DoubleVerify Holdings, Inc. Q1 FY2022 Earnings Call

Greetings. Welcome to DoubleVerify's First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. At this time, I'll now turn the conference over to Tejal Engman with Investor Relations. Tejal, you may now begin.

Good afternoon, and welcome to DoubleVerify's First Quarter 2022 Earnings Conference Call. With us today are Mark Zagorski, CEO; and Nicola Allais, CFO. Today's press release and this call may contain forward-looking statements that are subject to inherent risks, uncertainties and changes and reflect our current expectations and information currently available to us. Our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings, including our Form 10-Q and the annual report on Form 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 our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on our Investor Relations website at ir.doubleverify.com. Also during the call today, we'll be referring to the slide deck posted on our website. With that, I'll turn it over to Mark.

Thanks, Tejal, and thank you all for joining us today. I'm excited to discuss our strong first quarter performance and optimistic outlook for the year ahead. But before I do, let me reiterate our support for all of those affected by the heartbreaking conflict in Ukraine. We continue to support humanitarian relief efforts in Ukraine and have voluntarily discontinued services with Russia-based clients. With information wars raging across the worldwide web, we remain deeply committed to promoting truth and transparency and defunding misinformation as we work toward making digital advertising stronger, safer and more secure. Now turning to our results. We had a strong start to 2022 with an outstanding first quarter. Building on the solid organic growth we achieved in the full year 2021, we delivered nearly $97 million in revenue in Q1 2022, representing 43% year-over-year growth and the biggest first quarter in the history of the company. What's even more exciting is that our revenue growth was broadly distributed, driven by strong product upsell and geographic expansion momentum from existing clients as well as product activations by new clients. The resulting stronger-than-expected volume growth was the foundation for the outperformance relative to our revenue guidance. Activation revenue substantially outperformed our expectations, driven by the continued adoption of Authentic Brand Suitability with large advertisers such as Mondelez growing their use of this industry-leading product and an expanding number of international markets. Other programmatic solutions outside of Brand Safety and Suitability also delivered strong revenue growth due to new advertisers activating and ramping DV solutions on their programmatic media buys. Profitability remained solid with nearly $25 million of adjusted EBITDA generated in the first quarter. We delivered 26% adjusted EBITDA margins even as we continue to meaningfully invest in expanding our solutions, growing our workforce and operational footprint and integrating two new businesses. In addition, DV continues to achieve positive net income and net income margins, a testament to the attractive economics of our high-growth and high-margin software solutions. Our business has demonstrated strong and sustained revenue growth momentum year-to-date. March delivered the highest year-over-year growth rate within the first quarter, and the second quarter is off to a good start. We have raised our internal expectations for second quarter performance, which gives us the confidence to raise our full year revenue and adjusted EBITDA guidance beyond the first quarter beat. I'd like to highlight that DV continues to demonstrate sustained business performance in an environment of macroeconomic and geopolitical uncertainty. While our business isn't immune to the marketplace challenges that our clients operate in, numerous factors set DV apart from our peers. Our fixed transaction fee business model insulates our revenue from CPM volatility that those in the media sales business face. Our products serve to protect brand equity and reduce media waste, making them essential to advertisers. Our verify everywhere product strategy diversifies our revenue across platforms, making DV largely agnostic to shifts in ad spend. And finally, we remain in the early stages of global market penetration and have a vast untapped TAM to sustain our long-term growth, as exemplified by the fact that nearly 70% of our Q1 wins were greenfields. Now I'd like to take a few minutes to discuss our revenue growth within the context of our three key differentiators. Our rapidly growing market-leading scale, our focus on innovation and the deep level of trust we've built with our customers as an unbiased, independent partner. Beginning with scale. We're leveraging our extensive DSP coverage and wide-ranging programmatic solutions to drive further scale in our activation business. Seventy-five percent of our first quarter advertiser revenue growth was driven by activation, which had 56% higher revenue year-over-year. Activation revenue now represents 61% of our advertiser revenue. Advertiser revenue growth continues to be volume-led, and our first quarter outperformance was driven by stronger-than-expected organic ad impression volumes generated across our diversified client base. We also drove incremental revenue growth through both the growth in premium product adoption and the implementation of enhanced pricing tiers across our programmatic integration. These tiers allow us to bifurcate our pricing for display and video impressions on DSPs, ensuring that each tier is priced competitively. The tiered structure has resulted in higher fixed fees for video impressions whose pricing is now in line with that of our competitors. In the long term, we believe there may be further opportunity to raise prices on higher CPM media like CTV. The enhanced pricing and more premium product mix in the quarter supported growth in our overall MTF, or media transaction fees and, in combination with stronger advertiser volumes, delivered an exceptional start to the year. Success in activation and measurement go hand in hand as our measurement data fuels a virtuous cycle in which post-campaign insights inform continuous optimization opportunities that can be acted upon in prebid applications. When we engage a client, we immediately introduce them to the performance opportunities embedded in this process, expanding our relationship with them across new geographies and new solutions that feed the cycle. Advertisers are enthusiastically embracing the power of this combination. So