You guys good? Yeah. Yeah. All right, I think we can go ahead and get started here. Great. All right, well, thanks everybody for joining us today. For those of you who don't know me, my name is Vikram Kesavabhotla. I'm one of our senior research analysts here at Baird. I lead our coverage of the internet and digital services sector. Very excited to be hosting the conference this week, and pleased to welcome DoubleVerify to our conference today. Joining me from the company is Mark Zagorski, the company's CEO, and Nicola Allais, the company's Chief Financial Officer. Just to set the table here, we have about 30 minutes scheduled for this conversation, a bunch of topics to get through, so we'll try to cover as much as we can. With that, Mark and Nicola, thanks for joining us today. Really appreciate you being here. Maybe just to start off, for the benefit of those who are not as familiar with the company, if you could start off just giving us a, a brief overview of DoubleVerify, and we'll dive into some topics from there. Yeah, so it's nice to be here. Just to let everybody know, the sign outside that said, "Free ice cream," was not true. Just to bring you all in here, which is a very packed room at lunchtime, which is great. No, if DoubleVerify, we exist in the digital ad space, and, and what we do is we ensure the transaction between an ad buyer and an ad seller is secure, safe, viewable, and fraud-free. So think of it, we basically do verification both on a pre-bid side, so before someone buys an ad, and a post-bid side, so measurement, to ensure that that ad transaction did not involve fraud. We ensure that it was viewable by a real person, that the ad was delivered in a brand safe or suitable environment for that advertiser, and that it's aligned with the geography where that advertiser wants to spend. So it's something we call the Authentic Ad or the authentic ad, a measurement that we do majority for advertisers who are our customers. So some of the biggest advertisers in the world, folks like Mondelēz, Unilever, Colgate, all are advertisers who use our solutions in global markets around the world. Awesome. All right, so I wanted to start off kind of with some higher level topics as it relates to the industry and to your company. Maybe first just talking about the state of the macro environment for digital advertising. You know, how would you characterize the health of the backdrop right now and what you've been observing so far this year? Yeah, I think the digital ad space is fairly healthy right now. I wouldn't call it a boomer year, but I'd call it a good, solid year. We're seeing double-digit digital growth for the first time in a long time. So I think overall advertising spend is healthy, albeit it's changed, and it's kind of dynamic. It's much more a quarter-to-quarter environment that we're existing in today, and I think that's the new norm when it comes to ad spend, but overall, pretty good. Yeah. And one of the things you talked about, been talking about for a while, but certainly on, on the most recent call, it's kind of, one of the trends you're observing is this shift towards social and, and CTV within the business. I'm curious if you can talk about like what you think or is driving that trend to become kind of more prominent, within the industry, but within your company as well. Yeah, I don't think there's much new with the knowledge that, you know, a lot of dollars are going to social. I mean, that's been happening for years. I think we've seen a slight acceleration of that when it's come to the growth of short-form video, so things like TikTok, YouTube Shorts, Facebook Reels. I mean, you know, when you look at some of the data that the social media companies have released, something's upwards of 50% of the time spent on Instagram now is with short-form video. So, you know, the movement towards social is largely one that is around engagement with video, with short-form video that's driving that growth. When you look at CTV on the other side, it, it's a story of entirely new inventory coming to market that's ad-supported, right? You saw the launch of the streamers over the last few years. Now it's the launch of the streamers that are ad-supported, right? So, you saw HBO Max coming in with an ad-supported tier. You saw Paramount and Peacock with ad-supported. You now see Netflix with ad-supported, and, you know, the recent 800-pound gorilla that's launched into the CTV space around ad-supported tier is Amazon, with over 100 million users from day one, Prime users and Prime Video coming to market. So, I think whereas, you know, social has seen a shift to a kind of a new product, CTV is introducing entirely new inventory into the ad market that's changing both user engagement, and the advertising opportunities, you know, across the board. Yeah. And so when you think about that broader, broader trend towards those channels. What does that mean for DoubleVerify in terms of the impact to your company? Yeah, so I think it's, you know, to put it short, briefly, it's all opportunity for us, right? So our drive is to verify every ad impression across any type of media or platform anywhere on the planet, right? When a lot of that spend was in Open Web, that's where we focused. When that spend, you know, increasingly grows across platforms like CTV or social, that's