DoubleVerify Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 10, 2023

Key Takeaways

  • DoubleVerify reported Q1 2023 revenue of $123 million, up 27% year-over-year and above the high end of guidance, prompting an uplift to full-year revenue and EBITDA outlook.
  • Activation revenue from Authentic Brand Suitability (ABS) grew 56% year-over-year, driven by a 55% increase in volume and a 1% price rise, underscoring strong customer adoption and pricing power.
  • Social measurement volumes rose 33% and CTV measurement volumes climbed 39% year-over-year, with TikTok revenue in Q1 nearly equaling all of 2022 and Netflix verification launched in 12 markets.
  • The industry-first Universal Attention segment was introduced as a pre-bid optimization solution, complementing post-bid attention measurement (tests doubled and campaign activations tripled year-over-year).
  • International revenue grew 26% year-over-year as DoubleVerify expanded commercial headcount and market footprint, while maintaining an 80% RFP win rate (67% greenfield) and 95% gross revenue retention.
AI Generated. May Contain Errors.
Earnings Conference Call
DoubleVerify Q1 2023
00:00 / 00:00

There are 14 speakers on the call.

Operator

Greetings. Welcome to Double Verify's First Quarter 2023 Financial Results Conference Call. At this time, all participants Please note this conference is being recorded. I will now turn the conference over to TJ Elginman, Investor Relations, thank you. You may begin.

Speaker 1

Good afternoon, and welcome to Double Verify's Q1 2023 earnings conference call. Are with us today are Mark Sikorsky, CEO and Nicole Lai, CFO. Today's press release and this call may contain forward looking statements that are subject to inherent risks,

Speaker 2

have made a statement of

Speaker 1

uncertainties and changes and reflect our current expectations and 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 for Form 10 ks. 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 the Investor Relations website at ir.doubleferic5.com. Also during the call today will be referring to the slide deck posted on our website.

Speaker 1

With that, I'll turn it over to Mark.

Speaker 3

Thanks, Angel, and thank you all for joining us today. I'm excited to discuss our strong Q1 performance and optimistic outlook for the rest of the year. We started 2023 laser focused on a few key areas. 1st, on launching innovative, outcome driving products are anchored in our deep expertise and legacy investments in machine learning and data science. 2nd, scaling our independently accredited core verification solutions across leading social and CTV platforms and finally, expanding our partnerships with large advertisers and preeminent digital ad platforms are in the range of 2.5 times.

Speaker 3

On all three fronts, we can confidently state that we are executing ahead of our expectations. In the face of a challenging macro environment, our performance remains resilient due to the efficacy and utility of our solutions and the deep trust we have built with all of our stakeholders as an unbiased independent analytics engine committed to making the digital advertising ecosystem are stronger, safer and more secure. This steadfast vision continues to be dd's North Star, core to the value we deliver have proven to generate exceptional ROI for our customers and partners. Our first quarter results exemplify the impact of this commitment when it is embraced and empowered by a passionate group of DVT members in 21 locations around the world. We grew 1st quarter revenue by 27% year over year to $123,000,000 exceeding the top end of our are in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in

Speaker 2

are ready for dd

Speaker 3

solutions with each of our 3 business lines delivering double digit growth. Advertiser demand for both our premium priced authentic brand suitability programmatic solution and our social measurement solutions continue to grow, resulting in strong business expansion with existing customers and new customer wins. We won numerous RFPs in the Q1, representing meaningful expansions with existing clients, including Merck are adopting DD Measurement and ABS in 60 International Markets Airbnb Making DD Authentic Ad Its Measurement Currency in multiple LatAm markets and Amazon Prime Video to deploying DP's proprietary pre campaign activation and post campaign measurement solutions on YouTube. On the customer acquisition front, in addition to previously announced Q1 wins, including Air France and Swarovski in EMEA and Mattress Firm in the U. S, we closed additional new logos in the Q1, including Evoke Health and New York Presbyterian in the U.

Speaker 3

S, Daikin in APAC and the Public Investment Fund of Saudi Arabia in the Middle East. Our win rate across all opportunities remained above 80%, with 67% of our Q1 wins being greenfield, which we define as wins where the advertiser wasn't using third party tools for the business that DV won. This steady weight rate of greenfield wins exemplifies the underpenetrated TAM that DD continues to benefit from. These new client wins play into 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 31% in the Q1. With 45% of our top 700 customers using less than half of our key products are in 2020 2.

Speaker 3

The opportunity to expand within our existing customer base remains significant. Our acquisition strategy also continues to pay dividends when it comes to client growth. By focusing on M and A that accelerates our product roadmap, add complementary new technologies and expands new local market coverage, we create growth opportunities across the DV portfolio and drive measurement currency ubiquity. Since integrating our acquired social activation tools at the beginning of 2022, over 65 new customers have activated DV's pre campaign social solutions on YouTube and or on Meta. Newly acquired resources help drive growth across our international measurement customer base with over 60 new customers activating the DV Authentic ad in EMEA are in the Q4 of 2021.

