Q4 2023 Outbrain Inc Earnings Call

Operator: Welcome to Outbrain Incorporated's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Fourth quarter and full year 20 twenty-three earnings conference call. At this time all participants are in a listen only mode of question and answer session will follow the formal presentation. As a reminder, this conference is being recorded I would like to turn the call over to outbreaks Investor Relations. Please go ahead <unk>.

Operator: A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would like to turn the call over to Outbrain's Investor Relations. Please go ahead.

Unknown Executive: Good morning, and thank you for joining us on today's conference call to discuss Outbrain's fourth quarter and full year 2023 results. Joining me on the call today are Outbrain's co-founder and co-CEO, Yaron Galai, co-CEO, David Kostman, and CFO, Jason Kiviat. 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, as updated in our 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 such statements.

Morning, and thank you for joining us on today's conference call to discuss out brains fourth quarter and full year 20 twenty-three resolved.

Joining me on the call today, we have out brains cofounder and Cookie O. Your own Goodbye co C E O, 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.

Updated in our subsequent report 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 such statements.

David Kostman: 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 investor relations website, investors.outbrain.com, under news and events. With that, I will turn the call over to David.

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 relief for definitional information and reconciliations of non-GAAP measures to the comparable GAAP financial measures.

Our earnings release can be found on our I R website investors dot out brain Dot com.

Under news and events.

With that let me turn the call over to David.

David Kostman: Thank you, Jackie, and good morning, and thank you for joining us. Before going into the specifics of the year, I wanted to acknowledge the challenging events that faced us on a geopolitical level. The events of October 7 and the ensuing war are devastating and continue to impact so many of us.

Thank you Jackie and good morning, good thank you for joining <unk>.

Before going into the specifics of the year I wanted to acknowledge the challenging you been six <unk> geopolitical level.

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David Kostman: I want to take a moment to acknowledge our team in Israel and thank them for their unwavering commitment. Over the past couple of years, there have been massive changes to how audiences consume content and how the advertising industry functions as a result. We believe the unique foundational assets we own give us a strong opportunity to capitalize on these changes. We are looking at 2024 as a year of return to growth.

I Wanna take a moment to acknowledge all with him in Israel and thank them for the unwavering commitment and <unk> global team pulled the ongoing support.

Over the past couple of you've gotta be massive change as to how audiences consume content and how the advertising industry functions as a result.

We believe that unique foundation <unk> give us a stronger <unk> to capitalize on these changes.

We are looking at 2024 is a year old returned to grow.

David Kostman: Extract Margin Expansion and Investment in New Growth Areas. We believe this will result in growth this year, as well as double digit growth and a 20% plus EBITDA margin in 2025. With that said, we would like to update you on our long term vision and strategic investment area. Before we dive into the details, I'm going to provide a perspective on the open internet, which is estimated to be a $100 billion advertising market and the opportunities it presents. The open Internet provides access to an increasingly valuable resource. Journalistic Non-User Generated Editorial Content. In addition.

Extra margin expansion in investment and new growth areas.

We believe this will result in <unk>. This here is where the double digit growth and a 20 per cent plus you'd be the mountain in 2025.

With that said, we would like to update you on our long term vision and strategic investment areas.

Before we dive into the details I'm going to provide a perspective on the open internet.

Which is estimated to be 100 billion dollar advertising market and you'll <unk>.

The open Internet provides access to an increasingly valuable resource.

The lipstick non user generated editorial content in addition.

David Kostman: The open internet also provides access to expanded and emerging environments, such as mobile apps, CTV, and retail media. These environments create deep engagement and attention opportunities not found within walled gardens, and they provide unique value to advertisers. And while walled gardens continue to grow, advertisers are seeking to diversify their ad spend across channels that can provide incremental audience moments and efficient reach. Outbrain is well positioned to capitalize on this opportunity, providing a single access point for advertisers. We have an excellent starting point due to our foundational business assets in core AI prediction technology, which has been developed over the last 17 years.

The open Internet also provides access to expand in emerging environments, such as mobile labs C T V and <unk>.

These environments create deep engagement and attention opportunities not found within walled gardens.

And they provide unique value to advertisers.

And why it won't gardens continued to grow advertising speaking to diversify the redfin across channels that can provide incremental audience moments inefficient reach.

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Well positioned to capitalize on this opportunity providing a single access point for advertisers.

We have an excellent starting point, Utah foundation of business assets and core a I predictions technology.

Which has been developed over the last 17 years.

First we have one of the very few companies on the open internet with a critical mass of exclusive cold on page inventory.

David Kostman: We are one of the very few companies on the open internet with a critical mass of exclusive code on page inventory across some 8,000 publishers. This yields valuable proprietary data around consumer interest and engagement. This data, coupled with our core prediction technology, fuels our successful performance advertising business. We've been able to develop new applications of our data and technology with offerings like Keystone, optimizing total publisher revenue initiatives, including subscriptions and e-commerce, and so on. As third-party cookies decline, we believe that our approach to predicting consumer attention based on their editorial interest and their content will be a strong solution for a range of advertised objects.

Cross some 8000 publishes.

This yields valuable proprietary data I won't consumer interest and engagement.

These data coupled with our corporate addiction technology.

That was successful performance advertising business.

We've been able to develop new applications of all the data in technology, we'd offerings like Keystone optimizing told a publisher's revenue initiatives, including subscriptions any commerce and <unk>.

It's third party cookies decline, we believe that our approach to predicting consume attention based on their Vittorio interested in the content will be a strong solution for range of advertise objective.

Second.

David Kostman: We operate a true end-to-end supply chain and two-sided platform. Our owned and operated SSP, DSP, and NatiVac platforms provide transparent, direct access to our critical mass of inventories. We have tools tailored to a range of enterprise objects.

<unk> I'll, probably the true end to end supply chain and two sided platform.

I will owned and operated S. S. B D. S. B a navy bed platform provide transparent directx is still a critical mass of inventory.

With two <unk> two a range of advertising objectives.

David Kostman: As the industry continues to focus on supply path optimization, owning a direct route to unique consumer moments and inventory is more critical than ever. In addition, we believe that these tools give us unique bidding capabilities that drive ROAS for performance advertisers across the open internet. This is especially differentiated in the programmatic ecosystem.

Is the industry continues to focus on to fly past optimization owning a direct route to unique consume a moments in inventory is more critical than ever.

In addition, we believe that these tools give us unique bidding capabilities <unk> performance advertises across the open internet.

This is especially differentiated in the programmatic ecosystem.

David Kostman: So in 2024, we plan to lean on these core assets to expand across three strategic growth pillars. The first pillar is growing our share of Wallet with AdWords. We plan to do so by first, expanding our programmatic branding solutions with Onyxx and second, further developing our performance suite to serve a diverse range of advertisers. Onyxx has enabled us to grow our business with enterprise brands and agencies, significantly expanding our total demand addressable market. Onyx applies our prediction technology to maximize attention with video and high-impact experiences across a dedicated environment, Viewable in Article Inventory.

So in 2024, we plan to lean on <unk> to expand.

Three strategic gross payload.

The first pillar is growing our show of all agree that advertisers.

We plan to do so by first expanding our programmatic branding solutions to be <unk> and second further developing double a performance sweet to serve a diverse range of advertising.

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Has enabled us to grow a business with enterprise brands and agencies significantly expanding our total demand addressable markets.

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Viewable in article inventory.

David Kostman: In 2024, we will be focused on scaling ONIX to directly address ecosystem opportunities around supply path optimization and programmatic media effectiveness with attention. We have a strong foundation of working with enterprise brands through our performance office, with a client base that includes companies such as BMW, GSK, Paramount Plus, Call Your Family, and others, spending more than $200 million with us in 2023. We believe this presents a large opportunity to tap into new branding budgets across our existing client base, driving impactful results across the funnel. We will also continue investing in our performance business, expanding the types of customers we can serve with our two unique platforms. Investment in our proprietary DSP, Zementa, will enable us to provide advanced controls and bespoke service offerings for large-scale advertisers seeking to drive engagement and ROAS across the open internet. Total spend on our DSP in 2023 was approximately $125 million, representing a CAGR of approximately 20% over the last two years. It is important to mention that we don't recognize this amount as part of our gross revenue but keep a service fee from that spend, which is part of our extra gross profit.

In 2024, we will be focused on skating, all mixed to directly address ecosystem opportunities around supply pretzel, figuration and programmatic media effectiveness with attention.

We have a strong foundation of working with enterprise rent two hour performance offering with a client base that includes companies such as B M. W. GSK, Paramount plus <unk> spending more than $200 million with us in 2023.

We believe this presents a large opportunity to tap into new branding budgets across our existing client base driving impactful results across the funnel.

We will also continue investing in <unk> performance business expanding the types of customers. We can service widow with two unique platforms.

Investment into our proprietary Dsp's Samantha will enable us to provide advanced controls and bespoke service offerings for large scale empathizes seeking to drive engagement then Ross across the open Internet.

Total spend on <unk> 2023 was approximately $125 million <unk>.

Representing a keg of approximately 20 per cent over the last two years.

It is important to mention that we don't recognize these amount is part of our gross revenue, but keep the service <unk>, which is part of our extra gross profit.

