Outbrain Inc.

Good morning, and welcome to the Outbrain, Inc. First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. Now, I'd like to turn the call over to your Outbrain Management team.

Good morning, and thank you for joining us on today's conference call to discuss Outbrain's First Quarter 2023 results. Joining me on the call today, we have Outbrain's co-founder and co-CEO, Jeroen Gulley, co-CEO, David Kosman, and CFO, Jason Kvyat. 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-K filed for the year ended December 31, 2022, and in subsequent reports filed with the Securities and Exchange 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 first quarter earnings release for definitional information and reconciliations of non-GAAP measures to the comparable GAAP financial measures. Our 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.

Thank you, McKenna. In Q1, we exceeded the guidance we provided, delivering 52.2 million in extra gross profit and positive adjusted EBITDA of 0.7 million. In what is still an uncertain macro environment, we are focused on first, driving growth of usage and better performance in our current marketplace, and second, growing our addressable market, both on the advertiser side and the publisher side, to a focused product and technology-led strategy while maintaining tight controls on costs. I will start with a macro environment where the outlook continues to be uncertain. The softness in advertising budgets continues. From a geographical perspective, we are seeing some more favorable trends on advertiser budgets in Europe versus a more cautious approach in the U.S. From an industry perspective, we are encouraged by the accelerating trend of advertisers from enterprise brands to performance marketers, increasingly making budget decisions based on measurable outcomes driven by user attention and engagement and leveraging contextual data. This is why, for the last few months, we've been accelerating our focus, helping enterprise brands deliver experiences that drive deeper engagement, attention, and measurable results. We believe that we are well-positioned to deliver on this market need thanks to our heritage and strength in predictive AI-based performance. We've been working with some of the top global agencies and enterprise brands on validating our unique selling proposition and testing it on our platform. We are encouraged by the initial signs, and we'll be making several announcements regarding this product launch in the coming weeks. In order to support our efforts in these growth areas, we've also announced several organizational changes such as the appointment of Andras Tori, the former founder and CTO of Zementa, who has led Outbrain's recommendations and data science department for the past four years, to also become chief product officer, and work closely with our new CTO, Jonathan Mamman, who's led our engineering organization for the past five years. We have also announced several changes in our business organization under the new leadership of our CRO, Alex Erlmeyer, who previously led our international business, to ensure the right focus on our growth areas with teams in local markets, while at the same time consolidating into hubs certain segments of advertisers and publishers to better serve them with centralized know-how and generate cost efficiency. Andrade, Jonathan, and Alex have each been with us for over a decade. With that, I will move to the publisher side of our business. We continued to solidify our position with premium publishers globally. We signed several new deals, including an emphasis on financial publishers with Fortune, Entrepreneur, and Coindesk. We renewed multi-year deals with several anchor premium publishers, including the Washington Post, Le Monde in France at the end of Q4, Ansa in Italy, Hearst and Bocento in Spain, and Orange in France. we remain focused on premium publishers as we believe the trust they've built with their audiences on the open internet leads to a deep and meaningful relationship with their readers, which is a flywheel for a better user experience and better attention and engagement moments for advertisers. On the product side, our publishers are enjoying the constant architectural improvements we are making to smart logic, such as optimizing the experiences, reducing widget latency, which is expected to increase revenue. They also continue the adoption of new products and capabilities to optimize the performance on their properties. An additional growth driver is the increase of in-article integrations to header binning or code on page. In Q1, we added about 70 of such in-article integrations, which is also an important part of our enterprise brand strategy. On the non-publisher supply side of the business, which includes our direct-to-device partnerships that we highlighted as one of our growth drivers, we also continued to expand. And in the last few months, we signed partnerships with SmartNews, Flipboard, Quora, and others, enabling us to expand our advertiser campaigns to such platforms, leveraging our real-time bidding capabilities that optimize the engagement and performance. In Q1 2023, these partnerships contributed approximately 10% of our revenue. On this front, we are particularly excited about the launch of Upday News, an access bringer company on Samsung devices in the US, replacing the resisting news app provider. Through our partnership with Upday, we'll now also be able to access that highly valuable inventory for our advertisers. Moving to the advertiser side of our marketplace. I refer to the macro trends impacting demand and resulting in stable but still lower CPCs than last year. On our end, we continue to improve the programmatic access to our network. In Q1, we fully integrated our performance DSP, Zementa, into our core, such that all our advertisers can select the platform of their choice to access the outbrain supply and our extended network of supply via the Zementa platform or through our Amplify dashboard. We are also leveraging many of the AI-driven ROAS improvements in our Amplify dashboard into our programmatic marketplace. We are seeing some promising success stories for our advertisers, and we believe that we could see significant upside from further scaling the use of the Zementa technology for our core advertisers. Bringing together our investment in AI and CBS conversion-based strategy, I wanted to highlight the results of one of our customers, Babbel, one of the world's top-selling language learning apps. They used Outbrain's title suggestions, a tool powered by AI technology that automatically suggests the titles by scanning the brand landing pages alongside conversion-based strategy, which resulted in an improvement of 20% average click-through rate and a 20% conversion rate improvement. The combination of these products resulted in quality leads and a more effective use of campaign dollars for Babel's team. Another growth driver we highlighted and are excited about is our video business, which includes the VI acquisition and our Outstream video product. In Q1, we saw significant new wins with VI's smart video products, including the SPIEGEL and UPDATE in Germany, ANSA in Italy, and EVENING STANDARD in the UK. These represent just a few examples of the new in-article placements worn in Q1, alongside more than the 190 implementations of the VI product in existing Outbrain publishers. The power and impact that video experiences can have in capturing attention and driving engagement is one of the keys for the future of our enterprise brand strategy. To sum it up, we are pleased that we exceeded our guidance for Q1, and considering the macro headwinds, we are proceeding with caution. We are focused on product and technology-led improvements of the performance of our marketplace and in growing our addressable market for advertisers and publishers, particularly our offering for enterprise brands. At the same time, we are maintaining cost discipline across the company consistent with our previously stated objective of generating positive cash flow in 2023. I'll now hand it over to Yaron. Thanks, David.