DoubleVerify (NYSE:DV) Q3 Sales Beat Estimates
Digital media measurement and analytics provider DoubleVerify (NYSE:DV) announced better-than-expected results in Q3 FY2023, with revenue up 28.3% year on year to $144 million. The company also expects next quarter's revenue to be around $172 million, in line with analysts' estimates. Turning to EPS, DoubleVerify made a GAAP profit of $0.08 per share, improving from its profit of $0.06 per share in the same quarter last year.
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DoubleVerify (DV) Q3 FY2023 Highlights:
Revenue: $144 million vs analyst estimates of $139 million (3.6% beat)
Adjusted EBITDA: $45.7 million vs. analyst estimates of $40.3 million (13.4% beat)
EPS: $0.08 vs analyst estimates of $0.06 (27.7% beat)
Revenue Guidance for Q4 2023 is $172 million at the midpoint, roughly in line with what analysts were expecting
Free Cash Flow of $30.88 million, up from $7.17 million in the previous quarter
Gross Margin (GAAP): 81.6%, down from 82.8% in the same quarter last year
“We delivered an outstanding third quarter with business momentum far outpacing the industry and our competitors across all key geographies and digital media environments. We also completed the acquisition of Scibids, an AI powered optimization platform that will dynamically optimize DV & client data in programmatic activation applications, creating a highly differentiated product offering,” said Mark Zagorski, CEO of DoubleVerify.
When Oren Netzer saw a digital ad for US-based Target while sitting in his Tel Aviv apartment, he knew there was an unsolved problem, so he started DoubleVerify (NYSE:DV), a provider of advertising solutions to businesses that helps with ad verification, fraud prevention, and brand safety.
Advertising Software
The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.
Sales Growth
As you can see below, DoubleVerify's revenue growth has been very strong over the last two years, growing from $83.1 million in Q3 FY2021 to $144 million this quarter.
This quarter, DoubleVerify's quarterly revenue was once again up a very solid 28.3% year on year. Quarter on quarter, its revenue increased by $10.23 million in Q3, which was roughly in line with the Q2 2023 increase. This steady growth shows that the company can maintain a strong growth trajectory.
Next quarter's guidance suggests that DoubleVerify is expecting revenue to grow 28.7% year on year to $172 million, in line with the 26.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 24.4% over the next 12 months before the earnings results announcement.
The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.
Profitability
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. DoubleVerify's gross profit margin, an important metric measuring how much money there's left after paying for servers, licenses, technical support, and other necessary running expenses, was 81.6% in Q3.
That means that for every $1 in revenue the company had $0.82 left to spend on developing new products, sales and marketing, and general administrative overhead. Significantly up from the last quarter, DoubleVerify's excellent gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.
Key Takeaways from DoubleVerify's Q3 Results
With a market capitalization of $4.92 billion, DoubleVerify is among smaller companies, but its $259.2 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.
This was a classic "beat and raised" quarter that many investors relish. It was good to see DoubleVerify beat analysts' revenue, adjusted EBITDA, and adjusted EPS expectations this quarter. While revenue and adjusted EBITDA guidance for the next quarter were more or less in line, the company raised its full year revenue and adjusted EBITDA outlooks. Overall, this quarter's results were solid, and many shareholders should feel optimistic. The stock is up 1.1% after reporting and currently trades at $29.27 per share.
So should you invest in DoubleVerify right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.
