OB - Earnings call transcript Q3 2024

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Operator

Good day, ladies and gentlemen, and welcome to Outbrain Inc.

Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the call over to Outbrain's Investor Relations.

Sarah Baird

Good morning, and thank you for joining us on today's conference call to discuss Outbrain's Third Quarter 2024 Results.

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

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

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

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

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

David Kostman

the Thank of to transaction morning, us with start you, joining on and like status Sarah. Teads. Good today. with update I'd thank for you the a brief

planned. are close still as QX We on to track XXXX in

regulatory reviews are the the necessary and geographies. progressing several have We remaining countries and the cleared in U.S. in in other

set to shareholder December a deal X. meeting have We for the approve

about the smoothly, is the that our conviction We contributing regarding to integration synergies. are report and pleased to excitement our opportunity process progressing the planning very

progress XXXX update provide on drivers. QX an me let against our and growth Now

flow range. dollars grew pleased I'm quarters. cash X adjusted exceeded year-over-year our generated the out guidance of I want that guidance, We profit For X we fifth Ex-TAC the delivered highlight our to positive quarter. that and gross free we for last consecutive to EBITDA we within Ex-TAC QX, report for

improved The growth year-over-year significant other quarter results our has despite quarters consecutive core partner. margin across headwinds in are one that driven trends X the for momentum and believe pillars. business these We was flat, and by positive our Ex-TAC of

refers and expanding as well first our share with of Our performance wallet advertisers. to pillar agencies brands as

are to value We traction proposition. with from solutions, including of full branding delivering Solutions outcomes. Disney, Onyx branding our gaining benefit Amazon funnel Performance our drive advertisers, performance, incremental invested Betterman solutions U.S. showcasing cross-sell and both the both products on Outbrain and leveraging in to

side, continues open known adoption. wallet this for of Outbrain embracing performance previously platform the XX% its platform scale performance us Internet. the in year-to-date. increasingly share capture the advertising spend allows This across tooling a the the as larger drive to MANTA ability a DSP, year-over-year On steady and Advertisers to increase comprehensive with to our see are on

represented approximately to which our second results. total expand our from XXXX compared traditional XXXX. beyond QX to XX% is traditional We've on in drive of opening generated supply continued in feeds, Moving year. feed, opportunities This QX to for new our for of advertisers revenue, growth beyond last pillar XX% revenue to

advertiser our a key last this across open continued also quarters, the to is outcomes We Internet. the our grow We scale supply quarterly inventory expanded X on focus for at this consecutive to demonstrating have believe expanding enabler metric power diversity.

capabilities. important France. successfully with Meteo a These to relationships deepening of We've continued including giving ensure our media some in performance Outbrain Our unique fuel that our agreements contextual of and focus steady strategic business. third premium our partnerships, our Huffington refers exclusive insights our inventory engagement partners, premium of predictive base key publishing a while and pillar owner asset on Post renewed and

partnerships comes business This launched strategic value Germany again new when new partners, our demonstrates relationships and it in Newsweek secured superior from Japan. proposition Sports to also globally. including Reuters competitors and with and X We publishers premium

Now or navigation. impact our brand and product the TikTok new I'd from we opportunity vertical extending of August to advancements. more signs by the platforms video benefit traditional high in the brings found brands Moments watching to in of our Brands open an platforms moments September, audience Internet, driving launched open and the impact their one publishers a by Moments of seen Moments vertical indicates on social on into years. of by professional In with few is assets users XXXX recognition. products like X premium has a social the the their creating our social vertical most Springer the on the feeds level, social that opportunities We on strategies and performance An with the our XX% on a like their their of ads full-screen recent MediaScience truly compound this successfully environments update recall delivered Moments Internet, believe own strong and creative for Reels Axel engagement video video Internet, to of Fortune engagement technology some sites. ads beta. videos. generating in study enhanced create to immersive delivered swappable personal of higher alone. to transforming I've brand already entirely early media give experience. shown Data audience like open On believe of exciting space publishers last video I use in experience content

Now let's to turn AI.

focus with improving efficiency large-scale We are outcomes AI advertisers. a into integration accelerating our creative our segment and sophisticated performance clear of on the offerings, and

suite, creative the more creative and AI to images automation insights easily better new this predictive consumer creatives images, ad are results. tailor We allows use optimized AI, create through headlines deliver relevant, which automation highly generative marketers for Outbrain's our to to uses product's doing adjust fuel delivering suite targeted to The engagement.

