Outbrain Inc.

Good day and welcome to the Outbrain second quarter 2023 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, Please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to the management team. Please go ahead.

Good morning, and thank you for joining us on today's conference call to discuss Outbring's second quarter 2023 results. Joining me on the call today, we have Outbring's co-founder and co-CEO, Yaron Ghalai, co-CEO, David Kossman, and CFO, Jason Kivyat. During this conference call, management will make forward-looking statements based on current expectations and assumptions. These statements are subject to risks and uncertainties and 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, as updated in our Form 10-Q and other reports, and in subsequent reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the course 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 second 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, and the news and events. With that, let me turn the call over to David.

Thank you, Imelda. Thank you all for joining us. I'm excited to share with you our financial results and the significant progress we are making across multiple strategic fronts. Also, as you will hear, we are innovating at a great pace, leveraging AI and other technologies. We are pleased to report a solid second quarter in which we achieved $54.6 million in extra gross profit, representing 5% sequential quarterly growth and reaching the high end of our guidance, and adjusted EBITDA of $3.5 million, exceeding the high end of our guidance. In what is still an uncertain but relatively stable macro environment, we continue to, A, focus on driving growth and better performance within our current marketplace, while maintaining tight cost controls, and B, making strategic investments, growing our addressable market both on the advertiser side and publisher side through a product and technology-led strategy. I want to start with ONIX. Last quarter marked an exciting milestone for our company with the launch of ONIX by Outbrain. is a new brand building platform focused on driving high attention from video and high impact rich display ads for premium enterprise brands. With our core performance platform and now with the launch of Onyx, we are proud to be one of the very few advertising platforms that can offer true full funnel capabilities to advertisers at a global scale on the open web. From building brand awareness and consideration all the way to customer acquisition. ONIX is expected to deliver incremental value to us through premium brand campaigns carrying high CPM, which will be delivered outside of our traditional feed. This launch means we expect to do a lot more with existing and new customers. It increases our total accessible market by an estimated factor of three times. This is according to Gartner data that breaks down budget allocation between performance marketing, brand building, consideration, and loyalty. So what is ONIX? What makes it unique? ONIX is a brand building platform for enterprise brands and agencies. It is built to deliver strong ROAS from video and high-impact display campaigns. While most of the advertising market is focused on ad viewability and video-completed views, ONIX goes one step further to maximize user attention, which has been proven to drive business impact. With marketers focusing more and more on outcome and ROAS, attention is gaining momentum as a much smarter success KPI for advertisers. We partnered with Adelaide, a leader in attention measurement, to allow ONIX to capture attention units in real time and use predictive AI to find moments and opportunities to maximize customer attention for every campaign. Yaron will elaborate later on the technology and how we leverage our powerful prediction capabilities developed over 15 years. We launched ONIX in mid-June, and we're off to a great start with more than 25 brands already live or committed to testing. One of the first campaigns we tested was in partnership with DAX's UK for Ford. We used a custom ONIX ad experience called Hybrid that combines both video and display assets into an interactive ad experience. The results exceeded our customers' expectations, with Adelaide putting the campaign attention score 30% higher than the benchmark. We continue to experience higher performance than the Adelaide benchmark on our Onyx campaigns. This is a powerful testimony for how Onyx is successfully winning user attention and, as a result, driving stronger brand impact for advertisers. ONIX is now available for enterprise brands and agencies in the US, UK, Germany, France, and Italy, and will be launched in other markets later this year. We've run ONIX campaigns in these markets for premium brands like Visa, Porsche, Mattel, iHeartRadio, Opel, Alfa Romeo, and others. Our pipeline is building, and we expect to generate double-digit millions of dollars of revenue from ONIX already in H2 of this year. Just as a side comment, while ONIX is great for brand advertisers, it's also extremely strategic for our relationship with publishers, helping us elevate quality and user experience, which has been one of our key differentiators and factors in winning premium supply deals. And ultimately, it helps deliver even more revenue to our publisher partners. Moving to the general marketplace advertising results. On the revenue side, we think stabilization in the market with positive signs of growth in the last two weeks of the quarter and sequential growth over the course of Q2 and stronger start in Q3. From a vertical perspective, we saw year-over-year growth in auto, health, and retail. In addition to the continued innovations we make for conversion bid strategy, One interesting area of progress in Q2 was the increased adoption of Zementa by our core advertisers. As a reminder, Zementa is our in-house performance DSP. Unlike traditional DSPs that focus on streamlining media buying for display and video on a CPM basis, Zementa is connected to most major native advertising SSPs, and it allows marketers to run performance-based campaigns across the entire open web. If this trend with Zementa continues, we expect this to lead to increased share of wallet with many of our performance advertising. Moving to the publisher side, where we entered into several new exclusive long-term partnerships in Q2, including TMZ, Washington Times, The Messenger, and others. On the device or platform side, we established a partnership with Disqus, a commenting platform, and started ramping up our placement in Samsung devices through our partnership with Upday. With existing partners, I want to highlight our success in renewing partnerships to secure our long-term business growth with the recent renewals of multi-year deals with New York Post in the US, Burda in Germany, CCM Benchmark in France, and Hearst Italy. So overall, we're very excited about the launch of our strategic branding platform, Onyx, that we believe will further strengthen our position in the open web as the quality partner for premium publishers and the full funnel open web partner for all types of advertisers. We're encouraged with a 5% sequential growth in extra gross profit in Q2 and our profitability and expect significant acceleration in growth rates in the coming quarters, both in extra gross profit and adjusted EBITDA. I'll now hand it over to Yaron.