Digital media measurement and analytics provider DoubleVerify (NYSE:DV) reported results in line with analyst expectations in Q4 FY2022 quarter, with revenue up 26.6% year on year to $133.6 million. The company expects that next quarter's revenue would be around $118 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. DoubleVerify made a GAAP profit of $18.1 million, down on its profit of $28.3 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) Q4 FY2022 Highlights:
- Revenue: $133.6 million vs analyst estimates of $133.0 million (small beat)
- EPS: $0.11 vs analyst expectations of $0.11 (2.2% miss)
- Revenue guidance for Q1 2023 is $118 million at the midpoint, roughly in line with what analysts were expecting
- Management's revenue guidance for upcoming financial year 2023 is $557 million at the midpoint, in line with analyst expectations and predicting 23.1% growth (vs 37.1% in FY2022)
- Free cash flow of $24.2 million, up 37% from previous quarter
- Gross Margin (GAAP): 82.9%, in line with same quarter last year
“2022 was another year of exceptional growth driven by strong execution,” 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.
As you can see below, DoubleVerify's revenue growth has been very strong over the last two years, growing from quarterly revenue of $78.6 million in Q4 FY2020, to $133.6 million.
This quarter, DoubleVerify's quarterly revenue was once again up a very solid 26.6% year on year. On top of that, revenue increased $21.4 million quarter on quarter, a very strong improvement on the $2.45 million increase in Q3 2022, which shows acceleration of growth, and is great to see.
Guidance for the next quarter indicates DoubleVerify is expecting revenue to grow 22% year on year to $118 million, slowing down from the 43.1% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $557 million at the midpoint, growing 23.1% compared to 36% increase in FY2022.
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.
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 82.9% in Q4.
That means that for every $1 in revenue the company had $0.83 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 Q4 Results
With a market capitalization of $4.33 billion DoubleVerify is among smaller companies, but its more than $267.8 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
DoubleVerify delivered solid revenue growth and free cash flow generation this quarter. Those features of the results really stood out as positives. Although revenue guidance for the next quarter and upcoming year were relatively in line, we thought this was a solid quarter. The company is up 11.5% on the results and currently trades at $29 per share.
DoubleVerify may have had a tough quarter, but does that actually create an opportunity to 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.