PubMatic, Inc. Q1 FY2025 earnings call

• Exceeded guidance in Q1 on top and bottom line, driven by secular growth areas like CTV and SPO, with SPO representing a record 55% of total activity.
• Impact of Google AdTech antitrust case creates a more level playing field, with PubMatic positioned to benefit. Google's announcement on third-party cookies continues to support growth in newer media environments.
• Invested in Activate for SPO, Convert for commerce media, and Connect for curation, resonating with stakeholders across the digital supply chain.
• Focus on three guiding principles: anticipate advertising growth shifts, manage costs, and align investments to high growth opportunities.

Omni-channel video revenues in the quarter grew 20% year-over-year and represented 40% of total revenues, driven by strong CTV revenues up over 50% YOY. Emerging revenue streams more than doubled YOY, with Connect, the curation and data business, growing at over 100% YOY. Revenue from display declined 10% YOY due to a large DSP buyer, but excluding this buyer, other display revenues grew over 20% YOY. Underlying business, excluding the DSP and political advertising, increased 21%.

• Q2 revenue expected to be in the range of $66 million to $70 million, assuming 15% plus year-over-year growth of underlying business.
• Q2 adjusted EBITDA expected to be in the range of $9 million to $12 million, factoring in continued weakness of the U.S. dollar.
• Expect online revenues to continue growing 15% plus in the second half of the year, with second half year-over-year revenue growth including a headwind from political spend in the back half of 2024.
• Anticipate reducing full-year CapEx by at least 15% to $15 million through optimization efforts and cost-saving measures.

• Economic uncertainty could impact ad spend.
• Impact of a single large DSP buyer, though lapping in a few weeks.
• Potential negative effects of market shifts, but confidence in navigating through due to diversified business and secular growth drivers.

Q: Curious to know if you've had direct interaction with the DOJ as they've looked to size up potential remedies to the monopolistic behavior?

A: The DOJ is talking to witnesses from the trial, and the verdict has crystallized that Google is not immovable, with potential for PubMatic to gain market share as customers look for alternatives.

Q: Can you give an update on how volumes trended with your key DSP partner here in the first quarter?

A: There's been stability, with better results than anticipated, and the company feels good about the relationship with growth opportunities beyond the technical auction shift.

Q: Can you talk about the macro environment and spend and what you're seeing at a high level with the uncertainty as we think about the rest of the year?

A: Advertisers are scenario planning, with shifts expected from linear TV to streaming, upper funnel to lower funnel, spend consolidation, and increased use of AI solutions, all favoring PubMatic's growth drivers.

Q: How do you think about letting those higher CPMs drop through to margins versus reinvesting for future growth?

A: Focus is on growing secular areas like video, with continued investment in growth opportunities while balancing funding growth and managing the bottom line, with a right mix between the two.

Q: What's next in driving ROIs over the next two years and roadmap?

A: Key drivers include data investment, driving supply chain efficiency with SPO and Activate, and building performance solutions using AI and first-party data to enhance ROI.