outbrain-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission file number 001-40643

Outbrain Inc.

(Exact name of registrant as specified in its charter)


Delaware									20-5391629
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)


111 West 19th Street,	New York,	NY	10011
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (646) 867-0149

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.001 per share

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of April 30, 2024, Outbrain Inc. had 48,842,763 shares of common stock outstanding.

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		Page
Part I - Financial Information
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Condensed Consolidated Statements of Stockholders’ Equity	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
Part II - Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

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Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements may include, without limitation, statements generally relating to possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. You can generally identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “foresee,” “potential” or “continue” or the negative of these terms or other similar expressions that concern our expectations, strategy, plans or intentions or are not statements of historical fact. We have based these forward-looking statements largely on our expectations and projections regarding future events and trends that we believe may affect our business, financial condition, and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors including, but not limited to:

•overall advertising demand and traffic generated by our media partners;

•factors that affect advertising demand and spending, such as the continuation or worsening of unfavorable economic or business conditions or downturns, instability or volatility in financial markets, and other events or factors outside of our control, such as U.S. and global recession concerns, geopolitical concerns, including the ongoing wars between Ukraine-Russia and Israel-Hamas, supply chain issues, inflationary pressures, labor market volatility, bank closures or disruptions, the impact of challenging economic conditions and other factors that have and may further impact advertisers’ ability to pay;

•our ability to continue to innovate, and adoption by our advertisers and media partners of our expanding solutions;

•the success of our sales and marketing investments, which may require significant investments and may involve long sales cycles;

•our ability to grow our business and manage growth effectively;

•our ability to compete effectively against current and future competitors;

•the loss of one or more of our large media partners, and our ability to expand our advertiser and media partner relationships;

•conditions in Israel, including the ongoing war between Israel and Hamas and other terrorist organizations, may limit our ability to market, support and innovate on our products due to the impact on our employees as well as our advertisers and their advertising markets;

•our ability to maintain our revenues or profitability despite quarterly fluctuations in our results, whether due to seasonality, large cyclical events, or other causes;

•the risk that our research and development efforts may not meet the demands of a rapidly evolving technology market;

•any failure of our recommendation engine to accurately predict attention or engagement, any deterioration in the quality of our recommendations or failure to present interesting content to users or other factors which may cause us to experience a decline in user engagement or loss of media partners;

•limits on our ability to collect, use and disclose data to deliver advertisements;

•our ability to extend our reach into evolving digital media platforms;

•our ability to maintain and scale our technology platform;

•our ability to meet demands on our infrastructure and resources due to future growth or otherwise;

•our failure or the failure of third parties to protect our sites, networks and systems against security breaches, or otherwise to protect the confidential information of us or our partners;

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•outages or disruptions that impact us or our service providers, resulting from cyber incidents, or failures or loss of our infrastructure;

•significant fluctuations in currency exchange rates;

•political and regulatory risks in the various markets in which we operate;

•the challenges of compliance with differing and changing regulatory requirements;

•the timing and execution of any cost-saving measures and the impact on our business or strategy; and

•the risks described in the section entitled “Risk Factors” in the Annual Report on Form 10-K filed for the year ended December 31, 2023 and elsewhere in this Report.

Accordingly, you should not rely upon forward-looking statements as an indication of future performance. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or will occur, and actual results, events, or circumstances could differ materially from those projected in the forward-looking statements. The forward-looking statements made in this Report relate only to events as of the date on which the statements are made. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. We undertake no obligation and do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events or otherwise, except as required by law.

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Part I Financial Information

Item 1. Financial Statements

OUTBRAIN INC.

