Ad verification company Integral Ad Science (NASDAQ: IAS) beat Wall Street’s revenue expectations in Q4 CY2024, with sales up 14% year on year to $153 million. Guidance for next quarter’s revenue was better than expected at $129.5 million at the midpoint, 1.9% above analysts’ estimates. Its GAAP profit of $0.09 per share was 20% below analysts’ consensus estimates.
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Integral Ad Science (IAS) Q4 CY2024 Highlights:
- Revenue: $153 million vs analyst estimates of $149.1 million (14% year-on-year growth, 2.7% beat)
- EPS (GAAP): $0.09 vs analyst expectations of $0.11 (20% miss)
- Adjusted EBITDA: $61.35 million vs analyst estimates of $56.17 million (40.1% margin, 9.2% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $594 million at the midpoint, beating analyst estimates by 0.6% and implying 12.1% growth (vs 11.6% in FY2024)
- EBITDA guidance for the upcoming financial year 2025 is $206 million at the midpoint, below analyst estimates of $208.3 million
- Operating Margin: 16.7%, up from 12.3% in the same quarter last year
- Free Cash Flow Margin: 44.1%, up from 18.9% in the previous quarter
- Market Capitalization: $1.57 billion
"We achieved 14% revenue growth in the fourth quarter with double-digit gains across our optimization, measurement, and publisher businesses," said Lisa Utzschneider, CEO of IAS.
Company Overview
Founded in 2009, Integral Ad Science (NASDAQ: IAS) provides digital advertising verification and optimization solutions, ensuring that ads are viewable by real people in brand-safe environments across various platforms and devices.
Advertising Software
The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, Integral Ad Science grew its sales at a 17.9% annual rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Integral Ad Science.
This quarter, Integral Ad Science reported year-on-year revenue growth of 14%, and its $153 million of revenue exceeded Wall Street’s estimates by 2.7%. Company management is currently guiding for a 13.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 11.6% over the next 12 months, a deceleration versus the last three years. Still, this projection is above the sector average and implies the market sees some success for its newer products and services.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Integral Ad Science is extremely efficient at acquiring new customers, and its CAC payback period checked in at 8.2 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.
Key Takeaways from Integral Ad Science’s Q4 Results
We liked how Integral Ad Science beat analysts’ revenue and EBITDA expectations this quarter. While full-year revenue guidance beat, full-year EBITDA guidance slightly missed. Overall, we think this was a mixed quarter. The stock traded up 5.2% to $10.16 immediately following the results.
Integral Ad Science had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
