Kubient, Inc. (NASDAQ:KBNT) is a technology company that has developed the Audience Marketplace, a modular, highly scalable, transparent, cloud-based software platform for real-time trading of digital, Programmatic Advertising. The company's platform provides both advertisers (ad space buyers) and Publishers (ad space sellers) the ability to use machine learning in the critical parts of any Programmatic Advertising inventory auction, while simultaneously reducing their exposure to fraud, specifically in the pre-bid environment.
Business Overview
Kubient's Audience Marketplace platform is powered by its proprietary pre-bid ad fraud detection and prevention technology, Kubient Artificial Intelligence (KAI), which has the ability to stop fraud in the critical 300 millisecond window before an advertiser spends their budget on fraudulent ad space. The company's deep learning algorithms allow it to ingest vast amounts of data, find complex patterns, and make accurate predictions, providing advertisers with a powerful tool to prevent the purchase of ad fraud.
Financials
In the first quarter of 2023, Kubient reported net revenues of $11,748, a significant decrease from the $1,245,304 reported in the same period of the prior year. This decline was primarily attributable to the loss of certain customers that the company had acquired in connection with its acquisition of MediaCrossing. Despite the revenue decline, Kubient's business continues to show promise, with the company reaffirming its full-year guidance.
For the full year 2023, Kubient expects revenue in the range of a decline of 2% to an increase of 1%, which includes a headwind of approximately 135 basis points from the 53rd week in 2022's results. The company also expects total company comparable sales in a range of a decrease of 1% to an increase of 2% in 2023 versus 52 weeks in 2022. From a profitability standpoint, Kubient expects a full-year EBIT margin in the range of 3.5% to 4%, and earnings per share in the range of $1.65 to $2.05, excluding the impact of any share repurchases.
Kubient's financial performance in the first quarter of 2023 was impacted by a number of factors. The company's gross profit as a percentage of net sales decreased 225 basis points compared to the same period last year, primarily due to timing-related impacts and operational factors. The timing-related impacts were largely due to a higher-than-expected increase in the company's reserves as it grew its inventory throughout the first quarter, as well as additional loyalty-related deferred revenue. The operational factors that impacted gross margin included external theft in the company's transportation network and inventory cleanup in its supply chain.
Liquidity
Despite these headwinds, Kubient's balance sheet and financial position remain solid. As of March 31, 2023, the company had $11.8 million in cash and cash equivalents, and $1.2 billion in available liquidity, including over $400 million in cash after retiring $250 million in notes in April. Kubient's management team has taken swift actions to mitigate the risks associated with the operational factors that impacted gross margin in the first quarter, and the company remains confident in its outlook for the full year.
Technology and Competitive Advantage
Kubient's Audience Marketplace platform is designed to address some of the most significant challenges facing the global digital advertising industry, including fraud, lack of transparency, and inefficient targeting. The company's technology allows advertisers to reach entire audiences rather than buying single impressions from disparate sources, while simultaneously reducing their exposure to fraud and increasing economic transparency during the advertising auction process.
One of Kubient's key competitive advantages is its proprietary KAI technology, which leverages deep learning algorithms to detect and prevent ad fraud in the critical pre-bid window. This technology is a crucial differentiator in the Programmatic Advertising landscape, where ad fraud remains a significant challenge for advertisers and Publishers alike.
Strategic Investments and Challenges
In addition to its technology offerings, Kubient has also made strategic investments to bolster its Managed Services capabilities through the acquisition of certain assets and personnel of MediaCrossing in 2021. This acquisition was intended to enhance the company's ability to provide end-to-end solutions for its customers, including campaign management, optimization, and performance reporting.
However, the integration of the MediaCrossing business has not been without its challenges. Throughout 2022, Kubient experienced an increase in customer churn stemming from MediaCrossing's legacy business, which prompted the company to execute further cost-cutting measures, including a reduction in force. Despite these challenges, Kubient remains committed to its Programmatic Advertising operations, including the monetization of supply and demand customers connected to its Audience Marketplace, as well as through the use of its KAI ad fraud prevention technology.
