DoubleVerify Holdings, Inc. Q2 FY2022 earnings

DoubleVerify reported second quarter revenue of $109.8 million, up 43.5% from the prior-year quarter and a record for the second quarter. Year-to-date revenue was $206.5 million, up 43.3% from the prior-year year-to-date period. The company swung to operating income of $13.2 million in the quarter from an operating loss a year earlier. Year-to-date operating income was $16.0 million, also up from an operating loss. Net income was $10.3 million in the quarter, up from a net loss, while year-to-date net income was $14.9 million, up from a net loss. Diluted earnings per share were $0.06 in the quarter, up from a loss per share, and $0.09 year to date, up from a loss per share. Operating margin was 12.0% in the quarter, up 25.0 percentage points from the prior-year quarter, and 7.8% year to date, up 8.6 percentage points from the prior-year year-to-date period.

Adjusted EBITDA, a non-GAAP measure, was $34.0 million in the quarter, an increase of 60%, and represented a 31% adjusted EBITDA margin, compared with 28% in the prior-year quarter. Management attributed the revenue increase to a 24% rise in Media Transactions Measured and a 10% rise in Measured Transaction Fees. The gross revenue retention rate remained above 95%. The company said CTV and Social Media Transactions Measured increased by 56% and 26%, respectively. The number of advertisers activating its Authentic Brand Suitability solution rose 20% year over year, driven by existing client upsells and geographic expansion. DoubleVerify announced partnerships with Reddit, Scope3, and the LinkedIn Audience Network, and began working with Twitch Ads on a closed beta for livestreamed content. New enterprise wins included British Airways, Taco Bell, Universal Parks, Roshfrans, Meta, Asda, Califia Farms, Infiniti, and Smile Direct. Management said the quarter reflected record Activation revenue and continued momentum on Social and CTV platforms.

Cash generation was mixed. Operating cash flow was $28.8 million in the quarter, up 26.5% from the prior-year quarter. Year-to-date operating cash flow was $26.5 million, down 37.1% from the prior-year year-to-date period. The company said the year-to-date decline reflected timing of collections and employee-related payroll tax liabilities. Capital expenditures were $8.8 million in the quarter, up 453.6% from the prior-year quarter, and $13.6 million year to date, up 287.3% from the prior-year year-to-date period. Management said the spending supported leasehold improvements for a new global headquarters and capitalized software development costs. As of June 30, 2022, the company had no outstanding variable rate indebtedness and $150 million of availability under its New Revolving Credit Facility.

Third quarter 2022 guidance calls for revenue growth of 31% at the midpoint year over year, along with adjusted EBITDA of $32 million to $34 million, a 30% margin at the midpoint. Full year 2022 guidance calls for revenue growth of 35% at the midpoint year over year, along with adjusted EBITDA of $136 million to $140 million, a 31% margin at the midpoint. Management raised the midpoints of its full-year 2022 guidance ranges. The company said it has not reconciled forward-looking adjusted EBITDA to GAAP net income because it cannot quantify certain items without unreasonable efforts. DoubleVerify continues to monitor the macroeconomic and geopolitical environment and its effect on clients' advertising budgets. Other risks include competition, data privacy legislation and regulation, system failures, security breaches, economic downturns, international operations, use of open source software, limited operating history, and potential revenue fluctuations. The company also discontinued services with Russia-based customers after Russia's invasion of Ukraine.