Q1 2024 Outbrain Inc Earnings Call
Operator: Good day, and welcome to Outbrain Incorporated's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I'd like to turn the call over to Outbrain's investor relations. Please go ahead.
And welcome to our brain incorporated first quarter 2024 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
Investor Relations: I'd like to turn the call over to our brains Investor Relations. Please go ahead.
Unknown Executive: Good morning, and thank you for joining us on today's conference call to discuss Outbrain's first quarter 2024 results. Joining me on the call today are Outbrain CEO David Kostman and CFO Jason Kiviat.
Investor Relations: Good morning, and thank you for joining us on today's conference call to discuss our brands' first quarter 2024 result.
Investor Relations: Joining me on the call today, we have alpine CEO, David Kaufman and CFO, Jason caveat.
Unknown Executive: 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, 2023, as updated in our subsequent reports filed with the Securities and Exchange Commission. Forward booking statements speak only as of the call's original date, and we do not undertake any duty to update any such statement.
Investor Relations: During this conference call management will make forward looking statements based on current expectations and assumptions.
Investor Relations: These statements are subject to risks and uncertainties and may cause actual results to differ materially from our forward looking statements.
Investor Relations: These risk factors are discussed in detail in our Form 10-K filed for the year ended December 31st 2023.
Investor Relations: Updated in our subsequent reports.
Investor Relations: File with the Securities and Exchange Commission.
Investor Relations: Forward looking statements speak only as it would be called the original date and we do not undertake any duty to update any such statements.
Unknown Executive: Today's presentation also includes references to non-GAAP financial measures. We should refer to the information contained in the company's first quarter earnings release for definitional information and reconciliations of non-GAAP measures to the comparable GAAP financial measures. Our early release can be found on our IR website, investors.outbrain.com, under news and events.
Investor Relations: Today's presentation also includes references to non-GAAP financial measures.
Investor Relations: You should refer to the information contained in the company's first quarter earnings release.
Investor Relations: Initial information and reconciliations of non-GAAP measures to the comparable GAAP financial measures.
Investor Relations: Our earnings release can be found on our IR website investors that outbreak dot com under news and events.
Unknown Executive: With that, let me turn the call over to David.
Investor Relations: That let me turn the call over to David.
David Kostman: Thank you, Lane. Good morning, everyone.
David Kostman: Thank you Lynn.
David: Everyone and thank you for joining us today for first quarter 'twenty 'twenty four earnings call.
David Kostman: And thank you for joining us today for our first quarter 2024 earnings call. I'm pleased to share with you our progress and achievements over the past quarter, as well as our strategic direction moving forward. On the financial front, I'm pleased that we delivered an extra gross profit of $52.2 million towards the high end of our guidance. And then we exceeded our adjusted EBIDA guidance, reporting $1.4 million. We generated a positive free cash flow of $4.6 million.
David: I'm pleased to share with you our progress and achievements over the past quarter as well as our strategic direction moving forward.
David: On the financial front I am pleased that we delivered extra gross profit of $52 2 million towards the high end of our guidance.
David: And did we exceeded our adjusted EBITDA guidance reporting $1.4 million.
David: Generated positive free cash flow.
David: $6 million.
David Kostman: Strategically, Outbrain is on a journey to become one of the largest gateways to the open internet forever. We believe we are uniquely positioned on the open internet to offer a cross-funnel platform that enables advertisers to build their brands, drive consideration, and deliver conversions. The Open Internet is estimated to be a $100 billion advertising opportunity, providing advertisers with access to incremental audiences across highly relevant, professionally produced digital content. As we look to the future, we believe the industry's focus on consumer privacy, premium quality, transparency, and outcomes aligns favorably with our strengths.
David: Strategically.
David: He is on a journey to become one of the largest gateways to the open internet for advertising.
David: We believe we are uniquely positioned on the open internet to offer a cross channel platform that enables advertisers to build the brand drive consideration and deliver conversions.
David: The open Internet is estimated to be 800 billion dollar advertising opportunity, providing advertisers with access to incremental audiences.
David: Relevant fashion they produce they determine content.
David: As we look to the future we believe the industry's focus on consumer privacy premium quality transparency and outcomes.
David: Favorably with our strength now.
David Kostman: Now more than ever, we are seeing all buyer types, from brands to performance, focus on measurable outcomes. We believe that we possess a competitive edge in driving these outcomes from relevant audiences. Despite Google's announcement to further delay third-party cookie deprecation on Chrome, we believe advertisers remain focused on finding more advanced solutions to drive brand outcomes from relevant audiences. Our foundational code on page and engagement data signals continue to enable us to leverage our proprietary data and AI to innovate these solutions for advertisers. Next, I want to provide a quick update on how we're progressing on our gross drivers for 2024. As you may recall from our last call, these revolve around three key pillars.
David: Now more than ever we are seeing all buyer types from brands to perform and focus on measurable outcomes.
David: We believe that we put that as a competitive edge in driving these outcomes from relevant audiences.
David: Despite google's announcement to further delayed third party cookie deprecation on chrome.
David: We believe advertisers remain focused on finding more advanced solutions to drive brand outcome from relevant audiences.
David: Our foundational Couldnt page and engagement data signals continue to enable us to leverage our proprietary data and AI to innovate solutions for advertising.
Speaker Change: Next I wanted to provide a quick update on how we're progressing on our growth drivers for 'twenty to 'twenty four.
Speaker Change: As you may recall from our last call. These revolve around three key pillars.
David Kostman: Our first pillar focuses on expanding our share of wallets with advertisers, brands, and agencies, and performance advertisers. First, our business with brands and agencies. In Q1, overall direct spend from our brand and agency clients was over $100 million globally.
Speaker Change: Our first pillar focuses on expanding our showboat leads me to advertise the brands and agencies and performance advertisers.
Speaker Change: First our business with brands and agencies in Q1.
Speaker Change: Overall direct spend from our brand and agency clients with over $100 million globally.
David Kostman: This number represents spend from direct advertisers of all sizes, from mid-market to enterprise brands and independent agencies to holding companies. We are seeing good progress with ONIX, our brand building offering focused on enterprise clients, with revenues in Q1 exceeding $7 million. We launched Onyxx in the Japanese market in Q1, which we believe represents a strong agency growth opportunity, and plan to make ONYX available in additional markets in Q2. Speaking of Onyxx, I'm excited to share the success story of one of our most recent enterprise clients, Lake. Laker chose to partner with Onyx for the launch of their new home cinema.
Speaker Change: This number represents spend from direct advertisers of all sizes are midmarket Atlantic like Brian and independent agencies to holding company.
Speaker Change: We're seeing good progress with Onyx, our brand building offering focused on enterprise clients with.
Speaker Change: Revenues in Q1 exceeding $7 billion.
Speaker Change: We launched <unk> in the Japanese market in Q1, which we believe represents a strong agency growth opportunity.