where we focus then. We're really about ensuring that wherever our advertisers spend, we are there. And if you look at, for example, last quarter's growth, our social business grew over 50%, grew 51% last year. So we're seeing, you know, increases in social volumes and social revenue. Our CTV business also grew over 40% last quarter. So CTV impressions are up. And when it comes to the opportunity, though, that's where we get really excited because although those growth numbers are great, right now, we estimate we're only attached to less than 5% of all the social impressions in the U.S., right? So that's a very low attach rate. And less than 20% of all the CTV ad impressions in the U.S., and that's just U.S., that's not global, right? So I think there's a significant opportunity in both of those areas for us to grow. You know, it's great that we continue to lean into those areas with new products and new coverage. Yeah. So you touched on there kind of the opportunity in front of you from a volume perspective. I guess maybe if we can talk about monetization as well. So how does your monetization on social and CTV compare to other channels today, and how are you expecting that to evolve going forward? Yeah, I think, I think on, you know, you've got kind of two different stories between those areas versus kind of where we are in the Open Web. In the Open Web, we are focused very heavily on what we call pre-bid and post-bid, where we can help filter impressions that are programmatically bought, and then measure the efficacy of that filtering, either our filtering or any buying on the measurement side of our business. And that's been a, you know, growth driver of our business to date. When we look at Social, for example, our monetization is very heavily focused on measurement today, right? So the measurement, the post-bid side of that business. But I think there's opportunities for us to grow our activation business across Social down the road. We have a pre-bid solution in market now for YouTube, which continues to grow, and allows us to again make money on both the pre-bid and the measurement parts of YouTube. We've got activation solutions now via our Scibids implementation across social networks that are just being launched, so we've got activation opportunities there, too. So I think right now when we look at social, it's very heavily measurement focused, with significant activation opportunities down the road, as we build more tools and as we penetrate more platforms. When we look at CTV, it's a matter of we do both pre-bid and post-bid for CTV. I think there, the monetization really has to do more with pricing versus penetration and product. Pricing for CTV for us still is, I think we're taking a lesser opportunity of pricing increase versus the cost of those impressions. So if you look at, for example, general video, CPMs are $3-$5 if they're on mobile, maybe give or take. Connected television CPMs are $30-$40. We are still now charging the same on pre-bid and post-bid for CTV as we do for all video. So I think that that is a pricing opportunity for us when we look at monetization of those two areas. So think of social monetization being one of, you know, some increased product penetration and, and product development. CTV monetization opportunities really have to do with pricing opportunities down the road. Yeah. Okay. Maybe shifting gears to another topic, and Nicola, this one might be a good, good one for you. So if we go back to the most recent print, you know, your company lowered its guidance for the year. One of the big factors you called out was some change in spending patterns among certain of your large customers, particularly within the CPG and retail verticals. Right. You know, now that some more time has passed, it'd be great to get your perspective on just what's happening with that group of customers and what's kind of driven that volatility this year. Right. So, against all the positive opportunity that we just discussed, we have this specific issues around these six advertisers that are among the top 100, three of them are in our top 10. And you know, what we've disclosed is that our top 100 spent about $3.7 million with us last year, and that was a 40% growth year-on-year. Within that cohort, this within the top 100, this six is a large part of that 100. Three of them are in our top 10. You know, they have underperformed based on the expectation that we had for them to continue to grow. Yeah. Right? And the issues are very specific to the companies. We've mentioned that one of, one of our customers is closing retail locations, one had a legal consideration around one of their divisions, and so their ad spend is just lowered, which has an impact on our revenue. We've assumed for the rest of the year that that underperformance continues versus our expectations, and if you kind of read the print from both the February and the May periods, the total amount of the impact of this cohort is about $28 million versus our initial consensus number. Yeah. So if you were to back down into the numbers that we're now guiding to, that would give you a 22% growth rate for the whole, for the whole year, which is a very healthy growth rate. It is very specific to this cohort. We haven't seen this spread to other clients. Other clients are actually performing even