PubMatic Inc

Previous wording

(2)Amounts for the three and six months ended June 30, 2023 include a provision for bad debt of $5.7 million relating to a Demand Side Platform (“DSP”) buyer of our platform that filed for Chapter 11 bankruptcy.

Current wording

(2)Amounts for the nine months ended September 30, 2023 include a provision for bad debt of $5.7 million relating to a Demand Side Platform (“DSP”) buyer of our platform that filed for Chapter 11 bankruptcy.

Previous wording

Our net dollar-based retention rate equals the Current Period Revenue divided by Prior Period Revenue. Our net dollar-based retention rate was 108% for the trailing twelve months ended June 30, 2024 and 100% for the trailing twelve months ended June 30, 2023. Our revenue growth in the period ended June 30, 2024 and 2023 was primarily attributable to an increase in the number of ad impressions processed from our publishers, upselling additional products, penetration of header bidding for mobile app and digital video, and increased demand from the growth of our buyer relationships primarily through SPO agreements.

Current wording

Our net dollar-based retention rate equals the Current Period Revenue divided by Prior Period Revenue. Our net dollar-based retention rate was 112% for the trailing twelve months ended September 30, 2024 and 97% for the trailing twelve months ended September 30, 2023. Our revenue growth in the period ended September 30, 2024 and 2023 was primarily attributable to an increase in the number of ad impressions processed from our publishers, upselling additional products, penetration of header bidding for mobile app and digital video, and increased demand from the growth of our buyer relationships primarily through SPO agreements.

Previous wording

We focus on monetizing digital impressions by coordinating over a hundred billion real-time auctions and nearly a trillion bids globally on a daily basis, using our specialized cloud software, machine learning algorithms, and scaled transaction infrastructure. Valuable ad impressions are transparent and data rich, viewable by humans, and verifiable. Each ad impression we auction consists of 606 independent data parameters, which can yield valuable insights if recorded and analyzed properly. This processing of voluminous data for each ad impression must occur in less than half a second as consumers expect a seamless digital ad experience. We continually assess impressions from new and existing publishers through a rigorous validation process. We add or remove impressions from our platform based on an assessment of the projected value of the impressions, which is influenced by the type of publisher and its related consumers, as well as the potential volume of monetizable impressions and ad format types, such as digital video. We continuously create and iterate algorithms that leverage vast datasets flowing through our infrastructure to improve the liquidity in our marketplace. Our ability to drive successful outcomes in the real-time auction process on behalf of our publishers and buyers will affect our operating results.

Current wording

We focus on monetizing digital impressions by coordinating over a hundred billion real-time auctions and nearly a trillion bids globally on a daily basis, using our specialized cloud software, machine learning algorithms, and scaled transaction infrastructure. Valuable ad impressions are transparent and data rich, viewable by humans, and verifiable. Each ad impression we auction consists of 631 independent data parameters, which can yield valuable insights if recorded and analyzed properly. This processing of voluminous data for each ad impression must occur in less than half a second as consumers expect a seamless digital ad experience. We continually assess impressions from new and existing publishers through a rigorous validation process. We add or remove impressions from our platform based on an assessment of the projected value of the impressions, which is influenced by the type of publisher and its related consumers, as well as the potential volume of monetizable impressions and ad format types, such as digital video. We continuously create and iterate algorithms that leverage vast datasets flowing through our infrastructure to improve the liquidity in our marketplace. Our ability to drive successful outcomes in the real-time auction process on behalf of our publishers and buyers will affect our operating results.

Previous wording

Our recent growth has been driven by a variety of factors including increased access to mobile web (display and video) and mobile app (display and video) impressions and desktop video impressions. Our performance is affected by our ability to maintain and grow our access to valuable ad impressions from current publishers as well as through new relationships with publishers. In June 2024, our platform processed approximately 687 billion ad impressions daily, each in a fraction of a second.

Current wording

Our recent growth has been driven by a variety of factors including increased access to mobile web (display and video) and mobile app (display and video) impressions and desktop video impressions. Our performance is affected by our ability to maintain and grow our access to valuable ad impressions from current publishers as well as through new relationships with publishers. In September 2024, our platform processed approximately 781 billion ad impressions daily, each in a fraction of a second.

