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DoubleVerify's (NYSE:DV) Q1 Sales Top Estimates, Stock Soars


Adam Hejl /
2023/05/10 4:17 pm EDT

Digital media measurement and analytics provider DoubleVerify (NYSE:DV) reported Q1 FY2023 results that beat analyst expectations, with revenue up 26.7% year on year to $122.6 million. The company expects that next quarter's revenue would be around $133 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. DoubleVerify made a GAAP profit of $12.2 million, improving on its profit of $4.58 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 FY2023 Highlights:

  • Revenue: $122.6 million vs analyst estimates of $118.1 million (3.78% beat)
  • EPS: $0.07 vs analyst estimates of $0.04 ($0.03 beat)
  • Revenue guidance for Q2 2023 is $133 million at the midpoint, roughly in line with what analysts were expecting
  • The company lifted revenue guidance for the full year, from $557 million to $563 million at the midpoint, a 1.08% increase
  • Free cash flow of $17.3 million, down 28.5% from previous quarter
  • Gross Margin (GAAP): 80.5%, down from 82.6% same quarter last year

“DV has once again delivered a powerful combination of strong revenue growth and profitability that has exceeded expectations,” 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 two years, growing from quarterly revenue of $67.6 million in Q1 FY2021, to $122.6 million.

DoubleVerify Total Revenue

This quarter, DoubleVerify's quarterly revenue was once again up a very solid 26.7% year on year. But the revenue actually decreased by $11 million in Q1, compared to $21.4 million increase in Q4 2022. 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 21.1% year on year to $133 million, slowing down from the 43.5% 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 22.2% 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 80.5% in Q1.

DoubleVerify Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.80 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite the recent drop that 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 $4.49 billion DoubleVerify is among smaller companies, but its more than $285.7 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see DoubleVerify outperform Wall St’s revenue and EBITDA expectations this quarter. The company also raised full year guidance to complete a "beat and raise" performance. Next quarter's revenue and EBITDA guidance were relatively in line. On an absolute basis, revenue growth was strong. On the other hand, it was less good to see some deterioration in gross margin. Zooming out, we think this was still a strong quarter, showing the company is staying on target. The company is up 5.92% on the results and currently trades at $29.5 per share.

Should you invest in DoubleVerify 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.