Outbrain, Inc. ((OB)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for Outbrain, Inc. was marked by a positive sentiment, underscored by strategic initiatives such as the Teads acquisition and growth in non-traditional revenue streams. Despite facing challenges like a decline in revenue and transition issues with a key supply partner, the company expressed optimism about future synergies and growth opportunities.
Teads Acquisition and Integration
Outbrain has successfully completed the acquisition of Teads, a significant move that unites two leaders in the open Internet category. This merger is projected to generate substantial synergies, estimated between $65 million and $75 million by 2026. Notably, half of the cost-related synergies have already been secured shortly after the acquisition’s closure.
Outbrain DSP Growth
The Outbrain Demand-Side Platform (DSP) has shown impressive growth, with advertiser spend increasing by 45% in 2024. This growth highlights the strong momentum in Outbrain’s performance solutions, reinforcing its position in the market.
Expansion Beyond Traditional Feed
Outbrain has made significant strides in expanding its revenue sources beyond the traditional feed. By Q4 2024, revenue from these non-traditional sources rose to approximately 30%, up from 26% in the same quarter of the previous year.
Strong Free Cash Flow
Outbrain reported a record free cash flow of $38 million in Q4 2024, contributing to a total of $51 million for the year. This financial strength underscores the company’s effective cash management strategies.
New Partnerships and Renewals
The company has successfully renewed agreements with major publishing partners and secured new business partnerships. These strategic relationships with premium publishers globally highlight Outbrain’s value proposition and its commitment to expanding its network.
AI Creative Automation Adoption
Outbrain’s AI-based Creative Automation suite has been adopted by over 70% of its customer base. This tool enhances consumer engagement by leveraging AI-driven insights, showcasing Outbrain’s innovative approach to digital advertising.
Revenue Decline
Despite the positive developments, Outbrain experienced a revenue decline in Q4 2024, with revenue totaling approximately $235 million, a 5% decrease year-over-year. This decline highlights the challenges the company faces in maintaining its growth trajectory.
Challenges with Key Supply Partner
Outbrain faced a significant challenge due to a key partner transitioning to new bidding technology, which negatively impacted growth by a high single-digit percentage. This transition issue underscores the complexities of maintaining supply chain stability.
One-time Transaction Costs
Operating expenses for Outbrain increased year-over-year, primarily due to one-time costs of $5.5 million associated with the Teads acquisition. These costs reflect the financial implications of strategic acquisitions.
Forward-Looking Guidance
Looking ahead, Outbrain’s guidance for Q1 2025 projects an 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 an adjusted EBITDA of at least $180 million. These projections indicate a strong focus on financial growth and strategic expansion.
In summary, Outbrain’s earnings call reflected a mix of strategic successes and challenges. The company’s positive sentiment is fueled by the Teads acquisition and growth in non-traditional revenue streams, despite facing revenue declines and supply partner issues. With forward-looking guidance projecting continued growth, Outbrain remains optimistic about its future prospects.