Delivered total revenue of $64.5 million, up 11% year over year, with omnichannel video growth of 45%;Generated $3.3 million in GAAP net income, or 5% margin;Delivered $25.3 million in adjusted EBITDA, or 39% margin;Generated cash from operations of $28.1 million
NO-HEADQUARTERS/REDWOOD CITY, Calif., Nov. 08, 2022 (GLOBE NEWSWIRE) -- PubMatic, Inc. (Nasdaq: PUBM), an independent technology company delivering digital advertising’s supply chain of the future, today reported financial results for the third quarter ending September 30, 2022.
“Our role in the ecosystem is only getting stronger, providing publishers with the critical tools and levers they need to control how their inventory and audiences are accessed,” said Rajeev Goel, co-founder and CEO at PubMatic. “Our proven ability to consolidate activity on our platform and grow market share stems from years of investment and focus in both technology and strong customer relationships, which is difficult to replicate. Despite the near-term economic pressure, we are well positioned to continue to gain market share. Because of our long term focus on both revenue growth and profitability, we are in a strong position to make select innovation investments while leveraging our existing infrastructure in the uncertain economic environment.”
Third Quarter 2022 Financial Highlights
The section titled “Non-GAAP Financial Measures” below describes our usage of non-GAAP financial measures. Reconciliations between historical GAAP and non-GAAP information are contained at the end of this press release following the accompanying financial data.
1 Net dollar-based retention is calculated by starting with the revenue from publishers in the trailing twelve months ended September 30, 2021 (Prior Period Revenue). We then calculate the revenue from these same publishers in the trailing twelve months ended September 30, 2022 (Current Period Revenue). Current Period Revenue includes any upsells and is net of contraction or attrition, but excludes revenue from new publishers. Our net dollar-based retention rate equals the Current Period Revenue divided by Prior Period Revenue. Net dollar-based retention rate is an important indicator of publisher satisfaction and usage of our platform, as well as potential revenue for future periods
Third Quarter 2022 Business Highlights
“Our financial results underscore the strength of our business model, and our team’s ability to navigate challenging macro conditions. While revenue in the third quarter was impacted by industry-wide softer ad spend, we were able to grow our revenue 11% on top of last year’s 54% growth and deliver strong profit margins and cash flow.” said Steve Pantelick, CFO at PubMatic. “In the face of these macro headwinds, we are focused on leveraging our current infrastructure and making targeted investments for future growth. Together, we believe these two operational objectives will drive higher margins and position us well for accelerated growth when ad spend stabilizes.”
2 References to CTV include over-the-top (OTT).
Financial Outlook
Based on our assessment of the uncertain economic environment and factoring in both headwinds and tailwinds, we are taking a conservative approach to our guidance due to the continued possibility of global advertising spend deceleration which could impact our business. Despite a deceleration in global advertising spend, we believe that we will continue to grow faster than the market rate of growth due to the strength of our omnichannel platform, financial profile and selective growth investments.
Given the range of macroeconomic pressures, we believe there could be a wider range of outcomes for the fourth quarter than we typically see, especially as our Q4 revenue tends to be back-end weighted. We anticipate omnichannel video revenues to grow and SPO activity to increase, but we see continued pressure on our display formats that are disproportionately impacted by macro conditions. Accordingly, we estimate the following:
Although we provide guidance for adjusted EBITDA, we are not able to provide guidance for net income, the most directly comparable GAAP measure. Certain elements of the composition of GAAP net income, including, unrealized gain(loss) on equity investments and stock-based compensation expenses, are not predictable, making it impractical for us to provide guidance on net income or to reconcile our adjusted EBITDA guidance to net income without unreasonable efforts. For the same reason, we are unable to address the probable significance of the unavailable information.
Conference Call and Webcast details
PubMatic will host a conference call to discuss its financial results on Tuesday, November 8, 2022 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). A live webcast of the call can be accessed from PubMatic’s Investor Relations website at https://investors.pubmatic.com. An archived version of the webcast will be available from the same website after the call.
