Greetings. And welcome to the DoubleVerify Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tejal Engman, Senior Vice President of Investor Relations. Thank you. You may begin.

Good afternoon. And welcome to DoubleVerify’s second quarter 2023 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 the information currently available to us and 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 our 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 will be referring to the slide deck posted on our website. With that, I will turn it over to Mark.

Thanks, Tejal, and thank you all for joining us today. I am excited to discuss our second quarter results and to share the significant progress we have made across multiple fronts, from product innovation and channel expansion to new enterprise logo wins and international growth, as DV continues to fire on all cylinders. In addition, I’d like to discuss our pending acquisition of Scibids, a global leader in AI-powered digital campaign optimization. Scibids AI makes DV data more impactful and accelerates our evolution from protection to performance. This transformative acquisition combines our media quality and performance data with Scibids’ AI-powered real-time optimization algorithms to drive superior ad KPIs and tangible business outcomes for advertisers. Scibids will help make our sizable and successful activation business bigger and even more essential for marketers and significantly differentiate our programmatic offering in the marketplace. But first, let’s talk about the quarter. We grew second quarter revenue by 22% to nearly $134 million, above the midpoint of our guidance range. We achieved second quarter adjusted EBITDA of $40 million, representing 30% adjusted EBITDA margins and exceeding the top-end of our guidance range. Revenue in the first six months of 2023 grew 24%, against an elevated 43% prior year growth rate. The key drivers of our first half 2023 revenue growth included continued strong adoption and expansion of our ABS product, increased social platform coverage and volume, and a growing number of international wins with key global customers. DV remained highly profitable and continued to generate strong cash flow from operations. We delivered approximately $25 million of net income and generated over $32 million of net cash from operations in the first half of 2023. Our customer win and expansion momentum continued in the second quarter. We won several large new enterprise logos including Uber Brand Marketing, Sam’s Club, Pizza Hut, Revlon, Liberty Mutual and Bose in the United States, Lululemon and UNICEF in EMEA, Spotify in MENAT and the Ministry of Foreign Affairs in Japan. Notable existing customer expansions include DeBeers activating DV Measurement across multiple international markets, Swarovski activating DV’s Measurement and pre-screen social solutions in Japan and Avis adopting ABS in the United States. Our win rate across all opportunities remained above 80%, with 54% of our second quarter wins being greenfield, which we define as wins where the advertiser wasn’t using third-party tools for the business that DV won. This high rate of greenfield wins speaks to the underpenetrated total addressable market that continues to fuel DV’s growth. We expect new client wins to propel our successful land and expand strategy, through which we grew the number of advertiser customers generating more than $200,000 over the last 12 months by 20% year-over-year. In addition to generating strong core revenue growth, we remain focused on investing in long-term strategic initiatives that leverage our core verification offering to evolve our customer value proposition from protecting media spend to optimizing media performance. Our verification business continues to create a proprietary data asset of unparalleled scale and granularity. DV analyzes approximately 300 billion data transactions, including 60 years of video content, on a daily basis. Our investments in performance solutions have leveraged this vast data asset to create measurement products such as DV Authentic Attention, as well as pre-bid, programmatic, tools such as ABS that are based on aggregated measurement data and contextual intelligence. The acquisition of Scibids represents the latest and potentially most impactful of these evolutionary investments to unlock even greater value in these proprietary data assets. Scibids is a cutting-edge, Paris-based startup founded by a team of data science PhDs and machine learning engineers who are driven to bring programmatic advertising into the AI age. Scibids builds independent AI that automates and optimizes programmatic buying of digital ad campaigns agnostically across demand-side platforms. Their AI dynamically generates custom bidding algorithms aligned with client KPIs and desired outcomes. Scibids’ powerful and sophisticated machine learning technology can dynamically action DV’s granular measurement data within a programmatic ad campaign. DV and Scibids’ combined customer value proposition is to deliver industry-leading campaign performance based on bespoke ad KPIs or business outcomes, by offering a continuous feedback loop between activation, measurement and optimization. This loop is powered by Scibids AI technology and DV’s trusted media quality and performance data that is comprehensive, granular and actionable in real-time. For example, Scibids can dynamically optimize advertiser campaign performance against customizable KPIs and desired business outcomes using DV’s Authentic Attention Measurement data. The algorithmic bidding function that Scibids builds can deliver results that far outstrip static programmatic segments, ushering in a new era for results-driven advertisers. In addition to DV’s proprietary data, Scibids AI is able to ingest a wide range of data points, including first-party data, third-party contextual data, alternative media quality and performance measurement data, programmatic bid stream data and pricing data, all to help inform advertisers’ programmatic strategies in a way that maximizes campaign performance. This means that even if an advertiser is not a DV Measurement customer, we can still help them deliver powerful results from their programmatic spend and that ad spend can be across any of the major DSPs where Scibids complements their platforms and has seamless integrations including The Trade Desk, Google’s DV360, Microsoft’s Xandr, Comcast’s Beeswax and mobile platform Kayzen. We have seen the power of Scibids’ AI technology firsthand. In partnership with Scibids, we recently launched the DV Algorithmic Optimizer, where Scibids AI ingests impression-level DV Authentic Attention data and campaign cost data, enabling advertisers to automatically optimize towards the best performing inventory at the best price, while maintaining scale. In the results of the initial tests, on average, we observed a 45% reduction in media CPMs, a 63% increase in Attention levels and a 95% increase in impressions won. The Scibids acquisition also has the potential to enhance and differentiate DV’s Measurement business. Not only will our existing Measurement data be significantly more actionable and impactful in programmatic activation applications, but Scibids AI will also help enhance the precision and effectiveness of measurement datasets such as Authentic Attention. By weighting Attention signals against conversions and other ROI measures, DV can construct customized Measurement metrics based on specific KPIs and/or verticals. Simply put, the results of algorithmic optimization in activation applications will help enhance the construction of a truly differentiated measurement data set. Scibids shares DV’s values of transparency, independence and innovation. Both companies are ad server and DSP agnostic and do not buy or sell media. Both companies’ solutions are privacy-forward and don't use persistent tracking technologies, such as third-party cookies or Apple’s IDFA. And both companies have a legacy of leaning into machine learning-based AI. Scibids will bring nearly 20 data scientists and engineers to DV, which will augment and accelerate our existing machine learning programs with critical AI talent that is difficult to source. To demonstrate the power of Scibids AI and explore the future of AI-driven innovation at DV, Scibids and DV’s executive leadership teams along with industry experts will be hosting an in-person Innovation Day for the investment community on Thursday, September 14th, from 1 p.m. to 4 p.m. at The Standard Hotel in New York City. The event will also be webcast live. As you can tell, we are excited about the opportunity Scibids creates to help our customers harness the power of their DV data to optimize and maximize campaign performance. Acquiring this AI-powered technology allows us to meaningfully elevate our customer value proposition across activation and measurement, while also increasing our potential total addressable market with performance-driven advertisers, creating broader upsell opportunities for current and new customers. I would like to turn now to the key growth