Outbrain (OB) - 2025 Q2 - Quarterly Results

Company Overview and Q2 2025 Performance Teads Holding Co. reported its Q2 2025 results, meeting guidance, with strong CTV growth and strategic rebranding, while addressing integration challenges Executive Summary Teads met Q2 2025 guidance with strong cash generation and over 80% CTV growth, but integration benefits are slower, prompting focus on H2 2025 growth - Achieved Q2 guidance on both Ex-TAC gross profit and Adjusted EBITDA, with strong cash generation and over 80% CTV growth year-over-year[2] - CEO David Kostman noted Q2 results were within guidance for the combined company, but integration benefits are taking longer, with a focus on reigniting growth in H2 2025 and into 2026[3][4] | (in millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :---------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Revenue | $343.1 | $214.1 | 60 % | $629.5 | $431.1 | 46 % | | Gross profit | 120.3 | 45.6 | 164 % | 202.9 | 87.2 | 133 % | | Net loss | (14.3) | (2.2) | (551)% | (69.2) | (7.2) | (855)% | | Net cash provided by operating activities | 25.0 | 3.6 | 590 % | 24.1 | 12.2 | 97 % | | Non-GAAP Financial Data* | | | | | | | | Ex-TAC gross profit | 144.2 | 56.0 | 158 % | 247.3 | 108.1 | 129 % | | Adjusted EBITDA | 27.0 | 7.4 | 264 % | 37.7 | 8.8 | 328 % | | Adjusted net (loss) income | (9.7) | 0.1 | NM | (25.0) | (4.8) | (415)% | | Adjusted free cash flow | 22.1 | 0.3 | NM | 27.4 | 5.0 | 451 % | Business Highlights Teads rebranded to 'TEAD', repurchased debt, expanded CTV revenue over 80% with new OEM partnerships, and launched innovative AI-powered ad formats - Corporate name changed from "Outbrain Inc." to "Teads Holding Co.", with common stock trading on Nasdaq under "TEAD" from June 10, 2025[6] - Repurchased $9.3 million aggregate principal amount of 10% senior secured notes for approximately $8.0 million in cash, a discount of approximately 17%[6] - Grew Connected TV ("CTV") revenue by more than 80% year-over-year in Q2 2025 on a pro-forma basis, securing premium homescreen inventory through new OEM partnerships, including Samsung[8] - Introduced innovative ad formats like the beta launch of Connected Ads and scaled vertical experience offerings, alongside launching Amplify MCP Server with agentic AI for campaign management[8] Financial Highlights Q2 2025 revenue grew 60% to $343.1 million, gross profit 164%, and Adjusted EBITDA 264% to $27.0 million, driven by acquisition, with significant synergies expected - Expects to realize at least $40 million of total synergies in 2025, and $65 million to $75 million in 2026[8] - Over 500 advertisers spent at least $0.5 million over the twelve months ended June 30, 2025, representing approximately 70% of total customer spend, with an average spend per advertiser over $2 million[8] | Metric (Q2 2025 vs Q2 2024) | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | % Change | | :--------------------------- | :--------------------- | :--------------------- | :------- | | Revenue | $343.1 | $214.1 | 60 % | | Gross profit | $120.3 | $45.6 | 164 % | | Gross margin | 35.1 % | 21.3 % | +13.8 pp | | Ex-TAC gross profit | $144.2 | $56.0 | 158 % | | Ex-TAC gross margin | 42.0 % | 26.1 % | +15.9 pp | | Net loss | $(14.3) | $(2.2) | (551)% | | Adjusted net loss | $(9.7) | $0.1 | NM | | Metric (Q2 2025 vs Q2 2024) | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | % Change | | :--------------------------- | :--------------------- | :--------------------- | :------- | | Adjusted EBITDA | $27.0 | $7.4 | 264 % | | Net cash provided by operating activities | $25.0 | $3.6 | 590 % | | Adjusted free cash flow | $22.1 | $0.3 | NM | | Cash, cash equivalents and investments (as of June 30, 2025) | $166.1 | N/A | N/A | | Total debt obligations (as of June 30, 2025) | $620.6 | N/A | N/A | Outlook and Guidance Teads provides Q3 2025 financial guidance but withholds full-year Adjusted EBITDA outlook due to Q4's significant contribution and post-merger integration uncertainties Third Quarter 2025 Guidance For the third quarter ending September 30, 2025, Teads expects Ex-TAC gross profit