Outbrain Inc. Q1 2023 Earnings Call
Good morning, and welcome to the outbreak 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.
Her to your outbreak management team.
Good morning, and thank you for joining us on today's conference call to discuss our brands' first quarter 2023 results joining me on the call today, we have our brains co founder and co CEO you round Goodbye.
Oh, CEO , David Kaufman and CFO , Jason caveat.
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 31st 2022, and in subsequent reports filed with the Securities and Exchange Commission.
Forward looking statements speak only as of the calls 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 the comparable GAAP financial measures.
Our earnings release can be found on our IR website investors thought out brain dot com under news and events.
With that let me turn the call over to David.
Yeah.
Thank you Makena in.
In Q1, we exceeded the guidance, we provided delivering $52 2 million in extra gross profit.
<unk> adjusted EBITDA.
7 million.
And what is still an uncertain macro environment, we are focused on driving growth of usage and better performance in our current marketplace and second growing our addressable market. Both on the advertiser side, the publisher side through a focused product and technology led strategy, while maintaining tight control.
It wasn't cool.
I will start with a macro environment, where the outlook continues to be.
I'm sure.
The softness in advertising budgets continues from.
From a geographical perspective, we are seeing some more favorable trends in advertising budgets in Europe .
This is 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 decision based on measurable outcome.
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, Brian 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 needs on our platform.
We're encouraged by the initial size and we'd be making several announcements regarding this product launched in the coming weeks.
In order to support our efforts in these growth areas. We have also announced several organizational changes.
Such as the appointment of Unwashed told me the former founder and CEO , Samantha who has led our brands of accommodations and data Science Department for the past four years.
To also become chief product officer, and work closely with our new CTO you understand my man 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 CA row, Alex URL Maya who pre.
Obviously led our international business to ensure the right focus on other growth areas with teams in local markets. While at the same time consolidating into certain segments of advertisers and publishers to better serve them with centralized knowhow.
And generate cost efficiencies and.
And do I wish you all the time and Alex have each been with us for decades.
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, and so printer and coin that.
We renewed multiyear deals with several anchor premium publishers, including the Washington Post Lamont in France at the end of Q4, I'm, saying, Italy, Hearst and Butch entering Spain, and <unk> homes in France.
We remain focused on premium publishers as we believe the trust they've built with the audience says on the open Internet leads to a deep and meaningful relationship with the reader, which is a flywheel for a better user experience and better attention and engagement moments for advertisers.
On the product side.
Our publishers I enjoying the constant architectural improvements, we're making to smart logic, such as optimizing the experiences reducing widget latency, which is expected to increase revenue.
They also continue with the adoption of new products and capabilities to optimize the performance on their properties.
An additional growth driver in the increase of in optical integrations to header bidding or quoting on page <unk>.
In Q1, we added about 70 of such in Knoxville integrations, which is also an important part of our enterprise brand strategy.
On the non publishers supply side of the business, which includes our direct to device partnerships that'd be highlighted as one of our growth drivers. We also continued to expand and in the last few months, we signed partnerships with smart.
Flip both core and other <unk>.
Leading us to expand our advertising campaigns to such platform.
Leveraging our real time bidding capabilities 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 updating us and access Springer company on Samsung devices in the U S, replacing their existing use that provider.
Through our partnership with update will now also be able to access the 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 CPC than last year.
On our end, we continued to improve the programmatic access to our network in Q1, we fully integrated our performance DSP the manta into our core such that all our advertisers can select the platform of their choice to exit the outbound supply and our extended network of supply via the <unk> platform.
Oh, two hour amplified dashboard will.
We are also leveraging many of the AI driven Ros improvements in our amplified dashboard into our programmatic marketplace. We are seeing some promising success story for our advertisers and we believe that we could see significant upside from further scaling the use of this technology for our core advertising.
Bringing together our investment in AI and CBS conversion strategy I wanted to highlight the results of one of our customers.
