DoubleVerify Reports Third Quarter 2022 Financial Results

Increased Revenue by 35% Year-over-Year to $112.3 Million, the Highest in Any Quarter, Driven by Growth in Pre-Campaign Activation Across Programmatic, Social and CTV

Activation Revenue Increased 48% to $62.2 Million

Achieved Net Income of $10.3 Million and Third Quarter Adjusted EBITDA of $34.0 Million, representing a 30% Adjusted EBITDA margin

Raised Midpoint of Full-Year 2022 Guidance Range to 36% Total Revenue Growth and 31% Adjusted EBITDA margins

DoubleVerify (“DV”) (NYSE: DV), a leading software platform for digital media measurement, data and analytics, today announced financial results for the third quarter ended September 30, 2022.

“We delivered another strong quarter and outstanding year-to-date performance fueled by continued momentum in programmatic activation and Social and CTV measurement,” said Mark Zagorski, CEO of DoubleVerify. “Our revenue growth of 35% in the third quarter and 40% year-to-date has significantly outpaced that of the broader digital advertising industry as we continue to win new customers and gain market share across geographies and platforms. Additionally, we continue to expand product coverage across premium CTV environments such as Netflix and pre-eminent Social media platforms such as TikTok, Linkedin and Twitter. Scaling our solutions to ‘verify everywhere’ gives advertisers the ability to consistently measure their media investment across environments, platforms, formats, devices and types of content. As the macroeconomic advertising environment becomes increasingly challenging, advertisers continue to turn to DV solutions to optimize their media investment and reduce media waste while protecting brand equity.”

Third Quarter 2022 Financial Highlights:

(All comparisons are to the third quarter of 2021)

• Total revenue of $112.3 million, an increase of 35%.
• Activation revenue of $62.2 million, an increase of 48%.
• Measurement revenue of $38.8 million, an increase of 14%.
  • Media Transactions Measured (“MTM”) for CTV and Social increased by 48% and 23% respectively.
  • International measurement revenue increased by 2%, with a decline in EMEA revenue of -6% and APAC revenue growth of 16%.
• Supply-Side revenue of $11.2 million, an increase of 57%.
• Net income of $10.3 million and adjusted EBITDA of $34.0 million, which represented a 30% adjusted EBITDA margin.

Third Quarter and Recent Business Highlights:

• Grew Total Advertiser revenue by 33% year-over-year in the third quarter primarily due to a 17% increase in Media Transactions Measured (“MTM”) and a 10% increase in Measured Transaction Fee (“MTF”), and continued to achieve a Gross Revenue Retention rate of over 95% in the third quarter.

• Grew premium-priced Authentic Brand Suitability (ABS) revenues by 46% year-over-year in the third quarter driven by new advertisers activating the solution as well as by existing client upsells and geographic expansion.

• Drove global market share growth through product upsells, international expansion and new enterprise logo wins including GAP, Mattel, Kroger Precision Marketing, TUI, Club Med, Marina Bay Sands, Hyundai Motor Company, Michelin, SC Johnson and SmartEnergy UK.

• Expanded coverage across premium video and CTV environments with a partnership with Netflix to enable media verification and maximize advertiser performance. The partnership will leverage DV’s technology and data to help Netflix advertisers ensure their video ads are fully viewed, by real people and safe from Fraud/Invalid Traffic (“IVT”).

• Expanded partnership with TikTok to offer advertisers post campaign Brand Safety and Suitability measurement. This proprietary solution leverages DV’s artificial intelligence, machine learning, ontology, and manual review to give advertisers confidence that their ads across TikTok are appearing next to content that is brand safe and suitable.

• Completed the development of Brand Safety and Suitability measurement on Twitter’s newsfeed, known as Timeline, and are launching the beta in the coming weeks.

• Launched DV Authentic Attention Snapshot and DV Attention Lab™ to help advertisers optimize campaign performance by leveraging DV’s industry-leading technology platform and attention dataset.

• Launched DV’s Election Task Force to help advertisers navigate the challenging media landscape ahead of the 2022 US midterm elections and beyond. DV anticipates the next presidential election in 2024 to be characterized by a fast-evolving news cycle. The Election Taskforce helps shed light on trends relative to specific events, individuals and hot button topics and provides actionable data insights and analysis to protect brand equity and safeguard media investment ahead of, during and following elections.

• Uncovered a CTV fraud scheme, LeoTerra, that spoofs IoT (Internet of Things) devices including smart refrigerators and smart watches, protecting DV customers from wasting millions of dollars of investment each month.

• Achieved ISO 27001:2013 certification, the most widely recognized international standard for information security management, a testament to DV’s continued dedication to information security and to creating a culture of trust and excellence for the benefit of its clients and partners.

“In the third quarter, we continued to deliver strong business performance with year-over-year revenue growth of 35% and adjusted EBITDA margins of 30% driven by product successes in fast-growth sectors such as programmatic Activation, Social and CTV,” said Nicola Allais, CFO of DoubleVerify. “We are raising the midpoint of our full-year guidance range by the magnitude of our outperformance in the third quarter. Our outlook for the fourth quarter is based on our current visibility and assumes a typical upswing in our Activation business into year end. We continue to monitor the impact of the macroeconomic environment on our client’s ad budgets and to engage them in regular dialogue as we execute our plan through the end of the year and the longer term.”

