Outbrain Inc. (Nasdaq: OB), a leading technology platform that
drives business results by engaging people across the open
Internet, announced today financial results for the quarter ended
June 30, 2023.
“We are pleased with our financial results for
Q2, significantly exceeding our guidance for Adjusted EBITDA and
ending the quarter at the high end of our Ex-TAC gross profit
guidance with 5% sequential growth," said David Kostman, Co-CEO,
Outbrain. “The launch of Onyx by Outbrain™, our new branding
platform for enterprise brands and agencies, leverages our premium
publisher partnerships, significantly increases our total
addressable market, and positions us to be one of the largest
full-funnel partners for advertisers on the open web. Onyx's value
proposition will meet a market need: predicting and delivering
attention which will drive clear business outcomes and measurable
ROI for awareness and consideration campaigns," added Kostman.
“Outbrain is well-positioned to support the
industry-wide push for attention, a metric that goes beyond
viewability and completion and instead provides better insights to
determine an ad’s efficacy and impact. Leveraging the technology
and data assets we’ve built for over a decade to predict user
interests and to power publishers’ personalized news feeds, Onyx
can help advertisers make more confident investments, fine-tune
their media strategies, and achieve better brand outcomes,” added
Yaron Galai, Outbrain’s Co-Founder and Co-CEO.
Second Quarter
2023 Key Financial Metrics:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
(in millions USD) |
2023 |
2022 |
% Change |
|
2023 |
2022 |
% Change |
|
Revenue |
$ |
225.8 |
|
$ |
250.9 |
|
(10 |
)% |
|
$ |
457.6 |
|
$ |
505.1 |
|
(9 |
)% |
|
Gross profit |
|
44.0 |
|
|
48.7 |
|
(10 |
)% |
|
|
85.2 |
|
|
102.6 |
|
(17 |
)% |
|
Net income (loss) |
|
11.3 |
|
|
(10.3 |
) |
209 |
% |
|
|
5.7 |
|
|
(12.2 |
) |
(147 |
)% |
|
Net cash provided by (used in) operating activities |
|
1.8 |
|
|
1.5 |
|
21 |
% |
|
|
(18.7 |
) |
|
(1.1 |
) |
NM |
|
|
Non-GAAP Financial Data* |
|
|
|
|
|
|
|
|
Ex-TAC gross profit |
|
54.6 |
|
|
59.3 |
|
(8 |
)% |
|
|
106.8 |
|
|
122.8 |
|
(13 |
)% |
|
Adjusted EBITDA |
|
3.5 |
|
|
5.9 |
|
(40 |
)% |
|
|
4.2 |
|
|
17.5 |
|
(76 |
)% |
|
Adjusted net loss |
|
(3.9 |
) |
|
(10.9 |
) |
64 |
% |
|
|
(8.4 |
) |
|
(11.0 |
) |
23 |
% |
|
Free cash flow |
|
(2.2 |
) |
|
(8.9 |
) |
76 |
% |
|
|
(29.2 |
) |
|
(17.8 |
) |
(64 |
)% |
_____________________________
*
See non-GAAP
reconciliations belowNM Not meaningful
Second Quarter
2023 Financial Results
-
Revenue of $225.8 million, a decrease of $25.1 million, or 10%,
compared to $250.9 million in the prior year period, including net
favorable foreign currency effects of approximately $0.8 million.
The reported decrease was driven by lower revenue of approximately
$55.7 million due to net revenue retention of 78% on existing
media partners, partially offset by approximately $29.7 million, or
12%, of growth from new media partners1.
- Gross profit of
$44.0 million, a 10% year-over-year decrease, compared to $48.7
million in the prior year period.
- Ex-TAC gross profit of $54.6
million, an 8% year-over-year decrease, compared to $59.3 million
in the prior year period. The decrease was primarily driven by
lower revenue levels.
- Net income of $11.3
million, compared to net loss of $10.3 million in the prior year
period. Net income for the second quarter of 2023 reflected a
pre-tax gain of $22.6 million recorded in connection with our
partial repurchase of Convertible Notes, as described below, as
well as pre-tax charges of $2.3 million related to the reduction in
our global workforce of approximately 10%, which was announced in
May.
- Adjusted net loss
of $3.9 million compared to adjusted net loss of $10.9 million in
the prior year period.
- Adjusted EBITDA of
$3.5 million compared to Adjusted EBITDA of $5.9 million in the
prior year period, primarily reflecting lower Ex-TAC gross profit,
partially offset by lower operating expenses. Adjusted EBITDA in
the current year period included net favorable foreign currency
effects of approximately $1.9 million.