above our expectations. So this is not. We're not calling it a vertical issue. As Mark said, the macro is fairly positive. Yeah. Just as a cohort, these are having an outsized impact on our numbers this year. Yeah. Just to clarify a couple of things that you brought up there. I guess, as far as the guidance as it stands today. Yeah W hat is it now assumed for that kind of specific group of customers that you talked about? Basically, we've assumed that they continue to underperform the way we had seen in the first three or four months of the year, right? Yeah. It's a very uneven pattern, and we basically just lowered the rest of the year based on what we had seen in the first four months. Okay. I think you addressed this before, but maybe just to double click on it. Are you seeing any signs of that maybe emerging in other customers so far? No or has it still been specific to that? No, yeah, we haven't changed the cohort. It is that cohort. You know, other companies within even those verticals are doing very well for us. Yeah. Okay, great. Maybe kind of shifting gears a little bit as well. So, ABS has been a big product for your company- Yeah one of the fastest growing ones for a while. I want to talk a little bit about the trends that you're seeing there. Yeah. So maybe the kind of, frame this question. So first quarter, you saw some deceleration in the product. Maybe if you can talk about kind of what drove the deceleration, but also kind of how you expect growth, the trend from here? Yeah, I think a big chunk of that decel came from, as Nicola noted, the core. Those core six customers were very heavy ABS users. Yep. So, you know, their pullback in overall media spend actually hurt ABS in that quarter. We expect ABS growth to get back on a positive trajectory for the remainder of the year. But driven by, you know, some different factors than what we've seen in the past. A lot of ABS activation growth came from core client growth or same-store sales. We're seeing a larger percentage of that now come from new customers, both new customers who are current DV customers who are turning ABS on, and new to DV customers. So, you know, we still have a significant amount of growth with ABS. If you look at our top 500 customers, you know, over 40% still are not using ABS. Yep. So we've got, you know, you know, greenfield opportunities internally, plus new partners that we're bringing on board. So we closed some big brands like Haleon and Pepsi, earlier this year. So we look at those as being activation drivers for the remainder of the year as well. Yep. Maybe your point about kind of, the strength you're seeing with new customers, that might be a good segue into one of the other higher level questions I wanted to talk about, which is, if a customer is not using measurement solutions on the measurement side or on the activation side, you know, what are they typically using right now, and what are the biggest factors that get them to sign on, with DoubleVerify? Yeah, I mean, you know, we talk about this every quarter, and for every quarter since we IPO'd, with the exception of one, a majority of our new wins have been greenfield wins, which an advertiser is not using our product or any product, even a competitive product, in that sector, right? So we still have a significant amount of greenfield. So in many cases, particularly outside the U.S., there's still a lot of education being done. There are advertisers, it's like people driving around without insurance on their car, right? Mm. There's no law that mandates verification, but there's common sense that mandates it, right? So we have to go out and educate folks, particularly out in the U.S., outside the U.S., on verification. I think that's piece one. You know, the second aspect of when we grow with verification is the upsell motion of kind of getting in with measurement first, and then selling, for example, activation solutions afterwards. That continues to create a drag between people that use one of our solutions versus using, you know, seven of our key solutions. And I think the third piece is, you know, what are they doing if they're not working with us? They may be doing nothing. There are, like, pieces, parts that they try to assemble, right? There may be a, you know, embedded free solution on one platform for filtering and maybe a localized version of a tool set someplace in one market. But as with all software, we see as enterprises become more global, as they look to centralize on single solutions, they start rolling up into a single, consistent product, right? And they want a single, consistent, independent solution that's unbiased, that has the ability to verify across all different types of media. And it's no different than traditional software motion, where a large enterprise company may use one CRM tool in one part of the world, another CRM tool in another part of the world. But at some point, they decide, "You know what? This doesn't make sense for us. We all need to be on platform X so that we can trade data." Same thing happens with verification, and we see that with large customers like Unilever and Mondelez and Colgate, who look to create a consistent verification standard in all their markets all around the world, and that gives us an opportunity to upsell. It gives us the opportunity to create global