Q1 2025 Outbrain Inc Earnings Call

Good day and welcome to our brain Incorporated's first quarter 2025 earnings conference call. At this time, all participants are in a listen only mode.

<unk> and answer session will follow the pharma presentation. As a reminder, this conference is being recorded.

Speaker Change: Like to turn the call over to Outrange Investor Relations. Please go ahead.

Speaker Change: Good morning, and thank you for joining today's conference call.

Speaker Change: Right now operating as a team first quarter, 'twenty 'twenty five or something.

Jackson: What do you mean, you're on the call today, you don't see any coffee Jackson.

Speaker Change: CEO and CFO.

Speaker Change: During this conference call management will make forward looking statements based on current expectations and assumptions, including statements regarding our business.

Speaker Change: Yeah.

Speaker Change: These statements are subject your best I'm, sorry that may cause actual results to differ materially from my point I can see.

Speaker Change: These risk factors are discussed in detail in our form 10.

Speaker Change: 10-K for the year were.

Speaker Change: 31st 2024.

Speaker Change: It isn't a subsequent reports filed with the Securities and Exchange Commission.

Speaker Change: Well, we're looking statements speak only as of the original date.

Speaker Change: Undertake any duty to update any such statements.

Speaker Change: Today's presentation also includes references to non-GAAP financial measures.

Speaker Change: And you should refer to the information contained in the company's first quarter earnings.

Speaker Change: For definitional information and reconciliations of non-GAAP measures and the comparable GAAP financial measures.

Speaker Change: Our earnings release can be found on our IR with investors the outbreak.

Underneath it.

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

David: Thank you Tiffany.

David: Good morning, and thank you for joining us today.

David: I'm pleased to share that we had a strong start to the year.

David: As a reminder, our brain impedes marriage on February 3rd to form the new teams.

David: I'm glad to report that we achieved our Q1 guidance both in terms of extra gross profit and adjusted EBITDA, while achieving significant milestones in the integration.

David: Our vision for the new T. This clear to create the open internet advertising platform for elevated outcomes from branding to performance.

David: Our end to end platform empowers brands to connect the consumer journey from discovery to purchase driving real business outcomes.

The open Internet provides a different level of access to incremental scaled user moments, but we've lacked the solution that can connect the fragmented channels of the open internet in order to drive real business outcomes across all stages of the marketing funnel.

David: That's where the new teach comes in.

David: We believe there are several key factors that will enable <unk> to become the platform of choice to drive outcomes from branding to performance on the open Internet.

David: Yeah.

David: We have direct exclusive media relationships that allow us to curate inventory at massive scale globally.

David: This means that we have significant flexibility around the use of such supply mimicking the controls the walled gardens have of owned and operated inventory.

David: The fact that we are an end to end platform provides advertisers with the optimized transparent supply path.

David: Central for delivering outcomes.

David: And we do this at a significant global scale across 50 markets and 2 billion users.

David: Second these unique media relationships also yield a wealth of proprietary data around.

David: How consumers engage and take action.

David: We exited over 1 billion data points, each minutes, which fuel our AI powered algorithm there.

David: I agree with him tailors, our inventory environment to drive the optimum outcome.

David: So again in a very similar way to the algorithm of walled gardens.

David: Third our creative studio.

David: He is the key layer that enables our Bryan and agency partners to seamlessly connect with audiences across previously fragmented channels, we understand what's most likely to drive outcomes from a creative perspective for each of our partners businesses, making us a deeply entrenched strategic partner.

David: We believe that these capabilities will allow us to deliver dependable outcomes at scale on the open internet similar to the walled garden in a way that's not possible with the currently fragmented DSP or Hsp point solutions on the market.

David: Moving to execution.

David: We see solid execution across the business and see momentum behind this strategy.

David: Our platform features a healthy diverse balance of advertising segments verticals and geographies.

David: I want to mention that in terms of the marketing campaign objectives, we are well balanced with approximately two thirds of spend on our platform performance campaigns and approximately one third of the spend on our platform on branding campaigns.