David Kostman: We expect that our focus on driving strategic key accounts to leverage our DSP will result in significantly higher budgets from these advertisers through access to new open internet supply beyond our country. Both of these strategies create incremental margin opportunities for us. At the same time, we believe that our proprietary native ad platform, Amplify, enables us to drive results for customers of all sizes. We will continue to focus on new uses of AI and automation to provide these customers with growth at scale. [inaudible] This year, we have developed new uses of generative AI in our native app platform to reduce marketer legwork and improve creative performance with dynamic titles. We've seen great success with the adoption of our key automated bidding product conversion bid strategy. Today, 73% of our native ad platform customers use the conversion bit strategy.

We expect that our focus on driving strategic he accounts to leverage all with your speed will result in significantly higher budgets won't be as advertisers through access to the new open internet supply beyond outbreak.

Both of these tried to <unk> create incremental marginal between the police force.

At the same time, we believe that our proprietary navy bed platform amplify.

Enables us to drive results for customers of all sizes.

We will continue to focus on new users will be I am automation to provide this customer's withdraw that's kayla.

While a I has been at the core of our prediction entered for over a decade.

This year, we have developed new uses of January T. V. I, you know when they did that platform to reduce market, the legwork and improve creative fulfillment with dynamic titles.

We've seen great success, we the adoption of over key automated bidding product <unk> strategy.

Today 73 per cent of our navy bed platform customers.

Conversion beat strategy.

David Kostman: Through new uses of AI and automation, we plan to further grow our co-performance customer base. The second pillar is expanding our supply footprint to reach consumers across the entirety of the open internet beyond traditional fees. As audience consumption habits shift, we're expanding our access to audiences beyond web publishing. We plan to continue bringing our core technology and demand offering to mobile apps, OEMs, and platforms. We expect that the engagement-based bidding capabilities on our DSP will enable us to drive differentiated performance and outcomes across this new supply, providing a single access point to open internet consumers while driving outcomes and ROAS in 2023.

Two new uses obey iron automation <unk>, our quote performance customer base.

The second pillar is expanding of a supply footprints to reach consumers across the entirety of the open internet beyond traditional fees.

Audience consumption habits shift, we're expanding away access to audiences beyond with publishing.

Plan to continue bringing up a quote technology and demand offering to mobile apps Oems and platforms.

We expected the engagement <unk> billing capabilities on our D. S P.

Will enable us to drive differentiated performance and outcome across this new supply providing a single access point to open internet consumers.

Driving outcomes and Ross.

In 2023.

David Kostman: Advertiser spend that was incremental to our co-publisher feed inventory accounted for over 20% of the total advertiser spend with Outbrain. We plan to grow this supply in 2024 and beyond to expand advertiser access to engage audiences at scale. Now to our third pillar, continuing to grow our premium publisher partnership. Bringing advertising dollars back to news by better demonstrating the value of these audiences is more critical than ever, as authentic reporting is so essential to democracy.

Advertised to spend the incremental to our quote published to feed inventory accounted for over 20 per cent of the total advertisers spend without brain.

We plan to grow the supply in 2024 and beyond to expand advertise access to engage audiences escape.

I'll do a third pillar <unk>.

Continuing to grow our premium Punisher partnerships.

Bringing advertising dollars back to news by better exhibiting the value of these audiences is more critical than ever.

Authentic reporting is so essential to democracy.

David Kostman: Journalistic content will only become more valuable and differentiated. We're continuing to invest in enhancements to our core prediction engine in an effort to drive higher yields for our publisher partners. In 2023, we saw continuous CTR improvement with double-digit improvement in H2.

Journalistic content will only become more valuable than differentiated.

We're continuing to invest in enhancement install a corporate addiction engine in an effort to drive higher yields follow a publisher partners.

In 2023, we still continue C T R improvements with double digit improvements in H two.

David Kostman: This prediction engine underpins our co-publisher and advertiser offerings with the goal of infusing publishers with sustainable year-round revenue and critical audience development solutions. As mentioned, Keystone remains a key area of investment, providing publishers with a customizable SaaS platform that optimizes total publisher revenue across subscriptions, e-commerce, and more. And finally, ONIX also enables our publisher partners to benefit from a new demand offering, monetizing new in-article video inventory for us. At the end of 2023, we secured access to more than 1,000 video placements in articles.

Prediction engine underpins, the cold probably showing advertise offerings with the goal.

Choosing publishes with sustainable year round revenue and critical audience development solution.

As mentioned Keystone remains a key area of investment providing publishers with a customizable theft platform that optimize the total publisher revenue across subscriptions Tacoma symbol and.

And finally <unk> also enables that will publish a process to benefit from a new demand offering monetizing new in article V do inventory for us.

At the end of 2023, we secured access to more than 1000 nautical placement.

David Kostman: Coupled with our existing performance offering, publishers can now benefit from a total full-page monetization offering with one part. Let me now recap our Q4 performance. First, I am pleased that we achieved our guidance both on extra gross profit and adjusted EBITDA. I want to refer to some of the highlights for Q4, which reflect the investments we have already made in each of the areas I just mentioned. We've seen great market reception since the launch of Onyx in June 2023, with more than 150 accounts running on the ONIX platform in H2. We hit our initial expectations of 10 to 20 million dollars in ONIX revenue just six months after launching in the second half of the year. Onyxx enables us to expand our demand offering for brands with solutions from brand building to performance. Toyota is a good example of this opportunity. Toyota leveraged ONIX for the pilot of its new Toyota C-HR model.

Coupled with our existing performance offering publishers can benefit from the total full page monetization offering with one partner.

Let me know we kept up with Q for performance.

First I'm pleased that we achieve though a guidance both an excellent gross profit and adjusted EBITDA.

I want to refer to some of the highlights will queue for which reflect the investments we have already made they need to be areas I just mentioned.

We've seen great market reception to the launch of all mixed in June 2023.

With more than 150 account's running on the <unk>.

We've hit that way initial expectations with $10 million to $20 million <unk>, just six months after launching in the second half of the year.

Onyx enables us to expand out with demand offering for brands with solutions from brand building to performance.

So you don't think it's a good example of this opportunity.

So you are the leveraged <unk> for the pilots of its new Toyota C. H R model.

David Kostman: Using ONIX's contextual pre-roll video format to drive incremental high-attention moments, building stronger awareness and consideration with its target audience. Toyota then harnessed the top of its final successes to fuel the performance campaigns they run via Outbrain's performance suite. With Onyxx, Toyota achieved 82% viewability, 70% video completion rate, and outperformed Adelaide's attention benchmark by 41%.

Using onyxis contextual feral video four months to drive incremental high attention moment building stronger awareness in consideration <unk> get the audience.

Toyota then <unk> <unk>.

Talk to funnel successes too.

<unk> the performance campaigns, they run <unk> performance suite with Onyx, Toyota cheap, 82% of your ability, 70% completion rate and outperform add alive attention benchmark by 41 per cent widow performance sweep Toyota managed to drive efficient qualified visit.

David Kostman: With our performance suite, Toyota managed to drive efficient, qualified visits to Toyota's dedicated landing page, offering advertising offers for the new car model. This is a true cross-funnel opportunity. We also continue to secure strategic publisher partners, which is a testament to the value of our full-page monetization and our total revenue offer. In Q4, we continued our momentum of premium publishers switching from competitors, securing a long-term partnership with Newscope Australia. This marquee deal was signed early January.

Toyota dedicated landing page.

Advertising offers for the new car model.

This is a true cross final opportunity.

We also continue to secure strategic publish apartments, which is a testament to the value of a full page one a physician and with total revenue awesome.

In queue for we continue though on momentum of premium publishers switching from competitors, securing the longterm partnership with new scope Australia.

<unk> deal was signed early January.

David Kostman: Additional wins from competition in Q4 include Huffington Post. [inaudible] These Q4 wins complement our premium publisher wins in the last two years, demonstrating the strategic value and our relative advantage in the market. We also renewed long-term partnerships with leading premium publishers, including.dash Meredith, Pochento, Le Parisien, Eaton Digital, and Handelsblad. Adoption of Keystone increased the cost of our existing and New Publisher Base with launches on CNN, Entrepreneur, and The Telegraph and was a key factor in our New Scope deal. To sum it up, we are confident that our investment strategy, started in H2 2023 and continuing into 2024, will strengthen our strategic value as a leading cross-funnel platform for the open internet. As a result, we're also providing a high-level outlook for 2025, where we expect to achieve extra growth of 10 to 15% and an EBITDA margin of at least 20%. I'm personally very excited about the decisions we've made and the speed in which we are executing them. As you may have seen in the release this morning, Yaron will be stepping down from the co-CEO role.

Additional links from competition in queue for include Huffing, some polls would.

<unk> sports, one border international and others.

These two forwards complement our premium publish a wins in the last two years, demonstrating the strategic value and a relative advantage in the market.

We also renewed long term partnerships with needing premium comedy shows, including the dish Meredith <unk>, Ethan digit, though and hundreds of <unk>.

Adoption of Keystone increase the costs are existing.

And you'll publish a bit we'd launches on C N N and to printer and the telegraph and was a key factor in our newest cold deal.

To sum it up.

Confident that the only investment strategy.

In H, 220, 23, and continuing into 24.

Would strengthen our strategic value as a leading cross final platform for the open Internet.