Speaker 3

TV continues to outpace the industry and gain market share are in the range of 3 key differentiators: our rapidly growing scale, our industry leading innovation and the deep level of trust we've built with our customers as an are unbiased and independent partners. Beginning with innovation, dd's innovation engine is fueled by the unparalleled scale and ubiquity of the data we capture and which is brought to life by the proprietary data science that drives our machine learning technologies. AI and machine learning that powers it have become buzzwords with little explanation of how they drive differentiation and build advantages are the companies that leverage them. Let's discuss how this works for DV. Head to head tests that show at DV's ML supported prebid brand safety and suitability solutions consistently drive greater reductions in post bid block rates than our competitors' solutions are ready to respond to our differentiated and proprietary text and video classification technologies will leverage sophisticated models that have been built and trained over the last decade.

Speaker 3

The same is true for our fraud verification capabilities. The DV Fraud Lab consists of dedicated data scientists, mathematicians and analysts from the cyber fraud prevention community, who have developed and trained DV's proprietary algorithms, making them incredibly effective at identifying millions of bought and malware devices daily. Increasing number of advertisers are wrestling with their approach to AI created content and their comfort with having ads associated with it. Didi currently identifies low quality content that may be algorithmically generated and is working with clients to determine how we evolve classification to meet their new demands. The data science rigor that powers our AI models is best in class, extending from contextual classification to fraud detection and now to attention.

Speaker 3

Today, DD offers the industry's most robust cross platform attention solution, which uses impression level data not limited to panels to measure 50 unique data points related to the exposure and engagement of ad impressions that are first verified as viewable by DB's industry accredited standards. Last week, we were thrilled to make the leap from attention to action by launching the DV Universal Attention segment, are the industry's 1st automated attention optimization solution for programmatic media buying. Powered by DV's global attention data, are prebid Universal Attention segment enables brands to improve performance by optimizing away from low attention environments are in the same store without sacrificing scale and reach. Across numerous leading DSPs, any advertiser can activate DB's Universal Attention segment, including those that use our competitors' measurement solutions, not only creating a fast long term activation opportunity, are also unlocking a large measurement upsell opportunity down the road. Speaking of measurement, DB Authentic Attention measurement continues to gain momentum with 1st quarter test volumes doubling and campaign activations tripling year over year.

Speaker 3

Nearly 80 advertisers have activated DD authentic attention campaign so far in 2023, exceeding the number of have activated campaigns in all of 2022. Our pioneering work and attention goes beyond thought leadership. Dd has real attention solutions that are at the forefront of driving attention as a currency and generating real results for our customers in market today. Let's move on to 1 of dd's most successful and important product innovations, authentic brand suitability. Since its release in 2018, we significantly enhanced the value ABS delivers through the release of new performance driving functionality, including brand suitability tiers, CTV exclusion and inclusion lists, page exception lists and new content avoidance categories that out strip any competitive offering.

Speaker 3

On the heels of our successful price bifurcation for our standard programmatic products in 2022, We've also started to implement a bifurcation of ABS' pricing by introducing a higher rate for ABS video, while maintaining the original price for display. ABS revenue grew 56% year over year in the Q1, driven by a 55% increase in volume are in a 1% increase in price. Our ability to raise prices even on our premium price products, while continuing to deliver Strong volume growth speaks to the value of our solutions deliver to our customers and the long term potential for DV to evolve towards a more value based pricing model, particularly for higher CPM media such as CTV. On top of these great revenue generating innovations, DV continues to launch self-service automation tools like Campaign Automator and Pinnacle 2.0 are upgraded client UI, which lower client overhead to employ dd solutions, make it easier than ever to efficiently drive results across a client's full portfolio of brands. With our next differentiator scale, let me begin with social measurement, which delivered 33% year over year volume growth in the Q1.

Speaker 3

Existing social customers such as Mondelez and Airbnb expanded their use of DV social solutions on Meta and YouTube have activated the authentic ad on TikTok for the first time, with new logo wins also contributing to the social measurement growth. Our customers are rapidly activating the defi authentic ad on TikTok, where we have doubled the number of customers year over year have grown TikTok's 1st quarter revenue contribution by over 50% compared to the Q4 of 2022. In fact, we generated nearly as much TikTok revenue in Q1 as we did in the full year of 2022. With TikTok supporting their badge measurement partners brand safety and suitability expansion to nearly 45 markets, we are scaling our coverage across key English, Spanish, in French and Portuguese speaking markets this year with a focus on maximizing market coverage for our top advertiser customers. As a badged Meta business partner, we value Meta's ongoing commitment to providing advertisers with transparency through brand suitability controls and verification.

Speaker 3

We are excited to be expanding our offerings over the coming months and remain in consultation with Meta for brand suitability verification and measurement solutions on the feed, which will complement our viewability and invalid traffic solutions, enabling further expansion of dd's authentic ad coverage are welcome to an even broader array of consumer engagement. Turning to CTV scale, We grew CTV measurement volumes by 39% in the Q1, outpacing the 14% CTV revenue growth expected of the industry in 2023, are in the range of 2nd quarter. We launched Viewability verification and fraud protection coverage on Netflix ad supported plan with DV's verification on Netflix now available in 12 markets globally. CTV remains a strong differentiator for DV are in the range of $1,000,000 due to our comprehensive coverage, industry leading solutions and proprietary ability to identify CTV fraud. Only DV covers all of the platforms that receive the majority of CTV ad spend and our industry leading solutions span all aspects of CTV from pre bid avoidance to post bid blocking and monitoring.

