Outbrain, Inc. ((OB)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Outbrain, Inc. recently held its earnings call, which conveyed a generally positive sentiment, buoyed by strong financial performance and successful merger integration. The company expressed optimism about future growth and cost synergies, despite challenges such as a pro forma revenue decline and cash flow issues.
Successful Merger and Integration
Outbrain and Teads merged on February 3, forming the new Teads. The company has achieved significant milestones in its integration efforts, with 90% of headcount-related synergies actioned. The focus remains on achieving $60 million in annualized cost savings by 2026, showcasing a strategic approach to maximizing merger benefits.
Strong Financial Performance
The company reported a robust financial performance for Q1, with revenue reaching approximately $286 million, marking a 32% increase year over year on an as-reported basis. Ex-TAC gross profit for the quarter was $103.1 million, reflecting a remarkable 98% increase year over year, underscoring the positive impact of the merger.
Growth in CTV Revenue
Outbrain has seen significant growth in its CTV revenue, which increased by over 50% year over year. This segment now represents approximately 5% of total ad spend, with access to more than 300 million TV screens globally, indicating a strong foothold in the CTV market.
Positive Client Engagement
The company closed Q1 with over 50 Joint Business Partnerships, including new commitments with major brands like Ferrero, Halion, Philip Morris International, and Beiersdorf. Additionally, more than 500 advertisers are spending at least $500,000 annually on the platform, highlighting robust client engagement.
Pro Forma Revenue Decline
Despite the positive financial metrics, the company experienced a year-over-year decline of approximately 7% on a pro forma basis for the full quarter. This follows a 9% decline year over year in Q4, indicating challenges in maintaining consistent revenue growth.
Significant Acquisition and Restructuring Costs
The quarter saw $16 million in acquisition-related costs, $16 million from the impairment of intangible assets, and $7 million in restructuring charges. These significant costs highlight the financial impact of the merger and restructuring efforts.
Free Cash Flow Challenges
Free cash flow was a use of cash of approximately $7 million in the quarter, negatively impacted by acquisition-related costs and restructuring charges. This presents a challenge for the company in managing its cash flow effectively.
Forward-Looking Guidance
Outbrain provided guidance on several key financial metrics, achieving its Q1 guidance for Ex-TAC gross profit and adjusted EBITDA. The company targets $60 million in annualized cost savings by 2026, with significant savings expected in 2025. For Q2, Ex-TAC gross profit is projected to be between $141 million and $150 million, and adjusted EBITDA between $26 million and $34 million. Full-year 2025 adjusted EBITDA is anticipated to be at least $180 million, reflecting confidence in future financial performance.
In summary, Outbrain’s earnings call highlighted a positive outlook with strong financial performance and successful merger integration. Despite challenges such as pro forma revenue decline and cash flow issues, the company remains optimistic about future growth and cost synergies. Investors and stakeholders can look forward to continued progress as Outbrain navigates its post-merger landscape.