- Net cash provided
by operating activities of $1.8 million in the period; free cash
flow was use of cash of $2.2 million.
- Cash, cash
equivalents and investments in marketable securities were $217.8
million, comprised of cash and cash equivalents of $59.8 million
and investments in marketable securities of $158.0 million, as of
June 30, 2023.
- Our balance sheet
as of June 30, 2023 included convertible notes of $118.0
million, reflecting our April 2023 repurchase of
$118.0 million of convertible notes for approximately
$96.2 million in cash, including accrued interest,
representing a discount of approximately 19% to the principal
amount of the repurchased notes.
As of June 30, 2023, we have repurchased a total
of 1,513,073 shares for $7.1 million, including commissions, under
our $30 million stock repurchase program authorized in December
2022. The remaining availability under the repurchase program was
$22.9 million as of June 30, 2023.
2023 Full Year and Third Quarter
Guidance
The following forward-looking statements reflect
our expectations for 2023. For the third quarter ending September
30, 2023, we expect:
- Ex-TAC gross profit of $56.5 million to
$59.5 million
- Adjusted EBITDA of $7.5 million to $9.5
million
For the full year ending December 31, 2023, we expect:
- Ex TAC Gross Profit of at least $237
million, consistent with our previous guidance
- Adjusted EBITDA of
at least $30 million, increasing our previous guidance
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.________________________________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.
Conference Call and Webcast
Information
Outbrain will host an investor conference call
this morning, Tuesday, August 8 at 8:30 am ET. Interested parties
are invited to listen to the conference call which can be accessed
live by phone by dialing 1-844-826-3035 or for international
callers, 1-412-317-5195. A replay will be available two hours after
the call and can be accessed by dialing 1-844-512-2921, or for
international callers, 1-412-317-6671. The passcode for the live
call and the replay is 10179990. The replay will be available until
August 22, 2023. Interested investors and other parties may also
listen to a simultaneous webcast of the conference call by logging
onto the Investors Relations section of the Company’s website at
https://investors.outbrain.com. The online replay will be available
for a limited time shortly following the call.
Non-GAAP Financial Measures
In addition to GAAP performance measures, we use
the following supplemental non-GAAP financial measures to evaluate
our business, measure our performance, identify trends and allocate
our resources: Ex-TAC gross profit, Adjusted EBITDA, free cash
flow, adjusted net income (loss) and adjusted diluted EPS. These
non-GAAP financial measures are defined and reconciled to the
corresponding GAAP measures below. These non-GAAP financial
measures are subject to significant limitations, including those we
identify below. In addition, other companies in our industry may
define these measures differently, which may reduce their
usefulness as comparative measures. As a result, this information
should be considered as supplemental in nature and is not meant as
a substitute for revenue, gross profit, net income (loss), diluted
EPS or cash flows from operating activities presented in accordance
with U.S. GAAP.
Because we are a global company, the
comparability of our operating results is affected by foreign
exchange fluctuations. We calculate certain constant currency
measures and foreign currency impacts by translating the current
year’s reported amounts into comparable amounts using the prior
year’s exchange rates. All constant currency financial information
being presented is non-GAAP and should be used as a supplement to
our reported operating results. We believe that this information is
helpful to our management and investors to assess our operating
performance on a comparable basis. However, these measures are not
intended to replace amounts presented in accordance with GAAP and
may be different from similar measures calculated by other
companies.
The Company is also providing third quarter and
full year 2023 guidance on a non-GAAP basis. These forward-looking
non-GAAP financial measures are calculated based on internal
forecasts that omit certain amounts that would be included in GAAP
financial measures. The Company has not provided quantitative
reconciliations of these forward-looking non-GAAP financial
measures to the most directly comparable GAAP financial measures
because it is unable, without unreasonable effort, to predict with
reasonable certainty the occurrence or amount of all excluded items
that may arise during the forward-looking period, which can be
dependent on future events that may not be reliably predicted. Such
excluded items could be material to the reported results
individually or in the aggregate.
Ex-TAC Gross Profit
Ex-TAC gross profit is a non-GAAP financial
measure. Gross profit is the most comparable GAAP measure. In
calculating Ex-TAC gross profit, we add back other cost of revenue
to gross profit. Ex-TAC gross profit may fluctuate in the future
due to various factors, including, but not limited to, seasonality
and changes in the number of media partners and advertisers,
advertiser demand or user engagements.
