OB - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to Outbrain, Inc.

Second 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

you Outbrain's us Second thank call today's and discuss to Quarter morning, for on joining conference Good XXXX results.

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

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

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

earnings refer the me should for release non-GAAP information You the in turn the GAAP investors.outbrain.com that, on contained over David. under comparable the quarter and financial can measures to company's Events. of let to News earnings second Her With our IR and release the to be website, reconciliations call found definitional information measures.

David Kostman

the amazing a next through The of the deliver Thursday, accretion agreement of second talented, X establishing transaction. and dramatically you, today and scaled end-to-end partners of the us to brand news announced our a instrumental that outwining X been Thank leverage performance Teads financial We for serving profitability merger companies in have rationale. generation driven advertising. changes call. people a growth profile only for become of outcomes and will massively allows platform funnel create positions our we vision been confidence clear in needs. the merger's in companies quarter Open transformative significant a believe platform into full excitement is we of strategy. branding. brands largest and shareholders merger Open financial companies would that We've advertising have global innovative, synergies in platforms. X with our owners category industry terms reception can our Walled will the opportunities. teams to our definitive opportunities as Last the the the joining Open reinforces Teads XXXX to forward agencies our currently believe and many executing our new Internet, It morning, Internet to leaders, you combination a acquire true define of level media on for that Teads, deliver Together, The with earnings us the expressed the us as and Sam. to seen create. will thank Good combining we've This is in we our one Garden. for that by of advertisers and a The from their creators company this players of platform that Many rivaled standards believe take Internet the service we for centered about

from at companies, President seeing to look us. wrote, France, in a for marketing and positive Alexandra Axel want are and the industry our prepare to milestone by overwhelmingly GroupM Springer that QX their for thank significant and this have exciting continue will transformative opportunity video them clients, on leaders are the just our the performance Vice this statements as the alliance. expected This feedback merger For I standard take of Executive partnership for of so regulatory we and examples Closing, CEO which of And is X an be These integration to one will impact to many and approval, conditions post-merger this [indiscernible] of to on XXXX. both We continued the branding one, partnership. and promises partners, companies other of vote forward subject wrote collaboration. X see example, many closing to another shareholder Chabanne, The of Peter our as Wurtenberger, capabilities. and plans. expanded agency operate to thrilled is to positive your we businesses is stand-alone

I progress on XXXX update want Now the our drivers. to and provide QX an on growth

report fourth significantly positive million QX, our of end drivers. towards consecutive to in positive extra and I'm pleased we generated profit We adjusted $XX are trends of guidance and results These our we with EBITDA quarter. in business free the momentum the by driven our flow for $X.X exceeded delivered For the high gross our growth that million, guidance. cash core

we you may recall, pillars. revolve about growth talked drivers X these around As

refers to grow through the our Onyx across of The advertisers share as to and Spain, first advertisers. in markets, new campaigns Italy, continued wallet pillar in to rebookings. new and live expanding agencies U.S., successfully clients, is Onyx performance This well brands both countries. Japan. direct have with in the U.K., as launched of Germany, and sales both and Israel addition combination several and We

rate a In partners the QX, Notably, Purina, [Taylor the in secured from campaigns our has impact Nissan, reflecting promoting as nearly to addition, multiple including continued store]. great business Onyx Aero Onyx such we has campaign for enterprise clients. see of strong rebooking Swift delivered XX% Disney+,

daughter. this mention with credit to campaign to had my get some I Sorry,

side initiatives the to On Zemanta. of performance one DSP, is of our business, certain shifting profiles our main buyer our

higher DSP with In Internet, we growth achieved ROS enables capture on Open larger approximately ex-TAC XX% these to the remarkable advertiser our larger at from half a DSP first the to to first these clients in comparison on share margin. XXXX, at of the of wallet by spend growing XXXX. Our of scale a allowing half us drive clients a

outside are with We've in to XX% beyond of on of on feed, consumers of continued which revenues, expand XXXX Moving footprint QX our our QX advertisers across of traditional our range approximately revenue to our versus XXXX. traditional represented entirety Open reach in the our inventory XX% Internet. These enabling the second supply a to placements pillar. feed,

among We pillar, Beast new exclusive continue signed the to our feed we [EBRA] partnerships in Daily U.S. media third premium France with in others, The partnerships, owners. in Our with and deepening invest top

