Outbrain (US:OB)2025-11-06 22:10Acquisition and Integration - The company completed the acquisition of TEADS for approximately $0.9 billion, including $625 million in cash and 43.75 million shares of common stock[178][184]. - The company incurred acquisition and integration costs of approximately $3.7 million and $25.5 million for the three and nine months ended September 30, 2025, respectively[185]. - A restructuring plan was announced on February 3, 2025, with estimated charges of $11 million to $14 million, primarily for severance costs[187]. - The company recorded impairment charges of $15.5 million related to the discontinuation of the video product offering associated with the prior acquisition of vi[196]. - Ex-TAC Gross Profit increased by $70.8 million, or 118.7%, to $130.5 million for Q3 2025, and by $210.0 million, or 125.2%, to $377.8 million for the nine months ended September 30, 2025, primarily due to the impact of the Acquisition[254]. - Adjusted EBITDA increased by $7.7 million to $19.2 million for Q3 2025 and by $36.5 million to $56.8 million for the nine months ended September 30, 2025, driven largely by the Acquisition[275]. Financial Performance - Revenue for the three months ended September 30, 2025, was $318.8 million, a 42.3% increase from $224.2 million in the same period in 2024[186]. - Gross profit for the three months ended September 30, 2025, was $105.7 million, with a gross margin of 33.2%, compared to $48.9 million and 21.8% in the prior year[186]. - The company recorded a net loss of $19.7 million for the three months ended September 30, 2025, compared to a net income of $6.7 million in the same period in 2024[186]. - Adjusted EBITDA for the three months ended September 30, 2025, was $19.2 million, up from $11.5 million in the same period in 2024[186]. - Revenue for Q3 2025 increased by $94.6 million, or 42.2%, to $318.8 million compared to $224.2 million in Q3 2024[246]. - Revenue for the first nine months of 2025 rose by $292.9 million, or 44.7%, to $948.2 million from $655.3 million in the same period of 2024[246]. - Gross profit for Q3 2025 increased by $56.8 million, or 116.4%, to $105.7 million compared to $48.9 million in Q3 2024[253]. - Gross profit for the first nine months of 2025 rose by $172.7 million, or 126.9%, to $308.7 million from $136.0 million in the same period of 2024[253]. - The company reported a net loss of $19.7 million for Q3 2025 compared to a net income of $6.7 million in Q3 2024[245]. - The company experienced a loss from operations of $6.3 million in Q3 2025, compared to a loss of $2.9 million in Q3 2024[245]. Operational Challenges - The company faced operational challenges in returning to growth during Q2 and Q3 2025, implementing a complex integration of two similarly scaled companies, resulting in a lagging indicator of sales in key markets like the U.S., U.K., and France[201]. - A decline in paid page views for premium publisher partners was observed, with an approximate decrease of 10% to 15% attributed to the shift in user behavior due to generative AI tools[202]. - The legacy Outbrain DSP business experienced a $5.0 million decline in year-over-year Ex-TAC Gross Profit, driven by a small number of customers spending a combined $30.0 million less on the platform[203]. - The global economic environment has been unstable, with factors such as geopolitical tensions and inflation negatively impacting advertisers and overall business performance[205]. Advertising and User Engagement - The click-through rate (CTR) for ads on the Outbrain platform is currently less than 1%, highlighting significant room for growth in consumer engagement[211]. - The company plans to expand its platform to new media environments and formats, including unique video and high-impact display, to enhance user engagement and advertising effectiveness[216]. - The introduction of Connected Ads solutions aims to provide a more immersive brand experience, which is expected to drive new types of advertiser demand[218]. - The company continues to invest in its AI prediction engine to improve ad relevance and user engagement, which is critical for enhancing return on advertiser spend (ROAS)[220]. - The company reported tens of thousands of unique advertisers active on its platforms for the nine months ended September 30, 2025, indicating a broad engagement with its advertising services[209]. Financial Position and Liquidity - As of September 30, 2025, total debt was $621,629,000, with long-term debt amounting to $604,023,000[300]. - The company had cash and cash equivalents of $130,751,000 and short-term investments of $7,501,000 as of September 30, 2025, totaling available liquidity of $238,252,000[291]. - The company plans to meet liquidity needs through available cash, cash generated from operations, and borrowing capacity, focusing on payments to media partners and operating expenses[298]. - The 2025 Revolving Facility allows for up to $100,000,000 in borrowing capacity, with interest rates ranging from 3.25% to 4.25% depending on the company's leverage ratio[292]. - The company recorded a pre-tax gain of $1,200,000 from the repurchase of $9,300,000 aggregate principal amount of notes for $8,000,000 in cash[300]. - As of September 30, 2025, the company was in compliance with the financial covenants under the Credit Agreement[297]. - The Company has a new Overdraft Facility with HSBC providing a revolving line of credit of up to €15 million at a 3-month EURIBOR plus a margin of 1.8%[303]. - Net cash provided by operating activities decreased to $0.3 million for the nine months ended September 30, 2025, down from $25.9 million in the same period of 2024[311]. - Adjusted free cash flow decreased to $3.4 million for the nine months ended September 30, 2025, compared to $13.6 million for the same period in 2024[312]. - Cash used in investing activities was $545.4 million for the nine months ended September 30, 2025, a decrease of $621.0 million from cash provided by investing activities of $75.6 million in 2024[313]. - Net cash provided by financing activities increased to $585.4 million for the nine months ended September 30, 2025, from net cash used of $116.9 million in the same period of 2024[314]. - The Company repurchased 1,410,001 shares with a fair value of $5.8 million during the nine months ended September 30, 2024, with $6.6 million remaining under the stock repurchase program as of September 30, 2025[306]. - The Company has long-term debt of $604.0 million as of September 30, 2025, with no long-term debt outstanding as of December 31, 2024[327]. - The Company incurred future interest payments of approximately $62.8 million annually from 2026 to 2029, and $31.4 million in 2030 related to the Notes issued for the Acquisition[310]. - A hypothetical 10% change in foreign currency exchange rates would result in a $2.2 million impact on operating income for the three months ended September 30, 2025[322]. - The Company plans to monitor its exposure to interest rate risk, with a 100-basis point change in interest rates affecting the fair value of its investment portfolio by less than $0.1 million[325].