NEW YORK - DoubleVerify Holdings Inc. (NYSE: NYSE:DV), a leading software platform for digital media measurement, data, and analytics, reported first-quarter earnings that fell short of Wall Street expectations, alongside a weaker-than-expected sales forecast, sending its shares crashing by 40% in premarket trading Wednesday.
The company posted adjusted earnings per share (EPS) of $0.04 for the first quarter ended March 31, 2024, which was below the analyst consensus of $0.12. However, revenue for the quarter was $140.8 million, slightly exceeding the consensus estimate of $138.25 million and marking a 15% increase from the same quarter last year.
CEO Mark Zagorski highlighted the company's progress, stating, "We enhanced and scaled our independently accredited core verification and performance solutions across leading social and CTV platforms... all of which drove strong revenue growth and profitability." Despite this, the company's projection of weak sales in the coming quarters has overshadowed the current quarter's achievements.
For the second quarter of 2024, DoubleVerify anticipates revenue between $152 million and $156 million, which falls short of the analyst consensus of $159 million. The midpoint of this guidance suggests a year-over-year revenue increase of 15%. The company also forecasts adjusted EBITDA to be in the range of $41 million to $45 million, representing a 28% margin at the midpoint.
Looking ahead to the full year 2024, DoubleVerify expects revenue to range from $663 million to $675 million, which is below the consensus estimate of $696 million. The adjusted EBITDA guidance is set between $199 million and $211 million, indicating a 31% margin at the midpoint and implying a 17% increase in revenue year-over-year.
CFO Nicola Allais commented on the financial outlook, "We are adjusting our full-year 2024 guidance ranges to 17% revenue growth, and 31% adjusted EBITDA margins at the midpoints primarily due to uneven spending patterns among select large advertisers."
The stock's significant drop reflects investor concerns over the company's future revenue prospects. Despite the current quarter's revenue exceeding analyst expectations and a 15% increase from the previous year, the market's reaction was heavily influenced by the subdued sales forecast and missed EPS target.
The company's first-quarter performance was bolstered by a 16% growth in Total Advertiser revenue and an 18% increase in Media Transactions Measured (MTM) year-over-year. However, the Measured Transaction Fee (MTF) declined by 2%, primarily due to a shift in product mix favoring lower-priced measurement volumes.
DoubleVerify's strategic expansions and new business wins, such as partnerships with Asda, Hyundai Motor (OTC:HYMTF) Group, and Audible by Amazon (NASDAQ:AMZN), and new enterprise customers like McAfee, Carlsberg (CSE:CARLb), and Perigo, have contributed to its market share growth. Additionally, the company has made significant strides in accreditation and certification, including becoming the first company to attain TrustArc's TRUSTe Responsible AI Certification.
Following the earnings report's release, KeyBanc analysts downgraded DV shares to Sector Weight from Overweight, saying Q1 "was a thesis-changing quarter."
According to them, the print showed that the expected boost from social and CTV "is taking longer than expected to play out; customer concentration is greater
than perceived; and there is now real de-rating risk."
"Until it becomes more clear social and CTV products are ramping, we struggle to see DoubleVerify sustainably growing to the 20%+ level," analysts continued.
Meanwhile, Goldman Sachs analysts said they believe many investors will leave DV stock "in the "show me story" camp" after the report.
"While the short-term period in the coming quarters is likely to be fixated on sequential revenue performance, we still have a high confidence interval in the long-term company narrative and industry thematic element that could sustain above digital ad industry growth rates," they added.
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