renewed in Adeliance top partnerships, XX% longer retention in QX.Also saw publishers. including U.S. in Germany premium some also resulted of Vox continued and in several our Keystone the This We by of adoption

segments to me predictive our itself targeting share XX%. Zemanta an demographic on third-party our showing Let and highlights third-party Outbrain-predicted up establishing among as cookies. a relevant with demographics without is new adoption by early relying a to option reach enables [bias], data surpassing demographic a demographics. our traditional product We AI-driven targeting few targeting on demographics for goal. clients real solution, audiences rate launched Predictive

demographics our For campaigns drove campaign higher recent in public comparison the to U.S., X.Xx in health one third-party of predictive click-through using demographic segments. rate clients, a

are We that that forward are encouraged signal results. audience for drive to can by advertisers solutions looking these privately us results, which

On their results the to a privacy-centric contextual announcement demographics signals. heels The we successful of reflection and predictive plans Google's committed of third-party to launch deprecate to driving this. reverse form, cookies with remain in of is

second sustaining On we've of consecutive are the witnessed that future. of growth RPM third our our in new sustained in partnerships the growth, and momentum. and upward the by witnessed And also our that conclusion, double-digit click-through side, quarter remains Algo we positioned quarter performance In rate has success our XXXX. first year-over-year campaign half well has strong strides and I'm marked trajectory user in innovative been for growth, confident improving engagement. our

turn full embark preferred to to and platform funnel thrilled build the on Open over with it a are brands chapter executing our We Jason. next towards on Internet. the becoming that, strategy to the I'll Teads focus With on for

Jason Kiviat

David. Thanks,

As the for structure quarter. Revenue revenue expect of QX our David we having are our overall, mix that for continue the profit on fourth million, profitability and to free consecutive in was impact achieved reflecting for and And mentioned, we year-over-year. exceeded to a in adjusted and feel flow $XXX cost a positive guidance guidance generating made QX decrease our EBITDA, that ex-TAC future. cash positive X% approximately now we have QX updates gross our

drove month-over-month. acceleration $XX quarter With seen with least This, points headwind in Ex-TAC of or click-through $XX,XXX, year-over-year, at the environment pricing performance ad history. key for it growth consecutive continued as of in row, fifth contributed was of $XX year-over-year RPMs, third the prior Consistent X million revenue noted downward in year-over-year. positive outpacing improved to have quarter. generated from approximately we was mix retention the our X% partners but logo quarters, course NRR. growth million, media of relative was that which of in rates, an terms improvements of quarter. impressions low seen our advertising revenue along revenue down recent as supply continued X percentage QX, over from in profit and headwind deals. amounted certain net the combined the revenue our the demand on pressure Net New the partners trends certain increase reflects all by on only partners respect and from largest for with gross retention favorable demand, as for XX% remains publishers to And year-over-year improvement have year-over-year, primarily change while to well remains pricing now in XX%, which quarter points our driven impact X a

areas are expect a largely higher take As investment we noted and focused the that these drive ex-TAC are helping are bring previously, on rate, fruition. areas to we areas will that

noted gross growth transitioning technology, of quarters, new profit May. the to we've remain percentage. the access our the high of profit this ex-TAC partners QX our accelerating key us, year-over-year on on in of transition QX past positive rescaling in opportunities impacted complete the involves returned partners, the areas ex-TAC Outbrain to gross being to RPMs, of by While one one and over strength and and demand. these single-digit The our transition This new to of for volatility momentum X from we volatility growth supply a early optimization in focused bidding first

isolated excluding Our overall QX profit headwind. would this year-over-year, ex-TAC grown have one double-digit percentage gross

to offset driven the of Teads. professional QX into fees to bad savings approximately announced well million our discipline. Moving with with continued debt anticipated we benefits strategic expenses as by increased year-over-year and compensation X% cost partially as shifting decreased the priorities to investments to $XX.X was OpEx in expenses Operating in as HX, decline by timing The quarter expenses. by our year-over-year continue transaction related balance from

As a to doubled year-over-year result, $X.X our EBITDA million. we adjusted

reminder, other tax cash from collections payments Moving in of the of and quarter and costs, CapEx receivables, software impacts as flow, which, to as strong profitability, the timing cash define less income of activities result $XXX,XXX capitalized and of approximately as offsetting liquidity. Free of a a seasonality. operating we second