Bill one of the worlds top selling language learning apps they.
They used the outbreak titled suggestions tools powered by AI technology that automatically suggest the titles by scanning the brand landing pages alongside conversion strategy, which resulted in an improvement of 20% average click through rate and the 20% conversion rate improvement.
The combination of these products resulted in quality leads and a more effective use of campaign for.
<unk> team.
Another growth driver we highlighted at my excited about is our video business, which includes the <unk> acquisition and our extreme video product.
In Q1, we saw significant new wins with.
<unk> smart beta products, including they'll Spiegel, and updating Germany and say in.
Italy and evening standard in the UK.
These represent just a few examples of the new in article placements volume Q1, alongside more than the 119 implementations of UBI product in existing outbreak publishers.
The power and the impact that video experiences can have in capturing attention and driving engagement is one of the keys for the future of our enterprise growth 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.
Our focus on product and technology led improvement of the performance of our marketplace and in growing our addressable market for advertisers and publishers, particularly our offering for enterprise brands at.
At the same time, while 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 you Ron.
Thanks, David.
Turning to like this are the perfect opportunity to keep inventing and innovating around product algorithms and AI.
I want to highlight a few key areas, where we brought new innovations to our platform during the last quarter.
Let's start with algorithms.
Last call I shared some of the progress we made on the algorithm side during 2022, culminating in a 95% improvement of our yield potential. This was based on our internal testing of algorithms.
While these improvements towards muted in last year's numbers due to the macro demand challenges. They are spring loaded so to speak into our platform.
During the first quarter, we released five new algorithm updates, which are internally testing indicates a further improves our RPM youll potential by another two 7%.
Here are two examples.
First we released a new exploration strategy based on what academic call Wilson score interval, which improves the efficiency of how our system test new at.
This algorithm allows us to save AD impressions that were previously used for testing ads and instead served high higher yielding ads.
Second we doubled the number of model parameters in our online prediction algorithm and boosted the throughput of predictions, we can process to about 1 billion predictions per second.
We've done that while maintaining a very low latency of processing of our recommendations.
These are just two examples of the five algorithm upgrade so we released in Q1.
Advertiser demand is robust we expect the $2 seven increase in yield potential to continued compounding our results on top of the previous upgrades.
Switching gears to serving efficiency, which is another example of how we're using these times to innovate by improving our operating model.
We have been intensely focused on reducing our cost of sales, while maintaining our service capabilities and RPM yield levels.
As a reminder, the majority of our data center capabilities are operated by US in house with a certain footprint on public cloud Microsoft Azure.
We signed the speed much more cost efficient at our scale than relying on public clouds.
But more importantly, it allows our engineers better control and the ability to better optimize serving architecture for our specific needs and for efficiency.
In Q1, we released a new framework that calculates in real time to revenue potential of each at Fisher and based on that dynamically allocates more or less compute resources for handling that specific yet.
We started implementing this on some of the X. We serve and initial results are showing an approximately 10% savings on cost of sales on those specific ads without a noticeable impact on RPM.
In fact, we believe that over time. This technology may help us increase rpms by allocating more compute resources to those specific assets with the highest potential of driving higher rpms, while staying disciplined on cost of sales.
Lastly, AI is obviously an area. We're very focused on I spoke about this in more detail last quarter and our engineers are obviously exploring multiple ways of leveraging AI on our platform.
As I mentioned previously we have been using our AI solutions for a while to assist to advertisers with scaling headline creative.
David mentioned Babble is one example of an advertiser successful using the technology to achieve better outcomes.
We've now built a more robust solution that includes AI headline creatives from open AI chat CPT.
And by April about 50% of the headlines we suggested calculating advertisers we're originating from chat CPT.
Another area, our engineers have been focusing our efforts on his predictions of AD view ability.
Late last year, we started including our AI predicted the ability within programmatic channels.
As David mentioned view ability is an important factor for our enterprise brand strategy.
