Outbrain Inc

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 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.”

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 and in the section entitled “Risk Factors” in our definitive proxy statement filed with the SEC on October 31, 2024, 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

Outbrain is a leading technology platform that drives business results by connecting media owners and advertisers with engaged audiences to drive business outcomes, reaching over a billion unique consumers around the world. Outbrain’s artificial intelligence (“AI”) prediction engine powers a two-sided platform for advertisers and media owners that delivers concrete business outcomes. Our platform enables thousands of digital media owners to provide tailored experiences to their audiences, delivering audience engagement and monetization. For tens of thousands of advertisers, from enterprise brands to performance marketers, our platform optimizes audience attention and engagement to deliver greater return on investment at each step of the marketing funnel.

Current wording

Outbrain is a leading technology platform that drives business results by connecting media owners and advertisers with engaged audiences to drive business outcomes, reaching over a billion unique consumers around the world. Outbrain’s artificial intelligence (“AI”) prediction engine powers a two-sided platform (including our proprietary demand side platforms and supply side platform) for advertisers and media owners that delivers concrete business outcomes enabling advertisers to maximize return-on-ad-spend (“ROAS”). Our platform enables thousands of digital media owners to provide tailored experiences to their audiences, delivering audience engagement and monetization. For tens of thousands of advertisers, from enterprise brands to performance marketers, our platform optimizes audience attention and engagement to deliver greater return on investment at each step of the marketing funnel.

Previous wording

•Media Partners. We are committed to supporting the long-term success of our media partners. We strive to develop multi-year contracts with media partners, with the objective of delivering long-term revenue and deeper audience engagement. Our media partners include both traditional publishers and companies in new and rapidly evolving categories, such as mobile device manufacturers.

Current wording

•Media Partners. We are committed to supporting the long-term success of our media partners. We strive to develop multi-year contracts with media partners, with the objective of delivering long-term revenue and deeper audience engagement. Our media partners include both traditional publishers and companies in new and rapidly evolving categories, such as mobile device manufacturers. Some key partners with which we have long-standing relationships across our various regions include Asahi Shimbun, CNN, Der Spiegel, Le Monde, MSN, New York Post, Sky News and Sky Sports, and The Washington Post.

Previous wording

•Advertisers. We offer unique advertising solutions across the marketing funnel and provide a single access point to not only reach, but drive real business outcomes from consumers across the Open Internet. We provide advertisers from enterprise brands to performance marketers with solutions to optimize consumer attention and engagement, to deliver accountable business results and greater return on investment.

Current wording

•Advertisers. We offer unique advertising solutions across the marketing funnel and provide a single access point to not only reach, but drive real business outcomes from consumers across the Open Internet. We provide advertisers from enterprise brands to performance marketers, as well as their agencies, with solutions to optimize consumer attention and engagement, to deliver accountable business results and greater return on investment.

Previous wording

Through our direct, usually exclusive code-on-page integrations with media owners, we have become one of the largest online advertising platforms on the Open Internet. In 2023, we provided personalized ads to over a billion monthly unique consumers, delivering on average over 12 billion experiences promoting content, services, and products per day, with tens of thousands of advertisers directly using our platform.

Current wording

Through our direct, usually exclusive code-on-page integrations with media owners, we have become one of the largest online advertising platforms on the Open Internet. In 2023, we provided personalized ads to over a billion monthly unique consumers, delivering on average over 12 billion experiences promoting content, services, and products per day, with tens of thousands of advertisers directly using our platform. We generate revenue from advertisers through ads that we deliver across a variety of media partner properties. We charge advertisers for clicks on and, to a lesser extent, impressions of their ads, depending on how they choose to contract with us.

Previous wording

•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 wording

•Our revenue was $224.2 million in the three months ended September 30, 2024, compared to $230.0 million in the three months ended September 30, 2023, including net favorable foreign currency effects of approximately $1.3 million. Revenue for the nine months ended September 30, 2024 was $655.3 million, compared to $687.6 million for the nine months ended September 30, 2023.

