DoubleVerify (NYSE:DV) Surprises With Q1 Sales But Stock Drops 21.5%
Digital media measurement and analytics provider DoubleVerify (NYSE:DV) beat analysts' expectations in Q1 CY2024, with revenue up 14.8% year on year to $140.8 million. On the other hand, next quarter's revenue guidance of $154 million was less impressive, coming in 2.8% below analysts' estimates. It made a GAAP profit of $0.04 per share, down from its profit of $0.07 per share in the same quarter last year.
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DoubleVerify (DV) Q1 CY2024 Highlights:
- Revenue: $140.8 million vs analyst estimates of $138.2 million (1.8% beat)
- Adjusted EBITDA: $38.1 million vs analyst estimates of $35.2 million (8.2% beat)
- EPS: $0.04 vs analyst estimates of $0.02 ($0.02 beat)
- Revenue Guidance for Q2 CY2024 is $154 million at the midpoint, below analyst estimates of $158.4 million
- The company dropped its revenue guidance for the full year from $696 million to $669 million at the midpoint, a 3.9% decrease (also dropped its adjusted EBITDA guidance for the full year)
- GAAP): 81.1%, in line with the same quarter last year
- Free Cash Flow of $25.38 million, down 46.4% from the previous quarter
- Market Capitalization: $5.33 billion
“We made solid progress across multiple growth vectors in the first quarter, ending the period above the high end of our guidance,” 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.
Advertising Software
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Sales Growth
As you can see below, DoubleVerify's revenue growth has been very strong over the last three years, growing from $67.59 million in Q1 2021 to $140.8 million this quarter.
This quarter, DoubleVerify's quarterly revenue was once again up 14.8% year on year. However, the company's revenue actually decreased by $31.45 million in Q1 compared to the $28.26 million increase in Q4 CY2023. Regardless, we aren't too concerned because DoubleVerify's sales seem to follow a seasonal pattern and management is guiding for revenue to rebound in the coming quarter.
Next quarter's guidance suggests that DoubleVerify is expecting revenue to grow 15.1% year on year to $154 million, slowing down from the 21.8% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 23.6% over the next 12 months before the earnings results announcement.
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Cash Is King
If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. DoubleVerify's free cash flow came in at $25.38 million in Q1, up 46.5% year on year.
DoubleVerify has generated $110.8 million in free cash flow over the last 12 months, a solid 18.8% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.
Key Takeaways from DoubleVerify's Q1 Results
It was encouraging to see DoubleVerify narrowly top analysts' revenue expectations this quarter. On the other hand, its full-year revenue guidance was lowered and is now below expectations, as is adjusted EBITDA guidance. Overall, the results could have been better, and after competitor Integral Ad Science (NASDAQ:IAS) warned of pricing competition in the market last quarter (which DV denied seeing), this result is certainly bad for sentiment and puts into question what short to medium-term topline projections should look like. The company is down 21.5% on the results and currently trades at $24 per share.
DoubleVerify may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
