DSP - Viant Technology: Making Progress

2024-01-04 12:48:27 ET

Summary

• Today, we take a look at Viant Technology Inc., an advertising technology company that offers a cloud-based demand-side platform for marketers and advertising agencies.
• The company is seeing solid revenue growth and is seeing a noticeable drop in losses. Viant also has a rock-solid balance sheet.
• An analysis of Viant Technology follows in the paragraphs below.

You can have peace. Or you can have freedom. Don't ever count on having both at once ."? Robert A. Heinlein.

Today, we put Viant Technology Inc. ( DSP ) in the spotlight for the first time. The company came public during the SPAC/IPO wave of 2020/2021 and the stock now finds itself deep in "Busted IPO" territory like so many other debuts from this " vintage ." Third-quarter earnings were a bit better than expected, and the company has a large amount of cash on its balance sheet . In addition, losses will fall sharply in FY2023 and are expected to drop again in 2024 as revenues rise in the low teens. Is a turnaround in store for shareholders in the coming year? An analysis follows below.

Company Overview:

This advertising technology company is headquartered just outside of Los Angeles in Irvine, CA. Viant serves purchasers of programmatic advertising inventory; and large, independent, and mid-market advertising agencies. The company offers several products, including Adelphic. This is a cloud-based demand-side platform or DSP (like the ticker symbol). This technology enables marketers and their advertising agencies to plan, buy, and measure advertising across multiple channels, relying on open data instead of cookies. These channels include desktop, mobile, connected, and linear TV, as well as digital billboards. The stock currently trades at just over $6.50 a share and sports an approximate market capitalization of $425 million.

Third Quarter Results:

The company posted its Q3 numbers on November 6th. The company delivered non-GAAP earnings of 8 cents a share as revenues rose just over 22% on a year-over-year basis to $59.6 million. Both top and bottom line results slightly exceeded expectations.

Other notable tidbits from the quarter. Spending per active customer was up 11% from the same period a year ago, and CTV accounted for one-third of overall advertising spending.

Analyst Commentary & Balance Sheet:

Since third-quarter results were posted, Canaccord Genuity maintained its Hold rating and $7 price target on DSP. Meanwhile, both JMP Securities ($7 price target) and Craig-Hallum ($8 price target) reissued Buy ratings on the stock. Raymond James also upgraded the stock to Outperform at the end of October with a $7 price target noting they were " upbeat on Viant's customer base rationalization, commenting that the company's decision to focus attention behind its highest-value customers has been 'ultimately a beneficial move' even as Viant's customer count has declined."

Approximately four percent of the outstanding float in the shares is currently held short. One insider sold nearly $45,000 worth of shares in mid-June. However, that was the only insider activity in the stock in 2023. The company ended the third quarter with just over $200 million worth of cash and marketable securities on its balance sheet (a bit over three bucks a share). The company has no long-term debt.

Verdict:

Viant Technology lost 84 cents a share in FY2022 on $197 million worth of revenues. The current analyst firm consensus has losses dropping to 28 cents a share in FY2023 as sales rise to just over $224 million. The project losses fell further to 16 cents a share in FY2024 as sales rise 12%. The company's fortunes are projected to improve markedly in 2024 as far as losses are of concern. Viant certainly has a large cash balance sheet to get it to eventual profitability in the coming years.

Viant Technology Inc. should continue to benefit from the ongoing migration and transition of approximately $60 billion of linear television advertising moving into connected TV or CTV. Viant will also be increasingly using AI to provide a platform that helps its clients easily and efficiently maximize their campaign performance. Approximately half of Viant's customers are already using its AI Bid Optimizer, which is resulting in a drop in CPM costs. Management also believes Google's deletion of cookies and other identifiers will further accelerate the growth of ad spend on their platform.

Equating for the net cash on the firm's balance sheet, the shares are priced at just one times annual sales. Cheap enough to merit a small " watch item" position while the story improves around the company in the year ahead.

You may choose to look the other way but you can never say again that you did not know. "? William Wilberforce.

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