Outbrain Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
TEAD$0.18+3.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001454938-24-000074
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001454938-24-000157
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 163 previous paragraphs and 190 current paragraphs.
112 unchanged; 34 reworded; 41 added; 16 removed; 1 previous and 3 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (41)
Current report
•Our revenue was $214.1 million in the three months ended June 30, 2024, compared to $225.8 million in the three months ended June 30, 2023, including net unfavorable foreign currency effects of approximately $1.5 million. Revenue for the six months ended June 30, 2024 was $431.1 million, compared to $457.6 million for the six months ended June 30, 2023, including net unfavorable foreign currency effects of $1.8 million.
Current report
•Our Ex-TAC Gross Profit(1) was $56.0 million in the three months ended June 30, 2024, compared to $54.6 million in the three months ended June 30, 2023. Our Ex-TAC Gross Profit(1) was $108.1 million for the six months ended June 30, 2024, compared to $106.8 million for the six months ended June 30, 2023.
Current report
Share Purchase Agreement
Current report
On August 1, 2024, we entered into a definitive share purchase agreement (the “Agreement”) with Altice Teads S.A. (the “Seller” or “Altice”), a public limited liability company (société anonyme) incorporated and existing under the laws of the Grand Duchy of Luxembourg and the sole shareholder of Teads S.A., a public limited liability company (société anonyme) incorporated and existing under the laws of the Grand Duchy of Luxembourg (“Teads”), and Teads. Pursuant to the Agreement, We agreed to acquire all of the issued and outstanding share capital of Teads upon the terms and subject to the conditions set forth in the Agreement (the “Transaction”).
Current report
The Agreement provides for the following consideration to be paid to the Seller at closing of the Transaction (the “Closing”): (1) a cash payment of $725.0 million, subject to certain customary adjustments as set forth in the Agreement (the “Cash Consideration”), (2) $35.0 million newly issued shares of the Company’s common stock, par value $0.001 (the “Common Stock”; such newly issued shares of Common Stock, the “Consideration Common Stock”), and (3) $10.5 million newly issued shares of the Company’s Series A Convertible Preferred Stock, par value $0.001 (the “Series A Preferred Stock” and, together with the Consideration Common Stock, the “Consideration Stock”). Additionally, the Seller will be entitled to a deferred cash payment in an amount equal to $25.0 million payable in one or more installments subject to compliance with the covenants of any of the debt financing(s) described below. Following the Closing, the Seller will own approximately 42% of the Company’s issued and outstanding shares of Common Stock, or 48% assuming conversion of the Series A Preferred Stock (based on the amount of issued and outstanding shares of Common Stock as of June 30, 2024).
Current report
Subject to certain conditions, either we or the Seller may terminate the Agreement if the Closing has not occurred by the date which is nine months after the date of the Agreement, which date may be extended for three additional periods of three months each if the reason for not closing is that the regulatory conditions have not been satisfied.
Current report
The Agreement contains customary representations, warranties and covenants for a transaction of this type. Closing under the Agreement is subject to customary conditions, including (1) approval of our stockholders to the issuance of the Consideration Stock in accordance with the rules and regulations of the Nasdaq Stock Market and our organizational documents (the “Stockholder Approval”), (2) the absence of any law or order issued by any governmental authority prohibiting or preventing the consummation of the Transaction, (3) obtaining certain regulatory approvals, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (4) subject to certain exceptions, the accuracy of the representations and warranties of, and compliance with covenants by, each of the parties to the Agreement, and (5) the absence of a Material Adverse Event (as defined in the Agreement).
Current report
See Note 15 to the accompanying condensed consolidated financial statements for additional information on the Transaction.
Current report
Conditions in Israel
Current report
Gain on Convertible Debt. In April 2023, we repurchased $118.0 million of our outstanding Convertible Notes at a discount of approximately 19% of the principal amount and recorded a pre-tax gain of $22.6 million.
Current report
(Benefit) Provision for Income Taxes
Current report
See “Non-GAAP Reconciliations” for information regarding the constant currency measures provided in this discussion and below to supplement our reported results.
Current report
Other cost of revenue decreased $0.2 million, or 1.6%, to $10.4 million for the three months ended June 30, 2024, compared to $10.6 million in the prior year period, primarily due to lower server depreciation expense and lower network costs. As a percentage of revenue, other cost of revenue remained relatively constant at 4.8% and 4.7% for the three months ended June 30, 2024 and 2023, respectively.
Current report
Gross profit increased $1.6 million, or 3.5%, to $45.6 million for the three months ended June 30, 2024, compared to $44.0 million for the three months ended June 30, 2023. This increase was largely attributable to lower traffic acquisition costs, partially offset by lower revenue, as previously described.
Current report
Operating expenses decreased $0.5 million, or 0.9%, to $51.2 million for the three months ended June 30, 2024, from $51.7 million for the three months ended June 30, 2023, primarily attributable to lower severance and related costs of $1.7 million and a $1.5 million reduction in our provision for credit losses. These decreases were partially offset by a $2.7 million increase in professional fees, largely attributable to acquisition-related costs recorded during the three months ended June 30, 2024.
