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DoubleVerify (NYSE:DV) Beats Expectations in Strong Q2, Stock Soars


Jabin Bastian /
2022/08/03 4:24 pm EDT
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Digital media measurement and analytics provider DoubleVerify (NYSE:DV) reported Q2 FY2022 results beating Wall St's expectations, with revenue up 43.4% year on year to $109.8 million. Guidance for next quarter's revenue was $109 million at the midpoint, which is 1.77% above the analyst consensus. DoubleVerify made a GAAP profit of $10.2 million, improving on its loss of $12.5 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) Q2 FY2022 Highlights:

  • Revenue: $109.8 million vs analyst estimates of $101.9 million (7.67% beat)
  • EPS (GAAP): $0.06
  • Revenue guidance for Q3 2022 is $109 million at the midpoint, above analyst estimates of $107.1 million
  • The company lifted revenue guidance for the full year, from $442 million to $449 million at the midpoint, a 1.58% increase
  • Free cash flow of $19.9 million, up from negative free cash flow of $7 million in previous quarter
  • Gross Margin (GAAP): 82.8%, down from 83.9% same quarter last year

“We delivered an outstanding second quarter and surpassed our expectations for growth and profitability fueled by record Activation revenue and continued momentum on Social and CTV platforms,” 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 $76.5 million, to $109.8 million.

DoubleVerify Total Revenue

And unsurprisingly, this was another great quarter for DoubleVerify with revenue up 43.4% year on year. On top of that, revenue increased $13 million quarter on quarter, a strong improvement on the $8.81 million decrease in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates DoubleVerify is expecting revenue to grow 31.1% year on year to $109 million, slowing down from the 36.1% 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 23.7% 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 82.8% in Q2.

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. This is 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. It is good to see that the gross margin is staying stable which indicates that DoubleVerify is doing a good job controlling costs and is not under pressure from competition to lower prices.

Key Takeaways from DoubleVerify's Q2 Results

With a market capitalization of $3.76 billion DoubleVerify is among smaller companies, but its more than $223.7 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 the strong free cash flow. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 8.62% on the results and currently trades at $25.95 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.