Previous wording

Revenue for the three months ended June 30, 2024 increased by $3.9 million, or 6%, compared to the three months ended June 30, 2023. Revenue for the six months ended June 30, 2024 increased by $15.2 million, or 13%, compared to the six months ended June 30, 2023. Our revenues were primarily driven by increased impressions processed on our platform, new revenue streams, and growth in customer relationships. Our business was negatively impacted by bidding methodology changes implemented by one of our buyers in the second half of the second fiscal quarter.

Current wording

Revenue for the three months ended September 30, 2024 increased by $8.1 million, or 13%, compared to the three months ended September 30, 2023. Revenue for the nine months ended September 30, 2024 increased by $23.3 million, or 13%, compared to the nine months ended September 30, 2023. Our revenues were primarily driven by increased impressions processed on our platform, new revenue streams, and growth in customer relationships. In addition,our revenues for the three and nine months ended September 30, 2024 benefited by approximately $4.2 million and $5.3 million, respectively, from incremental political spend in the United States due to the 2024 presidential election. Our business was negatively impacted by bidding methodology changes implemented by one of our buyers in the second half of the second fiscal quarter.

Previous wording

As of June 30, 2024, we served approximately 1,800 publishers and app developers worldwide on our platform, compared to approximately 1,750 publishers and app developers worldwide as of June 30, 2023. For purposes of our publisher count, we aggregate multiple business accounts from separate divisions, segments or subsidiaries into a single “master” publisher based on our assessment of the related nature of the group.

Current wording

As of September 30, 2024, we served approximately 1,900 publishers and app developers worldwide on our platform, compared to approximately 1,750 publishers and app developers worldwide as of September 30, 2023. For purposes of our publisher count, we aggregate multiple business accounts from separate divisions, segments or subsidiaries into a single “master” publisher based on our assessment of the related nature of the group.

Previous wording

Cost of revenue increased $0.1 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to a $0.4 million increase in depreciation of data center equipment and amortization of internal-use software and a $0.4 million increase in personnel costs as headcount increased, offset by a $0.5 million decrease in data center costs. Overall, our cost of revenue per impression processed for the three months ended June 30, 2024 decreased by approximately 19% compared to the three months ended June 30, 2023.

Current wording

Cost of revenue decreased $0.6 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to a $1.1 million decrease in data center costs offset by a $0.4 million increase in personnel costs as headcount increased. Overall, our cost of revenue per impression processed for the three months ended September 30, 2024 decreased by approximately 22% compared to the three months ended September 30, 2023.

Previous wording

Cost of revenue increased $1.7 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to a $0.9 million increase in depreciation of data center equipment and amortization of internal-use software and a $1.1 million increase in personnel costs as headcount increased, offset by a $0.5 million decrease in data center costs. Overall, our cost of revenue per impression processed for the six months ended June 30, 2024 decreased by approximately 17% compared to the six months ended June 30, 2023.

Current wording

Cost of revenue increased $1.1 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to a $0.9 million increase in depreciation of data center equipment and amortization of internal-use software, and a $1.5 million increase in personnel costs, offset by a $1.6 million decrease in data center costs. Overall, our cost of revenue per impression processed for the nine months ended September 30, 2024 decreased by approximately 19% compared to the nine months ended September 30, 2023.

Previous wording

Our gross margin of 63% for the three months ended June 30, 2024 increased compared to 60% for the three months ended June 30, 2023, and our gross margin of 62% for the six months ended June 30, 2024 increased compared to 59% for the six months ended June 30, 2023 primarily due to acceleration of revenue growth.

Current wording

Our gross margin of 64% for the three months ended September 30, 2024 increased compared to 59% for the three months ended September 30, 2023, and our gross margin of 63% for the nine months ended September 30, 2024 increased compared to 59% for the nine months ended September 30, 2023 primarily due to acceleration of revenue growth.

Previous wording

The increase in technology and development costs for the three months ended June 30, 2024 was primarily due to an increase of $2.1 million in personnel costs as headcount increased, partially offset by an increase of $0.5 million related to the capitalization of internal-use software.

Current wording

The increase in technology and development costs for the three months ended September 30, 2024 was primarily due to an increase of $2.9 million in personnel costs as headcount increased, partially offset by an increase of $1.0 million related to the capitalization of internal-use software.

Previous wording

The increase in technology and development costs for the six months ended June 30, 2024 was primarily due to an increase of $3.7 million in personnel costs as headcount increased and an increase in facilities costs of $0.4 million, partially offset by an increase of $1.0 million related to the capitalization of internal-use software.