David: And the feedback from the hundreds of client meetings, you've had since closing has been consistent.

David: All friggin outcome based solution for objectives from branding to performance and a combined brand performance solutions across all screen is highly compelling.

is highly compelling.

David: One segment of clients I'm excited by those strategic joint business partner accounts.

David: We closed Q1 with more than 50 JBPs, including new commitments with Ferrerro, Halley on Philip Moise International, and Bayer Stove.

David: We believe the structure of these strategic partnerships gives us a large opportunity for growth, servicing new product lines, geographies and marketing objectives in each brand's portfolio.

David: Legacy Teeds has mostly serviced branding campaigns with the JBT partners, but practically all of them have significant performance objectives and budgets that would be available to us.

David: We have already seen several successes with legacy teed branding customers, expanding with us now to performance.

David: These customers have been expanding excess of $2 million annually, which represents roughly 70% of total customer spend on our platform.

David: Additionally, we have another approximately 1000 advertisers spending between $100,000 and $500,000 annually, representing a great base to grow our share of all it with these large customers.

David: We're seeing wins, not just from new business, but from long-time customers who trust us to innovate and scale with them. Renewals have included Webbedia in France, Sunkay in Japan, and TMZ in Condonast in the US.

David: We are also innovating the experiences we can provide to consumers across these traditional web environments.

David: Moment, our vertical video solution provides the immersive experience of social media's scrollable format to traditional publishing environments and consumers are showing high engagement with users now consuming eight videos on average.

David: Over 70 publishers have adopted moments and with examples delivering close to 80% of your ability with nearly double the engagement rate of other branding formats.

David: Moments will be one of the cornerstones of an expanded, vertical experiences suite at the New Teeds, where brands can scale social experiences beyond the World Governance.

David: As we strive to drive outcomes for advertisers across all screens on the open internet, expanding our access to unique CKV environment remains a key focus.

David: In Q1, CTB revenue global 100% the over year, now we're presenting approximately 5% of

David: We also now have access to more than 300 million TV screens for many sectors globally, with about half of these coming to our exclusive partnerships with LG and Vida, in addition to our access to more than 7,000 CDB properties globally.

David: and we believe the value of our unique CTV home screen inventory is clear. Hinted launch in 2023, more than 1,500 CTV home screen campaigns have been run by premium brands globally, including Carpier, Nestle, and Air France.

David: On the operational side, our focus remains on integration, efficiency and execution. Immediately post-closing, we implemented the majority of headcount related synergies.

David: At this point, we have action 90% of our annualized compensation related targets.

David: We're also making significant progress on other operating expense synergy opportunities such as office consolidation, license, professional services and others.

David: and we remain on track to reach our total target of 60 million in annualized cost savings in 2026 and to achieve this run rate by the end of 2025.

David: In addition, we are focused on our AI everywhere, effort, identifying opportunities and implementing AI across our engineering, algorithm product solutions and internal processes schemes with great potential to serve our partners faster and better.

David: Just as one example, in our direct response to performance business, we have already seen more than one million dollar of campaigns using our image to clip that enables short video creation for performance marketers based on an image.

David: To sum it up, we are well underway in our strategic and financial transformation. I'm very excited that we are successfully executing with discipline on the mergers' synergies and continue to be committed to our profitability targets while also getting great traction for our market position and vision.

David: We are deepening our relationships with advertisers and media owners alike and seeing real validation for our strategy that we believe we need to increasingly winning a larger show for it.

David: Thank you again for joining us. Now I will turn it over to Jason for a more detailed financial update.

Jason: Thanks David. As David mentioned, we achieved our Q1 guidance for ex-tech growth profit and adjusted even though following our completion of the acquisition of Teague in February .

Jason: They'll be closed at transaction in the middle of Q1, we are already starting to realize the benefits of this combination in our financials, and we are very pleased with the progress of our integration, both from the financial standpoint and with respect to integration of people, processes and systems.