We present Ex-TAC gross profit, as well as
Adjusted EBITDA as a percentage of Ex-TAC gross profit, because
they are key profitability measures used by our management and
board of directors to understand and evaluate our operating
performance and trends, develop short-term and long-term
operational plans and make strategic decisions regarding the
allocation of capital. Accordingly, we believe that these measures
provide information to investors and the market in understanding
and evaluating our operating results in the same manner as our
management and board of directors. There are limitations on the use
of Ex-TAC gross profit in that traffic acquisition cost is a
significant component of our total cost of revenue but not the only
component and, by definition, Ex-TAC gross profit presented for any
period will be higher than gross profit for that period. A
potential limitation of this non-GAAP financial measure is that
other companies, including companies in our industry, which have a
similar business, may define Ex-TAC gross profit differently, which
may make comparisons difficult. As a result, this information
should be considered as supplemental in nature and is not meant as
a substitute for revenue or gross profit presented in accordance
with U.S. GAAP.
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss)
before gain on repurchase of convertible debt; interest expense;
interest income and other income (expense), net; provision for
income taxes; depreciation and amortization; stock-based
compensation; and other income or expenses that we do not consider
indicative of our core operating performance, including but not
limited to, merger and acquisition costs, certain public company
implementation related costs, regulatory matter costs, and
severance costs related to our cost saving initiatives. We present
Adjusted EBITDA as a supplemental performance measure because it is
a key profitability measure used by our management and board of
directors to understand and evaluate our operating performance and
trends, develop short-term and long-term operational plans and make
strategic decisions regarding the allocation of capital, and we
believe it facilitates operating performance comparisons from
period to period.
We believe that Adjusted EBITDA provides useful
information to investors and others in understanding and evaluating
our operating results in the same manner as our management and
board of directors. However, our calculation of Adjusted EBITDA is
not necessarily comparable to non-GAAP information of other
companies. Adjusted EBITDA should be considered as a supplemental
measure and should not be considered in isolation or as a
substitute for any measures of our financial performance that are
calculated and reported in accordance with GAAP.
Adjusted Net Income (Loss) and Adjusted Diluted
EPS
Adjusted net income (loss) is a non-GAAP
financial measure, which is defined as net income (loss) excluding
items that we do not consider indicative of our core operating
performance, including but not limited to gain on repurchase of
convertible debt, merger and acquisition costs, certain public
company implementation related costs, regulatory matter costs, and
severance costs related to our cost saving initiatives. Adjusted
net income (loss), as defined above, is also presented on a per
diluted share basis. We present adjusted net income (loss) and
adjusted diluted EPS as supplemental performance measures because
we believe they facilitate performance comparisons from period to
period. However, adjusted net income (loss) or adjusted diluted EPS
should not be considered in isolation or as a substitute for net
income (loss) or diluted earnings per share reported in accordance
with GAAP.
Free Cash Flow
Free cash flow is defined as cash flow provided
by (used in) operating activities less capital expenditures and
capitalized software development costs. Free cash flow is a
supplementary measure used by our management and board of directors
to evaluate our ability to generate cash and we believe it allows
for a more complete analysis of our available cash flows. Free cash
flow should be considered as a supplemental measure and should not
be considered in isolation or as a substitute for any measures of
our financial performance that are calculated and reported in
accordance with GAAP.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of the federal securities laws, which
statements involve substantial risks and uncertainties.
