DOI: 10.3886/e224742v1
title: VIANT TECHNOLOGY INC ANALYSIS

description: DescriptionOVERVIEWContrary to popular opinion, we believe ad tech represents fertile hunting ground for alpha. While the walled gardens have dominated the advertising landscape for the past decade, there have been exceptions to the rule. For example, The Trade Desk’s early adoption and focus on programmatic advertising has allowed it to achieve substantial success across the open web and, more recently, in connected television (CTV). Moreover, in the in-app gaming ecosystem, we mentioned last August that we thought AppLovin (at $66 and 13x FCF) was a “gift” in the APP thread. <br><br>Is Netflix undervalued?Is Netflix a buy?Is Netflix a good investmentIs Disney undervalued?Is Disney a buy?Is Disney a good investmentOn a smaller scale, we highlighted Opera LTD in 2022 as an undervalued alternative browser. Last July, Thor wrote up MGNI as a “Long”, and we agree with that thesis. In this writeup, we are recommending Viant Technology (DSP) and see 40% potential upside over the next year. An investment in Viant is essentially a bet that the company (with continued successful execution) can evolve into a mini Trade Desk over time. Modest continued success in this regard could lead to favorable medium term equity returns.INVESTMENT THESISViant is one of two pure-play publicly-traded demand side advertising platforms (DSPs), the other being industry behemoth, The Trade Desk (TTD.) Over the next several years, we believe Viant is one of the better positioned companies to benefit from two powerful tailwinds:the continued secular shift of advertising spend from linear television to connected TV (CTV); andthe shift from direct-sold advertising to programmatic buying and, specifically, growing use of programmatic real-time bidding (particularly in CTV). Moreover, Viant is relatively early in rolling out improvements to its technology platform that are benefiting its net revenue and EBITDA growth. Further operational progress could lead to considerably larger EBITDA and FCF generation over the next few years. We believe revenue and EBITDA are likely to materially exceed street expectations in 2025 and, potentially, 2026. Short-term upside may be somewhat limited as the stock has appreciated considerably since we started this writeup a few weeks ago. However, if we are directionally right, the stock could continue to re-rate over the next year and compound at healthy double-digit rates over the next several years, Based on our 2026 adjusted EBITDA estimate of $93 million and a target multiple of 25x EBITDA (roughly 35x FCF), we believe the stock can reach $34, representing 38% potential appreciation over the next year. <br><br>Intermediate-term (3 to 5-year) revenue growth could meet or exceed 20%During the third quarter of 2024, roughly 50% of Viant revenues were represented by CTV and audio streaming, and together these categories grew close to 50% year over year. For 2025, we believe Viant CTV and audio streaming revenue excluding traffic acquisition costs (TAC) could increase close to 50% (contributing roughly 20 percentage points to revenue growth.) Further, we believe display, mobile and other advertising categories could account for additional 3 percentage points of top-line growth. Over the intermediate term, if Viant takes modest market share in the high growth categories of CTV and audio streaming, net revenue growth could exceed 20%, leading to substantial EBITDA and FCF generation.Revenue growth excluding TAC has exceeded 20% for each of the past six quarters. <br><br>Note:*Revenue growth excludes TAC.*4Q:24 estimate is based on the midpoint of company guidance. While growth has lagged best-in-class and demonstrably larger peer The Trade Desk, we believe Viant has made notable progress with its DSP platform and its AI feature set is creating some buzz in the advertising community.Significant operating leverageDuring 2024, EBITDA margins (as a percent of net revenue) increased an estimated 400 basis points to 26%. We forecast another 500 basis points of margin expansion in 2025.Street estimates far too low for 2025We believe street estimates are likely to be materially exceeded in 2025 and 2026, driving a significant re-rating in the stock’s valuation. Current street estimates call for 13% gross revenue growth in 2025 and 7% growth in 2026. We estimate net revenue growth of 23% in 2025 and 22% growth in 2026. <br><br>Coupled with midteens operating expense growth, EBITDA growth could approach 50% in 2025 and increase by over 35% in 2026.2025 street consensus EBITDA: $54.62025 EBITDA (our estimate): $67 million2026 street consensus EBITDA: $71 million2026 EBITDA (our estimate): $93 million Growing free cash flow and balance sheet with net cash of $215 million (as of 3Q)Aided by its substantial cash balance, Viant’s free cash flow grew from $24 million in 2024 to an estimated $35 million in 2024. We estimate that FCF could reach $65 million in 2026.ValuationIncluding all options and restricted shares, DSP currently trades at 7.5x 2025 net revenue and roughly 6.3x