far this year, we signed new logos, including Best Buy, Subway, KFC, Norwegian Cruise Lines, Travelers and Oppo, further fueling an average RFP win rate of nearly 80% since the first quarter of 2021. We also expanded across multiple additional geographies with Meta and Mondelez as we capitalize on the vast untapped TAM for our solutions all around the world. In addition, we continue to lean into our verify everywhere strategy by developing an exciting new growth opportunity within our retail client base, the emerging category of retail networks, which we are building a unique competency and differentiated leadership position. Retail media networks leverage the footprint and relationships of some of the world's biggest retailers to create entirely new advertising opportunities for leading manufacturers and affiliates and net new ad dollars for the industry. Bain estimates that advertisers' spend on retail media will grow to $25 billion by 2023. And just as our solutions drive a return on investment for the retailer on its own brand advertising spend, our platform capabilities drive a yield on retail media networks by prequalifying supply and ensuring a high-quality advertising environment that sustains optimal ad pricing. Today, DoubleVerify is the independent measurement partner for some of the largest retail media networks in the world, including Amazon, Walmart, Target, Macy's, and Kroger. These partnerships are expected to grow impression volumes and revenues as well as expand the use of DV solutions for an entirely new sector of affiliated advertisers that includes small and midsized businesses that we traditionally have not had access to. And today, we are announcing that DV has closed an enterprise deal with Best Buy, which will rely on DV's suite of measurement and performance solutions for its ad campaigns. In addition, DV will provide its services to Best Buy Ads, Best Buy's in-house media company. Turning to our second key differentiator, DV's market-leading innovation, our leading end solutions continue to drive our growth momentum. Fully-On Screen prebid targeting, our activation attention metrics specific to CTV continues to gain traction, while our CTV measurement products have delivered 55% impression volume growth year-over-year. As highlighted last quarter, over 25% of our tag-based advertiser video impressions are now CTV, which over-indexes DV relative to CTV's share of the overall market. Although it's early days, we continue to see momentum for attention as an important metric in ad buying. A study released last week noted that over 50% of media buyers agree that their organizations will invest in media attention metrics within the next 12 months, while approximately 65% agree that attention will become a currency within three years. There is clearly a market appetite for alternative currencies that power performance on premium media, and DV is well positioned to take advantage of this trend. This summer, we'll be leveraging our Pinnacle platform, which currently connects DV data to thousands of the world's top brands, to launch a free preview of Authentic Attention, delivering these unique powerful analytics directly to DV's highly scaled customer base. Year-to-date, we've measured over 225 billion Authentic Ads, all of which have been benchmarked for attention, enabling our clients to contextualize their performance against specific industries, buying channels, regions, and markets and to uncover performance drivers in the context of their specific industry vertical. We continue to believe that attention will be the next currency that advertisers rely on to drive outcomes and are excited to be the only leading verification company to have built and launched a comprehensive attention solution. Moving on to innovation and social, DV continues to have the most comprehensive and accredited suite of social solutions in the industry. On Meta, we are the only provider of both prescreen Brand Safety and Suitability protection and measurement for Facebook in stream, Instant Articles, and Facebook Audience Network. On YouTube, we recently announced that we are the first and only company to have earned accreditation by the Media Rating Council for its independent third-party calculation and reporting of YouTube video viewability for desktop and mobile. We remain excited about the opportunity to innovate new products on high-growth social platforms like TikTok and to extend our industry-leading Brand Safety and Suitability verification solutions to Meta's feed, which remains one of the largest generators of ad impressions across social media. DV, along with OpenSlate, is proud to represent two of Meta's four badged Business Partners, and we look forward to the opportunity to work with Meta on Brand Safety and Suitability coverage on the feed following the Alpha phase of their process. Let me wrap innovation with Authentic Brand Suitability, one of the industry's most innovative media quality solutions and an incredible growth driver for our business. ABS revenue grew 52% year-over-year, driven by impression volume growth with current clients, continued upsell momentum, and international adoption. Nearly 100 more clients used ABS in the first quarter of 2022 compared with the prior year period. ABS' performance superiority in reducing media waste, while safeguarding brand reputation in programmatic applications, is rapidly evolving ABS into not only an upsell opportunity for DV, but also into a competitive conquesting tool as well. 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. We continue to be the only leading independent verification company that is not in the conflicted business of selling digital ads. We strongly believe that as a trusted objective verification and measurement partner to advertisers, you can't be part of the media transaction. We expect independents to remain a key differentiator across all channels and particularly in CTV, where unconflicted accredited metrics are becoming more valuable. We are well positioned to capture the accelerating shift of linear TV ad budgets, especially with large new streaming companies such as Netflix potentially adopting ad-driven models. To conclude, we've had a strong start to the year and expect the strength to carry through to the second quarter. Consequently, we've raised our full year outlook and anticipate sustained business performance that outperforms digital advertising growth. Our business remains resilient. And as we lean into our three key differentiators: scale, innovation, and trust, we are excited about the opportunities that lie ahead for DV. With that, let me turn the call over to Nicola.