creative have clients click-through how automation been performance demonstrating increase tools. able studies AI-based case to by several their campaign using meaningfully have We rates

on collaboration will continue to expanded we integrating ad Azure, to to our that focused We're with internal existing in services. return recognized as also enhance OpenAI recently with investment. of our range us prioritizing Microsoft XX processes. efficiencies with a Outbrain solution higher innovative of been allow UiPath business creatives Azure into AI Azure to our one has creative most proud for that advancements predicted addition, solutions, We the believe on In solutions We're Outbrain highlight our customers AI. deploying

within for workloads enabling by to applicants Our and ability out account XX%, Teads managers automation our reduced global redefine and By ad particularly to generation and are and operations will up, stood small, and medium some focus highly confident on the manual we revenue are relevant work. team our among to their pleased XXXX and publishers of workflows, our focus success with we've that AI to use our be divisions, key we Teads. automating clients. way innovation our on into To our with Ex-TAC drive drivers the integration its and margin wrap success improvements, will growth to profit year-over-year continue continued

it I'll to financial Now for update. over turn Jason a detailed more

Jason Kiviat

Thanks, David.

which David positive we seen realize the ad year-over-year, QX our structure, to adjusted was changes expect we've to as X% been the Overall, revenue benefits grew decrease a of exceeded saw making the QX X% consecutive solid to million, As profitability in of approximately Revenue started HX. for and and our growth cash spend the guidance ex-TAC cash generating total free and gross profit for continue quarter. we QX fifth $XXX achieved future. flow cost faster than EBITDA, we guidance mix our for in our generation into on year-over-year. And mentioned, platform reflecting we

partner downward of improvements stable percentage one early acceleration for recent X click-through to yields, quarters, RPMs X million contributed X% for XX%, with supply $XX quarter along retention reflects favorable key in revenue in all in impressions at course of and $XX.X primarily net from Net seen for now the of prior change improved to first revenue for points primarily slightly Ex-TAC in increase of driven in over a quarters. publishers and quarter by slight gross drove a since performance partners outpacing an mix rates, CPCs improving partners row, the quarter was year-over-year retention revenue $XX,XXX. of which profit time noted This, as or for generated positive, growth was million, media in ad year-over-year quarters. year-over-year. growth logo QX increase our remain with the XX% revenue XXXX. seen New netting was least We've approximately continued sixth consecutive the that the have from our or year-over-year, deals. Consistent which certain pressure

turn, that the largely As we areas noted are we in higher on previously, take see are rates focused that areas driving higher profitability. Ex-TAC investment and

these bidding of and profit gross May. RPMs, our growth and key one QX on in in excluding year-over-year, as of on ex-TAC percentage. and one volatility Ex-TAC accelerating momentum double-digit headwind. gross optimizing And early our areas We quarters, growth supply. this technology, by remain completed have This strength mid-teens overall continued of in percentage impacted in profit focused positive QX in this noted transitioned partners year-over-year grown growth the the would to transition new the prior overall isolated QX our rescaling we While

of expenses transaction Moving costs to driven with year-over-year, our related to increased Teads. predominantly million anticipated Operating onetime expenses. by $X.X

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

CapEx for representing repurchased reminder, approximately we of repurchase define a software which, capital. principal remaining cash Moving the working principal costs, quarter our aggregate approximately operating notes to accrued result million convertible capitalized to liquidity. discount $XXX.X In including September, the the less stronger we of and million $X cash, amount amount in $XXX of interest, flow, Free and profitability in a as a as cash notes. million activities third the X.X% of as from approximately was

As quarter remaining the outstanding. marketable no cash and with million investments cash, a of and the balance $XXX result, ended securities in equivalents debt sheet we on

program, amount maintain repurchases existing our we there share share $X.X were While in million an no repurchase under QX. authorized of

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

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

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

million million to an annual range EBITDA to of million $XX of For profit gross $XX.X million. approximately million, an million, to adjusted $XX.X reflecting of increased $XX.X expect $XX we $XX $XXX of approximately annual we And million. reflecting $XXX range QX, to Ex-TAC million expect

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

Operator

[Operator comes JMP. from our Andrew Boone question from And Instructions] Citizens first

Andrew Boone

for second then a what question, is rolling York more couple want headwind specifically you on AI to And partners? we of with on as Teads. accelerate Times integration just can the anything growth. New you're Matt My or overviews maybe some is, with road just is map? And first of AI do publishers, the Google from This my heard to your out thoughts integration one out Andrew. an a to just today any your that as traffic has as just publisher traffic as And people, seeing far update called

David Kostman

take I'll one. that Matt. Thanks,

this upside which each we So, a planning, What there's when things. very both $XX revenue the terms operationally, lot on synergies. really can announced we is are we Teads, and synergies million cannot of we're the and guidance and individually product, doing provided we but need we progressing integration the on around what go-to-market We operate others. do on stage we of about other are businesses see focus -- excited performance, on structurally, in what across synergies. their post-merger deal And in planning and of at to the in

to by installed day with agencies the and to the synergies. has base which we pretty see cross-sell by small most world, enterprise of the Teads, an the ability premium we as around products other see medium partnerships customer cross-sell and the opportunity and the of confident excited we're what more base into with our and brands, brands are opportunities, performance and business joint brands the We also advertisers, realize

what question, we tiers, premium flat. traffic separate views the sort mean, base On see different in see of the we our paid publisher and I we terms of relatively

from just the of impact XXXX. haven't deal, remarks, to seen, the we timing traffic. we're looking add, still on the point, prepared at negative of said I on this it on AI mean, Maybe I at any So, QX

