Our growth investments year on year and that is specifically around data scientists to allow us to go deeper into AI and machine learning investments are these are not brand new investments we've been doing it for many years already but the opportunity there to continue to investors is available to us and we're going to do it because it's going to accelerate our product road map.
So it's a long way to say we are choosing to continue to invest our EBITA margin is still very healthy.
But we are already seeing the benefits of the scaling of our business and our sales and marketing and G&A.
Thank you.
Sure.
Our next question is from Mark Murphy with J P. Morgan. Please proceed.
Do you so much and I'll add my congrats.
Mark I wanted to ask you the the win rates remain very high can you refresh us on the role of accreditations them through that lens just to help you win business and how wide is the gap today in the accreditations between double verify and if we compare that to the number two.
Some of your competitors and then I have a quick follow up.
Yeah.
The accreditation.
Are definitely part of the matrix of of elements that go into the decision process for an advertiser, it's an important one for us.
One is customer service and customer support as these pricing.
But probably still the most important one is the performance of a platform.
And that's where we can see an arena and that's why it's technology expenses, such an important one for us to keep investing in because when those platforms go head to head. Yeah. We said this time again whichever platform delivers the highest ROI by filtering out the most fraud by creating the greatest level of grants granularity a branch seasonality granularity.
He is the one that's going to win and I think that's driving a great weight ratio for us.
But when it does come through accreditations.
We look at the number across the multiple different organizations that are out there.
Our best estimate is were anywhere from 50% more different accreditations to almost double depending on it is it's hard to find that there's lots of different places where people have accreditations and different countries, but.
We certainly outpace our competitors a bias if we get them out in that space.
Okay, and then as a quick follow up what are you discovering in terms of view ability and the C. T V realm.
What I mean is are there fewer issues because in some cases, you have much larger screens or are.
Are you finding that there are more issues. Because you can you can encounter buffering or you know AD placement problems or you know some of the AD skipping capabilities of those platforms.
Yeah. It's a great question I mean, there's always been this assumption that Oh Gee is harder.
Someone's wedding rental how could it not be viewed very different problems that a banner AD on a web page, where some control by or an impression on the mobile phone that gets.
Pushed by very quickly a shut off.
But there are still significant issues around your ability and the things that we're tracking are exactly the things Mark that you know.
Which is does the add back for the full first quartile right does it get a credit for that period of time that I can actually registered as yield.
Does that and most importantly is it right while the T. He is on.
Believe it or not becoming an increasingly significant issue for advertisers because many apps are not passing the signal that says TV is they're actually running as long as he is off either stage III stage.
They shouldn't be doing that.
Or on purpose, because theyre not legitimate apps since your ability the way that we measure it.
It is different than what you think of initiation of web world, but those issues arent real issues for advertisers, which is as not running the full extent they should have and that's why we're telling.
Screening is actually off the box on.
It's just unfortunate computers working as rough as that streaming applications, but the screen.
So those are issues that continue to be challenging to advertisers and I think they are just starting to wake up to the fact that this is a real.
Yeah. This is really something that we start measuring and paying attention to.
Thank you very much.
Yeah.
Our next question is from Eric Sheridan with Goldman Sachs. Please proceed.
Thanks, so much for taking the questions maybe two if I could.
The Stat, you gave an increasing number of large advertisers and bringing that back to potentially new logos are there any industry verticals Edward G O as youre, calling out when you look at your backlog for new large advertisers are new logos or do you think we should be monitoring for potential for outsized growth or areas, where the backlog is showing a lot of promise.
In terms of building not only for 'twenty to 'twenty, three but beyond and then the second question would be on Netflix as a platform how much of scaling the.
Now as we move through 'twenty three in and out.
It out into the out year, it's about elements, where you need to invest to sort of position you to benefit from what they build over the long term versus just them executing on simply scale of AD supported customers and subscribers over time, and that's where the revenue our block is thanks so much.
But for sure.
So your first question.
The nice thing about our business, which for which we mentioned.
Pat is that we've got a pretty broad based set of advertisers.
So you remember several quarters ago, there was that there were supply chain issues around auto delivery and electronics Larissa.
A lot of folks who are focused on those two segments.
<unk> had some challenges you know running ads because there is no reason to advertise that you could sell a product to get the product in store.
Didn't see that because you know, we're really nicely distributed across all of the major asics. So there's not one we can say we've seen any either oversize increase or decrease over the last several quarters, we've seen growth across all of them, which is which has been pretty nice with regard to Netflix.
It won't watch you know a few months ago.
Harsh and silk.
Still relatively early but we're seeing some pretty decent volume starting to come across that it is having an impact on our Cte d'ivoire.
Got it.
Like most of course in hand in hand, or Toyota battery storage buyer crossing and use a verification across Netflix. So there's definitely interest there's definitely dollars starting to flow there.
And all of that it's pretty early for Netflix.
Small.
We're gonna be there with them for the rock, which is great and I think it's a nice place for us to be more in 12 markets with that that will continue to grow and will continue to grow it.