Thanks, Mark, and good afternoon, everyone. We are pleased to have delivered strong revenue growth and profitability in the first quarter. While we continue to monitor and discuss with our clients this uncertain macroeconomic and geopolitical environment, our year-to-date business momentum and current visibility are enabling us to increase our full year 2022 outlook. Total revenue growth of 43% was primarily driven by activation revenue growth of 56%. Activation revenue was led by our premium priced Authentic Brand Suitability product with revenue growth of 52% and by a greater number of clients activating our other programmatic solutions. Our social activation solutions through OpenSlate performed in line with expectations. Finally, the programmatic display and video price bifurcation, which was implemented one quarter ahead of our initial plan, also contributed to first quarter activation revenue growth. Turning to measurement, revenue grew 23%, primarily driven by the ramping of new enterprise customers that were signed and highlighted last year, including Diageo, Grupo Bimbo, and Philip Morris. CTV and social measurement volumes grew 55% and 22%, respectively. CTV volumes continue to grow due to the launch of our industry-leading products. With regards to social, DV's measurement volume growth was particularly strong in the first quarter of 2021, driven by two of the world's largest CPG advertisers activating and expanding their geographic usage of our social solution. Our long-term growth opportunities in social remain significant with new avenues for product expansion and coverage on platforms such as TikTok, Meta, and others. International remained a solid contributor to revenue growth and grew 40% in the first quarter, now representing 27% of measurement revenue. As Mark mentioned, advertiser revenue growth continues to be volume-led. In Q1 '22, MTMs were up 27% year-over-year. MTF grew 7% year-over-year, driven by improved premium product mix and by the impact of the programmatic display and video price bifurcation. Moreover, advertiser revenue continues to benefit from our industry diversification. In the first quarter, revenue from our top 100 clients grew across all sectors, with outsized growth from industries benefiting from a return to pre-pandemic levels, including travel, restaurants, and media and entertainment. Supply-side revenue grew 61%, driven by the ramping of new platform clients that were signed last year, such as Yahoo! Japan and Amazon, as well as new wins and expansion deals with publishers. Year-over-year growth also includes the impact of publisher and platform revenue from OpenSlate and from Meetrics. Overall, the acquisition of OpenSlate is performing in line with expectations of generating between $15 million and $18 million in revenue this year with the seasonality similar to our overall business. Shifting to expenses. Cost of revenue increased by $6.7 million, primarily due to an increase in costs from revenue-sharing arrangements with programmatic partners as activation revenue grew as a percentage of total revenue. In addition, the first quarter of 2022 captures a full quarter of higher cloud services costs. The increase in product development, sales and marketing, and G&A expenses is primarily due to higher people-related costs as we added 160 employees year-over-year in the first quarter. G&A also includes a $1 million increase in bad debt reserves related to our advertising revenue exposure to Russia. Adjusted EBITDA of $24.7 million exceeded the top end of Q1 guidance. Q1 adjusted EBITDA margins of 26% was higher than anticipated due to higher revenues as well as a faster reduction in duplicative overhead expenses related to the OpenSlate acquisition. Net operating cash flow was negative $2.2 million, primarily driven by normal course of business timing factors related to cash collections as strong revenue growth led to an increase in trade receivables of $11 million and cash related to employee payroll liabilities that was collected in Q4 '21 and paid in Q1 '22. We continue to have zero debt outstanding. We ended the quarter with $212 million in cash on hand and have a $150 million unused revolving credit facility. The strength of the balance sheet is an advantage for DV in a rising interest rate environment and provides the opportunity to accelerate long-term growth through strategic investments, including M&A that will advance our product and technology roadmap, open up adjacencies such as gaming and audio, and continue to expand our global footprint. Now turning to guidance. We expect second quarter revenue in the range of $101 million to $103 million, which implies year-over-year growth of 33% at the midpoint. We expect second quarter adjusted EBITDA in the range of $27 million to $29 million, which implies a year-over-year increase of 32% and an adjusted EBITDA margin of 27% at the midpoint. For the second quarter, we expect stock-based compensation to range between $9 million and $10 million and weighted average diluted shares outstanding to range between 170 million and 172 million shares. For full year 2022 guidance, we expect revenue in the range of $439 million to $445 million, which implies a year-over-year growth of 33% at the midpoint. We expect adjusted EBITDA in the range of $131 million to $137 million, which implies a year-over-year increase of 22% and an adjusted EBITDA margin of 30% at the midpoint. We have raised our full year revenue and adjusted EBITDA guidance due to stronger-than-expected performance in the first quarter, which continues into the second quarter to date. Quarterly share of full year revenue is expected to reflect normal seasonality with second and third quarter revenue representing approximately 23% and 24% of full year revenue, respectively. We expect full year margins to remain unchanged at 30% as we are accelerating investments in hiring engineering and sales talent, enhancing machine learning capabilities, and further building out the IT infrastructure to support our growth. On a sequential basis, we expect adjusted EBITDA margins to remain stable in the second and third quarters and to return to more normalized levels in the fourth quarter, which typically contributes the largest share of full year revenue. As previously disclosed, we expect capital expenditure to range between $25 million to $35 million in 2022, including investments in office space around the world as we return to office with a significantly larger employee base, which grew from 500 employees two years ago to over 800 employees today. We're consolidating our footprint in New York into a single global headquarter and are taking advantage of the opportunity to build a new approach to a collaborative hybrid environment. Our investments in people will enable DV to attract and retain the best talent anywhere in the world. Based on the timing of spending on office renovations and relocations, we expect to incur most of our full year capital expenditure by the end of the third quarter. To close, we delivered a strong first quarter and are ahead of our initial full year 2022 plan. We continue to monitor the impact of the macroeconomic and geopolitical environment on our clients' ad budgets and to engage them in regular dialogue as we successfully execute our plan for the rest of the year. And with that, we will open the line for questions. Operator, please go ahead.

Our first question is from Arjun Bhatia with William Blair.

Congrats on a great Q1, guys. It sort of seems like the business is going well. The first thing I wanted to touch on was the pricing bifurcation. I thought that there was a really interesting announcement. Mark, I'd be curious to hear if that's across all solutions, both on the premium side and the standard solutions. And then how do you think about rolling that out to other channels? I know you mentioned CTV. Right now, it seems like it's display and video. But what about social, is that another area where you can potentially introduce another pricing lever in the model here, given the ROI of the solution?

Great. Thanks for the question, Arjun. When we look at, just to be clear, when we look at the growth in our MTF or our overall fees that over-delivered in the quarter, a vast majority of that came from our product mix, right? We had a small uptake from the increase in prices, as you know, and the bifurcation of price. But we also have to note that we had much stronger positive momentum around our premium product mix on the premium side. But specifically to the bifurcation, it currently is across two categories, display and video; and across our entire solution set, more or less, on the activation side. So it gives us the ability to align pricing on those two types of components across activation in our key platform partners. So it's relatively broad-based and, again, gives us some flexibility when it comes to different types of categorization content of buyers. The question regarding further segmentation down the road, I think this does kind of exhibit an opportunity for us when we think the scale is there and the opportunity is there for us to create even further kind of bifurcation, or it would be trifurcation at that point, of pricing into specific media types down the road. So right now, it's display, video. We could see a point in the future where we want to go display, video and then potentially CTV. We are treading lightly here because we know we want to continue to focus on volume as our key revenue driver. But as we've always said, where we think there are opportunities to become more market parity or take opportunities where we think there's pricing flexibility, we're going to do so.

