PubMatic, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights:

• 2024 was a year of solid revenue growth (9% growth) and margin expansion (adjusted EBITDA margin 32%), returning to a rule of 40 company.
• CTV was a breakout quarter, with 20% of Q4 revenue, working with 80% of the top 30 global streamers.
• Mobile app business grew 16% full-year, with over 900 mobile app publishers on platform.
• Supply Path Optimization (SPO) reached 53% of platform activity in 2024, up from 33% 2 years ago.
• Generative AI increased engineering productivity by over 15%, launched PubMatic Assistant, and applied Gen AI to customer-facing products.
• Commerce media scaled with Convert platform, 190 data sets available on PubMatic, and Connect diversifying revenues.

Segment Performance:

• CTV: Q4 revenue was 20% of total revenue, more than doubling year-over-year.
• Mobile app: Full-year growth 16%, represented 20% of total revenue in Q4.
• Emerging revenues: Doubled in 2024, reaching 6% of revenues in Q4; Connect, a curation and data business, grew 140% year-over-year.
• Display: Declined 8% year-over-year in Q4 due to a DSP buyer, but excluding that, other display revenues increased over 20% year-over-year. Revenue contribution percentages varied by segment, with CTV, mobile app, and emerging revenues gaining share.

Guidance:

• Targeting underlying business growth of 15%+ in 2025.
• Q1 2025 revenue expected to be in the range of $61 million to $63 million, factoring in DSP headwind and double-digit growth in underlying business.
• Q1 adjusted EBITDA range $5 million to $7 million.
• Full-year adjusted EBITDA margin anticipated in the high 20% range, with lap of DSP impact by mid-2025 shifting focus to CTV, mobile app, and emerging revenues.

Risks:

• Impact from a single DSP partner starting in May 2024 negatively affecting desktop display revenue.
• Dependence on cookie-dependent advertising; need to shift to sell-side targeting and data-driven impressions to diversify revenue streams.

Q: James Heaney at Jefferies asked about month-on-month trends in the quarter and CPM trends.

A: Steve Pantelick responded that softness was due to a single DSP in the latter part of Q4, CTV, mobile were on track, CPMs were positive full-year with growth in monetized impressions.

Q: Rob Coolbrith at Evercore asked about the large DSP partner's impact on display and data opportunity.

A: Steve Pantelick said the DSP change was a structural issue affecting display, but the company is transitioning and focused on secular growth areas; Rajeev Goel discussed data opportunity shift to sell-side targeting due to cookie pressure and first-party data growth.

Q: Zach Cummins at B. Riley asked about CTV success and runway.

A: Rajeev Goel stated CTV is growing with 80% of top 30 streamers, strong traction in live sports and data curation, with long runway ahead.

Q: Andrew Boone at JMP asked about Activate growth and Gen AI savings.

A: Rajeev Goel explained Activate's growth due to efficiency and scale, with dollars spent on Activate flowing to PubMatic's SSP; Steve Pantelick discussed Gen AI improving engineering productivity and customer-facing products.

Q: Jason Helfstein at Oppenheimer asked about DSP risk and investment in buy-side products.

A: Steve Pantelick said the DSP change was the last to move to sole first bid, Rajeev Goel discussed investment in SPO, Activate, curation, and commerce media products.

Q: Matthew Swanson at RBC asked about CTV ecosystem evolution and adjusted EBITDA.

A: Rajeev Goel talked about CTV transitioning from insertion order to programmatic, Steve Pantelick noted adjusted EBITDA beat was due to long-term efficiency focus.

Q: Kenneth Wu at Wolfe asked about second half growth convergence and new partnerships.

A: Steve Pantelick said second half growth expected to converge with 15%+ underlying growth, and new partnerships adding incrementality, especially in CTV.

Q: Mauricio Munoz at Raymond James asked about CTV contribution from political spend and competitive dynamics.

A: Steve Pantelick and Rajeev Goel discussed CTV political spend impact and competitive landscape focusing on supply chain efficiency and control.

Q: Eric Martinuzzi at Lake Street asked about Q1/Q2 2024 comps and DSP impact.

A: Steve Pantelick and Rajeev Goel explained the DSP impact was in the second half, with underlying growth in secular areas set to accelerate after lap of DSP impact.