Outbrain Inc. (OB) has firmly established itself as a leading technology platform that drives business results by engaging people across the Open Internet. With its recent acquisition of Teads, the combined company is poised to redefine the advertising landscape, offering a comprehensive solution that spans the entire marketing funnel, from branding to performance.
Business Overview Outbrain Inc. was incorporated in August 2006 in Delaware, with its headquarters located in New York, New York. The company has expanded its global presence through wholly owned subsidiaries in Israel, Europe, Asia, Brazil, and Australia. As a pioneer in the content discovery and recommendation space, Outbrain has built a vast network of premium publisher partners, reaching over 2 billion consumers per month across more than 50 markets globally.
The company's core business model revolves around generating revenue from advertisers through consumer engagements with advertisements delivered across a variety of third-party media owners' online properties. This approach has allowed Outbrain to establish itself as a crucial intermediary in the digital advertising ecosystem, connecting media owners and advertisers with engaged audiences across the Open Internet.
A significant milestone in Outbrain's history came in July 2021 when the company's registration statement on Form S-1 was declared effective by the SEC in connection with its initial public offering (IPO) of common stock. Outbrain's common stock began trading on The Nasdaq Stock Market, and the company closed its IPO on July 27, 2021. The offering saw Outbrain issue 8 million shares of common stock at an initial offering price of $20 per share, resulting in aggregate net proceeds of $145.1 million after deducting underwriting discounts, commissions, and other offering costs.
In February 2025, Outbrain completed the highly anticipated acquisition of Teads, a leading omnichannel advertising platform. This transformative deal combined two of the most influential players in the Open Internet advertising space, creating a formidable force that can deliver outcomes across the entire marketing funnel. The combined entity, operating under the Teads brand, boasts an impressive advertising spend of approximately $1.7 billion in fiscal year 2024, solidifying its position as one of the largest players in the Open Internet ecosystem.
Throughout its history, Outbrain has demonstrated financial prudence and strategic decision-making. In April 2023, the company repurchased $118 million of its 2.95% Convertible Senior Notes due 2026 at a discount of approximately 19% to the principal amount. Following this, in September 2024, Outbrain repurchased the remaining $118 million of the Convertible Notes at a discount of approximately 7.5% to the principal amount. These moves have strengthened the company's financial position and demonstrated its commitment to optimizing its capital structure.
Despite facing various challenges, including the impact of macroeconomic factors on advertising demand and spending, as well as the evolving regulatory environment around privacy and data usage, Outbrain has remained resilient. The company has consistently invested in innovation, expanded its relationships with media partners, and enhanced its offerings to drive value for advertisers and media owners.
Financial Performance Outbrain's financial performance has been marked by a consistent focus on growth and profitability. In the fourth quarter of 2024, the company reported revenue of $234.6 million, a decrease of 5% year-over-year. However, this was offset by a 7% increase in Ex-TAC Gross Profit, which reached $68.3 million. The company's Adjusted EBITDA also grew by 21% year-over-year to $17 million, showcasing its ability to drive operational efficiency.
For the full year 2024, Outbrain reported revenue of $889.9 million, a 5% decline compared to the previous year. This decrease was primarily due to lower ad impressions from certain supply partners, partially offset by growth of approximately 6% from new media partners. Despite the revenue decrease, the company's Ex-TAC Gross Profit increased by 3.9% to $236.1 million, and Adjusted EBITDA rose by 31.0% to $37.3 million.
Outbrain's strong cash flow generation was another highlight, with the company reporting free cash flow of $51.3 million for the full year 2024, a significant improvement from the $6.5 million generated in the prior year. Operating cash flow increased by $54.9 million to $68.6 million in 2024, driven by improved working capital and higher profitability. This robust cash flow position, combined with the company's debt-free balance sheet, provides Outbrain with the financial flexibility to execute its strategic initiatives and navigate market uncertainties.
The company's net loss for 2024 was $0.7 million, compared to net income of $10.2 million in the prior year. This decrease was primarily attributable to higher professional fees, including $14.3 million in acquisition-related costs, partially offset by lower provision for credit losses and a gain on repurchase of convertible notes.
Liquidity Outbrain's liquidity position remains strong, supported by its healthy cash flow generation and prudent financial management. As of December 31, 2024, the company reported a cash and cash equivalents balance of $89.09 million, providing ample resources to fund operations, invest in growth initiatives, and pursue strategic opportunities. The company's debt-to-equity ratio stood at 0.05, reflecting its low leverage and financial flexibility.
Outbrain maintains a $75 million revolving credit facility, with $58.12 million available as of December 31, 2024. The company's current ratio and quick ratio both stand at 1.19, indicating a healthy short-term liquidity position and the ability to meet its near-term obligations.
Synergies from the Teads Acquisition The integration of Teads is expected to unlock significant synergies for the combined company. Outbrain has estimated an annual impact of $65 million to $75 million on Adjusted EBITDA, with approximately $60 million coming from cost savings. The company has already achieved around half of this target within the first few weeks of the acquisition, primarily through headcount reductions and organizational realignment.
Beyond the cost synergies, the combination of Outbrain's performance capabilities and Teads' expertise in branding and video advertising is expected to create cross-selling opportunities and drive revenue growth. The new Teads platform will offer a comprehensive suite of solutions that can address the entire marketing funnel, from awareness to conversion, providing advertisers with a seamless and highly effective way to engage their target audience.