Very helpful. And then one more just on the broader macro environment. I know there's a lot of uncertainties out there with inflation and Europe, etc. I was wondering if you could maybe put a finer point on the model and how that might play out if advertising spend does come under pressure? Is it a scenario where, given your transactional revenue model where CPMs may go lower, which may drive transaction volume actually higher, how do you anticipate that this could play out for DoubleVerify?

Yes, it's something we're monitoring closely. Looking back to the pandemic in the second quarter of 2020, which is a great reference point for supply-demand imbalances, we saw CPMs collapse while volumes remained steady or even increased. Our model enabled us to grow during a time when the overall advertising market was shrinking by 10% to 20%, while we achieved 20% growth, highlighting a significant difference. This situation reflects our volume-driven business compared to a CPM or take rate-driven business, which describes us well. Additionally, as mentioned before, there are a couple of key aspects of our model that help shield us from the challenges facing many companies. The fundamental nature of our product is crucial, especially regarding Brand Safety and Suitability during events like upcoming elections and ongoing global conflicts, making our solution even more essential for our users. Even with individual advertisers experiencing reduced ad spend, there are still plenty of new opportunities for us to pursue. In fact, nearly 70% of the deals we closed in the first quarter were with new customers, so we are not solely dependent on our existing customer base to drive spending. Considering all these factors, while our business isn't completely immune to broader economic challenges, we are in a strong position compared to many other ad-based companies.

Our next question comes from the line of Youssef Squali with Truist Securities.

Two questions from me. One, just stepping back to where we were 90 days ago when you guys gave guidance for Q1, can you maybe just double-click on the one or two areas or products specifically that contributed to the biggest upside, to the biggest surprise to you? And then on timing for the Meta relationship with regard to the News Feed, I was wondering if there's any update there? And lastly, last quarter, you had talked about maybe rolling out on Twitter and the Reddit platforms. Maybe you can just provide an update on that as well.

Thanks, Youssef. In Q1, there were a couple of key drivers that stood out. Firstly, I want to commend our sales team for their impressive performance in cross-selling and upselling our solutions, exceeding our expectations. We previously discussed the reorganization of our sales team during our Investor Day, which brought together those selling measurement and those focused on activation or programmatic solutions into one unit. We implemented this change late last year and began seeing benefits immediately. A significant portion of our growth in Q1 came from activation, which over-delivered due to strong cross-selling and our ability to introduce measurement and activation to new clients. We added nearly 100 new clients on ABS in Q1 of 2022 compared to Q1 of 2021, marking a significant increase in our upselling capacity. Additionally, the new solutions we upsold were premium offerings, enhancing our product mix and resulting in a stronger MTF profile than we anticipated. Our commercial team deserves recognition for seizing cross-sell and upsell opportunities while promoting more premium-priced products. While we benefited from increased volume, much of this came from new users of our solutions, indicating that our growth was proactive rather than passive. Regarding the timing for Meta, there are no new updates. They made a public announcement a few months back and are currently working with their badged partners, of which we are one. They have indicated that work with us will commence later this year, and this timeline remains unchanged. Lastly, regarding Twitter and Reddit, we expect to roll out on Twitter this summer and will likely announce that soon, while the work with Reddit is still ongoing.

Our next question is coming from the line of Andrew Boone with JMP Securities.

Two, please. The first is, Mark, you've now mentioned this a couple of times in your responses, it's just the really strong new client adds that you guys experienced in the quarter. Can you just double-click on that in terms of sales execution? Or is that just more resonating in the product, just given the kind of the overall environment? Help us understand what's driving the new adds. And then secondly, can you talk about the expectations that you have following the rollout of Authentic Attention, as we think beyond these initial tests? Lay out kind of what you think this could be in terms of an addition to the overall suite for DV?

