This Weeks Earnings, so Far, and One Undiscovered Gem
This week has been good, have you seen UPST? However, I want talk about something different than anyone else, a hidden gem with a unique competitive advantage.
To sum up what I’ve seen over the past few days:
On Monday, Digital Turbine had a stellar quarter and raised guidance. However, this wasn’t enough for big banks and institutions, they were down 6% today. They most likely sold off on a contracting QoQ gross margin, which I believe is temporary due to the mergers. See, Wall Street is extremely short sighted and will unnecessarily beat down a good business *cough* *cough* ($BHG) due to over analyzing details that are working them selves out through growing pains of a hyper growth business.
Fubo absolutely knocked it out of the park on Tuesday and Upstart (holy ^&%) didn’t just smash earnings, they Hulk Smash’d earnings. I will write about them in the coming days.
But what really stole the show for me was a company NOBODY
is noticing or talking about. Before I tell you the stock, let me share some numbers:
88% YoY Revenue Growth
1,419% YoY Net Income Growth
278% YoY EBITDA Growth
150% Net Based Revenue Retention (how much existing clients spent with them)
Net Income 20%
Gross Margin 74%
Adjusted EBITDA 37%
Full year revenue guidance 40%
These numbers are earth shattering, almost unbelievable and unheard of in this market. You rarely find a business growing this fast, this profitably, ever. Let me show you their margins through a visual:
And lastly, their cash to total debt ratio:
Have you guessed the stock yet? Alright, I’ll tell you, it’s PubMatic. A small Ad-Tech firm that’s not just taking market share away from competitors, it’s ripping it away! Let’s talk about a few more numbers and then why they’re performing this way:
I want to point you directly toward the 114 publishers that they have, globally. This is up from 80 LAST QUARTER. That’s 42% QoQ organic customer growth, unbelievable. Couple this with increased revenue and 150% net retention, they’re capturing and maintaining market share faster than the market is growing. It is fair to bring up that Verizon Media Group accounted for 17% of PubMatic’s revenue, which is down from 20% last quarter and 25% when they first IPO’d less than a year ago.
The thing that makes them different and unique is their infrastructure first approach to programmatic advertising. I have to stop here for a second, because some may dismiss this and say, “Yea, it’s no big deal. They just own their own cloud infrastructure.” But let me tell you, it absolutely is a massive competitive advantage and was a huge investment (honestly, it was more of a bet) for PubMatic to make in the beginning. This makes them competitively better than the rest of their competition because they can:
Innovate faster: This is important due to the fast changing land scape around cookies and privacy controls in digital advertising. Some businesses are being swallowed due to these long term risks. They’re investing now and have been for years to take advantage of this disruptive opportunity.
Run better margins: They can charge less than their competition and run more profitably because of their initial investment in their infrastructure. This means they have pricing power over their competition and their margins are still better than them!
Address larger audiences: Many SSP’s have niche’s they play in, but PubMatic is unique and has the versatility to enter into other spaces, like CTV to compete against the big dogs, like Magnite and Google.
What an incredible earnings call this was, I walked away happy that I’ve been accumulating PubMatic every time it got under $29 per share. Despite the high short interest, despite the bearish looking chart, despite all the noise; I had that gut feeling that investors get when they know they’ve got a winner.
I am long $PUBM, I’ll continue to be long and I hope this helped paint a picture that could inspire you to do further DD on a business I have the highest of convictions in.
Happy investing BluSuit community!
Referenced financial slides: