DoubleVerify Holdings, Inc. Q1 2026 earnings call

Good afternoon, and welcome to DoubleVerify's first quarter 2026 earnings conference call. With us today are Mark Zagorski, CEO, and Nicola Allais, CFO. Today's press release with this call may contain forward-looking statements that are subject to inherent risks, uncertainties, and changes and reflect our current expectations and information currently available to us, 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 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. Reconciliation 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.

During the call today, we'll be referring to the slide deck posted on our website. With that, I'll turn it over to Mark.

Thanks, Brinlea, and good afternoon, everyone. We delivered strong Q1 results as we continued our solid execution on our product innovation, strategic, and financial roadmaps. In Q1, we achieved 10% year-over-year revenue growth led by accelerating growth of our social verification and optimization solutions, and we delivered a 31% EBITDA margin, which exceeded expectations largely due to AI-fueled operational efficiencies. Advertiser growth was positive across all key industry verticals in the quarter as we continue to benefit from our focus on further diversification of customer engagements and ad spend across various client types. We also repurchased $100 million worth of shares year-to-date, reflecting confidence in our business and our commitment to returning capital to shareholders as a core element of our long-term value creation strategy.

We expect to deliver a strong 2026 as we successfully execute on our strategic plan to verify the quality, optimize the investment, and prove the impact of digital ad impressions across any platform, media, or market where advertisers spend. The solid results this quarter were fueled by our core growth catalysts, social activation and measurement products, streaming TV verification, and our dynamic suite of solutions that empower advertisers to better navigate the evolving ecosystem of AI advertising platforms and gen AI content. Across all of these sectors, our incredibly durable value proposition remains tantamount. DV is the independent, essential trust layer that marketers rely on to ensure their ad spend is protected from fraud and unsuitable context, and most importantly, delivers the highest possible return on investment. This essential role in the ecosystem continues to expand as new product innovations power our growth flywheel.

Let me share a few recent stats that underscore the impact of these investments. Driven by continued success on Meta, social measurement grew 23% year-over-year, a significant acceleration from Q4. Social activation, our fastest-growing solution set, grew 92% year-over-year in Q1, up from 62% in the fourth quarter. DV Authentic AdVantage on YouTube, which combines Scibids AI optimization with pre-bid filtering and post-bid measurement, launched in Q3 last year and is also expanding rapidly. It is now on track to deliver $10 million of expected ACV in 2026. CTV measurement impression volumes also grew, up 28% in the quarter, and our ABS-enabled streaming TV pre-bid do not air list entered general availability in January, with three top 15 customers representing hundreds of millions in CTV spend implementing these DV-only streaming TV controls.

DV continues to break new ground in the drive towards greater transparency in streaming TV. AI measurement tools like AI SlopStopper, which is now available on YouTube, and AI Agent ID are showing meaningful engagement rates. Our AI SlopStopper measurement solution for mobile and online video and display is already applied to over 40% of measured impressions, and the pre-bid tool is being tested by six of our largest advertisers. Our midterm goal remains to increase the contribution of social, streaming TV, and AI-driven solutions from under 30% of total revenue today to approximately 50%. As we drive this evolution, our mobile and online video and display business remains stable in Q1, with approximately two-thirds of impressions that we engage with delivered on mobile in-app and mobile web environments.

We remain focused on creating a revenue mix that closely aligns with the fastest-growing global digital ad sectors. DV continues to drive new revenue opportunities, distance ourselves from competition, and create meaningful margin expansion through AI efficiencies and product innovation. AI solutions, social activation tools, and streaming TV quality solutions are positively impacting our customers' ad performance and building a foundation for TAM and market share expansion for DoubleVerify. Shifting focus to the role that AI is playing in the ongoing expansion of our product-led growth cycle, we continue to lean into AI to operate more efficiently, launch products faster, and improve margins. As the emerging AI advertising universe evolves, it is creating new revenue opportunities that expand our TAM as we extend our essential role in this burgeoning environment.