We are certainly impressed with the new client additions and how our team has focused on the synergistic relationship between our post-campaign measurement solutions and our pre-campaign activation solutions. The effectiveness of these solutions is clearly demonstrated in ABS, which is a unique offering that utilizes our measurement data to enhance performance and optimize programmatic applications on the buy side. Advertisers are increasingly recognizing the value of understanding the post-purchase outcomes and using that data to refine their targeting and filtering methods in the programmatic landscape, resulting in a robust relationship between these tools. As we have mentioned previously, our software implementations are frequently executed through RFPs, where we often compete directly with others. Our strong performance in these contests is evident, with an 80% or more win ratio since the first quarter of last year, showcasing the strength of our product. It’s not just outstanding salespeople; it’s the combination of our excellent products that consistently outperform the competition. We find ourselves gaining market share by integrating both measurement and activation tools effectively. Regarding Authentic Attention, we acknowledge that we are still in the early stages, yet we are encouraged by the continued client interest and increasing volume in these measurement solutions. Many of our clients are becoming significant advocates for this approach, and it often takes one sector to embrace it for others to follow. We are optimistic about the growing acceptance of alternative currencies in advertising, as highlighted by Horizon Media’s commitment to using alternative currencies for a substantial portion of their upfront television buys. This trend signals a shift towards embracing metrics beyond just reach and frequency. Additionally, our ongoing development of new tools, such as Fully-On Screen in the CTV space, is gaining traction and generating revenue and volume. As we observe our current clients adopting these innovations, we feel positive about what attention metrics can achieve. We previously mentioned that our performance suite surrounding attention and contextual solutions could eventually match the scale of our fundamental programmatic offerings, and we still believe this is achievable over multiple quarters. We remain optimistic about the future of attention as an alternative currency, especially as we continue to introduce more tools in the CTV space, which will create further opportunities.

The next question is coming from the line of Justin Patterson with KeyBanc.

Two if I can. Mark, could you talk about the steps to succeed in retail media? How does this compare to entering other channels? And really what investments do you need to make to get this up and running? And then secondly, perhaps for Nicola, could you talk about just how we should think about the political environment impacting the second half? There's clearly some big dollars being thrown around this year. It looks like a contentious election. Is this something that could be an opportunity for you in the second half with your product suite?

Thank you, Justin. We discussed retail media in the prepared remarks, and it’s a sector where we are very excited about the opportunities available. There is increasing discussion around it, with studies predicting potential growth from $25 billion to over $50 billion in the coming years for retail media networks. While I wish we could claim to have predicted the significance of these networks two or three years ago, we have developed strong capabilities in retail media measurement. Retailers are supporting their brands, and our strength in aiding these retailers—such as Macy’s, Walmart, and Target—has led them to approach us for assistance with their networks and tools. We didn't need to develop many new solutions to support these retail media networks for two reasons. First, we have a platform business that has been supporting sell-side platforms for some time, which constitutes about 9% of our business focusing on media sellers, including publishers and SSPs. The tools we have in this area have performed well. Our programmatic implementations allow us to filter and manage impressions for buyers across various networks. The tools we initially developed were effectively adapted for retail media networks and buyers, showcasing the versatility of our data across different environments. Our core capabilities in brand safety, suitability, fraud protection, and viewability can be utilized in many different ways for various advertisers. Lastly, the exciting aspect of retail media is that it introduces us to a new segment of advertisers. We wouldn't typically target small retailers or direct sellers for measurement sales due to their limited scale, but these retail media networks create a pathway to engage with them. Similarly, programmatic platforms like The Trade Desk or DV360 provide channels to distribute our metrics to small to mid-sized programmatic buyers. This has opened up a new market for us, which we appreciate as it is rapidly expanding. Importantly, it does not require any additional investment from us for new tools or developments, emphasizing the adaptability of our datasets.

Yes, Justin, I'll address the second question regarding the political environment. To clarify, in the past, we haven't directly collaborated with political campaigns. However, if political campaigns choose to use our activation services, we will benefit from that. More generally, considering your inquiry about the opportunity for our product suite, that's where we see potential. During any election cycle, if there is a rise in incendiary content, advertisers are likely to increase their use of our services. This presents a clear opportunity for our products. Since we haven't previously capitalized on these campaigns, we've not included this in our forecast for the second half of the year.

Our next question comes from the line of Raimo Lenschow with Barclays.

This is Frank on for Raimo. Congrats on the quarter. I wanted to ask one on the Meta announcement. I know there's obviously still a lot to sort out here, but has this served to further validate the need for independent brand safety so far? I mean have you seen any increased urgency or awareness from customers around adopting or going deeper with those offerings since the announcement?

