OB - Earnings call transcript Q1 2024

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Operator

Good day, and welcome to Outbrain Incorporated First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.I'd like to turn the call over to Outbrain's Investor Relations. Please go ahead.

Unknown Executive

Good morning, and thank you for joining us on today's conference call to discuss Outbrain's first quarter 2024 results.

Joining me on the call today, we have Outbrain's CEO, David Kostman; and CFO, Jason Kiviat.

results management assumptions.These forward-looking risks statements that cause call, current based and conference from may and materially expectations are actual this will statements. statements make on uncertainties our During forward-looking differ to subject to discussed XX, These December the our Form year and Securities filed with updated in and detail XX-K risk in in Commission. for filed factors the reports Exchange are XXXX, ended our subsequent

duty as only non-GAAP do of the update date presentation original statements.Today's we any financial to speak call's not and also undertake statements to references such any Forward-looking includes measures.

to contained GAAP release comparable of You the should quarter and measures first non-GAAP the financial earnings measures. refer definitional reconciliations information information in the company's to for

under David. let over Our the call News&Events.With turn earnings can website, that, found release me to be on our investors.outbrain.com IR

David Kostman

relevant, achievements you, share ]. Laine joining I'm today moving for thank morning, earnings audiences our editorial on strategic aligns consumer you first advertisers and to with our incremental opportunity, drive forward.On favorably for pleased as conversions. our the outcomes us delivered professionally to we We direction we Open with the privacy, everyone, am advertisers call. cash [ Thank is believe the of financial of enables and cross We gross our journey one their platform XXXX Open $XXX with a a become deliver offer that $X.X EBITDA The exceeded Outbrain look that and we focus a estimated Internet across we $X.X our towards billion past build Ex-TAC advertisers. end to funnel quarter free are to I advertising quality, quarter front, million over and Internet we our largest the well to as you for profit Good premium of to and guidance positioned industry's reporting to future, brands, Internet the gateways providing guidance, is on believe adjusted Open uniquely transparency generated on the high the consideration strengths. positive pleased million. produced the $XX.X be of contents.As million.Strategically, access flow to that progress highly

types, audiences. are than more measurable advertisers outcomes believe more competitive third ever, from edge to all we delay relevant advanced we performance, Google's focused driving buyer deprecation from we on announcement seeing possess solutions believe further brands that outcomes. brand focused to on Chrome, from on in audiences. We these outcomes relevant drive finding party cookie Despite Now remain to a

code foundational how our enable these AI and signals data solutions innovate quick we're our a page and drivers on advertisers.Next, progressing update for to on engagement provide XXXX. growth Our want on continued us proprietary I leverage for to to to data

key last from revolve recall call, you our As around may pillars. X these

advertisers and of pillar share from million first was our expanding and and with from enterprise our brands all companies. spend brand agencies clients focuses direct Our represents agencies. to independent globally. performance direct advertisers.First, of spend from over business number to QX, on overall holding wallet In agency agencies This and $XXX advertisers, and mid-market brands brands sizes, our with

of that Leica Leica strong cinema. enterprise leveraged study Onyx, exemplifies which OnyxGreen brand markets the clients, enabled a I'm brand outperform our case QX.Speaking enabling Leica. XXX,XXX experiences studio emissions most high We Onyx This we Leica enterprise Onyx in to create and attention interactions. share Onyx home display. of April. chose deliver QX, that one We represents recent available that benchmarks Onyx's immersive launch enabled ScopeX, with plan in clients, format agency $X with the early to make sparked to up exchange excited XX% success moments impact with Leica audience in provides the OnyxGreen additional by video on to Onyx for by to building new partner to exceeding home and the launch to ability to of deliver measurable opportunity buyers story deals custom, access the market QX in beautiful focused audiences the of of Japanese Onyx, cinema. seeing outcomes.In brand XX% progress our addition, good growth to the million. in Onyx's are curated partnership we to open Onyx compared reduce offering announced with revenues us carbon believe in a to and experience with launched

are supply. quality advertising, Premium we the past, invest the of better the advertisers publishers, ones like to for our in continue in our attracted looking Outbrain this performance said are flywheel premium we platform, the share global pillar, objectives.The focused and will base and As from demand are offerings. and funnel cross publisher to wallet brand across core for second growing advertisers our on of

scale advertisers performance our large of growth DSP enabling in invested on are We Zemanta.