Speaker 3

Most importantly, we believe that no other company has made are as comprehensive as an investment in people, infrastructure and partnerships to ensure that CTV transactions are fraud free. Let me wrap up on scale with a focus on our international business expansion, where we delivered 26% year over year measurement revenue growth in the Q1 with both the EMEA and APAC regions exhibiting double digit growth. Since the beginning of 2021, We've nearly doubled our international sales, marketing and client services headcount, including appointing several new country leaders to cultivate local business. With approximately 170 commercial personnel in the ME and APAC and a market growth plan that includes opening 5 new international markets will expand DD's commercial footprint to 26 locations by year end, we couldn't be more excited about our prospects outside of North America in the coming years. A great example of the payoff of our increased international investments is the deal we recently closed with the TVS Television Network in Japan, are a news site owned by 28 Japan News Network TV Broadcasting Companies.

Speaker 3

TBS has adopted DV's Publisher Suite, and analytics and automation solution that comprehensively supports ad quality control and revenue analysis for publishers and media companies globally. 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 in the system. DV has a comprehensive suite of accreditations and certifications and has never lost an international accreditation or had one revoked. Are globally recognized TAG certifications and MRC accreditations demonstrate dd's commitment to innovation and delivery against the highest

Speaker 2

have a strong financial performance.

Speaker 3

This trust extends to how we approach privacy and data management as well. DV was recently ranked in the top 1% of over 1600 data providers scored by Neutronian in their latest transparency ratings report and has renewed its Neutronium cookie list certification badge, which provides marketers with verification action to uncover and publicize sophisticated global fraud schemes that attempt to siphon 1,000,000 of dollars of ad spend across industry channels cements our position as a trusted partner acting in the best interest of our customers and the industry. Aggressively unearthing fraud is are core to DV's mission and the basis upon which any advertising outcome should be measured. Last year, DV's Fraud Lab detected and mitigated have dozens of fraud schemes and variants with new fraud schemes more than doubling over the last 2 years. This year, DV uncovered Beat Sting, and audio fraud scheme and partner with Roku to expand its Watermark technology to uncover many more fraud use cases, including sophisticated user spoofing that creates fake impressions.

Speaker 3

This was the case with Smokestream, a fraud scheme that DV identified that continues to write more than $300,000,000 ad requests and siphons over $6,000,000 monthly from unprotected advertisers and publishers. Trust isn't only about accreditations reports. It's about people and relationships. Since the day I joined nearly 3 years ago, My drive has been to build a powerful, diverse and stable leadership team made up of the most innovative customer centric minds in the space. Our transparent commitment to a clear common goal has allowed us to attract the best talent who become a consistent voice to all of our stakeholders are in the process of generating trust across the advertising ecosystem.

Speaker 3

Driven by a common mission and belief in our long term vision, our team sticks together and based on our 95% gross revenue retention rate over the last 3 years, they are a big factor in why our clients stick with us too. To conclude, while we often talk about how scale, innovation and trust are 3 key differentiators, execution is arguably the most critical to the success of any business. DV continues to win because we execute better period. Our ability to successfully innovate drives better product performance that helps us win new clients, which in turn provides the data fuel that powers a are recognizing our solid pipeline of new and expansionary deals that will further drive our market share and create an even stronger long term growth trajectory. With that, let me hand the call over to Nicola.

Speaker 3

Thanks, Mark, and good afternoon, everyone.

Speaker 4

We're pleased to have delivered have strong revenue growth and profitability in the Q1. The outperformance relative to our expectations was primarily driven by stronger than expected measurement growth, Which gives us the confidence to raise our full year 2023 revenue and adjusted EBITDA guidance. Total revenue grew 27% in Q1 2023 to $123,000,000 primarily driven by advertiser revenue growth of 28%, which continues to be volume led. In the Q1, NTM's were up 25% year over year, while NTFs grew 3% year over year. Activation revenue continues to be driven by our premium ABS programmatic solution, which is now in its 5th year since launch.

Speaker 4

ABS delivered 56% revenue growth and comprised 56% of activation revenue compared to 48% in the prior year period. As Mark mentioned, ABS volumes were up 55% and the ABS 60 was 1% higher as we rolled out bifurcated ABS pricing for display and video impressions following the implementation of a similar price bifurcation for our standard programmatic and products in the Q1 of last year. The ABS price bifurcation was assumed in our original full year 2023 guidance. And most of ABS' 1st quarter growth came from volume expansion by existing customers who continue to deploy this industry leading solution across additional markets. Turning to measurement, revenue grew 22%, driven by existing customer expansion on social and by the ramp of new enterprise customers that we signed last year.

Speaker 4

Social measurement growth was led by Meta and by TikTok, which almost achieved its full year 2022 revenue contribution in the Q1 alone. International growth of 26% in the Q1 outpaced overall measurement growth and now represents 26% of total measurement revenue. Supply side revenue grew 15%, driven in particular by continued platform revenue growth from Amazon and LinkedIn.

Speaker 1

Are subject to expenses.

Speaker 4

Cost of revenue increased by approximately $7,000,000 primarily due to higher costs from revenue sharing arrangements with programmatic partners are tied to higher programmatic revenue and also due to an increase in cloud services costs. Revenue less cost of sales of 80% in Q1 'twenty three 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. 1st quarter research and development expenses increased due to investments in AI and machine learning engineering resources. Sales and marketing and G and A expenses combined remained relatively stable year over year as our growing scale is driving leverage on these are in the line with 2 operating expense lines. Adjusted EBITDA of $36,000,000 in Q1 'twenty three represented a 29% margin and was ahead of plan due to higher revenue as well as a moderated pace of hiring, which we expect to accelerate in the 2nd quarter.