Speaker Change: And plan to make on its available in additional markets in Q2.
Speaker Change: Speaking of all makes that I'm excited to share the success story of <unk>.
David Kostman: Laker leveraged the Onyx brand studio to create a custom, high-impact format that enabled audiences to experience the immersive moments of the Laker home cinema. Onyx enabled Laker to outperform attention benchmarks by 65% and spark 550,000 audience interactions. This case study exemplifies Onyx's ability to deliver beautiful brand experiences that deliver measurable outcomes. In addition, we announced Onyx's partnership with Scope3, enabling us to launch Onyx Green in early April. Onyx Green provides buyers with access to curated deals that reduce carbon emissions by up to 30% compared to open exchange video and display.
Speaker Change: One of our most recent enterprise clients Laker.
Speaker Change: They could chose to partner with <unk> for the launch of the new home cinema.
Speaker Change: We can leverage the onyx studio to create a custom high impact formats that enabled audiences to experience immersive moments on the Lake home cinema.
Speaker Change: Onyx enabled lake to outperform attention benchmark.
Speaker Change: 65% and 550000 audience interactions.
Speaker Change: This case study exemplifies the onyx has the ability to deliver beautiful brand experiences that deliver measurable outcomes.
Speaker Change: In addition, we announced this partnership with scope three.
Speaker Change: Enabling us to launch on the screen in early April.
Speaker Change: Onyx screen provides buyers with access to create a deal that reduce carbon emissions by up to 30% compared to open exchange of video and display.
David Kostman: As we said in the past, we are focused on and will continue to invest in this flywheel of demand and supply. Premium global publishers, like the ones on the Outbrain platform, are looking for better quality advertising, and brand advertisers are attracted to our premium publisher base for the cross-funnel objective. The second pillar, growing our show value from advertisers across our core performance offerings. We are invested in enabling growth of large-scale advertisers on our performance DSPs and managers.
Speaker Change: As we said in the past we are focused and will continue to invest in this flywheel of demand and supply.
Speaker Change: We named global publishers like the ones on the platform.
Speaker Change: For better quality advertising and brand advertisers.
Speaker Change: Our premium publisher base for the cross final objective.
Speaker Change: The second pillar Guangzhou show bullet from advertisers crossover Coca formats offerings.
Speaker Change: We are invested in and they've been growth of lost can advertise on our performance DSP.
David Kostman: As part of those efforts, we saw increased total expense through the mentor by approximately 40% in Q1 2024 compared to Q1 of last year. We look forward to leveraging our DSP as a strategic enabler for savvy clients to drive strong performance across the open internet.
Speaker Change: As part of those that we saw increased total spend Tuesday, manta by approximately 40% to one 'twenty 'twenty four.
Speaker Change: Two Q1 Oclock P M.
Speaker Change: We look forward to leveraging our DSP, a strategic enabler for that'd be clients to drive strong performance across the open internet.
Speaker Change: In addition.
David Kostman: Our ad manager, Amplify, remains our core offering for advertisers of all sizes to drive scalable performance. However, our focus has been on enabling greater automation of workloads and bidding strategies through AI. Growth in adoption of our AI creative tools nearly doubled from Q4 2023 to Q1, with 14% of our customers utilizing creative AI tools. This suite of tools empowers our teams to deliver innovative, creative solutions that enable advertisers of all sizes to scale.
Speaker Change: Our AD manager amplify remains a core offering for advertisers of all sizes to drive scalable performance.
Speaker Change: Focus has been on enabling greater automation of workloads and bidding strategies through AI.
Speaker Change: Growth in adoption of our AI creative tools nearly doubled from Q4 2023 into Q1 with 14% of our customers utilizing creative AI tools.
Speaker Change: This suite of tools and powers, our teams to deliver innovative creative solutions that enable advertisers of all sizes to escape.
David Kostman: AI also sits at the core of our prediction engine and corresponding automated bidding technology. Continued investment in the performance of this technology has led to high adoption, with 89% of advertisers now leveraging one of our automated bidding modes.
Speaker Change: He also sits at the core of our prediction engine and corresponding automated bidding technology.
Speaker Change: Continued investment in the performance of this technology has led to high adoption with 89% of advertising spend now leveraging one of our automated bidding modes.
David Kostman: Moving on to our next pillar, we've continued to expand our supply footprint, enabling advertisers to reach consumers across the entirety of the open internet. We've accelerated the expansion of partnerships beyond our co-publisher inventory, which drove over 25% of total advertiser spend in Q1 on our platform. Bringing our prediction technology and performance capability beyond traditional ways of publishing is a major focus in 2024 that we believe will enable advertisers to reach wider audiences across diverse media types.
Speaker Change: Moving on to our next pillar.
Speaker Change: We've continued to expand our supply footprint, enabling advertisers to reach consumers across the entirety of the open internet.
Speaker Change: Accelerated the expansion of partnerships beyond our co publisher inventory.
Speaker Change: Drove over 25% or total advertising spend in Q1 on our platform.
Speaker Change: Bringing our prediction technology and performance capabilities beyond the traditional way Amish Inc. Is a major focus in 2024 that we believe will enable advertisers to reach wider audiences across diverse media types.
David Kostman: The next pillar focuses on growing our differentiated premium publisher partnership. Publisher logo retention remains strong in Q1 at 98%. This achievement reflects the enduring nature of our publisher partnerships, which remain core to our future success. Exclusive, Codename Page Inventory continues to be a differentiator for our demand business, both due to access to proprietary supply and corresponding page level and engagement data.
Speaker Change: The next pillar focuses on growing our differentiated premium publisher partnerships.
Speaker Change: Publish a logo retention remained strong in Q1 at 98%.
Speaker Change: This achievement reflects the enduring nature of our publisher partnerships, which remains core to our future success.
Speaker Change: Exclusive Codell page inventory continues to be a differentiator for our demand business, both through access to proprietary supply and corresponding page level and engagement data.
David Kostman: We are focused on expanding the breadth of services we offer to these premium publishers in an effort to expand monetization opportunities and access viewable, brand-suitable placement. Our premium publisher base is also continuing to grow. In Q1, we added new supply partnerships, including Newscope Australia and Webedia Spain, both of them moving from a competitor. In addition, we signed the Telegraph, which is working with us on the Keystone platform, showcasing Keystone's ability to bring incremental partnerships and margin opportunities to our portfolio.
Speaker Change: We are focused on expanding the breadth of services, we offer to these premium publishers.
Speaker Change: In an effort to expand monetization opportunities and Nexus, you'll do grand suitable placement.
Speaker Change: Our premium publisher base.
Speaker Change: Also continued to expand in Q1, we added new supply partnerships.
Speaker Change: News Corp, Australia, and we'd be just Spain, both of them moving from a competitor.
Speaker Change: In addition, we signed the telegraph, which is working with us on the Keystone platform showcasing keystones ability to bring incremental pasta shapes and margin opportunity solid portfolio.