Current report
•Research and development expenses — decreased $0.6 million, primarily due to lower personnel-related costs largely driven by lower severance and related costs during the three months ended June 30, 2024, compared to the prior year period.
Current report
•Sales and marketing expenses— decreased $1.1 million, primarily reflecting lower severance and related costs during the three months ended June 30, 2024, compared to the prior year period.
Current report
•General and administrative expenses — increased $1.2 million, primarily due to increased professional fees of $2.7 million, largely attributable to acquisition-related costs recorded during the three months ended June 30, 2024, partially offset by a $1.5 million reduction in our provision for credit losses.
Current report
Total other income, net, decreased $20.8 million to $2.2 million for the three months ended June 30, 2024, compared to $23.0 million for the three months ended June 30, 2023, primarily due to a pre-tax gain of approximately $22.6 million recorded during the three months ended June 30, 2023 in connection with the partial repurchase of our Convertible Notes. The decrease was partially offset by an increase of $1.4 million resulting from remeasurement of transactions denominated in currencies other than the functional currencies.
Current report
Benefit (Provision) for Income Taxes
Current report
Benefit from income taxes was $1.3 million for the three months ended June 30, 2024, compared to provision for income taxes of $4.1 million for the three months ended June 30, 2023, primarily due to pre-tax loss during the three months ended June 30, 2024, compared to pre-tax income in the prior year period. Our effective tax rate increased to 36.3% in the three months ended June 30, 2024, compared to 26.5% in the three months ended June 30, 2023, primarily due to an increase in the profitability of non-U.S. jurisdictions and a change to our foreign-derived intangible income deduction partially offset by a change to our uncertain tax positions.
Current report
Net (Loss) Income
Current report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Current report
Revenue
Current report
Revenue decreased $26.5 million, or 5.8%, to $431.1 million for the six months ended June 30, 2024 from $457.6 million for the six months ended June 30, 2023. Revenue for the six months ended June 30, 2024 included net unfavorable foreign currency effects of approximately $1.8 million, and decreased $24.7 million, or 5.4%, on a constant currency basis, compared to the prior year period. Our reported revenue decreased approximately $51 million due to net revenue retention of 89% on existing media partners, as we have experienced lower ad impressions from certain supply partners, as well as weaker demand on our platform. This decrease was partially offset by growth of approximately 5.0%, or $24 million, from new media partners.
Current report
See "Non-GAAP Reconciliations" for information regarding the constant currency measures provided in this discussion and below to supplement our reported results.
Current report
Traffic acquisition costs decreased $27.8 million, or 7.9%, to $323.0 million for the six months ended June 30, 2024, compared to $350.8 million in the prior year period. Traffic acquisition costs included net favorable foreign currency effects of approximately $1.1 million, and decreased $26.7 million, or 7.6%, on a constant currency basis, compared to the prior year period. The decrease in traffic acquisition costs was primarily related to the decrease in our revenue, a net favorable change in our revenue mix and improved performance from certain deals. As a percentage of revenue, traffic acquisition costs decreased 180 basis points to 74.9% for the six months ended June 30, 2024, from 76.7% for the six months ended June 30, 2023.
Current report
Our Ex-TAC Gross Profit increased $1.3 million, or 1.3%, to $108.1 million for the six months ended June 30, 2024, from $106.8 million for the six months ended June 30, 2023, including net unfavorable foreign currency effects of approximately $0.7 million, as the impact of lower revenue was more than offset by the net favorable change in our revenue mix and improved performance from certain deals. See “Non-GAAP Reconciliations” for the related definition and reconciliations to our gross profit.
Current report
•Research and development expenses — decreased $0.7 million, primarily due to lower personnel-related costs, including lower severance and related costs during the six months ended June 30, 2024, compared to the prior year period.
Current report
•General and administrative expenses — increased $1.1 million, primarily due to higher professional fees of $3.6 million, largely attributable to acquisition-related costs recorded during the second quarter of 2024, and higher personnel costs of $1.2 million largely driven by increased incentive-based compensation costs. These increases were partially offset by a $2.4 million decrease in the provision for credit losses and the absence of the prior year’s regulatory fees of $1.1 million.
Current report
Operating expenses as a percentage of revenue increased 80 basis points to 23.1% for the six months ended June 30, 2024 from 22.3% for the six months ended June 30, 2023, primarily attributable to lower revenue and increased acquisition-related costs.
Current report
Total Other Income, Net
Current report
Benefit (Provision) for Income Taxes
Current report
Benefit from income taxes was $2.3 million for the six months ended June 30, 2024, compared to provision for income taxes of $2.4 million for the six months ended June 30, 2023, primarily due to pre-tax loss during the six months ended June 30, 2024, compared to pre-tax income in the prior year period. Our effective tax rate decreased to 24.4% in the six months ended June 30, 2024, compared to 29.3% in the six months ended June 30, 2023, primarily due to a change in our uncertain tax positions and a change to our foreign-derived intangible income deduction, partially offset by an increase in the profitability of non-U.S. jurisdictions and certain non-deductible stock based compensation expenses.