Current wording

The increase in technology and development costs for the nine months ended September 30, 2024 was primarily due to an increase of $6.7 million in personnel costs as headcount increased and an increase in facilities costs of $0.5 million, partially offset by an increase of $2.1 million related to the capitalization of internal-use software.

Previous wording

Sales and marketing costs for the three months ended June 30, 2024 increased primarily due to a $2.9 million increase in personnel costs and a $0.3 million increase in facilities costs.

Current wording

Sales and marketing costs for the three months ended September 30, 2024 increased primarily due to a $3.8 million increase in personnel costs and a $0.2 million increase in facilities costs.

Previous wording

Sales and marketing costs for the six months ended June 30, 2024 increased primarily due to a $5.1 million increase in personnel costs and a $0.5 million increase in facilities costs, offset by a decrease in amortization of intangible assets of $0.9 million.

Current wording

Sales and marketing costs for the nine months ended September 30, 2024 increased primarily due to a $9.0 million increase in personnel costs and a $0.7 million increase in facilities costs, offset by a decrease in amortization of intangible assets of $0.9 million.

Previous wording

General and administrative expense decreased for the six months ended June 30, 2024 primarily due to a $5.7 million decrease in provision for bad debt relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy in June 2023 and a $0.6 million decrease in property taxes, offset by a $3.2 million increase in personnel costs.

Current wording

General and administrative expense increased for the nine months ended September 30, 2024 primarily due to a $5.2 million increase in personnel costs and a $1.0 million increase in professional services fees, offset by a $5.7 million decrease in provision for bad debt relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy in June 2023 and a $0.5 million decrease in property taxes.

Previous wording

Interest income increased for the three and six months ended June 30, 2024 compared to the prior year period due to the increase in interest rates.

Current wording

Interest income decreased for the three months ended September 30, 2024 compared to the prior year period due to a decrease in the Company’s interest-bearing securities balance. Interest income increased for the nine months ended September 30, 2024 compared to the prior year period due to the increase in interest rates.

Previous wording

Other income (expense), net increased for the three and six months ended June 30, 2024 compared to the prior year period due to other income of $4.0 million from the Google Privacy Sandbox initiative in connection with their previous initiative to phase out the use of third-party cookies. This income was related to our efforts to build and test integrations with the privacy sandbox.

Current wording

Other income (expense), net decreased for the three months ended September 30, 2024 due to foreign exchange rate fluctuations. Other income (expense), net increased for the nine months ended September 30, 2024 compared to the prior year period due to other income of $4.0 million from the Google Privacy Sandbox initiative in connection with their previous initiative to phase out the use of third-party cookies. This income was related to our efforts to build and test integrations with the privacy sandbox.

Previous wording

The difference between the effective tax rate for the six months ended June 30, 2024 of (51)% and the federal statutory income tax rate of 21% was related to tax benefits from foreign-derived intangible income, research tax credits, and deductions for equity awards, partially offset by nondeductible stock-based compensation and Section 162(m) limitation on the tax deductibility of officers compensation. The effective income tax rate of 20% for the six months ended June 30, 2023 was related to the tax benefit from foreign-derived intangible income (FDII), foreign tax credit and research tax credit partially offset by an increase in nondeductible stock-based compensation, global intangible low-taxed income (GILTI), and Section 162(m) limitation on the tax deductibility of officers compensation.

Current wording

The difference between the effective tax rate for the three months ended September 30, 2024 of (180)% and the federal statutory income tax rate of 21% was related to tax benefits from foreign-derived intangible income (FDII), research tax credits and deductions for equity awards, partially offset by nondeductible stock-based compensation, and Section 162(m) limitation on the tax deductibility of officers' compensation. The effective income tax rate of 6% for the three months ended September 30, 2023 was related to the tax benefit from FDII, the 2022 federal tax provision to return adjustments and research tax credit, partially offset by an increase in nondeductible stock-based compensation and Section 162(m) limitation on the tax deductibility of officers’ compensation.

Previous wording

The difference between the effective tax rate for the three months ended June 30, 2024 of 17% and the federal statutory income tax rate of 21% was related to tax benefits from foreign-derived intangible income and research tax credits, partially offset by Section 162(m) limitation on the tax deductibility of officers compensation. The effective income tax rate of (11)% for the three months ended June 30, 2023 was related to the tax benefit from foreign-derived intangible income (FDII), foreign tax credit and research tax credit partially offset by an increase in nondeductible stock-based compensation, global intangible low-taxed income (GILTI), and Section 162(m) limitation on the tax deductibility of officers compensation.