milestones we achieved since our last earnings call. I will discuss these in the context of our three core differentiators; our rapidly growing scale, our focus on market defining innovation and the deep level of trust that we build with our customers as an unbiased independent partner. Starting with our expanding coverage scale, we continue to grow our measurement breadth across key social platforms with a focus on short-form video, which has a steep growth trajectory and an impressive ad load that offers a unique opportunity for advertisers and DV. HubSpot’s State of Marketing 2023 study expects short-form video to see the most growth of all marketing strategies this year as one in five marketers plan to leverage short-form video for the first time in 2023. To that end, we are excited to expand our viewability offering on Meta to include measurement on Facebook and Instagram Reels, a rapidly growing short-form video environment with a highly engaged user base. With Reels plays exceeding 200 billion per day across Facebook and Instagram, Reels is sought after by advertisers, who can now leverage DV’s viewability and fraud measurement technology for insights into which of their ads are being seen by real users and driving results for their campaigns. We are also excited to announce the expansion of our quality solution on YouTube to enable measurement on YouTube Shorts. DV’s launch of viewability and fraud measurement across YouTube Shorts inventory will help advertisers ensure that their ads are viewable and safe from fraud, thereby providing performance insights across a greater volume of ad impressions on YouTube. To conclude on short-form video, we continue to build momentum with TikTok, which contributed nearly a third of our social measurement revenue growth in the second quarter as customers rapidly activated the DV Authentic Ad. We generated more TikTok revenue in the second quarter than we did in the full year 2022 and TikTok remained our third largest social revenue generator, after Meta and YouTube. International markets fueled a good deal of our TikTok growth, where we continue to focus on maximizing our language coverage and plan to be live with brand safety and suitability in 25 additional markets in the second half of the year. Overall, we grew social measurement volume by 41% year-over-year in the second quarter. Our social revenue growth in dollar terms continues to be led by advertisers leveraging our solutions on Meta, which generates almost half of our social measurement revenue. In addition to offering a greater breadth of verification coverage across its platform with Reels, Meta remains committed to providing advertisers with a deeper level of transparency through brand suitability controls and verification. We continue to engage with Meta on brand suitability verification and measurement solutions and look forward to rolling out an expanded DV Authentic Ad in the coming months. Turning to CTV scale, we grew CTV measurement volumes by 32% in the second quarter, outpacing the 14% CTV revenue growth rate expected of the industry in 2023, according to IAB’s research. And since we launched viewability verification and fraud protection coverage on Netflix’s ad-supported plan in March, we have seen four consecutive months of growth, both in the number of advertisers using our solution and in impression volumes. We expect long-term growth as Netflix continues to innovate its advertiser offerings. In addition, we continue to scale across retail media networks, which generated 81% year-over-year revenue growth in the second quarter, with revenue contribution across all three business lines. Our measurement tags are accepted on over 50 of the key global retail media networks and sites, including 12 of the top retail media platforms and 39 major retailers. Moreover, our partnerships are global, with DV’s measurement coverage of retail media spanning all major geographies, including the U.S., EMEA and APAC, with international partners such as Sainsbury’s, CitrusAd and Zitcha working with DV for verification. Staying with scale across ad networks, we were excited to share the news last week of a new partnership with Uber’s advertising platform to help advertisers verify their media spend and maximize campaign performance across the Uber Journey Ads ad format in the United States. Uber’s mobility ad inventory represents a new source of measurement impressions for DV, across an ad network with growing scale and unique first-party data. We look forward to bringing Uber’s advertisers a higher level of trust and transparency as we broaden our quality coverage across another major tech platform. In addition to this supply-side partnership, we are also excited to announce that we have added Uber to our roster of NASDAQ 100 advertisers, which includes the likes of Amazon, Meta, Airbnb and Adobe. Uber Brand Marketing selected DV as its exclusive measurement partner for its own media spend globally, across all lines of business and geographies. This is another great example of the network effect between our platform and advertiser businesses. DV is uniquely positioned to be embedded in the world’s largest advertising platforms as a verification partner and to be selected by the brands that power these platforms, including Amazon, Meta, Adobe and now Uber, to verify and protect their own advertising spend. Shifting gears to scale through international business expansion, we have continued to grow our commercial footprint to 27 locations, through the launch of business operations in Indonesia, the Philippines, Vietnam and three more locations in Europe. We grew international measurement revenue by 39% year-over-year in the second quarter, with EMEA growing 33% and APAC delivering 50% growth. International growth has strongly rebounded as advertisers activate DV’s social solutions across more markets as we expand platform coverage and roll out additional language capabilities. Turning to innovation, we launched two new programmatic attention optimization solutions in the second quarter. I touched on the DV Algorithmic Optimizer, a product recently developed with Scibids, that puts DV’s clients at the forefront of using AI to power attention-based bidding. We also launched the DV Universal Attention Segment, which is a pre-bid programmatic segment powered by best-in-class machine learning and data from DV Authentic Attention. In CTV, we found that attention measurement for CTV was the single most requested attention solution from advertisers. So we joined forces with TVision to develop a solution that will combine DV’s scalable ad exposure data, including viewable time and fully on-screen measurement, with TVision’s viewer presence and eyes-on-screen ad attention signals, that will deliver the most holistic attention measurement solution for advertisers looking to gauge their performance on CTV. To conclude on the differentiated pillar of Trust, we are pleased to be expanding our partnership with Roku as we work jointly to investigate and mitigate emerging ad fraud schemes in CTV, following our successful neutralization of Smokescreen, a sophisticated ad fraud scheme that targeted CTV devices, siphoning over $6 million monthly from unprotected advertisers and publishers. In addition, DV’s viewability and programmatic analytics are integrated with Roku’s OneView platform, with a plan to expand DV’s quality and performance offerings in the coming months. Finally, we continue to demonstrate our commitment to providing identity independent, privacy-forward, secure tools by completing several annual privacy-focused third-party attestations, conducted by TrustArc and further expanding their scope to cover the full enterprise. These include TrustArc’s International Privacy Verification and the APEC-CBPR and APEC-PRP certifications. We remain the only company in the ad measurement and verification space to achieve these privacy-focused attestations. In addition, we have successfully achieved SOC 2 Type II compliance and have been issued a report with no qualified opinion for the fourth consecutive year, cementing DV as the leader when it comes to global data privacy compliance, data protection and information security, which is the foundation of trust upon which we have built our market-leading technology. To conclude, we are successfully building on our core differentiators of scale, innovation and trust and strategically positioning DV for industry leadership and market share growth for years to come. Our strategic investment in AI-powered campaign optimization technology like Scibids AI is expected to unlock new growth for our activation and our measurement business as we continue to create dynamic, market-leading solutions that drive real outcomes for our customers. We continue to expand coverage across social to provide advertisers with verification everywhere and for every ad impression. And we remain laser-focused on growing and realizing our solid pipeline of new and expansionary deals that will create an even stronger long-term growth trajectory for DV. With that, let me hand the call over to Nicola.

