Outbrain Announces Fourth Quarter and Full Year 2022 Results

NEW YORK, March 02, 2023 (GLOBE NEWSWIRE) — Outbrain Inc. (Nasdaq: OB), a leading recommendation platform for the open web, announced today financial results for the quarter and full year ended December 31, 2022.

“We finished the year at the high end of our fourth quarter guidance for Ex-TAC gross profit and beat our guidance for Adjusted EBITDA,” said David Kostman, Outbrain’s Co-CEO. “Despite the very challenging macro environment that impacted our results, I am pleased with the strong foundation for future growth our team has built in 2022. We controlled costs starting in Q1 of the year, which drove profitability and free cash flow in the quarter. Our record of global supply wins solidified our position among premium publishers. These market share gains will serve us well as we add more demand from advertisers across the funnel looking for measurable outcomes,” added David.

“In 2022 we broadened our value proposition and deepened our partnerships with premium publishers, including through the introduction of Keystone,” added Yaron Galai, Outbrain’s Co-Founder and Co-CEO. “Overall, we are committed to continue building strong partnerships based on product innovation designed to drive results for our partners.”

Fourth Quarter and Full Year 2022 Key Financial Metrics:

Three Months Ended
December 31,
Twelve Months Ended
December 31,
(in millions USD, except per share amounts) 2022 2021 % Change 2022 2021 % Change
Revenue $ 258.0 $ 289.7 (11)% $ 992.1 $ 1,015.6 (2)%
Gross profit 48.1 67.5 (29)% 192.7 240.3 (20)%
Net (loss) income (7.7 ) 39.0 * NM (24.6 ) 11.0 NM
Net cash provided by (used in) operating activities 17.1 (4.3 ) NM 3.8 56.8 (93)%
Non-GAAP Financial Data**
Ex-TAC gross profit 59.2 76.7 (23)% 234.8 272.1 (14)%
Adjusted EBITDA 7.1 23.9 (70)% 26.3 88.9 (70)%
Adjusted net (loss) income (7.2 ) 11.8 NM (23.6 ) 45.5 NM
Free cash flow 11.5 (13.1 ) NM (22.1 ) 36.7 NM

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* Net income for the three months ended December 31, 2021 includes, among other items, a one-time $31.8 million tax benefit due to a release of the valuation allowance on certain U.S. deferred tax assets.

** See non-GAAP reconciliations below

NM Not meaningful

Fourth Quarter 2022 Highlights:

  • Revenue of $258.0 million, a decrease of $31.7 million, or 11%, compared to $289.7 million in the prior year period. Revenue decreased 6.9% on a constant currency basis, excluding net unfavorable foreign currency effects of approximately $11.7 million. The reported decrease was driven by lower revenue of approximately $75.3 million due to net revenue retention of 74% on existing media partners, as we have experienced lower yields mainly due to weaker demand on our platform, primarily as a result of the current macroeconomic conditions and the impact on advertising spend, as well as due to unfavorable foreign currency effects. This decrease was partially offset by approximately $45.5 million, or 16%, of growth from new media partners1.
  • Gross profit of $48.1 million, a 29% year-over-year decrease, compared to $67.5 million in the prior year period. Gross profit decreased 26% on a constant currency basis, excluding net unfavorable foreign currency effects of approximately $1.5 million.
  • Ex-TAC gross profit of $59.2 million, a 23% year-over-year decrease, compared to $76.7 million in the prior year period. Ex-TAC gross profit decreased 21% on a constant currency basis, excluding net unfavorable foreign currency effects of approximately $1.5 million. The decrease in Ex-TAC Gross Profit was primarily driven by lower revenue levels, an unfavorable revenue mix and lower performance from certain deals.
  • Net loss of $7.7 million, compared to net income of $39.0 million in the prior year period, which included a one-time tax benefit of $31.8 million in the fourth quarter of 2021 due to a release of the valuation allowance on certain U.S. deferred tax assets. See non-GAAP reconciliations below.
  • Adjusted net loss of $7.2 million compared to adjusted net income of $11.8 million in the prior year period.
  • Adjusted EBITDA of $7.1 million compared to $23.9 million in the prior year period, primarily reflecting lower Ex-TAC gross profit. Adjusted EBITDA in the current year period included net favorable foreign currency effects of approximately $2.2 million.
  • Cash provided by operating activities was $17.1 million in the period; free cash flow was $11.5 million. Cash, cash equivalents and investments in marketable securities were $351.2 million, comprised of cash and cash equivalents of $105.6 million and investments of $245.6 million as of December 31, 2022. Our balance sheet as of December 31, 2022 also included convertible notes of $236.0 million.

