• Revenue: Approximately $170 million, an 18% year-over-year increase.
• Gross Margin: Achieved 83% margin on revenue less cost of sales.
• Adjusted EBITDA Margin: 35%, marking the highest profitability for any Q3 on record.
• Net Cash Flows from Operating Activities: Over 50% increase to $55 million in the third quarter.
• Activation Revenue Growth: 18% year-over-year.
• Measurement Revenue Growth: 14%, driven by a 21% increase in social measurement revenue.
• Supply Side Revenue Growth: 30% in the third quarter.
• Media Transactions Measured (MTMs): Rose 22% year-over-year.
• Measured Transaction Fees (MTFs): Declined 4% year-over-year.
• Share Repurchases: 1.3 million shares for $25 million in Q3; total of 4.1 million shares for $75 million through November 6.
• Cash and Short Term Investments: Approximately $363 million at the end of the third quarter.
• Guidance for Q4 Revenue: Expected to range between $194 million and $200 million.
• Guidance for Q4 Adjusted EBITDA: Expected to range between $73 million and $79 million.
• Full-Year 2024 Revenue Guidance: Expected to range between $660 million and $666 million.
• Full-Year 2024 Adjusted EBITDA Guidance: Expected to range between $218 million and $224 million.

• Warning! GuruFocus has detected 7 Warning Signs with CORZ.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• DoubleVerify Holdings Inc (NYSE:DV) achieved an 18% year-over-year revenue growth in Q3 2024, with double-digit growth across all three revenue lines: activation, measurement, and supply side.
• The company recorded an impressive 83% gross margin and a 35% adjusted EBITDA margin, marking its highest profitability for any Q3 on record.
• DV secured significant new advertiser wins, including Pepsi, Haleon, Uber, and General Motors, and expanded its partnerships with major platforms and publishers.
• The company successfully upsold Scibids AI to nearly 50 DV customers, contributing to a strong momentum in its activation solutions.
• DV's strategic partnerships and market share gains, such as winning 70% of RFPs from former Moat advertisers, position it as a leader in the digital ad ecosystem.

Negative Points

• Six large customers scaled back on ad spend, impacting DV's premium products and creating headwinds for revenue growth.
• Ad dollars shifted from open exchange programmatic to walled gardens, where DV's activation solutions are not yet available, affecting growth potential.
• The timing of launching pre-bid social solutions has created a near-term impact on overall social growth expectations.
• Brand spending softened ahead of the election, with uncertainty around how quickly traditional ad spending will rebound post-election.
• The gradual ramp in social measurement adoption on Meta platforms is slower than anticipated, affecting short-term revenue growth.

Q & A Highlights

Q: Can you expand on the more gradual ramp in measurement and the upcoming pre-avoidance products for Meta? A: Mark Zagorski, CEO, explained that social measurement growth was more gradual in Q3, with a 21% increase compared to 47% in the first half of the year. This is partly due to advertisers waiting for the pre-bid activation solutions on Meta, expected to launch in early 2025, which will integrate measurement and activation for better performance.

Q: Can you provide more detail on the opportunity with Oracle exiting the market? A: Mark Zagorski, CEO, noted that DoubleVerify won about 70% of the RFPs from former Moat advertisers, including major clients like P&G and Google. The focus is on upselling these clients over time, as they were initially using Moat's basic verification solutions.

Q: How does Oracle's exit affect long-term pricing dynamics? A: Mark Zagorski, CEO, stated that Oracle's exit allows DoubleVerify to enter new markets and advertisers who previously opted for lower-end products. The strategy is to land and expand, initially offering competitive pricing and then upselling additional solutions over time.

Q: How should we think about the durability of adjusted EBITDA margin expansion? A: Nicola Allais, CFO, highlighted that the business is highly scalable, with sustainable gross margins above 80%. While they plan to continue investing in growth, the inherent profitability of the business suggests that EBITDA margins will remain strong.

Q: Can you discuss the launch of social activation features on Meta and their scaling relative to the open web? A: Mark Zagorski, CEO, explained that while the testing cycle for social activation is longer, the scale of advertising on platforms like Meta is massive. The integration of measurement and activation will create a virtuous cycle, leading to significant growth over time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.