Thank you, Mark. And good afternoon, everyone. We delivered solid revenue growth and strong profitability in the second quarter and the first half of the year, in the face of elevated prior year growth rates. The business performed broadly in line with our second quarter expectations. Revenue came in slightly above the midpoint of our guidance range while adjusted EBITDA exceeded the top end. Second-quarter revenue growth of 22% was driven by 29% growth in activation revenue, 16% growth in measurement revenue and 4% growth in supply-side revenue. Advertiser revenue, which includes activation and measurement, grew 24% year-over-year and continued to be volume led. Second quarter volumes or MTMs were up 24% year-over-year, while price for MTF was unchanged. The price impact of the continued mix shift toward premium-priced solutions and the ABS price bifurcation that was implemented this year was offset by strong revenue growth in international, where our fixed fees are lower than in the U.S., commensurate with media costs being lower in international markets. Additionally, the price bifurcation of our standard programmatic products last year contributed to 10% MTF growth in Q2 2022, creating a substantial prior year comparison. Activation revenue was led by ABS, our premium-priced solution, which delivered 51% revenue growth in the quarter and comprised 56% of activation revenue compared to 48% in the prior year period. ABS volumes were up 48% and the product’s fixed fee was 2% higher. ABS’ growth was largely driven by existing ABS users continuing to expand their ABS usage with new advertiser activations also contributing to the growth. Turning to measurement, revenue grew 16% driven by 41% growth in social volumes with nearly half of our social revenue growth coming from markets across EMEA and APAC. Overall, international measurement revenue grew 39%, as compared to 18% in the second quarter of last year, primarily driven by existing customers expanding their use of DV’s solutions on social platforms. International represented 27% of total measurement revenue in the second quarter. We expect measurement growth to continue to be driven by existing customer expansion on social, as we roll out the DV Authentic Ad on Meta Reels and YouTube Shorts and expand language coverage on TikTok. We expect non-social measurement growth to be mainly driven by new enterprise logo wins and therefore subject to the timing of when new customers sign, onboard and ramp their ad campaigns. Supply-side revenue grew 4%. The majority of our supply-side revenue is generated by platforms, which include SSPs, DSPs, marketplaces, ad exchanges and retail media networks. DV’s successful platform offering is well penetrated across the ad tech ecosystem and we expect incremental revenue growth to come from the adoption of new product offerings, such as DV’s Brand Safety Floor, by existing platform customers, as well as new wins such as Outbrain, who signed a multiyear contract for brand safety and fraud avoidance in the second quarter. Shifting to expenses, cost of revenue increased by approximately $7 million, primarily due to an increase in costs from revenue sharing arrangements with programmatic partners tied to higher programmatic revenue, as well as an increase in cloud services costs. Revenue less cost of sales was 80% in the first half and is expected to remain relatively stable for the remainder of the year as we continue to invest in scaling the infrastructure needed to support our growth. Similar to the first quarter, product development expenses increased due to our ongoing investments in AI and machine learning engineering resources. Sales and marketing expenses increased as we launched business operations in several international markets, executing on the international business expansion plans we discussed last quarter. G&A expenses declined year-over-year due to lower compensation and insurance expense, despite a $1.5 million increase in bad debt expense primarily related to a reserve for the MediaMath bankruptcy. We continue to expect both sales and marketing and G&A to benefit from our growing scale. Total non-GAAP operating expenses, which exclude stock-based compensation and other items for comparability, grew 18% compared to our topline growth of 22%, reflecting the efficiency of our operating model as we scale. We achieved second quarter adjusted EBITDA of $40 million and adjusted EBITDA margins of 30%, partially due to G&A savings and a pace of hiring that was slightly slower than planned. We delivered approximately $13 million of net income, as compared to $10 million in the prior year. Net operating cash flow was $32 million in the first half of the year, as compared to $27 million in the first half of last year. Capital expenditure was approximately $8 million in the first half of the year, as compared to $14 million in the first half of last year, which included the expansion of our global headquarters. We ended the quarter with approximately $295 million in cash on hand. Turning to guidance, we expect third quarter revenue in the range of $135 million to $141 million, which at the mid-point implies growth of 23% year-over-year. We expect third quarter adjusted EBITDA in the range of $39 million to $41 million, which at the midpoint implies an EBITDA margin of 29%. For the third quarter, we expect stock-based compensation to range between $15 million and $17 million and weighted average diluted shares outstanding to range between 173 million and 175 million shares. Following a second quarter topline performance that was broadly in line with our expectations and accounting for some friction as a few of our large advertisers transition to new DSPs, we are reiterating our full year 2023 revenue guidance range of $557 million to $569 million, a year-over-year increase of 24% at the midpoint. We are also reiterating our adjusted EBITDA guidance range of $171 million to $179 million, which continues to represent an adjusted EBITDA margin of 31% at the midpoint. Turning to Scibids, we have agreed to acquire this industry-leading AI technology for $125 million with a mix of cash and equity. Approximately $66 million of the purchase price is expected to be paid in cash, which we will fund with cash on hand and the remaining consideration will be paid in DV common stock. The deal is subject to customary adjustments and with potential additional consideration to be paid based on Scibids’ achievement of certain performance milestones by year end 2023. While we are not providing 2024 guidance today, we expect Scibids to generate between $15 million to $17 million in 2024, based on a 30% to 40% year-over-year growth rate. The company is near breakeven today and we see the opportunity to scale Scibids’ product across our customer base. We plan to enhance Scibids platform and value proposition through investment in people, software, processes and systems, and by building scalable data integrations between our two companies. We anticipate completing the transaction by the end of the third quarter and plan on updating 2023 guidance to reflect the impact of Scibids after the transaction has closed. To conclude, we delivered a strong first half and remain focused on successfully executing against our plan for the rest of the year. And with that, we will open the line for questions.