Current wording

The difference between the effective tax rate for the nine months ended September 30, 2024 of (116)% and the federal statutory income tax rate of 21% was related to tax benefits from FDII, research tax credits and deductions for equity awards, partially offset by nondeductible stock-based compensation, and Section 162(m) limitation on the tax deductibility of officers' compensation. The effective income tax rate of 22% for the nine months ended September 30, 2023 was related to the tax benefit from FDII, research tax credit, and 2022 federal tax provision to return adjustments, partially offset by an increase in tax expense primarily related to nondeductible stock-based compensation, and Section 162(m) limitation on the tax deductibility of officers’ compensation.

Previous wording

(2)Net income (loss) and Adjusted EBITDA for the three and six months ended June 30, 2024 include other income of $4.0 million related to our efforts to build and test integrations with the Google Privacy Sandbox.

Current wording

(1)Net income (loss) and Adjusted EBITDA for the nine months ended September 30, 2024 include other income of $4.0 million related to our efforts to build and test integrations with the Google Privacy Sandbox.

Previous wording

We have financed our operations and capital expenditures primarily through utilization of cash generated from operations as well as sales of equity securities. As of June 30, 2024, we had cash, cash equivalents, and marketable securities of $165.6 million and net working capital, consisting of current assets less current liabilities, of $161.8 million.

Current wording

We have financed our operations and capital expenditures primarily through utilization of cash generated from operations as well as sales of equity securities. As of September 30, 2024, we had cash, cash equivalents, and marketable securities of $140.4 million and net working capital, consisting of current assets less current liabilities, of $137.0 million.

Previous wording

In February 2023, our board of directors authorized the 2023 Repurchase Program. Subsequently in February 2024, our board of directors authorized the 2024 Repurchase Program. During the six months ended June 30, 2024, we repurchased 1,777,846 shares of Class A common stock under the 2023 Repurchase Program and 2024 Repurchase Program, collectively, for an aggregate purchase price of $35.9 million. As of June 30, 2024, $79.9 million remained available for future share repurchases under the 2024 Repurchase Program. The U.S. Inflation Reduction Act of 2022 was enacted on August 16, 2022 and requires a one percent excise tax on certain share repurchases in excess of shares issued for employee compensation made after December 31, 2022. For purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain stock issuances against the fair market value of stock repurchases during the same taxable year, with certain exceptions. We do not expect this provision to have a material effect on our condensed consolidated financial statements.

Current wording

In February 2023, our board of directors authorized the 2023 Repurchase Program. Subsequently in February 2024, our board of directors authorized the 2024 Repurchase Program. During the nine months ended September 30, 2024, we repurchased 3,572,563 shares of Class A common stock under the 2023 Repurchase Program and 2024 Repurchase Program, collectively, for an aggregate purchase price of $64.8 million. As of September 30, 2024, $50.9 million remained available for future share repurchases under the 2024 Repurchase Program. The U.S. Inflation Reduction Act of 2022 was enacted on August 16, 2022 and requires a one percent excise tax on certain share repurchases in excess of shares issued for employee compensation made after December 31, 2022. For purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain stock issuances against the fair market value of stock repurchases during the same taxable year, with certain exceptions. We do not expect this provision to have a material effect on our condensed consolidated financial statements.

Previous wording

Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our buyers and related payments to our publishers, as well as our investment in personnel to support the anticipated growth of our business. Cash flows from operating activities have been affected by changes in our working capital, particularly changes in accounts receivable and accounts payable. The timing of cash receipts from buyers and payments to publishers can significantly impact our cash flows from operating activities. In addition, we expect seasonality to impact quarterly cash flows from operating activities.

Current wording

Our cash flows from operating activities are primarily influenced by growth in our operations, increases or decreases in collections from our buyers and related payments to our publishers, as well as our investment in personnel to support the anticipated growth of our business. Cash flows from operating activities have been affected by changes in our working capital, particularly changes in accounts receivable and accounts payable. The timing of cash receipts from buyers and payments to publishers can significantly impact our cash flows from operating activities. For example, we noted an impact to our operating cash flows for the nine months ended September 30, 2024 as a result of shifts in spend from one of our large DSPs. In addition, we expect seasonality to impact quarterly cash flows from operating activities.

