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DoubleVerify (NYSE:DV) Beats Expectations in Strong Q1, Provides Optimistic Full Year Guidance


Radek Strnad /
2022/05/10 4:17 pm EDT
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Digital media measurement and analytics provider DoubleVerify (NYSE:DV) reported Q1 FY2022 results beating Wall St's expectations, with revenue up 43.1% year on year to $96.7 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $102 million at the midpoint, 3.01% above what analysts were expecting. DoubleVerify made a GAAP profit of $4.57 million, down on its profit of $5.64 million, in the same quarter last year.

Is now the time to buy DoubleVerify? Access our full analysis of the earnings results here, it's free.

DoubleVerify (DV) Q1 FY2022 Highlights:

  • Revenue: $96.7 million vs analyst estimates of $89.9 million (7.58% beat)
  • EPS (GAAP): $0.03
  • Revenue guidance for Q2 2022 is $102 million at the midpoint, above analyst estimates of $99 million
  • The company lifted revenue guidance for the full year, from $433 million to $442 million at the midpoint, a 2.07% increase
  • Free cash flow was negative $7 million, down from positive free cash flow of $20.4 million in previous quarter
  • Gross Margin (GAAP): 82.5%, down from 84.9% same quarter last year

“We came out of the gate exceptionally strong in 2022,” 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.

The digital advertising market is large, growing and becoming more diverse, both in terms of audiences and media. This as a result drives a growing need for a 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 year, growing from quarterly revenue of $67.5 million, to $96.7 million.

DoubleVerify Total Revenue

And unsurprisingly, this was another great quarter for DoubleVerify with revenue up 43.1% year on year. But the revenue actually decreased by $8.81 million in Q1, compared to $22.4 million increase in Q4 2021. However, DoubleVerify's sales do seem to have a seasonal pattern to them, and since management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.

Guidance for the next quarter indicates DoubleVerify is expecting revenue to grow 33.2% year on year to $102 million, slowing down from the 44.3% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 26.4% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. 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 is left after paying for servers, licenses, technical support and other necessary running expenses was at 82.5% in Q1.

DoubleVerify Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.82 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite it going down over the last year, this is still a great gross margin, that allows companies like DoubleVerify to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from DoubleVerify's Q1 Results

With a market capitalization of $3.13 billion DoubleVerify is among smaller companies, but its more than $211.6 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were impressed by the exceptional revenue growth DoubleVerify delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is flat on the results and currently trades at $18.28 per share.

DoubleVerify may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.