Thank you. Thank you. Our first question is from Michael Graham with Canaccord. Please proceed with your question.

Hi. Thank you and congrats on the steady growth. I wanted to dive into the AI topic and Scibids for a minute. And Mark, you mentioned in the past that the interplay between Measurement and Activation is a key multiplier for your business. Can you just talk first about how does Scibids fit into your business model? Should we think of it as another product like Authentic Attention that advertisers can use or is it going to be more integrated into your product roadmap? And then just talk about more broadly how do you think it impacts your long-term product roadmap?

Thank you for the question, Michael. We are genuinely excited about this acquisition. The short answer is that it serves both as a separate product that we can leverage in activation applications with our data for advertisers, and it enhances our overall product offering by utilizing insights gained from activation implementations to improve our measurement capabilities. I see three main areas where it impacts our business. The first is revenue, as it is a product we will sell alongside them to utilize our data. Additionally, it serves as a significant differentiator for us; no other company in our industry has a similar product, which distinguishes our range of offerings. This will drive revenue and provide a competitive edge. Lastly, it opens up new markets for us. We often get asked how we engage with performance-based advertisers or direct response teams, and this acquisition really addresses those questions, as it is an activation tool that can use our data to meet specific performance indicators like customer acquisitions. In summary, it impacts our revenue, strengthens our differentiation, and expands our market reach. I see it as a highly effective enhancement to our future capabilities.

Okay. Thanks a lot for the extra color there, Mark.

Thank you. Our next question is from Matt Swanson with RBC Capital Markets. Please proceed with your question.

Yeah. Thanks guys for taking the question. For Nicola, you have got a history of being very pragmatic around guidance. Could you just kind of talk to us about how you are thinking about the macro environment for the rest of 2023 and then maybe just given the durability of your volume-based model, can you maybe help us think about how potentially a better spending environment shows up in that MTM, MTF equation?

Yeah. I will take the question, Matt. So as we have said since the beginning of the year, I think, from our perspective, the macro to us is something that is not providing strong tailwinds this year. We have taken sort of a conservative view and sort of a limited outlook view, right? So we are kind of looking at it on a quarter-by-quarter basis based on what we are seeing to be the spending pattern of our advertisers. So we are not seeing it as a strong tailwind. This is certainly not something that we put into our guidance consideration for the second half of the year. If there were improvements, I think, what you would see is an MTM growth number that would be above what we have been able to achieve in Q2, which was so 24% growth in MTM. I think what you would see is an increase in the MTM part of our equation. The MTF is actually a good story. It was unchanged this quarter just because our international growth is very strong and that has an impact on MTF, because the price of media outside of the U.S. is obviously lower than in the U.S. But when you say 39% growth in the rest of the world, on the measurement side of the business, that’s actually a positive, which has an impact on MTF sitting at basically flat. So if the market were to really rebalance strongly, I think, our assumption of no tailwinds returning to the strong billings.

