Q2 2024 Outbrain Inc Earnings Call

August 8, 2024

Unknown Executive: Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's second quarter earnings release for definitional information on reconciliation of the non-GAAP measures to the comparable GAAP financial measures. The earnings release can be found on the IR website, investors.outbrain.com, under News and Events.

Unknown Executive: Good day and welcome to Outbrain Incorporated 2nd quarter, 2024 earnings conference call. At this time, all participants are in a listen-only mode. Question and answer session will follow the formal presentation.

good day and welcome to outbrain incorporated second quarter two thousand and twenty four earnings conference call at this time all participants are in a listen only mode

Unknown Executive: As a reminder, this conference is being recorded. I'd like to turn the call over to Outbrain's Investor Relations.

Speaker Change: question and- answer such them 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

Unknown Executive: Please go ahead. This morning, and thank you for joining us on today's conference call to discuss Outbrain's 2nd quarter 2024 results. Joining me on the call today, we have Outbrain's PO, David Kostman, and TFO, Jason Kiviat.

David Kostman: With that, let me turn the call over to David.

Unknown Executive: Good morning, and thank you for joining us on today's conference call to discuss Outbrain's second quarter 2024 results. Joining me on the call today are Outbrain CEO David Kostman and CFO Jason Kiviat.

Speaker Change: Good morning, and thank you for joining us on today's conference call to discuss Outbrain's second quarter 2024 results. Joining me on the call today, we have Outbrain CEO David Kostman and CFO Jason Kiviat.

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 a subsequent report filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the call's original date, but we do not undertake any duty to update any such statements.

Unknown Executive: During this conference call, management will make forward-looking statements based on current expectations and assumptions. These statements are subject to the rest of the certainties that may cause the actual results to differ materially from our forward-looking statements. These rest factors are discussed in detail in our form 10-K files for the year and December 31, 2023. As updated in a subsequent report filed with the Securities and Exchange Commission.

Speaker Change: during this conference call management will make forward-looking statements based on current expectations and assumption these statements are subject to arrestks and uncertainties that may cause actual results to differ materially from our forward-looking statements

Speaker Change: These risk factors are discussed in detail in our Form 10-K , filed for the EURA on December 31, 2023, as updated in subsequent reports filed with the Securities and Exchange Commission.

Unknown Executive: Forward-looking statements are based only as of the call's original date, but we do not undertake any due date to update any such statements.

Speaker Change: Forward-looking statements speak only as of the call's original date, so we do not undertake any duty to update any such statement.

Unknown Executive: Today's presentation also includes references to non-GAAP financial measures, which would refer to the information contained in the company's 2nd quarter earnings release for definitional information and reconciliation of the non-GAAP measures with a comparable GAAP financial measures.

Speaker Change: Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's second quarter earnings release for definitional information on reconciliation of the non-GAAP measures to the comparable GAAP financial measures.

Unknown Executive: Her earnings release can be found on the IR website Investors.

Speaker Change: Her earnings release can be found on the IR website, investors.albrain.com, under News and Events. With that, let me turn the call over to David.

Unknown Executive: With that, let me turn the call over to David. Thank you, Sam.

David Kostman: Thank you, Sam. Good morning, and thank you for joining us today for our second quarter 2024 earnings call. Last Thursday, we announced the definitive agreement to acquire Teads, combining the two companies into a platform that we believe will define the next generation of open internet advertising. This is a transformative merger that positions us as one of the largest open internet advertising platforms. It dramatically changes our financial profile in terms of profitability and growth opportunities.

David Kostman: Thank you, Sam. Good morning, and thank you for joining us today for our second quarter 2024 earnings call. The news of our merger with Tees allows us to take a massive leap forward in executing this strategy. These statements are just two of many examples of the overwhelmingly positive feedback from so many of our clients, and I want to take this opportunity to thank them for that and for their continued partnership. The two companies will continue to operate as standalone businesses as we prepare the post-merger integration plan.

David Kostman: Good morning, and thank you for joining us today for our 2nd quarter 2024 earnings call. Last Thursday, we announced the definitive agreement to acquire Teeds, combining the two companies into a platform that we believe will define the next generation of open internet advertising. This is a transformative merger that positions us as one of the largest open internet advertising platforms. It dramatically changes our financial profile in terms of profitability and growth opportunities. We believe the combination will deliver significant accretions to our shareholders, to synergies, and the financial leverage of the transaction. The two companies have amazing teams of talented, innovative, driven people that have been instrumental in establishing our two companies as category creators and leaders, opening Performance and Teeds in branding.

David: Thank you, Sam. Good morning and thank you for joining us today for our second quarter 2024 earnings call.

David: Last Thursday we announced the definitive agreement to acquire Teads, combining the two companies into a platform that we believe will define the next generation of open internet advertising.

Speaker Change: This is a transformative merger that positions us as one of the largest open internet advertising platforms. It dramatically changes our financial profile in terms of profitability and growth opportunities.

David Kostman: We believe the combination will deliver significant accretion to our shareholders, due to synergies and the financial leverage of the transaction. The two companies have amazing teams of talented, innovative, driven people that have been instrumental in establishing our two companies as category creators and leaders, Outbrain in performance and Teams in branding. Together, we believe we will create a scaled, global platform that can deliver outcomes for advertisers currently only rivaled by WorldGuard. We've been clear that our vision is to become a true end-to-end, full-fledged platform for the open Internet, with a level of service and standards centered on serving brand needs. The news of our merger with Tees allows us to take a massive leap forward in executing this strategy. The reception we've seen from many industry players reinforces our confidence in the merger rationale.

David: we believe the combination will deliver significant decret to our shareholders to synergies in the financial leverage of the transaction

Speaker Change: The two companies have amazing teams of talented, innovative, driven people that have been instrumental in establishing our two companies as category creators and leaders, Outbrain in performance and Teams in branding.

David Kostman: Together, we believe we will create a scaled global platform that can deliver outcomes for advertisers, currently only rivaled by world gardens. We've been clear that our vision is to become a true end-to-end full-sunder platform for the open internet, with the level of service and standards centered on serving brand needs. The use of our merger with Teeds allows us to take a massively forward in executing this strategy. The reception we've seen from many industry players reinforces our confidence in the merger's rationale. Many of our partners, for media owners, to brands and agencies, express their excitement about the opportunities that your company would create.

Speaker Change: Together, we believe we will create a scaled global platform that can deliver outcomes for advertisers currently only rivaled by walled gardens.

David: We've been clear that our vision is to become a true end-to-end full funnel platform for the open internet, with a level of service and standards centered on serving brand needs.

David: The news of our merger with Tees allows us to take a massive leap forward in executing this strategy.

David: The reception we've seen from many industry players reinforces our confidence in the mergers rationale. Many of our partners, from media owners to brands and agencies, express their excitement about the opportunities the new company would create.

David Kostman: Many of our partners, from media owners to brands and agencies, expressed their excitement about the opportunities the new company would create. For example, Peter Wootenberger, Executive Vice President at Axel Schringer, wrote to us: "This is a significant milestone for both companies, and we are thrilled to see you expand your capabilities." We look forward to seeing the positive impact this partnership will have on the industry and on our collaboration. And another one, Alexandra Chabann, CEO of Group M France, one of our agency partners wrote, This merger of the leaders in performance marketing and video branding promises to be an exciting and transformative alliance.

David Kostman: For example, Peter Wootenberger, Executive Vice-President at Axel Schringer, wrote to us: this is a significant milestone for both companies, and we are thrilled to see you expanded capabilities. We look forward to seeing the positive impact this partnership will have on the industry and on our collaboration. And another one, Alexandra Shaban, CEO of Group M Friends, one of our agency partners, wrote, this merger of the leaders in performance marketing and video branding promises to be an exciting and transformative alliance. These statements are just two of many examples of the overwhelming positive feedback from so many of our clients, and I want to thank this opportunity to thank them for that and for their continued partnership.

Speaker Change: For example, Peter Wurtenberger, Executive Vice President at Axel Springer wrote to us.

Peter Wurtenberger: This is a significant milestone for both companies, and we are thrilled to see your expanded capabilities. We look forward to seeing the positive impact this partnership will have on the industry and on our collaboration.

Speaker Change: And another one, Alexandre Chaban, CEO of Group M France, one of our agency partners wrote, this merger of the leaders in performance marketing and video branding promises to be an exciting and transformative alliance.

David Kostman: These statements are just two of many examples of the overwhelmingly positive feedback from so many of our clients, and I want to take this opportunity to thank them for that and for their continued partnership. The two companies will continue to operate as standalone businesses as we prepare the post-merger integration plan.

Speaker Change: These statements are just two of many examples of the overwhelmingly positive feedback from so many of our clients, and I want to take this opportunity to thank them for that and for their continued partnership.

David Kostman: The two companies will continue to operate at standalone businesses as we picker the post merger integration plans, clothing which is subject to regulatory approval, outreach shareholder vote and other standard clothing conditions is expected by Q1 2025.

Speaker Change: The two companies will continue to operate as stand-alone businesses as we prepare the post-merger integration plans.

David Kostman: Closing, which is subject to regulatory approval, Outbrain shareholder vote, and other standard closing conditions, is expected by Q1 2025. Now, I want to provide an update on Q2 and the progress on our 2024 growth drive. For Q2, I'm pleased to report that we delivered an extra gross profit of $56 million towards the higher end of our guidance. We significantly exceeded our adjusted EBITDA guidance with $7.4 million, and we generated positive free cash flow for the fourth consecutive quarter.

Speaker Change: closing which is subject to regulatory approval our being shareholderable and other standard closing conditions is expected by q two thousand and twenty -five

David Kostman: Now I want to provide an update on Q2 and the progress on our 2024 growth drivers. For Q2, please to report that we delivered extra growth profits of $56 million to both the higher end of our guidance. We significantly exceeded our adjusted EBITDA guidance with $7.4 million, and we generated positive free cash flow for the fourth consecutive quarter. These results are driven by positive trends in our core business and the momentum in our growth drivers.

Speaker Change: now i want to provide an update on q two and the progress on our two thousand and twenty-four growth drivers

David Kostman: For Q2, I'm pleased to report that we delivered an extra gross profit of $56 million towards the higher end of our guide. The first pillar refers to expanding our share of wallets with advertisers across both brands and agencies, as well as performance advertisers. Our next direct sales continue to grow through the combination of new clients, new markets, and rebooking. We successfully launched Onyx in Israel and Spain and have several campaigns live in both countries. This is in addition to the U.S., U.K., Germany, Italy, and Japan.

Speaker Change: For Q2, I'm pleased to report that we delivered extra gross profit of $56 million towards the higher end of our guidance.

Speaker Change: we significantly exceed our adjusted ebn guidance with seven point four million dollars and we generated politic cash flow for the fourth consecutive quarter

David Kostman: These results are driven by positive trends in our core business and the momentum in our growth drivers. As you may recall, these growth drivers we talked about revolve around three pillars. The first pillar refers to expanding our share of wallets with advertisers across both brands and agencies, as well as performance advertisers. Our next direct sales continue to grow through the combination of new clients, new markets, and rebooking. We successfully launched Onyx in Israel and Spain and have several campaigns live in both countries. This is in addition to the U.S., U.K., Germany, Italy, and Japan.

Speaker Change: These results are driven by positive trends in our core business and the momentum in our growth drivers.

David Kostman: As you may recall, these growth drivers we talked about revolve around three pillars. The first pillar refers to expanding our share of wallet with advertisers across both brands and agencies, as well as performance advertisers. Onyx Direct sales continue to grow through the combination of new clients, new markets, and rebookings. We successfully launched Onyx and Israel in Spain and have several campaigns live in both countries. This is in addition to the US, UK, Germany, Italy, and Japan. In addition, Onyx has continued to see a strongly booking rate of nearly 40% in Q2, reflecting the business impact Onyx has delivered for our clients.

Speaker Change: As you may recall, these growth drivers we talked about revolve around three pillars.

Speaker Change: The first pillar refers to expanding our share of wallets with advertisers across both brands and agencies, as well as performance advertisers.