Forward-looking statements may include, without limitation,
statements generally relating to possible or assumed future results
of our business, financial condition, results of operations,
liquidity, plans and objectives. You can generally identify
forward-looking statements because they contain words such as
“may,” “will,” “should,” “expects,” “plan,” “anticipates,” “could,”
“intends,” “guidance,” “outlook,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” "foresee,”
“potential” or “continue” or the negative of these terms or other
similar expressions that concern our expectations, strategy, plans
or intentions or are not statements of historical fact. We have
based these forward-looking statements largely on our expectations
and projections regarding future events and trends that we believe
may affect our business, financial condition and results of
operations. The outcome of the events described in these
forward-looking statements is subject to risks, uncertainties and
other factors, including but not limited to: overall advertising
demand and traffic generated by our media partners; factors that
affect advertising demand and spending, such as the continuation or
worsening of unfavorable economic or business conditions or
downturns, instability or volatility in financial markets, and
other events or factors outside of our control, such as U.S. and
global recession concerns, geopolitical concerns, including the
ongoing conflict between Russia and Ukraine, supply chain issues,
inflationary pressures, labor market volatility, bank closures or
disruptions, and the pace of recovery or any resurgences of the
COVID-19 pandemic, and the impact of unfavorable economic
conditions and other factors that have and may further impact
advertisers’ ability to pay; our ability to continue to innovate,
and adoption by our advertisers and media partners of our expanding
solutions; the success of our sales and marketing investments,
which may require significant investments and may involve long
sales cycles; our ability to grow our business and manage growth
effectively; our ability to compete effectively against current and
future competitors; the loss of one or more of our large media
partners, and our ability to expand our advertiser and media
partner relationships; our ability to maintain our revenues or
profitability despite quarterly fluctuations in our results,
whether due to seasonality, large cyclical events, or other causes;
the risk that our research and development efforts may not meet the
demands of a rapidly evolving technology market; any failure of our
recommendation engine to accurately predict user engagement, any
deterioration in the quality of our recommendations or failure to
present interesting content to users or other factors which may
cause us to experience a decline in user engagement or loss of
media partners; limits on our ability to collect, use and disclose
data to deliver advertisements; our ability to extend our reach
into evolving digital media platforms; our ability to maintain and
scale our technology platform; our ability to meet demands on our
infrastructure and resources due to future growth or otherwise;
outages or disruptions that impact us or our service providers,
resulting from cyber incidents, or failures or loss of our
infrastructure, which could adversely affect our business;
significant fluctuations in currency exchange rates; political and
regulatory risks in the various markets in which we operate; the
challenges of compliance with differing and changing regulatory
requirements; the timing and execution of, and the expected
benefits from, our cost-saving measures, including our workforce
reduction; any changes in management’s plans, assumptions,
estimates and projections with respect to our cost-savings
measures; the impact of the cost-saving measures, including the
workforce reduction, on our business or strategy; and the risks
described in the section entitled “Risk Factors” in the Annual
Report on Form 10-K filed for the year ended December 31, 2022 and
in subsequent reports filed with the SEC. Accordingly, you should
not rely upon forward-looking statements as an indication of future
performance. We cannot assure you that the results, events and
circumstances reflected in the forward-looking statements will be