our 2026 estimate. On EV/EBITDA, the stock trades at roughly 25x our 2025 and 18x our 2026 estimates. TTD shares trade at 19X ‘25 consensus revenues and 16x ‘26 estimates. On EV/EBITDA, TTD shares trade at 45x ‘25E and 36x ‘26E, respectively.TTD has clearly earned its premium valuation and is in another class today. <br><br>However, if Viiant continues to deliver 20%+ net revenue growth, the company is likely to garner increasing investor attention as a levered play on CTV advertising (with optionality to the upside). Given its tiny size, modest market share gains can have a disproportionate impact on the company’s growth rate. RISKSExecution. Viant is still relatively unproven in the grand scheme of things, and much of the company’s operational progress and product momentum has occurred over the past 18 months. We believe this perception is beginning to change as Viant becomes increasingly viewed as a thought leader in AI.Competition. Viant competes with AMZN, GOOG, TTD, YHOO and other small DSP players. Controlling shareholders. Co-founders Tim and Chris Vanderhook collectively own over 70% of outstanding shares.Limited float / liquidity. Due to the Vanderhook brothers’ majority ownership in the company, trading liquidity is somewhat limited. Dollar volume has averaged 236,000 or roughly $5 million over the past 20 days. <br><br>Is Google undervalued?Is Google a buy?Is Google a good investmentIs Walmart undervalued?Is Walmart a buy?Is Walmart a good investment<br>CTV AD MARKETThe CTV advertising market is benefiting from an explosion in advertiser supported content moving to TV, driven by the adoption of advertising supported packages from Netflix and Amazon and the shifting of an increasingly large amount of live events (NFL games, Tom Brady Roast, Tyson/ Paul fight, etc.) to CTV platforms.Linear TV advertising peaked at roughly $70 billion in 2019. At the time, CTV advertising was extremely early in its adoption cycle and estimated at just $6 billion. Noticeably, the total overall TV advertising pie is actually growing, as shown in the table below.US TV Advertising Market ($ billions) <br>Stack AdaptConnected TV is attracting advertising dollars from linear TV and taking budget share from radio, publishing, experimental ad budgets, display ads, and other digital formats because of its ability to blend TV-scale reach with the targeting and measurability of digital platforms. This trend will likely continue as more households embrace streaming services and advertisers increasingly adopt programmatic advertising. Because of its higher measurable impact and targetability, we believe CTV will continue to drive an expansion in total US TV ad spend. Viant represents less than 1% of total US CTV and audio ad spendingIn 2024, the US advertising market for the high growth markets of CTV advertising ($29 billion) and audio streaming/podcasting ($7.2 billion) were estimated to total $36 billion.Viant is still quite small; total 2024 net revenue (excluding TAC) is estimated at $177 million. <br><br>Of this figure, CTV and audio/streaming advertising spend is less than $90 million. During the third quarter alone, The Trade Desk generated an estimated $300 million in CTV revenue or $1.2 billion on an annualized basis, representing more than 13x the size of Viant’s total CTV/audio streaming advertising business.Viant’s target market is US focused advertisers with budgets up to $500 million. Viant works with small, medium size and some large advertiser agencies but has yet to break through and win material budget share of any large advertiser. Winning material budget share from just a couple of midsize advertisers could have a material impact on the company. PRODUCT: VIANT DSPViant Technology is one of two publicly-traded pure play self-service DSPs serving advertisers and advertising agencies.Viant describers their self-service DSP as follows in their 2023 10-K: Our DSP is an easy-to-use self-service platform that provides our customers with transparency and control over their advertising campaigns. Our platform offers customers unique visibility across a variety of inventory, allowing them to create customized audience segments and leverage our peoplebased and strategic partner data to reach target audiences at scale. <br><br>Is Apple undervalued?Is Apple a buy?Is Apple a good investmentIs Nvidia undervalued?Is Nvidia a buy?Is Nvidia a good investmentOur platform delivers a full suite of forecasting, reporting and built-in automation that provides our customers with insights into available inventory based on the desired target audience. We offer advanced forecasting and reporting that empowers our customers with functionality designed to ensure they can accurately measure and improve their return-on-advertising spend (“ROAS”) across channels.Viant AI technology platformIn 2023, Viant introduced a bid optimization tool and made a significant upgrade to the tool in June 2024, resulting in material improvements to advertiser performance. During 2024, Viant also launched an AI planning tool, Viant AI, to streamline the process of media planning.