Speaker Change: onnix direis continue to grow through the combination of new client new markets and rebookings we successfully launched onics and israel and spain and at several campaigns li in both countries this is in addition to the u s uk germany italy and japan

David Kostman: In addition, Onyxx has continued to see strong rebooking rates of nearly 40% in Q2, reflecting the business impact Onyxx has delivered for our clients. Notably, we've secured multiple campaigns from enterprise partners such as Disney+, Purina, and Nissan, including a great campaign promoting the Taylor Swift era store. Sorry, I had to mention this thing to get some credit with my daughter. On the performance side of our business, one of our main initiatives is shifting certain buyer profiles to our DSP. Zemanta

Speaker Change: In addition, Onyxx has continued to see strong rebooking rate of nearly 40% in Q2, reflecting the business impact Onyxx has delivered for our clients.

David Kostman: Notably, we secured multiple campaigns from enterprise partners such as Disney Class, Purina, Nissan, including a great campaign promoting the tailors with Aeros tour. Sorry, I had to mention this campaign to get some credit with my daughter. On the performance side of our business, one of our main initiatives is shifting certain buyer profiles to our DSP, the Manta. Our DSP enables these clients to drive growers at a larger scale on the open internet, allowing us to capture a larger share of wallet from these clients at a higher extract margin. In the first half of 2024, we achieved remarkable growth on our DSP, with advertisers paying growing by approximately 50% in comparison to the first half of 2023.

David Kostman: Notably, we've secured multiple campaigns from enterprise partners such as Disney+, Purina, and Nissan, including a great campaign promoting the Taylor Swift era store. We continue to expand our supply footprint outside of our traditional feed, enabling advertisers to reach consumers with a range of placements across the entirety of the open internet. This resulted in logo retention of 99% in Q2. Let me share a few highlights of our product and our book. The successful launch of Predictive Demographics is a reflection of this.

Speaker Change: Notably, we've secured multiple campaigns from enterprise partners such as Disney+, Purina, Nissan, including a great campaign promoting the Taylor Swift Airwrestler. Sorry, I had to mention this campaign to get some credit with my daughter.

Speaker Change: On the performance side of our business, one of our main initiatives is shifting certain buyer profiles to our DSP.

David Kostman: Our DSP enables these clients to drive ROAS at a larger scale on the open internet, allowing us to capture a larger share of wallets from these clients at a higher X-Tak. In the first half of 2024, we achieved remarkable growth on our DSP, with advertiser spend growing by approximately 50% in comparison to the first half of 2023. Moving on to our second pillar, we've continued to expand our supply footprint outside of our traditional feed, enabling advertisers to reach consumers with a range of placements across the entirety of the open internet.

Speaker Change: Zemanta. Our DSP enables these clients to drive ROAS at a larger scale on the open internet, allowing us to capture a larger share of wallets from these clients at a higher extract margin.

Speaker Change: in the first half of two thousand and twenty-four we achieved remarkable growth on our dsd with advertise of spend growing by approximately fifty percent in comparison to the first half of two thousand and twenty three

David Kostman: Moving on to our second pillar, we continue to expand our supply footprint outside of our traditional seed, enabling advertisers to reach consumers with a range of placements across the entirety of the open internet. These revenues, which are on inventory beyond our traditional seed, represented approximately 27% of our revenue in Q2 2024 versus 24% in Q2 2023.

Speaker Change: Moving on to our second pillar, we've continued to expand our supply footprint outside of our traditional feed, enabling advertisers to reach consumers with a range of placements across the entirety of the open internet.

David Kostman: These revenues, which are on inventory beyond our traditional feed, represented approximately 27% of our revenue in Q2 2024 versus 24% in Q2 2023. As our third pillar, we continue to invest in deepening our partnerships with top premium media owners. We signed new exclusive feed partnerships, among others, with Outbrain in France and The Daily Beast in the US. We also renewed several partnerships, including Ad Alliance in Germany and Vox in the US. This resulted in logo retention of 99% in Q2.

Speaker Change: These revenues, which are on inventory beyond our traditional feed, represented approximately 27% of our revenue in Q2 2024 versus 24% in Q2 2023.

David Kostman: Our third pillar, we continue to invest in deepening our partnerships with top premier media owners. We sign new exclusive seed partnerships, among others, with Abra in France and the Daily Beast in the US. We also renew several partnerships, including Adelaide in Germany and Vox in the US. This resulted in lower retention of 99% in Q2. Also Keystone, so continue the adoption by some of our top premier publishers.

Speaker Change: our third pillar will continue to invest in deening our partnerships with top tror media owners we sign new exclusive feed partnerships among others with a brian france and the datily based in the us

Speaker Change: We also renewed several partnerships, including Ad Alliance in Germany and Vox in the US.

Speaker Change: This resulted in logo retention of 99% in Q2.

David Kostman: Also, Keystone, so continued adoption by some of our top premium publishers. Let me share a few highlights about our product and our growth. We launched a new AI-driven targeting solution, Predictive Demographics. Predictive demographics enables our clients to reach relevant demographic audiences without relying on third-party cookies. Outbrain Predictive Demographics is establishing itself as a real option for demographic targeting among Dementor buyers, with early data showing an adoption rate surpassing traditional third-party targeting segments by up to 40% for one of our recent clients, a public health company in the U.S. Tradictive demographics drove 2.7 times higher click-through rates in comparison to campaigns using third-party demographic segments.

Speaker Change: Also Keystone, so continued adoption by some of our top premium publishers.

David Kostman: Let me share a few highlights on our product and our goal. We launch the new AI-driven targeting solution, predictive demographics. Predictive demographics enables our clients to reach relevant demographic audiences without relying on third-party cookies. Outbrain predictive demographics is establishing itself as a real option for demographic targeting among the mentor buyers, with only data showing an adoption rate surpassing traditional third-party targeting segments by up to 40%. For one of our recent clients, a public health campaign in the US, predictive demographics broke 2.7 times higher click-through rate in comparison to campaigns using third-party demographic segments. We are encouraged by these results, which signal to us that advertisers are looking for privacy-forward audience solutions that can drive results.

Speaker Change: let me sha a few highlights on our products can outgo

Speaker Change: We launched a new AI-driven targeting solution, Predictive Demographics.

Speaker Change: conneiciveve demographics enables our clients to reach relevant democratic audences without relying on third-party quickly

Speaker Change: Outbrain Predictive Demographics is establishing itself as a real option for demographic targeting among dementia buyers, with early data showing an adoption rate surpassing traditional third-party targeting segments by up to 40%.

Speaker Change: For one of our recent clients, a public health campaign in the US, predictive demographics drove 2.7 times higher click-through rate in comparison to campaigns using third-party demographic segments.

David Kostman: We are encouraged by these results, which signal to us that advertisers are looking for privacy-forward audience solutions that can drive results. On the heels of Google's announcement to reverse their plans to deprecate third-party cookies in Chrome, we remain committed to driving results with contextual and privacy-centric signals. The successful launch of Predictive Demographics is a reflection of this. On the algorithm, our click-through rate witnessed double-digit growth in the first half of 2024.

Speaker Change: We are encouraged by these results, which signal to us that advertisers are looking for privacy-forward audience solutions that can drive results.

David Kostman: On the heels of Google's announcement to reverse the plans to deprecate third-party cookies in Chrome, we remain committed to driving results with contextual and privacy-centric signals. The successful launch of predictive demographics is a reflection of this. On the algorithm side, our click-through rate has witnessed double-digit growth in the first half of 2024, and we've also witnessed our third consecutive quarter of year-over-year RPM growth, sustaining our upward momentum.

Speaker Change: On the heels of Google's announcement to reverse their plans to deprecate third-party cookies in Chrome, we remain committed to driving results with contextual and privacy-centric signals.

Speaker Change: The successful launch of Predictive Demographics is a reflection of this.

David Kostman: On the algo side, our click-through rate witnessed double-digit growth in the first half of 2024, and we've also witnessed our third consecutive quarter of year-over-year RPM growth, sustaining our upward momentum. In conclusion, our second quarter has been marked by growth, new partnerships, and innovative strides in improving campaign performance and user engagement. We are thrilled to embark on the next chapter with Teads and focus on executing our strategy to build towards becoming the preferred full-funnel platform provider.

Speaker Change: On the algo side, our click-through rate has witnessed double-digit growth in the first half of 2024, and we've also witnessed our third consecutive quarter of year-over-year RPM growth, sustaining our upward momentum.

David Kostman: In conclusion, our second quarter has been marked by growth, new partnerships, and innovative strides in improving campaign performance and using engagement. I'm confident that our trajectory remains strong, and that we are well positioned for sustained success in the future. We have thrilled to embark on the next chapter we need and are focused on executing our strategy to build towards becoming the deep-referred full-funner platform for brands on the open internet.

Speaker Change: In conclusion, our second quarter has been marked by growth, new partnerships, and innovative strides in improving campaign performance and user engagement.

Speaker Change: i'm confident that our trajectory remains strong and that we are well positioned for sustained to exset in the future

David Kostman: And we've also witnessed our third consecutive quarter of year-over-year RPM growth, sustaining our upward momentum. In conclusion, our second quarter has been marked by growth, new partnerships, and innovative strides in improving campaign performance and user engagement. I am confident that our trajectory remains strong and that we are well positioned for sustained success in the future. We are thrilled to embark on the next chapter with EADS and are focused on executing our strategy to build towards becoming the preferred full-funnel platform for brands on the open Internet. With that, I'll turn it over to Jason. I'll turn it over to Jason, David Kostman, David Kostman, David Kostman.

Speaker Change: We are thrilled to embark on the next chapter with Teads and are focused on executing our strategy to build towards becoming the preferred full-funnel platform for brands on the open Internet.

Jason Kiviat: With that, I'll turn it over to Jason. Thanks, David. As David mentioned, we achieved our Q2 guidance for X-Tech cross-profit and exceeded our Q2 guidance for adjusted EBITDA, generating positive free cash flow for the fourth consecutive quarter. Overall, we feel we have made updates to our revenue mix and cost structure that are having a positive impact on our profitability now, and expect that to continue in the future. Revenue in Q2 was approximately $214 million for selecting a decrease of 5% year-over-year. New media partners in the quarter contributed 6 percentage points for approximately 14 million of revenue growth year-over-year.

Speaker Change: With that, I'll turn it over to Jason.

Jason Kiviat: Thanks David. As David mentioned, we achieved our Q2 guidance for ex-Tecros profit and exceeded our Q2 guidance for just a thought, generating positive free cash flow for the fourth consecutive quarter. Overall, we feel we have made updates to our revenue mix and cost structure that are having a positive impact on our profitability now, and we expect that to continue in the future. Revenue in Q2 was approximately $214 million, reflecting a decrease of 5% year-over-year.

Jason Kiviat: Thanks, David. As David mentioned, we achieved our Q2 guidance for Exotec Cross Profit and exceeded our Q2 guidance for Adjusted EBITDA, generating positive free cash flow for the fourth consecutive quarter. Revenue in Q2 was approximately $214 million, reflecting a decrease of 5% year-over-year. However, new media partners in the quarter contributed 6 percentage points, for approximately $14 million of revenue growth year-over-year. As noted previously, the investment areas we are focused on are largely areas that we expect will drive a higher XTAC take rate, and these areas are helping bring that to fruition.

Jason: Thanks, David. As David mentioned, we achieved our Q2 guidance for XTAC Cross-Profit and exceeded our Q2 guidance for Adjusted EBITDA, generating positive free cash flow for the fourth consecutive quarter.

Jason: Overall, we feel we have made updates to our revenue mix and cost structure that are having a positive impact on our profitability now and expect that to continue in the future.

Jason: Revenue in Q2 was approximately $214 million, reflecting a decrease of 5% year-over-year. New media partners in the quarter contributed 6 percentage points for approximately $14 million of revenue growth year-over-year.

Jason Kiviat: New media partners in the quarter contributed 6 percentage points for approximately $14 million of revenue growth year-over-year. Net revenue retention of our publishers was 89 percent, but it reflects continued headwinds from the impact of the demand environment on pricing, as well as downward pressure on ad impressions from certain key supply partners, as noted in the prior quarter. Consistent with recent quarters, logo retention was 99% 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.