Speaker 4

Net operating cash flow was $21,000,000 primarily driven by higher year over year net income and stronger cash collections. We ended the quarter with nearly $286,000,000 in cash on hand and continue to have 0 debt outstanding. Turning to guidance, we expect 2nd quarter revenue in the range of $131,000,000 to $135,000,000 which implies year over year growth of 21% at the midpoint. The sequential growth implied by our revenue guidance reflects a are in a position to conduct a comparison with the Q2 of 2022 when large new advertisers significantly ramp their revenue contribution are in the range of $7,000,000 to $39,000,000 which implies a 29% margin at the midpoint. For the Q2, we expect Stock based compensation to range between $14,000,000 $16,000,000 and weighted average diluted shares outstanding to range between 171 are in a 173,000,000 shares.

Speaker 4

For full year 2023 guidance, we expect revenue in the range of 5 are in the range of $57,000,000 to $569,000,000 which implies year over year growth of 24% at the midpoint. And we expect adjusted EBITDA in the range of $171,000,000 to $179,000,000 which implies a 31% margin at the midpoint. We have raised full year revenue and adjusted EBITDA guidance due to a stronger Q1 performance and an expectation that the positive business trends, particularly in measurement, will continue. We expect full year adjusted EBITDA margins of 31% based on the strength in first quarter profitability, are reflecting our plan to continue to invest 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 the 3rd quarter to represent a little less than 25 are a 1st quarter and we expect 3rd quarter adjusted EBITDA margins to remain consistent with the 2nd quarter.

Speaker 4

To close, we delivered a strong Q1 with double digit revenue growth across all of our business lines and are focused on successfully executing against our plan enjoy the rest of the year. And with that, we will open the line for questions. Operator, please go ahead.

Operator

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

Speaker 2

Hey, congrats on the strong numbers. I just wanted to focus in on the international measurement growth for a minute because The last couple of quarters that growth rate had really slowed down and you accelerated to 26% growth this quarter against a tough comp in Q1 of last year of 40% growth. So yes, really just wanted to hear a little bit more about how you're achieving That sort of growth rebound internationally.

Speaker 3

Thanks, Michael, for the question. And we're are really pleased with the progress that we've made in the markets outside the U. S. EMEA grew at are at 23% year over year for the quarter, APAC at 31%. And I think a lot of that had to do with something we've been talking about for the last few quarters, which is are continued investment and commercial resources outside of the U.

Speaker 3

S. And then a commercial reorg, Which we started at the beginning of last year, which really started to close-up at the end of the year, those two things gave us a lot of confidence in the fact that we had the right people in the right places outside the U. S. And they had the right mission in front of them. Because of that, we saw a really strong pipeline coming out of Q4, which we mentioned earlier this year on our first call.

Speaker 3

Of that pipeline really came to fruition in Q1. So, it was a lot of hard work by our teams. It was a lot of investment and people and planning had ultimately turned into just better sales, better sales, better pipeline and that pipeline

Operator

our next question is from Arun Bhattachar with William Blair. Please proceed.

Speaker 2

Hi, guys. Thanks and congrats on the strong quarter here. I noticed you were optimistic. You raised your full year guide, obviously, when you called out, I think, optimism on the measurement side of the business. 1, can you just talk about what makes you are confident in raising guidance for the year.

Speaker 2

And what are you seeing in measurements specifically that's giving you That's making you optimistic on the rest of the year here.

Speaker 3

Thanks for the question, Arjun. We've always said the kind of measurements and the core measurement business was the backbone or the workhorse are welcome to the business. And a lot of our success there is related to what I mentioned to the question for Michael investment in sales resources and sales planning and reorganization of that sales team, those are the guys that go out, close the deals and measurement, as we said, is kind of core to spinning that flywheel, like I'd say, upselling into programmatic, upselling into So when that base hits, it's great news for us for the year. I wouldn't totally equate it to a SaaS business where they get a big chunk of their meat upfront and they know what the year is going to look like. But we know measurement customers, When they buy in, they buy in and stick and that sticks with their spend throughout the year.

Speaker 3

So I think we've got confidence in the fact that those customers that come in are measurement customers. Those dollars are not as fluid as activation dollars, which tend to move with programmatic spend. So that gives us a good amount of confidence that, yes, we're in the right place, where we need to be to raise the guide for the year, and we've got a good basis from which to do are

Speaker 2

open. Perfect. Thanks, Mark. That's very helpful. And then, I wanted to touch on attention.

Speaker 2

It seems like That product is starting to get some good traction here. Are we crossing the chasm with that solution? And maybe just would love to hear how you think the pre bid capabilities that you launched with universal attention might help advance some of the adoption of this attention solution here.

Speaker 3

Yes. I think It's a great question. And we do talk a lot about attention. I think I don't know if we call it a chasm, but let's call it a mountain to are live. And we're we started making our way up that mountain, and I think we're getting some good traction.

