Business context and reporting period
Viant Technology Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2023. Viant operates Adelphic, a cloud-based demand-side platform for programmatic advertising across digital channels. Unless otherwise stated, amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $57.2 million | $51.2 million | $98.9 million | $93.8 million |
| Gross profit | $23.7 million | $20.3 million | $42.1 million | $36.7 million |
| Gross margin | 41.4% | 39.6% | 42.5% | 39.1% |
| Operating loss | $5.3 million | $13.8 million | $16.4 million | $27.2 million |
| Net loss | $3.2 million | $14.1 million | $12.6 million | $27.7 million |
| Net loss attributable to Viant Inc.; loss per Class A share | $1.1 million; $0.07 | $3.4 million; $0.24 | $3.5 million; $0.24 | $6.6 million; $0.47 |
| Operating cash flow | Not separately presented for the quarter | $10.9 million | $(8.5) million |
Margins and non-GAAP measures: Q2 contribution ex-TAC was $33.7 million, up 6.2%, and adjusted EBITDA was $6.8 million versus a $3.1 million loss. For the six months, contribution ex-TAC was $61.7 million, up 4.0%, and adjusted EBITDA was $6.4 million versus a $7.0 million loss. Non-GAAP net income was $5.1 million in Q2 and $3.2 million for the six months, compared with losses of $5.9 million and $12.7 million, respectively. These are company-defined non-GAAP measures; GAAP results remained loss-making.
Balance sheet at June 30, 2023: Cash and cash equivalents were $203.9 million, current assets $298.1 million, current liabilities $74.1 million, and working capital $224.0 million. Total liabilities were $97.4 million, including $27.3 million of operating lease liabilities; there was no long-term debt outstanding. The revolving credit facility was amended in April to increase capacity to $75 million and extend maturity to April 2028. $74.1 million was undrawn and available at quarter-end, and the company reported covenant compliance.
Cash flows, six months: Investing activities used $6.5 million, mainly for $6.1 million of capitalized software development. Financing activities used $7.1 million, primarily for member tax distributions and taxes on net share settlements. Cash declined by $2.7 million from year-end 2022.
Material changes versus the prior comparable period
- Q2 revenue rose 11.8%; six-month revenue rose 5.5%. Gross profit increased 17.0% and 14.7%, respectively, with gross margin improving in both periods.
- Q2 sales and marketing expense fell 32% to $11.7 million, while technology and development expense rose 23% to $6.2 million. For the six months, sales and marketing fell 23% and technology and development rose 20%.
- Q2 traffic acquisition costs increased 21% to $23.5 million, partly offset by lower other platform costs. Six-month platform operations expense was nearly flat as higher acquisition costs were offset by lower other platform expenses.
- Other income improved substantially, primarily from higher interest income on cash and lower interest expense after the revolving facility was repaid in 2022.
- Operating cash flow improved to a positive $10.9 million for the six months from an $8.5 million use in the prior-year period. The company attributed cash generation partly to noncash expenses and working-capital timing.
- Revenue growth was concentrated in certain verticals: Q2 retail revenue increased 60%; for the six months, retail, public services and consumer goods together increased 29%, while other verticals decreased 13%.
Outlook, commentary, risks and unusual items
- The filing provides no specific numerical revenue or earnings guidance. Management expects to continue investing in platform operations, technology and development, and sales and marketing, and cautions that such investment may weigh on near-term profitability. It also says it slowed the pace of further sales and marketing investment amid macroeconomic conditions.
- Management said advertising-budget trends stabilized in the first half of 2023 after reductions in the second half of 2022. Q2 advertiser spend per active customer increased 7%; active customer count declined year over year. The filing gives inconsistent prior-period active-customer figures: 336 in one table and 326 in the accompanying discussion.
- Management believes cash, operating cash generation and undrawn credit availability are sufficient for requirements over the next 12 months. Longer-term funding depends on operating cash flows and access to credit or capital markets.
- Risks include advertiser budget cuts amid economic uncertainty, customer and agency concentration, competition, reliance on advertising inventory and third-party data, privacy regulation, cybersecurity and platform availability, and seasonal advertising patterns. One customer represented 18.4% of Q2 revenue and 12.2% of six-month revenue. Two customers represented 11.8% and 10.1% of receivables at quarter-end.
- The company has a full valuation allowance against deferred tax assets and recorded no Tax Receivable Agreement liability; the estimated unrecorded TRA liability was approximately $10.3 million. Management said payment is not currently expected based on its taxable-income estimates.
- Non-cancelable hosting commitments were estimated at $6.0 million for the remainder of 2023, $6.4 million in 2024, $5.1 million in 2025 and $0.8 million in 2026. Management did not believe ordinary-course legal matters would have a material effect. No material change in market-risk exposure was reported.
- Cash-flow and earnings figures include substantial stock-based compensation: $8.5 million in Q2 and $16.0 million for the six months. A prior-year workforce reduction of approximately 13% was part of a cost-reduction plan; no Q2 restructuring charge was reported.
Important facts for investors to verify
- Reconcile the active-customer disclosure: the filing reports 336 prior-year customers in one table but 326 in the narrative, against 314 for the twelve months ended June 30, 2023.
- Assess the durability and mix of revenue growth, including the contribution of the retail vertical and the impact of customer concentration and declining active customers.
- Evaluate GAAP losses and cash generation alongside non-GAAP measures, their exclusions, stock-based compensation, and working-capital timing.
- Confirm credit-facility availability, covenant headroom and the ability to meet lease, hosting and other contractual commitments as investment continues.
- Monitor privacy, data access, cybersecurity and advertising-market risks, as well as the potential future realization of deferred tax assets and related TRA obligations.
- Consider the dual-class structure and control: the filing says the Vanderhook Parties held approximately 71% of voting power, limiting other shareholders’ influence.