We believe this will drag substantial growth and profitability in the coming years.

A result, we're also providing a high level out to look for 2025, where we expect to achieve extra growth of 10% to 15% and then maybe the mountain.

Of at least 20 per cent.

I personally very excited about the decisions, we've made and the speeds speed in which we are executing them.

As you May have seen either released this morning, <unk> will be stepping down from the cosio role.

Yaron Galai: I want to take this opportunity to thank Yaron, a close personal friend and a truly amazing business partner. We have accomplished an incredible amount over our six years working together, and I'm privileged to be part of the amazing company he founded. With that, I'll turn it over to Yaron to talk about the future and what's next for him. Thanks, David. I appreciate the kind words.

I want to take this opportunity to thank you run a close personal friend and a truly amazing business partner.

I have accomplished an incredible amount over with six years working together.

And a privilege to be part of the Amazing company. He founded.

With that I'll turn it over to your wrong to talk about the future and what's next for him.

Thanks, David.

Appreciate the kind words.

Yaron Galai: 17 years ago, I recognized that consumers needed better personalization of their content and ad experiences, that publishers needed better ways to engage people and monetize, and that advertisers needed great ROAS on the open internet. That's when I decided, together with Ori Laha, my co-founder, to create Outbrain and pioneer many of the things that inspired other companies over the years. Since then, we've generated over $5 billion for our partners, and it has been a crucial way for many of the world's best publishers to keep journalists, editors, and fact-checkers employed, which, as we all know, are so crucial for our functioning democracies now Today, many of Outbrain's innovations are taken for granted as this is obviously how things are done.

17 years ago, I recognize the consumers needed better personalization of their content at experiences upstairs needed better ways to engage people and monetize and the advertisers needed great row S. On the open Internet.

That's why I decided together with oriola mycostat or to create alperin and pioneer many of the things that inspired other companies over the years.

Since then we've generated over $5 billion for our partners, which has been a crucial way for many of the world's best sculptures to keep journalists editors in fact checkers employed.

Which as we all know are so crucial for a functioning democracy is now more than ever.

Today, many of outbreaks innovations are taken for granted as this is obviously how things are done.

Yaron Galai: As a founder, I'm tremendously proud of that. It's every founder's dream to move from untested, widely doubted ideas to form multi-billion dollar markets where their fundamentals are taken for granted. Before I talk about the CEO transition, I want to acknowledge the shifts in our industry and the opportunities they present to Outbrain as the company evolves into its next chapter. Advertisers are moving through paradigm shifts, both because of consumer habit changes and traditional ad targeting methods, which are evolving with the decline of third-party cookies. Accordingly, publishers on the open Internet are also challenged on both ad monetization and audience development. I strongly believe in Through the combination of Outbrain's expanded performance suite and our entirely new branding platform on it, Advertise will be able to connect the steps of the consumer journey across the open internet.

As a founder of tremendously proud about that it's every <unk> founder screen to move from untested widely touted ikea to forming multi billion dollar markets, where there are fundamentals are taken for granted.

Before I talk about the seal transition I Wanna acknowledged assist in our industry and the opportunities they present to alperin accompany a false truths next chapter chapter.

Advertisers are moving through paradigm shift because of consumer habit changes.

In traditional AD targeting methods, which are evolving with the decline of third party cookies.

Accordingly publishers on the open Internet are also challenge them, both at monetization and audience development.

I strongly believe in the points that David has raised about <unk> ability to provide compelling solutions for both advertisers and publishers are meant the industry changes.

Through the combination of outbreaks extended performance sweet and are entirely new branding platform Onyx.

Advertise will be able to connect the steps of the consumer journey across the open internet.

Yaron Galai: This has the potential to create huge value for our publisher partners, giving them one reliable partner to provide sustainable, year-round monetization from both brand and performance budgets. As we look to the future, we're focused on utilizing the core prediction technology that has enabled us to recommend relevant editorial and paid experiences for over 17 years to new supply environments and new publisher revenue goals. Through Keystone, we enable partners to both diversify their revenues on top of ads and to enhance their audience development at a time when search and social are no longer as reliable as they were in the past. And I believe Outbrain will only become a more critical partner for publishers as we use new solutions like Onyx to bring even more advertising dollars back to news.

This has the potential to create huge value for a publisher partner is giving them one reliable partner to provide sustainable year round monetization from both brand and performance budgets.

Cause we look to the future we're focused on utilizing core prediction technology has enabled us to recommend relevant editorial paid experience for over 17 years to new supply environments, New publisher revenue goes.

Through Keystone, we enable partners to both the first five of revenues on top of that and to enhance their audience development.

Time, where search and social are no longer as reliable as they were in the past.

And I believed alperin will only become a more critical partner for publishers.

We use new solutions like Onyx to bring even more advertising dollars that to news.

Yaron Galai: But beyond products like Onyx and Keystone, what gives me the most confidence about Outbrain's future is the incredible leadership team we've grown over the years. The average tenure of both our executive team as well as the key employees driving business each day is over 10-plus years, and that's a real rarity in tech. And for the past several years, Outbrain's management team has received amongst the highest scores in our company-wide engagement surveys. Of everything I've built over the years at Outbrain, it's our team of people at Outbrain that I am most proud of, and it's this incredible quality of talent that gives me tremendous confidence and comfort in the future of Outbrain through this transition. So, for all these reasons, I feel now is the right time to phase out of my role as co-CEO.

But beyond products like audits in Keystone, What gives me the most confidence about offering future incredible leadership team with grown over the years.

The average tenure of both our executive team as well as the key employees driving business each day as it over 10 plus years, that's a real rarity in tech.

And for the past several years offerings management team has been receiving amongst the high scores in our company wide engaged in surveys.

Of everything I've built over the years it out brain, it's our team of people that out for him that I am most proud of and it's just incredible quality of talent, which gives me tremendous confidence and comfort in the future if out for him through this transition.

So for all these reasons I feel now is the right time to phase out of my role as co C. O. It's clear that out brain is entering a new and exciting era applying the best parts of our business to new areas as the industry around us changes.

Yaron Galai: It's clear that Outbrain is entering a new and exciting era, applying the best parts of our business to new areas as the industry around us changes. As an entrepreneur, I view times of change as times of opportunities for companies like Outbrain. Therefore, I'm very excited about the company's prospects. CEO transitions can be difficult for companies, especially after a tenure as long as 17 years.

As an entrepreneur of you times have changed times of opportunities for companies like out for him and therefore I'm very excited about the company's prospects through this.

C O transitions can be difficult for companies, especially after a tenure as long as 17 years than afternoons case, we've had the privilege of our next C O David Kaufman already operating as Cosio together with me for the past six years.

Yaron Galai: In Outbrain's case, we've had the privilege of our next CEO, David Kostman, already operating as co-CEO together with me for the past six years. David is greatly respected at all levels of the company and is deeply trusted by our customers and our shareholders. For all these reasons, I'm confident that our CEO transition will be as smooth as it can be.

David is greatly respected at all levels of the company and it's deeply trusted with our customers and our shareholders.

For all these reasons I'm confident that our C O transition will be smooth as can be.

Yaron Galai: On a personal note, I look forward to continuing as chairman of the board and serving as an advisor to the company. I have no plans for a new or next company upon departing Outbrain, and I look forward to this next chapter after 17 amazing years. And with that, for my last time, I'll hand it over to Jason to cover. Thank you, Ron.

On a personal note I look forward to continuing as chairman of the board and serving as an advisor to the company.

Have no plans for new or next company with Hunter Party out brain and I look forward to this next chapter Asterix 17 amazing ears.

And with that for my last time, I'll hand, it over to Jason's cover financials.

Thank you.

Jason Kiviat: As David mentioned, we achieved our Q4 guidance for both ex-tech gross profit and adjusted EBITDA. From a demand perspective, I mentioned last quarter that October showed a flatter pattern than the seasonal list we historically see that time of year, which we believe was driven by transient factors, the delaying or reducing of budgets in the early part of the quarter, resulting from geopolitical and macro uncertainties, along with lower monetization from the war-related news that dominated much of our large publisher partners' content in October. We then saw recoveries in November, particularly around Black Friday and Cyber Monday.

As David mentioned, we achieved our queue for guidance for both X Tech gross profit and adjusted EBITDA from.

I'm in demand perspective, I had mentioned the last quarter of October had shown a platter pattern and then the seasonal list, we historically see that time of year, which.

Which we believe was driven by transient factors delaying or reducing our budgets in the early part of the quarter, resulting from geopolitical and macro uncertainties, along with lower modification from the war related news that dominated much of our large publisher partners content at October.

That's a recovery and say November, particularly around Black Friday and cyber Monday.

Jason Kiviat: Despite the softer October, Q4 saw a recovery of yields, or RPM, which returned to year-over-year growth for the first quarter since Q1 2022. Notably, as demand levels remain soft relative to our supply levels, the yield growth was driven by higher click-through rates, benefiting from algorithm and optimization improvements. Revenue in Q4 was approximately $248 million, reflecting a decrease of 4% year-over-year.

Despite the software October two four saw recovery of yields RPM, which returned to your your growth for the first quarter since Q1 2022.

Notably at the man levels remain soft relative to our supply levels field.

The old growth was driven by higher click through rates benefiting from algorithm and optimization improvements.