Jason: For context, given the timing of the closing of the transaction in February we estimated year over year decline of approximately 7% on a pro forma basis for the fourth quarter.

Jason: This is our best estimate of a like for like year over year comparison.

Jason: As a reminder, this represents an improvement as compared with the pro forma 9% decline year over year in Q4.

Jason: We attribute the improvement to several factors, including a reduction of the employee uncertainty and distraction that we saw in the period. Following the deal announcement prior to the deal closing and team structure.

Jason: Notably we saw in Q1, which continued into Q2.

Jason: Movement in the trends of the U S business, which represents around 30% of our revenue.

Jason: I expect gross profit in the quarter was $103 1 million, an increase of 98% year over year on an as reported basis, driven primarily by the impact of the acquisition.

Jason: Note that extra gross profit growth is outpacing revenue growth, which was driven primarily by a net favorable change in our revenue mix, resulting from the acquisition as well as the continuation of improvements to revenue mix from the legacy operating business.

Jason: And that's with revenue.

Jason: While we are in the very early days, we're seeing a trend in a positive direction in terms of growth rates and that's before we've been able to influence the overall growth in terms of combining our offerings and realizing any real synergies from cross selling.

Jason: Other cost of sales and operating expenses increased year over year predominantly driven by the impact of the acquisition as well as several related onetime expenses.

Jason: Note in the quarter, we recognized $16 million of acquisition related costs as well as 16 million from the impairment of intangible assets for cloud that's determined to be discontinued as a result of the acquisition and.

Jason: <unk> 7 million of restructuring charges.

Jason: Note that we recorded a benefit from deal related cost synergies in Q1 of approximately $2 million, which we expect to increase in Q2 and beyond as we continue to capture savings across both compensation and non compensation areas.

Jason: We continue to expect to achieve approximately $60 million of cost synergies in 2026 and to approach. This run rate in Q4 this year.

Jason: As a reminder, $45 million of this amount relates to compensation expenses and as an update we have now actions on approximately 90% of this amount at this point in time.

Jason: Accordingly, we have better visibility to the impact of synergies and full year 2025, and I expect total cost synergy savings to amount to approximately $40 million for the year, which represents an increase versus prior expectations.

Jason: So theres a significantly higher amount of costs coming off the books in the coming quarters, and we see opportunities beyond that as well to be more efficient.

Jason: Overall, we're focused on our integration and plan to remain disciplined on costs and extremely targeted investments to areas that we see as high confidence ROI drivers are critical to driving growth and efficiency.

Jason: Adjusted EBITDA for Q1 was $10 7 million.

Jason: Which on an as reported basis represents a greater than seven X increase year over year. Despite.

Jason: Despite the synergy capture being extremely nascent given the timing of closing and our past more fulsome realization of the synergy opportunities in the coming quarters.

Jason: Moving to liquidity.

Jason: Free cash flow, which as a reminder, we define as cash from operating activities less capex and capitalized software costs was a use of cash of approximately $7 million in the quarter.

Jason: Note that this included cash outflows for acquisition related costs and restructuring charges of approximately $16 million negatively.

Jason: Impacting our free cash flow in the quarter.

Jason: <unk> these amounts the free cash flow generation for the quarter would've been a positive $10 million.

Jason: As a result, we ended the quarter with $156 million of cash cash equivalents and investments and marketable securities on the balance sheet as.

Jason: As well as $16 million in overdraft borrowings, which are classified on our balance sheet as short term debt.

Jason: And we have 637 and a half million principal amount of long term debt at 10% coupon due in 2000 <unk>.

Jason: The first of our semi annual interest payments to be paid in August.

Jason: Our long term debt is carried on our balance sheet net of discount and deferred financing fees and the balance of $611 million as of March 31, resulting in a net debt balance of $471 million.

Jason: Okay.

Jason: Now I'll turn to our outlook.

Jason: Although we haven't seen any meaningful impact on our results to date, we have seen some advertisers planning and buying cycle shortening.

Jason: They finalize their budget commitments with less advanced notice typically seen.