Previous wording

For the six months ended June 30, 2024, net cash provided by operating activities of $36.2 million resulted primarily from adjustments for non-cash expenses of $33.6 million, including $22.5 million for depreciation and amortization and $18.8 million for stock-based compensation, a decrease in accounts receivable of $23.9 million, offset by a net loss of $0.5 million, an increase in prepaid expenses and other assets of $3.4 million, a decrease in operating lease liabilities of $3.0 million, and a decrease in accounts payable of $14.8 million.

Current wording

For the nine months ended September 30, 2024, net cash provided by operating activities of $55.4 million resulted primarily from adjustments for non-cash expenses of $52.8 million, including $33.9 million for depreciation and amortization and $28.3 million for stock-based compensation, offset by a net loss of $1.4 million, an increase in accounts receivable of $1.3 million, an increase in prepaid expenses and other assets of $1.6 million, a decrease in operating lease liabilities of $4.7 million, and an increase in accounts payable of $8.8 million.

Previous wording

For the six months ended June 30, 2023, net cash provided by operating activities of $28.6 million resulted primarily from adjustments for non-cash expenses of $29.8 million, including $22.3 million for depreciation and amortization and $14.3 million for stock-based compensation, provision for bad debt of $5.7 million relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy, a decrease in accounts receivable of $41.7 million, offset by a net loss of $11.6 million, and a decrease in accounts payable of $30.1 million.

Current wording

For the nine months ended September 30, 2023, net cash provided by operating activities of $52.4 million resulted primarily from adjustments for non-cash expenses of $48.3 million, including $33.7 million for depreciation and amortization and $21.5 million for stock-based compensation, provision for bad debt of $5.7 million relating to a DSP buyer of our platform that filed for Chapter 11 bankruptcy, a decrease in accounts receivable of $8.4 million, offset by a net loss of $9.8 million, and an increase in accrued liabilities of $3.2 million.

Previous wording

For the six months ended June 30, 2024, we used $5.9 million in investing activities, consisting of $1.5 million in purchases of property and equipment (primarily data center infrastructure), and $11.5 million of investments in capitalized internal-use software, and a net decrease in investments of marketable securities of $7.2 million.

Current wording

For the nine months ended September 30, 2024, we used $9.6 million in investing activities, consisting of $13.3 million in purchases of property and equipment (primarily data center infrastructure), and $16.1 million of investments in capitalized internal-use software, and a net decrease in investments of marketable securities of $39.0 million.

Previous wording

For the six months ended June 30, 2023, net cash provided by investing activities of $6.2 million was primarily due to sales of marketable securities prior to maturity of $18.9 million, and decreases due to $2.6 million in purchases of property and equipment (primarily data center infrastructure), and $9.9 million of investments in capitalized internal-use software.

Current wording

For the nine months ended September 30, 2023, we used $7.7 million in investing activities, consisting of $5.4 million in purchases of property and equipment (primarily data center infrastructure), and $13.7 million of investments in capitalized internal-use software, a net increase in investments of marketable securities of $7.4 million, offset by an increase from sales of marketable securities prior to maturity of $18.9 million.

Previous wording

For the six months ended June 30, 2024, net cash used in financing activities of $35.4 million was primarily due to purchases of treasury stock of $35.9 million, payment of a business combination indemnification holdback of $2.1 million, offset by proceeds from employee stock option exercises of $1.3 million and proceeds from our employee stock purchase plan of $1.5 million.

Current wording

For the nine months ended September 30, 2024, net cash used in financing activities of $64.6 million was primarily due to purchases of treasury stock of $65.4 million, payment of a business combination indemnification holdback of $2.1 million, offset by proceeds from employee stock option exercises of $1.6 million and proceeds from our employee stock purchase plan of $1.5 million.

Previous wording

For the six months ended June 30, 2023, net cash used in financing activities of $21.6 million was primarily due to purchases of treasury stock.

Current wording

For the nine months ended September 30, 2023, net cash used in financing activities of $39.4 million was primarily due to purchases of treasury stock.

Previous wording

As of June 30, 2024, we had $5.1 million of long-term income tax liabilities, including interest, related to uncertain tax positions. Because of the high degree of uncertainty regarding the settlement of these liabilities, we are unable to estimate the years in which future cash outflows may occur.

Current wording

As of September 30, 2024, we had $5.4 million of long-term income tax liabilities, including interest, related to uncertain tax positions. Because of the high degree of uncertainty regarding the settlement of these liabilities, we are unable to estimate the years in which future cash outflows may occur.