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

we of have As $X.X million XX, our remaining June current under authorization.

pending do currently shares. the not of continue Given Teads, repurchasing acquisition intend we to

In to noted as guidance, and seasonality continued our growth prior the Turning of we our assume drivers. our regular outlook. quarter, execution in

guidance the reflects assumption announced our before context, Teads transaction business with provided as have year-end. that the Outbrain Additionally, a following close we stand-alone guidance. with With not the that will

guidance our $X $XXX For are $XX.X profit year to $XX We for $XXX QX, EBITDA guidance gross XXXX adjusted million. of we $XX our expect maintain million. of and full million to million of to million gross expect $XX.X million increasing to million ex-TAC EBITDA million, $XX to profit we ex-TAC for adjusted and previous

back the to Q&A. operator it for turn I'll Now

Operator

you. from and question first Boone take Thank we'll gentlemen, from Andrew is now floor Instructions] open questions. [Operator And the Securities. our Ladies JMP for

Andrew Boone

in the XQ about And full just talk into week, that RPMs year quarter. you that XQ? guidance and new. the to still last about Teads what's of implied talk very then guidance talk you given your advertisers in just understood been can for the you're implied in acceleration then, confidence growth the Jason, you the highlighted the stepping with can wrap And reception that confidence, just about the your acquisition? continue? the drivers can Can implies Dicky, this of announcement You that that for the conversations having back, But the and

Jason Kiviat

first Sure. couple I'll Thanks, Andrew. take the It's Jason, there. and

our click-through RPMs records as yields we're rates. previous been as I click-through driving the it's as that we've some So using constant breaking those that been rates, that that. helping or higher are signals, has the One which what's high of each rates far A year-over-year. in kind row as quarter use of mean, dynamic just we're drive RPMs, far click-through algorithmic into seeing Obviously, lot driver how a of up goes our additional third improvements, optimization, placements are. data like quarter

and have started for which the kind the on per time rates been click, say on was the have I'd just this the see for thing going headwind just headwind long to it for CPCs, new a in trend started quarter quarter, better So a one us as in a us of thing right in going good of The direction. click right we to course narrowing a year-over-year. direction been the over a year-over-year and QX. see far remain But as we cost headwind

maybe a also real internally some some made was that as and with market changes So dynamics It positive. comes well. we

half versus QX, saw acceleration margins. not at the QX then we things obviously get X% I as it in there XX% And and We confidence but the midpoint the and versus, also better the back QX. the see to, and and good midpoint. RPMs, as do driving we also at QX So only expect growth far better QX versus revenue in ex-TAC QX in QX QX we X% think, in in

So things see we QX, that continuing see into maybe a and the good the success QX just in driving into we of QX. lot

growth it. comps definitely A of piece think X% actually. of from big But that's a to is piece and step-up it from it is. a coming year-over-year So difference that lot XX% of the I the

war-related partner on So and just tech year. points at the our X on demand. see views QX. to that use of QX comps in advertising is about QX it. some and a it didn't we Obviously, year, just talk the the Last did we and in have way to page the war transition, we X look started also on key start attack normal of really And with last even impact one headwinds October

comps the driving, growth improvement combined for to X of drivers the think, and X that QX. as already we're of RPM's continued that's I So and some of compared And then election. the the ease success obviously, with, those things seeing points QX success yes,

our that are So more for flowing combined. model, just those but they're smaller items all

David Kostman

Andrew, I'll Thanks. take the one. second

been positive publishers. exciting BD advertisers the both it's week very feedback players a overwhelmingly So and in industry, with owners from actually

means an end-to-end to conversions to about they side, we the consideration, really and view opportunity one the full funnel, On that on full the solution specifically, of as can player this Open advertiser a the talk huge provide funnel advantage have When that due branding, data. Internet. on basis

us leaders to both is overwhelmingly So performance, Teads. on side of be it close people Teads as us combination the on which them and proposition this that quickly our able talking side, which leaders and in really expecting the was the are as to bring is we're value possible and is in for about, branding

you So it's very as it's and imagine. been a great, exciting been week can

Operator

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

Ygal Arounian

kind like maybe the out? you're now that of there's I playing and the year, how of guess, vertical maybe to start out geographical It seeing mixed. seems seeing But macro. first, see what through maybe if it's what rest just the with anything a or in call little more been you're ad you