Regarding this new environment, we've identified three main areas where DV has the largest AI growth opportunities and which we are already seeing traction with customers. First, the agentic buying and selling of media, where we are building new products, connecting with and leading the development of the numerous protocols that will help advertisers lean into AI-based buying. Second, we are empowering advertisers to navigate the dynamic AI-impacted advertising landscape as AI cyber fraud and AI content swap becomes prolific. Third, we are digging into the massive potential ad market on LLM chatbots, where many of our current advertisers are beginning to deploy their marketing dollars, yet have had little in the way of transparency and independent measurement. Let me talk briefly about each one of these opportunities. First, we are focused on establishing security and trust in the agentic advertising ecosystem.

Trust has always been essential in our industry, and we recently joined the Ad Context Protocol, AdCP, a coalition of ad tech companies established by AgenticAdvertising.org to define standards for ad buying and selling by AI agents. According to eMarketer, about two-thirds of ad buyers plan to focus more time on agentic ad buying this year. While in early days, we are actively engaged to make sure DV is at the forefront of establishing standards that will continue to preserve trust and transparency for its advertisers wherever they choose to deploy their advertising investments. As with all of our engagements, we remain independent and agnostic, and the way we operate in the agentic advertising world will be the same, with the ability to plug into any agentic protocol from the IAB framework to platform-specific systems that are important to our customers.

We are expanding tools to protect ad investments from AI-fueled challenges. We continue to enhance our market-leading suite of AI tools that combat the increasing challenges of navigating AI slop and avoiding AI cyber fraud. With the launch of DV's AI SlopStopper for social, we've expanded our capability for advertisers to avoid low-quality AI-generated content on YouTube and will broaden our coverage to other walled gardens in the coming quarters. Fueled by malicious AI, cyber fraud continues to become more sophisticated, threatening to challenge the ROI and efficiency gains driven by the positive use of AI. In Q1 2026, DV Fraud Lab continued to harness AI to fight fraud as AI-powered fraud schemes proliferated at a record pace and became even more sophisticated.

AI-powered bot schemes continue to evolve faster than ever, with 140% more bot scheme variants emerging in Q1 2026 compared to Q1 2025. In parallel, app-based fraud continues to accelerate dramatically, especially across mobile and CTV, where we have classified over 1,300 apps as fraudulent since the beginning of 2026. Finally, we are focused on capitalizing on the massive potential ad market that AI chatbot marketing will represent. According to eMarketer, ad spend on LLMs is forecasted to grow by over $25 billion by 2029, with ad spend expected to cannibalize over 14% of search spend, a $400 billion market that DV has historically not been able to access.

OpenAI recently shared that they expect to generate $100 billion in advertising revenue by 2030, underscoring just how the market may be moving even more rapidly than analysts are predicting. As has been the case for the open web, mobile, streaming, and social environments, unbiased, independent measurement will play a key role in engendering the advertiser trust needed for this new ecosystem to thrive. While AI platform ad models continue to evolve, advertiser demands remain the same, ensuring ad transactions are trusted and transparent and ads are viewable, brand suitable, and delivered to legitimate traffic within authentic content environments. Our enterprise customers and agency platforms have made it clear to us that expanding beyond test budgets in AI environments will require even greater transparency and trust than is present today.

We are confident that, as we have shown on social and streaming platforms, our role as an essential trust layer will extend to this new ecosystem, and we are engaged in discussions with several LLMs who are leaning into ad-supported models. As AI drives digital advertising to become more automated, agentic, and opaque, as AI slop becomes the must-avoid content category for advertisers, the need for independent verification, protection, and performance measurement has never been greater. Regardless of platform, buying mode, or message, DV will be an integral, trusted part of the ad equation. Moving to social verification. The social sector remains our fastest-growing business segment and is a core driver of our next phase of growth. No other verification or measurement provider has more innovative solutions for advertisers seeking to protect their spend on social platforms and ensure it performs.

