Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DoubleVerify Holdings Inc (DV, Financial) reported a 15% year-over-year revenue growth in Q1 2024, reaching $141 million, exceeding the top end of their guidance.
- Adjusted EBITDA for Q1 was $38 million, representing a 27% margin, which was ahead of expectations.
- Net cash from operating activities grew by nearly 50% year-over-year to $32 million, indicating strong cash flow generation.
- Significant growth in social media revenue, which increased by 51% year-over-year, driven by existing advertisers increasing their usage of DV's social measurement solutions.
- Expansion in CTV and online video, with CTV impression volumes growing by 45% year-over-year, highlighting the company's strong positioning in fast-growing media environments.
Negative Points
- Despite overall growth, measured transaction fees (MTF) declined by 2% year-over-year due to a product mix shift towards measurement, which typically commands lower prices than activation.
- DV's guidance for the full year was lowered primarily due to uneven spending patterns by select large retail and CPG advertisers, indicating potential volatility in revenue streams.
- The company noted a shift in ad spend towards social and CTV, where DV currently earns lower fees compared to other platforms, potentially impacting profitability.
- Challenges in increasing the attachment rate of DV's solutions to programmatic CTV impressions, which is crucial for monetizing this growing segment.
- The need for further product development and market adaptation to enhance DV's competitive edge in social and CTV platforms, where ad spend is increasing.
Q & A Highlights
Q: We have a lot of good metrics in the quarter, right? Attention, triple; social, 51; CTV, 45; Retail Media, 45; International, 40. Could you just maybe go a little bit more into the parts of the business that didn't perform as well? Because obviously, those numbers are all quite a bit higher than overall revenue growth. So maybe drilling down a little deeper beyond those handful of CPG and retail companies.
A: (Mark S. Zagorski - CEO & Director) Thanks for the question. In addition to that, we also saw great growth outside of the U.S. that was a positive. And so we do see some bright spots. Now obviously, where we saw some challenges is where our activation business, which has been such a powerhouse over the last several quarters. And I think a lot of that was driven by those core customers who are heavily leaned into our activation solutions, including ADS. So I think there is definitely some drag on the activation side of our business, as we noted, considering this is the first quarter that I can remember in which activation actually grew slower than measurement.
Q: Mark, can you talk about the early learnings from Meta brand safety and what advertiser conversations are like currently in terms of adoption and demand for the product?
A: (Mark S. Zagorski - CEO & Director) Yes. Thanks, Andrew. We've got -- we're engaged with just about every one of our top customers on the Meta brand safety solution. I think last -- in the last call, we've talked to something like 40 to 45 folks are testing it. The good is we're starting to wrap those tests now and activate some of those clients. So we've got a handful of folks who are now running. A bunch of them are new. And the feedback has been really positive. They like the fact now that we've got the full suite across all the solutions. As we noted in the call, we've now even extended some new aspects of Instagram as well.
Q: Maybe for Mark to start. It seems like, obviously, social is a little bit of a headwind here. But when you think about getting more attached with prebid, I guess, how is product parity for DV solution and what you have in social from a prebid perspective versus what you have with ABS and programmatic? And then just help us understand maybe what tools you have at your disposal to actually increase those attach rates on the social side. And maybe chop away at some of these headwinds that I see impacting you.
A: (Mark S. Zagorski - CEO & Director) Yes, it's a great question, Arjun. So we -- in the slides we showed, our some level of prescreen controls across a handful of social network. So certainly not as broad across activation as we have across measurement. And the depths and types of those tools are different. So prescreening, social heavily leaned on YouTube and TikTok right now is the main drivers of application. I think there is opportunity for us to expand on both of those platforms, and we are as well as look at growing out some of the things we're doing on optimization and activation.
Q: This is Frank on for Raimo. Despite the [trim] guidance, it still implies a step-up in the growth rate throughout the year. With that, what's giving you the most confidence there? And within this, how much does Meta ramping factor in, especially relative to your Q4 view?
A: (Nicola T. Allais - CFO) Yes, I'll take that question, Frank. So if you just step back and look at what we're expecting in the second half versus the first half of the year, we expect the second half to contribute about 56% of total revenue, which is in line with what we saw last year. So there is always more revenue in the second half of the year as there is in the first half. So that's one way to look at the numbers.
Q: Mark, I'd like to pick up on your comments on the opportunity in CTV. And I thought it was very interesting discussing how a majority of CTV deals are still done on insertion orders, not through private marketplaces, but that, that is changing. And actually, the role that DV can play in helping bring about that change to CTV. I just wonder if you could expand a bit more on that. Is this comment and efforts you're getting from your advertiser base to move toward that, that you can offer more attribution tools that can help move that market to be more biddable programmatically driven? I just think it's a very interesting concept. I'd love to hear some more color on that, please.
A: (Mark S. Zagorski - CEO & Director) Yes. Thanks for the question. I think this is something I've been personally (inaudible) for a while, which is the lack of transparency in CTV buying, which has led towards basically an old school way of purchasing, which is [private] PG or programmatic guaranteed buys, which are not very innovative, don't apply any data and don't really take advantage of the programmatic pipes and the elegance of the programmatic pipes that people like Trade Desk and others have. I think where we see an opportunity there is to provide the same level of granular transparency and safety and suitability performance applications that we see on a page level on the open Internet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
