Okay, welcome everyone. I'm Mark Murphy, software analyst with J.P. Morgan, and it is a great pleasure, of course, to be here with Mark Zagorski, who is the CEO of DoubleVerify, as well as Nicola Allais, who is the CFO of the business. So first off, gentlemen, can't thank you enough for taking the time to be here, and welcome to the conference. Great. Thanks for having us. Maybe you could spend a moment just to give us a very brief introduction of yourselves and DoubleVerify, just in case there's anyone in the audience who's not familiar yet. Yeah. So, I'm Mark Zagorski. I'm CEO. Nicola here is our CFO. CFO. DoubleVerify provides verification services and solutions to some of the biggest advertisers on the planet. We ensure that their ad spend across digital media is delivered to a real person, is viewable, and is delivered in a brand-safe or brand-suitable environment. So, thinking back on, thinking back on the time of the IPO, the company's grown very successfully, and the customer feedback that we've collected on DoubleVerify, it's always impressed us. You know, we'll hear these comments that we'll run into brand advertisers, they'll say, "We would never run a campaign without this. It's a must-have. It's the most well-rounded." There've been a lot of companies that'll tell us that the DoubleVerify measurement is second to none. Can you spend a moment or two helping us understand what is it that is unique about the actual platform that it kind of gets that type of an accolade from the customer? So I think maybe just try to understand what is differentiated about the platform. Yeah. So we've always thought ourselves is where we wanted to end up is become an essential part of an advertiser's playbook. We want them to think of never wanting to spend a single dollar without working with us, right? To ensure that spend is secure, it performs, and is you know, reaches who they want it to reach. And I think the way we've built that up over time and how the platform has differentiated itself is really on three main areas. The first being trust. You know, we are a measurement company. We're a verification company. They need to trust us, and the way we lean into that is by having more accreditations or more external accreditations than any other platform out there. So, A, who scores the scores? Groups like the MRC and others do that. So A, trust. The second differentiator is really around performance and the way our tools perform. When we do things like brand suitability measurement, we do so at a much more granular level than any other platform out there. We have more tiers of suitability and more levels of sensitivity than anybody else, which allows us to measure more granularly. On the fraud side, because we use deterministic fraud techniques and have our own fraud lab, which was the first in the industry, and I think it's pretty much the only one that's really at scale out there, we're able to identify fraud 8.5 times more effectively and efficiency than our competitors. So if you think of trust, performance, and then just basic features, like features of the tool set. You know, tools that we have, like pre-bid optimization tools, like Scibids, which we now employ, pre-screen solutions for social, that we do across YouTube and others. And even, you know, our broader tool set, like Attention, which we now have, an attention solution, an attention measurement solution, that is both in the pre-bid aspect or the activation aspect of our business and in the measurement aspect of the business, which no one else has in our space. It's very differentiated, and to, you know, most recently, Attention was leveraged by Netflix. They ran a test with us last quarter, to look at the engagement on CTV impressions. So, all of these things, performance, trust, differentiation, features, have allowed us to grow faster than the market, faster than our competitors, and put us in a, a unique position. And so if we try to take that, the uniqueness of the product level and try to apply that back to the business model, Nicola- Mm-hmm ... you know, the trajectory for DoubleVerify, you know, when there have been periods of, you know, huge volatility- Yeah ... you know, downward volatility in advertising, you know, you've at least in the prior cycle of that, you held onto growth, you know- Right ... that was above 20% through- Right ... through that course of that year. What do you think it is about the business model that makes it more resilient? What's unique about our model is that it's tied to the volume growth, right? So we charge a fixed fee per impression that we measure. And so as the volume of advertising that's coming to digital grows, we grow with it. We're less subject to fluctuations on the CPM side of the business, just because we're not a take-rate business. So if there is higher volatility or volatility around CPMs that are charged in the market based on market condition, we don't feel that as strongly, neither the upside nor the downside. We have a much steadier business model because we are attached to the MTMs, which we call the Media Transactions Measured. So, you know, one of the other metrics we've noticed that you do tend to provide that, you know, we don't see it too commonly- Mm-hmm ... across the rest of our software coverage, is where you'll actually comment on the win rates. Yeah. And you've consistently cited these win rates that have been 80% plus. I feel as though we can see that in the numbers, because