Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Outbrain Inc (OB, Financial) announced a transformative merger with Teads, positioning it as one of the largest Open Internet advertising platforms.
- The company reported a strong financial performance in Q2 2024, with ex-TAC gross profit of $56 million and adjusted EBITDA of $7.4 million, exceeding guidance.
- Outbrain Inc (OB) achieved positive free cash flow for the fourth consecutive quarter, indicating strong financial health.
- The company's DSP, Zemanta, saw a 50% growth in advertiser spend in the first half of 2024 compared to the same period in 2023.
- Outbrain Inc (OB) launched a new AI-driven targeting solution, predictive demographics, which showed promising results with a 2.7 times higher click-through rate for a recent campaign.
Negative Points
- Revenue in Q2 2024 was approximately $214 million, reflecting a decrease of 5% year over year.
- Net revenue retention of publishers was 89%, indicating challenges in maintaining existing partnerships.
- Pricing remains low relative to historical levels, impacting advertising demand and revenue.
- The company experienced volatility from a key partner transitioning to a new bidding technology, affecting ex-TAC gross profit.
- Operating expenses decreased by only 1% year over year, suggesting limited cost-saving measures.
Q & A Highlights
Q: Can you talk about the drivers of RPM growth in the quarter and your confidence in its continuation? Also, how does this tie into your guidance for Q4?
A: Jason Kiviat, CFO: The RPM growth is driven by record-high click-through rates due to algorithmic improvements and better optimization. We also saw positive trends in cost per click, which narrowed the year-over-year headwind. For Q4, we expect acceleration due to easier year-over-year comps and continued success in our growth drivers.
Q: What has been the reception from advertisers regarding the Teads acquisition?
A: David Kostman, CEO: The feedback has been overwhelmingly positive. Advertisers see this as an opportunity for a full-funnel solution on the Open Internet, combining branding and performance capabilities. Both Teads and Outbrain are expected to bring significant value to advertisers.
Q: What are you seeing in the ad macro environment, and how do you expect it to play out for the rest of the year?
A: Jason Kiviat, CFO: We observed positive trends in RPM and CPC gains during Q2, with strength in Europe, particularly Germany and Spain. While it's hard to predict macro trends, we hope to see continued acceleration but are not overly reliant on it in our guidance.
Q: How is Zemanta performing, and what role will it play in the combined company with Teads?
A: David Kostman, CEO: Zemanta has been a growth driver, allowing performance advertisers to spend more across the Open Internet. It enhances margins and will continue to be a key growth area. In the combined company, Zemanta will focus on performance buyers, complementing Teads' branding strengths.
Q: Regarding revenue synergies, is there more upside from Teads selling performance advertising or Outbrain adding upper funnel from Teads' client base?
A: David Kostman, CEO: There are opportunities on both sides. Teads can leverage our prediction technology for better conversions, while Outbrain can offer a full-funnel solution to existing brand clients. The announced synergy numbers primarily reflect operational synergies, not top-line synergies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
