Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PubMatic Inc (NASDAQ:PUBM) achieved a 9% revenue growth in 2024, more than doubling the growth rate from 2023.
• CTV revenue more than doubled in 2024, reaching 20% of total revenue in Q4.
• The company expanded its adjusted EBITDA margins to 32%, marking its fourth year out of the last five exceeding the 'rule of 40' benchmark.
• PubMatic Inc (NASDAQ:PUBM) increased its engineering productivity by over 15% through the adoption of generative AI technology.
• The company successfully executed a share repurchase program, reducing fully diluted shares outstanding by 8% in 2024.

Negative Points

• A significant headwind was experienced due to a change in bidding approach by a major DSP partner, affecting desktop display revenues.
• Total Q4 revenues were below expectations due to weak holiday spending by a large DSP buyer.
• The company anticipates a continuation of softer trends for the large DSP in 2025, impacting display revenues.
• PubMatic Inc (NASDAQ:PUBM) expects its first half margins in 2025 to be slightly lower than historical levels due to the DSP impact.
• The company faces tough comparisons in 2025 due to the significant political ad spend in 2024, which contributed to 6% of total revenue.

Q & A Highlights

• Warning! GuruFocus has detected 8 Warning Signs with PUBM.

Q: Can you discuss the month-on-month trends throughout the quarter and any insights on CPM trends? A: Steve Pantalli, CFO: The sequential progression through the fourth quarter was on track with expectations for CTV and mobile. The softness was primarily due to a single DSP in the display format. CPMs were positive for the full year, with monetized impressions also showing growth, highlighting the traction in secular growth areas like CTV.

Q: Could you elaborate on the impact of the large DSP partner on display and why it was limited to the latter part of the quarter? A: Steve Pantalli, CFO: The DSP's structural change in bidding approach affected display formats, with seasonality being about half the rate of other DSPs. The relationship remains strong, and we are transitioning through this period, focusing on growth in CTV, mobile app, and emerging revenues.

Q: What are the secular shifts in the industry driving your data opportunity, and how do you size this opportunity? A: Rajiv Goel, CEO: The industry is shifting towards sell-side targeting due to the pressure on cookies and the rise of first-party data. This shift is more efficient and allows us to apply data directly on the sell side. We have diversified revenues away from cookie-dependent advertising and invested in our Connect capability, integrating over 190 data partners.

Q: Can you discuss the success and growth potential of CTV, and what types of media streamers are attracted to PubMatic? A: Rajiv Goel, CEO: CTV revenue more than doubled year-over-year, with 80% of the top 30 streamers now working with us. We focus on programmatic transactions and have strong relationships with major streamers like Roku and Disney Plus Hotstar. We see a long runway for growth in CTV, driven by live sports, data curation, and supply path optimization.

Q: How does the competitive landscape look as the lines between DSPs and SSPs blur? A: Rajiv Goel, CEO: The blurring of lines is not new, with companies like Google and Xander operating on both buy and sell sides. Our focus is on making the digital advertising supply chain efficient and transparent, providing end-to-end control and visibility. We believe our financial profile and scale position us well to drive industry consolidation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.