leveraging saw as increased spend Zemanta DSP approximately across the performance strong enabler XX% QX drive efforts, compared clients strategic QX We year. to those we forward savvy of total a look part As to our in last to to XXXX by Open of Internet. for

drive our In offering sizes manager, ad scalable remains addition, for performance. advertisers our of Amplify, core to all

bidding to advertisers AI innovative scale. solutions tools. of This empowers workloads the sizes greater utilizing all doubled deliver with adoption XX% tools QX, tools that QX technology. bidding automated Our of automation through our our enabling AI core to has from of in engine creative creative prediction our sits nearly teams at and to strategies XXXX focus corresponding creative enable also our suite of been of AI on AI.Growth of customers and

the to we achievement diverse level total with advertiser entirety pillar, this beyond differentiator media reflects through capabilities that Publisher platform. will proprietary our in performance our XXXX reach prediction pillar nature advertiser in corresponding enable partnerships, to of beyond led on traditional remains across to advertisers advertisers focus core spend XX% major of business, leveraging of and of focuses our inventory growing publisher both QX reach success. technology now enduring of our logo which XX% footprint, future engagement across of to page believe remain our in our partnerships. accelerated one investment XX%. the a spend at publisher our to audiences bidding supply colon We've our in a the technology on we've This demand high core and of has expand data. logs.Moving access to Continued QX retention drove consumers Internet. automated continued is web adoption, Exclusive premium supply page which to enabling on expansion inventory, types.The next strong and performance our be wider to differentiated continues Open over the for our publisher the Bringing publishing partnerships next

expanding premium Spain, News also brand are access from expand. We QX, Corp publisher we offer in is suitable of of moving the to them In expand premium on services added Australia base publishers viewable these an placements.Our both partnerships, effort focused continuing breadth opportunities and and monetization Webedia we a to to including supply new competitor.

gateways We've with our the to the to the Keystone's efforts In our of results on resolution underscore advertiser signed account operation same and ability the addition, showcasing expand Internet. handling the XX% capabilities seeing quarter also to and leading been exploring team to to the segments, AI opportunities the our been becoming publisher effectiveness, to medium support partnerships first working AI of our cases AI our Open the applied of team AI and with our we margin our incremental demand of one thus the product which addition commitment more front, relevance platform, objective We've portfolio.On the by business broadening able and to on to the Keystone to bring use real operational approach teams.In conclusion, robotics management in us to of automation. drive cases efficiency leveraging with and our far. automate small plan Telegraph, to support has and team side, process is success more

we on it XXXX.With with this confident growth turn financials. to that, continued to be and execution deliver profitability on and able our year cover that over the to growth for I'll drivers, will are Jason targets We the

Jason Kiviat

David. Thanks,

As in adjusted our guidance Ex-TAC a David $XXX reflecting year-over-year. million, QX our QX gross profit mentioned, Revenue X% approximately for for was we guidance of achieved EBITDA. QX decrease and exceeded

partners percentage retention.I'll environment approximately media trends touch X was pricing, or our of the on the revenue the revenue demand which retention impact on on which $XX revenue in pressure our on Net year-over-year. remains the continued and points quarter driving the publishers moment. reflects contributed of growth net million New our from factor of a in demand XX%, revenue consistent headwind the

largely at churn to of advertising has below supply opposed by prior least the $XX,XXX, on demand. QX.Turning the As from year-over-year Consistent amounted for on in points XXX%. volatility all to to this quarters, largest being and year-over-year was view Again, churn. driven also only NRR similarly contributing churns X retention sources remained that XX% retention quarter, with noted ad levels experienced we a in recent page as combined to logo X certain low partners of decline generated with headwind our impressions, at

supply but revenue fairly Following of highs. a profit areas largely February driven media investment to we partners exceed impact consecutive was net down yield and we previously, million, row, experienced lower which revenue Despite quarter Ex-TAC year. growth January, significantly thanks high are stable Ex-TAC experienced versus and gross gross CPC second focused quarter, a certain RPM expect throughout year-over-year, on year-over-year the continues take by remains remained the mix.As noted key on improved outpacing fourth the $XX.X in in click-through percentage. prior are higher or the growth for the March, to negatively the the performance areas ongoing flat drive for we primarily by yield seasonal to profit rate step previous a will mid We pricing, expansion, partner, from impacted our down Ex-TAC that single-digit which rate. a volatility