Outlook
Kubient's financial performance in 2023 will be closely watched by investors, as the company navigates the evolving Programmatic Advertising landscape and works to capitalize on the growth opportunities presented by its Audience Marketplace platform. The company's ability to effectively manage its costs, integrate the MediaCrossing business, and continue to innovate its technology offerings will be key to its long-term success.
In terms of the company's financial position, Kubient reported annual net income of -$12,977,287 and annual revenue of $2,403,408 in its most recent fiscal year. The company's annual operating cash flow was -$9,599,932, and its annual free cash flow was -$9,616,481. These financial metrics highlight the challenges the company has faced in recent years, as it has invested heavily in its technology and growth initiatives.
Looking ahead, Kubient's management team remains optimistic about the company's prospects. In the first quarter of 2023, the company reported net revenues of $11,748, a significant decline from the $1,245,304 reported in the same period of the prior year. This decrease was primarily attributable to the loss of certain customers that the company had acquired in connection with its acquisition of MediaCrossing.
Despite the revenue decline, Kubient's management team has reaffirmed the company's full-year guidance, which includes revenue in the range of a decline of 2% to an increase of 1%, and a full-year EBIT margin in the range of 3.5% to 4%. The company also expects total company comparable sales in a range of a decrease of 1% to an increase of 2% in 2023 versus 52 weeks in 2022.
Kubient's financial performance in the first quarter of 2023 was impacted by a number of factors, including timing-related impacts and operational factors that affected the company's gross margin. The timing-related impacts were largely due to a higher-than-expected increase in the company's reserves as it grew its inventory throughout the first quarter, as well as additional loyalty-related deferred revenue. The operational factors that impacted gross margin included external theft in the company's transportation network and inventory cleanup in its supply chain.
Despite these headwinds, Kubient's balance sheet and financial position remain solid. As of March 31, 2023, the company had $11.8 million in cash and cash equivalents, and $1.2 billion in available liquidity, including over $400 million in cash after retiring $250 million in notes in April. Kubient's management team has taken swift actions to mitigate the risks associated with the operational factors that impacted gross margin in the first quarter, and the company remains confident in its outlook for the full year.
Recent Developments
One of the key drivers of Kubient's growth strategy is the continued development and expansion of its Audience Marketplace platform. The company's technology is designed to address some of the most significant challenges facing the global digital advertising industry, including fraud, lack of transparency, and inefficient targeting. Kubient's Audience Marketplace platform gives both advertisers and Publishers the ability to use machine learning in the critical parts of any Programmatic Advertising inventory auction, while simultaneously reducing their exposure to fraud.
Kubient's proprietary KAI technology is a crucial differentiator in the Programmatic Advertising landscape, as it leverages deep learning algorithms to detect and prevent ad fraud in the critical pre-bid window. This technology is a key competitive advantage for the company, as ad fraud remains a significant challenge for advertisers and Publishers alike.
In addition to its technology offerings, Kubient has also made strategic investments to bolster its Managed Services capabilities through the acquisition of certain assets and personnel of MediaCrossing in 2021. This acquisition was intended to enhance the company's ability to provide end-to-end solutions for its customers, including campaign management, optimization, and performance reporting.
However, the integration of the MediaCrossing business has not been without its challenges. Throughout 2022, Kubient experienced an increase in customer churn stemming from MediaCrossing's legacy business, which prompted the company to execute further cost-cutting measures, including a reduction in force. Despite these challenges, Kubient remains committed to its Programmatic Advertising operations, including the monetization of supply and demand customers connected to its Audience Marketplace, as well as through the use of its KAI ad fraud prevention technology.
Kubient's financial performance in 2023 will be closely watched by investors, as the company navigates the evolving Programmatic Advertising landscape and works to capitalize on the growth opportunities presented by its Audience Marketplace platform. The company's ability to effectively manage its costs, integrate the MediaCrossing business, and continue to innovate its technology offerings will be key to its long-term success.
Conclusion
In conclusion, Kubient is a technology company that has developed a unique and innovative platform for the Programmatic Advertising industry. The company's Audience Marketplace platform and proprietary KAI technology provide a compelling value proposition for both advertisers and Publishers, as they seek to navigate the complex and often challenging digital advertising landscape. While Kubient has faced some headwinds in recent quarters, the company's management team remains confident in its outlook and is committed to driving long-term growth and value for its shareholders.