PubMatic (NASDAQ:PUBM) Exceeds Q2 Expectations, Stock Soars

Adam Hejl /
2022/08/08 4:24 pm EDT
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Programmatic Advertising platform Pubmatic (NASDAQ: PUBM) announced better-than-expected results in the Q2 FY2022 quarter, with revenue up 26.9% year on year to $63 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $67 million, 1.98% below analyst estimates. PubMatic made a GAAP profit of $7.81 million, down on its profit of $9.92 million, in the same quarter last year.

Is now the time to buy PubMatic? Access our full analysis of the earnings results here, it's free.

PubMatic (PUBM) Q2 FY2022 Highlights:

  • Revenue: $63 million vs analyst estimates of $60.6 million (3.94% beat)
  • EPS (non-GAAP): $0.23 vs analyst estimates of $0.15 ($0.08 beat)
  • Revenue guidance for Q3 2022 is $67 million at the midpoint, below analyst estimates of $68.3 million
  • The company dropped revenue guidance for the full year, from $284 million to $279 million at the midpoint, a 1.76% decrease
  • Free cash flow of $5.69 million, down 61.8% from previous quarter
  • Net Revenue Retention Rate: 130%, down from 140% previous quarter
  • Gross Margin (GAAP): 69.8%, down from 73.6% same quarter last year

“We delivered another terrific quarter, with organic revenue growth of 27% year over year, well above market growth rates. Our results demonstrate the number and magnitude of growth opportunities we have incorporated into our business, as we continue to consolidate the market,” said Rajeev Goel, co-founder and CEO at PubMatic.

Founded in 2006, as an online ad platform focused on ad sellers, Pubmatic (NASDAQ: PUBM) is a fully integrated cloud-based programmatic advertising platform.

The digital advertising market is large, growing and becoming more diverse, both in terms of audiences and media. This as a result drives a growing need for a software that enables advertisers to use data to automate and optimize ad placements.

Sales Growth

As you can see below, PubMatic's revenue growth has been very strong over the last year, growing from quarterly revenue of $49.6 million, to $63 million.

PubMatic Total Revenue

This quarter, PubMatic's quarterly revenue was once again up a very solid 26.9% year on year. On top of that, revenue increased $8.48 million quarter on quarter, a strong improvement on the $21 million decrease in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates PubMatic is expecting revenue to grow 15.3% year on year to $67 million, slowing down from the 53.6% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 17.8% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

PubMatic Net Revenue Retention Rate

PubMatic's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 130% in Q2. That means even if they didn't win any new customers, PubMatic would have grown its revenue 30% year on year. Despite it going down over the last year this is still a great retention rate and a clear proof of a great product. We can see that PubMatic's customers are very satisfied with their software and are using it more and more over time.

Key Takeaways from PubMatic's Q2 Results

With a market capitalization of $907.2 million PubMatic is among smaller companies, but its more than $182.9 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see PubMatic outperform Wall St’s revenue expectations this quarter. And we were also glad to see good revenue growth. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results could have been better. The company is up 6.92% on the results and currently trades at $19 per share.

Should you invest in PubMatic right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.