Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Outbrain Inc (OB, Financial) successfully closed its acquisition of Teads, creating a combined entity that enhances capabilities in branding and performance across multiple channels.
- The company reported record free cash flow for Q4 2024, demonstrating strong financial management and operational efficiency.
- Outbrain Inc (OB) achieved its Q4 guidance for ex-TAC gross profit and adjusted EBITDA, indicating solid financial performance.
- The company's AI-driven prediction technology and creative automation suite are being widely adopted, with over 70% of the customer base utilizing these tools.
- Outbrain Inc (OB) has expanded its revenue sources beyond traditional feeds, with 30% of Q4 2024 revenue coming from non-traditional supply channels, up from 26% in Q4 2023.
Negative Points
- Revenue in Q4 2024 decreased by 5% year over year, reflecting challenges in maintaining top-line growth.
- The company faced downward pressure on ad impressions from a key supply partner, impacting net revenue retention, which stood at 86%.
- Operating expenses increased due to one-time costs related to the Teads acquisition, affecting overall profitability.
- There is potential for short-term disruptions due to the integration of Outbrain Inc (OB) and Teads, which could impact performance.
- The transition to new bidding technology by a key partner caused volatility, impacting overall growth in Q4 2024.
Q & A Highlights
Q: Can you provide an update on the transition of publishers and advertisers to the combined platform and address any concerns about potential dis-synergies? Also, how do you view the demand for native advertising?
A: David Kostman, CEO: Our focus is on unifying teams and starting cross-selling. We have a clear roadmap for platform integration, particularly in CTV and performance delivery. We've planned this for six months and are already seeing cross-selling opportunities. Regarding native advertising, we've expanded beyond traditional feeds, with 30% of our business now outside of it, and we continue to see growth in our DSP platform.
Q: What are the drivers behind the growth of the Outbrain DSP, and how should we think about its strategy under the combined company?
A: David Kostman, CEO: We acquired Zemanta for its bidding technology, allowing us to expand beyond Outbrain's inventory. This has driven growth by broadening our reach to native, display, and video formats. We will continue investing in this platform for performance advertisers and integrate performance capabilities into Teads Manager for brands and agencies.
Q: How do you envision the revenue from supply outside of traditional feeds progressing under the combined company?
A: David Kostman, CEO: While the percentage of revenue from outside traditional feeds will be lower in the combined company, we will continue to invest in this area as it supports growth for performance buyers looking to expand into display and other formats.
Q: Can you elaborate on the factors affecting the full-year EBITDA guidance and the integration process?
A: Jason Kiviat, CFO: We've seen improvements in legacy Teads' performance and expect year-over-year growth in the second half of 2025. Synergy realization will ramp up throughout the year, with significant contributions expected by year-end. Seasonality will also affect EBITDA distribution, with two-thirds typically recognized in the second half.
Q: Regarding the synergies, how much is expected from cost versus revenue, and what is the breakdown?
A: Jason Kiviat, CFO: We estimate $65 million to $75 million in synergies by 2026, with $60 million from cost savings. Of this, $45 million is personnel-related, and the rest from non-compensation and traffic acquisition cost optimizations. Revenue synergies are conservatively estimated but hold significant long-term potential.
Q: Will the company name and ticker symbol change to Teads, as mentioned in the press release?
A: David Kostman, CEO: Yes, we will operate under the name Teads, reflecting a refreshed brand combining performance and branding capabilities. This will include a name and ticker change over time, aligning with our strategic direction.
Q: Are you seeing any changes in advertising spend in the news genre?
A: David Kostman, CEO: While our inventory mix extends beyond news, there are positive trends with agencies recognizing the value of advertising in news. Efforts are ongoing to communicate this value to CMOs and agencies.
Q: How is the CTV opportunity evolving, particularly in terms of performance advertising?
A: David Kostman, CEO: CTV has been a growth area for Teads, primarily in branding. We see significant potential in performance advertising, driven by demand from SMEs and enterprise brands. The combination of Teads' capabilities and Outbrain's performance customer base positions us uniquely in the market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