by platform week. their completed the year-over-year transitioning a legacy bidding grown platform.Our last have excluding this this this would new migration partner. from Ex-TAC of This Our key to was partner's primarily one result tech impact was percentage,

driving strategic the However, our approximately Operating we And ongoing. XXXX rescaling of January as priorities greater expenses investments discipline.We onetime QX, see benefit as more in collection is expenses current year growth efficiencies continued nearly year-over-year attention around we our decreased the expenses. was debt than X% XXXX growth balance confidence to year-over-year repeat down a lower redeploying with operations down the have partially to anticipated, which did by in year. Of reduced over note, cost from higher decline expect focus now, we while an to we The compensations a saw XXX in expect approximately began our FTEs, is to quarter variable with we QX areas. months.Moving coming continue efforts demand our prior not headcount of in towards results year-over-year XX% optimization million we focused on on resources in the the see to of by $XX.X on we and, impact offset $X levels sequential year. over and see continue million we and the in bad as remainder to that

approximately result, Free we software driven in as liquidity. benefits focused around DSO. to payables EBITDA capital our was timing million CapEx and as activities operating a working doubled As quarter. from adjusted costs coming first year-over-year and This we by which, cash million.Moving $X.X capitalized a cash define seasonality, from reminder, flow, improvements less the $X end to was period of in largely

Directors we million with million XXXX, in the debt.In X.X the $XXX marketable December a equivalents XXXX, $XX.X cash, company's securities ended sheet investments in quarter long-term $XX balance cash share for And authorized and on purchased $XXX approximately result, of of of million. repurchase convertible program. and million million a shares Board we As the

share for approximately continued XXXX. $X.X million. shares we in repurchased In We repurchases million QX, X

noted to under So is March remaining market $X.X enhance continue have turning to current we we improvement, regular our shareholder we assume guidance, with and our material believe XX, and persist as our deterioration conditions.Now no in an current execution growth of attractive macro value as under continued seasonality, of In the million or current prior to quarter, outlook. it that conditions drivers. authorization, way our

have to Additionally, progresses lap period to QX.With the context, the guidance. as we in HX provided particularly that expect and year add start following to comparison softer color, a in we

$X million. $XX For million, we $X EBITDA our expect of guidance previous expect provided and QX, to gross profit of at $XX to maintain Ex-TAC year XXXX adjusted we million million We full operator EBITDA.Now the year I'll $XX $XX turn back $XXX beginning of for adjusted $XXX gross to the the Ex-TAC million to it of Q&A. profit million million of of million to and

Operator

question JMP [Operator we'll take Andrew from And from our Instructions] first Boone Securities.

Andrew Boone

to question terms Dickey, view you revenue a the big just for will you key have drivers And X, thinking second. Jason, bit year? Outbrain? the you for in talk talk But take then, What the Jason guys remainder for key can growth I X, go the tactical of do should drive and XQ? growth? we you of X better rates, about a about And more little returning top growth do about saw that things then as that can Dickey, kind how be picture the tactically line the of can that drivers to in you on

David Kostman

is to think I funnel. if I the really move So rank had them our full biggest to growth driver

performance a and in unique and you solution very on requires on The formats of placements offer is video It to here and like very the unique It the advertisers requires large. funnel we link full opportunity Open is this a terms to to site. Internet, participation on display. brand I opportunity high-impact have have Open think Internet. and

So one great we're mid advertisers. our that lower a second growing our very share base funnel biggest the just including is our with the of opportunity which is upper unique for in of terms of and wallet and pretty ability confident funnel, combine to us funnel.And advertiser, performance advertisers, the that's