Non-GAAP Financial Measures
In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), including, in particular operating income, net cash provided by operating activities, and net income, we believe that adjusted EBITDA and non-GAAP net income, each a non-GAAP measure, are useful in evaluating our operating performance. We define adjusted EBITDA as net income adjusted for stock-based compensation expense, depreciation and amortization, unrealized loss and impairment of equity investment, interest income, acquisition-related and other expenses, and provision for (benefit from) income taxes. Adjusted EBITDA margin represents adjusted EBITDA calculated as a percentage of revenue. We define non-GAAP net income as net income adjusted for unrealized (gain) loss on equity investments, stock-based compensation expense, acquisition-related and other expenses, and adjustments for income taxes.
In addition to operating income and net income, we use adjusted EBITDA and non-GAAP net income as measures of operational efficiency. We believe that these non-GAAP financial measures are useful to investors for period to period comparisons of our business and in understanding and evaluating our operating results for the following reasons:
Our use of non-GAAP financial measures has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows:
Because of these and other limitations, you should consider adjusted EBITDA and non-GAAP net income along with other GAAP-based financial performance measures, including net income and our GAAP financial results.
Forward Looking Statements
This press release contains “forward-looking statements” regarding our future business expectations, including our guidance relating to our revenue and adjusted EBITDA for Q4 2022 and full year 2022, our expectations regarding future hiring, future market growth, and our ability to gain market share. These forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions and may differ materially from actual results due to a variety of factors including: our dependency on the overall demand for advertising and the channels we rely on; our existing customers not expanding their usage of our platform, or our failure to attract new publishers and buyers; our ability to maintain and expand access to spend from buyers and valuable ad impressions from publishers; the rejection of the use of digital advertising by consumers through opt-in, opt-out or ad-blocking technologies or other means; our failure to innovate and develop new solutions that are adopted by publishers; the war between Ukraine and Russia and the related measures taken in response by the global community; the impacts of inflation as well as fiscal tightening and rising interest rates; the ongoing COVID-19 pandemic, including the resulting global economic uncertainty; limitations imposed on our collection, use or disclosure of data about advertisements; the lack of similar or better alternatives to the use of third-party cookies, mobile device IDs or other tracking technologies if such uses are restricted; any failure to scale our platform infrastructure to support anticipated growth and transaction volume; liabilities or fines due to publishers, buyers, and data providers not obtaining consents from consumers for us to process their personal data; any failure to comply with laws and regulations related to data privacy, data protection, information security, and consumer protection; and our ability to manage our growth. Moreover, we operate in a competitive and rapidly changing market, and new risks may emerge from time to time. For more information about risks and uncertainties associated with our business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2021, which is on file with the SEC and is available on our investor relations website at https://investors.pubmatic.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022. All information in this press release is as of November 8, 2022. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
About PubMatic
PubMatic is an independent technology company maximizing customer value by delivering digital advertising’s supply chain of the future. PubMatic’s sell-side platform empowers the world’s leading digital content creators across the open internet to control access to their inventory and increase monetization by enabling marketers to drive return on investment and reach addressable audiences across ad formats and devices. Since 2006, PubMatic’s infrastructure-driven approach has allowed for the efficient processing and utilization of data in real time. By delivering scalable and flexible programmatic innovation, PubMatic improves outcomes for its customers while championing a vibrant and transparent digital advertising supply chain.