Current report
Net (Loss) Income
Current report
As a result of the foregoing, we recorded net loss of $7.2 million for the six months ended June 30, 2024, as compared to net income of $5.7 million for the six months ended June 30, 2023.
Current report
Our Adjusted EBITDA increased $4.6 million to $8.8 million for the six months ended June 30, 2024 from $4.2 million for the six months ended June 30, 2023, primarily due to higher Ex-TAC Gross Profit and lower operating expenses, as previously described. See “Non-GAAP Reconciliations” for the related definitions of Adjusted EBITDA and reconciliations to our net (loss) income.
Current report
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 U.S. GAAP and may be different from similar measures calculated by other companies.
Current report
In connection with entering into the definitive share purchase agreement to acquire all of the issued and outstanding share capital of Teads, as discussed in more detail under “Recent Developments -Share Purchase Agreement” and Note 15 to the accompanying condensed consolidated financial statements, we entered into a debt commitment letter, dated August 1, 2024 (the “Commitment Letter”), with Goldman Sachs Bank USA, Jefferies Finance LLC and Mizuho Bank, LTD (collectively, the “Commitment Parties”), pursuant to which the Commitment Parties have committed to provide (i) a $100 million senior secured revolving credit facility (the “Revolving Credit Facility”) and (ii) a senior secured bridge facility in an aggregate principal amount of up to $750 million (the “Bridge Facility”). The Bridge Facility will be used to fund the cash consideration for the Transaction to pay fees and expenses related thereto. Additionally, a portion of the Revolving Credit Facility may be used to fund a portion of the cash consideration for the Transaction and to pay fees and expenses related thereto, and will otherwise be available, for working capital and general corporate purposes. The obligation of Commitment Parties to provide the contemplated financings is subject to a number of customary conditions contained in the Commitment Letter, including the execution of definitive debt financing documentation contemplated by the Commitment Letter and the Transaction being consummated substantially contemporaneously with the initial funding of the Bridge Facility. We expect to replace the Bridge Facility with permanent financing, which we currently expect to include the issuance of debt securities.
Current report
See above under “Recent Developments - Share Purchase Agreement” and below under Item 1A “Risk Factors” for information regarding cash requirements in connection with the pending Transaction with Teads.
Showing the first 40 of 41 passages. Open the source sections for the rest.
Removed paragraphs (16)
Previous report
•Our revenue was $217.0 million in the three months ended March 31, 2024, compared to $231.8 million in the three months ended March 31, 2023.
Previous report
•Our Ex-TAC Gross Profit(1) remained flat at $52.2 million in each of the three months ended March 31, 2024 and 2023.
Previous report
Israel-Hamas War
Previous report
Operating Expenses
Previous report
Benefit from Income Taxes
Previous report
Ex-TAC Gross Profit
Previous report
Operating Expenses
Previous report
•Research and development expenses — decreased $0.1 million.
Previous report
•General and administrative expenses — decreased $0.2 million, reflecting a $1.0 million decrease in the provision for credit losses, largely offset by higher incentive-based compensation costs.
Previous report
Benefit from Income Taxes
Previous report
Benefit from income taxes was $1.1 million for the three months ended March 31, 2024, compared to $1.7 million for the three months ended March 31, 2023. Our effective tax rate decreased to 17.8% in the three months ended March 31, 2024, compared to 23.4% in the three months ended March 31, 2023, primarily due to a change in our uncertain tax positions.
Previous report
Net Loss
Previous report
Adjusted EBITDA
Previous report
Ex-TAC Gross Profit
Previous report
Adjusted EBITDA
Previous report
Net cash used in activities increased $0.2 million to $4.2 million in the three months ended March 31, 2024, from $4.0 million in the three months ended March 31, 2023, primarily driven by the $2.9 million decline in net proceeds from our investments in marketable securities, largely offset by lower capital expenditures of $2.4 million in the three months ended March 31, 2024, compared to the prior year period.
Reworded paragraphs (34)
Previous wording
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 8, 2024 (“2023 Form 10-K”). In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations, and involve risks and uncertainties that could cause actual results, events, or circumstances to differ materially from those projected in the forward-looking statements. Factors that could cause or contribute to these differences include those incorporated by reference in Part II, Item 1A “Risk Factors” in this Report as such factors may be revised or supplemented in subsequent filings with the SEC, as well as those discussed below and elsewhere in this Report, including under the caption “Note About Forward-Looking Statements.”
Current wording
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 8, 2024 (“2023 Form 10-K”). In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations, and involve risks and uncertainties that could cause actual results, events, or circumstances to differ materially from those projected in the forward-looking statements. Factors that could cause or contribute to these differences include those set forth in Part I, Item 1A of our 2023 Form 10-K, which are incorporated by reference in this report, as updated and supplemented by the risk factors set forth in Part II, Item 1A “Risk Factors” in this Report as such factors may be revised or supplemented in subsequent filings with the SEC, as well as those discussed below and elsewhere in this Report, including under the caption “Note About Forward-Looking Statements.”
Previous wording
•Our gross profit was $41.6 million and our gross margin was 19.2% for the three months ended March 31, 2024, compared to gross profit of $41.2 million and gross margin of 17.8% for the comparable period in 2023.