Revenue in Q4 was approximately $248 million, reflecting a decrease of 4% year over year.

Jason Kiviat: New media partners in the quarter contributed 4 percentage points or approximately $11 million of revenue growth year-over-year. Net revenue retention of our publishers is 91%, which reflects the continued headwind from the impact of the demand environment on pricing, which remains the consistent factor driving pressure on our revenue and on our net revenue. We did also experience a decline year-over-year in ad impressions, also contributing to the retention being below 100%, driven largely by page view volatility from certain supply sources and platforms, as opposed to churn.

Mmm me your partners in the corner of contributed four percentage points are approximately $11 billion of revenue growth year over year <unk>.

Net revenue retention of our publishers was 91 per cent, which reflects the continued headwind from the impact of the demand environment on pricing, which remains the consistent factor driving pressure on our revenue and on our net revenue attention.

We did also experienced a decline year over year of bad impressions also contributing to the retention being below 100 per cent driven largely by pages volatility I'm certain supply sources and platforms as opposed to churn.

Jason Kiviat: Consistent with recent quarters, Churn has remained at similarly low levels, with logo retention of 96% for all partners that generated at least $10,000, and our five largest churns amounted to only three combined points of year-over-year headwind in Q4. Into Q1, we have seen a slightly higher seasonal step down from Q4. While yields remain up year over year, continuing the momentum from Q4, supply volatility from certain partners and platforms has driven ad impressions to be down year over year. Based on what we've experienced, we also see opportunity for growth from these sources into late Q1 and beyond. In our guidance, we applied a wider range of outcomes to reflect volatility. Hashtag gross profit was $63.8 million, an increase of 8% year over year, outpacing revenue for the third quarter in a row, driven primarily by improved deal performance on certain media partners and the net impact of revenue, Moving to expense. Operating expenses decreased approximately 8% year-over-year to $47.5 million in the quarter as we continue to exercise discipline around spending.

Consistent with recent quarters churn has remained similarly low levels with logo retention of 96 per cent for all partners the generated at least $10000 and our five largest turns amounted to only three combined points of year over your head when you Q4.

Into Q1, we have seen a slightly higher seasonal stepped down from two four.

<unk> remain up year over year, continuing the momentum from two for the supply of volatility from certain partners and platforms has driven add impressions to be down your over here.

Based on what we've experienced we also see opportunity for growth from new sources until eight Q1 and beyond.

And our guidance, we applied a wider range of outcomes, reflecting volatility.

Et at gross profit.

$63.8 million, an increase of 8% year over year outpacing revenue for the third quarter in a row driven primarily by improved your performance on certain media partners and the net impact of revenue mix.

Moving too expensive.

Operating expenses decreased approximately 8% year over year to 47, and a half a million and a quarter as we continued to exercise discipline around spending.

Jason Kiviat: The largest component of this is compensation-related expenses, which were down approximately $4 million or 11% year over year. We began 2024 with a headcount of approximately 870 SDEs, which is down about 11% from January 2023, as we have focused our attention on driving greater efficiencies in our operations and now on redeploying resources towards higher confidence growth areas that David mentioned. As a result of our cost management and growth of expected gross profit, demonstrating the leverage in our model, adjusted EBITDA was $14 million in Q4, approximately doubling year over year, moving to liquidity. Free cash flow, which, as a reminder, we define as cash from operating activities plus capex and capitalized software costs of approximately $21 million in the fourth quarter, benefiting from higher profitability and seasonal working capital.

<unk> component of this is compensation related expenses, which were down approximately $4 million or 11% year over year.

He began 2024 with a head count on approximately 870, Ftes, which is down about 11% from January 2023, we have focused our attention on driving greater efficiencies in our operations and now on redeploying resources towards higher confidence crook areas that David mentioned.

As a result of our cost management and growth of pet gross profit displaying leveraged our model adjusted EBITDA was $14 billion in queue for approximately doubling year over year.

Moving to liquidity.

Free cash flow, which as a reminder, we define as cash from operating activities less capex and capitalized software cough.

Approximately $21 million in the fourth quarter benefiting from higher profitability seasonal working capital benefits.

Jason Kiviat: While we are pleased to have such strong free cash flow in the quarter, we still see pressures on working capital, particularly around collections, with elevated DSO levels remaining from Q2 into Q4. Considering free cash flow for the full year 2023, we saw a net use of cash of approximately $6 million, which excludes a $4 million benefit from our investment portfolio that benefits cash from investing activities as opposed to free cash. As a result, we ended the quarter with $231 million of cash, cash equivalents, and investments in marketable securities on the balance sheet, and $118 million of long-term convertible debt. In December 2022, the company's board of directors authorized the $30 million share repurchase program, incremental to the $30 million program fully executed in 2022.

While we were pleased to have such drunk free cash flow in the corner, we still see pressures on working capital, particularly around collections with elevated PSA levels remaining Q2 Q4.

Considering free cash flow for the full year 2023, we saw <unk> use of cash on approximately $6 million, which includes a 4 million dollar benefit from our investment portfolio that benefits Katherine investing activities as opposed to free cash flow.

As a result, we ended the quarter over $231 billion cash cash equivalents and investments and marketable securities on the balance sheet at 118 million a longterm convertible debt.

In December 2022, the company's board of directors authorized 30 million dollar share repurchase program incremental to the 30 million dollar program fully executed in 2022.

Jason Kiviat: In 2023, we purchased approximately 3.7 million shares for $17.8 million. In total, in 2022 and 2023, we have reduced our outstanding share count by approximately 12%, which 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 and regular seasonality.

2023.

You purchase approximately 3.7 million chairs for $17.8 million in total in 2022, and 20 twenty-three you ever do you start outstanding share count by approximately 12%.

I continue to believe as an attractive way to enhance shareholder value under current market conditions.

Now turning to our outlook.

Discuss today and and prior Clutters visibility to advertising budgets remains limited in.

In our guidance, we assume that current macro conditions persist with no material deterioration or improvement in regular seasonality.

Jason Kiviat: With that in mind, we have provided the following guidance for Q1 and full year 2022. For Q1, we expect an ex-tech gross profit of $50.5 million to $53.5 million, and we expect just an EBITDA of negative 1 million to positive 1 million. For full year 2024, we expect an ex-tech gross profit of $238 million to $248 million, and we expect just an EBITDA of $30 million to $35 million. This provides additional context to how we see 2024. Our expectation is that we will begin to see more meaningful year-over-year growth of ex-tech gross profit over the course of the year, while expenses increase slightly sequentially over the year. For XPAC, we expect mid-single-digit percentage growth year-over-year in Q2 and Q3, followed by double-digit growth in Q4, driven by returns from our focused investment areas David touched on.

With that context via.

We have provided the fallen guidance for Q1 and pull your 2024.

Q1 respect X tech gross profit of 50.5 million to $53.5 million.

Can we expect adjusted EBITDA of negative $1 million deposit of $1 million.

For full year 2024, we expect X Tet gross profit of 238 million to $248 million and we expect adjusted EBITDA of 30 million the $35 million.

Provide additional context of how we see 2024, our expectation that we begin to see more meaningful year over year Groesbeck Tex gross profit over the course of the year.

<unk> increased slightly sequentially over the year.

<unk> respect mid single digit percentage growth year over year, two two and Q3, followed by double digit growth in queue for driven by returns from our focused investment areas David touched on.

Expanding our supply beyond our traditional fees.

Growing enterprise Brandon Agency spent crunk performance advertisers spent and growing and optimizing publisher revenues.

Notably many of the areas where focus on our areas, where we expect that we can <unk> gross profit growth outpaces revenue growth.

Jason Kiviat: Ending Our Supply Beyond Our Traditional Feeds, growing enterprise brand and agency spend, growing performance advertiser spend, and growing and optimizing publisher revenues. Notably, many of the areas we're focused on are areas where we expect that we can drive extra gross profit growth that outpaces revenue growth. As we assume a flat macro environment with no material lifts from pricing improvements, our assumed growth over the course of the year is driven by our execution of these investment areas, contributing more meaningfully in the second half of the year. Now I'll turn it back to the operator for Q&A. Thank you. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue.

As we assume a flat macro environment with no material list from pricing improvements are assumed growth over the course of the year is driven by her execution. These investment areas contributing more meaningfully in the second half of the year.

Now I'll turn it back to the operator for Q&A.

Thank you if you would like to ask a question. Please press star one on your telephone keypad a confirmation teller indicate your line is in the question queue. You may <unk>, if he would like to remove your question in the queue and.

And for a package that you think speaker equipment, it may be necessary to pick up your handset before pressing the darkies.

Our first question is from <unk> <unk> with Evercore ISI. Please proceed.

Okay. Thank you for taking my question.

Could you. Please comment on your confidence of getting to 20 per cent plus <unk> <unk> right now as I did and after that it implies no double digit system is Marshall. So that's a meaningful expansion. So could you. Please help us put that together.

Shweta R. Khajuria: And for participants using speaker equipment, it may be necessary to pick up your handset before pressing Star 2. Our first question is from Shweta Khajuria from Evercore ISI, please. Okay, thank you for taking my questions. Could you please comment on your confidence of getting to 20% plus EBITDA margins next year? So your full year guide right now, if I did the math right, it implies low double digit percentage margins. So that's a meaningful expansion. So could you please help us put that together?