Previous 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.

Current wording

•Our gross profit was $48.9 million and our gross margin was 21.8% for the three months ended September 30, 2024, compared to gross profit of $46.4 million and gross margin of 20.2% for the comparable period in 2023. Our gross profit was $136.0 million and our gross margin was 20.8% for the nine months ended September 30, 2024, compared to gross profit of $131.6 million and gross margin of 19.1% for the nine months ended September 30, 2023.

Previous wording

•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 wording

•Our Ex-TAC Gross Profit(1) was $59.7 million in the three months ended September 30, 2024, compared to $56.8 million in the three months ended September 30, 2023. Our Ex-TAC Gross Profit(1) was $167.8 million for the nine months ended September 30, 2024, compared to $163.6 million for the nine months ended September 30, 2023.

Previous 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.

Current wording

•Our net income was $6.7 million, or 13.7% of gross profit, in the three months ended September 30, 2024, compared to net income of $0.5 million, or 1.1% of gross profit, for the comparable period in 2023. For the nine months ended September 30, 2024, our net loss was $0.5 million, or (0.4)% of gross profit, compared to net income of $6.2 million, or 4.7% of gross profit, for the nine months ended September 30, 2023.

Previous 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.

Current wording

•Our Adjusted EBITDA(1) was $11.5 million for the three months ended September 30, 2024, compared to $10.3 million for the three months ended September 30, 2023. Adjusted EBITDA(1) was 19.3% and 18.1% of Ex-TAC Gross Profit(1)in the three months ended September 30, 2024 and 2023, respectively. Our Adjusted EBITDA(1) was $20.3 million for the nine months ended September 30, 2024, compared to $14.5 million for the nine months ended September 30, 2023. Adjusted EBITDA(1) was 12.1% and 8.8% of Ex-TAC Gross Profit(1) for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

(1)Ex-TAC Gross Profit and Adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Reconciliations” in this Report for definitions and limitations of these measures, and reconciliations to the comparable GAAP financial measures.

Current wording

(1)Ex-TAC Gross Profit, Adjusted EBITDA, Adjusted EBITDA as a percentage of Ex-TAC Gross Profit, and constant currency measures are non-GAAP financial measures. See “Non-GAAP Reconciliations” in this Report for definitions and limitations of these measures, and reconciliations to the comparable GAAP financial measures.

Previous wording

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 wording

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 financing covenants. Following the Closing, the Seller will own approximately 41% 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 September 30, 2024).

Previous wording

See Note 15 to the accompanying condensed consolidated financial statements for additional information on the Transaction.

Current wording

See Notes 3 and 10 to the accompanying condensed consolidated financial statements for additional information on the Transaction.

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, 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.

Current wording

Many of our employees, including certain members of our management team and board of directors, operate from Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations. 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, along the Red Sea (a vital maritime route for international trade to Israel) with the Houthis of Yemen, and on other fronts, including with various rebel militia groups in Syria and Iraq. Israel has carried out a number of targeted strikes on sites belonging to these terror organizations, and in October 2024, Israel began limited ground operations against Hezbollah in Lebanon. In addition, Iran recently launched direct attacks on Israel involving hundreds of drones and missiles and has threatened to continue to attack Israel. Israel has responded by launching direct attacks against certain targets in Iran. These situations may escalate in the future into more violent events or greater regional conflict which may affect Israel and us.

Previous wording

The draft of Israeli military reservists, as well as the evacuation of Israeli citizens from areas near conflict zones have adversely affected our employees impacted by such actions. In addition, future government-imposed restrictions and precautions in response to such conflicts may negatively impact our employees, management and directors by interrupting their ability to effectively perform their roles and responsibilities. In addition, further hostilities involving Israel, possible damage to facilities and infrastructure, increased cyber attacks, the interruption or curtailment of trade between Israel and its trading partners, and/or the willingness to do business with companies with operations in Israel, as well as macroeconomic indications of deterioration of Israel’s economic standing as reflected in the downgrading in Israel's credit rating by rating agencies that took place in parallel to these events, could adversely affect our business, financial condition and results of operations and could make it more difficult for us to raise capital. The intensity and duration of Israel’s current war against Hamas and the other terror organizations is difficult to predict and we are continuing to monitor the situation and assessing its potential impact on our business.