Current wording
•Our gross profit was $45.6 million and our gross margin was 21.3% for the three months ended June 30, 2024, compared to gross profit of $44.0 million and gross margin of 19.5% for the comparable period in 2023. Our gross profit was $87.2 million and our gross margin was 20.2% for the six months ended June 30, 2024, compared to gross profit of $85.2 million and gross margin of 18.6% for the six months ended June 30, 2023.
Previous wording
•Our net loss was $5.0 million, or (12.1)% of gross profit, in the three months ended March 31, 2024, compared to net loss of $5.6 million, or (13.6)% of gross profit, for the comparable period in 2023.
Current wording
•Our net loss was $2.2 million, or (4.8)% of gross profit, in the three months ended June 30, 2024, compared to net income of $11.3 million, or 25.6% of gross profit, for the comparable period in 2023. For the six months ended June 30, 2024, our net loss was $7.2 million, or (8.3)% of gross profit, compared to net income of $5.7 million, or 6.7% of gross profit, for the six months ended June 30, 2023.
Previous wording
•Our Adjusted EBITDA(1) was $1.4 million for the three months ended March 31, 2024, compared to $0.7 million for the three months ended March 31, 2023. Adjusted EBITDA(1) was 2.7% and 1.3% of Ex-TAC Gross Profit(1)in the three months ended March 31, 2024 and 2023, respectively.
Current wording
•Our Adjusted EBITDA(1) was $7.4 million for the three months ended June 30, 2024, compared to $3.5 million for the three months ended June 30, 2023. Adjusted EBITDA(1) was 13.2% and 6.4% of Ex-TAC Gross Profit(1)in the three months ended June 30, 2024 and 2023, respectively. Our Adjusted EBITDA(1) was $8.8 million for the six months ended June 30, 2024, compared to $4.2 million for the six months ended June 30, 2023. Adjusted EBITDA(1) was 8.1% and 3.9% of Ex-TAC Gross Profit(1) for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and the kidnapping of civilians and soldiers. In response, Israel’s security cabinet declared war against Hamas and a military campaign against this terrorist organization commenced in parallel to their continued rocket and terror attacks. In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization). Furthermore, the Houthi movement, which controls parts of Yemen, launched several attacks on marine vessels traversing the Red Sea, which were thought either to be in route toward Israel or to be owned by Israeli persons. The Red Sea is a vital maritime route for international trade traveling to or from Israel, and in response to the Houthi movement’s attacks, coalition forces led by the United States and Great Britain have targeted sites in Yemen. In addition, Iran launched attacks on specific targets in Israel and indicated that it may continue to do so in the future. It is possible that hostilities with Hezbollah in Lebanon and with Iran will escalate, and that other terrorist organizations, including Palestinian military organizations in the West Bank as well as other hostile countries will join or intensify the hostilities and these clashes may escalate in the future into a greater regional conflict.
Current wording
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and the kidnapping of civilians and soldiers. In response, Israel’s security cabinet declared war against Hamas and a military campaign against this terrorist organization commenced in parallel to their continued rocket and terror attacks. In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon, as the Hezbollah terror organization has launched strikes on specific targets in Israel. Furthermore, the Houthi movement, which controls parts of Yemen, launched several attacks on marine vessels traversing the Red Sea, which were thought either to be in route toward Israel or to be owned by Israeli persons. The Red Sea is a vital maritime route for international trade traveling to or from Israel, and in response to the Houthi movement’s attacks, coalition forces led by the United States and Great Britain have targeted sites in Yemen. In addition, Iran launched attacks on specific targets in Israel and indicated that it may continue to do so in the future. It is possible that hostilities with Hezbollah in Lebanon and with Iran will further escalate, and that other terrorist organizations, including Palestinian military organizations in the West Bank as well as other hostile countries will join or intensify the hostilities and these clashes may escalate in the future into a greater regional conflict.
Previous wording
We cannot attribute the impact of the current trends in advertising demand to any particular factor, including the Israel-Hamas War, and cannot predict the impact if the war continues or escalates further. See Item 1A “Risk Factors” included in our 2023 Annual Report for more information regarding certain risks associated with the Israel-Hamas conflict.
Current wording
We cannot attribute the impact of the current trends in advertising demand to any particular factor, including the conditions in Israel, and cannot predict the impact if the war continues or escalates further. See Item 1A “Risk Factors” included in our 2023 Form 10-K for more information regarding certain risks associated with the conditions in Israel.
Previous wording
We calculate media partner net revenue retention at the end of each quarter by starting with revenue generated on media partners’ properties during 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. To calculate media partner net revenue retention for year-to-date and annual periods, we sum the quarterly Current Period Retention Revenue and divide it by the sum of the quarterly Prior Period Retention Revenue. These amounts exclude certain revenue adjustments and revenue recognized on a net basis. Our media partner net revenue retention was approximately 89% for the three months ended March 31, 2024.
Current wording
We calculate media partner net revenue retention at the end of each quarter by starting with revenue generated on media partners’ properties during 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. To calculate media partner net revenue retention for year-to-date and annual periods, we sum the quarterly Current Period Retention Revenue and divide it by the sum of the quarterly Prior Period Retention Revenue. These amounts exclude certain revenue adjustments and revenue recognized on a net basis. Our media partner net revenue retention was approximately 89% for each of the three and six months ended June 30, 2024.