Jason Kiviat

Sure. that. And with I start can

continued So I yes, is QX, said, over a of like combination which factors. and gains see of a course we the RPM lot did CPC of

So did of hard know to macro things. us, it versus positive it's internal to or we see much but is specific how

relying QX Europe, in I'd we're hope is going a particularly throughout but guess, forward, we're second think I markets sign. anything, macro is we our yes, good the our forward, mean, of in see market, hoping of And our and predict acceleration saw obviously largest Spain, the going Geographically, Germany, for, that, a I'd we quarter. I strength that's to what stronger say, what guidance. not So say, which I see to through but continued hard overly wise we it's couple

Ygal Arounian

look but obviously, driving and combining combine, then helpful. picture on combined do -- a good going think fitting to Zemanta just That's little with Obviously, any see Is on growth ex-TAC anything when thoughts you some And like in out then days, time of a company, this? how kind on those early about Okay. have as with early specific what's too maybe you maybe bigger in how there maybe And spending the a just you just some maybe call Zemanta. just maybe there. you Teads forward.

David Kostman

Sure.

drivers one allowing more spend this them on our the So entirety of [indiscernible] of Zemanta, year just growth it's also broader for the been on on been really and performance to to Open Internet, has line some advertisers of them clients better for superior all our platform year by that to share gateway ship on started that. the last had type again, Zemanta for Internet into both brand in performance performance. Open vision, the just to and becoming with advertisers We main of the delivering

So margin third-party then the but spend on X can then that they because causes platforms A; it's for more growth think We've [indiscernible]and that stand-alone. and spend for and be of I they also, company drivers on in will outbound they the us, growth Zemanta publisher one we continue still XX% also network, a that the main things: said grows spend on spend [indiscernible], -- seen enhancer. the to the

combination to bit with little days. it's Teads, the a early As

of yet product not into have just cetera. We planning, We started. et deeply gone sort

the I Generally, very, is would focused platform integration we planning. post-merger say Zemanta on very think I performance mentioned buyers.

buyers. future that will continue to our be believe So for growth of those drivers I part type of in the

Operator

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

Laura Martin

Yes. I also have X.

base? client bigger performance you upside from synergies, about business a core sell Outbrain adds the more Outbrain Teads be think The in advertising the driver will upper or from is reverse revenue is, the that first when Teads it to funnel one able

David Kostman

on it's actually both Laura, sides.

of buyers. and X conversions, but the was So and also what with again, enterprise going throughout to we've mid-fall only brand sort Teads the process, heard

that customer and in objectives also of So base the customer terms on campaigns. focus that's has their base, different the

the technology conversions So time, our with just leveraging lower that XX% we I of have campaigns about see a for brand prediction enterprises. few performance. brand management better opportunity mentioned we we just have. and is opportunity huge algorithms, the Teads the today and business mostly also drive huge sees a At They our business same the advertisers. to funnel and do

you as So call, in us have look client like for automotive for funnel. mentioned of Audi, if entirety the example, it an they really the can the partner we the at

we that million, When doesn't $XX to directions. just operating both number minimal announced It's deal, X across in the opportunities top mostly it's we that around $XX think I gave -- million line the synergy the when other the So include synergies we and synergies. networks.

Laura Martin

And Okay. revenue, net estimates. came came in revenue sort in for value, our light, we The then, of which really the Jason, with is you. but right in how gross line

take So is client an Is that onetime how an had related on to your should only not I that -- had but it's Microsoft? assume, this net commentary I and it impact about gross revenue. impact unique revenue, disruption of, the that

Jason Kiviat

Yes.

So yes, both. yes, now are higher the not drivers. lot are line. margin A right other or so that of impacted that the just the things partner, one on focusing we're It's it things line definitely segments or

customers I revenue and DSP way platform And are buy spend works that think revenue a on are basis. good business recognized to for business, net and that a that fees is actually it's example the net of a that. use media the charged Zemanta is

thing exchange in ex-TAC in some gross accounting that. doing So trade-off see and an we're revenue we for there, might it's just when

David Kostman

on add, one want partner. the to Laura, just And maybe I

So partner, made they strategic transition. a a

We partner a Microsoft games new to of full are others. transition also within signed to transition, involves outlook types new supply access that them -- native that with agreement a and the in make first

but also that. down were big We of need we transition. scale it. road, our just a opportunities how sort to think with the to it's first I see up the complete on cautious upside be potentially we So We buyers

Operator

we'll next question Heaney James from And take our from Jefferies.