to be between $133 million and $143 million, and Adjusted EBITDA to range from $21 million to $29 million | Metric (Q3 2025 Guidance) | Range (Millions USD) | | :------------------------ | :------------------- | | Ex-TAC gross profit | $133 - $143 | | Adjusted EBITDA | $21 - $29 | Full Year 2025 Outlook Teads anticipates generating positive Free Cash Flow for the full year 2025, but has not reaffirmed FY 2025 Adjusted EBITDA guidance due to Q4's significant contribution and post-merger integration uncertainties - The Company expects to generate positive Free Cash Flow for the full year 2025[9] - FY 2025 Adjusted EBITDA guidance is not reaffirmed due to Q4 historically contributing nearly ~50% of annual Adjusted EBITDA and the wide range of outcomes from post-merger integration[10] Non-GAAP Financial Measures Definitions This section defines Teads' supplemental non-GAAP financial measures, including Ex-TAC gross profit and Adjusted EBITDA, used to assess performance and trends Overview of Non-GAAP Measures Teads uses various non-GAAP measures like Ex-TAC gross profit and Adjusted EBITDA to assess performance, acknowledging their limitations and potential for foreign exchange impact - Teads uses Ex-TAC gross profit, Ex-TAC gross margin, Adjusted EBITDA, free cash flow, adjusted free cash flow, adjusted net income (loss), and adjusted diluted EPS as supplemental non-GAAP financial measures[14] - These non-GAAP measures have limitations, including potential differences in definition by other companies, and are not substitutes for GAAP measures[14] - Operating results comparability is affected by foreign exchange fluctuations, with constant currency measures used as a non-GAAP supplement[15] - Quantitative reconciliations for forward-looking non-GAAP financial measures are not provided due to the inability to predict excluded items with reasonable certainty[16] Ex-TAC Gross Profit Ex-TAC gross profit is a non-GAAP measure, adding 'other cost of revenue' to GAAP gross profit, used to evaluate operating performance and trends - Ex-TAC gross profit is a non-GAAP financial measure calculated by adding back other cost of revenue to gross profit[17] - It is a key profitability measure used by management and the board to understand and evaluate operating performance, trends, and make strategic decisions[18] - Limitations include that traffic acquisition cost is a significant but not the only component of total cost of revenue, and its definition may vary among companies[18] Adjusted EBITDA Adjusted EBITDA is a non-GAAP measure, adjusting net income (loss) for non-operating and non-recurring items, used to evaluate core operating performance - Adjusted EBITDA is defined as net income (loss) before gain on repurchase of long-term debt, interest, taxes, depreciation, amortization, stock-based compensation, and other non-core operating expenses[19] - It is a key profitability measure used by management and the board to understand and evaluate operating performance and trends, facilitating period-to-period comparisons[19] - Adjusted EBITDA should be considered a supplemental measure and not in isolation or as a substitute for GAAP financial performance measures[20] Adjusted Net Income (Loss) and Adjusted Diluted EPS Adjusted net income (loss) and diluted EPS are non-GAAP measures excluding non-core items, used for performance comparisons, not replacing GAAP metrics - Adjusted net income (loss) is a non-GAAP financial measure excluding items not indicative of core operating performance, such as gain on debt repurchase, acquisition and integration costs, and severance[21] - Adjusted net income (loss) is also presented on a per diluted share basis (Adjusted Diluted EPS) to facilitate performance comparisons across periods[21] - These adjusted measures should not be considered in isolation or as a substitute for net income (loss) or diluted earnings per share reported in accordance with GAAP[21] Free Cash Flow Free cash flow, and adjusted free cash flow including direct acquisition costs, are non-GAAP measures used to evaluate cash generation, not replacing GAAP cash