Previous wording
Our growth also depends on our ability to secure partnerships with new media partners. New media partners are defined as those relationships in which revenue was not generated in the prior 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. Revenue generated on new media partners’ properties contributed approximately 5% to revenue growth for the three months ended March 31, 2024.
Current wording
Our growth also depends on our ability to secure partnerships with new media partners. New media partners are defined as those relationships in which revenue was not generated in the prior 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. Revenue generated on new media partners’ properties contributed approximately 6% and 5%, respectively, to revenue growth for the three and six months ended June 30, 2024.
Previous wording
Other income, net is comprised of interest expense, and interest income and other income (expense), net.
Current wording
Other income, net is comprised of gain on convertible debt, interest expense, and interest income and other income, net.
Previous wording
Interest Expense. Interest expense consists of interest expense on the Convertible Notes, our revolving credit facility and capital leases. Interest expense may increase if we incur any borrowings under our revolving credit facility or if we enter into new debt facilities or capital leasing arrangements.
Current wording
Interest Expense. Interest expense consists of interest expense on the Convertible Notes, our revolving credit facility and our prior finance leases. Interest expense may increase if we incur any borrowings under our revolving credit facility or if we enter into new debt facilities or finance lease arrangements.
Previous wording
Interest Income and Other Income (Expense), net. Interest income and other income (expense), net primarily consists of interest earned on our cash, cash equivalents andinvestments in marketable securities, discount amortization on our investments in marketable securities, and foreign currency exchange gains and losses. Foreign currency exchange gains and losses, both realized and unrealized, relate to transactions and monetary asset and liability balances denominated in currencies other than the functional currencies, including mark-to-market adjustments on undesignated foreign exchange forward contracts. Foreign currency gains and losses may continue to fluctuate in the future due to changes in foreign currency exchange rates.
Current wording
Interest Income and Other Income, net. Interest income and other income, net primarily consists of interest earned on our cash, cash equivalents andinvestments in marketable securities, discount amortization on our investments in marketable securities, and foreign currency exchange gains and losses. Foreign currency exchange gains and losses, both realized and unrealized, relate to transactions and monetary asset and liability balances denominated in currencies other than the functional currencies, including mark-to-market adjustments on undesignated foreign exchange forward contracts. Foreign currency gains and losses may continue to fluctuate in the future due to changes in foreign currency exchange rates.
Previous wording
Benefit from income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions, as well as deferred income taxes and changes in valuation allowance, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Current wording
(Benefit) provision for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions, as well as deferred income taxes and changes in valuation allowance, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Previous wording
Revenue decreased $14.8 million, or 6.4%, to $217.0 million for the three months ended March 31, 2024 from $231.8 million for the three months ended March 31, 2023. Our revenue decreased approximately $26 million due to net revenue retention of 89% on existing media partners, as we have experienced weaker demand on our platform, reflecting the current macroeconomic conditions and the related impact on advertising spend, as well as lower ad impressions from certain supply partners. This decrease was partially offset by growth of approximately 5%, or $11 million, from new media partners.
Current wording
Revenue decreased $11.7 million, or 5.2%, to $214.1 million for the three months ended June 30, 2024, from $225.8 million for the three months ended June 30, 2023. Revenue for the three months ended June 30, 2024 included net unfavorable foreign currency effects of approximately $1.5 million, and decreased $10.2 million, or 4.5%, on a constant currency basis, compared to the prior year period. Our reported revenue decline was primarily attributable to a decrease of approximately $26 million due to net revenue retention of 89% on existing media partners, as we have experienced lower ad impressions from certain supply partners, as well as weaker demand on our platform. This decrease was partially offset by growth of approximately 6.0%, or $14 million, from new media partners.
Previous wording
Traffic acquisition costs decreased $14.8 million, or 8.2%, to $164.8 million for the three months ended March 31, 2024, compared to $179.6 million in the prior year period. The decrease in traffic acquisition costs was primarily due to the decrease in our revenue and a net favorable change in our revenue mix. As a percentage of revenue, traffic acquisition costs decreased 150 basis points to 76.0% for the three months ended March 31, 2024, from 77.5% for the three months ended March 31, 2023.
Current wording
Traffic acquisition costs decreased $13.0 million, or 7.6%, to $158.2 million for the three months ended June 30, 2024, compared to $171.2 million in the prior year period. Traffic acquisition costs included net favorable foreign currency effects of approximately $1.2 million, and decreased $11.8 million, or 6.9%, on a constant currency basis, compared to the prior year period. The decrease in traffic acquisition costs was primarily related to the decrease in our revenue, a net favorable change in our revenue mix, and improved performance from certain deals. As a percentage of revenue, traffic acquisition costs decreased 190 basis points to 73.9% for the three months ended June 30, 2024, from 75.8% for the three months ended June 30, 2023.
Previous wording
Our Ex-TAC Gross Profit remained flat at $52.2 million in each of the three months ended March 31, 2024 and 2023, as lower revenue was offset by the net favorable change in our revenue mix. See “Non-GAAP Reconciliations” for the related definition and reconciliations to our gross profit.