Jason Kiviat: Net revenue retention of our publishers was 89%, but for flexible continued headwind from the impact of the demand environment on pricing, as well as downward pressure of added impressions from certain key supply partners, as noted in the prior quarter. Consistent with recent quarters, logo retention was 99% for all partners that generated at least $10,000, and our five largest turns amounted to only two combined points of pricing. Remains low relative to our history, and while it remains down year over year, we have seen positive trends over the course of Q2, its improvement month over month. This, along with continued improvements in click-through rates, growth acceleration in RPMs, which have now seen growth year over year for the third consecutive quarter.

Jason: Net revenue retention of our publishers was 89%, which reflects continued headwind from the impact of the demand environment on pricing, as well as downward pressure of ad impressions from certain key supply partners, as noted in the prior quarter.

Jason: Consistent with recent quarters, logo retention was 99% 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.

Jason Kiviat: With respect to advertising demand, pricing remains low relative to our history, and while it remains down year over year, we've seen positive trends over the course of Q2, with improvement month over month. This, along with continued improvements in click-through rates, curve acceleration, and RPMs, which have now seen growth year-over-year for the third consecutive quarter. Ex-tech net worth profit was $56 million, an increase of 3% year-over-year, outpacing revenue for the fifth quarter in a row, driven primarily by a net favorable change in our revenue mix and improved performance from certain deals. As noted previously, the investment areas we are focused on are largely areas that we expect to drive a higher XX take rate. And these areas are helping bring that vision to fruition.

Speaker Change: With respect to advertising demand.

Speaker Change: pricing remains low relative to our history and while it remains down year-over-year we have seen positive trends over the course of q two its improvement month over month this along with continued improvements in quickly rates dve acceleration in rpms which have now seen growth year-over-year for the third exsecutive quarter

Jason Kiviat: X-Tech growth profit was $56 million, and increase at 3% year over year, outpacing revenue for the fifth quarter in a row, driven primarily by net favorable change in our revenue mix, and improved performance from certain yield. As noted previously, the investment areas we were focused on are largely areas that we expect will drive a higher X-Tech take rate, and these areas are helping bring that to fruition. While X-Tech growth profit returned to year over year growth in Q2 on the strength of these accelerating growth areas and the positive momentum of RPMs. Over the past two quarters, we've noted volatility from one of our key partners transitioning to a new bidding technology, offering being one of the first partners to complete this transition in early May.

Speaker Change: x tech ross profit was fifty-six million an increase of three percent year-over-year outpacing revenue for the fifth quarter in a row driven primarily by net favorable change in our revenue mix and improved performance from certain deals

Speaker Change: As noted previously, the investment areas we are focused on are largely areas that we expect will drive a higher ex-tech take rate, and these areas are helping bring NET to fruition.

Jason Kiviat: Well, the ex-techress prophet returned to you over your growth in Q2 on the strength of these accelerating growth areas and the positive momentum of RPM. However, over the past two quarters, we've noted volatility from one of our key partners transitioning to a new bidding technology, outbrain being one of the first partners to complete this transition in early May. The transition involves access to new supply opportunities for us, and we remain focused on the optimization and the reskilling of our demands.

Jason Kiviat: Will X-Tech, with Profit, return to year-over-year growth in Q2 on the strength of these accelerating growth areas and the positive momentum of RPM? Outbrain being one of the first partners to complete this transition in early May? The transition involves access to new supply opportunities for us, and we remain focused on the optimization and rescaling of our demand. As a result, we doubled our adjusted EBITDA year over year to $7.4 million. Free cash flow, which, as a reminder, we define as cash from operating activities, less capex and capitalized software costs of approximately $300,000 in the second quarter, as a result of offsetting impacts of profitability, strong collections For Q3, we expect Ex-Tecro's profit of $58 million to $62 million, and we expect adjusted EBITDA of $8 million to $10.5 million.

Speaker Change: Will X-Tech with profit return to year-over-year growth in Q2 on the strength of these accelerating growth areas and the positive momentum of RPMs?

Speaker Change: over the past two quarters we've noted volatility from one of our key partners transitioning to a new bidding technology outbr and being one of the first partners to complete this transition in early man the transition involves access to new supply opportunitiesuced for us and we remain focused on the optimization in a resscaling of our demand

Jason Kiviat: The transition involves access to new supply opportunities for us, and we remain focused on the optimization and rescaling of our demand. This volatility impact that our X-Tech growth profit in Q2 by high single digit percentage, our overall Q2 X-Tech growth profit would have grown double digit percentage year over year, excluding this one isolated headwind.

Jason Kiviat: This volatility impact our ex-secrous profit in Q2 by a high single-digit percentage. Our overall Q2 ex-tech growth profit would have grown double-digit percentage year-over-year, excluding this one isolated head. Renaissance.

Speaker Change: this volatility impact that our xpect ross profit in q two by high single-digit percentage

Speaker Change: Our overall Q2 ex-tech growth profit would have grown double-digit percentage year-over-year, excluding this one isolated headwind.

Jason Kiviat: Moving to expenses. Offering expenses decreased by approximately 1% year over year to 51.2 million in a quarter, as we continue to balance investments in our strategic priorities, and maintain continued cost discipline. The effect decline year over year was driven by compensation and bad debt savings, as well as timing benefits of expenses shifting from Q2 into H2, often partially by the increased professional fees related to our announced anticipated transaction with T. As a result, we doubled our adjusted year over year to 7.4 million.

Jason Kiviat: Operating expenses decreased by approximately 1% year-over-year to $51.2 million in the quarter, as we continue to balance investments in our strategic priorities with continued cost assessment. The OPEX decline year-over-year was driven by compensation and bad debt savings, as well as timing benefits of expenses shifting from Q2 into H2, offset partially by the increased professional fees related to our announced anticipated transaction with fees. As a result, we doubled our adjusted EBITDA year over year to $7.4 million.

Speaker Change: Well thanks for the presentation.

Speaker Change: operating expenses decreased by approximately one percent year-over-year to fifty-one pointts two million in the quarter as we continue to balance investments in our strategic priorities is continued cost discipline

Speaker Change: The OPEX decline year-over-year was driven by compensation and bad debt savings, as well as timing benefits of expenses shifting from Q2 into H2, offset partially by the increased professional fees related to our announced anticipated transaction with fees.

Speaker Change: As a result, we doubled our adjusted EBITDA year-over-year to $7.4 million.

Jason Kiviat: Moving to liquidity. Re-cashflow, which as our reminder, we define as cash from operating activities less capex and capitalized software costs, for approximately $300,000 in the second quarter, as a result of offsetting impacts of profitability, strong collections of receivables, timing income tax and other payments, and seasonality. As a result, we ended the quarter with 229 million of cash, cash equivalent, and investments in marketable securities on the vouchee, a 118 million of long-term, affordable debt. In December 2022, the board's companies, board of directors authorized a $30 million share purchase program, and in Q2, we purchased approximately half a million shares for $2 million.

Jason Kiviat: Moving to liquidity. Free cash flow, which, as a reminder, we define as cash from operating activities, less CapEx and capitalized software costs, was approximately $300,000 in the second quarter as a result of the offsetting impacts of profitability, strong collections of receivables, timing of income tax and other payments, and seasonality.

Speaker Change: Moving to liquidity.

Speaker Change: Free cash flow, which, as a reminder, we define as cash from operating activities less capex and capitalized software costs, was approximately $300,000 in the second quarter as a result of offsetting impacts of profitability, strong collections of receivables, timing of income tax and other payments, and seasonality.

Operator: As a result, we ended the quarter with $229 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 Q2, we purchased approximately half a million shares for $2 million. As of June 30th, we have 6.6 million remaining under our current authorization. Given the pending acquisition of Teads, we currently do not intend to continue repurchasing shares.

Speaker Change: As a result, we ended the quarter with $229 million of cash, cash equivalents, and investments in marketable securities on the balance sheet, and $118 million of long-term convertible debt.

Speaker Change: In December 2022, the company's board of directors authorized a $30 million share repurchase program, and in Q2, we purchased approximately half a million shares for $2 million.

Jason Kiviat: As of June 30th, we have 6.6 million remaining under our current authorization. Given the pending acquisition of Teeds, we currently do not intend to continue re-purchasing shares.

Speaker Change: as of june thereif we have six pointin six million remaining under our current authorization

Speaker Change: given the pending acquisition of teeds we currently do not intend continue repurchasing shares

Jason Kiviat: Nicholas. Turning to our outlook. In our guidance, we assume regular seasonality and is noted in the prior corner, continued execution of our growth drivers. Additionally, our guidance reflects the Outbrain as a stand-alone business, with the assumption that the announced transaction with Keys will not close before year-end. With that context, we have provided the following guidance. For Q3, we expect ex-tekros profit at $58 million to $62 million, and we expected just to eat up of $8 million to $10.5 million. We maintain our previous full-year 2024 guidance for ex-tekros profit of $238 million to $248 million, and are increasing our guidance for adjusted eat at the $31.5 million to $36 million.

Operator: Turning to our Outlook. In our guidance, we assume regular seasonality and, as noted in the prior quarter, continued execution of our growth strategy. Additionally, our guidance reflected outbrain as a standalone business, with the assumption that the announced transaction with Keys will not close before you're in. With that in mind, we provided the following guidance. For Q3, we expect Ex-Tecro's profit of $58 million to $62 million, and we expect adjusted EDA of $8 million to $10.5 million.

Speaker Change: Returning to our outlook. In our guidance, we assume regular seasonality and as noted in the prior quarter, continued execution of our growth drivers.

Speaker Change: Additionally, our guidance reflects Outbrain as a standalone business with the assumption that the announced transaction with keys will not close before year-end.

Speaker Change: With that context, we have provided the following guidance.

Speaker Change: For Q3, we expect Exotec gross profit of $58 million to $62 million, and we expect adjusted EBITDA of $8 million to $10.5 million.

Operator: We maintain our previous full year 2024 guidance for ex-tech growth profit of $238 million to $248 million and are increasing our guidance for adjusted EBITDA to $31.5 million to $36 million. Now I'll turn it back to the operator for Q&A.

Speaker Change: We maintain our previous full-year 2024 guidance for Exitech Gross Profit of $238 million to $248 million and are increasing our guidance for Adjusted EBITDA to $31.5 million to $36 million.

Unknown Executive: Now, I'll turn it back to the operator for Q&A. 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.

Speaker Change: Now, I'll turn it back to the operator for Q&A.

Operator: Thank you. Ladies and gentlemen, the floor is now open to questions. If you do 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. 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 1 on your telephone keypad at this time. Again, that's star 1 if you do have a question or comment.

Unknown Executive: Good day and welcome to Outbrain Incorporated 2nd quarter, 2024 earnings conference call. At this time, all participants are in a listen only mode. Question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I'd like to turn the call over to Outbrain's investor relations. Please go ahead. This morning, and thank you for joining us on today's conference call to discuss Outbrain's 2nd quarter, 2024 results.

Andrew Boone: And we'll take our first question from Andrew Boone from JMP Securities.

Speaker Change: And we'll take our first question from Andrew Boone from JMP Securities. Please go ahead, Andrew.

Andrew Boone: Please go ahead, Andrew. Good morning, and thanks for taking my questions. You highlighted the growth in RPMs in the quarter. Can you talk about the drivers of that and your confidence that this can continue?

Andrew Boone: Good morning, and thanks so much for taking my questions. You highlighted the growth in RPMs in the quarter. Can you talk about the drivers of that and your confidence that this can continue? And then, Jason, can you wrap that into the implied guidance for 4Q and talk about your confidence just given the implied acceleration that the four-year guidance implies for 4Q? And then, Dickie, just stepping back, can you talk about the conversations that you've had with advertisers just in the last week, understood still very new, but what's the reception been to the announcement of the Teed acquisition? Thanks so much, guys.

