PubMatic shares surge 34% on upbeat guidance and strong Q4 results
PubMatic, a leading advertising technology company, has reported its fourth-quarter (Q4) earnings for 2023, exceeding expectations and demonstrating strong financial performance. The company provided upside guidance which has propelled it to a 34% rally in after hours.
PUBM reported Q4 EPS of $0.34, beating the estimates of $0.20. Revenue for the quarter increased by 13.9% year-over-year to $84.6 million, surpassing the estimates of $78.19 million.
The company's strong financial performance can be attributed to significant growth in monetized impressions, emerging revenue streams, and strong execution on key operating priorities. PubMatic's active publishers on the platform grew by 9% in 2023, monetizing inventory from approximately 1,800 global publishers and app developers. Combined revenue from mobile display formats and omnichannel video represented 78% of total revenue for the year ended December 31, 2023, up 4 percentage points over the year ended December 31, 2022.
For the first quarter of 2024, the company expects revenue to be in the range of $61 million to $63 million, with adjusted EBITDA in the range of $10 million to $12 million. The company anticipates its adjusted EBITDA will improve as the year progresses, driven by the full effect of cost reductions, optimizations, and ad spend growth recovery. For the full year 2024, the company expects year-over-year revenue growth of over 10%, or over 12% excluding Yahoo, with an adjusted EBITDA margin of approximately 30%.
Within the full year 2024, PubMatic sets ambitious goals. The company aims for year-over-year revenue growth of over 10%, or over 12% when excluding Yahoo's contribution. Furthermore, PubMatic anticipates maintaining an adjusted EBITDA margin of approximately 30%. The company also expects free cash flow to align with the previous year's performance, and capital expenditures (CapEx) are estimated to be between $16-18 million.
Steve Pantelick, CFO of PubMatic, expressed satisfaction with the outstanding financial results achieved in the fourth quarter. Pantelick attributed the positive outcome to substantial growth in monetized impressions, multi-year investments, emerging revenue streams, and efficient execution of key operating priorities. Looking ahead to 2024, Pantelick highlighted a more favorable environment for digital ad spending and emphasized PubMatic's commitment to doubling year-over-year revenue growth, excluding Yahoo. Additional key focuses for 2024 include increased investment in high-return areas, cost efficiencies, infrastructure optimization, and the generation of strong free cash flow.
The company has also expanded its technology partnerships with CTV ad server Freewheel and secured partnerships with premium streaming brands such as AMC Networks, DISH Media, FOX, iQIYI, TiVo, and Vevo. PUBM ended Q4 2023 with over 45% of total activity coming from Supply Path Optimization (SPO), up from 34% in Q4 2022.
Supply Path Optimization (SPO) played an important role in PubMatic's strategy, with over 45% of total activity in Q4 2023 coming from SPO, up from 34% in the same period of the previous year. SPO partners who had collaborated with PubMatic for three or more years exhibited an impressive average net spend retention rate of 120% in 2023. The company diversified across more than 20 verticals, with the top 10 ad verticals experiencing a collective growth of over 26% year-over-year in the fourth quarter.
On February 26, 2024, the company announced that its Board of Directors has authorized an extension of its existing share repurchase program, allowing the company to repurchase up to an additional $100 million of its Class A common stock through the end of 2025.
In conclusion, PubMatic's strong Q4 results and upbeat guidance for Q1 2024 are a testament to the company's resilience and growth potential. With a focus on increasing investment in high-return areas, delivering further cost efficiencies, and generating strong free cash flow, the company is well-positioned to accelerate revenue growth and expand its adjusted EBITDA margin in 2024.