Outbrain’s Earnings Call: Growth Amid Challenges

Outbrain, Inc. ((TEAD)) has held its Q3 earnings call. Read on for the main highlights of the call.Meet Your ETF AI Analyst Discover how TipRanks' ETF AI Analyst can help you make smarter investment decisions Explore ETFs TipRanks' users love and see what insights the ETF AI Analyst reveals about the ones you follow. The recent earnings call for Outbrain, Inc. presented a mixed sentiment, with notable highlights in growth areas tempered by significant challenges. While the company showcased impressive advancements in connected TV and AI, it also faced revenue declines and operational hurdles, leading to a cautious outlook. Connected TV Growth Connected TV emerged as a standout performer, achieving approximately 40% year-over-year growth in Q3. This segment is on track to reach $100 million by the end of the year, underscoring its importance as a growth driver for Outbrain. Cross-Screen and CTV Performance The integration of cross-screen strategies has shown promising results, with over 10% of branding advertisers now active across both CTV and web platforms. A notable campaign with Men’s Wearhouse resulted in over 41,000 site visits and more than 50,000 incremental store visits, highlighting the potential of cross-screen advertising. AI and Algorithmic Advancements The merger has significantly enhanced Outbrain’s AI and algorithmic capabilities, leading to improved conversion rates, click-through rates, and personalized ad selection. These advancements set a promising trajectory for the company’s growth through 2026. Leadership Strengthening The appointment of Mollie Spilman as the new Chief Commercial Officer marks a strategic move to strengthen leadership. With her extensive experience, Spilman is expected to spearhead transformative initiatives within the company. Revenue Decline Despite growth in certain areas, Outbrain faced a 15% year-over-year decline in pro forma revenue for Q3. This decline is attributed to volatility in key markets such as the U.S., UK, and France, posing challenges to the company’s top-line performance. Page View Decline A decline in page views on premium publishers has been observed, partly due to the increased adoption of AI summaries and volatility in programmatic supply, impacting overall engagement metrics. Operational Challenges The complexities of integrating post-merger operations and execution challenges have resulted in slower-than-expected improvements, particularly in major markets like the U.S., UK, and France. Client Losses in DSP Business Outbrain experienced a significant reduction in spending from a few large clients within its DSP business, leading to a $5 million decline in Ex-TAC revenue year-over-year, highlighting the need for client retention strategies. Forward-Looking Guidance Looking ahead, Outbrain’s guidance reflects both challenges and strategic actions aimed at improvement. Despite a 15% year-over-year revenue decline, the company projects a 40% growth in its Connected TV segment, targeting $100 million by the end of 2025. The focus remains on portfolio optimization, operational efficiency, and cost optimization to drive future growth and profitability. In summary, Outbrain’s earnings call revealed a complex landscape of growth opportunities and challenges. While connected TV and AI advancements offer promising prospects, revenue declines and operational hurdles necessitate strategic focus and caution moving forward.