achieved or will occur, and actual results, events or circumstances
could differ materially from those projected in the forward-looking
statements. The forward-looking statements made in this press
release relate only to events as of the date on which the
statements are made. We may not actually achieve the plans,
intentions or expectations disclosed in our forward-looking
statements and you should not place undue reliance on our
forward-looking statements. We undertake no obligation and do not
assume any obligation to update any forward-looking statements,
whether as a result of new information, future events or
circumstances after the date on which the statements are made or to
reflect the occurrence of unanticipated events or otherwise, except
as required by law.
About Outbrain
Outbrain (Nasdaq: OB) is a leading technology
platform that drives business results by engaging people across the
open internet. Outbrain predicts moments of engagement to drive
measurable outcomes for advertisers and publishers using AI and
machine learning across more than 7,000 online properties globally.
Founded in 2006, Outbrain is headquartered in New York with offices
in Israel and across the United States, Europe, Asia-Pacific, and
South America.
Media Contactpress@outbrain.com
Investor Relations ContactIR@outbrain.com(332)
205-8999
OUTBRAIN INC.Condensed
Consolidated Statements of Operations(In
thousands, except for share and per share data)
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
Revenue |
$ |
225,800 |
|
|
$ |
250,883 |
|
|
$ |
457,574 |
|
|
$ |
505,099 |
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Traffic acquisition costs |
|
171,224 |
|
|
|
191,554 |
|
|
|
350,800 |
|
|
|
382,250 |
|
|
Other cost of revenue |
|
10,555 |
|
|
|
10,610 |
|
|
|
21,598 |
|
|
|
20,199 |
|
|
Total cost of revenue |
|
181,779 |
|
|
|
202,164 |
|
|
|
372,398 |
|
|
|
402,449 |
|
|
Gross profit |
|
44,021 |
|
|
|
48,719 |
|
|
|
85,176 |
|
|
|
102,650 |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
10,041 |
|
|
|
10,519 |
|
|
|
19,352 |
|
|
|
20,947 |
|
|
Sales and marketing |
|
25,896 |
|
|
|
28,122 |
|
|
|
51,644 |
|
|
|
55,517 |
|
|
General and administrative |
|
15,743 |
|
|
|
12,957 |
|
|
|
31,149 |
|
|
|
28,991 |
|
|
Total operating expenses |
|
51,680 |
|
|
|
51,598 |
|
|
|
102,145 |
|
|
|
105,455 |
|
|
Loss from operations |
|
(7,659 |
) |
|
|
(2,879 |
) |
|
|
(16,969 |
) |
|
|
(2,805 |
) |
| Other income (expense),
net: |
|
|
|
|
|
|
|
|
Gain on repurchase of convertible debt |
|
22,594 |
|
|
|
— |
|
|
|
22,594 |
|
|
|
— |
|
|
Interest expense |
|
(1,105 |
) |
|
|
(1,953 |
) |
|
|
(2,972 |
) |
|
|
(3,824 |
) |
|
Interest income and other income (expense), net |
|
1,515 |
|
|
|
(3,828 |
) |
|
|
5,375 |
|
|
|
(4,909 |
) |
|
Total other income (expense), net |
|
23,004 |
|
|
|
(5,781 |
) |
|
|
24,997 |
|
|
|
(8,733 |
) |
| Income (loss) before provision
for income taxes |
|
15,345 |
|
|
|
(8,660 |
) |
|
|
8,028 |
|
|
|
(11,538 |
) |
|
Provision for income taxes |
|
4,063 |
|
|
|
1,658 |
|
|
|
2,351 |
|
|
|
670 |
|
| Net income (loss) |
$ |
11,282 |
|
|
$ |
(10,318 |
) |
|
$ |
5,677 |
|
|
$ |
(12,208 |
) |
| |
|
|
|
|
|
|
|
| Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
51,223,988 |
|
|
|
57,590,308 |
|
|
|
51,329,055 |
|
|
|
57,414,636 |
|
|
Diluted |
|
56,678,916 |
|
|
|
57,590,308 |
|
|
|
51,387,151 |
|
|
|
57,414,636 |
|
|
|
|
|
|
|
|
|
|
| Net income (loss) per common
share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.22 |
|
|
$ |
(0.18 |
) |
|
$ |
0.11 |
|
|
$ |
(0.21 |
) |
|
Diluted |
$ |
0.21 |
|
|
$ |
(0.18 |
) |
|
$ |
0.11 |
|
|
$ |
(0.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OUTBRAIN INC.Condensed
Consolidated Balance Sheets(In thousands, except
for number of shares and par value)
|
|
June 30,2023 |
|
December 31,2022 |
| |
(Unaudited) |
|
|
| ASSETS |
|
|
|
| Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
59,802 |
|
|
$ |
105,580 |
|
|
Short-term investments in marketable securities |
|
113,168 |
|
|
|
166,905 |
|
|
Accounts receivable, net of allowances |
|
168,879 |
|
|
|
181,258 |
|
|
Prepaid expenses and other current assets |
|
47,336 |
|
|
|
46,761 |
|
|
Total current assets |
|
389,185 |
|
|
|
500,504 |
|
| Non-current assets: |
|
|
|
|
Long-term investments in marketable securities |
|