That’s really helpful. And if I could squeeze one more in for Mark. Greenfield wins still really impressive at 54%, but maybe like a slight step back than what we have seen in the last few quarters. Could you just kind of talk about the dynamics of the quarter, whether it be competitive, vertical, geo-specific that led to that change or were the last few quarters of being high 60%, 70%, was that more the anomaly from a greenfield perspective?

That's a great question, Matt. There was indeed a slight decline in the percentage of greenfield wins. I believe this is somewhat of an anomaly considering our future outlook, especially regarding our activation business and the Scibids acquisition. Nonetheless, we still outperformed many competitors, which is a positive aspect. It's important to note that winning against competition often requires dislodging an existing product, which can take longer than starting from scratch with a new client. We appreciate both greenfield and competitive wins, as all wins are valuable, though some may take a bit longer to activate, particularly the competitive ones.

Thank you. Our next question is from Laura Martin with Needham & Company. Please proceed with your question.

Thank you. Okay. My first one is on Attention. Mark, you are sort of been spearheading the pivot towards Attention has been really great resonance. Love the deal with TVision, because they are the other sort of leader. You guys are the tip of the spear in redefining Attention. My question is, can you bring us up to date on this metric pivot towards attention in the digital space? But secondly, my recollection is they are based on a panel, so I would love your thinking about why a panel plus your super high tech is worth more than just your standalone solution to Attention? That’s my first.

That’s a great question, Laura. We are indeed expanding the definition of Attention, and the TVision deal illustrates that well. The combination of our strong panel and the extensive reach of granular data is likely the best solution available. The panel that TVision uses offers unique insights into behavior, especially regarding TV, that a granular data set alone cannot provide. This partnership enhances our offering significantly, creating an unmatched attention solution. Additionally, when paired with the capabilities from the Scibids acquisition and our recent partnership announced over a month ago, we’ve already seen outstanding results in our initial trials on Attention, with one impressions increasing by over 90% and attention levels rising notably. By integrating a panel with granular data metrics and a sophisticated optimization tool for Attention activation, we are positioned uniquely in the market as we transition from acceptance to large-scale commercialization.

Super helpful, Mark. My question is about Roku, as mentioned in your press release today. I appreciate the work you’re doing with them. Firstly, you charge $0.08 per Measurement and $0.21 for Activation. Why focus on connected television when you could use that effort to promote other Meta or TikTok products and gain a lot of impressions from both existing and new clients? The fixed fees associated with CTV seem less appealing compared to the social platforms, especially since CPMs are higher but with fewer impressions available. Thanks very much.

It's a really interesting question, Laura. The short answer is that our customers are present in CTV, and our goal has always been to measure every impression across all platforms and markets globally. We aim to have a diverse range of offerings so that when advertisers spend on platforms like Roku, Meta, the open internet, or through programmatic buying, we are included. Being in CTV is important for us. While the volume of impressions there differs significantly from what we see in short-form video, which has been a rapidly growing area for us on platforms like TikTok and Reels, advertisers want us to have a presence everywhere, including CTV. This approach of providing a comprehensive range of services is crucial when securing enterprise customers, like Sam’s Club or Uber, who advertise across multiple channels and expect us to be involved. It's vital for our business.

Thank you. Our next question is from Raimo Lenschow with Barclays. Please proceed with your question.

Thank you for your insights. I apologize for revisiting the macroeconomic context. Considering the reports from various companies today, it seems the situation is worsening incrementally. Could you elaborate on your thoughts regarding the current climate? At the start of the year, it appeared things were improving, but is there a sense that caution is increasing? How would you describe the overall feel of the market? I know you've addressed this already, but I’m eager to understand more. Thank you.

Yeah. Raimo, what I would say is, we haven’t seen much of a change. I would say that, what we have seen in the market is also the benefit of lower comps for some of these companies, which as you know, our model is fairly steady in a good environment versus a bad environment, especially related to CPMs. So we have not seen a material change in the environment and we are taking a cautious approach towards it. The one number that we do track is Magna, they published in June and didn’t essentially change our forecast for the year. So I would say those are the two things we are seeing probably some lower comps for some of the companies that are reporting and a general unchanged environment for us and our view that we will take the tailwinds only when they really appear.

Yeah. Okay. Perfect. And then how are you thinking about like setup in terms of like the growth internationally was really strong. As we go further through this and people talk about soft lending, how do you think about that balance of like maintaining that high discipline around margins and profit, which you do and well done and also getting ready for any potential improvement in underlying business? Thank you.

Yeah. Raimo, I think, we have been pretty clear that we have continued to invest even when the market has not been extraordinary and I think that investment is going to pay off. Whether it’s our R&D expenses, which we continue to lean into to build new products, new coverage or the acquisitions that we just did. We are ready when the market tailwinds do materialize to take advantage of those, I think even in cases where we are looking at some of the enterprise clients that we have added to our roster, their spend has been relatively muted. I think when they are ready to start spending as well, we will be able to experience that. So closing lots of deals now, even if those deals aren’t huge and investing in our technology and spending money on acquisitions, all of those things together are going to put us in a great position when that tailwind does hit.

Okay. Perfect. Thank you.

Thank you. Our next question is from Youssef Squali with Truist Securities. Please proceed with your question.

Thank you very much. I have a question for Mark and another for Nicola. Mark, regarding the Scibids acquisition, congratulations on that. At a high level, you mentioned the expansion of the total addressable market due to this acquisition. Could you provide more details on how this positions you to enhance performance? Additionally, could you quantify the potential total addressable market and identify your competitors in this space, especially since you are increasing your focus on AI in your offerings? Nicola, could you discuss your guidance for the year, specifically for the second half, and your expectations for growth in Activation compared to Measurement? Thank you.

