Investing.com | Author Vlad Schepkov
Published Feb 28, 2023 04:08PM ET
Updated Feb 28, 2023 04:20PM ET
PubMatic, Inc. (Nasdaq: PUBM), an independent technology company delivering digital advertising’s supply chain of the future, today reported financial results for the fourth quarter and fiscal year ended December 31, 2022.
“We continued to organically outpace the global digital ad market forecasts, with total revenue in 2022 up 13% over last year. Our estimated market share at the end of 2022 rose to 4-4.5%, significantly up from when we went public just over two years ago. As the ecosystem grows more complex, we believe the need for greater efficiency is driving publishers and buyers toward independent platform providers like PubMatic to help them better compete,” said Rajeev Goel, co-founder and CEO at PubMatic. “Recent actions to organize more of our resources toward higher-growth formats and channels such as CTV and online video will diversify our revenue mix while delivering strong, profitable growth. We remain focused on acquiring new customers and deepening integrations with existing customers which we expect will position us well for when ad spend growth re-accelerates. In addition, the investments we’ve made over the last several years and our strong financial profile gives us a significant competitive advantage for sustainable, long-term market share gains.”
Fiscal Year 2022 Financial Highlights
Fourth 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.
“We effectively navigated a challenging second half, particularly in December, when mobile and desktop display revenue was impacted by unprecedented, industry-wide ad spend declines. Nonetheless, 2022 was our 7th straight year of positive GAAP Net Income, 9th year of positive cash from operations and 10th year of positive adjusted EBITDA. These consistent results are driven by our robust business model that enables us to proactively adjust our expense structure, lean into targeted investments and achieve significant optimization and efficiencies,” said Steve Pantelick, CFO at PubMatic. “Our operational objectives in 2023 are to optimize prior infrastructure investments, increase our omnichannel video revenue mix, expand our SPO activity, deliver an annual adjusted EBITDA margin of 30%+ and generate free cash flow consistent with 2022.”
2022 Business Highlights
1 Fiscal year 2022 and fiscal year 2021 GAAP net income includes an unrealized loss and unrealized gain, respectively, on equity investments. Net of income taxes, the impact was $4.5 million for fiscal year 2022 and $4.2 million for fiscal year 2021. Fourth quarter 2021 GAAP net income includes an unrealized gain on equity investments. Net of income taxes, the impact was $4.2 million.
2 Net dollar-based retention is calculated by starting with the revenue from publishers in the trailing twelve months ended December 31, 2021 (“Prior Period Revenue”). We then calculate the revenue from these same publishers in the trailing twelve months ended December 31, 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.
3 We calculate our Supply Path Optimization (“SPO”) net spend retention rate by starting with the spend from SPO buyers that have been buyers on our platform for at least three years, in the last prior year (“Prior Period SPO Buyer Spend”). We then calculate the spend from these same buyers in the current year (“Current Period Spend”). Current Period SPO Buyer Spend includes any upsells and is net of contraction or attrition but excludes spend from new SPO buyers. Our net SPO retention rate equals the Current Period SPO Buyer Spend divided by Prior Period SPO Buyer Spend.
Share Repurchase Program
The Company also announced that its board of directors authorized a share repurchase program. Through the program, the Company may repurchase up to $75 million of the Company’s Class A common stock through the end of 2024. Shares may be purchased from time to time in the open market or in privately negotiated transactions, in accordance with Rule 10b-18 and/or Rule 10b5-1 of the Exchange Act. The timing and total amount of repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices and other considerations. The share repurchase program may be suspended or discontinued at any time. The Company expects to fund repurchases with existing cash and cash equivalents and short-term investments. The share repurchase program does not obligate PubMatic to acquire any amount of Class A common stock.
Financial Outlook
There is considerable uncertainty about the trajectory for digital ad spend this year due to the pronounced December weakness and persistent overhang of macro headwinds across the globe. Display, in particular, continues to see pressure. These trends and challenging conditions have led to a wide range of industry forecasts for 2023. It is also possible, as we saw in 2022, when ad spend declined alongside deteriorating macro trends, these forecasts may significantly change as the year progresses.
Our guidance assumes that digital ad spend in 2023 will grow in the low to mid-single digits, with continued softness in the first half of the year followed by tempered improvement in the second half of the year. Overall, we anticipate that we will outperform industry growth rates and continue to gain market share on an annual basis.