Condensed Consolidated Balance Sheets

(In thousands, except for number of shares and par value)


	March 31, 2024		December 31, 2023
	(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents	$	71,362	$	70,889
Short-term investments in marketable securities	91,909		94,313
Accounts receivable, net of allowances	156,392		189,334
Prepaid expenses and other current assets	38,997		47,240
Total current assets	358,660		401,776
Non-current assets:
Long-term investments in marketable securities	68,349		65,767
Property, equipment and capitalized software, net	41,736		42,461
Operating lease right-of-use assets, net	17,113		12,145
Intangible assets, net	19,516		20,396
Goodwill	63,063		63,063
Deferred tax assets	38,346		38,360
Other assets	19,875		20,669
TOTAL ASSETS	$	626,658	$	664,637

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	139,763	$	150,812
Accrued compensation and benefits	19,055		18,620
Accrued and other current liabilities	95,594		119,703
Deferred revenue	6,987		8,486
Total current liabilities	261,399		297,621
Non-current liabilities:
Long-term debt	118,000		118,000
Operating lease liabilities, non-current	14,237		9,217
Other liabilities	16,094		16,735
TOTAL LIABILITIES	$	409,730	$	441,573

Commitments and Contingencies (Note 10)

STOCKHOLDERS’ EQUITY:
Common stock, par value of $0.001 per share − one billion shares authorized; 61,915,671 shares issued and 49,091,230 shares outstanding as of March 31, 2024; 61,567,520 shares issued and 49,726,518 shares outstanding as of December 31, 2023.	62		62
Preferred stock, par value of $0.001 per share − 100,000,000 shares authorized, none issued and outstanding as of March 31, 2024 and December 31, 2023	—		—
Additional paid-in capital	471,593		468,525
Treasury stock, at cost − 12,824,441 shares as of March 31, 2024 and 11,841,002 shares as of December 31, 2023	(71,704)		(67,689)
Accumulated other comprehensive loss	(9,200)		(9,052)
Accumulated deficit	(173,823)		(168,782)
TOTAL STOCKHOLDERS’ EQUITY	216,928		223,064
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	626,658	$	664,637

See Accompanying Notes to Condensed Consolidated Financial Statements.

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OUTBRAIN INC.

Condensed Consolidated Statements of Operations

(In thousands, except for share and per share data)

(Unaudited)


	Three Months Ended March 31,
		2024		2023
Revenue		$	216,964	$	231,774
Cost of revenue:
Traffic acquisition costs		164,810		179,576
Other cost of revenue		10,559		11,043
Total cost of revenue		175,369		190,619
Gross profit		41,595		41,155
Operating expenses:
Research and development		9,193		9,311
Sales and marketing		23,784		25,748
General and administrative		15,215		15,406
Total operating expenses		48,192		50,465
Loss from operations		(6,597)		(9,310)
Other income (expense), net:
Interest expense		(937)		(1,867)
Interest income and other income, net		1,405		3,860
Total other income, net		468		1,993
Loss before benefit from income taxes		(6,129)		(7,317)
Benefit from income taxes		(1,088)		(1,712)
Net loss		$	(5,041)	$	(5,605)

Weighted average shares outstanding:
Basic		49,265,012		51,435,289
Diluted		49,265,012		51,435,289

Net loss per common share:
Basic		$	(0.10)	$	(0.11)
Diluted		$	(0.10)	$	(0.11)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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OUTBRAIN INC.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)


	Three Months Ended March 31,
		2024		2023
Net loss		$	(5,041)	$	(5,605)
Other comprehensive income (loss):
Foreign currency translation adjustments		98		(1,220)
Unrealized (losses) gains on available-for-sale investments in debt securities (net of taxes of $74 and $(123) for the three months ended March 31, 2024 and 2023, respectively)		(246)		420
Total other comprehensive loss		(148)		(800)
Comprehensive loss		$	(5,189)	$	(6,405)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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OUTBRAIN INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except for number of shares)

(Unaudited)


	Common Stock		Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Accumulated Deficit		Total Stockholders’ Equity
		Shares			Amount			Shares			Amount
Balance – January 1, 2024		61,567,520	$	62		$	468,525	(11,841,002)	$	(67,689)		$	(9,052)

SEC Form 10-Q filed by Outbrain Inc.