Current wording

The draft of Israeli military reservists, as well as the evacuation of Israeli citizens from areas near conflict zones have adversely affected our employees impacted by such actions. In addition, future government-imposed restrictions and precautions in response to such conflicts may negatively impact our employees, management and directors by interrupting their ability to effectively perform their roles and responsibilities. In addition, further hostilities involving Israel, possible damage to facilities and infrastructure, increased cyber attacks, the interruption or curtailment of trade between Israel and its trading partners, and/or the willingness to do business with companies with operations in Israel, as well as macroeconomic indications of deterioration of Israel’s economic standing as reflected in the downgrading in Israel’s credit rating by rating agencies that took place in parallel to these events, could adversely affect our business, financial condition and results of operations and could make it more difficult for us to raise capital. The intensity and duration of Israel’s current war against Hamas, Hezbollah, and the other terror organizations is difficult to predict and we are continuing to monitor the situation and assessing its potential impact on our business.

Previous wording

General worldwide economic conditions have recently experienced significant instability, as well as volatility and disruption in the financial markets, resulting from factors including the effects of the wars between Russia-Ukraine and Israel-Hamas, bank closures, and general economic uncertainty. The current macroeconomic environment, with variables such as inflation, increased interest rates, bank disruptions, recessionary concerns, bankruptcies, currency exchange rate fluctuations, global supply chain disruptions, and labor market volatility, has negatively impacted our advertisers. Accordingly, these conditions have adversely impacted our business and could, if they continue or worsen, adversely impact us in the future, including if our advertisers were to reduce or further reduce their advertising spending as a result of any of these factors. We continue to monitor our operations, and the operations of those in our ecosystem (including media partners, advertisers, and agencies). These conditions make it difficult for us, our media partners, advertisers, and agencies to accurately forecast and plan future business activities and could cause a further reduction or delay in overall advertising demand and spending or impact our advertisers’ ability to pay, which would negatively impact our business, financial condition, and results of operations.

Current wording

General worldwide economic conditions have recently experienced significant instability, as well as volatility and disruption in the financial markets, resulting from factors including the effects of the wars between Russia-Ukraine and Israel-Hamas and the expansion of such conflict, bank closures, the outcome of the U.S. presidential election and general economic uncertainty. The current macroeconomic environment, with variables such as inflation, increased interest rates, bank disruptions, recessionary concerns, bankruptcies, currency exchange rate fluctuations, global supply chain disruptions, and labor market volatility, has negatively impacted our advertisers. Accordingly, these conditions have adversely impacted our business and could, if they continue or worsen, adversely impact us in the future, including if our advertisers were to reduce or further reduce their advertising spending as a result of any of these factors. We continue to monitor our operations, and the operations of those in our ecosystem (including media partners, advertisers, and agencies). These conditions make it difficult for us, our media partners, advertisers, and agencies to accurately forecast and plan future business activities and could cause a further reduction or delay in overall advertising demand and spending or impact our advertisers’ ability to pay, which would negatively impact our business, financial condition, and results of operations.

Previous wording

We rely on relationships with our media partners for a significant portion of our advertising inventory and our corresponding ability to drive advertising revenue. To further strengthen these relationships, we continuously invest in our technology and product functionality to drive user engagement and monetization by (i) improving our algorithms, referred to as our AI prediction engine; (ii) effectively managing supply and demand; (iii) expanding the adoption of our enhanced products by media partners; and (iv) expanding our demand capabilities to new formats and business lines such as Onyx.