Jason: On the other hand, we see some positivity in our Q2 pipeline as well we see continued improvements in the legacy business since the closing of the merger and better visibility into the cross sell opportunities.

Jason: Also we view the uncertainty of the environment, it's a longer term opportunity as we expect advertisers to scrutinize their AD spend and do you expect greater accountability from their budgets, which we believe aligns well with our mission.

Jason: Yeah.

Jason: As we look forward in our guidance considering the uncertainty of macro conditions, we are providing for a wider range of outcomes in our guidance and with that context, we have provided the following guidance for.

Jason: For Q2, we expect that gross profit of $141 million to $150 million and we expect adjusted EBITDA of $26 million a $34 million for.

Jason: For full year 2025.

Jason: We need to expect adjusted EBITDA of at least $180 million.

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

Jason: Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Jason: May press star two if he would like.

Jason: A question from the queue.

Jason: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Jason: One moment.

Jason: Poll for questions.

Jason: Our first question is fine.

Jason: Uh huh.

Jason: With Citigroup. Please proceed.

Jason: Hey, guys good morning.

Jason: Nice to see the results in light of the macro contacted contact so I guess, firstly can you just expand on the macro.

Jason: A little bit more.

Jason: What you're seeing so shortening of planning and buying cycles, but.

Jason: It doesn't sound like there's been any real pullback yet and then.

Jason: On that opportunity.

Jason: Advertisers scrutinized budgets.

Speaker Change: You can talk a little bit more how it can capture that and are you seeing any difference.

Speaker Change: From advertisers on their focus between brand and performance is performance holding up better to the brands. We just start there and then I have a follow up thanks.

Speaker Change: Sure. So thanks for the question look I'll, maybe I'll start Jason Yeah, I mean, so what we saw in Q1 was really no improvements in demand levels from January into February and March and as I said in the prepared remarks, and overall continuation of that positive trend of improving growth rates for the legacy <unk> business into.

Speaker Change: Q2.

Speaker Change: So far so good we haven't seen any meaningful impact in our results to date.

Speaker Change: Stemming from the uncertainty in the macro.

Speaker Change: Clarifying maybe what I said on the call.

Speaker Change: The shortened selling or buying cycles.

Speaker Change: As an example, if you you know typically might get a month or two months warning on a budget maybe it comes in you know a few weeks a few weeks you know closer to the start date than typical so.

Speaker Change: To us that indicates obviously theres more scrutiny nation of the AD spend happening, which obviously you know the second part of your question, we view as a good thing.

Speaker Change: For us that you know of.

Speaker Change: Obviously, there is a little bit less visibility in <unk> and <unk>.

Speaker Change: Obviously, I think you know.

Speaker Change: You got to factor that in to when you're giving your outlook in the guidance.

Speaker Change: I know.

Speaker Change: Obviously verticals.

Speaker Change: You look at you know, there's some stronger some some weaker but nothing nothing unusual I would say and you know as I said, we're seeing we're seeing really more positives and negatives at this point you know in terms of the legacy operating business continued growth from the same growth drivers yields are up.

Speaker Change: And as I said in a year over year growth rates for legacy teas in U S. In particular, which is encouraging.

Speaker Change: Positivity.

Speaker Change: That we see and the team is eagerly eagerly starting the early days here of the cross sell we have our first Windsor. So so generally good things obviously, we're we're being balanced that are in our guidance just given the uncertainty, but so far so good as how I would do it.

Speaker Change: Maybe I would add the Hello, Hi, it's David to your to the last point around advertised with solid breakdown say that generally the seventh expense performance.

Speaker Change: Blending but.

Speaker Change: But we need to focus on is that we'd drive outcomes and.

Speaker Change: It's Glenn dollars, Oklahoma installed those advertisers, whether it's a direct to consumer or an enterprise brand that booking for measurable outcomes and this is how we look at the future in terms of my position in the market as a platform.

Speaker Change: What's the best outcomes, both for branding and performance. So we have very strategically important for fall partner, then we believe that.

Speaker Change: As long as we can continue and deliver on those measurable outcomes.

