Outbrain Inc.

Good morning, and welcome to Outbrain's fourth quarter and full year 2021 earnings conference call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Jason Kiviat. Thank you. Please go ahead.

Good morning, and thank you for joining us on today's conference call to discuss Outbrain's fourth quarter and full year 2021 results. Joining me on the call today, we have Outbrain's co-founder and co-CEO, Yaron Golai, co-CEO, David Kaufman, and CFO, Elise Garfalo. During this conference call, management will make forward-looking statements based on current expectations and assumptions. These statements are subject to risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. These risk factors are discussed in detail in our Form 10-Q for the quarter ended September 30, 2021, filed with the Securities and Exchange Commission. as updated in our subsequent reports filed with the Commission. Forward-looking statements speak only as of the call's original date, and we do not undertake any duty to update any such statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's fourth quarter earnings release for definitional information and reconciliations of non-GAAP measures to the comparable GAAP financial measures. Earnings release can be found on our IR website, investors.outbrain.com. under news and events. With that, let me turn the call over to David.

Thanks, Jason, and thank you all for joining us. I'm pleased to report that, as we expected, Albring closed a record year of financial and business performance with a strong fourth quarter. Our extra gross profit was up 17% from Q4 2020 to $76.7 million, and our adjusted EBITDA grew 13% to 23.9 million, exceeding the guidance we provided last quarter. For the full year 2021, our gross revenue exceeded $1 billion and our extra gross profit was up by 40% year over year. As a result, our adjusted EBITDA more than doubled to nearly $89 million. Our business continued to grow as we worked with more media partners and advertisers than ever before. We continued our growth by focusing on providing open web media platforms with stronger monetization, higher engagement, and better quality, leveraging our unique platform capabilities like smart logic for media owners and conversion bid strategy and real-time bidding for advertisers. Let's start with the supply side. We continue to deepen the relationships with our existing premium media partners, extending our long-term deals, among others with CNN, Sky News, BuzzFeed Japan, Scripps, Orange, L'Equipe, for an average of more than three years, while at the same time growing our market share with new material partnerships and competitive wins, such as OneXL, UK's largest group of local publishers, Olympia Verlag in Germany, and Hoyte in Austria. The momentum of wins continues into 2022, and we anticipate some significant wins in the coming weeks. Let's talk for a minute about some of the groundbreaking proprietary technology that is helping us win in the market, SmartLogic. This solution changes the game of feed personalization, taking publishers from the old world of serving a predefined user experience to everyone to a new world of tailoring the feed experience to the taste of every user, We have deployed SmartLogic on about 70% of our mobile web feeds to date and are beginning our desktop deployment. Our media partners see significant value in this offering as it is driving double-digit yield lifts on average. It has been a deciding factor in how we continue to extend our deals with existing partners and win more market share as publishers are looking to offer their audiences, particularly younger audiences, personalized experiences. As an example, the head of ad technology and monetization at Funke Media in Germany worked with us to implement smart logic and noted they have seen a 61% increase in mobile page monetization as a result. He cited the higher customization to the preferences of Funke's users as driving increased engagement and optimized monetization. You can see this and many more case studies on our website. In addition, we are growing our business with our partners by expanding to more real estate on their properties. We launched a native header bidding solution building on the strong foundation of our superior native programmatic bidding technology from Demanta. This solution allows us to expand our supply relationships with our media partners by gaining incremental access to high-yielding inventory such as in-article placements. Our unique angle here is the ability to leverage data from our code on page on many of these publishers to improve our bidder win rate. It is important to mention that the optimization of these bidders takes a long time. We have years of experience accessing supply to programmatic pipes. In fact, MSN, one of our top supply partners, has grown over the last couple of years to a programmatic relationship on the Microsoft Open Exchange. In addition, we've seen significant growth in the Outbrain extended network, which enables Outbrain's advertisers to reach and optimize access to third-party supply via integrations with dozens of SSPs on different media platforms. We recently integrated Amazon Publisher Services and Google Open Bidding that will give us access to exciting and diverse new supply environments, such as new news aggregator apps. In Q4, we also continue to grow our supply in new environments beyond traditional publishers. We signed partners such as Vivo and Huawei in Q4, and these partnerships are expected to connect our brand's advertisers with millions of new users. Revenue from these types of partners doubled year over year and drove more than 10% of our top-line revenue. Let's switch to the demand side. Our demand continues to grow and benefits from positive market momentum. In Q4, we had a record number of advertisers directly running their ad campaigns on our platform and our highest ever average spend per advertiser. Advertisers using Outbrain increasingly realized the opportunities to grow the business and reach more customers on the open web in contrast to some of the limitations they are experiencing on World Gardens. we see an increasing number of high-end brands shifting budgets to outcome-based campaign goals. More than 40% of our business comes from brands and agencies. For example, we grow our business with Disney Plus, supporting the growth of subscribers for the streaming service across Europe. Amazon also increased their budget with us promoting Amazon Prime by leveraging our native video format. These are just two examples. More and more businesses are embracing digital customer experiences and sell direct to consumer, as well as increasing their digital budgets. Further, in a consumer survey conducted by a third-party market research company, it was found that consumers trust the content and recommendations they find on news, special interests, and hobby sites significantly more than those found on social media. The same survey reported that over 20% of consumers plan to spend less time on social media in the next six months. This reinforces our optimism in the opportunity to continue to grow our recommendations on the open web. We are investing in building the operational infrastructure to support our growth. We grew our team by nearly 200 people in 2021, and Israel and Slovenia, where we have our R&D hubs, were our highest growth regions. We're very pleased with the strategic investment to accelerate our video offering through the acquisition of premium contextual video solution, video intelligence, or VI in short. We are already seeing some of the benefits of the synergy, having launched the offering on several of our publishers in Q1. With VI, we are able to accelerate our growth in the large market of in-stream video, which is very desirable for advertisers, particularly brands. It also gives us an entry point to CTV. We plan to accelerate BI's growth by leveraging Outbrain's global footprint and deep publisher relationships. To sum up, the 40% growth year-over-year in extra gross profit for 2021 came in large part because we are realizing the value of the investments we have made in our business over the last few years. We will continue to invest in technology, Specifically in our core engine, we choose deep machine learning and AI to personalize recommended content and add to over 1 billion users around the world. Elise will provide more details on our guidance. You will see softer growth rate for Q1 driven by lacking a very strong Q1 in 2021, heavy with political and pandemic news consumption, as well as an impact on some timing factors on optimization, and expansion opportunities. We expect to see an acceleration of extra growth over the remainder of the year. We anticipate a lot of headroom to grow. So overall, I'm very optimistic about the future of our business and the role we play in supporting journalism and the free and open internet. Now, I'll hand it over to Yaron.