Search Icon
Outbrain Inc. (NASDAQ:OB): Delivering Measurable Outcomes Across the Open Internet
Published on September 24, 2024 | Ticker: OB

Outbrain Inc. (NASDAQ:OB) is a leading technology platform that drives business results by connecting media owners and advertisers with engaged audiences to drive business outcomes across the Open Internet. The company's artificial intelligence-powered platform enables thousands of digital media owners to provide tailored experiences to their audiences, delivering audience engagement and monetization, while offering advertisers from enterprise brands to performance marketers solutions to optimize consumer attention and engagement and deliver greater return on investment.

Business Overview

Outbrain's Unique Positioning in the Open Internet

Outbrain's core business model is centered around its two-sided marketplace, which provides the company with exclusive control over the consumer experience, allowing it to quickly test and deploy new formats for its advertisers and media partners. This unique positioning has enabled Outbrain to become one of the largest online advertising platforms on the Open Internet, reaching over a billion unique consumers around the world and delivering on average over 12 billion experiences promoting content, services, and products per day.

Outbrain's strategy is focused on three key pillars: expanding its share of wallet with advertisers, growing its differentiated premium publisher partnerships, and leveraging its AI prediction engine to drive user engagement and monetization across new environments, experiences, and ad formats.

Expanding Share of Wallet with Advertisers

Outbrain has seen strong momentum in its business with brands and agencies, with overall direct spend from these clients exceeding $100 million globally in the first quarter of 2024. The company's Onyx offering, which is focused on delivering brand-building solutions for enterprise clients, generated revenues of over $7 million in the first quarter, reflecting the strong demand for Outbrain's cross-funnel capabilities.

The company has also seen significant growth in its performance offerings, with total spend on its Zemanta DSP increasing by approximately 40% in the first quarter of 2024 compared to the prior year period. Outbrain's focus on enabling greater automation of workloads and bidding strategies through AI has also driven strong adoption, with 89% of advertiser spend now leveraging one of the company's automated bidding tools.

Growing Differentiated Premium Publisher Partnerships

Outbrain's relationships with its media partners are a key competitive advantage, with the company's top 20 media partners having used its platform for an average of seven years. The company's publisher logo retention remained strong at 98% in the first quarter, reflecting the enduring nature of these partnerships.

Outbrain continues to expand its premium publisher base, adding new supply partnerships with News Corp Australia and Webedia Spain in the first quarter, both of which moved from a competitor. The company also signed a partnership with The Telegraph, which is leveraging Outbrain's Keystone platform to drive incremental monetization opportunities.

Leveraging AI to Drive Engagement and Monetization

Outbrain's AI prediction engine is a core driver of its platform, enabling the company to deliver personalized ads and content experiences that drive consumer attention and engagement. The company has been exploring the use of AI to drive business efficiency and operational effectiveness, automating the handling and resolution of 40% of account management support cases with its small and medium publisher team.

Outlook

Outbrain's first quarter 2024 results demonstrate the company's progress in executing on its strategic priorities. Despite the challenging macroeconomic environment, Outbrain delivered Ex-TAC gross profit of $52.2 million, in line with its guidance, and exceeded its adjusted EBITDA guidance, reporting $1.4 million.

For the second quarter of 2024, the company expects Ex-TAC gross profit of $53 million to $57 million and adjusted EBITDA of $1 million to $4 million. For the full year 2024, Outbrain maintains its previous guidance of $238 million to $248 million in Ex-TAC gross profit and $30 million to $35 million in adjusted EBITDA.

Outbrain's strong positioning in the Open Internet, its focus on driving measurable outcomes for advertisers, and its continued investment in its technology and infrastructure position the company well to capitalize on the growing demand for digital advertising solutions that deliver tangible business results.

Financials

Outbrain reported annual revenue of $935.8 million and net income of $102.4 million in 2023. The company generated annual operating cash flow of $137.5 million and had negative free cash flow of $64.9 million for the year.