Amplify, in a or our And on moving investing across which delivers platform couple not is in We've to quarters. base. direct So continuously entire directions lot the last we're is of advertisers those there. platform. just large that CTRs the record improving access seen some publisher X own Internet, One performance Open our of DSP Zemanta

feel the we So ability very growth to good there. about drive

I So the think these ones. are main X

Jason Kiviat

for question. Jason the second Andrew, it's

rates of that and about So weighting mix part yes, a Less QX. obviously some quarter about it deals been -- of up year-over-year in this of a X.X have mentioned few or deals. row, take points the quarters in new different new is just I

in kind mix it we on.I the that's what's something in couple included performance. and driving of and trade. and we are We areas is But -- Of ourselves see of happening third here.And really, we see that working the time. years of and better which always that land performance course, works as kind rates. these our a forward, And ourselves things all click-through improving growth, certainly optimizations of higher is preached ton We yields, and a take AI optimization beyond David rates learning we learning and as that expand of to improving a users ways. should users drive ago, we're investments of we part better see just on and the that performance added his going of both are mean pillar focused supply drive

rates. rates. technology the higher feed, So to And take us we supply beyond whether can where it's Onyx -- drive video, drive take higher tend these our think we bidding have and help

more all share growth. course, that getting yields, kind of wallet of things more right? are more optimization focused And So opportunities a of of DSP. on, Additional they from efficient margin we're through our

so going expect what And that's forward. we

Operator

Laura we'll our from And from take next Martin question Needham.

Laura Martin

CTV. feels have X. like And closing has and One But So tech is CTV performance-oriented been I what is with they're performance-oriented. a RMNs, fastest, seeing the that it of in loop they're the Outbrain more ad connected segment rise traditionally making television growing the we're is company. that

by would don't nontraditional end-to-end is was when is that. if you learning adding? you risk much your And second So your are quarter, commentary, nontraditional. placement the What an ad the you that adding guessed that supply performance, which because I targeted you interested cookies in mentioned third, you have in kind of I'm tasks.My television then is that's you supply connected said I'm have worsening lot cookies, more of platform. your wondering that performance-oriented you landscape actually as remind more are that how about for does cookies? in us is just a Could competitive of market, first of have using piece you think the one

David Kostman

first the CTV. one So on I'll take

play if grow opportunity. capabilities format growth as good relatively players brought position. seeing of of a a also We're We've large share digital way that there, performance combination in that video to believe video CTV. into lock us consume made becoming very believe platforms. find gaming deployment to a see today We of significant the in is small a to a we in player, intelligence way.When such news and our performance it's way a is an company platform, what a market a there called we ago couple that advertisers. publishers. screens we but we it have of nontraditional, are And business, recall, we today years that we future call environments a of bigger has BI of acquisition our we And other content. you a and it's made believe It's talk branding third-parties, We base but it's that definitely you to the about it's of find need need users more where a CTV on that it's apps, and

-- So funnel, way consideration the of brand that. but and Open we're also of performance, again, part full building, becoming gateway to traditional It's strategy our Internet, publisher beyond growing the our base. publisher getting

business we for the that's outside about think one who done today publishers, XX% our spend. anchored brands want premium those which leveraging of again, an are which publisher is we for growth, is big those of important So traditional -- lever on have of our capabilities efforts. our base, It's core to

we're from algos driven on that. are mean, beginning, your growing cookies. We last mentioned I we based on said expanding We're giving contextually it the So up primarily. Australia. that. News But that.And one we we're beyond not also on Corp

We that our have leverage. corresponded on data we publishers

don't have versus think we big cookie companies track relative focused actually a sites. advantage a on across are the we basis see very a the on risk other they to So Internet, On third-party need users from retargeting, application. we Open that

when us, our algos minimal it's it had impact go So and it, it for relatively We deprecated cookies a impact. on minimal away. Firefox tested when

Operator

our Zach question from take Riley. from Cummins we'll B. And next

Zach Cummins

QX. about just to disclosure start more little the appreciate But strong really wanted $X I which the can in in to revenue to you meaningful on the resonating of on the drive side bit continue Congrats pretty overall a to year. kind on I with? here Onyx. in to be customer side million it adoption a the this that is And dig what's strategy of really since growth with appears talk scheme? the driver

