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Programmatic advertising platform Pubmatic (NASDAQ: NASDAQ:PUBM) fell short of analysts' expectations in Q2 CY2024, with revenue up 6.2% year on year to $67.27 million. Next quarter's revenue guidance of $66 million also underwhelmed, coming in 4.4% below analysts' estimates. It made a non-GAAP profit of $0.17 per share, improving from its loss of $0.11 per share in the same quarter last year.
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PubMatic (PUBM) Q2 CY2024 Highlights:
- Revenue: $67.27 million vs analyst estimates of $70.11 million (4.1% miss)
- EPS (non-GAAP): $0.17 vs analyst estimates of $0.13 (33.3% beat)
- Revenue Guidance for Q3 CY2024 is $66 million at the midpoint, below analyst estimates of $69.03 million
- The company dropped its revenue guidance for the full year from $300 million to $290 million at the midpoint, a 3.3% decrease
- Gross Margin (GAAP): 62.6%, up from 60.4% in the same quarter last year
- Free Cash Flow of $6.91 million, down 57.5% from the previous quarter
- Net Revenue Retention Rate: 108%, up from 106% in the previous quarter
- Market Capitalization: $946.7 million
Founded in 2006 as an online ad platform helping ad sellers, Pubmatic (NASDAQ: PUBM) is a fully integrated cloud-based programmatic advertising platform.
Advertising SoftwareThe digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.
Sales GrowthAs you can see below, PubMatic's 14.6% annualized revenue growth over the last three years has been sluggish, and its sales came in at $67.27 million this quarter.
PubMatic's quarterly revenue was only up 6.2% year on year, which might disappoint some shareholders. However, its revenue increased $566,000 quarter on quarter, a strong improvement from the $17.9 million decrease in Q1 CY2024. This is a sign of acceleration of growth and very nice to see indeed.
Next quarter's guidance suggests that PubMatic is expecting revenue to grow 3.6% year on year to $66 million, improving on the 1.3% year-on-year decline it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 10.9% over the next 12 months before the earnings results announcement.
Product SuccessOne of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.
PubMatic's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 108% in Q2. This means that even if PubMatic didn't win any new customers over the last 12 months, it would've grown its revenue by 8%.
Significantly up from the last quarter, PubMatic has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.
Key Takeaways from PubMatic's Q2 Results It was great to see PubMatic improve its net revenue retention this quarter. We were also glad its gross margin improved. On the other hand, it lowered its full-year revenue and EBITDA guidance significantly. Overall, this was a weaker quarter for PubMatic. The stock traded down 24% to $14.90 immediately after reporting.