Great questions, Youssef. Let me explain how Scibids creates new business opportunities for us. First, it introduces a completely new set of customers focused on specific performance KPIs. These are direct marketers who base their business on CPA or acquisition metrics. While brand safety has been a consideration for many, it's not always a priority. Scibids provides us with new tools to create unique offerings for these customers, thus expanding our potential client base. Second, when looking at the share of digital ad spend represented by programmatic, it accounts for more than 85% when search is excluded. We are still far from reaching that level in terms of our revenue from programmatic. Therefore, Scibids presents us with opportunities to tap into customers who allocate a significant portion of their budget to programmatic advertising. Lastly, as I mentioned in the earnings call, we can leverage our data within Scibids, which we have already started doing with our attention data sets and in other experimental areas. Importantly, Scibids can also utilize any data set, even those of our competitors, for optimization. This allows us to reach an entirely new audience, including potential customers who may currently use competitor data but could become DV Measurement customers in the future. By enhancing our programmatic toolsets, we can engage with new types of customers and even those who aren’t part of DV Measurement yet. This indicates a significant expansion opportunity for us. Programmatic advertising is a multibillion-dollar industry, and Scibids operates on a take rate model. Although we aren't ready to pinpoint exact figures, I believe this represents substantial total addressable market growth for us.

Youssef, your question about the second half and the mix of the business, we basically ended the first half with roughly 30% growth on Activation, roughly 20% on Measurement. I think we are continuing to be excited about the contribution of ABS in the Activation line and we are really excited about the contribution of social in the Measurement line. So I think those two are good indicators of what we are thinking will continue in the second half. As a result, obviously, you will end up with Activation representing a larger percentage of our total revenue. So the key growth drivers of those two lines remain the same as what we see in the first half.

Thank you. Our next question is from Eric Sheridan with Goldman Sachs. Please proceed with your question.

Thanks so much for taking the question. I wanted to focus on slide 12 on the Retail Media Network disclosure that was in the deck for the earnings. Can you talk a little bit about maybe how we should be framing up the opportunity set you see when you lay out 12 retail media platforms, 39 retailers, the number of global partnerships? How should we be thinking about elements of both client growth, spend, scale building in that business on a multiyear view versus what you have already seen in the recent past? Thanks so much.

Yeah. It’s a great question, Eric. I mean, obviously, Retail Media Networks continue to be a bright spot in our business, growing at over 80% this year and the nice part about it for us is that it covers all three line items of our business, right? So we work with folks, Retail Media Networks, both on the Measurement side, the Activation side and the supply-side. I think we have kind of given rough numbers on a quarterly basis, what this looks like. Generally, it’s grown. In Q1, it grew over 100%. This quarter, it’s grown over 80%. We are working with some of the biggest customers, Retail Media Networks out there like Target, Kroger, which we closed around this time last year, Macy’s, Dollar General, Walmart, Amazon, big companies. What does this mean for us as potential upside? I mean, this was a business now, which I think is approaching $30 million, $40 million for us a year, which I think is pretty substantial coming from zero just a few years ago, and I think as that sector continues to grow and as these companies continue to more sophisticated our business opportunity gets stronger and stronger. The other thing it does is, we have got a really strong footprint of CPG companies that we work with. So folks like Colgate, Mondelez and Unilever. It just makes our connection with those folks that much stronger, right? So those are traditional CPG companies, but they plug into these ad networks, these Retail Media Networks. So it creates a stickier relationship when we are touching both the Retail Media Network and the CPG company as well. And so, I think, our ability to grow here, I think, is continues to be strong, but it has a residual impact of really creating a stronger vertical offering for our overall business, particularly CPG companies.

And maybe if I could just ask one follow-up there, because this was kind of where I was going as well is to the extent to which this acquisition you are doing today talks about pooling sort of your data with third-party data and you think about elements of data that come in from the CPG world potentially into Retail Media. Is this another AI optimization theme that we could see brought back to some of these retail media networks? Thanks.

Certainly. The way Scibids operates involves multi-variant decision-making for a single ad impression, and integrating Retail Media data, such as transaction or shopping cart data, offers a significant advantage for this model. This addition opens up further opportunities, and we are actively exploring potential partnerships and clients that can benefit from Scibids and AI bidding. Retail Media is particularly relevant since it focuses on sales, making it a response and performance-driven area, which aligns well with our objectives.

Thank you. Our next question is from Vasily Karasyov with Cannonball Research. Please proceed with your question.

Thank you. Good afternoon. I wanted to follow up on your prepared remarks. You mentioned that the results for the second quarter were generally in line, which suggests they might not have met expectations. Could you provide more detail on the areas where you experienced unexpected softness? Additionally, you noted that there is some disruption as certain advertisers are switching DSPs. I understand that you are distributed across all major DSPs, so there shouldn’t be significant friction, correct? Also, once this transition is complete, should we anticipate a benefit or an increase in revenue growth rate in the second half of the year, possibly in Q4? Thank you.

Sure. Let me address them one by one. In the second quarter, we were essentially in line with expectations, having slightly surpassed the midpoint of our guidance. The factors contributing to our Q2 revenue were similar to those in Q1. We experienced over 50% growth in ABS, 41% growth in social volumes, and 39% growth internationally. We also had a strong client win rate, exceeding 80%. However, in Q2, we noticed that the ramp-up period for some of our larger client wins in the measurement area took longer than anticipated, which delayed some revenue recognition. This situation resulted in us landing at the midpoint of our guidance. As we continue to acquire larger enterprise clients, we might experience similar delays in ramp-up times, particularly for clients that are not starting from scratch.

Okay. Thanks.