We're either building or evaluating AI solutions on areas, such as code, writing and automated could review testing with solutions such as hub copilot.
On education and enhancement for added inches on ctr predictions et cetera.
Overall, we're very excited with the new opportunities that this wave of AI creates for us on many factors of our technology and business.
And with that I'll hand, it over to Jason to cover our financials.
Yeah.
Thanks, Ron.
As Steven mentioned, we beat our Q1 guidance for both gross profit and adjusted EBITDA from a demand perspective, we experienced the continued soft but fairly normal pattern in Q1 with strengthening demand over the course of the quarter in both Europe and the U S.
The early portion of Q2 has remained volatile you've seen a softer start in the U S and more relative strength in Europe .
Revenue in Q1 was approximately $232 million, a decrease of 7% year over year on a constant currency basis, and 9% on an as reported basis the.
The decrease year over year was driven primarily by lower yields as we continue to lap prior year periods that was not meaningfully impacted by the headwinds on advertising demand affecting our industry.
These headwinds were partially offset by growth in new supply partners.
New media partners in the quarter contributed 11 percentage points or approximately $29 million of revenue growth year over year, which compares favorably to the approximately seven points of growth from new media partners that we have averaged in 2020 and 2021.
Net revenue retention of our publishers was 80%.
The continued impact of the demand environment on yields which drove the majority of the decline year over year.
Our churn remains very low by our standards and our.
Our three largest turns year over year contributed just for total points of net revenue retention headwinds in Q1.
That's another data point, our logo retention was 95% for all partners that generated at least $10000 in Q1 2022.
Ex Tech gross profit was $52 2 million a decrease of 17% year over year on a constant currency basis and 18% as reported.
Consistent with what we've seen in the past several quarters in this environment. The steeper decline of X that gross profit year over year versus revenue was driven by an unfavorable mix of revenue.
Lower performance on certain media partners driven in part by the demand headwinds, we're seeing which impacts a portion of our take rates with certain partners.
And the impact of Onboarding, and optimizing significant new supply partners, which is challenged by the weaker than normal demand environment.
Moving to expenses opt.
Operating expenses decreased approximately $3 $4 million year over year to $50 5 million in the first quarter.
The decrease was driven largely by lower personnel related costs coming from lower head count year over year favorability of FX rates and lower variable compensation.
This was partially offset by higher bad debt expense and higher severance costs, the latter of which relates to some of the organizational changes that David referred to to prioritize the efforts of our team.
As mentioned in previous quarters, we implemented a series of cost reduction efforts to adjust the current business headwinds and as we said in the prior quarter, we plan to keep our expenses essentially flat over the remaining quarters of the year.
We finished Q1 with the head count of approximately 977, which is down 4% year over year.
8% since we began the cost reduction in Q2 of last year.
We continue to focus on driving greater efficiencies in our operations and as noted in the prior quarter headcount accounts for around 70% of our operating expenses.
As a result, adjusted EBITDA was approximately $1 million in Q1.
Moving to liquidity.
Free cash flow, which as a reminder, we define as cash from operating activities less capex and capitalized software costs was a net use of cash in the period of approximately $27 million use.
The use of cash was primarily due to a significant slowdown in collections of customer receivables driven most meaningfully by the sudden closure of Silicon Valley Bank in March.
On the news, we ask customers to hold payments for over a week until we were able to set a supplemental operating accounts that additional financial institution.
We have regained full access to all of our funds held at the bank and collections in April have returned to more normal levels as we switch over customers to the new account.
We estimate around $15 million is the temporary impact of reduced cash and cash equivalents on our balance sheet as of March 31, resulting from this and other operational challenges impacting collections as of the balance sheet date.
As these issues have been resolved, we expect the DSO and cash balances to normalize to historical levels in the coming months.
It impacted our cash flows for Q1, we do not expect it will impact our cash flow on a full year basis.
As we said our objective is to achieve positive free cash flow for the year.