Current wording
Our Ex-TAC Gross Profit increased $1.4 million, or 2.5%, to $56.0 million for the three months ended June 30, 2024, from $54.6 million for the three months ended June 30, 2023, as the impact of lower revenue was more than offset by the net favorable change in our revenue mix and improved performance from certain deals. See “Non-GAAP Reconciliations” for the related definition and reconciliations to our gross profit.
Previous wording
Operating expenses as a percentage of revenue increased 40 basis points to 22.2% for the three months ended March 31, 2024 from 21.8% for the three months ended March 31, 2023, primarily attributable to lower revenue.
Current wording
Operating expenses as a percentage of revenue increased 100 basis points to 23.9% for the three months ended June 30, 2024 from 22.9% for the three months ended June 30, 2023, primarily due to lower revenue and increased acquisition-related costs.
Previous wording
A provision enacted as part of the 2017 Tax Cuts & Jobs Act requires companies to capitalize certain research and experimental expenditures for tax purposes in tax years beginning after December 31, 2021. As a result, we expect to pay higher cash taxes and have a lower effective tax rate due to a deduction related to foreign-derived intangible income in 2024.
Current wording
A provision enacted as part of the 2017 Tax Cuts & Jobs Act requires companies to capitalize certain research and experimental expenditures for tax purposes in tax years beginning after December 31, 2021. As a result, we expect to pay higher cash taxes and expect our effective tax rate to be more favorably impacted by a deduction related to foreign-derived intangible income in 2024.
Previous wording
As a result of the foregoing, we recorded net loss of $5.0 million for the three months ended March 31, 2024, as compared to net loss of $5.6 million for the three months ended March 31, 2023.
Current wording
As a result of the foregoing, we recorded net loss of $2.2 million for the three months ended June 30, 2024, as compared to net income of $11.3 million for the three months ended June 30, 2023.
Previous wording
Our Adjusted EBITDA increased $0.7 million to $1.4 million for the three months ended March 31, 2024 from $0.7 million for the three months ended March 31, 2023, primarily due to lower operating expenses, as previously described. See “Non-GAAP Reconciliations” for the related definitions of Adjusted EBITDA and reconciliations to our net loss.
Current wording
Our Adjusted EBITDA increased $3.9 million to $7.4 million for the three months ended June 30, 2024 from $3.5 million for the three months ended June 30, 2023, due to higher Ex-TAC Gross Profit and lower operating expenses, as previously described. See “Non-GAAP Reconciliations” for the related definitions of Adjusted EBITDA and reconciliations to our net income.
Previous wording
Other cost of revenue decreased $0.4 million, or 4.4%, to $10.6 million for the three months ended March 31, 2024, compared to $11.0 million in the prior year period, primarily due to lower software amortization expense and lower network costs. As a percentage of revenue, other cost of revenue increased slightly to 4.9% for the three months ended March 31, 2024, from 4.8% for the three months ended March 31, 2023.
Current wording
Other cost of revenue decreased $0.7 million, or 3.0%, to $20.9 million for the six months ended June 30, 2024, compared to $21.6 million in the prior year period, primarily due to lower server depreciation expense and lower network costs. As a percentage of revenue, other cost of revenue increased to 4.9% for the six months ended June 30, 2024, from 4.7% for the six months ended June 30, 2023.
Previous wording
Gross profit increased $0.4 million, or 1.1%, to $41.6 million for the three months ended March 31, 2024, compared to $41.2 million for the three months ended March 31, 2023, as the revenue decline was more than offset by the decrease in the cost of revenue, as previously described.
Current wording
Gross profit increased $2.0 million, or 2.3%, to $87.2 million for the six months ended June 30, 2024, compared to $85.2 million for the six months ended June 30, 2023, including net unfavorable foreign currency effects of approximately $0.7 million, as the revenue decline was more than offset by the decrease in the cost of revenue, as previously described.
Previous wording
Operating expenses decreased $2.3 million, or 4.5%, to $48.2 million for the three months ended March 31, 2024, from $50.5 million for the three months ended March 31, 2023. The decrease in operating expenses was primarily attributable to a $1.0 million decrease in our provision for credit losses, lower personnel-related costs, and lower expense related to fully amortized intangible assets from a prior acquisition.
Current wording
Operating expenses decreased $2.7 million, or 2.7%, to $99.4 million for the six months ended June 30, 2024, from $102.1 million for the six months ended June 30, 2023, including net favorable foreign currency effects of $0.7 million. The reported decrease in operating expenses was primarily attributable to a $2.4 million decrease in severance and related costs, a lower provision for credit losses of $2.4 million, the absence of the prior year regulatory fees of $1.1 million, and lower expense related to fully amortized intangible assets from a prior acquisition. These decreases were partially offset by higher professional fees of $3.7 million, largely attributable to acquisition-related costs recorded during the second quarter of 2024.
Previous wording
•Sales and marketing expenses— decreased $2.0 million, primarily due to a $1.5 million decrease in personnel-related costs (including a $0.7 million decline in severance and related costs) and lower expense of $0.7 million related to fully amortized intangible assets.
