Viant Technology Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited results compared with the three months ended March 31, 2022. Viant operates Adelphic, an omnichannel demand-side platform for programmatic advertising.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $41.7 million | $42.6 million | Down 2.1% |
| Gross profit | $18.4 million | $16.4 million | Up 11.9% |
| Gross margin | 44.1% | 38.6% | Up 5.5 percentage points |
| Operating loss | $11.1 million | $13.4 million | Loss narrowed |
| Net loss | $9.4 million | $13.6 million | Loss narrowed 30.9% |
| Net loss attributable to Viant Inc. | $2.5 million | $3.2 million | Loss narrowed |
| Class A loss per share, basic and diluted | $0.17 | $0.23 | Improved |
| Operating cash flow | $(0.6) million | $11.6 million | Decreased $12.1 million |
| Cash and cash equivalents, quarter-end | $201.7 million | Down from $206.6 million at Dec. 31, 2022 |
Operating expenses declined 5.7% to $52.8 million. Platform operations fell 10.9% and sales and marketing fell 11.5%, while technology and development rose 17.8%. Net interest income was $1.8 million, versus $0.2 million of net interest expense in the prior-year quarter. The company reported non-GAAP contribution ex-TAC of $28.0 million, up 1.6%; adjusted EBITDA loss of $0.4 million, versus a $3.9 million loss; and non-GAAP net loss of $1.8 million, versus $6.8 million. These are non-GAAP measures and should be considered alongside GAAP results.
Liquidity, debt and commitments
- Working capital was $223.3 million at March 31, 2023, compared with $227.7 million at year-end 2022. Cash was substantially above current liabilities of $63.1 million.
- There was no debt outstanding at quarter-end. The then-existing $40 million revolving facility had $39.6 million of undrawn availability; Viant reported covenant compliance.
- On April 4, 2023, after quarter-end, Viant amended the facility, increasing it to $75 million and extending maturity to April 4, 2028. Advances bear interest at term SOFR plus 2.00%–2.25%; no balance was outstanding under the amended facility.
- Q1 investing cash outflow was $2.7 million, primarily software development costs; financing cash outflow was $1.6 million, primarily taxes on net share settlement of equity awards.
- Operating lease liabilities totaled $28.0 million. Hosting commitments were estimated at $8.8 million for the remainder of 2023, with additional commitments thereafter.
Changes, outlook and risks
- Revenue declined as advertising spend weakened in business and financial services, consumer products, and retail, where combined revenue fell 27% year over year. Growth in other verticals partly offset this. Management cited stabilizing trends in Q1, but said the advertising-spend deceleration could continue if macroeconomic and geopolitical pressures persist or worsen.
- Active customers remained 327. Management reported advertiser spend per active customer up 6% year over year and contribution ex-TAC up 2%; average contribution ex-TAC per active customer for the trailing 12 months declined to $384 from $435.
- Management plans continued investment in platform operations, technology and development, and customer acquisition, while noting such investment may weigh on near-term profitability. The company had reduced workforce by approximately 13% in December 2022 and said it had slowed the pace of additional sales and marketing investment.
- No specific numerical revenue or earnings guidance is provided in the filing. Management said cash, expected operating cash flows and undrawn credit availability should meet requirements for the next 12 months.
- Key exposures include advertising-budget sensitivity to economic conditions and seasonality; competition and customer retention; reliance on third-party advertising inventory, data and cloud hosting; privacy, cybersecurity and evolving cookie/platform policies; and customer payment timing. One agency holding company represented 11.5% of Q1 revenue, and one customer represented 10.3% of receivables at quarter-end.
- The company recorded a full valuation allowance against deferred tax assets and did not record a liability for the Tax Receivable Agreement; the estimated unrecorded TRA liability was approximately $10.3 million. Ordinary-course legal matters were not believed by management to be material. Adoption of the expected-credit-loss standard had no material financial-statement impact.
Important facts for investors to verify
- Whether the reported Q1 stabilization in advertiser spending continues, particularly in the industry verticals that drove the revenue decline.
- How operating cash flow develops: Q1 cash use reflected working-capital timing, including payments and collections, and differed sharply from the prior-year inflow.
- Whether gross-profit and contribution ex-TAC growth can continue while revenue is flat or declining, and how non-GAAP measures reconcile to GAAP results.
- The availability, pricing and covenant terms of the amended $75 million credit facility, and whether cash generation meets management’s liquidity expectations.
- Potential effects of customer concentration, privacy or platform-policy changes, and the unrecorded TRA liability and deferred-tax valuation allowance.