Outbrain (US:OB)2023-08-10 09:45Financial Data and Key Metrics Changes - The company reported ex-TAC gross profit of $54.6 million, representing a 5% sequential growth and reaching the high end of guidance, while adjusted EBITDA was $3.5 million, exceeding guidance [7][21][26] - Revenue for Q2 was approximately $226 million, a decrease of 10% year-over-year, with new media partners contributing 12 percentage points to revenue growth [27][29] - Ex-TAC gross profit decreased by 8% year-over-year, driven primarily by the revenue decline, but the decline was slightly lower than revenue due to better performance from certain media partners [29][30] Business Line Data and Key Metrics Changes - The launch of Onyx, a brand-building platform, is expected to increase the total addressable market by an estimated factor of two times, with expectations to generate double-digit millions in revenue from Onyx in H2 of 2023 [11][16][21] - The company experienced year-over-year growth in the auto, health, and retail sectors, while finance remained weaker [17][77] Market Data and Key Metrics Changes - Europe showed stronger signals of demand recovery compared to the U.S., with sequential improvement in demand observed in Q2 [26][75] - The company noted a stabilization in the marketplace with positive signs of growth in the last weeks of the quarter and a stronger start in Q3 [17][26] Company Strategy and Development Direction - The company is focusing on driving growth and better performance within its current marketplace while maintaining cost controls and making strategic investments [8][21] - The launch of Onyx is seen as a strategic move to strengthen the company's position in the open web as a quality partner for premium publishers and a full-funnel partner for all types of advertisers [21][58] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the outlook for the second half of the year, despite lower visibility into advertising budgets [26][36] - The company expects ex-TAC gross profit for Q3 to be between $56.5 million and $59.5 million, and adjusted EBITDA to be between $7.5 million and $9.5 million [36] Other Important Information - The company announced a 10% workforce reduction to improve cost structure, which is expected to reduce annualized costs by about $12 million to $14 million [30][59] - The company ended the quarter with $218 million in cash and cash equivalents, and $118 million in long-term convertible debt [34] Q&A Session Summary Question: Can you explain how Onyx works and its expected revenue contribution? - Management expects Onyx to contribute between $10 million to $20 million in the second half of the year, targeting enterprise brands with high-impact display and video ads [54][56] Question: What is the status of headcount reduction and future hiring? - The company has reduced its workforce by 10% and is now focused on hiring for critical positions, particularly in relation to Onyx [55][59] Question: Can you discuss the bad debt expense and potential exposure? - The company reported a higher bad debt expense due to macro pressures and a few large bankruptcies, with expectations to reverse some of that expense in the second half of the year [63][65] Question: How do Onyx and Keystone interact in terms of supply side capabilities? - Onyx and Keystone are separate but complementary products, with Onyx focused on advertisers and Keystone on publishers, both enhancing strategic relationships [67][71] Question: What are the key drivers for yield improvement moving forward? - Management highlighted ongoing investments in technology and algorithms as key drivers for yield improvement, with expectations for better results as new products are introduced [82][84]