As a result, we ended the quarter with $318 million of cash cash equivalents and investments in marketable securities on the balance sheet and $236 million of long term convertible debt.
On April 14th we repurchased $118 million aggregate principal amount of the convertible notes for approximately $96 2 million in cash, including accrued interest representing a discount of approximately 19% to the principal amount of the repurchase notes.
We view the opportunity to repurchase a portion of the debt at a considerable discount to be opportunistic given the strength of our balance sheet with remaining cash balance that retain the optionality to invest in any organic or inorganic opportunities that can drive further shareholder value.
In December the company's board of directors authorized $30 million share repurchase program incremental to the $30 million program fully executed in 2022.
We began executing the new program in Q1, though we temporarily paused share repurchases upon the news of Fcb's closure and due to our purchase of the convertible notes in April .
We are monitoring closely is our cash collections normalized and we continue to believe is an attractive way to enhance shareholder value under current market conditions.
Now turning to our outlook.
As discussed today and in prior quarters visibility to advertising budgets remains limited.
In our guidance, we assume that current macro conditions persist with no material deterioration or improvement regular seasonality and as noted in the prior quarter continued execution of our growth drivers such as optimization of new supply partners algorithmic improvements expansion of our video and full funnel offerings and attracting new partners.
With that context, we have provided the following guidance for.
For Q2, we expect that gross profit of $52 million to $55 million and we expect adjusted EBITDA of half a million dollars to $1 5 million.
We maintain our previous full year 2023 guidance provided at the beginning of the year of at least $237 million of expect gross profit in at least $28 million of adjusted EBITDA.
Now I'll turn it back to the operator for Q&A.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press star two if he'd like to remove your question from Mccann for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Schweitzer <unk> with Evercore ISI. Please proceed with your question.
Okay. Thank you for taking my questions Jason for the guidance that you provided could you. Please help us.
I think through the cadence for the rest of the year when it comes to EBITDA as well as.
Revenue ex Tac grew.
Growth rates.
Specifically, the second quarter EBITDA guidance came in lighter than we would have thought so anything to call out there and how you're thinking about driving profitability in the back half and the same thing for top line growth. Thanks a lot.
Sure. So I think we mentioned on our call last time.
And just tried to reiterate on the prepared remarks, just now that our plan is to keep the expenses pretty flat each quarter of the year and if you look back at the last.
Five or six quarters as well, you'll see that we've been on a cash expenses, meaning ex tech minus EBITDA equal cash expenses.
Basis, we've been pretty flat around 51% to $52 million of cash expenses.
Our intent is still in.
In our guidance.
The cash expenses flat over the course of this year. So the EBITDA growth really in the towards the end of the year is coming from the ex Tac growth right. So just to talk to that for a moment we do.
We do have our normal kind of process here for forecasting which is which as you know are considering trends in the first part obviously through Q1 and the first part of Q2 using current FX rates, which for US is April nor.
Normal seasonality is assumed flat macro meaning not a not an improvement.
Generation from from what we've seen so far.
On top of that.
Our growth levers right and so we've talked to that a little bit I think on the last couple of calls, but just what they are as you know.
Scaling our supply.
Growth through New partners I think David touched on some of the some of the exciting kind of but you know.
That forms and traditional partners that we're that we're opening ourselves up to now.
Obviously your own talk to some of the algorithmic improvements that we have and we're continuing to invest there.
C W.
We expect to grow more over the course of the year and also notably the expansion of our video.
Full funnel offerings and miracle placements as David talked about today. So those are some of the things we expect to grow really more over the back half of the year and keeping expenses flat that's essentially the cadence that we expect.
Okay. Thanks Shannon.
Go ahead.
Maybe just just to add I mean on the second quarter and the way were looking at EBITDA is pretty much in line with our internal plans I know that.
Higher numbers.
They have classes, nor the so far pretty much something we never gave specific guidance for Q2, and but we maintained the guidance for the year.
