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OI

Outbrain Inc. (OB)·Q4 2024 Earnings Summary

Executive Summary

  • Outbrain (operating under the new Teads brand) delivered Q4 revenue of $234.6M, Gross Profit of $56.1M, Ex‑TAC Gross Profit of $68.3M (+7% YoY), and Adjusted EBITDA of $17.0M, achieving Q4 guidance and generating record free cash flow of $37.6M .
  • Margin mix improved materially: gross margin rose 250 bps to 23.9% and Ex‑TAC margin rose ~340 bps to 29.1%, reflecting RPM gains and revenue mix shifts despite a key supply partner bidding transition headwind that would have otherwise driven mid‑teens Ex‑TAC growth YoY .
  • Q1 2025 guidance: Ex‑TAC Gross Profit $100–$105M and Adjusted EBITDA $8–$12M; FY 2025 Adjusted EBITDA ≥$180M; synergy target raised to $65–$75M annual in 2026 (≈$60M cost, $5–$15M revenue) with ~70% of personnel synergies actioned in Feb .
  • Strategic catalysts: closing of Teads acquisition (Feb 3) creating one of the largest open‑internet platforms; strong CTV momentum at Teads (≈10% of Q4 mix and growing), deep enterprise brand relationships, and accelerating cross‑sell; management expects positive pro forma growth to resume in H2 2025 as integration ramps .

What Went Well and What Went Wrong

What Went Well

  • Achieved Q4 guidance on Ex‑TAC and Adjusted EBITDA; free cash flow hit $37.6M with operating cash flow of $42.7M, signaling strong cash conversion and working capital performance .
  • Mix/efficiency tailwinds: gross margin +250 bps and Ex‑TAC margin +340 bps YoY; RPM grew for the fifth consecutive quarter; Adjusted EBITDA up 21% YoY .
  • Management quote: “Continued momentum in our growth areas helped drive accelerated growth and profitability, with a record level of cash flow” — David Kostman, CEO ; and “We achieved our Q4 guidance… generating significant free cash flow” — CFO Jason Kiviat .

What Went Wrong

  • Headline revenue declined 5% YoY to $234.6M, impacted by FX (~$1.8M) and the lingering effect of a key supply partner’s bidding transition; net result was a slight GAAP net loss of $(0.2)M .
  • Acquisition‑related costs of $5.5M in Q4 (pre‑tax) and $14.3M for the year weighed on GAAP profitability; adjusted net income was $3.5M vs $4.3M prior year .
  • Management flagged near‑term integration disruptions from combining two similarly sized companies; Q1 pro forma Ex‑TAC is guided down YoY, with improvement expected as synergies ramp through 2025 .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$214.1 $224.2 $234.6
Gross Profit ($USD Millions)$45.6 $48.9 $56.1
Gross Margin (%)21.3% 21.8% 23.9%
Ex‑TAC Gross Profit ($USD Millions)$56.0 $59.7 $68.3
Ex‑TAC Margin (%)26.1% 26.6% 29.1%
Adjusted EBITDA ($USD Millions)$7.4 $11.5 $17.0
Net Income (Loss) ($USD Millions)$(2.2) $6.7 $(0.2)
Diluted EPS ($)$(0.04) $0.01 $0.00
Free Cash Flow ($USD Millions)$0.3 $8.7 $37.6
KPIQ2 2024Q3 2024Q4 2024
Supply outside traditional feed (% of revenue)27% 28% 30%
RPM YoY trend3rd consecutive YoY growth 4th consecutive YoY growth 5th consecutive YoY growth
Outbrain DSP advertiser spend growth~50% YoY in H1 ~60% YTD thru Sept ~45% FY 2024
Moments adoption—Beta launched >40 publishers; strong engagement (avg swipe depth 7.2; engagement >47%)
Net revenue retention (publishers)—91% 86%
Cash, cash equivalents$75.1M $57.7M (restricted cash included) $89.1M (cash); $166.1M incl. ST investments

Note: No consensus estimate comparison available (see Estimates Context).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Ex‑TAC Gross ProfitQ4 2024$67.5M–$72.5M (issued Nov 7, 2024) Actual: $68.3M Achieved within guidance
Adjusted EBITDAQ4 2024$15.0M–$18.5M (issued Nov 7, 2024) Actual: $17.0M Achieved within guidance
Ex‑TAC Gross ProfitQ1 2025—$100M–$105M Initiated
Adjusted EBITDAQ1 2025—$8M–$12M Initiated
Adjusted EBITDAFY 2025—≥$180M Initiated
Adjusted EBITDA (synergies)FY 2026 run‑rate$50M–$60M (Aug ’24) $65M–$75M (raised Feb 3, 2025) Raised
Adjusted EBITDAFY 2024$35.3M–$38.8M (raised Nov 7, 2024) Actual: $37.3M Achieved