Investors:The Blueshirt Group for PubMaticinvestors@pubmatic.com
Press Contact:Broadsheet Communications for PubMaticpubmaticteam@broadsheetcomms.com
CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)(unaudited)
September 30,2022 | December 31,2021 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 52,177 | $ | 82,505 | |||
Marketable securities | 113,914 | 77,121 | |||||
Accounts receivable, net | 277,265 | 286,916 | |||||
Prepaid expenses and other current assets | 14,885 | 14,207 | |||||
Total Current Assets | 458,241 | 460,749 | |||||
Property, equipment and software, net | 74,975 | 50,140 | |||||
Operating lease right-of-use assets | 27,733 | 21,613 | |||||
Acquisition-related intangible assets, net | 8,819 | — | |||||
Goodwill | 29,832 | 6,250 | |||||
Deferred tax assets | 469 | 515 | |||||
Other assets, non-current | 2,095 | 10,948 | |||||
TOTAL ASSETS | $ | 602,164 | $ | 550,215 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 258,478 | $ | 244,321 | |||
Accrued liabilities | 14,819 | 18,780 | |||||
Operating lease liabilities, current | 5,668 | 3,864 | |||||
Total Current Liabilities | 278,965 | 266,965 | |||||
Operating lease liabilities, non-current | 22,465 | 17,842 | |||||
Deferred tax liabilities | 3,212 | 6,067 | |||||
Other liabilities, non-current | 4,919 | 2,161 | |||||
TOTAL LIABILITIES | 309,561 | 293,035 | |||||
Stockholders' Equity: | |||||||
Common stock | 6 | 6 | |||||
Treasury stock | (11,486 | ) | (11,486 | ) | |||
Additional paid-in capital | 189,085 | 169,401 | |||||
Accumulated other comprehensive loss | (221 | ) | (36 | ) | |||
Retained earnings | 115,219 | 99,295 | |||||
TOTAL STOCKHOLDERS’ EQUITY | 292,603 | 257,180 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 602,164 | $ | 550,215 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except share and per share data)(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||
Revenue | $ | 64,500 | $ | 58,086 | $ | 182,084 | $ | 151,352 | |||||
Cost of revenue(1) | 21,591 | 16,020 | 58,557 | 41,408 | |||||||||
Gross profit | 42,909 | 42,066 | 123,527 | 109,944 | |||||||||
Operating expenses:(1) | |||||||||||||
Technology and development | 5,080 | 4,139 | 14,928 | 11,738 | |||||||||
Sales and marketing | 16,087 | 15,004 | 50,755 | 41,790 | |||||||||
General and administrative | 12,120 | 8,875 | 33,847 | 25,593 | |||||||||
Total operating expenses | 33,287 | 28,018 | 99,530 | 79,121 | |||||||||
Operating income | 9,622 | 14,048 | 23,997 | 30,823 | |||||||||
Total other income (expense), net | (4,898 | ) | 277 | (3,345 | ) | 237 | |||||||
Income before income taxes | 4,724 | 14,325 | 20,652 | 31,060 | |||||||||
Provision for income taxes | 1,398 | 799 | 4,728 | 2,695 | |||||||||
Net income | $ | 3,326 | $ | 13,526 | $ | 15,924 | $ | 28,365 | |||||
Net income per share attributable to common stockholders: | |||||||||||||
Basic | $ | 0.06 | $ | 0.27 | $ | 0.31 | $ | 0.57 | |||||
Diluted | $ | 0.06 | $ | 0.24 | $ | 0.28 | $ | 0.50 | |||||
Weighted-average shares used to compute net income per share attributable to common stockholders: | |||||||||||||
Basic | 52,435,601 | 50,559,636 | 52,168,853 | 49,754,449 | |||||||||
Diluted | 56,944,230 | 56,498,891 | 56,895,162 | 56,575,867 |
(1)Stock-based compensation expense includes the following:
STOCK-BASED COMPENSATION EXPENSE(In thousands)(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||
Cost of revenue | $ | 256 | $ | 233 | $ | 861 | $ | 605 | |||
Technology and development | 683 | 586 | 2,467 | 1,646 | |||||||
Sales and marketing | 1,735 | 1,388 | 5,740 | 3,839 | |||||||
General and administrative | 1,981 | 1,507 | 6,114 | 4,418 | |||||||
Total stock-based compensation | $ | 4,655 | $ | 3,714 | $ | 15,182 | $ | 10,508 |