Our next question is from Laura Martin with Needham and company. Please proceed.
Hey, there Mark Great results. My first one is on this 80% new business. When you continue to get my question is when you go to pitch and then they try you versus your competitor.
Do you bundle your products is it that hit rate goes up over time or when you do the RFP does it always start with a single product. So you aren't really benefiting from bundling and he is in these fabulous products very best interest creating later.
But it's.
It's a great question Laura.
I wish we could bundle everything in on day, one and just sell them a big package.
But they they that's the short answer is it definitely varies yeah. There are clients that are looking for single solutions and we're displacing for example boats on the view ability deal or I guess on the brand safety.
And then we grow from there so it definitely is a bit all over the board, but it still leads us to that whole land and expand right, we want to get in and get a split in there and so that we can push other solutions to cross and when we say 80% win ratio, that's yeah that could be against a single products or.
It could be across at Buckler enterprise deal. So yeah. It is definitely a mix of different types of wins, but in either case, you know, we're looking to sell them all.
Products across our entire six categories of solutions.
And I would say in a van.
Vast majority of them were not growing it with all six of those categories covered it.
Very small portion of that.
Super Helpful. My second one is you know the thing I liked about carrying the video products for avs.
My question on pricing strategy is what is the business model for attention is it a percent of media or is it just an add on to flat fee impression.
Yeah.
Question right out of attention is set up as a CPM based product. So it's very much like measurements.
It's a measurement which is sold.
Mental.
Two our verification so think of it as an add on to verification and that's a relatively decent premium to core measurement. So it's a premium priced add ons to our measurement solutions today.
It doesn't mean that that model may not change in the future and especially as we start expanding our attention to CTV and other places.
Certainly look at different models that may drive a different type of profile for distribution.
Fantastic Thanks very much.
Got it.
Our next question is from Linda.
Lynn show with Barclays. Please proceed.
Hi, This is Frank on for Raimo, Congrats on another strong quarter today I want to stay in those new logo wins as the buying decisions still more driven by the our I pitch or have a newer products media begun to move the needle on those rfps.
A great question I think Roy is what gets us in the door right and B.
The newer performance based solutions.
At this stage still the icing on the cake right.
I can tell you they do sometimes open that door for us.
So what we watch for example, our emissions measurement solutions with scope three there's a huge amount of interest.
And looking at the environment.
Hum and transaction.
That created a dialogue, which of course came in and she can.
Sell additional solutions across the board.
But for the most part.
Social usually looking for core solutions.
We look to drive new implementations in process of course.
Supplement that with our performance afterwards.
Yes, it does.
Yes, it does.
It varies across the board at that basket of goods gets bigger it provides more opportunities to have conversations with our customers and.
And each of them has different needs and that's why having.
A broad basis that are good at.
Broad coverage across multiple different types of platforms is so critically important to us because we just want to have a big nut to capture lots of different types of opportunities.
Very helpful. Thanks, Mark.
Got it.
Our next question is from <unk>, Kim with loop capital markets. Please proceed.
Right. Thank you congrats on a solid color Marc and.
Just following up on the question about what about the expansion with existing customers. So you know you can talk about the current trends that you're seeing for the overall expansion rate for the existing customers has that been steady or has that shown improvement in recent quarters and.
And also just kind of curious if you can compare it.
That expansion rate.
Listing customer or is that more product driven or is that more driven by customer simple simply increasing their volume and adding more channels.
Yeah.
Oh I forgot that.
Nikolas tsakos.
Yeah I'll take it so.
I will say the one thing that we've seen that's consistent year on year is that the this sort of getting in with a customer and then expanding has continued.
What we what is what is really at the bottom and the core what's driving the expansion is obviously product upsell, but I don't want to forget geographic expansion. So we might start with a client in one region and then expand with volume and additional rate.
And while the growth in international that were that we experienced in this quarter was partly on new wins are there is also an aspect of it which is just geographic expansion for existing customers.
So the profile of what we're seeing in terms of expansion is our mix, it's really new products, new geographies, and obviously as new sectors become available such as tick tock, and we're able to expand as well one measure to to maybe kind of anchor the answer is the top 200 customers.
On the top 200 customers.
That number I'm sorry on the customers that spent over 200000 in the last 12 months that number grew 29% in Q4 and it grew 31% in Q1 'twenty. Three so you you see that the power of the expansion on the dollars that we're getting from those customers.
Great and then cooler I have a follow up on the gross margin was there a new higher revenue sharing arrangement.
With that big sequential uptick or and then also you know just the overall increase in cloud cost is that primarily driven by new products that require more cloud resources.
This international mix, having any impact on the gross margin. Thanks.
Yeah, so what.
What is driving the change in gross margin is a higher revenue share.
For the activation revenue, but it's not because the actual agreements or changes just had their revenues back as getting bigger. So it's a higher revenue share just because the revenue is higher and so it is impacting our gross margin from that perspective.
In addition to those costs.
Said in our in our prepared remarks, we are choosing to invest in additional cloud computing resources, which are costs are impacting the gross margin. This is a decision that we're making this year because we are expecting to see our returns in terms of us being able to show more growth.
