PubMatic's (NASDAQ:PUBM) Q1 Earnings Results: Revenue In Line With Expectations But Full Year Guidance Underwhelms

Radek Strnad /
2022/05/09 4:25 pm EDT
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Programmatic Advertising platform Pubmatic (NASDAQ: PUBM) reported results in line with analyst expectations in Q1 FY2022 quarter, with revenue up 25% year on year to $54.5 million. However, guidance for the next quarter was less impressive, coming in at $61 million at the midpoint, being 0.98% below analyst estimates. PubMatic made a GAAP profit of $4.77 million, down on its profit of $4.91 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) Q1 FY2022 Highlights:

  • Revenue: $54.5 million vs analyst estimates of $54.4 million (small beat)
  • EPS (non-GAAP): $0.14 vs analyst estimates of $0.10 (37.7% beat)
  • Revenue guidance for Q2 2022 is $61 million at the midpoint, below analyst estimates of $61.6 million
  • The company provided revenue guidance for the full year, at $284 million at the midpoint, missing analyst estimates by 0.98%
  • Free cash flow of $14.9 million, down 20.2% from previous quarter
  • Net Revenue Retention Rate: 140%, down from 149% previous quarter
  • Gross Margin (GAAP): 67%, down from 71.7% same quarter last year

“PubMatic continued its outstanding track record of durable growth, GAAP profitability and cash generation. This consistent performance is driven by our unique infrastructure driven approach to digital advertising,” 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 exceptional over the last year, growing from quarterly revenue of $43.6 million, to $54.5 million.

PubMatic Total Revenue

This quarter, PubMatic's quarterly revenue was once again up a very solid 25% year on year. But the revenue actually decreased by $21 million in Q1, compared to $17.4 million increase in Q4 2021. However, PubMatic's sales do seem to have a seasonal pattern to them, and since management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.

Guidance for the next quarter indicates PubMatic is expecting revenue to grow 22.8% year on year to $61 million, slowing down from the 88.3% 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 25% over the next twelve months.

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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 140% in Q1. That means even if they didn't win any new customers, PubMatic would have grown its revenue 40% year on year. Despite the recent drop that is still an absolutely exceptional retention rate, meaning PubMatic's software is extremely successful with their customers who are rapidly expanding the use of it across their organizations.

Key Takeaways from PubMatic's Q1 Results

With a market capitalization of $1.12 billion PubMatic is among smaller companies, but its more than $174.7 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

PubMatic delivered solid revenue growth this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and the revenue guidance for the full year missed expectations. Overall, it seems to us that this was a complicated quarter for PubMatic. The company is flat on the results and currently trades at $18.94 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.

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