Speaker 3

We saw 2 times the volumes of tests year over year, 2 times the volume of revenue in Q1 year over year, 3 times the volume of campaign blueprints and attention. So it's we're getting there, right? The scale is getting there. I think a big part of it, and I think we also mentioned this on our last call, was We love the value prop of having pre bid and post bid work together. We've seen the power of that with our core verification solutions.

Speaker 3

We've seen the power of that with ABS working with measurement. And I think The ability for us to kind of grow the attention category as a whole, I think we'll also benefit are having pre bid and post bid working together. So I think we always say, it's still early days, even though it's been A long period of early days, but as the industry catches up with standardization, and those things get locked in, and even as competition gets are greater. I think competition is okay in this space because it actually kind of justifies the idea that matters and attention matters to advertisers. We're going to see more traction there.

Speaker 3

So, we love the introduction of a pre bid solution. We think that's are going to help kind of drive that optimization cycle. And this is just the beginning for Prebid on attention. We think there is an evolution of that are seeing more powerful solution on the Prebid side, the same way we evolved standard brand safety and brand suitability into authentic brand suitability, which is arguably now still one of our most powerful products. I think we've got a long way to go, But we're taking those steps 1 by 1 and the introduction of really the 1st scaled optimization pre bid and the retention segment out there is a great step towards that.

Speaker 2

Thank you, Mark, and congrats again on the quarter, guys.

Speaker 3

Thank you.

Operator

Our next question is from Justin Patterson with KeyBanc Capital Markets. Please proceed.

Speaker 5

Are Great. Thank you. Two questions. I'll do the first and then follow-up after. I just wanted to touch on ABS.

Speaker 5

Have been your biggest solution, 5 years in launch and now still growing 56%. I think most of that was driven by volume this quarter. Could you just talk about how you see that volume expansion potential from existing customers going forward and then I'll there and go for my follow-up after.

Speaker 3

Yes. Look, ABS continues to be a real powerhouse for us. As you noted, a majority of the growth that we had from ABS, the revenue growth came from existing customers this quarter. 94 of our top 100 customers are using ABS right are in Q1. So what that shows to me is that even with pretty significant penetration, our top 100 customers To be able to grow at a 56% year over year growth rate means ABS works, clients are using it in more markets, they're using it across more brands, and it still got legs.

Speaker 3

So we continue to lead with our programmatic solutions in many We continue to have opportunities below the top 100 clients to continue to grow. And We think ABS is going to continue to drive growth for us even after, as we noted, price bifurcation in which we raised the price on video. We saw have very little friction from that price increase. So it not only shows the utility of the product, but the value that we're creating for advertisers to

Speaker 5

are Great. Thanks. And then for the second question, I wanted to touch on social measurement a bit more Meta and TikTok almost achieving their 22 revenue contribution in just the first quarter's are very impressive. Would love to hear more about just how you're thinking about social progressing in the year and whether that could actually burn into a are that brings net new advertisers into the broader DV ecosystem. Thank you.

Speaker 4

Yes, Justin, I'll take this one. So just to clarify, it is TikTok revenue that achieved all of 'twenty two revenue in Q1, 'twenty three. Meta is a much larger base and we've had products with Meta for a much longer period of time. But your points around social are the right ones. We were very pleased with how strong the uptake is on the TikTok product.

Speaker 4

Are it is now already our 3rd largest social platform. It remains small if you compare it to Meta and YouTube, but it is an indicator that our products are really resonating in the social channel. Social was about 38% of our Measurements business in the quarter and it was up from where it was last year. So we feel very strongly that we will continue to see traction on the social walled gardens as we continue to put more products out there

Speaker 3

and go into new markets. And I'll throw one other point there too, Justin, which is you mentioned, does it have the ability to attract new customers? In Q1, it certainly did, because 40% of our revenue growth was from new customers in the quarter And social measurement growth that is, was from new customers. And it was folks like Mars, Paramount, Fumble, Beiersdorf, Conagra, of big brands who are activating across social, TikTok is certainly helping on that front because the people are moving there. So again, Social is a place that we're going to feel very comfortable, continue to focus on growth there and we'll continue to invest as well.

Speaker 3

Thank you both.

Operator

Our next question is from Andrew Boone with JMP Securities. Please proceed.

Speaker 6

Hi. Thanks for taking my questions. Mark, you took the EBITDA guide up a point. And earlier you mentioned the investments that you made last year are in international. I guess my question is, are you now at a scale with resources that you can let more upside flow through to EBITDA and profitability?

Speaker 6

And then for my second, you guys mentioned 45% of the top 700 clients are using less than half of the key products in 2022. Can you just talk about that upsell cycle. What's left that you guys really want to push as you think about 'twenty three and 'twenty four? What do you think is the low hanging fruit from here on the upsell? Thanks so much.

Speaker 3

Sure. I'll take the second half of that question and let Nicola take the first half. Anything that says EBITDA, I put that the CFO is are but when we look at the upsell cycle, and you're right, we've got still have a pretty decent amount of product upsells to make across the board. We talk about ABS. Although, ABS is are very high penetration in our top 100 clients.

Speaker 3

We still got a lot of room in our next several 100 to go after. And that's always going to be our first go to when we look at the upsell cycle is move anybody who's using standard brand safety or brand suitability to AES, Right. So I think that's a big one. The second one is when we look at social. Social measurement used to be a great growth engine for us, but we look at social as a separate category.

