Ad verification company Integral Ad Science (NASDAQ: IAS) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 17.1% year on year to $134.1 million. The company expects next quarter’s revenue to be around $143 million, close to analysts’ estimates. Its GAAP profit of $0.05 per share was $0.02 above analysts’ consensus estimates.
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Integral Ad Science (IAS) Q1 CY2025 Highlights:
- Revenue: $134.1 million vs analyst estimates of $129.6 million (17.1% year-on-year growth, 3.5% beat)
- EPS (GAAP): $0.05 vs analyst estimates of $0.03 ($0.02 beat)
- Adjusted EBITDA: $41.52 million vs analyst estimates of $38.89 million (31% margin, 6.7% beat)
- The company slightly lifted its revenue guidance for the full year to $595 million at the midpoint from $594 million
- EBITDA guidance for the full year is $207 million at the midpoint, in line with analyst expectations
- Operating Margin: 8.5%, up from 0.5% in the same quarter last year
- Free Cash Flow was -$7.37 million, down from $67.46 million in the previous quarter
- Market Capitalization: $1.27 billion
"We exceeded our expectations for the first quarter with 17% revenue growth highlighted by a 24% increase in optimization revenue and a 33% increase in publisher revenue," 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.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Integral Ad Science grew its sales at a 16.7% 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 17.1%, and its $134.1 million of revenue exceeded Wall Street’s estimates by 3.5%. Company management is currently guiding for a 10.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 10.1% over the next 12 months, a deceleration versus the last three years. Still, this projection is above the sector average and suggests 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 Q1 Results
We enjoyed seeing Integral Ad Science beat analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also happy it raised its full-year revenue guidance. Zooming out, we think this was a solid quarter. The stock traded up 1.7% to $8.30 immediately after reporting.
Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
