Business context and reporting period
Viant Technology Inc. operates Adelphic, a demand-side advertising platform used to plan, buy and measure programmatic advertising across multiple channels. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2022; comparisons are with the corresponding 2021 periods. Financial amounts below are in millions unless noted.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $48.8 | $50.9 | $142.7 | $141.4 |
| Gross profit | $21.3 | $21.9 | $58.0 | $56.4 |
| Gross margin | 43.6% | 43.1% | 40.7% | 39.9% |
| Operating loss | $(12.9) | $(11.8) | $(40.1) | $(50.5) |
| Consolidated net loss | $(12.4) | $(12.2) | $(40.1) | $(45.1) |
| Net loss attributable to Viant Technology Inc. | $(3.1) | $(2.5) | $(9.7) | $(9.3) |
| Adjusted EBITDA (non-GAAP) | $(1.8) | $6.5 | $(8.8) | $19.7 |
Q3 revenue declined 4.0%; gross profit fell 2.7%, and operating loss widened. Nine-month revenue grew 0.9% and gross profit increased 2.8%, while the consolidated net loss narrowed. Adjusted EBITDA moved to a loss in both 2022 periods. The filing reports diluted loss per Class A share of $0.22 for Q3 and $0.69 for the nine months, versus $0.20 and $0.78, respectively, in 2021.
Cash and cash equivalents were $199.7 at September 30, 2022, down from $238.5 at December 31, 2021. Working capital was $228.6, compared with $269.1. For the nine months, operating cash flow was $(13.3), investing cash flow $(6.4), and financing cash flow $(19.1); cash decreased by $38.8. The company repaid its $17.5 revolving-credit balance in May and reported no borrowings at quarter-end. Its credit facility provides up to $40.0 of undrawn availability, subject to terms and covenants.
Material changes and management commentary
- Advertiser spend, a company-defined operating metric, rose 19.4% in Q3 and 30.3% for the nine months year over year, but management said spending decelerated during Q3 as macroeconomic conditions worsened. Active customers increased to 334 from 305.
- Revenue weakness was concentrated in consumer products, automotive and entertainment: those verticals’ combined revenue fell 22% in Q3 and approximately 36% for the nine months. Other verticals grew 3% in Q3 and 23% for the nine months; financial services, travel and political advertising were among the areas of strength.
- Sales and marketing expense rose 12% in Q3, mainly from personnel and advertising costs. Lower stock-based compensation helped reduce several other expense categories. Nine-month stock-based compensation was $21.9, down from $62.2 in 2021.
- Operating cash flow was affected by a $6.5 reduction in deferred revenue, primarily following an agreement modification under which Viant paid a customer $6.2 in exchange for termination of certain deferred-revenue liabilities.
Outlook, risks and contingencies
The filing provides no numerical revenue or earnings guidance. Management expects continued investment in platform operations, technology and development, and sales and marketing, while noting such spending may weigh on near-term profitability. It said existing cash, operating cash flow and undrawn credit availability should cover cash requirements for the next 12 months; longer-term needs may also depend on cash generation and access to capital markets.
Management cited inflation, labor shortages, rising interest rates, tighter credit markets, recession risks, COVID-19 effects and the Russia-Ukraine conflict as uncertainties that could affect advertiser budgets and results. It also identified seasonality, changing programmatic-adoption trends, customer retention, privacy regulation and access to advertising inventory and people-based data as relevant risks. One advertising agency holding company accounted for 20.3% of Q3 revenue, although no individual customer represented 10% or more of revenue. The company reported routine legal matters without expected material effect and no material change to previously disclosed risk factors. A $10.3 potential Tax Receivable Agreement liability was unrecorded because realization of the related tax benefits was not considered more likely than not.
Important facts for investors to verify
- Whether the Q3 advertiser-spend deceleration continued, particularly in consumer products, automotive and entertainment, and how it affected revenue and customer budgets.
- Whether operating cash flow recovers after the nine-month outflow and the customer settlement, and how collections, supplier payments and deferred revenue develop.
- Whether the company sustains liquidity while funding software development and other investments; confirm credit-facility availability, covenant compliance and lease commitments.
- How non-GAAP measures reconcile to GAAP results. Q3 adjusted EBITDA was negative despite higher advertiser spend; assess stock-based compensation and potential dilution, including outstanding RSUs, options and Class B shares.
- How concentrated revenue remains among agency holding companies and whether the unrecorded Tax Receivable Agreement liability or other contingencies change.