when we look back on it, I'm not saying that everything's, you know, perfect in the industry right now, but on average, you've grown 10 points faster- Mm ... right? Than you know, kind of your number two competitor. That's over the last two years, and you've actually done that on a slightly larger scale. So... Can you help us understand where, I mean, where do you think there's a shortcoming from any of your competitors that are out there, either on the product side or the strategy vision side? Yeah, I think, you know, when we look at our overall vision, it's pretty all-encompassing. You know, we want to verify everywhere. We think it's important for us to be any place where our advertiser partners spend, so that means physically being globally in the markets where they are. So last year, we expanded further into APAC with offices in Vietnam, and the Philippines, and in Thailand, and, you know, doubled down in other, you know, markets like Singapore and Southeast Asia. So I think it's important for us to verify everywhere and on every platform. And we leaned very heavily into social over the last several quarters, and that coverage differentiates ourselves versus, you know, many in this space, particularly the point solutions that don't have the kind of coverage. But I think when it comes to kind of taking on, you know, our, our larger direct competitors, it comes down to performance of the tool set, how well we filter out fraud, how well we provide granular measurement on a brand suitability level, number one, and then more importantly, the features that we're able to provide or the functions we're able to provide. Our competitors don't have pre-bid social tools. Our competitors don't have pre-bid optimization tools, like SciBids. Our competitors are late to market on things like attention and MFA filtering. I think our investments in technology, which have been considerably more than our competitors over the last several quarters, have allowed us to advance, allow us to have strong win ratios, and keep that, you know, that 80%+ target that we've been shooting for on the wins. So, let's talk about then the 20%. Yeah. Where the 20% where you lose the business in a competitive selling situation, what is there a commonality? I mean, if you're identifying fraud 8.5 times better and you've- Yeah ... you've got the pre-bid and all this other tooling that some of the competitors maybe haven't moved as quickly, why do you lose? Yeah. I would love to make this sound very sophisticated and deep, but, you know, this is still a world based on relationships, so in some cases we'll have a CMO or a, you know, media leader who has a relationship with a competitor, and that sometimes trumps us. There's also cases where geographically, maybe that we may not be as strong. You know, we, I, you know, to be very direct, you know, we didn't open an office outside the U.S. till 2018, and some of our competitors had been there long before us. So, for some global advertisers, if we're maybe weaker in a market, we may lose because of that. We've caught up very quickly, and we've invested in that over the last, you know, several years, so I think that's become less of a factor. And then there's always the issue of price, and I think we've been able to maintain price integrity pretty, you know, pretty strongly over the last several quarters. We'll continue to do so. You know, there'll be a price at which we just won't go to, and what we find is, you know, in most cases, those customers will come back to us over time, over quality. So Mark, what... You know, as we try to understand what inning is this opportunity in, right? What, where are we in the kind of the technology adoption curve? I think you said on the Q1 earnings call, 62% of the wins are greenfield. Yep. You're defining that as it's a win where the advertiser wasn't using third-party tools for the business that DoubleVerify won. I think if we took that in a vacuum, it makes it sound like, or it conveys to us a market that is super early stages, right, in the development. But then I think we look at it, then the flip side is you already have nearly half of the top 1,000 advertisers as customers, I believe. And I think it's something similar in the top 100. So how do those two go together? Like, if we said, where are we on a spectrum of it's early stages, low penetration, versus just maturing and we've, and there's some saturation out there for ad verification? Yeah, I think this is where kind of the basket of goods that we sell really comes into play. So when we say we work with, you know, half of the top, you know, 1,000 advertisers, they could be working with us with one product in one market, right? And I think as our customers become more global, we see that there's a huge amount of growth potential to penetrate across their global entities. The upsell capabilities that we have across new solutions, I think, is never been greater as we add new solutions like pre-screened social and optimization through SciBids' AI. So I think, A, you know, we may have engagements with a lot of these customers, but we've got massive upsell capabilities across the board. You know, a couple things to note, too. Only about 30% of our measurement revenue last quarter came from outside the US, whereas, you know, arguably over 50% of digital ad spend happens outside the US. So we're still under-penetrated on a global basis as well. We've got great relationships. I think those relationships now