flow - Free cash flow is defined as cash flow from operating activities less capital expenditures and capitalized software development costs[22] - Adjusted free cash flow is defined as free cash flow plus direct acquisition costs[22] - These measures are used by management and the board to evaluate the company's ability to generate cash and provide a more complete analysis of available cash flows[22] - Free cash flow and adjusted free cash flow should be considered supplemental and not as substitutes for GAAP cash flow measures[22] Forward-Looking Statements and Risk Factors This section outlines forward-looking statements and associated risks, including integration challenges, market volatility, and regulatory compliance Forward-Looking Statements and Risk Factors Forward-looking statements regarding Teads' future business and Legacy Teads integration are subject to risks including integration challenges, market volatility, AI impact, and regulatory compliance - The press release contains forward-looking statements regarding future business, financial condition, results of operations, liquidity, plans, objectives, and the acquisition and integration of Legacy Teads[23] - Statements are subject to substantial risks and uncertainties, including successful integration of Legacy Teads, realizing anticipated benefits, unexpected costs, ability to raise financing, attract customers and personnel, volatility of advertising demand, economic conditions, and geopolitical concerns[24] - Additional risks include the potential impact of AI, competition, loss of media partners, conditions in Israel, maintaining revenues despite fluctuations, R&D efforts, data collection limitations, and regulatory compliance[25] - Investors should not rely on forward-looking statements as an indication of future performance, as actual results could differ materially from projections[26] About Teads Holding Co. Teads Holding Co. is an omnichannel outcomes platform for the Open Internet, leveraging AI to connect marketers with premium media globally About Teads Holding Co. Teads Holding Co., formed by Outbrain and TEADS, is an omnichannel outcomes platform leveraging predictive AI for marketers across 10,000+ publishers and 20,000+ advertisers globally - Teads Holding Co. was formed by the combination of Outbrain Inc. and TEADS on February 3, 2025, with the corporate name change and Nasdaq ticker 'TEAD' effective June 6, 2025[27] - It is an omnichannel outcomes platform for the Open Internet, driving full-funnel results for marketers across premium media[27] - The company leverages predictive AI technology to connect quality media, brand creative, and context-driven addressability and measurement, partnering with over 10,000 publishers and 20,000 advertisers globally[27] - Headquartered in New York, New York, with a global team of nearly 1,800 people in 30+ countries[27] Condensed Consolidated Financial Statements This section presents Teads' condensed consolidated financial statements, including statements of operations, balance sheets, and cash flows Statements of Operations Q2 2025 statements of operations show substantial increases in revenue and expenses, leading to a larger net loss due to acquisition and restructuring costs | | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $343,096 | $214,148 | $629,453 | $431,112 | | Total cost of revenue | $222,832 | $168,572 | $426,539 | $343,941 | | Gross profit | $120,264 | $45,576 | $202,914 | $87,171 | | Total operating expenses | $122,523 | $51,203 | $249,609 | $99,395 | | Loss from operations | $(2,259) | $(5,627) | $(46,695) | $(12,224) | | Total other (expense) income, net | $(17,805) | $2,177 | $(41,413) | $2,645 | | Net loss | $(14,313) | $(2,199) | $(69,156) | $(7,240) | | Basic net loss per common share | $(0.15) | $(0.04) | $(0.80) | $(0.15) | | Diluted net loss per common share | $(0.15) | $(0.04) | $(0.80) | $(0.15) | Balance Sheets June 30, 2025 balance sheets show total assets increased to $1,774.9 million and total liabilities to $1,243.0 million, primarily due to acquisition-related goodwill and new debt | (In