Speaker Change: That's what's going to continue.

Speaker Change: The ability to increase share of wallet.

Speaker Change: I want to make one comment on performance I mean, we've been.

Speaker Change: Following vessel few years, so we before the merger we've been talking about the increase in growth of show all at home people performance and because it's two hours the medical DSP that we rebranded without going DSD. So that trend continues and there we help.

Speaker Change: Performance advertisers bid into third party environments.

Speaker Change: Display advertising, so something we've been doing already for few years.

Before we merged.

Speaker Change: It's all about 30% of our business was outside of the fleet. So we believe we're very well balanced in terms of the macro level also.

Speaker Change: And to the point that Jason Hi, Mike.

Speaker Change: Okay, Great and then.

So one on kind of fundamentals also.

Speaker Change: On the integration and you guys called out the strong GBP wins, and that's nice to see how much of that is is.

Speaker Change: Maybe a direct result of all of the new combination versus things that may have been in the pipeline.

Speaker Change: I think if I'm understanding you correctly, you guys were saying that the cross selling opportunity.

Speaker Change: Isn't really even started I don't know if that was more of a <unk> thing that's starting to plateau.

Speaker Change: But you just talk a little bit about what youre seeing there and the opportunity from cross selling thank you.

Speaker Change: But I think that so we are very excited about the J b piece I think it's a huge asset.

Speaker Change: Sort of we have today.

Speaker Change: His relationships and you highlighted that the size of the company.

Speaker Change: But any days enterprise brands their agencies.

Speaker Change: SME is actually working with large customer churn big budgets at the growth and in that is coming I think also from a combination of the two companies. This tremendous excitement about this combined value proposition. So look we have a weekly in turn the messaging and the company has posted a video post the BG group.

Speaker Change: Large agency where.

Speaker Change: We've got more share of wallet, because they're now able to bring to a legacy client.

Speaker Change: Flying performance capability, they all at the end.

Speaker Change: They want to sell a product they want to get a lead they want to get someone to download.

Speaker Change: And vacation I think so I think that that is helping I mean I cannot pinpoint directly that the growth is coming just from that but we've had hundreds of meetings and our responses, which is phenomenal to this value proposition of performance and brining combined so I'm sure some of it.

Speaker Change: A big growth driver.

Andrew Boone: Our next question is from Andrew Boone with citizens. Please proceed.

Andrew Boone: Thanks, so much for taking the question.

Speaker Change: You guys highlighted the improvement Keiths results in prepared remarks, you guys just speak to that and talk through kind of the trends you guys are seeing in moving that business back to that kind of a strong cost position.

Speaker Change: And then one of the striking things do you guys called out here is just the size of some of your peers.

Speaker Change: Larger clients.

Speaker Change: And so it can take heat can you just step back and talk about the opportunity whether that be larger.

Speaker Change: Lions for smaller clients or kind of how are you guys thinking about that and just kind of explain why you guys wanted to highlight that disclosure. Thanks. So much.

Speaker Change: Sure. So maybe I can start thanks for the question Andrew.

Speaker Change: In terms of the legacy <unk> business, obviously, it's something that we you know we talked about the idiosyncratic headwinds on the business in Q4.

One of which was in a region specific and you know we kind of updated on already last quarter, but I think the bigger kind of impact was about just the impact of the pending merger on the team and their regional.

Speaker Change: Hiring freeze and lack of focus on it I think just a lot of.

Speaker Change: Concern of Okay. When is this going to close and you know is there a restructuring happening.

Speaker Change: We do feel that the overhang from that has really been relieved them and we see it in the results really since we've gotten certainty of kind of the closing date.

Speaker Change: Obviously, we got in January.

Speaker Change: We have seen just kind of.

Speaker Change: Month over month improvement in that in those year over year trends. So you know obviously the focused execution.

Speaker Change: No.

Speaker Change: Yeah.