James Heaney

could to servicing And follow-up. growth you being on objectives? from more if Onyx And platform your from about that I in pivot the have Could the saw performance comment funnel you just talk you another more maybe of ad a upper quarter?

David Kostman

Yes.

strong strong it more launched half we in about Onyx, rebookings, break we're good had don't We it. sort specifically, excited but talking about adoption. it We rebookings. second and markets So of down of

half addressing in merger. somewhat I actually think large funnel part second impacted is upper mean, the it of get sort of one business the by I that may the opportunities the agencies. Teads that's with

Onyx. that's So

James Heaney

just the and to just growth your I'm just EBITDA Jason, then, raised, the about cost of business. where then balanced think And seeing you're the year the full And being guide how on curious profitability? savings majority in speaking, broadly

Jason Kiviat

to Yes. our year a changing I where in been in years margins been general. the bit a on that business year. ago, the And we areas in year We've think model and of on our terms you our at higher focus couple structure. focused and just it And with to last higher both improving take if of Sure. and done mix that before, have which also but as these pretty profit last was I on we've margins we've it think of revenue cost at versus the lot to that, successful a this been and that well, right years investment approach continue year we've pretty look focused now X on or tend

the our some just which on being we've to a and areas cost hard some on comes of do invest scrutinizing second of of ourselves outperforming that. during Obviously, costs not, And investment really half done year our for spend and and the operating hiring with been areas. We plans in that some in efficiently, really so step which more the up the in QX. expect areas we've on happened with in

spending. it's think higher in prudent expect the of us our nice that And and year. deliver second But to be so in a to obviously level of bit little half for the EBITDA setup a the higher we we remain

Operator

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

Zach Cummins

any from second in year? you're curious what these was baking baked sort of Or the I assumptions Are your of you're the levels? you Jason, Microsoft second half? in that stable half into relatively improvement are QX for assuming the

Jason Kiviat

Yes.

at months this partner the rescaling looking said the been Again, are very this few ago. obviously complete native focused closely. driving we we're a believe very to first transition, and we we've on So we as

I accounting range think half of second we've in for with seen just our just forecast really approach right it volatility, of is one numbers. see approach variability. Because seen do hand, of we the the on wider HX on volatility, upside, we year, with variability the hand, our the that's for to confer is to other we've greater just best the so what and now, a thought a is range and to

Zach Cummins

Understood. on of overall just And Internet. terms in your footprint the Open

metrics footprint XX% ideal curious nontraditional I of the that your outbreak. was on to shared continuing drive Could just to time you I'm your you integrate. go for open think you're as strategy. how stand-alone in formats on terms you the speak mix over

Jason Kiviat

the build of the We main to the gateway really trying to Open are Internet. entirety ourselves

asset in through strong us just we publisher bidding our a base. go to technology have the beyond way We acquired that Zemanta allows really that

we've mean, had premium great wins grow side this I the on publisher we both. some quarter. ideally, So

core just publisher on a base also parties going premium. in Zementa and focused they're sort and again, on platform that can supply. looking supply of terms of, we We brand sort that demand sort organic both entire is the on that's of delivered performance see base premium ourselves very growing terms to growth So drive that our we're these competition Again, deliver for for few [indiscernible] great of base the where looking and very, what again, that. of outperforming as to organic at we on premium our growth, supply do believe budget we're on enterprises on third-party other efforts overall, third and we in and

Zach Cummins

quarter. Best luck the rest of the with

Operator

floor Kostman question-and-answer session. back closing remarks. turn That will I'd for like David conclude the the to to

David Kostman

you, support Thank our you all journey shareholders. Thank We exciting you ahead Thank and joining the appreciate your to all together very us looking with today. Karen. much. for partnership and forward

Operator

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

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

Outbrain (OB) 8 Aug 242024 Q2 Earnings call transcript