Outbrain Inc.

Good day and welcome to Outbrain Inc. 4th Quarter and Full Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I'd like to turn the call over to Outbrain's Investor Relations. 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 2024 results. Joining me on the call today, we have David Kossman and Jason Kiviat, the CEO and CFO of Outbrain, which will operate under the Teads brand. During this conference call, management will make forward-looking statements based on current expectations and assumptions, including statements regarding our business outlooks and prospects. and our recently complete acquisition of TEADS. 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, 2023, and our definitive proxy statement filed with the Securities and Exchange Commission on October 31, 2024, and as updated in our subsequent reports filed with the Security and Exchange Commission, forward-looking statements speak only as 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. 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, Meg. Good morning, and thank you for joining us today. On February 3rd, we closed our acquisition of Teads. This merger brings together two open internet category leaders, combining the extensive expertise of Outbrain in performance and of Teads in video and branding into a single solution for omnichannel outcomes across the marketing funnel. This new and expanded company will operate under the name Teads. There's a huge opportunity to take advertising on the open internet to the next level. Today's open internet platforms focus on scale and efficiency. Marketers have shown us they expect more from the advertising. They need a partner that can surface the meaningful moments in the consumer's buying journey using a deeper understanding of audience engagement and behavior to identify when they are ready to discover new products or services and evaluate purchase decisions. Our unique data set and AI-driven prediction technology better positions us to provide these solutions. The new teams will better serve enterprise brands and agencies as well as mid-market advertisers and direct response advertisers by delivering elevated outcomes from branding to performance objectives. This foundation will enable us to derive new incremental value from the open internet as a true brand format solution. Now let me provide an update on Outbrain's standalone Q4 and full-year results. For Q4, I'm pleased to report that Outbrain delivered both extra gross profit and adjusted EBITDA within our guidance range. We also generated record-free cash flow. This is part of our continued trajectory for several quarters. Q4 results were driven by strength in the same key pillars we presented to you over the last couple of years. These will continue to be important drivers of our business. The first pillar, expanding our share of wallet from advertisers. It is important to clarify that we serve enterprise brands and their agencies both for branding and performance needs, as well as the segment of small and medium enterprises and direct response advertisers that are looking primarily for performance and ROAS. So with brands and agencies, we've seen continued momentum in our performance solution. Our direct response advertisers have embraced the use of our Outbrain DSP, which saw growth of 45% in advertiser spend in 2024 due to the continued delivery of superior performance, both on the Outbrain publisher base and third-party properties across different formats, such as native display and video. As a reminder, We have been doing this for several years, leveling the performance DSP we acquired in 2017, which also provides a valuable bidding engine and DSP capabilities, expanding our platform's reach. The second pillar, expanding beyond our traditional feed. Revenue generated from supply beyond our traditional feed represented approximately 30% of our revenue in Q4 2024, versus 26% in Q4 2023. We have continued to grow this metric quarterly for the last two years, demonstrating our focus on expanding our inventory diversity beyond our exclusive publisher base and extending the reach for our advertisers to OEMs, apps, and other platforms. One of the more exciting developments here was the launch as a data in September of moments. our vertical video experience that brings social media experiences to the open Internet. To date, we have more than 40 media owners using Moments, including New York Post, News Australia, RTL, and Rolling Stone. Initial user engagement results are strong, with swipe depth growing from about three videos on average to 7.2, and the percentage of people engaging with the experience growing from about 35% to over 47%. In addition, we are encouraged by the interest that LegacyT's advertisers have expressed in moments as it provides powerful video experiences for premium brands. Another example of how this combination will provide meaningful synergy. And the third pillar is deepening our premium media owner partnerships. In Q4, we successfully renewed agreements with some of our important publishing partners, including Spiegel in Germany, Il Messaggero in Italy, and Grape in Japan. We also secured new business partnerships from competitors and launched new partners, including Penske Media in the US and Prensa Iberica in Spain. We believe this again demonstrates the significant value proposition we offer when it comes to strategic relationships with premium publishers globally. On the technology front, over 