David Kostman: On the AI front, in addition to our AI efforts on the product side, our team has also been exploring the use of AI to drive business efficiency and operational effectiveness, seeing real success thus far. For example, we've been able to automate the handling and resolution of 40% of account management support cases with our small and medium publisher team by leveraging AI and robotics process automation. We've applied the same approach to our demand operation team support cases and plan to expand the capabilities to more.
Speaker Change: Well I from in addition to our AI efforts on the product side well. The team has also been exploring the use of AI to drive business efficiency and operational effectiveness.
Speaker Change: Real success this fall.
Speaker Change: We've been able to automate the handling and resolution or 40% of the account management support cases that were small and medium publisher team by leveraging AI and robotics process automation.
Speaker Change: Applying the same approach all demand operation team support cases and plan to expand the capabilities to more people.
Speaker Change: In conclusion our.
David Kostman: Our first quarter results underscore our commitment to broadening our relevance to more advertiser segments with the objective of becoming one of the leading gateways to the opening. We're confident that with continued execution on our growth drivers, we will be able to deliver on the growth and profitability targets for this year and 2025. With that, I'll turn it over to Jason to cover the financials.
Speaker Change: First quarter results underscore our commitment to broadening our relevance to more empathize the segments. We do objective will becoming one of the leading gateways to the open internet.
Speaker Change: We are confident that with continued execution on our growth drivers, we will be able to deliver on the growth and profitability targets for this year in 2025.
Speaker Change: With that I'll turn it over to Jason to cover the financials.
Jason Kiviat: David. As David mentioned, we achieved our Q1 guidance for ex-tech gross profit and exceeded our Q1 guidance for adjusted EBITDA. Revenue in Q1 was approximately $217 million, reflecting a decrease of 6% year-over-year. New Media Partners in the quarter contributed five percentage points, or approximately $11 million of revenue growth year over year. Net revenue retention of our publishers was 89%, which reflects a 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 retention. I'll touch on the demand trends in a moment.
Jason Caveat: Thanks, David.
Jason Caveat: David mentioned, we achieved our Q1 guidance for ex Tac gross profit and exceeded our Q1 guidance for adjusted EBITDA.
Jason Caveat: Revenue in Q1 was approximately 217 billion, reflecting a decrease of 6% year over year.
Jason Caveat: New media partners in the quarter contributed five percentage points or approximately $11 million of revenue growth year over year.
Jason Caveat: Net revenue retention number of publishers with 89%, which reflects the continued headwind from the impact of the demand environment and pricing, which remains a consistent factor driving pressure on our revenue and that our net revenue retention.
Jason Caveat: I'll touch on the demand trends in a moment.
Jason Kiviat: As noted in the prior quarter, we also experienced a decline year-over-year in ad impressions contributing to retention being below 100%. However, again, this was driven largely by page view volatility from certain supply sources as opposed to churn. Consistent with recent quarters, Churn has remained at similarly low levels, with logo retention of 98% for all partners that generated at least $10,000, and our five largest churns amounted to only two combined points of year-over-year headwind on NRR in Q1. Turning to the advertising domain.
Jason Caveat: As noted in the prior quarter, we also experienced a decline year over year on AD impressions contributing to the retention being below 100%.
Jason Caveat: Again, this was driven largely by page view volatility from certain supply sources as opposed to churn.
Jason Caveat: Consistent with recent quarters churn has remained at similarly, low levels with logo retention of 98% for all partners that generated at least $10000 in our five largest churns amounted to only two combined points of year over year headwind on <unk> in Q1.
Jason Caveat: Turning to advertising demand.
Jason Kiviat: Following a seasonal stepdown in January, CPC remained fairly stable throughout February and March but remained down significantly versus the prior year. Despite the lower pricing, we experienced RPM, or yield growth, for the second consecutive quarter thanks to ongoing click-through rate expansion, which continues to exceed our previous highs. Exotech gross profit was $52.2 million, flat year-over-year, outpacing revenue growth for the fourth quarter in a row, driven primarily by improved deal performance on certain media partners and the net impact of revenue.
Jason Caveat: Following a seasonal step down in January CPC remained fairly stable throughout February and March but remained down significantly versus the prior year.
Jason Caveat: Despite the lower pricing, we experienced RPM, our yield growth for the second consecutive quarter. Thanks to ongoing click through rate expansion, which continues to exceed our previous highs.
Jason Caveat: Gross profit was $52 2 million flat year over year outpacing revenue growth for the fourth quarter in a row, driven primarily by improved yield performance on certain media partners and the net impact of revenue mix.
Jason Kiviat: As noted previously, the investment areas we are focused on are largely areas that we expect will drive higher x-tech. We experienced supply volatility from a key partner which negatively impacted year-over-year expected gross profit by mid to high single-digit percentage. Our XTAC would have grown year over year by this percentage, excluding this one key part. This impact was primarily a result of this partner's transitioning from their legacy bidding platform. Our tech migration to the new platform was completed last week.
Jason Caveat: As noted previously the investment areas. We are focused on are largely areas that we expect will drive a higher ex Tac takeaways.
Jason Kiviat: We experienced supply volatility from our key partner, which negatively impacted year over year ex that gross profit by mid to high single digit percentage.
Jason Caveat: Our ex Tac would have grown year over year by this percentage excluding this one key partner.
Jason Caveat: This impact was primarily a result of this partners transitioning from their legacy billing platform.
Jason Kiviat: Our tech migration to the new platform was completed last week.
Jason Kiviat: However, the optimization and rescaling of our demand is ongoing, and while we see an impact in Q2 results more than we anticipated, we expect to see sequential growth over the coming months. Moving to expenses. Operating expenses decreased by approximately 5% year-over-year to $48.2 million in the quarter, as we continue to balance investments and our strategic priorities with continued cost discipline. We began 2024 with a headcount of approximately 870 FTEs, which is down 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. The decline year-over-year was partially offset by a prior year one-time benefit around variable compensation that did not repeat in the current year.
Jason Kiviat: However, the optimization and Reskilling of our demand is ongoing and while we.
Jason Caveat: See it impacting Q2 results more than we anticipated we expect to see sequential growth over the coming months.
Jason Caveat: Moving to expenses operating expenses decreased by approximately 5% year over year to $48 2 million in the quarter as we continue to balance investments in our strategic priorities with continued cost discipline.
Jason Kiviat: We began 2024 with a head count of approximately 870 S teams, which is down 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.
Jason Kiviat: The decline year over year was partially offset by a prior year onetime benefit around variable compensation that did not repeat in the current year.
Jason Kiviat: Of note, we saw reduced bad debt expenses in Q1 down nearly $1 million year over year as we continue to focus on collection efforts and we expect to see lower levels over the remainder of the year.
Jason Kiviat: As a result, we doubled our adjusted EBITDA year over year to $1 4 million.