David Kostman

So and are to build enterprise is agencies brands. that Onyx for who campaigns -- targeting brands looking launch

the of cross unique into last on us in year. of second this We in supply Internet, -- funnel. we Open the been better growth trend focused of year. brand been $XX but and position on building the in generally opportunity for building, a very on measurable since year. value launched second our key being good predictions.This very capabilities we've full prediction the last that outcomes. there's positive performance, half metric had attention on advertisers brand We unique able We've provide this driving drive also of also and see also as getting -- leverage the way we our huge we this to, much and So is a, lot half about start heritage QX I to very, our our for see will of looking a leverage then a a are Internet focused believe it good campaigns. QX the for mean And that to very million

brand and just drive promote interaction a And -- or with the leverage example, is could about drive worked very consideration could lead an mean, bottom, campaign they would and a unique. base doors enterprise then user for us have pretty the with us performance new with campaign, of engine building. do think really combine advertisers the driving them I to also not to you with enterprise from that then, we, existing before. on video. super cool a of our dealership.So the And able it's a And that that at new brands leveraging, take a, us BMW. new a If to being brands car, to holding opening understanding that their of and companies we're performance large

why great So that's growth really it's emphasize of as most us a it the to drivers uniquely positions important the on -- opportunity one Internet. and we Open

Zach Cummins

financial-related more one just question. And helpful. That's Understood.

year, expansion what's half And In second we parse terms of the guidance think Jason, just this thinking should way mean, to of seasonality that the kind and especially given terms the overall progression, of be into reaffirmed take about you growth out versus of can revenue? the of right rate the how year? the you've I about gross in

Jason Kiviat

of Yes, course.

reminder yes -- forecast on a just our So methodology. maybe

our up So on to take timing that do so. over quarter-to-quarter top month-to-month on trends is here, the and until XX-year we what what we that our seeing or history and kind we're we of that current expect seasonality right history build of based we know

was Of last course, cetera. out on, year. driver assumptions, the it And midpoint guidance. which percentage XXXX, the using of or a the relative known And items compare to XX% as of this at it et HX XX% XX% come slightly of to actual HX.If higher in year, Ex-TAC we're altogether you does -- we're growth other later

but than whole onset in business coming maybe where midpoint And the easier QX the of about that global the is talked and breaking a you're last it October started Israel, historically attacks the QX couple -- our our if quarters mean HX pieces, X down business, October from much comps. of and in QX of war, And increase from of to what that guidance, the the smaller growth prior as really so is, impact, the I also and obviously, of to on saw seen.We we that on have just to we on a a by using with half close year local war, sets of monetizing than last our lower for safety partners we softer bit I that due lots were a the see supply of started which to us were did We up and year.And So things about but other the brand concerns key the temporarily volatility year, largest would was really easier a they call of typically see that, showing first little news a mentioned to over bit and a meaningful like comp which right? page views -- from partner the course of thing partner. changes about of this on impact. from period is the tech 'XX, QX QX

as this And high growth, play in on kind we QX. -- we in QX, I that so, mid again, a of call on this out the excluding year, partner we mentioned and single-digit expect one we'll similar had Ex-TAC to year this

make As QX, year-over-year we way that our headwind subsides. into

And of expect is that and And coming where QX the be seasonally which has U.S. a it bit partner Onyx little of through. other And second flowing have the rates the Click-through seen yield global just election, we we a also strength things events year. last our drivers. growth continuing some X to talked the said the And through. well.And sequential then through. Obviously, then lift business in that more in in will Europe, then half focused months. course, historically. we for we things flowing the aids of flow We've other like quarters so, expecting about one our modest things been in growth to than are it our growth also as obviously, model. be are core

helps. So hope that

Zach Cummins

solid again congrats results. on And

Operator

from next our question Arounian Citi. take Ygal we'll from And

Unknown Analyst

the a first, on color It's give could to if for seems macro? Max in XQ. Maybe on better just start us Ygal. ad like seeing what you're you some we've seen It

there's there and strength more weaknesses but capital and what maybe the So of maybe then or if wondering like And million call vertical you sheet. geographical of mentioned ad you're on allocation $XXX the seeing investments to out? balance was cash kind just with I budgets, any question, a

about how you Just else And wondering the are you on that's whether anything have think authorization, there's guys guys to cash you but uses. deploy how that some thinking the M&A buyback if position. or understand about other capital,

Jason Kiviat

Sure.

on we've seen. So the maybe start that I'll trends demand

So couple or quarter it's a been of a for year-over-year or a RPM say the quarters the we increase We same. row. more I'd material yield now. really second haven't of seen drive kind growth did for of in decrease

there So some strength is there.