Current wording

We rely on relationships with our media partners for a significant portion of our advertising inventory and our corresponding ability to drive advertising revenue. To further strengthen these relationships, we continuously invest in our technology and product functionality to drive user engagement and monetization by (i) improving our algorithms, referred to as our AI prediction engine; (ii) effectively managing supply and demand; (iii) expanding the adoption of our enhanced products by media partners; and (iv) expanding our demand capabilities to new formats and business lines such as Onyx, a branding platform designed to maximize consumer attention to deliver more effective branding and consideration campaigns.

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 each of the three and six months ended June 30, 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 91% and 89%, respectively, for the three and nine months ended September 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 6% and 5%, respectively, to revenue growth for the three and six months ended June 30, 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 7% and 6%, respectively, to revenue growth for the three and nine months ended September 30, 2024.

Previous wording

Growth in attention and engagement is driven by several factors, including enhancements to our AI prediction technology, growth in the breadth and depth of our data assets, the size and quality of our content and advertising index, user engagement, new media partners, and expansion on existing media partners. As we grow attention and engagement, we are able to collect more data and continually improve our prediction engine — which drives better results for our advertiser and media owner partners. This growth “flywheel” can be measured by growth of the consumer data points we drive, such as click-through-rate (“CTR”). CTR improvements increase the number of clicks on our platform. We believe that we have a significant opportunity to further grow consumer engagement, and thus our business, as today CTR for ads on our platform is less than 1% of ads served. With the launch of Onyx, we have expanded the measurable consumer data points that fuel our prediction engine, expanding our ability to drive concrete business outcomes at each step of the marketing funnel.

Current wording

Growth in attention and engagement is driven by several factors, including enhancements to our AI prediction technology, growth in the breadth and depth of our data assets, the size and quality of our content and advertising index, user engagement, new media partners, and expansion on existing media partners. As we grow attention and engagement, we are able to collect more data and continually improve our prediction engine — which drives better results for our advertiser and media owner partners. This growth “flywheel” can be measured by growth of the consumer data points we drive, such as click-through-rate (“CTR”). CTR improvements increase the number of clicks on our platform. We believe that we have a significant opportunity to further grow consumer engagement, and thus our business, as today CTR for ads on our platform is less than 1% of ads served. With the launch of Onyx, we have expanded the measurable consumer data points that fuel our prediction engine, expanding our ability to drive concrete business outcomes at each step of the marketing funnel. Our Onyx platform optimizes towards an accountable outcome: attention. Onyx enables advertisers to deliver concrete ROAS with their branding campaigns, by providing high audience attention and corresponding incremental outcomes as a result, rather than ad views alone.

Previous wording

Our engine serves the ad experiences that are predicted to deliver high attention or engagement, rather than on price of the ads. We believe this approach leads to better return-on-ad-spend (“ROAS”) for advertisers, whether they are focused on driving a performance outcome, or a branding outcome. Our growth is partially driven by retaining and expanding the amount of spend by advertisers on our platform, as well as by acquiring new advertisers. Our recent launch of Onyx by Outbrain™ expands Outbrain’s total addressable market to now include top of the funnel marketing dollars while also attracting more diverse, premium demand.

Current wording

Our engine serves the ad experiences that are predicted to deliver high attention or engagement, rather than on price of the ads. We believe this approach leads to better ROAS for advertisers, whether they are focused on driving a performance outcome, or a branding outcome. Our growth is partially driven by retaining and expanding the amount of spend by advertisers on our platform, as well as by acquiring new advertisers. Our launch of Onyx by Outbrain™ expanded Outbrain’s total addressable market to now include top of the funnel marketing dollars while also attracting more diverse, premium demand.

Previous wording

Examples of new environments in which content consumption is expected to grow include pre-installed applications on Smartphones, Smartphone content feeds, gaming applications, and push notifications. Additionally, we believe there is a strong opportunity to develop better personalization solutions for the visual and video consumption of news media across the Open Internet.