enterprise deals, and I think that's where the opportunities continue to create themselves. Yep. So I want to continue along that path with some other things from a product perspective and some of the more recent changes. So maybe first on Meta, right? Earlier this year, you launched brand safety and, and suitability solutions there, on Feeds and Reels. Curious if you can talk about just what the initial feedback has been, to that product being available and, and how it's been performing so far. Yeah, I mean, it was a long time coming. We've been working with Meta for years. But really, the kind of crown jewel of Meta, which is the News Feed, where a vast majority of their traffic comes from, vast majority of revenue, and a vast majority of ad dollars go to, has always been out of touch. So the ability for us to launch that in January was really a milestone moment. Since then, we've been testing the solution with around 40 of our top customers, many of those in our top 100 cohort group of customers, so large customers testing it. Feedback has been great. I think that they've been looking to have the same type of measurement on the News Feed that they've had everywhere else. Let's put it directly, you know, this is the same measurement they get in the open web. It's the same measurement they've been able to do on YouTube. It's the same measurement that they can do on TikTok. Now that they can do it in the place where probably spend a vast majority of their social dollars, I think has been seen as a big opportunity. I think it also unlocks an opportunity for us, whereas prior to, you know, having news feed coverage, we only had about 50% of our top 100 advertisers using us on Meta. If you compare that to, for example, YouTube, where over 90% of our top 100 customers use us, you see that there's a pretty big opportunity or a delta in our ability to upsell and get cover our top 100 customers. You know, last year, something like $40 million of revenue came from Meta. If you think about, you know, if we can create the same type of penetration on Meta that we see on YouTube, you know, there's an opportunity to double that revenue there. So feedback's been good. We've got great top customers testing it, and you know, we're excited to continue to grow that opportunity. Okay, and then maybe if we could also talk about Scibids, which you acquired last year. Maybe if you can just talk about the key capabilities that that now brings to DoubleVerify and what's been resonating the most in the early feedback from customers. Yes, Scibids is a really unique solution for us. We're the only platform in the market that has the capability to do dynamic bid optimization on with multiple variables, and do so across platforms like The Trade Desk and DV360. We're testing it now across some social platforms as well, and what that does is it allows us to take any data point or any KPI that an advertiser may want, and we launched this with, for example, DV's attention, and optimize reach and cost against attention. So multivariable. How do I ensure that I'm getting the best optimal bid to drive attention levels up, drive reach up, and drive costs down? It basically builds custom algorithms to solve for those solutions. The uptake has been great. We've closed 18 DV customers, so since we acquired them, 18 of our own customers, nine of those are our top 100 customers. So we're getting big DV advertisers to employ this bid optimizer into their systems. It also enhances the value of DV data, right? So we can pull things like attention signals in there. We can optimize against viewability in there. So not... In the past, think of all those pre-bid activations were very binary, viewable, not viewable, high attention, not high attention. You had to make a choice, right? Between using a filter to optimize against that or not. Now, you can say, "Ah, let me see that against cost. Let me see that against reach. Let me see, viewability across a whole other bunch of KPIs." So it means our data, or really anyone's data, can be employed in a much broader fashion, rather than a binary filter, which says, "Filter yes, filter no." And I think, it's been exciting. We've closed deals with it. We have now folks that use competitive measurement tools, that use competitive measurement tools using Scibids, which is awesome. That gives us a foot in the door, with advertisers who may have said, "You know what? We're not ready to change our enterprise employment of verification and measurement. It's not. But we love this thing. We want to use this." That gives us a wedge in the door, and that allows us to now further have discussions with advertisers who maybe weren't interested in making any changes. Yeah. Okay, maybe to shift gears a little bit, Nicola Yeah. A couple of questions for you in terms of the numbers and what's been going on this year. So maybe first, just looking, going back to the guidance for fiscal 2024, you know, the range implies some revenue acceleration in the back half of this year. Could you talk us through kind of the main drivers that are gonna support that acceleration in the back half of 2024? Sure. So, just to anchor the first half, second half, right? Yeah. So the first half, we're guiding to about 15% growth and then 18% the second half. The mix, there's always more revenue in the second