Social activation accelerated meaningfully to over 90% year-over-year growth in the first quarter, up from around 60% growth in Q4. This acceleration was driven by continued scaling of our social pre-bid solutions, elevated by enhanced product capabilities on Meta, as well as expanded capabilities across TikTok and YouTube. 87 advertisers have now utilized Meta Activation since launch, up from 68 in the fourth quarter, with 31 of these customers coming from our top 100 clients. As of the end of the first quarter, our Meta Activation product was already at a $12 million annualized run rate. On YouTube, DV Authentic AdVantage has seen strong customer adoption. Some of our largest CPG customers have started scaling on the solution, driven by the significant ROI improvements that it delivers.

Thanks, Mark, and good afternoon, everyone. For the first quarter, we achieved 10% year-over-year revenue growth and 31% EBITDA margins. Off to strong start to the year, we're reiterating guidance for the full year. For the first quarter, total revenue was $181 million, representing 10% year-over-year growth. Total advertiser revenue, which includes activation and measurement, represented 90% of total revenue and grew 9% year-over-year, driven by 12% growth in volume or MTM, partially offset by a 4% decline in fees or MTF. Activation revenue grew 6%, with ABS representing 53% of activation revenue in the quarter. As of quarter end, over 75% of our top 500 clients were using ABS.

Measurement revenue grew 16% year-over-year, with social measurement revenue increasing 23% and representing 49% of measurement revenue, and international revenue increasing 18% and representing 27% of measurement revenue. Supply side revenue represented 10% of total revenue in the quarter and grew 12% year-over-year. We're driving growth by adding new CTV and digital platform partnerships and by continuing to expand DV solutions on retail media networks. Moving to expenses. In the first quarter, we delivered 82% revenue less cost of sales. Our continued investments and use of AI capabilities are allowing us to scale at a consistently efficient rate, even as we measure increasing levels of volume. We delivered $55 million of adjusted EBITDA, representing a 31% margin as compared to 27% margin in Q1 of 2025.

Total expenses for product development, sales and marketing, and G&A increased 2% as compared to 10% revenue growth. We are showing early signs of the benefit of using AI capabilities to grow through improved productivity across the organization and increase software capitalization related to product development. We are scaling the business more efficiently, which results in increasing EBITDA margins. Stock-based compensation was $24 million in the first quarter, flat to prior year. For the second quarter, we expect stock-based compensation of approximately $25 million-$27 million and weighted average fully diluted shares outstanding of approximately 157 million shares.

For the full year, we continue to expect stock-based compensation to range between $102 million-$107 million, a decline year-over-year, reflecting the impact of our updated equity incentive plan that reduced the annual value of equity grants in 2026 by over 40% as compared to 2025. Turning to cash. Year to date, we have repurchased 9.8 million shares for $100 million, of which 7.3 million shares were repurchased in the first quarter for approximately $75 million and 2.5 million shares were repurchased in April for approximately $25 million. Year to date, the 9.8 million shares were repurchased represent approximately 6% of fiscal year end 2025 outstanding shares.

Net cash from operating activities in the first quarter was $4 million and was impacted by timing of collections and payments at the end of the quarter. For the full year, we expect free cash flow conversion of approximately 60%. We ended the first quarter with approximately $174 million in cash and no long-term debt. Now turning to guidance. For the second quarter of 2026, we expect revenue to range between $199 million-$205 million, representing a year-over-year increase of approximately 7% at the midpoint. As a reminder, we're lapping our 21% growth rate in Q2 of 2025, and we expect adjusted EBITDA to range between $63 million-$67 million, representing a 32% adjusted EBITDA margin at the midpoint. For the full year 2026, we are reiterating our prior guidance.

We expect revenue to range between $810 million and $826 million, representing an 8%-10% year-over-year increase, and expect adjusted EBITDA margins of approximately 34%. As discussed on our prior call, incremental growth in 2026 will be driven by three product-led growth engines. First, continued adoption of our solutions across social and streaming TV. Second, growth from existing enterprise clients scaling our product offering. Third, continued new customer acquisition driven by DV's differentiated products. Our first quarter results demonstrate progress on each growth driver with increasing social activation revenue growth, increased adoption and scaling of new products, and a consistently high win rate. Our first quarter results show solid execution. With a clear focus on durable growth and expanding profitability, we're well-positioned to continue to deliver long-term shareholder value.

With that, we will open up the line for questions. Operator, please go ahead.