70% of our customer base has used our AI-based creative automation suite. As a reminder, the creative automation suite uses our algorithms and predictive insights to fuel the product's generative AI, delivering more relevant, highly targeted creatives optimized for consumer engagement. The strong foundation we built with the AI Creative Automation Suite informs how we think about some of the highest potential applications of AI at the new teams. We plan to leverage AI to create a greater continuity of experience across the consumer journey, leveraging the exclusive inventory environments we own, from CTB home screens to premium publishers, as well as in our in-house creative studio that utilizes data and interactivity to deliver video and viewable display assets that deliver on advertisers' KPIs. The new team is one of the largest platforms on the open internet that can curate meaningful audience moments across screens, from mobile to CTV to apps and beyond. We believe that the combination of our unique core assets positions us extremely well to capture more and more share of wallet away from other platforms. First, The new Teets combines best-in-class capabilities from our brand in performance to deliver outcomes and superior roles. Teets brings extensive expertise in branding and creative capabilities across screens. Advertisers are looking for KPIs way beyond just reach. They want results. It's also evident that the combined performance plus branding strategy can increase return on investment for advertisers. With an independent study estimating a total revenue impact increase by 90%. That's why in the future, brandformance is a huge opportunity. Second, the new teeth has the most direct exclusive bypass on the open internet across the digital landscape. As you've heard over the last couple of years, including for many of our peers, this is becoming increasingly important as advertisers are looking for curated premium environments to limit the risk of open exchange buys on DSPs. And we believe that also CTV is becoming a core part of the performance marketing mix. Our CTV presence from the feed side, combined with the leadership with performance marketers that legacy Outbrain brings to the table, positions as well for growth in this area, which is an important element of our combined product strategy. And third, we have exceptional global reach with more than 2 billion unique users and proprietary data signals to our exclusive condom page with the most premium media properties. I want to underscore that Teams already has more than 50 joint business partnerships with the leading premium brands of the world, including Apple, Visa, Louis Vuitton, McDonald's, Nissan, and many others. These partnerships generate an average of $5 million per year and upwards of $20 million per year. It's important to note that even before the combination with Outbrain, Teams had a significant amount of performance budgets from these advertisers. These types of relationships are the privilege of only the largest players in the digital advertising space. Teads has been growing these direct relationships with advertisers and their agencies for many years, having developed a winning multi-touch strategy of working directly with advertisers and their agencies, which are primarily the largest agency holding companies. The response from these advertisers to the new team's value proposition of branding and performance has been overwhelmingly positive, which bodes well for our cross-sell synergy plan. If you combine these joint business partnerships with a strong focus on small medium enterprises of the legacy outbrain, we believe we have a great coverage of the market. I want to spend a minute talking about the status of the post-merger integration. As Jason will discuss, we are also well underway in the realization of the synergies of $65 to $75 million we presented to you. We had the opportunity to plan the forced merger integration in detail for over six months. And as a result, we first executed on the headcount reductions in our plan in the first week, which we expect to result in approximately $35 million of just the compensation savings on an annualized basis. Second, we affected the reorganization and combination of the two organizations in the first two weeks, meaning that a much new company structure with clear leaders and roles and responsibilities is in place. Third, we already implemented certain synergies by connecting the demand and supply of the two platforms where feasible. And fourth, our global sales teams are working on the cross-sending opportunities as one team with aligned incentives and books of business. already testing the water, and actually have already sold the first campaigns with key elements of our combined performance and branding value proposition. We've seen strong enthusiasm and confidence in our new combined teams since closing the deal, with many already seizing the new business opportunities this merger has unlocked. We expect this to begin positively impacting our Q2 results. operating as we say internally as one team and one dream is underway, which I believe will ensure we are ready to capture the large opportunity ahead despite some short-term increased disruptions, which are natural consequences of such quick and decisive moves when merging two same-size companies. To sum it up, the early momentum is energizing and we're just getting started. Now, I turn it over to Jason for more detailed financial updates.