PubMatic(PUBM) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended March 31, 2022, show total assets of $497.6 million, a decrease from $550.2 million at the end of 2021, with revenue at $54.6 million and net income at $4.8 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $74,467 | $82,505 | | Accounts receivable - net | $218,359 | $286,916 | | Total Current Assets | $404,874 | $460,749 | | TOTAL ASSETS | $497,609 | $550,215 | | Accounts payable | $186,012 | $244,321 | | Total Current Liabilities | $200,557 | $266,965 | | TOTAL LIABILITIES | $229,903 | $293,035 | | TOTAL STOCKHOLDERS' EQUITY | $267,706 | $257,180 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Revenue | $54,552 | $43,608 | | Gross profit | $36,560 | $31,308 | | Operating income | $4,581 | $6,642 | | Net income | $4,779 | $4,918 | | Diluted EPS | $0.08 | $0.09 | Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,314 | $12,687 | | Net cash used in investing activities | ($27,805) | ($16,848) | | Net cash provided by (used in) financing activities | $453 | ($381) | - For the three months ended March 31, 2022, one publisher represented 14% of the Company's revenue, a decrease from 20% in the same period of 2021[28] - As of March 31, 2022, two buyers accounted for 29% and 20% of accounts receivable, respectively, showing significant concentration[28] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports a 25% year-over-year revenue increase to $54.6 million for Q1 2022, driven by more impressions processed, with a strong net dollar-based retention rate of 140% - The company processed approximately 32.6 trillion ad impressions for the three months ended March 31, 2022, a 76% increase from 18.5 trillion in the same period of 2021[82] - The net dollar-based retention rate was 140% for the trailing twelve months ended March 31, 2022, up from 130% for the trailing twelve months ended March 31, 2021[75][86] - For Q1 2022, revenue from mobile and video (including OTT/CTV) combined comprised approximately 67% of total revenue[78] Financial Highlights (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Revenue | $54,552 | $43,608 | | Operating income | $4,581 | $6,642 | | Net income | $4,779 | $4,918 | | Adjusted EBITDA | $17,006 | $14,494 | Revenue and Gross Profit Comparison (in thousands) | Metric | Q1 2022 | Q1 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $54,552 | $43,608 | $10,944 | 25% | | Cost of revenue | $17,992 | $12,300 | $5,692 | 46% | | Gross profit | $36,560 | $31,308 | $5,252 | 17% | | Gross profit margin | 67% | 72% | | | - Operating expenses increased year-over-year primarily due to higher personnel costs from increased headcount: Technology and Development (+28%), Sales and Marketing (+29%), and General and Administrative (+32%)[118][120][122] - As of March 31, 2022, the company had cash, cash equivalents, and marketable securities of $174.7 million and net working capital of $204.3 million[126] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks primarily from interest rates, foreign currency exchange rates, and inflation, though interest rate risk is considered low - The company does not believe a 100 basis point change in interest rates would materially affect its financial condition[153] - A hypothetical 10% change in the U.S. Dollar to Indian Rupee exchange rate could change operating income by $0.4 million for Q1 2022[154] - A hypothetical 10% change in the U.S. Dollar to British Pound exchange rate could change operating income by $0.3 million for Q1 2022[154] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective[156] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[158] PART II - OTHER INFORMATION Legal Proceedings The company is not currently a party to any legal proceedings that would have a material adverse effect on its business, financial condition, or cash flows - As of the filing date, the company is not a party to any legal proceedings that management believes would have a material adverse effect on the business[162] Risk Factors The company faces significant risks including dependency on advertising demand, the need to retain customers, operational fluctuations, data privacy regulations, and corporate governance issues - Business & Operational Risks: - Revenue is highly dependent on overall advertising demand - Failure to attract/retain customers or expand into emerging channels could harm growth - The business is subject to seasonal fluctuations, with higher spending in Q4 and lower in Q1 - Platform outages, security breaches, or failure to prevent fraud could damage reputation and business[164][171][172][175] - Data & Regulatory Risks: - Rejection of third-party cookies, ad-blocking technologies, and evolving data privacy laws (CCPA, GDPR) threaten the ability to collect and use data, which is critical to the business - Failure to comply with complex and evolving data privacy laws could result in significant fines and liability[168][169][178] - Financial & Corporate Risks: - Insiders have substantial control due to the dual-class stock structure, limiting the influence of Class A stockholders - The company received a notice of delisting from Nasdaq for failing to have a minimum of three independent directors on its audit committee, following the death of a director, and has a cure period to regain compliance[179][283][288] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable[293] Defaults Upon Senior Securities This item is not applicable for the reporting period - Not applicable[294] Mine Safety Disclosures This item is not applicable for the reporting period - Not applicable[295] Other Information This item is not applicable for the reporting period - Not applicable[296] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and various Inline XBRL documents for interactive data[298]