Andrew Boone: You highlighted the growth in RPMs in the quarter. Can you talk about the drivers of that and your confidence that this can continue? And then, Jason, can you wrap that into the implied guidance for 4Q and talk about your confidence, just given the implied acceleration that four-year guidance implies for 4Q? And then, Dickie, just stepping back, can you talk about the conversations that you've had with advertisers just in the last week, understood still very new, but what's the reception been to the announcement of the Teed acquisition? Thanks so much, guys.

Andrew Boone: good morning and thanks much for take my questions

Andrew Boone: And then, Jason, can you wrap that into the implied guidance per 4Q and talk about your confidence, just giving the implied acceleration that four-year guidance implies per 4Q?

Unknown Executive: Joining me on the call today, we have Outbrain's PO, David Kostman, and TFO, Jason Kiviat. During this conference call, management will make forward-looking statements based on current expectations and assumptions. These statements are subject to the rest of the certainties that may cause the actual results to differ materially from our forward-looking statements.

Andrew Boone: And then, Dickie, just stepping back, can you talk about the conversation that you're having with advertisers just in the last week? Understands still very new. What's the reception been to the announcement of the T acquisition?

Andrew Boone: and then Dickie, just stepping back, can you talk about the conversations that you're having with advertisers just in the last week, understood still very new, but what's the reception been to the announcement of the Teads acquisition? Thanks so much, guys.

Andrew Boone: Thanks so much, guys.

Jason Kiviat: Sure. Thanks, Andrew.

Jason Kiviat: Sure. Thanks, Andrew. It's Jason, and I'll take the first couple there.

Jason Kiviat: It's Jason, and I'll take the first couple there. So, you know, as far as what's driving RPMs, I mean, it's the third quarter in a row that we're seeing yields or RPMs up year over year. One constant driver has been the click-through rates, which we've been in each quarter breaking our previous records as far as just how high the click-through rates are. A lot that goes into that. Obviously, algorithmic improvements, use of additional data signals, optimization, like some of our dynamic placements that we're using, are helping drive higher click-through rates. So, click-through rates have been a good thing for a long time for us, and you can go in the right direction.

Unknown Executive: These rest factors are discussed in detail in our form 10K files for the year and December 31, 2023. As updated in a subsequent report, filed with the Securities and Exchange Commission. Forward-looking statements based only as of the call's original date, but we do not undertake any due date to update any such statements.

Speaker Change: sure thanks sander 'sjason and i' i 'll take the first the first couple of there so

Jason Kiviat: So, you know, as far as what's driving RPMs, I mean, it's the third quarter in a row that we're seeing yields or RPMs up year over year. One constant driver has been the click-through rates, which we've been, kind of, each quarter breaking our previous records as far as just how high those click-through rates are. There's a lot that goes into that.

Speaker Change: You know, as far as what's driving RPMs, I mean, it's the third quarter in a row that we're seeing yields or RPMs up year over year.

Speaker Change: one constant driver has been the click the rates which we've been and of each quarter breaking our previous records as far as just how high the clickthe rates are

Jason Kiviat: Obviously, algorithmic improvements, the use of additional data signals, and optimization, like some of our dynamic placements that we're using are helping drive higher click-through rates. So, click-through rates have been a good thing for a long time for us and are going in the right direction. The one, kind of, new thing I'd say this quarter was we started to see just a better trend on cost per click on CPCs, which have been a headwind and will remain a headwind for us year over year in Q2. But over the course of the quarter, we started to see it go in the right direction as far as just narrowing the headwind year over year. So, that was a real positive.

Unknown Executive: Today's presentation also includes references to non-gab financial measures, which would refer to the information contained in the company's 2nd quarter earnings release for definitional information and reconciliation of the non-gab measures with a comparable gap financial measures. Her earnings release can be found on the IR website investors.

Speaker Change: There's a lot that goes into that, obviously.

Andrew Boone: algorithmic improvements use of additional data signals optimization like some v dynamic placements that we're ing are helping drive higher click rates so quick the rates have been a good thing for

Jason Kiviat: The one kind of new thing I'd say this quarter was, we started to see just a better trend on cost per click on CPCs, which have been aheadwinded, and remain aheadwind for us year or year in Q2 over the course of the quarter. We started to see it go in the right direction as far as just narrowing the headwind year over year. So, that was a real positive. It comes with, you know, maybe some market dynamics and also some changes we made internally as well. So, good things there are RPMs, and we obviously see it, you know, not only driving better revenue, but also better margins.

Speaker Change: A long time for us and going the right direction. The one kind of new thing I'd say this quarter was we started to see just a better trend on cost per click on CPCs.

Unknown Executive: With that, let me turn the call over to David. Thank you, Sam.

Andrew Boone: which had been a headwind and remain a headwind for us year or-year in q two over the course of the quarter we started this year it going in the right direction as far as just narrowing the headwind year-over- year so that was a real positive it comes with

David Kostman: Good morning, and thank you for joining us today for our 2nd quarter, 2024 earnings call. Last Thursday, we announced the definitive agreement to acquire Teeds, combining the two companies into a platform that we believe will define the next generation of open internet advertising. This is a transformative merger that positions us as one of the largest open internet advertising platforms. It dramatically changes our financial profile in terms of profitability and growth opportunities.

Jason Kiviat: It comes with, you know, maybe some market dynamics and also some changes we made internally as well. So, the good things there are RPMs, and we obviously see them, not only driving better revenue but also better margins. And then, as far as the confidence in the back half and Q4, yes, you know, we do expect acceleration in Q3 versus Q2 and also, you know, in Q4 versus Q3, versus the 3% extra growth we saw in Q2.

Speaker Change: Maybe some market dynamics and also some changes we made internally as well. So good things there are our PMs and we obviously see it, you know, not only driving better revenue, but also better margins.

Jason Kiviat: And then, as far as the confidence in the back half and Q4, yeah, you know, we do expect acceleration, you know, in Q3 versus Q2, and also, you know, Q4 versus Q3. You know, versus the 3 percent X that growth we saw in Q2, we get to about, I think, 6 percent in Q3 at the midpoint, and 17 percent in Q4 at the midpoint. So, maybe just, you know, a lot of the good things that we see driving the success in Q2 and into Q3, we see continuing into Q4. So, that's definitely a piece of it, but I think a big piece of it, and that expects step up from the 6 percent growth to 17 percent differences.

Speaker Change: Imelda Lee, Jason Kiviat, Yaron Galai

David Kostman: We believe the combination will deliver significant accretions to our shareholders, to synergies, and the financial leverage of the transaction. The two companies have amazing teams of talented, innovative, driven people that have been instrumental in establishing our two companies as category creators and leaders, opening performance and Teeds in branding. Together, we believe we will create a scaled global platform that can deliver outcomes for advertisers, currently only rivals by world gardens. We've been clear that our vision is to become a true end-to-end full-sunder platform for the open internet, with the level of service and standards centered on serving brand needs.

Speaker Change: versus the 3% X-step growth we saw in Q2. We get to, I think, 6% in Q3 at the midpoint and 17% in Q4 at the midpoint. So maybe just a lot of the good things that we see driving the success in Q2 and into Q3, we see continuing into Q4.

Jason Kiviat: We get to, I think, 6% in Q3 at the midpoint and 17% in Q4 at the midpoint. So, maybe just, you know, a lot of the good things that we see driving the success in Q2 and into Q3 we see continuing into Q4. So, that's definitely a piece of it, but I think a big part of it and that step up from the 6% growth to 17%, the difference is that a lot of it is coming from year-over-year comps, actually.

Speaker Change: So that's definitely a piece of it, but I think a big piece of it, and that step up from the 6% growth to 17%, the difference is a lot of it's coming from year-over-year comps actually. So eight points of even comps in Q4 is one way to look at it. Last year, we didn't have a normal Q4. Obviously, it started with the attacks on October 7th and the war and the impact on our war-related news page views and just advertising demand. And also just, you know, we talk about the key tech partner transition. We did start to see some headwinds on that really in Q4 of last year. So the two of those things combined ease the comps.

Jason Kiviat: A lot of it's coming from year-over-year comms, actually. So, eight points of even comms in Q4 is one way to look at it. Last year, we didn't have a normal Q4. Obviously, it started with the attacks on October 7th, and the war and the impact on our, you know, war-related use page views, and just advertising demands. And also, just, you know, we talk about the key tech partner transition, we did start to see some headwinds on that really in Q4 last year. So, the two of those things combined, ease the comms for Q4 and best driving, I think, eight points of improvement as compared to the Q3, and then, you know, continued success of the growth drivers that we've already seen some success with, obviously.

Jason Kiviat: So, eight points of even comps in Q4 is one way to look at it. Last year, we didn't have a normal Q4. Obviously, it started with the attacks on October 7th and the war and the impact on our, you know, war-related news page views and just advertising demand.

David Kostman: The use of our merger with Teeds allows us to take a massively forward in executing this strategy. The reception we've seen from many industry players reinforces our confidence in the merger's rationale. Many of our partners, for media owners, to brands and agencies, express their excitement about the opportunities that your company would create. For example, Peter Wootenberger, Executive Vice-President at Axel Schringer, wrote to us, this is a significant milestone for both companies and we are thrilled to see you expanded capabilities.

David Kostman: And also, just, you know, we talk about the key tech partner transition. We did start to see some headwinds on that, really, in Q4 of last year. So, the two of those things combined ease the comps for Q4, and that's driving, I think, eight points of improvement as compared to Q3. And then, you know, continued success of the growth drivers that we're already seeing some success with, obviously. And, yeah, RPMs, and elections. So, just those are more smaller items in our model, but all that combined.

Speaker Change: for Q4, and that's driving, I think, eight points of...

Speaker Change: of Improvement as compared to the Q3. And then, you know, continued success of the growth drivers that we're already seeing some success with, obviously. And, yeah, RPMs, election. So, just those are those are more smaller items there for our model, but all that combined.

Jason Kiviat: And, yeah, RPMs, elections, so just those are more smaller items. They're a little more volatile, but all that combined.

David Kostman: Andrew, I'll take the second one.

David Kostman: Hey Andrew, I'll take the second one. Thanks. So it's actually been a very Thank you for joining us for this exciting week with overwhelmingly positive feedback from players in the industry, both advertisers and media owners, and publishers. On the advertiser side specifically, they really view this as a huge opportunity to have one player that can provide the full funnel solution on the open Internet. When we talk about the full funnel, that means branding, consideration, and conversions on an end-to-end basis.

unknown: Hey, Andrew, I'll take the second one. Thanks. So it's actually been a very University of California, San Diego, California, www.universityofcalifornia.com

David Kostman: Thanks. So it's been a very exciting week with overwhelmingly positive feedback from players in the industry, both advertisers and video owners.

David Kostman: We look forward to seeing the positive impact this partnership will have on the industry and on our collaboration. And another one, Alexandra Shaban, CEO of Group M Friends, one of our agency partners wrote, this merger of the leaders in performance marketing and video branding promises to be an exciting and transformative alliance. These statements are just two of many examples of the overwhelming positive feedback from so many of our clients and I want to thank this opportunity to thank them for that and for their continued partnership.

Speaker Change: And I'll take the second one. Thanks. So it's been a actually very...

Speaker Change: Exciting week with overwhelmingly positive feedback from players in the industry, both advertisers and video owners, publishers on the advertiser side specifically.

David Kostman: Publishers on the advertiser side, specifically, they really do this as a huge opportunity to have one player that can provide the school funnel solution on the open internet. When we talk about food funnel, that means branding, consideration, and conversions on an end-to-end basis; you the advantage of the data.

Speaker Change: They really do this as a huge opportunity to have one player that can provide the full funnel solution on the open internet. When we talk about full funnel, that means branding, consideration and conversions on an end-to-end basis.

David Kostman: Judith took advantage of the data. So it was overwhelmingly the teeth on the teeth side and on our side, really people are expecting as quickly as possible for us to close this and be able to bring them the value proposition we're talking about, which is really the combination of leaders in performance, which is us, and leaders in branding, which is teeth. So it's been great, and it's been a very exciting week, as you can imagine.

David Kostman: So it was overwhelmingly both the teats on the teats side and on our side, really people are expecting as quickly as possible for us to close this and be able to bring them the value proposition we're talking about, which is really the combination of leaders in performance, which is us and leaders in branding that is teats. So it's been great; it's been a very exciting week, as you can imagine.