half, right? So the mix of revenue between the second, first and second half in 2024 is not so far off where it was in 2023. But the accelerators that we're putting into the guidance are, there's three main ones. One is the large advertisers that we signed, like Pepsi, Haleon, Uber, those ramping, which they're doing. New client wins, I mean, we're actively out there looking at large enterprise clients. And continued momentum on social, which Mark spoke about a lot. Against that, you have obviously the continuum, the performance of the cohort of 6, and then we've been pretty measured around how many of the tests will turn into a paid customer for the brand safety in the second half of 2024. That hasn't changed. We've always been fairly measured and know that it will take some time to contract that out. Yeah. Scibids is a big opportunity, is performing to our expectation, but it could also do better sooner. Those are kind of the two large ones that, you know, we could see some upside against what we've guided to. Yeah, and then in terms of, you addressed some of this before Yeah W hen we talked about large customers, but in terms of kind of the visibility into the year at this point and Yeah Y ou know, how you feel like you've accounted for some of the drivers of volatility so far this year. Like, what kind of gives you confidence in the range as we look at the balance of the year? Yeah. So I think, again, the big driver this year is this cohort of six, and we Yeah F eel like we've de-risked the year based on the underperformance that we saw in the first four months. But I think, you know, this is a visibility question a little bit Yeah W hich is, you know, 56% of our business is now on the programmatic side of the equation, which is a fluid channel, right? Advertisers can turn it on and off, you know, as they need. Right. In general, advertisers don't really have to commit to more than a three-month period, right? They have so many options to be able to put money at play later in the year and kind of adjust their ad spend, that, you know, it is an environment where visibility is just a little bit shorter. We feel good about what we see on the measurement side because we need to see their campaigns, and that kind of instructs us a little bit as to what we're gonna see on the programmatic side. So we feel good about the visibility that we have, and again, all the drivers that I just mentioned is really what's gonna drive the second half overperformance for the first half. Yeah. Okay, and maybe if we can touch on pricing a little bit Sure A s well. Yeah. It's been, you know, a topic for investors so far this year. Curious what you're seeing in the pricing environment. I think on the most recent conference call, you said it's been stable on Yeah On a per product basis. Is that still the case today, and what have been kind of your observations there? Yeah, I think, I mean, look, we, we've been in the market for 10+ years with the same competitive set, right? So it's not as though the environment has changed. I mean, I would say it's kind of business as usual in terms of price for everyone, which is price is part of the equation when you have an RFP, when a customer is doing considerations around which vendor to use, but it's, it's hardly ever the decider factor, right? Especially when you have a product suite that's superior, and we have more products to offer to a client. Price is always part of the conversation, but it's generally not the deciding factor. Yeah. You're correct that the overall mix, shifting more towards measurement, towards social, which is more heavily international, is gonna have an overall impact of lowering the average MTF that we, that we charge per impression. That's okay, because it's a broader expansion for large clients globally. So yes, what we said is, you know, per product, the fee hasn't changed. It's just that the mix of the business is changing, which is okay. We're not driving that. It's just where the advertisers wanna be spending. Yeah. As you look at the portfolio, and Mark, you touched on this a little bit in the CTV kind of description, but where are the places where you think there's the most pricing power that still kind of remains? Right O r opportunity for pricing to be a tailwind for your company? I mean, CTV is the obvious one, right? Yeah. If you take the benchmark of CPMs, where the advertiser is actually spending per ad slot, you know, the gap between what we charge and what they're paying is much larger on CTV than it is for a display ad. Yeah. And so that we're gonna remain very focused on just verifying everywhere, get the impressions first, and then at some point we'll talk about pricing. But it's very important for us to be able to verify everywhere and make it very seamless for the advertisers to just turn on our service and not have conversation around: Why is this price different here than there? Yeah. Okay. So we talked about some of the, you know, factors influencing this year, kind of the first half, second half dynamic. Just as we look beyond 2024 Sure K inda how do you help investors frame the long-term kinda growth profile for DoubleVerify? And then also, if you could talk about the margins as well. How should we think about the framework for this business? Yeah. So, the two numbers I'll give is, NRR has been over 120% for