Okay. That's helpful. Thanks, David and Jason just a follow up on your prior comment any way to quantify the impact of the growth drivers in the back half in terms of contribution and that's it for me. Thank you.
Sure. So you know not too.
Big numbers, but maybe just order of magnitude.
One of those four things that I looked at is is really the lion's share, but the biggest if you combine.
The kind of video growth expansion and growth of the upper funnel.
Enterprise branch strategy that David David talked about that'd probably be the largest.
Number two and three would be.
Scaling our supply and also adding additional new suppliers and then algo number four that's been our biggest driver over the last couple of years.
Combined but.
We've noted in the demand environment.
Not as impactful despite the lift that we see in our.
So keeping that as kind of the smallest of the four right now.
Okay. Thanks, David Thanks, Jason.
Yes.
Thank you. Our next question comes from the line of Andrew Boone with JMP Securities. Please proceed with your question.
Hi, guys. Good morning, and thanks for taking my questions I wanted to ask two first just on take rates. We've seen a couple of quarters now where it's been below kind of 2021 levels is there anything structurally that changed in the contracts over the last kind of two years in the AD market was just higher where we should think about take rates being lower.
Just given higher maybe guarantees that are in there is there anything else to call out in terms of take rates.
And then in terms of existing publishers can you just broadly speaking talk about the path back to a 100% is this just comps getting easier what else can you guys do to to drive existing publishers back to that 100% level that you guys had so consistent eagle point. Thanks, so much.
Thanks, Andrew So maybe I'll start so so just on the on the take rates.
Things changed.
As far as far as contract terms or anything like that we still I think we said in the past around 20% of our revenue is subject to those.
Minimum RPM revenue guarantees that that's still the same vicinity as it's been.
The things that have driven it down have been obviously, we've been saying the same thing for a few quarters as we continue to lap the.
The period, that's not affected by the headwinds.
But it's been a mix some of the some of the.
Exciting supply we won.
Not to speak to anything individually, but maybe it at lower rates than some some different segments or geographies.
Obviously macro is playing the biggest factor in the supply and demand.
Imbalanced that we continue to see in this environment.
So and those are obviously, the new supply kind of taking time to scale I mean, those are the things that it brought it down those are also the things that will bring it back up.
We do have downside protections on these generally so.
There is not like an unlimited risk and I don't expect these to go down materially further versus the current levels that they're at you have to get back to the levels from from a couple of years ago, probably will take some some level of macro recovery.
But there is definitely things in our control to drive them higher.
Obviously, the algo improvements expansions of segments with higher take rates and we do expect some of that to happen over.
The tail end of this year, particularly video expansion, which drives higher margins for us and also higher better seasonality generally.
The end of the year versus the beginning of the year, we had higher.
Higher take rates at the end of the year versus the beginning of the year.
As far as retention.
Yes.
Again, we're still kind of lapping this challenged period. So I think as we kind of get into the back half of the year, we'll have a easier comp and you know.
Not expect to be the same the same 80% range that we've been we did see some improvement from the prior quarter.
Obviously, you're getting with 74% last quarter versus 80% this quarter and Thats really driven by.
Some improvement in pricing and also improvement in click through rates that we've seen kind of each month of Q1, we've seen improvements in click through rate.
And in pricing.
And again not churn driven logo retention I said, 95% largest returns combined with under 4%. So again as we get towards the back half of the year I think that <unk> will be.
Are you able to see more growth through our through how we used to grow through blend and extend.
Thank you.
Thank you. Our next question comes from the line of Ross Sandler with Barclays. Please proceed with your question.
Hey, guys just two questions.
David <unk>, New senior management changes or appointments can you just give us some more color on.
The overall strategy and how this new structure better equips offering to compete and then you rune.
10% efficiency improvement for AD, serving data points pretty interesting just broadly how is.
Hi.
Helping with efficiency or the productivity of your engineering team just any high level color on these cost savings.