Jason Kiviat: Of note, we saw reduced bad debt expenses in Q1, down nearly $1 million year over year as we continue to focus on collection efforts, and we expect to see lower levels over the remainder of the year. As a result, we doubled our adjusted EBITDA year-over-year to $1.4 million. Moving to liquidity. Free cash flow, which, as a reminder, we define as cash from operating activities plus CapEx and capitalized software costs, was approximately $5 million in the first quarter.
Jason Kiviat: Moving to liquidity.
Jason Kiviat: Free cash flow, which as a reminder, we define as cash from operating activities less capex and capitalized software costs.
Jason Kiviat: Approximately $5 million in the first quarter.
Jason Kiviat: This was driven largely by working capital benefits coming from seasonality, timing of payables around period ends, and focused improvements in DSO. As a result, we ended the quarter with $232 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 a $30 million share repurchase program, and in 2023, we purchased approximately 3.7 million shares for $17.8 million. We will continue share repurchases in 2024. In Q1, we repurchased approximately 1 million shares for $3.9 million.
Jason Kiviat: This was driven largely by working capital benefits coming from seasonality timing of payables around paradigm and focused improvements in DSO.
Jason Kiviat: As a result, we ended the quarter with $232 million of cash cash equivalents and investments in marketable securities on the balance sheet.
Jason Kiviat: <unk> 18 billion of long term convertible debt.
Jason Kiviat: In December 'twenty train to the company's board of directors authorized a $30 million share repurchase program and in 2023, we purchased approximately $3 7 million shares for $17 $8 million.
Jason Kiviat: We continue share repurchases in 2024 and in Q1, we repurchased approximately 1 million shares for $3 $9 billion.
Jason Kiviat: So, as of March 31st, we have 8.6 million remaining under our current authorization. We continue to believe that this is an attractive way to enhance shareholder value under current market conditions. Now turning to our Outlook. In our guidance, we assume that current macro conditions persist with no material deterioration or improvement, regular seasonality, and, as noted in the prior quarter, continued execution of our growth drivers. Additionally, to add color, we expect to start to lap a softer comparison period as the year progresses in H2 and particularly in Q4.
Jason Kiviat: So as of March 31, we have eight.
Jason Kiviat: $8 6 million remaining under our current authorization.
Jason Kiviat: And we continue to believe is an attractive way to enhance shareholder value under current market conditions.
Jason Kiviat: Now turning to our outlook.
Jason Kiviat: Our guidance, we assume that current macro conditions persist with no material deterioration or improvement regular seasonality and as noted in the prior quarter continued execution of our growth drivers.
Jason Kiviat: Additionally to add color, we expect to start to lap a softer comparison period as the year progresses and H two particularly in Q4.
Jason Kiviat: With that in mind, we have provided the following guidance. For Q2, we expect Ex-Tecro's profit of $53 million to $57 million, and we expect adjusted EBITDA of $1 million to $4 million. We maintain our previous full year 2024 guidance provided at the beginning of the year of $238 million to $248 million of expat gross profit and $30 million to $35 million of adjusted EBITDA. Now I'll turn it back to the operator for Q&A.
Jason Kiviat: With that context, we are providing the following guidance.
Jason Kiviat: For Q2, we expect X that gross profit of $53 million to $57 million and we expect adjusted EBITDA of $1 million to $4 million.
Jason Kiviat: We maintain our previous full year 2020 guidance provided at the beginning of the year of 238 million to $248 million of X that gross profit and 30 to 35 billion of adjusted EBITDA.
Jason Kiviat: Now I'll turn it back to the operator for Q&A.
Operator: Thank you. Ladies and gentlemen, the floor is now open for questions. If you have a question, please press star 1 on your telephone keypad at this time. Again, that's star 1 if you have a question or comment. Please hold as we poll for questions. And we'll take our first question from Andrew Boone from JMP Securities. Please go ahead, Andrew.
Speaker Change: Thank you ladies and gentlemen, the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time again that star one if you do have a question or comment please hold as we poll for questions.
Operator: We will take our first question from Andrew Boone from JMP Securities. Please go ahead Andrew.
Andrew M. Boone: Good morning, and thanks so much for taking my questions. Dickie, I have a big picture question, and then Jason will go a little bit more tactical for the second. But Dickie, can you just talk about the key growth drivers in terms of returning revenue to growth for Outbrain? What do you view as kind of the key one, two, three things that you guys can do to drive better top-line growth? And then Jason, tactically on take rates, how should we be thinking about that for the remainder of the year? And can you talk about the drivers that you saw in 1Q?
Andrew M. Boone: Good morning, and thanks, so much for taking my questions, particularly out of a big picture question and then Jason will go a little bit more tactical for the second.
Andrew M. Boone: Can you just talk about the key growth drivers in terms of returning revenue to grow its for for outbreak what do you view as kind of the key one to three things that you guys can do to drive better top line growth and then Jason taxpayer on take rates, how should we be thinking about that for the remainder of the year and can you talk about the drivers that you saw in <unk>.
Speaker Change: Thank you so much.
David Kostman: Thank you so much for
Dickie: Andrew Good morning. Thanks for the question. So I think the biggest growth driver, but if I had to rank them is really our move to find though I think this is very unique in terms of participation on the open internet and wherever unique opportunity here to to link brand and performance and to offer advertisers a full funnel.
David Kostman: Hey Andrew, good morning, thanks for the question. So I think the biggest growth driver if I had to rank them, it would really be our move to the full funnel. I think this is very unique in terms of participation on the open Internet, and we have a unique opportunity here to link brand and performance and to offer advertisers a full funnel solution on the open Internet. The potential is very large. It requires formats like video and a high-impact display.
David Kostman: Solution on the open Internet the opportunity is very large it requires formats like video and high impact display to apprise you used to have placements on on site. So we're very confident that that's a great opportunity for us and pretty unique in terms of the ability to combine upper funnel mid funnel and the funnel.
David Kostman: It requires you to have placements on site, so we're very confident that that's a great opportunity for us and pretty unique in terms of the ability to combine the upper funnel, the mid-funnel, and the lower funnel. The second one is just growing our share of wallet with advertisers, including our performance advertiser, which is the biggest base of our advertisers. So we're investing a lot in two directions there. One is moving some of those large advertisers to Zementa or a DSP platform that delivers performance across the entire open Internet, not just on our publisher base and continuously improving Amplify, which is our own direct access platform. We've seen record CTRs in the last couple of quarters. So we feel very good about the ability to drive ROAS there. So I would say these are the two main ones, and you're
David Kostman: The second one is just growing our share of wallet with advertisers, including our performance at Bethesda, which is the biggest base of our advertisers. So we're investing a lot in two directions. There one is moving some of those large advertisers to the menthol with DSP platform that delivers performance across the entire opening.
David Kostman: Not just in our publisher base.
David Kostman: And continuously improving our amplify which is our own direct access platform.
David Kostman: Seen record C. T hours in the last couple of quarters. So we feel very good about the ability to drive rents. There. So I would say these are the two main ones.