Current wording

Examples of new environments in which content consumption is expected to grow include pre-installed applications on Smartphones, Smartphone content feeds, gaming applications, push notifications and connected TV. Additionally, we believe there is a strong opportunity to develop better personalization solutions for the visual and video consumption of news media across the Open Internet.

Previous wording

Through our acquisition of vi in the first quarter of 2022, we expanded our video product offerings to new formats and environments, including pre-roll video formats. With the introduction of Onyx by Outbrain™, we have expanded our investment in applying our AI prediction to these new video and high-impact formats, delivering a curated consumer experience that drives attention for enterprise brands. We plan to continue to evaluate strategic acquisition or investment opportunities as part of our growth strategy in the future.

Current wording

Through our acquisition of video intelligence AG (‘‘vi’’), a Swiss-based contextual video technology company for digital media owners in the first quarter of 2022, we expanded our video product offerings to new formats and environments, including pre-roll video formats. With the introduction of Onyx by Outbrain™, we have expanded our investment in applying our AI prediction to these new video and high-impact formats, delivering a curated consumer experience that drives attention for enterprise brands. We plan to continue to evaluate strategic acquisition or investment opportunities as part of our growth strategy in the future.

Previous wording

We strongly believe in the transformative power of AI in shaping the future of sustainable media, and have been utilizing AI technology for years to empower both media owners and advertisers in their businesses. We leverage AI in a manner designed to enable media owners to increase their revenues and connect with audiences on their own platforms within the Open Internet. We use machine learning to predict consumer interest and propensity to convert. We make around 1 billion such predictions every second. Our technology has developed into a robust AI machine learning system and is largely homegrown by our Research and Development team. One of the strongest long-term levers in our business is the continuous improvement of our algorithms and the data sets our algorithms learn from. Our direct integrations across our media partners’ properties provide us with a large volume of proprietary first-party data, including context, user interest and behavioral signals. The more data points we have, the better our CTR predictions and yield potential can be.

Current wording

We strongly believe in the transformative power of AI in shaping the future of sustainable media, and have been utilizing AI technology for years to empower both media owners and advertisers in their businesses. We leverage AI in a manner designed to enable media owners to increase their revenues and connect with audiences on their own platforms within the Open Internet. We use machine learning to predict consumer interest and propensity to convert ads to sales. We make around 1 billion such predictions every second. Our technology has developed into a robust AI machine learning system and is largely homegrown by our Research and Development team. One of the strongest long-term levers in our business is the continuous improvement of our algorithms and the data sets our algorithms learn from. Our direct integrations across our media partners’ properties provide us with a large volume of proprietary first-party data, including context, user interest and behavioral signals. The more data points we have, the better our CTR predictions and yield potential can be.

Previous wording

Other income, net is comprised of gain on convertible debt, interest expense, and interest income and other income, net.

Current wording

Other income (expense), net is comprised of gain on convertible debt, interest expense, and interest income and other income, net.

Previous wording

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 wording

Gain on Convertible Debt. In April 2023, we repurchased $118.0 million of our Convertible Notes at a discount of approximately 19% of the principal amount and recorded a pre-tax gain of $22.6 million. In September 2024, we repurchased the remaining $118.0 million of our Convertible Notes at a discount of approximately 7.5% of the principal amount and recorded a pre-tax gain of $8.8 million.

Previous 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.

Current wording

Provision (benefit) for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign juris dictions, 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 $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.

Current wording

Revenue decreased $5.8 million, or 2.5%, to $224.2 million for the three months ended September 30, 2024, from $230.0 million for the three months ended September 30, 2023. Revenue for the three months ended September 30, 2024 included net favorable foreign currency effects of approximately $1.3 million, and decreased $7.1 million, or 3.1%, on a constant currency basis, compared to the prior year period. Our reported revenue decline was primarily attributable to a decrease of approximately $21 million due to net revenue retention of approximately 91% on existing media partners, as we have experienced lower ad impressions from certain supply partners. This decrease was partially offset by growth of approximately 6.6%, or $15 million, from new media partners.

Previous 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.