Speaker Change: Just to you know doing the restructuring very quickly and everyone kind of knows their role in the team and how everything fits in and the product roadmap, we really feel like it's kind of lifted and given up really in kind of the ability to just go do what they're good at.

Speaker Change: And bring this back to go with them and we feel good about it we feel good about the trends we've seen in.

Speaker Change: Are you expecting to get to.

Speaker Change: Pro forma pro forma overall growth in the second half of the year so from them.

Speaker Change: And to.

Speaker Change: The other part of the question Andrew Thanks on that so we are highlighting those cutoffs, we believe that there's a huge opportunity to get more share of wallet from these customers I mean, a lot of the spend goes to point solutions ESP, we believe that our platform on the open internet by delivering better outcomes with elevated created will.

Speaker Change: Allow us to get market share and gained more share of wallet from very very large customers when they.

Brian: Enterprise Brian.

Brian: Some of them are small and medium enterprises, the field significant budgets and obviously direct response customers. So it is about growing gaucho wallet from them both for their branding.

Brian: And put up performance campaigns and doing that sort of across the board on.

Brian: On screen and I think that's the opportunity I mean, he has a tremendous.

Brian: Sales team today combined with the legacy all Brendan legacy.

Brian: It's hundreds of people across the world organized and protocols. So we're very excited about the ability to glide.

Brian: More.

Brian: Shell bullet through to these capabilities.

Brian: Okay.

Brian: Thank you.

Brian: Our next question is from Laura Martin.

Brian: Needham <unk> company. Please proceed.

Speaker Change: Hi, there yeah. So you guys had a really a central activation at possible and you just said that you've had hundreds of meetings and customers are seeing.

Really delighted with this end to end strategy of that brand and performance what remind us what the path is between meetings to getting sign ups with the revenue show up assuming you get some kind of 20% conversion rate or something when do we start seeing revenue from those positive meetings here.

Speaker Change: Hello. Thank you. So yes possible was great sorry, I wasn't there, but then you had some good meetings, there and with our team and we are looking at returning back to growth I mean is it as teams in the second half of the year and it's a combination of some of the things Jason mentioned around just improvement in the performance.

Speaker Change: The legacy <unk> business, but a lot of it is also coming from cross selling.

Speaker Change: And the selling performance solutions to Keith advertise it sending some.

Speaker Change: Branding solutions to the SME advertising so that is reflected in our plans for the second half of the year and.

Speaker Change: We have already seen some will be say, what's happening with certain customers. So I think it's going to ramp up in an exponential way into the second half of the year.

Speaker Change: Okay. So there isn't a typical you sign an MSA and then they experiment is theres not a typical path.

Speaker Change: You just have to wait till the end.

Speaker Change: See a headwind of tariffs against people, bringing new business to you.

At the moment as Jay said, we have not seen any meaningful impact on tariffs.

Speaker Change: Okay and that wouldn't affect all these needs okay. That's interesting.

Speaker Change: Okay and then my other thing is you know.

Speaker Change: One of the things that's been really threatening to started the existence of the open Internet is an extra essential threat is that agents with a cut off their funding of new sites.

Speaker Change: And so I'm wondering if you're seeing there's been a lot of.

Speaker Change: Pushback on that and really trying to get at agents seems to be more nuanced about the type of news that they are willing to advertise on have you seen any reversal or.

Speaker Change: People advertising on new sites again.

Speaker Change: Yes, so I think actually we have seen a more openness anything does better technology solutions that.

Speaker Change: Allow advertisers to be much more selective as to what they're trying to blocks are now doing.

Speaker Change: So the really large scale block ingalls new stages the victory being <unk>.

Speaker Change: Much more granular around specific things that they want to block and I feel very positive about the topic actually that's very close to my heart panel, let's see yes, let's talk about the it can with some of our partners on the agency side some of the Cmo's and publisher side I think there is a change of that.

Speaker Change: I think the ability of reaching incremental audience says at times. They are engaging with authentic content that is professionally produced the value of that has been proven based on usage out there that shows that there is no.

Speaker Change: Actually a detriment actually visit the positive impact of being associated with paid which have credible authentic journalistic.