Expansion into Connected TV (CTV) One of the key strategic priorities for the combined Teads platform is the expansion into the rapidly growing Connected TV (CTV) market. Teads has already established a strong foothold in this space, with CTV revenue contributing close to 10% of its total revenue in the fourth quarter of 2024. The company's CTV offering, which includes exclusive integrations with leading OEMs and app publishers, has been well-received by advertisers seeking to reach consumers across multiple screens.
By leveraging Outbrain's performance marketing expertise and Teads' established CTV presence, the combined entity is poised to capitalize on the convergence of traditional linear TV and digital advertising. This omnichannel approach is expected to drive incremental advertising spend, as advertisers seek to optimize their campaigns across all relevant touchpoints.
Competitive Landscape and Growth Opportunities The digital advertising industry is highly competitive, with players ranging from large technology platforms to niche players. Outbrain's key competitors include Google, Meta, Amazon, and a host of independent ad tech companies such as The Trade Desk and Magnite.
What sets Outbrain apart is its unique value proposition, which combines the company's proprietary AI-powered recommendation engine, extensive publisher relationships, and the ability to drive outcomes across the marketing funnel. The integration of Teads further enhances Outbrain's capabilities, allowing the company to offer a comprehensive solution that addresses the evolving needs of both advertisers and media owners.
Furthermore, the Open Internet landscape presents significant growth opportunities for Outbrain. As the industry continues to shift away from reliance on third-party cookies and walled garden platforms, advertisers are increasingly seeking transparent and brand-safe environments to reach their target audiences. Outbrain's extensive network of premium publishers, coupled with its advanced targeting and optimization capabilities, positions the company as a strategic partner for advertisers navigating this changing landscape.
Risks and Challenges While Outbrain's growth prospects appear promising, the company is not without its risks and challenges. The digital advertising industry is subject to rapid technological changes, evolving consumer preferences, and shifting regulatory environments, all of which can significantly impact the company's operations and financial performance.
One key risk is the potential loss of large media partners, which could have a material impact on Outbrain's revenue and profitability. The company's ability to retain and expand its relationships with these partners is crucial to its long-term success. Additionally, the company's reliance on data and user engagement metrics exposes it to risks related to privacy regulations and changes in platform policies by major technology companies.
Furthermore, the integration of Teads, while expected to generate substantial synergies, also carries integration risks that the company must navigate effectively. Ensuring a seamless transition, aligning corporate cultures, and realizing the anticipated benefits of the acquisition will be critical to the combined entity's success.
Media Owner and Advertiser Solutions Outbrain operates a two-sided marketplace, providing advertising solutions for both media owners and advertisers. The company partners with over 10,000 media owners, ranging from premium publishers to original equipment manufacturers (OEMs) including connected TV (CTV) and smartphone manufacturers. Many of these strategic, long-standing partnerships span several years, with Outbrain's top 20 media partners having an average tenure of 7 years.
For media owners, Outbrain provides sustainable, year-round advertising revenue and technology solutions to help them more deeply engage and retain their audiences. The company's relationships with media partners are typically long-term, exclusive, and strategic in nature. Outbrain's media partner net revenue retention was approximately 88% for the year ended December 31, 2024, indicating strong satisfaction and the ability to grow revenue from existing relationships.
On the advertiser side, Outbrain offers a range of solutions for brands, performance marketers, and other advertisers. The company's platform enables advertisers to reach their audiences across the entire Open Internet, from web to CTV to app environments, and to drive outcomes from those audiences at each step of the marketing funnel. These outcomes include completed views, post-click engagement, brand uplift, sign-ups, sales, and more. In 2024, over 20,000 unique advertisers were active on Outbrain's owned and operated platform, in addition to the thousands of advertisers who access the platform through Outbrain's programmatic partnerships.
Industry Trends and Future Outlook The digital advertising industry is experiencing robust growth, with projections indicating an expansion from $140 billion in spend in 2023 to $192 billion by 2027, representing an 8% CAGR. This growth is driven by the continued proliferation of digital content, shifting consumer behavior patterns, and a continuous shift towards data-driven, performance-oriented advertising.
Looking ahead, Outbrain has provided guidance for the first quarter of 2025, expecting Ex-TAC gross profit of $100 million to $105 million and Adjusted EBITDA of $8 million to $12 million. For the full year 2025, the company anticipates adjusted EBITDA of at least $180 million. On a pro forma basis, Outbrain expects to see improvement in year-over-year growth rates over the course of 2025, with the second half of the year projected to achieve single-digit positive growth year-over-year.
The company also anticipates that synergy realization from the Teads acquisition will increase over the course of 2025, starting from a few million dollars in Q1 and ramping up to the full $65-$75 million annual run-rate by Q4. This progressive realization of synergies is expected to contribute significantly to the company's financial performance and operational efficiency.
Conclusion Outbrain's acquisition of Teads has transformed the company into a formidable player in the Open Internet advertising space. The combined entity, operating under the Teads brand, offers a comprehensive suite of solutions that can drive outcomes across the entire marketing funnel, from branding to performance. With its strong financial position, robust cash flow generation, and strategic focus on growth areas such as CTV, Outbrain is well-positioned to capitalize on the evolving digital advertising landscape.
However, the company must remain vigilant in addressing the risks and challenges inherent to the industry, including the retention of key media partners, adapting to regulatory changes, and successfully integrating the Teads business. By navigating these hurdles effectively and continuing to innovate, Outbrain has the potential to solidify its position as a leading player in the Open Internet advertising ecosystem. The company's focus on delivering value to both media owners and advertisers, coupled with its strong technological capabilities and strategic vision, positions it well for sustainable growth in the dynamic and competitive digital advertising market.