Fourth Quarter and Full-Year 2022 Guidance:

DoubleVerify anticipates Revenue and Adjusted EBITDA to be in the following ranges:

Fourth Quarter 2022:

• Revenue of $131 to $135 million, a year-over-year increase of 26% at the midpoint.
• Adjusted EBITDA in the range of $45 to $47 million, representing a 35% margin at the midpoint.

Full Year 2022:

• Revenue of $450 to $454 million, a year-over-year increase of 36% at the midpoint.
• Adjusted EBITDA in the range of $138 to $140 million, representing a 31% margin at the midpoint.

With respect to the Company’s expectations under “Fourth Quarter and Full Year 2022 Guidance” above, the Company has not reconciled the non-GAAP measure Adjusted EBITDA to the GAAP measure net income in this press release because the Company does not provide guidance for stock-based compensation expense, depreciation and amortization expense, acquisition-related costs, interest income, and income taxes on a consistent basis as the Company is unable to quantify these amounts without unreasonable efforts, which would be required to include a reconciliation of Adjusted EBITDA to GAAP net income. In addition, the Company believes such a reconciliation would imply a degree of precision that could be confusing or misleading to investors.

Conference Call, Webcast and Other Information

DoubleVerify will host a conference call and live webcast to discuss its third quarter 2022 financial results at 4:30 p.m. Eastern Time today, November 8, 2022. To access the conference call, dial (877) 841-2987 for the U.S. or Canada, or (215) 268-9878 for international callers. The webcast will be available live on the Investors section of the Company’s website at https://ir.doubleverify.com/. An archived webcast will be available approximately two hours after the conclusion of the live event.

In addition, DoubleVerify plans to post certain additional historical quarterly financial information on the investor relations portion of its website for easy access to investors.

Key Business Terms

Activation revenue is generated from the evaluation, verification and measurement of advertising impressions purchased through programmatic demand-side and social media platforms.

Measurement revenue is generated from the verification and measurement of advertising impressions that are directly purchased on digital media properties, including publishers and social media platforms.

Supply-Side revenue is generated from platforms and publisher partners who use DoubleVerify’s data analytics to evaluate, verify and measure their advertising inventory.

Gross Revenue Retention Rate is the total prior period revenue earned from advertiser customers, less the portion of prior period revenue attributable to lost advertiser customers, divided by the total prior period revenue from advertiser customers.

Media Transactions Measured (MTM) is the volume of media transactions that DoubleVerify’s software platform measures.

Measured Transaction Fee (MTF) is the fixed fee DoubleVerify charges per thousand Media Transactions Measured.

International Revenue Growth Rates are inclusive of foreign currency fluctuations.

Comparison of the Three and Nine Months Ended September 30, 2022 and September 30, 2021

Revenue

Adjusted EBITDA

In addition to our results determined in accordance with GAAP, we believe that certain non-GAAP financial measures, including Adjusted EBITDA and Adjusted EBITDA Margin, are useful in evaluating our business. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenue. The following table presents a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to the most directly comparable financial measure prepared in accordance with GAAP.

We use Adjusted EBITDA and Adjusted EBITDA Margin as measures of operational efficiency to understand and evaluate our core business operations. We believe that these non-GAAP financial measures are useful to investors for period to period comparisons of our core business and for understanding and evaluating trends in our operating results on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under GAAP. Some of the limitations of these measures are:

• they do not reflect changes in, or cash requirements for, working capital needs;
• Adjusted EBITDA does not reflect capital expenditures or future requirements for capital expenditures or contractual commitments;
• they do not reflect income tax expense or the cash requirements to pay income taxes;
• they do not reflect interest expense or the cash requirements necessary to service interest or principal debt payments; and
• although depreciation and amortization are non-cash charges related mainly to intangible assets, certain assets being depreciated and amortized will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

In addition, other companies in our industry may calculate these non-GAAP financial measures differently than we do, limiting their usefulness as a comparative measure. You should compensate for these limitations by relying primarily on our GAAP results and using the non-GAAP financial measures only supplementally.

Total stock-based compensation expense recorded in the Consolidated Statements of Operations and Comprehensive Income is as follows:

Forward-Looking Statements

This press release includes “forward-looking statements”. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “plan,” “seek,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Any statements in this press release regarding future revenues, earnings, margins, financial performance or results of operations (including the guidance provided under “Fourth Quarter and Full-Year 2022 Guidance”), and any other statements that are not historical facts are forward-looking statements. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that the forward-looking information presented in this press release is not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking information contained in this press release. These risks, uncertainties, assumptions and other factors include, but are not limited to, the competitiveness of our solutions amid technological developments or evolving industry standards, the competitiveness of our market, system failures, security breaches, cyberattacks or natural disasters, economic downturns and unstable market conditions, our ability to collect payments, data privacy legislation and regulation, public criticism of digital advertising technology, our international operations, our use of “open source” software, our limited operating history and the potential for our revenues and results of operations to fluctuate in the future. Moreover, we operate in a very competitive and rapidly changing environment, and new risks may emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results or outcomes to differ materially from those contained in any forward-looking statements we may make.

Further information on these and additional risks, uncertainties, and other factors that could cause actual outcomes and results to differ materially from those included in or contemplated by the forward-looking statements contained in this press release are included under the caption “Risk Factors” under our Annual Report on Form 10-K filed with the SEC on March 8, 2022 and other filings and reports we make with the SEC from time to time.

We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. Any forward-looking information presented herein is made only as of the date of this press release, and, except as required by law, we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

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