The strategy or is it or is it just shipping product quicker using.
Using these new copilot tools and stuff like that.
Thank you.
Hey, Ross.
I'll take the first one so on the senior management, it's about talking about generally about timing of promoting the right comments from whom we then to new positions you can see that there is.
This is a little bit more of a programmatic so on Raj who has been.
He was the founder and CEO demand very.
Very strong on programmatic and I'll go AI and machine learning. So we wanted to emphasize that and put it more into the product. This is why we also gave them the responsibility people deploying the organization.
Alex as Endo International business, which is more brand focused in the U S business and now we're pushing very hard on the enterprise Grant funds. So we believe that he is the relationship with agencies brands and his understanding of the business and just generally the right time to make some changes.
Refresh management for the next few years.
Hey, Ross Tennenbaum here I'll take the second question. So first the cost of sales point I made before.
What our engineers did is.
Playing AI predictive technologies to try to predict on the fly in real time, how valuable each one of the ads that we are about to serve this for us and for the publisher and based on that I predicted kind of value ability.
We in real time, we deploy more or less compute resources really affects our actual AD serving.
And data center.
Capacity and so for ads that are <unk>.
Predicted to be lower of lower value, we use less compute creative center resources in both that are.
That are more valuable we use more resources and for those ads that we serve through this architecture, you've seen about a 10% savings in cost of sales. So we think that's a very exciting use of AI.
AI predictive models in terms of where else I'd say, our engineers are pretty much all over this in many different directions that did mentioned briefly.
The co branding is probably something that will be assisted it's going to continue be human human engineered we still don't see anything on code ratings that is.
If it is replacing.
Software human software engineers anytime soon but assisting in writing code more efficiently and faster I think is second for our engineers.
Terms of co testing and review that is an area, where we think we can we can have the engineers being much more efficient and have much more robust in SaaS.
Couldn't be testing.
Using AI and then on <unk>.
Pretty much everything you can imagine on generative.
But I'm not.
Headline or AD creative generation be down to play chess GPT on about 50% of.
Headline suggestions for advertisers.
And we think there is much more to do there and the areas. We're exploring not deployed yet, but we are exploring or on the image generate of AI.
<unk> at creative So I'd say the answer is all of the above.
I happened to be in it. So a couple of weeks ago, and we had a hackathon below engineers globally doing competition around ideas then.
The top three and it's a very exciting thing everyone is embracing it across all the dimensions you everyone mentioned and I think it's gonna be a great.
Great infrastructure for the future.
Yeah.
Thank you. Our next question comes from the line of Laura Martin with Needham <unk> Company. Please proceed with your question.
Just continuing on that really interesting generative I had a question here.
Cost control is really excellent in the quarter, but doesn't just generally the AI work you're doing.
Actually Ed.
Or does it.
Talking about cost savings and the new content.
Capabilities degenerative, but doesn't that isn't it.
Constantly.
Let's start from I wrong about that.
Two.
Yeah.
Yeah.
Okay.
Okay.
Okay.
Kathy.
Ed.
And besides.
How much compute resources to dedicate or to take off each one of the adds that we process. So that kind of cost of sales on the generative.
Parts like the check <unk> headlines and things like that.
We view it as ROI driven.
About creating many more variations of the ads, which feeds into the algorithms, which allows us to drive higher click through rates and.
And higher yield so the way, we view that as really ROI based and obviously a bunch of it takes investments, but if the returns there will we will deploy it.
No.
Okay interesting and then Jason one for you.
In terms of cash allocation. So your free cash flow was negative 27, but I noticed that you're still bought in $3 million worth of shares. So my question is.
Talk to me about cash allocation since it feels like you really need cash for the business right now why would you be shrinking your shareholder base at the same time please.
Sure So maybe I'll start and David given even to add feel free to chime in just to just to just to clarify what are we actually.
$6 million.
Cash that we spent on share repurchases.
In Q1.
Again.