Jason just your confidence in the back half way to go for for top line and you you just mentioned some of the drivers.

How much visibility do you have in your ability to deliver accelerating and the back half of this year.

Wishing you all the best around thank the time, it's been great.

Looking forward to seeing what you do next.

I swear that thanks bye.

Okay.

Shweta R. Khajuria: And then, Jason, just your confidence in the back half-weighted growth for the top line. And you just mentioned some of the drivers, but how much visibility do you have in your ability to deliver accelerating growth in the back half of this year? And then, wishing you all the best year-round.

Thank you.

And let me take the first the first one on 25 I mean, there's a reason to be giving good outlook. I mean, you can see with giving <unk> many more matrix than before.

Really excited about the future we're very excited about opportunities on the open internet, both with though existing basin and another platform. Then you heard the strategic wrote to highlight thank.

Shweta R. Khajuria: Thanks a ton. It's been great. I'm so looking forward to seeing what you do next. Hi Shweta.

David Kostman: Thanks Shweta. Sorry. Thank you. And let me take the first point on 25.

We're looking at noon expansion of shove only be dead, but things are both on the.

David Kostman: I mean, there's a reason we're giving an outlook. You can see we're giving on this call many more metrics than before. We're very excited about the future. We're very excited about opportunities on the open internet, both with our existing base and on other platforms. And you heard the strategic pillars of growth we're highlighting. And we're looking at real expansion of shareholding with advertisers, both on the brand awareness side that we're building with Onyx and much deeper into shareholding with our performance advertisers, which has been the core of our business. So we see many segments there where we can grow significantly through the use of the Zementa bidding technology and expand the reach to third-party supplies way beyond our publisher base. So that's the second one, going beyond the publisher base and offering a much larger supply base for them. And then growing the premium publisher partnerships that we have. It's something we announced in Newscope Australia.

Brand awareness side that <unk> and much deeper into show avoided without performance Empathizes, which has been Nicole viable business. So we see many segments there will be can grow significantly through the use of <unk> technology.

And expanding the reach to third party supplies way beyond that will punish the base. So that's the second one going beyond the <unk> and and offering much lodge a supply base for them and then.

A growing the premium pump publish <unk> publish upon the shapes that we have something we announced a new scope of strained there'll be paid to the string of major.

Premium publisher wins, we think there's a lot of what you need to do to grow and it's coming through the offering that we give them, but these gross but to do the combination of the fee and Keystone sort of looking at E Commerce optimization subscriptions and others gives us a we believe a big advantage and also the quality of <unk> and the <unk> replacement so would it be.

I'm a good most strategic partner there.

<unk> and this is giving us and we made the investments I mean, you can see it in our expensive.

David Kostman: We've had a string of major Premium Publisher wins. We think there's a lot of opportunity there to grow, and it's coming through the offering that we give them that is very strategic. The combination of the feed and Keystone, sort of looking at e-commerce optimization, subscriptions, and others gives us, we believe, a big advantage there, and also the quality of Onyx Demand and the Mid-Arctic Replacement. So we're becoming a more strategic partner there. And so overall, and this is giving us, and we made investments, I mean, you can see in our expenses, they're a little higher than probably what you expected.

Higher than probably what to expect it. So we we made some strategic investment second half and we're doing anything 24.

And then that that's where we have really good confidence around the 2500 <unk>.

<unk>, you'll double digit growth in 2025, and also very focused on the adjusted EBITDA margin of 20 per cent.

Sure sure such Jason I'll I'll I'll put you on the second question that you had so as far as just how we you know build our guidance. It's our our normal seasonality based model of course, and we're considering the trends that we've seen as a Q1, which is a continuation of of Q for his growth and <unk>.

David Kostman: So we made some new strategic investments in the second half, and we're doing it again in 2024. And then that's where we have really good confidence around 2025. And we gave that outlook of, we've seen real double-digit growth in 2025, and also very focused on the adjusted EBITDA margin of 2023. Sure, Hi Shweta, it's Jason.

A year, but you again I mentioned that a call we haven't seen in quite a few quarters. Here. We're also considering the isolated supply volatility that I talk to on the call, but we we think is a temporary but roughly know expanding our arrange an in being cautious about it as.

As far as you know the impact of these these these gross drivers over the course of the year you know.

Many of them are areas that we expect will grow margin and so you know what you'll see is you know, we're we're kind of doubling down on a lot of areas that we think can can pay off and there's a balance of of some of these items have more immediate you know pay off optimizations of our network celebration of our supply outside the fees and partnerships.

Jason Kiviat: I'll push on the second question that you had. So as far as just how we, you know, build our guidance, it's our normal seasonality-based model, of course, and we're considering the trends that we've seen in Q1, which is a continuation of Q4's growth in yields year over year, which again, like I mentioned on the call, we haven't seen in quite a few quarters here. We're also considering the isolated supply volatility that I talked about on the call, which we think is temporary, but we're obviously, you know, expanding our range and being cautious about it. As far as, you know, the impact of these growth drivers over the course of the year, many of them are areas that we expect will grow margin.

Perfect performance, along with some that have probably a little bit longer term payoffs that are that are more back have waited the penetration of onyx and and the shift to more video formats <unk>, you'll see in our guidance as a slightly more back waited that are you know 2020th for your 2021, but not not more meaningfully.

From the top line perspective, and obviously I think our costs are you know really headcount related as far as an investment going there, they're really evenly spaced throughout the year, which which excuse me bitter towards the back half consistent with our history, but I think we'll we'll be able to kind of monitor results and and you know.

Jason Kiviat: And so, you know, what you'll see is that we're kind of doubling down on a lot of the areas that we think can pay off. And there's a balance between some of these items that have more immediate payoffs, such as optimizations of our network, you know, acceleration of our supply outside the feed and partner specific performance, along with some that have probably a little bit longer-term payoffs that are more back half weighted, you know, the penetration of Onyx and the shift to more video formats. What you'll see in our guidance is slightly more backweighted than our, you know, 2023 or 2021, but not meaningfully from a top line perspective. And obviously, I think our costs are, you know, really headcount related as far as our investments go. And they're really evenly spaced throughout the year, which skews EBITDA towards the back half, consistent with our history, but I think we'll be able to kind of monitor results and, you know, Control. Okay, thanks, David. Thanks, Jason. Our next question is from Andrew Boone with JMP Security. Good morning, and thanks so much for taking my questions.

<unk>.

Okay. Thank you and at Thanksgiving.

Our next question is from Android phone with J M. P Securities. Please proceed.

Good morning, and thanks, so much for taking my questions I wanted to ask a bigger picture question just on the health of the overall digital publisher <unk>.

We've seen shutdowns in terms of advice by the speed you sold complex. It just feels like it's very tough sledding out there for general publishers.

Can you just opine on the overall health of the industry and how that relates back to to out brain. How viable do you guys need digital journalism can be prop random or it can grow revenue.

And then secondly, I wanted to ask about the second pillar of great that you talked about earlier exceeding supply tactfully. What is that look like help us better understand what additional sore supplies could be and then how that relates back to kind.

<unk>. Thanks, so much.

Hey, I'm sure I'm, sorry to hear you want or I can take out a bright mucus.

Okay. Thanks, Andrew you're around here, so I'll take the first steps of the over all of them 60 will jump in with the second question. So first of all as as we said and now we've been executing.

The view of just publishers for us is quite an error. So we grow outside of the traditional publishers and <unk>.

Andrew M. Boone: I wanted to ask a bigger picture question just on the health of the overall digital publisher scene, and shutdown. BuzzFeed just sold Complex. It just feels like it's very tough sledding out there for digital publishers. Can you just comment on the overall health of the industry and how that relates back to Outbrain?

Three main ways. The first one is through our programmatic extensions through the D. S. T that we <unk>, we have reached plenty of non publisher or <unk> in Detroit.

The second is through our platform partnerships. So we confirm business with non apsaras, such as Samsung phones, and Oh, Yeah, I'm, so looks like that and the third which we also mentioned you're still small the crow in his in <unk> presence, which some of it helps you split up much of it is into the future isn't necessarily so.

Andrew M. Boone: How viable do you guys need digital journalism to be for Outbrain to work and grow revenue? And then, secondly, I want to ask about the second pillar of growth that you talked about earlier, expanding supply. Tactically, what does that look like?

The way the way I think of this in in <unk> terms is less of the word publishers. They are obviously very important partners fuss and and will be for the future, but it's not necessarily think of this war as <unk> contact consumption time or canvases, where.

David Kostman: Help us better understand what additional sources of supplies could be, and then how that relates back to Quirrell. Thanks so much. Hey, Andrew. I think you want it, or I can take it.

Yaron Galai: Okay, thanks, Andrew. You're on here. So I'll take the first stab at the overall picture, and then Tiki will jump in with the second question. So first of all, as we've said, and as we've been implementing, I think the view of just publishers for us is quite narrow. So we grow outside of traditional publishers in three main ways. The first one is through our programmatic extensions; through the DST that we own, Zenanta, we now reach plenty of non-publisher or non-feed inventory.

Consumption happens, that's still plenty big and moving maybe you know shifting between different different types of companies, but for us as long as that kind of consumption and time spent happens that's opportunity for us also with the <unk> with some of the pressures I think <unk> is.