are the launching point for further penetration, for upselling of products, further global penetration, with additional solutions around the world. Okay. So within the customers that you have, you're not all that penetrated when we look at the kind of the broader, portfolio that you, that you've crafted here. Sure. Nicola, is there any alternate method to try to, you know, estimate where we are penetration-wise? I mean, I think, you know, for example, is there any way to estimate, like if we said, "Here's the total volume of digital advertisements- Right “in the world,” do we know what percentage of them are undergoing verification today? So we did, we did an analysis at the time we went public, to try to estimate the TAM, which is a very large number, and that number, at the time we did it, was estimated to be $13 billion-$25 billion. What's important is that the percent served was estimated to go up to 50%, so it's still pretty small percentage of that opportunity being served. Mm. I think more practically, to think about, you know, what we see as the opportunity for us, is to think about just our customer base and our own metrics. We have 120%+ NRR over the last four or five years, which means that, you know, we are growing with the customers that we have. If you think about it, even at the level of a specific product, if we take ABS, for example- Mm ... which is our premium price product on the activation side, only 60% of our top 500 clients use it. So that means there's an opportunity, even within our base, to continue to have more customers using it. And even within the base of customers that use it, this is the part that's hard to evaluate, but even within the piece of the pie that uses our product, there's probably another 40% or 50% of the business that still don't use ABS. So not only do we have customers that- Yeah ... don't use it yet, but even the ones that use it don't necessarily use it on all of their volume. Because they may have other brands, other geos. They may have other brands- Yeah ... and it might take time to get to certain geographies. So the opportunity to continue to penetrate there is pretty high for us. Yeah, and let me throw out just another kind of data point, you know, a stake in the sand. We, we did some analysis recently on kind of social penetration and what our attach rate in social, and what we estimated is only about 5% of all the social impressions in the US is what we're covering right now. So think about that. There's 95% of social impressions in the US that we're not verifying. Mm. There's... I mean, look, there's a ton of volume out there for us to still tackle. Okay, and I definitely wanna come back to that. I wanna talk about- Mm ... social in- Mm ... in just a moment. But before we do, can I try to get your assessment on just the current health of the advertising market? I don't mean for, you know, your kind of small subset, the small handful. I mean for the rest, I mean for the bulk of the market. Yep. Because I seem to recall, like if we think back a little over a year, we were coming into 2023, and it felt kind of soft. I think you thought, coming into 2023, that there could be some softness lurking out there. And when we look at what has happened more recently, there's actually been an improvement. I mean, certainly if we look at advertising growth rates for Google and Meta, right? Both of those picked up in Q1, and so that actually feels like it's been kind of resilient in the face of, you know, there's been consumer softness, there's been a macroeconomic slowdown. So, what is the sense you're getting just on... If we, if we said business confidence, right, and willingness to lean in and do some advertising, you have, you have I believe you've had customers like Mondelēz and Colgate and Pfizer. I mean, you've got a lot of very big- We do ... brands. What are they telling you? Yeah, I think, you know, everyone's pretty feels okay, and I know that's not a very technical term, but everyone feels okay about the space. The challenge right now is that no one's willing to bet further than a quarter out. You know, most advertisers now have total flexibility in their spend. They can move it, especially in the digital space, where they can move it programmatically from platform to platform. I mean, Upfronts, you can call them commitments, but I can tell you, anybody who's selling Upfronts right now know that the commitments are pretty loose. Really? Right? So the reality of it is, I think advertisers are really in a world where they are playing quarter to quarter. They feel okay, generally economy's fine. They're not pulling back massively on spend, and where they're spending, they're spending where they know they can prove an ROI, and that's a key thing. So when you hear people like Google and Meta having great results, it's because they've done a lot of work, as have platforms like Amazon and retail media networks, which are booming, on trying to ensure that they can prove an ROI from spend, so tying it to an outcome, and I think that's really important, right? Platforms and media that can prove an outcome, that can tie to an outcome, or verification companies that can help optimize that outcome, like TV, I think are gonna continue to thrive in a market where there's that kind of imbalance. But what is, what do you read into that kind of mindset that they're in? Is it? It could just be very simple, they also don't know where the economy is going right now. Is