Jason Kiviat: Andrew, it's Jason for the second question. So yeah, so yeah, the take rates have been up a few quarters in a row. I mentioned about a point and a half year over year this quarter and Q1, less about, you know, that lend and expand, right? We see our AI learning the users, and ourselves learning the users and driving better performance over time. And that's certainly part of what's happening here. And beyond that, and going forward, you know, we are focused on areas of these investments that we see as all things that should drive higher take rates.
David Kostman: Hey, Andrew it's Jason for the second question. So yeah. So yeah. The take rates have been up a few quarters in a row I mentioned about a point and a half year over year this quarter in Q1.
Jason Kiviat: Less about.
Jason Kiviat: New you know.
Jason Kiviat: Part of it's you know, obviously mix and some of that new deals are just different weighting of deals of course mix kind of works both ways.
Jason Kiviat: Really the optimization and performance is something that we're just always working on I mean, David included it.
Jason Kiviat: His third pillar of growth, which as you know improving yields improving click through rates and optimization to drive better performance. We added a ton of supply a couple of years ago, and we kind of preached we are we see ourselves as land and expand trade, we see our AI learning users and ourselves letting me users.
Jason Kiviat: Driving the better performance in time, and that's certainly part of what's happening here and beyond that and going forward. We are focused on.
Jason Kiviat: On areas of these investments that we see as all things that should drive higher take rates.
Jason Kiviat: So whether it's a supply beyond the feed where we think we have a bidding technology can help us drive higher take rates and an onyx in video, which tends to drive higher take rates additional margin opportunities from from getting more share of wallet for D. S. P.
Jason Kiviat: So, you know, whether it's supply beyond the feed, where we think we have, you know, our bidding technology can help us drive higher take rates, and Onyx and video tend to drive higher take rates, additional margin opportunities from getting more share of wallet for DSP, and, of course, more optimization of yields, right? So they're all things that we're focused on kind of more efficient growth. And so that's what we expect going forward.
Jason Kiviat: Of course more optimization of yields right. So they're all things that we're focused on kind of a more efficient growth and so that's what we expect going forward.
Speaker Change: Thank you.
Operator: Thank you. And we'll take our next question from Laura Martin from Needham. Please go ahead, Laura.
Jason Kiviat: Thank you and we will take our next question from Laura Martin from Needham. Please go ahead Laura.
Laura Anne Martin: Hi, So I have three.
Laura Anne Martin: So I have three.
Laura Anne Martin: One is our brain has traditionally been.
Laura Anne Martin: Formats oriented or AD Tech company, but what we're seeing in connected TV is that with the rise of <unk> and start closing the loop and they're making CTV more performance oriented and it feels like that.
Laura Anne Martin: <unk> is growing the fastest CTV. So I'm wondering if you think the competitive landscape is of course the launch for you our piece of the market, which is performance as connected TV does more performance oriented tasks. My second one is when you in your commentary you said that you are adding supply that is non traditional I'm interested.
Laura Anne Martin: And learning more about that what kind of supply that's non traditionally you're adding and then third when you mentioned cookies I would have guessed that you don't actually have a lot of cookies rest because you'll have an answer and platform could you just remind us in the first quarter how much of your AD.
Laura Anne Martin: AD placement was targeted by using crutches. Thanks.
David Kostman: One is Outbrain has traditionally been a performance-oriented ad tech company, but what we're seeing in connected television is that with the rise of RMNs, they're closing the loop, and they're making CTV more performance-oriented, and it feels like that segment is growing the fastest. CTV. So I'm wondering if the competitive landscape is worsening for your piece of the market, which is performance, as connected television My second point is that, in your commentary, you said that you were adding supply that is nontraditional.
David Kostman: I'm interested in learning more about that. What kind of supply that's nontraditional are you adding? And then third, when you mentioned cookies, I would have guessed that you don't actually have a lot of cookie risk because you have an end-to-end platform. Could you just remind us in the first quarter how much of your ad placement was targeted by using cookies? Thanks. Hey, Laura.
Laura Anne Martin: Hey, Laura Thanks for the question so I'll take the first one on CTV.
Speaker Change: And we are today, a relatively small player, but we if you'll recall we made an acquisition a couple of years ago, we'd be doing intelligence that has capabilities that have brought us into CTV and we believe that video is the format is a very large opportunity. We made that acquisition were seeing good growth in the deployment of <unk>.
David Kostman: Hey, Laura, thanks for the question. I'll take the first one on CTV.
David Kostman: We are today a relatively small player, but we, if you recall, we made an acquisition a couple of years ago, a company called Video Intelligence, that has capabilities that have brought us into CTV. And we believe that video as a format is a very large opportunity. Since we made that acquisition, we're seeing good growth in the deployment of VI players on our base of digital publishers.
David Kostman: And we need to find a way to grow our CTV business. But we believe that, definitely, it's also a combination of branding and performance that we see there. And it is becoming a more significant share of the market for performance advertisers; we believe we in the future need to find a way to play there in a bigger way. When we talk about non-traditional, it's what we call platforms, it's third parties, it's gaming platforms, it's news apps, it's lock screens, and other such environments where users today consume content.
David Kostman: Players on an hour.
David Kostman: The base of the digital publishers, and we need to find a way to grow our CTV business, but we believe that definitely it's a combination also branding and performance that we see there and it is a it is becoming a more significant shale of market performance advertisers.
David Kostman: We in the future we need to find a way to play there in a big away.
David Kostman: When you talk about non non traditionally what we called platforms. It's third parties at a gain.
David Kostman: Gaming platform is to use the apps, they lock screens and and other such.
David Kostman: <unk>, where users today consume content. So we're growing that it's part of our strategy of becoming the gateway to the open Internet again Bufano brand building consideration of performance, but also getting way beyond that we'll publish a traditional publisher base. So that's one big effort is today about 25% of all viable.
David Kostman: So we're growing that. It's part of our strategy of becoming the gateway to the open Internet. Again, full funnel, brand building, consideration, and performance, but also getting way beyond our publisher, traditional publisher base. So that's one of our big efforts. Today, about 25% of our business is done outside of our traditional publisher base, which we think is an important level for growth, again, leveraging the core capabilities we have on those premium publishers, which are anchors for those brands who want to spend.
David Kostman: Isn't it.
David Kostman: Outside of our traditional publisher base, which we think is that is an important.
David Kostman: Lever for growth again, leveraging the core capabilities, we have on this premium publishers, which are and coats for those brands, who want to spend so we're not giving up on beds. We're growing that we mentioned your scope of Australia, but we're also expanding beyond that.
David Kostman: So we're not giving up on that. We're growing it. We mentioned Newscope Australia, but we're also expanding beyond that. And the last point on cookies, I mean, we've said it from the beginning. We are based on contextually driven algos primarily. We have first-party data on our publishers that we leverage. So we don't see a risk from the cookie application on a relative basis on the open Internet. We think we actually have a big advantage versus other companies that are very focused on retargeting and need to track users across third-party sites. On the other side
David Kostman: And and the <unk>.
