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Small-cap DaaS companies unable to beat the market in Q2
Despite a few shining stars, cummulative performance was -4% vs +4% the market posted during the period
Earlier this month we dove into the Q2 earnings of the large cap $DAAS companies - the themes we saw there carry through as you go down in market cap.
A mixed quarter with some big wins
While many data companies demonstrated resilience and growth in Q2 2024, some stood out as clear winners, others stumbled.
THE HIGHLIGHTS
Red Violet: Showcased exceptional performance with a 30% year-over-year revenue increase, reaching a record $19.1 million. Adjusted EBITDA also soared by 47% to a record $6.8 million, with a record margin of 36%.
Semrush: Reported a strong quarter with 32% year-over-year revenue growth, reaching $91 million. Non-GAAP operating margin saw a significant improvement, increasing to 13.4% from 3.1% in the prior year period.
Integral Ad Science (IAS): Exceeded revenue and adjusted EBITDA guidance for the second quarter, with total revenue increasing 14% to $129 million. The company also reported double-digit growth across all of its businesses.
Criteo: Achieved record top line and adjusted EBITDA margin for Q2, driven by double-digit organic growth for the third consecutive quarter.
THE STUMBLES
Cardlytics: Missed its Q2 guidance primarily due to a shortfall in top-line revenue related to delivery issues. The company is actively addressing these issues but expects continued disruption in Q3.
ZoomInfo: Q2 2024 performance was overshadowed by higher-than-anticipated write-offs, primarily from SMB customers in prior periods. This led to a $33 million charge, impacting revenue and profitability.
Lectra: While the company's EBITDA before non-recurring items increased, reflecting improved fundamentals, its orders for new systems were negatively impacted by macroeconomic uncertainties.
TechTarget: Navigated a challenging macro environment with revenue increasing only 1% year-over-year. The company remains optimistic about its future prospects, particularly with its upcoming merger with Informa Tech.
Definitive Healthcare: Exceeded expectations for total revenue and adjusted EBITDA in Q2 2024, but faced sales execution challenges due to macro headwinds, leading to a revised guidance for the remainder of the year.
Planet Labs sees 25% YoY growth
Location intelligence and mapping solutions providers like TomTom and Planet Labs are also making significant strides. TomTom, specializing in navigation and location technology, is transitioning to a new map platform, TomTom Orbis Maps, which has already garnered attention from major players like Microsoft, contributing to an 11% year-on-year growth in their Enterprise revenue for Q2 2024. Planet Labs, a provider of Earth observation data and insights, is leveraging AI to enhance its data analytics capabilities, leading to approximately 25% year-over-year revenue growth in the defense and intelligence sector during Q1 2025.
Magnite grows EBITDA by 20% with margins now at 30%.
The digital advertising and marketing landscape is also undergoing a transformation, with companies like PubMatic, Magnite, Integral Ad Science (IAS), and Cardlytics adapting to new challenges and opportunities. PubMatic, a sell-side platform for publishers, is experiencing strong growth in omnichannel video, CTV, and mobile app advertising, with mobile app revenue growing over 20% for the third straight quarter. Magnite, operating a similar sell-side platform, saw a 12% year-over-year growth in CTV contribution ex-TAC, driven by strong overall ad spend growth and increasing programmatic adoption. IAS, a provider of verification, optimization, and analytics solutions for digital advertising, exceeded its revenue and adjusted EBITDA guidance for the second quarter, reporting a total revenue of $163 million. Cardlytics, a card-linked marketing platform, is undergoing a significant transformation to evolve its business, focusing on improving its technology platform and pricing models to better align its offerings with the modern advertising market.
Risk Management and Compliance: Growth and Cost Reductions
In an increasingly complex regulatory environment, companies like Red Violet and FiscalNote are providing critical risk management and compliance solutions. Red Violet, offering data-driven risk management solutions, is seeing strong demand across various verticals, leading to a record quarterly revenue of $19.1 million, a 30% increase year-over-year. FiscalNote, a platform for legal, political, and regulatory intelligence, is leveraging AI to enhance its data analytics and insights capabilities, contributing to a 25% year-over-year decrease in operating expenses in Q2 2024, reflecting cost-saving initiatives and improved efficiencies.
Challenges and Opportunities Ahead
While the future looks promising for these data companies, they also face several challenges, including macroeconomic headwinds, evolving customer needs, and increasing competition. Companies like Cars.com are navigating industry-wide disruptions, such as the CDK cyber incident, which impacted their sales momentum and product launches. The successful companies will be those that can adapt to the changing market dynamics, innovate their product offerings, and execute their strategies effectively.
As the demand for data-driven insights and solutions continues to grow, these companies are well-positioned to capitalize on the market opportunity and drive long-term growth. However, they must also remain vigilant in navigating the complexities of the current landscape and continue to invest in innovation and customer success to maintain their competitive edge.
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