Speaker Change: You get advantage of the data. So it was overwhelmingly both the teats on the teat side and on our side. People are expecting as quickly as possible for us to close this and be able to.

Speaker Change: to bring them the value proposition we're talking about, which is really the combination of leaders in performance, which is us, and leaders in branding that is T. So it's been great and it's been a very exciting week, as you can imagine.

David Kostman: Now I want to provide an update on Q2 and the progress on our 2024 growth drivers. For Q2 and please to report that we delivered extra growth profits of $56 million to both the higher end of our guidance. We significantly exceeded our adjusted EBITDA guidance with $7.4 million and we generated positive free cash flow for the fourth consecutive quarter. These results are driven by positive trends in our core business and the momentum in our growth drivers.

Ygal Arounian: Thank you. Thank you, and we'll take our next question from Ygal Arounian from City. Please go ahead, Ygal. Good morning, guys. You have maxed on for Ygal.

Operator: Thank you. And we'll take our next question from Ygal Arounian from Citi. Please go ahead, Ygal.

Operator: Thank you, and we'll take our next question from Ygal Arounian from Citi. Please go ahead, Ygal.

Speaker Change: thank you

Speaker Change: Thank you. And we'll take our next question from Yigal Aronian from Citi. Please go ahead, Yigal.

Operator: Hey, good morning, guys. You have Max on for y'all.

Ygal Arounian: I guess first maybe I just start with what you're seeing in the ad macro, you know, seems like we've maybe been a little more mixed, but you know what you're seeing now and kind of how you see that playing out through the rest of the year. If there's anything maybe geographical or vertical to call out. Sure, and I could start with that. So yeah, like I said, we did see, you know, continued our PM and the CDC gains over the course of Q2, which is, you know, a combination of a lot of factors. So it's hard to know how much of it is macro versus, you know, internal or specific to us, but we did see positive things.

Speaker Change: good morning guys you at mackx on free gol

Ygal Arounian: I guess first, maybe just start with what you're seeing in the ad macro. You know, it seems like maybe it's been a little more mixed. But you know what you're seeing now and kind of how you see that playing out through the rest of the year. If there's anything maybe geographical or vertical to call out.

Yigal Aronian: I guess first, maybe just start with what you're seeing in the ad macro. You know, seems like maybe it's been a little more mixed. But you know what you're seeing now and kind of how you see that playing out through the rest of the year. If there's anything maybe geographical or vertical to call out.

David Kostman: As you may recall, these growth drivers we talked about revolve around three pillars. The first pillar refers to expanding our share of wallet with advertisers across both brands and agencies as well as performance advertisers. Onyx Direct sales continue to grow through the combination of new clients, new markets and rebookings. We successfully launched Onyx and Israel in Spain and have several campaigns live in both countries. This is in addition to the US, UK, Germany, Italy and Japan.

Jason Kiviat: Sure. And I could start with that.

Speaker Change: Sure, and I could start with that. So yeah, like I said, we did see, you know, continued RPM and CPC gains over the course of Q2.

Jason Kiviat: So, yeah, like I said, we did see continued RPM and even CPC gains over the course of Q2, which is, you know, a combination of a lot of factors. So it's hard to know how much of it is macro versus, you know, internal or specific to us, but we did see positive things. So that's a good sign. Geographically, I'd say, you know, we see particularly Germany, which is our second largest market, and Spain were a couple of our stronger markets throughout the quarter.

Speaker Change: which is you a combination of a lot of factors so it's hard to to know how much of it is macro versus you know internal or specific to us but we did see positive thing so that's a good sign geographically i'd say you know we see strength in europe particularly

Ygal Arounian: So that's a good sign. Geographically, I'd say, you know, we see strength in Europe, particularly, you know, Germany, which is our second largest market in Spain. We're a couple of our stronger markets throughout the quarter.

David Kostman: In addition, Onyx has continued to see strongly booking rate of nearly 40% in Q2, reflecting the business impact onyx has delivered for our clients. Notably, we secured multiple campaigns from enterprise partners such as Disney class, Purina, Nissan, including a great campaign promoting the tailors with Aeros tour. Sorry, I had to mention this campaign to get some credit with my daughter. On the performance side of our business, one of our main initiatives is shifting certain buyer profiles to our DSP, the Manta.

Speaker Change: Germany, which is our second largest market in Spain. We're a couple of our stronger markets throughout the quarter. And yeah, I mean, going forward, I think it's

Ygal Arounian: And yeah, I mean, going forward, I think it's hard to predict anything, I guess, macro-wise going forward, but, you know, we obviously hope to see the continued acceleration of what we saw through Q2 is what we're, you know, hoping for, but not overly relying that, I'd say, in our guidance. Okay, thanks. Yeah, that's helpful.

Jason Kiviat: And yeah, I mean, going forward, I think it's hard to predict anything, I guess, macro-wise, going forward, but we obviously hope to see the continued acceleration of what we saw through Q2, but not overly relying, I'd say, on our guidance.

Speaker Change: It's hard to predict anything I guess macro wise going forward but you know we obviously hope to see the continued acceleration of what we saw through Q2 is what we're you know hoping for but not not overly relying on I'd say in our guidance.

Jason Kiviat: Okay, thanks. Yeah, that's helpful. And then maybe just spending a little time on Zamantha, you know, obviously some good growth there. You know, is there anything maybe like specific you can call out on what's driving this?

Speaker Change: ant

Ygal Arounian: And then maybe just spending a little time on Samantha, you know, obviously some good growth there. You know, is there anything, maybe like, specific? Yes, we call out what's driving this.

Speaker Change: okay thank the other helpouple and then maybe just spending all time on deananta you obvious could growth there you know is there anything maybe like specific

David Kostman: Our DSP enables these clients to drive growers at a larger scale on the open internet, allowing us to capture a larger share of wallet from these clients, at a higher extract margin. In the first half of 2024, we achieved remarkable growth on our DSP with advertisers paying growing by approximately 50% in comparison to the first half of 2023.

David Kostman: And then, you know, maybe just kind of like the bigger picture. You know, when you think of the combined company, how do you see Zamantha fitting in with Teads? And, you know, maybe just with the tech stack too, as you look to combine, obviously, early days, but maybe just any early thoughts on how you think about combining those going forward. Sure. Yeah, I think that makes sense.

David Kostman: And then, you know, maybe just kind of like bigger picture, you know, when, you know, in the combined company, how do you see, you know, Samantha fitting in with Teeds and, you know, maybe just would be a tech spec too, if you look to combine honestly early days, but maybe just having any early thoughts on how do you think about combining those going forward? Sure, I say that makes so on Samantha. It's been one of our growth drivers for this year. I've been really to grow the show of all this from performance advertisers, by just delivering superior raw to them and also allowing them to spend more on the entirety of the open internet again, in line with our vision of becoming the main gateway for the open internet for both brand advertisers and performance.

Speaker Change: Yes, we call out what's driving this and then, you know, maybe just kind of like bigger picture

Speaker Change: Unknown Executive, Jason Kiviat, Yaron Galai

David Kostman: Sure, I'll take that, Max. So on Zementa, one of our growth drivers for this year has been really growing the share of all its own performance advertisers by just delivering superior ROAS to them and also allowing them to spend more on the entirety of the open internet, again, in line with our vision of becoming the main gateway for the open internet for both brand advertisers and performance. And we started last year to ship some clients that just had better performance on the Zementa platform into that. So that causes two things.

David Kostman: Moving on to our second pillar, we continue to expand our supply footprint outside of our traditional seed, enabling advertisers to reach consumers with a range of placement across the entirety of the open internet. These revenues, which are on inventory beyond our traditional seed, represented approximately 27% of our revenue in Q2, 2024 versus 24% in Q2, 2023.

Speaker Change: sure i say that ma on on gment has been one of our growth drivers for this year has been reallyready to grow the show ble on performance advertisers by just delivering superior war to them

Speaker Change: and also allowing them to spend more on the entirety of the open internet again in line with our vision of becoming the main gateway for the open internet for both brand advertisers and performance.

David Kostman: A. They spend more because they still spend on the Outbrain publisher network, but they can also spend on third-party platforms, other SPS, and so, and then that grows the share of all, and then also we, for us, it's a margin enhancer. We've seen 50% growth in the spend on Zementa, and I think that will continue to be one of the main growth drivers for the company standalone. As to the combination, it's a little bit early days.

David Kostman: And we started the last year to ship some type of clients that just had better performance under the mentor platform into that. So the causes two things, they they spend more because they still spend on the out brand publishing network, but they also can spend on third party platforms, other species and so and then that's close to sure. Hold it, and also we for us, it's a margin enhancer. We've seen; we said 50% growth in the span on the mentor, and I think that will continue to be one of the main growth drivers for the company stand alone.

Speaker Change: We started last year to ship some type of clients that just had better performance on the Dementor platform into that. So that causes two things. A, they spend more.

David Kostman: Our third pillar, we continue to invest in deepening our partnerships with top premier media owners. We sign new exclusive seed partnerships among others with Abra in France and the Daily Beast in the US. We also renew several partnerships, including Adelaide in Germany and Vox in the US. This resulted in lower retention of 99% in Q2. Also Keystone, so continue the adoption by some of our top premier publishers.

Speaker Change: because they still spend on the outbrain the tion network but they also can spend on third party

Speaker Change: Unknown Executive, Jason Kiviat, Yaron Galai

David Kostman: As to the combination that we teed, it's a little bit early days. We have not yet gone deeply into sort of product planning, et cetera. We just started, I think we mentioned the post merging integration planning. And generally I would say the mentor platform is very, very focused on performance buyers. So I believe it will continue to be part of our growth drivers in the future for those types of buyers.

Speaker Change: as to the combination we ple it a little bit early days

David Kostman: We have not yet gone deeply into product planning, et cetera. We just started, I think we mentioned, the post-merger integration planning. And generally, I would say the Meta platform is very, very focused on performance buyers. So I believe it will continue to be part of our growth drivers in the future for those types of buyers.

Speaker Change: we have not yet had gone deeply into sort of product planning a tedtrwhere we just started i think we mentioned the post-merging integration planning

Speaker Change: Generally, I would say that the Meta platform is very, very focused on performance buyers, so I believe it will continue to be part of our growth drivers in the future for those type of buyers.

Unknown Executive: Thank you.

Operator: Thank you. And we'll take our next question from Laura Martin from Needham. Please go ahead, Laura.

Speaker Change: Okay, great. Thanks, guys.

Laura Martin: And we'll take our next question from Laura Martin from Needham, Priso Head, Laura. Yeah, I also have two. The first one is when you think about Dravenew's synergies, is it a bigger upside driver that that teeds will be able to sell in performance advertising from the Outbrain court business or the reverse Outbrain adds more upper funnel from the teeds client base. Hey, Laura. It's actually on both sides. So what we've heard and also throughout the process, a teeds world going sort of through the mid funnel and two conversions, but they get only with enterprise brand buyer.

Speaker Change: Thank you and we'll take our next question from Laura Martin from Needham. Please go ahead Laura.

Operator: I also have two. The first one is when you think about revenue synergies, is it a bigger upside driver that Teads will be able to sell performance advertising from the Outbrain core business, or the reverse? Outbrain adds more upper funnel from the Teads client base.

Ygal Arounian: Yeah, I also have two. The first one is, when you think about revenue synergies, is it a bigger upside driver that Teads will be able to sell performance advertising from the Outbrain core business, or the reverse? Outbrain adds more upper funnel from the Teads client base.

Laura Martin: Yeah, I also have two. The first one is when you think about revenue synergies, is it a bigger upside driver that Teads will be able to sell in performance advertising from the outgrowing core business?

David Kostman: We are encouraged by these results, which signal to us that advertisers are looking for privacy forward audience solutions that can drive results. On the heels of Google's announcement to reverse the plans to deprecate third-party cookies in Chrome, we remain committed to driving results with contextual and privacy-centric signals. The successful launch of predictive demographics is a reflection of this. On the algorithm side, our click-through rate has witnessed double-digit growth in the first half of 2024, and we've also witnessed our third consecutive quarter of year-over-year RPM growth, sustaining our upward momentum.