David Kostman: The last point on cookies I mean, we've said it from the beginning we are.
David Kostman: Based on contextually, driven our growth primarily with first party data on our publishers that we leverage so we don't see a risk from the cookie.
David Kostman: <unk> on a relative basis on the open internet with in Victoria.
David Kostman: So for us, it's a relatively minimal impact on our algos when cookies go away. We tested it when Firefox deprecated it, and it had minimal impact.
Operator: Thank you. And we'll take our next question from Zach Cummins from B Reilly. Please go ahead, Zach.
Zach Cummins: Yeah, hi, good morning. Thanks for taking my questions and congrats on the strong start to the year. I really wanted to dig in a little bit more on Onyx. I appreciate the disclosure of $7 million in revenue here in Q1. But can you just talk about which customer side is this really responding to and kind of what's the strategy to continue to drive adoption on that side since it appears to be a pretty meaningful growth driver in the overall scheme?
David Kostman: Thanks, Zach, for the question. So Onyx is targeting enterprise brands and agencies who are looking to launch campaigns that build brands. So this is us. We've been very, very focused since our start on performance, but we see a huge opportunity to A, leverage a lot of our prediction capabilities and our unique supply to drive much better value also for brand building campaigns. I mean, there's a good positive trend on the internet generally for that also for brand building.
David Kostman: Emergent seats, we're looking for to launch campaigns that build brands. So this is we've been very very focused since our stock on performance, but we see a huge opportunity to leverage a lot of our prediction capabilities and our unique supply to drive much better value also for brand building.
David Kostman: I mean, there is a good positive trend on the Internet generally that also for brand building and advertisers are looking for measurable outcomes, we've been very focused on putting attention.
David Kostman: Advertisers are looking for measurable outcomes; we've been very focused on driving attention as the key metric, and then leveraging our heritage of prediction. We launched this in the second half of last year. We had about $15 million in the second half of last year.
David Kostman: The key metric and that leverage our heritage of prediction.
David Kostman:
David Kostman: We see good growth getting into Q1 and Q2 of this year, and we believe that this will also position us in a very unique way on the open internet, being able to provide a full cross-funnel. If you think about just one example, take BMW. I mean, they could do with us a campaign that would promote a new engine with a super cool video. And then we understand how the interaction of the user with that campaign could drive performance or consideration of a new car and, ultimately, really drive a lead to their dealership.
David Kostman: This we launched it in a in the second half of last year, we had about $60 million in the second half of last year, we see good growth getting into Q1.
David Kostman: And Q2 of this year and we believe that this will also position us in a very unique way on the open internet being able to provide a full cross funnel. If you think about just an example take a BMW I mean, they could do with us a a campaign that would promote a new engine with a super cool video.
David Kostman: So being able to combine that is pretty unique, and we're leveraging our existing base of enterprise brands and advertisers to leverage them for driving performance and also brand building. And it's opening new doors for us at the holding companies and very large enterprise brands that have not worked with us before. So it's a great opportunity to really differentiate ourselves. That's why we emphasize it as one of the most important growth drivers and uniquely positions us on the open market.
David Kostman: And then we understanding the interaction of the user with that contain could drive performance or consideration of a new car and then on the bottom really drive the lead to their dealership, so being able to combine that is pretty unique and we're leveraging our existing base of enterprise.
David Kostman: <unk> and advertisers to leverage them from driving performance also to brand building and it's opening new doors for us at the holding companies and very large enterprise brands that have not worked with us before so it's a great opportunity to really that's why I reemphasize. It is one of our most important growth drivers and uniquely positions us.
David Kostman: The open Internet.
Jason Kiviat: understood. That's helpful. And just one more financial-related question, in terms of the reaffirmed guidance that you've given this year, Jason, can you parse out how we should be thinking about just expansion of the take rate versus overall growth in terms of gross revenue and kind of what's the right way to think about seasonality and progression, especially into the second half of the year?
Speaker Change: Understood. That's helpful and just one more financial related question in terms of the reaffirmed guidance that you're giving us here I mean, Jason can you parse out how should we be thinking about just.
Jason Kiviat: Expansion of a take rate versus overall growth.
Jason Kiviat: In terms of gross revenue and kind of whats the right way to think about seasonality in progression, especially into the second half of the year.
Jason Kiviat: Yeah, of course. So yeah, maybe just a reminder about our forecast methodology. So what we do is we take current trends that we're seeing, you know, kind of right up until the timing here, and we build seasonality on top of that based on our history, you know, that we know, you know, month to month and quarter to quarter what to expect over, you know, a 15 year history or so. Of course, later on other known items or growth driver assumptions, etc.
Jason Kiviat: Yeah of course, so yeah.
Jason Kiviat: Maybe just a reminder.
Jason Kiviat: But our forecast methodology. So we do is we take current trends that we're seeing.
Jason Kiviat: Right up until the timing here and rebuild seasonality on top of that based on our history. You know that we know no month to month and quarter to quarter, what you expect over our 15 year history or so.
Jason Kiviat: No of course later on other other known items or growth driver assumptions et cetera, and it does come out altogether as a slightly higher percentage of ex Tac in each two to relative to each one.
Jason Kiviat: And it does come out, you know, altogether as a slightly higher percentage of x tech in each two relative to each one. If you compare it to 2023, we're at 56% this year, which 53% was the actual last year. 56% of them are using the midpoint of the guidance, and Sue. You know, maybe breaking that down into a couple of pieces, you know, if you're using the midpoint of the guidance, close to half of that H2 growth is coming from easier comps.
Jason Kiviat: To 2023.
Jason Kiviat: 56%. This year. It was 53% was the actuals last year, 56% of our using the midpoint of the guidance.
Jason Kiviat: And so you.
Jason Kiviat: Maybe breaking that down into a couple of pieces, if you're using the midpoint of the guidance close to half of that <unk> growth is coming from easier comps and what I mean by that is last year Q4, and really start with October.
Jason Kiviat: And what I mean by that is, you know, last year, Q4, and, you know, really started with October, you know, and, and, and, and, the attacks on October 7, and the onset of the war, we saw just a smaller increase from Q3 to Q4, as a whole, than we historically have seen. We talked in prior quarters about, you know, the impact, obviously, on our, you know, local business in Israel, but also, you know, on our global business, where much of the page views of our, of our largest partners were, you know, temporarily showing lots of news about the war, which were, you know, monetizing lower than they typically would due to safety concerns and things like that, okay.
Jason Kiviat: And you'll be attacks on October 7th and the onset of the war.
Jason Kiviat: We saw we saw just a <unk>.
Jason Kiviat: Smaller increase from Q3 to Q4 as a whole.
Jason Kiviat: We'll then than we historically have seen we talked in prior quarters about the impact.