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 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, February 28, 2023 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 the first quarter of 2023 and the full year 2023, 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 SEC filings, including but not limited to, our annual report on Form 10-K and quarterly reports on From 10-Q, copies of are available on our investor relations website at https://investors.pubmatic.com and on the SEC website at www.sec.gov. All information in this press release is as of February 28, 2023. 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 PubMatic
investors@pubmatic.com
Press Contact:
Broadsheet Communications for PubMatic
pubmaticteam@broadsheetcomms.com
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
December 31, 2022 | December 31, 2021 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 92,382 | $ | 82,505 | |||
Marketable securities | 82,013 | 77,121 | |||||
Accounts receivable, net | 314,299 | 286,916 | |||||
Prepaid expenses and other current assets | 14,784 | 14,207 | |||||
Total Current Assets | 503,478 | 460,749 | |||||
Property, equipment and software, net | 71,156 | 50,140 | |||||
Operating lease right-of-use assets | 26,206 | 21,613 | |||||
Acquisition-related intangible assets, net | 8,299 | — | |||||
Goodwill | 29,577 | 6,250 | |||||
Deferred tax assets | 1,047 | 515 | |||||
Other assets, non-current | 2,412 | 10,948 | |||||
TOTAL ASSETS | $ | 642,175 | $ | 550,215 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 277,414 | $ | 244,321 | |||
Accrued liabilities | 18,936 | 18,780 | |||||
Operating lease liabilities, current | 5,676 | 3,864 | |||||
Total Current Liabilities | 302,026 | 266,965 | |||||
Operating lease liabilities, non-current | 20,915 | 17,842 | |||||
Deferred tax liabilities | 573 | 6,067 | |||||
Other liabilities, non-current | 6,473 | 2,161 | |||||
TOTAL LIABILITIES | 329,987 | 293,035 | |||||
Stockholders' Equity: | |||||||
Common stock | 6 | 6 | |||||
Treasury stock | (11,486 | ) | (11,486 | ) | |||
Additional paid-in capital | 195,677 | 169,401 | |||||
Accumulated other comprehensive loss | (9 | ) | (36 | ) | |||
Retained earnings | 128,000 | 99,295 | |||||
Total Stockholders' Equity | 312,188 | 257,180 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 642,175 | $ | 550,215 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(unaudited)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Revenue | $ | 74,296 | $ | 75,556 | $ | 256,380 | $ | 226,908 | ||||
Cost of revenue(1) | 22,955 | 16,905 | 81,512 | 58,313 | ||||||||
Gross profit | 51,341 | 58,651 | 174,868 | 168,595 | ||||||||
Operating expenses:(1) | ||||||||||||
Technology and development | 5,918 | 4,147 | 20,846 | 15,885 | ||||||||
Sales and marketing | 17,807 | 16,369 | 68,562 | 58,160 | ||||||||
General and administrative | 11,093 | 10,168 | 44,940 | 35,761 | ||||||||
Total operating expenses | 34,818 | 30,684 | 134,348 | 109,806 | ||||||||
Operating income | 16,523 | 27,967 | 40,520 | 58,789 | ||||||||
Total other income (expense), net | 292 | 5,776 | (3,053 | ) | 6,014 | |||||||
Income before provision for income taxes | 16,815 | 33,743 | 37,467 | 64,803 | ||||||||
Provision for income taxes | 4,034 | 5,504 | 8,762 | 8,199 | ||||||||
Net income | $ | 12,781 | $ | 28,239 | $ | 28,705 | $ | 56,604 | ||||
Net income per share attributable to common stockholders: | ||||||||||||
Basic | $ | 0.24 | $ | 0.55 | $ | 0.55 | $ | 1.13 | ||||
Diluted | $ | 0.22 | $ | 0.50 | $ | 0.50 | $ | 1.00 | ||||
Weighted-average shares used to compute net income per share attributable to common stockholders: | ||||||||||||
Basic | 52,601,917 | 51,460,452 | 52,278,009 | 50,184,455 | ||||||||
Diluted | 56,943,742 | 56,772,672 | 56,908,197 | 56,628,574 |
(1)Stock-based compensation expense includes the following:
STOCK BASED COMPENSATION EXPENSE
(In thousands)
(unaudited)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||
Cost of revenue | $ | 274 | $ | 220 | $ | 1,135 | $ | 825 | |||
Technology and development | 758 | 586 | 3,225 | 2,232 | |||||||