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS(In thousands)(unaudited)
Nine Months Ended September 30, | |||||||
2022 | 2021 | ||||||
CASH FLOW FROM OPERATING ACTIVITIES: | |||||||
Net Income | $ | 15,924 | $ | 28,365 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 23,587 | 15,992 | |||||
Unrealized loss and impairment of equity investment | 5,948 | — | |||||
Stock-based compensation | 15,182 | 10,508 | |||||
Deferred income taxes | (3,949 | ) | 1,404 | ||||
Accretion of discount on marketable securities | (170 | ) | (46 | ) | |||
Non-cash operating lease expense | 4,292 | 1,355 | |||||
Other | 98 | (2 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 12,626 | (8,876 | ) | ||||
Prepaid expenses and other assets | (1,354 | ) | (6,620 | ) | |||
Accounts payable | 4,013 | 16,648 | |||||
Accrued liabilities | (4,806 | ) | 3,386 | ||||
Operating lease liabilities | (3,985 | ) | (1,546 | ) | |||
Other liabilities, non-current | 448 | (366 | ) | ||||
Net cash provided by operating activities | 67,854 | 60,202 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment | (26,961 | ) | (22,846 | ) | |||
Capitalized software development costs | (9,597 | ) | (6,755 | ) | |||
Purchases of marketable securities | (100,113 | ) | (53,118 | ) | |||
Proceeds from maturities of marketable securities | 63,200 | 25,600 | |||||
Business combination, net of cash acquired | (28,085 | ) | — | ||||
Net cash used in investing activities | (101,556 | ) | (57,119 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from issuance of common stock for employee stock purchase plan | 2,402 | 2,635 | |||||
Proceeds from exercise of stock options | 1,060 | 3,327 | |||||
Principal payments on finance lease obligations | (88 | ) | — | ||||
Payments for offering costs | — | (805 | ) | ||||
Payments to acquire treasury stock | — | (52 | ) | ||||
Net cash provided by financing activities | 3,374 | 5,105 | |||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (30,328 | ) | 8,188 | ||||
CASH AND CASH EQUIVALENTS - Beginning of period | 82,505 | 81,188 | |||||
CASH AND CASH EQUIVALENTS - End of period | $ | 52,177 | $ | 89,376 |
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDA AND NON-GAAP NETINCOME(In thousands)(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income | $ | 3,326 | $ | 13,526 | $ | 15,924 | $ | 28,365 | |||||||
Add back (deduct): | |||||||||||||||
Stock-based compensation | 4,655 | 3,714 | 15,182 | 10,508 | |||||||||||
Depreciation and amortization | 9,082 | 6,304 | 23,587 | 15,992 | |||||||||||
Unrealized loss and impairment of equity investment | 6,405 | — | 5,948 | — | |||||||||||
Interest income | (596 | ) | (79 | ) | (1,044 | ) | (208 | ) | |||||||
Acquisition-related and other expenses | 1,061 | — | 1,061 | — | |||||||||||
Provision for income taxes | 1,398 | 799 | 4,728 | 2,695 | |||||||||||
Adjusted EBITDA | $ | 25,331 | $ | 24,264 | $ | 65,386 | $ | 57,352 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income | $ | 3,326 | $ | 13,526 | $ | 15,924 | $ | 28,365 | |||||||
Add back (deduct): | |||||||||||||||
Unrealized loss and impairment of equity investment | 6,405 | — | 5,948 | — | |||||||||||
Stock-based compensation | 4,655 | 3,714 | 15,182 | 10,508 | |||||||||||
Acquisition-related and other expenses | 1,061 | — | 1,061 | — | |||||||||||
Adjustment for income taxes | (3,032 | ) | (521 | ) | (4,616 | ) | (1,401 | ) | |||||||
Non-GAAP Net Income | $ | 12,415 | $ | 16,719 | $ | 33,499 | $ | 37,472 | |||||||
GAAP diluted EPS | $ | 0.06 | $ | 0.24 | $ | 0.28 | $ | 0.50 | |||||||
Non-GAAP diluted EPS | $ | 0.22 | $ | 0.30 | $ | 0.59 | $ | 0.66 | |||||||
Weighted average shares outstanding—diluted | 56,944,230 | 56,498,891 | 56,895,162 | 56,575,867 |