It's a great question. I think the interesting part is the customers have always wanted this. If anything, it's validated their demands for a while. Where it has kind of pushed others is the rest of the ecosystem who either were somewhat reluctant of the closed marketing because the closed or walled-garden ecosystem, who were somewhat reluctant to work with us or kind of said, 'Hey, if Facebook isn't going to need to do it or Meta is not going to need it, I'm not going to.' As I mentioned earlier, folks like Twitter have leaned into it. We will be launching our Brand Suitability and Safety solutions with them in the feed in the next few months. We've mentioned our TikTok relationship and how that continues to grow. The interesting part is it's really kind of driven everybody else in the space who've been somewhat sitting on the fence saying, 'Do I really need third-party validation?' And they're beginning to embrace it and saying, 'Yes. The whole market is going to do it.' From an advertiser perspective, they're all in.

The next question is from the line of Michael Graham with Canaccord.

It was a fantastic quarter, everyone. I have two questions. First, you mentioned the pricing difference. Can you provide an update on international pricing? I understand it's generally lower than U.S. pricing, but I’d like to know how that's evolving. Second, I want to ask about your approach to balancing growth and profitability. You had a strong Rule of 60 profile, which seemed more like Rule of 70 this quarter, which is excellent. How are you planning to manage your projects and initiatives if revenue growth remains strong? Conversely, if growth starts to slow down, how do you feel about adjusting the business in that scenario?

Yes, Mike, I'll start with the first one. Regarding international pricing for MTF, particularly on the measurement side, the patterns remain consistent, meaning there is an implied discount due to lower CPMs outside of the U.S. compared to within the U.S. This key factor has not changed. We have not observed any shifts. In fact, as we secure larger enterprise deals that include activation with measurement, we can develop a more comprehensive solution across all our services. The notion of a discount for international expansion is still applicable. Concerning growth versus profitability, I want to emphasize that we are reinvesting in the business as we recognize opportunities, especially following our strong first quarter results. In response to your question about having enough projects, I can confirm that we do. It is still early from our perspective, and we continue to experience revenue growth that allows us to keep investing.

Yes. Now just to reiterate that, we're doing great on revenue top line, we're doing great on growth. I think this is the perfect time for us to lean into investments because we've got room to do so, right? What we want is we know there are macroeconomic factors out there that are hitting the industry a little bit. We've been largely immune to those. What better time for us to start investing is when the market comes roaring back to come back even stronger because we've got new solutions, because we've got great people and great places, because we've got sales force expansion in global markets. I think this is the time when smart companies invest, and that's what we're doing.

Our next question is from the line of Dan Salmon with BMO Capital Markets.

I've got a couple of questions, maybe a little bit more technical. And admittedly, it does not seem like these are showing up in your numbers. But the first issue, it seems like there's a little bit more noise in the ecosystem lately about how media quality companies create their products such as, for example, a contextual targeting product and how you may be using publisher data for that, whether you have the rights to use that intellectual property. Mark, I'd love to hear your thoughts on that issue as there's, I think, a few circular elements to it and any sort of legal elements to it that you think are important to highlight for your company and how you build your products. And then the second one, again, a little under the hood, but it's increasingly clear that most platforms are removing IP address from their ecosystems largely in the push towards more privacy, and we know you don't tend to measure the who, but rather the what and the how. But could you remind us how you use IP address in your methodologies for your products? And how removal of it from the ecosystem may or may not impact you?

For sure, for sure. Good, deep questions, Dan. Shows your understanding of the space, which is great. So on the publisher side, a couple of things to note. I think we have a good relationship with the sell-side, the publisher business because we actually provide them with tools that help to drive and optimize performance of their ads. We've had a relationship with publishers for years, and we've seen really zero conflict with them or based on the relationship that we have. With regard to how we build our products, we build them based on all publicly available data that we get both from the open internet and from walled gardens, right, who allow us and actually work with us to pull data together. Our solutions are a combination of things that are available via the relationships that we have directly with social networks, CTV networks, etc., as well as what's available publicly on the internet. We don't see a conflict there. As a matter of fact, we believe that everything we do around context, whether it's protecting advertisers' interests or helping direct them to premium sectors or premium contextual sites actually help legitimate publishers. There's a synergistic positive relationship with publishers that we lean into. On the IP address side, we always talk about, we don't look at the who. We look at the where, the how, the what. We leverage IP for our fraud and invalid traffic solutions, right? When we look at IPs being blocked, a lot of that's going to be done on iOS devices and issues around iOS devices, which have a relatively low penetration. Those are kind of around the edges. The big part of this to really dive into is we've built solutions that IP address is just one factor of many, many criteria that we look at in deciding whether something is invalid traffic and deciding the geography of where a user comes from and whether or not it's a bot. So IP is one part of a very, very rich and complex recipe that we put together to build our fraud solutions and one which we can certainly live without if we had to.

