Programmatic advertising platform Pubmatic (NASDAQ: PUBM) announced better-than-expected revenue in Q1 CY2025, but sales fell by 4.3% year on year to $63.83 million. Guidance for next quarter’s revenue was better than expected at $68 million at the midpoint, 0.6% above analysts’ estimates. Its non-GAAP loss of $0.04 per share was $0.03 above analysts’ consensus estimates.
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PubMatic (PUBM) Q1 CY2025 Highlights:
- Revenue: $63.83 million vs analyst estimates of $62.09 million (4.3% year-on-year decline, 2.8% beat)
- Adjusted EPS: -$0.04 vs analyst estimates of -$0.07 ($0.03 beat)
- Adjusted EBITDA: $8.46 million vs analyst estimates of $6.13 million (13.3% margin, 38% beat)
- Revenue Guidance for Q2 CY2025 is $68 million at the midpoint, roughly in line with what analysts were expecting
- EBITDA guidance for Q2 CY2025 is $10.5 million at the midpoint, below analyst estimates of $11.36 million
- Operating Margin: -18.6%, down from -8.3% in the same quarter last year
- Free Cash Flow Margin: 11.4%, up from 10.4% in the previous quarter
- Market Capitalization: $485.4 million
“We are pleased with our Q1 performance, exceeding guidance on both the top and bottom line driven by the secular growth areas in our business. Ongoing investments in product innovation and go to market teams drove 21% year over year growth in our underlying business, with momentum carrying into April,” said Rajeev Goel, co-founder and CEO at PubMatic.
Company Overview
Founded in 2006 as an online ad platform helping ad sellers, Pubmatic (NASDAQ: PUBM) is a fully integrated cloud-based programmatic advertising platform.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, PubMatic grew its sales at a weak 6.6% compounded annual growth rate. This was below our standard for the software sector and is a tough starting point for our analysis.
This quarter, PubMatic’s revenue fell by 4.3% year on year to $63.83 million but beat Wall Street’s estimates by 2.8%. Company management is currently guiding for a 1.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 5.3% over the next 12 months, similar to its three-year rate. This projection doesn't excite us and indicates its products and services will face some demand challenges.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
It’s relatively expensive for PubMatic to acquire new customers as its CAC payback period checked in at 58.9 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low.
Key Takeaways from PubMatic’s Q1 Results
We were impressed by how significantly PubMatic blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its EBITDA guidance for next quarter missed significantly. Zooming out, we think this was a mixed quarter. The stock traded up 2.4% to $11.25 immediately following the results.
Big picture, is PubMatic a buy here and now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
