Digital media measurement and analytics provider DoubleVerify (NYSE:DV) beat analyst expectations in Q3 FY2022 quarter, with revenue up 35% year on year to $112.2 million. The company expects that next quarter's revenue would be around $133 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. DoubleVerify made a GAAP profit of $10.3 million, improving on its profit of $7.92 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) Q3 FY2022 Highlights:
- Revenue: $112.2 million vs analyst estimates of $109.2 million (2.73% beat)
- EPS: $0.06 vs analyst estimates of $0.05 (14.8% beat)
- Revenue guidance for Q4 2022 is $133 million at the midpoint, roughly in line with what analysts were expecting
- Free cash flow of $17.6 million, down 11.2% from previous quarter
- Gross Margin (GAAP): 82.7%, down from 83.8% same quarter last year
“We delivered another strong quarter and outstanding year-to-date performance fueled by continued momentum in programmatic activation and Social and CTV measurement,” 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 $61 million in Q3 FY2020, to $112.2 million.
And unsurprisingly, this was another great quarter for DoubleVerify with revenue up 35% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $2.44 million in Q3, compared to $13 million in Q2 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.
Guidance for the next quarter indicates DoubleVerify is expecting revenue to grow 26% year on year to $133 million, slowing down from the 34.1% 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 23.5% 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 82.7% in Q3.
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 Q3 Results
With a market capitalization of $3.89 billion DoubleVerify is among smaller companies, but its more than $242.6 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 enjoyed seeing DoubleVerify’s impressive revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. Overall, this quarter's results seemed pretty positive. But investors might have been expecting more and the company is down 0.76% on the results and currently trades at $23.28 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.