Our next question is from the line of Mark Kelley with Stifel.

Two quick ones. First one is on the Meta Feed announcement. I guess, given that it's a private competitor that's the initial partner, do you anticipate any incremental changes that you need to make to your solution as a result of that? That's the first question. And then the second one is on TikTok. I know you guys have a nice relationship there. And they've had a lot of recent announcements like Pulse, their contextual product that they're rolling out. Just curious if the broadening of their platform, even if they do have some homegrown solutions, does that mean that your opportunities also expand along with the broadening of their platform as well?

Sure. First off, on the Meta Feed question, the reality is we know that we've built an incredible relationship with them over the years with an extensive suite of solutions. We've been plugged into that company for several years looking at data across numerous parts of Meta. Because of that and because of the extensive nature of our platform and our solution set, there always will be incremental work to do, but I don't think it will be incremental work based on the fact that a competitor has something that we don't. If anything, the partner that they chose to start off with is much more limited in their purview of both social networks and the broader Internet as a whole. Not to say that anyone who works with Meta on the feed is going to have to do some work, but we're in a good position to leverage what we've already built out there. I don't see any distinct advantage of the partner that they chose to work with having anything special that we didn't have. We're in good shape. With regard to TikTok, we continue to be really impressed with how quickly they are not only expanding their business and meeting the needs of what advertisers are looking for, but how open they've been to third parties being part of that. They've certainly learned the lessons of how to appeal to advertisers, how to address concerns that they have and how to ensure that they can build a long-term productive relationship with advertisers. As they continue to expand and grow their business globally, it just provides more and more opportunities for us to take part in that as well.

Our next question is from the line of Mark Murphy from JPMorgan.

I want to congratulate you on a strong top line in Q1. Mark, I've noticed that several of your enterprise wins are in industries affected by the pandemic, including Best Buy, Norwegian Cruise Lines, Subway, and KFC. Should we view that as a sign of recovery for those industries? Or is it more indicative of a trend where they see your independence as a key differentiator, potentially leading some of them to switch to DoubleVerify?

It's a great question, Mark. I hadn’t thought about it that way, but it's a good observation. We've been emphasizing that our client base is quite diversified. We don’t heavily depend on the automotive sector or many of the companies affected by supply chain issues. Some of these clients have indeed returned, and a portion of them switched to us as a result of competitive takeaways. Our independence has played a role in that, but ultimately, it's the effectiveness of our solutions that truly makes the difference. Independence is an advantage, but if our solutions are strong, clients appreciate them because they achieve better returns by filtering out more impressions and ensuring a safer environment for their brands. When you add our independence and the trust we've built through our accreditations, it can really push the decision in our favor. We’re confident in this aspect and will continue to highlight our unique attributes, but the effectiveness of our tools is what truly matters.

I understand, Mark. Nicola, I have a quick question for you. Can you explain the relationship between your 43% revenue growth and the 14% EBITDA growth? Given that you've mentioned it's a good time to invest, I noticed that margins have declined by about 500 to 600 basis points year-over-year. Could you break down how much of this decline is due to structural margin pressures, like the programmatic revenue share or increased cloud service costs, versus how much is a temporary factor from hiring or M&A dilution?

Yes. Mark, I'll go straight to the answer, which is this is temporary. You can see that from the fact that we are guiding back to a 30% margin for the full year. The temporary items are, as you mentioned, M&A. The acquisition of OpenSlate is a smaller operation that was not operating at margin levels similar to ours. We're actually ahead of where we thought we would be in terms of identifying and reducing the duplicative costs in G&A for that transaction, which is why in our Q1 margins, we were ahead of our initial guidance for the first quarter. The integration is going very well, and it is temporary. By the end of the year, we will be back to more normalized margins. That’s really what's influencing the margins.

And at this time, we've reached the end of our question-and-answer session. I'll now turn the call over to Mark Zagorski for closing remarks.

Thank you all for joining. We appreciate your time and attention today. I look forward to updating you on our successes in the quarters ahead.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.