44,828 |
|
|
|
78,761 |
|
|
Property, equipment and capitalized software, net |
|
42,092 |
|
|
|
39,890 |
|
|
Operating lease right-of-use assets, net |
|
13,701 |
|
|
|
11,065 |
|
|
Intangible assets, net |
|
22,116 |
|
|
|
24,574 |
|
|
Goodwill |
|
63,063 |
|
|
|
63,063 |
|
|
Deferred tax assets |
|
34,831 |
|
|
|
35,735 |
|
|
Other assets |
|
23,790 |
|
|
|
27,556 |
|
| TOTAL ASSETS |
$ |
633,606 |
|
|
$ |
781,148 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
| Current liabilities: |
|
|
|
|
Accounts payable |
$ |
140,918 |
|
|
$ |
147,653 |
|
|
Accrued compensation and benefits |
|
16,871 |
|
|
|
19,662 |
|
|
Accrued and other current liabilities |
|
102,782 |
|
|
|
126,092 |
|
|
Deferred revenue |
|
6,607 |
|
|
|
6,698 |
|
|
Total current liabilities |
|
267,178 |
|
|
|
300,105 |
|
|
Non-current liabilities: |
|
|
|
|
Long-term debt |
|
118,000 |
|
|
|
236,000 |
|
|
Operating lease liabilities, non-current |
|
10,967 |
|
|
|
8,445 |
|
|
Other liabilities |
|
17,242 |
|
|
|
18,812 |
|
| TOTAL LIABILITIES |
$ |
413,387 |
|
|
$ |
563,362 |
|
| |
|
|
|
| STOCKHOLDERS’ EQUITY: |
|
|
|
|
Common stock, par value of $0.001 per share − one billion shares
authorized, 60,856,628 shares issued and 51,305,013 shares
outstanding as of June 30, 2023; one billion shares
authorized, 60,175,020 share issued and 52,226,745 shares
outstanding as of December 31, 2022. |
|
61 |
|
|
|
60 |
|
|
Preferred stock, par value of $0.001 per share − 100,000,000 shares
authorized, none issued and outstanding as of June 30, 2023
and December 31, 2022 |
|
— |
|
|
|
— |
|
|
Additional paid-in capital |
|
462,209 |
|
|
|
455,831 |
|
|
Treasury stock, at cost − 9,551,615 shares as of June 30, 2023
and 7,948,275 shares as of December 31, 2022 |
|
(56,700 |
) |
|
|
(49,168 |
) |
|
Accumulated other comprehensive loss |
|
(12,004 |
) |
|
|
(9,913 |
) |
|
Accumulated deficit |
|
(173,347 |
) |
|
|
(179,024 |
) |
|
TOTAL STOCKHOLDERS’ EQUITY |
|
220,219 |
|
|
|
217,786 |
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
633,606 |
|
|
$ |
781,148 |
|
|
|
OUTBRAIN INC.Condensed
Consolidated Statements of Cash Flows(In
thousands)
|
|
Three Months Ended June 30, |
|
Six Months Ended June
30, |
| |
2023 |
|
2022 |
|
2023 |
|
2022 |
| |
(Unaudited) |
| CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
11,282 |
|
|
$ |
(10,318 |
) |
|
$ |
5,677 |
|
|
$ |
(12,208 |
) |
| Adjustments to reconcile net
income (loss) to net cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
Gain on partial repurchase of debt |
|
(22,594 |
) |
|
|
— |
|
|
|
(22,594 |
) |
|
|
— |
|
|
Depreciation and amortization of property and equipment |
|
1,754 |
|
|
|
2,756 |
|
|
|
3,458 |
|
|
|
5,160 |
|
|
Amortization of capitalized software development costs |
|
2,268 |
|
|
|
2,416 |
|
|
|
4,909 |
|
|
|
4,711 |
|
|
Amortization of intangible assets |
|
853 |
|
|
|
1,584 |
|
|
|
2,449 |
|
|
|
3,153 |
|
|
Amortization of discount on marketable securities |
|
(857 |
) |
|
|
— |
|
|
|
(2,098 |
) |
|
|
— |
|
|
Stock-based compensation |
|
3,496 |
|
|
|
3,357 |
|
|
|
6,107 |
|
|
|
6,090 |
|
|
Non-cash operating lease expense |
|
1,136 |
|
|
|
965 |
|
|
|
2,282 |
|
|
|
2,133 |
|
|
Provision for credit losses |
|
2,196 |
|
|
|
1,227 |
|
|
|
4,835 |
|
|
|
978 |
|
|
Deferred income taxes |
|
217 |
|
|
|
(3,655 |
) |
|
|
(220 |
) |
|
|
(3,995 |
) |
|
Other |
|
(382 |
) |
|
|
2,476 |
|
|
|
(1,436 |
) |
|
|
3,530 |
|
| Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
11,527 |
|
|
|
(7,362 |
) |
|
|
10,049 |
|
|
|
8,523 |
|
|
Prepaid expenses and other current assets |
|
(5,134 |
) |
|
|
(6,016 |
) |
|
|
(536 |
) |
|
|
(4,598 |
) |
|
Accounts payable and other current liabilities |
|
(5,384 |
) |
|
|
14,998 |
|
|
|
(33,401 |
) |
|
|
(16,123 |
) |
|
Operating lease liabilities |
|
(1,007 |
) |
|
|
(839 |
) |
|
|
(2,145 |
) |
|
|
(1,936 |
) |
|
Deferred revenue |
|
86 |
|
|
|
(755 |
) |
|
|
(231 |
) |
|
|
904 |
|
|
Other non-current assets and liabilities |
|
2,370 |
|
|
|
677 |
|
|
|
4,244 |
|
|
|
2,548 |
|
|
Net cash provided by (used in) operating activities |
|
1,827 |
|
|
|
1,511 |
|
|
|
(18,651 |
) |
|
|
(1,130 |
) |
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Acquisition of business, net of cash acquired |
|
— |
|
|
|
— |
|
|
|
(285 |
) |
|
|
(34,524 |
) |
|
Purchases of property and equipment |
