DoubleVerify Holdings, Inc. Q2 FY2021 earnings

DoubleVerify reported $76.5 million of revenue for its fiscal 2021 second quarter, up 44.3% from the prior-year quarter. Revenue for the six months ended June 30, 2021 rose 38.2% to $144.1 million. The quarter swung to an operating loss of $9.9 million from operating income in the prior-year quarter. The six-month period also swung to an operating loss of $1.1 million. Net loss was $12.6 million for the quarter and $6.9 million for the six months, both down from net income in the comparable prior-year periods. Diluted EPS was negative $0.08 for the quarter and negative $0.05 for the six months, down from positive diluted EPS in the prior-year periods.

Operating margin was negative 13.0% in the quarter, down 26.6 percentage points from the prior-year quarter. For the six months, operating margin was negative 0.8%, down 12.2 percentage points. Operating cash flow was $22.8 million in the quarter, up 377.8% from the prior-year quarter, and $42.2 million for the six months, up 141.8%. Capital expenditures were $1.6 million in the quarter, up 5.6%, and $3.5 million for the six months, down 23.0%. The company ended the quarter with $330 million of cash and no outstanding variable rate debt after repaying $22.0 million under its New Revolving Credit Facility.

Adjusted EBITDA was $21.2 million in the quarter, up 35%, at a 28% Adjusted EBITDA margin. The company said it achieved over 95% gross revenue retention in the quarter. Media Transactions Measured for Social increased by 100% and for CTV increased by 89%. DoubleVerify won new enterprise clients including Diageo, BMW, Philip Morris International, Grupo Bimbo, Bumble, Progressive, Target, Zaxby's, CarGurus and Truist. It launched a TikTok open beta in 14 markets and extended Media Rating Council accreditation of its CTV capabilities to include DV Video Filtering. It also received three privacy certification seals from TrustArc. The company credited its Authentic Brand Safety solution for adoption on Google's DV360 and a second-quarter launch on other programmatic buying platforms including Adform, Quantcast and Pulsepoint. The number of weekly advertisers using DV Custom Contextual doubled compared with the first quarter of 2021.

Management raised full-year 2021 revenue guidance, saying the midpoint implies a year-over-year increase of 34%, above the range given on May 25, 2021. Full-year Adjusted EBITDA guidance of $103 to $105 million implies a year-over-year increase of 42% at the midpoint and is unchanged from the prior range. For the third quarter of 2021, the company guided to a year-over-year revenue increase of 34% at the midpoint and Adjusted EBITDA of $22 to $24 million, a year-over-year improvement of 59% at the midpoint. The company said its growth expectations for the second half of the year rest on a positive outlook for the fourth quarter, which tends to benefit from seasonally higher spending on advertising campaigns. It did not reconcile the non-GAAP Adjusted EBITDA guidance to GAAP net income because it cannot quantify certain items without unreasonable efforts.

The quarter included $18.9 million of one-time IPO transaction costs, which drove the net loss. Management said the COVID-19 pandemic has not had a significant impact on results to date, but warned that a decline in digital advertising demand, market disruptions or a prolonged global economic slowdown could materially and adversely affect the business. The company said the duration of the global economic slowdown is highly uncertain and cannot be predicted. DoubleVerify also expects to keep incurring additional costs as a public company.