Speaker 3

So just because you're doing measurement for us in the open web or even using programmatic and open web doesn't mean your client is using us for measurement on social. So when we think of like the first two things we're going to walk into a customer to do and we're going to upsell, it's going to be ABS and then social. I think we've got room on both of those products as we look at the potential upsell. Plus, we know that they're both great margin drivers for us, great growth drivers for us, are in opportunities outside the U. S.

Speaker 4

Yes. In terms of EBITDA margins and expectations and how we think about it for the future of the business. We did have a strong Q1 around profitability. I think the numbers that make us feel very strongly that we have a business that can scale is really where the investments were. So we were able to essentially have virtually year on year flat on sales and marketing and G and A.

Speaker 4

And we've spoken about the fact that we've already invested in SG and A in prior years. And In a quarter where, for example, you see 26% growth in international, it's not so we have to invest additional resources to achieve that growth. So there is inherent scale coming from those two lines as we become a larger company. However, we are continuing to choose to invest in R and D. That is one area where you will see growth in investments year on year, and that is specifically around data scientists to allow us to go deeper into AI machine learning investments.

Speaker 4

These are not brand new investments. We've been doing it for many years already, but the opportunity there to continue to invest is available to us and we're going to do it because it's going to accelerate our product roadmap. So it's a long way to say we are are choosing to continue to invest. Our EBITDA margin is still very healthy, but we are already seeing the benefits of the scaling of our business in sales and marketing and G and A.

Speaker 3

Thank you. Sure.

Operator

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

Speaker 7

Thank you so much and I'll add my congrats. Mark, I wanted to ask you the win rates remain very high. Can you refresh us on the role of accreditations through that lens just to help you win business. And how wide is the gap today in the accreditations between Doubleverify? And if we compare that to the number 2 and number 3 competitors, then I have a quick follow-up.

Speaker 3

Yes. Look, accreditations are definitely part of the matrix of elements that go into the decision process for an advertiser. It's an important one, as is customer service and customer support, as is pricing. But probably still the most important one is the performance of the platform. And that's where we continue to lean in.

Speaker 3

That's why technology expense is such are an important one for us to keep investing in because when those platforms go head to head, we've said this time and again, Whichever platform delivers the highest ROI by filtering out the most fraud by creating the greatest level of brand granularity brand suitability granularity is the one that's going to win. And I think that's driving a great win ratio for us. But when it does come to accreditations, I mean, we look at the number across the multiple different organizations that are out there. Our best estimate is were anywhere from 50% more different accreditations to almost double depending on it. It's hard to find that there's lots of different places where people have accreditations are in different countries, but we certainly outpace our competitors by a significant amount in that space.

Speaker 7

Okay. And then as a quick follow-up, what are you discovering in terms of viewability in the CTV realm? What I mean is, are there fewer issues because In some cases, you have much larger screens or are you finding that there are more issues because you can encounter buffering or ad

Speaker 3

are in the range of the 2nd question. I think there's always been this assumption that CTV is 100% viewable, right? It's in someone's living room. Have very different problems than a banner ad on a web page where someone can scroll by it or have an impression on mobile phone that gets pushed by very quickly or shut off. But there are still significant issues around viewability and the things that we're tracking are exactly the things Mark that you know, which is does the ad run for the full 1st quartile, Right.

Speaker 3

Does it run for that period of time that I can actually register as viewable? Doesn't add most importantly, Is it running while the TV is on, which is, believe it or not, becoming an increasingly significant issue for advertisers because many apps are not passing the signal that says this television is on. They're actually running ads while the TV is off, either mistakenly, They should be doing that or on purpose because they're not legitimate apps. So viewability, The way that we measure the ability is a bit different than what you think of in the traditional web world. But those issues are continuing to be real issues for advertisers, which is have not running the full extent they should and ads running when a television screen is actually off.

Speaker 3

The box is on, the seem to be challenging to advertisers. I think they're just starting to wake up to the fact that this is a real this is really something that we should start measuring and paying attention to.

Speaker 7

Thank you very much.

Speaker 3

Yes.

Operator

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

Speaker 8

Thanks so much for taking the questions. Maybe 2 if I could. In terms of the stat you gave on increasing number of large advertisers and bringing that back to potentially are building not only for 2023, but beyond. And then the second question would be on Netflix as a platform. How much of are scaling the Netflix business now as we move through 2023 and out into the out year is about elements where you need to invest to sort of position you to benefit from what they build over the long term versus just them executing on simply Scale of ad supported customers and subscribers over time and that's where the revenue unlock is.

Speaker 8

Thanks so much. Sure.

Speaker 3

So your first question, the nice thing about our business, which we mentioned in the past is that We've got a pretty broad based set of advertisers. So if you remember several quarters ago, there was There were supply chain issues around auto delivery and electronics delivery. So a lot of folks who were focused on those two segments had some challenges running ads because there just was no reason to advertise if you couldn't sell the product to get the product in store. We didn't see that because we're really nicely distributed across all major ad segments. So there's not one in which we could say, we've seen either oversized increase or decrease over the last several quarters.

Speaker 3

We've seen growth across all of them, which has been pretty nice. With regard to Netflix, it was launched a few months ago, I think March. And are still relatively early, but we're seeing some pretty decent volumes starting to come across that. And it is having an impact on our are we've got customers like Molson Coors, Nintendo, Santander, Toyota, that are starting to buy across and use verification across Netflix. So there's definitely interest.