In the second half of the year, we anticipate some challenges due to large clients who are in the process of transitioning from MediaMath as their DSP to another platform. We are collaborating with them on this transition, but it may take some time to fully adapt to a new trading platform. While this creates temporary friction, we do not expect it to significantly affect our long-term revenue trajectory. The current situation is just momentary. Additionally, we are optimistic about new growth opportunities, such as Meta Reels and the upcoming launch of YouTube Shorts, which will contribute to social revenue growth. A key opportunity for us remains ensuring brand safety on Meta, which we hope will enhance our revenue contributions next year.

Thank you.

Thank you. Our next question is from Arjun Bhatia with William Blair. Please proceed with your question.

Perfect. Thanks for taking the question. I wanted to ask about new form factors, Mark, as you kind of expand into new form factors on social with Reels, right? So whether it’s short-form video or eventually to come with the news feed, what does the typical cadence of existing DV customers turning you on look like? Is there a friction point where they are deciding do we turn on DV or are they doing a cost benefit? What is that decision-making like and what does that timeline look like?

It’s interesting to see that with the rollout of Reels, there has been minimal friction, likely due to high demand in that area. We observed a steady increase in users activating additional coverage. However, when examining our coverage of Facebook customers, it's worth noting that slightly over 50% of our top 100 customers who measure Facebook are actually utilizing our services. This indicates that there’s still significant growth potential to encourage more users to engage with social platforms. As Nicola mentioned, enhancing brand safety and suitability across our social networks will be crucial. Currently, despite our efforts with Reels and our upcoming launch on YouTube Shorts, we’re still focusing on viewability and managing invalid traffic. The true opportunity in social lies in achieving brand safety, as demonstrated by our growth on TikTok and in short-form videos. The rollout of simpler products like IBTN and viewability solutions has been positive, but we still have work to do in providing what users really desire, which is enhanced brand safety and suitability across social networks, where we still see exciting opportunities to explore.

All right. Perfect and that’s super helpful. And then going to Scibids, it sounds like as we move more into performance, especially with the Scibids acquisition, it seems like you might have a role to play in directing ad dollars and ad spend to different DSPs and correct me if that’s wrong. But how does that impact DV’s role as an independent player in this ecosystem where you are not a part of any conflict if advertisers decide to move ad dollars from one network to another?

It's a great question, Arjun. The acquisition of Scibids and its role in the digital ecosystem creates no additional conflict and remains independent, just like we are in media transactions. Scibids collaborates with Trade Desk, DV360, Xandr, Beeswax, and likely more DSPs in the future. The idea is that they provide tools that advertisers can use, similar to our activation tools, allowing advertisers to transition between platforms. For both us and Scibids, the goal is to be present across various platforms, remaining agnostic to where we operate, and ensuring that we have the technology in place wherever our advertisers choose to allocate their spending. This approach mirrors our current activation business, whether it's with ABS or standard brand safety and suitability segments or our contextual targeting segments. We aspire for these tools to be universally accessible and driven by DV data. Therefore, the acquisition of Scibids does not alter our independence or theirs, and they have established excellent relationships with these platforms since their inception.

Okay. Got it. Thank you for taking the questions.

Thank you. Our next question is from Mark Kelley with Stifel. Please proceed with your question.

Hey. Great. Thanks very much. A couple of quick ones just on Scibids. I guess you talked about getting access to new customers. Can you give us a sense for the types of customers you now have access to? Is it more small and medium business types of clients, is it geographic specific, given that they are based in France? That’s my first one. And then as a follow-up to that, I guess, your 30% to 40% growth rate assumption for next year for Scibids, does that bake in accelerating growth, given that you have got a large sales force or is that consistent with the current trends for the Scibids business? Thank you.

Sure. Regarding our customers, it's not just about geography, even though having additional resources in EMEA is beneficial given the recent positive trends in our numbers. It's also not merely about size. Instead, it comes down to their goals and KPIs. Advertisers are seeking specific results and may not prioritize viewability or brand suitability as much, as long as they can achieve their desired performance. They are looking for flexibility, where they might accept slightly lower viewability or suitability in exchange for improved outcomes. The way Scibids’ algorithms operate allows for a spectrum of options rather than a strict yes or no. This attracts various advertisers who focus more on performance rather than strict viewability standards. This shift in advertiser type is quite interesting for us. Additionally, about geography, it's noteworthy that 60% of their business originates from international markets, which is significantly different from our own business ratio. Having connections outside the U.S. is advantageous for us.

And on the question for the growth, the 30% to 40% growth is, it doesn’t assume an accelerate growth. We are buying an early-stage technology. We are going to spend a lot of time just making sure we understand the technology and how we integrate them to our own technology. So there will be growth above the standalone growth. But understand this is an early-stage technology and their current revenue pattern is really dependent on a few clients. So this is about the technology, understanding how we are going to use it on our side. The revenue will grow in the future years, but this is really about technology first and foremost.

Okay. Great. Thank you both. Thank you. Our next question is from Andrew Boone with JMP Securities. Please proceed with your question.

Good afternoon and thanks for taking my question. I will keep it to one. I wanted to go back to Facebook. It sounds like social has some real tailwinds, and as we think about brand safety coming on to the feed for next year, Mark, there’s the real potential that you guys could have a step function change in terms of revenue. And so the question is really, you guys have held EBITDA margins at 30% and that’s kind of how you guys have managed the business. If there was a step function change as we think about the potential of Facebook, would you be willing to let margins expand or would you maybe reinvest now back into performance. How are you thinking about controlling kind of the EBITDA profile with the potential of a significant supply source coming online? Thanks so much.