Speaker Change: Or are the professionally created content and I think that is a big opportunity for US also to grow monetization within our base of supply.

Speaker Change: Okay, great. Thanks, very much thank you.

Speaker Change: Our next question is from James <unk> with Jefferies. Please proceed.

Speaker Change: Great. Thank you guys I'd love to hear your perspective, just on the ruling in the Doj Google lawsuit curious how do you. How do you think the benefit if gold were to divest it AD serving and publisher side, Jack and then I had a follow up question.

Speaker Change: Great. So I'll take that thank you so the the Google.

Speaker Change: Offsetting the good thing for the overall ecosystem.

Affects us probably directly less than others. Because we are an end to end platform. This has direct exclusive relationship on the supply. So we don't go for most of the business. We have to Gamble exchange of 360. So we have exclusive supply which is one of the differentiators right. We can drive better outcomes by the way when you look good.

Speaker Change: The point solutions like DSP.

Speaker Change: And so it's impacting does less I think overall on the SSP Fund I think it is they could potentially provide the great takeaway.

Speaker Change: Takeaway two.

Which could benefit us.

Speaker Change: Mentioned that say for example on the performance side on the direct response side of our business. We have been over the last year is expanding significantly with third party supply display.

Speaker Change: As this market becomes more open and more competitive I think it allows us to even further grow.

Speaker Change: The value, we can bring to our performance marketing on this growth path with suppliers. So that's a direct positive, but overall I think us being an end to end platform with direct quote on page co sponsored data. This is less impactful on us directly.

Speaker Change: Great and then just one on your moments vertical video product would just love to hear what your strategy is for expanding that that product into new publishers and how we should be thinking about that as a growth driver for the business.

Speaker Change: So we're looking at as part of a broader suite of vertical video experiences. Some moments is one type of format. They don't want to be too technical one type of format, but there's other vertical opportunities that we see where we can leverage our endobiotic coke placement.

Speaker Change: To create a vertical experience.

Speaker Change: Very very suitable for brand advertising for brands that want to drive performance. So overall, we think vertical video.

Speaker Change: The category.

Speaker Change: The engagement of audiences with content and he's a great canvas for advertisers that want to promote either performance or Brian.

Speaker Change: We've been seeing.

Speaker Change: Seeing great success with moments I mentioned on the call some of the some of the data points and we will continue to invest quite significantly to old vertical video opportunities.

Speaker Change: Great. Thank you.

Speaker Change: Our next question is from Zach Cummins with B Riley Securities. Please proceed.

Zach Cummins: Yes, hi, good morning, Thanks for taking my questions.

Zach Cummins: I just wanted to get a little more context around your second half guidance I think David you might have alluded to it but just.

Zach Cummins: Curious, if you're still assuming kind of a return to <unk>.

Zach Cummins: Single digit growth in the second half of the year on a pro forma basis, and just from a modeling perspective.

Zach Cummins: Synergies are expected to ramp throughout the year. So just curious of how we should be thinking about kind of the adjusted EBITDA progression for the pro forma entity in the second half of this year.

Zach Cummins: Sure. Thanks for the question Zack I'll take that one yes. So obviously you know as I said, we're factoring in a number of things you know the continued improvement of the year over year growth rates that we've seen from the legacy <unk> business continued.

Zach Cummins: Gross obviously from the legacy operating business, we've been talking about for about a year now.

Zach Cummins: Obviously, the early days of the revenue synergy capture so we are expecting something there, but we're we're obviously being fairly conservative in our model for that and of course, you know acknowledging that the uncertainty in the world exists right. Now we are accounting for that Oh, even though we haven't seen any meaningful impact so far.

Zach Cummins: Considering all the all the positives there are also you know anecdotally some.

Zach Cummins: Some easing of the comps for us, particularly in the on the legacy <unk> business as we get later in the year as we talked about the idiosyncratic headwinds from last year's Q4.

Zach Cummins: As well and so yeah all of that kind of comes together and we still do expect as we said last quarter.