it? Is that it? Because when you describe the technologies, right, and what they can do with pre-bid and programmatic, I mean, would it ever go back to really meaningful, kind of upfront long-term commitments? Would you say, like if we're going, if it becomes clear that we're coming into a booming economy, would it go back to that? You know, it's all a matter of supply and demand dynamics, and right now there's lots of supply out there, right? And whatever supply is going to work is where advertisers are gonna point their, you know, their ad spend to. Yeah. So, you know, I would be surprised if there is ever a point in the future where, you know, people would have to commit to anything. Right. And, and again, the platforms are making it easier for people to move money and to prove where that money works or doesn't work. Nicola- Yeah ... what do you think are going to be the swing factors on this? So if you try to think, let's say between now and the end of the year, what is it that would change the health of the advertising market? Because when I think, I think back on what happened in the last, you know, three, four, five years, the pandemic had a real oscillation, right? There were these, you know, supply chain, if you don't have a product, you're not gonna go- Sure ... advertise it. The recession fears will seem like they'll trigger it at times. The inflation will have an impact on the- Sure ... on the consumer. Yeah. ... Is that what you think it's gonna drive it between now and year end, or is there anything else you'd throw into the mix? I think immediately, between now and the rest of the year, you have the elections, you have the Olympics. That will obviously have an impact on the ad spend levels. It won't necessarily have an impact on our business directly, 'cause as we said, we're kind of tied to impression level, and we don't really do a lot of political ad spend anyway. But I think overall in the market, those will be more immediate factors that will have an impact on, you know, how the market reacts one way or the other in terms of ad spend. So I think, and just- Yeah ... since you brought up the election- Sure, sure ... and everyone cares about that, Mark. I think there was a point in the past, there was a comment that, you know, during election years, your advertisers are gonna need to pretty closely monitor, you know, like, politically charged, you know, content and that type of thing. And that they need to kind of do it globally, they need to do it in real time. I mean, could there be a bit of a tailwind this year as we get into it, or- Yeah, I mean- not the right ingredient? Historically, we haven't seen significant volume tailwinds. What we do see is much more concern from an advertiser's perspective. They don't wanna be uncovered during political seasons or during any type of, you know, heavy events, whether it's a, you know, political conflict someplace around the world or, you know, when we saw when Ukraine was invaded. You know, it creates more angst for advertisers. You know, two years ago in the midterms, we saw we have an election task force. We monitor what happens across sites, we monitor in what we call inflammatory news and politics. Two years ago, in states that had competitive Senate races, we saw hate speech increase by almost 30%. Mm. So, like, you know, politics and political campaigns do create more challenges for advertisers. It creates more incendiary social situations. On the open web, there's more challenges. So yeah, there is, there is kind of a more, you know, a return to quality during those phases and also a much more, you know, a much more of a need, I think, for verification solutions. We don't see volumes go up, but we do see more advertisers kind of leaning in, saying: "Yeah, I'm gonna make sure that this is, this is running, and I'm gonna pay attention to it. Okay. Well, how about on the topic of pricing? Because I'm sure everyone in the room noticed that you have a competitor, IAS, that was seeming to state that there was a competitive pricing situation happening, I guess I'll put it that way, earlier in the year. I guess they didn't use the term pricing war, but a situation. I think you've been very adamant that there really is not that kind of a dynamic out there in the marketplace, and we appreciate that. You know, but it's a little odd, right, for one provider to be saying there is and one to be saying that there isn't. So, you know, how did we end up here? Yeah, I think there is some misinterpretation of their last statements. I mean, basically, they said: "Look, we're gonna ring-fence some customers, and because we didn't wanna lose them, we lowered price to maintain those relationships." That's very different than saying: "We're going out to the market to attack our competitors with a price war." We've been very clear. We've been competing against the same group of folks for 10 years. You know, the dynamics have not changed much, which is you win deals based on performance, you win deals based on product differentiation, you maintain deals based on service, and somewhere in that list of criteria, price plays a role, right? But it's never number one, particularly when you're dealing with things like brand safety, suitability. These are things that can crush a brand if they happen the wrong way, and especially in things like fraud. I mean, a cheaper fraud solution, it's kind of like having a cheaper alarm on your house. "Yeah, I'm gonna save some money, but