Speaker Change: or the reverse outbrain adds more upper funnel from the teie's centes

David Kostman: Hey Laura, it's actually on both sides. So what we've heard and also throughout the process, it was going sort of to the mid-fallon and to conversions, but again, only with enterprise brand buyers. So that's the focus in terms of the customer base. And that customer base also has different objectives for their campaigns. So we see a huge opportunity, and also the team's management sees a huge opportunity to just drive, leveraging our prediction technology algorithms, just better conversions and lower funnel business for the brand advertisers.

Speaker Change: kayora it's actually on both sidesso would be heardling also throughtril the process

Speaker Change: It involves going sort of to the mid-fallen and to conversions, but again, only with enterprise brand buyers. So that's the focus in terms of the customer base, and that customer base also has different objectives on their campaigns.

David Kostman: So that's the focal terms of the customer base. And that customer base also has different objectives on their campaigns. So we see a huge opportunity, and also the teeds management sees a huge opportunity to just try leveraging our prediction technology, algorithms, just better conversions and the law funnel business for for the brand advertisers at the same time. We have about 40% of our business today is with brands and enterprises. They do mostly performance. I mentioned a few campaigns that we have. So, for example, if you look at automotive clients like Audi, we mentioned it in the course.

Speaker Change: So we see a huge opportunity, and also the teeth management sees a huge opportunity to just drive

Speaker Change: leveraging our prediction technology algorithms just better conversions and and and low funnel business for for the brand advertisers at the same time we have about 40% of our business today is with brand and enterprises

David Kostman: At the same time, about 40% of our business today is with brands and enterprises. They mostly do performance. I mentioned a few campaigns that we have. So, for example, if you look at an automotive client like Audi, we mentioned it in the call, they can really have us as the partner for the entirety of the funnel. So I think it's in both directions. When we gave the synergy number that we announced when we announced the deal, the $50 million to $60 million, that doesn't include minimal top-line synergies. It's mostly just around operating synergies and other opportunities across the two networks.

Speaker Change: They do mostly performance. I mentioned a few campaigns that we have.

Speaker Change: So, for example, if you look at an automotive client like Audi, we mentioned it in the call, they can really have us as the partner for the entirety of the funnel. So I think it's in both directions.

David Kostman: They can really have access to the partner for the entirety of the funnel. So I think it's in both directions.

David Kostman: When we gave the synergy number that we when we announced the deal, the $50 to $60 million, that doesn't include minimal top line synergies. It's mostly just around operating synergies and other opportunities that cost the two networks.

Jason Kiviat: With that, I'll turn it over to Jason. Thanks, David. As David mentioned, we achieved our Q2 guidance for X-Tech Cross-Profit and exceeded our Q2 guidance for adjusted EBITDA, generating positive free cash flow for the fourth consecutive quarter.

Speaker Change: When we announced the deal, the $50 to $60 million, that doesn't include minimal top-line synergies. It's mostly just around operating synergies and other opportunities across the two networks.

Laura Martin: Okay. Thanks.

Laura Martin: Okay, thanks. And then Jason, for you, the gross revenue came in really low, but the net revenue, which is how we value it, came in right in line sort of with our estimates. So is that related to this? This unique client that had an impact, and it only had an impact on gross revenue but not net revenue? Is that how I should take your commentary about the one-time disruption of, I assume it's Microsoft?

Jason Kiviat: And then Jason for you. The gross revenue came in really light, but the net revenue, which is how we value, came in right in line sort of with our estimates. So is that related to this, this unique clients that had an impact, and it only had an impact on gross revenue, but not net revenue? Is that how I should take your commentary about the one-time disruption of I assume it's Microsoft? Yeah. So yeah. So the partner, yes, it definitely impacted both. It's not, it's not just one line or the other line. You know, a lot of the things that we're focusing on right now are things that are, you know, higher margin, you know, segments or drivers.

Jason Kiviat: Overall, we feel we have made updates to our revenue mix and cost structure that are having a positive impact on our profitability now, and expect that to continue in the future. Revenue in Q2 was approximately $214 million for selecting a decrease of 5% year-over-year. New media partners in the quarter contributed 6 percentage points for approximately 14 million of revenue growth year-over-year. Net revenue retention of our publishers was 89%, but for flexible continued headwind from the impact of the demand environment on pricing, as well as downward pressure of added impressions from certain key supply partners as noted in the prior quarter.

Speaker Change: Okay, thanks. And then Jason, for you, the gross revenue came in really light, but the net revenue, which is how we value you, came in right in line sort of with our estimates. So is that related to this?

Speaker Change: This unique client that had an impact and it only had an impact on gross revenue, but not net revenue Is that how I should take your commentary about the one-time disruption of I assume it's Microsoft

Jason Kiviat: Yeah, so yeah, so the partner, yes, it definitely impacted both. It's not, it's not just one line or the other line.

David Kostman: Yeah, so yeah, so the partner, yes, it definitely impacted both. It's not, it's not just one line or the other line.

Speaker Change: Yeah, so yeah, so the partner yes, it definitely impacted both It's not it's not just one line or the other line You know a lot of the things that we're focusing on right now are things that are that are you know higher margin? You know segments or drivers. I think you know Samantha DSP business is a good example of that

Jason Kiviat: You know, a lot of the things that we're focusing on right now are things that are, that are, higher-margin segments or drivers. I think, you know, the Samantha DSP business is a good example of that. And the way that works is it's actually, you know, like a net revenue business in that the fees that are charged for customers to use the platform and buy media spend are recognized on a net revenue basis. So, it's just an accounting thing there. And we might see some, you know, trade-off in gross revenue in exchange for extent when we're doing that.

Jason Kiviat: Consistent with recent quarters, logo retention was 99% for all partners that generated at least $10,000, and our five largest turns amounted to only two combined points of pricing remains low relative to our history, and while it remains down year over year, we have seen positive trends over the course of Q2, its improvement month over month. This, along with continued improvements in click-through rates, growth acceleration in RPMs, which have now seen growth year over year for the third consecutive quarter.

Jason Kiviat: You know, a lot of the things that we're focusing on right now are things that are, that are, you know, higher-margin segments or drivers. I think, you know, Samantha DSP business is a good example of that, in that, you know, the way that works is it's actually, you know, like a net revenue business, in that, you know, the fees that are charged for customers to use the platform and buy media spend are recognized on a net revenue basis. So, it's just an accounting thing there, and we might see some, you know, trade-off in gross revenue in exchange for extent when we're doing that.

Jason Kiviat: I think, you know, Samantha DSP business is a good example of that. In that, you know, the way that works is it's actually a net revenue business in that, you know, the fees that are charged, you know, for customers to use the platform and buy media spend. I recognize that I net revenue basis, so it's just an accounting thing there. And we might see some, you know, trade off in gross revenue in exchange for exit when we're doing that. I made that just one add on the law on the one partner. So again, strategic partner, they made a transition.

Speaker Change: in that, you know, the way that works is it's actually a.

Speaker Change: a net revenue business in that you the

Speaker Change: fees that are charged you know for for customers to use the platform and buy media spend are recognized on a net revenue basis. So it's just an accounting thing there and we might see some you know trade-off in gross revenue in exchange for x-tax when we're doing that.

Jason Kiviat: Maybe I just want to add on one partner. So again, strategic partner, they made a transition. We are the first native partner to make a full transition, signed a new agreement with them, that transition also involves access to new types of supply within Microsoft, Outlook, and games and others. So it's a transition, and we were the first to complete it. We also see, you know, big upside opportunities potentially down the road, but I think we just need to be cautious with sort of how we scale up our buyers on that.

Speaker Change: Maybe I just want to add, Laura, on the one partner. So again, strategic partner, they made the transition. We are the first native partner to make a full transition, signed a new agreement with them that, you know, that transition also involves access to new types of supply within Microsoft, like Outlook and games and others. So it's a transition. We were the first to complete it. We see also, you know, big upside opportunities potentially down the road, but I think we just need to be cautious with sort of how we scale up our buyers on that.

Jason Kiviat: We are the first native partner to make a food transition, find a new agreement with them that, you know, that transition also involves access to new types of supply within. Within Microsoft, Outlook and games and others, so it's a transition. We were the first to complete it. We see also, you know, big upset opportunities potentially down the road, but I think we just need to be cautious when sort of how we. We scale up our bias on that.

Jason Kiviat: Over the past two quarters, we've noted volatility from one of our key partners transitioning to a new bidding technology, offering being one of the first partners to complete this transition in early May. The transition involves access to new supply opportunities for us, and we remain focused on the optimization and rescaling of our demand. This volatility impact that our X-Tech growth profit in Q2 by high single digit percentage, our overall Q2 X-Tech growth profit would have grown double digit percentage year over year, excluding this one isolated headwind.

James Heaney: Thank you. And we'll take our next question from James Heaney from Jeffries. Please go ahead, James. Great. Thank you, guys.

Operator: Thank you. And we'll take our next question from James Heaney from Jeffries. Please go ahead, James.

Speaker Change: Thank you.

james teny: thank you and we'll take our next question from james teny from jeffreys please go ahead james

Operator: Great, thank you guys. Could you just talk about the growth that you saw from ONIX in the quarter? And maybe you could comment on your pivot from being, you know, more of a performance ad platform to servicing more upper funnel objectives. I have another question.

James Heaney: Can you just talk about the growth that you saw from Onyx in the quarter and maybe if you could comment on your pivot from being more of a performance ad platform to servicing more upper funnel objectives? And I have another follow up. So we're talking about Onyx. We had strong; the bookings we don't bring. We don't specifically, but strongly booking good adoption. We launched it in more markets, and I'm excited about sort of second half of it. I think that that's actually one part of the business that, you know, in the second of May, gets someone impacted by the team merger.

james teny: Great, thank you guys. Could you just talk about the growth that you saw from ONIX in the quarter and maybe if you could comment on your pivot from being, you know, more of a performance ad platform to servicing more upper funnel objectives and I have another follow up.

David Kostman: So we're talking about Onyx, we had strong rebookings, we don't break it down specifically, but strong rebooking, good adoption, we launched it in more markets, and Mike said about the sort of second half of it. I think that's actually one part of the business that, you know, in the second half may get somewhat impacted by the Teeth merger. I mean, it is addressing sort of the upper funnel And so that that's Onyx.

Jason Kiviat: Moving to expenses. Offering expenses decreased by approximately 1% year over year to 51.2 million in a quarter, as we continue to balance investments in our strategic priorities, is continued cost discipline. The effect decline year over year was driven by compensation and bad debt savings, as well as timing benefits of expenses shifting from Q2 into H2, often partially by the increased professional fees related to our announced anticipated transaction with T. As a result, we doubled our adjusted year over year to 7.4 million.

Speaker Change: so so with turn boonics we had stronger we bookings we don't break it down specifically but strongly rebookings good adoption we launch it in more markets and i excited about sort of

Speaker Change: second half of it. I think that that's actually one part of the business that, you know, in the second half may get somewhat impacted by the teeth merger. I mean, it is addressing sort of the upper funnel opportunities with large agencies.

David Kostman: I mean, it is addressing sort of the upper funnel opportunities with large agencies. And so that, that's Onyx. Great.

Speaker Change: and so that that's onx

Jason Kiviat: Great. And then, Jason, just on your full year EBITDA guide being raised, I'm just curious where you're seeing the majority of the cost savings in the business. And then, you know, just broadly speaking, how to think about balance, growth, and profitability.

Jason Kiviat: Great. And then, Jason, just on your full-year EBITDA guide being raised, I'm just curious where you're seeing the majority of the cost savings in the business, and then, you know, just broadly speaking, how to think about the balance, growth, and profitability. Thank you.

Jason Kiviat: Sure. Yeah. Well, we do, you know, we've been a bit, you know, focused on in the last couple of years on just improving our business model in general. And I think that we've done a lot of that both in terms of, you know, changing our revenue mix and our approach to these investment areas that tend to have higher margins and higher profit margins as well, which I think we've been pretty successful at it. If you look at the take right now versus where it was a year or two years ago, but also with cost structure.