Yaron Galai: The second is through our platform partnerships. So we've been growing business with non-publishers, such as Samsung phones and OEMs and folks like that. And the third, which we also mentioned here, still small but growing, is in-app presence, which some of it is publishers, but much of it, in the future, isn't necessarily. So the way I think of this in Outbrain terms is less of the word publishers.

Is there a number one best.

Best partner of choice, because we're both a reliable solid manifestation partner growing the monetization opportunities for things like the <unk> with code on page and the tremendous size of.

<unk>, we have a lot of first part of data, which makes us pretty resilient compared to other things cultures have and then the other pillars that are very important for these pictures, especially these days audience development, which they're not getting as much of from search and social operating as a fantastic partner for them on that and revenue.

Yaron Galai: They are obviously very important partners for us and will be in the future, but it's not necessarily so. I think of this more as content consumption time or canvases where consumption happens. That's still plenty big and moving, maybe, shifting between different types of companies. But for us, as long as that kind of consumption and time spent happens, that's an opportunity for us; some of the pressures, I think Outbrain is their number one best partner of choice because we're both a reliable, solid monetization partner, growing the monetization opportunities through things like ONIX, with code on page, and the tremendous size of our footprint. We have a lot of first-party data, which makes us pretty resilient And then on the other pillars that are very important for these publishers, especially these days, audience development, which they're not getting as much of from search and social. Outbrain is a fantastic partner for them on that, and revenue diversification through Keystone. So all those things, I think, will become even more important for publishers in the future.

Presentation through Keystone. So all those things I think become even more important for for the publishers are into the future and then just the last point in terms of <unk> open Internet is I'm not good with cancer and call. It the $60 billion to $80 billion in and Tim and throwing within that we think.

Is a big auction visa things like the Onyx, we're both incremental growth Sun.

The types of budgets, we bring in but also on the real estate side with our partner. So I think it's a big opportunity for us.

David.

I think you want answered both questions, but I will just add that when you look at the traditional publishers. The most premium ones. If you look at the top 50 top 100, I mean pay dues and we analyze that all the time P. D. A constant and we do believe that we bring strategic value to them. We're looking.

Yaron Galai: And then just the last point in terms of growth, the open internet is, I'm not good with TAMs, but call it the $60 to $80 billion in TAM. And growing within that, we think is a big opportunity. So things like ONIX, where it's both incremental growth on the types of budgets we bring in, but also on the real estate side with our partners, I think is a big opportunity for us. David.

Right now with the election, you would shake traditionally will increase pay juice and generally when you look at trends of consumption, we do believe that <unk>.

<unk> won't be doing sort of getting to <unk>, there's a lot of value in in the deep journalism <unk>, but again I think <unk> is it on on the longer Tayloe, probably shows then and the bigger ones, but the clearly I mean that that industry is under pressure in our strategic.

David Kostman: I think Yaron answered both questions, but I will just add that when you look at the traditional publishers, the most premium ones, if you look at the top 50, top 100, I mean, paid views, and we analyze that all the time, are pretty constant. We do believe that we bring strategic value to them. We're looking right now at the election year, which traditionally will increase paid views. And generally, when you look at trends in consumption, we do believe that short-form video is sort of getting to some plateau. There's a lot of value in deep journalism and value there.

Here is to again provide audience development and help them monetize on on a variety of add and other revenue sources like a combo and has their own set I mean, we we do look at third party supply.

Said, it's about 20 per cent.

<unk> business today, we see a <unk> opportunity then so there'll be <unk> by doing that increasing that to an office with <unk> <unk> <unk> <unk> <unk> <unk>.

Thank you.

Our next question is from Laura M. R N with Needham and company. Please proceed.

Hi, I am going to build on Andros comment and ask you about the threat to the open Internet <unk>.

David Kostman: So, but again, I think what you hear more is about the longer tail of publishers than the bigger ones. But clearly, I mean, that industry is under pressure, and our strategic role here is to, again, provide audience development and help them monetize through a variety of ads and other revenue sources like e-commerce. And as Yaron said, I mean, we do look at third-party supply. We said it's about 20%.

Connected television is growing faster and that sort of a collection of walled garden and cookies deprecation risks signal loss in the open Internet, which may push ad spending.

The near term into walk gardens, where there's no signal loss. So could you speak to the health of the open Internet, which is where are you participate and why you think it will have a robust.

Give me three years forward.

Sure sure. So first of all you know maybe we need to hear thanks, Laura I I think we might need to start making distinctions between walled gardens, which in my mind is basically where you have logged in or registered users.

David Kostman: All of our business today, we see a big opportunity there and sort of a union by doing that, increasing that third-party supply, but our, with our very strong bidding technologies, we also grow shell, wallet, form, and format. Our next question is from Laura Martin with Needham and Company. Hi, so I'm going to build on Andrew's comment and ask you about the threat to the open internet more generally.

Versus the big Tech companies and.

And I think the shipped to walled gardens is that does not necessarily all that are all <unk> Timothy the best publishers back to answer this question.

Laura Anne Martin: Connected television is growing faster, and that's sort of a collection of walled gardens, and cookie deprecation risks signal loss on the open internet, which may push ad spending at least in the near term into walled gardens where there's no signal loss. So could you speak to the health of the open internet, which is where you participate, and why you think it will have a robust future for two to three years? Sure.

The best Publishers are you know in a way a walled gardens, but maybe those companies are not necessarily the big Tech Google Facebook type the companies and even though they have kind of a walled garden environment and first part of the data and <unk> and all that they they need partners like alperin.

<unk> to build out the <unk>.

<unk> <unk>, an audience development capabilities, they're not gonna be that each one of those is gonna be building their own sweet and <unk> and all that like Google and Facebook and some of the Big Tech companies. Two in those terms you know I think I'm four cartons as as great partners for us because the.

Yaron Galai: So, first of all, you know, maybe we need to, I think we might need to start making distinctions between walled gardens, which in my mind is basically where you have logged in or registered users versus big tech companies. And I think the shift to walled gardens is not necessarily all bad or all doom and gloom. We can see some of the best publishers, back to Andrew's question, the best publishers are, you know, in a way, a walled garden. But many of those companies are not necessarily the big tech Google or Facebook type companies. And even though they have kind of a walled garden environment and first-party data and registrations and all that, they need partners like Outbrain to build out their monetization and audience development capabilities.

Signal fidelity potato fidelity is higher they'll only partner with you know usually one exclusive partner or a couple of of a meaningful partners and.

Data synchronization and an ability to better target I think it's just gonna.

That's gonna benefit from that I think the other thing we should all be paying attention to his.

Yaron Galai: They're not going to be, not each one of those is going to be building their own suite and ad stacks and all that like Google and Facebook and some of the big tech companies do. In those terms, you know, I think of walled gardens as great partners for us because the signal fidelity, the data fidelity is higher. They'll only partner with, usually, one exclusive partner or a couple of meaningful partners.

You know it's true the the growth of the Big Test, Google and Facebook has been has been tremendous I do think if we look at many governments around the world and the regulations that are coming in the limitations, they're trying to.

Try to place those or should only targeted at those big Tech companies, while trying to benefit the the open internet or you know journalism based publisher's or if there's a touch of categories and what's happening in Australia, and Canada with in terms of.

Yaron Galai: And that data synchronization and ability to better target, I think we should all be paying attention to. You know, it's true that the growth of those big tech companies like Google and Facebook has been tremendous. I do think if we look at many governments around the world and the regulations that are coming and the limitations they're trying to place, those are generally targeted at those big tech companies while trying to benefit the open internet or, you know, journalism-based publishers or those types of categories.

Getting getting some of the capabilities that to <unk>. So I think that's all set an important dynamic I don't think that's that world necessarily is becoming easier and easier for the big Tech company. So that's like the ultimate or it might be a beneficiary of that.

Okay, perhaps one.

Yaron Galai: And what's happening in Australia and Canada, I think, in terms of getting some of the capabilities back to publishers, I think that's also an important dynamic. I don't think that the world necessarily is becoming easier and easier for the big tech companies. I think the open internet might be a beneficiary of that. Okay, super helpful.

Right when I had one point I mean, as we also know that somebody would be coming as the company much more focused old song how do these sort of much made a wide range of advertisement from an advertising perspective.

The opening <unk> incremental audiences, we have endless number of case, it's showing that we're gonna do something when you too but to be delivered to them incremental log into it that we can target.

David Kostman: I want to add one point. As you have also noticed, we're becoming, as the company, much more focused on how we serve a wide range of advertisers much better. From an advertiser perspective, the open internet delivers incremental audiences. We have an endless number of cases showing that we do something on YouTube, but we deliver to them incremental audiences that we can target in a better way using unique signals that we have. We talked about cookie deprecation, but you know the contextual signals are super critical here.

Better way using unique signal that we have to talk to about cookie deprecation, but.

Contextual signals supercritical here, we develop audiences for them. So it's incremental and also there's the pricing question in terms of where do you get your incremental yield and you open it and it is is there and and delivering that so for any advertisement you open. It then it is.

