PubMatic (PUBM -2.14%), a leader in programmatic advertising, posted its third-quarter 2024 earnings on Tuesday, Nov. 12. Revenue grew 13% year over year to reach $71.8 million, exceeding management's predicted range of $65 million to $67 million. Adjusted EBITDA reached $18.5 million, topping internal guidance for $15 million to $17 million, with a 26% margin compared to the expected 24%.
Despite the robust results beating expectations, PubMatic reported a net loss of $912,000, suggesting there are still areas in need of improvement.
| Metric | Q3 2024 | Management's Expectations | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $71.8 million | $65 million-$67 million | $63.7 million | 13% |
| Adjusted EBITDA | $18.5 million | $15 million-$17 million | $18.2 million | 1.6% |
| Adj. EBITDA margin | 26% | 24% | 29% | (3 pps) |
| Net income (loss) | ($912,000) | N/A | $1.77 million | N/A |
| Adj. EPS | $0.12 | N/A | $0.14 | (14%) |
Source: Pubmatic. Note: Expectations based on management's guidance provided on Aug. 8, 2024. YOY = Year over year. EBITDA = Ear nings before interest, taxes, depreciation, and amortization. pps = percentage points.
Overview of PubMatic's Business
PubMatic stands at the forefront of the digital advertising industry with its cloud-based platform focusing on programmatic advertising and header bidding. The company's technology helps publishers optimize ad revenue by offering inventory to multiple buyers simultaneously, which often results in better pricing. Recently, its attention has been on omnichannel video, particularly connected TV (CTV), and improving infrastructure efficiency.
Key focuses include expanding programmatic advertising capabilities and optimizing infrastructure to enhance cost-efficiency. Significant success factors are these strategic advancements in mobile apps and infrastructure cost reductions.
Quarterly Highlights and Achievements
PubMatic achieved notable growth in Q3, with the omnichannel video segment, including CTV, growing revenue by 25% year over year, driven by nearly 50% growth in monetized impressions. CTV now includes 70% of the top 30 streaming publishers, enhancing its market standing.
Infrastructure optimizations led to an 18% reduction in revenue costs per million impressions. This contributed to a 23% increase in gross profit. As for challenges, the quarter saw a net income loss and a decline in cash flow, with marketable securities reducing from $96.8 million to $61.5 million. Yet, PubMatic maintains a robust balance sheet with a strong cash position of $140.4 million and no debt.
Financial metrics showed programs like header bidding processed a record 70 trillion impressions, reflecting infrastructure efficiency. However, the margin pressures that resulted in the net loss drive home the need for careful management of growth and cost strategies.
Progress in AI integration and privacy compliance standards like GDPR reflects PubMatic's readiness for increasingly complex regulatory landscapes. Despite setbacks such as a weak revenue outlook and a major DSP partner modifying its bidding approach, highlights include recognition by Forrester (FORR -2.36%) as a leader in Sell-Side Platforms and growth in omnichannel and infrastructure efficiencies.
Looking Forward
For the fourth quarter, PubMatic management expects revenue to range between $86 million and $90 million, with adjusted EBITDA of $34 million to $37 million and adjusted EBITDA margins around 40%. This reflects ongoing momentum and confidence, albeit with cautious optimism.
Investors are advised to monitor emerging trends in the digital advertising market. Key areas are DSP relationships and infrastructure cost control amid evolving external challenges. PubMatic's guidance underscores these priorities, hinting at strategic shifts to mitigate risks and leverage growth opportunities as they harness emerging market demands.