I'm gonna leave four windows open so people can sneak in," right? Mm-hmm. It just doesn't make sense. So, you know, pricing is always a factor, but we don't see it as the factor, and we haven't seen it any more this year than we've ever have in the past. Okay. So you've... I wanna move on and talk a little bit about what you saw with a handful of your larger customers, and I think trying to keep the full, the fuller, broader perspective. You know, DoubleVerify has been a top executing company. You've been capital efficient. It's been, it's a trusted brand. Yep. You have the best list of customers. You've grown rapidly, you've outgrown your competitors. You had, you know, so you had a little bit of an adverse change in, which I think you've said is a handful of your larger top 100. So these are big customers, retail and CPG. You described it in February coming off of Q4, and then... So it seems like it's been kind of anomalous and company specific. Those issues continued into April, right? And it, that did affect the guidance. Can you walk us through, you know, from your perspective, maybe just a bit of the timeline? Like, what, when were you realizing it, and what were the underlying causes? Yeah, I can start. Yeah, that'd be great. Um, so- Go. So this all started in January. It is the same cohort of six that we've been discussing since the beginning of the year, and basically, across these six, you have three of those six are in our top 10, so they're very large. You know, our top 100 spends $3.7 million on average. Mm-hmm. That cohort grew 40%+ year-on-year since last year. The top 100 grew 40%. On average, they spend $3.7, but out of this cohort of 6, 3 of them are in the top 10. That's a much larger spend level than $3.7. Yeah, I see. Okay. And the, you know, there are two items that happened, basically. One is they started belt-tightening, coming out of the gates at the beginning of the year. These are specific issues related to each advertiser. There's really no—it's not a retail vertical issue or a CPG vertical issue, 'cause you're not hearing in the market, and we're not hearing in the market either. We have retail advertisers and CPG advertisers that are doing very well against our own expectations. But within that cohort, you had specific issues that led to them tightening their ad spend, which obviously has an impact on our revenue, and because they're quite large on our top 100, it has an outweighted impact on our revenue. What's good from what we're seeing is that they didn't turn off any products, so it's not as all of a sudden they say, "Look, we're gonna stop doing ABS, and we're gonna start just focusing on social." And so it's just, and they remain very large advertisers for us. The mix of what they were spending remains the same. It's just less dollars that they're that's coming through the system. Can you kind of clarify, Nicola, was- Yeah. Is it a slowdown in expansion? You said something about. Yep ... they had grown 40%. Yep. Or is it, is it an actual reduction? So, like, you know, there's- Yeah ... you, maybe you were saying they're gonna go from 100 to 100, I don't know- Yeah ... 100 from to 220, and it's only gonna go to 110. Right. Or is it 100 and it's dropping to 90- Yeah ... or something like that? No, this, this cohort is spending less than they did last year. It is actually- Yeah ... gonna be down? Yes, yes. And the bigger impact, though, towards versus our guidance is that we had an expectation that this cohort was gonna grow, right? Like, last year, and based on the fact they've been advertisers for us for a very long time, this is a cohort that had been contributing a lot to the growth. So not only are they downspend year on year, but they're also of course a lot lower than what our expectations were. I think, Nicola, you alluded to this a moment ago, but I do wanna come back to this. And maybe, maybe I'll ask Mark- Okay ... to get his perspective. How do we know? Like, how do we gain confidence that if it's six situations, that they're idiosyncratic, and they're contained, versus, you know, but there's a scenario where that's like the canary in the coal mine on the economic cycle, right? And at least in my mind, I know less about advertising and hopefully a little more about economic cycles. But the higher cost of capital, you know, we would think that, you know, the consumer could get a little tired from that, and, you know, maybe it would impact those kinds of companies first, and then it would kind of fan out from there, right? Mm-hmm. It would, so you know, weaker hands that are more exposed to higher interest rates, exposed to consumer, exposed to lending, that kind of thing, and then later you kind of find yourself in an economic slowdown. How do we get our arms around that? Yeah, I mean, I think, you know... So I think Nicola noted, first off, you know, although we saw this across some retail and CPG companies, we have many other retail and CPG companies that have done according to plan, are delivering well, and growing year-over-year. So it's not vertical specific. And for these clients in particular, they're very anomalous types of activities. So one of the clients was rebuilding their entire ad stack and their entire spend and decided to kind of take a slowdown in what they were gonna spend, rebuild their team, and take several quarters to figure out what they actually wanna spend for the rest of the year. So it was very much client-specific. Another one had