Jason Kiviat: Thank you.

Jason Kiviat: Sure, yeah, well, we do, you know, we've been a bit, you know,

Jason Kiviat: Sure, yeah, well, we do, you know, we've been a bit, you know, focused in the last couple years on just improving our business model in general. And I think that we've done a lot of that, both in terms of, you know, changing our revenue mix and our approach to these investment areas that tend to have higher margins and higher profit margins as well, which I think we've been pretty successful at, if you look at the take right now versus where it was a year or two years ago. But also in terms of cost structure. And we've, you know, been pretty focused on that last year and the year before. And we will continue to focus on it this year.

Jason Kiviat: focused on in the last couple years on just improving our business model in general. And I think that we've done a lot of that both in terms of

Jason Kiviat: changing our revenue mix in ourapproach for these investmentareas that that tends to have higher margins and higher profit margins as well which i think we've been pretty successful lot if you look at the

Jason Kiviat: In December 2022, the board's companies, board of directors authorized $30 million sharey purchase program, and in Q2, we purchased approximately half a million shares for $2 million. As a June 30th, we have 6.6 million remaining under our current authorization.

Jason Kiviat: We've been pretty focused on that last year and the year before, and we continue to focus on it this year. And so, you know, we've been outperforming our plans on cost, and, you know, some of that comes with just, you know, operating more efficiently, really, you know, being hard on ourselves with, you know, which areas to invest in and which not.

Jason Kiviat: And we've, you know, been pretty focused on that, you know, last year and the year before. And we continue to focus on it this year. And so, you know, we've been outperforming our plans on cost. And, you know, some of that comes with just, you know, operating more efficiently, really, you know, being hard on ourselves with, you know, which, which areas to invest in and which not. And, you know, really scrutinizing our spend on that, you know, we do expect to step up in the second half of the year on costs in some areas. Obviously, some of the hiring we've done for the investment areas happened during Q2.

Jason Kiviat: And so, you know, we've been outperforming our plans on cost, and, you know, some of that comes with just, you know, operating more efficiently, really, you know, being hard on ourselves with, you know, which areas to invest in and which not, and, you know, really scrutinizing our spend on that. We do expect to step up in the second half of the year on costs in some areas. Obviously, some of the hiring we've done for the investment areas happened during Q2.

Jason Kiviat: Given the pending acquisition of teeds, we currently do not intend to continue re-purchasing shares.

Jason Kiviat: and, you know, really scrutinizing our spend on that. You know, we do expect to step up in the second half of the year on costs.

Jason Kiviat: In some areas, obviously some of the hiring we've done for the investment areas happened during Q2.

Jason Kiviat: With that context, we have provided the following guidance. For Q3, we expect ex-tekros profit at $58 million to $62 million, and we expected just to eat up of $8 million to $10.5 million. We maintain our previous full-year 2024 guidance for ex-tekros profit of $238 million to $248 million, and are increasing our guidance for adjusted eat at the $31.5 million to $36 million.

Jason Kiviat: And so we expect that to be a little bit higher in the second half of the year. But, you know, we think it's a nice setup for us to obviously deliver the higher level of EBITDA and, you know, remain prudent in our spending. Thank you.

Jason Kiviat: And so, we expect that to be a little bit higher in the second half of the year. But, you know, we think it's a nice setup for us to obviously deliver a higher level of EBITDA and, you know, remain prudent in our spending.

Jason Kiviat: and so we expect that to be a little bit higher in the second half of the year but you know we think it's a nice setup for us to obviously deliver the higher level of EBITDA and you know remain prudent in our spending.

Operator: Thank you. And we'll take our next question from Zach Cummins from B Riley. Please go ahead.

Speaker Change: Thank you.

Zachary Cummins: And we'll take our next question from Zach Cummins from B. Riley. Please go ahead. Hi. Good morning. Thanks for taking my questions. Jason, I was curious.

Jason Kiviat: Thank you and we'll take our next question from Zach Cummins from B Riley please go ahead

Operator: Hi, good morning. Thanks for taking my questions. Jason, I was curious, what are your assumptions that you're baking in for Microsoft in the second half of the year? Are you assuming that you're relatively stable from these Q2 levels or any sort of improvement baked into the numbers?

Unknown Executive: Now, I'll turn it back to the operator for Q&A. Thank you.

Zach Cummins: Hi, good morning. Thanks for taking my questions. Jason, I was curious, what are your assumptions that you're baking in for Microsoft in the second half of the year? Are you assuming you're relatively stable from these Q2 levels or any sort of improvement baked into the second half?

Jason Kiviat: What are your assumptions that you're baking in for Microsoft in the second half of the year? Are you assuming you're relatively stable from these Q2 levels, or any sort of improvement baked into the second half? Yes, so we obviously are looking at this very closely. You know, again, we believe we're the first native partner to complete this transition. And we've been very focused on driving the rescaling, as we said it, you know, a few months ago. So, you know, I think right now what we've seen is just volatility. And that's really our approach to the forecast for the second half of the year is accounting for it with just a greater, a greater range of variability in our Q2 in our HQ numbers.

Unknown Executive: Ladies and gentlemen, the floor is now open for questions.

Unknown Executive: If you do have a question, please press star one on your telephone keypad at this time.

Jason Kiviat: Yes, so we obviously are looking at this very closely. Again, we believe we're the first native partner to complete this transition, and we've been very focused on driving the rescaling, as we said a few months ago. I think right now what we've seen is just volatility, and that's really our approach to the forecast for the second half of the year is accounting for it with just a greater range of variability in our Q2 and our H2 numbers because, on the one hand, we do see upside; on the other hand, we've seen volatility, and so we thought the best approach was to just account for it with a wider range of variability.

Jason Kiviat: Yeah. So, we are obviously looking at this very closely. You know, again, we believe we're the first native partner to complete this transition, and we've been very focused on driving the rescaling, as we said a few months ago. You know, I think right now what we've seen is just volatility, and that's really our approach to the forecast for the second half of the year is accounting for it with just a greater range of variability in our Q2 and our H2 numbers. You know, because on the one hand, we do see upside; on the other hand, we've seen volatility, and so we thought the best approach was to just account for it with a wider range of variability.

Unknown Executive: Again, that star one, if you do have a question or comment.

Speaker Change: Yes, so we obviously are looking at this very closely, you know, again, we believe we're the first native partner to complete this transition and we've been very focused on that.

Andrew Boone: And we'll take our first question from Andrew Boone, from JMP Securities. Please go ahead, Andrew. Good morning and thanks for taking my questions. You highlighted the growth in RPMs in the quarter. Can you talk about the drivers of that and your confidence that this can continue? And then, Jason, can you wrap that into the implied guidance per 4Q and talk about your confidence, just giving the implied acceleration that four-year guidance implies per 4Q?

Speaker Change: on driving the rescaling, as we said, you know, a few months ago.

Speaker Change: I think right now what we've seen is just volatility, and that's really our approach to the forecast for the second half of the year, is accounting for it with just a greater range of variability in our Q2 and our H2 numbers.

Jason Kiviat: Because, on one hand, we do see upside; on the other hand, we've seen volatility. And so we thought the best approach is to just account for a wider range of variability.

Speaker Change: Because on one hand we do see upside, on the other hand we've seen volatility, and so we thought the best approach was to just account for it with a wider range of variability.

Jason Kiviat: understood and in terms of your overall footprint on the open internet. I think the metrics you shared were 27% for your non-traditional formats on the open internet. Can you speak to the ideal mix as you go over time in terms of your footprint, just for standalone Outbrain? I'm curious how you're continuing to drive that strategy.

Zachary Cummins: Understood.

Jason Kiviat: And in terms of just your overall footprint on the Open Internet, I think metrics you share, it was 27% on your non-traditional formats on the Open Internet. Can you speak to the ideal mix as you go over time in terms of your footprint, just for standalone Outbrain that carries out how you're continuing to drive that strategy? So we are really trying to build ourselves as the main gateway to the entirety of the Open Internet. We have a strong asset in the bidding technology that we acquired through the matter that allows us to really go way beyond just our publisher base.

unknown: Just your overall footprint on the open internet. I think the metrics you shared was 27% on your non-traditional footprint.

Speaker Change: Understood. And in terms of just your overall footprint on the open internet, I think metrics you shared was 27% on your non-traditional.

Jason Kiviat: It's Jason and I'll take the first couple there. So, you know, as far as what's driving RPMs, I mean, it's the third quarter in a row that we're seeing yields or RPMs up year over year. One constant driver has been the click-through rates, which we've been in each quarter breaking our previous records as far as just how high the click-through rates are. A lot that goes into that. Obviously, algorithmic improvements, use of additional data signals, optimization, like some of our dynamic placements that we're using are helping drive higher click-through rates.

Speaker Change: Can you speak to the ideal mix as you go over time in terms of your footprint, just for standalone Outbrain? I'm curious how you're continuing to drive that strategy.

David Kostman: So we are really trying to build ourselves as the main gateway to the entirety of the open Internet. We have a strong asset in the bidding technology that we acquired through Zemanta that allows us to really go way beyond just our publisher base. So, ideally, we grow both.

Speaker Change: sowe are really trying to build ourselves the main gabwayy to the entirety of the open internet we have the strong asset in the building technology that we acquired to demter that allows us to really go way beyond just our publisher base

Jason Kiviat: So, click-through rates have been a good thing for a long time for us, and you can go in the right direction. The one kind of new thing I'd say this quarter was, we started to see just a better trend on cost per click on CPCs, which have been aheadwinded, and remain aheadwind for us year or year in Q2 over the course of the quarter. We started to see it go in the right direction as far as just narrowing the the headwind year over year.

David Kostman: So ideally, we grow both. I mean, we've had some great wins on the premium publisher side this quarter. So again, we're very, very focused on our core supply base and brand enterprises on the premium. We believe that sort of premium supply drive premium demand was going for performance on third parties, where they're looking for fewer rowers and demand is just a great platform to do that. And again, overall, we see ourselves in terms of the organic growth that we deliver to sort of these efforts as the sort of outperforming competition on organic growth. And that's what we're looking at in terms of, again, growing the entire budget base that we can deliver both on our publisher base and on the third party supply.

David Kostman: I mean, we've had some great wins on the premium publisher side this quarter. So again, we're very, very focused on our core supply base and brand, and enterprises on Tremium. We believe that sort of premium supply, and premium demand is going for performance on third parties where they're looking for pure ROAS. And Zemanta is just a great platform to do that. Again, overall, we see ourselves in terms of the organic growth that we deliver to these efforts as sort of outperforming competition in terms of organic growth. And that's what we're looking at in terms of, again, growing the entire budget-based growth that we can deliver both on our publisher base and on other third-party sources.

Speaker Change: So ideally we grow both. I mean, we've had some great wins on the premium publisher side.

Speaker Change: Unknown Speaker This quarter, so again, we're very, very focused on our core supply base and, and brand and enterprises on premium. We believe that sort of premium supply drive premium demand was a going for performance on third parties where they're looking for

Jason Kiviat: So, that was a real positive. It comes with, you know, maybe some market dynamics and also some changes we made internally as well. So, good things there are RPMs, and we obviously see it, you know, not only driving better revenue, but also better margins. And then as far as the confidence in the back half and Q4, yeah, you know, we do expect acceleration, you know, in Q3 versus Q2, and also, you know, Q4 versus Q3, you know, versus the 3 percent X that growth we saw in Q2, we get to about, I think, 6 percent in Q3 at the midpoint, and 17 percent in Q4 at the midpoint.

Speaker Change: Pure ROAS and Dementa. It's just a great platform to do that.

Speaker Change: Again, overall, we see ourselves in terms of the organic growth that we deliver to sort of these efforts as the sort of outperforming competition on organic growth. And that's, that's what we're looking at in terms of, again, growing the entire

unknown: budget-based that we can deliver both on our publisher base and on other third-party suppliers.

Speaker Change: budget base that we can deliver both on our publisher base and on other third-party supplies.

Zachary Cummins: Understood.