In the first quarter of 2024, Outbrain's revenue decreased 6.4% year-over-year to $217.0 million, primarily due to a 89% net revenue retention on existing media partners, reflecting weaker demand on the platform. This was partially offset by 5% growth from new media partners. Ex-TAC gross profit remained flat at $52.2 million, as the revenue decline was more than offset by a decrease in traffic acquisition costs.

Operating expenses decreased 4.5% year-over-year to $48.2 million, driven by lower personnel-related costs and a decrease in the provision for credit losses. Adjusted EBITDA increased to $1.4 million, compared to $0.7 million in the prior year period.

Outbrain's balance sheet remains strong, with $232 million in cash, cash equivalents, and investments in marketable securities as of March 31, 2024. The company has $118 million in long-term convertible debt and access to a $75 million revolving credit facility, providing ample liquidity to fund its growth initiatives.

Risks and Challenges

Outbrain operates in a highly competitive and rapidly evolving digital advertising market, which exposes the company to risks related to changes in industry dynamics, technological advancements, and regulatory environments. The company's business is also subject to macroeconomic conditions, which can impact advertiser demand and spending.

The company's reliance on its relationships with media partners and its ability to retain and grow these partnerships is a critical factor in its success. Additionally, Outbrain's ability to continue innovating and enhancing its AI prediction engine and technology platform is essential to maintaining its competitive edge and driving long-term growth.

Conclusion

Outbrain's unique positioning in the Open Internet, its focus on delivering measurable outcomes for advertisers, and its continued investment in technology and innovation position the company well to capitalize on the growing demand for digital advertising solutions that drive tangible business results. Despite the challenging macroeconomic environment, Outbrain's first quarter 2024 results demonstrate the company's progress in executing on its strategic priorities, and its guidance for the remainder of the year suggests continued momentum.

You may be interested in...
AppLovin (APP): A Promising Ad-Tech Powerhouse Reshaping the Mobile Ecosystem
AppLovin Corporation (APP) has emerged as a formidable player in the dynamic mobile advertising landscape, leveraging its innovative technology and data-driven approach to drive remarkable growth and cement its position as a leading ad-tech platform.
Read More
Kubient’s Innovative Programmatic Platform Navigates Competitive Landscape
Kubient, Inc. (KBNT) is a technology company that has developed a cutting-edge, cloud-based software platform for real-time trading of digital, Programmatic Advertising. The company’s Audience Marketplace platform aims to provide advertisers and publishers with a transparent, efficient, and fraud-free ecosystem to deliver targeted advertising campaigns.
Read More
Upexi (NASDAQ:UPXI): Adapting to a Changing Landscape and Positioning for Long-Term Growth
Upexi, Inc. (NASDAQ:UPXI) is a multi-faceted brand owner and innovator in the e-commerce and direct-to-consumer (DTC) space. With a diversified portfolio of owned brands across various industries, the company has demonstrated resilience and an ability to navigate the evolving retail landscape. As Upexi continues to refine its operations and strategically invest in high-margin brand segments, it appears poised to capitalize on emerging opportunities and drive long-term shareholder value.
Read More
Outbrain (OB): A Resilient Digital Ad Platform Navigating Industry Shifts
Outbrain Inc. (OB) is a leading technology platform that drives business results by connecting media owners and advertisers with engaged audiences across the Open Internet. The company’s AI-powered platform delivers personalized content and advertising recommendations to consumers, enabling media partners to increase user engagement and monetization while providing advertisers with a scalable solution to reach their target audiences.
Read More
OUTFRONT Media Inc. (NYSE:OUT): Diversifying Its Digital Offerings Amidst Economic Headwinds
OUTFRONT Media Inc. (NYSE:OUT) is a real estate investment trust (REIT) that provides advertising space displays on out-of-home advertising structures and sites across the United States. The company has a long and storied history, having been founded in 1933 as Outdoor Advertising Inc. Over the decades, OUTFRONT Media has navigated numerous economic cycles and industry shifts, evolving its business model to remain a leader in the out-of-home advertising landscape.
Read More