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
AI/Creative automationLaunched Predictive Demographics; DSP tooling expansion 70% of customers used AI creative automation; deeper AI application across journey Broadening adoption and scope
RPM/YieldsRPM YoY growth continued; CPCs turning stable/positive 5th consecutive RPM YoY growth; mix drives margin expansion Improving
Outbrain DSP shift+50% H1; net revenue recognition impact +45% FY spend; CFO explains net vs gross revenue dynamic Strong growth; accounting optics
Supply beyond feed27% of revenue 30% of revenue; continued expansion Rising contribution
Moments productBeta launch; early interest >40 publishers live; engagement metrics strong Scaling
CTV momentum—Teads CTV ~10% of Q4, expected higher in Q1; performance opportunity Expanding channel
Regional dynamics (France)—Teads’ France recovered in Jan; broader improvement into Feb/March Improving
Integration/synergiesPlanning phase; pending close ~70% personnel synergies actioned; cost/revenue synergy plan detailed Accelerating

Management Commentary

  • “A few weeks post closing of our merger with Teads, I am even more excited about combining the category‑leading branding and performance capabilities… into one of the largest Open Internet platforms” — CEO David Kostman .
  • “Ex‑TAC gross profit was $68.3 million, an increase of 7% year‑over‑year… our overall Q4 Ex‑TAC gross profit would have grown in the mid‑teens percentage year‑over‑year, excluding this one isolated headwind” — CFO Jason Kiviat .
  • “We expect to realize approximately $65 million to $75 million of annual synergies in 2026… approximately 70% of the estimated compensation‑related synergies already actioned in February” — Company release .
  • “We believe CTV is becoming a core part of the performance marketing mix… positions us well for growth in this area” — CEO David Kostman .

Q&A Highlights

  • Integration and cross‑sell: Teams unified within weeks; cross‑sell pipelines connected and initial combined campaigns sold; near‑term disruption acknowledged but expected to ease by Q2 .
  • DSP strategy: Continued investment in Outbrain DSP (formerly Zemanta) for performance advertisers; consolidation of performance capabilities into Teads Ad Manager for brands and SMEs; net revenue recognition explains gross vs ad spend optics .
  • Supply beyond feed trajectory: Legacy Outbrain supply outside feed at 30% of revenue; expected to remain a growth driver, though % of combined company will be lower .
  • Teads salesforce and regional recovery: French market snapped back in January; global metrics improved Jan→Feb→March; Q1 still YoY down on pro forma basis but improving .
  • Synergy breakdown: ~$60M cost synergies (≈$45M personnel, ≈$15M non‑comp/TAC optimizations) and $5–$15M revenue synergies (kept conservative) targeted for 2026 run‑rate; ~70% personnel synergies already actioned .
  • Brand/name change: Company operating under “Teads”; name and ticker change planned over time .

Estimates Context

  • Wall Street consensus via S&P Global was not available for OB due to a CIQ mapping gap in our system at time of request, so we cannot provide beat/miss vs consensus for Q4 2024. We will update when mapping is available. No estimate values are presented in this report.

Key Takeaways for Investors

  • Ex‑TAC Gross Profit and margins continue to outpace revenue, supported by RPM gains and mix shift — a structural positive for profitability trajectory .
  • Strong cash generation is a standout: $42.7M operating cash flow and $37.6M free cash flow in Q4; balance sheet held $166.1M in cash and ST investments at year‑end (pre‑Teads) .
  • Near‑term integration noise is likely, but synergy capture is ahead of schedule (raised to $65–$75M in FY 2026), with ~70% personnel actions completed; model for EBITDA ramps through 2025, skewed to H2 seasonally and with synergy realization .
  • CTV and omnichannel branding‑to‑performance positioning should be a medium‑term growth driver; Teads’ CTV scaled rapidly and is expected to lift online video and cross‑funnel outcomes .
  • DSP shift (net revenue recognition) obscures gross revenue optics but reflects deeper wallet share and performance reach; ad spend grew even when reported revenue was pressured .
  • Watch FX and supply partner dynamics; management highlighted FX headwinds and one partner bidding transition that tempered reported growth but is being rescaled/optimized .
  • Tactical setup: Q1 guide is conservative (integration timing, accounting alignment) but management expects pro forma growth improvement across 2025 and single‑digit positive growth in H2; consider positioning for synergy update cadence and CTV cross‑sell wins as potential catalysts .

[All figures and statements are sourced from Outbrain/Teads Q4 2024 8‑K and press materials, and the Q4/Q3 earnings call transcripts as cited.]