Summary
DoubleVerify reported third quarter fiscal 2022 revenue of $112.3 million, up 35.1% from the prior-year quarter. The press release called it the highest revenue in any quarter. Year-to-date revenue reached $318.8 million, up 40.3%. Net income was $10.3 million, up 30.4%. Operating income was $14.4 million, up 21.9%. Diluted earnings per share were $0.06, up 20.0%. Operating margin slipped 1.4 percentage points to 12.8%. On a non-GAAP basis, adjusted EBITDA was $34.0 million, a 30% adjusted EBITDA margin. The company ended the quarter with a gross revenue retention rate above 95%. Management said revenue growth significantly outpaced the broader digital advertising industry.
Management credited growth to programmatic activation and Social and CTV measurement. Media transactions measured for CTV rose 48%, while Social media transactions measured rose 23%. The company reported a 17% increase in media transactions measured and a 10% increase in the measured transaction fee. DoubleVerify expanded partnerships with Netflix and TikTok and completed development of Brand Safety and Suitability measurement on Twitter's newsfeed. New enterprise wins included GAP, Mattel, Kroger Precision Marketing, TUI, Club Med, Marina Bay Sands, Hyundai Motor Company, Michelin, SC Johnson and SmartEnergy UK. DoubleVerify also uncovered a CTV fraud scheme called LeoTerra, which spoofs IoT devices including smart refrigerators and smart watches. It achieved ISO 27001:2013 certification, launched DV Authentic Attention Snapshot and DV Attention Lab, and created an Election Task Force ahead of the 2022 US midterm elections.
Cash generation was strong in the quarter. Operating cash flow was $31.8 million, up 96.3%. Year-to-date operating cash flow was $58.4 million, essentially flat with a 0.1% decline. Capital expenditures were $14.1 million in the quarter, up 610.6%. Year-to-date capital expenditures were $27.7 million, up 404.1%. Year-to-date operating margin was 9.5%, up 4.9 percentage points. Year-to-date operating income was $30.4 million, up 185.3%. Year-to-date net income was $25.2 million, up 2,420.0%. The company said it had no outstanding variable rate debt and $150 million of availability under its revolver. Management said existing cash and cash generated from operations, together with the undrawn balance under the New Revolving Credit Facility, will be sufficient to meet working capital and capital expenditure requirements for at least the next 12 months.
For the fourth quarter of 2022, DoubleVerify guided revenue to $131 million to $135 million, a year-over-year increase of 26% at the midpoint. Fourth quarter adjusted EBITDA was guided to $45 million to $47 million, a 35% margin at the midpoint. For the full year 2022, revenue guidance was $450 million to $454 million, up 36% at the midpoint. Full year adjusted EBITDA guidance was $138 million to $140 million, a 31% margin at the midpoint. Management raised the midpoint of its full-year guidance range by the magnitude of its third quarter outperformance. The fourth quarter outlook assumes a typical upswing in the Activation business into year end. The company has not reconciled adjusted EBITDA guidance to GAAP net income because it cannot quantify certain items without unreasonable efforts.
Risks remain. Management said the macroeconomic advertising environment is becoming increasingly challenging. The company is monitoring the impact on clients' ad budgets and engaging in regular dialogue. Other named risks include foreign currency fluctuations, competition, technological developments, system failures, security breaches, cyberattacks, natural disasters, data privacy legislation and regulation, public criticism of digital advertising technology, international operations, 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, though it said the impact was not material. The COVID-19 pandemic and a global economic slowdown could also affect demand for digital advertising. The company said the duration of the pandemic is highly uncertain and cannot be predicted.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $112.3M | $109.8M | +2.2% | $83.1M | +35.1% |
| Gross profit | $92.9M | $91.0M | +2.2% | $69.7M | +33.4% |
| Gross margin | 82.8% | 82.8% | -0.1 pp | 83.8% | -1.0 pp |
| Research & development | $23.9M | $23.2M | +3.1% | $16.4M | +46.3% |
| Sales & marketing | $27.1M | $24.7M | +9.6% | $19.5M | +38.8% |
| General & administrative | $19.4M | $21.5M | -9.9% | $14.5M | +34.1% |
| Operating income (loss) | $14.4M | $13.2M | +9.3% | $11.8M | +21.9% |
| Operating margin | 12.8% | 12.0% | +0.8 pp | 14.2% | -1.4 pp |
| Net income (loss) | $10.3M | $10.3M | +0.4% | $7.9M | +30.4% |
| Net margin | 9.2% | 9.4% | -0.2 pp | 9.5% | -0.3 pp |
| Diluted EPS | $0.06 | $0.06 | ±$0.00 | $0.05 | +$0.01 |
Risks
Management ties future results to demand for digital advertising, noting the pandemic and other market forces have resulted in market and supply chain disruptions and a global economic slowdown, and that a decline in digital advertising demand could materially and adversely impact results. The conflict in Ukraine also led the Company to voluntarily discontinue services with Russia-based customers and record a $1.0 million increase in bad debt reserves during the three months ended March 31, 2022.
General and administrative expenses rose 34% in the three months ended September 30, 2022, driven in part by a $3.0 million increase in bad debt reserves, and reserves increased $4.8 million for the nine months ended September 30, 2022 (versus a $1.2 million reversal in the prior-year nine-month period). This signals deterioration in customer collections as the collection and payment cycles vary period to period.
For each of the three and nine months ended September 30, 2022, 90% of revenue was generated from advertiser customers, with Activation revenue alone up 48% in the quarter and Measurement revenue up only 14%. Results therefore depend heavily on a narrow customer type and on continued growth in Media Transactions Measured and Measured Transaction Fees.
Operating margin declined 1.4 percentage points to 12.8% in the three months ended September 30, 2022, as stock-based compensation rose to $11.0 million in the quarter, from $4.8 million in the prior-year quarter, and headcount-related costs grew across cost of revenue (up 44%), product development (up 46%) and sales and marketing (up 39%). Continued hiring and equity compensation could keep pressuring profitability.
Capital expenditures increased 610.6% to $14.1 million in the three months ended September 30, 2022 and 404.1% to $27.7 million for the nine months ended September 30, 2022, including leasehold improvements for a new global headquarters and capitalized software development costs, even as operating cash flow was flat for the nine-month period. Rising capital needs could reduce free cash flow generation.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA Margin
Gross Revenue Retention
Media Transactions Measured (MTM) growth
Measured Transaction Fee (MTF) growth
Summary, forecast, risks and KPIs are extracted from DoubleVerify Holdings, Inc.'s SEC filings for Q3 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.