An important part of the overall spent delivering incremental value and audiences and and in many respects. It <unk>. Thank you Wanna talk with someone on that's interested into certain vertical we aggregate those probably should do that so that there's a lot more <unk> I mean, we estimate that market, leading citizen I'll call. It's about <unk> about.

David Kostman: We develop audiences for them, so it's incremental, and also, there's a pricing question in terms of where do you get your incremental yield, and the open internet is there and is delivering that. So for any advertiser, the open internet is an important part of the overall spend delivering incremental value and audiences, and, in many respects, it's better targeting if you think you want to target someone that's interested in a certain vertical. We aggregate those publishers that do that, so there's a lot more there. I mean, we estimate that market. We set it on our call. It's about with a lot. It's about 100 billion dollars in advertising, and by the way, we're also expanding beyond what you call traditional publishing. So I think the combination of all that gives us a lot of optimism. Okay, this is my second one, and I have three.

<unk>, all the advertising and by the way, we also expanding beyond what.

<unk> traditional publishing so I think the combination of all that gives us a lot of optimism about the future.

Okay. My second one and I have three my second one uhm is about industry structure. So when <unk>. When you guys can't public you sort of orange or black competition with one other company that company has really taken sort of a hard left or right. It's really pivoted away from what I will call. Your core business My question.

And it does that make it easier for you to participate is your sort of world opening up if they sort of leave.

<unk>, it's really different direction news E Commerce Big brands, Apple announced yesterday does that leave you more of an open greenfield to compete.

Laura Anne Martin: My second one is about industry structures. So when you guys came public, you sort of were in direct competition with one other company. That company has really taken sort of a hard left or right. It's really pivoted away from what I would call your. My question is, does that make it easier for you to participate? Is your sort of world opening up as they sort of leave this space and move in really different directions?

Price better and have less competition.

So yeah.

Yeah, I mean, I think the companies have taken different directions, and we are very focused around the demand side and offering to cross the final offering quite <unk> launched all makes <unk> very differentiated.

It is.

David Kostman: News, e-commerce, big brands, Apple announced yesterday; does that leave you more of an open greenfield to compete, to price better and have less competition? Oh, yeah. I think the companies have taken different directions. And we are very focused around the demand side and offering a cross-funnel offering for advertisers. We launched Onyx. Onyx is very differentiated.

I needed to leave it in a different environment different experiences <unk> display it shouldn't placements off the page I need media allows us I mean, we've been very focused on developing that crosses funnel notion for advertisers.

On the traditional published a time that we have that competitive I mean, you've seen our our wins over the last two years I mean, I think we clearly differentiated around premium publisher when it's coming from a combination of the strategic value that that we're offering greens to those public shows and back to your earlier question, we still believe that the <unk> business.

David Kostman: It is, Value that's delivered in a different environment, different experiences, video, high impact display in certain placements on the page. And it really allows us, I mean, we've been very focused on developing that cross-funnel notion for advertisers. On the traditional publisher side, where we have that competitor, I mean, you've seen our wins over the last two years. I mean, I think we are clearly differentiated around premium publisher wins

So by delivering better value higher monetization better audience tools and abroad, a value proposition strategically with Keystone, We believe with on that side I think again, it's been demonstrated I think in terms of market share. Your so the names that we talked about major wins. So on that phone I think that's helping us that double competitor.

If we can get the other things also when you look at them right now the issue of demand <unk> coming to log into play here with.

David Kostman: It's coming from a combination of the strategic value that our offering brings to those publishers. I mean, back to your earlier question, we still believe that it's a big opportunity in business. So by delivering better value, higher monetization, better audience tools, and a broader value proposition strategically with Keystone, we believe that on that side, I think, again, it's been demonstrated, I think, in terms of market share. You saw the names that we talked about, major wins. So on that front, I think that's helping us that our competitor is looking at other things. Also, when you look at right now, the issue of demand density is coming a lot into play here with us being able to really focus on delivering our demand in two existing plants and not having to really take the same level of demand and spread it around. You referred to the Apple news. I would urge you to look into the details of that. I mean, we don't know much about it.

With without being able to really focus on the different hour demanding to existing and not having to really take the same level of demand and spreading it around.

You referred to the I phone use I I would urge allergic to look into the details of that I mean, we don't know much about that and then you.

Okay.

So eat again each company is taking a different direction I think it's actually a good thing.

I agree with that Okay. My last one is super quick he gave this really intriguing statistic about the <unk>.

73 per cent of your clients are using in the conversion that strategy and my <unk>. My quick question is what kind of lift R. U C and using those Jenny I tour that is getting 73 per cent adoption, which is quite high.

So.

<unk> Oh, sorry go ahead of them.

So we haven't shared but we do see an increase from the deployment of C. D. S and just to be clear C. D S or converse with that strategy is <unk>.

The equivalent person to Google's, Teaneck, where the the advertiser such circles their business schools. The the sale if they want to make the revenues.

Laura Anne Martin: So again, each company is taking a different direction. I think it's actually a good thing. I agree with that. Okay, my last one is super quick.

Converse with a person that they want to make and then there's no there's no pending or costs that they need to set rather upbringings.

Laura Anne Martin: You gave this really intriguing statistic about 73% of your clients were using the conversion bid strategy. And my quick question is, what kind of lift are you seeing using those Gen AI tools that are getting 73% adoption, which is quite high? and Laura Martin.

Rhythms front at all for them. So I I think the the best indication. This has gone from nonexistent, a coupla years ago to over 70 B. As you said 73 per cent of the campaigns running on C. D. S. Now and I think that's the best indication with performance marketers, but that's where they're finding value it's too big values first.

Yaron Galai: So we haven't shared specifics, but we do see an increase from the deployment of CVS. And just to be clear, CVS, or Convergent Big Strategy, is Outbrain's kind of equivalent version of Google's PMAX, where the advertiser sets their goals, their business goals, the sales they want to make, the revenues, and conversions they want to make. And then there's no bidding or cost that they need

Of all there's there's the simplicity of setting up Cvs campaign, you you just need a lot less manual labor on the side of the appetizer.

Campaign management cost management, and all that and the other has improved zarrella maximizes their return on <unk> and so we don't break out or haven't at least this quarter. The specific uplift were saying, but I think just given the indication of.

Yaron Galai: Rather, Outbrain's algorithms run that all for them. So I think the best indication, this has gone from nonexistent a couple of years ago to over, as you said, 73% of the campaigns running on CVS now. And I think that's the best indication with performance marketers, that that's where they're finding value. Two big values.

So many of you advertise switching to it and you can imagine that's that's the dynamic.

Thanks very much thank you.

Our final question is <unk> around here with the city. Please proceed.

Hey, good morning, guys got back down for a golf.

Maybe.

Maybe just look into the 2024 double digit growth outlook Wonder if you could help us just to kind of bridge that how much is maybe just.

Yaron Galai: First of all, there's the simplicity of setting up a CVS campaign. You just need a lot less manual labor on the side of the advertiser. There's campaign management, cost management, and all that.

Strengthening of the current core business and how much that is driven by some neat new growth pillars, you outlined maybe specifically on <unk>, how do you see that ramping 2024, and 2025 I know you've given some quantified before killing packs.

Yaron Galai: And the other is improved ROI. It just maximizes their return on ad spend. And so we don't break out, or haven't, at least this quarter, the specific uplist we're seeing. But I think, just given the indication of so many of the advertisers switching to it, you can imagine that's the dynamic. Thanks very much.

Or the last six months, but maybe expect any expectations for 2024 and 2025.

Sure. Thanks Man, it's it's Jason I'll I'll I'll start on this and maybe David could touch on the unacceptable part of the question.

Ygal Arounian: Thank you. Our final question is from Ygal Arounian with Citi. Hey, good morning, guys. We've got Mac time for Ygal.

As far as just getting to grips me give me one.

Jason Kiviat: Maybe just looking to the 2024 double-digit growth outlook. I wonder if we could help us just kind of bridge that. How much is, maybe, Strengthening the current core business and how much of that is driven by some of these new growth pillars you outlined, maybe specifically on Onyx, how you see that ramping up in 2024 and 2025. I know you've given some quantified expectations before QMPAC or the last six months, but maybe you can give me any expectations for 2024 and 2025. Sure. Thanks, Max. It's Jason.

Helpful Data point and how we received your growing is that you know I mentioned I mentioned on the call just some some volatility in small pockets of of supply you know without that and it's very isolated to you know a couple a couple of partners, who you know have either.

Changes that they made an auction or or technology or or or policy changes in absent the that volatility we would've seen or we would expect to see I should say no growth of X Pac in Q1 in the high single digit percentages. So it's not that we're we're we're far off from that double digit growth that were regarding to their you know absent.

Jason Kiviat: I'll start on that. Maybe David could touch on the ONIX part of the question. You know, as far as just getting to growth, maybe one helpful data point in how we see the year growing is that, you know, I mentioned on the call, just some volatility in small pockets of supply. Without that, it's very isolated to, you know, a couple partners who, you know, have either changes that they made in the auction or technology or policy changes. And absent that volatility, you know, we would have seen or we would expect to see, I should say, growth of XPAC in Q1 and high single-digit percentages.

This this one off which we which we are you know cautious about the <unk>.

You as temporary with with some optimism around there and obviously optimism around you know all the areas that the David talked about and and optimism around just positive yield trends that we started to see in queue for in ramping in Q1. So you know it's kind of a combination of the things I mean as far as maybe just giving you.