Speaker 3

There's definitely dollars starting to flow there. And although it's pretty early for Netflix, It's pretty small. We're going to be there with them for the ride, which is great. And I think it's a nice place for us to be. We're in 12 markets with them.

Speaker 3

Now continue to grow and we'll continue to grow it.

Operator

Our next question is from Laura Martin with Needham and Company. Please proceed.

Speaker 9

Hey there, Mark. Great results. My first one is on this 80% new business when you continue to get. My question is, when you go to pitch And then they try you versus your competitor. Do you bundle your products so that, that hit rate goes up over When you do the RFP, does it always start with a single product, so you aren't really benefiting from bundling in these fabulous products that are creating later.

Speaker 3

It's a great question, Laura. I wish we could bundle everything in on day 1 and just sell them a big package. But the short answer is, it definitely varies. There are clients that are looking for single solutions and we're displacing, for example, Moat on a Viewability deal or IES on are on a brand safety deal, and then we grow from there. So it definitely is a bit all over the board, but it still lends us To that whole kind of land and expand, right?

Speaker 3

We want to get in, get a foot in there, so that we can push other solutions across. And when we say 80% win ratio, that could be against a single product or it could be across a bundle or enterprise deal. So it is definitely a mix of different types of wins. But in either case, we're looking to sell them all products across our entire 6 categories of solutions.

Speaker 2

And I

Speaker 3

would say, in a vast majority of them, are not going in with all 6 of those categories covered. It's a very small portion of that.

Speaker 9

Super helpful. My second one is, you know the thing I like best You're carrying the video product for AVS. So my question on pricing strategy is, what is the business model for attention? Is it a percent of media or is it just an add on to flat fee impressions?

Speaker 3

Yes, It's a great question. Right now, Tencent is set up as a CPM based product. So it's very much like measurement. It's to Measurement Solutions sold incremental to our verification. So think of it as an add on to verification.

Speaker 3

Have a relatively decent premium to core measurements. So it's a premium priced add on to our measurement solution today. It doesn't mean that model may not change in the future and Especially as we start expanding attention to CTV and other places, we'll certainly look at different models that may drive a different have a profile for the solution.

Speaker 9

Fantastic. Thanks very much.

Speaker 3

Got it.

Operator

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

Speaker 10

Hi, this is Frank on for Raimo. Congrats on another have a strong quarter today. I want to stay in those new logo wins. Is the buying decision still more driven by the RI pitch? Or have newer products and media begun to move the needle on those RFPs?

Speaker 3

Great question. I think ROI is what gets us in the door, right? And the newer performance based solutions are kind of at this Still the icing on the cake, right? I can tell you, they do sometimes open that door for us. So when we launched, for example, our emissions measurement solutions with Scope 3, there's a huge amount of interest in looking at the environmental impact of add transactions.

Speaker 3

That created a dialogue, which of course we came in and explained to kind of sell additional solutions across the board. So but for the most part, folks are usually looking for core solutions. We look to drive new implementations across those core solutions and then supplement them with our performance have questions afterwards. It definitely varies across the board. And as that basket of goods gets bigger, It provides more opportunities to have conversations with our customers, and each of them has different needs.

Speaker 3

And that's why having have a broad basis of goods and broad coverage across multiple different types of platforms is so critically important to us because we just want to have a big net capture lots of different types of opportunities.

Speaker 10

Very helpful. Thanks, Mark.

Speaker 4

Got it.

Operator

Our next question is from Yoon Kim with Loop Capital Markets. Please proceed.

Speaker 11

All right. Thank you. Congrats on a solid quarter, are marked and just following up on a question about the expansion with existing customers. If you can talk about the current trend that you're seeing for the overall expansion rate for the existing customers, has that been steady or has that shown improvement in recent quarters? And also just kind of curious, if you can compare that expansion rate with existing customers, is that more product driven or is that more driven by customers simply increasing their volume and adding more channels?

Speaker 2

I'll

Speaker 4

So I'll say the one thing that we've seen that's consistent year on year is that the this sort of getting in with a customer and then expanding has continued. What is really at the bottom at the core, what's driving the expansion is obviously product upsell, but I don't want to forget geographic expansion. So we might start with a client in one region and then expand with volume in additional regions. And while the growth in International that we experienced in this quarter was partly on new wins. There is also an aspect of it, which are so the profile of what we're seeing in terms of expansion is mix.

Speaker 4

It's really new products, new geographies. And obviously, as new sectors become available, such as TikTok, then we're able to expand as well. One measure to maybe kind of anchor the answer is the top 200 customers. On the top 200 customers, That number I'm sorry, on the customers that spent over $200,000 in the last 12 months, that number grew 29% in Q4 and it grew 31% are in Q1 'twenty three. So you see that the power of the expansion on the dollars that we're getting from those customers.

Speaker 11

Great. And then Nicola, I have a follow-up. On the gross margin, was there a new higher revenue sharing arrangement That drove that big sequential uptick or and then also just overall increase in cloud costs, is that primarily driven by New products that require more cloud resources. Is international mix having any impact on the gross margin? Thanks.

