DoubleVerify Holdings, Inc. Q2 FY2024 earnings call

Key Milestones - Second quarter was pivotal with reacceleration of revenue growth, fueled by social and CTV measurement momentum and supply side platform growth. - Achieved high end of revenue guidance, exceeded profitability and cash flow expectations. - Measured more video impressions than display impressions and more impressions outside North America than within for the first time. ### Product Segment Progress - Social: Social measurement revenue grew 44% YOY, with growth in short-form video on platforms like TikTok, Meta reels, and YouTube shorts. Launched brand safety and suitability measurement solution on Meta, with over 30 advertisers new to DV on Meta. Free screen solution for YouTube drove 30% YOY growth in social activation revenue. - CTV: CTV measurement impression volumes grew 55% YOY. Partnered with a leading streaming network to launch a program level measurement solution. Authentic attention solution powered by impression-level data saw approximately 300% YOY growth in measurement impression volumes. - Retail Media Networks: Supply side solutions delivered over 50% revenue growth, with retail media platforms like Amazon and Walmart driving expansion. DV measurement TAGs accepted on over 100 key global retail media networks and sites. - Open Web: Activation revenue increased 12% YOY. ABS showed some momentum, Scibids expected to exceed expectations in H2, and open web activation solutions benefited from Google's cookie change and political spending potential.

DoubleVerify achieved second quarter 2024 revenue of $156 million, a 17% year-over-year growth. Revenue grew across all three lines: activation, measurement, and supply side. Social measurement revenue grew 44% year-over-year. CTV measurement impression volumes grew 55% year-over-year. Supply side revenue grew 26% year-over-year. Activation revenue increased 12% year-over-year. Gross margin was 83%, and adjusted EBITDA was $47 million, representing a 30% adjusted EBITDA margin. Net cash from operating activities totaled $36 million for the second quarter.

DoubleVerify raised the midpoint of its full-year guidance. Third quarter revenue is expected to range between $167 million and $171 million, representing a 17% year-over-year growth at the midpoint. Third quarter adjusted EBITDA is expected to range between $49 million and $53 million, with a 30% margin at the midpoint. Full-year 2024 revenue is expected to range between $667 million and $675 million (17% YOY growth at midpoint), and adjusted EBITDA between $206 million and $214 million (31% margin at midpoint). The second half of the year is expected to contribute approximately 56% of full-year revenue, with an acceleration to 18% revenue growth from 16% in the first half.

Potential delays in onboarding and ramping up MOAT customers, impact of macroeconomic factors on spending by certain CPG and retail advertisers, and competition from other players in the media quality and performance solutions space.

Q: With Moat exiting the market, how much of their business is up for grabs and how many new logos came from them?

A: There are still a good number of Moat customers in play, including both advertiser and platform opportunities. Already made traction with customers like Pepsi, AB InBev, etc., but still many in play.

Q: Can you talk about the level of adoption of brand safety and suitability within the Meta news feed?

A: Greater than 30 new advertisers had not worked with them on Meta before, including AB InBev, Best Buy, ELF Beauty, Choice Hotel, Helion, J&J.

Q: How do you think about the building momentum around revenue as you execute against partnerships?

A: Have a lot of arrows in the quiver with investments in people and technology, including AI and automation, and new customer closers will build against growth profile.

Q: Drill down on Scibids. What's the conversion rate and is it an upsell?

A: Scibids is an additive upsell sold as a percentage of media, not bundled, and has traction with customers outside the core bundle.

Q: Talk about cost philosophy as revenue has load to 17% level?

A: It's an investment philosophy towards areas to accelerate market share, with margins still above 30%, and focused on gaining share through investments.

Q: On ABS slowing in 2Q, any additional pressure?

A: Softness was due to a cohort of six heavy ABS spenders, but existing user expansions and upsells with other customers are expected to boost ABS growth.

Q: On MOAT withdrawal, how much extra resources needed?

A: Pretty well staffed to handle, may need small incremental headcount but nothing significant.

Q: On political component and impact on business?

A: Not a huge direct tailwind, but social volumes may increase, and open web news engagement could benefit. CTV growth not impacted by other events.

Q: On retail media revenue breakdown and growth gating factors?

A: Activation portion exists in off-site buys through DSPs. Growth will come from activation and supply side, with no major barriers other than potential dollar shifts.

Q: On Scibids integration and timeline?

A: Integrated sales, technology, and overhead teams, with work ongoing on UIs and data set integrations, on track with expectations.

Q: On social pricing dynamics?

A: Social activation solutions are premium priced, with potential for significant bump in MTF as we expand into social activation.

Q: On MOAT customers ramping time?

A: Still some ramping as advertisers test and implement solutions, but deal pressure is high.

Q: On Scibids growth confidence?

A: Strong conversions in H1, scaling customers, and healthy CPMs give confidence in H2 growth.

Q: On social activation mix and Meta adoption among top 100 customers?

A: Social activation is a small percentage of total activation. Nine of top 100 were testing Meta brand suitability in H1, with some converted and others still testing.