So it is a it is a business decision to invest in to that line. In addition to the fact that activation is not a larger share of our revenue.
Awesome. Thank you so much.
Dan.
Our next question is from Mark Kelley with Stifel. Please proceed.
Hi, great. Thank you very much I wanted to go back to attention really quickly just.
I wanted to get your thoughts.
Given that there is a bunch of different methodologies that are being worked on things like eye tracking and the method that you guys are.
Use does that kind of extend the.
The timeline for some sort of standardization across the industry and.
That's the first one and then the second one is just on this new product that you mentioned.
Dive into that just a little bit more I guess, what are the moving pieces and how much of the current tech that you have can you reuse there. Thank you.
Yeah, Great question. So first of all if I address the question on the different types.
Wednesday.
Folks are trying to build retention metrics.
I think you know.
The reality of it is methodology should not drive.
Standardization.
Our standards are scant attention and engagement and shouldn't be seen as relatively finite.
Metrics that can be consistent no matter, how someone determines what attention is yep.
Yep.
Measuring reach and frequency, it's 18 to 34 year old male is the metric right. How you found that out it's not permanent.
What happens at the edge I think.
Different methodologies should slow down.
The standardization of the standard metrics that people.
There are green shoots to determine how we're going to measure attention.
I think it's they can sometimes be a full acceleration.
Accelerating discussion, but at the end of the day.
She is going to settle on.
So by definition that makes sense no matter what the methodology is what do you believe that senses and impression level methodology is the most valid its.
It's the most robust as we saw in the third.
Linear measurement world or any other world that uses panels or very small samples are.
There has to be extrapolated to the wrong way.
And many times the supply so ultimately we do feel that the most robust way of measuring it actually has to do with census level impression by impression measurement. It doesn't mean it can't be supplemented by.
By other types of panel based.
Methodology, but ultimately we think that's the one that's going to have the highest level of effectiveness and efficiency.
Around there.
When it comes to what we mentioned regarding our new prepaid products.
This is the first step and its the first baby step into taking attention metrics and launching them into the activation sphere, and we know how successful taking a measurement metric like brand suitability of brand safety can be put into activation, so the ability to soldier and optimize and measure afterwards.
So it's a first step there just like our first steps where were standard brand safety and they evolved into authentic brand suitability, which is a much more fluid a much more dynamic application in the programmatic world. We think this is kind of the first step in on which will evolve into a much more fluid much more dynamic application down there.
Road on the <unk> side.
Okay.
Alright, Thank you Mark.
Got it.
And our final question is from Youssef Squali with truly Securities. Please proceed.
Great. Thank you very much and congrats.
On a solid quarter. So one quick question for Mark and one can you call out so mark it was interesting in the press release, you mentioned market share gains across your three business lines. I was just wondering if you could just please remind us of the two or three products you feel or product.
That you feel you have the most kind of competitive advantage with the sustainability of that and and then let me call out sorry. If you mentioned this in your prepared remarks, but can you just remind us what's baked into your guidance in terms of gross margin for Q2 in 2023. Thank you.
Right.
Absolutely I'll talk a little bit about you know I think where we really excel in our in our product and our innovation I think the first is that okay.
I'm about to say, yes.
They are in the tariffs.
There are other solutions out there that try to do the same thing, but no single product out. There do you think is comparable it yes, and I think it shows that the kitchen legs and growth and as even after numerous years expand market to be able to grow at 56% year over year in Q1.
It is pretty exceptional so.
I think Andy Yes is a is an advantage that helps us grow market share it helps us.
Making deals and obviously it helps drive revenue for the business as well I think outside of that I E things.
These are unique basket of.
It's around the edges I call them around the edges, but they're they're not lesser products and.
So our advantage intention I can tell you just helped us win a major advertiser deal not because it was going to be a huge part of what they get what they want what we did around attention and said this is a differentiator between you guys and others will take your core solutions, but we're going to lean into attached down the road I think Argentina ability.
Even today around things like attention around areas like CTV and CTV view ability, where we have really unique visibility solutions and unique solutions that are detecting things like TD off those are areas, which we can talk about a lot. They don't generate huge amounts of revenue for us yet.
But when someone looks at the basket of goods. They are buying they want to look at a core solution plus innovations around the edges, it really matter and they help us close the deals.
And you said from the on the on your second question on the <unk>.
Gross margin side revenue less cost of sales it was 80% in Q1, and we expect it to remain relatively stable around those levels as we choose to continue to investing in our infrastructure. So it's a choice, we're making to invest in it.
The telephone okay. Thank you.
We have reached the end of our question and answer session I would like to turn the conference back over to Mark for closing comments.
Great. Thank you all for the great questions and I'd like to take this time and thank the DD team worldwide for their hard work commitment to our mission and for delivering another great quarter of results and also to thank all of our stakeholders, our customers partners and investors for their continued support.
Look forward to seeing many of your upcoming conferences and events have a great evening everybody.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you again for your participation.
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