|
(1,342 |
) |
|
|
(7,546 |
) |
|
|
(5,091 |
) |
|
|
(10,355 |
) |
|
Capitalized software development costs |
|
(2,650 |
) |
|
|
(2,888 |
) |
|
|
(5,503 |
) |
|
|
(6,333 |
) |
|
Purchases of marketable securities |
|
(27,956 |
) |
|
|
— |
|
|
|
(60,718 |
) |
|
|
— |
|
|
Proceeds from sales and maturities of marketable securities |
|
115,388 |
|
|
|
— |
|
|
|
151,003 |
|
|
|
— |
|
|
Other |
|
(3 |
) |
|
|
(111 |
) |
|
|
(8 |
) |
|
|
(97 |
) |
|
Net cash provided by (used in) investing activities |
|
83,437 |
|
|
|
(10,545 |
) |
|
|
79,398 |
|
|
|
(51,309 |
) |
| |
|
|
|
|
|
|
|
| CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Repayment of long-term debt obligations |
|
(96,170 |
) |
|
|
— |
|
|
|
(96,170 |
) |
|
|
— |
|
|
Proceeds from exercise of common stock options and warrants |
|
— |
|
|
|
1,479 |
|
|
|
— |
|
|
|
3,753 |
|
|
Treasury stock repurchases and share withholdings on vested
awards |
|
(1,177 |
) |
|
|
(7,854 |
) |
|
|
(7,532 |
) |
|
|
(9,572 |
) |
|
Principal payments on finance lease obligations |
|
(519 |
) |
|
|
(857 |
) |
|
|
(1,028 |
) |
|
|
(1,871 |
) |
|
Payment of contingent consideration liability up to acquisition
fair value |
|
— |
|
|
|
— |
|
|
|
(547 |
) |
|
|
— |
|
|
Net cash used in financing activities |
|
(97,866 |
) |
|
|
(7,232 |
) |
|
|
(105,277 |
) |
|
|
(7,690 |
) |
| |
|
|
|
|
|
|
|
|
Effect of exchange rate changes |
|
(810 |
) |
|
|
(3,212 |
) |
|
|
(1,246 |
) |
|
|
(3,875 |
) |
| |
|
|
|
|
|
|
|
| Net decrease in cash, cash
equivalents and restricted cash |
$ |
(13,412 |
) |
|
$ |
(19,478 |
) |
|
$ |
(45,776 |
) |
|
$ |
(64,004 |
) |
| Cash, cash equivalents and
restricted cash — Beginning |
|
73,401 |
|
|
|
411,066 |
|
|
|
105,765 |
|
|
|
455,592 |
|
| Cash, cash equivalents and
restricted cash — Ending |
$ |
59,989 |
|
|
$ |
391,588 |
|
|
$ |
59,989 |
|
|
$ |
391,588 |
|
| |
OUTBRAIN INC.Non-GAAP
Reconciliations(In
thousands)(Unaudited)
The following table presents the reconciliation
of Gross profit to Ex-TAC gross profit, for the periods
presented:
| |
Three Months Ended June
30, |
|
Six Months Ended June
30, |
| |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Revenue |
$ |
225,800 |
|
|
$ |
250,883 |
|
|
$ |
457,574 |
|
|
$ |
505,099 |
|
| Traffic acquisition costs |
|
(171,224 |
) |
|
|
(191,554 |
) |
|
|
(350,800 |
) |
|
|
(382,250 |
) |
| Other cost of revenue |
|
(10,555 |
) |
|
|
(10,610 |
) |
|
|
(21,598 |
) |
|
|
(20,199 |
) |
|
Gross profit |
|
44,021 |
|
|
|
48,719 |
|
|
|
85,176 |
|
|
|
102,650 |
|
| Other cost of revenue |
|
10,555 |
|
|
|
10,610 |
|
|
|
21,598 |
|
|
|
20,199 |
|
|
Ex-TAC gross profit |
$ |
54,576 |
|
|
$ |
59,329 |
|
|
$ |
106,774 |
|
|
$ |
122,849 |
|
The following table presents the reconciliation of net income
(loss) to Adjusted EBITDA, for the periods presented:
| |
Three Months Ended June
30, |
|
Six Months Ended June 30, |
| |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Net income (loss) |
$ |
11,282 |
|
|
$ |
(10,318 |
) |
|
$ |
5,677 |
|
|
$ |
(12,208 |
) |
|
Gain on repurchase of convertible debt |
|
(22,594 |
) |
|
|
— |
|
|
|
(22,594 |
) |
|
|
— |
|
|
Interest expense |
|
1,105 |
|
|
|
1,953 |
|
|
|
2,972 |
|
|
|
3,824 |
|
|
Interest income and other income (expense), net |
|
(1,515 |
) |
|
|
3,828 |
|
|
|
(5,375 |
) |
|
|
4,909 |
|
|
Provision for income taxes |
|
4,063 |
|
|
|
1,658 |
|
|
|
2,351 |
|
|
|
670 |
|
|
Depreciation and amortization |
|
4,875 |
|
|
|
6,756 |
|
|
|
10,816 |
|
|
|
13,024 |
|
|
Stock-based compensation |
|
3,496 |
|
|
|
3,357 |
|
|
|
6,107 |
|
|
|
6,090 |
|
|
Regulatory matter costs |
|
486 |
|
|
|
(1,980 |
) |
|
|
1,096 |
|
|
|
(261 |
) |
|
Merger and acquisition, public company implementation costs(1) |
|
— |
|
|
|
610 |
|
|
|
— |
|
|
|
1,424 |
|
|
Severance and related costs |
|
2,305 |
|
|
|
— |
|
|
|
3,148 |
|
|
|
— |
|
| Adjusted EBITDA |
$ |
3,503 |
|
|
$ |
5,864 |
|
|
$ |
4,198 |
|
|
$ |
17,472 |
|
| |
|
|
|
|
|
|
|
| Net income (loss) as % of
gross profit |
|
25.6 |
% |
|
|
(21.2 |
)% |
|
|
6.7 |
% |
|
|
(11.9 |
)% |
| Adjusted EBITDA as % of Ex-TAC
gross profit |
|
6.4 |
% |
|
|
9.9 |
% |
|
|
3.9 |
% |
|
|
14.2 |
% |
_______________________________________________
(1) Includes our public company
implementation costs and costs related to our acquisition of video
intelligence AG (“vi”) in January 2022.