Current wording

Traffic acquisition costs decreased $8.7 million, or 5.0%, to $164.5 million for the three months ended September 30, 2024, compared to $173.2 million in the prior year period. Traffic acquisition costs included net unfavorable foreign currency effects of approximately $1.2 million, and decreased $9.9 million, or 5.7%, 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 73.4% for the three months ended September 30, 2024, from 75.3% for the three months ended September 30, 2023.

Previous wording

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 wording

Other cost of revenue increased $0.4 million, or 4.1%, to $10.8 million for the three months ended September 30, 2024, compared to $10.4 million in the prior year period, primarily due to increased hosting costs. As a percentage of revenue, other cost of revenue increased to 4.8% for the three months ended September 30, 2024, from 4.5% for the three months ended September 30, 2023.

Previous wording

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 wording

Gross profit increased $2.5 million, or 5.3%, to $48.9 million for the three months ended September 30, 2024, compared to $46.4 million for the three months ended September 30, 2023. This increase was largely attributable to lower traffic acquisition costs, partially offset by lower revenue, as previously described.

Previous 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.

Current wording

Our Ex-TAC Gross Profit increased $2.9 million, or 5.1%, to $59.7 million for the three months ended September 30, 2024, from $56.8 million for the three months ended September 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

•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 wording

•General and administrative expenses — increased $5.9 million, primarily due to acquisition-related costs of $5.6 million recorded during the three months ended September 30, 2024 and increased personnel-related costs of $1.7 million, offset in part by a $0.7 million reduction in our provision for credit losses.

Previous 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.

Current wording

Total other income (expense), net, increased $12.0 million to $10.9 million for the three months ended September 30, 2024, compared to net expense of $1.1 million for the three months ended September 30, 2023. This increase was primarily driven by a pre-tax gain of approximately $8.8 million recorded during the three months ended September 30, 2024 in connection with our repurchase of the remaining Convertible Notes, a favorable change of $1.4 million in mark-to-market adjustments on 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, and an increase of $1.4 million resulting from the remeasurement of transactions denominated in currencies other than the functional currencies.

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 expect our effective tax rate to be more favorably impacted by 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, excluding the impacts relating to the Convertible Debt repurchase and the Teads Transaction, 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 $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.

Current wording

As a result of the foregoing, we recorded net income of $6.7 million for the three months ended September 30, 2024, as compared to net income of $0.5 million for the three months ended September 30, 2023.

Previous 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.

Current wording

Our Adjusted EBITDA increased $1.2 million to $11.5 million for the three months ended September 30, 2024 from $10.3 million for the three months ended September 30, 2023, due to higher Ex-TAC Gross Profit, offset in part by higher operating expenses, as previously described. See “Non-GAAP Reconciliations” for the related definitions of Adjusted EBITDA and reconciliations to our net income (loss).

Previous wording

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 wording

Revenue decreased $32.3 million, or 4.7%, to $655.3 million for the nine months ended September 30, 2024 from $687.6 million for the nine months ended September 30, 2023. Our reported revenue decreased approximately $72 million due to net revenue retention of approximately 89% on existing media partners, as we have experienced lower ad impressions from certain supply partners. This decrease was partially offset by growth of approximately 5.7%, or $39 million, from new media partners.

Previous wording

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 wording

Traffic acquisition costs decreased $36.5 million, or 7.0%, to $487.5 million for the nine months ended September 30, 2024, compared to $524.0 million in 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 74.4% for the nine months ended September 30, 2024, from 76.2% for the nine months ended September 30, 2023.

Previous 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.

Current wording

Other cost of revenue decreased $0.2 million, or 0.7%, to $31.8 million for the nine months ended September 30, 2024, compared to $32.0 million in the prior year period, primarily due to lower server depreciation expense and network costs, partially offset by higher hosting costs. As a percentage of revenue, other cost of revenue increased to 4.8% for the nine months ended September 30, 2024, from 4.7% for the nine months ended September 30, 2023.