thousands) | June 30, 2025 (Unaudited) | December 31, 2024 | | :------------- | :------------------------ | :---------------- | | ASSETS: | | | | Total current assets | $551,310 | $343,131 | | Total non-current assets | $1,223,605 | $290,052 | | TOTAL ASSETS | $1,774,913 | $549,213 | | LIABILITIES AND STOCKHOLDERS' EQUITY: | | | | Total current liabilities | $502,613 | $289,471 | | Total non-current liabilities | $737,238 | $28,399 | | TOTAL LIABILITIES | $1,242,951 | $317,870 | | Total stockholders' equity | $531,962 | $231,343 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $1,774,913 | $549,213 | Statements of Cash Flows Cash flow statements show increased operating cash flow, substantial investing outflow due to acquisition, and significant financing inflow from senior secured notes | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $25,044 | $3,631 | $24,078 | $12,236 | | Net cash (used in) provided by investing activities | $(2,549) | $3,470 | $(548,869) | $(759) | | Net cash (used in) provided by financing activities | $(10,541) | $(2,215) | $585,553 | $(6,485) | | Net increase in cash, cash equivalents and restricted cash | $12,158 | $4,131 | $60,909 | $4,600 | | Cash, cash equivalents and restricted cash — Ending | $150,634 | $75,679 | $150,634 | $75,679 | Non-GAAP Reconciliations This section provides reconciliations of GAAP financial measures to their non-GAAP counterparts, including Ex-TAC gross profit, Adjusted EBITDA, and free cash flow Gross Profit to Ex-TAC Gross Profit Reconciliation of GAAP Gross Profit to non-GAAP Ex-TAC Gross Profit, showing $144.2 million for Q2 2025, a 158% increase, with margin improving to 42.0% | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $343,096 | $214,148 | $629,453 | $431,112 | | Gross profit | $120,264 | $45,576 | $202,914 | $87,171 | | Other cost of revenue | $23,905 | $10,381 | $44,377 | $20,940 | | Ex-TAC gross profit | $144,169 | $55,957 | $247,291 | $108,111 | | Gross margin (% of revenue) | 35.1 % | 21.3 % | 32.2 % | 20.2 % | | Ex-TAC gross margin (% of revenue) | 42.0 % | 26.1 % | 39.3 % | 25.1 % | Net Loss to Adjusted EBITDA Reconciliation of GAAP Net Loss to non-GAAP Adjusted EBITDA, showing $27.0 million for Q2 2025, a 264% increase, with 18.7% as a percentage of Ex-TAC Gross Profit | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(14,313) | $(2,199) | $(69,156) | $(7,240) | | Adjustments (e.g., Interest expense, D&A, Stock-based comp, Acquisition/Restructuring costs) | $41,289 | $9,608 | $106,821 | $16,046 | | Adjusted EBITDA | $26,976 | $7,409 | $37,665 | $8,806 | | Net loss as % of gross profit | (11.9)% | (4.8)% | (34.1)% | (8.3)% | | Adjusted EBITDA as % of Ex-TAC Gross Profit | 18.7 % | 13.2 % | 15.2 % | 8.1 % | Net Loss to Adjusted Net (Loss) Income and Adjusted Diluted EPS Reconciliation of GAAP Net Loss and Diluted EPS to adjusted non-GAAP counterparts, showing Q2 2025 adjusted net loss of $9.7 million and adjusted diluted loss per share of $(0.10) | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(14,313) | $(2,199) | $(69,156) | $(7,240) | | Total adjustments, after tax | $4,657 | $2,273 | $44,205 | $2,399 | | Adjusted net (loss) income | $(9,656) | $74 | $(24,951) | $(4,841) | | Diluted net loss per share - reported | $(0.15) | $(0.04) | $(0.80) | $(0.15) | | Adjustments, after tax | $0.05 | $0.04 | $0.51 | $0.05 | | Diluted loss per share - adjusted | $(0.10) | $0.00 | $(0.29) | $(0.10) | Net Cash Provided by Operating Activities to Free Cash Flow Reconciliation of net cash from operating activities to free cash flow and adjusted free cash flow, showing Q2 2025 free cash flow of $19.5 million and adjusted free cash flow of $22.1 million | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $25,044 | $3,631 | $24,078 | $12,236 | | Purchases of property and equipment | $(1,143) | $(805) | $(4,064) | $(2,140) | | Capitalized software development costs | $(4,406) | $(2,503) | $(7,105) | $(5,130) | | Free cash flow | $19,495 | $323 | $12,909 | $4,966 | | Direct acquisition costs | $2,643 | $0 | $14,447 | $0 | | Adjusted free cash flow | $22,138 | $323 | $27,356 | $4,966 |