PubMatic (NASDAQ:PUBM) Reports Sales Below Analyst Estimates In Q4 Earnings

Adam Hejl /
2023/02/28 4:18 pm EST

Programmatic advertising platform Pubmatic (NASDAQ: PUBM) fell short of analyst expectations in Q4 FY2022 quarter, with revenue down 1.67% year on year to $74.3 million. PubMatic made a GAAP profit of $12.8 million, down on its profit of $28.2 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) Q4 FY2022 Highlights:

  • Revenue: $74.3 million vs analyst estimates of $76.7 million (3.07% miss)
  • EPS (non-GAAP): $0.33 vs analyst expectations of $0.35 (6.6% miss)
  • Revenue guidance for Q1 2023 is $51 million at the midpoint, below analyst estimates of $55.1 million
  • Free cash flow of $7.02 million, down 48% from previous quarter
  • Net Revenue Retention Rate: 108%, down from 120% previous quarter
  • Gross Margin (GAAP): 69.1%, down from 77.6% same quarter last year

“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.

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 two years, growing from quarterly revenue of $56.2 million in Q4 FY2020, to $74.3 million.

PubMatic Total Revenue

But this quarter PubMatic's revenue was down 1.67% year on year, which might be a disappointment to some shareholders.

PubMatic is guiding for revenue to decline next quarter 6.51% year on year to $51 million, a further deceleration on the 25.1% year-over-year decrease in revenue the company had recorded in the same quarter last year.

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 108% in Q4. That means even if they didn't win any new customers, PubMatic would have grown its revenue 8% year on year. Despite it going down over the last year this is still a decent retention rate and it shows us that not only PubMatic's customers stick around but at least some of them get increasing value from its software over time.

Key Takeaways from PubMatic's Q4 Results

With a market capitalization of $797.4 million PubMatic is among smaller companies, but its more than $174.4 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We enjoyed seeing PubMatic’s improve their gross margin materially this quarter. That feature of these results really stood out as a positive. On the other hand, revenue growth was quite weak and the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results could have been better. The company is down 4.68% on the results and currently trades at $14.46 per share.

PubMatic may have had a tough quarter, but does that actually create an opportunity to invest 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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