Operator

from comes Arounian Citigroup. question next our And from Ygal

Unknown Analyst

just about Ex-TAC is if in what just if you're And we impacts on impacting? you a maybe expected. below -- I XQ what Ygal. for little came partner walk Can start seeing any from the This think Max there's I ongoing that you talk wonder Can just had large it with supply guidance. we there? maybe

Jason Kiviat

the we question, we've Max. prior to and very really This since QX, seen nice for see the X kind flat happy saw thing gains of Yes, quarters slightly to QX I'm start is that what Yes, of for high it CPC the time up take to was to strength, Jason. is XXXX. I that first RPM was CPR the mean, Thanks one. continued now.

stability, algo been spend ad working and us. overall, demand And good X% improvements, So we've for yields. on driving mix was higher those up

So, I was revenue dollars actually know encapsulates which down, ad from but the we advertisers see gross slightly spend, up. all

and rest October, So acceleration in see a election given quarter in advertisers prudent X% more QX. being reflect more particularly cautious start we do and slower jumping there the quarter for election outlook in kind the some good year-over-year. that more rest a percent the was partner, we midpoint in the it higher results was our agencies to rapidly saw around Ex-TAC in normal bit that key off to the uncertainties experienced growth be to our XX% with expect growth your somewhat be lower with of mean, yes, partner, one QX, I on Ex-TAC expect X% that we We U.S. that mid-teens indications the the much than around as and growth excluding a macro, will the the cautious And of We point reported more was about Into QX there. start budgets reported did being do we are cautious now certainty the seasonal in thought we QX, spike coming at the October, obviously really hope that year-over-year in But their and quarter. we in more from it given the in growth of with saw. this pretty the we of the to

meaningful year, we the slightly for QX we've a easier before that lap see challenges, not middle into for assuming of comp continue we completely in QX It well that there. in is the stability in partner. QX next and So difference seeing as us to a the been QX

little from is to want with outcome election QX a I of a bit. think Next, I fact helpfully. that is just I the advertisers, there conversations a very the on add lot clear of mean,

haven't potential they terms money. But more I we waiting is in I say to terms it's life. to hours. mindset were people release if terms what have think holding back their of were normal I people I shopping things. as intention we gets back that's XX Clarity and good seen X, about don't it. on news the think doing think it's of people concerned will will on, in were of budgets budget in of get dragged mean business this of spend and I the the the

Unknown Analyst

the maybe improvements be solution, in have feed that And helpful. it's And know picture, bigger can of right. on it launched maybe drive? will so seems anything I bottom but early, That's then I just about you it you Moments. what talk the just seeing beta, like this you're if

solution the have see existing in now? replace you do Or how see with the fitting you this you complementary? being existing it this Do as you solution would have? So

David Kostman

launch. will very bring we've premium help But a it's working it audiences. of with good And anticipation great social that also is offering been think is to Internet an again, the of brands long that mean publishers sort on the experiences think have exciting canvases for for combination, inventory campaigns. more for a will time. this want open video to their this media we So in I engage I

vertical advertising. do that opportunities content integrating the those using brand and have about really advertisers that for content publishers it's to into So,

brands our with to already it, the feed. launch trying screen what publisher when we're right that with and we have of instead the working advertiser, time And right experience out, are immersive an going it be several it. is for with partners will working to going almost this with doing this opportunity right XX about We the user be full

the engagement lift, our by with decision of a with Initial time. when work launch in be XXXX, very sort brand and to users to the it's watching deep of publishers terms it exciting around impact, videos by But when videos indications certain of the going the it's great. right a So, and joint algo of I it's are any And better a early financial of into they numbers it's successful of view, to a from talk very course. is launch, product swipe, about think launch. point and

Operator

[Operator now management back any would Instructions] this turn to it And be to to at I there no time. further for remarks. closing questions appear like

David Kostman

Thank you us. all for joining

terms doing see we're Thank then in margin, Innovation moment We quarters is ahead the next with I combination financial great dollars, and consecutive cash Ex-TAC improvement both performance, obviously, lot. are you. into and looking looking early performance, us. me AI an excited the with critical we of today opportunities the of what in that flow. a And we're great, Teads the excites think at by year,

Operator

This does you today's Thank thank conclude conference. your participation. for We you.

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

Outbrain (OB) 7 Nov 242024 Q3 Earnings call transcript