PubMatic(PUBM) - 2023 Q4 - Annual Report

Financial Performance - For the year ended December 31, 2023, the company's revenue was $267.0 million, an increase from$256.4 million in 2022, representing a growth of approximately 0.25%[358]. - The company's net income for 2023 was $8.9 million, a significant decrease from$28.7 million in 2022, reflecting a decline of approximately 68.9%[365]. - The company reported a gross profit of $167.79 million in 2023, down from$174.87 million in 2022, a decrease of about 4.0%[365]. - The company's income before provision for income taxes for 2023 was $10,505,000, a decrease of 72.0$37,467,000 in 2022[479]. - The effective tax rate for 2023 was 15.44%, down from 23.43% in 2022, indicating a significant reduction in the tax burden[479]. Assets and Liabilities - Total current assets increased to $561.96 million in 2023 from$503.48 million in 2022, marking a growth of about 11.6%[363]. - The company's total liabilities increased to $399.04 million in 2023 from$329.99 million in 2022, representing a growth of approximately 20.9%[363]. - The company's cash and cash equivalents decreased to $78.51 million in 2023 from$92.38 million in 2022, a decline of about 15.0%[363]. - Total accounts payable increased to $347.673 million as of December 31, 2023, up from$277.414 million in 2022[435]. - Total deferred tax assets, net of valuation allowance, increased to $30,514,000 in 2023 from$13,564,000 in 2022, representing a growth of 125.5%[480]. Operating Expenses - Operating expenses rose to $165.75 million in 2023, up from$134.35 million in 2022, indicating an increase of approximately 23.3%[365]. - Depreciation and amortization expenses increased to $44,770,000 in 2023 from$34,249,000 in 2022[374]. - Stock-based compensation rose to $28,862,000 in 2023, compared to$20,646,000 in 2022[374]. - Operating lease cost increased to $7,468,000 in 2023 from$6,876,000 in 2022, reflecting a growth of approximately 8.6%[446]. Cash Flow and Investments - Operating cash flow for 2023 was $81,121,000, slightly lower than$87,212,000 in 2022[374]. - The company reported a net cash used in investing activities of $39,018,000 in 2023, compared to$81,371,000 in 2022[374]. - The Company capitalized $21.3 million in software development costs during the year ended December 31, 2023, compared to$14.5 million in 2022[433]. Stock and Equity - The Company repurchased treasury stock at a cost of $59,617,000 in 2023, compared to no repurchases in 2022[374]. - The total stockholders' equity as of December 31, 2023, was$296,199,000, an increase from $312,188,000 in 2022[371]. - The Company granted 2,573 RSUs in 2023, with a weighted-average grant date fair value of$15.98 per share[468]. - The total stock-based compensation expense for 2023 was $28.9 million, an increase from$20.6 million in 2022 and $14.1 million in 2021[476]. Revenue Recognition and Accounting Policies - The company recognized revenue net of payments to publishers, with a critical audit matter related to the revenue cycle due to the complexity of the revenue recognition process[359]. - Revenue is recognized on a net basis, as the Company does not act as the principal in the purchase and sale of digital advertising inventory[406]. - The Company capitalizes internal use software development costs, which are amortized over an estimated useful life of two to five years[393]. Market and Competitive Environment - The digital advertising industry is intensely competitive, and failure to effectively compete could adversely affect the company's business and financial condition[24]. - The company relies on third-party data centers, and any disruption could adversely affect its operations and financial results[24]. - Future acquisitions or strategic investments may be difficult to identify and integrate, potentially disrupting business operations[24]. Foreign Currency and Economic Factors - A hypothetical 10$2.0 million in operating income for the year ended December 31, 2023[345]. - The company has not entered into any hedging arrangements for foreign currency risk, which could affect operating income if foreign sales and expenses increase[345]. - The company does not believe that inflation has had a material effect on its business, but significant inflationary pressures could adversely affect operations[346]. Legal and Regulatory Compliance - The company is subject to evolving legal and industry standards regarding data protection, which could impact its operations[24].