OUTBRAIN INC.Non-GAAP
Reconciliations - Continued(In thousands, except
for share and per share
data)(Unaudited)
The following table presents the reconciliation
of net income (loss) and diluted EPS to adjusted net loss and
adjusted diluted EPS, respectively, for the periods presented:
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Net income (loss) |
$ |
11,282 |
|
|
$ |
(10,318 |
) |
|
$ |
5,677 |
|
|
$ |
(12,208 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
Gain on partial repurchase of debt |
|
(22,594 |
) |
|
|
— |
|
|
|
(22,594 |
) |
|
|
— |
|
|
Regulatory matter costs |
|
486 |
|
|
|
(1,980 |
) |
|
|
1,096 |
|
|
|
(261 |
) |
|
Merger and acquisition, public company implementation costs(1) |
|
— |
|
|
|
610 |
|
|
|
— |
|
|
|
1,424 |
|
|
Severance and related costs |
|
2,305 |
|
|
|
— |
|
|
|
3,148 |
|
|
|
— |
|
| Total adjustments, before
tax |
|
(19,803 |
) |
|
|
(1,370 |
) |
|
|
(18,350 |
) |
|
|
1,163 |
|
|
Income tax effect |
|
4,607 |
|
|
|
816 |
|
|
|
4,269 |
|
|
|
87 |
|
| Total adjustments, after
tax |
|
(15,196 |
) |
|
|
(554 |
) |
|
|
(14,081 |
) |
|
|
1,250 |
|
| Adjusted net loss |
$ |
(3,914 |
) |
|
$ |
(10,872 |
) |
|
$ |
(8,404 |
) |
|
$ |
(10,958 |
) |
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares |
|
51,223,988 |
|
|
|
57,590,308 |
|
|
|
51,329,055 |
|
|
|
57,414,636 |
|
| |
|
|
|
|
|
|
|
| Diluted net loss per share -
reported |
$ |
0.21 |
|
|
$ |
(0.18 |
) |
|
$ |
0.11 |
|
|
$ |
(0.21 |
) |
|
Adjustments, after tax |
|
(0.29 |
) |
|
|
(0.01 |
) |
|
|
(0.27 |
) |
|
|
0.02 |
|
| Diluted net loss per share -
adjusted |
$ |
(0.08 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.19 |
) |
_______________________________________________
(1) Includes our public company
implementation costs and costs related to our acquisition of vi in
January 2022.
The following table presents the reconciliation
of net cash provided by (used in) operating activities to free cash
flow, for the periods presented:
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Net cash provided by (used in) operating activities |
$ |
1,827 |
|
|
$ |
1,511 |
|
|
$ |
(18,651 |
) |
|
$ |
(1,130 |
) |
| Purchases of property and
equipment |
|
(1,342 |
) |
|
|
(7,546 |
) |
|
|
(5,091 |
) |
|
|
(10,355 |
) |
| Capitalized software
development costs |
|
(2,650 |
) |
|
|
(2,888 |
) |
|
|
(5,503 |
) |
|
|
(6,333 |
) |
|
Free cash flow |
$ |
(2,165 |
) |
|
$ |
(8,923 |
) |
|
$ |
(29,245 |
) |
|
$ |
(17,818 |
) |
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