Viant Technology Inc. 2020 Form 10-K Summary
Business Context and Reporting Period
Viant operates Adelphic, an enterprise demand-side platform that enables marketers and agencies to plan, buy and measure programmatic advertising across desktop, mobile, connected TV, linear TV, streaming audio and digital billboards. The fiscal year ended December 31, 2020. Historical operating results are those of Viant Technology LLC, the predecessor for accounting purposes, because Viant Technology Inc. was incorporated in October 2020 and became the public holding company upon completion of the February 2021 IPO.
The company reported a single operating segment and had 289 employees in 10 U.S. offices at December 31, 2020. Its strategy emphasizes people-based identity resolution, omnichannel inventory, self-service functionality and measurement capabilities.
Financial and Operating Metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $165.3 million | $164.9 million | 0.2% increase |
| Revenue ex-TAC | $110.5 million | $104.4 million | 6% increase |
| Gross profit | $77.0 million | $70.8 million | 9% increase |
| Income from operations | $21.8 million | $12.8 million | 70% increase |
| Net income | $20.6 million | $9.9 million | 108% increase |
| Adjusted EBITDA | $31.8 million | $24.7 million | 29% increase |
| Adjusted EBITDA margin on revenue ex-TAC | 29% | 24% | 5 percentage-point increase |
| Cash flow from operations | $18.9 million | $13.0 million | 45% increase |
| Capitalized software development | $7.4 million | $7.4 million | Approximately flat |
| Active Customers | 264 | 277 | 5% decrease |
| Average revenue ex-TAC per Active Customer | $419,000 | $377,000 | 11% increase |
GAAP net income margin was approximately 12% of revenue in 2020 versus 6% in 2019. Operating expenses declined to $143.5 million from $152.1 million, or 87% of revenue versus 92% in the prior year. Platform operations expense declined 6%, primarily because of lower traffic acquisition costs and a shift toward percentage-of-spend pricing.
At December 31, 2020, cash was $9.6 million, accounts receivable were $89.8 million and working capital was $24.2 million. Total debt was $23.5 million, consisting of $17.5 million drawn under a $40.0 million secured revolving credit facility and a $6.0 million Paycheck Protection Program loan. Revolving facility availability was $22.5 million, and the company was in compliance with its debt covenants. Average DSO was 64 days and DPO was 62 days.
Material Changes Versus the Prior Comparable Period
- Revenue was essentially flat because COVID-19 reduced advertising spending by customers in travel, tourism, retail and automotive, although platform spend increased 17%.
- Revenue ex-TAC increased faster than reported revenue because customer mix shifted toward percentage-of-spend pricing, which carries lower reported traffic acquisition costs.
- Profitability improved materially as platform operations, general and administrative, technology and development, and sales and marketing expenses declined or grew more slowly than revenue.
- Net interest expense declined by approximately $2.9 million because 2020 debt carried lower rates and the prior-year related-party debt was settled in connection with the 2019 Former Holdco transaction.
- Active Customers declined from 277 to 264, but average revenue ex-TAC per Active Customer increased from $377,000 to $419,000.
- Accounts receivable increased from $68.1 million to $89.8 million, while cash increased from $4.8 million to $9.6 million.
- The company paid $5.5 million of member tax distributions, $5.0 million of member dividends and $1.7 million of IPO offering costs during 2020.
Guidance, Outlook, Commentary and Risks
Management did not provide formal numerical revenue or earnings guidance in the filing. It expects to continue investing in platform operations, technology and development, sales and marketing, identity resolution and new advertising-channel integrations. Management stated that these investments may pressure near-term profitability.
Management views the shift toward programmatic advertising and away from third-party cookies as a significant opportunity. However, the filing cautions that adoption may develop more slowly than expected and that browser, mobile-platform and privacy-policy changes could reduce data availability or alter the digital advertising market.
COVID-19 negatively affected revenue and Adjusted EBITDA in 2020. The company implemented temporary salary reductions in the second and third quarters, restored normal salaries in the fourth quarter and paid employees for the deferred amounts. The duration and economic effects of the pandemic remained uncertain.
Key risks include customer concentration and agency dependence, sequential-liability collection risk, working-capital pressure from paying suppliers before collecting from customers, intense competition, platform outages and cybersecurity incidents, changing privacy regulation, loss of third-party data or advertising inventory, and the uncertain growth of programmatic connected-TV and other emerging channels.
The company owns and operates Myspace.com, which creates additional privacy, cybersecurity, content-liability and regulatory risks. The filing references a prior Myspace data breach involving approximately 360 million user accounts and an FTC privacy consent order that remains in effect through August 2032.
The $6.0 million PPP loan bears interest at 1% and matures in April 2022. The company expected to apply for forgiveness but could not assure that any amount would be forgiven. Because the loan exceeded $2.0 million, it was subject to SBA review or audit.
Following year-end, Viant completed its IPO on February 12, 2021, selling 11.5 million Class A shares, including the underwriters’ overallotment, at $25.00 per share. Gross proceeds were $250.0 million and net proceeds were $232.5 million. The IPO created a dual-class structure, with the Vanderhook Parties retaining approximately 74.9% of voting power, and established a Tax Receivable Agreement under which Viant Technology Inc. generally must pay continuing LLC members 85% of realized or deemed net cash tax savings.
Approximately 6.2 million restricted stock units were granted in connection with the IPO with an aggregate grant-date fair value of approximately $155 million. The company expected to recognize approximately $83.5 million of stock-based compensation expense during 2021, with the remainder recognized over a weighted-average period of 2.1 years.
Most Important Facts for Investors to Verify
- Reconcile reported revenue growth with the 17% increase in platform spend and the 6% increase in revenue ex-TAC.
- Evaluate whether the improvement in margins is sustainable after COVID-related salary actions, lower travel costs and other temporary effects.
- Review customer and agency concentration, including two advertising agency holding companies representing 13.3% and 13.2% of 2020 revenue.
- Assess accounts receivable collection risk, sequential-liability terms, DSO relative to DPO and the effect of working-capital growth on liquidity.
- Confirm the status and ultimate forgiveness amount of the $6.0 million PPP loan.
- Model the secured revolving facility, covenant requirements, variable-rate exposure and LIBOR transition risk.
- Quantify the future cash burden of the Tax Receivable Agreement, including potential accelerated payments upon a change in control or termination.
- Assess dilution and future stock-based compensation from the IPO-related RSU grants and the 2021 long-term incentive plan.
- Monitor privacy regulation, third-party-cookie restrictions, mobile-platform changes and the availability of people-based data.
- Consider the implications of founder control, the dual-class structure, Nasdaq controlled-company exemptions and the absence of cash dividends.