Just.

Sense of magnitude of some of those investment areas I think the expansion.

That's it for 2024 X tech the expansion of supply beyond the traditional feeds and a performance sure wallet increase are probably the top too contributors. This year, but you know we we really see contribution small for over the course of the year and then maybe David can touch on you know the enterprise brand names.

Jason Kiviat: So it's not that we're, we're far off from that double digit growth that we're getting to there, you know, absent kind of this, this one off, which we, which we are, you know, cautious about, but do view as temporary with, with some optimism around there. And obviously, optimism around, you know, all the areas that David talked about, and optimism around just positive yield trends that we started to see in Q4, and ramping in Q1. So, you know, it's kind of a combination of the things, I mean, as far as maybe just giving you just a sense of magnitude of some of those investment areas, I think the expansion, you know, I think for 2024, you know, XPAC, the expansion of supply beyond the traditional feeds, and the performance share of wallet increase are probably the top two contributors this year, but, you know, that we really see contributions from all four over the course of the year.

C N on its.

<unk> <unk> on <unk> generally Brendon agencies, we reset on the call. We have about 200 million dollar business that is Brandon agency that a lot of his performance that go so now leveraging into into all mixed on makes it has delivered the.

Dictations in the second half of last year. It will only talking about specific about cough for you. So you can imagine that we assume that <unk> more than more than double in 2024 and the important thing here is that we are in a very different dialogue today with empathize with an agent to surround this cross on the notion.

And the ability to really help them <unk> all together, that's very unique to Austin in the ecosystem in the open Internet and I'm also very excited about the against the other growth drivers that.

Jason referred to a thing then you Keystone brought up and we have to they Keystone on about 15 I'll be sure that that's also an important driver for us and that's helping us on the published looks nice so but the the branch eye disease.

Jason Kiviat: And then maybe David can touch on, you know, the enterprise branding agency and Onyx. About Onyx and, generally, brands and agencies, we said on the call that we have about a $200 million business that is brands and agencies, a lot of it is performance that we're also now leveraging into Onyx. Onyx has delivered better than expectations in the second half of last year. We're only talking about specific about half a year, so you can imagine that we assume that it will more than double in 2024.

Very exciting all makes them.

It sounds of the acceptance.

Acceptance in the market has been something that's very successful and we think that's gonna be a big road driveway in the future really focus around increasing our ability show falling from the demand side, both on the <unk> on the performance fine.

Okay, great. Thanks, very helpful. And then maybe just want on Cookie deprecation, just how are you guys <unk> <unk> if you can.

Couldn't help but think about your exposure to cookies I understand it's a lot of recommendations, but you know how much exposure do you have the cookies you know in with your exposure to news publishers. How do you see you know with cookies deprecating any impact 230 P M as in flow through to your business.

David Kostman: And the important thing here is that we are in a very different dialogue today with advertisers and agencies around this cross-funnel notion and ability to really help them tie it all together. That's very unique to us in the ecosystem and in the open internet, and also very excited about the other growth variables that The Jason referred to. I think, again, Keystone brought us, we have Keystone on about 15 publishers today. That's also an important growth driver for us, and that's helping us on the publisher side. So, but the brand side is very exciting; Onyx, in terms of its acceptance in the market, has been something that's been very successful, and we think that's going to be a big growth driver. around increasing our ability to sell wallets from the demand side, both on the brand with Onyx and online. Okay, great.

And you know maybe it seems you know some of your new products like an extra Keystone, maybe put you in a better position, helping them leverage monkey data. So is that maybe the right way to think about it.

Yeah. Thanks, you around here, so with with Cookie first it's important to make a distinction between as you said like between the first part of cookies and the third party, let's see let's be interpreted as third party cookies that his date of signals that we will definitely use we tried to use any date of signals that we have but.

It's actually it's gonna be the weakest rebooting, the less meaningful signals we use.

Ygal Arounian: Thanks. Very helpful. And then maybe just one on cookie deprecation.

We have a tremendous amount of first start date of being the the ensign towering B C. It's on.

Ygal Arounian: Just how exposed are you guys? How, you know, maybe you could help us think about your exposure to cookies. I understand there are a lot of recommendations, but you know, how much exposure do you have to cookies?

Any of those publishers and those are mutually exclusive partnerships, where we're upgrading it's the only one telling that cheap that gives us a tremendous amount of data not just because code on page in word powering those those ads.

Ygal Arounian: You know, and with your exposure to news publishers, how do you see cookies degrading any impact on their CPMs and flow through to your business? And, you know, maybe some of your new products like Onyx and Keystone maybe put you in a better position, you know, helping them leverage 1P data. So is that maybe the right way to think about it?

Fees and definitely one of the pages on web on their apps.

Also far beyond that because repairing usually author turtle or organic recommendation keeps get much higher in patient Richardson.

Has ever do and and give us a lot of first party data signals that we can use. So <unk> you know when you try to compare that to anyone and <unk>. It's just a different kind of order of magnitude of update on first party data that we have code on page on every one of those pages power associates Anthony <unk>.

Yaron Galai: Thanks, everyone here. So, with cookies, first, it's important to make a distinction, as you did, between first-party cookies and third-party cookies, what's being defined as third-party cookies. That is data signals that we definitely use. We try to use any data signals that we have. But it's actually some of the weakest or the less meaningful data signals that we use.

<unk>, you're absolutely right with things like she's still giving us even more data signals on those places I'll also mention myself and of course of art scene here it out for him and and our previous company, we've been to the space of contextual advertising about 20 some years ago.

Yaron Galai: We have a tremendous amount of first-party data being the engine powering those feeds on many of those publishers, and those are usually exclusive partnerships where we're Outbrain is the only one powering that feed. That gives us a tremendous amount of data, not just because the code on the page and we're powering those ads on feeds and on every one of the pages, on the web, on their apps, but it's also far beyond that because we're usually powering all their internal or organic recommendations, which get much higher engagement rates than ads ever do, and there is a lot of first-party data and signals that we can use. So, when you try to compare that to, say, anyone in ad tech, it's just a different kind of order of magnitude of data and first-party data that we have coded on every page, on every one of those pages, powering both the ads and the non-ads, and you're absolutely right with things like Keystone giving us even more data signals in those places.

So we kicked off Alfred with a tremendous amount of extra cheese on contextual that obviously uses no cookies at all that works at a person on any page and where I feel a <unk> b B S. First invented that space in the world.

And then things like Onyx and video the all the targeting signals are.

<unk> very different we don't do re targeting across different sites, where powering those experiences on those partners that we work with so that's.

Good way to think of it maybe maybe just the last point cookies third party cookies were deprecated on a bunch of environment few years ago, three about three years ago on.

Yaron Galai: I'll also mention myself and the core of our team here at Outbrain and our previous company invented the space of contextual advertising about 20-some years ago, and so we kicked off Outbrain with a tremendous amount of expertise in contextual advertising. And that obviously uses no cookies at all. That works at its best on any page, and I feel like we're the experts in that space in the world. And then on things like ONIX and video, all the targeting signals are very different.

<unk> and Firefox and we've been just going from strength to strength on the maintenance caters that we have which is quicker rate ever since so you know if he takes out is any indication of what's coming with the Google Chrome. This year I think we've done quite well.

Alright awesome. Thanks appreciate the topics.

You have reached the end of our question and answer session I would like to turn the conference back up like a management for closing remarks.

Thanks, you round here thanks for joining us today, we're very excited about this new chapter for the company with exciting strategy for looks like the enterprise, France with Onyx, extending appetizer sharp wallet with our foreign smart pretty sweet.

Yaron Galai: We don't do retargeting across different sites. We're powering those experiences on those partners that we work with. The way to think of it, maybe, maybe just the last point, cookies, third-party cookies were defecated on a bunch of environments a few years ago, three, about three years ago on Safari and Firefox.

Standing are exclusive code on page through improved manifestation Keystone as well as the programmatic reach through <unk>.

On a personal note it's been a privilege of a lifetime to work with the thousand or so incredible out Brainers I'm excited for the future of the company's subscribed to see chapter and I'm confident that are fantastic group of.

Yaron Galai: And we've been just going from strength to strength on the main indicator that we have, which is click through rate. So, you know, if you take that as an indication of what's coming with Google Chrome this year, I think we've done quite well. All right. It's awesome. Thanks. I appreciate the thought. You have reached the end of our question and answer session. I would like to turn the conference back over to management for closing.

People will continue carrying in building our unique company culture for many years to come.

Look for forward to serving you all the offerings shareholders as the company's chairman. Thank you.

Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Yaron Galai: Thanks, Yaron here. Thanks for joining us today. We're very excited about this new chapter for the company with exciting strategy pillars like the enterprise brands with Onyx, expanding advertiser share of Wallet with our Explorance marketing suite, and expanding our exclusive code on page through improved monetization in Keystone, as well as programmatic leads through our DSPs Vanta. On a personal note, it's been the privilege of a lifetime to work with a thousand or so incredible Outbrainer I'm excited for the future of the company as it starts its new chapter, and I'm confident that our fantastic group of people will continue caring for and building our unique company culture for many years to come. I look forward to serving you all, the Outbrain shareholders, as the company's chairman. Thank you. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

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