the past five years. Obviously, this year it's gonna be impacted by this cohort of six, and then our margins has been at around 30% for that full period as well. Those are not bad numbers to think about in terms of what's gonna drive the future of the business, right? Like, once you take out this cohort of six, you kinda have that, the power of the 120 kind of powering on top of new sales, on top of new products. The 30% margin is a number that we see as a healthy margin that allows us to continue to invest into our business. So we're very focused on top line growth, not just for us, but also for a proof point that we're becoming kind of the currency in the market, right? We're gaining market share. It's clear from the financials that we report. And so if we're able to continue to invest into that number, right, and continue to show superior top line growth, I think a 30% margin is something that we can, you know, we can invest within those ranges, and that works very well for us. What are some of the kind of key areas of investment for the company? It's gonna be R&D. It's gonna be marketing and sales is gonna be opportunistic. If we see markets where we're not, and we can kinda, you know, have a beachhead into a new market, we'll do that. Yeah. That will be opportunistic, as opposed to R&D, which is really where the innovation comes to have the next product available in the market, even before the advertiser knows they need that product. Yeah. Okay. Maybe kinda staying along that thread of profitability, just can you talk about capital allocations for this business? Yeah. You know, how do you think about your priorities there? Yeah. I know you just recently announced the share repurchase authorization. Yeah. Where does that rank between kinda your uses of cash today? Yeah, so in the last quarter, we had $300 million of cash, which is a nice amount of cash. To speak about the buyback, you know, there was an opportunity there, right? We changed guidance by less than 5%, and the price, the share price went down by more than 40%. It's an opportunity. We authorized a $150 million share buyback. We think that that's gonna be something that's gonna be, you know, at a pretty regular cadence, right? So nice use of cash. Obviously, M&A remains a big priority for us. It has allowed us to kind of, you know, take our distance versus other players in the market, and that M&A, you know, the threshold for M&A is still gonna be geographic expansion, additional capabilities, or adjacent products that can just expand our own product roadmap faster than if we were to buy, to build it ourselves. Yeah. That hasn't changed either, and it remains pretty high priority. Yeah. Okay. We're coming up shortly on time here. I wanted to leave a little bit at the end just to give you all a chance to address. You know, is there an aspect of the DoubleVerify story that you think is underappreciated by the investment community? Or maybe said differently, is there something in particular that you wanna highlight here, just as we kinda think about final messages for the audience? Yeah, I'd say two things. The first is, the core value proposition that we offer to advertisers has not changed since the day the company started, since the day that we IPO'd, or since yesterday, which is, we ensure that their ad spend is safe, is viewable, and secure. That is incredibly important to advertisers in every different medium, whether it's social, CTV, mobile, you know, open web. So the value prop hasn't changed, and it's seen in our GRR, which has been over 95% for the last five years, right? Customers stick with us. We are incredibly important to them, and we grow with them over time. I think that's the first piece. The second piece is, we are much bigger than just one line item of growth, right? I mean, there's a lot of focus on our activation, on our ABS tools, but when you look at the levers of growth for us moving ahead, going back to that core value proposition, it's social. As social continues to eat everything and looking at 50% growth last quarter in our social business. It's international, where for the first time ever in the company's history, over 30% of our revenue came from, measurement revenue came from outside the U.S., whereas over 50% of ad spend comes from outside the U.S. So we've got a huge gap there to make up. And it's new products, right? It's new products. We've, you know, a majority of our customers use a minority of our products right now, which means that we have an opportunity to upsell over time. So when you look at the growth levers of international, of continued expansion across new media, and across upselling of different products, it's like we've got a lot of different ways to grow, and I think there's a lot of focus on specific things when there's a broader portfolio of opportunities that go back to that core value prop, which hasn't changed at all, which is advertisers need us. They want us. We're independent. We drive safety and trust in their spend, and that will never change. All right, well, that's probably a good place for us to wrap up. Mark and Nicola, thank you both for joining us today. Thanks for those of you in the room. If you have any follow-up questions, you know, feel free to reach out, and it's a good place for us to end it there. Thank you. Perfect. Thank you.