Speaker 4

Yes. So what is driving the change in gross margin is a higher revenue share are looking for the activation revenue, but it's not because the actual agreements are changing, it's just that the revenue is getting bigger. So It's a higher revenue share just because the revenue is higher, and so it's impacting gross margin from that perspective. The in addition to those costs, As we said in our prepared remarks, we are choosing to invest in additional cloud computing resources, which are causing our impacting the gross margin. This is a decision that we're making this year because we're expecting to see returns in terms of us being able are ready to see more growth.

Speaker 4

So it is a business decision to invest into that line in addition to the fact that activation is now a larger share of our revenue.

Speaker 11

Awesome. Thank you so much.

Operator

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

Speaker 12

Hi, great. Thank you very much. I wanted to go back to attention really quickly. Just I want to get your thoughts, given that there is a bunch of different methodologies that are being worked on, things like eye tracking and the method that you guys

Speaker 4

Does that kind of

Speaker 12

extend the timeline for some sort of standardization across the industry? That's the first one. And then the second one is just on this new AI product that you mentioned. Can you dive into that just a little bit more? I guess, what are the moving pieces?

Speaker 12

And How much of the current tech that you have can you reuse there? Thank you.

Speaker 3

It's a great question. So firstly, let me address the question on the different types of ways that folks are trying to build attention metrics. I think the reality is methodology should not drive standardization. Standards are same. Attention and engagement should be seen as relatively finite metrics that can be consistent no matter how someone determines what attention is, I.

Speaker 3

When someone's measuring reach and frequency, it's 18 to 34 year old male is the metric, Right. How you found that out is not determinant of what happens at the end. So I think the different methodologies shouldn't slow down the standardization of the standard metrics that people agree to determine how we're going to measure attention. So A, I think it's they can sometimes be helpful and accelerating discussion. But at the end of the day, I think the industry is going to settle on have a definition that makes sense no matter what the methodology is.

Speaker 3

We believe that census and impression level methodology is the most valid, is the most robust. And as we saw in the within your TD measurement world or any other world that uses panels or very small samples, they're apt to be extrapolated in wrong ways to be interpreted in many times misapplied. So ultimately, we do feel that are in the most robust way of measuring attention has to do with census level impression by impression measurement. It doesn't mean it can be supplemented are by other types of panel based methodology, but ultimately, we think that's the one that's going to have the highest level of effectiveness and are out there. When it comes to what we mentioned regarding our new pre bid product, This is the first step and it's the first baby step into taking attention metrics and launching them into the activation sphere.

Speaker 3

We know how successful taking a measurement metric like brand suitability or brand safety can be when put into activation. So the ability to filter and optimize and then measure afterwards. So it's a first step there, just like our first steps were standard brand safety and they evolved into authentic brand suitability, which is a much more fluid, much more dynamic application in the programmatic world. We think this is kind of the first step in, which will evolve into a much more fluid, much more dynamic application down the road on the pre bid side.

Speaker 12

Great. Thank you, Mark.

Operator

And our final question is from Youssef Squali with Truist Securities. Please proceed.

Speaker 13

Are. Great. Thank you very much and congrats on a solid quarter. So one quick question for Mark and one for Nicolas. So Mark, it was interesting in in the press release you mentioned market share gains across your 3 business lines.

Speaker 13

I was just wondering if you could just please remind us of the 2 or 3 products you feel or products that you feel you have the most have competitive advantage with sustainability of that edge. And then, Nicolas, sorry if you mentioned this in your prepared remarks, but Can you just remind us what's baked into your guidance in terms of gross margin for Q2 and 2023? Thank you.

Speaker 3

Great. So I'll talk a little bit about, I think, where we really excel in our product and our innovation. I think First is something, again, we continue to talk about, which is ABS. There are imitators. There are other solutions out there that try to do the same thing, but no single product out there we think is comparable to ADS.

Speaker 3

And I think it shows with the continued legs and growth it has even after the numerous years it's been in market to be able to grow at 56 spent year over year in Q1 is pretty exceptional. So, I think ABS is an advantage. Helps us grow market share, it helps us win deals and obviously, it helps drive revenue for the business as well. I think outside of that, e gates are unique basket of goods around the edges. I call them around the edges, but they're not lesser products.

Speaker 3

So our advantage and attention, I can tell you, just helped us win a major advertiser deal, Not because it was going to be a huge part of what they did, but they loved what we did around attention and said this is a differentiator between you guys and others. Will take your core solutions, but we're going to lean into attention down the road. And I think our continued ability to innovate around things like attention, around areas like CTV and CTV Viewability, where we have really unique viewability solutions and unique of solutions that are detecting things like TV off, those are areas which we talk about a lot. They don't generate huge amounts of revenue for us yet. But When someone looks at the basket of goods they're buying, they want to look at a core solution plus innovations around the edges, they really matter and they help us close New Deal.

Speaker 3

Yes. And

Speaker 4

Youssef, on your second question, on the gross margin side, revenue led cost Sales, it was 80% in Q1 and we expect it to remain relatively stable around those levels as we choose to continue to invest in our infrastructure.

Operator

We have reached the end of our question and answer session. I would like to turn the conference back over to Mark for closing comments.

Speaker 3

Thank you all for the great questions. And I'd like to take the time to thank the DV team worldwide for their hard work are welcome to our mission and for delivering another great quarter of results. And also thank all of our stakeholders, our customers, partners and investors for their continued support. We look forward to seeing many of you at upcoming conferences and events. Have a great evening, everybody.

Operator

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you again for your participation.

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