Operator: Okay. Well, thanks for taking my questions and best of luck with the rest of the quarter.

Unknown Executive: Well, thanks for taking my questions, and best luck with the rest of the quarter.

Speaker Change: Understood. Well, thanks for taking my questions and best of luck with the rest of the quarter.

Jason Kiviat: So, maybe just, you know, a lot of the good things that we see driving the success in Q2 and into Q3, we see continuing into Q4. So, that's definitely a piece of it, but I think a big piece of it, and that expects step up from the 6 percent growth to 17 percent differences. A lot of it's coming from year-over-year comms, actually. So, eight points of even comms in Q4 is one way to look at it.

Unknown Executive: And that will conclude the question-and-answer session.

David Kostman: And that will conclude the question and answer session. I'd like to turn the floor back to David Kostman for closing remarks.

David Kostman: I'd like to turn the floor back to David Crossman for closing remarks. Thank you, Kevin. So thank you all for joining us today. We appreciate your support and partnership and looking forward to the exciting journey ahead together with all our shareholders. Thank you very much. Thank you.

Speaker Change: And that will conclude the question and answer session. I'd like to turn the floor back to David Kostman for closing remarks.

Operator: Thank you, Kamento. Thank you all for joining us today. We appreciate your support and partnership and are looking forward to the exciting journey ahead together with all our shareholders. Thank you very much.

David Kostman: thank you ke thank you all for joining us today be appreciate your support and partnership and looking forward to the exciting journey head together with all our shareholders thank you very much

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.

Unknown Executive: 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.

Jason Kiviat: Last year, we didn't have a normal Q4. Obviously, it started with the attacks on October 7th, and the war and the impact on our, you know, war-related use page views, and just advertising demands. And also, just, you know, we talk about the key tech partner transition, we did start to see some headwinds on that really in Q4 last year. So, the two of those things combined, ease the comms for Q4 and best driving, I think, eight points of improvement as compared to the Q3, and then, you know, continued success of the growth drivers that we've already seen some success with, obviously. And, yeah, RPMs, elections, so just those are more smaller items. They're a little more volatile, but all that combined.

David Kostman: Andrew, I'll take the second one. Thanks. So it's been a very exciting week with overwhelmingly positive feedback from players in the industry, both advertisers and video owners. Publishers on the advertiser side, specifically, they really do this as a huge opportunity to have one player that can provide the school funnel solution on the open internet. When we talk about food funnel, that means branding, consideration and conversions on an end-to-end basis, you the advantage of the data.

David Kostman: So it was overwhelmingly both the teats on the teats side and on our side, really people are expecting as quickly as possible for us to close this and be able to bring them the value proposition we're talking about, which is really the combination of leaders in performance, which is us and leaders in branding that is teats. So it's been great, it's been a very exciting week as you can imagine. Thank you.

Ygal Arounian: Thank you, and we'll take our next question from Ygal Arounian from City. Please go ahead, Ygal. Good morning, guys.

Ygal Arounian: You have maxed on for Ygal. I guess first maybe I just start with what you're seeing in the ad macro, you know, seems like we've maybe been a little more mixed, but you know what you're seeing now and kind of how you see that playing out through the rest of the year. If there's anything maybe geographical or vertical to call out. Sure, and I could start with that. So yeah, like I said, we did see, you know, continued our PM and the CDC gains over the course of Q2, which is, you know, a combination of a lot of factors.

Ygal Arounian: So it's hard to know how much of it is macro versus, you know, internal or specific to us, but we did see positive things. So that's a good sign. Geographically, I'd say, you know, we see strength in Europe, particularly, you know, Germany, which is our second largest market in Spain. We're a couple of our stronger markets throughout the quarter. And yeah, I mean, going forward, I think it's hard to predict anything, I guess, macro wise going forward, but, you know, we obviously hope to see the continued acceleration of what we saw through Q2 is what we're, you know, hoping for, but not overly relying that, I'd say, in our guidance. Okay, thanks. Yeah, that's helpful.

David Kostman: And then maybe just spending a little time on Samantha, you know, obviously some good growth there. You know, is there anything, maybe like, specific, yes, we call out what's driving this. And then, you know, maybe just kind of like bigger picture, you know, when, you know, in the combined company, how do you see, you know, Samantha fitting in with teeds and, you know, maybe just would be a tech spec too, if you look to combine honestly early days, but maybe just having any early thoughts on how do you think about combining those going forward?

David Kostman: Sure, I say that makes so on Samantha, it's been one of our growth drivers for this year. I've been really to grow the show of all this from performance advertisers, by just delivering superior raw to them and also allowing them to spend more on the entirety of the open internet again, in line with our vision of becoming the main gateway for the open internet for both brand advertisers and performance. And we started the last year to ship some type of clients that just had better performance under the mentor platform into that.

David Kostman: So the causes two things, they they spend more because they still spend on the out brand publishing network, but they also can spend on third party platforms, other species and so and then that's close to sure. Hold it and also we for us, it's a margin enhancer. We've seen, we said 50% growth in the span on the mentor and I think that will continue to be one of the main growth drivers for the company stand alone.

David Kostman: As to the combination that we teed it's a little bit early days, we have not yet gone deeply into sort of product planning, et cetera, we just started, I think we mentioned the post merging integration planning. And generally I would say the the mentor platform is very, very focused on performance buyers. So I believe it will continue to be part of our growth drivers in the future for those type of buyers. Thank you.

David Kostman: And we'll take our next question from Laura Martin from Needham, Priso Head, Laura. Yeah, I also have two. The first one is when you think about Dravenew's synergies, is it a bigger upside driver that that teeds will be able to sell in performance advertising from the Outbrain court business or the reverse Outbrain adds more upper funnel from the teeds client base. Hey, Laura. It's actually on both sides. So what we've heard and also throughout the process, a teeds world going sort of through the mid funnel and two conversions, but they get only with enterprise brand buyer.

David Kostman: So that's the focal terms of the customer base. And that customer base also has different objectives on their campaigns. So we see a huge opportunity and also the teeds management sees a huge opportunity to just try leveraging our prediction technology, algorithms, just better conversions and and the law funnel business for for the brand advertisers at the same time. We have about 40% of our business today is with brand and enterprises. They do mostly performance.

David Kostman: I mentioned a few campaigns that we have. So for example, if you look at a automotive clients like Audi, we mentioned it in the course. They can really have access the partner for the entirety of the funnel. So I think it's in both directions. When we gave the synergy number that we when we announced the deal, the $50 to $60 million, that doesn't include minimal top line synergies. It's mostly just around operating synergies and other opportunities that cost the two networks.

Jason Kiviat: Okay. Thanks. And then Jason for you. The gross revenue came in really light, but the net revenue, which is how we value came in right in line sort of with our estimates. So is that related to this, this unique clients that had an impact and it only had an impact on gross revenue, but not net revenue? Is that how I should take your commentary about the one time disruption of I assume it's Microsoft?

Jason Kiviat: Yeah. So yeah. So the partner, yes, it definitely impacted both. It's not it's not just one line or the other line. You know, a lot of the things that we're focusing on right now are things that are that are, you know, higher margin, you know, segments or drivers. I think, you know, Samantha DSP business is a good example of that. In that, you know, the way that works is it's actually a net revenue business in that, you know, the fees that are charged, you know, for customers to use the platform and buy media spend.

Jason Kiviat: I recognize that I net revenue basis, so it's just an accounting thing there. And we might see some, you know, trade off in gross revenue in exchange for exit when we're doing that. I made that just one add on the law on the one partner. So again, strategic partner, they made a transition. We are the first native partner to make a food transition, find a new agreement with them that, you know, that transition also involves access to new types of supply within.

Jason Kiviat: Within Microsoft, outlook and games and others, so it's a transition. We were the first to complete it. We see also, you know, big upset opportunities potentially down the road, but I think we just need to be cautious when sort of how we. We scale up our bias on that.

James Heaney: Thank you. And we'll take our next question from James Heaney from Jeffries. Please go ahead, James. Great. Thank you guys.

James Heaney: Can you just talk about the growth that you saw from Onyx in the quarter and maybe if you could comment on your pivot from being more of a performance ad platform to servicing more upper funnel objectives and I have another follow up. So we're talking about Onyx. We had strong, the bookings we don't bring. We don't specifically, but strongly booking good adoption. We launched it in more markets and I'm excited about sort of second half of it.

James Heaney: I think that that's actually one part of the business that, you know, in the second of May gets someone impacted by the team merger. I mean, it is addressing sort of the upper funnel opportunities with large agencies. And so that that's Onyx.

Jason Kiviat: Great.

Jason Kiviat: And then Jason, just on your full year, you the dog guide being raised, I'm just curious where you're seeing the majority of the cost savings in the business. And then, you know, just probably speaking, how to think about the balance, growth and profitability. Thank you. Sure. Yeah. Well, we do, you know, we've been a bit, you know, focused on in the last couple of years on just improving our business model in general.

Jason Kiviat: And I think that we've done a lot of that both in terms of, you know, changing our revenue mix and our approach to these investment areas that tend to have higher margins and higher profit margins as well, which I think we've been pretty successful at it. If you look at the take right now versus where it was a year or two years ago, but also with cost structure. And we've, you know, been, been pretty focused on that, you know, last year and the year before.

Jason Kiviat: And we continue to focus on it this year. And so, you know, we've been outperforming our plans on cost. And, you know, some of that comes with just, you know, operating more efficiently, really, you know, being hard on ourselves with, you know, which, which areas to invest in and which not. And, you know, really scrutinizing our spend on that, you know, we do expect to step up in the second half of the year on costs in some areas.

Jason Kiviat: Obviously some of the hiring we've done for the investment areas happened during Q2. And so we expect that to be a little bit higher in the second half of the year. But, you know, we think it's a nice setup for us to obviously deliver the higher level of EBITDA and, you know, remain prudent in our spending. Thank you.

Jason Kiviat: And we'll take our next question from Zach Cummins from B. Riley. Please go ahead. Hi. Good morning. Thanks for taking my questions. Jason, I was curious. What are your assumptions that you're baking in for Microsoft in the second half of the year? Are you assuming you're relatively stable from these Q2 levels or any sort of improvement baked into the second half? Yes, so we obviously are looking at this very closely. You know, again, we believe we're the first native partner to complete this transition.

Jason Kiviat: And we've been very focused on on driving the rescaling as we said it, you know, a few months ago. So, you know, I think right now what we've seen is just volatility. And that's really our approach to the forecast for the second half of the year is accounting for it with just a greater, a greater range of variability in our Q2 in our HQ numbers. Because on one hand, we do see upside on the other hand, we've seen volatility. And so we thought the best approach is to just account for a wider range of variability.

David Kostman: Understood. And in terms of just your overall footprint on the Open Internet, I think metrics you share, it was 27% on your non-traditional formats on the Open Internet. Can you speak to the ideal mix as you go over time in terms of your footprint, just for standalone outbrain that carries out how you're continuing to drive that strategy? So we are really trying to build ourselves as the main gateway to the entirety of the Open Internet.

David Kostman: We have a strong asset in the bidding technology that we acquired through the matter that allows us to really go way beyond just our publisher base. So ideally, we grow both. I mean, we've had some great wins on the premium publisher side, this quarter. So again, we're very, very focused on our core supply base and brand enterprises on the premium. We believe that sort of premium supply drive premium demand was going for performance on third parties, where they're looking for fewer rowers and demand is just a great platform to do that.

David Kostman: And again, overall, we see ourselves in terms of the organic growth that we deliver to sort of these efforts as the sort of outperforming competition on organic growth. And that's what we're looking at in terms of, again, growing the entire budget base that we can deliver both on our publisher base and on the third party supply.

Zachary Cummins: Understood. Well, thanks for taking my questions and best luck with the rest of the quarter.

Unknown Executive: And that will conclude the question and answer session.

David Kostman: I'd like to turn the floor back to David Crossman for closing remarks. Thank you, Kevin. So thank you all for joining us today.

Unknown Executive: We appreciate your support and partnership and looking forward to the exciting journey ahead together with all our shareholders. Thank you very much. Thank you.

Unknown Executive: 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.

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