Sales and marketing | 1,905 | 1,337 | 7,645 | 5,176 | |||||||
General and administrative | 2,527 | 1,456 | 8,641 | 5,874 | |||||||
Total stock-based compensation | $ | 5,464 | $ | 3,599 | $ | 20,646 | $ | 14,107 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(unaudited)
December 31, | |||||||
2022 | 2021 | ||||||
CASH FLOW FROM OPERATING ACTIVITIES: | |||||||
Net Income | $ | 28,705 | $ | 56,604 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 34,249 | 23,073 | |||||
Unrealized (gain) loss and impairment of equity investment | 5,948 | (5,433 | ) | ||||
Stock-based compensation | 20,646 | 14,107 | |||||
Deferred income taxes | (7,166 | ) | 4,753 | ||||
Accretion of discount on marketable securities | (577 | ) | (45 | ) | |||
Non-cash lease expense | 5,831 | 2,042 | |||||
Other | 90 | 45 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (24,408 | ) | (67,405 | ) | |||
Prepaid expenses and other current assets | (1,595 | ) | (7,681 | ) | |||
Accounts payable | 29,763 | 68,301 | |||||
Accrued liabilities | (1,024 | ) | 3,530 | ||||
Operating lease liabilities | (5,539 | ) | (2,283 | ) | |||
Other liabilities, non-current | 2,289 | (927 | ) | ||||
Net cash provided by operating activities | 87,212 | 88,681 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of and deposits on property and equipment | (35,869 | ) | (30,432 | ) | |||
Capitalized software development costs | (13,024 | ) | (8,929 | ) | |||
Purchases of marketable securities | (137,793 | ) | (90,562 | ) | |||
Proceeds from maturities of marketable securities | 133,400 | 33,200 | |||||
Business combination, net of cash acquired | (28,085 | ) | — | ||||
Net cash used in investing activities | (81,371 | ) | (96,723 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from initial public offering, net of underwriting discounts and commissions | — | (806 | ) | ||||
Proceeds from issuance of common stock for employee stock purchase plan | 2,960 | 4,804 | |||||
Proceeds from exercise of stock options | 1,195 | 5,423 | |||||
Principal payments on finance lease obligations | (119 | ) | (10 | ) | |||
Payments to acquire treasury stock | — | (52 | ) | ||||
Net cash provided by financing activities | 4,036 | 9,359 | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 9,877 | 1,317 | |||||
CASH AND CASH EQUIVALENTS - Beginning of year | 82,505 | 81,188 | |||||
CASH AND CASH EQUIVALENTS - End of year | $ | 92,382 | $ | 82,505 |
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDA AND NON-GAAP NET INCOME
(In thousands, except per share amounts)
(unaudited)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income | $ | 12,781 | $ | 28,239 | $ | 28,705 | $ | 56,604 | |||||||
Add back (deduct): | |||||||||||||||
Stock-based compensation | 5,464 | 3,599 | 20,646 | 14,107 | |||||||||||
Depreciation and amortization | 10,662 | 7,081 | 34,249 | 23,073 | |||||||||||
Unrealized (gain) loss and impairment of equity investment | — | (5,433 | ) | 5,948 | (5,433 | ) | |||||||||
Interest income | (1,170 | ) | (92 | ) | (2,214 | ) | (300 | ) | |||||||
Acquisition-related and other expenses | 821 | — | 1,882 | — | |||||||||||
Provision for income taxes | 4,034 | 5,504 | 8,762 | 8,199 | |||||||||||
Adjusted EBITDA | $ | 32,592 | $ | 38,898 | $ | 97,978 | $ | 96,250 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income | $ | 12,781 | $ | 28,239 | $ | 28,705 | $ | 56,604 | |||||||
Add back (deduct): | |||||||||||||||
Unrealized (gain) loss and impairment of equity investment | — | (5,433 | ) | 5,948 | (5,433 | ) | |||||||||
Stock-based compensation | 5,464 | 3,599 | 20,646 | 14,107 | |||||||||||
Acquisition-related and other expenses | 821 | — | 1,882 | — | |||||||||||
Adjustment for income taxes | (352 | ) | 669 | (4,968 | ) | (603 | ) | ||||||||
Non-GAAP Net Income | $ | 18,714 | $ | 27,074 | $ | 52,213 | $ | 64,675 | |||||||
GAAP diluted EPS | $ | 0.22 | $ | 0.50 | $ | 0.50 | $ | 1.00 | |||||||
Non-GAAP diluted EPS | $ | 0.33 | $ | 0.48 | $ | 0.92 | $ | 1.14 | |||||||
Weighted average shares outstanding—diluted | 56,943,742 | 56,772,672 | 56,908,197 | 56,628,574 |
Written By: Investing.com
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