Digital media measurement and analytics provider DoubleVerify (NYSE:DV) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 17.8% year on year to $169.6 million. On the other hand, next quarter’s revenue guidance of $197 million was less impressive, coming in 3.8% below analysts’ estimates. Its GAAP profit of $0.10 per share was 42.4% above analysts’ consensus estimates.
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DoubleVerify (DV) Q3 CY2024 Highlights:
- Revenue: $169.6 million vs analyst estimates of $168.9 million (in line)
- EPS: $0.10 vs analyst estimates of $0.07 (42.4% beat)
- EBITDA: $60.16 million vs analyst estimates of $50.9 million (18.2% beat)
- Revenue Guidance for Q4 CY2024 is $197 million at the midpoint, below analyst estimates of $204.8 million
- Revenue Guidance for full year 2024 lowered, calling for 16% year on year growth at the midpoint (17% prior)
- EBITDA guidance for the full year is $221 million at the midpoint, above analyst estimates of $209.8 million
- Gross Margin (GAAP): 82.6%, in line with the same quarter last year
- Operating Margin: 15.2%, up from 12.7% in the same quarter last year
- EBITDA Margin: 35.5%, up from 31.7% in the same quarter last year
- Free Cash Flow Margin: 28.5%, up from 18.4% in the previous quarter
- Market Capitalization: $3.12 billion
“We delivered a strong third quarter, expanding our product and channel capabilities while achieving the largest global market share gains in DoubleVerify’s history,” said Mark Zagorski, CEO of DoubleVerify.
Company Overview
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.
Advertising Software
The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.
Sales Growth
Examining a company’s long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, DoubleVerify’s 27.8% annualized revenue growth over the last three years was solid. This is a good starting point for our analysis.
This quarter, DoubleVerify’s year-on-year revenue growth was 17.8%, and its $169.6 million of revenue was in line with Wall Street’s estimates. Management is currently guiding for a 14.4% year-on-year increase next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 16.8% over the next 12 months, a deceleration versus the last three years. Still, this projection is admirable and indicates the market is baking in success for its products and services.
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Customer Acquisition Efficiency
Customer acquisition cost (CAC) payback represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for marketing and sales investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
DoubleVerify is extremely efficient at acquiring new customers, and its CAC payback period checked in at 5.2 months this quarter. The company’s efficiency indicates that it has a highly differentiated product offering and strong brand reputation, giving it the freedom to invest resources into new growth initiatives while maintaining optionality.
Key Takeaways from DoubleVerify’s Q3 Results
We were impressed by how significantly DoubleVerify blew past analysts’ EBITDA expectations this quarter despite in line revenue. We were also glad its full-year EBITDA guidance exceeded Wall Street’s estimates despite the company lowering full year revenue guidance, which came in below expectations. Zooming out, we think this was a mixed quarter. The areas below expectations seem to be driving the move, and the stock traded down 5.5% to $18.50 immediately after reporting.
Is DoubleVerify an attractive investment opportunity right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