Yeah. Thanks, Andrew. It’s a great question. I think we have been pretty adamant around this idea that we are going to continue to reinvest in the business. Now it doesn’t mean that margins won’t expand a point here or there if we do open up a step function when it comes to an inventory source or a platform like Meta. But those platforms also come with some work and some scaling around it, too. So I think we continue to focus on revenue and topline, keeping that EBITDA margin right in the sweet spot where we have it. So we can continue to invest. We talk a lot about land and expand, and we are still focused on landing lots of customers. And I think as we have noted several times so far today, some of those customers may be totally new opportunities for us through algorithmic, fee-based solutions. So we want to continue to invest there, too. So I think we are going to keep that band fairly tight like we said. We have done a pretty good job over the last three years, keeping in that zone, and I think we are going to stay in that zone.

Thank you.

Thank you. Our next question is from Brian Fitzgerald with Wells Fargo. Please proceed with your question.

Thanks, guys. Maybe two really quick follow-ups on Scibids. Congratulations on the deal. I wanted to know maybe if you could explain a little bit how their customer algorithms work alongside the bid algos from the DSPs, how they deal with advertisers who do use cookies and other identifiers? And then quick clarification, did you take a bad debt charge regarding MediaMath in 2Q or should we expect that in 3Q?

Yeah. I will answer the second question first. We did take a charge in the second quarter. Bad debt increased by $1.5 million in the quarter versus prior year and that includes the impact of MediaMath.

Okay.

On the topic of Scibids and their relationships with the DSPs, the custom algorithm operates alongside any additional optimization that the platforms might have. Leading platforms like The Trade Desk and Google have expressed their enthusiasm about integrating your own algorithm, allowing it to function based on what advertisers prioritize, while also providing support in terms of optimization afterwards. This creates a mutually beneficial relationship between the platforms and the tools provided. Regarding the data points that advertisers are utilizing, they are primarily not cookie-based; particularly the data we are integrating into these systems, such as Attention and viewability, is free from identifiers and cookies. They uphold the same level of privacy that we've maintained and still effectively drive real key performance indicators. We see this as a complementary addition to our business and believe it's a growing area that will not only boost our activation efforts but also enhance our overall measurement capabilities.

Excellent. Thanks. Thanks, Mark. Thanks, Nicola.

Thank you. Our next question is from Nick Zangler with Stephens. Please proceed with your question.

Hey, guys. Thanks for fitting me on here. Just a little bit deeper on Scibids, if you don’t mind. I mean, so you mentioned Scibids, it automates and it optimizes programmatic buying across DSPs. I am envisioning Scibids technology is designed to deploy and allocate ad spend on behalf of the brand, maybe following a rule set across KPIs as dictated by the brand or agency. So effectively, I am thinking AI trading here, but I just want to understand if I am correcting that, if I am understanding that correctly or not or perhaps this technology is more designed to act like an AI assistant for traders. Just any further deep dive here on how Scibids is deployed would be helpful?

It's primarily about optimizing bids and ensuring media spending is directed towards impressions that yield the highest returns. The focus is on how to achieve the desired KPIs for advertisers while maintaining the lowest possible costs that lead to the best ROI. Essentially, it evaluates each impression against specific KPIs in order to maximize or minimize bids to achieve the highest returns. This approach operates independently of the overall campaign or advertiser and analyzes every individual impression. The technology is integrated into Demand-Side Platforms (DSPs) for decision-making, automating trading and bid optimization. Additionally, we can incorporate our unique data, such as Attention data, into these algorithms, enabling advertisers to optimize for metrics like Attention at much lower rates than targeting static segments.

Got it. That’s actually super helpful. And then just one follow-up, if I could. Just regards to the allegations that Google has been facing for some video ads delivered on third-party websites in small windows and without audio, as I am sure you know. I am just curious if there are any implications here for DV. Like are you seeing advertisers potentially pull back on YouTube and redirect or perhaps it triggers advertisers to actually utilize your viewability solutions more so, just given the concern? Just any thoughts on implications of the recent development here?

It's definitely a tough situation for advertisers trying to determine their next steps as they continue spending on Google platforms. This raises questions about transparency and the involvement of third parties. We've collaborated effectively with Google to provide an independent perspective on GDP and the YouTube issues that have come up. We've published a detailed blog post outlining our findings and market observations. It's essential that the companies analyzing transactions remain independent from the media transactions themselves. We've always maintained that we work with everyone in an accredited and independent manner, prioritizing our relationship with advertisers who fund our operations. Trust is our focus, and we strive to ensure transparency in our dealings. We haven't observed any significant reduction in spending on Google properties, especially after their successful quarter. Our relationship with them is robust, and we both aim to deliver excellent results to advertisers in a transparent way that utilizes our technology.

Great. Thanks, guys.

Thank you. Our next question is from Mark Murphy with JPMorgan. Please proceed with your question.

Hi. This is Arti on for Mark Murphy. Thanks for taking the questions and congrats on the quarter. First question is, I know you talked about the macro a little bit earlier. Anything worth calling out in terms of divergences among customers in terms of the sector?

No. As you know, we are fairly diversified across most sectors. We didn't see anything significantly outweighing other sectors. We remain very strong in consumer packaged goods and experienced some positive growth in the automotive segment, which is one of our smaller areas. Overall, our diversification means that fluctuations in one segment do not significantly impact our financials, and we didn't observe anything materially different from the previous quarter.

Great. Thank you. And then one more, I will step back into the queue. In terms of the ABS price bifurcation, I know last time you guys said that was kind of frictionless and rolling out nicely. Does that continue to be the case or just anything worth calling out given we have a couple of more months behind us? Thank you.

No. It’s as we had planned. It was frictionless. It was a small amount based on the price of the product. So nothing new to report on that.

Thanks.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Mark Zagorski for closing comments.

Thank you all for joining us this evening. We delivered solid business momentum and couldn’t be more excited about the opportunities that lie ahead. We look forward to seeing many of you at DV’s Innovation Day in New York on September 14th, where we plan to share our long-term vision and strategy for AI-powered innovation. Have a great evening, everybody.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.