Zach Cummins: You know to get to the pro forma growth year over year in the second half of this year.

Zach Cummins: And in terms of expenses and how that kind of relates to EBITDA.

Zach Cummins: We've now shared that we expect to realize about $40 million of cost synergies alone in 2025, and that's really ramping over over the next few quarters going on about 2 million of benefit in Q1, just based on the timing of closing and actions being put in place are you.

Zach Cummins: We expect that the step up in Q2, but even more so in Q3 and for Q4 and much of those actions are actually already done its really just a matter of time at this point before the.

Zach Cummins: Accounting you know he's able to recognize those those savings. So we feel very confident about that in terms of the expenses getting lower over the course of the year Q2 also has some marketing events and Neal just timing type issues meeting Q2 really the the high watermark in terms of expenses for the.

Zach Cummins: Year, So you put it altogether it.

Zach Cummins: It.

Zach Cummins: Definitely a we feel good about obviously, maintaining our guidance said the historical seasonality is one that.

Zach Cummins: Two thirds of the EBITDA has always been recognized in each too. If you put these two companies together so between that and the synergies we feel very good.

Zach Cummins: Okay.

Zach Cummins: Just on.

Zach Cummins: These are financially a transformational year with this merger. So you can see for example, the ramp up of a based on the guidance of EBITDA as we <unk>. The EBITDA in Q2 from Q1. So we are seeing it I mean, it's really the timing go a lot of these efficiencies synergies coming gain the cross sell that is starting.

Zach Cummins: In five geographies now in Europe and in the U S. So all of these things will come in in Wuhan, We expect a significant impact on the sea going into the second half.

Zach Cummins: Understood and my one follow up question is just around your <unk> business and I appreciate the disclosure there.

Zach Cummins: The growth rate and percentage of spend so.

Jim: Jim just curious.

Zach Cummins: <unk>.

Zach Cummins: The combined entity as a differentiated <unk> offering and where's kind of the near term opportunities that you see to continue that momentum here in the coming quarters.

Zach Cummins: So it today the differentiation is into two aspects one is we have.

Zach Cummins: For some <unk>.

Zach Cummins: TD manufacturers and operating system LNG be doing certain geographies of the world exclusive video on the home screen placement that is.

Zach Cummins: He is a highly impactful sort of native statesman. When you look at the different pile then you decide what to do so we spend a lot of time. There. So we have exclusivity on that that helps US also increased in general our share of wallet with video advertisers once they do displacement. We will also get some of the in stream.

Regular call it a video advertising from them.

Zach Cummins: Trying to grow that because this this four months Ah.

Zach Cummins: You can buy them programmatically, they're all unique and they're really leveraging the tremendous power that we have a teens with brand advertisers and these are the type of advertisers that CTV and end applications want to have on the home screen. So that that's a big differentiator today, when we're looking into the future.

Zach Cummins: A huge opportunity on performance CTV I think it's early days for that and when you combine the performance capabilities of legacy outgrowing the SME base that we have.

Zach Cummins: Use of producing today video content for these type of advertisers and the ability to target and deliver outcomes. We are spending a lot of time working on sort of the implementation of strategy for performance on CTV.

Zach Cummins: Uniquely positioned to capture significant share there.

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

Zach Cummins: Thank you.

Speaker Change: We have reached the end of our question and answer session I would like to turn the conference back over to management for closing remarks.

Speaker Change: So thank you all for joining you want to take this opportunity to thank our close to 2000 employees across the world It's been a.

Speaker Change: A great journey until now and I'm very excited to see the one team one dream coming together. It's also been great I mean, if some of our partners on the call I mean on the business side and they've been tremendous and the confidence and validation. We've got some bad news is really fueling the energy and thank you all for continuing to support us as shareholders.

Speaker Change: We look forward to continuing that.

Speaker Change: <unk>. Thank you.

Speaker Change: Thank you.

Speaker Change: Today's conference you may disconnect your lines at this time and thank you for your participation.

Speaker Change: Okay.

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