a division that they had to pause spending against because it was under lawsuit and under investigation, so they had to stop spending across it. A third was closing stores across the country and decided to pull back on spend. So these were very kind of client-specific issues. You know, the challenge for DV is three of them were in our top ten customers, so they were quite large. And I think, you know, usually we would be able to, you know, obviously, we've got lots of customers, lots of top customers and top brands, and we usually fill in the gaps. These just happened to be quite large, and based on the growth trajectory we expected for the group, kind of impacted us much more than we thought. And so, this is gonna drag your growth down to it feels as though we're gonna have a couple of quarters, I think, where it's gonna be around 17%. Right. Or kind of, that kind of exit trajectory coming out of the year. These customers are so large that it's like you could almost compare this to what was happening temporarily in the pandemic, right? In terms of overall impact. Yeah, I mean, you know, it's interesting because the pandemic was, you know, 3 or 4 years ago, where these custom—you know, we were significantly smaller. Right. The size of these customers is actually, you know, some of them as large as entire lines of business were three or four years ago. I see. see. Okay, okay. But, you know, the challenge for us now is we've got to refill that pipe and make sure that other customers start moving into that, that top tier. We closed deals this year like Pepsi, like Haleon, like Uber. All of these guys, once they're scaled up, will be in our top 100 customers, and some of them maybe even roll into the top 10. So, you know, for us, it's about making sure the pipeline is robust, diversified, non-concentrated, but, you know, as our customers get bigger and more global, which is a good thing, we're gonna have some of these $20-$30 million a year customers. Okay. Thank you for the clarification. I appreciate that. The, we're down to about three minutes. I thought I would just check and see if there are any questions in the audience. If you do, raise your hand, and we'll run a microphone to you. Okay, then, why don't we spend the last couple moments here talking about the social growth opportunity? Yeah. You know, this is something, you know, we've been bullish on this aspect of it in particular. You're kind of cracking into the social walled gardens. You gave us a stat a moment ago that I think it's only 5% of that volume that's getting verified. And then we look in Q1, your social revenue grew 51%. Yep. And you said it was led by Meta and YouTube, so it's simultaneously that it feels like that is succeeding. Mm-hmm. I don't know how we could have asked for more growth out of that, and yet it also, it was, like, kind of a secondary factor maybe that was weighing on things a little bit. Can you help us understand how that goes together? Yeah, I mean, social right now is still underweighted in our total revenue mix, so I think we're only around 17% of our total revenue or so is from social. So that growth obviously needs to... You know, even though it is extraordinary, and we've had over 50% growth the last three quarters, you know, still needs to catch up to the rest of the size of the business. So once that gets to be bulky, right? I think the impact of that type of growth is gonna be even more exceptional. You know, the launch across short-form video, whether it was Reels or Shorts or TikTok, is driving that growth. Plus News Feed, which we just launched in January, we launched in 7 languages. We launched in 18 more languages since, so we're now 25 languages, doing brand safety and suitability, and Meta's News Feed hasn't even caught traction yet. Like, we literally- we're testing now with 40 new customers, 40-plus new customers on the News Feed. We think that will be a growth driver for us down the road. So look, social is gonna be a, a, a significant growth driver across short-form video, across the News Feed. And, you know, as we become more global, our business become more global, a vast majority of ad spend outside the U.S. is social, so those two things go together. And for the first time in Q1 in the company's history, over 30% of our measurement revenue came from outside the U.S. So those things are all kind of running in tandem right now. And Mark, we're down to the last 45 seconds. Let me ask you one more, because I think this could be a great note to end on. What are your aspirations in social? What I mean by that is when, if you look at the market share that you could have in social, and then you compare it to what you've... Because your market share is very strong and very robust in your kind of pre-existing markets. Is there any way to think that through or to even, even just to think about how much of the social kind of walled garden inventory they would expose to you? Like, where, where could this be in 5 or 10 years? I mean, look, if you look at digital ad spend, something like 70% of it is social. Right now, 17% of our revenue is social. So we would like our business at some point to look like the ad spend business. If we're verifying everywhere, then we see a significant amount of upside coming from social, and I think we're just scratching the surface there. Okay, great note to end on. Mark and Nicola, I can't thank you enough for taking the time to be with us here. Yeah. Thanks for having us.