Jason Kiviat: Obviously on our on our.
Jason Kiviat: Local business in Israel, but also on our global business, where much of our page views of our of our largest partners were temporarily shut.
Jason Kiviat: Lots of news about the war, which were which were you know monetizing lower than than they typically would due to safety concerns and things like that right. So we did see a softer Q4 last year, which sets us up for a little bit of an easier comp this year and the other thing as I mentioned on the call about.
Jason Kiviat: So we did see a softer Q4 last year, which sets us up for a little bit of an easier comp this year. And the other thing is, I mentioned on the call about supply volatility from a key tech partner. We started to see changes from that partner over the course of 23, but really Q4 was the first meaningful period of impact. And so, again, as we kind of play out this year, I mentioned on the call that, you know, we had mid to high single-digit growth excluding this one partner on X-Tac this year in Q1, and we expect, you know, similar in Q2, as we make our way into Q4.
Jason Kiviat: Supply volatility from a key tech partner, we starting to see changes from that partner over.
Jason Kiviat: Over the course of 'twenty, three but really Q4 was the first the first meaningful period of impact and so again as we as we kind of play out this year.
Jason Kiviat: Mentioned on the call that we had a mid to high single digit growth. Excluding this one partner on ex Tac. This year in Q1, and we expect similar in Q2 as we make our way into Q4.
Jason Kiviat: And so, you know, obviously also expecting some modest sequential growth in the coming months in that partner also, you know, aids it as well. And then the other things are just, you know, things that are in our model. Obviously, we talked about our growth drivers. You know, Onyx is one where we expect to be more seasonally Q4 focused than our core business has historically been. And then other things flowing through, click through rates, as we said in yield growth for the last two quarters, continuing to flow through.
Jason Kiviat: That year over year headwind subsides.
Jason Kiviat: And so you know obviously, you're also expecting some some modest.
Jason Kiviat: Sequential growth in the coming months and that partner also.
Jason Kiviat: As well and then the other things are just you know things that are in our model. Obviously, we talked about our growth drivers Onyx is one where we expect it to be more seasonally Q4 focused on are that our core business has been historically.
Jason Kiviat: In other things flowing through click through rates, we said Neil.
Jason Kiviat: And yield growth for the last two quarters continuing to flow through we've seen strength in Europe, which we are flowing through and global events like the U S election of course.
Jason Kiviat: We've seen strength in Europe, which is flowing through in global events like the U.S. election. And that, of course, will be a little bit of a lift in the second half of the year. So I hope that helps.
Jason Kiviat: Will will be a little bit of a lift in the second half of the year. So hope that hope that helps.
Operator: Yeah, very, very helpful. So thank you so much for all the detail. And congrats again on solid results.
Speaker Change: Yes, very very helpful. So thank you so much for all the details and congrats again on the solid results.
Operator: Sure.
Ygal Arounian: Thank you. And we'll take our next question from Ygal Arounian from Citi. Please go ahead, Ygal.
Operator: Thank you and we will take our next question from Yigal <unk> from Citi. Please go ahead you go.
Max: Hey, guys, good morning. You have Max on for Ygal. Maybe first, if you could just give us some color on what you're seeing in the ad macro. It seems like, you know, we've seen a better start to 1Q. So just wondering what you're seeing there with ad budgets, maybe if there are any geographical or vertical strengths and weaknesses to call out. And then maybe more of like a capital allocation question, but you know, you mentioned the $232 million in cash investments on the balance sheet.
Ygal Arounian: Hey, guys. Good morning, Matt country Golf, maybe first if you could just give us some color on what youre seeing in the macro it seems like we've seen a better start to <unk>. So just wondering what youre seeing there with AD budgets, maybe if there's any geographical or vertical strength and weaknesses to call out and then.
Max: Maybe more like a capital allocation question, but.
Max: The $232 million of kind of cash and investments on the balance sheet I.
Max: Just wondering how you guys think about.
Max: Just wondering how you guys think about, you know, the cash position and, you know, understand you have to buy back authorization. But if there's anything else you guys are thinking about how to deploy that capital, you know, whether that's M&A or some other use.
Max: The cash position.
Max: Understand the buyback authorization, but if there is anything else you guys are thinking about.
Max: On how to deploy that capital, whether that's M&A or some other uses.
Jason Kiviat: Sure, so maybe I'll start on the demand trend that we've seen. So it's been kind of more of the same. You know, I'd say we haven't seen a material increase or decrease really for a couple quarters now. But we did drive yield or RPM growth year over a year for the second quarter in a row. So there is some strength there.
Speaker Change: Sure So maybe I'll start on the.
Jason Kiviat: The demand trends that we've seen so.
Jason Kiviat: It's been kind of more of the same I'd say, we haven't seen a material increase or decrease really for.
Jason Kiviat: For a couple of quarters now.
Jason Kiviat: We didn't drive yield or RPM growth year over year for the second quarter in a row.
Jason Kiviat: So there is some some strength there now a lot of that is coming as I said from from breaking our previous highs on click through rates, which comes obviously from from improvements in our tech and our ability to predict.
Jason Kiviat: Now, a lot of that's coming, as I said, from breaking our previous highs on click-through rates, which, you know, comes obviously from improvements in our tech and our ability to predict, you know, what to show to different users. And, you know, on the contrary, we've seen pricing or CPC remaining down year over year. So part of that is because we're optimizing not for pricing but for yields, obviously, that's what makes us and our partners money.
Jason Kiviat: What the show to different users.
Jason Kiviat: And on the contrary, we have seen pricing, our CPC remaining down year over year.
Jason Kiviat: So part of it is because we're optimizing not for for pricing, but for for yields obviously, that's what makes us and our partners money and so driving higher click through rates.
Jason Kiviat: And so, you know, driving higher click-through rates at the cost of pricing might be something that we're, you know, that's inherent in our model here. So it's hard to say that pricing down is a sign of anything deteriorating versus how we're able to drive higher yields from it. And as far as geographically, in Europe, we've seen stronger trends, you know, Spain, Italy, and Germany, Germany's our second largest market, have been showing really positive metrics over Q1 into Q2, relative to the US, which has been flat.
Jason Kiviat: The cost of of pricing.
Jason Kiviat: Be something that were those.
Jason Kiviat: That's inherent in our in our interim model here. So it's hard to say that pricing down as a sign of anything deteriorating versus you know, we're able to drive higher yields from it.
Jason Kiviat: And as far as geographically in Europe, we've seen stronger trends.
Jason Kiviat: Italy, and Germany, Germany is our second largest market have been I've been showing really positive metrics over over Q1 into Q2.
Jason Kiviat: Relative to U S, which has been flatter.
Jason Kiviat: And then, you know, verticals, we don't really overly rely on any verticals. I mean, just for color, we've seen strength in entertainment and health, while CPG, retail, and tech probably have been weaker verticals for us, but again, not overly meaningful to our results.