Full Year 2022 Highlights:

  • Revenue of $992.1 million, a decrease of $23.5 million, or 2%, compared to $1,015.6 million in the prior year period. Revenue increased 1.9% on a constant currency basis, excluding net unfavorable foreign currency effects of approximately $42.7 million.
  • Gross profit of $192.7 million, a 20% year-over-year decrease, compared to $240.3 million in the prior year period. Gross profit decreased 17% on a constant currency basis, excluding net unfavorable foreign currency effects of approximately $6.6 million.
  • Ex-TAC gross profit of $234.8 million, a 14% year-over-year decrease, compared to $272.1 million in the prior year period. Ex-TAC gross profit decreased 11% on a constant currency basis, excluding net unfavorable foreign currency effects of approximately $6.6 million.
  • Net loss of $24.6 million, including net one-time expenses of $1.0 million, compared to net income of $11.0 million, including net one-time expenses of $34.5 million in the prior year. See non-GAAP reconciliations below.
  • Adjusted net loss of $23.6 million compared to adjusted net income of $45.5 million in the prior year.
  • Adjusted EBITDA of $26.3 million compared to $88.9 million in the prior year period. Adjusted EBITDA included net favorable foreign currency effects of approximately $3.4 million.
  • Generated $3.8 million of net cash from operating activities; free cash flow was a use of cash of $22.1 million.

Share Repurchases

During 2022, we fully utilized our $30 million share repurchase program authorized in February 2022 and repurchased 6,389,129 shares of our common stock.

On December 14, 2022, the Company’s Board of Directors authorized a new $30 million share repurchase program. The Company believes it is an attractive way to enhance shareholder value under current market conditions.

The timing and actual number of shares repurchased under the program will depend on a variety of factors, including price, general business and market conditions, and other investment opportunities. Shares may be repurchased through privately negotiated transactions, or open market purchases, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act. The share repurchase program does not obligate Outbrain to acquire any particular amount of common stock, and the program and repurchases under the program may be commenced, suspended or terminated, as applicable, at any time by the Company at its discretion without prior notice.

2023 Full Year and First Quarter Guidance

The following forward-looking statements reflect our expectations for 2023. For the first quarter ending March 31, 2023, we expect:

  • Ex-TAC gross profit of $50 million to $52 million
  • Adjusted EBITDA of $(2.5) million to breakeven

For the full year ending December 31, 2023, we expect:

  • Ex-TAC gross profit of at least $237 million
  • Adjusted EBITDA of at least $28 million

The above measures are forward-looking non-GAAP financial measures for which a reconciliation to the most directly comparable GAAP financial measure is not available without unreasonable efforts. See “Non-GAAP Financial Measures” below. In addition, our guidance is subject to risks and uncertainties, as outlined below in this release.

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1 We calculate media partner net revenue retention at the end of each quarter by starting with revenue generated on media partners’ properties in the same period in the prior year, “Prior Period Retention Revenue.” We then calculate the revenue generated on these same media partners’ properties in the current period, “Current Period Retention Revenue.” Current Period Retention Revenue reflects any expansions within the media partner relationships, such as any additional placements or properties on which we extend our recommendations, as well as contraction or attrition. Our media partner net revenue retention in a quarter equals the Current Period Retention Revenue divided by the Prior Period Retention Revenue. These amounts exclude certain revenue adjustments and revenue recognized on a net basis. New media partners are defined as those relationships in which revenue was not generated in the prior year period, except for limited instances where residual revenue was generated on a media partner’s properties. In such instances, the residual revenue would be excluded from net revenue retention above.

About Outbrain

Outbrain (Nasdaq: OB) is a leading recommendation platform for the open web. Our technology enables 10 billion daily recommendations to consumers across more than 7,000 online properties and connects advertisers to these audiences to grow their business. Founded in 2006, Outbrain is headquartered in New York with offices in 17 cities worldwide.