Current wording
•Sales and marketing expenses— decreased $3.1 million, primarily due to a $2.8 million decrease in personnel-related costs, including lower severance and related costs of $1.7 million during the six months ended June 30, 2024, compared to the prior year period, as well as lower expense of $0.7 million related to fully amortized intangible assets.
Previous wording
Total other income, net decreased $1.5 million, to income of $0.5 million for the three months ended March 31, 2024, from income of $2.0 million for the three months ended March 31, 2023, primarily driven by higher losses of $1.2 million from remeasurement of transactions denominated in currencies other than the functional currencies. This decrease also reflected net unfavorable mark-to-market adjustments of $0.8 million on the undesignated foreign exchange forward contracts used to manage our foreign currency exchange risk on net cash flows from our non-U.S. dollar denominated operations, as well as lower investment income of $0.5 million. These decreases were partially offset by reduced interest expense of $0.9 million due to the lower outstanding principal balance of Convertible Notes.
Current wording
Total other income, net decreased $22.4 million, to $2.6 million for the six months ended June 30, 2024, from $25.0 million for the six months ended June 30, 2023, primarily driven by a pre-tax gain of approximately $22.6 million recorded during the three months ended June 30, 2023 in connection with the partial repurchase of our Convertible Notes, as well as more unfavorable mark-to-market adjustments of $1.3 million for undesignated foreign exchange forward contracts used to manage our foreign currency exchange risk on net cash flows from our non-U.S. dollar denominated operations. These decreases were partially offset by reduced interest expense of $1.0 million, due to the lower outstanding principal balance of Convertible Notes.
Previous wording
We define Adjusted EBITDA as net loss before interest expense; interest income and other income, net; benefit 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 regulatory matter costs, and severance costs related to our cost saving initiatives. We present Adjusted EBITDA as a supplemental performance measure because we believe it facilitates operating performance comparisons from period to period.
Current wording
We define Adjusted EBITDA as net (loss) income before interest expense; interest income and other income, net; (benefit) 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 regulatory matter costs, and severance costs related to our cost saving initiatives. We present Adjusted EBITDA as a supplemental performance measure because we believe it facilitates operating performance comparisons from period to period.
Previous wording
The following table presents the reconciliation of Adjusted EBITDA to net loss, the most directly comparable U.S. GAAP measure, for the periods presented:
Current wording
The following table presents the reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable U.S. GAAP measure, for the periods presented:
Previous wording
(1) As of March 31, 2024, approximately $35.7 million of our cash and cash equivalents was held outside of the United States by our non-U.S. subsidiaries. We currently do not have any plans to repatriate our earnings from our foreign subsidiaries. We intend to continue to reinvest our earnings from foreign operations for the foreseeable future, and do not anticipate that we will need funds generated from foreign operations to fund our domestic operations.
Current wording
(1) As of June 30, 2024, approximately $33.3 million of our cash and cash equivalents was held outside of the United States by our non-U.S. subsidiaries. We currently do not have any plans to repatriate our earnings from our foreign subsidiaries. We intend to continue to reinvest our earnings from foreign operations for the foreseeable future, and do not anticipate that we will need funds generated from foreign operations to fund our domestic operations.
Previous wording
We primarily use our operating cash for payments due to media partners and vendors, as well as for personnel costs, and other employee-related expenditures. Our contracts with media partners are generally variable based on volume or guarantee a minimum rate of payment if the media partner reaches certain performance targets. See “Definitions of Financial and Performance Measures —Traffic Acquisition Costs.”
Current wording
As a general matter, our primary uses of liquidity are payments to our media partners, our operating expenses, capital expenditures, our long-term debt and the related interest payments, and repurchases under our $30 million share repurchase program. We may also use our available cash to make acquisitions or investments in complementary companies or technologies. We primarily use our operating cash for payments due to media partners and vendors, as well as for personnel costs, and other employee-related expenditures. Our contracts with media partners are generally variable based on volume or guarantee a minimum rate of payment if the media partner reaches certain performance targets. See “Definitions of Financial and Performance Measures —Traffic Acquisition Costs.”
Previous wording
On December 14, 2022, our Board approved a new stock repurchase program, authorizing us to repurchase up to $30 million of our common stock, par value $0.001 per share, with no requirement to purchase any minimum number of shares. The manner, 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 repurchase program may be commenced, suspended, or terminated at any time at our discretion without prior notice. During the three months ended March 31, 2024 and 2023 we repurchased 945,947 shares and 1,313,073 shares, respectively, with a fair value of $3.9 million and $6.1 million, respectively, under our share repurchase program. As of March 31, 2024, the remaining availability under our $30 million share repurchase program was $8.6 million.
Current wording
On December 14, 2022, our Board approved a new stock repurchase program, authorizing us to repurchase up to $30 million of our common stock, par value $0.001 per share, with no requirement to purchase any minimum number of shares. The manner, 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”). The repurchase program may be commenced, suspended, or terminated at any time at our discretion without prior notice. During the six months ended June 30, 2024 and 2023 we repurchased 1,410,001 shares and 1,513,073 shares, respectively, with a fair value of $5.9 million and $7.1 million, respectively, under our share repurchase program. As of June 30, 2024, the remaining availability under our $30 million share repurchase program was $6.6 million.