Now a improvements obviously our predict different click-through on as lot breaking on we've the that us ability rates, for pricing, because of or optimizing for to from we're and partners contrary, what that's not down comes to in what And pricing users. and of I our coming, to remaining seen money. makes CPC Obviously, said, our tech our that is is which show previous yields. highs part from year-over-year.So but

And so in that's something model might of at our pricing -- click-through driving be rates the here. higher cost that we're inherent

we've it.And overly probably But us. seen just in that been is kind entertainment been then have market, QX to again, seen flatter. for I second mean, say Italy relative retail health, showing those and verticals. hard been CPG, Spain, trends, a metrics to And Europe, down as anything it's QX any has in color, able strength So positive over while of our pricing of have verticals tech is and really Germany. which higher largest verticals, geographically, from stronger rely U.S., verticals. on yields to as we're not Germany far we've for sign deteriorating we versus into and overly meaningful really weaker our to drive don't results

David Kostman

of terms question. in take I'll maybe the And other --

So a strong we sheet. balance very have

buyback we an still cash flow are looking acquisitions, opportunity. this to only some attractive of think and We for use is continuously

have think, still we we I authorization. have So $X an authorization. And around, million on that

Operator

Jefferies. James our [Operator Heaney next from question Instructions] from And we'll take

James Heaney

XX% in saw spend you DSP. on growth ad So Zemanta the

channel driving what's spend could about talk and also DSPs? how if you're in just balancing you from So curious the success that third-party coming just

David Kostman

but are I will we with get types of second had budgets I the one that strategically advertisers the certain really So performance platform. on didn't shifting large very Zemanta. start -- It's some that part, elastic first into

lot you of our So Zemanta. it shift same effectively of they They they $XXX,XXX, Outbrain will will think to hopefully, with and ROAS. they or spend And If close example. third-party buy now that, and $XXX,XXX. will to give on they numerical a $XXX,XXX, to total can spend spend the a a now as delivering supply also brand,

get advertiser. on for that effective ROAS a like service spend and see We will also and increased fee very we a that DSP, and would

certain -- it's and better Zemanta very where technical, ROAS. delivers So there platform are better of segments, that fits types the

that's repeat on you And growth So we're a can successful And advertisers. shifting the of DSP think question some and that's for for second us great those. these very I been part? opportunity.James, the

James Heaney

Yes. Yes.

Sorry.

just from trends question about was spend DSPs. coming that from part just that's The the third-party you're second overall of seeing

David Kostman

Okay.

So the of comes business we -- that total business of see, from programmatic but little our network, we've less positive -- brand mean, on side XX% seen into overall. from stable trends it's DSPs a our about I the spend our It's partners. good than on

James Heaney

I you -- And if could ask your AI more customers. just talked Great. on then maybe question you're giving creative about tool one that quick

for improved from some then case investment of implementing And of tools? sense on seeing these any these success clients what Just or studies tools are? just return any

David Kostman

way and what's which understand on a test intervention. types -- placements tool to images very manual use require this iterate prior customers in it allows it of that when with see what's on and working, The -- a different in of exciting not time working and text of is real you lot much would faster

working their improving campaigns. It's -- the measuring couldn't It variations, that. of advertise we're do test it's thousands and So focused now, before. We've and because automatically We're the to adoption you see updating. you optimizes it.And seen which early. right on for allows are adoption models We now, right really ROAS increased still ROAS. definitely I learning and think analyzing it of it

-- images on are text on also our big -- we AI, mentioned generally business. investments part that's our It's again, now So a call. the on leveraging internal it to on tools, of and optimize and AI

Operator

And that management floor remarks. question-and-answer turn to for I'd concludes our the like closing back to session.

David Kostman

attending the very Thank everyone, call you much, today. for

and performance. again, We And to We progress is our a brand very, today. forward full about building, can we're solution Being updating funnel look we think opportunities the where opportunity. very provide the is are focused very call. next the consideration our player excited that highlighted great on Internet on, on driving you a growth Open

Operator

We this gentlemen, your today's participation. and thank Ladies you. conclude you for does Thank teleconference.

disconnect have day. a time, and lines may your great You at this

Outbrain (OB) 9 May 242024 Q1 Earnings call transcript