Outbrain Inc is a platform powering the open web that matches audiences with personalized content and ads, driving quality engagement. Its platform delivers ads to end-users that appear as links to articles, products, and videos on media partners' sites. The company derives revenue from advertisers through user engagement with the ads that it places on media partners' web pages and mobile applications. The company has its geographic presence in Europe, the Middle East, and Africa followed by the USA and others.
Performance and Challenges
Outbrain Inc (OB, Financial) reported revenue of $214.1 million for Q2 2024, a 5% decrease compared to $225.8 million in the same period last year. This figure fell short of the analyst estimate of $228.70 million. The company also reported a net loss of $2.2 million, a significant decline from the net income of $11.3 million reported in Q2 2023. The net loss includes acquisition-related costs of $3.2 million and severance and related costs of $0.6 million.
Financial Achievements
Despite the revenue shortfall, Outbrain Inc (OB, Financial) achieved several financial milestones. The company reported an adjusted EBITDA of $7.4 million, more than doubling the $3.5 million reported in the same period last year. This beat the analyst estimate of $6.8 million. Additionally, the company generated positive cash flow from operating activities for the fourth consecutive quarter, amounting to $3.6 million, up from $1.8 million in Q2 2023.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Revenue | $214.1 million | $225.8 million | -5% |
| Gross Profit | $45.6 million | $44.0 million | 4% |
| Net (Loss) Income | $(2.2) million | $11.3 million | -119% |
| Adjusted EBITDA | $7.4 million | $3.5 million | 112% |
| Free Cash Flow | $0.3 million | $(2.2) million | 115% |
Commentary
“We are pleased with our financial results for Q2, which are a testament to the improvements in our business model and progress in our growth areas,” said David Kostman, CEO of Outbrain. “In addition, we shared the news on August 1, 2024, that Outbrain has agreed to merge with Teads, a leader in omnichannel video, in a transformative transaction that we believe will create one of the largest end-to-end full funnel platforms for the Open Internet. The combination of our highly-complementary offerings accelerates our vision to become the preferred partner to deliver meaningful brand outcomes across premium, quality media environments. We expect this transaction to be highly accretive and transform our financial profile,” said Kostman.
Income Statement Highlights
Outbrain Inc (OB, Financial) reported a gross profit of $45.6 million, a 4% increase from $44.0 million in Q2 2023. The gross margin improved by 180 basis points to 21.3%, compared to 19.5% in the prior year period. The company also reported an Ex-TAC gross profit of $56.0 million, a 3% increase from $54.6 million in Q2 2023, driven by an Ex-TAC gross margin improvement of approximately 190 basis points to 26.1%.
Balance Sheet and Cash Flow
As of June 30, 2024, Outbrain Inc (OB, Financial) had cash, cash equivalents, and investments in marketable securities totaling $228.9 million. The company also reported long-term convertible notes of $118.0 million. During Q2 2024, Outbrain repurchased 464,054 shares for $2.0 million under its $30 million stock repurchase program, leaving $6.6 million available for future repurchases.
Analysis
Outbrain Inc (OB, Financial) has shown resilience in a challenging market environment by improving its gross profit and adjusted EBITDA. However, the decline in revenue and net income indicates that the company faces significant challenges, including acquisition-related costs and severance expenses. The upcoming merger with Teads is expected to be transformative, potentially creating one of the largest open internet advertising platforms. Investors should keep an eye on how this merger impacts Outbrain's financial performance in the coming quarters.
For more detailed insights and analysis, visit GuruFocus.com.
Explore the complete 8-K earnings release (here) from Outbrain Inc for further details.