Previous wording
In addition, we periodically withhold shares to satisfy employee tax withholding obligations arising in connection with the vesting of restricted stock units and exercise of options and warrants in accordance with the terms of our equity incentive plans and the underlying award agreements. During the three months ended March 31, 2024 and 2023, we withheld 37,492 shares and 48,202 shares, respectively, with a fair value of $0.2 million and$0.2 million, respectively, to satisfy the minimum employee tax withholding obligations.
Current wording
In addition, we periodically withhold shares to satisfy employee tax withholding obligations arising in connection with the vesting of restricted stock units and exercise of options and warrants in accordance with the terms of our equity incentive plans and the underlying award agreements. During the six months ended June 30, 2024 and 2023, we withheld 84,580 shares and 90,267 shares, respectively, in each case with a fair value of $0.4 million, to satisfy the minimum employee tax withholding obligations.
Previous wording
Our cash flow from investing activities primarily consists of capital expenditures and capitalized software development costs. We spent $1.3 million in capital expenditures during thethree months ended March 31, 2024. We currently anticipate that our capital expenditures will be between $8 million and $10 million in 2024, primarily relating to expenditures for servers and related equipment and other equipment. However, actual amounts may vary from these estimates.
Current wording
Our cash flow from investing activities primarily consists of capital expenditures and capitalized software development costs. We spent $2.1 million in capital expenditures during thesix months ended June 30, 2024. We currently anticipate that our capital expenditures will be between $7 million and $9 million in 2024, primarily relating to expenditures for servers and related equipment and other equipment. However, actual amounts may vary from these estimates.
Previous wording
Net cash from operating activities increased $29.1 million, to net cash provided by operating activities of $8.6 million for the three months ended March 31, 2024, as compared to net cash used in operating activities of $20.5 million for the three months ended March 31, 2023. This increase was primarily driven by a $30.6 million favorable change in our working capital, largely due to lower accounts receivable due to higher collections during the three months ended March 31, 2024, compared to the prior year period, which was negatively impacted by delays in collections of customer payments as we were transitioning to alternative bank accounts due to the sudden closure of SVB in March 2023, as well as a $1.2 million increase in net income after non-cash adjustments during the three months ended March 31, 2024, compared to the same prior year period.
Current wording
Net cash from operating activities increased $30.9 million, to net cash provided by operating activities of $12.2 million for the six months ended June 30, 2024, as compared to net cash used in operating activities of $18.7 million for the six months ended June 30, 2023. This increase was primarily driven by a $26.4 million favorable change in our working capital primarily due to faster cash collections and the timing of payments. In addition, net income after non-cash adjustments increased $5.7 million during the six months ended June 30, 2024, compared to the same prior year period.
Previous wording
Our free cash flow for the three months ended March 31, 2024 was $4.6 million, as compared to use of cash of $27.1 million for the three months ended March 31, 2023, primarily reflecting higher cash collections and lower capital expenditures. Free cash flow is a supplemental non-GAAP financial measure. See “Non-GAAP Reconciliations” for the related definition and a reconciliation to net cash provided by operating activities.
Current wording
Our free cash flow for the six months ended June 30, 2024 was $5.0 million, as compared to use of cash of $29.2 million for the six months ended June 30, 2023, primarily reflecting higher operating cash flow, as discussed above, as well as lower capital expenditures. Free cash flow is a supplemental non-GAAP financial measure. See “Non-GAAP Reconciliations” for the related definition and a reconciliation to net cash provided by operating activities.
Previous wording
Net cash used in financing activities decreased $3.1 million to $4.3 million in the three months ended March 31, 2024, from $7.4 million in the three months ended March 31, 2023. This favorable change was primarily attributable to lower treasury share repurchases of $2.3 million in the three months ended March 31, 2024, compared to the prior year period, as well as to $0.5 million of contingent consideration paid during the three months ended March 31, 2023 in connection with our acquisition of video intelligence AG.
Current wording
Net cash used in financing activities decreased $98.8 million to $6.5 million in the six months ended June 30, 2024, from $105.3 million in the six months ended June 30, 2023. This favorable change was primarily attributable to $96.2 million of cash used to repurchase half of the Company’s Convertible Notes in April 2023, as well as lower treasury share repurchases of $1.3 million during the six months ended June 30, 2024, compared to the prior year period.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
The components of operating expenses are discussed below:
Current report — wording carried from elsewhere
Cost of Revenue and Gross Profit
Current report — wording carried from elsewhere
Our future effective tax rate may be affected by the geographic mix of earnings in countries with different statutory rates. Additionally, our future effective tax rate may be affected by our ongoing assessment of the need for a valuation allowance on our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, tax planning initiatives, as well as certain discrete items.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Our primary uses of liquidity are payments to our media partners, our operating expenses, capital expenditures, our long-term debt and the related interest payments, and repurchases under our $30 million share repurchase program. We may also use our available cash to make acquisitions or investments in complementary companies or technologies.