We're considering market conditions and pricing and everything we do feel it is.
It is accretive for our shareholders.
Obviously have to weigh the context of the environment.
Trends on the business and all of that as well, which will continue to do.
Yeah, I think Laura.
We do believe it was.
The Reits use of capital we have significant cash on our balance sheet.
Including top line, you're planning to be cash flow profitable. This year, So I think.
The Reits useful for shareholders then.
We are we will so excited about the about those buying bank, where we manage to buy back half of the debt at very attractive financial terms, and we believe that shifts the value from that.
For into the equity holders of the company.
Thanks, very much thanks, guys.
Thank you, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone keypad. Our next question comes from the line of Hugo <unk> with Citi. Please proceed with your question.
Right.
Oh.
Well you got them all.
Yes.
Yes.
Okay great.
Great. Thanks.
First question just quickly.
So would love an update on Keystone.
What the progress has been.
Some of the stuff we could expect there.
Maybe I'll take that thank you everyone on this call domestic but.
On our last call. We mentioned that we had three more publishers to in the EU and one in Japan.
Since then we've deployed the code on page a keystone to more new publishers.
We see a healthy pipeline of deals.
Okay. Thanks.
So there's some background noise, so I hope, it's not coming through.
On your end.
Think about.
Last year's pace.
Large publisher sign ups.
With which has slowed a little bit this year also.
Thinking about how you guys are focused on the integrations there versus.
Looking to expand this year.
How that changes over the course of the year and into next year.
I'll take that one so last year.
Was there a record year of premium publisher wins and as we said we are very very focused on the premium side of the market and.
Because we also believe it does support.
And so the approach that we're having now to more premium enterprise Brian .
Here, we're looking at it more as Jason said earlier, we're looking to going back to hopefully too.
A better mix. So the net revenue retention versus new we still had I mean, you will see a very strong growth in the coming couple of quarters because of the new publishes agreement.
Last year, but it should be hopefully getting back to a more normalized level of the mix you've seen in prior years from us with these.
Getting closer hopefully soon to the 100% net revenue retention on existing in.
Low single digits.
Low double digits growth.
Thanks.
I could just ask one last bigger.
It's your question.
We're coming to the tail end of.
Earnings here for digital advertisers and thinking about some of the trends we've seen this quarter.
Yes.
I guess, notably.
Unmet.
They look they have outperformed the market their guidance for the second quarter was really strong and what we're seeing.
Not just from them, but across the board, but it's some innovation around ad products.
<unk> done some of our checks we've heard things like.
Like advertisers are getting stronger rollouts are as strong as they did in the past.
So it looks like were.
We're moving past some of those both headwinds and <unk>.
Maybe not all the way back to the idea.
Okay levels I know, it's certainly not everywhere.
But things have kind of evolved since all that came into place and just bigger picture how that impacts how you see that impacting.
Back in the business.
How things move forward.
Okay.
And we saw.
Similar trends.
But you mentioned between January February and March.
<unk> April and May started more volatile April started mobile apparel and stabilize towards the end of the quarter. So we're still in the uncertain environment generally on demand.
The one trend that we see that is in.
You can go full spool leads for advertisers looking for measurable outcome measurable returns on their expanded even if we're talking about brand awareness campaigns of brand consideration campaigns. This plays very well for us because we can deploy our predictive analytics predictive capabilities into delivering much better results from.
Those campaigns, that's why we are so.
Focused on that.
We believe that premium supply attract premium demand. That's why we are focused on the premium supply side. So these areas, we started making more significant investments last year with very limited right now on the amount of areas, where we invest so I would say a keystone in this area I want to be investing and we believe that we can.
Benefits from this trend.
Format of the kinds of things.
Thank you.
Thank you ladies and gentlemen. This concludes our question and answer session I will turn the floor back to management for any final comments.
Hi, This is David so thank you very much towards joining us and.
We look forward to seeing you on our next call. Thank you.
Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.