Jason Kiviat: And then you know verticals, we don't really know.
Jason Kiviat: Overly kind of rely on any verticals I mean, just for color, we have seen strength in entertainment and health, while CPG retail and tech probably been a weaker verticals for us, but again not overly meaningful to our results those verticals.
David Kostman: And maybe in terms of the I'll take the location question. So we have a very strong balance sheet; we are, you know, continuously looking to use some of this cash for acquisitions. And we think buyback is still an attractive opportunity. So we have an authorization, and we still have around $8 million on that.
Jason Kiviat: And maybe in terms of I think the accretion question. So we have a very strong balance sheet we.
David Kostman: We continue to see what are you looking to use some of this cash for acquisitions and we think by bankers still are an attractive opportunity. So we have that and authorization and we still have around $8 million on that authorization.
Max: Okay, great. Thanks, guys. Appreciate the call.
Speaker Change: Okay, great. Thanks, guys appreciate the color.
Operator: Thank you. Once again, Star One, if you do have a question or comment, we'll take our next question from James Heaney from Jeffries. Please go ahead, James.
Max: Thank you once again star one if you do have a question or comment and we will take our next question from John <unk> from Jefferies. Please go ahead James.
James Heaney: Great. Good morning. And thanks for the question. So you saw 40% growth in ad spend on the Zamanda DSP. Curious if you could just talk about what's driving the success of that channel and also just how you're balancing spend coming from third-party DSPs. Thank you.
James Heaney: Great Good morning, and thanks for the question so.
James Heaney: So you saw a 40% growth in AD spend on does the math of DSP. So curious if you could just talk about what's driving the success in that channel and also just how you're balancing that.
James Heaney: Coming from third party DSP.
David Kostman: Hi James, I didn't get the second part, but I'll start with the first part on Zementa. It's really just that we are strategically shifting some certain types of performance advertisers that have very large elastic budgets into that platform. So to give you a numerical example, if they spend $100,000 on Outbrain, now they will shift it to Zementa, and since they can also buy a lot of third-party supply as effectively in delivering ROAS, they will spend the same $100,000, hopefully, or close to that on Outbrain, and will now spend $150,000.
James Heaney: I didn't I didn't I think that the second part of that must not be the first part and I'll answer them and Thats really we are strategically shifting some certain types of performance advertisers that have very large elastic budget into into that platform. So give you a numerical example, they spend without going under 1000.
David Kostman: Now they will shift it to them and then they think they can also buy a lot of third party supply as effectively and delivering.
David Kostman: Ross they will spend the same Honda and hopefully we're close to that are now growing and will now spent a total of 150. We will also get service fee on that like like a DSP and we will see increased and very effective spend and Ross for that advertiser. So there's certain types of segments.
David Kostman: We will also get a service fee on that, like a DSP, and we will see increased and very effective spend in ROAS for that advertiser. So there are certain types of segments, it's very technical, where the Zementa platform fits better and delivers better ROAS, so we're shifting some of those, and that's been very successful for us and for these advertisers, and I think that's a great growth opportunity. And James, can you repeat the second question on the DSP?
David Kostman: Technical that would be the medical platform fits better and they give us better rod. So we're shifting some of those and that's been.
David Kostman: Very successful cross and for these advertisers and I think that's a that's a great growth opportunity and James can you repeat the second question on the BSP Yeah.
David Kostman: Yeah, sorry, the second part of the question was just about just overall trends that you're seeing from spend that's coming from third-party DSPs. Okay, so we see, I mean, on the bright side of the business, good, good spend on that front from our programmatic partners. It's about, a little less than 20% of our total business comes from DSPs into our network, but we've seen, you know, stable, positive trends over the past.
James Heaney: Yes, sorry, the second part of the question was just about just overall trends that youre seeing from spend that's coming from third party D. S. P.
David Kostman: Okay. So we see them in on the on the brand side of the business.
David Kostman: Good spend on on on that front from home our programmatic partners, it's about little less than 20% of our total business comes from.
David Kostman: DSP into into our network, but we've seen stable positive trends overall.
David Kostman: And then maybe if I could just ask one more quick question on, you know, the AI creative tools that you're giving customers, just any sense for what some of these tools are, and then any, you know, case studies of clients seeing success or improved return on investment from implementing these tools.
Speaker Change: Great and then maybe if I could just ask one more quick question on.
David Kostman: You talked about your AI creates all that youre, giving customers just any sense for what some of the tools are and then just any case.
David Kostman: Case studies of clients being SaaS or improved.
David Kostman: Return on investment from implementing new tools.
David Kostman: The use of this tool is very exciting when you when you see it allows customers to much faster test with different types of images and text and in real time understand what's working what's not working on which placement and iterate on it in a way that prior would require a lot of manual intervention so I think the models are learning it and automatically updating it allows you to test thousands of variations which you couldn't do before we've seen increased adoption of it and right now it's still early we're measuring ROAS that it's definitely improving the ROAS for advertisers because it optimizes their campaigns we see right now we're really focused on adoption and working and analyzing that so again that's we mentioned it on the call it's a big part of our investments generally are now on AI on text and images and also on internal tools leveraging AI to optimize our business
David Kostman: This and the use of it still is a very exciting when you when you see it allows customers to much faster test with different types of images and texts and in real time to understand what's working what's not working on which placement and iterate on at a in a in a in.
David Kostman: And with it the prior would require a lot of manual intervention. So I think the malls are learning it and automatically updating it allows you to test.
David Kostman: Thousands of variations that you couldn't do before we've seen increased adoption of it and right now it's still early we are measuring Ross that it's definitely improving the ros for quite a bit that's because it optimizes their campaigns, we see right now we're really focused on adoption and working and analyzing them. So again, that's what we meant.
David Kostman: On the call. It's a big part of our investments are generally are now on AI on text and images and also on internal tools, leveraging AI to optimize that business.
Speaker Change: Great. Thank you.
Operator: Thank you. And that concludes our question and answer session. I'd like to turn the floor back to management for closing remarks.
Speaker Change: Thank you and that concludes our question and answer session I would like to turn the floor back to management for closing remarks.
David Kostman: Thank you very much, everyone, for attending the call today. We are very excited about the growth opportunities we highlighted today. We think the open Internet is a great opportunity. Being a player that can provide the full funnel solution is what we're very, very focused on driving Brand Building, Consideration, and Performance. And we look forward to updating you on our progress on our next call.
Speaker Change: Thank you very much everyone for attending the call today, we are very excited about the growth opportunities. We highlighted today. We think the opening then it is a great opportunity being a player that can provide the full funnel solution is where we're very very focused on again driving.
David Kostman: Brand building consideration and performance and look forward to updating you on our progress on our next call.
Operator: Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.
Speaker Change: Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.
Operator: Okay.
Operator: [music].
Operator: Yeah.
Operator: Okay.
Operator: Yeah.
Operator: Okay.